As filed with the Securities and Exchange Commission on April 30, 1999
Registration No. 333-54011
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ICON Income Fund Eight
ICON Income Fund Eight A L.P., a Delaware limited partnership ("ICON Eight A")
ICON Income Fund Eight B L.P., a Delaware limited partnership ("ICON Eight B")
(Exact name of registrant as specified in governing instruments)
DELAWARE
(State or other jurisdiction of incorporation or organization)
7394
(Primary Standard Industrial Classification Code Number)
ICON Eight A [13-4006824], ICON Eight B [to be applied for]
(I.R.S. Employer Identification Numbers)
600 MAMARONECK AVENUE, HARRISON, NEW YORK 10528 (914) 698-0600 (Address,
including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOHN L. LEE, SECRETARY AND GENERAL COUNSEL
ICON Capital Corp.
600 Mamaroneck Avenue
Harrison, New York 10528
(914) 698-0600
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Ross Pascal, Esq.
Day, Berry & Howard LLP
260 Franklin Street
Boston, Massachusetts 02109
(counsel to registrants)
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This Post-Effective Amendment to the Registration Statement shall
hereafter become effective in accordance with Section 8(c) of the Securities
Act of 1933, as amended, or on such date as the Commission, acting pursuant to
said Section 8(c), may determine.
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PAGE 1 of ________ PAGES EXHIBIT INDEX IS ON PAGE ________
<PAGE>
ICON INCOME FUND EIGHT
Cross Reference Sheet Required by Item 501(b) of Regulation S-K
Item Number and Caption Location in Prospectus
1. Forepart of the Registration Cover Pages of Registration
Statement
Statement and Outside Front and Prospectus
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Page; Back Page
Cover Pages of Prospectus
3. Summary Information, Risk Summary of the Offering; Risk
Factors
Factors and Ratio of Earnings to
Fixed Charges
4. Use of Proceeds Sources and Uses of Offering Proceeds;
Summary of Compensation; Investment
Objectives and Policies
5. Determination of Offering Price *
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Cover Pages; Plan of Distribution
9. Description of Securities to be Cover Pages; Summary of
the Offering;
Registered Summary of the Partnership Agreement;
Partnership Agreement
10. Interests of Named Experts Legal Matters; Experts
and Counsel
11. Information with Respect to Summary of the Offering;
Management;
the Registrant Investment Objectives and Policies;
Summary of the Partnership Agreement;
Financial Statements
12. Disclosure of Commission Fiduciary Responsibility;
Position on Indemnification Partnership Agreement
for Securities Act Liabilities
- ---------------------
* Omitted because the item is inapplicable or the answer is negative.
<PAGE>
ICON INCOME FUND EIGHT A L.P.
SUPPLEMENT NO. 4
DATED APRIL 30, 1999
TO PROSPECTUS DATED SEPTEMBER 23, 1998
This Supplement No. 4 dated April 30, 1999 ("Supplement No. 4") updates and
revises the prospectus (the "Prospectus") dated September 23, 1998 as previously
supplemented by Supplement No. 1 dated January 8, 1999 ("Supplement No. 1"),
Supplement No. 2 dated January 29, 1999 ("Supplement No. 2") and Supplement No.
3 dated April 14, 1999 ("Supplement No. 3".) This Supplement No. 4 forms a part
of, and must be accompanied or preceded by the Prospectus and incorporates all
changes made to the Prospectus by Supplement No. 1, Supplement No. 2 and
Supplement No. 3. Capitalized terms used in this Supplement No. 4 and not
defined in this Supplement No. 4 have the meanings specified in the Prospectus.
Supplement No. 4 describes the current status of the Offering and equipment
acquisitions, changes in the management of the General Partner, a name change
in the EXPERTS section of the Prospectus and updates certain financial
information of the General Partner and the Partnership.
STATUS OF THE OFFERING AND EQUIPMENT ACQUISITION EFFORTS
The Offering commenced on September 23, 1998. As of April 28, 1999, investor
closings have been held reflecting the sale of 300,852.35 Units ($30,085,235) to
1,461 Limited Partners (exclusive of the Initial Limited Partner which has
withdrawn in accordance with the procedures described in the Prospectus), which
leaves a maximum of 449,147.65 Units ($44,914,765) available for sale. In view
of these closings, the material in the Prospectus on pages 80-81 under the
heading "PLAN OF DISTRIBUTION - Segregation of Subscription Payments" should be
considered revised because the Minimum Offering required to release the general
investor funds from the Escrow Account and the special amount needed to release
Pennsylvania funds from the Escrow Account have been met.
Included with this Supplement No. 4 is a summary of the equipment acquisition,
leasing and financing efforts of the Partnership; details of the transactions
representing approximately ten percent or more of the offering proceeds raised
to date are provided below.
Amazon.com, Inc.
Amazon.com, Inc. ("Amazon.com"), an online retailer mainly selling books,
compact disks, video and audio tapes, and more recently prescription drugs via
the affiliate Drugstore.com, has leased $7,687,321 of information systems and
network server equipment with a primary lease term ending March 30, 2002.
Amazon.com sells to the global general public via the Internet with (according
to the Company) more than 3 million book titles and about 225,000 music titles
that are sold to approximately 6.2 million customer accounts. The company
completed its initial public offering in May 1997, and is currently traded on
the NASDAQ market system.
America West Airlines, Inc.
America West Airlines, Inc. ("America West"), believed to be the ninth largest
commercial air carrier in the United States as measured by passenger
enplanement, is leasing two Boeing 737-200 Advanced aircraft which the
Partnership acquired in March 1999 with a gross purchase price of $13,699,000
and a primary lease term ending December 2003. America West has hubs in Phoenix,
Las Vegas and Columbus, Ohio and serves both domestic and international
destinations.
<PAGE>
BP Amoco Plc
The Partnership acquired a 115 foot tugboat and a 414 foot, 70,000 barrel tank
barge on charter to Keystone Great Lakes, Inc., whose obligations are ultimately
guaranteed by BP Amoco Plc. The Vessels had a gross purchase price of
$13,310,245 with a primary lease term ending January 1, 2003. BP Amoco Plc is
one of the world's largest oil companies.
Oxford Health Plans, Inc.
Oxford Health Plans, Inc. ("Oxford") has leased various pieces of information
systems equipment under primary leases ending December 31, 2001. This equipment
enables the processing and storage of data and had a gross purchase price of
$17,879,210. Oxford is one of the largest managed healthcare providers in the
United States providing health benefit plans. The company's product lines
include traditional health maintenance organizations, point-of-service plans,
third-party administration of employer funded benefit plans, Medicare and
Medicaid plans, and dental plans.
Portland General Electric Company
Portland General Electric Company ("Portland General"), an electric utility
engaged in the generation, purchase, transmission, distribution and sale of
electricity in the State of Oregon and servicing 54 cities including Portland
and Salem, is leasing a coal unloading and handling facility (the "Facility")
which was acquired by the Partnership in December 1998. The Facility had a gross
purchase price of $28,244,464 with a primary lease term ending January 23, 2005.
It serves Portland General's coal fired power-generating plant located in
Boardman, Oregon, the second largest plant in Portland General's system believe
to represent 15.6% of Portland General's total energy generating capacity.
Portland General is a wholly-owned subsidiary of Enron Corp.
Sabena SA
Sabena SA ("Sabena") has leased rotables used in the maintenance of aircraft
with a gross purchase price of $3,067,695 and a primary lease term ending March
30, 2002. Rotables are serialized aircraft components that can be overhauled,
repaired and placed back into service in an aircraft; some examples of rotables
include instruments, accessories and flight management computers. Sabena is the
Belgian flag carrier airline which provides service to many European and Asian
destinations; Swissair now owns 49.5% of Sabena. In Europe, Sabena has
partnership arrangements with 15 airlines.
CHANGES IN MANAGEMENT
Paul B. Weiss, described in the Prospectus as Vice Chairman and Executive
Vice President of the General Partner, is now Vice Chairman and President.
Beaufort J. B. Clarke is now Chairman, Chief Executive Officer and Director of
the General Partner.
On December 15, 1998 Gary N. Silverhardt resigned his position as Senior Vice
President and Chief Financial Officer of the General Partner. Kevin F. Redmond
has assumed the duties of Chief Financial Officer of the General Partner. Prior
to his present position, Mr. Redmond was Vice President and Controller of the
General Partner, Manager of Accounting at NationsCredit Corp. and Audit Manager
with the accounting firm of Deloite & Touche.
In view of the management changes described above, the material appearing in
the Prospectus under the heading "MANAGEMENT" on pages 38 - 40 of the Prospectus
should be considered revised accordingly.
<PAGE>
EXPERTS
KPMG Peat Marwick LLP now operates under the name KPMG LLP. Accordingly, the
material appearing in the Prospectus under the heading "EXPERTS" on page 87 of
the Prospectus that refers to KPMG Peat Marwick LLP should be considered revised
to refer to KPMG LLP.
The audited financial statements of ICON Income Fund Eight A L.P. as of
December 31, 1998 and for the period July 9, 1997 (date of inception) to
December 31, 1998 have been included in this Supplement No. 4 in reliance upon
the reports of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, upon the authority of said firm as experts in accounting and
auditing.
- -------------------------------------------------------------------------------
ICON Income Fund Eight A L.P.
- -------------------------------------------------------------------------------
The following sets forth all of the completed equipment acquisition, leasing
and financing efforts of the Partnership at April 30, 1999.
Amazon.com, Inc. America West Airlines, Inc.
Lease Financing of: Information Lease Financing of:737-200 Aircraft (2)
Systems&Network Server Equipment
Lease Term: 3 years Lease Term: 4.75 years
Equipment Cost:$ 7,687,321 Equipment Cost: $ 13,699,000
BP Amoco Plc Oxford Health Plans, Inc.
Lease Financing of:Tugboat and
Oil Barge Lease Financing of:Information Systems
Lease Term: 46 months Lease Term: 3 years
Equipment Cost:$ 13,310,245 Equipment Cost:$17,879,210
PETsMART, Inc. Pharmaprint, Inc.
Lease Financing of:Furniture
& Fixtures Lease Financing of:Manufacturing Equipment
Lease Term: 3 to 4 years Lease Term: 4 years
Equipment Cost:$ 2,503,322 Equipment Cost: $ 2,223,995
Portland General Electric Company Sabena SA
Lease Financing of:Coal Unloading Lease Financing of: Aircraft Rotables
& Handling Facility
Lease Term: 6 years Lease Term: 3 years
Equipment Cost:$ 28,244,464 Equipment Cost: $ 3,067,695
Total
Equipment Cost: $ 88,615,252
<PAGE>
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1998
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
ICON Income Fund Eight A L.P.:
We have audited the accompanying consolidated balance sheet of ICON Income Fund
Eight A L.P. (a Delaware limited partnership) as of December 31, 1998, and the
related consolidated statement of operations, changes in partners' equity, and
cash flows for the period July 9, 1997 (date of inception) to December 31, 1998.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Income Fund
Eight A L.P. as of December 31, 1998, and the results of its operations and its
cash flows for the period July 9, 1997 (date of inception) to December 31, 1998,
in conformity with generally accepted accounting principles.
/s/ KPMG LLP
--------------------------------------
KPMG LLP
March 12, 1999
New York, New York
<PAGE>
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Balance Sheet
December 31, 1998
Assets
Cash ......................................................... $ 2,283,067
------------
Investment in finance leases
Minimum rents receivable .................................. 42,719,705
Estimated unguaranteed residual values .................... 14,931,068
Initial direct costs ...................................... 1,413,835
Unearned income ........................................... (14,262,754)
------------
44,801,854
Other assets ................................................. 44,658
Total assets ................................................. $ 47,129,579
============
Liabilities and Partners' Equity
Notes payable - non-recourse ................................. $ 28,758,019
Note payable - line of credit ................................ 5,000,000
Accounts payable - General Partner and affiliate, net ........ 1,232,922
Accounts payable - other ..................................... 172,918
Minority interests in consolidated joint venture ............. 170,880
------------
35,334,739
Commitments and Contingencies
Partners' equity
General Partner ........................................... 618
Limited partners (136,786.33 units
outstanding, $100 per unit original issue price) ........ 11,794,222
------------
Total partners' equity .................................. 11,794,840
Total liabilities and partners' equity ....................... $ 47,129,579
============
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Statement of Operations
For the Period July 9, 1997 (date of inception) to December 31, 1998
Revenues
Finance income ............................................. $23,869
Interest income and other .................................. 23,129
-------
Total revenues ............................................. 46,998
Expenses
General and administrative ................................. 10,673
Interest ................................................... 4,590
Amortization of initial direct costs ....................... 3,179
Administrative expense
reimbursements - General Partner ......................... 956
Management fees - General Partner .......................... 395
Total expenses ............................................. 19,793
-------
Net income .................................................... $27,205
=======
Net income allocable to:
Limited partners ........................................... $26,933
General Partner ............................................ 272
-------
$27,205
=======
Weighted average number of limited
partnership units outstanding .............................. 95,236
=======
Net income per weighted average
limited partnership unit ................................... $ .28
=======
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Statement of Changes in Partners' Equity
For the Period from July 9, 1997 (date of inception) to December 31, 1998
<TABLE>
Limited Partner Distributions
-----------------------------
Return of Investment Limited General
Capital Income Partners Partner Total
--------- ---------- -------- ------- -----
(Per weighted average unit)
<S> <C> <C> <C>
Initial partners'
capital contribution
May 6, 1998 $ 1,000 $ 1,000 $ 2,000
Refund of initial
limited partners'
capital contribution (1,000) - (1,000)
Proceeds from issuance
of limited partnership
units (136,786.33 units) 13,678,633 13,678,633
Sales and offering expenses (1,846,616) (1,846,616)
Cash distributions to partners $.40 $.28 (64,728) (654) (65,382)
Net income 26,933 272 27,205
------------ ------- ------------
Balance at
December 31, 1998 $ 11,794,222 $ 618 $ 11,794,840
============ ======= ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Statement of Cash Flows
For the Period July 9, 1997 (date of inception) to December 31, 1998
Cash flows from operating activities:
Net income .................................................. $ 27,205
------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Finance income portion of receivables paid directly
to lenders by lessees ................................... (6,266)
Interest expense on non-recourse financing paid
directly by lessees ..................................... 4,590
Amortization of initial direct costs ...................... 3,179
Changes in operating assets and liabilities:
Collection of principal - non-financed receivables ...... 47,915
Other assets ............................................ (44,658)
Minority interests in consolidated joint venture ........ 170,880
Accounts payable to General Partner and affiliates, net . 1,232,922
Accounts payable - other ................................ 172,918
Other, net .............................................. 1,392
------------
Total adjustments ..................................... 1,582,872
------------
Net cash provided by operating activities ............... 1,610,077
------------
Cash flows from investing activities:
Equipment and receivables purchased ......................... (18,479,739)
Initial direct costs ........................................ (1,417,014)
------------
Net cash used in investing activities ................... (19,896,753)
------------
Cash flows from financing activities:
Initial partners' capital contribution ...................... 2,000
Issuance of limited partnership units,
net of offering expenses .................................. 11,832,017
Proceeds from note payable - line of credit ................. 5,000,000
Proceeds from sale of receivables ........................... 3,801,108
Cash distributions to partners .............................. (65,382)
------------
Net cash provided by financing activities ............... 20,569,743
------------
Net increase in cash ........................................... 2,283,067
Cash at beginning of the period ................................ --
------------
Cash at end of year ............................................ $ 2,283,067
============
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Consolidated Statement of Cash Flows (continued)
Supplemental Disclosure of Cash Flow Information
- ------------------------------------------------
For the period ended December 31, 1998, non-cash activities included the
following:
Fair value of equipment and receivables purchased for debt .... $(28,753,429)
Non-recourse notes payable assumed in purchase price .......... 28,753,429
------------
$ -
============
See accompanying notes to consolidated financial statements.
<PAGE>
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1998
1. Organization
ICON Income Fund Eight A L.P. (the "Partnership") was formed on July 9,
1997 as a Delaware limited partnership with an initial capitalization of $2,000.
It was formed to acquire various types of equipment, to lease such equipment to
third parties and, to a lesser degree, to enter into secured financing
transactions. The Partnership's maximum offering is $75,000,000. The Partnership
commenced business operations on its initial closing date, October 14, 1998,
with the admission of 12,000 limited partnership units at $100 per unit
representing $1,200,000 of capital contributions. As of December 31, 1998,
124,786.33 additional units had been admitted into the Partnership with
aggregate gross proceeds of $12,478,633 bringing the total admission to
136,786.33 units totaling $13,678,633 in capital contributions.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner will manage and
control the business affairs of the Partnership's equipment, leases and
financing transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, has and will
receive an underwriting commission on the gross proceeds from sales of all
units. The total underwriting compensation to be paid by the Partnership,
including underwriting commissions, sales commissions, incentive fees, public
offering expense reimbursements and due diligence activities will be limited to
13.5% of gross proceeds up to $25,000,000, 13.0% of gross proceeds from
$25,000,000 to $50,000,000 and 12.5% of gross offering proceeds from $50,000,000
to $75,000,000. Such offering expenses aggregated $1,846,616 (including $752,325
paid to the General Partner or its affiliates (See Note 6) and were charged
directly to limited partners' equity.
Profits, losses, cash distributions and disposition proceeds will be
allocated 99% to the limited partners and 1% to the General Partner until each
limited partner has received cash distributions and disposition proceeds
sufficient to reduce its adjusted capital contribution account to zero and
receive, in addition, other distributions and allocations which would provide a
10% per annum cumulative return on its outstanding adjusted capital contribution
account. After such time, the distributions will be allocated 90% to the limited
partners and 10% to the General Partner.
2. Significant Accounting Policies
Basis of Accounting and Presentation - The Partnership's records are
maintained on the accrual basis. The preparation of financial statements in
conformity with generally accepted accounting principles requires the General
Partner's management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates. In addition, management is required to disclose contingent
assets and liabilities.
Consolidation - The consolidated financial statements include the accounts
of the Partnership and its majority owned subsidiary, ICON Boardman Funding
L.L.C. ("ICON BF"). All inter-company accounts and transactions have been
eliminated. The Partnership accounts for its interests in less than 50% owned
joint ventures under the equity method of accounting. In such cases, the
Partnership's original investments are recorded at cost and adjusted for its
share of earnings, losses and distributions thereafter.
<PAGE>
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Leases - The Partnership accounts for owned equipment leased to third
parties as finance leases. For finance leases, the Partnership records, at the
inception of the lease, the total minimum lease payments receivable, the
estimated unguaranteed residual values, the initial direct costs related to the
leases and the related unearned income. Unearned income represents the
difference between the sum of the minimum lease payments receivable plus the
estimated unguaranteed residual minus the cost of the leased equipment. Unearned
income is recognized as finance income over the terms of the related leases
using the interest method. Initial direct costs of finance leases are
capitalized and are amortized over the terms of the related leases using the
interest method. Each lease is expected to provide aggregate contractual rents
that, along with residual proceeds, return the Partnership's cost of its
investments along with investment income.
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, except for lease related instruments. Separate disclosure of fair
value information as of December 31, 1998 with respect to the Company's assets
and certain liabilities is not provided because (i) SFAS No. 107 does not
require disclosures about the fair value of lease arrangements and (ii) the
carrying value of financial assets, other than lease related investments, and
certain payables approximates market value and (iii) fair value information
concerning certain non-recourse debt obligations is not practicable to estimate
without incurring excessive costs to obtain all the information that would be
necessary to derive a market rate.
Impairment of Estimated Residual Values - The Partnership follows Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The Partnership's policy with respect to impairment of estimated residual
values is 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 Partnership'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 Partnership'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 their rental payments directly to the lender and the Partnership
does not recover its residual until the non-recourse note obligation is repaid
in full.
The Partnership measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Partnership from release or resale of the equipment. Generally,
quoted market prices are used as the basis for measuring whether an impairment
loss should be recognized.
Income Taxes - No provision for income taxes has been made as the liability
for such taxes is that of each of the partners rather than the Partnership.
<PAGE>
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
New Accounting Pronouncements - In June 1998 the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires that an entity recognize all derivative instruments as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
SFAS No. 133 is effective for all quarters of fiscal years beginning after June
15, 1999. The adoption of SFAS No. 133 is not expected to have a material effect
on the Partnership's net income, partners' equity or total assets.
3. Investment in Joint Venture
The Partnership and affiliates formed the joint venture discussed below for
the purpose of acquiring and managing various assets.
ICON Boardman Funding L.L.C.
In December 1998 the Partnership and three affiliates, ICON Cash Flow
Partners, L.P., Series C ("Series C"), ICON Cash Flow Partners L.P. Six ("L.P.
Six") and ICON Cash Flow Partners L.P. Seven ("L.P. Seven") formed ICON Boardman
Funding L.L.C. ("ICON BF"), for the purpose of acquiring a lease with Portland
General Electric. The purchase price totaled $27,421,810, and was funded with
cash and non-recourse debt assumed in the purchase price. The Partnership,
Series C, L.P. Six and L.P. Seven received a 98.5%, .5%, .5% and .5% interest,
respectively, in ICON BF. The Partnership's financial statements include 100% of
the assets and liabilities of ICON BF. Series C, L.P. Six and L.P. Seven's
investments in ICON BF have been reflected as "minority interests in joint
venture." Simultaneously with the acquisition of the Portland General Electric
lease by ICON BF, the rent in excess of the senior debt payments was acquired by
L.P. Six for $3,801,108. No gain or loss was recognized on this transaction.
4. Receivables Due in Installments
Non-cancelable minimum annual amounts due on finance leases are as
follows:
Year
----
1999 $ 11,712,022
2000 8,192,984
2001 7,875,315
2002 3,294,285
2003 3,876,618
Thereafter 7,768,481
--------------
$ 42,719,705
==============
5. Notes Payable
Notes payable consists of notes payable non-recourse, which are being paid
directly to the lenders by the lessees, and note payable-line of credit. The
notes bear interest at rates ranging from 7.49% to 10.0%.
The Partnership and an affiliate, ICON Cash Flow Partners L.P. Seven ("L.P.
Seven") entered into a joint line of credit agreement (the "Facility") with a
lender in December 1998. The maximum amount available under the Facility is
$5,000,000. The Facility is secured by eligible receivables and residuals and
bears interest at the rate of Prime plus one half percent. At December 31, 1998
the Partnership and L.P. Seven had $5,000,000 and $0, respectively, outstanding
under the Facility.
<PAGE>
ICON Income Fund Eight A L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The above notes mature as follows:
Notes Payable Note Payable
Year Non-Recourse Recourse Total
---- ------------ ------------ -----
1999 $10,396,652 $ 5,000,000 $15,396,652
2000 6,272,573 -- 6,272,573
2001 5,286,151 -- 5,286,151
2002 1,861,518 -- 1,861,518
2003 1,880,500 -- 1,880,500
Thereafter 3,060,625 -- 3,060,625
----------- ----------- -----------
$28,758,019 $ 5,000,000 $33,758,019
=========== =========== ===========
6. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the period ended December 31, 1998 were as
follows:
Organization and offering expenses .... $ 478,752 Charged to equity
Underwriting commissions .............. 273,573 Charged to equity
Acquisition fees ...................... 1,417,014 Capitalized
Administrative expense
reimbursements ...................... 956 Charged to operations
Management fees ....................... 395 Charged to operations
----------
$2,170,690
==========
In December 1998 the Partnership and three affiliates, formed ICON Boardman
Funding LLC ("ICON BF"), for the purpose of acquiring a lease with Portland
General Electric. (See Note 3 for additional information relating to the joint
venture.)
7. Tax Information (Unaudited)
The following table reconciles net income for financial reporting purposes
to income for federal income tax purposes for the period ended December 31,
1998:
Net income per financial statements ...................... $ 27,205
Differences due to:
Direct finance leases .................................. 15,665
Depreciation ........................................... (1,995,119)
Provision for losses ................................... --
Loss on sale of equipment .............................. --
Other .................................................. --
-----------
Partnership income for
federal income tax purposes ............................. $(1,952,249)
===========
As of December 31, 1998, the partners' capital accounts included in the
financial statements totaled $11,794,840 compared to the partners' capital
accounts for federal income tax purposes of $11,663,001 (unaudited). The
difference arises primarily from commissions reported as a reduction in the
partners' capital accounts for financial reporting purposes but not for federal
income tax purposes, and temporary differences related to direct finance leases,
depreciation and provision for losses.
<PAGE>
ICON CAPITAL CORP.
Financial Statements
December 31, 1998
(Unaudited)
<PAGE>
ICON CAPITAL CORP.
BALANCE SHEETS
(Unaudited)
<TABLE>
December 31, March 31,
1998 1998
---- ----
ASSETS
<S> <C> <C>
Cash ............................................................. $ 1,368,602 $ 179,403
Receivables from related parties - managed partnerships .......... 268,965 340,990
Receivables from related party ................................... 3,419,495 3,580,727
Prepaid and other assets ......................................... 363,301 226,855
Deferred charges ................................................. 694,383 524,270
Fixed assets and leasehold improvements, at cost, less accumulated
depreciation and amortization of $219,166 and $1,865,232 ....... 1,969,393 758,680
----------- -----------
Total assets ..................................................... $ 8,084,139 $ 5,610,925
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses ............................ $ 2,475,752 $ 1,819,003
Notes payable and capital lease obligations ...................... 1,645,832 2,246,386
Deferred income taxes, net ....................................... 1,271,677 583,436
Deferred gain on sale of furniture and fixtues ................... 887,595 --
----------- -----------
Total liabilities ................................................ 6,280,856 4,648,825
----------- -----------
Commitments and contingencies
Stockholder's equity:
Common stock: no par value; $10 stated
value; authorized 3,000 shares;
issued and outstanding 1,500 shares .......................... 15,000 15,000
Additional paid-in capital ..................................... 716,200 716,200
Retained earnings .............................................. 2,172,083 1,330,900
----------- -----------
2,903,283 2,062,100
Note receivable from stockholder ................................. (1,100,000) (1,100,000)
----------- -----------
1,803,283 962,100
----------- -----------
Total liabilities and stockholders' equity ....................... $ 8,084,139 $ 5,610,925
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
<PAGE>
ICON CAPITAL CORP.
STATEMENTS OF INCOME
For the Nine Months Ended December 31,
(Unaudited)
1998 1997
---- ----
Revenues:
Fees - managed partnerships ....... $10,186,199 $ 8,071,539
Management fees - affiliate ....... 758,129 414,084
Servicing fee ..................... 228,721 --
Interest income and other ......... 35,266 34,770
----------- -----------
Total revenues .................... 11,208,315 8,520,402
----------- -----------
Expenses:
Selling, general and administrative 8,310,345 6,451,292
Amortization of deferred charges .. 1,051,632 390,897
Depreciation and amortization ..... 184,651 270,307
Interest expense .................. 132,263 31,330
----------- -----------
Total expenses .................... 9,678,891 7,143,826
----------- -----------
Income before provision for
income taxes ................... 1,529,424 1,376,576
Provision for income taxes ....... 688,241 619,459
----------- -----------
Net income ....................... $ 841,183 $ 757,117
=========== ===========
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
<PAGE>
ICON CAPITAL CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended December 31, 1998 and
the Years Ended March 31, 1998, 1997 and 1996
(Unaudited)
<TABLE>
Note Total
Common Stock Additional Receivable Stock-
Shares Stated Paid-in Retained from holders'
Outstanding Value Capital Earnings Stockholder Equity
<S> <C> <C> <C> <C> <C> <C>
March 31, 1996 1,500 $15,000 $716,200 $ 889,957 $ - $ 1,621,157
Issuance of
note from stockholder - - - - (1,100,000) (1,100,000)
Net income - - - 2,363,371 - 2,363,371
,
Distributions to Parent - - - (2,203,046) - (2,203,046)
------- ------- -------- ----------- ----------- -----------
March 31, 1997 1,500 15,000 716,200 1,050,282 (1,100,000) 681,482
Net income - - - 1,072,521 - 1,072,521
Distributions to Parent - - - (791,903) - (791,903)
------- ------- -------- ----------- ----------- -----------
March 31, 1998 1,500 15,000 716,200 1,330,900 (1,100,000) 962,100
Net income - - - 841,183 - 841,183
------- ------- -------- ----------- ----------- -----------
December 31, 1998 1,500 $15,000 $716,200 $ 2,172,083 $(1,100,000) $ 2,903,283
======= ======= ======== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
<PAGE>
ICON CAPITAL CORP.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended December 31,
<TABLE>
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income ......................................... $ 841,183 $ 757,117
----------- -----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization ................... 184,651 270,307
Amortization of deferred charges ................ 1,051,632 390,897
Deferred income taxes ........................... 688,241 619,459
Changes in operating assets and liabilities:
Receivables from managed partnerships, net ... 72,025 255,065
Receivables from related party ............... 161,232 (1,255,581)
Prepaid and other assets ..................... (136,446) (53,699)
Increase in deferred charges ................. (1,221,745) (749,862)
Accounts payable and accrued expenses ........ 656,749 (97,128)
Other ........................................ -- 32,491
----------- -----------
Total adjustments .......................... 1,456,340 (393,795)
----------- -----------
Net cash provided by operating activities .......... 2,297,523 363,322
----------- -----------
Cash flows from investing activities:
Purchases of fixed assets and leasehold improvements (443,870) (198,274)
----------- -----------
Net cash used for investing activities ............. (443,870) (198,274)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of furniture and fixtures ....... 1,500,000 --
Repayment of remaining line of credit .............. (2,000,000) --
Principal payments on capital lease obligations .... (164,450) (37,985)
Proceeds from notes payable ....................... -- 1,300,000
Distributions to Parent ........................... -- (1,328,440)
----------- -----------
Net cash used for financing activities ............. (664,450) (66,425)
----------- -----------
Net increase in cash .................................. 1,189,199 98,623
Cash, beginning of period ............................. 179,403 292,524
----------- -----------
Cash, end of period ................................... $ 1,368,602 $ 391,147
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
<PAGE>
ICON CAPITAL CORP.
Notes to Financial Statements
December 31, 1998
(unaudited)
(1) Basis of Accounting and Presentation
The financial statements of ICON Capital Corp., (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 financial position and operating
results for the interim period. Certain information and footnote
disclosures normally included in 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
financial statements should be read in conjunction with the Company's
March 31, 1998 and 1997 audited financial statements. The results of
operations for the nine months ended December 31, 1998 are not
necessarily indicative of the results of operations for the entire
fiscal year ending March 31, 1999.
(2) Income Fund Fees
The Company is the general partner and manager of 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, ICON Cash Flow
Partners L.P. Six, ICON Cash Flow Partners L.P. Seven, and ICON Income
Fund Eight A L.P. (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 earns fees from the Partnerships for the organization and
offering of the Partnership and for the acquisition, management and
administration of their lease portfolios. Organization and offering
fees are earned based on investment units sold and are recognized at
each closing. Acquisition fees on the purchase or origination of
equipment lease transactions 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 earned are based
primarily on gross rental payments. The Company had accounts receivable
due from the Partnerships of $268,965 and $340,990 at December 31, 1998
and March 31, 1998, respectively. Under the Partnership agreements, the
Company is entitled to management fees and reimbursement from the
Partnerships for certain operating and administrative expenses incurred
by it on behalf of the Partnerships.
<PAGE>
ICON CAPITAL CORP.
Notes to Financial Statements - Continued
(3) Notes Payable
Notes payable consisted of the following:
December 31, March 31,
1998 1998
---- ----
Various obligations under capital leases, payable
in monthly installments through March 2002 .... $1,645,832 $ 246,386
Unsecured line of credit, interest at Prime
(8.5% at March 31,1998) On July30, 1998,
the unsecured line of credit was repaid ....... -- 2,000,000
---------- ----------
$1,645,832 $2,246,386
========== ==========
(4) Sale Leaseback
On July 31, 1998 the Company entered into an agreement to sell a portion
of its fixed assets to ICON Receivables Corp. 1998-A ("1998-A") for
$1,500,000. 1998-A simultaneously leased the fixed assets back to the
Company. Under the lease, the Company agreed to pay 60 equal monthly
installments of $31,255 with the first payment due August 4, 1998. The
lease contains a purchase option to purchase the assets at the end of
the term for one dollar ($1.00). The Company treated the transaction as
a sale of assets and established a deferred gain on sale in the amount
of $950,994. The deferred gain is being amortized against depreciation
expenses on a straight line basis over the remaining useful life of the
assets sold. A capital lease obligation was established and the
Company's fixed assets were revalued to reflect their new carrying
value.
<PAGE>
ICON Income Fund Eight
$150,000,000
1,500,000 Units of Limited Partnership Interests (in two
limited partnerships, each having a minimum capitalization of 12,000
Units)
$100.00 Per Unit/Minimum Investment 25 Units ($2,500)
(10 Units ($1,000) for IRAs and Qualified Plans)
ICON Income Fund Eight is an equipment leasing program (the "Program")
consisting of two Delaware limited partnerships (collectively, the
"Partnerships", or, individually, a "Partnership"); ICON Income Fund Eight A
L.P., a Delaware limited partnership, ("ICON Eight A") and ICON Income Fund
Eight B L.P., a Delaware limited partnership, ("ICON Eight B"). Each Partnership
will be formed by ICON Capital Corp. (the "General Partner") immediately prior
to the Offering of its Units. The Partnerships will be separate entities and an
investor will have an interest only in the Partnership in which he purchases
Units. This prospectus describes an investment by investors ("Limited Partners")
in limited partnership interests (or "Units") of a Partnership. Each Partnership
may sell as few as 12,000 or as many as 750,000 of Units.
THESE ARE SPECULATIVE SECURITIES. An investment in Units of the Partnerships
involves certain risks (see "RISK FACTORS", Page 14).
* Limited Partners must rely on the skills, integrity and business expertise
of the General Partner.
* The profitability of an investment in Units cannot be estimated. All
Investment decisions will be made solely by the General Partner.
* The General Partner and its affiliates will receive substantial fees, only
a portion of which is contingent on amounts paid to Limited Partners.
* No public market for Units exists. As a result, Limited Partners may only
be able to resell their Units, if at all, at a discount and should,
therefore, be prepared to hold their Units for the entire life of the
Partnership.
* The General Partner manages similar existing partnerships and this may
give rise to potential conflicts of interest, including a conflict for
management services and available investments.
* There are certain tax risks associated with the Partnerships, including
the possible adverse effects of future tax legislation.
* The Partnerships' ability to realize lease revenues and make cash
distributions is subject to the risk of lessee defaults.
* A portion of the distributions made to date by Prior Public Programs have
been a return of capital (i.e., the money you originally invested).
* Three of the Prior Public Programs, Series A, Series B and Series C
experienced losses in excess or reserves therefor in 1991-92, due
primarily to lessee bankruptcies.
The Partnerships intend to use the funds invested by the Limited Partners,
together with the Partnerships' borrowings, to buy and lease a wide range of
equipment primarily to businesses located in North America and Europe which are
diversified as to industry types and geographic location. The Partnerships may
also provide financing to such companies secured by equipment used in their
businesses. ICON Capital Corp. (the "General Partner") estimates that not less
than 80.40% of the gross amount of funds invested by Limited Partners (the
"Gross Offering Proceeds") will be used to make investments in such equipment
and financings (assuming a Maximum Offering with the maximum intended leverage
permitted in such circumstances of 67%). 1% of Gross Offering Proceeds will be
used to establish a working capital reserve and the balance (of up to 19.60% of
Gross Offering Proceeds) will be used to pay the costs of organizing the
Partnerships offering Units to the public and acquiring the Partnerships'
assets.
It is intended that the Partnerships will (a) make monthly distributions,
primarily to the Limited Partners and to a much lesser extent to the General
Partner, of cash generated by its operations beginning the month following a
Limited Partner's admission to a Partnership and (b) reinvest undistributed net
cash from normal Partnership operations and sale proceeds during their
respective Reinvestment Periods in additional Leases and Financing Transactions.
Thereafter, the Partnerships intend to (x) sell all their assets in an orderly
manner and (y) distribute the cash proceeds to the Limited Partners, and to a
much lesser extent to the General Partner, in accordance with the terms set
forth in this Prospectus. The Offering is presently expected to have a
termination date not later than twelve (12) months from the date of this
Prospectus for ICON Income Fund Eight A L.P., and twelve (12) months thereafter
for ICON Income Fund Eight B L.P.; provided that the General Partner may, in its
sole and absolute discretion, extend the offering of Units in each Partnership
for a further period not more than an additional twelve (12) months. In no event
may the Offering of the Program extend beyond forty-eight (48) months from the
date of this Prospectus. The Offering may terminate sooner than twenty-four (24)
months from the date of this Prospectus if either (i) the General Partner
terminates the Offering earlier or (ii) subscriptions for the Maximum Offering
of 750,000 Units per Partnership are received prior to the end of such period.
See "INVESTMENT OBJECTIVES AND POLICIES". The Partnerships are intended for
income-oriented investment purposes and not as tax shelters. The majority of
their income is expected to be passive activity income for federal income tax
purposes.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
Price Proceeds
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
to Public(1) Sales
Costs(to Partnership(3)
- -------------------------------------------------------------------------------
Per Unit $ 100 $ 10 $ 90
Total (Minimum per Partnership of 12,000 Units)(5) 1,200,000(3)(4)
120,000 1,080,000
Total (Maximum per Partnership of 750,000 Units) 75,000,000(4)
7,500,000 67,500,000
The date of this Prospectus is September 23, 1998 ICON
SECURITIES CORP.
600 Mamaroneck Avenue, Harrison, NY 10528 (914) 698-0600
<PAGE>
Footnotes from Cover Page. All capitalized terms used in these footnotes and
in the balance of this Prospectus are defined in the Glossary that appears in
Section 17 of the Partnership Agreement attached hereto as Exhibit A.
(1) The Gross Unit Price is $100.00, except that officers, employees and
securities representatives of the General Partner, its Affiliates and Selling
Dealers ("Affiliated Limited Partners") may purchase Units for investment
purposes only for the Net Unit Price of $92.00 per Unit. The Partnerships will
incur no obligation to pay any Sales Commissions with respect to such purchases.
The General Partner's and its Affiliates' purchases of Units are limited to a
maximum of 10% of the total Units purchased of each Partnership.
(2) The Partnerships will pay to a Selling Dealer or to the Dealer-Manager
(which is an Affiliate of the General Partner) a Sales Commission of $8.00 (8%
of the Gross Unit Price) for each Unit sold by their respective registered
representatives (except as noted in footnote 1). In addition, the Partnerships
will pay the Dealer-Manager Underwriting Fees of $2.00 (2.0% of Gross Offering
Proceeds of the Partnership in question) for each Unit sold for its services in
managing the Offering and to reimburse it, on a non-accountable basis, for the
wholesaling fees and expenses of the Sponsor.
See "PLAN OF DISTRIBUTION".
(3) Proceeds to the Partnerships are calculated before deduction of:
(a) the O & O Expense Allowance in an amount equal to 3.50% of the first
$25,000,000 of Gross Offering Proceeds, 2.50% of Gross Offering Proceeds over
$25,000,000 but less than $50,000,000 and 1.50% of Gross Offering Proceeds
above $50,000,000. The O & O Expense Allowance is payable to the General
Partner and/or the Dealer-Manager on a non-accountable basis for expenses of
organizing the Partnerships, registering it with federal and state securities
authorities and printing the Prospectus and related legal and accounting
costs and other costs of organizing the Partnership and offering Units to the
public. The O & O Expense Allowance may be less or greater than the General
Partner's actual expenses. The General Partner is responsible to pay
Organizational and Offering Expenses which exceed such Allowance; and
(b) Acquisition Fees in an amount equal to 3.0% (subject to certain
conditions and limitations specified in the Partnership Agreement) of the sum
of (i) the aggregate Purchase Price paid (including indebtedness incurred or
assumed) by the Partnerships for all items of Equipment and (ii) the
principal amount of all financing provided by the Partnerships to Users is
payable to the General Partner for its services and expenses of finding,
evaluating, documenting and acquiring the Partnerships' Investments. See
"COMPENSATION TO THE GENERAL PARTNER AND AFFILIATES".
(4) The amounts shown exclude ten Units ($1,000) in each Partnership that were
purchased by the Original Limited Partner in connection with the organization of
each Partnership and which will be refunded to the Original Limited Partner, and
his Units will be retired, upon the Initial Closing Date. Such amounts also
exclude the excess, if any, of (a) total Units which the General Partner and its
Affiliates are entitled to purchase for their own investment account (a maximum
of 10% of all non-affiliate Unit purchases) over (b) 600 Units ($60,000), the
maximum amount of Unit purchases by the Sponsor which may be counted in
determining whether the Minimum Offering of 12,000 Units has been completed.
Accordingly, of the Minimum Offering of 12,000 Units, only 11,400 Units would
need to be purchased by the general public to satisfy such condition if the
General Partner and its Affiliates purchased 600 Units of such total (as they
are permitted to do).
(5) A minimum of 12,000 Units (the "Minimum Offering") and a maximum of 750,000
Units will be offered in each Partnership. The Offering Period for Units is
presently expected to have a termination date not later than twelve (12) months
from the date of this Prospectus for ICON Eight A, and twelve (12) months
thereafter for ICON Eight B. In no event may the Offering of the Program extend
beyond forty-eight (48) months from the date of this Prospectus. The Offering
will terminate sooner than twenty-four (24) months if either (1) the General
Partner terminates the Offering earlier or (2) subscriptions for the Maximum
Offering of 750,000 Units per Partnership are received prior to the end of such
period. The General Partner in its sole discretion may increase the maximum
number of Units which may be sold in ICON Income Fund Eight B L.P. by the number
of authorized and unsold Units in ICON Income Fund Eight A L.P. (including any
Units which were not sold because of the failure of ICON Income Fund Eight A
L.P. to receive acceptable subscription for the minimum number of Units).
NOTICE TO PENNSYLVANIA INVESTORS: BECAUSE THE MINIMUM CLOSING AMOUNT IS LESS
THAN $3,750,000 (A MAXIMUM TO MINIMUM OFFERING RATIO OF 20:1) YOU ARE CAUTIONED
TO CAREFULLY EVALUATE THE PROGRAM'S ABILITY TO FULLY ACCOMPLISH ITS STATED
OBJECTIVES AND TO INQUIRE AS TO THE CURRENT DOLLAR VOLUME OF PROGRAM
SUBSCRIPTIONS.
THE USE OF FORECASTS IN THIS OFFERING IS PROHIBITED. ANY REPRESENTATIONS TO
THE CONTRARY AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE AMOUNT OR CERTAINTY
OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCE WHICH MAY FLOW FROM AN
INVESTMENT IN THIS PROGRAM IS NOT PERMITTED.
THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND RESALE, AND MAY
ONLY BE TRANSFERRED OR RESOLD IN CONFORMITY WITH THE AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF THE PARTNERSHIPS AND IN COMPLIANCE WITH
APPLICABLE LAW.
<PAGE>
General
Investors are subject to certain suitability standards described herein.
The General Partner will generally not have direct knowledge of the
investor's financial situation so it will be relying upon the investor's
representations concerning his financial situation in concluding that such
suitability standards will be met. In addition, Soliciting Dealers are
obligated to have reasonable grounds to believe, on the basis of information
obtained from the investor concerning his investment objectives, financial
situation and any other information known by it concerning the investor, that
an investment in a Partnership is suitable for that investor. Consequently,
it is important that the information provided by the investor to the
Soliciting Dealer and the General Partner be complete and accurate.
Investor Suitability -- To be eligible to purchase Units, all prospective
investors are required to comply with the Partnership's basic suitability
requirements. In general, prospective owners of Units must either have:
(i) both (A) a net worth of not less than $30,000 (determined
exclusive of the net fair market value of (a) his or her home, (b) home
furnishings and (c) personal automobiles) and (B) $30,000 of annual
gross income; or
(ii) a net worth of at least $75,000 (determined as above).
Certain State Requirements. Suitability. The following States have
established more stringent investor suitability standards than those
established by the Partnership: Alabama, Arizona, Arkansas, California,
Indiana, Iowa, Kansas, Massachusetts, Minnesota, Nebraska, New Hampshire,
New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon,
Pennsylvania, South Dakota, Texas, Vermont and Washington. Units will only
be sold to residents of such jurisdictions who meet such more stringent
standards. Any proposed transferee of a Unit who is a resident of such
States must also meet such suitability standards.
Instead of the foregoing standards, to be admitted to the Partnership as a
Limited Partner a subscriber (or fiduciary acting on his, her or its behalf)
who is a resident Alabama, Arizona, Arkansas, California, Indiana, Iowa,
Kansas, Minnesota, Nebraska, New Hampshire, New Mexico, North Dakota, Ohio,
Oklahoma, Oregon, Pennsylvania, South Dakota, Texas, Vermont and Washington
must (1) either have (a) a net worth of not less than $45,000 (determined
exclusive of the net fair market value of (i) his or her home, (ii) home
furnishings and (iii) personal automobiles) plus (b) $45,000 of annual gross
income or (2) a net worth of at least $150,000 (determined as above) and a
subscriber (or fiduciary acting on his, her or its behalf).
Residents of Massachusetts and North Carolina must (1) either (a) have a
net worth of not less than $60,000 (determined exclusive of the net fair
market value of (i) his or her home, (ii) home furnishings and (iii)
personal automobiles) plus (b) $60,000 of annual gross income or (2) a net
worth of at least $225,000 (determined as above) and a subscriber (or
fiduciary acting on his, her or its behalf). (See "INVESTOR SUITABILITY AND
MINIMUM INVESTMENT REQUIREMENTS; SUBSCRIPTION PROCEDURES" and the
Subscription Agreement for a more detailed explanation of any specific state
suitability requirements.)
An investment by each subscriber residing in Pennsylvania may not exceed
10% of his or her net worth (exclusive of home, home furnishings and
automobiles). An investment by each subscriber residing in Ohio may not
exceed 10% of his or her liquid net worth.
Who Should Invest -- You should only invest in the Partnerships if you (a)
are prepared to make an investment for the entire Reinvestment Period seven
(7) years from the date of this Prospectus as well as the additional
Liquidation Period of from twelve (12) to thirty-six (36) months thereafter,
(b) have no need for liquidity of such investment (except as may be provided
by monthly cash distributions) and (c) are prepared to assume the
substantial risks associated with such investment. An investment in Units is
not suitable for investors who will need access to their Capital
Contribution during the term of the Partnerships or for whom the projected
monthly cash distributions are an essential source of funds to pay their
necessary living expenses. An investment also may produce "unrelated
business taxable income" for pension, profit-sharing and other Qualified
Plans in excess of applicable exemptions. Each potential investor should
review the information appearing under the captions "RISK FACTORS," "FEDERAL
INCOME TAX CONSEQUENCES" and "INVESTOR SUITABILITY AND MINIMUM INVESTMENT
REQUIREMENTS; SUBSCRIPTION PROCEDURES" with particular care and should
consult his or her tax and investment advisors to determine (1) if an
investment in Units is appropriate for him or her in light of his particular
tax and investment situation and (2) if so, what portion of his or her total
investment portfolio may prudently be invested in Units.
Minimum Investment -- The minimum investment by an investor (whether by
subscription or through resale) is 25 Units (other than residents of
Nebraska, for whom the minimum investment is 50 Units) except IRAs and
Qualified Plans for which the minimum investment is 10 Units.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY OF THE OFFERING.................................... 8
Investment Objectives and Policies...................... 8
Summary of Certain Risk Factors ....................... 9
Sources and Uses of Offering Proceeds and Related Indebtedness
10
Compensation to the General Partner and Affiliates .... 10
Conflicts of Interest .................................. 11
Fiduciary Responsibility................................ 11
Other Offerings by the General Partner and its Affiliates 11
Management; Financial Statements of the General Partner and of the
Partnership................................................ 11
Federal Income Tax Considerations....................... 12
Capitalization ......................................... 12
Summary of Partnership Agreements....................... 12
Transfer of Units....................................... 12
Plan of Distribution......................................12
Fiscal Year............................................. 14
Glossary of Terms....................................... 14
RISK FACTORS............................................... 14
Operating Risks......................................... 14
Partnership Risks and Investment Risks.................. 14
Federal Income Tax Risks and ERISA Risks................ 20
SOURCES AND USES OF OFFERING PROCEEDS AND RELATED INDEBTEDNESS 22
COMPENSATION TO THE GENERAL PARTNER AND AFFILIATES......... 23
Organization and Offering Stage......................... 24
Operational Stage....................................... 25
Interest in Partnership Profits or Losses............... 28
CONFLICTS OF INTEREST...................................... 30
Lack of Separate Legal Representation and Lack of Arm's Length
Negotiation
of the Program Agreements............................. 30
Compensation of the General Partner and Affiliates...... 30
Effect of Leverage on Compensation Arrangements......... 31
Competition With the General Partner and its Affiliates. 31
Determination of Reserves and Liability of the General Partner for
Partnership Obligations.................................... 32
Joint Ventures.......................................... 32
Lease Referrals......................................... 32
Participation of a Securities Sales Affiliate in this Offering
33
General Partner to Act as Tax Matters Partner........... 33
FIDUCIARY RESPONSIBILITY................................... 33
General................................................. 33
Conflicts............................................... 33
Indemnification of the General Partner, Dealer-Manager and Selling
Dealers....................................................... 34
Investor Remedies....................................... 34
OTHER OFFERINGS BY THE GENERAL PARTNER AND ITS AFFILIATES.. 35
Prior Public Programs................................... 35
STATUS OF THE OFFERING..................................... 37
CERTAIN RELATIONSHIPS WITH THE PARTNERSHIPS................ 38
<PAGE>
Page
MANAGEMENT................................................. 38
The General Partner..................................... 38
Affiliates of the General Partner....................... 40
INVESTMENT OBJECTIVES AND POLICIES......................... 40
General................................................. 40
Acquisition Policies and Procedures..................... 41
Leases and Financing Transactions....................... 41
Transaction Approval Procedures ....................... 43
Credit Review Procedures................................ 44
Equipment............................................... 44
Portfolio Acquisitions.................................. 45
Other Investments....................................... 45
Interim Financing ......................................45
CASH DISTRIBUTIONS TO PARTNERS ............................ 46
Monthly Cash Distributions.............................. 46
First Cash Distribution to the Limited Partners......... 47
Reinvestment of Undistributed Cash in Additional Equipment, Leases and
Financing Transactions................................ 47
Distribution of Cash from Sales of the Partnership's Investment
........................................................... 48
Reinvestment of Distribution ........................ 48
FEDERAL INCOME TAX CONSEQUENCES............................ 48
Summary................................................. 48
Opinion of Tax Counsel.................................. 49
Classification as a Partnership......................... 49
Publicly Traded Partnerships............................ 50
Taxation of Distributions............................... 51
Partnership Income Versus Partnership Distributions..... 51
Allocations of Profits and Losses....................... 52
Deductibility of Losses: Passive Losses, Tax Basis and "At Risk"
Limitation................................................. 53
Deductions for Organizational and Offering Expenses; Start-up Costs
54
Tax Treatment of the Leases............................. 54
Cost Recovery........................................... 55
Limitations on Cost Recovery Deductions................. 55
Deferred Payment Leases................................. 56
Sale or Other Disposition of Partnership Property....... 57
Sale or Other Disposition of Partnership Interest....... 57
Treatment of Cash Distributions Upon Redemption......... 58
Gifts of Units.......................................... 58
Consequence of No Section 754 Election.................. 58
Tax Treatment of Termination of the Partnership Pursuant to the
Partnership Agreement...................................... 58
Audit by the Service.................................... 59
Alternative Minimum Tax................................. 59
Interest Expense........................................ 60
Self-Employment Income and Tax.......................... 60
Maximum Individual Tax Rates............................ 61
Section 183............................................. 61
Foreign Source Taxable Income ........................ 61
Registration, Interest, and Penalties................... 62
State and Local Taxation................................ 63
Foreign Investors....................................... 63
Tax Treatment of Certain Trusts and Estates............. 63
Taxation of Employee Benefit Plans and Other Tax-Exempt Organizations
63
Corporate Investors..................................... 63
<PAGE>
Page
INVESTMENT BY QUALIFIED PLANS.............................. 64
Fiduciaries under ERISA................................. 64
Prohibited Transactions Under ERISA and the Code........ 64
Plan Assets............................................. 65
Other ERISA Considerations.............................. 66
CAPITALIZATION............................................. 66
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION............. 67
Liquidity and Capital Resources......................... 67
Operations.............................................. 67
SUMMARY OF THE PARTNERSHIP AGREEMENT....................... 68
Establishment and Nature of the Partnership............. 68
Name and Address........................................ 68
Purposes and Powers..................................... 68
Duration of Partnership................................. 68
Capital Contributions................................... 68
Powers of the Partners.................................. 69
Limitations on Exercise of Powers by the General Partner 69
Indemnification of the General Partner.................. 71
Liability of Partners................................... 71
Non-assessability of Units.............................. 71
Distribution of Distributable Cash From Operations
and Distributable Cash From Sales..................... 71
Allocation of Profits and Losses........................ 72
Withdrawal of the General Partner....................... 73
Transfer of Units....................................... 73
Dissolution and Winding up.............................. 73
Access to Books and Records............................. 74
Meetings and Voting Rights of Limited Partners.......... 74
Amendments.............................................. 74
TRANSFER OF UNITS.......................................... 75
Withdrawal ............................................. 75
Restrictions on the Transfer of Units................... 75
Limited Right of Presentment for Redemption of Units.... 77
Certain Consequences of Transfer........................ 78
REPORTS TO LIMITED PARTNERS................................ 78
Annual Reports.......................................... 78
Quarterly Reports....................................... 79
PLAN OF DISTRIBUTION....................................... 79
Segregation of Subscription Payments ................... 80
INVESTOR SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS;
SUBSCRIPTION PROCEDURES.................................. 81
General Suitability Considerations...................... 81
State Requirements Concerning Minimum Investment and Minimum Investor
Net Worth/Income...................................... 81
Subscriber Representations.............................. 83
Citizenship ............................................ 85
Special Limit on Ownership of Units by Benefit Plans.... 85
Minimum Investment and Suitability Standards............ 85
How to Subscribe........................................ 86
Admission of Partners; Closings......................... 86
SALES MATERIAL............................................. 86
LEGAL MATTERS.............................................. 87
Page
EXPERTS.................................................... 87
ADDITIONAL INFORMATION..................................... 87
TABULAR INFORMATION CONCERNING PRIOR PUBLIC PROGRAMS....... 87
FINANCIAL STATEMENTS....................................... 88
GLOSSARY - Section 17 of the Limited Partnership Agreement
EXHIBITS:
A. Amended and Restated Agreement of Limited Partnership A-1
B. Prior Performance Tables for the Prior Public Programs B-1
C. Subscription Documents.............................. C-1
<PAGE>
SUMMARY OF THE OFFERING
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and in the Exhibits hereto.
See the Glossary contained in Section 17 of the Amended and Restated Agreement
of Limited Partnership attached as Exhibit A (the "Partnership Agreement") to
this Prospectus for the definition of certain terms used in this Summary and
throughout this Prospectus.
ICON Income Fund Eight is an equipment leasing program consisting of two
Delaware limited partnerships (collectively, the "Partnerships" and,
individually, a "Partnership") the first of which was formed on July 9, 1997
primarily to engage in the business of leasing Equipment or acquiring residual
interests thereon and providing financing, secured by equipment, to companies
determined to be creditworthy by the General Partner as well as to engage in any
other businesses which are consistent with the Partnership's objectives and in
which the Partnership may lawfully engage. The General Partner expects that most
of the Net Offering Proceeds will be invested in Equipment which is subject to
Leases which produce passive income but that a portion of Proceeds will be
invested in Financing Transactions as well as Leases or other transactions which
produce portfolio income if the General Partner, in its sole discretion,
believes such Investments to be in the best interests of each of the
Partnerships. See "SUMMARY OF THE PARTNERSHIP AGREEMENT". Each of the
Partnerships is expected to complete its Reinvestment Period seven (7) years
from the date of the commencement of the Offering in each Partnership provided
that such period may be extended at the sole and absolute discretion of the
General Partner. The General Partner will then liquidate each of the
Partnerships' Investments in the ordinary course of business within a further
period ending eight (8) years but no later than ten (10) years after the date of
this Prospectus. Investors should therefor expect to hold their Units for the
full term of the Partnership in question (i.e. from 7 to 10 years from the time
they invest).
Investment Objectives and Policies
The Partnerships intend to acquire and lease various types of Equipment to
businesses primarily within the United States and also in other countries
expected to be primarily in North America and Europe and in every case
determined by the General Partner to be politically stable and to have
suitable legal systems (see "RISK FACTORS--Partnership Risks and Investment
Risks--Risks Associated with Foreign Investments; Lack of U.S.
Jurisdiction"). The Partnerships will also provide financing to these same
types of businesses secured by tangible and intangible personal property and
other or additional collateral determined by the General Partner to be
sufficient in amounts and types to provide adequate security for the current
and future obligations of such borrowers (see "Investment Objectives and
Policies--Leases and Financing Transactions").
The terms of the Partnerships' Leases and Financing Transactions are
expected to range from two to seven years provided that such period may be
extended at the sole and absolute discretion of the General Partner. Each
such investment is expected to provide for aggregate, basic contractual
payments (rents in the case of Leases and debt service in the case of
Financing Transactions) together with expected residual proceeds in the case
of Leases which, in the aggregate, are intended to return the Partnerships'
cost of such Investments (including Front-End Fees), together with
investment income.
The Partnerships' overall investment objectives are:
(i) INVESTMENT IN EQUIPMENT: to invest in a diversified portfolio of low
obsolescence Equipment having long lives and high residual values, at
prices that the General Partner believes to be below inherent values
subject to lease or under other contractual arrangements with lessees of
Equipment;
(ii) CASH DISTRIBUTIONS: to generate cash distributions after the minimum
number of Units are sold, which may be substantially tax-deferred (i.e.,
distributions which are not subject to current taxation) during the early
years of the Partnership. Such cash distributions will commence the month
following the month in which the investor is admitted as a Limited
Partner;
(iii) SAFETY: to create a significant degree of safety relative to other
equipment leasing investments through the purchase of a diversified
equipment portfolio. This diversification reduces the exposure to market
fluctuations in any one sector. The purchase of used, long-lived, low
obsolescence equipment typically at prices which are substantially below
the cost of new equipment also reduces the impact of economic depreciation
and can create the opportunity for appreciation in certain market
situations, where supply and demand return to balance from oversupply
conditions; and
(iv) TOTAL RETURN: to provide to limited partners a total return on their
investment which, by the end of the Liquidation Period, compares
favorably with other investment alternative with similar risk profiles.
There can be no assurance, however, that an above average rate of return
can be achieved while satisfying the other stated investment objectives
of the Partnerships and, as such, the General Partner intends to target
the highest available rate or return consistent with prudent risk
management and reasonably conservative investment decisions.
Not less than 80.40% of the Gross Offering Proceeds (assuming a Maximum
Offering; 75% assuming a Minimum Offering) will be used to make investments
in Equipment, Leases and Financing Transactions (collectively "Investments")
on behalf of the Partnerships (see "SOURCES AND USES OF OFFERING PROCEEDS
AND RELATED INDEBTEDNESS") and 1% of Gross Offering Proceeds will be
initially set aside in a working capital reserve. If one assumed that
individual investors (1) could purchase Investments with the same average
yield as the Partnerships are able to achieve, (2) could arrange financing
on the same terms and (3) could make such acquisitions without paying any
transfer taxes or fees to brokers or attorneys to locate, negotiate and
document such transactions (each of which assumptions the General Partner
believes to be unlikely), then an investor's return from a direct ownership
of Leases and Financing Transactions would be greater than the return from
an investment in the Partnerships. In addition, if one assumed that an
investor would incur no expenses in (1) managing Investments (e.g. billing
and collecting rents, corresponding with the Lessees, insurers and others,
administering sales, use and property tax collections, accounting and
remittances to appropriate taxing authorities, etc.) and (2) re-marketing
the Equipment (both of which assumptions the General Partner also believes
to be unlikely), then such investor's annual share of gross revenues could
be said to be reduced in direct proportion to the fees payable to the
General Partner for performing such services.
Summary of Certain Risk Factors
An investment in the Partnerships has many risks. The information appearing
under the caption "RISK FACTORS" in this Prospectus contains a detailed
discussion of the most important risks associated with an investment in
Units. Please refer thereto for a discussion of the following specific risk
factors as well as other relevant risk factors:
Operating Risks:
The Equipment owned by each Partnership will be subject to unanticipated
declines in market value and Lessee defaults, both of which can adversely
effect such Partnership's financial performance. To the extent the
Partnership's Equipment will be acquired in part with borrowed funds, a
Lessee default increases the risk of a material loss to the Partnership.
Partnership and Investment Risks:
o No one can predict whether Limited Partners will receive cash
distributions in amounts sufficient to return their original investment or
the amount of profit thereon, if any, that they will ultimately receive.
o The Investments to be acquired or entered into by each Partnership have
not been specified as of the date of this Prospectus and will be
determined solely by the General Partner.
o A portion of the distributions made to date by the Prior Public Programs
have been, and a portion of the distributions to be made by the
Partnership are expected to be a return of investor's Capital
Contributions.
o Investors will have no right to be involved in the management of the
Partnership and will not have the opportunity to vote except in
extraordinary circumstances. As a result, they must rely on the skills,
integrity and business expertise of the General Partner.
o The General Partner, the Dealer-Manager and the Selling Dealers will
receive significant compensation for organizing the Partnership and
conducting the Offering and managing the Partnership's business. None of
this compensation has been the subject of arm's length negotiations. (See
"Compensation to the General Partners and Affiliates".)
o Investors must be prepared to hold their Units for the entire operational
life of the Partnerships which currently is estimated to be 8 years, but,
may be as long as ten (10) years because (a) only a limited secondary
market exists for partnership units generally, (b) a buyer for Units
(other than the Partnership under certain circumstances) may not exist and
(c) they are likely to be unable to resell or dispose of Units except at a
substantial discount from their purchase price. (See "TRANSFER OF
UNITS--Limited Right of Presentment for Redemption of Units" for a
discussion of redemption rights and prices.)
o The Partnership may not raise sufficient Gross Offering Proceeds to
achieve its objectives of owning a broadly diversified portfolio of
Investments.
o Each Partnership may lease a portion of its Equipment to Lessees formed
under the laws of foreign countries or to other Lessees which conduct
operations outside the United States for use exclusively outside the
United States (or between foreign countries and the United States). In
such cases, regulatory requirements of other countries governing Equipment
registration, maintenance, liability of owners and lessors and similar
considerations might reduce the value of the Partnership's Equipment in
unanticipated ways. (See "RISK FACTORS--Partnership Risks and Investment
Risks-- Risks Associated With Foreign Investments; Lack of U.S.
Jurisdiction".)
Federal Income Tax Risks:
o Income and expenses of the Partnerships, due to their classification as
"passive income" or "portfolio income," may not be able to be offset
against other activities on an investor's income tax return.
o Certain of each Partnerships investment transactions or deductions could
be re-characterized which could result in loss of certain tax benefits
associated with an investment in Units.
o Each of the Partnerships may be treated as a "publicly-traded partnership"
and therefore taxed at the partnership level as though it were a
corporation with a second tax assessed against investors on Partnership
distributions received by them.
Sources and Uses of Offering Proceeds and Related Indebtedness
Not less than 80.40% of Gross Offering Proceeds will be used to make
Investments assuming a Maximum Offering (75% assuming a Minimum Offering),
1% will be held in reserves (including working capital) and the balance will
be applied to pay fees and expenses to the Sponsor and its Affiliates and to
others involved in the Offering (19.60% assuming the Maximum Offering; 25%
assuming the Minimum Offering). See "SOURCES AND USES OF OFFERING PROCEEDS
AND RELATED INDEBTEDNESS" for a breakdown of the General Partner's estimate
as to how the capital it raises and a portion of the indebtedness it may
employ will be used.
Compensation to the General Partner and Affiliates
The Dealer-Manager (an Affiliate of the General Partner which will select
the Selling Dealers and manage the Offering of Units) and the General
Partner (which will acquire the assets for and manage the business of the
Partnerships) will receive compensation for their services. The section of
the Prospectus entitled "COMPENSATION TO THE GENERAL PARTNER AND AFFILIATES"
details the estimated amount and range of each item of compensation payable
to the Dealer Manager and the General Partner by the Partnerships. The most
significant items of compensation are:
o Approximately 19.60% of Gross Offering Proceeds (assuming a Maximum
Offering) will be used to pay the costs of organizing each Partnership,
offering the Units to the public and acquiring Partnership assets and, of
such percentage, approximately 11.60% of Gross Offering Proceeds will be
paid to the General Partner or an Affiliate and approximately 8.0% of
Gross Offering Proceeds is expected to be paid to unrelated Selling
Dealers. (See "SOURCES AND USES OF OFFERING PROCEEDS AND RELATED
INDEBTEDNESS").
o The General Partner will generally be entitled to receive a Management Fee
of between 2% and 5% of annual gross rental payments (fee percentages for
Leases are based on whether they are Full-Payout or Operating Leases) and
2% of payments on Financing Transactions.
o The General Partner shall receive 1% and the Limited Partners 99% of each
distribution of Distributable Cash From Operations and Distributable Cash
From Sales until the Limited Partners have received total cash
distributions in an amount equal to Payout (i.e., the time when each of
the Limited Partners has received cash distributions in an amount equal to
the sum of (i) his or her Capital Contribution plus (ii) an 8.0%
cumulative annual return thereon, computed from a date not later than the
last day of the calendar quarter in which such Capital Contribution is
made (determined by treating cash actually distributed to such 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
such cumulative return requirement.
o After Payout distributions of Distributable Cash From Operations and
Distributable Cash From Sales shall be 90% to the Limited Partners and 10%
to the General Partner.
o There are a number of other items of compensation and expense
reimbursements that the General Partner may receive during the operation
of the Partnerships. See "COMPENSATION TO THE GENERAL PARTNER AND
AFFILIATES".
Conflicts of Interest
Each Partnership will be subject to various conflicts of interest arising
out of its relationship to the General Partner and its Affiliates.
These conflicts may include, but are not limited to:
o the lack of arm's length negotiations in determining compensation;
o competition with other leasing programs sponsored by the General Partner
or its Affiliates (including the other Partnership) for the acquisition,
lease, financing or sale of Equipment;
o competition with an Affiliate of the General Partner for the acquisition,
lease, financing or sale of Equipment; and
o competition with certain other leasing programs sponsored by the General
Partner or its Affiliates for management services.
In addition to the fiduciary duty that the General Partner owes to the
Limited Partners, the Partnership Agreement contains certain provisions
intended to minimize conflicts between the General Partner and its Affiliates
on the one hand and the Limited Partners on the other. See "CONFLICTS OF
INTEREST" and "SUMMARY OF THE PARTNERSHIP AGREEMENT".
Fiduciary Responsibility
The General Partner will act as fiduciary to each Partnership. However,
each Partnership will be obligated to provide certain indemnities to the
General Partner, and, as detailed under "CONFLICTS OF INTEREST," the General
Partner will be permitted to engage in certain activities that may involve a
conflict of interest.
Other Offerings by the General Partner and its Affiliates
The General Partner has sponsored, and is currently managing, seven other
public leasing programs with objectives similar to those of the
Partnerships. See "OTHER OFFERINGS BY THE GENERAL PARTNER AND ITS
AFFILIATES" for more detailed information concerning the Prior Public
Programs (ICON Cash Flow Partners, L.P., Series A through Series E, ICON
Cash Flow Partners L.P. Six and ICON Cash Flow Partners L.P. Seven) and the
Prior Performance Tables included in Exhibit B to this Prospectus for
tabular and statistical data concerning the Prior Public Programs.
Management; Financial Statements of the General Partner and of the Partnership
The sole General Partner of the Partnerships is ICON Capital Corp., a
Connecticut corporation located at 600 Mamaroneck Avenue, Harrison, New York
10528 (telephone 914-698-0600). The General Partner will manage and control
the affairs of the Partnerships. See "MANAGEMENT" for a description of the
officers and other key personnel who will be responsible for the management
of the Partnerships' business.
The financial statements of the General Partner and of ICON Income Fund
Eight A L.P. are located in the section of this Prospectus entitled
"FINANCIAL STATEMENTS".
Federal Income Tax Considerations
See "FEDERAL INCOME TAX CONSEQUENCES" for a discussion of significant
federal income tax issues pertinent to the Partnerships. Such Section also
contains a description of the legal opinion regarding federal income tax
matters that the Partnerships will receive, which together with such
opinion, addresses the material federal income tax issues which are expected
to be of relevance to U.S. taxpayers who are individuals. Other tax issues
of relevance to other taxpayers should be reviewed carefully by such
investors, prior to their subscription, to determine special tax
consequences of an investment to the Partnerships.
The Partnerships have obtained an opinion from Day, Berry & Howard LLP,
Tax Counsel to the General Partner, concerning the Partnerships'
classification as partnerships for federal income tax purposes. See "FEDERAL
INCOME TAX CONSEQUENCES--Classification as a Partnership". The opinion
states further that the summaries of federal income tax consequences to
individual holders of Units and to certain tax-exempt entities, including
qualified plans, set forth in this Prospectus under the headings "RISK
FACTORS--Federal Income Tax Risks and ERISA Risks" and "FEDERAL INCOME TAX
CONSEQUENCES" and "INVESTMENT BY QUALIFIED PLANS" have been reviewed by Tax
Counsel and that, to the extent such summaries contain statements or
conclusions of law, Tax Counsel are of the opinion that such statements or
conclusions are correct under the Internal Revenue Code, as presently in
effect, and applicable current and proposed Treasury Regulations, current
published administrative positions of the Service contained in Revenue
Rulings and Revenue Procedures and judicial decisions.
Capitalization
The section of this Prospectus entitled "CAPITALIZATION" details, in
tabular form, the Partnerships' current and projected capitalization, after
deduction of Sales Commissions, Underwriting Fees and the O & O Expense
Allowance.
Summary of Partnership Agreements
Each Partnership Agreement governs the relationship between the Limited
Partners and the General Partner. Investors should be particularly aware
that under either Partnership Agreement:
(1) they will have limited voting rights;
(2)their Units will not be freely transferable, and, even if transferable,
can probably only be sold at a substantial discount; and
(3)the fiduciary duty owed by the General Partner to the Limited Partners
has been modified in recognition of its sponsorship of the Prior Public
Programs so as to avoid conflicts in fiduciary standards that would
otherwise apply to the sponsor of only one investment program.
See "FIDUCIARY RESPONSIBILITY," "SUMMARY OF THE PARTNERSHIP AGREEMENT,"
"TRANSFER OF UNITS" and "REPORTS TO LIMITED PARTNERS" for further details.
Transfer of Units
The transfer of Units in each Partnership is subject to restrictions
contained in the Partnership Agreement for that Partnership which are
primarily intended to avoid having the Partnerships be treated as a
"publicly traded partnership" and thereby become subject to taxation as a
corporation (see "FEDERAL INCOME TAX CONSEQUENCES--Publicly Traded
Partnerships"). As a result of such limitations, however, it is possible
that a Limited Partner wishing to transfer Units might not be able to do so
if the aggregate transfer limits of the Partnerships have been reached for
such year. See the "TRANSFER OF UNITS" section of the Prospectus discusses
the restrictions on transfer of Units in greater detail.
Plan of Distribution
The Offering -- Each of the Partnerships is offering a minimum of 12,000
Units and a maximum of 750,000 units in each Partnership with a total
maximum offering of $75,000,000 for each Partnership. Such offering is on a
"best efforts" basis; that is, there is no guarantee that any specified
amount of money will be raised. Units will be offered for sale by ICON
Securities Corp. (the "Dealer-Manager") and NASD-member firms (the "Selling
Dealers") which have entered into Selling Dealer Agreements with the
Dealer-Manager.
Offering Period -- The Offering of Units in each Partnership may be
terminated in the discretion of the General Partner at any time. The
Offering Period for Units is presently expected to have a termination date
not later than twelve (12) months from the date of this Prospectus for ICON
Eight A, and twelve (12) months thereafter for ICON Eight B; provided that
the General Partner may, in its sole and absolute discretion, extend the
offering of Units in each Partnership for a further period not more than an
additional twelve (12) months. In no event may the Offering of the program
extend beyond forty-eight (48) months from the date of this Prospectus. The
General Partner has a reasonable period of time (generally not in excess of
5 business days) in which to conclude the closing of a Partnership after the
termination of such Partnership's offering. The Offering Period may be
terminated at the option of the General Partner at any earlier time.
Further, after the first Partnership offering is terminated, the General
Partner is not required to undertake the second Partnership offering. In
most states, continued offering beyond one year after the effective date in
such state is subject to approval by the applicable state securities
authority. The Offering will terminate sooner than twenty-four (24) months
if either (1) the General Partner terminates the Offering earlier or (2)
subscriptions for the Maximum Offering of 750,000 Units per Partnership are
received prior to the end of such period. The end of the Offering Period is
also called the Termination Date. Subscriptions for Units will only be
accepted from the date of this Prospectus until the Termination Date.Minimum
Offering -- Unless each Partnership receives subscriptions for 12,000 Units
prior to the completion of its Offering Period, no Units will be issued and
all funds received in connection with the Offering (including accrued
interest on Subscription Monies) will be promptly refunded. Although the
General Partner and its Affiliates may purchase up to ten percent (10%) of
the total Units purchased, not more than 600 of such Units may be included
in determining whether the Minimum Offering has been achieved.
Escrow Agent; Distribution of Escrow Interest -- All subscription payments
for each Partnership, will be deposited and held in an interest-bearing
escrow account with a national banking association (or another banking
institution named by the General Partner in the event that such bank is
unable to serve as escrow agent) until the earlier to occur of (i) the date
on which the Minimum Offering (or $1,200,000 in subscriptions) have been
received (exclusive of subscriptions from Pennsylvania residents) or (ii)
twelve (12) months after the commencement of the Offering of each
Partnership. Subscriptions from residents of Pennsylvania are subject to the
further conditions that (1) each such subscription must be held in escrow
until such time as at least $3,750,000 in subscriptions per Partnership (5%
of the Maximum Offering of $75,000,000 per Partnership) have been received
from all investors and (2) each Pennsylvania subscriber must be offered the
opportunity to rescind his or her subscription if such condition has not
been met, initially 120 days following the date his or her subscription is
received by the Escrow Agent and every 120 days thereafter during the
effective period of the offering in Pennsylvania. During the period that
subscription monies are held in escrow, such funds will be invested in a
savings or money-market account with the Escrow Agent and earn interest at
the prevailing rates applicable to such accounts from the time on the
subscription payments deposited with the Escrow Agent until the earlier of
the date (i) the subscriber is admitted to the Program as a Limited Partner,
(ii) in the case of Pennsylvania investors, at the end of the respective 120
day period following the Effective Date during which his subscription was
received (during which period aggregate subscriptions of $3,750,000 per
Partnership must be satisfied for such investor to be admitted as a Limited
Partner or rescission of his subscription offered to him) or (iii) one year
from the commencement of the Offering Period of the Partnership in question.
The interest so earned will be paid to the subscriber upon his or her
admission to a Partnership (or, if such subscriber is not admitted to a
Partnership, when the subscription payments are returned). After the Initial
Closing Date (see "--Closings"), subscriptions will be held in a special,
segregated, interest-bearing subscription account of the Partnership pending
each subsequent Closing (other than subscriptions from Pennsylvania
investors, which will continue to be held in the Escrow Account until
subscriptions for at least $3,750,000 of Units per Partnership have been
received and the next Closing is held).
Subscription -- Every investor must manually execute a Subscription
Agreement in the form attached as Exhibit C hereto in order to purchase
Units. By subscribing for Units, each investor will be deemed to have made
all of the representations and warranties contained therein and will be
bound by all of the terms of such Agreement and of the Partnership
Agreement.
Closings -- The initial Closing for each Partnership will be held after
subscriptions for at least 12,000 Units have been received by the Escrow
Agent, at which time subscribers for at least such number of Units may be
admitted to that Partnership as Limited Partners. After the Initial Closing
Date, each Partnership intends to hold daily Closings until the Offering is
completed or terminated.
Status of the Offering -- As of the date of this Prospectus, investors
have not been admitted as Limited Partners to a Partnership.
Fiscal Year
The fiscal year of each Partnership will end on December 31.
Glossary of Terms
For definitions of certain terms used in this Prospectus, see Section 17 of
the Partnership Agreement included as Exhibit A to this Prospectus.
RISK FACTORS
- -------------------------------------------------------------------------------
The purchase of Units may be considered speculative and subject to certain
risks. In addition to the factors set forth elsewhere in this Prospectus,
prospective investors should consider the following:
Operating Risks
General. The Partnerships will engage in the business of equipment leasing
and providing financing, which entail certain economic and other risks,
including, but not limited to, the following: the risk of sharp changes in the
market value or technological obsolescence of some or all of the types of
Equipment that the Partnerships may lease or finance and the physical
deterioration of such Equipment; the possibility of Lessee or User defaults;
fluctuations in general business and economic conditions; the adoption of
legislation or regulations that may affect the cost, manner of operations, and
titling and registration (when necessary) of certain of the Partnerships'
Equipment. Many of the foregoing risks are outside the control of the
Partnerships and may adversely affect their operating costs or revenues and the
amounts of residual equipment values actually realizable by them. Such risks are
further discussed below.
Year 2000 Compliance. Most computer programs have been written using two
digits rather than four to define the applicable year. As a result, the programs
are not designed to make the transition to the year 2000. This computer software
problem is commonly referred to as the "year 2000" issue. Computer programs with
date-sensitive applications may, if not modified, fail or miscalculate dates,
causing system failures, the inability to process transactions or other
disruptions of operations. The Manager uses, and expects on behalf of the Fund
to use, primarily third party software and is communicating with key software
vendors to ensure that the systems used by the Manager and the Fund are not
impaired by the year 2000 issue. The ultimate impact of the year 2000 issue on
the Fund will depend to a great extent on the manner in which the issue is
addressed by those businesses whose operational capability is important to the
operation of the Fund. Each of these entities will have a material self interest
in resolving any year 2000 issue. The General Partner does not expect the Fund
to incur significant costs as a result of the year 2000 issue.
Certain of the Prior Public Programs with Investment Objectives Similar to
the Partnership have Experienced Unexpected Losses. As discussed in greater
detail in the "OTHER OFFERINGS BY THE GENERAL PARTNER AND ITS AFFILIATES"
Section of this Prospectus at page 35 and as shown on TABLE III, three of the
early Prior Public Programs, Series A, Series B and Series C, while under
previous management experienced unexpected losses in 1991-92 due primarily to
lessee bankruptcies.
Partnership Risks and Investment Risks
Investments Unspecified. The Equipment to be purchased and the Leases and
Financing Transactions to be entered into or acquired have not been determined
as of the date of this Prospectus. The General Partner will have complete
discretion in investing the Net Offering Proceeds and proceeds from
Partnerships' Indebtedness within the limits set forth under the caption
"INVESTMENT OBJECTIVES AND POLICIES". In addition, because the Partnerships'
Investments have not been specified, no one can make a judgment as to whether or
not the investments to be made will result in investors receiving distributions
sufficient to return their investment and/or profit thereon.
Limited Voting Rights of Limited Partners. All decisions with respect to
management of the Partnerships, including the determination as to which
Equipment the Partnerships will purchase and which Leases and Financing
Transactions each will enter into or acquire, will be made exclusively by the
General Partner. The success of the Partnerships, to a large extent, will depend
on the quality of the investment decisions made by the General Partner,
particularly as it relates to the purchase of Equipment, the acquisition of
Leases and Financing Transactions and the re-leasing and disposition of its
Equipment. Limited Partners are not permitted to take part in the management of
the Partnerships or the establishment of the Partnerships' investment objectives
or policies. Accordingly, potential investors should not purchase Units unless
they are willing to entrust all aspects of the management of the Partnerships to
the General Partner.
Generally speaking, only extraordinary matters, such as a proposed amendment
to the Partnership Agreement, are required to be submitted for vote of the
Limited Partners. For any matter submitted for vote of the Limited Partners, the
Consent of the Majority Interest (more than 50% of the relevant Partnership's
Interests) is required for approval. The Partnership Agreement provides that in
determining the requisite percentage of Interests necessary for a vote
concerning (i) the removal of the Sponsor as General Partner or (ii) any
transaction between the Sponsor and the Program, any Interests owned by the
Sponsor shall not be included. See Section 13.2 of the Partnership Agreement,
"Limited Voting Rights of the Limited Partners".
Investment Portfolio Composition. There can be no assurance as to the
ultimate composition of the Partnerships' actual Investment portfolio, as there
is no way of anticipating what types of Equipment, Leases and Financing
Transactions will be available on reasonable terms at the times the Partnerships
are ready to invest their funds. The General Partner may vary the Partnerships'
Investment portfolios (although it is the General Partner's intention to invest
all Net Offering Proceeds and Cash From Operations and/or Cash From Sales in
Leases and Financing Transactions as described under the caption "INVESTMENT
OBJECTIVES AND POLICIES") or may invest in Financing Transactions to a greater
degree than currently anticipated. Net Offering Proceeds, in this instance,
means the gross amount of Capital Contributions of all limited partners less
underwriting fees, sales commissions and the O & O Expense Allowance payable by
the Partnership.
Residual Value of Equipment. With respect to Leases - as distinguished from
Financing Transactions - a significant part of the value of any such transaction
to the Partnerships is the potential value of the Equipment once the primary
Lease term expires. Each investor's ultimate investment return from the
Partnerships will depend, in part, upon the residual value of the Partnership's
Equipment at the time of its sale or re-lease. The General Partner's ability to
purchase Equipment at a favorable price is an important factor in maximizing its
ultimate return on its investment in such Equipment. The extent to which this
residual value can be realized will also depend to a significant extent on a)
the ability of the General Partner to acquire Leases with lease agreements
containing provisions which have the effect of preserving or enhancing the value
of the Equipment upon its return by the Lessee to the Partnership in question at
the expiration of the primary Lease term and b) the General Partner's ability to
maximize the value of the Equipment in the market for used equipment such as the
Equipment existing at such time. The residual value realized by the Partnerships
will also depend, however, on factors beyond the control of the Partnerships
such as the cost of new equipment similar to the Equipment at the time the
Equipment is being remarketed by the Partnership in question, the extent to
which technological developments during the Lease term have reduced to an
unanticipated extent the market for used equipment such as the Equipment and the
strength of the economy at such time.
A Lack of Diversification of Investments Would Result if only the Minimum
Offering were Raised. Each Partnership may begin operations with minimum
capitalization of approximately $1,038,000 (after payment of estimated Sales
Commissions, Underwriting Fees and O & O Expense Allowance totaling 13.50% or
$162,000 of Gross Offering Proceeds). The ability of the Partnerships to
diversify its Investments and their profitability could be adversely affected by
the amount of funds at their disposal. To the extent that the minimum number of
Units are sold, it is likely that the Partnerships would not be able to achieve
as great a degree of diversification in their portfolio of Investments as would
be possible with more capital to invest. See "SOURCES AND USES OF OFFERING
PROCEEDS AND RELATED INDEBTEDNESS".
Losses Due to Lessee Bankruptcies. While the Partnership will use its
diligent business efforts to avoid and minimize losses and to establish reserves
for losses which are adequate and prudent, there can be no assurance that losses
of the Partnership will not exceed such reserves due to conditions beyond the
control of the General Partner. If the Partnership were to incur any such excess
losses, the amounts otherwise distributable as a return of, and a return on,
capital to the Limited Partners would be reduced in the absence of offsetting
investment gains or cost savings by the Partnership.
Investments in "Seasoned" Leases and "Used" Equipment. The General Partner
expects it will invest a significant amount of the Net Offering Proceeds and
proceeds of any Indebtedness in "seasoned" and/or "used" Equipment. (See
"INVESTMENT OBJECTIVES AND POLICIES--General" and "--Equipment".) Purchasers of
Units must therefore rely solely on the judgment and ability of the executive
officers of the General Partner with respect to the selection of lessees, the
purchase of Equipment, incurring Indebtedness, the negotiation of the terms of
purchases of Equipment, Leases and Financing Transactions and other aspects of
the Partnership's business and affairs. The General Partner will seek, and
expects that it will be able in substantially all instances to obtain for the
Partnership, representations from the sellers and lessees of all Equipment,
including "seasoned" and "used" Equipment, that such Equipment has been
maintained in compliance with the terms of the applicable Leases, that neither
the seller, as lessor, nor the lessee, is in violation of any material terms of
such Leases and that the Equipment is in good operating condition and repair and
the user has no defenses to, or offsets against, rents payable with respect to
such Equipment as a result of the condition of the Equipment. The Partnership
would have rights against the seller or user of such "seasoned" or "used"
Equipment or both for any losses of the Partnership arising from their breach of
such representations.
Risks Associated with Investment in Options. The Partnerships may enter into
transactions where the Partnerships acquire or enter into an option to purchase
Equipment for a fixed price at a future date (typically at the end of the Lease
Term encumbering the asset). In the event of the bankruptcy of the party
granting the option or the Lessee in the underlying Lease, the option held by
the Partnerships might be unenforceable and the price paid by the Partnerships
might prove to be unrecoverable in whole or in part.
Risks Associated with Lessee or User Default. If a Lessee or User defaulted
on its payment obligations under a Lease or Financing Transaction, the relevant
Partnership would need to repossess the Equipment in question or foreclose on
such Equipment and/or other collateral securing such transaction. If the
Partnership in question was then unable to sell or re-lease the foreclosed
Equipment or collateral upon rental terms comparable to those under the original
lease or were unable to repossess such Equipment or collateral promptly or at
all, the relevant Partnership might realize a significant loss of anticipated
revenues that may result in the inability of such Partnership to recover fully
its investment in such Lease or Financing Transaction. In that regard, if a
Lessee or User (meaning any equipment user to whom the Partnership provides
financing pursuant to a Financing Transaction) default occurs in connection with
the bankruptcy of such Lessee or User, there could be a significant delay in the
Partnership being able to recover possession of the Equipment in question which
delay could, as noted in the preceding sentence, result in significant loss to
the Partnership. In the event a Lease was partially financed with borrowed funds
and there was a default by the Lessee, the entire value of the Equipment
realized upon its repossession must first go to repay the related Lender and
only after that had occurred would any of the remaining realized value be
available for distribution to investors or reinvestment by the Partnership. In
any such circumstance, it is possible that the Partnership's entire investment
in the Investment would be lost.
Risks Of Investment In Securitization Transactions. The Partnerships may
invest in subordinated interests in special purpose entities formed to acquire
pools of Leases and Financing Transactions. The pool of Leases and Financing
Transactions owned by such a special purpose entity would typically consist of
many hundreds of such transactions. A loss reserve is created based on
historical data to account for the small percentage of these transactions
projected to be in default over the life of the securitization. If the actual
default experience of a special purpose entity in which a Partnership invested
is worse than the loss reserve, the Partnership's return on its investment, or
the investment itself, could be reduced or eliminated.
Leveraged Investment--Increased Risk of Loss. It is expected that each
Partnership will acquire a portion of their Investments for cash consideration
and to acquire other Investments subject to existing (primarily non-recourse)
indebtedness. The General Partner intends to use borrowings (or "leverage") from
unaffiliated lenders to acquire additional Investments and generate additional
Gross Revenues for the Partnerships. Typically, such borrowings are secured by a
lien on the item of the Partnership's Equipment being financed and the related
Leases. Such loans are generally, although not exclusively, non-recourse to the
other assets of the Partnership. Although the use of borrowings permits the
Partnership to acquire a greater number and variety of Investments, borrowings
may also increase the Partnership's risk of loss. For example, if a Lessee
defaults in the payment of rentals due under a Lease which has been assigned to
a Lender, and if the Partnership is unable to sell or re-lease such Equipment or
collateral upon rental terms comparable to those under the original Lease or is
unable to repossess such Equipment or collateral promptly or at all, the Lender
could foreclose on such Equipment and the Partnership could be unable to recover
its Investment.
It is also possible that the Partnership may, on occasion, find it necessary
to borrow funds for use in operations (for example to upgrade Equipment so that
it can be remarketed more effectively). There can be no assurance that, if the
need to borrow funds for use in operations were to develop, financing would be
available on terms satisfactory to the Partnership.
A Portion of the Cash Distributions of the Prior Public Programs has been a
Return of Capital. A portion of distributions made to date by the Prior Public
Programs has been a return of investors' capital contributions. See Table III of
the Prior Performance Tables for the Prior Public Programs which appear as
Exhibit B to this Prospectus. Subscribers will not acquire any ownership
interest in any Prior Public Program and should not assume that they will
experience investment results or returns, if any, comparable to those
experienced by investors in any such Prior Public Program (notwithstanding the
similarity in investment objectives and intended operations of such Programs and
the Partnership) or that the prior performance of any such Prior Public Program
indicates the future results of operations of such Prior Public Program.
Risks Associated with Foreign Investments; Lack of U.S. Jurisdiction. The
Partnerships may lease a portion of their Equipment to lessees formed under the
laws of foreign countries or to other Lessees for use exclusively outside the
United States (or between foreign countries and the United States). In such
cases, regulatory requirements of other countries governing equipment
registration, maintenance, noise control and other environmental factors,
liability of owners and lessors and other matters would apply. Use of different
accounting or financial reporting practices in such countries may make it
difficult to judge the risk that the Lessees and Users will maintain their
financial viability for the entire term of the related Lease and Financing
Transactions thereby creating the risk of default and the possible loss of a
Partnership's investment in the related Lease and Financing Transactions.
Foreign registries may permit the recordation of liens which would cloud the
Partnership's title to its Equipment or may omit to record liens or charges
permitted under the laws of such countries needed to ensure the relevant
Partnership's interest in any such Investment. The recognition in foreign courts
of judgments obtained in United States courts may be difficult or impossible to
obtain and foreign procedural rules may otherwise delay such recognition.
Political instability, changes in national policy, competitive pressures, fuel
shortages, labor stoppages, recessions and other political and economic events
adversely affecting world or regional trading markets of a particular foreign
Lessee or User could also create the risk that a foreign Lessee would fail or be
unable to perform its obligations to the Partnership. It may be difficult for a
Partnership to obtain possession of Equipment used outside of the United States
in the event of a default by the Lessee, or for a Partnership to enforce its
rights under the related Lease or Financing Transaction. Moreover, foreign
jurisdictions may confiscate or expropriate Equipment without paying adequate
compensation. The use and operation of Equipment in a foreign jurisdiction will
be subject to the tax laws of that jurisdiction, which may impose unanticipated
taxes on the ownership of Equipment, or the income derived therefrom. The
General Partner anticipates that the Leases and Financing Transactions will
contain provisions requiring the Lessees and Users to reimburse the Partnerships
for all taxes arising out of the use and operation of the Equipment and to
maintain insurance covering the risks of confiscation of the Equipment by
foreign countries.
Changes in Currency Exchange Rates. Although the Partnerships expect that
most of their Investments will require payment in U.S. dollars, payments under
such Leases and/or Financing Transactions may be payable in foreign currency. To
avoid the risks associated with changes in currency exchange rates the
Partnerships will only purchase Equipment subject to Leases or Financing
Transactions in which the rental payments are either U.S. dollar denominated or
where a foreign exchange contract or letter of credit to assure the U.S. dollar
value of the full Lease or Financing Transaction payment schedule has been
purchased. In those circumstances where a Partnership acquires a residual
interest in Equipment, the amount and timing of receipt of which is inherently
unpredictable, it may be impossible to hedge a foreign currency exposure which
could positively or adversely affect a Partnership's income from such a
transaction as measured in U.S. dollars. It is possible that a country in which
Equipment acquired by the Partnerships is operated or registered may
subsequently impose regulations or restrictions upon the exchange or transfer of
currency, so that payment in U.S. currency may be prevented.
Risks Of Currency Hedge Contracts. A Partnership may enter into Leases or
Financing Transactions pursuant to which it would receive periodic payments in
currencies other than United States dollars. In such circumstance the
Partnership may elect to enter into a hedge contract pursuant to which it would
receive a fixed United States dollar equivalent of such payments regardless of
subsequent fluctuations in the exchange rate between the two currencies. In the
event of a disruption in the foreign currency payments due the Partnership from
the Lease or Financing Transaction in question, due to the default by the
related Lessee or User, the Partnership would probably be required to continue
to meet its obligations under the hedge contract by acquiring the foreign
currency equivalent of the missing hedged payments at what might then be
unfavorable exchange rates
Risks of Joint Ventures. The Partnership Agreement permits the Partnerships
to invest in Joint Ventures with other limited partnerships or investment
programs sponsored by the General Partner and its Affiliates as well as programs
sponsored by non-Affiliates. Joint Ventures will not permit the Partnerships
indirectly to engage in activities which it cannot directly engage in as sole
owner of any Investment under the terms of the Partnership Agreement. Investing
in Joint Ventures rather than a direct investment in Leases or Financing
Transactions may, under some circumstances, involve additional risks, including
risks associated with the possibility that the Partnerships' co-investors might
become bankrupt or that such co-investors may have economic or business
interests or goals which are inconsistent with the business interests or goals
of the Partnerships. Among other things, actions by such a co-investor might
have the result of subjecting Leases or Financing Transactions owned by the
Joint Venture to liabilities in excess of those contemplated by the Partnerships
or might have other adverse consequences for the Partnerships. It is possible
that, if no one Person controls the Joint Venture, there will be a potential
risk of impasse on decisions, including a proposed sale or other transfer of any
Leases or Financing Transactions.
Uninsured Losses. The Partnerships' Leases and Financing Transactions will
generally require Lessees and Users to arrange, at their 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
and Financing Transactions, whether or not insured. When the Lessee or User is
not required to provide such insurance, the Partnerships will obtain it at their
own expense. However, there are certain types of losses (generally of a
catastrophic nature such as those due to war or earthquakes) which are either
uninsurable or not economically insurable. Should such a disaster occur with
respect to Equipment or collateral securing the Leases and Financing
Transactions a Partnership could suffer a total loss of its Investment.
Risk of Loss of Equipment Registration. Aircraft and marine vessels are
subject to certain registration requirements. Registration with the Federal
Aviation Administration ("FAA") may be required for the operation of aircraft
within the United States. Similarly, certain types of marine vessels must be
registered with the United States Coast Guard prior to operation in the
waterways of the United States and rolling stock and over-the-road vehicles may
be subject to registration requirements. Failure to register or loss of such
registration for these types of equipment could result in substantial penalties,
the premature sale of such Equipment and the inability to operate and lease the
Equipment.
Rate of Limited Partner Cash Distributions Not Fixed. While it is the
Partnerships' objective to make monthly cash distributions from net cash flows
from operations, the General Partner may determine it is in the best interest of
the Partnerships to change the amount of such cash flows which are distributed
to the Limited Partners and reinvested in additional Investments. (See "Cash
Distributions to Partners--Monthly Cash Distributions".)
Return Difficult to Predict. The rate of monthly distribution may not equal
the return on Investment. The initial rate of cash distribution has been arrived
at by the General Partner using its experience to attempt to determine the
sustainable rate of distribution during the Reinvestment Period. The actual
return on the investment may be greater than or less than the rate of
distribution. If during the Reinvestment Period the actual return is less than
the rate of distribution, a portion of each such payment to limited partners
would be a partial return of their Investment. Until all cash distributions from
the operations of a Partnership and from sale of all its assets has been
completed the final level of an investor's return on investment, if any, cannot
be determined. There is no assurance that investors will achieve any specified
rate of return on their respective capital contributions to the Partnerships and
the total return on capital of each Partnership can only be determined at the
termination of the Partnership after all residual cash flows (proceeds from sale
and re-leasing of equipment after the initial and any subsequent lease terms
have expired) have been realized (see "Cash Distributions to Partners--Monthly
Cash Distributions").
Decrease in Distributions during Liquidation Period. During the Liquidation
Period of each Partnership, it is expected that distributions may sharply
decrease relative to the annual cash distribution objectives for the
Reinvestment Period, because as Investments are liquidated there will be fewer
Leases and Financing Transactions available to generate cash from operations.
Lack of a Secondary Market for Units; Restricted Transferability. The Units
are limited partnership interests. In order to avoid treatment as a "publicly
traded partnership," the Code and regulations promulgated thereunder by the
Department of the Treasury of the United States impose severe limitations on the
ability of the General Partner or the Partnerships to create or participate in a
"secondary market" for Units. As a result of the foregoing, only a limited
market for limited partnership interests, such as Units, currently exists. The
ability of an owner of Units to sell or otherwise transfer such Units (other
than at a substantial discount) is extremely limited. As a result, an investor
must view an investment in the Partnerships as a long-term, illiquid investment.
See "TRANSFER OF UNITS".
Redemption Price for Units Not Equal to Capital Account Balance. Commencing
with the second full quarter following the Final Closing Date, any Limited
Partner (other than any Affiliated Limited Partner) may request that a
Partnership redeem up to 100% of the Units held by such Limited Partner. A
Partnership is under no obligation to do so. The redemption price payable in the
event the General Partner determines in its sole discretion to redeem such Units
has been unilaterally set. Such redemption price is set forth in "TRANSFER OF
UNITS--Limited Right of Presentment for Redemption of Units". During the term of
a Partnership, the redemption price may have no direct relationship to a Limited
Partner's Capital Account at the time of a redemption. In the event a Limited
Partner's interest in a Partnership is redeemed it is probable that the
redemption price would provide a significantly lower value than the value
realized by retaining the Limited Partner's interest in a Partnership.
Liability of Limited Partners for Certain Distributions. A Limited Partner's
personal liability for obligations of the Partnerships generally will be limited
under the Delaware Act to the amount of such Limited Partner's Capital
Contribution. Under the Delaware Act, a Limited Partner may be liable to return
to a Partnership any amount distributed for a period of three years from the
date of such distribution if such distribution causes the liabilities of the
Partnership (other than Partnership liabilities to Partners on account of their
partnership interests and non-recourse debt) to exceed the fair market value of
the assets of such Partnership in the event the Limited Partner knew such facts
at the time of such distribution.
Conflicts of Interest. The Partnerships will be subject to various
conflicts of interest arising out of its relationship to the General Partner
and its Affiliates which may arise during the life of the Partnerships. (See
"CONFLICTS OF INTEREST".) Such conflicts may include:
o the lack of separate legal representation and arm's length negotiations of
the program agreements and of compensation payable to the General Partner;
o the General Partner would realize a greater amount of Acquisition Fees
(subject to a ceiling on such fees) if a greater percent of debt were
employed;
o the Partnership Agreement does not prohibit the General Partner or its
Affiliates from competing with a Partnership for Equipment acquisitions,
financing, refinancing, leasing and re-leasing opportunities on its or
their own behalf or on behalf of the prior Programs;
o because a deficiency in the amount of reserves relative to the
Partnerships' contingent liabilities may expose the General Partner to
potential liability to creditors of the Partnership, the General Partner
may have a conflict of interest in determining when to allocate cash flow
for distribution to the Limited Partners or to each Partnership's Reserve
Account;
o if the Partnership enters into a Joint Venture, the General Partner would
have a fiduciary duty to the Partnerships and to any other partnerships
sponsored by it which participate in the joint venture which may result in
conflicts arising in determining when and whether to dispose of any
jointly owned interest;
o the General Partner may be presented with the opportunity to earn fees or
other compensation for referring a prospective lessee to a lessor other
than the Partnerships or other programs sponsored by the General Partner
or to its Affiliates;
o due to affiliation with the General Partner, the Dealer-Manager's review
and investigation of the Partnerships and the information provided in this
Prospectus will not have the benefit of a review and investigation by an
independent securities firm in the capacity of a dealer-manager; and
o as Tax Matters Partner, the General Partner is empowered, among other
acts, to enter into negotiations with the Service to settle tax disputes
and to thereby bind the Partnerships and the Limited Partners by such
settlement. There is no assurance that such settlement will be in the best
interest of any specific Limited Partner given his or her specific tax
situation.
Certain of such conflicts are affected by (i) the fiduciary duty that the
General Partner owes to the Limited Partners and by (ii) provisions of the
Partnership Agreement which are intended to minimize conflicts between the
General Partner and its Affiliates on the one hand and the Limited Partners on
the other. See "CONFLICTS OF INTEREST" and "SUMMARY OF THE PARTNERSHIP
AGREEMENT".
Participation of a Securities Sales Affiliate in this Offering. The
Dealer-Manager is an Affiliate of the General Partner. As a result, the
information provided in this Prospectus will not have the benefit of a review
and investigation by an independent securities firm in the capacity of a
dealer-manager.
General Partner Not Employed by Partnership Exclusively. The Partnerships
will not employ their own full-time officers, directors or employees. The
General Partner will supervise and control the business affairs of the
Partnerships. The Partnerships will contract with the General Partner to manage
the Partnerships' Investments. The officers and employees of the General Partner
will devote to the Partnerships' affairs only such time as may be reasonably
necessary to conduct its business. See "CONFLICTS OF INTEREST".
Equipment Leases May be Subject to Usury Laws. Equipment leases have, on
occasion, been held by the courts to be loan transactions subject to state usury
laws. It is expected that all of the Financing Transactions will be treated as
loan transactions by the Partnerships. It is anticipated that the Partnerships
will structure their Leases and Financing Transactions so as to avoid
application of the usury laws of the states in which it will conduct their
operations. However, there can be no assurance that the Partnerships will be
successful in doing so.
Federal Income Tax Risks and ERISA Risks
Federal Tax Considerations in General. Although certain federal income tax
aspects may be important in analyzing the attractiveness of an investment in the
Partnerships' Units, prospective investors in the Partnerships should make an
investment based primarily on economic rather than tax factors. While the
Partnerships have obtained an opinion of Tax Counsel as to various tax matters
and Tax Counsel has reviewed the "FEDERAL INCOME TAX CONSEQUENCES" Section of
this Prospectus for accuracy, that opinion and such review is limited largely to
those tax matters believed to be material to an individual taxpayer.
Furthermore, such tax opinion is subject to certain assumptions concerning the
future operations of the Partnerships (which may vary from such assumptions) and
is not binding on the Internal Revenue Service (the "Service"). In addition, no
ruling has been or will be sought from the Service on any federal income tax
issue. Because of such facts and because each investor's other income and
expenses may materially affect the tax consequences of an investment in Units,
there can be no assurance that the tax consequences described in this Prospectus
will be obtained by every investor. Prospective investors and their advisors
should, therefore, not only carefully review the "FEDERAL INCOME TAX
CONSEQUENCES" Section of this Prospectus, but should also carefully review their
own particular circumstances. Many of the tax consequences described herein are
unclear because of the passage in recent years of major tax legislation, which
has not been interpreted through Treasury Regulations, published administrative
positions of the service or court decisions. Availability of the tax benefits
described herein may be challenged by the Service upon audit of any tax return
of the Partnerships. Any adjustment to any tax return of the Partnerships as a
result of an audit could also result in adjustments to the income tax returns of
the Limited Partners, and might result in an examination of such returns for
items unrelated to the Partnerships, or an examination of such returns for prior
years. The Limited Partners could incur substantial legal and accounting costs
in contesting any Service challenge, regardless of the outcome. No Partnership
will reimburse any Limited Partner for any individual legal and accounting
expenses incurred by such Limited Partner with regards to any examination of
such Limited Partner's income tax return. Nor will a Partnership represent a
Limited Partner in connection with an audit by the Service of items unrelated to
the Partnership (see "FEDERAL INCOME TAX CONSEQUENCES -Audit by the Service".)
Risk of Partnership Status. The Service may successfully contend that a
Partnership should be treated as a "publicly traded partnership" ("PTP") that is
treated as a corporation for federal income tax purposes rather than as a
partnership. In such event, substantially all of the possible tax benefits
(primarily non-taxation of a Partnership and a pass-through to investors of all
income and losses) of an investment in a Partnership could be eliminated. See
"FEDERAL INCOME TAX CONSEQUENCES--Publicly Traded Partnerships". If a
Partnership were treated as a PTP, the following results would occur: (a) losses
realized by a Partnership would not pass through to Partners, (b) a Partnership
would be taxed at income tax rates applicable to corporations, and (c)
distributions to the Partners would be taxable to them as dividend income to the
extent of current and accumulated earnings and profits. In order to minimize the
possibility of PTP treatment for a Partnership, Section 10 of the Partnership
Agreement provides for restrictions on transfers of Units by incorporating
certain "safe harbor" tests specified in Treasury Regulations.
Risk of Tax Treatment of Leases as Sales or Financings. Although the General
Partner expects that with respect to each Lease the Partnerships will be
treated, for federal income tax purposes, as the owner and lessor of the
Equipment, it is possible that the Service may challenge some or all of the
Partnerships' Leases and assert that they are properly characterized as sales or
financings for federal tax purposes. Such treatment would result in the loss of
cost recovery deductions by the Partnerships with respect to the Equipment
subject to such Leases. See "FEDERAL INCOME TAX CONSEQUENCES--Tax Treatment of
the Leases".
Tax Liability From Operations And Sales or Other Dispositions. The tax
liability of Limited Partners may materially exceed net income for financial
reporting purposes. The General Partner expects that taxable income for each
year will generally, if not always, be less than cash distributions for the same
year. However, the sale or other disposition of a Unit or Partnerships' property
may result in Limited Partners realizing federal income tax liabilities that
exceed the amount of cash (if any) realized from such sale or other disposition.
Audit of Partnership Return. An audit of a Partnership's information return
may lead to an audit of income tax returns of Limited Partners which could lead
to adjustments of items unrelated to a Partnership.
Limitations on the Deduction of Losses. The ability of individuals, trusts,
estates, personal service corporations and certain other closely-held
corporations to deduct losses generated by the Partnerships is limited to the
amounts such investors have "at risk" in the activity, i.e., generally the
amount paid for their Units plus any profit allocations, reduced by loss
allocations and distributions. Additionally, such investors are subject to
restriction on the deductibility of losses attributable to certain "passive
activities". The Partnerships' operations will constitute "passive activities".
Such investors can only use "passive losses" to offset "passive income" in
calculating tax liability. See "FEDERAL INCOME TAX CONSEQUENCES--Deductibility
of Losses: Passive Losses, Tax Basis and "At Risk" Limitations".
Risk of Allocation of Profits and Losses. Allocations of Profits or Losses
between the General Partner and Limited Partners might be successfully
challenged by the Service if they did not have substantial economic effect or
were not made in accordance with the "interests" of the Partners. If such a
challenge were upheld, taxable income and loss might be reallocated, resulting
in the Limited Partners being allocated more taxable income or less loss than
that allocated to them under the Partnership Agreement. To avoid such a
challenge, the Partnership Agreement includes provisions regarding "special
allocations" and "curative allocations" to comply with the applicable
requirements of Treasury Regulations. See "FEDERAL INCOME TAX
CONSEQUENCES--Allocations of Profits and Losses".
Risk of Unrelated Business Taxable Income. Investors that are entities
customarily exempt from federal income taxation on their income, such as
qualified corporate pension, profit sharing and stock bonus plans, including
Keogh Plans ("Qualified Plans"), IRAs and certain charitable and other
organizations described in Section 501(c) of the Code, are nevertheless subject
to "unrelated business tax" under the Code on "unrelated business taxable
income" ("UBTI"). Such entities are required to file federal income tax returns
if they have total UBTI from all sources in excess of $1,000 per year. The
Partnerships' leasing income and certain other income of the Partnerships will
generally constitute UBTI taxable to such entities. See "FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Employee Benefit Plans and Other Tax-Exempt
Organizations".
Risk of Determination of Equitable Owner of Properties. The Partnerships and
Joint Ventures in which they invest will be entitled to cost recovery,
depreciation or amortization deductions with respect to their properties only if
they are considered to be the equitable owners of the Partnerships' properties
for federal income tax purposes. The determination of who is the equitable owner
is based on many factors. If the Partnerships were deemed not to be the
equitable owner of its Equipment and other properties, it would not be entitled
to cost recovery, depreciation or amortization deductions, and the character of
Partnerships' leasing income might be deemed to be portfolio income instead of
passive income. See "FEDERAL INCOME TAX CONSEQUENCES--Tax Treatment of the
Leases" and "--Deductibility of Losses: Passive Losses, Tax Basis and "At Risk"
Limitation".
Foreign Investors Should be Aware. Foreign investors should be aware that
income from the Partnerships may be subject to United States federal income tax
withholding. Such investors may also be required to file United States federal
income tax returns. See "FEDERAL INCOME TAX CONSEQUENCES--Foreign Investors".
Additional Taxes and Reporting Obligations. Limited Partners may be required
to pay various taxes in connection with an investment in the Partnerships, such
as the alternative minimum tax ("AMT"). Each Limited Partner is expected to be
allocated a ratable share of "tax preference items" and the operations of the
Partnerships may give rise to other adjustments which could increase a
particular investor's AMT. AMT is treated in the same manner as the regular
income tax for purposes of payment of estimated taxes. See "FEDERAL INCOME TAX
CONSEQUENCES--Alternative Minimum Tax".
Limited Partners also may be subject to state and local taxation, such as
income, franchise or personal property taxes in the state in which they are a
resident, as a result of their Partnership investment. A Partnership's use of
Equipment outside the United States might also subject the Partnership or
Limited Partners to income or other taxation in foreign countries.
ERISA Risks. Under certain circumstances, ERISA and the Code, as interpreted
by the Department of Labor, will apply a "look-through" rule under which the
assets of an entity in which a Qualified Plan or IRA has made an equity
investment may constitute "plan assets". Under certain circumstances, an
investment in Units may not be an appropriate investment for Qualified Plans or
IRAs due to such interpretations. Fiduciaries of Qualified Plans and IRAs, in
consultation with their advisors, should carefully consider: (1) whether an
investment in Units is consistent with their fiduciary responsibilities and (2)
the effect of the possible treatment of assets if the Partnerships' underlying
assets are treated as "plan assets". See "INVESTMENT BY QUALIFIED PLANS".
THE FOREGOING IS A SUMMARY OF THE SIGNIFICANT FEDERAL INCOME TAX RISKS
RELATING TO A PURCHASE OF UNITS AND THE FORMATION AND PROPOSED OPERATIONS OF THE
PARTNERSHIPS. THE RISKS DESCRIBED ABOVE AND THE OTHER SIGNIFICANT FEDERAL INCOME
TAX CONSEQUENCES RELATING TO THE PURCHASE OF UNITS ARE FURTHER DESCRIBED IN
"FEDERAL INCOME TAX CONSEQUENCES".
VARIOUS TAX RULES INCLUDING, WITHOUT LIMITATION, STATE, LOCAL AND FOREIGN
TAXES, THE ALTERNATIVE MINIMUM TAX, THE 'AT-RISK,' PASSIVE LOSS AND INVESTMENT
INTEREST LIMITATIONS, AND THE UNRELATED BUSINESS INCOME TAX RULES PRODUCE TAX
EFFECTS THAT CAN VARY BASED ON A LIMITED PARTNER'S PARTICULAR CIRCUMSTANCES.
THEREFORE, PROSPECTIVE LIMITED PARTNERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE PARTICULAR CONSEQUENCES OF AN INVESTMENT IN UNITS.
SOURCES AND USES OF OFFERING PROCEEDS AND RELATED INDEBTEDNESS
The following tables set forth the General Partner's best estimate of the use
of the Gross Offering Proceeds from the sale of the Minimum Offering
($1,200,000) and the Maximum Offering ($75,000,000) for each Partnership.
Because the Partnerships have not made any acquisitions, certain of the amounts
below cannot be precisely calculated at the present time and may vary
substantially from these estimates. As shown below, it is projected that 80.40%
of Gross Offering Proceeds will be used to make investments in Leases and
Financing Transactions (assuming a Maximum Offering). See footnote 7 to the
following table.
Minimum Offering Maximum Offering
Dollar Dollar
Amount per Partnership %(1) Amount per
Partnership %(1)
Gross Offerings Proceeds (2)$1,200,000 100.00%$75,000,000
100.00%
Expenses:
Sales Commissions (3) (96,000) (8.00%) (6,000,000) (8.00%)
Underwriting Fees (4) (24,000) (2.00%) (1,500,000) (2.00%)
O & O Expense Allowance (5)(42,000)(3.50%) (1,875,000) (2.50%)
--------------- ----------- -------
Public Offering Expenses(162,000)(13.50%) (9,375,000) (12.50%)
Acquisition Fees (attributable to
Offering Proceeds and
Borrowings)(6) (138,000) (11.50%) (5,328,102) (7.10%)
--------- -------- ----------- -------
Gross Offering Proceeds
Available for Investments(7)$900,000 75.00%$60,296,898 80.40%
======== ================= ======
(1)All percentages shown in the table above are percentages of Gross Offering
Proceeds.
(2)Does not include $1,000 in cash contributed by both the Original Limited
Partner and the General Partner to each Partnership at the time of its
formation. Upon the Initial Closing of each Partnership, the Original Limited
Partner will withdraw from such Partnership and his capital contribution of
$1,000 will be refunded.
(3)Each Partnership will pay to participating broker-dealers a Sales Commission
of $8.00 per Unit sold (8% of Gross Offering Proceeds), except that no Sales
Commission will be paid in respect of Units sold to Affiliated Limited
Partners. The General Partner expects that substantially all Sales
Commissions will be paid to unaffiliated Selling Dealers.
(4)Each Partnership will pay the Dealer-Manager an Underwriting Fee equal to
$2.00 for each Unit sold (2.0% of Gross Offering Proceeds) for managing the
Offering of Units and to reimburse, on a non-accountable basis, for the
wholesaling fees and expenses of the Sponsor.
(5)Each Partnership will pay the General Partner an O & O Expense Allowance
equal to $3.50 for each Unit sold (3.5% of Gross Offering Proceeds) if the
Offering results in Gross Offering Proceeds of $25,000,000 or less. The
General Partner will reduce the percentage of O & O Expense Allowance payable
to it by the Partnership from 3.5% to 2.5% for Gross Offering Proceeds
exceeding $25,000,000 but less than $50,000,000; and from 2.5% to 1.5% for
Gross Offering Proceeds exceeding $50,000,000. The O & O Expense Allowance
will be paid on a non-accountable basis, which means that such compensation
may be less than, or greater than, the actual costs and expenses paid by the
General Partner and the Dealer-Manager in (a) organizing the Partnerships and
offering Units for sale (which may include advertising and promotional
expenses incurred in preparing the Partnerships for registration and
subsequently offering and distributing the Units to the public--the
"Organizational and Offering Expenses") and (b) fees and expenses actually
incurred by the Dealer-Manager and prospective Selling Dealers. Due diligence
fees and expenses are limited to an aggregate amount not to exceed the lesser
of (a) one-half of 1% of Gross Offering Proceeds or (b) the amount permitted
to be paid pursuant to Rule 2810 of the NASD Conduct Rules. The General
Partner has agreed in the Partnership Agreement to pay all Organizational and
Offering Expenses in excess of those previously noted, in the aggregate,
without recourse to, or reimbursement from, the Partnerships. See "SUMMARY OF
THE PARTNERSHIP AGREEMENT" and "PLAN OF DISTRIBUTION".
(6)The amounts and percentages shown in the column entitled Minimum Offering
represent for the Minimum Offering the maximum Acquisition Fees which are
payable from Gross Offering Proceeds. The amounts and percentages shown in
the column entitled Maximum Offering represent for the Maximum Offering the
minimum Acquisition Fees which are payable from Gross Offering Proceeds. The
amounts and percentage shown are computed by multiplying 3.0% by the total
purchase price of Investments purchased with both Capital Contributions and
with borrowings and the result is then reduced to the amounts and percentages
shown on the foregoing chart.
(7)Each Partnership intends to establish an initial Reserve equal to 1.0% of
Gross Offering Proceeds, which will be maintained and used for insurance,
certain repairs, replacements and miscellaneous contingencies.
COMPENSATION TO THE GENERAL PARTNER AND AFFILIATES
The following table discloses in summary fashion the forms and estimated
amounts of all compensation or distributions which may be paid, directly or
indirectly, by the Partnerships to the General Partner and its Affiliates. Some
of such compensation will be paid regardless of the success or profitability of
the Partnerships' operations. The following compensation was not determined by
arm's-length negotiations.
Notwithstanding the fact that some of the compensation disclosed below may
vary in amount from the amounts projected, the total amounts of compensation
payable to all Persons, including the General Partner, is limited by provisions
of the Partnership Agreement and the requirements of (a) the NASAA Guidelines,
which include specific maximum sponsor compensation and minimum use of proceeds
requirements and (b) the NASD's Conduct Rules (which limit selling
compensation).
<PAGE>
Organization and
Offering Stage
Form of (and Entity Estimated Dollar Amount
Receiving) Compensation Method of Compensation
Underwriting Fees A minimum of $24,000
(payable to ICON 2.0% ($2.00 per Unit) if the Minimum
Securities Corp., the of the Gross Offering Offering of 12,000
"Dealer-Manager") Proceeds on all Units Units is sold per
sold. Partnership and a
maximum of $1,500,000
if the Maximum
Offering of 750,000
Units is sold per
Partnership.
Sales Commissions 8.0% ($8.00 per Unit) Not determinable at (expected to be paid
of the Gross Offering this time.
primarily to Selling Proceeds of all Units
Dealers with a de minimis sold, except for Units If all Units sold were
amount expected to be sold to Affiliated sold by the
paid to ICON Securities Limited Partners, Dealer-Manager (which
Corp.) which shall be sold on is actually expected
a net of Sales to sell only a de
Commission basis. minimis number of
Units), the maximum amount of
Sales Commissions that the
Dealer-Manager could receive
would be $96,000 if the
Minimum Offering of 12,000
Units is sold per Partnership
and $6,000,000 if the Maximum
Offering of 750,000 Units is
sold per Partnership, in each
case calculated without
giving effect to possible
reduction of such Sales
Commissions not payable for
Units purchased by Affiliated
Limited Partners, if any.
O & O Expense Allowance 3.5% ($3.50 per Unit) Not determinable at (payable to
ICON Capital of the first this time. Corp., the "General $25,000,000 of each
Partner", or the Unit sold for Gross A minimum of $42,000 Dealer-Manager, or
both, Offering Proceeds; if the Minimum for Organizational and 2.5% ($2.50 per
Unit) Offering of 12,000 Offering Expenses) of each Unit sold for Units is sold
per
Gross Offering Partnership and a
Proceeds in excess of maximum of $1,875,000
$25,000,000 but less if the Maximum
than $50,000,000; and Offering of 750,000
1.5% ($1.50 per Unit) Units is sold per
for Gross Offering Partnership.
Proceeds exceeding
$50,000,000. The
General Partner has
agreed in the
Partnership Agreement
to pay actual
Organizational and
Offering Expenses for
this Offering to the
extent such expenses
exceed the O & O
Expense Allowance.
The General Partner will pay or advance the bona fide
due diligence fees and expenses of the Dealer-Manager
and actual and prospective Selling Dealers on a fully
accountable basis from such Allowance up to, but not
in excess, of the lesser of the maximum amount
payable under the NASD Conduct Rules, or 1/2 of 1% of
Gross Offering Proceeds per Unit with respect to each
Partnership payable to the Dealer-Manager.
Operational Stage
Form of (and Entity
Receiving) Compensation Method of Compensation Estimated Dollar Amount
Acquisition Fee (payable 3.0% of (a) the The total of all
to ICON Capital Corp.) purchase price paid by Acquisition Fees paid
the Partnership to the to the General Partner
seller of each item of and to any other
Equipment acquired or Persons over the life
residual value of each Partnership
interest acquired, in will not exceed the
each case inclusive of lesser of (a) 15% of
debt incurred or Gross Offering
assumed or debt which Proceeds or (b) an
would be assumed if aggregate amount
the option to acquire which, together with
a residual value other Front-End Fees,
interest were does not exceed the
immediately exercised maximum amount of
and (b) the principal Front-End Fees
amount of each allowable under
Financing Transaction Section IV.C.2. of the
entered into or NASAA Guidelines.
acquired by the
Partnership.(1) Total Acquisition Fees
would equal 11.5% of
Gross Offering
Proceeds per
Partnership (or
$138,000 if the
Minimum Offering of
12,000 Units is sold
per Partnership) and
7.10% of Gross
Offering Proceeds per
Partnership (
or $5,328,102 if the
Maximum Offering of 750,000
Units is sold per Partnership
.)).
In calculating
Acquisition Fees, fees
payable by or on
behalf of each
Partnership to
unaffiliated finders
and brokers will be
deducted from
Acquisition Fees
otherwise payable to
the General Partner.
No finder's or
broker's fees may be
paid to any Affiliate
of the General Partner.
Acquisition Fees are
required to be reduced
or refunded if the
Partnerships'
Investment in
Equipment is less than
the greater of (i) 80%
of the Gross Offering
(1)Total Acquisition Fees paid from all sources is limited to 3.0% of Gross
Offering Proceeds, an amount equal to the lesser of (a) 15.0% of Gross
Offering Proceeds or (b) the difference between (i) the maximum Front-End
Fees allowable under the NASAA Guidelines and (ii) all other Front-End Fees
(i.e., Sales Commissions, Underwriting Fees and the O & O Expense Allowance,
which total 13.5% of Gross Offering Proceeds). Pursuant to the NASAA
Guidelines, the maximum Front-End Fees which the Partnership may pay is 20%
of Gross Offering Proceeds (if no debt is employed by the Partnership to
acquire its Investments) which percentage is increased by .0625% for each 1%
of indebtedness (up to a maximum of 80% of the cost of the Partnership's
Investments) so utilized. As a result, if the Partnership utilized
indebtedness equal to 67% of the cost of the Partnership's Investments, the
Partnership would be able to pay total Front-end Fees equal to 19.60% of
Gross Offering Proceeds and Acquisition Fees would be limited to 7.5% of
Gross Offering Proceeds.
Form of (and Entity Method of Compensation Estimated Dollar Amount
Receiving) Compensation
Proceeds reduced by .0625%
for each 1% of borrowings
encumbering the Partnerships'
Equipment, or (ii) 75% of the
Gross Offering Proceeds. See
"SOURCES AND USES OF OFFERING
PROCEEDS AND RELATED
INDEBTEDNESS".
Management Fee for The lesser of: Not determinable at
actively managing the this time.
leasing, re-leasing, (i)(a) 5% of gross
financing and refinancing rental payments from The General Partner
of Partnership Leases and Operating Leases has agreed to
Financing Transactions (except Operating subordinate (without
(payable to the General Leases (if any) for interest) its receipt
Partner) which management of monthly payments of
services are performed the Management Fees to by
non-affiliates the Limited Partners' under the
supervision receipt of the First of the General
Partner Cash Distributions for which 1% of annual
until the earlier of gross rental payments (1)
receipt by the shall be payable), Limited Partners,
of
all accrued but
(b) 2% of gross rental previously unpaid, and
payments and debt current, installments
service payments from of First Cash
Full-Payout Leases Distributions (as so
with net lease limited) or (2)
provisions, 2% of expiration of the
annual gross principal Reinvestment Period.
and interest payments Any Management Fees so
from Financing deferred will be
Transactions (see deferred without
"INVESTMENT OBJECTIVES interest during the
AND POLICIES--Leases Reinvestment Period
and Financing until the Limited
Transactions--Financing Partners have received
Transactions"), the previously unpaid
portion of First Cash
(c) and 7% of gross Distributions
rental payments from described in the
Equipment operated by preceding sentence.
the Partnership as
provided in NASAA Management Fees
Guidelines Section payable with respect
IV.E.4(2), or to Investments
acquired by the Partnership
prior to the effective date
of the withdrawal of the
General Partner shall remain
payable to the General
Partner notwithstanding any
such withdrawal as and when
the Partnership receives the
rental proceeds from such
Investments creating the
obligation to pay such
Management Fees.
(2) If the General Partner provides both equipment management and additional
services, relating to the continued and active operation of program Equipment,
such as on-going marketing and re-leasing of Equipment, hiring or arranging for
the hiring of crews or operating personnel for the Partnerships' Equipment and
similar services, it may charge the Partnerships a management fee not to exceed
7.0% of the gross rental payments from Equipment operated by the Partnerships.
<PAGE>
Form of (and Entity
Receiving) Compensation Method of Estimated Dollar
Compensation Amount
(ii) management fees which are competitive and/or
customarily charged by others rendering similar
services as an ongoing public activity in the same
Distributable Cash From geographic location
Operations (share for similar Not determinable at
distributable to the equipment and this time.
General Partner) Financing
Transactions.
Prior to Payout
(i.e. the time when
cash distributions
in an amount equal
to the sum of the
Limited Partners'
(i) capital
contributions and
(ii) an 8.0%
cumulative annual
return thereon,
compounded daily,
have been made),
distributions of
Distributable Cash
From Operations
shall be made 99% to
the Limited Partners
and 1% to the
General Partner.
After Payout,
distributions of
Distributable Cash
From Operations
shall be tentatively
attributed 90% to
the Limited Partners
and 10% to the
General Partner.
Distributable Cash From Prior to Payout Not determinable at
Sales (share (i.e. the time when this time.
distributable to the cash distributions
General Partner) in an amount equal
to the sum of the
Limited Partners'
(i) capital
contributions and
(ii) an 8.0%
cumulative annual
return thereon,
compounded daily,
have been made),
distributions of
Distributable Cash
From Sales shall be
made 99% to the
Limited Partners and
1% to the General
Partner. After
Payout,
distributions of
Distributable Cash
From Operations
shall be tentatively
attributed 90% to
the Limited Partners
and 10% to the
General Partner.
<PAGE>
Form of (and Entity
Receiving) Compensation Method of Compensation Estimated Dollar Amount
Subordinated Remarketing With respect to sales Not determinable at Fee for
arranging the of the Equipment and this time.
sale of the Partnerships' of the Financing
Equipment and of the Transactions, a
Partnerships' Financing Subordinated
Transactions (payable to Remarketing Fee
the General Partner). payable to the General
Partner in an amount equal to the lesser of (i) 3.0%
of the contract sales price for the Partnerships'
Investments (as defined in the Glossary), or (ii)
one-half the normal competitive commission charged by
unaffiliated parties for such services in light of
the size, type and location of the Leases and
Financing Transactions. No Subordinated Remarketing
Fee will accrue or be payable with respect to any
portion of Cash From Sales which is reinvested in
additional Partnership Investments. Payment of such
Subordinated Remarketing Fee will be deferred until
after Payout and will be made without interest.
Reimbursement for Subject to the Not determinable at
out-of-pocket Acquisition limitations contained this time.
Expenses incurred by the in Section 6.4 of the
General Partner and Partnership Agreement,
Affiliates directly the Partnership will
attributable to the reimburse the General
acquisition of Equipment Partner and its
(payable to the General Affiliates for certain
Partner and Affiliates) expenses incurred by
(3) them in connection
with the Partnership's
operations.
Interest in Partnership Profits or Losses
Partnerships' Profits and The General Partner Not determinable at Losses for Tax
Purposes will be allocated this time.
(share allocable to the shares of the
General Partner) Partnerships' Profits
and Losses for Tax
Purposes that
generally approximate
its share of
Distributable Cash
From Operations and of
Distributable Cash
From Sales. See
"FEDERAL INCOME TAX
CONSEQUENCES--Alloca-tions
of Profits and Losses."
(3) In the event the General Partner or an Affiliate purchases Equipment with
its own funds in order to facilitate the later purchase by a Partnership or
borrows on behalf of a Partnership for any Partnership purpose, the General
Partner or such Affiliate will be entitled to receive interest on the funds
expended for such purpose on behalf of the Partnership until the purchase by the
Partnership of such Equipment or other repayment of the loan. Interest will be
paid at a rate equal to that which would be charged by third-party financing
institutions on comparable loans for the same purpose in the same geographic
area.
As described in the above table, the General Partner will reduce the percent
of O & O Expense Allowance payable to it by the Partnership from the 3.5% of
Gross Offering Proceeds of $25,000,000 or less to 2.5% for Gross Offering
Proceeds exceeding $25,000,000 but less than $50,000,000; and from 2.5% to 1.5%
for Gross Offering Proceeds exceeding $50,000,000. on a non-accountable basis
(exclusive of Sales Commissions) whether or not incurred. Such Organizational
and Offering Expenses include, but are not limited to, legal, accounting and
printing costs, and filing and qualification fees and disbursements, bona fide
due diligence fees and expenses actually incurred by the Dealer-Manager and
prospective Selling Dealers up to an aggregate amount equal to the lesser of
one-half of 1% of Gross Offering Proceeds or the amount permitted to be paid
pursuant to Rule 2810 of the NASD Conduct Rulesand expenses for salaries and
direct expenses of officers and directors of the General Partner while directly
engaged in organizing the Partnerships and registering the Units. The General
Partner has agreed to pay any amount by which such O & O Expense Allowance
exceeds the foregoing.
As described in the above table, the General Partner will be entitled to
receive Acquisition Fees from the Partnerships for evaluating, selecting,
negotiating and closing the acquisition of the Partnerships' Equipment and
entering into Financing Transactions. In addition, sellers of Equipment to the
Partnerships may pay fees to brokers or finders representing such sellers, but
in no event may such brokers or finders include the General Partner or any of
its Affiliates.
Acquisition Fees payable by the Partnerships to the General Partner will
equal the sum of 3.0% of (a) the aggregate purchase price paid for all items of
Equipment acquired by the Partnerships and (b) the aggregate principal amount of
Financing Transactions entered into by the Partnerships with unaffiliated Users,
subject to certain conditions and limitations specified in the Partnership
Agreement. The Acquisition Fees presented under the caption "SOURCES AND USES OF
OFFERING PROCEEDS AND RELATED INDEBTEDNESS" are calculated assuming that, on
average, total indebtedness will equal 67% of the Purchase Price of all of the
Partnership's Investments.
The General Partner has agreed to limit maximum permitted Partnership
borrowings during the Offering Period in the event Gross Offering Proceeds
exceed $25,000,000; the reduction will be pro rata from the 80% permitted
borrowings if Gross Offering Proceeds do not exceed $25,000,000 to an aggregate
of 67% if a Maximum Offering involving Gross Offering Proceeds of $75,000,000
are realized by the Partnership. Following the Offering Period and to the extent
the limitations in the immediately preceding sentence require leverage of less
than 75%, the Partnerships' permitted leverage may rise to 75% at the time
reinvestment proceeds are reinvested by the Partnership. To the extent that such
limitation is not otherwise satisfied, the Acquisition Fees payable or paid to
the General Partner by the Partnerships will be reduced or refunded by the
General Partner to the Partnerships to the extent necessary to comply with such
limitation. Any such refund shall bear interest calculated at a rate of 1% per
month if such refund is not made within 30 days after the end of any calendar
quarter in which the Partnerships' Investment in Equipment fails to satisfy such
minimum investment.
In addition to the O & O Expense Allowance, the Partnerships will reimburse
the General Partner and its Affiliates for (1) the actual costs to them of goods
and materials used for or by the Partnerships and obtained from unaffiliated
parties; (2) expenses related to the purchase, operation, financing and
disposition of the Partnerships' Leases and Financing Transactions incurred
prior to the time that each Partnership has funds available to pay such expenses
directly; and (3) administrative services necessary to the prudent operation of
a Partnership, not in excess of the lesser of the General Partner's (or
Affiliate's) costs or 90% of the costs which a Partnership would be required to
pay to independent parties for comparable services. Each Partnerships' Annual
Reports to its Limited Partners will provide a breakdown of services performed
by, and amounts reimbursed to, the General Partner and its Affiliates.
Assuming the sale of 750,000 Units in a twelve (12) month period, the General
Partner estimates that it would incur the following expenses which would be
potentially eligible to be reimbursed by the Partnerships at the end of such
period pursuant to the NASAA Guidelines and section 6.4(i) of the Partnership
Agreement (subject to the limitations on such reimbursements described below):
Salaries and benefits:
Accounting staff$150,000
Professional staff270,000
Secretarial staff90,000
Investor relations staff 150,000
Computer and equipment 90,000
Maintenance 30,000
Total $780,000
Section 6.4(i) of the Partnership Agreement provides limitations on types and
annual amounts of eligible expenses of the Partnerships which may actually be
paid by the Partnerships. No reimbursement shall be permitted for services for
which the General Partner is entitled to compensation by way of a separate fee.
Excluded from the allowable reimbursement (except as permitted under Section
6.4(i) of the Partnership Agreement) shall be:
(1) salaries, fringe benefits, travel expenses or other administrative items
incurred by or allocated to any Controlling Person of the Sponsor or any
Affiliate thereof; and
(2) expenses for rent, depreciation and utilities or for capital equipment or
other administrative items (other than as specified provided in such Section
6.4(i)).
In addition to the foregoing limitations, the reimbursement for
administrative expenses authorized by such Section 6.4(i) which is made in any
year during the Reinvestment Period may not exceed the sum of (a) 2.0% of the
Partnerships' Gross Revenues (excluding any Cash From Sales) for such year plus
(b) the excess (if any) of such expense reimbursement limitation for all prior
years over the amounts of such expenses actually reimbursed by the Partnerships
for such prior years. To the extent that the total of such expenses which are
actually incurred in any year exceed the amount which is actually reimbursed for
such year, the unreimbursed expenses will be accrued and may be paid to the
General Partner, without interest thereon, in any succeeding year for which the
administrative expenses are less than such year's expense reimbursement
limitation.
While a Partnership is not permitted to pay any remuneration to any officer
or director of the General Partner or any Affiliated Entity for services on a
Partnership's behalf, the Sponsor or the Dealer-Manager may apply any portion or
none of the O & O Expense Allowance paid to it to defray such costs.
No specific arrangements have been made for the General Partner or any of its
Affiliates of the General Partner to provide financing for a Partnership's
Leases and Financing Transactions. All such financing is subject to certain
restrictions set forth in Section 6.4 of the Partnership Agreement.
CONFLICTS OF INTEREST
The Partnerships will be subject to various conflicts of interest with the
General Partner, its Affiliates and investment entities advised, managed or
controlled by them. Certain provisions of the Partnership Agreement are intended
to protect the Limited Partners' interests (specifically Sections 6.2 and 6.4,
which limit the General Partner's exercise of powers and its and its Affiliates'
compensation therefor). In addition, see "FIDUCIARY RESPONSIBILITY" for a
discussion of the General Partner's fiduciary obligations to the Limited
Partners, which, in general, require the General Partner to consider the best
interests of the Limited Partners in managing the Partnerships' assets and
affairs.
The General Partner intends to use its best business judgment and discretion
in resolving any conflicts which arise. These conflicts include, but are not
limited to, the following:
Lack of Separate Legal Representation and Lack of Arm's Length Negotiation of
the Program Agreements
The Partnerships, the Dealer-Manager and the General Partner are represented
by the same Counsel. The Limited Partners, as a group, have not been represented
by legal counsel and the Partnerships' Counsel has not acted on behalf of
prospective investors nor conducted a review or investigation on their behalf.
None of the agreements and arrangements between the Partnerships on the one hand
and the General Partner or Dealer-Manager on the other hand have been negotiated
on an arm's length basis. The attorneys, accountants and other experts who
perform services for the Partnerships will also perform services for the General
Partner, the Dealer-Manager, certain of its Affiliates and for other
partnerships or ventures which the General Partner or its Affiliates may
sponsor. However, should a dispute arise between a Partnership, on the one hand,
and the General Partner or Dealer-Manager, on the other hand, the General
Partner will cause such Partnership to retain separate legal counsel to
represent such Partnership in connection with such dispute.
Compensation of the General Partner and Affiliates
The compensation payable by the Partnerships to the General Partner and
Dealer-Manager have been determined unilaterally by the General Partner and,
therefore, are not the result of arm's-length negotiations. However, the amount
of such compensation is believed to be representative of practices in the
industry and complies with the NASAA Guidelines as in effect on the date of this
Prospectus. The General Partner and Dealer-Manager will receive substantial
compensation upon each Closing and upon, or from, the Partnerships' acquisition,
use and sale of its Leases and Financing Transactions. Decisions involving these
transactions will be made by the General Partner in its discretion. See
"COMPENSATION TO THE GENERAL PARTNER AND AFFILIATES."
A conflict of interest may also arise from decisions by the General Partners
concerning the timing of the Partnerships' purchases and sales of Equipment or
the termination of the Partnership, each of which events will have an effect on
the timing and amounts of its compensation. In such circumstances, the interest
of the General Partner in continuing the Partnerships and receiving Management
Fees, for example, may conflict with the interests of the Limited Partners in
realizing an earlier return of their capital and any investment return thereon.
Effect of Leverage on Compensation Arrangements
The General Partner intends to acquire a Partnership's Investments with
borrowings approximating 67% of the aggregate purchase price of the
Partnership's total Investments, but is permitted to finance up to 80% of the
aggregate purchase price of all the Partnership Investments in the event Gross
Offering Proceeds are $25,000,000 or less. If Gross Offering Proceeds are
$25,000,000 or less for each Partnership the General Partner believes that
higher leverage will best serve the Partnership in question by allowing for
greater diversification of Equipment and lower concentrations from a Lessee
credit standpoint than could be the case if lower leverage standards existed.
Since Acquisition Fees are based upon the purchase price of all Equipment
acquired by each Partnership, including related borrowings, the General Partner
would realize a greater amount of Acquisition Fees (subject to a ceiling on such
fees) if a greater percent of debt were employed. If Gross Offering Proceeds
exceed $25,000,000, however, the General Partners has agreed to a pro rata
limitation on the aggregate permitted borrowings by the Partnerships. If Gross
Offering Proceeds were $50,000,000, their permitted borrowing limitation would
be reduced from 80% of the aggregate purchase price of the Partnerships' Total
Investment to 75%. In the event of a Maximum Offering of $75,000,000, the
limitation would be reduced further to 67% of the aggregate purchase price of
each Partnership's total Investments. Following the Offering Period and to the
extent the limitations in the immediately preceding sentence require leverage of
less than 75%, each Partnerships' permitted leverage may rise to 75% at the time
reinvestment proceeds are reinvested by the Partnership. (See "COMPENSATION TO
THE GENERAL PARTNER AND AFFILIATES")
Competition With the General Partner and its Affiliates
The General Partner and its Affiliates are engaged directly and indirectly in
the business of acquiring and leasing equipment for their own respective
accounts as well as for other Programs. The General Partner or any of its
Affiliates may in the future form, sponsor, act as a general partner of, or as
an advisor to other investment entities (including other public equipment
ownership and leasing partnerships) which have investment objectives similar to
the Partnerships' and which may be in a position to acquire the same Investments
at the same time as the Partnerships. See "CERTAIN RELATIONSHIPS WITH THE
PARTNERSHIPS" and "MANAGEMENT" for a chart of and a description of the
relationships of the Partnerships to the General Partner and relevant
Affiliates.
Until all Capital Contributions have been invested or committed to investment
in Investments and Reserves, used to pay permitted Front-End Fees or returned to
the Limited Partners as provided in the Partnership Agreement, all such
Investment opportunities meeting the investment objectives of the Partnerships
(including Equipment acquisition, financing, refinancing, leasing and re-leasing
opportunities) shall be presented to the Partnerships first except in the
following circumstances:.
o The required cash investment is greater than the cash available for
investment by the Partnerships;
o The amount of debt is above levels deemed acceptable for the
Partnerships;
o The equipment type is not appropriate to the Partnerships' objectives,
which include, among others, the avoidance of concentration of exposure to
any one class of equipment;
o The Lessee credit quality does not satisfy the Partnerships' objectives,
maintaining a high-quality portfolio with low credit losses while avoiding
a concentration of exposure to any individual Lessee or User;
o The term remaining exceeds the Liquidation Period guidelines established
for the Partnerships;
o The available cash flow (or lack thereof) is not commensurate with the
Partnerships' need to make certain distributions during each Partnership's
Reinvestment Period (as defined);
o The transaction structure, particularly with respect to the end-of-lease
options governing the Equipment, does not provide the Partnerships with
the residual value opportunity commensurate with the total return
requirements of the Partnerships; and
o The transaction does not comply with the terms of each Partnership's
partnership agreement.
The Partnership Agreement does not prohibit the General Partner or its
Affiliates from investing in equipment leasing acquisitions, financing,
refinancing, leasing and re-leasing opportunities on its or their own behalf or
on behalf of the Prior Programs. The General Partner and each such Affiliate
shall have the right, subject only to the provisions of the immediately
preceding paragraph, to take for its own account (individually or otherwise), or
to recommend to any Affiliated Program (including the Partnerships), any
particular investment opportunity after considering the factors in the preceding
paragraph.
Any conflicts in determining and allocating Investments between the General
Partner and its Affiliated Programs on the one hand and a Partnership will be
resolved by the Investment Committee, which will evaluate the suitability of all
prospective lease acquisitions and Financing Transactions for investment by a
Partnership.
If the Investments available from time to time to a Partnership and to other
Affiliated Programs is less than the aggregate amount of Investment then sought
by them, the available Investment shall generally be allocated to the investment
entity which has been seeking Investments for the longest period of time.
Conflicts may also arise between two or more Affiliated Programs (including
the Partnerships) advised or managed by the General Partner or any of its
Affiliates, or between one or more of such Affiliated Programs and any Affiliate
of the General Partner acting for its own account, which may be seeking to
re-lease or sell similar equipment at the same time. In any such case involving
Affiliated Programs, the first opportunity to re-lease or sell equipment shall
generally be allocated to the Affiliated Program attempting to re-lease or sell
equipment which has been subject to the lease which expired first, or, if the
leases expire simultaneously, the lease which was first to take effect. However,
the General Partner in its discretion may make exceptions to this general policy
where equipment is subject to remarketing commitments which provide otherwise or
in cases in which, in the General Partner's judgment, other circumstances make
the application of such policy inequitable or not economically feasible for a
particular Affiliated Program.
Determination of Reserves and Liability of the General Partner for
Partnership Obligations
As a general rule, the General Partner is liable for the Partnerships'
liabilities which exceed its assets (including Reserves for working capital and
contingent liabilities). The General Partner has sole discretion to determine
the amount of Reserves and the allocation of the Partnerships' cash flow to
maintain or increase the amount the Reserve account. Because a deficiency in the
amount of reserves relative to the Partnerships' contingent liabilities may
expose the General Partner to potential liability to creditors of the
Partnerships, the General Partner may have a conflict of interest in determining
when to allocate cash flow for distribution to the Limited Partners or to the
Partnerships' Reserve Account.
Joint Ventures
To permit added diversification, the Partnerships may invest in joint
ventures with other limited partnerships or other investment entities sponsored
by the General Partner, any Affiliate or any non-Affiliate. If the Partnership
enters into a joint venture, the General Partner would have a fiduciary duty to
the Partnerships and to any other partnerships sponsored by it which participate
in the joint venture which may result in conflicts arising in determining when
and whether to dispose of any jointly owned investment. In order to minimize the
likelihood of a conflict between these fiduciary duties, the Partnership
Agreement restricts investments in such joint ventures by requiring that such
joint investment must comply with the investment criteria and investment
objectives of the Partnerships. See "RISK FACTORS--Partnership Risks and
Investment Risks--Risks of Joint Ventures."
Lease Referrals
From time to time, the General Partner may be presented with the opportunity
to earn fees or other compensation for referring a prospective lessee to a
lessor other than the Partnerships or other programs sponsored by the General
Partner or to its Affiliates. Such activities could involve conflicts of
interest in that the General Partner would receive compensation as a result of
such referral even though the Partnerships would not receive any benefits.
Section 6.5 of the Partnership Agreement provides that, if the Partnerships have
funds available for investment, the General Partner will not refer prospective
lessees to third parties for compensation unless using the criteria listed above
under "Competition with the General Partner and its Affiliates" the investment
in question is deemed by the General Partner to be inconsistent with the
investment objectives and diversification of the Partnerships.
Participation of a Securities Sales Affiliate in this Offering
Units will be sold on a best-efforts basis through ICON Securities Corp.
which will act as Dealer-Manager and will receive Underwriting Fees, with
respect to sales of all Units and will receive Sales Commissions for Units (if
any) sold by its securities representatives (except for sales of Units to
Affiliated Limited Partners). Because of affiliation with the General Partner,
its review and investigation of the Partnerships and of the information provided
in this Prospectus will not have the benefit of a review and investigation by an
independent securities firm in the capacity of a dealer-manager.
General Partner to Act as Tax Matters Partner
The General Partner has been designated as the Tax Matters Partner under the
Partnership Agreement for purposes of dealing with the Internal Revenue Service
("Service") on any audit or other administrative proceeding before the Service
and/or any legal proceeding. As Tax Matters Partner, the General Partner is
empowered, among other acts, to enter into negotiations with the Service, to
settle tax disputes and to thereby bind the Partnerships and the Limited
Partners by such settlement. While the General Partner will seek to take into
consideration the interest of the Limited Partners generally in agreeing to any
settlement of any disputed items of Partnerships' income and expense, there is
no assurance that such settlement will be in the best interest of any specific
Limited Partner given his or her specific tax situation.
FIDUCIARY RESPONSIBILITY
General
The General Partner is accountable to the Partnerships as a fiduciary
pursuant to the terms of the Partnership Agreement. In accordance therewith, the
General Partner must at all times act with integrity and good faith and exercise
due diligence in the conduct of the business of the Partnerships and in
resolving conflicts of interest, subject to certain limitations set forth in the
Partnership Agreement.
Conflicts
General. Under Delaware law, general partners are held to a duty of the
highest good faith in conducting partnership affairs. This has been interpreted
to mean that a general partner cannot engage in a business which would create an
interest for the general partner that is adverse to that of the Partnerships.
Because the General Partner and certain partnerships and other investment
entities which it has sponsored, or in the future may sponsor, will acquire and
lease equipment and enter into financing arrangements, the General Partner may
be deemed to have a position adverse to the Partnerships.
Modification. The Partnership Agreement includes certain provisions which are
intended to facilitate resolution of conflicts of interest which may arise
between the Partnerships and other Programs sponsored by the General Partner or
any Affiliates of the General Partner with respect to particular investment
opportunities that become available. The General Partner shall make investment
opportunities available as described in that section; provided that until all
Capital Contributions have been invested or committed to investment in
Investments and Reserves, used to pay permitted Front-End Fees or returned to
the Limited Partners as provided in the Partnership Agreement, all such
investment opportunities shall be presented to the Partnerships first.
Furthermore, if two or more entities sponsored by the General Partner or any of
its Affiliates are in a position to lease the same equipment or provide the same
financing, the General Partner will generally afford priority to the entity that
has equipment which has been available for lease or sale or that has had funds
available to invest for the longest period of time. It is not clear under
Delaware law whether such provisions would be enforceable.
Detriment and Benefit. Without modifying the general common law fiduciary
duties, the General Partner could not serve as the general partner for the
Partnerships and any other investor program which might acquire, finance and
lease equipment at the same time. The modification made by the Partnership
Agreement may operate as a detriment to the Limited Partners because there may
be business opportunities that will not be made available to the Partnerships.
The foregoing modifications permit the General Partner to act as the General
Partner of more than one similar investment program and for the Partnerships to
benefit from its experience resulting therefrom, but relieves the General
Partner and/or its Affiliates of the strict fiduciary duty of a general partner
acting as such for only one investment program at a time, and permits the
Partnerships to use joint ventures to acquire larger and more diverse assets.
The Partnership Agreement provisions are intended to reconcile the applicable
requirements of the Delaware Act with the fact that the General Partner is
currently managing, and will continue to manage during the term of the
Partnerships, a number of other equipment leasing programs with which possible
conflicts of interest may arise and be resolved in a manner consistent with the
expectation of the investors of all such programs, the General Partner's
fiduciary duties and the Partnerships' and such other entities' investment
objectives, including especially that of investment diversification.
Indemnification of the General Partner, Dealer-Manager and Selling Dealers
The Partnership Agreement provides that the General Partner shall have
limited liability to the Partnerships and the Limited Partners, and provides for
the indemnification of the General Partner and its Affiliates by the
Partnerships, from the assets of the Partnerships (and not by the Limited
Partners), for any liability, loss, cost and expense of litigation that arises
out of certain acts or omissions by the General Partner and its Affiliates,
provided that the General Partner or the Affiliate determined in good faith that
such action or inaction was in the best interests of the Partnerships, the
General Partner or such Affiliate was acting on behalf of or performing services
for the Partnership and such course of conduct did not constitute negligence or
misconduct by the General Partner or such Affiliate. Notwithstanding the
foregoing, the General Partner and each Affiliate shall be liable, responsible
and accountable, and the Partnerships shall not be liable to any such party, for
any portion of any such liability, loss, cost or expense which resulted from
such party's own fraud, negligence, misconduct or, if applicable, breach of
fiduciary duty to the Partnerships or any Partner, as determined by a court of
competent jurisdiction. As a result, purchasers of Units may have a more limited
right of action in certain circumstances than they would in the absence of such
provisions in the Partnership Agreement which provisions could be asserted by
the General Partner as a defense to suit by a Limited Partner for alleged breach
by the General Partner of its fiduciary duty in conducting the affairs of the
Partnerships. 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 under this section.
In addition, the General Partner has agreed to indemnify the Dealer-Manager
and the Selling Dealers against all losses, claims, damages, liabilities and
expenses incurred by any of them (except those arising as a result of their own
fraud, negligence or misconduct) in connection with the offer or sale of Units.
A successful claim for any indemnification would deplete the Partnerships'
assets by the amount paid and could reduce the amount of distributions
subsequently made to the Limited Partners.
The Partnerships are not permitted, however, to furnish indemnification to
the General Partner, any Affiliate of the General Partner, any Affiliate or any
Person acting as a Selling Dealer (as the case may be) for any losses,
liabilities or litigation, settlement or any other costs or expenses arising
from or out of an alleged 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.
Investor Remedies
Under the Delaware Act, a Limited Partner may institute legal action (i) on
behalf of himself and all other similarly situated Limited Partners (a class
action) to recover damages for a breach by the General Partner of its fiduciary
duty or (ii) on behalf of the Partnerships (a derivative action) to recover
damages from the General Partner or from third parties where the General Partner
has failed or refused to enforce an obligation. In addition, (i) investors may
have the right, subject to procedural and jurisdictional requirements, to bring
partnership class actions in federal courts to enforce their rights under
federal and state securities laws; and (ii) investors who have suffered losses
in connection with the purchase or sale of their Units may be able to recover
such losses from the entity (e.g., a Selling Dealer or the Dealer-Manager
(including all Persons associated therewith)) which is determined to have
violated the anti-fraud provisions of federal or state securities laws.
In addition, where an employee benefit plan has acquired Units, case law
applying the fiduciary duty concepts of ERISA to an insurance company in
connection with an insurance contract could be viewed to apply with equal force
to the General Partner. The General Partner will provide quarterly and annual
reports of operations and must, on demand, give any Limited Partner or his/her
legal representative a copy of the Form 10-K and true and full information
concerning the Partnerships' affairs. Further, the Partnerships' books and
records may be inspected or copied by its Limited Partners or their legal
representatives at any time during normal business hours. See "SUMMARY OF THE
PARTNERSHIP AGREEMENT--Access to Books and Records."
This is a rapidly developing and changing area of the law and this summary,
which describes in general terms the remedies available to Limited Partners for
breaches of fiduciary duty by the General Partner, is based on statutes and
judicial and administrative decisions as of the date of this Prospectus. Limited
Partners who have questions concerning the duties of the General Partner or who
believe that a breach of fiduciary duty by the General Partner has occurred
should consult their own counsel.
To the extent that the indemnification provisions purport to include
indemnification for liabilities arising under the Securities Act, in the opinion
of the Commission, such indemnification is contrary to public policy and
therefore unenforceable. If a claim for indemnification against such liabilities
(other than for expenses incurred in a successful defense) is asserted against
the Partnerships by the General Partner under the Partnership Agreement or
otherwise, the Partnerships will submit to a court of competent 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.
OTHER OFFERINGS BY THE GENERAL PARTNER AND ITS AFFILIATES
Prior Public Programs
The General Partner was formed in 1985 to finance and lease equipment, and
sponsor and act as the general partner for publicly offered, income-oriented
equipment leasing limited partnerships. In addition to the Partnership, the
General Partner is the general partner of ICON Cash Flow Partners, L.P., Series
A ("Series A"), ICON Cash Flow Partners, L.P., Series B ("Series B"), ICON Cash
Flow Partners, L.P., Series C ("Series C"), ICON Cash Flow Partners, L.P.,
Series D ("Series D"), ICON Cash Flow Partners, L.P., Series E ("Series E"),
ICON Cash Flow Partners L.P. Six ("L.P. Six") and ICON Cash Flow Partners L.P.
Seven ("L.P. Seven"). Series A, Series B, Series C, Series D, Series E, L.P. Six
and L.P. Seven are referred to collectively as the "Prior Public Programs". The
Prior Public Programs were also publicly-offered and income-oriented equipment
leasing limited partnerships with objectives similar to the Partnerships. The
General Partner and its Affiliates have also engaged in the past and may in the
future engage, to a limited extent, in the business of brokering equipment
leasing or financing transactions which do not meet the investment criteria
established by the General Partner and the Prior Public Programs (such as
creditworthiness, equipment types, excess transaction size or concentration by
lessee, location or industry).
As of February 1, 1989 (the final date for admission of its limited partners),
Series A had held twelve closings beginning May 6, 1988 and ending January 8,
1989, and had received a total of $2,504,500 in limited partner capital
contributions from 222 investors. As of November 16, 1990 (the final date for
admission of its limited partners), Series B had held twenty-seven closings
beginning September 22, 1989 and ending on November 16, 1990 following which a
total of 1,742 investors, holding limited partnership interests equal to the
entire $20,000,000 offering of such partnership, were admitted as limited
partners in the Series B partnership. As of June 20, 1991 (the final date for
admission of its limited partners), Series C had held thirteen closings
beginning January 3, 1991 and ending on June 20, 1991 following which a total of
1,732 investors, holding limited partnership interests equal to the entire
$20,000,000 offering of such partnership, were admitted as limited partners in
the Series C partnership. As of June 5, 1992 (the final date for admission of
its limited partners), Series D had held nineteen closings beginning September
18, 1991 and ending on June 5, 1992, following which a total of 3,054 investors,
holding limited partnership interests equal to the entire $40,000,000 offering
of such partnership, were admitted as limited partners in the Series D
partnership. As of August 6, 1993, Series E had held 27 closings beginning July
6, 1992 and ending on August 6, 1993, following which a total of 3,738
investors, which had subscribed for units in such partnership through July 31,
1993 (the termination date of Series E's offering period) and which held limited
partnership interests equal to $61,041,150 out of the original $80,000,000
offering which was registered had been admitted as Limited Partners to the
Series E partnership. As of November 8, 1995, L.P. Six had held 41 closings
beginning March 31, 1994 and ending on November 8, 1995, following which a total
of 2,272 investors, which had subscribed for units in such partnership and held
limited partnership interests equal to $38,385,712 out of the original
$120,000,000 offering which was registered, had been admitted to the
partnership. As of June 30, 1998, L.P. Seven had held 53 closings beginning
January 19, 1996 and including June 30, 1998, following which a total of 4,126
investors, which had subscribed for units in such partnership and held limited
partnership interests equal to $85,793,834 out of the original $100,000,000
offering which was registered, and had been admitted to the L.P.
Seven partnership.
The Prior Public Programs are all actively engaged in the purchase of
Equipment and the entering into and the acquiring of Leases and Financing
Transactions. As of March 31, 1998, the Prior Public Programs had originated or
acquired investments (stated in terms of their respective original acquisition
costs) as follows: Series A had acquired a total of $6,033,973 of leased
equipment, $1,542,785 of Financing Transactions and total investments of
$7,576,758. Series B had acquired a total of $61,466,203 of leased equipment,
$4,114,770 of Financing Transactions and total investments of $65,580,973;
Series C had acquired a total of $66,504,867 of leased equipment, $3,752,413 of
Financing Transactions and total investments of $70,257,280; Series D had
acquired a total of $112,606,872 of leased equipment, $20,164,549 of Financing
Transactions and total investments of $132,771,421; Series E had acquired a
total of $207,778,033 of leased equipment, $22,998,729 of Financing Transactions
and total investments of $230,776,762; and L.P. Six had acquired a total of
$142,702,746 of leased equipment, $12,307,967 of Financing Transactions and
total investments of $155,010,713.; L.P. Seven acquired a total of $257,234,989
of leased equipment, $778,060 of Financing Transactions and total investments of
$258,013,049.
As of March 31, 1998, Series A had equipment under management (by original
cost of investment acquired less the total original cost of assets sold)
consisting of $98,054 of leases and $209,693 of Financing Transactions which
represents 2% and 14% of the original cost of investments acquired,
respectively. Series B had equipment under management (determined as above)
consisting of $2,153,000 of leases and $1,516,343 of Financing Transactions
which represents 4% and 27% of the original cost of investments acquired,
respectively. Series C had equipment under management (determined as above)
consisting of $4,081,683 of leases and $2,017,927 of Financing Transactions
which represents 6% and 54% of the original cost of investments acquired,
respectively. Series D had equipment under management (determined as above)
consisting of $32,194,705 of leases and $2,783,652 of Financing Transactions
which represents 29% and 14% of the original cost of investments acquired,
respectively. Series E had equipment under management (determined as above)
consisting of $73,180,285 of leases and $12,233,536 of Financing Transactions
which represents 35% and 53% of the original cost of investments acquired,
respectively, L.P. Six had equipment under management (determined as above)
consisting of $83,787,630 of leases and $4,192,552 of Financing Transactions
which represents 59% and 34% of the original cost of investments acquired,
respectively and L.P. Seven had equipment under management (determined as above)
consisting of $221,417,949 of leases and $778,060 of Financing Transactions
which represents 86% and 100% of the original cost of investments acquired,
respectively.
The percentages and amounts of cash distributions which represented investment
income (after deductions for depreciation and amortization of initial direct
costs of its investments) and a return of capital (corresponding to a portion of
the depreciation deductions for the related equipment) for Series A through L.P.
Seven for each year from their respective dates of formation through March 31,
1998 are included in TABLE III of Exhibit B to the Prospectus. Certain
additional investment information concerning such Programs as of March 31, 1998
is also included in Tables I, II and V of Exhibit B to the Prospectus.
Three of the Prior Public Programs, Series A, Series B and Series C
experienced unexpected losses in 1992 as shown on TABLE III of Exhibit B to
Cumulative Supplement No. 3. Series A experienced losses of $133,569 in 1992
primarily related to the bankruptcy of Richmond Gordman Stores, Inc. In 1992,
Series B wrote down its residual positions by $506,690, $138,218 of which was
related to the bankruptcy of Richmond Gordman Stores, Inc. and $368,472 of which
was related to rapid obsolescence of equipment due to unexpected withdrawal of
software support by the manufacturer. Series C wrote-down its residual position
in 1992 by $1,412,365 relating to the bankruptcy of PharMor, Inc. which involved
the reported misappropriation of funds by the management of such company and the
overstatement of inventory on its audited financial statements. The Sponsor has
taken certain steps which it believes will assist Series A, Series B and Series
C in the partial recovery of losses, including the following: (1) foregone
Administrative Expense reimbursements for the period July 1, 1991 through
September 30, 1993, to which it was otherwise entitled in the amount of $34,961
(Series A), $697,463 (Series B) and $859,961 (Series C); (2) reduced the annual
cash distribution rate to 9% effective September 1, 1993 for Series A, B and C
to make available additional funds for supplemental reinvestments for each of
such Programs; (3) effective September 30, 1993 the Sponsor deferred $38,081 in
Series A management fees and effective November 15, 1995 and June 19, 1996,
eliminated Series B and C's obligation to pay $220,000 and $529,125,
respectively, in accrued and future management fees; (4) effective January 1,
1994 reduced the management fees which Series A, Series B and Series C would
each pay to the Sponsor to a flat rate of 2% and effective January 1, 1995
further reduced the management fees which Series A pays to the Sponsor to a flat
rate of 1%; (5) effective January 31, 1994, converted the variable rate
borrowing facilities of Series A, B and C to fixed rate, term loan financings in
the original principal amounts of $720,000, $1,600,000 and $1,500,000,
respectively, to eliminate interest rate risk on the related portions of such
Programs' portfolios; (6) effective January 31, 1995, amended the partnership
agreement of Series A, by vote of a majority of its limited partners to (a)
extend the reinvestment period of Series A by not less than 2 nor more than 4
years, (b) authorize loans by the Sponsor to Series A under certain conditions
for a term in excess of twelve months and up to $250,000, and (c) (as noted in
clause (4), above) decrease the rate of management fees payable by Series A to
the Sponsor to a flat 1% of gross revenues from all of its Leases and Financing
Transactions (pursuant to the amendments, the Sponsor, in February and March
1995, lent $75,000 and $100,000, respectively, to Series A), which was converted
to a capital contribution in September, 1997; (7) effective November 15, 1995,
amended the Partnership Agreement of Series B, by vote of a majority of its
Limited Partners to (a) extend the reinvestment period of Series B for up to
four additional years and thereby delay the start and end of the Liquidation
Period, and (b) eliminate the obligation of Series B to pay the General Partner
$220,000 of the $347,000 of accrued management fees and any future management
fees, and (c) limit past management fees payable by Series B to $127,000 and
require the General Partner to pay such amount to Series B as an additional
capital contribution; and (8) effective June 19, 1996, amended the Partnership
Agreement of Series C by vote of a majority of its Limited Partners to (a)
extend the reinvestment period of Series C for up to four and one half
additional years and thereby delay the start and the end of the Liquidation
Period, and (b) eliminate the obligation of series B to pay the General Partner
$529,125 of the $634,125 of management fees and (c) limit past management fees
payable by Series C to $105,000 and require the General Partner to pay such
amount to Series C as an additional capital contribution. There can be no
assurance that the forgoing steps will be successful in recovering the full
amount of the losses of Series A, Series B and Series C which are described in
this paragraph. To the extent such efforts are not successful and, as a result
Series B or Series C do not earn sufficient amounts through their respective
remaining periods of operations to recoup such losses, any of such Programs so
effected would not be able to return all of its respective investors' capital.
The General Partner hereby agrees that it will provide the most recent Form
10-K, with exhibits, for the Partnerships, upon written request (with no fee but
with reimbursement of its actual out of pocket costs and expenses of copying and
mailing such Form 10-K.)
The information presented in this Section concerning the Prior Public Programs
and the information and data in the Tables included as Exhibit B for the Prior
Public Programs are unaudited and represent the experience of the General
Partner and its Affiliates in the Prior Programs. Persons who invest in Units in
a Partnership will not have any ownership interest in any other program as a
result of such investment and should not assume that they will experience
returns, if any, comparable to those experienced by the investors in the Prior
Public Programs.
STATUS OF THE OFFERING
As of the date of this Prospectus, a Partnership has not had an Initial
Closing.
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CERTAIN RELATIONSHIPS WITH THE PARTNERSHIPS
The following diagram shows the relationship of the Partnerships and the
General Partner with certain Affiliates of the General Partner. The solid lines
indicate ownership and the broken lines certain contractual relationships. All
of the entities shown below are corporations except as otherwise indicated.
ICON Holdings Corp.
MANAGEMENT
The General Partner
The General Partner, ICON Capital Corp., is a Connecticut corporation which
was formed in 1985 under the name ICON Properties, Inc. The name of the General
Partner was changed on July 19, 1990 to more accurately reflect the scope and
focus of its business activities. The financial statements which are presented
in this Prospectus show that the financial condition of ICON Capital Corp.
which, with an aggregate maximum Net Worth in excess of one million dollars, is
commensurate with the financial obligations assumed by it in the Offering and in
the operation of the Partnership. The General Partner's principal offices are
located at 600 Mamaroneck Avenue, Harrison, New York 10528 ((914) 698-0600),
with additional offices located at 31 Milk Street, Suite 1111, Boston,
Massachusetts 02109 ((617) 338-4292); Four Embarcadero Center, Suite 1810, San
Francisco, California 94111 ((415) 981-4266) and 599 Lexington Avenue, Suite
2705, New York, NY 10022 ((212) 418-4700). The officers of the General Partner,
listed below, have extensive experience in selecting, acquiring, leasing,
financing, managing and remarketing (re-leasing and selling) equipment.
The General Partner will perform, or cause to be performed, all services
relating to the day-to-day management of the Equipment purchased and Leases and
Financing Transactions acquired or entered into by the Partnerships. Such
services include the collection of payments due from the Lessees and Users,
re-leasing services in connection with Equipment which is off-lease, inspections
of the Equipment, liaison with Lessees and Users, supervision of maintenance
being performed by third parties, and monitoring of performance by the Lessees
of their obligations under the Leases and Users, including payment of rent or
principal and interest and all operating expenses.
The officers and directors of the General Partner are:
Beaufort J. B. Clarke Chairman, President, Chief Executive Officer
and Director
Thomas W. Martin Executive Vice President, Treasurer and Director
Paul B. Weiss Vice Chairman and Executive Vice President
Allen V. Hirsch Senior Vice President
Gary N. Silverhardt Senior Vice President and Chief Financial
Officer
Robert W. Kohlmeyer, Jr. Senior Vice President of Operations
David W. Parr Vice President, General Counsel and Assistant
Secretary
John L. Lee Secretary
Beaufort J. B. Clarke, 52, became the Chairman, President, Chief Executive
Officer and Director of both the General Partner and the Dealer-Manager in
August of 1996. Prior to his present positions, Mr. Clarke was founder,
President and Chief Executive Officer of Griffin Equity Partners, Inc. (a
purchaser of equipment leasing portfolios) from October 1993 through August
1996. Previous to that time, Mr. Clarke was president of Gemini Financial
Holdings, Inc. (an equipment leasing company) from June 1990 through
September 1993. Prior to that time, Mr. Clarke was a Vice President of AT&T
Systems Leasing. Mr. Clarke formerly was an attorney with Shearman and
Sterling and has over 20 years of senior management experience in the U.S.
leasing industry. Mr. Clarke received a B.A. degree from the University of
Virginia and a J.D. degree from the University of South Carolina.
Thomas W. Martin, 44, was appointed Executive Vice President, Treasurer and
Director of the General Partner in August of 1996. Mr. Martin also became the
Executive Vice President and Director of the Dealer-Manager in August of 1996.
Prior to his present positions, Mr. Martin was the Executive Vice President and
Chief Financial Officer of Griffin Equity Partners, Inc. from October 1993 to
August 1996. Prior to this time, Mr. Martin was Senior Vice President and a
member of the Executive Committee of Gemini Financial Holdings from April 1992
to October 1993 and he held the position of Vice President at Chancellor
Corporation (an equipment leasing company) for 7 years. Mr. Martin has a B.S.
degree from University of New Hampshire.
Paul B. Weiss, 37, became Executive Vice President of the General Partner
responsible for lease acquisitions in November of 1996. Mr. Weiss served as
Executive Vice President and co-founder of Griffin Equity Partners, Inc. for
the period from October of 1993 through November of 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 1989 through 1991. Mr. Weiss has a B.A. in Economics
from Connecticut College.
Allen V. Hirsch, 44, joined the General Partner in December of 1996 as
Senior Vice President. Mr. Hirsch also became the President and Chief
Executive Officer of the Dealer Manager in December of 1996. Prior to joining
ICON, Mr. Hirsch spent 16 years with PLM Financial Services and Affiliates
most recently as President of PLM Securities Corp. for four years and he also
served as the Vice Chairman of the Board of PLM International (an equipment
leasing company) from May of 1989 through June of 1996. Mr. Hirsch holds a
B.S. degree in Civil Engineering from the University of Illinois, an M.S.
degree in Transportation from the University of Maryland and an M.B.A. from
Harvard Business School.
Gary N. Silverhardt, 38, joined ICON in 1989. He served as Vice President and
Controller from 1989 through 1996, prior to being promoted to Chief Financial
Officer. From 1985 to 1989 he was with Coopers & Lybrand, most recently as an
Audit Supervisor. Prior to 1985, Mr. Silverhardt was employed by Katz,
Schneeberg & Co. He received a B.S. degree from the State University of New York
at New Paltz and is a Certified Public Accountant.
Robert W. Kohlmeyer, Jr., 36, was appointed Vice President of Operations of
the General Partner in August of 1996. Prior to joining ICON, Mr. Kohlmeyer
was President of Corporate Capital Services, an investment banking firm,
which he founded in March 1993. Prior to that time, Mr. Kohlmeyer held the
title of Vice President with Gemini Financial Holdings from September 1991 to
February 1993. Mr. Kohlmeyer has a B.B.A. degree from Texas Christian
University.
David W. Parr, 41, became Vice President and General Counsel of the General
Partner in September of 1996 and is the Assistant Secretary of the Dealer
Manager. Prior to joining ICON, Mr. Parr was Vice President, Clerk and
General Counsel of Chancellor Corporation from June of 1990 to September of
1996. Mr. Parr served as Vice President and Associate General Counsel of
American Finance Group, Inc. (an equipment leasing company) from December of
1986 through June of 1990 and previously counseled leasing companies as an
attorney with the law firm Widett, Slater & Goldman, P.C. from 1983 through
1986. Mr. Parr received a B.A. from Trinity College, a J.D. degree from
Syracuse University and a LL.M. degree, in taxation, from Boston University.
John L. Lee, 54, became Assistant Secretary of the General Partner in April
of 1997 and serves as Senior Vice President and General Partner of ICON
Holdings Corp. 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
from of 1992 through April of 1997. Prior to joining Peabody & Brown, Mr. Lee
served as General Counsel of American Finance Group, Inc. for over ten years,
and was earlier an associate with the law firm of Shearman & Sterling in New
York City. Mr. Lee received an A.B. degree from the University of North
Carolina (Chapel Hill) and a J.D. degree from Harvard Law School.
Affiliates of the General Partner
ICON Securities Corp., (the "Dealer-Manager"), is a New York corporation and
a wholly owned subsidiary of ICON Holdings Corp., and was formed in 1982 to
manage the equity sales for investor programs sponsored by its Affiliates. The
Dealer-Manager is registered with the Securities and Exchange Commission and is
a member of the National Association of Securities Dealers, Inc. and the
Securities Investor Protection Corporation. ICON Securities Corp. will act as
the Dealer-Manager of the Offering.
INVESTMENT OBJECTIVES AND POLICIES
General
Investment Objectives. The Partnerships intend to purchase various types of
Equipment and to acquire or enter into Leases and Financing Transactions
primarily to businesses located within North America and Europe. Such Lessees
and Users shall be those which the General Partner determines likely be able to
meet all of their obligations to the Partnership in a timely and complete
manner. The Partnerships' overall objectives are:
(i) INVEST IN EQUIPMENT: to invest in a diversified portfolio of new or used,
long-lived, low obsolescence Equipment expected to have high residual
values, at purchase prices that the General Partner believes to be
favorable, such Equipment to be subject to leases or other contractual
arrangements with the lessees or users of the Equipment;
(ii) CASH DISTRIBUTIONS: to make, from rental payments received from Lessees
and Users, cash distributions which may be substantially tax-deferred
(i.e., distributions which are not subject to current taxation) during the
early years of each Partnership to investors, beginning in the month
following the month in which the minimum number of Units are sold;
(iii) SAFETY: to create a relative degree of safety through the accumulation of
Investments which, when taken as a group, represent a diversified
equipment portfolio. In the opinion of the General Partner, this
diversification reduces the exposure to market fluctuations in any one
sector. Furthermore, the purchase of new or used, long-lived, low
obsolescence Equipment typically at prices below the cost of new equipment
may reduce the impact of economic depreciation; and
(iv) TOTAL RETURN: to provide to Limited Partners a total return on their
investment which, by the end of the Liquidation Period, compares
favorably with other investment alternatives with similar risk profiles.
There can be no assurance, however, that an above average rate of return
can be achieved while satisfying the other stated investment objectives
of the Partnerships and, as such, the General Partner intends to target
the highest available rate or return consistent with prudent risk
management and reasonably conservative investment decisions.
It is expected that each Partnership will initially invest a minimum of the
sum of (x) 75% of Gross Offering Proceeds which will increase to 80.40% in the
event of a Maximum Offering (see "SOURCES AND USES OF OFFERING PROCEEDS AND
RELATED INDEBTEDNESS") and (y) related borrowings (which may equal 80% of each
Partnership's Investments declining to 67% in the event of a Maximum Offering),
together with amounts payable from the rentals due from its Leases and excess
Cash From Operations, to make Investments.
THERE CAN BE NO ASSURANCE THAT EACH PARTNERSHIP WILL BE SUCCESSFUL IN MEETING
ALL OF ITS OBJECTIVES.
Acquisition Policies and Procedures
The General Partner believes that there are significant benefits available
through purchasing long-lived, low obsolescence capital equipment whether
constituting new Equipment or used Equipment, subject to Leases, Financing
Transactions and options, as described below. The principal investment vehicle
for the Partnerships will be the outright acquisition of Equipment, where the
Partnerships will purchase an item of Equipment and hold title to that Equipment
directly or through a special purpose equipment owning entity and enter into
leases or other contracts with unaffiliated parties regarding the use of
Equipment. The Partnerships may, within certain limitations, also jointly
purchase Equipment with other Affiliated Programs and with unaffiliated third
parties. Under these forms of investment, the Partnerships would generate cash
proceeds from the leasing or operation of its Equipment and ultimately receive
sales proceeds upon the liquidation of the Equipment.
In certain circumstances, a Partnership may make an investment which would
provide it with a future option to assume a lease or to purchase Equipment at
prices or rates which the General Partner considers favorable. In such a case, a
Partnership would, upon its exercise of the option, receive the ownership of the
Equipment. Such an arrangement would generate no cash flow to such Partnership
until such time as it exercised its option, if at all. The Partnerships may
also, on occasion, make other commitments to lease, purchase or purchase options
in Equipment at future points in time on conditions which the General Partner
deems to be in the Partnerships' best interest. A wide range of investment
structures exists and the General Partner has experience in tailoring equipment
investment structures to a particular investment opportunity.
The Partnerships will only acquire Equipment which a non-Affiliated Lessee
has committed to lease from the Partnerships or which is subject to an existing
lease. See "--Leases and Financing Transactions" in this section. Typically, the
Partnerships will purchase used Equipment from the current users (which may be
the proposed Lessees pursuant to a sale-leaseback or other arrangement) or other
leasing companies, or new Equipment from manufacturers, dealers or proposed
Lessees (through a sale-leaseback or other arrangement). Substantial Equipment
purchases by the Partnerships will only be made subject to the General Partner
obtaining such information and reports, and undertaking such inspections and
surveys, as the General Partner may deem necessary or advisable to determine the
probable economic life, reliability and productivity of such Equipment, as well
as the competitive position, suitability and desirability of investing in such
Equipment as compared with other investment opportunities.
Leases and Financing Transactions
Leases in General. In the typical Lease, the Partnerships will be the owner
of the Equipment for every purpose and the Lessee of such Equipment makes
periodic payments, usually a fixed amount payable periodically for a fixed term,
to the Partnerships for the right to use the Equipment. The most important
characteristic that distinguishes a lease from other contractual arrangements
involving capital equipment is that the Lessee has the right to use the
Equipment for a term that leaves a significant part of the Equipment's economic
life remaining at the end of that term. It is the value remaining after the
expiration of the initial fixed lease term that is the "residual value" of the
Equipment and in most cases the profitability of the transaction for the Lessor
is determined by the Lessor's ability to realize the Equipment's residual value.
The Partnerships also expect to acquire transactions where the only direct
economic benefit to be derived from its investment is the residual value of the
Equipment in question. These transactions usually take one of two forms. The
first is a "leveraged lease" in which the lessor, instead of receiving periodic
rent payments followed by the residual value, borrows funds from a third party
lender and assigns to the lender the periodic rent payments (and perhaps a
portion of the residual value of the Equipment) which are calculated to fully
repay the loan. The net effect is that in a leveraged lease transaction the cash
purchase price of the Equipment to the lessor is much lower because the loan
usually defrays a significant portion of the Equipment's purchase price. The
lessor retains the tax benefits of owning the Equipment (see "FEDERAL INCOME TAX
CONSEQUENCES--Tax Treatment of The Leases") as well as its residual value. The
second type of transaction where the only economic benefit to the Partnership is
the Equipment's residual value is in those instances where Partnership purchases
an option to purchase the Equipment, usually for a fixed price at the expiration
of an existing lease term.
It is anticipated that the Partnerships may acquire Leases where the Lessees'
obligations under such Leases are denominated in a currency other than United
States dollars. If a Lease is denominated in a major currency such as the pound
sterling, deutschmark or yen, which historically have stable exchange
relationships with the United States, dollar hedging may be unnecessary or not
cost effective. The General Partner expects Leases denominated in more volatile
currencies will be hedged. In any such circumstance a Partnership may elect to
enter into a hedge contract so that the Partnership would receive a fixed number
of United States dollars with respect to the rent and any other fixed, periodic
payments due under any such Lease even though the exchange rate between the
United States dollar and the currency the Lease is denominated in could change
over the Lease term. It is expected that the Partnerships would enter into hedge
contracts only if two additional requirements could be satisfied. First, the
hedge transaction expenses would have to be low enough so that the economics of
the Lease in question, even with these transaction expenses taken into account,
met the Partnerships' objectives. Second, the Lessee whose Lease obligations are
being hedged must be superior from a credit standpoint since a Partnership would
typically remain obligated under the hedge contract even if the Lessee in
question defaulted on the Lease obligations being hedged. See "RISK
FACTORS--Partnership Risks and Investment Risks-Risks of Currency Hedge
Contracts."
Leveraged Investments. The General Partner intends to use each Partnerships'
indebtedness (or "leverage") as a tool in acquiring and building a pool of
Partnerships' Investments and related receivables. It expects that each
Partnership may acquire a portion of its Investments entirely for cash and the
balance of its Investments (particularly Leases with investment-grade Lessees)
with a mixture of cash and (primarily "non-recourse") indebtedness (as to which
the lender will generally have no recourse to assets of a Partnership other than
to foreclose on a Partnership's interest in such Lease and dispose of the
related Equipment).
As a result of borrowings, the General Partner expects that each Partnership
may achieve substantial additional earnings for the Partnership represented by
the difference between the rate at which earnings on its Leases and Financing
Transactions exceed the interest and other costs to the Partnership of such
borrowings.
Lease Provisions. The specific provisions of each Lease to be entered into or
be acquired by each Partnership will depend upon a variety of factors, including
(i) the type and intended use of the Equipment covered thereby, (ii) the
business, operations and financial condition of the Lessee party thereto, (iii)
regulatory considerations and (iv) the tax consequences and accounting treatment
of certain provisions thereof.
The General Partner anticipates that each Lease entered into on behalf of the
Partnerships, as well as each existing Lease acquired on behalf of the
Partnerships, will generally provide that the Lessee will: (i) pay rent and
other payments without deduction or offset of any kind; (ii) bear the risk of
loss of the Equipment subject thereto and maintain both (a) casualty insurance
in an amount equal to the lesser of the market value of the Equipment subject
thereto or a specified amount set forth in such Lease and (b) liability
insurance (naming such Partnership as an additional insured) in an amount
consistent with industry standards; (iii) pay sales, use or similar taxes
relating to the lease or other use of the Equipment; (iv) indemnify the
Partnerships against any liability resulting from any act or omission of the
Lessee or its agents; (v) maintain the Equipment in good working order and
condition during the term of such Lease; and (vi) not permit the assignment or
sublease of the Equipment subject thereto without the prior written consent of
the General Partner. The General Partner also anticipates that, in general,
Leases will not be cancelable during their initial terms; provided that the
General Partner may agree to Lease provisions which permit cancellation of a
Lease upon payment of an appropriate compensation such that the cancellation
will not prevent the Partnership from achieving its objectives if such
provisions are deemed by the General Partner to be in the Partnership's best
interest.
In the opinion of the General Partner, each such Lease will also otherwise
generally afford each Partnership overall protection substantially equivalent to
that provided in leases then being negotiated by leasing companies and financial
institutions.
Each such Lease will prescribe certain events of default, including, without
limitation, (i) a default, subject to applicable grace periods (if any), in the
payment of rent, (ii) a failure, subject to applicable grace periods (if any),
to observe or perform covenants or terms of such Lease and (iii) certain events
with respect to the bankruptcy or insolvency of the Lessee party thereto.
Enforcement of remedies is subject to applicable bankruptcy and similar laws.
If, and to the extent that, each Partnership borrows funds in connection with
any Lease, it will generally be required to assign some or all of its rights
under such Lease as collateral for such borrowing.
The Partnerships' Leases are anticipated to have terms ranging from two to
seven years.
At the end of each Lease term, the Lessee may have the option to buy the
Equipment subject thereto or to terminate the Lease and return such Equipment.
Financing Transactions, in General. The Partnerships also expect to invest in
transactions which are frequently structured as leases but which, because the
lessee has the right under the transaction documents to use the Equipment for
its entire useful life, are treated as secured loans for most purposes and are
referred to herein as "Financing Transactions" or "Full-Payout Leases." The
nominal lessee is treated as the owner from the outset of the transaction and
the nominal lessor is treated as a lender whose loan is secured by the
Equipment. Since the Lessor gets no residual value in this type of transaction,
the profitability of the transaction to the Lessor is determined solely by the
periodic payments it receives from the User during the term.
The Partnerships may also enter into Financing Transactions with Users. Such
Financing Transactions shall be evidenced in one of two ways. First, in the form
of a Lease (described above) which would include a nominal or bargain purchase
option; in any such circumstance the User is deemed the owner of the Equipment
from the inception of the transaction with a Partnership deemed to be a lender
with a security interest in the Equipment. Second, by a written promissory note
or other instrument of the 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 shall be
sufficient to return the Partnership's full cost associated with such Financing
Transaction, together with an appropriate yield. Furthermore, such repayment
obligation would be collateralized by a security interest in such tangible or
intangible personal property (in addition to the Equipment) of such User as the
Investment Committee may deem to be appropriate. In either of the two cases
described above, the General Partner will use its best efforts to perfect such
security interest so that such security interest will constitute a perfected
lien on the Equipment. Financing Transactions will not include participation
features for the General Partner, its Affiliates or Users. The General Partner
expects that a substantial minority of Net Offering Proceeds will be invested in
Financing Transactions unless, in its sole discretion, such Investments at a
later date appear to be in the best interests of a Partnership.
The Partnerships' may also invest in subordinate interests in structured
finance transactions in which a special purpose entity not affiliated with the
General Partner (but managed by the General Partner as Servicer) accumulates a
portfolio consisting primarily of middle market and small ticket leases or
loans. When a suitably large portfolio of such transactions has been
accumulated, the portfolio is rated by rating agencies, and senior debt and
subordinate debt or equity interests are sold to investors.
In the structure typical of securitization transactions the Partnerships may
acquire an interest in senior and subordinate investors make equity investments
and loans to the special purpose entity and receive certificates and notes
issued by such entity; the proceeds of such investments are used to acquire a
portfolio of, typically, many hundreds of Leases and Financing Transactions. The
investors receive a return on their investments from the rents received by the
special purpose entity from the Leases and Financing Transactions owned by it.
By combining a large number or relatively small transactions into one large one,
by having senior and subordinate investors and by having the securitization
entity's obligations rated by rating agencies such as Moody's Investors
Services, Inc. or Fitch IBCA, Inc., the cost of financing the pool of
transactions is substantially less than financing them individually. The
subordinate interest in such a securitization entity receives a significantly
higher percentage return on its investment than the senior lenders receive on
theirs.
Transaction Approval Procedures
All investment decisions with respect to the purchase of Equipment and the
acquisition or entering into of Leases and Financing Transactions shall be made
by the Investment Committee of the General Partner using investment policies
described herein and the undertakings set forth under "CONFLICTS OF INTEREST."
All potential Leases and Financing Transactions shall be evaluated on the basis
of (i) the extent to which such transaction appears to satisfy the Partnerships'
investment objectives, (ii) the financial condition of the prospective Lessee or
User and the character of its business, (iii) the type of equipment to be
purchased for lease or which will secure the proposed Financing Transaction, and
(iv) to the extent deemed prudent, the availability of additional collateral and
credit enhancements to support the transaction in the event of a lack of
performance by the potential Lessee or User.
The General Partner has established an Investment Committee, which has set,
and may from time to time revise, standards and procedures for the review and
approval of potential Leases and Financing Transactions. The Investment
Committee will be responsible for supervising and approving significant
individual transactions or portfolio purchases as well as transactions which
vary from standard credit criteria and policies. The Investment Committee will,
at all times, consist of four persons designated by the General Partner. It is
anticipated that all four persons comprising the Investment Committee will be
officers and employees of the General Partner or an Affiliate of the General
Partner. Action by the Investment Committee shall be determined by a majority
and a written report of any action taken thereby shall promptly be completed. As
of the date of this Prospectus, the members of the Investment Committee are
Messrs. Clarke, Martin, Weiss and Kohlmeyer.
<PAGE>
Credit Review Procedures
The General Partner's credit department is responsible for following the
credit review procedures described below and determining compliance therewith.
The General Partner intends that such procedures (or similar procedures that it
believes to be equally reliable) shall be observed in reviewing potential
Lessees and Users. Such procedures generally require the following:
(i) receipt and analysis of such potential Lessee's or User's current and
recent years' financial statements and, if deemed appropriate, income tax
returns;
(ii) for Lessees and Users which do not have senior debt rated investment
grade by an independent rating agency, independent verification of the
potential Lessee's or User's credit history, bank accounts, trade references,
credit reports concerning the potential Lessee or User from credit agencies
such as Dun & Bradstreet, TRW, etc.; and
(iii) review and verification of underlying equipment or other collateral.
Equipment
"Used" Equipment. The General Partner anticipates that the majority of the
Partnerships' Investments, based on cash purchase price, will be comprised of
used Equipment (that is, Equipment initially delivered to the current Lessee
more than two months prior to the Partnerships' purchase of such Equipment).
"Used" Equipment transactions frequently may be advantageous because the General
Partner's credit and remarketing departments may have the opportunity to analyze
payment histories and compliance with other Lease provisions particularly the
condition of the Equipment and how the Equipment is used and maintained by the
Lessee and or User prior to entering into a purchase commitment.
Equipment Registration. The ownership of, and liens and encumbrances on,
certain types of assets, most notably aircraft and marine vessels, over-the-road
motor vehicles and rolling stock, are recorded in central registries maintained
by states or, in case of rolling stock, aircraft and marine vessels, the federal
government. Many foreign countries maintain similar registries for
transportation assets as well. The advantage of such registries is that they
permit a purchaser to independently confirm that the seller they are dealing
with is the true owner of an asset and that the asset is free of liens. Such
registries also add certainty to the securing of a lender's security interest in
an asset which can reduce the cost of such loans.
Types of Equipment. The Partnerships' Equipment is expected to include:
(i) transportation equipment, such as aircraft (including airframes, engines,
avionics and ground handling equipment), rail equipment (including boxcars,
tank cars, hopper cars, flatcars, locomotives and various other equipment
used by railroads in the maintenance of their railroad track), tractors,
trailers, heavy duty trucks and intermodal (rail, over-the-road and marine)
containers and chassis, and marine vessels (including, but not limited to,
towboats and barges);
(ii) machine tools and manufacturing equipment such as computer- and
mechanically-controlled lathes, drill presses, vertical or horizontal milling
machines, rotary or cylindrical grinders, metal fabrication or slitting
equipment, and other metal forming equipment used in the production of a
broad range of products;
(iii) materials handling equipment such as fork-lifts and other more
specialized equipment for moving materials in warehouse or shipping or areas;
(iv) furniture and fixtures, store fixtures, display cases, freezers,
manufacturing equipment, electronic test equipment, medical diagnostic and
testing equipment (such as radiology equipment, sonographic equipment,
patient monitoring equipment, miscellaneous medical equipment (such as lab
test equipment, blood-gas analyzers, treatment room furniture), and
(v) office and management information systems equipment (such as
microcomputer management information systems, communication and related
peripheral equipment, including, terminals, tape, magnetic or optical, disc
drives, disc controllers, printers, optical character scanning devices, and
communication devices and modems), graphic processing equipment (such as
typesetters, printing presses, computer aided design/computer aided
manufacturing ("CAD/CAM") equipment) and photocopying equipment and printing
systems (such as electronic laser printers).
Length of Ownership of Equipment. In most transactions, the General Partner
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
General Partner seeks to avoid in investing in Equipment that may become
technologically obsolete or is otherwise of limited utility (including from
excessive wear and tear).
The General Partner intends to evaluate the Partnerships' Investments at
least annually, and more frequently as circumstances require, to determine
whether all items of Leases and Financing Transactions should remain in its
portfolio or should be sold. The General Partner will make that decision based
upon the Partnerships' operating results, general economic conditions, tax
considerations, the nature and condition of items of Equipment, the financial
condition of the parties obligated to make payments under Leases and Financing
Transactions, alternate investment opportunities then available to the
Partnerships and other factors that the General Partner deems appropriate to
such evaluation. Following the expiration of any Lease entered into by the
Partnerships, the Partnerships will seek to remarket the Equipment subject
thereto by either (i) extending or renewing such Lease with the existing Lessee,
(ii) leasing such Equipment to a new Lessee or (iii) selling such Equipment to
the existing Lessee or a third party.
Portfolio Acquisitions
Each Partnership may purchase portfolios of Equipment subject to Leases or
Financing Transactions (hereinafter "Portfolios").
In evaluating a portfolio acquisition, the General Partner will typically
follow one or more of the following procedures:
(i) either the largest of the Leases and Financing Transactions (by present
value of contractual payments and assumed residual) or a substantial random
sampling in the event that there is not a concentration of large transactions
will be reviewed for completeness and accuracy of documentation;
(ii) where practicable Lessee and User payment histories will be reviewed and
verified;
(iii) underlying Equipment or other collateral will be evaluated and the
values thereof verified;
(iv) under certain circumstances, Dun & Bradstreet and/or TRW credit reports
will be obtained for a representative number of non-investment grade
potential Lessees and Users; and
(vi) Uniform Commercial Code lien searches will be performed against selected
potential Lessees and Users, as well as against the current holder of such
Portfolio.
In connection with the acquisition of any Portfolio, the General Partner may
require that such acquisition be full or partially recourse to the current
holder of such Portfolio in the event of any underlying Lessee or User default.
Other Investments
Each Partnership may also, from time to time, invest in certain other types
of 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 limitations set forth elsewhere in this Prospectus), Affiliated Programs,
joint ventures, other entities, and is not precluded from repurchasing
Partnership Interests in such Partnership if such repurchasing does not impair
the operations of the Program; provided that each Partnership may make such
Investments only in furtherance of its investment objectives and in accordance
with its investment policies, and in relation to the acquisition of Equipment or
the underlying value thereof as set forth in this section.
Interim Financing
A General Partner or any Affiliate of the General Partner (other than
Prior Programs) may acquire Equipment for a Partnership on an interim basis (not
to exceed six months) provided that (i) the acquisition is in the best interest
of a Partnership and (ii) such Equipment is purchased by the Partnership for a
price no greater than the cost of such Equipment to the General Partner and no
benefit to the General Partner or its Affiliates arises from the acquisition,
except allowable compensation to the General Partner as set forth in
"Compensation to the General Partner and Affiliates". In the event the General
Partner or an Affiliate purchases Equipment on an interim basis (generally not
in excess of six months) in its own name and with its own funds in order to
facilitate the ultimate purchase by a Partnership, the General Partner or such
Affiliates, as the case may be, will be entitled to receive interest on the
funds expended on behalf of the Partnership. Interest will be paid on such funds
or other loans from the General Partner or its Affiliates until the purchase of
Equipment by the Partnership or other loan repayment at a rate equal to that
which would be charged by third-party financing institutions on comparable loans
for the same purpose in the same geographic area. Interest on any such temporary
purchases to be paid by the Partnership to the General Partner or its Affiliates
will begin to accrue on the date of the purchase of the Equipment by the General
Partner or its Affiliates. In addition, if the General Partner or an Affiliate
either temporarily purchases the Equipment in its own name and assumes loans in
connection therewith for the purpose of facilitating the acquisition of the
Equipment or the borrowing of money on behalf of a Partnership, or borrows money
and loans it on a short-term basis to the Partnership, the General Partner or
such Affiliate shall receive an interest rate from the Partnership no greater
than that which the General Partner or such Affiliate is paying. Any rental
payments received or accrued by the General Partner or an Affiliate prior to the
sale of the Equipment to the Partnership will either reduce the sales price of
the Equipment to the Partnership or will be assigned to the Partnership upon its
purchase of the Equipment. If a loan secured by Equipment is assumed in
connection with any such acquisition, such loan must have the same interest
terms at the time such Equipment is acquired by a Partnership as it had at the
time such Equipment was first acquired by the General Partner or an Affiliate.
Cash Distributions to Partners
While it is the Partnerships' objective to make THE monthly cash
distributions DESCRIBED BELOW, no prediction can be made as to what level of
distributions or return on investment, if any, will be achieved NO PORTION OF
DISTRIBUTIONS IS GUARANTEED AND LIMITED PARTNERS BEAR A SIGNIFICANT RISK OF
LOSS.
Monthly Cash Distributions. Section 8.1(a) of the Partnership Agreement
provides that each Limited Partner is entitled to receive monthly cash
distributions computed as provided in this paragraph. Such distributions will be
made for the period which begins with his or her admission to a Partnership and
ending with the expiration or termination of the Reinvestment Period (the period
of active investment and reinvestment by a Partnership which ends five (5) years
after each of the Partnerships' Final Closing Date 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 such Limited Partner's 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 a Partnership
pursuant to Section 10.5 of the Partnership Agreement. A ratable portion (i.e.,
one-twelfth) of such annual distribution amount shall be payable monthly. Such
distributions, if made, will reduce the amount of money that may be reinvested
by a Partnership. Since Distributable Cash From Operations or From Sales
represents all cash from operations or from sales, as the case may be, less a
Partnership's expenses (the timing and amounts of which are expected to be
largely non-discretionary) and monies which the General Partner determines in
its discretion to (i) set aside as Reserves (which must be maintained at a
minimum of 1% of Gross Offering Proceeds) and (ii) reinvest in additional
Partnership Investments, decisions by the General Partner to establish
additional Reserves or to make Investments, or both, might effect the ability of
a Partnership to make such distributions. As noted in this Section in
"--Reinvestment of Undistributed Cash in Additional Equipment, Leases, and
Financing Transactions", a Partnership's ability to make cash distributions to
its Limited Partners may be subject to certain restrictions imposed upon a
Partnership by its banks or other lenders.
If Distributable Cash From Operations and Distributable Cash From Sales are
insufficient in any calendar month to pay the full amount of such distributions,
only the actual amount thereof is required to be distributed. Such cash
distributions will be noncumulative meaning that if there is insufficient cash
available in a given month to make the full distribution, as described in the
preceding paragraph, such shortfall will not be made up in the next or any
subsequent monthly distribution. Such cash distributions will also be computed
on a non-compounded basis; meaning that the principal amount upon which such
cash distributions is computed will not be increased as the result of the
inability of each Partnership to distribute any monthly portion of such annual
amounts, or reduced by any of such distributions actually made, in any prior
period. It is expected that a substantial portion of all of such cash
distributions (e.g. the portion thereof which exceeds taxable income for GAAP
purposes) will be treated as a return of Limited Partners' originally invested
capital) and that the balance of such distributions will be treated as a return
thereon (e.g. the portion thereof which equals taxable income for GAAP
purposes).
Section 8.1(a) of the Partnership Agreement also provides that each Limited
Partner is entitled to receive monthly cash distributions (if the distributions
described above are not adequate) in amounts which would permit the Limited
Partners to pay federal, state and local income taxes resulting from a
Partnership's 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.
It is anticipated that distributions of Cash From Operations and Cash From
Sales, if available, will be made monthly (approximately 5 days after the end of
each month), commencing in the first full month following the Initial Closing
Date. The monthly distribution of Cash From Operations and Cash From Sales is
subject to the availability of funds and, accordingly, there can be no assurance
that any such anticipated monthly distributions will be made or that any or all
of the Capital Contributions of the Limited Partners will be returned out of
Cash From Operations and/or Cash From Sales.
First Cash Distributions to the Limited Partners. Section 6.4(g) of the
Partnership Agreement provides that unless each Limited Partner has received
distributions equal to 8.0% as a percentage of such Limited Partner's Capital
Contribution (as reduced by any amounts of uninvested capital returned to such
Limited Partner pursuant to Section 8.6 of the Partnership Agreement and by any
amount paid to such Limited Partner in redemption of such Limited Partner's
Units) (the "First Cash Distributions"), the Management Fees otherwise payable
on a monthly basis to the General Partner in its capacity as Manager shall be
deferred and shall be paid without interest upon the earlier to occur of (i)
receipt by the Limited Partners of all current and accrued but unpaid First Cash
Distributions or (ii) expiration of the Reinvestment Period.
In addition, Section 8.1 of the Partnership Agreement provides that upon
Payout (see Section 17 of the Partnership Agreement for a definition of such
term) of Limited Partners' Capital Contributions and an economic return thereon,
the General Partner is entitled to an increase from 1% to 10% of Cash From
Operations and Cash From Sales when cash distributions to the limited Partners
upon Payout (i.e. the time when cash distributions in an amount equal to the sum
of the Limited Partners' (i) capital contributions and (ii) an 8.0% cumulative
annual return thereon, compounded daily, have been made), distributions of
Distributable Cash From Sales shall be made 99% to the Limited Partners and 1%
to the General Partner and that, after Payout, distributions of Distributable
Cash From Sales shall be tentatively attributed 90% to the Limited Partners and
10% to the General Partner.
It is the objective of each Partnership to make the First Cash Distributions
regardless of the number of Units sold, subject only to the limitations
described in "--Monthly Cash Distributions" above. A portion of such
distributions may represent a return of Capital Contributions recovered in the
form of depreciation deductions on the Equipment and the balance of such
distributions may represent investment income on such Capital Contribution in
the form of a Limited Partner's proportionate share of net taxable income of
each Partnership for such taxable year. Because neither a Partnership nor the
General Partner or any of its Affiliates had acquired any Equipment, Leases or
Financing Transactions as of the date of this Prospectus, it is not possible to
predict what proportion of such distributions may consist, from month-to-month
during the Reinvestment Period, of a return of, or investment income on,
capital. See Tables III and IV of Exhibit B hereto for Prior Performance of the
Prior Public Programs which contain past performance information with regard to
cash distributions made for such Programs (which information is not necessarily
indicative of either such Programs' or a Partnership's future performance as to
the amount, if any, of such future distributions or the relative composition
thereof from year to year.)
Each cash distribution will consist of a combination of (1) an investor's pro
rata share of a Partnership's net income generated from operations, after
deduction or amortization of non-cash expenses (such as depreciation and initial
direct costs) and cash expenses (such as interest on indebtedness) and (2) a
return of such investor's original capital investment as determined with
generally accepted accounting principles, consistently applied.
A material portion of each cash distribution may consist of a distribution of
an investor's original capital investment which, under GAAP, is deemed to be
that portion of cash distributions which are not attributable to a Partnership's
net income for the period of the distribution, irrespective of whether such
distributions have in fact been paid from cash from current or past operations.
Accordingly, cash distributions received by a limited partner may not, in all
instances, be characterized solely or primarily as investment income earned on
such limited partner's investment in a Partnership. Each Partnership anticipates
that it will receive gross revenues (e.g., rent or debt payments) from all of
its Financing Transactions and the majority of its Leases over the respective
terms of each such investment in an amount equal to the sum of (1) the purchase
price of such Financing Transactions and the Equipment subject to such Leases
plus (2) investment income earned on such investments.
Reinvestment of Undistributed Cash in Additional Equipment, Leases and
Financing Transactions. During the Reinvestment Period, each Partnership intends
to reinvest substantially all undistributed (1) Cash From Operations and (2)
Cash From Sales as well as (3) proceeds of non-recourse and recourse financing
which are not needed to pay current obligations in additional Equipment, Leases
and Financing Transactions. The Cash From Sales realized by each Partnership
from the sale or other disposition of an item of Equipment (including indemnity
and insurance payments arising from the loss or destruction of the Equipment),
after the payment of, or provision for, all related Partnership liabilities, may
be reinvested at the sole discretion of the General Partner, during the
Reinvestment Period. Each Partnership's ability to make cash distributions to
its Limited Partners may be subject to certain restrictions imposed upon that
Partnership by its banks or other lenders.
Distribution of Cash From Sales of the Partnership's Investments. After the
Reinvestment Period, it is an objective of each Partnership to sell or otherwise
dispose of its Equipment and liquidate all of its investments in Financing
Transactions as soon as is deemed prudent, usually not prior to the expiry of
the then remaining term of the related Lease, and to distribute substantially
all the proceeds therefrom ("Distributable Cash From Sales") together with
Reserves and other Cash From Operations and Cash From Sales not previously
distributed to its Limited Partners, less the estimated costs and expenses and
projected disbursements and reserves required for prompt and orderly termination
of each Partnership and the payment of deferred Management Fees and Subordinated
Remarketing Fees, which in each case have accrued but not been paid (if any).
See "RISK FACTORS--Partnership Risks and Investment Risks--Residual Value of
Equipment." Distributions made after the Reinvestment Period will depend upon
results of operations, Cash From Sales of each Partnership's Investments, and
the amount of Cash From Operations (if any) which each Partnership derives from
the operation of its remaining Investments (if any) during such period.
Reinvestment of Distributions. The Limited Partners have the option to elect
that their distributions from a Partnership be reinvested in additional Units
during the Offering Period of a Partnership. Distributions shall be invested
promptly, and in no event later than 30 days from the distribution date, in the
Units to the extent that they are available. All such investment of
distributions in Units will be purchased at the public offering price and
commissions equal to 8.0% of the Units purchase price shall be paid to the
unaffiliated Selling Dealer responsible for the sale to the Limited Partner of
his or her original Units. Investors may choose to elect for reinvestment of
their distributions at any time by completing the appropriate authorization form
which appears in Exhibit C, "Subscription Documents". Reinvestment of
Distributions will commence with the next distribution payable after receipt by
a Partnership of an investor's authorization form or subscription agreement.
The General Partner reserves the right to prohibit qualified plan investors
from the reinvestment of distributions if such participation would cause the
underlying assets of each Partnership to constitute "plan assets." See
"INVESTMENT BY QUALIFIED PLANS."
FEDERAL INCOME TAX CONSEQUENCES
Summary
THIS SECTION ADDRESSES THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF AN
INVESTMENT IN A PARTNERSHIP FOR AN INDIVIDUAL TAXPAYER. PROSPECTIVE INVESTORS
ARE URGED TO CONSULT THEIR TAX ADVISORS, SINCE TAX CONSEQUENCES WILL NOT BE THE
SAME FOR ALL INVESTORS AND ONLY BY A CAREFUL ANALYSIS OF A PROSPECTIVE
INVESTOR'S PARTICULAR TAX SITUATION CAN AN INVESTMENT IN A PARTNERSHIP BE
EVALUATED PROPERLY. IN PARTICULAR, INVESTORS THAT ARE TRUSTS, CORPORATIONS,
TAX-EXEMPT ORGANIZATIONS (SUCH AS EMPLOYEE BENEFIT PLANS), OR ANY OTHER
INVESTORS THAT ARE NOT DOMESTIC INDIVIDUAL TAXPAYERS SHOULD UNDERSTAND THAT THE
TAX CONSEQUENCES OF AN INVESTMENT IN A PARTNERSHIP ARE LIKELY TO DIFFER, PERHAPS
MATERIALLY, FROM THE PRINCIPAL TAX CONSEQUENCES OUTLINED IN THIS SECTION. SEE
"--FOREIGN INVESTORS," "--TAX TREATMENT OF CERTAIN TRUSTS AND ESTATES,"
"--TAXATION OF EMPLOYEE BENEFIT PLANS AND OTHER TAX-EXEMPT ORGANIZATIONS" AND
"--CORPORATE INVESTORS." STATE AND LOCAL TAX CONSEQUENCES MAY ALSO DIFFER FROM
THE FEDERAL INCOME TAX CONSEQUENCES DESCRIBED BELOW. SEE "--STATE AND LOCAL
TAXATION."
For federal income tax purposes, a partnership is treated as a "pass
through" entity as to which the partners, and not the partnership, pay tax on
partnership income and deduct losses incurred by the partnership. The Limited
Partners will report on their federal income tax returns their share of the
income, gain, loss and deduction incurred by each Partnership and pay the tax on
their share of any resulting taxable income generated by each Partnership. The
most substantial tax risk to the Limited Partners is that each Partnership will
be treated as a "publicly traded partnership." In such event, each Partnership
would have to pay tax on Partnership income and the Limited Partners may be
subject to a further tax on distributions from each Partnership. Tax Counsel are
of the opinion that each Partnership, will not be treated as a "publicly-traded
partnership."
The General Partner expects that the items of income and loss generated by
each Partnership will be treated as either "passive" or "portfolio" income and
losses for federal income tax purposes. Limited Partners will not be able to use
any "passive" losses produced by such Partnership to offset either "ordinary
income" (such as salaries and fees) or "portfolio" income (such as dividend,
interest income or certain capital gains).
The overwhelming majority of each Partnership's income is expected to be
generated from leasing activities. The General Partner expects the majority of
the partnerships' leases to be treated as such for federal income tax purposes
and will attempt to have such leasing activities comply with any requirements
necessary to cause the Partnerships to be treated as the owners of the leased
equipment for federal income tax purposes. If the Service were successfully to
challenge such tax treatment, the amount and timing of taxable income or loss to
the Limited Partners may be adversely affected.
Opinion of Tax Counsel
The Partnerships have obtained an opinion from Day, Berry & Howard LLP, Tax
Counsel to the General Partner, concerning the Partnerships' classification as
partnerships for federal income tax purposes. See "--Classification as a
Partnership." The opinion states further that the summaries of federal income
tax consequences to individual holders of Units and to certain tax-exempt
entities, including qualified plans, set forth in this Prospectus under the
headings "RISK FACTORS--Federal Income Tax Risks and ERISA Risks" and "FEDERAL
INCOME TAX CONSEQUENCES" and "INVESTMENT BY QUALIFIED PLANS" have been reviewed
by Tax Counsel and that, to the extent such summaries contain statements or
conclusions of law, Tax Counsel is of the opinion that such statements or
conclusions are correct under the Internal Revenue Code, as presently in effect,
and applicable current and proposed Treasury Regulations, current published
administrative positions of the Service and judicial decisions.
The opinion of Tax Counsel is based upon facts described in this Prospectus
and upon facts that have been represented by the General Partner to Tax Counsel.
Any alteration of such facts may adversely affect the opinion rendered.
Furthermore, as noted above, the opinion of Tax Counsel is based upon existing
law, which is subject to change, either prospectively or retroactively.
Each prospective investor should note that the tax opinion represents only
Tax Counsel's best legal judgment and has no binding effect or official status
of any kind. There can be no assurance that the Service will not challenge the
conclusions set forth in Tax Counsel's opinion.
As of the date of the opinion of Tax Counsel, no Equipment has been acquired
by a Partnership. Therefore, it is impossible at this time to opine on the
application of the tax law to the specific facts that will exist when a
particular item of Equipment is acquired and placed under lease. The issues on
which Tax Counsel have declined to express an opinion, and the likely adverse
federal income tax consequences resulting from an unfavorable resolution of any
of those issues, are set forth below in the following subsections of this
Section: "--Allocations of Profits and Losses," "--Tax Treatment of the Leases,"
"--Cost Recovery," and "--Limitations on Cost Recovery Deductions."
Classification as a Partnership
Under current Treasury Regulations, a business entity with two or more
members that does not fall within certain specified categories will be
classified as a partnership for federal income tax purposes unless it elects
otherwise. The Partnerships have received an opinion of Tax Counsel that, under
current federal income tax laws, case law and administrative regulations and
published rulings, each Partnership will be classified as a partnership and not
as an association taxable as a corporation. The Partnerships will not request
rulings from the IRS as to their classification as Partnerships for Federal
income tax purposes.
The opinion of Tax Counsel is based, in part, on representations of the
General Partner to the effect that: (1) the business of each Partnership will be
as described in this Memorandum and (2) neither Partnership will elect to be
classified as an association taxable as a corporation.
If either Partnership is or at any time hereafter becomes taxable as a
corporation, it would be subject to federal income tax at the tax rates and
under the rules applicable to corporations generally. The major consequences of
being treated as a corporation would be that such Partnership's losses would not
be passed through to the Partners, and Partnership income could be subject to
double tax. Corporations are required to pay federal income taxes on their
taxable income and corporate distributions are taxable to investors at ordinary
income tax rates to the extent of the corporation's earnings and profits and are
not deductible by the corporation in computing its taxable income. If either
Partnership at any time is taxable as a corporation, and particularly should
that occur retroactively, the effects of corporate taxation could have a
substantial adverse effect on the after-tax investment return of investors.
Furthermore, a change in the tax status of either Partnership from a partnership
to an association taxable as a corporation would be treated by the Service as
involving an exchange. Such an exchange may give rise to tax liabilities for the
Limited Partners under certain circumstances (e.g., if such Partnership's debt
exceeds the tax basis of such Partnership's assets at the time of such exchange)
even though they might not receive cash distributions from such Partnership to
cover such tax liabilities.
Publicly Traded Partnerships
Certain limited partnerships may be classified as publicly traded
partnerships ("PTPs"). If a partnership is classified as a PTP (either at
inception or as a result of subsequent events) and derives less than 90% of its
gross income from qualified sources (such as interest and dividends, rents from
real property and gains from the sale of real property) it will be taxed as a
corporation. A PTP is defined as any partnership in which interests are traded
on an established securities market or are readily tradable on a secondary
market or the substantial equivalent of such market. Units in each Partnership
are not currently traded on an established securities market (and the General
Partner does not intend to list the Units on any such market). Units are also
not readily tradable on a secondary market nor are they expected to be in the
future. Therefore, each Partnership will be a PTP only if the Units become
"readily tradable on the substantial equivalent of a secondary market."
Limited partnership interests may be "readily tradable" if they are
regularly quoted by persons who are making a market in the interests or if
prospective buyers and sellers of the interests have a readily available,
regular and ongoing opportunity to buy, sell or exchange interests in a market
that is publicly available, in a time frame which would be provided by a market
maker, and in a manner which is comparable, economically, to trading on an
established securities market. Limited partnership interests are not "readily
tradable" merely because a general partner provides information to partners
regarding partners' desires to buy or sell interests to each other or if it
arranges occasional transfers between partners.
Treasury Regulations provide certain safe harbor tests relating to PTP
status. If the trading of interests in a partnership falls into one of the safe
harbor tests, then interests in the partnership will not be considered to be
traded on a substantial equivalent of a secondary market and the partnership
will not be treated as a PTP. Safe harbor tests include a "2% safe harbor" test.
A partnership satisfies the "2% safe harbor" test if the partnership interests
that are sold or otherwise disposed of during the taxable year do not exceed 2%
of the total interests in partnership capital or profits. Certain transfers
("Excluded Transfers") are excluded from the 2% "safe harbor" test, including
transfers at death, transfers between certain family members and block transfers
(i.e., transfers by a single partner (and related persons) within a 30-day
period of interests representing in the aggregate more than 2% of the total
interests in partnership capital or profits). In addition to Excluded Transfers,
for the "2% safe harbor" test, transfers pursuant to a "qualified matching
service" are not counted. A matching service is a qualified matching service
only if (1) it consists of a computerized or printed listing system that lists
customer's bid and/or ask quotes in order to match sellers and buyers; (2)
matching occurs either by matching the list of interested buyers to bid on the
listed interest; (3) sellers cannot enter into a binding agreement to sell the
interest until at least 15 days after the date information regarding the
Offering of the interest for sale is made available to potential buyers ("notice
date"); and (4) the closing of the sale does not occur prior to 45 days after
the notice date; (5) the matching service displays only quotes at which any
person is committed to boy or sell a partnership interest at the quoted price
(firm quotes); (6) the seller's information is removed from the matching service
within 120 days after the notice date and, following any removal (other than
removal by reason of a sale of any part of such interest) of the seller's
information from the matching service, no offer to sell an interest in the
partnership is entered into the matching service by the seller for at least 60
calendar days; and (7) the sum of the percentage interests in partnership
capital or profits transferred during the taxable year of the partnership (other
than through private transfers) does not exceed 10 percent of the total
interests in partnership capital or profits. A failure to satisfy one of the
specified safe harbor tests does not give rise to a presumption that interests
are readily tradable on a secondary market or the substantial equivalent
thereof.
In the opinion of Tax Counsel, the Partnerships will not be treated as PTPs.
For the purpose of this opinion, Tax Counsel has received a representation from
the General Partner that the Units will not be listed on a securities exchange
or NASDAQ and that, acting in accordance with Section 10.2(c) of the Partnership
Agreement, the General Partner will refuse to permit any assignment of Units
which violates the "safe harbor" tests described above. See "TRANSFER OF
UNITS--Restrictions on the Transfer of Units."
If either Partnership were classified as a PTP it would be treated for
federal income tax purposes as an association taxable as a corporation unless
90% or more of its income were to come from certain "qualified sources." The
business of the Partnerships will be the leasing and financing of personal (not
real) property. Thus, their income would not be from such qualified sources. The
major consequences of being treated as a corporation would be that the
Partnership's losses would not be passed through to the Partners, and the
Partnership's income could be subject to double tax. Corporations are required
to pay federal income taxes on their taxable income and corporate distributions
are taxable to investors at ordinary income tax rates to the extent of the
corporation's earnings and profits and are not deductible by the corporation in
computing its taxable income. If the Partnerships at any time are taxable as
corporations, and particularly should that occur retroactively, the effects of
corporate taxation could have a substantial adverse effect on the after-tax
investment return of investors. Furthermore, a change in the tax status of
either Partnership from a partnership to an association taxable as a corporation
would be treated by the Service as involving an exchange. Such an exchange may
give rise to tax liabilities for the Limited Partners under certain
circumstances (e.g., if the Partnership's debt exceeds the tax basis of the
Partnership's assets at the time of such exchange) even though they might not
receive cash distributions from the Partnership to cover such tax liabilities.
See "--Classification as a Partnership" and "--Sale or Other Disposition of
Partnership Interest" in this Section.
Taxation of Distributions
If a Partnership is classified as a partnership for federal income tax
purposes, it will not be subject to federal income tax. Each Partner will be
required to report on his federal income tax return his share of the income,
gains, losses, deductions and credits of a Partnership for each year.
Each Partnership will report its operations on an accrual basis for federal
income tax purposes using a December 31 fiscal year and will file an annual
partnership information return with the Service. Each Limited Partner will be
furnished with all information with respect to a Partnership necessary for
preparation of his federal income tax return within 75 days after each fiscal
year end.
Cash distributions to a Limited Partner in any year may be greater or less
than his share of a Partnership's taxable income for such year. Distributions in
excess of income will not be taxable to the Limited Partner but will first
reduce the tax basis for his Units (as increased or decreased by such Limited
Partner's allocable share of a Partnership's income or loss for the year in
which such distributions occur) to the extent thereof. Any cash distributions in
excess of his basis will then be taxable to such Limited Partner, generally as
capital gains, provided the Units are capital assets in the hands of the Limited
Partner.
To the extent a Partnership reinvests Cash From Operations or Cash From Sales
in additional or replacement Investments, each Partnership intends to make
sufficient cash distributions to the Limited Partners during the Reinvestment
Period to enable them to pay when due their respective federal income taxes on
such Cash From Operations and Cash From Sales (assuming each Limited Partner is
in the highest marginal federal income tax bracket, determined without regard to
surtaxes, if any).
To the extent that the principal amount of the Partnerships' indebtedness is
repaid from cash derived from rentals or sales of the Partnerships' Equipment,
the taxable income of a Limited Partner in a Partnership may exceed the related
cash distributions for such year. Depreciation or other cost recovery with
respect to Equipment may create a deferral of tax liability in that larger cost
recovery deductions in the early years may reduce or eliminate the Partnerships'
taxable income in those early years of the Partnerships' operations. However,
this deferral is offset in later years by smaller or no depreciation or cost
recovery deductions, while an increasingly larger portion of the Partnerships'
income must be applied to reduce debt principal (thereby, possibly generating
taxable income in excess of cash distributions in those years).
Miscellaneous itemized deductions of an individual taxpayer, which include
investment expenses (such as organizational expenses; see "--Deductions for
Organizational and Offering Expenses; Start-Up Costs"), are deductible only to
the extent they exceed 2% of the taxpayer's adjusted gross income. Temporary
Regulations prohibit the indirect deduction through partnerships and other
pass-through entities of an amount that would not be deductible if paid by the
individual. Thus, these limitations may apply to certain of the Partnerships'
expenses under certain circumstances.
Partnership Income Versus Partnership Distributions
The income reported each year by each Partnership to the Limited Partners
will not be equivalent to the cash distributions made by the Partnerships to the
Limited Partners. The difference in the two amounts primarily arise from the
fact that depreciation and other cost recovery deductions reduce the
Partnerships' income but not its cash available for distribution, and revenues
reinvested by the Partnerships or used to repay debt principal will generally
constitute income even though not distributed to the Limited Partners. See
"--Taxation of Distributions" and "--Cost Recovery."
Allocations of Profits and Losses
As a general rule, during the Reinvestment Period, 99% of each Partnership's
Profits (including, inter alia, taxable income and gains and items thereof, and
items of revenue exempt from tax) will be allocated among the Limited Partners
in proportion to their respective numbers of Units and 1% will be allocated to
the General Partner, until the later of such time as (1) each Limited Partner's
Adjusted Capital Contribution (i.e., such Limited Partner's Capital Contribution
reduced by distributions from a Partnership that are in excess of such Limited
Partner's 8% Cumulative Return) is reduced to zero and (2) each Limited Partner
has been allocated Profits equal to the sum of (i) such Limited Partner's
aggregate 8% Cumulative Return plus (ii) any Partnerships' Losses previously
allocated to such Limited Partner. Thereafter the Partnerships' Profits will be
allocated 90% among the Limited Partners in proportion to their respective
numbers of Units and 10% to the General Partner. During the Disposition Period,
the Partnerships' Profits first will be allocated to all Partners in the amount
necessary to eliminate any deficits in their capital accounts, and, thereafter,
will be allocated as described above.
As a general rule, 99% of the Partnerships' Losses (including, inter alia,
tax losses and deductions and items thereof, and items of expense that are not
deductible for federal income tax purposes) will be allocated among the Limited
Partners in proportion to their respective numbers of Units and 1% will be
allocated to the General Partner throughout the term of each Partnership.
A Limited Partner's share of any item of income, gain, loss, deduction, or
credit is determined by the Partnership Agreement, unless the allocation set
forth therein does not have "substantial economic effect." If an allocation made
by a Partnership does not have substantial economic effect, the partner's share
of any such item will be determined in accordance with the Limited Partner's
"interest in the Partnership," taking into account all the facts and
circumstances.
An allocation of a Partnership's income, gain, loss, deduction, or credit
provided for in a partnership agreement will generally be upheld if: (a) the
allocation has "substantial economic effect," or (b) the partners can show that,
taking into account all facts and circumstances, the allocation is "in
accordance with the partner's interest in the partnership" or (c) the allocation
is "deemed" to be in accordance with the partner's interest in the partnership
under special rules requiring that partners receiving allocations of losses and
deductions which the partnership was able to generate as a result of, inter
alia, purchasing assets with borrowed money, be "charged back" income and gain
to the extent that such income and gain is generated by the assets that
generated such losses and deductions ("minimum gain charge-back").
The determination of substantial economic effect is to be made at the end of
each of the partnership's taxable years. In general, the regulations provide
that in order for an allocation to have "economic effect," among other things:
(a) the allocation must be appropriately reflected by an increase or decrease in
the dollar amount of the relevant partner's capital account; (b) liquidation
proceeds must be distributed in accordance with the partners' capital account
balances; and (c) either (i) upon liquidation of the partnership, any partner
with a deficit balance in his capital account must be required to restore the
deficit amount to the partnership, which amount will be distributed to partners
in accordance with their positive capital account balances or paid to creditors
or (ii) in the absence of an obligation to restore such deficit, the partnership
agreement must contain a "qualified income offset" provision pursuant to which a
partner who is allocated losses and deductions by the partnership which cause or
increase a capital account deficit must be allocated income and gains as quickly
as possible so as to eliminate any deficit balance in his capital accounts that
is greater than any amount that he is, in fact, obligated to restore. For this
purpose, capital accounts are required to be kept in accordance with certain tax
accounting principles described in the regulations.
The economic effect of an allocation is deemed to be "substantial" if there
is a reasonable possibility that the allocation will affect substantially the
amount to be received by the partners from the partnership, independent of tax
consequences. An economic effect is not considered substantial if, at the time
the allocation becomes part of the partnership agreement, (1) at least one
partner's after-tax consequences may, in present value terms, be enhanced
compared to such consequences if the allocation were not contained in the
partnership agreement and (2) there is a strong likelihood that the after-tax
consequences of no partner will, in present value terms, be substantially
diminished compared to such consequences if the allocation were not contained in
the partnership agreement. The regulations state that, in determining after-tax
consequences, the partner's tax attributes that are unrelated to the partnership
will also be taken into account.
The Partnership Agreement requires that (1) all allocations of revenues,
income, gain, costs, expenses, losses, deductions and distributions be reflected
by an increase or decrease in the relevant Partners' capital accounts, (2) all
Partners who are allocated losses and deductions generated by assets acquired
with borrowed money be charged back income and gains generated by such assets,
and (3) although no Limited Partner having a deficit balance in his Capital
Account after the final liquidating distribution will be required to make a cash
contribution to capital in the amount necessary to eliminate the deficit, the
Partnership Agreement does contain a provision for a qualified income offset.
The tax benefits of investment in a Partnership are largely dependent on the
Service's acceptance of the allocations provided under the Partnership
Agreement. The allocations in the Partnership Agreement are designed to have
"substantial economic effect." However, because the substantiality of an
allocation having economic effect depends in part on the interaction of such
allocation with the taxable income and losses of the Partners derived from other
sources, Tax Counsel can render no opinion on whether the allocations of a
Partnership's income, gain, loss, deduction or credit (or items thereof) under
the Partnership Agreement will be recognized, and no assurance can be given that
the Service will not challenge those allocations on the ground that they lack
"substantial economic effect." If, upon audit, the Service took the position
that any of those allocations should not be recognized and that position was
sustained by the courts, the Limited Partners could be taxed upon a portion of
the income allocated to the General Partner and all or part of the deductions
allocated to the Limited Partners could be disallowed.
Each Partnership will determine its income or loss annually, based on a
fiscal year ending December 31 and using the accrual basis of accounting. For
purposes of allocating such income or loss (or items thereof) among the
Partners, each Partnership will treat its operations as occurring ratably over
each fiscal year. Each Partnership's income and loss (or items thereof) for any
fiscal year will be allocated among the Limited Partners based on the number of
Units held by each Limited Partner throughout the fiscal year, or, if any
Partners hold their Units for less than the entire fiscal year, the portion of
the fiscal year during which each of such Partners held his Units.
Deductibility of Losses: Passive Losses, Tax Basis and "At Risk" Limitation
Passive Losses
The "passive activity" rules allow taxpayers to deduct their passive
activity losses only against their passive activity income. Passive activity
income does not include "portfolio income" such as interest, dividends and
royalties, and ordinary income such as salary and other compensation for
personal services. Therefore, taxpayers will generally be required to segregate
income and loss as follows: "active" trade or business income or loss; "passive
activity" income or loss; or "portfolio" income or loss. The passive activity
rules apply to individuals, estates, trusts, personal service corporations and
certain closely-held corporations (including S corporations).
A "passive activity" is one that involves the conduct of a trade or business
in which the taxpayer does not materially participate. Generally, rental
activities are considered passive activities. Furthermore, the status of limited
partners is generally considered passive with respect to a partnership's
activities.
Accordingly, a Limited Partner's distributive share of a Partnership's
income or losses is expected to be characterized as passive activity income or
loss (except to the extent attributable to portfolio income or loss, such as
interest earned on a Partnership's funds pending their investment or
reinvestment in Equipment). Any loss suspended under the passive activity rules
may be carried forward indefinitely to offset passive activity income, if any,
derived in future years, including income generated from the activity producing
the suspended loss. Additionally, suspended losses generally may be deducted
against non-passive income when a taxpayer recognizes gain or loss upon a
taxable disposition of his entire interest in the passive activity. Finally,
passive income from a Partnership can be used to absorb losses from other
passive activities, subject to the rules regarding publicly-traded partnerships.
Losses from a "publicly traded partnership" are treated as passive activity
losses that may not be used to offset income from any other activity other than
income subsequently generated by the same "publicly traded partnership." Income
from a "publicly traded partnership" (to the extent not used to offset losses
from the same partnership) is generally treated as portfolio income. Each
Partnership has been structured so as to avoid treatment as a "publicly traded
partnership." However, income or losses from each Partnership may not be used to
offset losses or income from a Limited Partner's interest in any other
partnerships which are treated as "publicly traded partnerships."
Tax Basis
A Limited Partner's initial tax basis in his Partnership interest will be
his capital contribution to a Partnership (i.e., the price he paid for his
Units). His tax basis will then be increased (or decreased) by his share of
income (or loss) and by his share of any increase (or decrease) of a
Partnership's indebtedness as to which no Partner is personally liable, and
reduced by the amount of any cash distributions. A Limited Partner may only
deduct his allocable share of a Partnership's losses, if any, to the extent of
his basis in his Units.
"At Risk" Limitation
Generally, taxpayers (including certain closely-held corporations) may not
deduct losses incurred in most activities, including the leasing of equipment,
in an amount exceeding the aggregate amount the taxpayer is "at risk" in the
activity at the close of a Partnership's tax year. Generally, a taxpayer is
considered "at risk" with respect to an activity to the extent of money and the
adjusted basis of other property contributed to the activity.
A Limited Partner generally will not be "at risk", and will not be entitled
to increase the tax basis of his Units, with respect to recourse liabilities, if
any, of each Partnership (such as trade payables), and he will not be "at risk"
with respect to nonrecourse liabilities incurred by a Partnership (such as
amounts borrowed to finance purchases of Equipment), even though such
nonrecourse liabilities may increase the tax basis of the Units. Thus, a Limited
Partner's initial amount "at risk" effectively will be the amount of his capital
contribution to a Partnership. Such amount will be reduced subsequently by cash
distributions and loss allocations, and increased by allocations of a
Partnership's income.
The effect of the "at risk" rules generally is to limit the availability of
a Partnership's losses to offset a Limited Partner's income from other sources
to an amount equal to his capital contribution to a Partnership, less cash
distributions received and allocations of such Partnership's losses, plus any of
such Partnership's income allocated to him. Therefore, although a Partnership
may generate tax losses for a taxable year, the Limited Partners who are subject
to the "at risk" rules will be unable to use such losses to the extent they
exceed such Limited Partner's "at risk" amount in computing taxable income for
the year. Any unused losses may be carried forward indefinitely until such
Limited Partners have sufficient "at risk" amounts in the Partnership to use the
losses.
Deductions for Organizational and Offering Expenses; Start-Up Costs
The costs of organizing and syndicating each Partnership, as well as certain
"start-up" costs, may not be deducted currently and must be capitalized.
Section 709 of the Code provides that no current deduction is allowed to a
partnership for organizational expenses. "Organizational expenses" include legal
fees incident to the organization of the partnership, accounting fees for
establishing a partnership accounting system and necessary filing fees. Such
expenses may be written off ratably over a 60-month period. Similar rules apply
to "start-up expenditures" under Section 195 of the Code
Under Section 709, no deduction is allowed at all for any amounts paid or
incurred to promote or effect the sale of an interest in a partnership
("syndication expenses"). Syndication expenses may be deducted, if at all, only
upon liquidation of the Partnership, and then perhaps only as a capital loss.
"Syndication expenses" include brokerage fees (such as the Underwriting Fees and
Sales Commissions), registration fees, legal fees of underwriters and placement
agents and the issuer (the Partnership) for securities advice and advice
concerning the adequacy of tax disclosures in the Offering documents, accounting
fees for the preparation of information to be included in the Offering
materials, printing and reproduction costs and other selling or promotional
expenses.
The General Partner will endeavor to treat the organizational, start-up and
syndication costs of each Partnership in accordance with the foregoing rules.
However, because there is uncertainty about the distinction between trade or
business expenses that may be currently deducted and organizational, start-up
and syndication costs that must be capitalized and either amortized or deferred,
there can be no assurance that the Service will not challenge the current
deduction of certain expenses of each Partnership on the grounds that such
expenses are not currently deductible.
Tax Treatment of the Leases
The availability to Limited Partners of depreciation or cost recovery
deductions with respect to a particular item of Equipment depends, in part, upon
the classification of the particular lease of that Equipment as a "true lease"
of property under which a Partnership is the owner, rather than as a sale,
financing or refinancing arrangement for federal income tax purposes.
Whether a Partnership is the owner of any particular item of Equipment and
whether any of its Leases is a "true lease" for federal income tax purposes
depends upon questions of fact and law. The Service has published guidelines for
purposes of issuing advance rulings on the tax treatment of "leveraged" leases.
These guidelines do not purport to be substantive rules of law and are not
supposed to be applied in audit contexts (although they have been so applied in
a number of instances).
The Partnerships will not request, and probably would not be able to obtain,
a ruling from the Service that each of its Leases will qualify as such for tax
purposes, nor is it expected that the General Partner will obtain the advice of
Tax Counsel with respect to any particular Lease. Moreover, the General Partner
may determine that a Partnership should enter into specific Leases on such terms
that the tax treatment of the Leases would be questionable. Should a Lease be
recharacterized as a sale, financing, or refinancing transaction for income tax
purposes, a portion of the "rental" income of a Partnership equivalent to
interest on the amount "financed" under such Lease would be treated as interest
income, without offset for deductions for depreciation or cost recovery, and the
balance of such "rental" income would be a tax-free recovery of principal. The
general result would be increased amounts of taxable income in the initial years
of the Lease followed by decreased amounts of income in later years.
Whether each Partnership Lease will meet the relevant requirements and
whether a Partnership otherwise will be treated, for federal income tax
purposes, as the owner of each item of Equipment acquired by that Partnership,
will depend on the specific facts in each case, which are undeterminable because
they will occur in the future. Accordingly, Tax Counsel can render no opinion on
this issue.
Cost Recovery
In general, equipment of the sort anticipated to be acquired and leased by
each Partnership is classified as either "3-year property," "5-year property" or
"7-year property," and may be written off for federal income tax purposes
(through "cost recovery" or "depreciation" deductions) over its respective
recovery period using the 200 percent declining-balance depreciation method,
with a switch to the straight-line method at a time that maximizes the
deduction. A taxpayer may elect to use a straight-line method of depreciation. A
"half-year convention" (under which a half-year's depreciation is allowed in the
year that the property is placed in service) will generally apply in computing
the first year's depreciation. However, if more than 40% of the aggregate basis
of depreciable property is placed in service in the last three months of the tax
year, a "mid-quarter convention" must be used whereunder all property placed in
service during any quarter of a tax year is treated as placed in service at the
midpoint of such quarter.
The General Partner expects that a Partnership's Equipment will consist
primarily of 5-year property. The General Partner intends to claim cost recovery
deductions with respect to each Partnership's Equipment under the method(s)
deemed by the General Partner to be in the best interests of each Partnership,
which generally will be a straight-line method. Whether the Partnerships will be
entitled to claim cost recovery deductions with respect to any particular item
of Equipment and the applicable method and convention to be used depends on a
number of factors, including whether the Leases are treated as true leases for
federal income tax purposes. See "--Tax Treatment of the Leases" in this
Section.
Each Partnership will allocate all or part of the Acquisition Fees to be
paid to the General Partner to the cost basis of Equipment on which cost
recovery is computed. No assurance can be given that the Service will agree that
the amount of such fee which is so allocated is properly attributable to
purchased Equipment such that cost recovery deductions based on such additional
basis are properly allowable. The Service might assert that the Acquisition Fees
are attributable to items other than the Equipment or are not subject to cost
recovery at all. If the Service were successful, the cost recovery deductions
available to each Partnership would be reduced accordingly. Because the
determination of this issue will depend on the magnitude and type of services
performed in consideration for these fees, which facts are presently
undeterminable and may vary in connection with each piece of Equipment acquired
by each Partnership, Tax Counsel is unable to render an opinion thereon.
Under certain circumstances, a taxpayer will be required to recover the cost
of an asset over a period longer than the period described above. Such
circumstances include the use of equipment predominantly outside the United
States and the use of equipment by a "tax-exempt entity." See "--Limitations on
Cost Recovery Deductions."
Limitations on Cost Recovery Deductions
Property Used Predominantly Outside the United States.
Each Partnership may own and lease Equipment that is used predominantly
outside the United States. The cost of such Equipment must be written off for
federal income tax purposes using the straight line method of depreciation over
a period corresponding to the Equipment's "ADR Class Life" (which generally is
longer than the 3-year, 5-year or 7-year periods permitted for other property)
and the applicable half-year or mid-quarter convention. If the Equipment does
not have an ADR Class Life, a 12-year period must be used.
See "--Cost Recovery."
However, certain types of property which are used predominantly outside the
United States nevertheless qualify for the normal rules discussed in "--Cost
Recovery" (that is, a shorter depreciable life should be allowable). The
exceptions include the following: (1) aircraft registered in the United States
which are operated to and from the United States; (2) certain railroad rolling
stock which is used within and without the United States; (3) vessels documented
under the laws of the United States which are operated in the foreign or
domestic commerce of the United States; and (4) containers of a United States
person which are used in the transportation of property to and from the United
States. It is not presently determinable whether any Equipment owned and leased
by the Partnership will be in any of these categories.
Tax-Exempt Leasing.
The Partnership may lease Equipment to certain tax-exempt entities. Property
leased to tax-exempt entities ("tax-exempt use property") must be written off
for federal income tax purposes using the applicable half-year or mid-quarter
convention and applying the straight line method of depreciation over a period
corresponding to the longer of (i) the Equipment's "ADR Class Life" (which
generally is longer than the 3-year, 5-year or 7-year periods permitted for
other property) and (ii) or 125% of the term of the lease. The term of a lease
will include all options to renew as well as certain successive leases,
determined under all of the facts and circumstances. The use of property by a
tax-exempt entity at any point in a chain of use results in its characterization
as tax-exempt use property (e.g., a sublease by a non-tax-exempt lessee to a
tax-exempt sublessee).
The definition of a "tax-exempt entity" includes governmental bodies and
tax-exempt governmental instrumentalities, tax-exempt organizations, certain
foreign persons and entities, and certain international organizations. The term
also generally includes certain organizations which were tax-exempt at any time
during the five-year period ending on the date such organization first uses the
property involved. Foreign persons or entities are treated as tax-exempt
entities with respect to property if 50% or less of the income derived from the
leased property is subject to U.S. income tax.
The term "tax-exempt use property" does not include: (1) any portion of
property which is used predominantly by a tax-exempt entity (directly, or
through a partnership in which the tax-exempt entity is a partner) in an
unrelated trade or business if the income from such trade or business is
included in the computation of income subject to the tax on unrelated business
taxable income; (2) property leased to a tax-exempt entity under a "short-term
lease" (that is, a lease which has a term of less than the greater of one year
or 30% of the property's ADR Class Life, but in any case less than three years);
and (3) certain high-technology equipment.
If any property which is not otherwise tax-exempt use property is owned by a
partnership which has both a tax-exempt entity and a person who is not a
tax-exempt entity as partners, such tax-exempt entity's proportionate share of
such property is treated as tax-exempt use property unless certain specific
requirements relating to the allocation of profits and losses among the partners
are met. These requirements will not be met by the Partnerships. However,
taxable income from the Partnerships will probably be treated as unrelated
business taxable income in the hands of employee benefit plans and other
tax-exempt investors. See "--Taxation of Employee Benefit Plans and Other
Tax-Exempt Organizations." Additionally, a substantial portion of the
Partnerships' taxable income will be treated as United States source business
income in the hands of foreign Limited Partners for which no exemption is
available. See "--Foreign Investors." Therefore, it is not anticipated that the
depreciation limitations applicable to tax-exempt use property will be material
as they relate to Equipment owned by the Partnerships and not leased to or used
by a tax-exempt entity.
Deferred Payment Leases
Both the lessor and lessee under certain rental agreements ("Section 467
rental agreements") are required to accrue annually the rent allocable to the
taxable year, as well as interest on deferred rental payments, where actual
payment of the rent is deferred. A Section 467 rental agreement is defined as
any rental agreement for the use of tangible property which involves total
payments in excess of $250,000 and either (i) provides for increasing or
decreasing rental payments or (ii) provides for rentals payable beyond the close
of the calendar year following the year in which the associated use occurred. In
general, the rent allocable to a taxable year will be determined by reference to
the terms of the lease. However, if a Section 467 rental agreement is silent as
to the allocation of rents, or, if (1) a Section 467 rental agreement provides
for increasing or decreasing rents, (2) a principal purpose for providing for
increasing or decreasing rents is the avoidance of taxes and (3) the lease is
part of a leaseback transaction or is for a term in excess of 75% of certain
prescribed asset write-off periods, then rents will be deemed to accrue on a
level basis in amounts having a present value (as determined by utilizing a
discount rate equal to 110% of the "applicable federal rate," which is roughly
equivalent to the rate on certain U.S. government securities with comparable
maturities) equal to the present value (as so determined) of the aggregate
rentals actually payable under the agreement. The differences between the rent
actually paid and the recomputed rents are treated as loans bearing interest at
the applicable federal rate.
Each Partnership may enter into transactions which will subject it to these
provisions. The application of such provisions could result in the acceleration
of income recognition by the Partnerships prior to receipt of corresponding cash
flow.
Sale or Other Disposition of Partnership Property
In general, an individual's long term capital gains (i.e., gains on sales of
capital assets held for more than 18 months) are taxed at 20% and mid-term
capital gains (i.e., gains on sales of capital assets held for more than 12
months but no more than 18 months) are taxed at 28% under current law while the
maximum tax rate for ordinary income is 39.6%. For corporations, the highest
maximum tax rate for both capital gains and ordinary income is 35%.
Because of the different individual tax rates for capital gains and ordinary
income, the Internal Revenue Code provides various rules concerning the
characterization of income as ordinary or capital and for distinguishing between
long-term, mid-term and short-term gains and losses. The distinction between
ordinary income and capital gains is relevant for other purposes as well. For
example, the amount of capital losses which an individual may offset against
ordinary income is limited to $3,000 ($1,500 in the case of a married individual
filing separately).
Upon a sale or other disposition of the Equipment of a Partnership
(including a sale or other disposition resulting from destruction of the
Equipment or from foreclosure or other enforcement of a security interest in the
Equipment), that the Partnership will realize gain or loss equal to the
difference between the basis of the Equipment at the time of sale or disposition
and the amount realized upon sale or disposition. The amount realized on a
foreclosure would include the face amount of the debt being discharged in a
foreclosure, even though a Partnership receives no cash. Since the Equipment
constitutes tangible personal property, upon a sale or other disposition of the
Equipment, all of the recovery deductions ("depreciation") taken by a
Partnership will, to the extent of any realized gain, be subject to recapture
(i.e., treated by the Partners as ordinary income). Recapture cannot be avoided
by holding the Equipment for any specified period of time. If a Partnership were
to sell property on an installment basis, all depreciation recapture income is
recognized at the time of sale, even though the payments are received in later
taxable years.
Any gain in excess of the amount of recapture will constitute gain or loss
described in Section 1231 of the Code if the property sold or otherwise disposed
of either was used in a Partnership's trade or business and held for more than
one year or was a capital asset which was held for more one year and not held
primarily for sale to customers. Under Section 1231 of the Code, if the sum of
the gains on sale or exchange of certain assets (generally, depreciable
property, other than inventory and literary properties) used in a trade or
business and held for more than one year and the gains from certain compulsory
or involuntary conversions exceed the losses on such sales, exchanges and
conversions, such excess gains will be treated as capital gains (subject to a
special Section 1231 recapture rule described below). If such losses exceed such
gains, however, such excess losses will be treated as ordinary losses.
There is a special rule under Section 1231 for casualty and theft losses on
depreciable business property and capital assets which are held for more than
one year and are held in connection with a trade or business or a transaction
entered into for profit. Such gains and losses must be separately grouped
together and if casualty gains equal or exceed casualty losses, then the gains
and losses are further grouped with other Section 1231 transactions to determine
whether there is an overall Section 1231 gain or loss. If the casualty or theft
losses exceed gains, the resulting net loss is not further grouped with other
Section 1231 transactions, but is, instead, excluded from Section 1231 and
treated as an ordinary loss.
Under a special "Section 1231 recapture" rule, net Section 1231 gain will be
treated as ordinary income to the extent of the taxpayer's "non-recaptured" net
Section 1231 losses. "Non-recaptured" net Section 1231 losses are any net
Section 1231 losses from the five preceding taxable years which have not yet
been offset against net Section 1231 gains in those years.
If, at the time of sale, the sold Equipment is a capital asset (i.e., was
not used in a Partnership's trade or business) and had been held by a
Partnership for one year or less, or if a Partnership is a "dealer" in Equipment
of the type sold, any gain or loss will be treated as short-term capital gain or
loss or ordinary income or loss, respectively.
Sale or Other Disposition of Partnership Interest
Gain or loss recognized by a Limited Partner on the sale of his interest in
a Partnership (which would include both the cash or other consideration received
by such Limited Partner from the purchaser as well as such Limited Partner's
share of the Partnership's nonrecourse indebtedness) will, except as noted
below, be taxable as a long-term, mid-term or short-term capital gain or loss,
depending on his holding period for his Units and assuming that his Units
qualify as capital assets in his hands. That portion of a selling Partner's gain
allocable to a Partnership's unrealized receivables (including depreciation
recapture) and inventory (the "ordinary income assets"), however, would be
treated as ordinary income. The term "ordinary income assets" would include
assets subject to recapture of recovery deductions determined as if a selling
Partner's proportionate share of a Partnership's properties had been sold at
that time. Thus, a substantial portion of a Limited Partner's gain upon the sale
of his Units may be treated as ordinary income. For a discussion of the
relevance of the distinction between ordinary income and capital gain, see
"--Sale or Other Disposition of Partnership Property" in this Section.
In connection with the sale or exchange of a Partnership interest, the
transferor must promptly notify the Partnership of the sale or exchange, and,
once the Partnership is notified, it is required to inform the Service (and the
seller and the buyer of the Partnership interest) on or before January 31
following the calendar year of sale of the fair market value of the allocable
share of unrealized receivables and appreciated inventory attributable to the
Partnership interest sold or exchanged. Penalty for failure to file is $50 for
each failure, with a limit of $100,000. In addition, failure of the transferor
of a Partnership interest to notify the Partnership will result in a $50 penalty
per failure.
Treatment of Cash Distributions Upon Redemption
The redemption by a Partnership of all or a portion of a Limited Partner's
Units (see "SUMMARY OF THE PARTNERSHIP AGREEMENT") will be treated as a sale or
exchange of such Units by the Limited Partner and may generate taxable income to
him. The "amount realized" by such Limited Partner on such redemption will equal
the sum of the cash received by such Limited Partner, plus the Limited Partner's
share of the Partnership's non-recourse liabilities.
Under Section 751(b) of the Code, in the event a Partnership distributes
cash to a Partner and, simultaneously, the Limited Partner's interest in the
Partnership's "ordinary income assets" is reduced, the Limited Partner will be
deemed to receive the cash, or a portion thereof, in exchange for the "ordinary
income assets." The Limited Partner will recognize ordinary income to the extent
the portion of the distribution that is attributable to the "ordinary income
assets" exceeds such Limited Partner's undivided interest in a Partnership's
adjusted basis in such assets prior to the exchange. The remainder of the
distribution, if any, will be treated in the same manner as a partnership
distribution (i.e., the Limited Partner will recognize income only to the extent
the cash distributions exceed such Limited Partner's adjusted basis in his
Units). See "--Taxation of Distributions."
The Partnerships anticipate that any redemption of a Limited Partner's Units
will be payable out of Cash From Operations and Cash From Sales that otherwise
would be available for distribution to all Limited Partners or for reinvestment
in additional Equipment. Accordingly, while any redemption of Units by a
Partnership would decrease the aggregate number of Units outstanding and thereby
proportionally increase each remaining Limited Partner's distributive share of
the Partnership's income, gain, loss and deductions and items thereof, it may
also reduce the total amount of cash which is available for investment or
reinvestment.
Gifts of Units
Generally, no gain or loss is recognized upon the gift of property. However,
a gift of Units (including a charitable contribution) may be treated partially
as a sale to the extent of the transferor's share of a Partnership's nonrecourse
liabilities, if any. Gain may be required to be recognized in an amount equal to
the difference between such nonrecourse debt share and that portion of the basis
in the Units allocable to the sale transaction. Charitable contribution
deductions for the fair market value of the Units will be reduced by the amounts
involved in such partial sale and, in any event, may be subject to reduction in
certain cases by the amount of gain which would be taxed as ordinary income to
the transferor on a sale of his Units.
Consequence of No Section 754 Election
Because of the complexities of the tax accounting required, each Partnership
does not presently intend to file elections under Section 754 of the Code to
adjust the basis of property in the case of transfers of Units. As a
consequence, a transferee of Units may be subject to tax upon a portion of the
proceeds of sales of a Partnership's property that represents, as to him, a
return of capital. This may affect adversely the price that potential purchasers
would be willing to pay for Units.
Tax Treatment of Termination of the Partnership Pursuant to the Partnership
Agreement
In the event of termination of a Partnership pursuant to the Partnership
Agreement (see "SUMMARY OF THE PARTNERSHIP AGREEMENT--Duration of Partnership")
the General Partner is required to sell or dispose of the Partnership assets,
apply the proceeds and other Partnership funds to repayment of the liabilities
of the Partnership and distribute any remaining funds to the Partners in
accordance with their positive Capital Accounts balances. Sales and other
dispositions of that Partnership's assets would have the tax consequences
described in "--Sale or Other Disposition of Partnership Property" in this
Section. Liquidating cash distributions in excess of a Partner's tax basis for
his Partnership interest generally would be taxable (generally as capital gain,
provided the Partnership interests constitute capital assets in the hands of the
Partners); cash distributions in amounts less than such basis may result in a
loss (generally a capital loss which would be subject to the general limitations
on deductibility of losses). The tax basis for the Units of a Limited Partner is
increased (or decreased) by his share of a Partnership's taxable income (or
loss) resulting from the sale or other disposition of Equipment. Hence, if a
Partnership's Equipment has been sold or disposed of under circumstances
resulting in a loss, distribution of the sale proceeds upon liquidation of the
Partnership may result in taxable gain to the Partners.
Audit by the Service
No tax rulings have been sought by either Partnership from the Service.
While the Partnerships (and any joint ventures in which the Partnerships
participate) intends to claim only such deductions and assert only such tax
positions for which there is a substantial basis, the Service may audit the
returns of the Partnerships or any such joint venture and it may not agree with
some or all of the positions taken by the Partnerships (or such joint venture).
An audit of a Partnership's information return may result in an increase in
a Partnership's income, the disallowance of deductions, and the reallocation of
income and deductions among the Partners. In addition, an audit of a
Partnership's information return may lead to an audit of income tax returns of
Limited Partners which could lead to adjustments of items unrelated to a
Partnership.
Partners must report a Partnership's items on their individual returns in a
manner consistent with the Partnership's return unless the Partner files a
statement with the Service identifying the inconsistency or unless the Partner
can prove his return is in accordance with information provided by such
Partnership. Failure to comply with this requirement is subject to penalties and
may result in an extended statute of limitations. In addition, in most
circumstances the federal tax treatment of items of a Partnership's income,
gain, loss, deduction and credit will be determined at the partnership level in
a unified partnership proceeding rather than in separate proceedings with its
partners.
Any audit of a Partnership will be at the Partnership's level and the
Service will deal with the Partnership's "Tax Matters Partner" (the "TMP") with
respect to its tax matters. The General Partner is designated as each
Partnership's TMP in the Partnership Agreement. Only those Limited Partners
having at least a 1% interest in a Partnership (the "Notice Partners") will be
entitled to receive separate notice from the Service of the audit of a
Partnership's return and of the results thereof, and Limited Partners who have
an interest of less than 1% ("Non-notice Partners") will not be entitled to
notice from the Service. However, groups of Non-notice Partners who together own
a 5% or greater interest in a Partnership (a "Notice Group") may, by
notification to the Service, designate a member of their group to receive
Service notices. All Partners in a Partnership have the right to participate in
any audit of the Partnership. The General Partner is required to keep all
Limited Partners informed of any administrative and judicial proceedings
involving the tax matters of a Partnership. Also, the General Partner will keep
Non-notice Partners advised of any significant audit activities in respect of a
Partnership.
The TMP is authorized to enter into settlement agreements with the Service
that are binding upon Non-notice Partners, except Non-notice Partners who are
members of a Notice Group or who have filed a statement with the Service that
the TMP does not have authority to enter into settlement agreements that are
binding upon them. Any Partner will have the right to have any favorable
settlement agreement reached between the Service and any other Partners with
respect to an item of his Partnership applied to him.
The General Partner is empowered by the Partnership Agreement to conduct, on
behalf of each Partnership and Limited Partners, all examinations by tax
authorities relating to each Partnership, at the expense of each Partnership.
See "SUMMARY OF THE PARTNERSHIP AGREEMENT." A tax controversy could result in
substantial legal and accounting expense being charged to a Partnership subject
to the controversy, irrespective of the outcome.
Alternative Minimum Tax
An alternative minimum tax ("AMT") is payable by taxpayers to the extent it
exceeds the taxpayer's regular federal income tax liability for the year. For
noncorporate taxpayers, the AMT is imposed on "alternative minimum taxable
income" ("AMTI") in excess of an exemption amount. The AMTI is based on the
taxpayer's taxable income, as recomputed with certain adjustments and increased
by certain "tax preference" items. A two-tiered AMT rate schedule for
noncorporate taxpayers exists consisting of a 26% rate (which applies to the
first $175,000 ($87,500 for married individuals filing separately) of a
taxpayer's AMTI in excess of the exemption amount) and a 28% rate (which applies
to the amount in excess of $175,000 ($87,500 for married individuals filing
separately) over the exemption amount). The exemption amount is $45,000 for
married individuals filing jointly, $33,750 for single persons, and $22,500 for
estates, trusts, and married individuals filing separately.
The principal adjustments include the following: (1) depreciation deductions
cannot exceed those computed under the 150% declining balance method and , for
property placed in service before January 1, 1999, an extended recovery period,
(2) mining exploration and development costs are capitalized and amortized
ratably over ten years, (3) magazine circulation expenditures are amortized over
three years, (4) research and experimental expenditures are amortized over ten
years, (5) miscellaneous itemized deductions are not allowed, (6) medical
expenses are deductible only to the extent they exceed 10% of adjusted gross
income, (7) state and local property and income taxes are not deductible, (8)
interest deductions are subject to further restrictions, (9) the standard
deduction and personal exemptions are not allowed, (10) only "alternative tax
net operating losses" are deductible and (11) the excess of the fair market
value of stock received on the exercise of an incentive stock option over the
exercise price must be included as income.
The principal "tax preference" items which must be added to taxable income
for AMT purposes include the following: (1) the excess of depletion over the
adjusted basis of the property at the end of the year, (2) the excess of
intangible drilling costs over 65% of net oil and gas income, and (3) private
activity bond interest.
The General Partner does not anticipate that any significant "tax
preference" items will be generated by either Partnership. The principal
Partnership items that may have an impact on a particular Partner's AMTI are
interest and depreciation. It is anticipated that each Partnership will
generally depreciate its Equipment using the straight line method. Therefore, a
Partnership's activities should not give rise to any significant depreciation
adjustments for purposes of computing the AMTI of the Limited Partners.
Prospective investors should be aware, however, that for purposes of computing
AMTI, interest incurred to acquire or maintain an ownership interest in a
passive activity (such as a Partnership) is deductible only to the extent that
such interest, when added to the passive activity income or loss of the taxpayer
(computed with the appropriate alternative minimum tax adjustments and tax
preferences), does not result in a passive activity loss (as so computed).
Accordingly, Limited Partners who borrow money and incur interest expense in
connection with their purchase of Units may only be allowed a limited deduction
for such interest in computing their AMTI.
The rules relating to the alternative minimum tax for corporations are
different than those just described. Corporations contemplating purchase of the
Units should consult their tax advisors as to the possible AMT consequences of
an investment in a Partnership.
Interest Expense
In general, interest expense incurred in connection with investment
activities is deductible only against investment income. Interest expense
incurred in connection with investments in "passive" activities (such as the
Partnership and other limited partnerships) may only be deducted in accordance
with the rules applicable to losses derived from passive activities. See
"--Deductibility of Losses: Passive Losses, Tax Basis and "At Risk" Limitation."
Interest expense incurred by a Partnership probably will be treated as
"passive" activity interest, as would interest expense incurred by a Limited
Partner on money he borrows to purchase or carry his interest in a Partnership
but may be deductible against related income of a Partnership allocable to the
Units purchased with such borrowed money.
Each Partnership may enter into transactions involving the prepayment of
interest or the payment of "points," commitment fees and loan origination or
brokerage fees. In general, prepaid interest, "points" and similar costs may not
be deductible currently and, instead, may have to be capitalized and written off
over the life of the related loan. The General Partner will treat such costs in
accordance with the applicable requirements.
Self-Employment Income and Tax
A Limited Partner's net earnings from self-employment for purposes of the
Social Security Act and the Code will not include his distributive share of any
item of income or loss from a Partnership, other than any guaranteed payments
made to such Limited Partner for services rendered to or on behalf of a
Partnership.
Maximum Individual Tax Rates
The federal income tax on individuals applies at a 15%, 28%, 31%, 36% and
39.6% rate. The personal exemption, which is $2,650 for 1997, is reduced by 2%
for each $2,500 by which an individual's adjusted gross income exceeds $181,800
for joint returns, $151,500 for heads of household, $121,200 for single
taxpayers, and $90,900 for married persons filing separately (as these amounts
are adjusted for inflation). An individual is required to reduce the amount of
certain of his otherwise allowable itemized deductions by 3% of the excess of
his adjusted gross income over $124,800 or $62,250 in the case of married
taxpayers filing separately (as these amounts are adjusted for inflation).
Section 183
Section 183 of the Code limits deductions attributable to "activities not
engaged in for profit." Section 183 contains a presumption that an activity is
engaged in for profit if the gross income from the activity exceeds the
deductions from the activity in at least three out of the five consecutive years
ending with taxable year at issue. The General Partner intends to operate each
Partnership for the purpose of providing an economic profit and anticipates that
each Partnership will have sufficient gross income to entitle it to the benefit
of the presumption referred to above. If either Partnership's activities were
treated as not being engaged in for profit, any deductions of that Partnership
in excess of its gross income might be permanently disallowed.
Foreign Source Taxable Income
It is possible that certain rental income and interest received by the
Partnerships from sources within foreign countries will be subject to
withholding and/or income taxes imposed by such countries. In addition, capital
gains on the sale of equipment may also be subject to capital gains taxes in
some of the foreign countries where the Partnerships sell equipment. Tax
treaties between certain countries and the United States may reduce or eliminate
certain of such taxes. The activities of the Partnerships within certain foreign
countries may cause Limited Partners to be required to file tax returns in such
foreign countries. It is impossible to predict in advance the rate of foreign
tax the income of the Partnerships will be subject to since the amount of the
Partnerships' assets to be invested in various countries is not known.
The Limited Partners will be informed by the Partnerships as to their
proportionate share of the foreign source of income of and foreign taxes paid by
the Partnerships which they will be required to include in their income. The
Limited Partners generally will be entitled to claim either a credit (subject to
the limitations discussed below) or, if they itemize their deductions, a
deduction (subject to the limitations generally applicable to deductions) for
their share of such foreign taxes in computing their Federal income taxes.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the Limited Partner's Federal tax (before the credit)
attributable to its total foreign source taxable income. A Limited Partner's
share of the Partnerships' rental income and interest attributable to equipment
used outside the U.S. generally will qualify as foreign source income.
Generally, the source of income realized upon the sale of personal property,
such as equipment, will be based on the location of the equipment.
The limitation on the foreign tax credit is applied separately to different
types of foreign source income, including foreign source passive income, such as
interest. Special limitations also apply with respect to income from the sale of
capital assets. In addition, the foreign tax credit is allowed to offset only
90% of the alternative minimum tax imposed on corporations and individuals.
Furthermore, for foreign tax credit limitation purposes, the amount of a Limited
Partner's foreign source income is reduced by various deductions that are
allocated and/or apportioned to such foreign source income. One such deduction
is interest expense, a portion of which will generally reduce the foreign source
income of any Limited Partner who owns (directly or indirectly) foreign assets.
For these purposes, foreign assets owned by the Partnerships will be treated as
owned by the Limited Partners in the Partnerships and indebtedness incurred by
the Partnerships will be treated as incurred by Limited Partners in the
Partnerships.
Because of these limitations, Limited Partners may be unable to claim credit
for the full amount of their proportionate share of the foreign taxes
attributable to the income of the Partnerships. In addition, foreign losses, if
any, generated by the Partnerships could reduce the tax credits available to a
Limited Partner from unrelated foreign source income. The foregoing is only a
general description of the foreign tax credit under current law. Moreover, since
the availability of a credit or deduction depends on the particular
circumstances of each Limited Partner, Limited Partners are advised to consult
their own tax advisers.
Registration, Interest and Penalties
Tax Shelter Registration
"Tax shelters" are required to be registered with the Service. Under
Temporary Treasury Regulations, an investment constitutes a "tax shelter" for
this purpose if a potential investor could reasonably infer from representations
made in connection with the sale of the investment that the aggregate amount of
deductions and 350% of the credits potentially allowable with respect to the
investment for any of the first five years will be greater than twice the amount
to be invested. Each Partnership is a "tax shelter" under this definition
because the term "amount of deductions" means gross deductions and gross income
expected to be realized by a Partnership is not counted. The Temporary Treasury
Regulations also provide that a tax shelter is not required to be registered
initially if it is a "projected income investment." A projected income
investment is any tax shelter that is not expected to reduce the cumulative tax
liability of any investor as of the close of any of the first five years of the
investment. The General Partner expects, based on economic and business
assumptions which the General Partner believes to be reasonable, that no Limited
Partner's cumulative tax liability will be reduced during any of the first five
years after the effective date of this Prospectus by reason of an investment in
a Partnership. There can be no assurance, however, that unexpected economic or
business developments will not cause Limited Partners to incur tax losses from a
Partnership, with the result that their cumulative tax liability during the
first five years might be reduced. Therefore, the General Partner has registered
each Partnership as a "tax shelter" with the Service. A Tax Shelter Registration
Number is expected to be received shortly. However, for so long as a Partnership
is a projected income investment, the Limited Partners are not required to
include a Partnership's registration number on their tax returns.
Even though each Partnership may be a projected income investment, each
Partnership will nonetheless be required to maintain a list identifying each
person who has been sold a Unit and containing such other information as
required by the regulations. This list must be made available to the Service
upon request.
In the event each Partnership ceases to be a projected income investment,
each Partnership and the Limited Partners will become subject to all remaining
requirements applicable to tax shelters. This means, among other things, that
the Limited Partners will be required to include a Partnership's registration
number on their tax returns.
Pursuant to the Temporary Treasury Regulations, the General Partner is
required to notify the Limited Partners that a Partnership is no longer a
projected income investment and to inform each Limited Partner that he must
report a Partnership's registration number on any return on which he claims a
deduction, credit or other tax benefit from that Partnership.
The General Partner is required by the Temporary Treasury Regulations to
include the following legend herein: "ISSUANCE OF A REGISTRATION NUMBER DOES NOT
INDICATE THAT THIS INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED,
EXAMINED OR APPROVED BY THE INTERNAL REVENUE SERVICE."
Interest on Underpayments
The interest that taxpayers must pay for underpayment of federal taxes is
the Federal short-term rate plus three percentage points, compounded daily. The
Federal short-term rate is set quarterly by the Treasury based on the yield of
U.S. obligations with maturities of three years or less.
Penalty for Substantial Understatements
The Code also contains a penalty for substantial understatement of federal
income tax liability equal to 20% of the amount of the understatement. An
understatement occurs if the correct tax for the year (as finally determined
after all administrative and judicial proceedings) exceeds the tax liability
actually shown on the taxpayer's returns for the year. An understatement on an
individual's return will be considered substantial for purposes of the penalty
if it exceeds both (a) 10% of the correct tax, and (b) $5,000. The imposition of
this penalty may be avoided however if, in the case of any item that is not
attributable to a "tax shelter," (a) there was substantial authority for the
taxpayer's treatment of the item, or (b) the relevant facts affecting the item's
tax treatment were adequately disclosed in the taxpayer's return provided that
the taxpayer had a "reasonable basis" for the tax treatment of such item. In the
case of an item that is attributable to a "tax shelter," the penalty may be
avoided if (a) there was substantial authority for the taxpayer's treatment of
the item, and (b) the taxpayer reasonably believed that his treatment of the
item on the return was more likely than not the proper treatment.
For purposes of the understatement penalty, "tax shelter" includes a
partnership if a significant purpose of the partnership is "the avoidance or
evasion of Federal income tax." Each Partnership should not be treated as a "tax
shelter" within the meaning of this provision primarily because (1) each
Partnership's objectives include the provision of cash distributions (real
economic gain) to the investors throughout the operating life of a Partnership,
and (2) claiming the tax benefits associated with the ownership of equipment
would be consistent with Congressional purpose in providing those benefits.
State and Local Taxation
In addition to the federal income tax consequences described above,
prospective investors should consider potential state and local tax consequences
of an investment in a Partnership. A Limited Partner's share of the taxable
income or loss of a Partnership generally will be required to be included in
determining reportable income for state or local tax purposes in the
jurisdiction in which the Limited Partner is a resident. In addition, other
states in which a Partnership owns Equipment or does business may require
nonresident Limited Partners to file state income tax returns and may impose
taxes determined with reference to their pro rata share of a Partnership's
income derived from such state. Any tax losses generated through a Partnership
from operations in such states may not be available to offset income from other
sources in other states. To the extent that a nonresident Limited Partner pays
tax to a state by virtue of the operations of a Partnership within that state,
he may be entitled to a deduction or credit against tax owed to his state of
residence with respect to the same income. Payment of state and local taxes will
constitute a deduction for federal income tax purposes, assuming that the
Limited Partner itemizes deductions. Each investor is advised to consult his own
tax adviser to determine the effect of state and local taxes, including gift and
death taxes as well as income taxes, which may be payable in connection with an
investment in a Partnership.
Foreign Investors
Foreign investors in each Partnership should be aware that, to a substantial
degree, the income of a Partnership will consist of trade or business income
that is attributable to or effectively connected with a fixed place of business
("permanent establishment") maintained by a Partnership in the United States. As
such, a Partnership's income will be subject to U.S. taxation in the hands of
foreign investors and it is unlikely that any exemption will be available under
any applicable tax treaty. Such foreign investors may be required to file a U.S.
federal income tax return to report their distributive shares of a Partnership's
income, gains, losses and deductions. Additionally, a Partnership is required to
withhold tax on each such foreign investor's distributive share of income from
that Partnership (whether or not any cash distributions are made); any amount
required to be withheld will be deducted from distributions otherwise payable to
such foreign investor and such foreign investor will be liable to repay that
Partnership for any withholdings in excess of the distributions to which he is
otherwise entitled. Foreign investors must consult with their tax advisors as to
the applicability to them of these rules and as to the other tax consequences
described herein.
Tax Treatment of Certain Trusts and Estates
The tax treatment of trusts and estates can differ somewhat from the tax
treatment of individuals. Investors which are trusts and estates should consult
with their tax advisors as to the applicability to them of the tax rules
discussed herein.
Taxation of Employee Benefit Plans and Other Tax-Exempt Organizations
Employee benefit plans, such as qualified pension and profit sharing plans,
Keogh plans, and IRAs, generally are exempt from federal income tax, except to
the extent their "unrelated business taxable income" exceeds $1,000 in any
taxable year. The excess "unrelated business taxable income" is subject to an
unrelated business income tax. Other charitable and tax-exempt organizations are
likewise subject to the unrelated business income tax. Tax-exempt investors in a
Partnership will be deemed to be engaged in the business carried on by such
Partnership and, therefore, subject to the unrelated business income tax. Such
investors must consult with tax advisors as to the tax consequences to them of
investing in a Partnership.
Corporate Investors
The federal income tax consequences to investors which are corporations
(other than certain closely-held corporations, which are subject to the "at
risk" and "passive loss" limitations discussed herein) may differ materially
from the tax consequences discussed herein, particularly as they relate to the
alternative minimum tax. Such investors must consult with tax advisors as to the
tax consequences to them of investing in a Partnership.
<PAGE>
INVESTMENT BY QUALIFIED PLANS
Fiduciaries under ERISA
A fiduciary of a Qualified Plan is subject to certain requirements under
ERISA, including the duty to discharge its responsibilities solely in the
interest of, and for the benefit of, the Qualified Plan's participants and
beneficiaries. A fiduciary is required to (a) perform its duties with the skill,
prudence and diligence of a prudent man acting in like capacity, (b) diversify
investments so as to minimize the risk of large losses and (c) act in accordance
with the Qualified Plan's governing documents.
Fiduciaries with respect to a Qualified Plan include, for example, any
persons who exercise any authority or control respecting the management or
disposition of the funds or other property of the Qualified Plan. For example,
any person who is responsible for choosing a Qualified Plan's investments, or
who is a member of a committee that is responsible for choosing a Qualified
Plan's investments, is a fiduciary of the Qualified Plan. Also, an investment
professional who renders, or who has the authority or responsibility to render,
investment advice with respect to the funds or other property of a Qualified
Plan may be a fiduciary of the Qualified Plan, as may any other person with
special knowledge or influence with respect to a Qualified Plan's investment or
administrative activities.
IRAs generally are not subject to ERISA's fiduciary duty rules. In addition,
where a participant in a Qualified Plan exercises control over such
participant's individual account in the Qualified Plan in a "self-directed
investment" arrangement that meets the requirements of Section 404(c) of ERISA,
such Participant (rather than the person who would otherwise be a fiduciary of
such Qualified Plan) will generally be held responsible for the consequences of
his investment decisions under interpretations of applicable regulations of the
Department of Labor. Certain Qualified Plans of sole proprietorships,
partnerships and closely-held corporations of which the owners of 100% of the
equity of such business and their respective spouses are the sole participants
in such plans at all times are generally not subject to ERISA's fiduciary duty
rules, although they are subject to the Code's prohibited transaction rules,
explained below.
A person subject to ERISA's fiduciary rules with respect to a Qualified Plan
(or, where applicable, IRA) should consider those rules in the context of the
particular circumstances of the Qualified Plan (or IRA) before authorizing an
investment of a portion of the Qualified Plan's (or IRA's) assets in Units.
Prohibited Transactions Under ERISA and the Code
Section 4975 of the Code (which applies to all Qualified Plans and IRAs) and
Section 406 of ERISA (which does not apply to IRAs or to certain transactions
with respect to Qualified Plans that, under the rules summarized above, are not
subject to ERISA's fiduciary rules) prohibit Qualified Plans and IRAs from
engaging in certain transactions involving "plan assets" with parties that are
"disqualified persons" under the Code or "parties in interest" under ERISA
("disqualified persons" and "parties in interest" are hereinafter referred to as
"Disqualified Persons"). Disqualified Persons include, for example, fiduciaries
of the Qualified Plan or IRA, officers, directors and certain shareholders and
other owners of the company sponsoring the Qualified Plan and natural persons
and legal entities sharing certain family or ownership relationships with other
Disqualified Persons. In addition, the beneficiary - "owner" or "account holder"
- - of an IRA is generally considered to be a Disqualified Person for purposes of
the prohibited transaction rules.
"Prohibited transactions" include, for example, any direct or indirect
transfer to, or use by or for the benefit of, a Disqualified Person of a
Qualified Plan's or IRA's assets, any act by a fiduciary that involves the use
of a Qualified Plan's or IRA's assets in the fiduciary's individual interest or
for the fiduciary's own account, and any receipt by a fiduciary of consideration
for his or her own personal account from any party dealing with a Qualified Plan
or IRA in connection with a transaction involving the assets of the Qualified
Plan or the IRA. Under ERISA, a Disqualified Person that engages in a prohibited
transaction will be required to disgorge any profits made in connection with the
transaction and will be required to compensate any Qualified Plan that was a
party to the prohibited transaction for any losses sustained by the Qualified
Plan. In addition, ERISA authorizes additional penalties and further relief from
such transaction. Section 4975 of the Code imposes excise taxes on a
Disqualified Person that engages in a prohibited transaction with a Qualified
Plan or IRA. Prohibited transactions subject to these sanctions will generally
be required to be "unwound" to avoid incurring additional penalties.
In order to avoid the occurrence of a prohibited transaction under Section
4975 of the Code and/or Section 406 of ERISA, Units may not be purchased by a
Qualified Plan or IRA from assets as to which the General Partner or any of its
Affiliates are fiduciaries. Additionally, fiduciaries of Qualified Plans and
IRAs should be alert to the potential for a prohibited transaction in the
context of a particular Qualified Plan's or IRA's decision to purchase Units if,
for example, such purchase were to constitute a use of plan assets by or for the
benefit of, or a purchase of Units from, a Disqualified Person.
Plan Assets
If a Partnership's assets were determined under ERISA or the Code to be
"plan assets" of Qualified Plans and/or IRAs holding Units, fiduciaries of such
Qualified Plans and IRAs might under certain circumstances be subject to
liability for actions taken by the General Partner or its Affiliates. In
addition, certain of the transactions described in this Prospectus in which a
Partnership might engage, including certain transactions with Affiliates, might
constitute prohibited transactions under the Code and ERISA with respect to such
Qualified Plans and IRAs, even if their acquisition of Units did not originally
constitute a prohibited transaction. Moreover, fiduciaries with responsibilities
to Qualified Plans and/or IRAs subject to ERISA's fiduciary duty rules might be
deemed to have improperly delegated their fiduciary responsibilities to the
General Partner in violation of ERISA.
Although under certain circumstances ERISA and the Code, as interpreted by
the Department of Labor ("DOL") in currently effective regulations, generally
apply a "look-through" rule under which the assets of an entity in which a
Qualified Plan or IRA has made an equity investment may constitute "plan
assets," the applicable regulations exempt investments in certain
publicly-registered securities and in certain operating companies, as well as
investments in entities not having significant equity participation by benefit
plan investors, from the application of the "look-through" principle. Under the
DOL's current regulations governing the determination of what constitutes the
assets of a Qualified Plan or IRA in the context of investment securities such
as the Units, an undivided interest in the underlying assets of a collective
investment entity such as a Partnership will not be treated as "plan assets" of
Qualified Plan or IRA investors if (i) the securities are "publicly offered,"
(ii) less than 25% by value of each class of equity securities of the entity is
owned by Qualified Plans, IRAs, and certain other employee benefit plans or
(iii) the entity is an "operating company."
In order to qualify for the publicly-offered exception described above, the
securities in question must be freely transferable, owned by at least 100
investors independent of the issuer and of one another, and either (a) part of a
class of securities registered under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934 or (b) sold as part of a public Offering pursuant to an
effective registration statement under the Securities Act of 1933 and registered
under the Securities Exchange Act of 1934 within 120 days (or such later time as
may be allowed by the Securities and Exchange Commission) after the end of the
issuer's fiscal year during which the Offering occurred. Units will be sold as
part of an Offering registered under the Securities Act of 1933. Further, the
General Partner has represented (a) that it intends to register the Units in
each Partnership under the Securities Exchange Act of 1934 in compliance with
the DOL's requirements and (b) that it is highly likely that substantially more
than 100 independent investors will purchase and hold Units in each Partnership.
Accordingly, the determination of whether the Units will qualify for the
publicly-offered exception will depend on whether they are freely transferable
within the meaning of the DOL regulations. Although whether a security is freely
transferable is a factual determination, the limitations on the assignment of
Units and substitution of Limited Partners contained in Sections 10.2, 10.3 and
10.4 of the Partnership Agreement appear to fall within the scope of certain
restrictions enumerated in the DOL's current regulations that ordinarily will
not affect a determination that securities are freely transferable when the
minimum investment, as in the case of the Units, is $10,000 or less. Because,
however, the effect of the restrictions on transferability of Units on the
ultimate determination of whether Units are "freely transferable" for purposes
of the DOL's regulations (as well as the determination of whether each
Partnership will be an "operating company" under the alternative DOL exemption
set forth above) is not certain, the General Partner has decided to rely on the
25% ownership exemption described above for these purposes. Consequently,
pending favorable clarification of such matters from the DOL, in order to ensure
that the assets of the Partnerships will not constitute "plan assets" of
Qualified Plan and IRA Unitholders, the General Partner will take such steps as
are necessary to ensure that ownership of Units by Qualified Plans, IRAs, and
certain other employee benefit plan investors is at all times less than 25% of
the total value of outstanding Units. In calculating this limit, the General
Partner will, as provided in the DOL's regulations, disregard the value of any
Units held by a person (other than a Qualified Plan, IRA, or certain other
employee benefit plans) who has discretionary authority or control with respect
to the assets of the Partnerships, or any person who provides investment advice
for a fee (direct or indirect) with respect to the assets of the Partnerships,
or any affiliate of any such a person. (See "INVESTOR SUITSBILITY AND MINIMUM
INVESTMENT REQUIREMENTS; SUBSCRIPTION PROCEDURES--Minimum Investment and
Suitability Standards.") Whether the assets of the Partnerships will constitute
"plan assets" is a factual issue which may depend in large part on the General
Partner's ability throughout the life of the Partnerships to satisfy the 25%
ownership exemption. Accordingly, tax counsel are unable to express an opinion
on this issue.
Other ERISA Considerations
In addition to the above considerations in connection with the "plan asset"
question, a fiduciary's decision to cause a Qualified Plan or IRA to acquire
Units should involve, among other factors, considerations that include whether
(a) the investment is in accordance with the documents and instruments governing
the Qualified Plan or IRA, (b) the purchase is prudent in light of the
diversification of assets requirement for such Plan and the potential
difficulties that may exist in liquidating Units, (c) the investment will
provide sufficient cash distributions in light of the Qualified Plan's likely
required benefit payments and other needs for liquidity, (d) the investment is
made solely in the interests of plan participants, (e) the evaluation of the
investment has properly taken into account the potential costs of determining
and paying any amounts of federal income tax that may be owed on unrelated
business taxable income derived from the Partnerships, and (f) the fair market
value of Units will be sufficiently ascertainable, and with sufficient
frequency, to enable the Qualified Plan or IRA to value its assets in accordance
with the rules and policies applicable to the Qualified Plan or IRA.
CAPITALIZATION
The capitalization of the Partnerships as of the date of this Prospectus and
as adjusted to reflect the sale of the Minimum and Maximum Offering of Units is
as follows:
As of Minimum OfferingMaximum Offering
the date per Partnership per Partnership
hereof (1)(12,000 Units)(750,000 Units)
General Partner's
Capital Contribution (1) $ 1,000 $ 1,000 $ 1,000
Limited Partner's
Capital Contribution (2) 1,000(1) 1,200,000 75,000,000
----- --------- ----------
Total Capitalization $ 2,000 $ 1,201,000 $ 75,001,000
Less Estimated
Organizational and
Offering Expenses (3) - (162,000)
---------- --------------
(9,375,000)
Net Capitalization $ 2,000 $
========== =====================
1,039,000(2) $ 55,626,000(2)
============
(1) Each Partnership was originally capitalized by the contribution of $1,000 by
the General Partner and $1,000 by the Original Limited Partner.
(2) The Original Limited Partner will withdraw from a Partnership and receive a
return of his original Capital Contribution on the Initial Closing Date upon
the admission of the Initial Limited Partners to such Partnership.
(3)The amounts shown reflect the Gross Offering Proceeds from sale of Units at
$100.00 per Unit before deduction of (a) Sales Commissions in an amount
equal to 8.0% of Gross Offering Proceeds (or $8 per Unit sold, which will be
paid except in the case of Units sold to Affiliated Limited Partners), (b)
Underwriting Fees equal in amount to 2.0% of Gross Offering Proceeds (or
$2.00 per Unit sold) and (c) the O & O Expense Allowance (without regard to
such actual expenses) of 3.5% ($3.50 per Unit) of the first $25,000,000 of
each Unit sold for Gross Offering Proceeds; 2.5% ($2.50 per Unit) of each
Unit sold for Gross Offering Proceeds in excess of $25,000,000 but less than
$50,000,000; and 1.5% ($1.50 per Unit) for Gross Offering Proceeds exceeding
$50,000,000. The General Partner has agreed in the Partnership Agreement to
pay actual Organizational and Offering Expenses for this Offering to the
extent such expenses exceed the O & O Expense Allowance. (No fees or
compensation were payable with regard to either the General Partner's or
Original Limited Partner's original subscription payment).
The maximum dollar amount of such items of compensation payable to the
General Partner, its Affiliates and non-affiliated Selling Dealers will
equal $162,000 for the Minimum Offering of 12,000 Units per Partnership and
$9,375,000 for the Maximum Offering of 750,000 Units per Partnership, in
each case computed as if all Units are sold to the general public without
purchases by Affiliated Limited Partners. Affiliated Limited Partners may
acquire Units (for investment purposes only) on a net of Sales Commissions
basis for a price of $92.00 per Unit (and a proportionate Net Unit Price for
each fractional Unit purchased). To the extent that Units are purchased by
such Affiliated Limited Partners, both the total Capital Contributions of
the Limited Partners and each Partnership's obligation to pay Sales
Commissions will be reduced accordingly. See "SOURCES AND USES OF OFFERING
PROCEEDS AND RELATED INDEBTEDNESS."
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
Liquidity and Capital Resources
Each Partnership will have limited funds at its formation because the capital
anticipated to be raised by each Partnership through its Offering of Units will
not be available on the date of formation.
Each Partnership's capital resources are expected to undergo major changes
during its initial year of operations as a result of completion of its Offering
and acquisition of its Equipment. Thereafter, each Partnership's capital needs
and resources are expected to be relatively stable over the holding periods of
the Equipment. Each Partnership intends to acquire its Equipment as required to
commit all Net Proceeds available for Investment in Equipment. As of the date of
this Prospectus, no material commitments with respect to capital expenditures of
any Partnership have been made. The General Partner anticipates that reserves
sufficient to pay each Partnership's operating expenses and to make
Distributions to the Limited Partners will initially be derived from rental
payments from the Leases. To date, no Partnership has had any operations. During
the period of ownership of the Equipment, each Partnership's operations will
consist principally of the ownership and leasing of Equipment.
Each Partnership intends to establish initially working capital reserves of
approximately 1.0% of Gross Proceeds per Unit, an amount which is anticipated to
be sufficient to satisfy general liquidity requirements. Liquidity would,
however, be adversely affected by unanticipated or greater than anticipated
operating costs or losses (including Lessees' inability to make timely Lease
payments). To the extent that working capital reserves are or may be
insufficient to satisfy the cash requirements of a Partnership, it is
anticipated that additional funds would be obtained through revenues from
Partnership operations, the proceeds from the sale of Equipment, bank loans,
short-term loans from the General Partner or its Affiliates or the sale of
Equipment. The General Partner may use a portion of Cash From Operations and
Cash From Sales or Refinancings to re-establish working capital reserves. In no
event will a Partnership's reserves be reduced for the purpose of making
Distributions to the Partners below a level which the General Partner deems
necessary for Partnership operations. There can be no assurance, however, that
the amounts in the working capital reserve will be adequate to meet a
Partnership's Obligations.
Operations
Each Partnership is newly formed and has had no operations to date. Until
receipt and acceptance of subscriptions for 12,000 Units and the admission of
the subscribers therefor as Limited Partners on the Initial Closing Date, a
Partnership will not commence active operations. During the period commencing
with the Initial Closing Date and continuing throughout the Reinvestment Period,
each Partnership will be in active operation.
Each Partnership will acquire Equipment with Net Offering Proceeds and
indebtedness, (which is expected to average at least 50% of a Partnership's
aggregate Purchase Price for all of its Equipment, determined when the Net
Offering Proceeds of this Offering are fully invested). However, in the event a
Partnership requires additional cash or the General Partner determines that it
is in the best interests of a Partnership to obtain additional funds to increase
cash available for Investment in Equipment and Financing Transactions or for any
other proper business need of a Partnership, a Partnership may borrow, on a
secured or unsecured basis, amounts up to 67% of the aggregate Purchase Price of
all Investments acquired by such Partnership at any given time following full
investment of the Net Offering Proceeds. The Partnerships currently have no
arrangements with, or commitments from, any Lender with respect to any such
borrowings. The General Partner anticipates that any acquisition financing or
other borrowings will be obtained from institutional lenders. See "INVESTMENT
OBJECTIVES AND POLICIES--Acquisition Policies and Procedures".
SUMMARY OF THE PARTNERSHIP AGREEMENT
The following is a brief summary of the material provisions of the Amended
and Restated Agreement of Limited Partnership (the "Partnership Agreement")
which will be executed by the General Partner, which sets forth the terms and
conditions upon which each Partnership will conduct its business and affairs and
certain of the rights and obligations of the Limited Partners of such
Partnership. Such summary does not purport to be complete and is subject to the
detailed provisions of, and qualified in its entirety by express reference to,
the Partnership Agreement, a copy of which is included as Exhibit A to the
Registration Statement of which this Prospectus forms a part. Prospective
investors in the Partnership should study the Partnership Agreement carefully
before making any investment. References below to Partnership and the
Partnership Agreement refer to each Partnership and its Partnership Agreement.
Establishment and Nature of the Partnerships
ICON Income Fund Eight A L.P. was organized under the Delaware Revised
Uniform Limited Partnership Act (the "Delaware Act") with ICON Capital Corp., a
Connecticut corporation, as its General Partner. A limited partnership is a
partnership having one or more general partners and one or more limited
partners. A limited partner ordinarily does not play a role in the management or
control of a partnership's affairs and his liability for partnership obligations
is generally limited to his investment, while a general partner is, in general,
personally liable for all partnership obligations.
Name and Address
The Partnerships will be conducted under the name "ICON Income Fund Eight"
which has its principal office and place of business at 600 Mamaroneck Avenue,
Harrison, New York 10528 (unless such offices are changed by the General Partner
with written notice to the Limited Partners).
Purposes and Powers
Each Partnership has been organized, without limitation, for the purposes of
(a) acquiring, investing in, owning, leasing, re-leasing, financing,
refinancing, transferring or otherwise disposing of, and in all respects
otherwise dealing in or with, Equipment of all kinds, residual interests
therein, and options to purchase Equipment and residual interests therein, (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 thereof) and other such personal
property, 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 each Partnership. In conducting such business, the Partnerships are not
limited to any part of the world (including, without limitation, all land,
waters and space under, on or above such part of the world).
Duration of Partnership
The term of ICON Income Fund Eight A L.P. commenced upon the filing of the
Certificate of Limited Partnership with the Secretary of State of the State of
Delaware on July 9, 1997 and will terminate at midnight on December 31, 2017,
subject, however, to earlier termination upon the occurrence of any Dissolution
Event, including, without limitation, (i) the withdrawal, removal or dissolution
of, or the occurrence of certain bankruptcy events with respect to, the General
Partner (unless a Substitute General Partner will be timely admitted to such
Partnership), (ii) the Sale of all or substantially all of such Partnership's
assets and (iii) the voluntary dissolution of such Partnership.
Capital Contributions
General Partner. The General Partner has contributed $1,000, in cash, as
its Capital Contribution to ICON Income Fund Eight A L.P. in exchange for a
one percent (1%) Partnership Interest.
Original Limited Partner. The Original Limited Partner has made a capital
contribution of $1,000 to ICON Income Fund Eight A L.P. in exchange for ten (10)
Units then representing a 99% Partnership Interest. On the Initial Closing Date,
the Original Limited Partner will withdraw from such Partnership, his capital
contribution of $1,000 will be returned to him in full and his original
Partnership Interest of ten (10) Units will be retired upon the admission of
additional Limited Partners.
Limited Partners. Each Limited Partner (other than the Original Limited
Partner and Affiliated Limited Partners) will make a Capital Contribution, in
cash, in an amount equal to the Gross Unit Price to the capital of each
Partnership for each Unit or fraction thereof purchased in exchange for such
Unit. Each Affiliated Limited Partner will make a Capital Contribution, in cash,
in an amount equal to the Net Unit Price for each Unit or fraction thereof
purchased in exchange for such Unit.
Powers of the Partners
General Partner. Except as otherwise specifically provided in the
Partnership Agreement, the General Partner will have complete and exclusive
discretion in the management and control of the affairs and business of the
Partnerships and will be authorized to employ all powers necessary or advisable
to carry out the purposes and investment policies, conduct the business and
affairs and exercise the powers of the Partnerships. Without limiting the
generality of the foregoing, the General Partner will have the right to make
Investments for and on behalf of the Partnerships and to manage such Investments
and all other assets of the Partnerships. The Limited Partners will not be
permitted to participate in the management of the Partnerships. Except to the
extent limited by the Delaware Act or the Partnership Agreement, the General
Partner may delegate all or any of its duties under the Partnership Agreement to
any Person (including, without limitation, any Affiliate of the General
Partner).
The General Partner will have the sole and absolute discretion to accept or
refuse to accept the admission of any subscriber as a Limited Partner to a
Partnership; provided that no such admission will be accepted unless (i) the
Minimum Offering will have been achieved, (ii) such admission will not have
certain tax consequences and (iii) the Person seeking such admission will agree
in writing to be bound by the provisions of the Partnership Agreement, will make
a written representation as to whether such Person is or is not a United States
Person and will satisfy all applicable suitability requirements (see "INVESTOR
SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS; SUBSCRIPTION PROCEDURES").
The General Partner is designated as the Partnership's Tax Matters Partner
and is authorized and directed by the Partnership Agreement to represent the
Partnerships and their Limited Partners in connection with all examinations of
the Partnerships' affairs by tax authorities and any resulting administrative or
judicial proceedings, and to expend the Partnerships' funds in doing so.
Limited Partners. No Limited Partner shall participate in or have any
control over a Partnership's business or have any right or authority to act for,
or to bind or otherwise obligate, the Partnerships (except one who is also the
General Partner, and then only in its capacity as the General Partner).
Limitations on Exercise of Powers by the General Partner
The General Partner will have no power to take any action prohibited by the
Partnership Agreement or the Delaware Act. Furthermore, the General Partner is
subject to certain provisions in its administration of the business and affairs
of the Partnerships, as outlined below.
From and after the date when all Capital Contributions have been invested or
committed to investment in Investments and Reserves, used to pay permitted
Front-End Fees or returned to the Limited Partners in accordance with the
Partnership Agreement, each Partnership will not incur or assume additional
Indebtedness in connection with the acquisition of any Investment to the extent
that the sum of the principal amount of such additional Indebtedness plus the
aggregate principal amount of Indebtedness of such Partnership then outstanding
would exceed 67% of the aggregate Purchase Price paid by such Partnership for
Investments then held by that Partnership (inclusive of the Purchase Price of
any Investment then being acquired).
Each Partnership will neither purchase ,or lease Investments from, nor sell
or lease 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 only upon the satisfaction of
certain conditions, including, but not limited to, the following:
(i) the General Partner has determined that such Affiliated Investment is in
the best interests of a Partnership;
(ii) such Affiliated Investment is made by a Partnership upon terms
(including price) no less favorable to such Partnership than the terms upon
which the General Partner or such Affiliate entered into such Affiliated
Investment;
(iii) neither the General Partner nor any such Affiliate will realize any
gain or other benefit, other than permitted reasonable compensation, as a
result of such Affiliated Investment; and
(iv) such Affiliated Investment was held only on an interim basis (generally
not longer than six months) by the General Partner or any Affiliate of the
General Partner for purposes of facilitating the acquisition of such
Investment by a Partnership, borrowing money or obtaining financing for a
Partnership or for other purposes related to the business of a Partnership.
No loans may be made by the Partnerships to the General Partner or any
Affiliate of the General Partner. The General Partner or any such Affiliate,
however, may make Partnership Loans to the Partnerships, provided the terms of
such Partnership Loan will include, without limitation, the following:
(i) interest will be payable with respect to such Partnership Loan at a rate
not in excess of the lesser of (A) the rate at which the General Partner or
such Affiliate itself borrowed funds for the purpose of making such
Partnership Loan, (B) if no such borrowing was incurred, the rate obtainable
by a Partnership in an arms-length borrowing with similar terms (without
reference to the General Partner's or such Affiliate's financial abilities
or guarantees) or (C) the rate from time to time announced by The Chase
Manhattan Bank N.A. (National Association) at its principal lending offices
in New York, New York as its prime lending rate plus 3% per annum;
(ii) such Partnership Loan will be fully repaid within twelve months after
the date on which it was made; and
(iii) neither the General Partner nor any such Affiliate may receive
financial charges or fees in connection with such Partnership Loan (except
that the General Partner or such Affiliate may be reimbursed, dollar for
dollar, for actual reasonable out-of-pocket expenses).
The Partnerships will not acquire any Investments in exchange for Interests in
the Partnerships.
The Partnerships may make Investments in Joint Ventures provided that:
(i) the General Partner has determined that such Investment is in the best
interests of a Partnership and will not result in duplicate fees to the
General Partner or any Affiliate of the General Partner;
(ii) such Investment will (if made with participants affiliated with the
Sponsor) be made by a Partnership upon terms that are substantially
identical to the terms upon which such participants have invested in such
Joint Venture; and
(iii) such Investment will (if made with non-affiliated Persons) give veto
power on disposition decisions only in such Joint Venture to a Partnership
and such Joint Venture will own and lease specific Equipment and/or invest
in one or more specific Financing Transactions.
Except as specifically permitted by the Partnership 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 or of the proceeds of the resale, exchange or refinancing of
Equipment. 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 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 the above shall not prohibit the payment to any
such Person of the Underwriting Fees and Sales Commissions otherwise in
accordance with the terms of the Partnership Agreement.
During the Reinvestment Period, the General Partner may not dissolve a
Partnership or sell or otherwise dispose of all or substantially all of the
assets of a Partnership without the Consent of the Majority Interest.
Indemnification of the General Partner
Pursuant to the Partnership Agreement, except to the limited extent provided
therein, the General Partner and any Affiliate of the General Partner and
individual officers engaged in the performance of services for the Partnerships
will be indemnified by the Partnerships from assets of the Partnerships (and not
by the Limited Partners) for any liability, loss, cost and expense of litigation
suffered by such party, which arises out of certain actions (for example, legal
costs associated with enforcing the Partnerships' rights against Lessees, Users
and others) or omissions to act (for example, the cost of a tax bond while
contesting the magnitude of, or liability for, state or local taxes) by the
General Partner or such Affiliate. See "FIDUCIARY
RESPONSIBILITY--Indemnification of the General Partner, Dealer-Manager and
Selling Dealers."
Liability of Partners
Liability of the General Partner. The General Partner will be liable for all
general obligations of the Partnership to the extent not paid by the
Partnerships; provided that neither the General Partner nor any Affiliate of the
General Partner will have any personal liability for obligations of the
Partnerships that are specifically non-recourse to the General Partner or for
the repayment of the Capital Contribution of any Limited Partner. All decisions
made for or on behalf of the Partnerships by the General Partner will be binding
upon the Partnerships. See "FIDUCIARY RESPONSIBILITY--General."
Limited Liability of the Limited Partners. No Limited Partner will have any
personal liability on account of any obligations and liabilities of, including
any amounts payable by, a Partnership and will only be liable, in its capacity
as a Limited Partner, to the extent of such Limited Partner's Capital
Contribution and pro rata share of any undistributed Profits and other assets of
such Partnership. Notwithstanding any of the foregoing, any Limited Partner who
participates in the management or control of a Partnership's affairs may be
deemed to be acting as a General Partner and may lose any entitlement to limited
liability as against third parties who reasonably believe, in connection with
the transaction of business with a Partnership, that such Limited Partner is a
General Partner. See also "RISK FACTORS--Partnership Risks and Investment
Risks--Liability of Limited Partners for Certain Distributions."
The Delaware Act provides that, for a period of three years from the date on
which any distribution is made to any Limited Partner, such Limited Partner may
be liable to a Partnership for such distribution if (i) after giving effect to
such distribution, all liabilities of a Partnership (other than liabilities to
Partners on account of their Partnership Interests and liabilities for which the
recourse of creditors is limited to specified property of a Partnership), exceed
the fair value of the assets of a Partnership (except that the fair value of any
property that is subject to such a limited recourse liability will be included
in the assets of a Partnership only to the extent that the fair value of such
property exceeds such liability) and (ii) such Limited Partner knew at the time
of such distribution that such distribution was made in violation of the
Delaware Act.
Non-assessability of Units
The Units are nonassessable. Except as may otherwise be required by law or
by the Partnership Agreement, after the payment of all Subscription Monies for
the Units purchased by such Limited Partner, no Limited Partner will have any
further obligations to a Partnership, be subject to any additional assessment or
be required to contribute any additional capital to, or to loan any funds to, a
Partnership, but may, under certain circumstances, be required to return
distributions made to such Limited Partner in violation of the Delaware Act as
described in the immediately preceding paragraph.
Distribution of Distributable Cash From Operations and Distributable Cash
From Sales
Distributable Cash from Operations and Distributable Cash From Sales
(Available Cash from such sources) that is not reinvested in Equipment and
Financing Transactions will be distributed 99% to the Limited Partners as a
group and 1% to the General Partner until Payout (which is defined as 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, 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 such cumulative return requirement. Thereafter,
such distributions will be distributable 90% to the Limited Partners as a group
and 10% to the General Partner.
During the Reinvestment Period (the period of active investment and
reinvestment by a Partnership which ends five (5) years after a Partnership's
Final Closing Date), the General Partner will have the sole discretion to
determine the amount of Distributable Cash From Operations and Distributable
Cash From Sales that are to be reinvested in new Investments and the amounts
that are to be distributed; provided, however, each Limited Partner is entitled
to receive, and shall receive, to the extent available, monthly cash
distributions computed as provided in this paragraph. Such distributions will be
made 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 such Limited Partner's
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 a
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.
Such distributions, if made, will reduce the amount of money that may be
reinvested by a Partnership. As discussed in "INVESTMENT OBJECTIVES AND
POLICIES--Cash Distributions to Partners", decisions by the General Partner as
to the amounts of Reserves which a Partnership establishes and the amounts of
that Partnership's funds which will be reinvested may effect the ability of such
Partnership to make such cash distributions.
Such cash distributions will be noncumulative; meaning that, if
Distributable Cash From Operations and Distributable Cash From Sales are
insufficient in any calendar month to pay the full amount of such distributions,
only the actual amount thereof is required to be distributed. Such cash
distributions will also computed on a non-compounded basis; meaning that the
principal amount upon which such cash distributions is computed will not be
increased as the result of the inability of a Partnership to distribute any
monthly portion of such annual amounts, or reduced by any of such distributions
actually made, in any prior period. It is expected that a substantial portion of
all of such cash distributions (e.g. the portion thereof which exceeds taxable
income for GAAP purposes) will be treated as a return of Limited Partners'
originally invested capital and that the balance of such distributions will be
treated as a return thereon (e.g. the portion thereof which equals taxable
income for GAAP purposes).
Section 8.1(a) of the Partnership Agreement also provides that each Limited
Partner is entitled to receive monthly cash distributions (if the distributions
described 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.
During the Disposition Period, each Partnership intends to promptly
distribute substantially all Distributable Cash From Operations and
Distributable Cash From Sales.
Section 6.4(g) of the Partnership Agreement provides that the General
Partner will be paid its monthly Management Fee for any month during the
Reinvestment Period only after payment in full of any accrued and unpaid First
Cash Distributions for such month and any previous month. To the extent such
Management Fee is not paid currently, it will be paid without interest out of
the first funds available therefore. (See the "COMPENSATION TO THE GENERAL
PARTNER AND AFFILIATES.")
Allocation of Profits and Losses
As a general rule, during the Reinvestment Period, a Partnership's Profits
(including, inter alia, taxable income and gains and items thereof, and items of
revenue exempt from tax) will be allocated, first, 99% to the Limited Partners
in proportion to their respective numbers of Units and 1% to the General
Partner, until each Limited Partner has been allocated Profits equal to the
excess, if any, of (1) such Limited Partner's Unpaid Target Distribution (i.e.
the sum of such Limited Partner's (a) Adjusted Capital Contribution plus (b)
Unpaid Cumulative Return thereon) over (2) such Limited Partner's Capital
Account balance; next, in a manner which 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
thereafter, 90% to the Limited Partners in proportion to their respective
numbers of Units and 10% to the General Partner. During the Disposition Period,
a Partnership's Profits first will be allocated to all Partners in the amount
necessary to eliminate any deficits in their capital accounts, and, thereafter,
will be allocated as described above.
As a general rule, 99% of a Partnership's Losses (including, inter alia, tax
losses and deductions and items thereof, and items of expense that are not
deductible for federal income tax purposes) will be allocated among the Limited
Partners in proportion to their respective numbers of Units and 1% will be
allocated to the General Partner throughout the term of such Partnership.
In addition to the general provisions regarding allocations of Profits and
Losses, the Partnership Agreement contains a number of special allocations that
are intended to meet certain "safe harbor" provisions contained in the Treasury
Regulations relating to partnership allocations (for example, a "qualified
income offset" provision requires that Profits be allocated to any Limited
Partners developing deficits in their Capital Account in an amount necessary to
eliminate such deficits; and "minimum gain chargeback" provisions require that
depreciation recapture and other similar items of income be allocated back to
the Partners who were initially allocated the depreciation deductions or other
related items of deduction); and certain other special allocations that are
designed to reflect the business deal among the Partners (for example, the Sales
Commissions with respect to any Unit are allocated to the owner of that Unit) or
to protect the Limited Partners in the event a Partnership is subjected to an
unexpected tax liability because of a particular Partner (for example, local
taxes that are imposed on the Partnership because of a Partner's residence in
that locality will be charged to that Partner).
The Partnership Agreement provides that Limited Partners who own Units for
less than an entire fiscal year will be allocated Profits or Losses (which will
be treated as if they occurred ratably over the fiscal year) based on the
proportionate part of the fiscal year that they owned their Units.
Withdrawal of the General Partner
Voluntary Withdrawal The General Partner may not voluntarily withdraw as a
General Partner from a Partnership without 60 days' advance written notice to
the Limited Partners, (b) an opinion of Tax Counsel that such withdrawal will
not cause the termination of such Partnership or materially adversely affect the
federal tax status of that the Partnership and (c) a selection of, and
acceptance of its appointment as such by, a Substitute General Partner
acceptable to a Majority Interest of the Limited Partners with an adequate net
worth in the opinion of Tax Counsel.
Involuntary Withdrawal The General Partner may be removed by 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.
Neither the General Partner nor any of its Affiliates may participate in any
vote by the Limited Partners to (i) involuntarily remove the General Partner or
(ii) cancel any management or service contract with the General Partner or any
such Affiliate.
Management Fees payable with respect to Investments acquired by the
Partnership prior to the effective date of the withdrawal of the General Partner
shall remain payable to the General Partner notwithstanding any such withdrawal
as and when the Partnership receives the gross rental from such Investments
creating the obligation to pay such Management Fees. In the event that the
General Partner pledges the Management Fees receivable to a Lender, the
assignment to the Lender shall be binding in the event of the voluntary or
involuntary withdrawal of the General Partner.
Liability of Withdrawn General Partner Generally speaking, the General
Partner shall remain liable for all obligations and liabilities incurred by it
or by a 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 a
Partnership from and after the time such withdrawal shall have become effective.
Transfer of Units
Withdrawal of a Limited Partner A Limited Partner may withdraw from a
Partnership only by Assigning or having all Units owned by such Limited Partner
redeemed in accordance with the Partnership Agreement. A Limited Partner may
generally assign all of his Units and may assign a portion of his or her Units
except certain impermissible types of assignees or assignments which would
adversely effect a Partnership (See Exhibit A--Section 10.2).
Limited Right of Presentment for Redemption of Units Described herein are
the provisions by which the General Partner is enabled to effect the redemption
of Units as set forth in Section 10.5 of the Partnership Agreement. 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 all or any portion of his or her Units. Subject to the
availability of funds and the other provisions of Section 10 of the Partnership
Agreement (see "TRANSFER OF UNITS"--"Limited Right of Presentment for Redemption
of Units").
Dissolution and Winding-up
Events Causing Dissolution A Partnership shall be dissolved upon the
happening of any of the following events (each a "Dissolution Event") (i) the
withdrawal of the General Partner (unless a Substitute General Partner has been
duly admitted to a Partnership); (ii) the voluntary dissolution of a Partnership
(A) by the General Partner with the Consent of the Majority Interest or (B)
subject to Section 13 of the Partnership Agreement, by the Consent of the
Majority Interest without action by the General Partner; (iii) the sale of all
or substantially all of the assets of a Partnership; (iv) expiration of a
Partnership term specified in the Partnership Agreement; (v) the Operations of a
Partnership shall cease to constitute legal activities under the Delaware Act or
any other applicable law; or (vi) any other event which causes the dissolution
or winding-up of a Partnership under the Delaware Act.
Liquidation of a Partnership Upon the occurrence of a Dissolution Event, the
Investments and other assets of a Partnership will be liquidated and the
proceeds thereof will be distributed to the Partners after payment of
liquidation expenses and the debts of a Partnership and otherwise in the order
of priority set forth in the Partnership Agreement and the existence of a
Partnership will be terminated. No Limited Partner is guaranteed the return of,
or a return on, such Limited Partner's Capital Contribution.
Access to Books and Records
The General Partner will maintain the books and records of each Partnership
at the Partnerships' principal office. Investor suitability records will be
maintained by the General Partner for a period of six years. Each Limited
Partner will have the right to have a copy of the Participant List (including,
among other things, the names and addresses of, and number of Units held by,
each Limited Partner) mailed to it for a nominal fee; provided such Limited
Partner will certify that such Participant List will not be sold or otherwise
provided to another party or used for commercial purpose other than in the
interest of the requesting party relative to his or its interest in such
Partnership matters. In addition, each Limited Partner or his representative
will have the right, upon written request, subject to reasonable Notice and at
such Limited Partner's expense, to inspect and copy such other books and records
of a Partnership as will be maintained by the General Partner.
Meetings and Voting Rights of Limited Partners
Meetings A meeting of the Limited Partners to act upon any matter on which
the Limited Partners may vote may be called by the General Partner at any time
on its own initiative and will 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. In addition, in lieu of a meeting, any such
matter may be submitted for action by Consent of the Limited Partners.
Voting Rights of Limited Partners The Limited Partners, acting by the
Consent of the Majority Interest constituting a numerical majority (i.e., more
than 50%) of Units, may take action on the following matters without the
concurrence of the General Partner:
(i) amendment of the Agreement; provided that such amendment (A) may not in
any manner allow the Limited Partners to take part in the control or
management of a Partnership's business, and (B) may not, without the
specific Consent of the General Partner, alter the rights, powers and duties
of the General Partner as set forth in the Partnership Agreement;
(ii) dissolution of a Partnership;
(iii) Sale or series of Sales of all or substantially all of the assets of a
Partnership (except any such Sale or series of Sales in the ordinary course
of liquidating a Partnership's Investments during the Disposition Period
(see "--Dissolution and Winding-up--Liquidation of a Partnership"); and
(iv) removal of the General Partner and election of one or more Substitute
General Partners.
Limited Partners who dissent from any vote approved by the Majority Interest are
bound by such vote and do not have a right to appraisal of, or automatic
repurchase of, their Units as a result thereof.
Amendments
Amendment by Limited Partners without Concurrence of the General Partner.
The Limited Partners, acting by the Consent of the Majority Interest without the
concurrence of the General Partner, may amend the Partnership Agreement to
effect any change therein, except (i) in any manner to allow the Limited
Partners to take part in the control or management of a Partnership's business,
and (ii) without the specific Consent of the General Partner, to alter the
rights, powers and duties of the General Partner as set forth in the Partnership
Agreement. Notwithstanding the foregoing, (x) any amendment of the provisions of
the Partnership Agreement relating to amendments of the Partnership Agreement
will require the Consent of each Limited Partner and (y) any amendment that will
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 a Partnership will require the Consent of
each Partner affected thereby.
Amendment by General Partner without the Consent of the Limited Partners.
The General Partner may, without the Consent of the Majority Interest, amend the
Partnership Agreement to effect any change therein for the benefit or protection
of the Limited Partners, including, without limitation:
(i) to add to the representations, duties or obligations of the General
Partner or to surrender any right or power granted to the General Partner;
(ii) to cure any ambiguity in, or to correct or supplement, any provision
thereof;
(iii) to preserve the status of a Partnership as a "limited partnership" for
federal income tax purposes (or under the Delaware Act or any other
applicable law);
(iv) to delete or add any provision thereof or thereto required to be so
deleted or added by 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 official;
(v) 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;
(vi) under certain circumstances, to amend the allocation provisions
thereof, in accordance with the advice of Tax Counsel, the Accountants or
the IRS, to the minimum extent necessary; and
(vii) to change the name of a Partnership or the location of its principal
office.
TRANSFER OF UNITS
Withdrawal
A Limited Partner may withdraw from a Partnership only by Assigning or
having redeemed all Units owned by such Limited Partner in accordance with the
terms of the Partnership Agreement.
Restrictions on the Transfer of Units
There is no public or secondary market for the Units and none is expected to
develop. Moreover, a Limited Partner may Assign Units owned by such Limited
Partner to an Assignee only upon the satisfaction of certain conditions and
subject to certain restrictions. Finally, an Assignee of any Partnership
Interest will become a Substitute Limited Partner only if the General Partner
has reasonably determined that all conditions to an Assignment have been
satisfied and that no adverse effect to a Partnership does or may result from
the admission of such Substitute Limited Partner to a Partnership and such
Assignee will have executed a transfer agreement and such other forms, including
executing a power of attorney to the effect set forth in the Partnership
Agreement, as the General Partner reasonably may require. Consequently, holders
of Units may not be able to liquidate their investments in the event of
emergencies or for any other reasons or to obtain financing from lenders who
will readily accept Units as collateral.
A Limited Partner may Assign Units held by it to any Person (an "Assignee")
only upon the satisfaction of certain conditions, including, but not limited to
the following:
(i) such Limited Partner and such Assignee will each execute a written
Assignment instrument, in form and substance satisfactory to the General
Partner, which will, among other things, state the intention of such Limited
Partner that such Assignee will become a Substitute Limited Partner,
evidence the acceptance by the Assignee of all of the terms and provisions
of the Partnership Agreement and 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
(ii) such Assignee will pay to a Partnership a fee not exceeding $150.00 to
the Partnership for costs and expenses reasonably incurred in connection
with such Assignment.
Furthermore, unless the General Partner will 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 a Partnership's taxable year or its status as a
partnership for federal income tax purposes, provided that a 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 a
Partnership's taxable year or its status as a partnership for federal income
tax purposes;
(iii) to any Person if such Assignment would affect a Partnership's
existence or qualification as a limited partnership under the Delaware Act
or the applicable laws of any other jurisdiction in which a 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) Units, or ten (10) Units in
the case of an IRA or 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 an
IRA or 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 a Partnership by "benefit plan investors" (both within the
meaning of DOL Reg. ss. 2510.3-101(f)) to equal or exceed 25%; or
(ix) if such Assignment 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 the provisions of
the Partnership Agreement or applicable law will be null and void ab initio and
will not bind the Partnership.
The Partnership Agreement provides further that 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 will not
permit any interest in a Unit to be Assigned on a Secondary Market and, if the
General Partner determines in its sole discretion, that a proposed assignment
was effected on a Secondary Market, a 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.
Any Assignment which results in a failure to meet the "safe harbor"
provisions of Treasury Regulations ss.1.7704-1, or any substitute safe-harbor
provisions subsequently established by Treasury Regulations or published
notices, will be treated as causing the Units to be publicly traded. Pursuant to
the Partnership Agreement, the Limited Partners will agree to provide all
information respecting Assignments, which the General Partner deems necessary in
order to determine whether a proposed transfer occurred on a Secondary Market.
Assignments of Units will be recognized by a Partnership as of the first day
of the Segment following the date upon which all conditions to such Assignment
will have been satisfied.
Limited Right of Presentment for Redemption of Units
A Partnership will at no time be under any obligation to redeem Units of a
Limited Partner and will do so only in the sole and absolute discretion of the
General Partner. 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 a Partnership, any Limited Partner may request that a Partnership
redeem, and, subject to the availability of funds and provided that a
Partnership will 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 calendar year, with the prior Consent of the General
Partner, a Partnership will redeem, for cash, up to 100% of the Partnership
Interest of such Limited Partner, at the Applicable Redemption Price. The
Applicable Redemption Price, with respect to any Unit, will be an amount
(determined as of the date of redemption of such Unit), as follows:
(a) during the second year of the Reinvestment Period, each Limited Partner
shall receive equal to 90% of the original Capital Contribution of such
Limited Partner;
(b) during the third year, each Limited Partner shall receive equal to 92% of
the original Capital Contribution of such Limited Partner;
(c) during the fourth year, each Limited Partner shall receive equal to 94% of
the original Capital Contribution of such Limited Partner;
(d) during the fifth year, each Limited Partner shall receive equal to 96% of
the original Capital Contribution of such Limited Partner;
(e) during the first year of the Liquidation Period, each Limited Partner
shall receive equal to 98% of the original Capital Contribution of such
Limited Partner;
(f) during the second year of the Liquidation Period, each Limited Partner
shall receive equal to 100% 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, (ii) 100% of previous distributions of
Distributable Cash, (iii) 100% of any previous allocations to such Limited
Partner of investment tax credit amounts and (iv) the aggregate amount, not
exceeding $150.00, of expenses reasonably incurred by a Partnership in
connection with the redemption such Unit;
provided, however, that in no event will the applicable redemption price
computed under clauses (a) through (f) 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).
There can be no assurance that the Applicable Redemption Price will in any
way reflect the fair market value of the Units at the time of redemption.
The availability of funds for the redemption of any Unit will be subject to
the availability of sufficient Distributable Cash. In this connection, it should
be noted that the General Partner intends to reinvest a substantial portion of a
Partnership's Cash From Operations and substantially all Cash From Sales during
the Reinvestment Period. 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 a Partnership's taxable
year or of its federal income tax status as a partnership. Any amounts used to
redeem Units will reduce a Partnership's funds available to make Investments and
distributions to the remaining Partners. In the event that a Partnership
receives requests to redeem more Units than there are funds sufficient to
redeem, the General Partner will honor redemption requests in the order in which
duly executed and supported redemption requests are received. The General
Partner will 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. A Limited Partner desiring to
have a portion or all or his Units redeemed will 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 a Partnership. Redemption requests
hereunder will 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 Partners 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") will be treated as having been received at
12:01 A.M. EST and all other requests will be deemed received with the start of
the business day during which received. Within the times specified above, the
General Partner will accept or deny each redemption request. The General Partner
will, in its sole discretion, decide whether a redemption is in the best
interest of a Partnership.
Certain Consequences of Transfer
Any Units tendered to, and accepted by, a Partnership for redemption will be
canceled when redeemed and, as of the date of such redemption, will no longer
represent a Partnership Interest. In the event that any Limited Partner will
Assign all Units owned by such Limited Partner, or have all such Units accepted
for redemption by a Partnership, such Limited Partner will thereupon cease to be
a Limited Partner and will no longer have any of the rights or privileges of a
Limited Partner in a Partnership. Whether or not any Assignee becomes a
Substitute Limited Partner, however, the Assignment by a Limited Partner of such
Limited Partner's entire Partnership Interest will not release such Limited
Partner from liability to a Partnership to the extent of any portion of such
Limited Partner's Capital Contribution not yet paid and of any distributions
(including any return of or on such Limited Partner's Capital Contribution) made
to such Limited Partner in violation of the Delaware Act or other applicable
law.
The sale of Units by a Limited Partner may result in the recapture of all of
the depreciation deductions previously allocated to such Limited Partner. See
the "FEDERAL INCOME TAX CONSEQUENCES--Sale or Other Disposition of Partnership
Interest."
Neither the General Partner nor any of its Affiliates (i.e., no Affiliate
Limited Partner) may redeem their Partnership Units, if any.
Gain or loss realized on the redemption of a Unit by a Limited Partner who
holds his Units as a capital asset and who has held such Unit for more than one
year, will be capital gain or loss, as the case may be, except that any gain
realized will be treated as ordinary income to the extent attributable to the
Limited Partner's share of potential depreciation recapture on a Partnership's
Equipment, substantially appreciated inventory items and unrealized receivables.
See "FEDERAL INCOME TAX CONSEQUENCES--Treatment of Cash Distributions Upon
Redemption."
REPORTS TO LIMITED PARTNERS
Annual Reports
By March 15 of each Fiscal Year, the General Partner will deliver to each
Limited Partner a statement of such Partner's share of a Partnership's income,
gains, losses, deductions, and items thereof, and credits, if any, for the
Fiscal Year most recently completed to enable such Limited Partner to prepare
his federal income tax return.
Within 120 days after the end of a Partnership's fiscal year, the General
Partner will send to each Person who was a Limited Partner at any time during
such Fiscal Year an annual report including, among other things:
(i) financial statements for a 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 will be
prepared as required by the Partnership Agreement and accompanied by an
auditor's report containing an opinion of the Accountants;
(ii) a breakdown (by source) of distributions made during such Fiscal Year
to the General Partner and the Limited Partners;
(iii) a status report with respect to each item of Equipment and each
Financing Transaction which individually represents at least 10% of the
aggregate Purchase Price of a Partnership's Investments at the end of such
Fiscal Year, including (among other things) information relevant to the
condition and utilization of such Equipment or the collateral securing such
Financing Transaction;
(iv) a breakdown of the compensation paid to, and any amounts reimbursed to,
the Sponsor and a summary of the terms and conditions of any contract with
the Sponsor which was not filed as an exhibit to the Registration Statement
of which this Prospectus forms a part any other Programs of the Sponsor
demonstrating the allocation thereof between a Partnership and such other
Programs;
(v) until all Capital Contributions have been invested or committed to
investment in Investments and Reserves, used to pay permitted Front-End Fees
or returned to the Limited Partners in accordance with the Partnership
Agreement, certain information regarding Investments made by a Partnership
during such Fiscal Year.
Quarterly Reports
Within 75 days after the end of each of the first three Fiscal Quarters in
any Fiscal Year, the General Partner will send, to each Person who was a Limited
Partner at any time during such Fiscal Quarter, an interim report for such
Fiscal Quarter including, among other things:
(i) unaudited financial statements for a Partnership at and for such Fiscal
Quarter, including a balance sheet and related statements of operations,
cash flows and changes in Partners' equity;
(ii) a tabular summary of the compensation paid to, and any amounts
reimbursed to, the Sponsor, including (among other things) a statement of
the services performed or expenses incurred in consideration therefor and a
summary of the terms and conditions of any contract with the Sponsor which
was not filed as an exhibit to the Registration Statement of which this
Prospectus forms a part; and
(iii) until all Capital Contributions have been invested or committed to
investment in Investments and Reserves, used to pay permitted Front-End Fees
or returned to the Limited Partners in accordance with a Partnership
Agreement, certain information regarding Investments made by a Partnership
during such Fiscal Quarter.
PLAN OF DISTRIBUTION
Subject to the conditions set forth in this Prospectus and in accordance
with the terms and conditions of the Partnership Agreement, pursuant to the
Dealer-Manager Agreement between a Partnership and the Dealer-Manager, a
Partnership will offer through the Dealer-Manager, on a best efforts basis, a
Maximum Offering of 750,000 Units per Partnership, all of which are priced at
$100 per Unit (except for certain Units which may be purchased by Affiliated
Limited Partners for the Net Unit Price of $92.00 per Unit). The minimum
subscription is 25 Units (10 Units for IRAs and Qualified Plans, including Keogh
plans except in certain states as set forth in the "INVESTOR SUITABILITY AND
MINIMUM INVESTMENT REQUIREMENTS; SUBSCRIPTION PROCEDURES" Section). See
"INVESTOR SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS; SUBSCRIPTION
PROCEDURES--How to subscribe".
The Offering Period for ICON Eight B will begin following the Closing of
ICON Eight A. The Offering is expected to terminate not later than September 30,
1999 for ICON Eight A and September 30, 2000 for ICON Eight B, provided that in
no event will the Offering Period for any Partnership continue for longer than
twenty four months. The General Partner has a reasonable period of time
(generally not in excess of 5 business days) to conclude a Partnership's closing
after the termination of such Partnership's Offering. The sale of Units in 1999
in various states may require extensions of the Offering permits by their state
securities commissions, which extensions may not be granted. Each Offering
Period may be terminated at the option of the General Partner at any time during
the Offering Period.
Only one Partnership will accept subscriptions at a time. An individual
subscription may not specify in which of the Partnerships a subscriber wishes to
invest. Subscription payments not applied to the purchase of Units in ICON Eight
A will be retained in escrow, carried over and automatically deemed a
subscription for Units in ICON Eight B. Accordingly, subscribers will generally
not have the right to withdraw or receive their funds from the Escrow Account
unless and until the Offering of ICON Eight B is terminated, which may be as
late forty eight (48) months after the effective date of this Prospectus.
Units will be sold primarily through the Selling Dealers and to a limited
extent by the Dealer-Manager. Each Partnership will pay to the Selling Dealer or
the Dealer-Manager, as the case may be, a Sales Commission equal to 8.0% of the
Gross Offering Proceeds from the sale of such Units (except for Units sold to
Affiliated Limited Partners, as to which no Sales Commission is payable) from
Gross Offering Proceeds of such sales.
Generally, Units are purchased by all subscribers at a price of $100.00 per
Units except for:
(a) officers, employees and securities representatives of the General
Partner, its Affiliates and Selling Dealers ("Affiliated Limited Partners")
who may purchase Units for investment purposes only for the Net Unit Price
of $92.00 per Unit. A Partnership will incur no obligation to pay any Sales
Commissions with respect to such purchases. The General Partner's and its
Affiliates' purchases of Units are limited to a maximum of 10% of the total
Units purchased.
The total marketing compensation to be paid to the Dealer-Manager and all
participating Selling Dealers in connection with the Offering of Units in the
Partnerships, including Sales Commissions and Underwriting Fees, will not exceed
a maximum of 10.0% of the Gross Offering Proceeds (except that the General
Partner may pay bona fide due diligence fees and expenses incurred by the
Dealer-Manager and prospective Selling Dealers from its O & O Expense Allowance
up to the lesser of (i) an additional 1/2 of 1% of such Gross Offering Proceeds
or (ii) the maximum amount allowable under the NASD Conduct Rules). Any payments
made in connection with due diligence activities will only be paid on a fully
accountable basis and only for bona fide due diligence activities. Amounts paid
or advanced for Sales Commissions and due diligence fees and expenses will be
made only for bona fide sales or due diligence activities as evidenced by
receipt of duly executed subscription documents (in the case of sales) and an
invoice and other evidence satisfactory to the General Partner confirming the
nature and cost of due diligence activity performed (in the case of due
diligence activities). The sums which may be expended in connection with due
diligence activities are included in the O & O Expense Allowance paid by each
Partnership to the General Partner. See "COMPENSATION TO THE GENERAL PARTNER AND
AFFILIATES."
The Dealer-Manager Agreement and the Selling Dealer Agreements contain
provisions for the indemnification of the Dealer-Manager and participating
Selling Dealers by a Partnership with respect to certain liabilities, including
liabilities arising under the Securities Act. The Dealer-Manager may be deemed
to be an "underwriter" for purposes of the Securities Act in connection with
this Offering.
Segregation of Subscription Payments
Commencing on the effective date of this Prospectus and until subscriptions
for 12,000 Units (or 37,500 Units per Partnership in the case of residents of
Pennsylvania) have been accepted by the General Partner and such subscribers
have been admitted as Limited Partners on the Initial Closing Date (or a
subsequent Closing Date in the case of Pennsylvania residents), all funds
received by the Dealer-Manager from subscriptions for Units will be placed in an
escrow account, at a Partnership's expense, The Chase Manhattan Bank N.A. by the
General Partner, as escrow agent. Thereafter, funds received through the
Termination Date will be deposited in the Qualified Subscription Account
maintained by a Partnership.
The General Partner will promptly accept or reject subscriptions for Units
after its receipt of a prospective investor's Subscription Documents and
subscription funds. Brokers have agreed to provide each investor with final
prospectuses prior to execution of a subscription agreement. Each subscriber has
the right to cancel his or her subscription during a period of five business
days after the date of receipt of a final prospectus. The Initial Closing Date
will be as soon as practicable after the receipt and acceptance by a Partnership
of subscriptions for 12,000 Units (excluding for such purpose subscriptions from
residents of Pennsylvania). Subsequent to the Initial Closing Date, it is
anticipated that daily Closings will be held (provided the number of Units
subscribed for is sufficient to justify the burden and expense of a Closing).
Once subscriptions for a total of 37,500 Units per Partnership (including
subscriptions from residents of Pennsylvania), all subscription payments then
remaining in escrow would be released from escrow and the escrow agreement would
be terminated. Thereafter subscription payments would continue to be deposited
with The Chase Manhattan Bank N.A. in a special, segregated, subscription
account of a Partnership which will be maintained during the Offering Period for
the receipt and investment of subscription payments. At each Closing, a
Partnership will admit as Limited Partners, effective as of the next day, all
subscribers whose subscriptions have been received and accepted by a Partnership
and who are then eligible to be admitted to a Partnership (e.g., Pennsylvania
subscribers are not eligible to be admitted to the Partnership prior to sale of
37,500 Units per Partnership) for the funds representing such subscriptions will
be released from the escrow account or from a Partnership's segregated
subscription account (as the case may be) to a Partnership.
Interest earned, if any, on subscription funds of subscribers who are
accepted and admitted to a Partnership will be remitted to the subscribers by
the Escrow Agent or the General Partner as soon as practicable after their
admission. If 12,000 Units have not been subscribed for on or before the
anniversary of the date on the cover of this Prospectus (which is dated as of
the Effective Date) (or, in the case of each subscriber from Pennsylvania, if
37,500 Units per Partnership have not be sold within 120 days of the Escrow
Agent's receipt of such subscription, and such subscriber has been offered and
has elected to rescind his or her subscription), then a Partnership will direct
the Escrow Agent to release the applicable subscription payments from escrow and
return them promptly to the related subscribers, together with all interest
earned thereon, in which case such Partnership will be terminated. The procedure
described in the preceding sentence will be applied to return subscription
payments (if any) which are held in the Escrow Account for twelve months from
the date of this Prospectus. In addition, any Net Proceeds from the sale of
Units in a Partnership which have not been invested or committed for investment
within two years after the Effective Date (except for Reserve and necessary
operating capital) will be returned, without interest, to the Limited Partners
in proportion to their respective Capital Contributions. Any such returned
proceeds will include, in addition, a return of the proportionate share of the O
& O Expense Allowance, Underwriting Fees and any Sales Commissions paid to the
General Partner or any of its Affiliates.
INVESTOR SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS;
SUBSCRIPTION PROCEDURES
General Suitability Considerations
Among the reasons for establishing investor suitability standards and
minimum dollar amounts of investment is that there is no public market for the
Units, which are not freely transferable, and none is expected to develop.
Accordingly, only Persons able to make a long-term investment and who have
adequate financial means and no need for liquidity with regard to their
investment should purchase Units. Investors subscribing for Units should
carefully consider the risk factors and other special considerations (including
the lack of a market for Units and the resulting long-term nature of an
investment in Units) described under "RISK FACTORS--Partnership Risks and
Investment Risks--Lack of a Secondary Market for Units; Restricted
Transferability", "TRANSFER OF UNITS--Restrictions on the Transfer of Units" and
"--Limited Right of Presentment". An investment in Units is not appropriate for
investors who must rely on cash distributions with respect to their Units as
their primary, or as an essential, source of income to meet their necessary
living expenses.
State Requirements Concerning Minimum Investment and Minimum Investor Net
Worth/Income
Minimum Investment. All Investors other than Qualified Plans and IRAs: The
minimum number of Units an investor may purchase is 25 Units (other than
residents of Nebraska, for whom the minimum investment is 50 Units).
Qualified Plans and IRAs: The minimum number of Units which a Qualified Plan
and an IRA may purchase is 10 Units.
Minimum Net Worth/Income. Except with respect to Qualified Plans and IRAs
and except for residents of states with higher suitability standards (as
described below), Units will be sold during the Offering only to an investor who
represents, in writing:
(i) that such investor has either (A) both a net worth of at least $30,000
in excess of Capital Contributions required to be made in respect of Units
subscribed for by such investor and an annual gross income of at least
$30,000, or (B) irrespective of annual gross income, a net worth of at least
$75,000 or that such investor is purchasing in a fiduciary capacity for a
Person who meets either such condition, or
(ii) that such investor satisfies the suitability standards applicable in
such investor's state of residence or domicile, if such standards are more
stringent (as listed in "--Certain State Requirements" paragraph below or in
the current Supplement to this Prospectus).
Certain State Requirements. Suitability. The following States have
established more stringent investor suitability standards than those established
by the Partnership: Alabama, Arizona, Arkansas, California, Indiana, Iowa,
Kansas, Massachusetts, Minnesota, Nebraska, New Hampshire, New Mexico, North
Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Dakota, Texas, Vermont and
Washington. Units will only be sold to residents of such jurisdictions who meet
such more stringent standards. Any proposed transferee of a Unit who is a
resident of such States must also meet such suitability standards.
Instead of the foregoing standards, to be admitted to the Partnership as a
Limited Partner a subscriber (or fiduciary acting on his, her or its behalf) who
is a resident Alabama, Arizona, Arkansas, California, Indiana, Iowa, Kansas,
Minnesota, Nebraska, New Hampshire, New Mexico, North Dakota, Ohio, Oklahoma,
Oregon, Pennsylvania, South Dakota, Texas, Vermont and Washington must (1)
either (a) a net worth of not less than $45,000 (determined exclusive of the net
fair market value of (i) his or her home, (ii) home furnishings and (iii)
personal automobiles) plus (b) $45,000 of annual gross income or (2) a net worth
of at least $150,000 (determined as above) and a subscriber (or fiduciary acting
on his, her or its behalf).
Subscribers who are residents of Massachusetts and North Carolina must (1)
have either (a) a net worth of not less than $60,000 (determined exclusive of
the net fair market value of (i) his or her home, (ii) home furnishings and
(iii) personal automobiles) plus (b) $60,000 of annual gross income or (2) a net
worth of at least $225,000 (determined as above) and a subscriber (or fiduciary
acting on his, her or its behalf). (See "INVESTOR SUITABILITY AND MINIMUM
INVESTMENT REQUIREMENTS; SUBSCRIPTION PROCEDURES" and the Subscription Agreement
for a more detailed explanation of any specific state suitability requirements).
An investment by each subscriber residing in Pennsylvania may not exceed 10%
of his or her net worth (exclusive of home, home furnishings and automobiles).
An investment by each subscriber residing in Ohio may not exceed 10% of his or
her liquid net worth.
All computations of net worth for purposes of all suitability standards
(whether described above or below) exclude the value of such investor's home,
home furnishings and personal automobiles and, in connection therewith, all of
such investor's assets must be valued at their fair market value.
If an investor is a Qualified Plan or an IRA, such investor must represent
(i) that the IRA owner or the participant in the self-directed Qualified Plan
satisfies the foregoing standards, or (ii) if other than a self-directed
Qualified Plan, that the Qualified Plan satisfies the foregoing suitability
standards.
Each investor must execute a copy of the Subscription Agreement, the form of
which is included as an exhibit to the Registration Statement of which this
Prospectus forms a part, or an Assignment instrument or other writing, to
evidence such investor's compliance with such standards and the requirements of
applicable laws.
Legending of Unit certificates issued to residents of California. The
California Corporations Commissioner requires that certificates evidencing
ownership of Units for all Units issued, or subsequently transferred, to Persons
who are residents of, or who are either domiciled or actually present in, the
State of California, must bear the following legend restricting transfer:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF A LIMITED PARTNERSHIP
INTEREST, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
Fiduciary and Qualified Plan Subscriptions. When Units are purchased for
fiduciary accounts, such as trusts and retirement plans, the foregoing
conditions must be met either by the fiduciary account or by the Person who
directly or indirectly supplies the funds for the purchase of Units. In the case
of gifts to minors by a donor, the foregoing conditions must be met by the donor
who directly or indirectly supplies the funds for such purchase. A transferee
will be required to comply with all of the foregoing requirements as a condition
to admission as a Substitute Limited Partner.
In addition, it should be noted that an investment in a Partnership will
not, in and of itself, create an IRA or Qualified Plan and that, in order to
create an IRA or Qualified Plan, an investor must itself comply with all
applicable provisions of the Code and ERISA. IRAs or Qualified Plans, and other
tax-exempt organizations, when making a decision concerning an investment in a
Partnership, should consider the following:
(i) any income or gain realized by such entity will be "unrelated business
taxable income" and subject to the unrelated business tax;
(ii) investments in a Partnership made by Qualified Plans and IRAs may cause
a pro rata portion of such Partnership's assets to be considered to be "plan
assets" with respect to such entities for purposes of ERISA and the excise
taxes imposed by Section 4975 of the Code; and
(iii) such entities, since they are exempt from federal income taxation,
will be unable to take full advantage of the tax benefits, if any, generated
by a Partnership.
See "RISK FACTORS--Federal Income Tax Risks and ERISA Risks--Risk of
Unrelated Business Taxable Income," "FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Employee Benefit Plans and Other Tax-Exempt
Organizations" and "INVESTMENT BY QUALIFIED PLANS."
A Fiduciary or Investment Manager (as such terms are defined in Sections
3(21) and 3(38) of ERISA, respectively) of a Qualified Plan or IRA or a
fiduciary of another tax-exempt organization should consider all risks and
investment concerns, including those unrelated to tax considerations, in
deciding whether an investment in a Partnership is appropriate and economically
advantageous for a Qualified Plan or other tax-exempt organization. See "RISK
FACTORS", "INVESTMENT OBJECTIVES AND POLICIES", "FEDERAL INCOME TAX
CONSEQUENCES" and "INVESTMENT BY QUALIFIED PLANS."
Although the General Partner believes that Units may represent suitable
investments for individuals, Qualified Plans, IRAs and many different types of
entities, Units may not be suitable investments for such entities due to tax
rules of particular application to certain types of entities. (For example, the
General Partner believes that Units will generally not be a suitable investment
for charitable remainder trusts.) Furthermore, the foregoing standards represent
minimum requirements, and a Person's satisfaction of such standards alone does
not mean that an investment in a Partnership would be suitable for such Person.
A prospective investor should consult his personal tax and financial advisors to
determine whether an investment in a Partnership would be advantageous in light
of his particular situation.
Transfer. Units are subject to substantial transfer restrictions and may be
transferred only under certain circumstances and subject to certain conditions
(see "TRANSFER OF UNITS--Restrictions on the Transfer of Units"), including,
among others, that Units may be sold only to an Assignee who meets all
applicable suitability standards and any Limited Partner making an Assignment of
Units may also become subject to the securities laws of the state or other
jurisdiction in which the transfers are deemed to take place. Furthermore,
following a transfer of less than all of the Units owned by any Limited Partner,
each Limited Partner must generally retain a sufficient number of Units to
satisfy the minimum investment standards applicable to such Limited Partner's
initial purchase of Units. In the case of a transfer in which a member firm of
the National Association of Securities Dealers, Inc. ("NASD") is involved, such
firm must be satisfied that a proposed Assignee of Units satisfies the
suitability requirements as to financial position and net worth specified in
Section (b)2(B)(i) of Rule 2810 of the NASD's Conduct Rules and must inform the
proposed Assignee of all pertinent facts relating to the liquidity and
marketability of the Units during the term of any investment therein.
Subscriber Representations
By signing and initialing the block provided in Section 5 of the
Subscription Agreement and paying for Units, each investor makes the
representations contained in such Section 5 (except as provided to the contrary
therein) and will be bound by all the terms thereof. In addition, each investor
acknowledges in his Subscription Agreement that his subscription is subject to
acceptance by the General Partner, in its sole discretion, and may be rejected
in whole or in part for any reason.
The representations made by each subscriber (except for certain of the
representations which may not be made by the residents of certain states as
noted on such Page C-4) are set forth on page C-4 of Exhibit C to this
Prospectus and confirm that each subscriber signing the Subscription Agreement:
(i) has received a copy of the Prospectus; (ii) has read the "General
Instructions" (on Page C-2) of the Subscription Agreement; (iii) that an
investment in Units is not liquid; and (iv) that the General Partner may rely
upon the accuracy of the factual data concerning such subscriber which is
contained in the Subscription Agreement (including, without limitation, that (A)
if such investor is an IRA, Qualified Plan or other Benefit Plan, has accurately
identified itself as such; (B) has accurately identified himself as either a
U.S. Citizen or non-U.S. Citizen (i.e., as determined in the manner described
under "Citizenship" below) and (C) has accurately reported his federal taxpayer
identification number and is not subject to backup withholding of federal income
taxes). Specifically, by representing whether he is a United States Citizen,
Resident Alien or resident of another country, each subscriber will be deemed to
have made a representation as to whether he is or is not a "United States
Person" as defined in Section 7710(a)(30) of the Code. In addition, each
subscriber appoints the General Partner as his true and lawful attorney-in-fact
to execute such documents (including the Partnership Agreement) as may be
required for the such subscriber's admission as a Limited Partner.
Each Partnership will require such representations to be made by each
subscriber in order to assist NASD-registered securities sales representatives,
Selling Dealers and the Dealer-Manager to determine whether an investment in
Units is suitable for such subscriber. The General Partner will rely upon the
accuracy and completeness of the subscriber's representations in complying with
its obligations under applicable state and federal securities laws and may
assert such representations as a defense against the subscribers or securities
regulatory agencies. Units shall not be purchased for a discretionary account
without obtaining the prior written approval of your customer and his or her
signature on a Subscription Agreement.
Each subscriber is also instructed on Page C-2 of the Subscription Agreement
that: (a) no offer to sell Units may be made except by means of the Prospectus
and, consequently, (b) SUBSCRIBERS SHOULD NOT RELY UPON ANY ORAL STATEMENTS BY
ANY PERSON, OR UPON ANY WRITTEN INFORMATION OTHER THAN AS SPECIFICALLY SET FORTH
IN THE PROSPECTUS AND SUPPLEMENTS THERETO OR IN PROMOTIONAL BROCHURES CLEARLY
MARKED AS BEING PREPARED AND AUTHORIZED BY THE GENERAL PARTNER, ICON CAPITAL
CORP., OR BY THE DEALER-MANAGER, ICON SECURITIES CORP., FOR USE IN CONNECTION
WITH OFFERING OF UNITS TO THE GENERAL PUBLIC BY MEANS OF THE PROSPECTUS. Each
subscriber is hereby further advised that an investment in Units of a
Partnership involves certain risks including, without limitation, the matters
set forth in this Prospectus under the captions "RISK FACTOR", "CONFLICTS ON
INTEREST", "MANAGEMENT" and "INCOME TAX CONSIDERATIONS" Each subscriber is
hereby advised that the representations set forth herein do not constitute a
waiver of any of such subscriber's rights under the Delaware Limited Partnership
Act and applicable federal and state securities laws. Each subscriber is hereby
instructed that: (a) the Units are subject to substantial restrictions on
transferability; (b) there will be no public market for the Units; and (c) it
may not be possible for subscriber to readily liquidate his investment in the
Partnership in question, if at all, even in the event of an emergency. Any
transfer of Units is subject to the General Partner's approval and must comply
with the terms of Section 10 of the Partnership Agreement. In particular, any
purchaser or transferee must satisfy the minimum investment and investor
suitability standards for his domiciliary state. See "INVESTOR SUITABILITY AND
MINIMUM INVESTMENT REQUIREMENTS; SUBSCRIPTION PROCEDURES". Various states may
also impose more stringent standards than the general requirements. See
"INVESTOR SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS; SUBSCRIPTION
PROCEDURES." In addition, the State of California has additional transfer
requirements as summarized in the following legend:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
Each subscriber's acknowledgment that he has received this Prospectus and the
instruction that he should rely on no information other than that contained in
this Prospectus, are required in order that the General Partner may make an
informed judgment as to whether it should accept such subscriber's offer to
subscribe for Units. The General Partner recognizes that in the sales process of
this Offering a potential subscriber will usually discuss a Partnership with his
registered representative. It is possible that a subscriber may misunderstand
what he is told or that someone might tell him something different from, or
contrary to, the information contained in this Prospectus. Additionally, a
subscriber might be relying on something he read or heard from sources for which
the neither the Dealer-Manager nor the General Partner is responsible, over
which they have no control and which contradicts the data and information
contained in this Prospectus. If a subscriber becomes a Limited Partner and
later makes claims against a Partnership, the Dealer Manager and/or the General
Partner alleging that he did not receive a Prospectus for this Offering or that
although he did receive a Prospectus, he relied upon information that is
contradictory to that disclosed in this Prospectus, then each Partnership, the
Dealer Manager and the General Partner anticipate that they will rely upon the
acknowledgment and receipt of this Prospectus and the instruction concerning
non-reliance on any Offering material other than this Prospectus as evidence
that such subscriber did, in fact, receive a Prospectus and that such subscriber
was properly notified that he should not rely upon any information other than
the information disclosed in this Prospectus.
The General Instructions on Page C-2 also ask a potential investor to review
the disclosure in this Prospectus concerning certain conflicts of interest faced
by a Partnership's management and certain risks involved in an investment in a
Partnership and that any federal income tax benefits which may be available as a
result of such purchase may be adversely affected as set forth in this
Prospectus under the captions "RISK FACTORS", "CONFLICTS OF INTEREST",
"MANAGEMENT" and "INCOME TAX CONSIDERATIONS". Such instruction has been included
because, since the investment involves inherent conflicts of interest and risks
as disclosed in this Prospectus, the General Partner does not intend to admit a
subscriber as a Limited Partner unless it has reason to believe that the
investor is aware of the risks involved with an investment in a Partnership. If
a subscriber becomes a Limited Partner and later makes claims against a
Partnership, the Dealer Manager and/or the General Partner to the effect that he
was not aware that an investment in a Partnership involved the inherent risks
described in this Prospectus, each Partnership, the Dealer Manager and the
General Partner anticipate that they will rely upon this instruction as evidence
that such subscriber had been aware of the degree of risks involved in an
investment in such Partnership for the reasons set forth in this Prospectus
under "RISK FACTORS."
Each Selling Dealer must countersign each Subscription Agreement for
subscribers solicited by such firm. By such signature, each Selling Dealer
selling Units to a subscriber certifies that it has obtained information from
the subscriber sufficient to enable it to determine that the subscriber has
satisfied the suitability standards named thereon. Since each Partnership, the
Dealer Manager and the General Partner will not have had the opportunity to
obtain such information directly from the subscriber, the General Partner will
rely on such representation so as to determine whether to admit a subscriber to
such Partnership as a Limited Partner. If a subscriber becomes a Limited Partner
and later makes claims against a Partnership, the Dealer Manager and/or the
General Partner alleging that the Units sold to him were not a suitable
investment for him because he did not meet the financial requirements contained
in the investor suitability standards, such Partnership, the Dealer Manager and
the General Partner anticipate that they will rely upon such representation as
evidence that such subscriber met such financial requirements.
The representation that a subscriber has agreed to all the terms and
conditions of the Partnership Agreement is necessary because the General Partner
and each Limited Partner are bound by all of the terms and conditions there of,
notwithstanding that the Limited Partners do not actually sign the Partnership
Agreement. Since the Partnership Agreement is not actually signed by each
subscriber but pursuant to powers of attorney granted in the Subscription
Agreement, the General Partner thereby obligates each subscriber to each of the
terms and conditions of the Partnership Agreement. If a subscriber becomes a
Limited Partner and later makes claims against a Partnership, the Dealer Manager
and/or the General Partner that he did not agree to be bound by all of the terms
of the Partnership Agreement and the Subscription Agreement, such Partnership,
the Dealer Manager and the General Partner anticipate that they will rely upon
such representation and the power of attorney as evidence of the subscriber's
agreement to be bound by all the terms of such agreement.
Citizenship
Federal law restricts the extent to which aircraft and marine vessels which
are to be registered in the United States may be owned or controlled by Persons
who are not United States Citizens. For these purposes, "United States Citizens"
is defined to include (i) individuals who are citizens of the United States or
one of its possessions, (ii) partnerships in which each partner is an individual
who is a citizen of the United States, in the case of aircraft, or in which at
least 75% of the equity in the partnership is held by citizen of the United
States, in the case of vessels, (iii) certain trusts, the trustees of which are
citizens of the United States (provided that, in the case of aircraft, persons
who are not citizens of the United States or resident aliens do not possess more
than 35% of the aggregate power to direct or remove the trustee, and in the case
of vessels, each of the beneficiaries of the trust is a citizen of the United
States), and (iv) domestic corporations of which the president (and the chairman
of the board of directors, in the case of vessels) and two-thirds or more of the
members of the board of directors and other managing officers are citizens of
the United States and in which at least 75% of the voting interest (or, in the
case of certain vessels, a majority voting interest) is owned or controlled by
Persons who are citizens of the United States.
As a consequence of those rules, a Partnership may cause title to certain
aircraft and vessels to be held by a trust of which a Partnership is the sole
beneficiary by a limited partnership beneficially owned by a Partnership or a
limited liability company of which the Partnership is a member. See "RISK
FACTORS--Business Risks--Risk of Loss of Equipment Registration." In addition,
each investor will be required to represent and warrant whether or not the
investor is a United States Citizen, and subscriptions will be accepted from
only a limited number of Persons who are not United States Citizens. See "PLAN
OF DISTRIBUTION-- Offering of Units." The General Partner will not admit a
non-United States Citizen as if such admission would result in the potential
invalidation of Equipment registration. See "RISK FACTORS--Partnership Risks and
Investment Risks--Lack of a Secondary Market for Units; Restricted
Transferability".
Special Limit on Ownership of Units by Benefit Plans
To avoid classification of a pro rata portion of a Partnership's underlying
assets as "plan assets" of investors which are benefit plan investors, each
Partnership intends to restrict the ownership of Units by benefit plan investors
to less than 25% of the total value of outstanding Units at all times. (See
"INVESTMENT BY QUALIFIED PLANS--Plan Assets.")
Minimum Investment and Suitability Standards
Each Selling Dealer Agreement and the Dealer-Manager Agreement each requires
that the broker-dealer selling Units in a Partnership make diligent inquiry, as
required by law, of each prospective investor to determine whether a purchase of
Units is suitable for such Person in light of his or her circumstances and, if
so and upon receipt of a subscription for Units, to promptly transmit to the
General Partner all Subscription Monies and duly executed Subscription
Agreements and related documents received by them.
To demonstrate that its registered representative has complied with Sections
(b)2(B)(i) and (b)3(D) of Rule 2810 of the NASD Conduct Rules in connection with
the Offering of Units to an investor, each Selling Dealer is required to
countersign each Subscription Agreement solicited by its registered
representative to confirm that such Selling Dealer had reasonable grounds to
believe (based on information requested from the investor concerning investment
objectives, other investments, financial situation and needs, as well as any
other information known to such registered representative) that (i) the proposed
investment in a Partnership is suitable for such investor, (ii) such Selling
Dealer or registered representative had delivered a copy of this Prospectus to
the investor at the time of or prior to solicitation of the subscription, (iii)
such Selling Dealer or registered representative has informed the investor of
the lack of liquidity and marketability of the investment and (4) such Selling
Dealer or registered representative has confirmed that the investor's signature
or the signature of the authorized Person appears on the subscribing document
where required.
How to Subscribe
An investor who meets the suitability standards set forth above may subscribe
to acquire Units. Subscribers must personally execute the Subscription Agreement
and deliver to a securities sales representative a check for all Subscription
Monies payable in connection with such subscription, made payable as provided in
the next paragraph, in order to subscribe for Units. In the case of IRA, SEP and
Keogh plan owners, both such owners and the plan fiduciary (if any) must sign
the Subscription Agreement. In the case of donor trusts or other trusts in which
the donor is the fiduciary, such donor must sign the subscription agreement. In
the case of other fiduciary accounts in which the donor neither exercises
control over, nor is a fiduciary, the plan fiduciary alone may sign the
Subscription Agreement.
Until subscriptions for 12,000 Units (or 37,500 Units per Partnership in the
case of residents of Pennsylvania) are received by the Partnership, checks for
the payment of Subscription Monies should be made payable to "--ICON Income Fund
Eight Escrow Account" for deposit into such Escrow Account. After the Initial
Closing Date, checks for the payment of Subscription Monies should be made
payable to "ICON Income Fund Eight Subscription Account" for deposit into a
Qualified Subscription Account.
The General Partner will promptly review, and accept or reject (in its sole
and absolute discretion), each subscription. Investors whose subscriptions are
accepted by the General Partner will receive prompt written confirmation of such
acceptance from the General Partner or its agents.
The General Partner and any Affiliate of the General Partner and the Selling
Dealers (and their respective officers and employees) will have the right, but
not the obligation, to subscribe for and purchase Units for their own account
for investment purposes, subject to the terms and conditions contained herein,
including purchases of Units on or before the Initial Closing Date, which will
count, to the extent of 600 Units, toward the achievement of the Minimum
Offering. All Units purchased by such parties will be purchased solely for
investment purposes and not with a present view towards resale or distribution.
The General Partner and its Affiliates (and their respective officers and
employees) may not purchase more than ten (10%) percent of all Units subscribed
for by all non-Affiliated Persons.
The NASD's Conduct Rules require that any member of, or Person associated
with, the Dealer-Manager or a Selling Dealer who sells or offers to sell Units
must make every reasonable effort to assure that such potential subscriber is a
suitable investor for a Partnership investment in light of such subscriber's
age, education level, knowledge of investments, need for liquidity, net worth
and other pertinent factors and further requires each selling broker and each
subscriber to make such determination of suitability. The State of Maine
requires us to inform you that the Dealer-Manager and each Person selling Units
cannot rely upon representations made by a subscriber in a Subscription
Agreement alone in making a determination of the suitability of the investment
for such subscriber.
Admission of Partners; Closings
Subscribers will be admitted to a Partnership as Limited Partners, and will
for all purposes become and be treated as Limited Partners, as of the first day
immediately following the Initial Closing Date or the Final Closing Date or 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. Upon the determination by the General Partner that the
Minimum Offering has been achieved, the General Partner will set the Initial
Closing Date. Following the Initial Closing Date, a Closing may be held each
day.
SALES MATERIAL
In addition to and apart from this Prospectus, a Partnership will utilize
certain sales material in connection with the Offering of Units. This material
may include reports describing the General Partner and its Affiliates, summary
descriptions of Investments (including, without limitation, pictures of
Equipment or facilities of Lessees), materials discussing the Prior Programs and
a brochure and audio-visual materials or taped presentations highlighting
various features of this Offering. The General Partner and its Affiliates may
also respond to specific questions from Selling Dealers and prospective
investors. Business reply cards, introductory letters or similar materials may
be sent to Selling Dealers for customer use, and other information relating to
this Offering may be made available to Selling Dealers for their internal use.
However, this Offering is made only by means of this Prospectus. Except as
described herein or in Supplements hereto, each Partnership has not authorized
the use of other sales materials in connection with this Offering. Although the
information contained in such material does not conflict with any of the
information contained in this Prospectus, such material does not purport to be
complete and should not be considered as a part of this Prospectus or the
Registration Statement of which this Prospectus is a part, or as incorporated in
this Prospectus or the Registration Statement by reference or as forming the
basis of this Offering of the Units described herein.
No dealer, salesman or other Person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus or in Supplements hereto or in supplemental sales literature issued
by a Partnership and described in this Prospectus or in Supplements hereto, and,
if given or made, such information or representations must not be relied upon.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, any securities other than the Units to which it relates or any of
such Units to any Person in any jurisdiction in which such solicitation is
unlawful. The delivery of this Prospectus at any time does not imply that the
information contained herein is correct as of any time subsequent to its date.
LEGAL MATTERS
The legality of the securities offered hereby and the tax matters set forth
under "Federal Income Tax Consequences" will be passed upon for the Partnerships
by Day, Berry & Howard LLP, Boston, Massachusetts.
EXPERTS
The audited balance sheet of ICON Income Fund Eight A L.P. as of May 6, 1998
and the audited financial statements of ICON Capital Corp. as of March 31, 1998
and 1997 and for each of the years then ended, have been included herein and in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, upon the authority of said firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement under the Securities Act has been filed with the
Securities and Exchange Commission, Washington, D.C., with respect to the
securities offered hereby. This Prospectus, which forms a part of the
Registration Statement filed with the Securities and Exchange Commission,
contains information concerning the Partnerships and includes a copy of the
Limited Partnership Agreement to be utilized by the Partnerships, but does not
contain all the information set forth in the Registration Statement and exhibits
thereto. The information omitted may be examined at the principal office of the
Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, without
charge, and copies thereof may be obtained from such office upon payment of the
fee prescribed by the Rules and Regulations of the Commission.
TABULAR INFORMATION CONCERNING PRIOR PUBLIC PROGRAMS
Exhibit B contains prior performance and investment information for the
General Partner's previous publicly-offered income-oriented programs, 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, ICON Cash Flow Partners L.P. Six and
ICON Cash Flow Partners L.P. Seven (the "Prior Public Programs"). Table I
through V of Exhibit B contain unaudited information relating to such Prior
Public Programs and their experience in raising and investing funds and to the
compensation paid to the General Partner and its Affiliates by, the operating
results of, and sales or dispositions of investments by, such Prior Public
Programs. PURCHASERS OF THE UNITS OFFERED BY THIS PROSPECTUS WILL NOT ACQUIRE
ANY OWNERSHIP INTEREST IN ANY OF THE PRIOR PUBLIC PROGRAMS AND SHOULD NOT ASSUME
THAT THE RESULTS OF ANY OF THE PRIOR PUBLIC PROGRAMS WILL BE INDICATIVE OF THE
FUTURE RESULTS OF THE PARTNERSHIPS. MOREOVER, THE OPERATING RESULTS FOR THE
PRIOR PUBLIC PROGRAMS SHOULD NOT BE CONSIDERED INDICATIVE OF FUTURE RESULTS OF
THE PRIOR PUBLIC PROGRAMS NOR OF WHETHER THE PRIOR PUBLIC PROGRAMS WILL ACHIEVE
THEIR INVESTMENT OBJECTIVES WHICH WILL IN LARGE PART DEPEND ON FACTS WHICH
CANNOT NOW BE DETERMINED, INCLUDING THE RESIDUAL VALUE OF EQUIPMENT HELD BY SUCH
PRIOR PUBLIC PROGRAMS.
FINANCIAL STATEMENTS
The audited balance sheet of ICON Income Fund Eight A L.P. as of May 6, 1998,
the unaudited balance sheet of ICON Income Fund Eight A L.P. as of June 30,
1998, the audited financial statements of ICON Capital Corp. and subsidiaries as
of March 31, 1998 and 1997 and for each of the years then ended, and the
unaudited financial statements of ICON Capital Corp. and subsidiaries as of June
30, 1998 and for the three months then ended are included herein.
Notwithstanding the inclusion of the General Partner's financial statements,
purchasers of the Units offered hereby should be aware that they are not thereby
purchasing an interest in ICON Capital Corp. and subsidiaries or in any of its
Affiliates or in any Prior Public Program.
<PAGE>
Index to Financial Statements
ICON Income Fund Eight A L.P.
- -----------------------------
Unaudited Balance Sheet - June 30, 1998
Balance Sheet at June 30, 1998
Notes to Balance Sheet
Audited Balance Sheet - May 6, 1998
Independent Auditors' Report
Balance Sheet at May 6, 1998
Notes to Balance Sheet
ICON Capital Corp.
- ------------------
Unaudited Financial Statements - June 30, 1998 and March 31, 1998
Balance Sheet at June 30, 1998 and March 31, 1998 Statement of Income for
the Three Months Ended
June 30, 1998 and 1997
Statements of Changes in Stockholders' Equity for the Three Months Ended
June 30, 1998 and the Years Ended March 31, 1998, 1997 and 1996
Statement of Cash Flows for the Three Months Ended
June 30, 1998 and 1997
Notes to Financial Statements
Audited Financial Statements - March 31, 1998 and 1997
Independent Auditors' Report
Balance Sheets at March 31, 1998 and 1997
Statements of Income for the Years Ended March 31,
1998 and 1997
Statements of Changes in Stockholders' Equity for
the Years Ended March 31, 1998 and 1997
Statements of Cash Flows for the Years Ended
March 31, 1998 and 1997
Notes to Financial Statements
ICON Income Fund Eight A L.P.
(a Delaware Limited Partnership)
Balance Sheet
June 30, 1998
ICON Income Fund Eight A L.P.
(a Delaware Limited Partnership)
Balance Sheet
June 30, 1998
Assets
Cash $ 2,000
---------
$ 2,000
Liabilities and Partners' Equity
Commitments and Contingencies
Partners' Equity
General Partner $ 1,000
Limited Partner 1,000
---------
$ 2,000
See accompanying notes to balance sheet.
ICON Income Fund Eight A L.P.
(a Delaware Limited Partnership)
Notes to Balance Sheet
June 30, 1998
(1) The Partnership
ICON Income Fund Eight A L.P. (the "Partnership"), was formed on July
9, 1997 as a Delaware Limited Partnership. The initial capitalization
of the Partnership was $2,000. The Partnership will continue until
December 31, 2017, unless terminated sooner. The Partnership intends to
offer limited partnership units on a "best efforts" basis to the
general public with the intention of raising up to $75,000,000 of
capital. With the funds raised, the Partnership intends to acquire
various types of equipment and to lease such equipment to third parties
and, to a lesser degree, to enter into secured financing transactions.
The General Partner of the Partnership is ICON Capital Corp. (the
"General Partner"), a Connecticut corporation. The General Partner will
acquire the assets and manage the business of the Partnership.
(2) Capital Contribution
The General Partner has made an initial capital contribution of $1,000,
and the original limited partner has made an initial capital
contribution of $1,000 to the Partnership.
(3) Commitment and Contingencies
The Partnership has not applied for an advance ruling from the Internal
Revenue Service; however, in the opinion of counsel the Partnership
will be classified as a Partnership and not as an association taxable
for U.S. Federal income tax purposes. In the absence of a ruling, there
cannot be assurance that the Partnership will not constitute an
association taxable as a corporation.
ICON Income Fund Eight A L.P.
(a Delaware Limited Partnership)
Balance Sheet
May 6, 1998
Independent Auditors' Report
The Partners
ICON Income Fund Eight A L.P.:
We have audited the accompanying balance sheet of ICON Income Fund Eight A L.P.
(a Delaware limited partnership) as of May 6, 1998. This financial statement is
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit of a balance sheet includes examining, on a test basis, evidence
supporting the amounts and disclosures in that balance sheet. An audit of a
balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of ICON Income Fund Eight A L.P. as of
May 6, 1998, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
May 6, 1998
New York, New York
ICON Income Fund Eight A L.P.
(a Delaware Limited Partnership)
Balance Sheet
May 6, 1998
Assets
Cash $ 2,000
--------
$ 2,000
========
Liabilities and Partners' Equity
Commitments and Contingencies
Partners' Equity
General Partner $ 1,000
Limited Partner 1,000
--------
$ 2,000
========
See accompanying notes to balance sheet.
ICON Income Fund Eight A L.P.
(a Delaware Limited Partnership)
Notes to Balance Sheet
May 6, 1998
(1) The Partnership
ICON Income Fund Eight A L.P. (the "Partnership"), was formed on July 9,
1997 as a Delaware Limited Partnership. The initial capitalization of
the Partnership was $2,000. The Partnership will continue until December
31, 2017, unless terminated sooner. The Partnership intends to offer
limited partnership units on a "best efforts" basis to the general
public with the intention of raising up to $75,000,000 of capital. With
the funds raised, the Partnership intends to acquire various types of
equipment and to lease such equipment to third parties and, to a lesser
degree, to enter into secured financing transactions. The General
Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner will acquire
the assets and manage the business of the Partnership.
(2) Capital Contribution
The General Partner has made an initial capital contribution of $1,000,
and the original limited partner has made an initial capital
contribution of $1,000 to the Partnership.
(3) Commitment and Contingencies
The Partnership has not applied for an advance ruling from the Internal
Revenue Service; however, in the opinion of counsel the Partnership will
be classified as a Partnership and not as an association taxable for
U.S. Federal income tax purposes. In the absence of a ruling, there
cannot be assurance that the Partnership will not constitute an
association taxable as a corporation.
ICON CAPITAL CORP.
Financial Statements
June 30, 1998
(Unaudited)
ICON CAPITAL CORP.
BALANCE SHEETS
(Unaudited)
<TABLE>
June 30, March 31,
1998 1998
---- ----
ASSETS
<S> <C> <C>
Cash ............................................................. $ 319,286 $ 179,403
Receivables from affiliates ...................................... 4,411,889 3,580,727
Receivables from related parties - managed partnerships .......... 232,000 572,990
Prepaid and other assets ......................................... 274,156 226,855
Deferred charges ................................................. 454,106 524,270
Fixed assets and leasehold improvements, at cost, less accumulated
depreciation and amortization of $1,943,516 and $1,872,399 ..... 812,095 758,680
----------- -----------
Total assets ..................................................... $ 6,503,532 $ 5,842,925
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses ............................ $ 2,251,232 $ 1,819,003
Notes payable - line of credit ................................... 2,000,000 2,000,000
Obligations under capital leases ................................. 255,967 246,386
Current and deferred income taxes, net ........................... 670,955 583,436
Deferred management fees - managed income funds .................. 232,000 232,000
----------- -----------
Total liabilities ................................................ 5,410,154 4,880,825
----------- -----------
Commitments and contingencies
Stockholder's equity:
Common stock: no par value; $10 stated
value; authorized 3,000 shares;
issued and outstanding 1,500 shares .......................... 15,000 15,000
Additional paid-in capital ..................................... 716,200 716,200
Retained earnings .............................................. 1,462,178 1,330,900
----------- -----------
2,193,378 2,062,100
Note receivable from stockholder ................................. (1,100,000) (1,100,000)
----------- -----------
1,093,378 962,100
----------- -----------
Total liabilities and stockholder's equity ....................... $ 6,503,532 $ 5,842,925
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
ICON CAPITAL CORP.
STATEMENTS OF INCOME
Three Months Ending June 30,
(Unaudited)
<TABLE>
1998 1997
---- ----
Revenues:
<S> <C> <C>
Fees - managed partnerships .................................. $ 3,403,320 $ 2,107,087
Management fees - affiliate .................................. 256,287 112,217
Lease consulting fees and other .............................. 76,786 47,571
----------- -----------
Total revenues ............................................... 3,736,393 2,266,875
----------- -----------
Expenses:
Selling, general and administrative .......................... 2,936,460 2,108,179
Amortization of deferred charges ............................. 454,279 136,637
Depreciation and amortization ................................ 71,117 91,579
Interest expense ............................................. 55,740 4,456
----------- -----------
Total expenses .......................................... 3,517,596 2,340,851
----------- -----------
Income (loss) before provision for (benefit from) income taxes 218,797 (73,976)
Provision for (benefit from) income taxes .................... 87,519 (37,424)
----------- -----------
Net income ................................................... $ 131,278 $ (36,552)
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
ICON CAPITAL CORP.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
For the Three Months Ended June 30, 1998 and the Years Ended
March 31, 1998, 1997 and 1996
(Unaudited)
<TABLE>
Note Total
Common Stock Additional Receivable Stock-
Shares Stated Paid-in Retained from holder's
Outstanding Value Capital Earnings Stockholder Equity
----------- ------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1995 ........ 1,500 $ 15,000 $ 1,416,200 $ 843,550 $ (700,000) $ 1,574,750
Net income ............ -- -- -- 46,407 -- 46,407
Cancellation of note
from stockholder ..... -- -- (700,000) -- 700,000 --
----------- ----------- ----------- ----------- -----------
March 31, 1996 ........ 1,500 15,000 716,200 889,957 -- 1,621,157
Issuance of
note from stockholder -- -- -- -- (1,100,000) (1,100,000)
Net income ............ -- -- -- 2,363,371 -- 2,363,371
Distributions to Parent -- -- -- (2,203,046) -- (2,203,046)
----------- ----------- ----------- ----------- ----------- -----------
March 31, 1997 ........ 1,500 15,000 716,200 1,050,282 (1,100,000) 681,482
Net income ............ -- -- -- 1,072,521 -- 1,072,521
Distributions to Parent -- -- -- (791,903) -- (791,903)
----------- ----------- ----------- ----------- ----------- -----------
March 31, 1998 ........ 1,500 15,000 716,200 1,330,900 (1,100,000) 962,100
Net Income ............ -- -- -- 131,278 -- 131,278
----------- ----------- ----------- ----------- ----------- -----------
June 30, 1998 ......... 1,500 $ 15,000 $ 716,200 $ 1,462,178 $(1,100,000) $ 1,093,378
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
ICON CAPITAL CORP.
STATEMENTS OF CASH FLOWS
For the Three Months Ended June 30,
(unaudited)
<TABLE>
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income ............................................ $ 131,278 $ (36,552)
--------- ---------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ...................... 71,117 91,579
Amortization of deferred charges ................... 454,279 136,637
Changes in operating assets and liabilities:
Receivables from managed income funds, net of
deferred amounts .............................. 340,990 414,522
Receivables from affiliates ..................... (831,162) 396,376
Deferred income taxes ........................... 87,519 303,354
Prepaid and other assets ........................ (47,302) (9,804)
Deferred charges ................................ (384,115) (215,712)
Accounts payable and accrued expenses ........... 432,229 (300,836)
Other ........................................... -- (44,704)
--------- ---------
Total adjustments ............................. 123,555 771,412
--------- ---------
Net cash provided by operating activities ............. 254,833 734,860
--------- ---------
Cash flows from investing activities:
Purchases of fixed assets and leasehold improvements .. (124,532) (60,819)
--------- ---------
Net cash used for investing activities ................ (124,532) (60,819)
--------- ---------
Cash flows from financing activities:
Increase in capital lease obligation .................. 26,300 --
Principal payments on capital lease obligations ....... (16,718) (9,230)
Distributions to Parent ............................... -- (908,440)
Principal payments on notes payable recourse financings -- (45,417)
--------- ---------
Net cash provided by (used for) financing activities .. 9,582 (917,670)
--------- ---------
Net increase in cash ..................................... 139,883 (243,629)
Cash, beginning of period ................................ 179,403 292,524
--------- ---------
Cash, end of period ...................................... $ 319,286 $ 48,895
========= =========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
ICON CAPITAL CORP.
Notes to Financial Statements
June 30, 1998
(unaudited)
(1) Basis of Accounting and Presentation
The financial statements of ICON Capital Corp. (the "Company") are
unaudited, however, in the opinion of management, they include all
adjustments (consisting only of normal recurring accruals) necessary for a
fair statement of financial position. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. Management believes that the disclosures made are
adequate to make the information represented not misleading. These
financial statements should be read in conjunction with the Company's March
31, 1998 and 1997 audited financial statements.
(2) Income Fund Fees
The Company 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 earns fees from the Partnerships for the organization and
offering of the Partnership and for the acquisition, management and
administration of their lease portfolios. Organization and offering fees
are earned based on investment units sold and are recognized at each
closing. Acquisition fees on the purchase or origination of equipment lease
transactions 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
earned are based primarily on gross rental payments. The Company had
accounts receivable due from the Partnerships of $232,000 and $572,990 at
June 30, 1998 and March 31, 1998, respectively. Under the Partnership
agreements, the Company is entitled to management fees and reimbursement
from the Partnerships for certain operating and administrative expenses
incurred by it on behalf of the Partnerships.
(3) Commitments and Contingencies
The Company has operating leases for office space through the year 2004.
Rent expense for the three months ended June 30, 1998 and 1997 was $207,321
and $125,014, respectively, net of sublease income of $40,665 and $44,586,
respectively.
$ 4,558,416
(11) Supplemental Disclosure of Cash Flow Information
During the year ended March 31, 1998 and 1997, the Company paid $80,885 and
$6,818 in interest on recourse financing, respectively.
ICON CAPITAL CORP.
Notes to Financial Statements - Continued
For the year ended March 31, 1997, payments relating to the Company's
non-recourse note payable aggregated $1,541,647, of which $1,293,775 was
principal and $247,872 was interest.
For the year ended March 31, 1998, the Company purchased $103,839 in fixed
assets utilizing proceeds from capital lease transactions.
ICON CAPITAL CORP.
Financial Statements
March 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ICON Capital Corp.:
We have audited the accompanying balance sheets of ICON Capital Corp. as of
March 31, 1998 and 1997, and the related statements of income, changes in
stockholder's equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of ICON Capital Corp. as of March
31, 1998 and 1997, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
June 12, 1998
New York, New York
ICON CAPITAL CORP.
BALANCE SHEETS
March 31,
<TABLE>
1998 1997
---- ----
ASSETS
<S> <C> <C>
Cash .................................................. $ 179,403 $ 292,524
Receivables from affiliates ........................... 3,580,727 181,039
Receivables from related parties - managed partnerships 572,990 1,323,502
Prepaid and other assets .............................. 226,855 187,687
Deferred charges ...................................... 524,270 379,717
Fixed assets and leasehold improvements, at cost, less
accumulated depreciation and amortization of
$1,865,232 and $1,533,265 ........................... 758,680 752,472
----------- -----------
Total assets .......................................... $ 5,842,925 $ 3,116,941
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued expenses ................. $ 1,819,003 $ 1,225,726
Notes payable - line of credit ........................ 2,000,000 --
Notes payable - capital lease obligations ............. 246,386 196,105
Deferred management fees - managed partnerships ....... 232,000 758,452
Deferred income taxes, net ............................ 583,436 255,176
----------- -----------
Total liabilities ..................................... 4,880,825 2,435,459
----------- -----------
Commitments and contingencies
Stockholder's equity:
Common stock: no par value; $10 stated
value; authorized 3,000 shares;
issued and outstanding 1,500 shares ............... 15,000 15,000
Additional paid-in capital .......................... 716,200 716,200
Retained earnings ................................... 1,330,900 1,050,282
----------- -----------
2,062,100 1,781,482
Note receivable from stockholder ...................... (1,100,000) (1,100,000)
----------- -----------
962,100 681,482
----------- -----------
Total liabilities and stockholder's equity ............ $ 5,842,925 $ 3,116,941
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
ICON CAPITAL CORP.
STATEMENTS OF INCOME
For the Years Ended March 31,
<TABLE>
1998 1997
---- ----
Revenues:
<S> <C> <C>
Fees - managed partnerships .................... $12,048,906 $11,517,396
Management fees - affiliate .................... 716,444 261,003
Lease consulting fees and other ................ 61,025 112,245
Rental income from investment in operating lease -- 1,541,647
----------- -----------
Total revenues ............................ 12,826,375 13,432,291
----------- -----------
Expenses:
Selling, general and administrative ............ 9,404,987 7,174,496
Amortization of deferred charges ............... 844,636 484,579
Depreciation and amortization .................. 331,967 319,000
Interest expense - notes payable ............... 80,885 6,818
Depreciation - equipment under operating lease . -- 1,293,775
Interest expense - non-recourse financings ..... -- 247,872
----------- -----------
Total expenses ............................ 10,662,475 9,526,540
----------- -----------
Income before provision for income taxes ....... 2,163,900 3,905,751
Provision for income taxes .......................... 1,091,379 1,542,380
----------- -----------
Net income ..................................... $ 1,072,521 $ 2,363,371
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
ICON CAPITAL CORP.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
For the Years Ended March 31, 1998 and 1997
<TABLE>
Note Total
Common Stock Additional Receivable Stock-
Shares Stated Paid-in Retained from holder's
Outstanding Value Capital Earnings Stockholder Equity
<S> <C> <C> <C> <C> <C> <C>
March 31, 1996 ........ 1,500 $ 15,000 $ 716,200 $ 889,957 $ -- $ 1,621,157
Issuance of
note from stockholder -- -- -- -- (1,100,000) (1,100,000)
Net income ............ -- -- -- 2,363,371 -- 2,363,371
Distributions to Parent -- -- -- (2,203,046) -- (2,203,046)
----------- ----------- ----------- ----------- ----------- -----------
March 31, 1997 ........ 1,500 15,000 716,200 1,050,282 (1,100,000) 681,482
Net income ............ -- -- -- 1,072,521 -- 1,072,521
Distributions to Parent -- -- -- (791,903) -- (791,903)
----------- ----------- ----------- ----------- ----------- -----------
March 31, 1998 ........ 1,500 $ 15,000 $ 716,200 $ 1,330,900 $(1,100,000) $ 962,100
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
ICON CAPITAL CORP.
STATEMENTS OF CASH FLOWS
For the Years Ended March 31,
<TABLE>
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income ....................................................... $ 1,072,521 $ 2,363,371
----------- -----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ................................. 331,967 1,612,775
Amortization of deferred charges .............................. 844,636 484,579
Deferred income taxes ......................................... 328,260 (228,768)
Rental income paid directly to lender by lessee ............... -- (1,541,647)
Interest expense paid directly to lenders by lessees .......... -- 247,872
Changes in operating assets and liabilities:
Receivables from managed partnerships, net of
deferred management fees ................................. 224,060 790,506
Receivables from affiliates ................................ (3,399,688) 155,767
Deferred charges ........................................... (989,189) (561,410)
Prepaid and other assets ................................... (39,168) (54,099)
Accounts payable and accrued expenses ...................... 593,277 353,956
Other ...................................................... -- 4,158
----------- -----------
Total adjustments ........................................ (2,105,845) 1,263,689
----------- -----------
Net cash provided by (used in) operating activities .............. (1,033,324) 3,627,060
----------- -----------
Cash flows from investing activities:
Purchases of fixed assets and leasehold improvements ............. (234,336) (97,279)
----------- -----------
Net cash used in investing activities ............................ (234,336) (97,279)
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable-line of credit ....................... 2,000,000 --
Distributions to Parent .......................................... (791,903) (2,203,046)
Principal payments on notes payable-capital lease obligations, net (53,558) (49,061)
Loan to stockholder .............................................. -- (1,100,000)
----------- -----------
Net cash provided by (used in) financing activities .............. 1,154,539 (3,352,107)
----------- -----------
Net (decrease) increase in cash ..................................... (113,121) 177,674
Cash, beginning of year ............................................. 292,524 114,850
----------- -----------
Cash, end of year ................................................... $ 179,403 $ 292,524
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Note: A purchaser of units is not acquiring an interest in this corporation.
ICON CAPITAL CORP.
Notes to Financial Statements
March 31, 1998
(1) Organization
ICON Capital Corp. (the "Company") was incorporated in 1985. Until August
20, 1996, the Company was owned by three individuals. On August 20, 1996,
ICON Holdings Corp. ("Holdings" or the "Parent") acquired all of the
outstanding stock of the Company, as well as all of the outstanding stock
of ICON Securities Corp. ("Securities"), an affiliated company. Holdings is
fifty percent owned by Summit Asset Holding L.L.C., 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"). The primary activity of the Company is the development,
marketing and management of publicly registered equipment leasing limited
partnerships. The Company will, on occasion, also provide consulting
services to unrelated parties in connection with the acquisition and
administration of lease transactions.
The Company 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 which totaled $7,000, are carried at cost and are included in
prepaid and other assets.
The Company earns fees from the Partnerships on the sale of Partnership
units. Additionally, the Company also earns acquisition and management fees
and shares in Partnership cash distributions. ICON Cash Flow Seven was
formed on May 23, 1995 with an initial capital contribution of $1,000 and
began offering its units to suitable investors on November 9, 1995. The
offering period for ICON Cash Flow Seven will end 36 months after ICON Cash
Flow Seven began offering such units, November 9, 1998.
The following table identifies pertinent offering information by the
Partnerships:
Date Operations Date Ceased Gross Proceeds
Began Offering Units Raised
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 20, 1991 20,000,000
ICON Cash Flow D September 13, 1991 June 5, 1992 40,000,000
ICON Cash Flow E June 5, 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 (1) 81,574,845
------------
$263,506,208
(1) Gross proceeds raised through May 31, 1998.
ICON CAPITAL CORP.
Notes to Financial Statements - Continued
(2) Significant Accounting Policies
(a) Basis of Accounting and Presentation
The Company's 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) Disclosures About Fair Value of Financial Instruments
The Statement of Financial Accounting Standards No. 107 ("SFAS No.
107"), "Disclosures about Fair Value of Financial Instruments" requires
disclosures about the fair value of financial instruments. The
Company's financial instruments (cash, receivables and notes payable)
are either payable on demand or have short-term maturities and present
relatively low credit and interest rate risk, and as a result, their
fair value approximates carrying value at March 31, 1998.
(c) Revenue and Cost Recognition
Income Fund Fees:
The Company earns fees from the Partnerships for the organization and
offering of each Partnership and for the acquisition, management and
administration of their lease portfolios. 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 managing the
Partnership's equipment and financing transactions. Management and
administrative fees are earned upon receipt of rental payments from
lease and financing transactions.
Effective September 1, 1993, ICON Cash Flow A, ICON Cash Flow B, and
ICON Cash Flow C decreased monthly distributions to the limited
partners from the cash distribution rates stated in their prospectuses
to an annual rate of 9%. As a result, all management fees payable to
the Company related to these entities had been deferred until the
limited partners of ICON Cash Flow A, ICON Cash Flow B and ICON Cash
Flow C received their stated cash distribution rate of return on a
cumulative basis. Due to the approval of amendments to the ICON Cash
Flow B and ICON Cash Flow C Partnership Agreements, effective November
15, 1995 and June 19, 1996, The Company eliminated ICON Cash Flow B and
ICON Cash Flow C's obligation to pay $220,000 and $529,125,
respectively of the original management fees deferred. As of December
31, 1997, ICON Cash Flow A investors had received the stated annual
rate of return, and as a result the Company reversed $38,081 in
deferred management fees and recognized such fees as income. Management
fees in the amount of $232,000 are deferred and outstanding at March
31, 1998, of which $127,000 is due from ICON Cash Flow B and $105,000
is due from ICON Cash Flow C. Such amounts are included in receivables
due from managed partnerships as well as in deferred management fees on
the March 31, 1998 balance sheet.
ICON CAPITAL CORP.
Notes to Financial Statements - Continued
(d) 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 are included on the balance sheets
as deferred charges and are being amortized over the offering period.
(e) 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.
(f) Income Taxes
The Company accounts for its income taxes following the liability
method as provided for in Statement of Financial Accounting Standard
No. 109 ("SFAS 109"), "Accounting for Income Taxes."
The Company filed stand alone Federal and state income tax returns for
the period April 1, 1996 to August 20, 1996. Thereafter the Company's
activity is included in the combined Federal and state income tax
returns of Holdings.
(3) Stockholder's Equity
As of March 31, 1998, the Company held a demand promissory note for
$1,100,000 from Holdings. The note is without interest, except in the case
of default, at which time the note would bear interest at the rate of 18%.
The note is reflected for financial statement reporting purposes as a
reduction from stockholders' equity.
ICON CAPITAL CORP.
Notes to Financial Statements - Continued
(4) Related Party Transactions
The Company earns fees from the Partnerships for the organization and
offering of each Partnership and for the acquisition, management and
administration of their lease portfolios. Receivables from managed
partnerships relate to such fees, which have been earned by the Company but
not paid by the Partnerships. The Company also earns a management fee from
Securities for the support and administration of Securities' operations.
Receivables from affiliates are due primarily from Holdings. Such
receivables relate to the reimbursement of amounts paid by the Company on
behalf of Holdings for items such as investment in a securitization trust
and debt obligations.
For the year ended March 31, 1998, the Company paid $1,328,440 in
distributions to Holdings.
(5) Prepaid and Other Assets
Included in prepaid and other assets are unamortized insurance costs, the
Company's investment in the Partnerships and sublease receivables.
(6) Income Taxes
The provision (benefit) for income taxes for the years ended March 31, 1998
and 1997 consisted of the following:
1998 1997
---- ----
Current
Federal $ 580,228 $ 1,263,920
State 182,891 507,228
------------- ------------
Total current 763,119 1,771,148
------------- ------------
Deferred:
Federal 100,481 (24,563)
State 227,779 (204,205)
------------- -------------
Total deferred 328,260 (228,768)
------------- ------------
Total $ 1,091,379 $ 1,542,380
============= ============
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the Company's assets and
liabilities. The deferred tax liabilities at March 31, 1998 and 1997 of
$583,436 and $347,155, respectively, are net of deferred tax assets of
$91,979 at March 31, 1997. Deferred income taxes at March 31, 1998 are
primarily the result of temporary differences relating to the carrying
value of fixed assets, the investments in the Partnerships and deferred
charges.
ICON CAPITAL CORP.
Notes to Financial Statements - Continued
The following table reconciles income taxes computed at the federal
statutory rate to the Company's effective tax rate for the years ended
March 31, 1998 and 1997:
<TABLE>
1998 1997
---- ----
Tax Rate Tax Rate
<S> <C> <C> <C> <C>
Federal statutory $ 735,726 34.00% $1,327,955 34.00%
State income taxes, net of Federal tax effect 271,041 12.53 199,995 5.12
Meals and entertainment exclusion 20,663 .95 21,979 0.56
Other 63,949 2.96 (7,549) (0.19)
---------- ------ ---------- ------
$1,091,379 50.44% $1,542,380 39.49%
========== ====== ========== ======
</TABLE>
(7) Notes Payable
On August 21, 1997, the Company entered into an unsecured line of credit
agreement. The maximum amount available and outstanding under the line of
credit was $600,000. On December 10, 1997, the Company refinanced the
discretionary line of credit with a new line of credit (the "Facility").
The maximum amount available and outstanding under that Facility was
$1,300,000. In March 1998, the Facility was increased to $2,000,000, all
of which was outstanding at March 31, 1998. The Facility matures on August
31, 1998.
Interest is payable at prime (8.5% at March 31, 1998) plus 1%. The Facility
requires that the Company, among other things, meet certain objectives with
respect to financial ratios. At March 31, 1998, the Company was in
compliance with the covenants required by the Facility.
Notes payable at March 31, 1998 and 1997 were as follows:
1998 1997
---- ----
Unsecured line of credit, interest at
prime (8.5% at March 31, 1998) plus 1%
due June 30, 1998 $ 2,000,000 $ -
Various obligations under capital leases, payable
in monthly installments through March 2002 246,386 196,105
----------- ----------
$ 2,246,386 $ 196,105
=========== ==========
ICON CAPITAL CORP.
Notes to Financial Statements - Continued
(8) Investment in Equipment Under Operating Lease
In December 1993, the Company invested $5,340,436 in manufacturing
equipment and leased such equipment to a third party for a two year period.
Simultaneously 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 of such proceeds were 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 was earned over the initial lease term.
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 due in January 1996.
On January 1, 1996, the lessee renewed the lease and the bank extended the
term of the non-recourse note. The terms of the renewal required 24
monthly installments of $171,294 through December 1997. Such rental
payments continued to be paid directly to the financial institution to
reduce the loan, with interest calculated at 8.95%. The lease terminated
in fiscal 1997 and the Company recognized a gain of $1,694 on disposition.
(9) Commitments and Contingencies
The Company has operating leases for office space through the year 2004.
Rent expense for the years ended March 31, 1998 and 1997 totaled to
$497,223 and $347,990, net of sublease income of $155,749 and $170,602,
respectively. The future minimum rental commitments under non-cancelable
operating leases are due as follows:
Fiscal Year Ending
March 31, Amount
1999 $ 988,702
2000 898,017
2001 773,501
2002 521,906
Thereafter 1,376,290
------------
$ 4,558,416
(11) Supplemental Disclosure of Cash Flow Information
During the year ended March 31, 1998 and 1997, the Company paid $80,885 and
$6,818 in interest on recourse financing, respectively.
ICON CAPITAL CORP.
Notes to Financial Statements - Continued
For the year ended March 31, 1997, payments relating to the Company's
non-recourse note payable aggregated $1,541,647, of which $1,293,775 was
principal and $247,872 was interest.
For the year ended March 31, 1998, the Company purchased $103,839 in fixed
assets utilizing proceeds from capital lease transactions.
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ICON INCOME FUND EIGHT 1___ L.P.
This Amended and Restated Agreement of Limited Partnership, dated as of
______________ (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"), Thomas W. Martin, 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, ICON Income Fund Eight 1__ L.P., a Delaware Limited Partnership
(the "Partnership") was formed as a Delaware limited partnership pursuant to a
Certificate of Limited Partnership, dated as of _____________, and filed on
_______ under and pursuant to the Delaware Revised Uniform Limited Partnership
Act
(the "Delaware Act").
WHEREAS, on ___________, 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 Income Fund Eight
1__ L.P." 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 1013 Centre Road, Wilmington,
Delaware, 19805. The name of its registered agent at such address shall be The
Corporation Service Company. The General Partner may change the registered
office and the registered agent of the Partnership, with prior written notice to
the Limited Partners.
- --------------
1 A or B
<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 objects and purposes of (a)
acquiring, investing in, purchasing, owning, purchasing options to purchase in,
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 and purchasing equity interests in Equipment owning
entities, (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 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) aircraft, rail and over-the-road transportation
equipment and marine vessels; (ii) machine tools and manufacturing equipment,
(iii) materials handling equipment, and (iv) miscellaneous equipment of other
types satisfying the investment objectives of the Partnership and consistent
with the remaining term of the Partnership. The Financing Transactions entered
into by the Partnership shall be with Users that shall provide 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 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,
Reserves or Joint Ventures shall be invested by the Partnership in Permitted
Investments.
3.3 Powers.
In furtherance of the above purposes, the Partnership shall have the
power, directly or indirectly:
(a) to acquire, invest in, purchase and/or make future commitments to
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 trust certificates, debt securities and equity
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;
(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
Programs), 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, and in relation to the acquisition of Equipment or the underlying
value thereof as set forth in this section;
(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 and
leases 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
June 9, 1997 and shall terminate at midnight on December 31, 2017, 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 750,000 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.
(c) Each Limited Partner (other than Affiliated Limited Partners) 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.
(d) Limited Partners must purchase a minimum of (i) twenty-five (25) whole
Units other than (ii) IRA or Qualified Plans (including Keogh Plans) which 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 Net Unit Price or Gross Unit Price, 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, daily Closings
may be held. 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. Each subscriber has the right to
cancel his or her subscription during a period of five business days after the
date of receipt of a final prospectus.
(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 Subscriber is admitted to the Partnership or the Final Closing
Date 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. Each subscriber has the right to cancel his or her
subscription during a period of five business days after receipt of a final
prospectus.
(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 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.
<PAGE>
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.
(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 contribution and liquidation 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), 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.
Section 6. GENERAL PARTNER.
6.1 Extent of Powers and Duties.
(a) General.
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 and
re-leasing the Equipment, monitoring the use of collateral for the Leases and
Financing Transactions, arranging for necessary 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 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.
(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, re-lease, 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 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,
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 Programs), 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 not
deny the admission of any Person as a Limited Partner (including any Substitute
Limited Partner and the General Partner and any Affiliate of the General
Partner) (except the Original Limited Partner) unless they have not satisfied
the following:
A (B) such Person shall agree, in writing, to be bound by the
provisions of this Agreement;
B(D) such Person shall represent, in writing, that such Person
is or is not a United States Person, as the case may be;
C (F) prior to the admission of such Person, the Minimum Offering
shall have been achieved;
D(H) 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(J) 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
F(L) such admission would not cause the "equity participation"
in the Partnership by "benefit plan investors" (both within the
meaning of DOL Reg. ss. 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 which
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 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) 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.
(x) Transactions with the General Partner. The General Partner and
its Affiliates (including programs sponsored by the General Partner and
its Affiliates) may purchase or otherwise make investments in Equipment in
its own name, an Affiliate's name, the name of a nominee or nominees, or a
trust or trustees or otherwise temporarily (generally not more than six
(6) months) hold title thereto for the purpose of facilitating the
acquisition of such Equipment by the Company; provided, however, that the
Company will not acquire Equipment from a Program in which the Manager or
any of its Affiliates has an interest.
(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).
(d) Reliance by Third Parties.
No Person dealing with the Partnership or its assets, whether as assignee,
lessee, purchaser, mortgagee, grantee or otherwise, shall be required to
investigate the authority of the General Partner in selling, assigning, leasing,
mortgaging, conveying or otherwise dealing with any Investments or other assets
or any part thereof, nor shall any such assignee, lessee, purchaser, 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, 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.
From and after the date when all Capital Contributions have been invested
or committed to investment in Investments and Reserves, 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).
Notwithstanding the foregoing, in the event all Capital Contributions exceed
$25,000,000 the limitation on Indebtedness set forth in subsection (ii) of the
preceding sentence shall be reduced by 0.0000003% for each dollar by which all
Capital Contributions exceeds $25,000,000. Following the Offering Period and to
the extent the limitations in the immediately preceding sentence require
leverage of less than 75%, the Partnerships' permitted leverage may rise to 75%
at the time reinvestment proceeds are reinvested by the Partnership.
(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.
The Partnership shall neither purchase or lease Investments from, nor sell
or lease 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 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.
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 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.
<PAGE>
(e) No Exchange of Interests for Investments.
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:
(i) the General Partner shall have determined that:
(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;
(ii) 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
(iii) 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 or of
the proceeds of the resale, exchange or refinancing of Equipment. 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 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) Transactions with the General Partner.
The General Partner and its Affiliates (including programs sponsored by
the General Partner or its Affiliates) will not buy or lease Equipment from, or
sell or lease Equipment to, the Partnership except as provided by this Section
6.2(j). The General Partner and its Affiliates (other than programs sponsored by
the General Partner or its Affiliates) shall be permitted to make acquisitions
of Equipment for the Partnership (and assume loans in connection therewith),
provided that (a) such acquisitions are in the best interests of the
Partnership, (b) no benefit arises out of such acquisitions to the General
Partner or its Affiliates by the Partnership), (c) such Equipment generally is
not held by the General Partner or any such Affiliate for more than six months
(provided, however, that with respect to unspecified Equipment, the General
Partner or its Affiliates shall not intend to hold such Equipment for more than
one hundred and twenty (120) days (but in no event more than six months) prior
to the transfer to the Partnership, and (d) there is no difference in interest
terms of the loans secured by the Equipment at the time acquired by the General
Partner or any such Affiliate and at the time acquired by the Partnership. The
General Partner or any Affiliate thereof (other than programs sponsored by the
General Partner or its Affiliates) may sell such Equipment to the Partnership at
a price equal to the sum of its cost for such Equipment and any acquisition
costs relating to the prospective selection and acquisition of or investment in
such Equipment (including, but not limited to, legal fees and expenses, travel
and communication expenses, cost of appraisal, commissions, accounting fees and
other related costs) paid by it with respect to such Equipment.
(k) 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.
(l) 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, the General
Partner or such Affiliate was acting on behalf of or performing services for 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 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.
<PAGE>
(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:
(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,
or (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%.
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:
(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 its Affiliates are engaged directly and indirectly
in the business of acquiring and leasing equipment for their own respective
accounts as well as for other Programs. The General Partner or any of its
Affiliates may in the future form, sponsor, act as a general partner of, or as
an advisor to other investment entities (including other public equipment
leasing partnerships) which have investment objectives similar to the
Partnerships' and which may be in a position to acquire the same Investments at
the same time as the Partnerships. See "CERTAIN RELATIONSHIPS WITH THE
PARTNERSHIPS" and "MANAGEMENT" for a chart of and a description of the
relationships of the Partnerships to the General Partner and relevant
Affiliates.
Until all Capital Contributions have been invested or committed to investment
in Investments and Reserves, used to pay permitted Front-End Fees or returned to
the Limited Partners as provided in the Partnership Agreement, all such
Investment opportunities meeting the investment objectives of the Partnerships
(including Equipment acquisition, financing, refinancing, leasing and re-leasing
opportunities) shall be presented to the Partnerships first except in the
following circumstances:.
The required cash investment is greater than the cash
available for investment by the Partnerships;
The amount of debt is above levels deemed acceptable for
the Partnerships;
The equipment type is not appropriate to the Partnerships' objectives,
which include, among others, the avoidance of concentration of exposure to
any one class of equipment;
The Lessee credit quality does not satisfy the Partnerships' objectives,
maintaining a high-quality portfolio with low credit losses while avoiding
a concentration of exposure to any individual Lessee or User;
The term remaining exceeds the Liquidation Period
guidelines established for the Partnerships;
The available cash flow (or lack thereof) is not commensurate with the
Partnerships' need to make certain distributions during each Partnership's
Reinvestment Period (as defined);
The transaction structure, particularly with respect to the end-of-lease
options governing the Equipment, does not provide the Partnerships with
the residual value opportunity commensurate with the total return
requirements of the Partnerships; and
The transaction does not comply with the terms of each Partnership's
partnership agreement.
The Partnership Agreement does not prohibit the General Partner or its
Affiliates from investing in equipment leasing acquisitions, financing,
refinancing, leasing and re-leasing opportunities on its or their own behalf or
on behalf of the Prior Programs. The General Partner and each such Affiliate
shall have the right, subject only to the provisions of the immediately
preceding paragraph, to take for its own account (individually or otherwise), or
to recommend to any Affiliated Program (including the Partnerships), any
particular investment opportunity after considering the factors in the preceding
paragraph.
Any conflicts in determining and allocating Investments between the General
Partner and its Affiliated Programs on the one hand and a Partnership will be
resolved by the Investment Committee, which will evaluate the suitability of all
prospective lease acquisitions and Financing Transactions for investment by a
Partnership.
If the Investments available from time to time to a Partnership and to
other Affiliated Programs is less than the aggregate amount of Investment then
sought by them, the available Investment shall generally be allocated to the
investment entity which has been seeking Investments for the longest period of
time.
Conflicts may also arise between two or more Affiliated Programs (including
the Partnerships) advised or managed by the General Partner or any of its
Affiliates, or between one or more of such Affiliated Programs and any Affiliate
of the General Partner acting for its own account, which may be seeking to
re-lease or sell similar equipment at the same time. In any such case involving
Affiliated Programs, the first opportunity to re-lease or sell equipment shall
generally be allocated to the Affiliated Program attempting to re-lease or sell
equipment which has been subject to the lease which expired first, or, if the
leases expire simultaneously, the lease which was first to take effect. However,
the General Partner in its discretion may make exceptions to this general policy
where equipment is subject to remarketing commitments which provide otherwise or
in cases in which, in the General Partner's judgment, other circumstances make
the application of such policy inequitable or not economically feasible for a
particular Affiliated Program.
If the financing available from time to time to two or more Affiliated
Programs (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 (i) above are
not adequate) in amounts which would permit the Limited Partners to pay
federal income taxes resulting from Partnership Operations (assuming that
all Limited Partners are subject to income taxation at the highest
marginal federal income tax rate (determined without regard to state
taxes, if any) on taxable income of the Partnership. 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.
51A-143
(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 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
allocated 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 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;
(ii) second, 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 days 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
(ii) 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 days 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
days 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 Section 8.3(b)(iii).
(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.
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 (b) of the definition of Gross Asset Value herein
and Section 5.5(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)(6) 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.
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.
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)
Management Fees payable with respect to Leases and Financing Transactions
acquired by the Partnership prior to the effective date of the withdrawal of the
General Partner shall remain payable to the General Partner notwithstanding any
such withdrawal as and when the Partnership receives the Cash Flow from such
Investments creating the obligation to pay such Management Fees and in the event
that the General Partner pledges the Management Fees receivable to a Lender, the
assignment to the Lender shall be binding in the event of the voluntary or
involuntary withdrawal of the General Partner (iii) 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) Management Fees
payable with respect to Leases and Financing Transactions acquired by the
Partnership prior to the effective date of the withdrawal of the General Partner
shall remain payable to the General Partner notwithstanding any such withdrawal
as and when the Partnership receives the Cash Flow from such Investments
creating the obligation to pay such Management Fees and in the event that the
General Partner pledges the Management Fees receivable to a Lender, the
assignment to the Lender shall be binding in the event of the voluntary or
involuntary withdrawal of the General Partner (iii) 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 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) 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. ss. 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 Treasury Regulations ss.1.7704-1, 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
considered terminated on the last day of the month upon which all of the
conditions of this Section 10.2 shall have been satisfied and effective for
record purposes and for purposes of Section 8 as of the first day of the month
following the date upon which all of the conditions of this Section 10.2 shall
have been satisfied. Distributions to the assignee shall commence the month
following effectiveness of the assignment.
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.
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
(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;
(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
(vii) investor suitability records for Units sold by any Affiliate of the
General Partner for a period of six years.
(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 a reasonable expense to such Limited Partner, 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) In addition, the General Partner shall mail a copy of the Participant
List to, or as directed by, any Limited Partner within ten (10) business days of
receipt by the Partnership of a written request therefor together with a check
in payment of the cost to the General Partner of preparing and transmitting such
list to such party or his designated representative; provided that, in
connection with any copying or request for a copy of, such Limited Partner shall
certify that the Participant List is not being requested for further
reproduction and sale or any other commercial purpose unrelated to the Interest
of such Limited Partner in the Partnership or for any unlawful purpose.
(d) If the General Partner refuses or neglects to (i) permit a Limited
Partner or its representative to examine the Participant List at the office of
the Partnership during normal business hours and with reasonable notice to the
General Partner or (ii) produce and mail a copy of the Participant List within
ten (10) days after receipt of the applicable Limited Partner's written request
(evidenced by a U.S. Postal Service registered or certified mail receipt), the
General Partner shall be liable to such Limited Partner who requested such list
for the costs, including reasonable attorneys' fees, incurred by such Limited
Partner to compel production of the Participant List, and for the actual damages
(if any) suffered by such Limited Partner by reason of such refusal or neglect.
It shall be a defense that the requesting Limited Partner has failed or refused
to provide the General Partner with either (i) the required fee or (ii) the
certification called for in the next sentence and, in the case of clause (ii),
the General Partner believes that the actual purpose and reason for a request
for a copy of the Participant List is to secure such List for the purpose of the
sale, reproduction or other use thereof for a commercial purpose other than in
the interest of the Limited Partner relative to the affairs of the Partnership.
In connection with any such request, the General Partner will require the
Limited Partner requesting the Participant List to certify that the List is not
being requested for a commercial purpose unrelated to such Limited Partner's
interest in 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 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, 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;
<PAGE>
(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;
(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, 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.
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,
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 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 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:
(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 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 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 Income Fund Eight 1__ L.P.
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.
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. In furtherance of and not in
limitation of the foregoing, the General Partner may assign as collateral
security or otherwise any items of compensation payable to it pursuant to the
terms of this Agreement; notwithstanding any such assignment the General Partner
and not any such assignee shall remain solely liable for its obligations
hereunder.
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 and
reference materials used to evaluate transactions, non-refundable option
payments on equipment and other tangible or intangible personal property
not acquired, 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
1 A or B
<PAGE>
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 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 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.
A-20
"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.
"Affiliated Program" means any investment program of whatever form that is
managed or advised by the General Partner.
"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) as follows:
(a) during the second year, each Limited Partner shall receive equal to
90% of the original Capital Contribution of such Limited Partner;
(b) during the third year, each limited partner shall receive equal to 92%
of the original Capital Contribution of such Limited Partner;
(c) during the fourth year, each limited partner shall receive equal to
94% of the original Capital Contribution of such Limited Partner;
(d) during the fifth year, each limited partner shall receive equal to 96%
of the original Capital Contribution of such Limited Partner;
(e) during the first year of the Liquidation Period, each limited partner
shall receive equal to 98% of the original Capital Contribution of such
Limited Partner;
(f) during the second year of the Liquidation Period and each year
thereafter, each limited partner shall receive equal to 100% 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, (ii) 100% of previous distributions
of Distributable Cash, (iii) 100% of any previous allocations to such
Limited Partner of investment tax credit amounts and (iv) the aggregate
amount, not exceeding $150.00, of expenses reasonably incurred by a
Partnership in connection with the redemption such Unit. 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 other 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.
"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.
"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 Day, Berry & Howard LLP,
Boston, Massachusetts, or any successor law firm selected by the General
Partner.
"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, ss. 17-101, et seq., as
amended from time to time, and any successor to such Delaware Act.
"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 Leases
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 Leases
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 Rule 2810 of the NASD Conduct Rules.
"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, or in which the Partnership
has acquired a direct or indirect interest, as more fully described in
Section 3.1 of this Agreement, 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 Chase Manhattan Bank N.A. 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
__________, 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 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.
"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, entered into or acquired from time to
time by the Partnership, pursuant to which the aggregate noncancelable
rental payments due during the initial term of such lease are at least
sufficient to permit the Partnership to recover the Purchase Price of the
Equipment subject to such lease.
"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 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.
"Investment 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 Investment Committee will, at all times, consist of at
least four persons designated by the General Partner.
"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 and any
residual value interest therein.
"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 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.
"Liquidation 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 Liquidation
Proceeds therefor, which period is expected to continue not less than
twelve (12), and not more than thirty six (36), months beyond the end of
the Reinvestment Period and which, in any event, will end no later than
eleven (11) years after the Final Closing Date.
"Majority" or "Majority Interest" means Limited Partners owning more than
50% of the aggregate outstanding Units.
"Management Fees" means, for any Fiscal Year, a 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 or
(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 or re-leasing 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 750,000 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 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, refinancing 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 asset and where the noncancelable rental 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) 3.5%
($3.50 per Unit) of the first $25,000,000 or less of each Unit sold for
Gross Offering Proceeds; 2.5% ($2.50 per Unit) of each Unit sold for Gross
Offering Proceeds in excess of $25,000,000 but less than $50,000,000; and
1.5% ($1.50 per Unit) for Gross Offering Proceeds exceeding $50,000,000.
"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 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, entered into or acquired from time to
time by the Partnership, pursuant to which the aggregate noncancelable
rental payments during the original term of such lease, on a net present
value basis, are not sufficient to recover the Purchase Price of the
Equipment leased 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 Thomas W. Martin.
"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 Income Fund Eight 1__ L.P., 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 ss.ss. 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.
"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.
"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, ICON Cash Flow Partners L.P. Six and ICON Cash
Flow Partners L.P. Seven.
"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. ss.
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. ss. 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. ss. 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.
1 A or B
"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. 333-54011) 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 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
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. Purchase Price shall also mean, with
respect to options to acquire Equipment or any interest therein, the sum
of the exercise price and the price to acquire the option.
"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. 333-54011) 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.
"Selling Dealer" means each member firm of the National Association of
Securities Dealers, Inc. which has been 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 Day, Berry & Howard LLP, Boston, Massachusetts, 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) twelve (12) months following the Effective
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 12 months 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 equipment user to whom the Partnership provides financing
pursuant to a Financing Transaction.
"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/Thomas W. Martin
BEAUFORT J. B. CLARKE, President THOMAS W. MARTIN
<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
Thomas W. Martin $1,000
31 Milk Street
Suite 1111
Boston, MA 02109
<PAGE>
C-14
AGREEMENT OF LIMITED PARTNERSHIP
OF
ICON INCOME FUND EIGHT 1 L.P.
TABLE OF CONTENTS
Page
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....................................... 2
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............................. 17
8.1 Distribution of Distributable Cash from Operations and
Distributable Cash from Sales ............................ 18
8.2 Allocations of Profits and Losses......................... 18
8.3 Distributions and Allocations Among the Limited Partners.. 20
8.4 Tax Allocations: Code Section 704(c); Revaluations........ 21
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.......................... 22
Section 9. WITHDRAWAL OF GENERAL PARTNER............................. 22
9.1 Voluntary Withdrawal...................................... 22
9.2 Involuntary Withdrawal.................................... 23
9.3 Consequences of Withdrawal................................ 23
9.4 Liability of Withdrawn General Partner.................... 24
9.5 Continuation of Partnership Business...................... 24
1 A or B
A-i
<PAGE>
Page
Section 10.TRANSFER OF UNITS 24
10.1 Withdrawal of a Limited Partner........................... 24
10.2 Assignment................................................ 24
10.3 Substitution.............................................. 25
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........................ 28
Section 12. FISCAL MATTERS 28
12.1 Title to Property and Bank Accounts....................... 28
12.2 Maintenance of and Access to Basic Partnership Documents.. 28
12.3 Financial Books and Accounting............................ 29
12.4 Fiscal Year............................................... 30
12.5 Reports................................................... 30
12.6 Tax Returns and Tax Information........................... 31
12.7 Accounting Decisions...................................... 32
12.8 Federal Tax Elections..................................... 32
12.9 Tax Matters Partner....................................... 33
12.10Reports to State Authorities.............................. 33
Section 13.MEETINGS AND VOTING RIGHTS OF THE LIMITED PARTNERS 33
13.1 Meetings of the Limited Partners.......................... 33
13.2 Voting Rights of the Limited Partners..................... 34
13.3 Limitations on Action by the Limited Partners............. 34
Section 14. AMENDMENTS 35
14.1 Amendments by the General Partner......................... 35
14.2 Amendments with the Consent of the Majority Interest...... 35
Section 15. POWER OF ATTORNEY 35
15.1 Appointment of Attorney-in-Fact........................... 35
15.2 Amendments to Agreement and Certificate of Limited
Partnership............................................... 36
15.3 Power Coupled With an Interest............................ 36
Section 16. GENERAL PROVISIONS 37
16.1 Notices, Approvals and Consents........................... 37
16.2 Further Assurances........................................ 37
16.3 Captions.................................................. 37
16.4 Binding Effect............................................ 37
16.5 Severability.............................................. 37
16.6 Integration............................................... 37
16.7 Applicable Law............................................ 38
16.8 Counterparts.............................................. 38
16.9 Creditors................................................. 38
16.10Interpretation............................................ 38
16.11Successors and Assigns.................................... 38
16.12Waiver of Action for Partition............................ 38
Section 17. DEFINITIONS 38
A-ii
<PAGE>
EXHIBIT B
PRIOR PERFORMANCE TABLES
FOR THE PRIOR PUBLIC PROGRAMS
Prior performance is not an indication of future results.
Prior Performance Tables
The following unaudited tables disclose certain information relating to
the performance, operations and investment for seven of the General Partner's
previous publicly-offered income-oriented programs, ICON Cash Flow
Partners,
L.P., Series A ("Series A"), ICON Cash Flow Partners, L.P., Series B ("Series
B"), ICON Cash Flow Partners, L.P., Series C ("Series C"), ICON Cash Flow
Partners, L.P., Series D ("Series D"), ICON Cash Flow Partners, L.P.,
Series E
("Series E"), ICON Cash Flow Partners L.P. Six ("LP Six") and ICON Cash
Flow
Partners L.P. Seven ("LP Seven"), collectively the "Prior Public Programs").
Purchasers of the Units of limited partnership interest in ICON Income Fund
Eight (the "Partnership") being offered by this Prospectus will not acquire any
ownership interest in any of the Prior Public Programs and should not assume
that they will experience investment results or returns, if any, comparable to
those experienced by investors in the Prior Public Programs.
Additional information concerning the Prior Public Programs will be
contained in Form 10-K Annual Reports for each such Program which may be
obtained (after their respective filing dates) without charge by contacting
ICON
Capital Corp., 600 Mamaroneck Avenue, Harrison, New York 10528-1632. Such Form
10-K Annual Reports will also be available upon request at the office of the
Securities and Exchange Commission, Washington, D.C. The results of the Prior
Public Programs should not be considered indicative of the likely results of the
Partnership. Moreover, the information presented below should not be considered
indicative of the extent to which the Prior Public Programs will achieve their
objectives, because this will in large part depend upon facts which cannot now
be determined or predicted.
See "Other Offerings By the General Partner and Its Affiliates" in this
Prospectus for a narrative discussion of the general investment objectives of
the Prior Public Programs and a narrative discussion of the data concerning the
Prior Public Programs contained in these Tables. Additionally, see Table VI
"Acquisition of Equipment by the Prior Public Programs" which is contained as an
Exhibit to the Registration Statement, as amended, of which this Prospectus is a
part.
Table Description Page
I Experience in Raising and Investing Funds B-2
II Compensation to the General Partner and Affiliates B-4
III Operating Results of Prior Public Programs
* Series A B-5
* Series B B-7
* Series C B-9
* Series D B-11
* Series E B-13
* LP Six B-15
* LP Seven B-17
IV Results of Completed Prior Public Programs (None) B-19
V Sales or Disposition of Equipment by Prior Public Programs
* Series A B-20
* Series B B-23
* Series C B-30
* Series D B-35
* Series E B-41
* LP Six B-50
* LP Seven B-52
Prior performance is not an indication of future results.
TABLE I
Experience in Raising and Investing Funds
(unaudited)
The following table sets forth certain information, as of March 31, 1998,
concerning the experience of the General Partner in raising and investing
limited partners' funds in its Prior Public Programs: <TABLE>
Series A Series B Series C Series D
------------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dollar amount offered $ 40,000,000 $20,000,000 $20,000,000 $40,000,000
============ =========== =========== ===========
Dollar amount raised $ 2,504,500 100.0% $20,000,000 100.0% $20,000,000 100.0% $40,000,000 100.0%
Less: Offering expenses:
Selling commissions 262,973 10.5% 1,800,000 9.0% 2,000,000 10.0% 4,000,000 10.0%
Organization and offering expenses paid to
General Partner or its Affiliates 100,180 4.0% 900,000 4.5% 600,000 3.0% 1,400,000 3.5%
Reserves 25,045 1.0% 200,000 1.0% 200,000 1.0% 400,000 1.0%
------------ ----- ----------- ----- ----------- ----- ----------- -----
Offering proceeds available for investment $ 2,116,302 84.5% $17,100,000 85.5% $17,200,000 86.0% $34,200,000 85.5%
============ ===== =========== ===== =========== ===== =========== =====
Debt proceeds $ 4,190,724 $46,092,749 $50,355,399 $70,962,589
============ =========== =========== ===========
Total equipment acquired $ 7,576,758 $65,580,973 $70,257,280 $32,771,421
============ =========== =========== ===========
Acquisition fees paid to General Partner
and its affiliates $ 206,710 $ 2,219,998 $ 2,396,810 $ 4,539,336
============ =========== =========== ===========
Equipment acquisition costs as a percentage of amount raised:
Purchase price 81.84% 82.23% 82.70% 82.19%
Acquisition fees paid to General Partner
or its Affiliates 2.66 3.27 3.30 3.31
------------ ----------- ----------- -----------
Percent invested 84.5% 85.5% 86.0% 85.5%
=========== ========== ========== ==========
Percent leveraged (non-recourse debt
financing divided by total purchase price) 55.31% 70.28% 71.67% 53.45%
Date offering commenced 1/9/87 7/18/89 12/7/90 8/23/91
Original offering period (in months) 24 18 18 18
Actual offering period (in months) 24 17 7 10
Months to invest 90% of amount available for
investment (measured from the beginning of offering) 24 18 10 4
</TABLE>
B-2
Prior performance is not an indication of future results.
TABLE I
Experience in Raising and Investing Funds
(unaudited)
The following table sets forth certain information, as of March 31, 1998,
concerning the experience of the General Partner in raising and investing
limited partners' funds in its Prior Public Programs: <TABLE>
Series E L.P. Six L.P. Seven
-------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dollar amount offered $ 80,000,000 $ 120,000,000 $100,000,000
============ ============= ============
Dollar amount raised $ 61,041,151 100.0% $ 38,385,712 100.0% 72,944,549(1) 100.0%
Less: Offering expenses:
Selling commissions 6,104,115 10.0% 3,838,571 10.0% 7,294,455 10.0%
Organization and offering expenses paid to
General Partner or its Affiliates 2,136,440 3.5% 1,343,500 3.5% 2,188,336 3.0%
Reserves 610,412 1.0% 383,857 1.0% 729,446 1.0%
------------ ----- ------------- ---- ------------ ---
Offering proceeds available for investment $ 52,190,184 85.5% $ 32,819,784 85.5% $ 62,732,312 86.0%
============ ===== ============= ==== ============ ====
Debt proceeds $124,431,396 $ 110,105,846 $193,840,785
============ ============= ============
Total equipment acquired $230,776,762 $ 155,010,713 $258,013,049
============ ============= ============
Acquisition fees paid to General Partner
and its affiliates $ 7,021,906 $ 4,390,033 $ 7,524,928
============ ============= ============
Equipment acquisition costs as a percentage of amount raised:
Purchase price 82.55% 82.75% 83.17%
Acquisition fees paid to General Partner
or its Affiliates 2.95 2.75 2.83
------------ ------------- ------------
Percent invested 85.5% 85.5% 86.0%
=========== ============ ===========
Percent leveraged (non-recourse debt
financing divided by total purchase price) 53.92% 71.12% 75.13%
Date offering commenced 6/5/92 11/12/93 11/9/95
Maximum offering period (in months) 24 24 36
Actual offering period (in months) 13 24 29 (1)
Months to invest 90% of amount available for
investment (measured from the beginning of offering) 9 16 14
</TABLE>
(1) L.P. Seven began offering its units to suitable investors on November 9,
1995. As of June 30, 1998, L.P. Seven had raised an aggregate dollar amount
of $85,793,834. The offering period for L.P. Seven will end no later than
November 8, 1998, 36 months after the Partnership began offering such
units.
B-3
Prior performance is not an indication of future results.
TABLE II
Compensation to the General Partner and Affiliates
(unaudited)
The following table sets forth certain information, as of March 31,
1998, concerning the compensation derived by the General Partner and its
affiliates from its Prior Public Programs: <TABLE>
Series A Series B Series C Series D Series E LP Six LP Seven
-------- -------- -------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Date offering commenced 1/9/87 7/18/89 12/7/90 8/23/91 6/5/92 11/12/93 11/9/95
Date offering closed 1/8/89 11/16/90 6/20/91 6/5/92 7/31/93 11/8/95 (1)
Dollar amount raised $2,504,500 $20,000,000 $20,000,000 $40,000,000 $ 61,041,151 $38,385,712 $72,944,549
========== =========== =========== =========== ============ =========== ===========
Amounts paid to the General Partner and its Affiliates from proceeds of the
offering:
Underwriting commissions $ 63,450 $ 215,218 $ 413,120 $ 807,188 $ 1,226,111 $ 767,714 $ 1,458,891
========== =========== =========== =========== ============ =========== ===========
Organization and offering reimbursements $ 100,180 $ 900,000 $ 600,000 $ 1,400,000 $ 2,136,440 $ 1,343,500 $ 2,188,336
========== =========== =========== =========== ============ =========== ===========
Acquisition fees $ 206,710 $ 2,219,998 $ 2,396,810 $ 4,539,336 $ 7,021,906 $ 4,390,033 $ 7,524,978
========== =========== =========== =========== ============ =========== ===========
Dollar amount of cash generated from operations
before deducting such payments/accruals to
the General Partner and Affiliates $4,879,680 $21,637,059 $22,454,061 $38,448,938 $100,506,618 $37,968,108 $ 3,922,437
========== =========== =========== =========== ============ =========== ===========
Amount paid or accrued to General Partner and Affiliates:
Management fee $ 308,386 $ 2,782,287 $ 2,685,205 $ 4,530,494 $ 6,582,207 $ 3,385,280 $ 2,265,130
========== =========== =========== =========== ============ =========== ===========
Administrative expense reimbursements $ 108,924 $ 690,679 $ 562,862 $ 1,664,407 $ 3,429,748 $ 1,701,219 $ 977,676
========== =========== =========== =========== ============ =========== ===========
</TABLE>
(1) L.P. Seven began offering its units to suitable investors on November 9,
1995. As of June 30, 1998, L.P. Seven had raised an aggregate dollar amount
of $85,793,834. The offering period for L.P. Seven will end no later than
November 8, 1998, 36 months after the Partnership began offering such
units.
B-4
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs - Series A
(unaudited)
The following table summarizes the operating results of Series A. The Program's
records are maintained in accordance with Generally Accepted Accounting
Principles ("GAAP") for financial statement purposes. <TABLE>
Three Months Ended
March 31, 1998 For the Years Ended December 31,
------------------ ----------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 18,478 $ 40,359 $ 53,041 $128,935 $188,148 $317,069
Net gain on sales or remarketing of equipment 12,429 82,576 142,237 74,970 87,985 118,143
--------- -------- -------- -------- -------- --------
Gross revenue 30,907 122,935 195,278 203,905 276,133 435,212
Less:
Administrative expense reimbursement
- General Partner 888 4,521 7,133 9,690 11,404 4,125
General and administrative 787 34,565 32,252 36,641 34,468 32,040
Management fees - General Partner 507 2,553 4,055 5,951 13,607 36,261
Interest expense - 7,875 15,092 39,350 63,423 84,324
Provision for (reversal of) bad debts (2) - (17,000) - 10,000 33,500 87,551
Depreciation expense - - - 18,236 46,330 97,179
Amortization of initial direct costs - - - - 27 686
--------- -------- -------- -------- -------- --------
Net income (loss) - GAAP $ 28,725 $ 90,421 $136,746 $ 84,037 $ 73,374 $ 93,046
========= ======== ======== ======== ======== ========
Net income (loss) - GAAP - allocable to
limited partners $ 27,289 $ 85,900 $129,909 $ 79,835 $ 69,705 $ 88,394
========= ======== ======== ======== ======== ========
Taxable income from operations (1) (3) 62,818 198,523 $ 94,532 $111,397 130,892
========= ======== ======== ======== ======== ========
Cash generated from operations $ 22,614 $109,929 $210,327 $268,467 $301,679 $382,184
Cash generated from sales equipment 14,082 112,356 202,787 136,363 216,200 490,078
Cash generated from refinancing - - - - - -
--------- -------- -------- -------- -------- -------
Cash generated from operations, sales and
refinancing 36,696 222,285 413,114 320,793 517,879 872,262
Less:
Cash distributions to investors from operations,
sales and refinancing 56,351 225,405 225,405 225,533 233,651 356,915
Cash distributions to General Partner from
operations, sales and refinancing 2,966 11,863 11,863 11,867 12,297 18,785
--------- -------- -------- -------- -------- --------
Cash generated from (used by) operations, sales
and refinancing after cash distributions $ (22,621) $(14,983) $175,846 $ 83,393 $271,931 $496,562
========= ======== ======== ======== ======== ========
</TABLE>
B-5
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs - Series A (Continued)
(unaudited)
<TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ -------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
Tax data and distributions per $1,000 limited
partner investment
Federal income tax results:
<S> <C> <C> <C> <C> <C> <C>
Taxable income from operations (1) (3) $ 23.82 $ 37.65 $ 35.86 $ 42.25 $ 49.65
======= ======= ======= ======= =======
Cash distributions to investors
Source (on GAAP basis)
Investment income $ 10.90 $ 34.30 $ 38.13 $ 31.88 $ 27.83 $ 35.29
Return of capital $ 11.60 $ 55.70 $ 51.87 $ 58.18 $ 65.46 $107.22
Source (on Cash basis)
- Operations $ 9.03 $ 43.89 $ 83.98 $ 90.06 $ 93.29 $142.51
- Sales $ 5.62 $ 44.87 $ 6.02 - - -
- Refinancing $ 7.85 - - - - -
- Other - $ 1.24 - - - -
Weighted average number of limited partnership
($500) units outstanding 5,009 5,009 5,009 5,009 5,009 5,009
======= ====== ====== ====== ====== =======
</TABLE>
(1) The difference between Net income (loss) - GAAP and Taxable income from
operations is due to different methods of calculating depreciation and
amortization, the use of the reserve method for providing for possible
doubtful accounts under GAAP and different methods of recognizing revenue
on Direct Finance Leases.
(2) The Partnership records a provision for bad debts to provide for estimated
credit losses in the portfolio. This policy is based on an analysis of the
aging of the Partnership's portfolio, a review of the non-performing
receivables and leases, prior collection experience and historical loss
experience.
(3) Interim tax information is not available.
B-6
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs - Series B
(unaudited)
The following table summarizes the operating results of Series B. The Program's
records are maintained in accordance with Generally Accepted Accounting
Principles ("GAAP") for financial statement purposes. <TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ ------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 77,990 $ 333,775 $ 342,739 $ 715,841 $1,327,962 $2,526,762
Net gain on sales or remarketing
of equipment 21,164 228,875 176,924 480,681 288,714 185,542
--------- ---------- ---------- ---------- ---------- ----------
Gross revenue 99,154 562,650 519,663 1,196,522 1,616,676 2,712,304
Less:
Interest expense 21,765 106,868 45,619 182,419 612,643 1,285,458
General and administrative 7,182 59,847 102,721 102,334 102,444 120,094
Administrative expense reimbursement
- General Partner 5,848 39,609 50,841 85,848 153,287 38,467
Management fees - General Partner (4) - - (228,906) 84,811 151,316 517,107
Depreciation expense - - - 54,799 106,001 244,819
Amortization of initial direct costs - - 4 33,433 100,949 255,570
Provision for bad debts (2) - - - 25,000 - 20,000
Write down of estimated residual values (3) - - - - - -
--------- ---------- ---------- ---------- ---------- -------
Net income (loss) - GAAP $ 64,359 $ 356,326 $ 549,384 $ 627,878 $ 390,036 $ 230,789
========= ========== ========== ========== ========== ==========
Net income (loss) - GAAP - allocable to
limited partners $ 63,715 $ 352,763 $ 543,890 $ 621,599 $ 386,136 $ 228,461
========= ========== ========== ========== ========== ==========
Taxable income from operations (1) (5) $ 44,995 $ 740,381 $2,363,289 $ 475,707 $ 103,180
========== ========== ========== ========== ==========
Cash generated from operations $ 382,639 $ 879,014 $1,002,547 $ 999,015 $ 800,648 $2,434,478
Cash generated from sales 22,335 544,232 600,737 2,148,030 3,443,168 1,129,325
Cash generated from refinancing 150,000 1,500,000 - - - -
--------- ---------- ---------- ---------- ---------- ---------
Cash generated from operations, sales and
refinancing 554,974 2,923,246 1,603,284 3,147,045 4,243,816 3,563,803
Less:
Cash distributions to investors from operations,
sales and refinancing 449,550 1,798,200 1,798,200 1,799,763 1,800,000 2,466,667
Cash distributions to General Partner from
operations, sales and refinancing 4,540 18,164 18,164 18,180 18,182 24,917
--------- ---------- ---------- ---------- ---------- ----------
Cash generated from (used by) operations, sales
and refinancing after cash distributions $ 100,884 $1,106,882 $ (213,080)$1,329,102 $2,425,634 $1,072,219
========= ========== ========== ========== ========== ==========
</TABLE>
B-7
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs - Series B (Continued)
(unaudited)
<TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ ------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Tax data and distributions per $1,000 limited
partner investment
Federal income tax results:
Taxable income from operations (1) (5) $ 2.23 $ 36.69 $ 116.99 $ 23.55 $ 5.11
========= ========= ======== ========== ========
Cash distributions to investors
Source (on GAAP basis)
Investment income $ 3.15 $ 17.73 $ 27.23 $ 31.08 $ 19.31 $ 11.42
Return of capital $ 19.35 $ 72.27 $ 62.78 $ 58.92 $ 70.69 $ 111.91
Source (on Cash basis)
- Operations $ 19.12 $ 44.00 $ 50.18 $ 49.96 $ 39.63 $ 120.50
- Sales $ 1.13 $ 27.24 $ 30.07 $ 40.04 $ 50.37 $ 2.83
- Refinancing $ 2.25 $ 18.76 - - - -
- Other - - $ 9.75 - - -
Weighted average number of limited partnership
($100) units outstanding 199,800 199,800 199,800 199,986 200,000 200,000
========= ======== ======== ======== ======== =========
</TABLE>
(1) The difference between Net income (loss) - GAAP and Taxable income from
operations is due to different methods of calculating depreciation and
amortization, the use of the reserve method for providing for possible
doubtful accounts under GAAP and different methods of recognizing revenue
on Direct Finance Leases.
(2) The Partnership records a provision for bad debts to provide for estimated
credit losses in the portfolio. This policy is based on an analysis of the
aging of the Partnership's portfolio, a review of the non-performing
receivables and leases, prior collection experience and historical loss
experience.
(3) The Partnership records a write down to its residual position if it has
been determined to be impaired. Impairment generally occurs for one of two
reasons: (1) when the recoverable value of the underlying equipment falls
below the Partnership's carrying value or (2) when the primary security
holder has foreclosed on the underlying equipment in order to satisfy the
remaining lease obligation and the amount of proceeds received by the
primary security holder in excess of such obligation is not sufficient to
recover the Partnership's residual position.
(4) The Partnership's Reinvestment Period expired on November 15, 1995, five
years after the Final Closing Date. The General Partner distributed a
Definitive Consent Statement to the Limited Partners to solicit approval of
two amendments to the Partnership Agreement. As of March 20, 1996 these
amendments were agreed to and are effective from and after November 15,
1995. The amendments: (1) extend the Reinvestment Period for a maximum of
four additional years and likewise delay the start and end of the
Liquidation Period, and (2) eliminate the Partnership=s obligation to pay
the General Partner $220,000 of the $347,000 accrued and unpaid management
fees as of November 15, 1995, and any additional management fees which
would otherwise accrue during the present Liquidation Period. The portion
of the accrued and unpaid management fees that would be payable to the
General Partner, or $127,000 ($347,000 less $220,000) will be returned to
the Partnership in the form of an additional Capital Contribution by the
General Partner.
(5) Interim tax information not available.
B-8
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs - Series C
(unaudited)
The following table summarizes the operating results of Series C. The Program's
records are maintained in accordance with Generally Accepted Accounting
Principles ("GAAP") for financial statement purposes. <TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ -------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $108,896 $ 455,472 $ 659,218 $ 964,104 $ 1,775,547 $3,203,141
Net gain on sales or remarketing of equipment 79,155 175,860 511,331 95,250 361,407 101,463
-------- ---------- ---------- ---------- ----------- ----------
Gross revenue 188,051 631,332 1,170,549 1,059,354 2,136,954 3,304,604
Less:
General and administrative 15,868 60,248 37,247 107,419 104,307 133,274
Administrative expense reimbursement
- General Partner 8,622 59,126 93,494 130,482 174,261 78,969
Interest expense - 4,888 16,809 253,143 920,433 1,715,520
Management fees - General Partner - (471,463) 92,360 128,533 171,135 695,662
Amortization of initial direct costs - - 6,912 38,892 154,879 427,625
Depreciation expense - - - - 224,474 393,185
Provision for/(reversal of) bad debt (2) - - - - 141,000 (90,000)
Write down of estimated residual values (3) - - - - - -
-------- ---------- ---------- ---------- ----------- -------
Net income (loss) - GAAP $163,561 $ 978,533 $ 923,727 $ 400,885 $ 246,645 $ (49,631)
======== ========== ========== ========== =========== ==========
Net income (loss) - GAAP - allocable to
limited partners $161,925 $ 968,748 $ 914,490 $ 396,876 $ 244,000 $ (49,135)
======== ========== ========== ========== =========== ==========
Taxable income (loss) from operations (1) (5) $ 274,376 $1,768,103 $ (649,775)$(3,611,476)$1,780,593
========== ========== ========== =========== ==========
Cash generated from operations $533,143 $2,038,710 $1,987,290 $ 391,072 $ 2,854,887 $2,694,348
Cash generated from sales 92,979 621,621 1,289,421 3,058,969 1,665,032 1,266,452
Cash generated from refinancing - - - - - -
-------- ---------- ---------- ---------- ----------- -------
Cash generated from operations, sales and
refinancing 626,122 2,660,331 3,276,711 3,450,041 4,519,919 3,960,800
Less:
Cash distributions to investors from operations,
sales and refinancing 445,921 1,784,993 1,786,992 1,796,363 1,799,100 2,466,667
Cash distributions to General Partner from
operations, sales and refinancing 4,504 18,030 18,050 18,144 18,173 24,916
-------- ---------- ---------- ---------- ----------- ----------
Cash generated from operations, sales and
refinancing after cash distributions $175,697 $ 857,308 $1,471,669 $1,635,534 $ 2,702,646 $1,469,217
======== ========== ========== ========== =========== ==========
</TABLE>
B-9
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs - Series C (Continued)
(unaudited)
<TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ -------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Tax data and distributions per $1,000 limited
partner investment
Federal income tax results:
Taxable income from operations (1) (5) $ 13.70 $ 88.16 $ (32.24) $ (178.86) $ 88.14
======= ========= ========= ========= ========
Cash distributions to investors
Source (on GAAP basis)
Investment income $ 8.17 $ 48.85 $ 46.06 $ 19.87 $ 12.21 -
Return of capital $ 14.33 $ 41.15 $ 43.94 $ 70.13 $ 77.79 $ 123.33
Source (on Cash basis)
- Operations $ 22.50 $ 90.00 $ 90.00 $ 19.59 $ 90.00 $ 123.33
- Sales - - - $ 70.41 - -
- Refinancing - - - - - -
- Other - - - - - -
Weighted average number of limited partnership
($100) units outstanding 198,187 198,332 198,551 199,558 199,900 199,992
========= ======== ======== ======== ======== ========
</TABLE>
(1) The difference between Net income (loss) - GAAP and Taxable income (loss)
from operations is due to different methods of calculating depreciation and
amortization, the use of the reserve method for providing for possible
doubtful accounts under GAAP and different methods of recognizing revenue
on Direct Finance Leases.
(2) The Partnership records a provision for bad debts to provide for estimated
credit losses in the portfolio. This policy is based on an analysis of the
aging of the Partnership's portfolio, a review of the non-performing
receivables and leases, prior collection experience and historical loss
experience.
(3) The Partnership records a write down to its residual position if it has
been determined to be impaired. Impairment generally occurs for one of two
reasons: (1) when the recoverable value of the underlying equipment falls
below the Partnership's carrying value or (2) when the primary security
holder has foreclosed on the underlying equipment in order to satisfy the
remaining lease obligation and the amount of proceeds received by the
primary security holder in excess of such obligation is not sufficient to
recover the Partnership's residual position.
(4) The Partnership's Reinvestment Period expired on June 19, 1996, five years
after the Final Closing Date. The General Partner distributed a Definitive
Consent Statement to the Limited Partners to solicit approval of two
amendments to the Partnership Agreement. As of February 19, 1998 these
amendments were agreed to and are effective from and after June 19, 1996.
The amendments: (1) extend the Reinvestment Period for a maximum of four
and one half additional years and likewise delay the start and end of the
Liquidation Period, and (2) eliminate the Partnership's obligation to pay
the General Partner $529,125 of the $634,125 accrued and unpaid management
fees as of December 31, 1997 and any additional management fees which would
otherwise accrue during the present Liquidation Period. The portion of the
accrued and unpaid management fees that would be payable to the General
Partner or $105,000 ($634,125 less $529,125) will be returned to the
Partnership in the form of an additional Capital Contribution by the
General Partner.
(5) Interim tax information not available.
B-10
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs - Series D
(unaudited)
The following table summarizes the operating results of Series D. The Program's
records are maintained in accordance with Generally Accepted Accounting
Principles ("GAAP") for financial statement purposes. <TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ -----------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 730,736 $ 3,084,705 $ 3,619,457 $ 3,270,722 $ 3,661,321 $ 6,300,753
Net gain on sales or remarketing of equipment 6,854 452,706 2,391,683 1,931,333 1,199,830 313,468
---------- ----------- ----------- ----------- ----------- -----------
Gross revenue 737,590 3,537,411 6,011,140 5,202,055 4,861,151 6,614,221
Less:
Interest expense 239,598 1,121,197 1,651,940 621,199 652,196 1,261,312
Depreciation expense 152,750 356,417 - - 4,167 1,144,609
Management fees - General Partner 130,599 548,400 685,103 594,623 778,568 996,356
Administrative expense reimbursement
- General Partner 71,978 271,829 301,945 257,401 337,867 423,387
General and administrative 48,002 199,751 217,378 273,663 412,655 184,604
Amortization of initial direct costs 34,695 363,087 614,441 511,427 580,457 931,983
Provision for bad debts (3) - - - 150,000 475,000 575,000
---------- ----------- ----------- ----------- ----------- -----------
Net income - GAAP $ 59,968 $ 676,730 $ 2,540,333 $ 2,793,742 $ 1,620,241 $ 1,096,970
========== =========== =========== =========== =========== ===========
Net income - GAAP - allocable to limited partners $ 59,368 $ 669,963 $ 2,514,930 $ 2,765,805 $ 1,604,039 $ 1,086,000
========== =========== =========== =========== =========== ===========
Taxable income from operations (1) (4) $ 3,483,507 $ 3,097,307 $ 1,641,323 $ 2,612,427 $ 5,766,321
=========== =========== =========== =========== ===========
Cash generated from operations $ 346,598 $ 8,409,703 $ 1,621,624 $ 2,756,354 $ 1,969,172 $ 6,330,281
Cash generated from sales 638,024 9,741,651 15,681,303 6,776,544 9,054,589 5,143,299
Cash generated from refinancing - 2,700,000 5,250,000 4,148,838 - -
---------- ----------- ----------- ----------- ----------- -----------
Cash generated from operations, sales and
refinancing 984,622 20,851,354 22,552,927 13,681,736 11,023,761 11,473,580
Less:
Cash distributions to investors from operations,
sales and refinancing 1,080,945 7,882,867 5,588,508 5,589,207 5,596,503 5,600,000
Cash distributions to General Partner from
operations, sales and refinancing 10,919 79,648 56,450 56,457 56,530 56,564
---------- ----------- ----------- ----------- ----------- -----------
Cash generated from (used by) operations, sales and
refinancing after cash distributions $ (107,242) $12,888,839 $16,907,969 $ 8,039,072 $ 5,370,728 $ 5,817,016
========== =========== =========== =========== =========== ===========
</TABLE>
B-11
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs - Series D (Continued)
(unaudited)
<TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ ------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Tax data and distributions per $1,000 limited
partner investment
Federal income tax results:
Taxable income from operations (1) (4) $ 86.40 $ 76.82 $ 40.70 $ 64.71 $ 142.72
======== ======== ======== ======== ========
Cash distributions to investors (2)
Source (on GAAP basis)
Investment income $ 1.37 $ 16.79 $ 63.00 $ 69.28 $ 40.13 $ 27.15
Return of capital 23.63 $ 180.71 $ 77.00 $ 70.72 $ 99.87 $ 112.85
Source (on Cash basis)
- Operations $ 8.01 $ 197.50 $ 40.62 $ 69.04 $ 48.77 $ 140.00
- Sales $ 14.75 - $ 99.38 $ 70.96 $ 91.23 -
- Refinancing $ 2.24 - - - - -
- Other - - - - - -
Weighted average number of limited partnership
($100) units outstanding 399,118 399,138 399,179 399,229 399,703 400,000
========= ======== ======== ======== ======== ========
</TABLE>
(1) The difference between Net income - GAAP and Taxable income from operations
is due to different methods of calculating depreciation and amortization,
the use of the reserve method for providing for possible doubtful accounts
under GAAP and different methods of recognizing revenue on Direct Finance
Leases.
(2) The program held its initial closing on September 13, 1991 and as of its
final closing date on June 5, 1992 it had eighteen (18) additional
semi-monthly closings. Taxable income from operations per $1,000 limited
partner investment is calculated based on the weighted average number of
limited partnership units outstanding during the period.
(3) The Partnership records a provision for bad debts to provide for estimated
credit losses in the portfolio. This policy is based on an analysis of the
aging of the Partnership's portfolio, a review of the non-performing
receivables and leases, prior collection experience and historical loss
experience.
(4) Interim tax information not available.
B-12
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs-Series E
(unaudited)
The following table summarizes the operating results of Series E. The Program's
records are maintained in accordance with Generally Accepted Accounting
Principles ("GAAP") for financial statement purposes. <TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ ---------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 2,216,133 $ 6,401,873 $ 7,907,175 $10,570,473 $10,946,254 $ 8,748,076
Net gain on sales or remarketing of equipment 270,346 1,209,420 1,942,041 1,610,392 628,027 1,486,575
----------- ----------- ----------- ----------- ----------- -----------
Gross revenue 2,486,479 7,611,293 9,849,216 12,180,865 11,574,281 10,234,651
Less:
Interest expense 1,019,133 2,471,045 2,957,534 4,377,702 4,868,950 3,023,934
Management fees - General Partner 432,694 919,728 1,120,336 1,596,569 1,547,509 949,468
Administrative expense reimbursement
- General Partner 208,970 486,253 563,107 784,775 408,114 811,966
Provision for bad debts (3) 200,000 - 400,000 600,000 250,000 2,186,750
Amortization of initial direct costs 173,973 461,620 887,960 1,530,505 1,840,714 1,667,212
Depreciation 105,096 475,619 1,061,711 1,061,712 289,478 18,037
General and administrative 90,139 370,705 608,293 638,362 438,569 315,000
Minority interest in joint venture 30,795 57,738 6,392 5,438 - -
----------- ----------- ----------- ----------- ----------- -----------
Net income - GAAP $ 225,679 $ 2,368,585 $ 2,243,883 $ 1,585,802 $ 1,527,095 $ 1,499,573
=========== =========== =========== =========== =========== ===========
Net income - GAAP - allocable to
limited partners $ 223,422 $ 2,344,899 $ 2,221,444 $ 1,569,944 $ 1,511,824 $ 1,484,577
=========== =========== =========== =========== =========== ===========
Taxable income (loss) from operations (1) (4) $ 981,575 $(3,280,008) $ 1,700,386 $ 2,793,029 $ 3,293,140
=========== =========== =========== =========== ===========
Cash generated from operations $ 4,759,343 $21,638,350 $13,210,339 $ 8,768,414 $17,597,929 $18,415,294
Cash generated from sales 580,586 15,313,194 10,358,637 7,419,261 6,492,842 9,416,909
Cash generated from refinancing 6,257,067 20,765,451 13,780,000 7,400,000 - 38,494,983
----------- ----------- ----------- ----------- ----------- -----------
Cash generated from operations,
sales and refinancing 11,596,996 57,716,995 37,348,976 23,587,675 24,090,771 66,327,186
Less:
Cash distributions to investors from
operations, sales and refinancing 1,939,210 7,768,316 7,771,164 7,773,082 8,390,043 5,796,799
Cash distributions to General Partner
from operations, sales and refinancing 19,588 78,468 78,496 78,512 78,582 58,637
----------- ----------- ----------- ----------- ----------- -----------
Cash generated from operations, sales and
refinancings after cash distributions $ 9,638,168 $49,870,211 $29,499,316 $15,736,081 $15,622,146 $60,471,750
=========== =========== =========== =========== =========== ===========
</TABLE>
B-13
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs-Series E (Continued)
(unaudited)
<TABLE>
Three Months Ended
March 31, For the Year Ended December 31,
------------------ -----------------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Tax and distribution data per $1,000 limited partner investment
Federal Income Tax results:
Taxable income (loss) from operations (1) (4) $ 15.95 $ (53.28) $ 27.61 $ 45.32 $ 66.54
======== ======== ======== ======== ========
Cash distributions to investors (2)
Source (on GAAP basis)
Investment income $ 3.67 $ 38.49 $ 36.45 $ 25.75 $ 24.78 $ 30.32
Return of capital $ 28.20 $ 89.01 $ 91.05 $ 101.75 $ 112.74 $ 88.06
Source (on cash basis)
- Operations $ 31.87 $ 127.50 $ 127.50 $ 127.50 $ 137.52 $ 118.38
- Sales - - - - - -
- Refinancings - - - - - -
- Other - - - - - -
Weighted average number of limited partnership
($100) units outstanding 608,381 609,211 609,503 609,650 610,080 489,966
======== ======== ======== ======== ======== ========
</TABLE>
(1) The difference between Net income - GAAP and Taxable income (loss) from
operations is due to different methods of calculating depreciation and
amortization, the use of the reserve method for providing for possible
doubtful accounts under GAAP and different methods of recognizing revenue
on Direct Finance Leases.
(2) The program held its initial closing on July 6, 1992 and as of its final
closing date of July 31, 1993 it had twenty-six (26) additional
semi-monthly closings. Taxable income from operations per $1,000 limited
partner investment is calculated based on the weighted average number of
limited partnership units outstanding during the period.
(3) The Partnership records a provision for bad debts to provide for estimated
credit losses in the portfolio. This policy is based on an analysis of the
aging of the Partnership's portfolio, a review of the non-performing
receivables and leases, prior collection experience and historical loss
experience.
(4) Interim tax information not available.
B-14
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs-L.P. Six
(unaudited)
The following table summarizes the operating results of L.P. Six. The Program's
records are maintained in accordance with Generally Accepted Accounting
Principles ("GAAP") for financial statement purposes.
<TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ -----------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $1,488,286 $ 6,452,409 $ 9,238,182 $ 6,622,180 $203,858
Net gain on sales or remarketing of equipment 94,149 58,523 338,574 107,733 -
---------- ----------- ----------- ----------- ------
Gross revenue 1,582,435 6,510,932 9,576,756 6,729,913 203,858
Less:
Interest expense 588,261 2,648,557 4,330,544 3,003,633 2,142
Management fees - General Partner 254,169 1,092,714 1,333,394 696,096 8,827
Amortization of initial direct costs 205,583 1,071,656 1,349,977 828,154 12,748
Depreciation 159,480 745,275 848,649 636,487 -
Administrative expense reimbursement - General Partner 123,218 547,382 642,276 381,471 6,872
Provision for bad debts (3) 100,000 183,274 750,000 570,000 63,500
General and administrative 43,559 178,464 657,470 360,235 38,879
Minority interest in joint venture 1,693 7,990 31,413 177,769 -
---------- ----------- ----------- ----------- ------
Net income (loss) - GAAP $ 106,472 $ 35,620 $ (366,967) $ 76,068 $ 70,890
========== =========== =========== =========== ========
Net income (loss) - GAAP - allocable to limited partners $ 105,407 $ 35,264 $ (363,297) $ 75,307 $ 70,181
========== =========== =========== =========== ========
Taxable income (loss) from operations (1) (4) $(1,154,365) $ (574,054) $ 2,239,753 $ 71,033
=========== =========== =========== ========
Cash generated from operations $1,474,692 $12,075,547 $ 9,923,936 $ 8,776,203 $439,913
Cash generated from sales 383,797 4,336,675 8,684,744 1,016,807 -
Cash generated from refinancing - 7,780,328 9,113,081 33,151,416 -
---------- ----------- ----------- ----------- ------
Cash generated from operations, sales and refinancing 1,858,489 24,192,550 27,721,761 42,944,426 439,913
Less:
Cash distributions to investors from operations,
sales and refinancing 1,022,275 4,102,940 4,119,354 2,543,783 311,335
Cash distributions to General Partner from operations,
sales and refinancing 10,326 41,444 41,613 25,694 3,145
---------- ----------- ----------- ----------- --------
Cash generated from operations, sales and refinancing
after cash distributions $ 825,888 $20,048,166 $23,560,794 $40,374,949 $125,433
========== =========== =========== =========== ========
</TABLE>
B-15
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs-L.P. Six
(unaudited)
<TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ -------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Tax data and distributions per $1,000 limited
partner investment
Federal income tax results:
Taxable income (loss) from operations (1) (4) $ (29.94) $ (14.83) $ 85.13 $ 22.15
======== ======== ======== =======
Cash distributions to investors (2)
Source (on GAAP basis)
Investment income $ 2.77 $ .86 $ - $ 2.89 $ 22.10
Return of capital $ 24.10 $ 106.64 $ 107.50 $ 94.78 $ 75.94
Source (on cash basis)
- Operations $ 26.87 $ 107.50 $ 107.50 $ 97.67 $ 98.04
- Sales - - - - -
- Refinancing - - - - -
- Other - - - - -
Weighted average number of limited partnership
($100) units outstanding 380,379 381,687 383,196 260,453 31,755
======== ======== ======== ======== =======
</TABLE>
(1) The difference between Net income (loss) - GAAP and Taxable income (loss)
from operations is due to different methods of calculating depreciation and
amortization, the use of the reserve method for providing for possible
doubtful accounts under GAAP and different methods of recognizing revenue
on Direct Finance Leases.
(2) The program held its initial closing on March 31, 1994. Taxable income from
operations per $1,000 limited partner investment is calculated based on the
weighted average number of limited partnership units outstanding during the
period.
(3) The Partnership records a provision for bad debts to provide for estimated
credit losses in the portfolio. This policy is based on an analysis of the
aging of the Partnership's portfolio, a review of the non-performing
receivables and leases, prior collection experience and historical loss
experience.
(4) Interim tax information not available.
B-16
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs-L.P. Seven
(unaudited)
The following table summarizes the operating results of L.P. Seven. The
Program's records are maintained in accordance with Generally Accepted
Accounting Principles ("GAAP") for financial statement purposes.
<TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ --------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues $ 3,096,163 $ 8,000,454 $1,564,069
Net gain on sales or remarketing of equipment - 1,748,790 -
----------- ----------- ----------
Gross revenue 3,096,163 9,749,244 1,564,069
Less:
Interest expense 1,531,238 3,652,517 398,200
Management fees - General Partner 478,301 1,522,045 264,784
Amortization of initial direct costs 423,326 932,123 230,785
Administrative expense reimbursement - General Partner 207,548 652,319 117,809
Provision for bad debts (3) 150,000 150,000 75,000
General and administrative 57,235 186,280 72,040
Minority interest in joint venture 1,116 4,380 -
----------- ----------- ----------
Net income - GAAP $ 247,399 $ 2,649,580 $ 405,451
=========== =========== ==========
Net income - GAAP - allocable to limited partners $ 244,925 $ 2,623,084 $ 401,396
=========== =========== ==========
Taxable income from operations (1) (4) $ 2,335,939 $ 146,726
=========== ==========
Cash generated from operations $ 93,208 $ 2,855,330 $ 973,899
Cash generated from sales - 7,315,408 -
Cash generated from refinancing - 4,250,000 -
----------- ----------- ----------
Cash generated from operations, sales and refinancing 93,208 14,420,738 973,899
Less:
Cash distributions to investors from operations,
sales and refinancing 1,858,176 4,147,829 1,361,099
Cash distributions to General Partner from operations,
sales and refinancing 16,036 41,125 13,749
----------- ----------- ----------
Cash generated from (used by) operations, sales and refinancing
after cash distributions $(1,781,004) $10,231,784 $ (400,949)
============ =========== ==========
</TABLE>
B-17
Prior performance is not an indication of future results.
TABLE III
Operating Results of Prior Public Programs-L.P. Seven
(unaudited)
<TABLE>
Three Months Ended
March 31, For the Years Ended December 31,
------------------ -------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Tax data and distributions per $1,000 limited
partner investment
Federal income tax results:
Taxable income from operations (1) (4) $ 55.90 $ 9.30
======== ========
Cash distributions to investors (2)
Source (on GAAP basis)
Investment income $ 3.54 $ 63.41 $ 25.69
Return of capital $ 23.33 $ 36.86 $ 61.44
Source (on cash basis)
- Operations $ 1.35 $ 69.03 $ 62.35
- Sales - $ 31.24 -
- Refinancing - - -
- Other $ 25.52 - $ 24.78
Weighted average number of limited partnership
($100) units outstanding 680,272 413,677 156,222
========= ======== ========
</TABLE>
(1) The difference between Net income - GAAP and Taxable income from operations
is due to different methods of calculating depreciation and amortization,
the use of the reserve method for providing for possible doubtful accounts
under GAAP and different methods of recognizing revenue on Direct Finance
Leases.
(2) The program held its initial closing on January 19, 1996. Taxable income
from operations per $1,000 limited partner investment is calculated based
on the weighted average number of limited partnership units outstanding
during the period.
(3) The Partnership records a provision for bad debts to provide for estimated
credit losses in the portfolio. This policy is based on an analysis of the
aging of the Partnership's portfolio, a review of the non-performing
receivables and leases, prior collection experience and historical loss
experience.
(4) Interim tax information not available.
B-18
Prior performance is not an indication of future results.
TABLE IV
Results of Completed Prior Public Programs
(unaudited)
No Prior Public Programs have completed operations in the five years ended March
31, 1998.
B-19
TABLE V
Sales or Dispositions of equipment - Prior Public Programs
(unaudited)
The following table summarizes the sales or dispositions of equipment for ICON
Cash Flow Partners, L.P., Series A for the seven years ended December 31, 1997,
and the three months ended March 31, 1998. Each of the Programs' records are
maintained in accordance with Generally Accepted Accounting Principles ("GAAP").
<TABLE>
Total Federal
Type of Year of Year of Acquisition Net Book Net GAAP Taxable
Equipment Acquisition Disposition Cost (1) Value (2) Proceeds(3) Gain (Loss) Gain (Loss)
- -------------------------- ----------- ----------- ----------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Computers 1988 1990 $32,352 $13,859 $16,955 $3,096 $1,064
Office Copier 1988 1990 $180,922 $52,504 $52,504 $0 ($30,400)
Agriculture 1988 1991 $19,032 $8,921 $7,225 ($1,696) ($2,214)
Computers 1988 1991 $8,450 $0 $465 $465 $0
Computers 1989 1991 $363,540 $28,027 $56,077 $28,050 $14,962
Telecommunications 1990 1991 $827,804 $49,393 $0 ($49,393) $0
Medical 1988 1991 $29,756 $0 $0 $0 ($10,626)
Copiers 1988 1991 $235,863 $0 $0 $0 ($18,115)
Agriculture 1988 1992 $61,200 $25,810 $24,152 ($1,658) $0
Computers 1988 1992 $51,353 $0 $0 $0 $0
Copiers 1988 1992 $195,875 $0 $0 $0 $0
Material Handling 1988 1992 $78,321 $0 $0 $0 $0
Medical 1988 1992 $50,433 $15,250 $7,000 ($8,250) $34,389
Computers 1989 1992 $41,058 $4,553 $6,606 $2,053 ($13,951)
Copiers 1989 1992 $81,913 $6,495 $6,495 $0 $1,114
Office Equipment 1989 1992 $81,986 $2,821 $12,298 $9,477 ($28,695)
Computers 1991 1992 $3,607 $3,196 $4,142 $946 $1,076
Furniture And Fixtures 1992 1992 $4,325 $4,430 $4,390 ($40) $65
Computers 1988 1993 $71,813 $0 $0 $0 $0
Furniture 1988 1993 $350,000 $0 $0 $0 $0
Medical 1988 1993 $221,191 $182 $2,382 $2,200 $2,341
Agriculture 1989 1993 $57,975 $2,050 $2,932 $882 ($1,724)
Printing 1989 1993 $126,900 $5,661 $7,800 $2,139 ($10,729)
Reprographics 1989 1993 $112,500 $115 $115 $0 ($12,079)
Computers 1990 1993 $79,043 $0 $0 $0 $0
Reprographics 1990 1993 $71,805 $8,391 $12,528 $4,137 $0
Retail 1990 1993 $198,513 ($32,916) $67,894 $100,810 $0
Video Production 1990 1993 $341,796 $67,965 $161,615 $93,650 $24,507
Computers 1991 1993 $135,380 $6,540 $20,134 $13,594 ($50,622)
Fixture 1992 1993 $2,267 $1,635 $1,824 $189 $11
Telecommunications 1992 1993 $20,000 $11,840 $11,200 ($640) ($4,800)
Video Production 1992 1993 $3,362 $1,110 $592 ($518) ($2,867)
Manufacturing & Production 1993 1993 $22,660 $0 $0 $0 $0
Agriculture 1988 1994 $30,000 $288 $288 $0 $0
Medical 1988 1994 $46,050 $6,438 $6,438 $0 $0
Computers 1989 1994 $71,152 $6,942 $500 ($6,442) ($1,449)
Computers 1991 1994 $156,552 $6,882 $16,611 $9,729 ($41,137)
Material Handling 1991 1994 $7,013 $1,973 $2,203 $230 ($604)
Medical 1991 1994 $40,556 ($11,278) $1,460 $12,738 $375
Fixture 1992 1994 $3,396 $751 $845 $94 ($1,192)
Manufacturing & Production 1992 1994 $17,103 ($199) $0 $199 ($5,443)
Furniture 1993 1994 $26,868 $0 $0 $0 $0
Manufacturing & Production 1993 1994 $27,096 $10,139 $11,054 $915 $0
Agriculture 1989 1994 $14,191 $350 $350 $0 $0
Printing 1993 1994 $24,112 $24,030 $27,061 $3,031 $0
Computers 1991 1995 $17,200 $173 $3,522 $3,349 $1,594
Copiers 1991 1995 $49,081 $7,350 $7,423 $73 ($3,044)
Sanitation 1991 1995 $21,452 $560 $4,818 $4,258 $3,010
Agriculture 1992 1995 $7,828 $462 $737 $275 ($1,901)
Computers 1993 1995 $64,391 $36,094 $5,863 ($30,231) $0
Manufacturing & Production 1993 1995 $28,557 $8,752 $8,912 $160 $0
Retail 1993 1995 $28,507 ($9) $697 $706 $0
Computers 1991 1996 $35,618 $1,502 $20,150 $18,648 $19,571
Copiers 1991 1996 $117,238 $17,784 $32,380 $14,596 $28,006
Material Handling 1991 1996 $14,996 $843 $3,223 $2,380 $3,432
Sanitation 1991 1996 $35,854 $5,946 $5,649 ($297) $5,260
Fixture 1992 1996 $18,452 $1,909 $1,909 $0 ($1,919)
Computers 1993 1996 $72,479 ($573) $515 $1,088 $0
Furniture 1993 1996 $9,978 ($2) $0 $2 $0
Material Handling 1993 1996 $11,824 $0 $0 $0 $0
1993 1996 $33,190 $400 $403 $3 $0
Retail 1993 1996 $44,673 ($5) $0 $0 $0
Sanitation 1993 1996 $5,822 $0 $0 $0 $0
Video Production 1993 1996 $41,465 $12,099 $12,441 $342 $0
Medical 1994 1996 $12,166 $960 $2,000 $1,040 ($4,259)
Computers 1991 1997 $75,602 $4,349 $15,753 $11,403 $19,783
Computers 1993 1997 $39,593 $6,013 $0 ($6,013) $0
Retail 1993 1997 $158,276 $16,960 $23,438 $23,423 $5,373
Video 1993 1997 $27,273 $0 $0 $0 $0
Sanitation 1996 1997 $3,571 $43 $1,380 $1,337 $0
Computers 1993 1998 $123,234 $0 $205 $205 (4)
Manufacturing & Production 1993 1998 $110,906 $366 $706 $340 (4)
Printing 1993 1998 $33,033 $0 $776 $776 (4)
Retail 1993 1998 $43,805 $0 $7 $7 (4)
Telecommunications 1993 1998 $26,238 $591 $605 $14 (4)
Video 1993 1998 $16,975 $0 $0 $0 (4)
Manufacturing & Production 1995 1998 $14,356 $0 $6 $6 (4)
</TABLE>
(1) Acquisition cost includes Acquisition Fee.
(2) Represents the total acquisition cost less accumulated depreciation and
other reserves, calculated on a GAAP Basis.
(3) Cash received and/or principal amount of debt reduction less any direct
selling cost.
(4) Federal Taxable Gain (Loss) information not yet available for 1998.
- ---------------------
Prior performance is not an indication of future results.
TABLE V
Sales or Dispositions of equipment - Prior Public Programs
(unaudited)
The following table summarizes the sales or dispositions of equipment for ICON
Cash Flow Partners, L.P., Series B for the seven years ended December 31, 1997,
and the three months ended March 31, 1998. Each of the Programs' records are
maintained in accordance with Generally Accepted Accounting Principles ("GAAP").
<TABLE>
Total Federal
Type of Year of Year of Acquisition Net Book Net GAAP Taxable
Equipment Acquisition Disposition Cost (1) Value (2) Proceeds (3) Gain (Loss) Gain (Loss)
- --------------------------- ----------- ----------- ----------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Manufacturing & Production 1990 1990 $31,129 $28,288 $34,142 $5,854 $3,013
Mining 1990 1990 $145,227 $120,804 $120,804 $0 $0
Video Production 1990 1990 $10,201 $8,006 $9,086 $1,080 $671
Agriculture 1989 1991 $5,986 $4,003 $0 ($4,003) $0
Computers 1989 1991 $76,899 $52,134 $7,492 ($44,642) $0
Construction 1989 1991 $48,299 $43,554 $7,784 ($35,770) ($7,007)
Copiers 1989 1991 $7,469 $4,997 $16 ($4,981) $0
Environmental 1989 1991 $10,609 $11,546 $0 ($11,546) $0
Furniture 1989 1991 $86,965 $62,229 $19,339 ($42,890) $0
Manufacturing & Production 1989 1991 $55,125 $34,435 $12,807 ($21,628) $0
Medical 1989 1991 $9,447 $7,643 $0 ($7,643) $0
Office Equipment 1989 1991 $25,171 $24,586 $64 ($24,522) ($1,985)
Retail 1989 1991 $4,405 $4,792 $0 ($4,792) $0
Sanitation 1989 1991 $15,448 $17,983 $0 ($17,983) $0
Telecommunications 1989 1991 $2,238 $0 $60 $60 $0
Transportation 1989 1991 $9,474 $10,801 $0 ($10,801) $0
Video Production 1989 1991 $11,925 $1,762 $7 ($1,755) $0
Agriculture 1990 1991 $35,245 $4,694 $0 ($4,694) ($5,210)
Computers 1990 1991 $2,671,588 $601,346 $136,169 ($465,177) ($476,397)
Construction 1990 1991 $64,544 $29,979 $24,379 ($5,600) ($9,949)
Copiers 1990 1991 $30,699 $18,760 $911 ($17,849) $0
Environmental 1990 1991 $14,658 $15,434 $0 ($15,434) $0
Fixture 1990 1991 $29,510 $27,027 $808 ($26,219) $0
Furniture 1990 1991 $53,420 $34,771 $3,598 ($31,173) ($5,953)
Manufacturing & Production 1990 1991 $526,568 $504,823 $226,978 ($277,845) ($47,036)
Material Handling 1990 1991 $112,075 $59,977 $34,758 ($25,219) $0
Medical 1990 1991 $93,771 $47,016 $0 ($47,016) ($19,410)
Mining 1990 1991 $221,706 $0 $0 $0 ($82,375)
Miscellaneous 1990 1991 $29,443 $28,179 $0 ($28,179) $0
Office Equipment 1990 1991 $44,560 $34,289 $760 ($33,529) $0
Restaurant 1990 1991 $97,304 $45,062 $18,564 ($26,498) ($24,787)
Retail 1990 1991 $43,751 $18,362 $9,230 ($9,132) ($12,624)
Sanitation 1990 1991 $171,345 $66,074 $77,146 $11,072 ($78,222)
Telecommunications 1990 1991 $980,613 $119,372 $0 ($119,372) ($11,618)
Transportation 1990 1991 $13,434 $13,858 $0 ($13,858) $0
Video Production 1990 1991 $46,645 $26,631 $3,754 ($22,877) $11,741
Material Handling 1991 1991 $109,115 $108,512 $113,482 $4,970 $0
Agriculture 1989 1992 $89,766 $19,058 $21,912 $2,854 ($12,999)
Computers 1989 1992 $60,747 $1,659 $2,593 $934 $0
Copiers 1989 1992 $79,556 $10,817 $10,839 $22 ($9,798)
Furniture 1989 1992 $35,512 $2,418 $2,911 $493 $0
Manufacturing & Production 1989 1992 $117,236 $1,924 $1,936 $12 $0
Material Handling 1989 1992 $16,058 $670 $789 $119 ($7,845)
Medical 1989 1992 $31,701 $7,548 $1,967 ($5,580) $0
Office Equipment 1989 1992 $19,981 $1,381 $1,427 $46 $0
Printing 1989 1992 $25,000 $3,510 $2,510 ($1,000) ($8,247)
Telecommunications 1989 1992 $18,779 $1,910 $2,012 $102 $0
Video Production 1989 1992 $21,849 $3,275 $3,283 $8 $0
Agriculture 1990 1992 $46,968 $2,847 $3,463 $617 ($4,451)
Computers 1990 1992 $3,872,456 $671,632 $342,387 ($329,245) ($1,086,408)
Construction 1990 1992 $23,493 $1,229 $1,229 $0 $0
Copiers 1990 1992 $19,240 $2,165 $3,524 $1,358 ($8,884)
Environmental 1990 1992 $7,195 $1,164 $1,164 $0 ($4,683)
Fixture 1990 1992 $55,869 $7,661 $9,096 $1,436 ($34,594)
Furniture 1990 1992 $58,095 $7,193 $7,719 $525 ($26,836)
Manufacturing & Production 1990 1992 $192,143 $47,665 $43,213 ($4,452) ($45,657)
Material Handling 1990 1992 $104,852 $23,011 $7,775 ($15,236) ($15,648)
Medical 1990 1992 $88,537 $12,382 $13,393 $1,011 ($38,945)
Miscellaneous 1990 1992 $4,999 $1,313 $1,236 ($77) ($2,804)
Office Equipment 1990 1992 $1,203,666 $179,190 $2,513 ($176,678) ($6,351)
Printing 1990 1992 $4,055 $787 $787 $0 ($2,487)
Restaurant 1990 1992 $83,624 $194 $6,850 $6,657 ($12,961)
Retail 1990 1992 $63,030 $35,999 $581 ($35,419) ($1,296)
Sanitation 1990 1992 $200,642 $12,623 $13,101 $478 ($14,846)
Telecommunications 1990 1992 $64,899 $11,997 $4,965 ($7,032) ($18,620)
Transportation 1990 1992 $7,610 $1 $1 $0 $0
Video Production 1990 1992 $18,558 $3,521 $4,302 $781 ($7,177)
Furniture 1991 1992 $25,909 $28,313 $0 ($28,313) $0
Manufacturing & Production 1991 1992 $51,311 $47,497 $57,487 $9,990 $0
Material Handling 1991 1992 $10,023 $10,462 $10,595 $133 $0
Office Equipment 1991 1992 $15,789 $0 $0 $0 $0
Sanitation 1991 1992 $18,840 $10,122 $10,516 $394 $0
Agriculture 1989 1993 $31,500 $4,370 $10,095 $5,725 $1,431
Computers 1989 1993 $93,554 $267 $661 $394 $0
Copiers 1989 1993 $168,679 $19,448 $23,072 $3,624 ($26,046)
Furniture 1989 1993 $116,287 $17,152 $19,536 $2,384 ($9,084)
Manufacturing & Production 1989 1993 $14,804 $2,832 $3,541 $709 $0
Material Handling 1989 1993 $20,725 $0 $1,650 $1,650 $0
Office Equipment 1989 1993 $81,777 $990 $17,490 $16,500 ($4,999)
Telecommunications 1989 1993 $2,524 $0 $0 $0 $0
Video Production 1989 1993 $22,321 $0 $0 $0 $0
Agriculture 1990 1993 $132,350 $11,556 $11,963 $407 ($42,903)
Automotive 1990 1993 $75,730 $45,795 $51,888 $6,093 ($3,043)
Computers 1990 1993 $1,069,393 $140,198 $164,423 $24,225 ($267,270)
Construction 1990 1993 $41,779 $5,058 $5,075 $17 ($9,774)
Copiers 1990 1993 $23,318 $3,058 $2,505 ($553) ($7,670)
Fixture 1990 1993 $73,038 $10,235 $10,235 $0 ($22,303)
Furniture 1990 1993 $118,834 $11,204 $11,509 $305 ($10,168)
Manufacturing & Production 1990 1993 $1,120,324 $139,342 $186,899 $47,557 ($271,929)
Material Handling 1990 1993 $210,922 $20,462 $29,157 $8,695 ($51,481)
Medical 1990 1993 $380,749 $56,711 $37,821 ($18,890) ($68,880)
Office Equipment 1990 1993 $69,232 $8,695 $9,275 $580 ($18,731)
Printing 1990 1993 $6,061 $1,431 $1,050 ($381) ($1,388)
Reprographics 1990 1993 $82,000 $8,200 $40,000 $31,800 $7,109
Restaurant 1990 1993 $121,682 $10,330 $11,517 $1,187 ($28,626)
Retail 1990 1993 $11,280 $813 $1,797 $984 ($2,806)
Sanitation 1990 1993 $43,697 $5,148 $5,152 $4 ($10,588)
Telecommunications 1990 1993 $278,193 $20,246 $22,616 $2,370 ($58,857)
Miscellaneous 1990 1993 $595,538 ($98,697) $203,595 $302,292 $0
Video Production 1990 1993 $7,981 $374 $374 $0 ($1,484)
Computers 1991 1993 $248,090 $36,021 $36,834 $813 ($9,175)
Construction 1991 1993 $10,590 $869 $1,875 $1,006 ($4,480)
Furniture 1991 1993 $73,541 ($66) $603 $669 ($7,311)
Manufacturing & Production 1991 1993 $12,951 $0 $0 $0 $0
Material Handling 1991 1993 $43,408 $20,390 $23,147 $2,757 ($1,015)
Medical 1991 1993 $9,425 $5,708 $6,513 $805 $858
Sanitation 1991 1993 $37,743 $16,285 $15,506 ($779) $0
Computers 1992 1993 $79,557 $38,668 $38,668 $0 ($36,961)
Material Handling 1992 1993 $30,692 $149 $6,578 $6,429 ($17,976)
Computers 1989 1994 $468,870 $109,719 $109,720 $1 $102,026
Copiers 1989 1994 $13,461 $30 $30 $0 $0
Furniture 1989 1994 $218,655 $79,000 $79,000 $0 $80,901
Manufacturing & Production 1989 1994 $90,725 ($13) $0 $13 $0
Medical 1989 1994 $97,017 $699 $1,141 $441 $0
Office Equipment 1989 1994 $2,796 $0 $126 $126 $0
Printing 1989 1994 $14,123 $0 $0 $0 $0
Telecommunications 1989 1994 $10,950 ($2) $127 $129 $0
Agriculture 1990 1994 $73,503 $11,518 $12,258 $740 ($3,345)
Computers 1990 1994 $3,937,366 $957,935 $959,231 $1,295 $367,292
Construction 1990 1994 $141,052 $16,265 $16,265 $0 ($14,659)
Fixture 1990 1994 $100,514 $10,959 $10,959 $0 ($6,640)
Furniture 1990 1994 $282,115 $89,792 $94,919 $5,127 $43,164
Manufacturing & Production 1990 1994 $443,855 $121,619 $137,376 $15,757 ($8,207)
Material Handling 1990 1994 $411,986 $20,972 $20,972 $0 ($33,402)
Medical 1990 1994 $462,679 $42,572 $62,365 $19,792 $805
Mining 1990 1994 $9,631,966 $1,298,813 $1,298,813 $0 ($689,039)
Office Equipment 1990 1994 $34,402 $3,434 $3,434 $0 ($8,258)
Reprographics 1990 1994 $16,482 $4,547 $4,547 $0 $904
Restaurant 1990 1994 $297,355 $32,327 $33,776 $1,449 ($29,158)
Retail 1990 1994 $841,977 $440,914 $440,914 $0 $668,569
Sanitation 1990 1994 $7,147 $0 $0 $0 $0
Telecommunications 1990 1994 $261,049 ($6,700) $30,311 $37,011 $11,248
Video Production 1990 1994 $45,804 $5,357 $5,365 $8 ($4,684)
Agriculture 1991 1994 $15,633 $625 $629 $4 $0
Computers 1991 1994 $684,631 $59,296 $59,296 $0 ($213,947)
Copiers 1991 1994 $39,270 $2,598 $648 ($1,950) ($15,152)
Environmental 1991 1994 $44,016 $864 $904 $41 $0
Furniture 1991 1994 $20,546 $906 $923 $17 $0
Material Handling 1991 1994 $66,497 $2,470 $2,642 $172 ($5,750)
Medical 1991 1994 $602,400 $306,415 $373,385 $66,970 $139,985
Sanitation 1991 1994 $83,638 $4,459 $4,634 $174 $0
Telecommunications 1991 1994 $11,188 $898 $1,146 $248 ($3,419)
Manufacturing & Production 1993 1994 $81,735 ($61) $34 $95 $0
Material Handling 1993 1994 $6,578 $3,110 $3,600 $490 $0
Sanitation 1994 1994 $7,320 $0 $0 $0 $0
Computers 1989 1995 $24,831 $1,574 $13 ($1,561) $0
Manufacturing & Production 1989 1995 $11,262 $4,128 $0 ($4,128) $0
Computers 1990 1995 $3,151,688 $784,267 $578,324 ($205,942) $61,278
Construction 1990 1995 $397,553 $139,680 $93,172 ($46,508) $2,914
Copiers 1990 1995 $26,920 $6,048 ($0) ($6,048) $0
Furniture 1990 1995 $64,010 $5,908 $4,760 ($1,148) $5,171
Material Handling 1990 1995 $108,329 $7,629 $6,899 ($730) ($15)
Medical 1990 1995 $919,987 $320,531 $260,980 ($59,551) $56,955
Manufacturing & Production 1990 1995 $846,718 $211,207 $244,937 $33,730 $243,103
Office Equipment 1990 1995 $38,014 $4,192 $2,111 ($2,081) $1,950
Reprographics 1990 1995 $102,003 $1 $1 $0 $0
Restaurant 1990 1995 $63,437 $4,636 $1,896 ($2,740) $897
Retail 1990 1995 $2,703,611 $349,429 $193,032 ($156,397) $184,637
Sanitation 1990 1995 $58,070 $4,110 $1,738 ($2,372) $1,518
Video Production 1990 1995 $3,404 $773 $0 ($773) $0
Agriculture 1991 1995 $23,262 $7,034 $7,449 $415 $1,921
Computers 1991 1995 $2,712,345 $677,342 $648,479 ($28,863) $126,108
Construction 1991 1995 $25,214 $1,539 $2,727 $1,188 ($2,122)
Furniture 1991 1995 $62,471 $16,192 $5,091 ($11,101) ($4,400)
Material Handling 1991 1995 $34,473 $12,502 $12,105 ($397) $0
Manufacturing & Production 1991 1995 $132,184 $5,116 $50,110 $44,993 $27,132
Office Equipment 1991 1995 $48,350 $7,177 $9,506 $2,329 ($2,320)
Restaurant 1991 1995 $73,807 $3,637 $2,910 ($728) ($1,107)
Telecommunications 1991 1995 $52,499 $3,093 $7,262 $4,169 ($3,403)
Audio 1992 1995 $128,455 $98,566 $122,689 $24,123 $32,942
Computers 1992 1995 $76,900 $2,447 $15,248 $12,801 ($10,269)
Furniture 1992 1995 $188,807 $19,652 $19,652 $0 ($57,369)
Telecommunications 1992 1995 $64,731 $47,017 $55,634 $8,616 $23,500
Video Production 1992 1995 $382,790 $247,199 $298,045 $50,846 $122,650
Copiers 1993 1995 $35,000 $0 $0 $0 $0
Computers 1994 1995 $1,043,007 $346,471 $739,181 $392,710 $661,239
Furniture 1994 1995 $204,779 $171,324 $181,605 $10,281 $0
Medical 1994 1995 $23,671 $2,015 $2,015 $0 $0
Manufacturing & Production 1994 1995 $21,038 $17,225 $18,733 $1,509 $1,436
Computers 1995 1995 $17,231 $16,864 $2,383 ($14,481) $0
Telecommunications 1989 1996 $20,339 $0 $1,566 $1,566 $0
Computers 1990 1996 $1,056,724 $123,220 $88,594 ($34,626) $94,675
Fixtures 1990 1996 $19,989 $1,285 $250 ($1,034) ($1,034)
Furniture 1990 1996 $34,265 $10,881 $0 ($10,881) ($10,881)
Medical 1990 1996 $49,882 $3,282 $332 ($2,949) ($2,357)
Manufacturing & Production 1990 1996 $72,805 $2,611 $1,588 ($1,023) $3,342
Printing 1990 1996 $26,691 $728 $0 ($728) ($728)
Reprographics 1990 1996 $77,770 $5,381 $1,037 ($4,345) $0
Retail 1990 1996 $1,332,608 $149,542 $230,752 $81,210 $238,200
Telecommunications 1990 1996 $71,300 $4,781 $895 ($3,886) $0
Computers 1991 1996 $70,789 $2,113 $1,000 ($1,113) ($1,113)
Construction 1991 1996 $24,724 $3,791 $3,857 $66 $2,506
Furniture 1991 1996 $281,079 $24,453 $28,755 $4,302 $3,424
Material Handling 1991 1996 $45,771 $7,124 $3,307 ($3,817) $0
Restaurant 1991 1996 $16,013 $1,663 $2,152 $489 $1,976
Video Production 1991 1996 $56,632 $4,245 $4,245 $0 $538
Printing 1993 1996 $15,733 $3,714 $3,814 $100 $0
Computers 1994 1996 $21,284 $13,176 $0 ($13,176) ($13,176)
Fixtures 1994 1996 $20,045 $0 $0 $0 ($14,238)
Manufacturing & Production 1994 1996 $16,349 $6,081 $6,191 $109 ($7,085)
Computers 1995 1996 $36,894 $21,698 $0 ($21,698) ($29,812)
Fixtures 1994 1996 $28,449 $25,882 $0 ($25,882) ($25,882)
Furniture 1994 1996 $20,000 $0 $0 $0 $0
Computers 1990 1997 $84,679 $10,369 $0 ($10,369) $0
Computers 1993 1997 $31,527 $1,238 $1,492 $254 $0
Retail 1993 1997 $1,811,259 $166,382 $231,762 $65,380 ($165,810)
Computers 1994 1997 $106,912 $689 $1,493 $804 ($41,957)
Manufacturing & Production 1994 1997 $43,759 $2,460 $3,548 $1,089 ($15,221)
Telecommunications 1994 1997 $64,781 $1,953 $3,990 $2,037 ($11,293)
Computers 1995 1997 $9,584 $0 $0 $0 $0
Manufacturing & Production 1995 1997 $74,770 $0 $0 $0 $0
Restaurant 1995 1997 $12,030 $0 $0 $0 ($7,218)
Video Production 1995 1997 $27,067 $4,971 $0 ($4,971) $0
Computers 1996 1997 $16,033 $15,371 $1,768 ($13,604) $0
Printing 1996 1997 $48,047 $36,903 $42,713 $5,811 $0
Computers 1993 1998 $25,907 $0 $7 $7 (4)
Manufacturing & Production 1993 1998 $26,401 $0 $8 $8 (4)
Computers 1995 1998 $59,354 $0 $1 $1 (4)
Medical 1995 1998 $30,287 $0 $0 $0 (4)
</TABLE>
(1) Acquisition cost includes Acquisition Fee.
(2) Represents the total acquisition cost less accumulated depreciation and
other reserves, calculated on a GAAP Basis.
(3) Cash received and/or principal amount of debt reduction less any direct
selling cost.
(4) Federal Taxable Gain (Loss) information not yet available for 1998.
- ---------------------
Prior performance is not an indication of future results.
<PAGE>
TABLE V
Sales or Dispositions of equipment - Prior Public Programs
(unaudited)
The following table summarizes the sales or dispositions of equipment for ICON
Cash Flow Partners, L.P., Series C for the six years ended December 31, 1997,
and the three months ended March 31, 1998. Each of the Programs' records are
maintained in accordance with Generally Accepted Accounting Principles ("GAAP").
<TABLE>
Total Federal
Type of Year of Year of Acquisition Net Book Net GAAP Taxable
Equipment Acquisition Disposition Cost (1) Value (2) Proceeds (3) Gain (Loss) Gain (Loss)
- -------------------------- ----------- ----------- ----------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Agriculture 1991 1991 $2,942 $0 $0 $0 $0
Computers 1991 1991 $1,389 $0 $31 $31 $31
Construction 1991 1991 $906 $102 $256 $154 $154
Manufacturing & Production 1991 1991 $1,800 $328 $343 $15 $15
Material Handling 1991 1991 $1,383 $0 $269 $269 $269
Office Equipment 1991 1991 $1,233 $0 $0 $0 $0
Printing 1991 1991 $19,967 $0 $6 $6 $6
Retail 1991 1991 $6,714 $557 $639 $83 $83
Sanitation 1991 1991 $167,899 $168,591 $172,406 $3,815 $3,815
Agriculture 1991 1992 $7,013 $1,133 $300 ($834) ($773)
Computers 1991 1992 $451,724 $57,141 $55,313 ($1,828) ($38,009)
Construction 1991 1992 $233,875 $115,470 $119,943 $4,473 ($49,808)
Copiers 1991 1992 $4,634 ($1,798) $336 $2,134 $0
Fixture 1991 1992 $10,326,838 $1,421,047 $614 ($1,420,433) $0
Furniture 1991 1992 $3,478 $1 $1 $0 $0
Material Handling 1991 1992 $25,677 $10,492 $11,432 $940 ($3,074)
Medical 1991 1992 $12,817 $100 $100 $0 ($10,859)
Manufacturing & Production 1991 1992 $43,629 ($1,124) $1,754 $2,878 ($32,166)
Office Equipment 1991 1992 $8,342 $8,593 $3,261 ($5,332) $0
Printing 1991 1992 $16,961 $790 $944 $154 ($9,907)
Restaurant 1991 1992 $35,504 $22,369 $8,777 ($13,592) $0
Retail 1991 1992 $118,527 $273,200 $10,583 ($262,617) ($69,026)
Sanitation 1991 1992 $253,845 $111,627 $115,785 $4,158 $0
Telecommunications 1991 1992 $12,916 $7,936 $9,356 $1,420 ($2,588)
Miscellaneous 1991 1992 $53,827 $21,578 $13,932 ($7,646) $1,797
Agriculture 1991 1993 $57,287 $7,456 $9,998 $2,542 ($18,745)
Automotive 1991 1993 $6,266 $1,328 $1,427 $99 ($2,344)
Computers 1991 1993 $1,051,652 $162,294 $207,909 $45,615 ($325,207)
Construction 1991 1993 $464,100 $55,261 $78,501 $23,240 ($73,626)
Fixture 1991 1993 $2,403 $0 $0 $0 ($15,392)
Furniture 1991 1993 $99,455 $25,656 $15,551 ($10,105) ($138,905)
Medical 1991 1993 $1,313,194 $708,948 $710,991 $2,043 ($81,725)
Manufacturing & Production 1991 1993 $207,168 $25,494 $33,904 $8,410 ($2,771)
Office Equipment 1991 1993 $50,397 $10,621 $11,360 $739 ($12,948)
Printing 1991 1993 $23,682 $425 $1,500 $1,075 $0
Reprographics 1991 1993 $3,898 $464 $464 $0 ($12,279)
Restaurant 1991 1993 $52,281 $8,374 $11,424 $3,050 ($45,442)
Retail 1991 1993 $107,672 $6,184 $14,538 $8,354 ($5,137)
Sanitation 1991 1993 $369,044 $58,844 $72,766 $13,922 ($3,854)
Telecommunications 1991 1993 $13,462 $609 $995 $386 ($1,686)
Transportation 1991 1993 $3,762 $271 $612 $341 $0
Construction 1992 1993 $14,788 ($961) $0 $961 $0
Retail 1992 1993 $4,093 ($139) $396 $535 ($2,058)
Agriculture 1991 1994 $37,987 $10,692 $14,276 $3,584 ($1,742)
Automotive 1991 1994 $54,591 $161 $190 $29 $0
Computers 1991 1994 $3,845,015 $145,861 $176,290 $30,428 ($761,570)
Construction 1991 1994 $144,438 $8,068 $10,874 $2,806 ($2,060)
Copiers 1991 1994 $2,041 ($0) $89 $89 $0
Environmental 1991 1994 $213,173 $94,203 $123,051 $28,848 ($38,471)
Fixture 1991 1994 $234,136 $31,188 $32,228 $1,040 ($64,973)
Furniture 1991 1994 $544,084 ($33,508) $42,733 $76,241 ($111,133)
Material Handling 1991 1994 $27,610 $9,861 $12,180 $2,320 ($8,523)
Medical 1991 1994 $166,398 $1,386 $15,777 $14,391 $490
Manufacturing & Production 1991 1994 $351,497 $31,295 $56,139 $24,844 ($79,430)
Office Equipment 1991 1994 $30,245 $0 $126 $125 $0
Printing 1991 1994 $1,066,789 $210,962 $210,962 $0 ($222,154)
Restaurant 1991 1994 $70,707 ($339) $796 $1,136 ($10,709)
Retail 1991 1994 $1,381,039 $152,323 $153,469 $1,146 ($361,934)
Sanitation 1991 1994 $173,772 $2,892 $4,374 $1,482 $0
Telecommunications 1991 1994 $277,162 ($2,629) $13,384 $16,013 ($57,036)
Video 1991 1994 $8,139 ($1) $327 $328 $0
Fixture 1992 1994 $15,450 $1,223 $1,552 $328 ($8,169)
Manufacturing & Production 1992 1994 $122,247 $21,475 $31,910 $10,435 ($37,107)
Furniture 1994 1994 $65,659 $69,225 $73,420 $4,195 $0
Computers 1991 1995 $14,393,689 $1,892,673 $1,681,499 ($211,174) ($60,114)
Construction 1991 1995 $238,913 $14,433 $27,420 $12,987 ($149,560)
Copiers 1991 1995 $39,507 $3,456 $4,077 $621 $13,504
Fixtures 1991 1995 $804,453 $113,148 $89,760 ($23,388) ($16,463)
Furniture 1991 1995 $603,534 $29,758 $76,781 $47,023 $0
Medical 1991 1995 $3,713,348 $1,692,752 $2,084,752 $392,000 ($260,046)
Manufacturing & Production 1991 1995 $3,123,635 $917,619 $768,141 ($149,478) ($1,022,443)
Office Equipment 1991 1995 $347,197 $17,431 $17,435 $5 ($3,502)
Retail 1991 1995 $1,765,207 $206,416 $117,745 ($88,670) $854,893
Sanitation 1991 1995 $26,224 $6,541 ($655) ($7,196) $0
Telecommunications 1991 1995 $373,595 $37,285 $38,143 $858 ($103,967)
Video Production 1991 1995 $192,070 $4,450 $23,511 $19,062 $55,805
Furniture 1993 1995 $54,942 $42,999 $23,436 ($19,562)
Material Handling 1993 1995 $46,931 $13,325 $13,753 $428 $0
Restaurant 1994 1995 $436,966 $379,595 $411,179 $31,584 ($17,421)
Retail 1994 1995 $35,025 $10,101 $10,120 $19
Telecommunications 1994 1995 $19,591 $11,665 $1,542 ($10,123) ($13,275)
Fixtures 1995 1995 $25,958 $26,768 $26,866 $99
Agriculture 1991 1996 $7,362 $365 $0 ($365) ($365)
Computers 1991 1996 $3,287,984 $417,743 $317,557 ($100,185) $469,256
Fixtures 1991 1996 $142,743 $1,011 $0 ($1,011) ($1,011)
Furniture 1991 1996 $1,670,320 ($155,540) $83,650 $239,190 $303,948
Medical 1991 1996 $2,023,960 $774,664 $377,555 ($397,109) $459,686
Manufacturing & Production 1991 1996 $160,029 $4,540 $1,849 ($2,691) ($812)
Restaurant 1991 1996 $85,715 ($780) $7,296 $8,077 $11,319
Retail 1991 1996 $71,310 $8,481 $1,150 ($7,331) $1,390
Sanitation 1991 1996 $4,363 $433 $0 ($433) ($433)
Telecommunications 1991 1996 $95,843 $6,362 $9,248 $2,886 $7,641
Transportation 1991 1996 $815,481 $30,308 $85,288 $54,980 $86,899
Video 1991 1996 $180,577 $3,186 $12,790 $9,604 $17,915
Automotive 1992 1996 $97,543 $11,860 $12,140 $278 $0
Environmental 1992 1996 $157,907 $3,659 $8,533 $4,874 ($11,597)
Retail 1992 1996 $53,003 $3,147 $3,897 $750 $0
Telecommunications 1992 1996 $362,250 ($28,983) $4,851 $33,834 ($21,366)
Manufacturing & Production 1993 1996 $16,123 $0 $0 $0 $0
Computers 1994 1996 $18,698 $216 $441 $255 ($11,060)
Construction 1994 1996 $14,015 $1,020 $1,020 $0 $0
Medical 1994 1996 $18,685 $15,364 $3,000 ($12,364) ($9,364)
Manufacturing & Production 1994 1996 $35,203 $0 $0 $0 ($21,180)
Office Equipment 1994 1996 $17,293 $596 $596 $0 $0
Telecommunications 1994 1996 $4,820 $0 $0 $0 $0
Computer 1991 1997 $5,327 $94 $3,865 $3,771 $4,461
Medical 1991 1997 $2,499,782 $258,686 $258,686 $0 $258,686
Retail 1991 1997 $30,855 $0 $2,500 $2,500 $3,475
Retail 1992 1997 $97,767 $1 $79 $78 $0
Sanitation 1992 1997 $147,542 $0 $1,640 $1,640 $0
Video Production 1992 1997 $66,253 $11,586 $12,305 $719 $3,869
Computers 1993 1997 $21,303 $0 $11 $11 $0
Manufacturing & Production 1993 1997 $36,069 ($0) $736 $736 $0
Restaurant 1993 1997 $25,794 $784 $1,400 $616 $0
Retail 1993 1997 $1,442,919 $134,489 $182,728 $48,239 ($136,145)
Automotive 1994 1997 $16,431 $5,412 $6,561 $1,149 ($376)
Computers 1994 1997 $24,615 $1,159 $1,350 $191 ($4,988)
Fixtures 1994 1997 $16,090 $872 $726 ($146) ($5,244)
Furniture 1994 1997 $12,814 $2,514 $0 ($2,514) $0
Manufacturing & Production 1994 1997 $86,687 $26 $1,462 $1,436 ($26,470)
Material Handling 1994 1997 $15,324 $0 $242 $242 ($5,888)
Medical 1994 1997 $485,541 $43,278 $31,102 ($12,176) $12,051
Telecommunications 1994 1997 $28,364 $1,496 $2,201 $705 ($9,751)
Manufacturing & Production 1995 1997 $25,764 $323 $1,349 $1,025 $0
Restaurant 1995 1997 $15,364 ($0) $0 $0 ($9,219)
Telecommunications 1995 1997 $34,104 $22,816 $0 ($22,816) $0
Audio 1996 1997 $46,335 $0 $0 $0 $0
Auto 1996 1997 $19,219 $602 $2,799 $2,197 $0
Computers 1996 1997 $81,936 $30,716 $32,590 $1,873 $0
Restaurant 1996 1997 $14,346 $13,996 $16,964 $2,968 $0
Telecommunications 1996 1997 $50,797 $886 $886 $0 $0
Construction 1991 1998 $13,317 $1,046 $1,244 $198 (4)
Fixtures 1994 1998 $27,381 $2,281 $3,432 $1,152 (4)
Computers 1995 1998 $19,695 $0 $708 $708 (4)
Manufacturing & Production 1995 1998 $36,284 $0 $0 $0 (4)
Restaurant 1995 1998 $24,039 $0 $46 $46 (4)
Auto 1996 1998 $22,278 $0 $2,245 $2,245 (4)
Computers 1996 1998 $14,663 $0 $894 $894 (4)
Video Production 1996 1998 $8,487 $0 $0 $0 (4)
</TABLE>
(1) Acquisition cost includes Acquisition Fee.
(2) Represents the total acquisition cost less accumulated depreciation and
other reserves, calculated on a GAAP Basis.
(3) Cash received and/or principal amount of debt reduction less any direct
selling cost.
(4) Federal Taxable Gain (Loss) information not yet available for 1998.
- ---------------------
Prior performance is not an indication of future results.
<PAGE>
TABLE V
Sales or Dispositions of equipment - Prior Public Programs
(unaudited)
The following table summarizes the sales or dispositions of equipment for ICON
Cash Flow Partners, L.P., Series D for the five years ended December 31, 1997,
and the three months ended March 31, 1998. Each of the Programs' records are
maintained in accordance with Generally Accepted Accounting Principles ("GAAP").
<TABLE>
Total Federal
Type of Year of Year of Acquisition Net Book Net GAAP Taxable
Equipment Acquisition Disposition Cost (1) Value (2) Proceeds (3) Gain (Loss) Gain (Loss)
- --------------------------- ----------- ----------- ------------ --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Medical 1991 1992 $48,364 $0 $0 $0 $0
Medical 1992 1992 $422,800 $406,812 $180,617 ($226,195) ($21,855)
Manufacturing & Production 1992 1992 $922,806 $0 $0 $0 $0
Telecommunications 1991 1992 $2,965 $3,153 $0 ($3,153) $0
Telecommunications 1992 1992 $9,287 $2,960 $19,223 $16,262 $9,564
Video Production 1992 1992 $66,253 $0 $0 $0 $0
Medical 1991 1993 $1,473,719 $767,962 $767,962 $0 ($367,414)
Manufacturing & Production 1991 1993 $729,750 $554,748 $690,006 $135,258 $230,288
Restaurant 1991 1993 $10,967 $9,300 $12,098 $2,798 $5,185
Computers 1992 1993 $804,823 $52,481 $51,141 ($1,340) ($28,781)
Construction 1992 1993 $4,788 $1,071 $1,076 $5 ($2,902)
Copiers 1992 1993 $3,464 $1,071 $1,072 $1 ($1,699)
Furniture 1992 1993 $38,333 $847 $4,245 $3,398 ($26,422)
Manufacturing & Production 1992 1993 $1,659,018 $235,971 $239,336 $3,365 ($108,394)
Material Handling 1992 1993 $4,261 $1,826 $1,826 $0 ($1,617)
Medical 1992 1993 $1,053,825 $421,329 $499,671 $78,342 ($312,299)
Office Equipment 1992 1993 $7,692 $968 $2,919 $1,951 ($3,263)
Sanitation 1992 1993 $9,167 $1,457 $1,457 $0 ($6,364)
Telecommunications 1992 1993 $210,033 $97,163 $97,355 $192 ($118,167)
Medical 1993 1993 $190,018 $27,839 $31,758 $3,919 ($15,146)
Computers 1991 1994 $5,918,285 $1,988,610 $1,988,610 $0 $364,917
Medical 1991 1994 $4,337,672 $1,324,650 $1,325,089 $440 $275,632
Manufacturing & Production 1991 1994 $564,133 $135,237 $139,295 $4,058 ($4,466)
Mining 1991 1994 $6,882,703 $1,911,959 $1,911,959 $0 ($335,688)
Telecommunications 1991 1994 $4,457 $0 $207 $207 $0
Agriculture 1992 1994 $14,661 $308 $392 $84 ($5,218)
Automotive 1992 1994 $2,180 $596 $596 $0 ($752)
Computers 1992 1994 $1,742,271 $515,871 $517,638 $1,767 ($202,085)
Construction 1992 1994 $6,320 $1,583 $1,511 ($72) ($575)
Copiers 1992 1994 $27,272 $3,088 $3,088 $0 ($6,206)
Environmental 1992 1994 $18,502 $3,377 $3,334 ($43) ($8,169)
Fixtures 1992 1994 $30,123 $4,000 $4,966 $966 $0
Furniture 1992 1994 $128,339 $33,457 $34,909 $1,452 ($45,840)
Material Handling 1992 1994 $1,292,595 $1,131,118 $1,129,165 ($1,953) ($7,118)
Medical 1992 1994 $2,243,134 $607,899 $713,599 $105,700 ($627,651)
Manufacturing & Production 1992 1994 $160,816 $85,334 $89,861 $4,527 ($30,668)
Office Equipment 1992 1994 $15,083 $3,869 $3,866 ($3) ($5,979)
Photography 1992 1994 $3,696 $747 $747 $0 ($1,651)
Printing 1992 1994 $12,680 $728 $728 $0 ($2,409)
Restaurant 1992 1994 $85,349 $4,717 $3,740 ($977) ($7,665)
Retail 1992 1994 $14,260 $1,686 $1,686 $0 ($3,106)
Sanitation 1992 1994 $2,333 $707 $707 $0 $0
Telecommunications 1992 1994 $10,655 $3,409 $3,569 $160 ($3,119)
Transportation 1992 1994 $2,452 $716 $442 ($274) ($1,046)
Video Production 1992 1994 $6,320 $2,055 $1,755 ($301) ($2,283)
Medical 1993 1994 $99,286 $21,595 $21,772 $178 $0
Restaurant 1994 1994 $287,433 $276,973 $296,218 $19,245 $0
Computers 1991 1995 $54,716 $6,105 $8,769 $2,664 $66,761
Fixtures 1991 1995 $20,592 $6,858 $466 ($6,391) ($5,577)
Furniture 1991 1995 $671,313 $182,750 $320,524 $137,774 ($6,770)
Medical 1991 1995 $4,238,594 $737,052 $700,553 $17,535 ($71,628)
Manufacturing & Production 1991 1995 $27,177 $1,358 $0 ($1,358) ($1,358)
Retail 1991 1995 $130,096 $31,986 $65,301 $33,315 ($1,749)
Sanitation 1991 1995 $74,519 $8,525 $40,968 $32,443 ($3,429)
Agriculture 1992 1995 $61,210 $12,058 $12,959 $1,475 ($15,540)
Audio 1992 1995 $15,467 $2,721 $0 ($1,964) ($1,964)
Automotive 1992 1995 $21,561 $11,527 ($0) ($1,840) ($1,840)
Computers 1992 1995 $212,151 $24,123 $20,948 ($2,754) ($21,058)
Construction 1992 1995 $39,933 $7,207 $6,398 $0 $38
Fixtures 1992 1995 $18,898 $2,668 $2,668 $0 ($432)
Furniture 1992 1995 $12,485 $1,209 $0 ($1,209) ($1,209)
Material Handling 1992 1995 $2,697,355 $3,586,072 $3,969,642 $1,139,585 ($724,447)
Medical 1992 1995 $3,348,398 $714,943 $494,343 ($220,601) ($1,322,760)
Manufacturing & Production 1992 1995 $1,101,940 $268,754 $269,476 $4,782 ($67,950)
Office Equipment 1992 1995 $2,469 $0 $198 $198 $0
Restaurant 1992 1995 $21,586 $3,710 $3,732 $22 $0
Retail 1992 1995 $160,369 $29,643 $26,957 $1,227 ($751)
Sanitation 1992 1995 $6,460 $1,545 $1,497 ($48) $0
Telecommunications 1992 1995 $224,337 $37,338 $70,923 $33,585 ($718)
Video Production 1992 1995 $95,387 $25,897 $30,829 $5,442 ($428)
Medical 1993 1995 $426,311 $0 $0 $0 $0
Material Handling 1993 1995 $26,836 $19,079 $0 ($19,079) ($19,078)
Agriculture 1994 1995 $16,304 $9,913 $10,262 $348 $0
Computers 1994 1995 $16,175 $15,485 $0 ($15,485) ($15,485)
Medical 1994 1995 $30,222 $5,772 $8,996 $3,225 $0
Manufacturing & Production 1994 1995 $17,817 $14,606 $15,678 $1,072 $0
Restaurant 1994 1995 $312,000 $247,116 $271,401 $24,285 $0
Medical 1995 1995 $10,146 $1,999 $2,000 $1 $0
Computers 1991 1996 $16,882 ($2) $105 $107 $0
Fixtures 1991 1996 $25,308 $1,210 $3,244 $2,034 $4,404
Printing 1991 1996 $20,891 ($95) $556 $650 $1,280
Audio 1992 1996 $16,137 $1,887 $1,905 $18 ($1,367)
Automotive 1992 1996 $33,805 $5,441 $2,000 ($3,441) ($722)
Computers 1992 1996 $280,451 $31,923 $10,348 ($21,575) ($20,806)
Construction 1992 1996 $50,624 $5,797 $6,467 $670 ($1,915)
Copiers 1992 1996 $11,160 $1,449 $0 ($1,449) ($845)
Environmental 1992 1996 $6,810 $936 $0 ($936) $0
Fixtures 1992 1996 $99,216 $11,745 $20,000 $8,255 ($1,825)
Furniture 1992 1996 $20,459 $3,706 $0 ($3,706) ($70)
Material Handling 1992 1996 $20,615,957 $10,585,846 $12,476,033 $1,891,187 $303,725
Medical 1992 1996 $2,462,850 $252,786 $243,792 ($8,994) ($167,648)
Manufacturing & Production 1992 1996 $1,414,399 $117,455 $59,071 ($58,384) ($74,762)
Office Equipment 1992 1996 $60,154 $9,886 $9,300 ($586) ($531)
Photography 1992 1996 $7,252 $1,286 $0 ($1,286) $0
Printing 1992 1996 $16,757 $2,390 $0 ($2,390) ($2,390)
Restaurant 1992 1996 $108,729 $13,773 $6,318 ($7,455) ($3,765)
Retail 1992 1996 $14,165 $609 $768 $159 $0
Sanitation 1992 1996 $44,503 $6,313 $4,821 ($1,491) ($5,206)
Telecommunications 1992 1996 $427,770 $44,812 $157,751 $112,939 $72,457
Video Production 1992 1996 $21,426 $3,259 $2,455 ($804) $0
Medical 1993 1996 $133,170 $4,221 $61,949 $57,728 $6,191
Manufacturing & Production 1993 1996 $36,441 ($484) $0 $484 $0
Office Equipment 1993 1996 $24,195 ($4) $0 $4 $0
Telecommunications 1993 1996 $24,949 ($4) $881 $885 $0
Computers 1994 1996 $252,860 $4,417 $58,071 $53,654 $14,037
Fixtures 1994 1996 $12,057 $0 $781 $781 ($6,175)
Furniture 1994 1996 $27,035 $23,539 $26,106 $2,567 $5,735
Restaurant 1994 1996 $16,307 $13,051 $4,750 ($8,301) ($8,301)
Telecommunications 1994 1996 $15,157 $10,262 $11,572 $1,310 ($7,857)
Computers 1995 1996 $6,916 $201 $750 $549 ($4,753)
Fixtures 1995 1996 $15,241 $9,204 $9,796 $593 $0
Medical 1995 1996 $6,162 $1,353 $19 $0 $0
Manufacturing & Production 1995 1996 $26,538 $25,942 $0 ($25,942) ($25,942)
Restaurant 1995 1996 $508,782 $434,244 $487,909 $53,665 $0
Manufacturing & Production 1996 1996 $51,625 $44,861 $48,959 $4,098 $0
Medical 1991 1997 $1,149,504 $276,606 $96,118 $0 $188,884
Automotive 1992 1997 $24,515 $4,367 $3,040 ($1,328) $1,981
Computers 1992 1997 $347,614 $11,917 $19,814 $7,898 $36,824
Copiers 1992 1997 $9,748 $976 $976 $0 $850
Fixture 1992 1997 $104,162 $0 $0 $0 $0
Furniture 1992 1997 $32,575 $5,708 $2,170 ($3,538) $1,208
Manufacturing & Production 1992 1997 $141,478 $11,341 $7,043 ($4,298) $6,046
Medical 1992 1997 $954,760 $103,649 $109,333 $6,185 $84,846
Printing 1992 1997 $85,513 $7,321 $5,849 ($1,472) $5,523
Retail 1992 1997 $362,443 $60,710 $84,800 $24,090 $79,536
Sanitation 1992 1997 $32,997 $3,983 $0 ($3,983) ($0)
Telecommunications 1992 1997 $18,803 $2,524 $0 ($2,524) $0
Video Production 1992 1997 $20,356 $3,472 $3,494 $22 $2,691
Computers 1993 1997 $39,800 $7,443 $7,997 $554 $0
Fixture 1993 1997 $79,718 $3,455 $3,455 $0 ($12,386)
Furniture 1993 1997 $23,436 $0 $1,307 $1,307 $0
Manufacturing & Production 1993 1997 $77,698 $421 $9,876 $9,455 $1,527
Restaurant 1993 1997 $17,005 ($3) $0 $3 $0
Retail 1993 1997 $42,786 $5,800 $32 ($5,769) $0
Telecommunications 1993 1997 $76,929 $2,509 $2,622 $113 $0
Video Production 1993 1997 $233,785 $52,954 $32,076 ($20,879) $0
Computers 1994 1997 $125,746 $3,499 $8,344 $4,845 ($14,285)
Fixture 1994 1997 $90,785 $6,445 $9,149 $2,704 ($33,609)
Manufacturing & Production 1994 1997 $13,760 $962 $1,381 $419 ($3,712)
Restaurant 1994 1997 $51,400 $488 $2,198 $1,710 ($18,580)
Retail 1994 1997 $1,501,983 $319,666 $256,568 $2 ($295,191)
Telecommunications 1994 1997 $56,505 $546 $1,770 $1,224 ($8,729)
Computers 1995 1997 $1,754,928 $299,886 $568,598 $1,619 $983,173
Manufacturing & Production 1995 1997 $1,732,267 $0 $570,337 $235,733 ($603,350)
Medical 1995 1997 $88,444 $784 $4,806 $4,022 $0
Printing 1995 1997 $549,350 $58,767 $451,179 $0 $597,439
Retail 1995 1997 $20,061 $11,468 $11,761 $292 $0
Computers 1996 1997 $36,872 $34,667 $400 ($34,267) $0
Fixture 1996 1997 $51,207 $40,982 $0 ($32,982) $0
Manufacturing & Production 1996 1997 $14,123 $12,443 $1,500 ($10,943) $0
Printing 1996 1997 $3,795 $0 $0 $0 $0
Computers 1997 1997 $20,254 $17,290 $0 ($17,290) $0
Restaurant 1997 1997 $53,637 $55,316 $64,495 $9,179 $0
Manufacturing & Production 1992 1998 $1,773,568 $510,063 $119,788 ($390,275) (4)
Medical 1992 1998 $28,431 $2,072 $3,993 $1,921 (4)
Retail 1993 1998 $14,272 $1,396 $0 ($1,396) (4)
Computers 1994 1998 $24,055 $0 $817 $817 (4)
Restaurant 1994 1998 $379,600 $27,557 $27,437 ($120) (4)
Retail 1994 1998 $254,056 $52,524 $35,943 ($16,581) (4)
Computers 1995 1998 $376,491 $42,215 $56,599 $14,384 (4)
Manufacturing & Production 1995 1998 $24,669 $0 $0 $0 (4)
Restaurant 1995 1998 $59,938 $0 $822 $821 (4)
Video Production 1995 1998 $21,548 $0 $0 $0 (4)
Computers 1996 1998 $6,368 $0 $0 $0 (4)
Manufacturing & Production 1996 1998 $49,800 $1,393 $4,500 $3,107 (4)
</TABLE>
(1) Acquisition cost includes Acquisition Fee.
(2) Represents the total acquisition cost less accumulated depreciation and
other reserves, calculated on a GAAP Basis.
(3) Cash received and/or principal amount of debt reduction less any direct
selling cost.
(4) Federal Taxable Gain (Loss) information not yet available for 1998.
- ---------------------
Prior performance is not an indication of future results.
TABLE V
Sales or Dispositions of equipment - Prior Public Programs
(unaudited)
The following table summarizes the sales or dispositions of equipment for ICON
Cash Flow Partners, L.P., Series E for the four years ended December 31, 1997,
and the three months ended March 31, 1998. Each of the Programs' records are
maintained in accordance with Generally Accepted Accounting Principles ("GAAP").
<TABLE>
Total Federal
Type of Year of Year of Acquisition Net Book Net GAAP Taxable
Equipment Acquisition Disposition Cost (1) Value (2) Proceeds (3) Gain (Loss) Gain (Loss)
- ---------------------------- ----------- ----------- ------------ ---------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Automotive 1992 1993 $78,708 $20,578 $21,261 $683 ($1,297)
Computers 1992 1993 $215,949 $106,608 $109,268 $2,660 $2,490
Construction 1992 1993 $19,166 $19,167 $19,758 $591 $2,748
Copiers 1992 1993 $20,119 $15,801 $16,186 $385 $2,162
Fixture 1992 1993 $34,015 $9,860 $11,228 $1,368 ($3,366)
Furniture 1992 1993 $35,126 $19,425 $19,425 $0 $0
Material Handling 1992 1993 $10,885 $6,689 $6,261 ($428) ($3,371)
Medical 1992 1993 $64,989 $4,223 $7,894 $3,671 ($22,951)
Manufacturing & Production 1992 1993 $214,901 $175,434 $180,435 $5,001 $7,349
Office Equipment 1992 1993 $56,763 $43,220 $45,905 $2,685 $2,491
Photography 1992 1993 $26,342 $21,122 $21,730 $608 ($2,163)
Printing 1992 1993 $5,275 $3,153 $3,153 $0 ($1,923)
Restaurant 1992 1993 $409,680 $272,826 $287,325 $14,499 $12,819
Sanitation 1992 1993 $16,288 $15,857 $16,556 $699 $2,098
Telecommunications 1992 1993 $61,395 $61,417 $62,977 $1,560 $8,481
Video Production 1992 1993 $17,990 $14,524 $15,710 $1,186 $1,867
Miscellaneous 1993 1993 $120,994 $77,602 $83,587 $5,985 $0
Agriculture 1993 1993 $116,298 $66,730 $83,866 $17,136 ($13,187)
Automotive 1993 1993 $271,300 $116,885 $117,399 $514 $0
Computers 1993 1993 $195,697 $48,654 $56,378 $7,724 $0
Construction 1993 1993 $38,791 $21,486 $25,834 $4,348 ($5,210)
Copiers 1993 1993 $80,019 $9,877 $13,724 $3,847 $0
Environmental 1993 1993 $14,991 $0 $0 $0 $0
Fixture 1993 1993 $111,120 $93,400 $109,342 $15,942 $0
Furniture 1993 1993 $25,242 $19,885 $18,203 ($1,682) $0
Material Handling 1993 1993 $176,632 $155,737 $183,099 $27,362 ($1,077)
Medical 1993 1993 $71,355 $57,939 $61,890 $3,951 $3,111
Manufacturing & Production 1993 1993 $26,412 $13,095 $15,580 $2,485 $0
Office Equipment 1993 1993 $14,703 $6,487 $7,422 $935 $0
Printing 1993 1993 $60,010 $12,274 $14,636 $2,362 $1,433
Restaurant 1993 1993 $63,908 $27,607 $31,424 $3,817 $0
Retail 1993 1993 $6,477 $1 $0 ($1) $0
Sanitation 1993 1993 $2,107 $82 $88 $6 ($1,893)
Telecommunications 1993 1993 $6,178,527 $5,799,650 $7,119,747 $1,320,097 $1,417,499
Transportation 1993 1993 $324,407 $260,480 $292,416 $31,936 $34,565
Video Production 1993 1993 $20,683 $20,683 $25,715 $5,032 $0
Agriculture 1992 1994 $49,841 $10,474 $10,474 $0 ($6,108)
Audio 1992 1994 $32,788 $7,383 $7,782 $399 $0
Automotive 1992 1994 $126,970 $11,657 $12,272 $615 $0
Computers 1992 1994 $198,376 $8,722 $8,549 ($172) ($14,333)
Construction 1992 1994 $54,843 $17,730 $17,730 $0 ($4,433)
Copiers 1992 1994 $15,376 $1,775 $1,775 $0 ($1,079)
Environmental 1992 1994 $31,995 $0 $0 $0 $0
Fixture 1992 1994 $20,674 $164 $1,064 $900 ($9,736)
Furniture 1992 1994 $61,625 $5,370 $5,636 $266 $0
Manufacturing & Production 1992 1994 $101,122 $13,969 $14,432 $463 ($21,582)
Material Handling 1992 1994 $2,734,334 $2,174,030 $2,212,133 $38,103 $0
Medical 1992 1994 $314,509 $34,726 $59,635 $24,909 ($113,150)
Office Equipment 1992 1994 $2,540 $118 $118 $0 $0
Photography 1992 1994 $47,692 $6,973 $6,973 $0 ($16,375)
Printing 1992 1994 $48,147 $36,679 $36,679 $0 $16,360
Restaurant 1992 1994 $474,258 $92,399 $94,557 $2,158 ($10,127)
Retail 1992 1994 $8,087 $878 $274 ($604) ($2,014)
Sanitation 1992 1994 $103,149 $38,401 $39,685 $1,284 ($358)
Telecommunications 1992 1994 $66,815 $26,524 $27,991 $1,468 ($1,110)
Video Production 1992 1994 $12,663 $1,074 $1,074 $0 ($663)
Agriculture 1993 1994 $43,840 $19,762 $20,825 $1,063 $0
Automotive 1993 1994 $786,378 $155,107 $163,558 $8,450 ($634)
Computers 1993 1994 $771,516 $130,886 $181,111 $50,226 ($3,077)
Construction 1993 1994 $274,175 $30,496 $38,465 $7,969 ($55,502)
Copiers 1993 1994 $82,454 $24,366 $26,172 $1,806 $0
Environmental 1993 1994 $49,112 $73 $93 $20 $0
Fixture 1993 1994 $77,419 $302 $303 $1 $0
Furniture 1993 1994 $280,317 $46,066 $50,280 $4,214 $0
Material Handling 1993 1994 $192,609 $37,782 $45,441 $7,659 ($11,521)
Medical 1993 1994 $77,005 $27,502 $29,111 $1,609 $0
Manufacturing & Production 1993 1994 $173,000 $18,644 $22,629 $3,986 ($2,632)
Miscellaneous 1993 1994 $10,796 $2,469 $2,469 $0 $0
Office Equipment 1993 1994 $43,986 $4,723 $5,910 $1,187 ($975)
Photography 1993 1994 $4,929 $292 $293 $1 $0
Printing 1993 1994 $77,122 $8,529 $8,530 $1 ($10,269)
Restaurant 1993 1994 $626,431 $287,444 $335,720 $48,276 ($340)
Retail 1993 1994 $103,594 $3,848 $4,856 $1,008 ($412)
Telecommunications 1993 1994 $3,820,321 $919,560 $1,253,601 $334,040 ($102,561)
Transportation 1993 1994 $287,586 $42,283 $51,224 $8,941 $0
Computers 1994 1994 $534,310 ($4,957) $0 $4,957 $0
Telecommunications 1994 1994 $1,787 $74 $95 $22 $0
Audio 1992 1995 $67,722 $9,191 $8,143 ($1,048) ($8,721)
Automotive 1992 1995 $245,537 $55,390 $30,876 ($24,514) ($62,029)
Computers 1992 1995 $670,255 $143,868 $69,402 ($74,466) ($139,420)
Construction 1992 1995 $91,856 $12,337 $11,839 ($498) ($12,399)
Copiers 1992 1995 $68,193 $17,372 $8,598 ($8,775) ($14,211)
Fixtures 1992 1995 $191,523 $41,188 $15,314 ($25,874) ($49,304)
Furniture 1992 1995 $321,142 $35,203 $22,974 ($12,230) ($28,301)
Material Handling 1992 1995 $34,982 $10,003 $10,666 $662 ($1,678)
Medical 1992 1995 $89,384 $3,814 $4,681 $867 ($11,772)
Manufacturing & Production 1992 1995 $315,323 $29,833 $26,162 ($3,671) ($53,473)
Office Equipment 1992 1995 $33,105 $17,344 $13,159 ($4,185) ($4,487)
Photography 1992 1995 $84,703 $13,769 $11,838 ($1,931) ($17,573)
Printing 1992 1995 $73,624 $14,780 $12,386 ($2,394) ($19,388)
Restaurant 1992 1995 $712,329 $90,616 $75,578 ($15,038) ($124,260)
Retail 1992 1995 $32,891 $10,703 $8,863 ($1,840) ($2,270)
Sanitation 1992 1995 $38,998 $767 $174 ($594) ($5,619)
Telecommunications 1992 1995 $79,770 $15,518 $12,517 ($3,001) ($14,459)
Video Production 1992 1995 $49,130 $2,010 $3,312 $1,302 ($6,072)
Agriculture 1993 1995 $30,211 $1 $0 ($1) $0
Automotive 1993 1995 $4,282,836 $349,513 $264,887 ($84,626) ($136,043)
Computers 1993 1995 $2,229,596 $188,186 $300,197 $112,011 ($168,156)
Construction 1993 1995 $156,808 $13,060 $13,838 $778 ($4,890)
Copiers 1993 1995 $182,402 $34,023 $41,091 $7,068 ($10,107)
Environmental 1993 1995 $72,193 $5,272 $10,169 $4,897 ($6,179)
Fixtures 1993 1995 $46,183 $4,458 $11,658 $7,200 $0
Furniture 1993 1995 $188,312 $22,536 $30,392 $7,856 ($2,545)
Material Handling 1993 1995 $215,464 $49,495 $47,550 ($1,945) ($8,613)
Medical 1993 1995 $321,168 $95,551 $62,632 ($32,918) ($11,098)
Manufacturing & Production 1993 1995 $214,562 $27,462 $18,400 ($9,062) ($10,793)
Office Equipment 1993 1995 $139,093 $6,376 $8,860 $2,485 ($240)
Printing 1993 1995 $86,115 $4,822 $7,457 $2,635 ($13,293)
Restaurant 1993 1995 $409,084 $48,198 $13,030 ($35,168) ($34,988)
Retail 1993 1995 $1,611,420 $1,042,917 $1,159,756 $116,839 $229,970
Telecommunications 1993 1995 $4,286,056 $743,382 $725,892 ($17,490) ($498,634)
Transportation 1993 1995 $492,417 $107,360 $20,019 ($87,341) ($41,603)
Video Production 1993 1995 $44,694 $834 $2,186 $1,353 ($38)
Computers 1994 1995 $87,124 $6,538 $6,681 $143 ($23,642)
Manufacturing & Production 1994 1995 $4,274,389 $3,282,651 $3,920,390 $637,739 $197,449
Restaurant 1994 1995 $328,731 $249,347 $279,689 $30,342 ($13,335)
Telecommunications 1994 1995 $216,656 $23,994 $131,743 $107,749 ($34,910)
Computers 1995 1995 $36,958 $33,442 $33,448 $6 $0
Copiers 1995 1995 $7,609 $6,148 $6,493 $346 $0
Medical 1995 1995 $2,583 $1,128 $2,188 $1,059 $0
Manufacturing & Production 1995 1995 $6,457 $2,849 $2,850 $1 $0
Agriculture 1992 1996 $31,460 $0 $0 $0 ($682)
Audio 1992 1996 $92,826 ($2,059) $3,806 $5,865 $3,870
Automotive 1992 1996 $287,713 $6,658 $17,197 $10,540 ($3,064)
Boats and Barges 1992 1996 $11,212,811 $5,847,446 $6,484,930 $997,484 $1,494,529
Computers 1992 1996 $898,409 $25,742 $43,694 $17,952 ($13,007)
Construction 1992 1996 $123,305 $14,286 $8,278 ($6,008) ($16,199)
Copiers 1992 1996 $68,955 ($1,779) $1,015 $2,794 ($1,081)
Environmental 1992 1996 $40,826 $3,783 $0 ($3,783) ($4,085)
Fixtures 1992 1996 $111,866 $6,089 $3,401 ($2,688) ($6,541)
Furniture 1992 1996 $146,474 $3,363 $5,462 $2,100 ($2,755)
Material Handling 1992 1996 $21,393 $8,813 $2,100 ($6,713) ($2,452)
Medical 1992 1996 $146,946 $11,947 $9,110 ($2,837) ($6,459)
Manufacturing & Production 1992 1996 $667,197 $65,774 $45,284 ($20,490) ($46,664)
Mining 1992 1996 $578,501 $170,022 $185,000 $14,978 $60,364
Office Equipment 1992 1996 $16,072 $569 $689 $120 ($602)
Photography 1992 1996 $141,810 $15,166 $6,252 ($8,914) ($14,371)
Printing 1992 1996 $145,378 $11,275 $15,431 $4,156 $6,849
Restaurant 1992 1996 $884,581 $44,176 $26,729 ($17,446) ($44,464)
Retail 1992 1996 $96,493 $3,602 $6,900 $3,298 ($1,170)
Sanitation 1992 1996 $98,510 $3,375 $493 ($2,882) ($2,914)
Telecommunications 1992 1996 $761,258 $59,641 $98,290 $38,650 $47,869
Video Production 1992 1996 $121,200 $6,149 $7,489 $1,339 ($3,760)
Agriculture 1993 1996 $21,432 $0 $70 $70 $0
Automotive 1993 1996 $4,857,549 $272,271 $189,368 ($82,903) ($162,026)
Computers 1993 1996 $3,479,468 $395,869 $645,770 $249,901 ($677,445)
Construction 1993 1996 $96,756 $7,966 $30,293 $22,327 $16,919
Copiers 1993 1996 $106,667 $7,311 $9,624 $2,313 ($303)
Environmental 1993 1996 $247,777 $17,423 $5,377 ($12,046) ($30,332)
Fixtures 1993 1996 $105,895 $0 $1,315 $1,315 $0
Furniture 1993 1996 $279,345 $35,048 $49,121 $14,073 ($29,464)
Material Handling 1993 1996 $101,226 $2,241 $3,333 $1,092 ($104)
Medical 1993 1996 $540,339 $7,760 $17,215 $9,455 $1,594
Manufacturing & Production 1993 1996 $726,873 $36,559 $63,956 $27,397 ($15,009)
Miscellaneous 1993 1996 $109,700 ($5) $3,135 $3,141 $0
Office Equipment 1993 1996 $325,028 $3,026 $12,953 $9,927 ($53,619)
Printing 1993 1996 $185,965 $10,656 $20,955 $10,299 ($4,786)
Restaurant 1993 1996 $280,383 $6,137 $12,560 $6,424 ($704)
Retail 1993 1996 $440,090 $71,872 $57,200 ($14,672) ($36,991)
Sanitation 1993 1996 $18,319 $3,870 $14,042 $10,172 $7,122
Telecommunications 1993 1996 $3,379,187 $417,507 $467,241 $49,735 ($193,057)
Transportation 1993 1996 $87,016 $8,588 $27,917 $19,330 $14,920
Video Production 1993 1996 $113,063 $9,869 $472 ($9,397) ($31,337)
Computers 1994 1996 $145,099 $18,104 $33,695 $15,591 ($51,596)
Fixtures 1994 1996 $5,701 ($248) $15 $263 $0
Furniture 1994 1996 $43,911 $5,660 $0 ($5,660) ($13,787)
Material Handling 1994 1996 $40,874 $4,719 $8,180 $3,462 $265,046
Medical 1994 1996 $600,290 $58,047 $64,059 $6,012 ($285,307)
Manufacturing & Production 1994 1996 $119,549 $31,979 $25,267 ($6,712) ($42,424)
Printing 1994 1996 $39,622 $6,853 $4,000 ($2,853) ($15,129)
Restaurant 1994 1996 $27,415 $14,772 $0 ($14,772) ($16,490)
Telecommunications 1994 1996 $15,173 ($6) $302 $308 $0
Computers 1995 1996 $173,672 $29,108 $20,133 ($8,975) ($7,703)
Copiers 1995 1996 $5,041 $0 $378 $378 $0
Fixtures 1995 1996 $44,435 $9,918 $7,530 ($2,389) ($2,388)
Furniture 1995 1996 $11,279 $0 $0 $0 ($9,023)
Material Handling 1995 1996 $3,725 $125 $420 $295 $0
Medical 1995 1996 $104,042 $82,701 $37,325 ($45,376) ($45,738)
Manufacturing & Production 1995 1996 $213,504 $115,772 $77,296 ($38,476) ($36,655)
Printing 1995 1996 $6,610 $2,807 $2,967 $160 $0
Restaurant 1995 1996 $69,892 $66,077 $36,359 ($29,718) ($29,718)
Retail 1995 1996 $623,532 $524,555 $584,336 $59,781 $0
Telecommunications 1995 1996 $57,101 $3,218 $1,541 ($1,677) ($1,867)
Video Production 1995 1996 $25,738 $12,618 $13,408 $790 $0
Computers 1996 1996 $24,535 $7,962 $0 ($7,962) ($7,962)
Manufacturing & Production 1996 1996 $52,320 $52,930 $0 $52,930 $0
Restaurant 1996 1996 $7,247 $114 $1,500 $1,386 ($1,312)
Automotive 1992 1997 $35,277 $0 $10,419 $10,419 $13,003
Computers 1992 1997 $74,483 $0 $9,165 $9,165 $13,519
Construction 1992 1997 $22,030 $4,101 $2,891 ($109) $1,200
Environmntal 1992 1997 $12,565 $2,224 $2,225 $0 $1,893
Fixture 1992 1997 $28,886 $0 $0 $0 $2,401
Furniture 1992 1997 $31,271 $1,531 $1,109 ($422) $2,063
Manufacturing & Production 1992 1997 $6,943 $819 $1,311 $0 $1,072
Material Handling 1992 1997 $4,110,891 $925,806 $1,116,242 $0 $858,263
Mining 1992 1997 $217,414 $71,977 $20,000 $0 $20,000
Photography 1992 1997 $31,894 $4,950 $3,622 $0 $2,338
Printing 1992 1997 $168,741 $18,014 $12,537 ($1,610) $11,395
Restaurant 1992 1997 $26,616 $0 $0 $0 $2,847
Sanitation 1992 1997 $9,361 $0 $0 $0 $2,119
Telecommunications 1992 1997 $412,360 $39,967 $49,682 $12,232 $52,607
Agriculture 1993 1997 $40,194 $0 $0 $0 $0
Automotive 1993 1997 $888,312 $47,663 $24,773 ($22,890) $0
Computers 1993 1997 $734,252 $93,839 $90,756 ($3,083) $3,687
Construction 1993 1997 $63,042 $9,790 $10,459 $670 $0
Copiers 1993 1997 $63,037 $0 $0 $0 $0
Environmntal 1993 1997 $32,236 $4,298 $4,796 $497 $0
Fixtures 1993 1997 $9,044,378 $1,170,547 $1,443,061 $504,440 $743,528
Furniture 1993 1997 $315,502 $66,485 $67,421 $936 $0
Install Chgs 1993 1997 $1,837 $0 $0 $0 $0
Manufacturing & Production 1993 1997 $536,057 $69,376 $86,814 $17,438 ($4,079)
Miscellaneous 1993 1997 $11,404 $0 $262 $262 $0
Material Handling 1993 1997 $208,966 $8,685 $6,409 ($2,276) $0
Medical 1993 1997 $980,345 $14,745 $9,015 ($5,730) ($4,502)
Office Equipment 1993 1997 $293,902 $39,096 $48,162 $9,066 ($10,334)
Photography 1993 1997 $106,420 $25,078 $25,359 $281 $0
Printing 1993 1997 $69,600 $1,744 $2,253 $508 $0
Restaurant 1993 1997 $1,033,639 $178,664 $193,503 $14,838 ($13,767)
Retail 1993 1997 $801,808 $81,489 $108,377 $26,888 ($56,651)
Sanitation 1993 1997 $38,711 $10,814 $1,093 ($9,721) $0
Telecommunications 1993 1997 $2,215,528 $167,220 $191,182 $38,463 $73,235
Transportation 1993 1997 $155,270 $27,237 $31,561 $4,324 $2,810
Video Production 1993 1997 $30,290 $0 $0 $0 $0
Agriculture 1994 1997 $16,669 $2,080 $1,356 ($724) $0
Automotive 1994 1997 $17,497 $2,193 $4,453 $2,260 ($2,429)
Computers 1994 1997 $246,517 $23,978 $19,260 ($201) ($50,581)
Furniture 1994 1997 $77,796 $8,383 $13,210 $4,827 ($18,169)
Manufacturing & Production 1994 1997 $770,651 $221,135 $156,719 ($4,256) ($168,342)
Medical 1994 1997 $97,293 $13,074 $17,107 $4,033 ($15,151)
Printing 1994 1997 $33,526 $0 $0 $0 $0
Restaurant 1994 1997 $17,087 $346 $2,314 $1,968 ($4,605)
Telecommunications 1994 1997 $17,862 $228 $0 ($228) $0
Video Production 1994 1997 $43,569 $0 $70 $70 $0
Audio 1995 1997 $24,180 $0 $0 $0 $0
Computers 1995 1997 $370,580 $19,725 $21,722 $1,997 $0
Copiers 1995 1997 $10,564 $1,482 $0 ($1,482) $0
Fixture 1995 1997 $18,012 $0 $518 $518 $0
Furniture 1995 1997 $25,418 $7,293 $8,354 $1,061 $0
Manufacturing & Production 1995 1997 $399,479 $78,533 $35,135 ($43,397) ($10,332)
Medical 1995 1997 $131,557 $30,567 $30,135 $1,728 $0
Office Equipment 1995 1997 $12,041 $0 $1 $1 $0
Printing 1995 1997 $10,883 $0 $523 $523 $0
Restaurant 1995 1997 $41,979 $6,944 $7,090 $145 $0
Telecommunications 1995 1997 $32,044 $644 $2,025 $1,382 $0
Transport 1995 1997 $9,915 $0 $0 $0 $0
Video Production 1995 1997 $5,116 $1,434 $1,619 $185 $0
Aircraft 1996 1997 $5,690,161 $5,231,289 $5,305,164 $73,875 $0
Computers 1996 1997 $69,115 $64,613 $28,495 ($36,118) $0
Manufacturing & Production 1996 1997 $112,286 $2,317,341 $2,316,413 ($929) $0
Printing 1996 1997 $30,867 $24,284 $0 ($24,284) $0
Restaurant 1996 1997 $21,703 $19,339 $0 ($16,339) $0
Retail 1996 1997 $28,814 $24,695 $0 ($24,695) $0
Telecommunications 1996 1997 $646,908 $204,268 $81,062 ($123,206) ($261,441)
Video Production 1996 1997 $53,503 $41,768 $45,625 $3,857 $0
Computers 1997 1997 $42,221 $41,673 $0 ($37,673) $0
Manufacturing & Production 1997 1997 $56,217 $54,750 $89,370 $34,620 $0
Medical 1992 1998 $28,945 $0 $13,065 $13,065 (4)
Office Equipment 1992 1998 $3,486 $0 $3,151 $3,151 (4)
Photography 1992 1998 $11,376 $1,738 $0 ($1,738) (4)
Automotive 1993 1998 $43,374 $0 $5,826 $5,826 (4)
Computers 1993 1998 $1,644,491 $273,716 $392,988 $119,271 (4)
Manufacturing & Production 1993 1998 $19,974 $0 $0 $0 (4)
Materials 1993 1998 $32,128 $4,221 $0 ($4,221) (4)
Restaurant 1993 1998 $115,199 $660 $106 ($554) (4)
Retail 1993 1998 $16,046 $774 $855 $81 (4)
Sanitation 1993 1998 $48,315 $0 $0 $0 (4)
Telecommunications 1993 1998 $101,076 $21,633 $34,819 $13,186 (4)
Computers 1994 1998 $22,525 $51 $300 $249 (4)
Furniture 1994 1998 $114,022 $31,477 $38,909 $7,432 (4)
Manufacturing & Production 1994 1998 $19,962 $485 $485 ($0) (4)
Computers 1995 1998 $91,349 $0 $2,178 $2,178 (4)
Manufacturing & Production 1995 1998 $82,681 $0 $3,163 $3,163 (4)
Medical 1995 1998 $32,578 $0 $0 $0 (4)
Restaurant 1995 1998 $23,799 $0 $0 $0 (4)
Retail 1995 1998 $34,492 $0 $58 $58 (4)
Telecommunications 1995 1998 $26,346 $0 $354 $354 (4)
Transport 1995 1998 $36,258 $0 $0 $0 (4)
Audio 1996 1998 $26,373 $1,409 $1,409 $0 (4)
</TABLE>
(1) Acquisition cost includes Acquisition Fee.
(2) Represents the total acquisition cost less accumulated depreciation and
other reserves, calculated on a GAAP Basis.
(3) Cash received and/or principal amount of debt reduction less any direct
selling cost.
(4) Federal Taxable Gain (Loss) information not yet available for 1998.
- ---------------------
Prior performance is not an indication of future results.
TABLE V
Sales or Dispositions of equipment - Prior Public Programs
(unaudited)
The following table summarizes the sales or dispositions of equipment for ICON
Cash Flow Partners, L.P. Six for the two years ended December 31, 1997, and the
three months ended March 31, 1998. Each of the Programs' records are maintained
in accordance with Generally Accepted Accounting Principles ("GAAP").
<TABLE>
Total Federal
Type of Year of Year of Acquisition Net Book Net GAAP Taxable
Equipment Acquisition Disposition Cost (1) Value (2) Proceeds (3) Gain (Loss) Gain (Loss)
- --------------------------- ----------- ----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Restaurant 1994 1995 $326,412 $274,229 $292,998 $18,770 ($8,364)
Computers 1995 1995 $40,355 $36,171 $4,310 ($31,861) $0
Manufacturing & Production 1995 1995 $107,995 $70,846 $13,253 ($57,593) ($6,821)
Printing 1995 1995 $1,820,770 $1,218,354 $847,650 ($370,703) ($189,624)
Computers 1994 1996 $18,446 $5,353 $3,560 ($1,793) ($10,985)
Manufacturing & Production 1994 1996 $17,177 $8,953 $9,433 $480 $0
Telecommunications 1994 1996 $24,655 $18,456 $20,460 $2,004 $0
Computers 1995 1996 $1,347,917 $329,160 $125,734 ($203,426) ($541,146)
Construction 1995 1996 $22,064,270 $16,995,923 $16,995,923 $0 ($623,361)
Medical 1995 1996 $103,056 $44,801 $50,884 $6,083 $0
Manufacturing & Production 1995 1996 $1,409,938 $812,883 $444,921 ($367,962) ($374,116)
Printing 1995 1996 $5,442,336 $2,288,789 $1,412,324 ($876,465) ($414,037)
Restaurant 1995 1996 $268,961 $253,439 $269,638 $16,199 $0
Telecommunications 1995 1996 $1,650,391 $1,200,958 $1,315,148 $114,190 $0
Automotive 1994 1997 $27,829 $14,749 $0 ($14,749) $0
Computers 1994 1997 $180,776 $66,976 $75,905 $8,929 ($13,291)
Construction 1994 1997 $32,848 $17,140 $0 ($17,140) $0
Fixture 1994 1997 $45,846 $1,789 $2,750 $961 ($15,349)
Restaurant 1994 1997 $94,554 $47,563 $52,007 $4,444 $0
Retail 1994 1997 $26,897 $0 $1,936 $1,936 ($8,598)
Computers 1995 1997 $3,262,279 $489,867 $501,756 ($140,124) $185,069
Fixture 1995 1997 $29,651 $18,427 $0 ($18,427) $0
Manufacturing & Production 1995 1997 $1,890,353 $255,830 $887,316 $28,163 $191,708
Medical 1995 1997 $88,067 $1,722 $2,461 $739 $0
Office Equipment 1995 1997 $27,724 $0 $0 $0 $0
Printing 1995 1997 $4,015,970 $898,332 $821,964 ($50,660) ($50,886)
Restaurant 1995 1997 $39,793 $28,957 $0 ($28,957) $0
Telecommunications 1995 1997 $19,948 $2,353 $2,428 $75 $0
Transport 1995 1997 $12,332 $541 $544 $2 $0
Furniture 1996 1997 $52,450 $51,399 $3,919 ($27,979) $0
Manufacturing & Production 1996 1997 $640,182 $81,744 $128,607 ($27,601) ($216,682)
Printing 1996 1997 $349,511 $243,488 $223,338 ($20,150) $0
Restaurant 1996 1997 $30,415 $0 $99 $99 $0
Telecommunications 1996 1997 $216,401 $118,544 $3,044 $3,044 ($7,459)
VIDEO PROD 1994 1998 $14,310 $100 $112 ($12) (4)
COMPUTES 1995 1998 $2,219,673 $187,957 $364,521 ($176,564) (4)
FURNITURE 1995 1998 $57,282 $0 $1,415 ($1,415) (4)
M & P 1995 1998 $181,790 $1,079 $64,199 ($63,120) (4)
MEDICAL 1995 1998 $40,799 $0 $1,154 ($1,154) (4)
PRINTING 1995 1998 $413,451 $12,413 $10,382 $2,030 (4)
RESTAURANT 1995 1998 $10,838 $0 $4 ($4) (4)
TELECOMM 1995 1998 $7,707 $542 $1,250 ($708) (4)
COMPUTERS 1996 1998 $26,138 $0 $13 ($13) (4)
M & P 1996 1998 $11,497 $0 $6 ($6) (4)
PRINTING 1996 1998 $39,424 $0 $562 ($562) (4)
</TABLE>
(1) Acquisition cost includes Acquisition Fee.
(2) Represents the total acquisition cost less accumulated depreciation and
other reserves, calculated on a GAAP Basis.
(3) Cash received and/or principal amount of debt reduction less any direct
selling cost.
(4) Federal Taxable Gain (Loss) information not yet available for 1998.
- ---------------------
Prior performance is not an indication of future results.
TABLE V
Sales or Dispositions of equipment - Prior Public Programs
(unaudited)
The following table summarizes the sales or dispositions of equipment for ICON
Cash Flow Partners, L.P. Seven for the year ended December 31, 1997, and the
three months ended March 31, 1998. Each of the Programs' records are maintained
in accordance with Generally Accepted Accounting Principles ("GAAP").
<TABLE>
Total Federal
Type of Year of Year of Acquisition Net Book Net GAAP Taxable
Equipment Acquisition Disposition Cost (1) Value (2) Proceeds (3) Gain (Loss) Gain (Loss)
- ------------------ ----------- ----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Construction 1996 1997 $50,702 $47,778 $0 ($47,778) $0
Vessels 1997 1997 $9,561,865 $4,154,528 $5,864,138 $1,709,610 $2,448,874
Computers 1996 1997 $2,048,220 $1,660,987 $1,774,347 $18,900 $0
Telecommunications 1996 1997 $52,104 $13,681 $22,837 $0 ($23,396)
</TABLE>
(1) Acquisition cost includes Acquisition Fee.
(2) Represents the total acquisition cost less accumulated depreciation and
other reserves, calculated on a GAAP Basis.
(3) Cash received and/or principal amount of debt reduction less any direct
selling cost.
(4) Federal Taxable Gain (Loss) information not yet available for 1998.
- ---------------------
Prior performance is not an indication of future results.
<PAGE>
ICON INCOME FUND EIGHT INSTRUCTIONS FOR COMPLETING THE SUBSCRIPTION
AGREEMENT
========================================================================
INSTRUCTIONS: To purchase or acquire ownership interests in ICON Income Fund
Eight, please complete and sign the Subscription Agreement. Please print or type
your responses clearly in the spaces provided.
======================================================================== Units
Purchased. Indicate the total dollar amount and the number of 1. Units you wish
to purchase in ICON Income Fund EIGHT. Each whole INVESTMENT: Unit has a cost of
$100.00 and each 1/10,000th of a Unit costs $.01. (Example: For an investment of
$2,723.25, the number of units will equal 27.2325 Units.) The Partnership has a
minimum Initial Investment requirement of $2,500 except for IRAs, SEPs and
Qualified Pension, Profit-Sharing or Stock Option Plans including Keogh Plans
for which the minimum Investment is $1,000. (Please see the "INVESTOR
SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS; SUBSCRIPTION PROCEDURES"
section in the Prospectus for details and restrictions).
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
A. Subscriber or Investor Information. Fill in the name, address 2. and tax
identification number or social security number for each REGISTRATION
subscriber. (If necessary, attach an additional sheet and have INFORMATION: the
additional subscribers sign such sheet.) B. Trustee or Custodian Information.
Please have the Trustee(s) or Custodian(s) of your fiduciary account complete
Section 2B, if the investment is to be held in a trustee or custodial account
(such as your IRA, SEP or Qualified Plan), or in another fiduciary account.
(Note: Section 2A must be completely filled out with all subscriber
information.) C. Citizenship. Please indicate if you are a U.S. Citizen, U.S.
Resident Alien or the citizen of a country other than the United States. If so,
please specify the country of which you are a citizen.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Mark only one box. Information as to signatures that are required, depending on
the type of ownership, is provided below.) 3. FORM OF INDIVIDUAL
OWNERSHIP-investor's signature required. OWNERSHIP: HUSBAND AND WIFE, AS
COMMUNITY PROPERTY-both parties' signature required. JOINT TENANTS-signatures of
all parties are required. TENANTS IN COMMON-signatures of all parties are
required. PARTNERSHIP-signature of an authorized partner required.
CORPORATION-signature of an authorized officer. IRA, SEP, KEOGH-signature of
trustee or custodian required. CUSTODIAL ACCOUNT-signature of custodian
required. TRUST-signature of trustee required.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
4. If you want your distribution checks to be mailed to an address DISTRIBUTION
other than shown in Section 2, please complete Section 4. If you ALTERNATIVES:
desire multiple payees or direct deposit for your distributions, please complete
the Special Payment Instruction Form (Page C-5).
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
5. Please complete the Investor Data Sheet of the Subscription SIGNATURES:
Agreement (Page C-3) and read the Investor Suitability Requirements and
Representations on the reverse side of the Data Sheet (see Page C-4). After you
have done so, please sign, initial and date the Subscription Agreement. (Please
refer to Section 3 above for information as to who should sign.)
- ------------------------------------------------------------------------------
6. The Registered Representative must complete this section of the BROKER/DEALER
Subscription Agreement. An authorized Branch Manager or Registered INFORMATION:
Principal of the Broker/Dealer firm must sign the Subscription Agreement. Orders
cannot be accepted without this Broker/Dealer authorization.
- -----------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Until you are notified that the escrow condition of the sale of 7. INVESTMENT
12,000 Units has been completed, please make checks payable to "The CHECKS &
Chase Manhattan Bank ICON Income Fund EIGHT Escrow Account."
SUBSCRIPTIONS:Thereafter, checks should be made payable to "ICON Income Fund
EIGHT" Your check should be in the amount of your subscription as shown in
Section 1 of the Subscription Agreement. Mail your completed white and pink
copies of the Subscription Agreement (Page C-3) together with your Special
Payment Instruction Form (Page C-5) (if applicable) and subscription check, in
the amount of the subscription price (as shown in Section 1 on page C-3) to:
ICON Securities Corp., 600 Mamaroneck Avenue, Harrison, New York 10528. An
original executed pink copy of this Subscription Agreement will be returned to
you for your files.
- -----------------------------------------------------------------------------
NO SUBSCRIPTION AGREEMENT WILL BE PROCESSED UNLESS FULLY COMPLETED AND
ACCOMPANIED BY PAYMENT IN FULL. ANY SUBSCRIPTION PAYMENT WHICH IS DISHONORED
WILL CAUSE THE SUBSCRIPTION AND ANY CERTIFICATE FOR UNITS TO BE VOID AS OF THE
SUBSCRIPTION DATE AND SHALL OBLIGATE THE SUBSCRIBER TO PAY ALL COSTS AND CHARGES
ASSOCIATED THEREWITH.
PLEASE SEE PAGE C-2 FOR GENERAL INSTRUCTIONS AND PAGE C-4 FOR INVESTOR
SUITABILITY REQUIREMENTS AND REPRESENTATIONS.
If you have any questions about completing this Subscription Agreement, please
call ICON Securities Corp., Subscription Processing Desk, at (800) 343-3736.
White-ICON copy, Yellow-Broker/Dealer copy, Pink-Investor copy
GENERAL INSTRUCTIONS
1. Each Subscriber is hereby instructed that: (a) no offer to sell Units
may be made except by means of the Prospectus and, consequently, (b) SUBSCRIBER
SHOULD NOT RELY UPON ANY ORAL STATEMENTS BY ANY PERSON, OR UPON ANY WRITTEN
INFORMATION OTHER THAN AS SPECIFICALLY SET FORTH IN THE PROSPECTUS AND
SUPPLEMENTS THERETO OR IN PROMOTIONAL BROCHURES CLEARLY MARKED AS BEING PREPARED
AND AUTHORIZED BY THE GENERAL PARTNER, ICON CAPITAL CORP., OR BY THE
DEALER-MANAGER, ICON SECURITIES CORP., FOR USE IN CONNECTION WITH OFFERING OF
UNITS TO THE GENERAL PUBLIC BY MEANS OF THE PROSPECTUS. Subscriber is hereby
further advised that an investment in Units of the Partnership involves certain
risks including, without limitation, the matters set forth in the Prospectus
under the captions "Risk Factors", "Conflicts of Interest", "Management" and
"Income Tax Considerations." Subscriber is hereby advised that the
representations set forth herein do not constitute a waiver of any of
Subscriber's rights under the Delaware Limited Partnership Act and applicable
federal and state securities laws.
2. Subscriber is hereby instructed that: (a) the Units are subject to
substantial restrictions on transferability; (b) there will be no public market
for the Units; and (c) it may not be possible for Subscriber to readily
liquidate his investment in the Partnership, if at all, even in the event of an
emergency. Any transfer of Units is subject to the General Partner's approval
and must comply with the terms of Section 10 of the Partnership Agreement. In
particular, any purchaser or transferee must satisfy the minimum investment and
investor suitability standards for his domiciliary state set forth in the
"INVESTOR SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS; SUBSCRIPTION
PROCEDURES" section. Various states may also impose more stringent standards
than the general requirements described under the "INVESTOR SUITABILITY AND
MINIMUM INVESTMENT REQUIREMENTS; SUBSCRIPTION PROCEDURES" section in the
Prospectus. In addition, the State of California has additional transfer
requirements as summarized in the following legend, which are in addition to the
provisions of Section 10 of the Partnership Agreement:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMISSIONER'S RULES."
<PAGE>
Page 13 ICON INCOME FUND EIGHT SUBSCRIPTION AGREEMENT A Delaware Limited
Partnership
- ----------------------------------------------------------------------------- 1.
A. UNITS PURCHASED Dollar ICON USE ONLY INVESTMENT:
Amount________________________ No. of Units Subscription (Check
_________________ Received Appropriate B. TYPE OF INVESTMENT Date: Boxes)
_____Initial Investment _____Additional ________________ Investment No. of
Units: __________ Blue Sky State: ________
- -----------------------------------------------------------------------------
- ---------------------------------------------------------------------------
A. SUBSCRIBER INFORMATION (Please specify Mr. or Ms.) Subscriber's
Name(s)______________________________________________________________________
________________________________________ Subscriber Tax I.D. 2. No. or Social
Security No.______________________________ REGISTRATION Subscriber's Residential
Address INFORMATION: (Please
Street_______________________________________________________________________
type or City/Town________________________________________ print
State___________________ Zip Code______________________________ clearly)
Telephone No. (Day) _______________________________ B. TRUSTEE OR CUSTODIAL
INFORMATION (of IRAs, Qualified Plans, other Trustees, etc., if applicable)
Trustee's or Custodian's Name(s)______________________________________Trustee
Tax I.D. No. _____________________________ FBO
_____________________________________________________________Acct. No
______________________________________ Date Trust or Account Established
___________________ Year to which Subscription applicable 19___ Trustee's or
Custodian's Address
Street_______________________________________________________________________
City/Town________________________________________ State___________________ Zip
Code____________________ Contact Name_____________________________________
Phone__________________________________________ C. CITIZENSHIP (Check One)
___U.S. Citizen ___U.S. Resident Alien ___Non-Resident (Specify
Country)________________
- -------------------------------------------------------------------
- --------------------------------------------------------------------
3. FORM OF _____ Individual Ownership _____ Partnership FIDUCIARY ACCOUNTS
OWNERSHIP: _____ Husband and Wife, as Community Property _____ Corporation (Mark
only (All Sections in 2B must be filled out) one box) _____ Joint Tenants _____
Trust ___ IRA, SEP, Keogh ___ Trust _____ Tenants in Common ___ Custodial
Account
- --------------------------------------------------------------------------
- ------------------------------------------------------------------------
4. Check if:____ You wish Distributions of the Partnership to be
DISTRIBUTIONreinvested in additional Units during the Offering Period.
ALTERNATIVES: ____ You wish Direct Deposit of Distributions or that (COMPLETE
they be sent to more than one Payee. Complete the Special Payment ONLY IF
Instruction Form. PAYEE IS ____ You wish Distributions to be sent to the Payee
and DIFFERENT Address listed below. Complete the following information: THAN
Payee Name: SECTION 2A
- ------------------------------------------------------------------------------
or 2B Branch: ___________________________________ Account ABOVE)
Number:__________________________ ABA #:___________________ Street Address:
- ------------------------------------------------------------------------------
City/Town: ____________________________________________________ State
___________________ Zip Code ____________
- --------------------------------------------------------------------------
- ------------------------------------------------------------------------
(Initial _________________) The undersigned confirms that he/she: has received a
copy of the Prospectus and has read page C-2 hereof, makes the representations
contained on Page C-4 hereof, acknowledges that an 5. investment in Units is not
liquid; declares that, to the best of SIGNATURES his/her knowledge, all
information in Sections 1-4 of the Page C-3 is AND accurate and may be relied
upon by the General Partner; and appoints INITIALS: the General Partner as
his/her attorney-in-fact as described in Paragraph 2 on Page C-4. Sign
X______________________________________ Sign
X_______________________________________________________ Here Subscriber's
Signature Date Here Authorized Signature (Custodian/Trustee/Officer/Partner)
Date X______________________________________
X_______________________________________________________ Subscriber's Signature
Date Print Name (Custodian/Trustee/Officer/Partner) Date
- ------------------------------------------------------------------------
- -----------------------------------------------------------------
The Selling Dealer must sign below to complete the order and, by doing so,
thereby represents that (1) both it and its registered 6. BROKER/ representative
which solicited the subscription (the "Registered DEALER Representative"): (a)
is duly licensed by, and in good standing with, INFORMATION:the NASD and may
lawfully offer Units in the State(s) listed in (Please Section 2.A above; (b)
has reasonable grounds to believe, based on type or information obtained from
the Subscriber concerning his/her investment print objectives, other
investments, financial situation and needs and any clearly) other information
known by the Selling Dealer or Registered Representative, that the Investment
described in Section 1, above is suitable in light of Subscriber's income, net
worth and other characteristics; and (c) the Registered Representative has (i)
informed the Subscriber as to the limited liquidity of the Units and (ii)
delivered a current copy of the Prospectus to the Subscriber in connection with
the offering of Units. PLEASE PRINT Brokerage Firm
Name_______________________________________ Supervisor_______________________
Tele. Number _______________ Registered Representative
Name_______________________________________ Rep. Number ______________ Tele.
Number ______________ Representative Street
Address_______________________________________________________________
City/Town_________________________________________________
State_______________________ Zip Code _______________ Authorized signature
(Branch Manager or Registered Principal). Order cannot be completed without
signature. X_______________________________________________________
- -----------------------------------------------------------------
- --------------------------------------------------------------------
7. Mail the completed Subscription Agreement with a check payable as INVESTMENT
indicated in the instructions to: ICON Securities Corp., 600 CHECKS & Mamaroneck
Avenue, Harrison, New York 10528. SUBSCRIPTIONS.
- --------------------------------------------------------------------------
- ---------------------------------------------------------------------
ACCEPTANCE BY GENERAL PARTNER ICON Capital Corp., General Partner ICON INCOME
FUND EIGHT By:_________________________________________________________
Authorized Signature Date
- -----------------------------------------------------------------
<PAGE>
INVESTOR SUITABILITY SUBSCRIPTION; APPOINTMENT OF ATTORNEY-IN-FACT; AND
REPRESENTATIONS
1. Subscription for Units. Each subscriber (a "Subscriber") desiring to
become a Limited Partner of ICON Income Fund Eight, an equipment leasing
program consisting of two Delaware limited partnerships, ICON Income Fund
Eight A L.P., a Delaware limited partnership, ("ICON Eight A") and ICON
Income Fund Eight B L.P., a Delaware limited partnership, ("ICON Eight B")
(collectively, the "Partnerships", or, individually, a "Partnership"), hereby
signs his/her name in Section 5 on Page C-3, and thereby (a) subscribes for
the number and dollar amount of limited partnership units ("Units") as set
forth in Section 1.A on Page C-3; (b) agrees to become a Limited Partner of a
Partnership upon acceptance of his/her subscription by the General Partner of
such Partnership, ICON Capital Corp. (the "General Partner"); and (c) adopts,
and agrees to be bound by each and every provision of, the Partnership
Agreement and this Subscription Agreement. Subscriber hereby subscribes for
the number of Units (whole and fractional), and has tendered good funds
herewith in full payment of the "Dollar Amount" therefor (computed at $100
per whole Unit/$.01 for each 1/10,000th of a Unit as shown in Section 1.A on
Page C-3, subject to (i) discounts (as described in the "Plan of
Distribution" Section of the Prospectus) and to the minimum investment
requirements (as described in the "INVESTOR SUITABILITY AND MINIMUM
REQUIREMENTS; SUBSCRIPTION PROCEDURES" Section of the Prospectus).
2. Appointment of the General Partner as Subscriber's Attorney-in-Fact. By
signing his/her name in Section 5 on Page C-3, (and effective upon admission
to the Partnership), each Subscriber thereby makes, constitutes and appoints
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, as the true and
lawful attorney-in-fact of, in the name, place and stead of, such Limited
Partner, to the full extent, and for the purposes and duration, set forth in
Section 15 of the Partnership Agreement (all of the terms of which are hereby
incorporated herein by this reference). Such purposes include, without
limitation, the power to make, execute, sign, acknowledge, affirm, deliver,
record and file any (a) document or instrument which the General Partner
deems necessary or desirable to carry out fully the provisions of the
Partnership Agreement (in the manner and for the purposes provided in Section
15.1 of the Partnership Agreement) and (b) amendment to the Partnership
Agreement and to the Certificate of Limited Partnership of the Partnership
(in the manner and for the purposes provided in Section 15.2 of the
Partnership Agreement, including, without limitation, admission of Limited
Partners to the Partnership and any application, certificate, instrument,
affidavit or other document required or appropriate in connection with
registration or documentation of the Partnership's Investments). The
foregoing appointment shall not in any way limit the authority of the General
Partner as attorney-in-fact for each Limited Partner of the Partnership under
Section 15 of the Partnership Agreement. The power of attorney hereby granted
is coupled with an interest, is irrevocable and shall survive Subscriber's
death, incapacity, insolvency or dissolution or his/her delivery of any
assignment of all or any portion of his/her Units.
3. General Subscriber Representations. As a condition to Subscriber's
being admitted to the Partnership, Subscriber hereby represents that he/she:
(a) either (i) has annual gross income of $30,000 plus a net worth of $30,000
(exclusive of his/her investment in Units, home, home furnishings and
automobiles) or a net worth of $75,000 (determined in the same manner) or
(ii) meets any higher investor gross income and/or net worth standards
applicable to residents of his/her State, as set forth in the "INVESTOR
SUITABILITY AND MINIMUM INVESTMENT REQUIREMENTS; SUBSCRIPTION PROCEDURES"
Section of the Prospectus; (b) if Subscriber is an IRA or a Qualified Plan,
it has been accurately identified as such in Sections 2.A and 3 on Page C-3;
(c) has accurately identified himself/herself in Section 2.C on Page C-3 as
either a U.S. Citizen or a non-U.S. Citizen (Note: a Subscriber which is a
corporation, a partnership or trust should review the requirements for being
considered a U.S. Citizen described in the "INVESTOR SUITABILITY AND MINIMUM
INVESTMENT REQUIREMENTS; SUBSCRIPTION PROCEDURES" Section of the Prospectus);
and (d) each subscriber who is purchasing Units for Individual Ownership (as
indicated in Section 3 on Page C-3) is purchasing for his or her own account.
If Subscriber is investing in a fiduciary or representative capacity, such
investment is being made for one or more persons, entities or trusts meeting
the above requirements.
4. Additional Fiduciary and Entity Representations. If the person signing
this Subscription Agreement is doing so on behalf of another person or entity
who is the Subscriber, including, without limitation, a corporation, a
partnership, an IRA, a Qualified Plan, or a trust (other than a Qualified
Plan), such signatory by signing his/her/its name in Section 5 of Page C-3
thereby represents and warrants that (a) he is duly authorized to (i) execute
and deliver this Subscription Agreement, (ii) make the representations
contained herein on behalf of Subscriber and (iii) bind Subscriber thereby
and (b) this investment is an authorized investment for Subscriber under
applicable documents and/or agreements (e.g., articles of incorporation or
corporate by-laws or action, partnership agreement, trust indenture, etc.)
and applicable law.
5. Under the penalties of perjury, by signing his/her name in Section 5 on
Page C-3, each Subscriber thereby certifies that: (a) the Taxpayer
Identification Number or Social Security Number listed in Section 2.A on Page
C-3 is correct; and (b) he/she is not subject to backup withholding either
because the Internal Revenue Service has (i) not notified such Subscriber
that he/she is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) has notified such Subscriber that
he/she is no longer subject to backup withholding. (If you have been notified
that you are currently subject to backup withholding, strike the language
under clause (b) of this paragraph 5 before signing).
UPON SUBSCRIBER'S EXECUTION OF THIS SUBSCRIPTION AGREEMENT AND ACCEPTANCE
THEREOF BY THE GENERAL PARTNER, THIS SUBSCRIPTION AGREEMENT (CONSISTING OF
PAGES C-1 THROUGH C-5) WILL BECOME A PART OF THE PARTNERSHIP AGREEMENT.
<PAGE>
ICON INCOME FUND EIGHT
600 Mamaroneck Avenue, Harrison, New York 10528
SPECIAL PAYMENT INSTRUCTION FORM
DISTRIBUTIONS TO DIRECT DEPOSIT ACCOUNTS AND/OR MULTIPLE
PAYEES
Please use this form only if you would like your cash distributions to be
directly deposited into an account and/or sent to more than one account,
location or payee. A maximum of two (2) choices are allowed. If these
instructions are being delivered in connection with an additional
investment in this Partnership which is being combined with a prior
investment, the designations of account, location and payee(s) must be
exactly the same unless we are advised that you are requesting prior
instructions be changed. Original signatures of all joint investors or
custodial authorization are required.
First Payee Direct Deposit
Checks
Bank Name____________________________________ Bank
Address_____________________________________
City State Zip
Bank ABA#___________________________________ Bank Routing
No.__________________________________
Name of Account Holder_________________________ Account
Type_____________________________________
Account
No.______________________________________
% to be Paid*__________________________________ New
instructions: Yes No
===================================================================
Second Payee Direct Deposit
Checking
Bank Name___________________________________ Bank
Address______________________________________
City State Zip
Bank ABA#__________________________________ Bank Routing
No.___________________________________
Name of Account Holder________________________Account
Type______________________________________
Account
No._______________________________________
% to be Paid*_________________________________New
instructions: Yes No
*Please note that the total of First Payee and Second Payee (if
applicable) should equal 100% of distribution.
--------------------------------------------
----------------------------------------------
Original Signature - Subscriber - Limited Partner Original
Signature - Subscriber - Limited Partner
or Authorized/Custodial Representative
--------------------------------------------
----------------------------------------------
Date Signed Original Signature -
Subscriber - Limited Partner
Please make a copy for your records
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus or
in Supplements hereto or in supplemental sales literature issued by the
Partnership and referred to in this Prospectus or in Supplements thereto, and,
if given or made, such information or representations must not be relied upon.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, any securities other than the Units to which it relates or any of
such Units to any person in any jurisdiction in which such offer or solicitation
is unlawful. The delivery of this Prospectus at any time does not imply that the
information contained herein is correct as of any time subsequent to its date.
-------------------------------------------------------------
ICON Income Fund Eight
-------------------------------------------------------------
$150,000,000 (Maximum Offering)
150,000 Units of Limited Partnership Interest
(two Delaware limited partnerships, each having a minimum capitalization of
12,000 Units)
$100.00 per Unit
Minimum Investment 25 Units ($2,500)
(10 Units or $1,000 for IRAs or Qualified Plans)
------------------
PROSPECTUS
------------------
ICON SECURITIES CORP.
Dealer-Manager
September 23, 1998
ICON Securities Corp.
600 Mamaroneck Avenue
Harrison, New York 10528
(914) 698-0600
UNTIL DECEMBER 21, 1998 (90 DAYS FROM THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT FOR THIS OFFERING, AS AMENDED), ALL DEALERS EFFECTING TRANSACTIONS
IN THE UNITS, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. *
ITEM 14. *
ITEM 15. *
ITEM 16. *
ITEM 17. *
* Filed in Amendment No. 2 to the S-1 Registration Statement filed on
September 18, 1998 and is incorporated herein.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the S-1 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the locations and on the dates indicated.
ICON INCOME FUND EIGHT,
ICON INCOME FUND EIGHT A L.P.
(a Delaware limited partnership)
ICON INCOME FUND EIGHT B L.P.
(a Delaware limited partnership)
By: ICON CAPITAL CORP.,
General Partner
By: _/s/ Paul B. Weiss
Paul B. Weiss, President
Pursuant to the requirements of the Securities Act of 1933, the
Post-Effective Amendment No. 2 to the S-1 Registration Statement has been signed
below by the following persons on behalf of the Registrant and in the capacities
indicated, on this 30th day of April, 1999.
Signatures Title(s)
/s/ Beaufort J. B. Clarke Chief Executive Officer and Chairman
of ICON Capital Corp.,
the General Partner of the Registrant
/s/ Paul B. Weiss President and Vice Chairman
Paul B. Weiss of ICON Capital Corp.
/s/ Thomas W. Martin Executive Vice President and Director
Thomas W. Martin of ICON Capital Corp.
/s/ Kevin F. Redmond Treasurer and Chief Financial Officer
Kevin F. Redmond of ICON Capital Corp.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
EXHIBITS
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
ICON INCOME FUND EIGHT
<PAGE>
ICON INCOME FUND EIGHT
EXHIBIT INDEX
Exhibit
No. DESCRIPTION Page
1. Underwriting agreements.
1.1 Form of Dealer-Manager Agreement....................... E-****
1.2 Form of Selling Dealer Agreement....................... E- *
4. Instruments defining the rights of security holders.
4.1 The Partnership's Amended and Restated Agreement of Limited
Partnership is included as Exhibit A to the Prospectus. E-***
4.2 The Subscription Agreement, including the Limited
Partner Signature Page and Power of Attorney, whereby a subscriber
agrees to purchase Units and adopts the provisions of the Agreement
of Limited Partnership is included in Exhibit C to the Prospectus.
E-*
4.3 Copy of the Partnership's Certificate of Limited
Partnership filed with the Delaware Secretary of State
On June 9, 1997........................................ E-*
5. Opinion re legality.
5.1 Opinion of Day, Berry & Howard LLP with
respect to securities being registered................. E-**
8. Opinion re tax matters.
8.1 Opinion of Day, Berry & Howard LLP with
respect to certain tax matters......................... E-**
10. Material Contracts.
10.2 Escrow Agreement....................................... E-***
23. Consents of experts and counsel.
23.1 Consent of KPMG LLP.................................... E-
23.2 Consent of Day, Berry & Howard LLP appears in
that firm's opinion (Exhibit 5.1) and is incorporated
herein by reference.
23.3 Consent of Day, Berry & Howard LLP appears in that firm's opinion
(Exhibit 8.1) and is incorporated herein by reference.
24. Power of Attorney.
24.1 Powers of Attorney .................................... E-*
99. Additional Exhibits.
99.1 Table VI - Acquisition of Equipment by the Prior
Public Programs........................................ E-*
* Filed as an Exhibit to the S-1 Registration Statement filed on May 29,
1998 and is incorporated herein by reference.
** Filed as an Exhibit to Amendment No. 1 to the S-1 Registration Statement
filed on July 24, 1998 and is incorporated herein.
*** Filed as an Exhibit to Amendment No. 2 to the S-1 Registration Statement
filed on September 18, 1998 and is incorporated herein.
**** Filed as an Exhibit to Post-Effective Amendment No. 1 to the S-1
Registration Statement filed on January 29, 1999 and is incorporated herein.
<PAGE>
EXHIBIT 23.1
CONSENT OF
KPMG LLP
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ICON Income Fund Eight A L.P.
We consent to the use of our reports on (i) ICON Income Fund Eight A L.P. and
(ii) ICON Capital Corp. included herein, and to the reference to our firm
under the heading "Experts" in the prospectus.
...... ..... KPMG LLP
New York, New York
April 30, 1999
