As filed with the Securities and Exchange Commission on August 28, 1998
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
Registration Statement
Under
The Securities Act of 1933
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
(Exact name of registrant as specified in governing instruments)
California 7394 94-3307404
(State or other juris- (Primary standard (IRS Employer
diction of organization) industrial classification Identification number)
code number)
235 Pine Street, 6th Floor
San Francisco, California 94104
(415) 989-8800
(Address, including zip code, and telephone number,including area code, of
principal executive offices)
DEAN L. CASH
235 Pine Street, 6th Floor
San Francisco, California 94104
(415) 989-8800
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
With a copy to:
PAUL J. DERENTHAL, ESQ.
Derenthal & Dannhauser
One Post Street, Suite 575
San Francisco, California 94104
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. X
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities to Amount to Offering Price Aggregate Registration
Be Registered Be Registered Per Unit Offering Price Fee
- ------------------------------------------------------------------------------
Units of Limited Liability
Company Interest 15,000,000 $10.00 $150,000,000 $45,454.45
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
atel8-1/04.s1
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ATEL CAPITAL EQUIPMENT FUND VIII, LLC
Limited Liability Company Units
$10 per Unit - Minimum Offering 120,000 Units
Minimum Investment -- 250 Units ($2,500)
(200 Units or $2,000 for an Individual Retirement Account or Qualified Plan)
ATEL Capital Equipment Fund VIII, LLC (the "Fund") is a California limited
liability company of which ATEL Financial Corporation ("ATEL") is the Manager.
The Fund's business will be to acquire a diversified portfolio of primarily
low-technology capital equipment leased to third parties. See "Investment
Objectives and Policies." The Fund expects
(Continued on following page)
-----------------------
AN INVESTMENT IN THE FUND INVOLVES SIGNIFICANT RISKS. (See "Risk Factors"
on page___) Among the most prominent risks are the following:
- - Limited voting rights for investors mean total reliance on the Manager for
Fund management, and the Manager may be subject to certain conflicts
of interest;
- - Substantial fees are payable to the Manager and its affiliates;
- - All equipment investments are not specified, and investors cannot fully assess
the risks involved in the Fund's equipment portfolio;
- - The Fund's ability to realize lease revenues and make cash distributions
is subject to the risk of lessee defaults;
- - The use of secured debt may result in the loss of equipment used as collateral
if the Fund is unable to pay its debt obligations;
- - The Units will not be listed on any securities exchange and there are
significant limitations on transferability. Accordingly, investors may be
unable to dispose of Units except at discounts from the offering price, which
discounts may be substantial, and final liquidation is expected to occur
approximately ten to eleven years after the date the final investors are
admitted to the Fund;
- The Fund's ability to diversify its portfolio of leased equipment by types
of equipment, manufacturers, lessees and geographic regions is dependent on
the amount of capital actually raised and the amount of available debt
financing (the Fund intends to incur debt equal to approximately 50% of
its equipment cost, but there can be no assurance as to the amount
of available debt financing);
- A substantial portion of distributions will be, and a substantial
portion of distributions by prior ATEL programs have been, a return of
invested capital, as opposed to investment income, and the amount of
investment income investors may realize depends in part on the value of
equipment after the initial leases terminate; and
(Continued on the following page)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Price to Selling Proceeds
to Public Commissions Fund
Per Unit $ 10 $ 0.95 $ 9.05
Total Minimum $ 1,200,000 $ 114,000 $ 1,086,000
Total Maximum $150,000,000 $14,250,000 $135,750,000
------------ ----------- ------------
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THE DATE OF THIS PROSPECTUS IS _____________, 1998
Any supplements which update this Prospectus are contained inside the back
cover.
ATEL Capital Equipment Fund VIII, LLC is not a mutual fund or any other
type of investment company within the meaning of the Investment Company Act of
1940 and is not subject to regulation thereunder.
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(Cover page continued)
to commit approximately 87% of the total proceeds of this offering to the
purchase of equipment. At least an additional 0.5% of the total proceeds will be
retained by the Fund as capital reserves. The balance will be used to pay
selling commissions equal to 9.5% of the total proceeds and other expenses in
the estimated amount of from 2.5% to 3.5% of the offering proceeds (which may be
advanced by the Manager and reimbursed by the Fund). See "Estimated Use of
Proceeds."
The Fund's objective is to invest in a diversified portfolio of leased
equipment which will generate regular cash distributions to investors. There can
be no assurance that such objective can be attained.
It is anticipated that a substantial portion of such distributions will
be tax-deferred during the initial years of Fund operations as a result of
depreciation available from equipment purchased by the Fund. To the extent the
Fund's net income is reduced thereby and distributions exceed net income, any
distributions will be considered a return of capital and income tax will be
deferred until subsequent years.
The offering is a best efforts minimum-maximum offering. A best efforts
offering is one in which no underwriter guarantees that any specific amount of
offering proceeds will be raised. All offering proceeds will be deposited in an
escrow account and will not be released to the Fund, until subscriptions for a
minimum of 120,000 Units ($1,200,000) have been received and accepted. Unless
the Fund receives and accepts subscriptions for a minimum of 120,000 Units by a
date one year from the date of this Prospectus, all subscription proceeds will
be promptly released from the escrow account and returned to subscribers,
together with all interest earned thereon. If the minimum offering amount is
achieved within the stated period, the offering may continue for a period of up
to two years from the date hereof, but will terminate when the maximum of
15,000,000 Units ($150,000,000) is sold or the offering is earlier terminated in
the discretion of the Fund and the Dealer Manager.
(Cover page risk factors continued)
- The return of investors' capital is not guaranteed and there can be no
assurance as to the timing or amount of any distributions.
Under the terms of its Operating Agreement, the Fund will provide each
Holder with quarterly and annual financial statements, Fund information
necessary to prepare the Holder's federal income tax return and an annual report
of the Fund's business. The annual financial statements will be examined by, and
include the opinion of, an independent certified public accountant.
THE USE OF PROJECTIONS IN THIS OFFERING IS PROHIBITED. ANY REPRESENTATIONS TO
THE CONTRARY AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE AMOUNT OR CERTAINTY
OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCE WHICH MAY FLOW FROM AN
INVESTMENT IN THE FUND IS A VIOLATION OF THE LAW. HOWEVER, SUCH PROHIBITIONS
SHOULD NOT BE CONSTRUED TO PREVENT THE FUND FROM FILING SUPPLEMENTALLY ANY PRO
FORMA FINANCIAL STATEMENTS REQUIRED BY THE FEDERAL SECURITIES LAWS AND
REGULATIONS THEREUNDER.
THE FOLLOWING LEGEND IS REQUIRED BY THE ARIZONA CORPORATION COMMISSION PURSUANT
TO ITS RULE 14-4-118B: THESE ARE SPECULATIVE SECURITIES.
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THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT RECOMMEND
OR ENDORSE THE PURCHASE OF THESE UNITS.
NOTICE TO PROSPECTIVE PURCHASERS IN THE STATE OF NEW HAMPSHIRE: NEITHER THE FACT
THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED NOR
THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED
CONSTITUTES A FINDING BY THE DIRECTOR OF THE NEW HAMPSHIRE OFFICE OF SECURITIES
REGULATION THAT ANY DOCUMENT FILED UNDER THE NEW HAMPSHIRE UNIFORM SECURITIES
ACT IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT
THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS THAT THE DIRECTOR HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION.
IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER,
CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS
SECTION 421-B:20 OF THE NEW HAMPSHIRE UNIFORM SECURITIES ACT.
PENNSYLVANIA INVESTORS: BECAUSE THE MINIMUM OFFERING AMOUNT IS UNDER
$15,000,000, YOU ARE CAUTIONED TO EVALUATE CAREFULLY THE FUND'S ABILITY TO
ACCOMPLISH FULLY ITS STATED OBJECTIVES AND INQUIRE AS TO THE CURRENT DOLLAR
VOLUME OF FUND SUBSCRIPTIONS.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
3
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TABLE OF CONTENTS
Page
SUMMARY OF THE OFFERING.................................................... 8
Risk Factors........................................................... 8
Who Should Invest...................................................... 9
Estimated Use of Proceeds.............................................. 9
Management Compensation................................................ 9
Investment Objectives and Policies..................................... 9
Conflicts of Interest.................................................. 11
Fiduciary Duty of the Manager.......................................... 11
Management............................................................. 11
Prior Performance Summary.............................................. 11
Income, Losses and Distributions....................................... 11
Reinvestment........................................................... 11
Income Tax Consequences................................................ 11
Summary of the Operating Agreement..................................... 12
Plan of Distribution................................................... 13
Glossary............................................................... 13
RISK FACTORS............................................................... 13
Limited Investor Voting Rights and
Total Reliance on Management........................................... 13
Manager's Compensation and
Conflicts of Interest................................................ 14
Unspecified Equipment and Lessees........................................ 14
Defaults by Lessees...................................................... 14
Risks of Leverage........................................................ 14
Balloon Payments......................................................... 15
Limited Transferability of Units......................................... 15
Diversification Dependent Upon Size of Fund.............................. 15
Return on Investment Dependent Upon
Residual Value of Equipment............................................ 15
Portion of Distributions Characterized
as Return of Capital................................................. 16
Activities Outside of the United States.................................. 16
General Risks in the Equipment Leasing Business.......................... 16
Fluctuations in Demand for Equipment..................................... 17
Competition.............................................................. 17
Risks of Operating Leases................................................ 17
Casualty Losses.......................................................... 17
Consequences of Government Regulation.................................... 17
Registration of Aircraft May Not Be Possible............................. 18
Newly-Formed Entity...................................................... 18
Difficulty in Investing Proceeds......................................... 18
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Liability of Holders...................................................... 18
Risks of Joint Ventures................................................... 18
Limited Liability Companies Newly Established............................. 18
Partnership Status........................................................ 18
Certain Other Tax Considerations.......................................... 19
Tax Opinion............................................................... 19
ERISA Considerations...................................................... 20
WHO SHOULD INVEST........................................................... 20
ESTIMATED USE OF PROCEEDS................................................... 22
MANAGEMENT COMPENSATION..................................................... 23
Summary Table........................................................... 23
Narrative Description of Compensation................................... 25
Limitations on Fees..................................................... 26
Defined Terms Used in Description of Compensation....................... 28
INVESTMENT OBJECTIVES AND POLICIES.......................................... 31
Principal Investment Objectives......................................... 31
General Policies........................................................ 31
Identified Equipment Acquisitions....................................... 33
Types of Equipment...................................................... 34
Prior Program Diversification........................................... 37
Borrowing Policies...................................................... 38
Description of Lessees.................................................. 39
Foreign Leases.......................................................... 40
Description of Leases................................................... 41
Competition............................................................. 42
Joint Venture Investments............................................... 43
General Restrictions.................................................... 43
Changes in Investment Objectives and Policies........................... 44
CONFLICTS OF INTEREST....................................................... 44
ORGANIZATIONAL DIAGRAM...................................................... 47
FIDUCIARY DUTY OF THE MANAGER............................................... 47
MANAGEMENT.................................................................. 48
The Manager............................................................. 48
The Dealer Manager...................................................... 52
PRIOR PERFORMANCE SUMMARY................................................... 53
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INCOME, LOSSES AND DISTRIBUTIONS............................................ 56
Allocations of Net Income and Net Loss.................................. 56
Timing of Distributions................................................. 56
Allocations of Distributions............................................ 56
Reinvestment............................................................ 57
Return of Unused Capital................................................ 58
Cash From Reserve Account............................................... 58
Sources of Distributions - Accounting Matters........................... 58
CAPITALIZATION.............................................................. 59
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION.................................................... 59
FEDERAL INCOME TAX CONSEQUENCES............................................. 61
Summary................................................................. 61
Opinion of Counsel...................................................... 61
Classification as a "Partnership"....................................... 61
Allocations of Profits and Losses....................................... 61
Income Recognition...................................................... 61
Taxation of Holders of Units............................................ 61
Limitation on Deduction of Losses....................................... 61
Tax Status of Leases.................................................... 62
Depreciation............................................................ 69
Deductibility of Management Fees........................................ 70
Tax Liability in Later Years............................................ 71
Sales or Exchanges of Fund Equipment.................................... 71
Disposition of Units.................................................... 72
Original Issue Discount................................................. 72
Fund Elections.......................................................... 72
Treatment of Gifts of Units............................................. 73
Investment by Qualified Plans and IRAS.................................. 73
Individual Tax Rates.................................................... 74
Alternative Minimum Tax................................................. 75
Fund Tax Returns and Tax Information.................................... 75
Interest and Penalties.................................................. 76
Audit of Tax Returns.................................................... 77
Registration Provisions................................................. 77
Miscellaneous Partnership Tax Aspects................................... 78
Foreign Tax Considerations.............................................. 78
Taxation of Foreign Persons............................................. 78
Future Federal Income Tax Changes....................................... 79
State and Local Taxes................................................... 79
Need for Independent Advice............................................. 80
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ERISA CONSIDERATIONS........................................................ 80
Prohibited Transactions Under ERISA and the Code........................ 80
Plan Assets............................................................. 81
Other ERISA Considerations.............................................. 81
SUMMARY OF THE OPERATING AGREEMENT........................................ 82
The Duties of the Manager............................................. 82
Liability of Holders.................................................. 82
Term and Dissolution.................................................. 82
Voting Rights of Members.............................................. 83
Dissenters' Rights and Limitations on
Mergers and Roll-ups................................................ 84
Meetings.............................................................. 84
Books of Account and Records.......................................... 84
Status of Units....................................................... 85
Transferability of Units.............................................. 85
Repurchase of Units................................................... 87
Indemnification of the Manager........................................ 87
PLAN OF DISTRIBUTION...................................................... 88
Distribution.......................................................... 88
Selling Compensation and Certain Expenses............................. 89
Escrow Arrangements................................................... 89
Investments by Certain Persons........................................ 90
State Requirements.................................................... 91
REPORTS TO HOLDERS........................................................ 91
SUPPLEMENTAL SALES MATERIAL............................................... 92
LEGAL OPINIONS............................................................ 92
EXPERTS................................................................... 93
ADDITIONAL INFORMATION.................................................... 93
GLOSSARY.................................................................. 93
FINANCIAL STATEMENTS...................................................... F-1
Exhibit A - Prior Performance Information................................. A-1
Exhibit B - Operating Agreement........................................... B-1
Exhibit C - Subscription Instructions and Documents....................... C-1
7
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer contained herein, and if given or made, such information or
representation must not be relied upon. This Prospectus does not constitute an
offer or solicitation by anyone in any state or other jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
is not qualified to do so or to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus or any Supplement
nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the facts set forth herein since
the date hereof; however, if any material change not contemplated hereby occurs
while this Prospectus is required to be delivered, this Prospectus will be
amended or supplemented accordingly.
Until____________, 199_, (90 days after the date of this Prospectus)
all dealers effecting transactions in the registered securities, whether or not
participating in this distribution may be required to deliver a Prospectus. This
is in addition to the obligation of dealers to deliver a Prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
SUMMARY OF THE OFFERING
The following is a summary of the pertinent facts and highlights from
the material contained in this Prospectus. More detailed information with
respect to this offering may be found in the remainder of this Prospectus.
Risk Factors: An investment in Units involves significant risks.
The "Risk Factors" section of this Prospectus contains a detailed
discussion of the most important risks. Please refer to those sections of the
Prospectus for discussions of material risk factors, including, but not limited
to, the following risks:
- Limited voting rights for investors mean total reliance on the Manager
for Fund management, and the Manager may be subject to certain
conflicts of interest;
- Substantial fees are payable to the Manager and its affiliates;
- All equipment investments are not specified, and investors cannot
fully assess the risks involved in the Fund's equipment portfolio;
- The Fund's ability to realize lease revenues and make cash
distributions is subject to the risk of lessee defaults;
- The use of secured debt may result in the loss of equipment used as
collateral if the Fund is unable to pay its debt obligations;
- The Units will not be listed on any securities exchange and there are
significant limitations on transferability. Accordingly, investors may
be unable to dispose of Units except at discounts from the offering
price, which discounts may be substantial, and final liquidation is
expected to occur approximately ten to eleven years after the date the
final investors are admitted to the Fund;
- The Fund's ability to diversify its portfolio of leased equipment by
types of equipment, manufacturers, lessees and geographic regions is
dependent on the amount of capital actually raised and the amount of
available debt financing (the Fund intends to incur debt equal to
approximately 50% of its equipment cost, but there can be no assurance
as to the amount of available debt financing);
8
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- A substantial portion of distributions will be, and a substantial
portion of distributions by prior ATEL programs have been, a return of
invested capital, as opposed to investment income, and the amount of
investment income investors may realize depends in part on the value of
equipment after the initial leases terminate; and
- The return of investors' capital is not guaranteed and there can be no
assurance as to the timing or amount of any distributions.
Who Should Invest: The section of the Prospectus entitled "Who Should
Invest" contains an explanation of investor suitability requirements, and
describes the minimum net worth and income requirements that various states
impose on investors. In particular, that discussion addresses the rules
applicable to certain investors such as IRAs.
Estimated Use of Proceeds: Of each dollar raised by the Fund,
approximately 87% is expected to be invested in the cash portion of the purchase
price of equipment. An additional 0.5% will be retained as capital reserves. The
balance will be used to pay selling commissions equal to 9.5%, and other
offering and organization expenses in the estimated amount of from 2.5% to 3.5%
(which may be advanced by the Manager and reimbursed by the Fund). See
"Estimated Use of Proceeds" for a precise breakdown of the Fund's estimate as to
the use of the capital it raises.
Management Compensation: The Manager and its affiliates will receive
substantial fees and compensation in connection with this offering and the
operation of the Fund's business, including the following:
- Selling commissions on the sale of Units are payable to the Dealer
Manager, a substantial portion of which will be reallowed to participating
broker dealers. The Dealer Manager may retain up to 1.5% of the total proceeds
from the sale of Units.
- An annual Asset Management Fee will be paid to the Manager in an
amount equal to 4.5% of the revenues from leasing and disposition of the
equipment held for lease by the Fund, subject to certain limitations.
- The Manager will have a carried interest equal to 7.5% of all
allocations of income, loss and cash distributions.
See "Management Compensation." The Manager has discretion with respect
to all decisions related to Fund transactions, and may therefore be able to
affect the amount and timing of compensation payable by the Fund. See "Conflicts
of Interest - Receipt of Commissions, Fees and other Compensation by the Manager
and its Affiliates."
Investment Objectives and Policies: The Fund's objectives are to
invest in a diversified portfolio of equipment for lease to third parties which
will:
(i) Preserve, protect and return the Fund's invested capital;
(ii) Generate regular distributions to investors from net lease
revenues and from sales or refinancing of equipment, with any balance remaining
after certain minimum distributions (see "Income, Losses and Distributions
Allocations of Distributions") to be reinvested in equipment during the period
ending six years after the year in which this offering of Units terminates (the
"Reinvestment Period"); and
(iii) Provide additional distributions after the end of the
Reinvestment Period and until all Equipment has been sold.
There can be no assurance that any such objectives can be attained.
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The Fund's equipment portfolio may include various types of equipment,
as described more fully under "Investment Objectives and Policies - Types of
Equipment."
It is the Fund's investment objective to acquire primarily
low-technology, low-obsolescence equipment such as materials handling equipment,
manufacturing equipment, mining equipment, and transportation equipment. A
portion of the portfolio may include technology-dependent equipment, such as
certain types of communications equipment, medical equipment and office
equipment, although the Fund will seek to invest in such equipment in a manner
consistent with its primary objective of acquiring equipment which is generally
subject to relatively low rates of technological obsolescence. The Operating
Agreement does not limit the Fund's ability to invest in high-technology
equipment. Equipment that depends on high-technology design or applications for
its value may lose value more rapidly than equipment which is less technology
dependent, as advances in technology may render such high-technology equipment
functionally obsolete at an earlier date. See Table IV of Exhibit A, "Prior
Performance Information," for information concerning the composition of the
equipment portfolios held by the prior public programs sponsored by the Manager
and its affiliates which have investment objectives and policies identical to
those of the Fund.
The effect of owning assets which may be subject to economic
depreciation is, generally, that the investors' return on their capital, and in
some cases the return of their capital, is dependent on the rate of such
economic depreciation. In other words, the residual values realized upon the
sale, re-lease or other disposition of the equipment will play a significant
role in determining the success of the investment. Like most goods, new
equipment generally has a higher market value than comparable used equipment,
and capital equipment tends to lose value as it is used over a period of time.
An equipment lessor such as the Fund seeks to negotiate lease terms based in
part on its estimate of the value of the leased equipment upon termination of
the lease. The lessor will negotiate a lease rate designed to generate
sufficient rental revenues over the term of the lease so that, when the total
lease payments are added to the estimated value of the equipment upon lease
termination, the lessor will have achieved a return of the capital used to
purchase the equipment plus an overall profit on the investment. There can be no
assurance, however, that the lessor's assumptions regarding the residual value
of the equipment will be accurate or that its objective will be achieved.
A majority of the Fund's equipment will be leased on terms which return
at least 90% of the original purchase price through lease payments ("High Payout
Leases"), and a substantial portion of the purchase prices of other leased
assets may be expected to be returned through rents. The residual value risk and
the dependence on residual values to achieve a return on investment is discussed
under "Risk Factors - Investment Risks - Return on Investment Dependent Upon
Residual Value of Equipment."
Upon termination of the Fund's leases, the Manager will seek to
re-lease or sell the equipment, provided that subsequent leases will be for
terms consistent with the Fund's intended term.
Other than as set forth under "Investment Objectives and Policies -
Identified Equipment Acquisitions" and in any supplement to this Prospectus, the
Fund does not currently have options, contractual obligations or letters of
intent to acquire any equipment. See "Risk Factors" and "Investment Objectives
and Policies."
There is no limit on the borrowings on individual items of equipment.
However, the Fund's objective is to incur total portfolio debt equal to the
maximum permitted under the Operating Agreement, which is an amount equal to 50%
of the cost of its equipment as of the date of its final investment of the
offering proceeds or, thereafter, as of the date any subsequent indebtedness is
incurred. See "Risk Factors - Risks of Leverage" and "Investment Objectives and
Policies - Borrowing Policies."
10
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Conflicts of Interest: The Manager will have conflicts of interest in
the management of the Fund, including having interests which may be inconsistent
with those of the investors under some circumstances and being permitted to
engage in other activities which may conflict with those of the Fund. The
section of this Prospectus entitled "Conflicts of Interest" discusses the most
important of these conflicts of interest and how the Manager intends to resolve
them.
Fiduciary Duty of the Manager: The Manager is responsible for
supervising all aspects of the administration of the Fund and management of its
business. The Manager, as Manager of the Fund, will act as a fiduciary to the
Fund, and, consequently, is required to exercise good faith and integrity in all
dealings with respect to Fund affairs. See "Fiduciary Duty of Manager." However,
the Fund will indemnify the Manager against certain liabilities and the Manager
will have certain conflicts of interest, as described under "Conflicts of
Interest."
Management: The Manager of the Fund is ATEL Financial Corporation
("ATEL" or the "Manager"), a California corporation. Affiliates of the Manager
will provide various services to the Fund. See "Management." The offices of the
Manager and its Affiliates are located at 235 Pine Street, 6th Floor, San
Francisco, California 94104, and its telephone numbers are (415) 989-8800 and
(800) 543-ATEL (2835). The Manager's balance sheet is included in this
Prospectus under the caption "Financial Statements."
Prior Performance Summary: The Manager and its affiliates have
sponsored seven prior public equipment leasing programs. The seven prior public
programs have had investment objectives substantially identical to those of the
Fund. The section of the Prospectus entitled "Prior Performance Summary"
contains a summary of certain of these prior investment programs in which the
Manager and its affiliates have been involved. The Prior Performance Tables
attached as Exhibit A to the Prospectus include statistical and financial data
regarding these prior investment programs. Upon request, the Manager will
provide a copy of the most recent annual report on Form 10-K for any of the
prior public programs.
Income, Losses and Distributions: Fund income and loss for tax purposes
and cash distributions shall be allocated 92.5% to investors in accordance with
their respective pro rata share of the outstanding Units and 7.5% to the
Manager. The Fund intends to distribute all cash revenues remaining after Fund
expenses, including the annual Asset Management Fee, capital reserves and, to
the extent permitted under the limitations described below, amounts set aside
for reinvestment in additional equipment. See "Income, Losses and Distributions"
for a more complete and precise description of these provisions.
Upon liquidation of the Fund, the proceeds of liquidation will be
distributed in accordance with each partner's positive capital account balance.
See "Income, Losses and Distributions."
Reinvestment: Subject to certain limitations, including the prior
distribution of cash in specified minimum amounts, the Manager may reinvest
Fund revenues in additional equipment through the end of a six-year period
commencing after the year this offering closes. See "Income, Losses and
Distributions - Reinvestment."
Income Tax Consequences: The following is a brief summary of, and is
qualified by, the more extensive discussion of the material federal income tax
consequences set forth in "Income Tax Consequences."
- - Partnership Classification. Counsel is of the opinion that the Fund
will be classified as a partnership for federal income tax purposes.
- - Allocation of Net Income and Net Loss. In tax counsel's opinion, it is
more likely than not that the tax allocation provisions in the
Operating Agreement will not be significantly modified by the Internal
Revenue Service.
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- - Income Recognition. In any year, an investor's tax liabilities
attributable to his investment in the Fund may exceed cash realized by
such investor in that year. In certain circumstances, the amount of tax
payable by an investor on the gain realized from a sale or disposition
of his Units may exceed the cash received therefrom.
- - Limitations on Deduction of Losses. There are certain limitations on
the ability of an investor to utilize his allocable share of Fund tax
losses.
- - Tax Status of Leases. In order for investors to be entitled to
depreciation deductions, the equipment leases must be classified "true
leases" for federal income tax purposes. The Manager has represented
that it will use its best efforts to assure that each item of equipment
will comply or will substantially comply with the Internal Revenue
Service's equipment leasing guidelines.
- - Fund Elections. The Fund is not expected to file an election under
Internal Revenue Code Section 754. The absence of such election may
have an adverse effect on the marketability and sale price of the
Units.
- - UBTI. The Fund will generate unrelated business taxable income to
Holders who are Qualified Plans or IRAs.
- - AMT. The Fund's depreciation deductions may be subject to adjustment
under the alternative minimum tax.
Summary of the Operating Agreement: The Operating Agreement that will
govern the relationship between the investors and the Manager is a complex legal
document, and the section of the Prospectus entitled "Summary of the Operating
Agreement" summarizes some of its important provisions. Other important
provisions are summarized elsewhere in the Prospectus under the captions
"Management Compensation," "Income, Losses and Distributions" and "Reports to
Holders." The following is a brief summary of certain provisions of the
Operating Agreement which are discussed in greater detail under "Summary of the
Operating Agreement."
- - Voting Rights of Members. Each member of the Fund ("Member") will be
entitled to cast one vote for each Unit which such Member owns as of
the date designated as the record date for any Member vote. The Members
are entitled to vote on only certain fundamental organizational matters
affecting the Fund, and are not authorized to participate in the
conduct of Fund operations or the establishment or implementation of
Fund investment policies.
- - Meetings. The Manager or Members holding 10% or more of the total
outstanding Units may call a meeting of the Members or a vote of the
Members without a meeting, on matters on which they are entitled to
vote.
- - Dissenters' Rights and Limitations on Mergers and Roll-ups. Section
16.7 of the Operating Agreement provides Members with certain rights in
the event of any proposal involving an acquisition, conversion, merger
or consolidation transaction in which the investors would be issued new
securities in the resulting entity.
- - Transferability of Units. The Manager may condition the effectiveness
of any proposed transfer of Units or an interest in Units on such
representations, warranties, opinions of counsel, and other assurances
as it considers appropriate as to certain specific matters set forth in
the Operating Agreement. Any assignment, sale, exchange or other
transfer in contravention of any of the provisions of the Operating
Agreement shall be void and ineffectual, and shall not bind or be
recognized by the Fund.
- - Liability of Investors. Under the Operating Agreement and the
California Act, an investor complying with the Operating Agreement will
not be liable for Fund obligations in excess of his unreturned capital
contribution and share
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of undistributed profits; provided that, if the Fund has made an
improper distribution, the investor may be required to return the
amount received as a result.
- - Status Of Units. Under the Operating Agreement, each Unit will be fully
paid and nonassessable and all Units have equal voting and other
rights, except as with respect to certain limitations on the voting of
Units held by the Manager or its Affiliates.
- - Term and Dissolution. The Fund intends to liquidate its assets and
distribute the proceeds thereof beginning after the Reinvestment Period
expires (at the end of the sixth full year following the year during
which the final investors are admitted to the Fund) with final
liquidation expected to occur approximately ten to eleven years after
the date the final investors are admitted to the Fund. In any event,
the Fund may continue for a maximum period ending December 31, 2019.
- - The Duties of the Manager. ATEL Financial Corporation, the Manager, is
Manager of the Fund and, under the terms of the Operating Agreement,
has the exclusive management and control of all aspects of the business
of the Fund.
- - Books of Account and Records. The Manager is responsible under the
Operating Agreement for keeping certain books of account and records of
the Fund reflecting all of the contributions to the capital of the Fund
and all of the expenses and transactions of the Fund. Such books of
account and records will be kept at the principal place of
business of the Fund in the State of California, and each Member and
his authorized representatives shall have, at all times during
reasonable business hours, free access to and the right to inspect and
copy at their expense such books of account and all records of the
Fund, and each Member shall have the right to compel the Fund to
deliver copies of certain of these records on demand.
- - Indemnification of the Manager. The Operating Agreement provides that
the Manager and its affiliates who perform services for the Fund will
be indemnified against certain liabilities.
Plan of Distribution: The Units will be offered through ATEL
Securities Corporation (the "Dealer Manager"), an Affiliate of the Manager.
The Dealer Manager will in turn offer Units through other broker-dealers who are
members of the National Association of Securities Dealers, Inc. ("NASD"). See
"Plan of Distribution."
Until subscriptions for a total of 120,000 Units are received and
accepted, all subscription checks must be made payable to, and all offering
proceeds will be deposited in an escrow account . The offering will terminate
not later than two years from the date of this Prospectus, subject to any
re-qualification or renewal of qualification of the offering which may be
required in certain jurisdictions after the end of the first year of the
offering. Upon receipt and acceptance of subscriptions to a minimum of 120,000
Units, the subscription proceeds will be released to the Fund. See "Plan of
Distribution."
Glossary: See "Glossary" for definitions of certain capitalized terms
which are not otherwise defined herein.
RISK FACTORS
The purchase of Units involves various risks. Therefore, prospective
purchasers should consider the following factors, among others discussed in this
Prospectus, before making a decision to purchase Units.
Limited Investor Voting Rights and Total Reliance on Management. All
decisions with respect to the management of the Fund will be made exclusively by
the Manager. The success of the Fund will, to a large extent, depend on the
quality
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of the management of the Fund, particularly as it relates to Equipment
acquisition, leasing and disposition. Holders are not permitted to take part in
the management of the Fund and Members have only limited voting rights. An
affirmative vote by holders of more than 50% of the outstanding Units is
required to remove the Manager. See "Summary of the Operating Agreement - Voting
Rights of Holders." Accordingly, no person should purchase any of the Units
offered hereby unless he is willing to entrust all aspects of the management of
the Fund to the Manager and has evaluated the Manager's capabilities to perform
such functions. Although the Manager does maintain key employee life insurance
policies, the key executives are not bound by specific employment agreements.
See "Management" and Exhibit A - "Prior Performance Information."
Manager's Compensation and Conflicts of Interest. Substantial fees are
payable to the Manager and its Affiliates before distributions are paid to
investors and even if the Fund does not generate profits. The Manager will also
be subject to conflicts of interest in connection with its management of the
Fund. In particular, the anticipated use of leverage equal to 50% of the
aggregate cost of Equipment would result in higher Asset Management Fees than if
less debt were incurred. See the discussion under "Investment Objectives and
Policies - Borrowing Policies."
Unspecified Equipment and Lessees. It is not possible to assess all of
the potential risks of an investment in Units because all of the Equipment to be
purchased and the lessees to whom such Equipment will be leased have not been
identified. A prospective investor will not have complete information as to the
manufacturers from which the Fund will purchase Equipment, the number of leases
to be entered into, the specific types and models of Equipment to be acquired,
or the identity, financial condition and creditworthiness of the lessees who
will lease such Equipment. The Holders must rely solely upon the judgment and
ability of the Manager with respect to the selection and methods of investment
and reinvestment in Equipment, evaluation of Equipment manufacturers, types of
leases and potential lessees. See "Investment Objectives and Policies."
Defaults by Lessees. The default by a lessee under a lease may cause a
lease to terminate and Equipment to be returned to the Fund at a time when the
Manager or its agents may be unable promptly to arrange for the re-leasing or
sale of such Equipment, thus resulting in the loss of anticipated revenues and
the inability to recover the entire amount of the Fund's original investment.
Furthermore, the Fund may experience difficulties and delays in recovering the
Equipment from the defaulting lessee, if a lessee files for protection under the
bankruptcy laws or otherwise. The Equipment may be returned in poor condition
and the Fund may be unable to enforce the return provisions and other lessee
obligations in its lease against an insolvent lessee. In any event, the costs
associated with recovering Equipment upon a lessee's default, enforcing the
lessee's obligations under the lease, and transporting, storing, repairing and
remarketing the Equipment may be substantial and may adversely affect Fund
operations. See the discussion under "Prior Performance Summary" and in Exhibit
A - "Prior Performance Tables" below.
Risks of Leverage. To finance a portion of the purchase price of its
Equipment portfolio, the Fund expects to incur aggregate indebtedness in an
amount equal to the maximum permitted under the Operating Agreement. Total Fund
debt may not exceed an amount equal to 50% of the aggregate cost of Equipment as
of the final commitment of the Net Proceeds and, thereafter, on the date any
subsequent indebtedness is incurred. Equipment purchased on a leveraged basis
generally can be expected to be profitable only if it generates sufficient cash
revenues from rents and residual proceeds in excess of those required to pay
interest on the related debt, recover the purchase price and cover other
operating expenses. The Fund intends to use both nonrecourse debt (debt in which
only the asset financed by the lender is collateral securing the obligation) and
recourse debt (in which all of the Fund's assets or a selected pool of the
assets are collateral securing the obligation). The Fund expects to incur
recourse debt obligations in the form of asset securitization transactions and
short term bridge financing to provide temporary financing for transactions
approved for acquisition by the Fund, including a common recourse debt facility
with affiliated programs. Upon a default by a borrower under a secured debt
transaction, the lender generally has the right to accelerate the entire debt
obligation and to foreclose on the collateral. The lender can thereby force a
sale of the
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collateral to satisfy the full balance due under the debt obligation of the
borrower. The use of leverage may therefore cause the risk of loss to the
Holders to be greater than if no debt were incurred, because fixed payment
obligations must be met on certain specified dates regardless of the amount of
revenues derived by the Fund from leveraged Equipment. At the same time, the use
of debt increases the potential size of the Fund's Equipment portfolio, the
amount of gross lease revenues and potential residual proceeds, and would also
thereby increase the potential Asset Management Fees payable to the Manager, as
such fees are determined as a percentage of the gross investment in Equipment.
Furthermore, the amount of Distributions to the Holders and the amount
of potential tax benefits may depend upon the availability and the terms of
financing for the purchase of Equipment. The Fund has not entered into any
agreements to obtain such financing, and it is not currently possible to
ascertain the availability of such financing. No assurance can be given that
financing will be available or, if available, that it will be provided upon
terms which the Manager deems reasonable.
See the discussion under "Investment Objectives and Policies -
Borrowing Policies."
Balloon Payments. The Fund may borrow on terms which do not provide for
amortization of the entire principal amount or a substantial portion thereof
prior to maturity. Such "balloon payment" debt involves greater risks than
secured debt where the principal amount is amortized over the term of the loan
because the ability of the Fund to repay at maturity the outstanding principal
amount may be dependent upon its ability to obtain adequate refinancing, and in
turn upon economic conditions in general and the value of the underlying
Equipment in particular. There is no assurance that the Equipment will have
sufficient value to permit the Fund to pay or refinance any such balloon payment
at maturity. Further, a significant decline in the value of the underlying
Equipment could result in a loss of the Equipment through foreclosure.
Limited Transferability of Units. There are significant limitations on
the transferability of Units, and, as a result of potential adverse tax effects,
the Manager will take steps to assure that no public trading market develops for
the Units offered hereby. Holders may not, therefore, be able to liquidate their
investments in the event of an emergency. In addition, Units may not be readily
accepted as collateral for a loan. Consequently, the purchase of Units should be
considered only as a long-term investment.
Diversification Dependent Upon Size of Fund. The Fund will be funded
with contributions of not less than $1,200,000 nor more than $150,000,000. The
potential for portfolio diversification and therefore the potential
profitability of the Fund may be affected by the amount of funds actually
raised. In the event that the Fund receives only the minimum Gross Proceeds, it
will have less ability to obtain diversification of its Equipment portfolio and
lessees, and the degree to which it may be adversely affected by the results of
any single lease transaction will be increased. See "Estimated Use of Proceeds"
and "Plan of Distribution." It should be noted that there is no minimum number
of lease transactions nor is there any restriction on the percentage of offering
proceeds at the minimum offering amount which may be used to purchase equipment
of a single type or equipment leased to a single lessee. See "Investment
Objectives and Policies."
Return on Investment Dependent Upon Residual Value of Equipment. A
substantial portion of Fund distributions from lease revenues is expected to be
a return of capital. The Fund's ability to generate income from its investment
in Equipment will depend in part upon the continuing value of such Equipment
when its leases terminate, which in turn will depend upon, among other things:
(i) the condition of the Equipment; (ii) the cost of comparable new Equipment;
and (iii) the functional and technological obsolescence of the Equipment. In
general, leased equipment can be expected to depreciate in constant dollars
(that is, in dollars discounted for the effects of inflation during the lease
term). In structuring the terms of Fund leases, the Manager will make certain
assumptions regarding the anticipated residual values of Equipment in an effort
to calculate lease rates which, when combined with estimated sale proceeds, may
be expected to return the Fund's invested
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capital and provide a profit. There can be no assurance that the Fund's residual
value assumptions will prove to be accurate or that the Equipment will not
decline in value more rapidly than anticipated. For information concerning
performance of prior programs, see Exhibit A- "Prior Performance Tables" below.
Portion of Distributions Characterized as Return of Capital. The
portion of each Distribution which exceeds the Fund's net income for the fiscal
period in which the Distribution is made would constitute a return of capital.
In other words, to the extent an investor receives cash in excess of his
allocable share of income for a period, he will be deemed to be receiving a
return of his invested capital rather than investment income. Distributions by
the Fund may be characterized for tax, accounting and economic purposes as a
return of capital, a return on capital (i.e., investment income) or a portion of
each, and for each such purpose may be characterized differently. The portion of
total Distributions which will constitute a return of capital and the portion
which will constitute investment income upon termination of the Fund will depend
on a number of factors in the Fund's operations, including the values which may
be realized on the sales of the Fund's Equipment at the end of its leases, and
cannot be determined until its Equipment portfolio is liquidated and the total
amount of all Distributions is compared to the total capital invested. The
amount and sources of cash distributions to investors in each of the prior
public programs sponsored by the Manager and its Affiliates are set forth in
Table III of Exhibit A to this Prospectus. Set forth under the line item "Cash
distributions to investors on a GAAP basis," are the amount of annual
distributions by each prior program per $1,000 invested and the portions of
which constitute return of capital and investment income. It should be noted,
however, that, as discussed above with respect to the Fund, the return of
capital and investment income ultimately to be realized by the prior programs
will not be finally determinable until each program is completed and liquidated.
Activities Outside of the United States. The Fund may lease Equipment
to foreign subsidiaries of United States corporations and to foreign lessees and
otherwise lease Equipment which is to be used outside the United States. There
is no limit on the amount of Equipment which may be so leased, but the Manager
will seek to limit the aggregate amount of the Fund's equity invested in all
Equipment which is leased to such foreign lessees and which is otherwise to be
used primarily outside the United States to not more than 20% of the Gross
Proceeds at any time during the period the Fund is acquiring equipment. In such
cases, the Fund's interest in the Equipment may be subject to the regulatory,
taxing and judicial authorities of a foreign jurisdiction. The Fund will attempt
to require foreign lessees to consent to the jurisdiction of U.S. courts in the
event disputes should arise regarding the lease. Even if the Fund is successful
in this effort, it may be difficult or impossible to enforce judgments obtained
against foreign lessees in the event of a lease default, or to obtain possession
of leased Equipment or otherwise to enforce the Fund's rights under the related
lease. Moreover, the use and operation of Fund Equipment in foreign
jurisdictions may subject the Equipment to unanticipated taxes, assessments or
confiscation without fair compensation. The Fund will attempt to include in such
leases provisions which will cause all payments due under the leases to be made
in U.S. currency and require lessees to reimburse the Fund for any foreign taxes
billed to the Fund and to maintain insurance covering the risk of confiscation.
In the event that lease payments or other terms of the leases involve payments
in other than U.S. currency, the Fund will be subject to the risk of currency
exchange rate fluctuations, which could reduce the Fund's overall return on an
investment. Many countries also have laws regulating the transfer and exchange
of currencies, and such laws may affect a foreign lessee's ability to comply
with lease terms. Finally, certain depreciation methods may not be available for
Equipment leased by a foreign lessee or "used predominantly outside the United
States." See the discussion below under "Income Tax Consequences - Depreciation
- - Limitations on the Use of MACRS - (1) Property Used Predominantly Outside the
United States, and (2) Tax-Exempt Leasing."
General Risks in the Equipment Leasing Business. The success of the
Fund will be affected by the quality of the Equipment, the viability of the
Equipment manufacturer, the timing of the purchases of Equipment by the Manager
and its ability to forecast technological advances concerning such Equipment.
Equipment leasing is subject to the risk of credit losses, technological and
economic obsolescence and defaults by lessees. Increases in operating expenses
borne by the Fund (including expenses relating to energy, labor, taxes and
insurance) could have an adverse impact upon the Fund's ability to
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<PAGE>
keep the Equipment leased on a profitable basis.
Fluctuations in Demand for Equipment. The ability of the Fund to keep
the Equipment leased and/or operating and the terms of acquisitions, leases and
dispositions of Equipment depend on various factors (many of which are not
within the control of the Manager or the Fund), such as general economic
conditions, including the effects of inflation or recession, and fluctuations in
supply and demand for various types of Equipment resulting from, among other
things, technological and economic obsolescence.
Competition. The equipment leasing industry is highly competitive.
Equipment manufacturers, corporations, partnerships and others offer users an
alternative to the purchase of most types of equipment with payment terms which
vary widely depending on the lease term and type of equipment. In seeking
suitable lease transactions, the Fund will compete with other entities,
including financial institutions, manufacturers and public and private leasing
companies, some of which may have greater financial resources or experience than
the Fund and the Manager. Such competition may have an adverse effect on the
terms of lease transactions available to the Fund.
Risks of Operating Leases. Although Equipment representing a majority
of the aggregate purchase price of the Fund's Equipment portfolio as of the
final investment of the Net Proceeds must be leased under High Payout Leases,
the Equipment portfolio will predominantly consist of investments in Operating
Leases, under which the Fund will receive aggregate rental payments in an amount
that is less than its purchase price for the Equipment. The Fund must, upon
termination of an Operating Lease, either obtain a renewal from the original
lessee, find a new lessee or sell the Equipment in order to cover its investment
in such Equipment. If the Fund is unable to renew leases, to enter into new
leases or to sell Equipment on desirable terms after the expiration of the
initial terms of Operating Leases, it may experience (i) loss of anticipated
revenues and (ii) the inability to recover the Fund's investment in the
Equipment. For information concerning performance of prior programs, see Exhibit
A- "Prior Performance Tables" below.
Casualty Losses. Equipment may be damaged or lost as a result of fire,
weather, accident, theft or other events of casualty. There is no assurance that
all potential casualties will be insurable or that, if insured, the insurance
proceeds will be sufficient to cover a casualty.
Consequences of Government Regulation. The use, maintenance and
ownership of certain types of Equipment are regulated by federal, state and/or
local authorities which may impose restrictions and financial burdens on the
Fund's ownership and operation of such Equipment. Changes in government
regulations, industry standards or deregulation may also affect the ownership,
operation and resale of such Equipment.
In addition, certain types of Equipment (such as railcars and aircraft)
are subject to extensive safety and operating regulations by governmental
agencies and/or industry organizations. Such agencies or organizations may
require modifications or capital improvements to items of Equipment. Such
modifications or improvements may require the removal from service of items of
Equipment for a period of time and substantial capital expenditures by the
owner. The terms of leases may provide for rent abatements if required
improvements cannot be made in a timely manner or if the Equipment must remain
out of service for an extended period. The Fund may as a result experience
reductions or interruptions in operating revenues from such leases. If the Fund
lacked sufficient funds to make a required improvement or modification, it might
be required to sell the affected item of Equipment or to sell other items of
Equipment owned by it in order to obtain the necessary funds; in either event,
the Fund might sustain a loss on its investment in the items sold and might lose
future revenues, and the Holders might experience adverse tax consequences.
Registration of Aircraft May Not Be Possible. The Fund may invest a portion
of the Net Proceeds in aircraft.
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Aircraft operated in the United States must be registered with the Federal
Aviation Administration, which limits such registration to aircraft owned by
U.S. Citizens and Resident Aliens. The FAA's Rules are not clear on the status
of a partnership which owns aircraft, and there may be a risk that a Fund
aircraft may not be registered or may have its registration revoked. The fund's
acquisition of any aircraft will be conditioned on appropriate registration with
the FAA or other government agency having jurisdiction over the aircraft. If
such registration were revoked for any reason, the aircraft could not be
operated in the United States airspace, and the Fund would be subject to
resulting risks, including a possible forced sale of the aircraft, the potential
for uninsured casualties to the aircraft, the loss of the benefits of the
central recording system under federal law (and exposure to liens not of record
with the FAA) and a breach by the Fund of leases or financing agreements
relating to the aircraft. See "Investment Objectives and Policies -- Types of
Equipment - Aircraft."
Newly-Formed Entity. The Fund was formed in July, 1998, and has no
operating history. No assurance can be given that the Fund's operations will be
successful or that it will meet its stated investment objectives.
Difficulty in Investing Proceeds. There can be no assurance as to the
length of time it will take the Fund to invest the Net Proceeds. A delay in the
investment could affect the Fund's ability to meet its investment objectives.
Any overall decline in corporate expansion or demand for capital goods would
adversely affect the Fund's ability to invest the Net Proceeds.
Liability of Holders. A Member's personal liability for obligations of
the Fund generally will be limited, under the California Act , to the amount of
his Capital Contribution and his right to undistributed profits and assets of
the Fund. Under the California Act, a Member will not be liable for Fund
obligations in excess of his unreturned Capital Contribution and share of
undistributed profits. Notwithstanding the foregoing, a Member may be liable to
the Fund in an amount equal to any distribution made by the Fund to such Member
to the extent that, immediately after the distribution is made, all liabilities
of the Fund exceed the value of the Fund's assets.
Risks of Joint Ventures. Some of the Fund's investments may be owned by
joint ventures or partnerships between the Fund and unaffiliated third parties
or, under certain circumstances, Affiliates of the Fund or the Manager, or as
co-tenants with such parties. The investment by the Fund in joint ownership of
Equipment, instead of investing in the Equipment directly or as the sole owner,
may involve risks not otherwise present, including, for example, risks
associated with the possibility that the Fund's co-venturer in an investment
might become bankrupt, that such co-venturer may at any time have economic or
business interests or goals which are inconsistent with the business interests
or goals of the Fund, that the parties may reach an impasse on joint venture
decisions or that such co-venturer may be in a position to take action contrary
to the instructions or the requests of the Fund or contrary to the Fund's
policies or objectives. Among other things, actions by such a co-venturer might
have the result of subjecting Equipment owned by the joint venture to
liabilities in excess of those contemplated by the terms of the joint venture
agreement or might have other adverse consequences for the Fund. (See
"Investment Objectives and Policies - Joint Venture Investments.")
Limited Liability Companies Newly Established. The Fund has been
organized under the California Act, which is based upon a Uniform Limited
Liability Company Act. Although most states have adopted some form of limited
liability company legislation, state statutes vary and limited liability
companies have only a short history in operation. As a result, there are limited
legal precedents available for courts addressing questions concerning limited
liability company questions. Therefore, uncertainty exists concerning potential
the judicial interpretations of the California Act and other relevant limited
liability company provisions.
Partnership Status. The Fund will not apply for a ruling from the Internal
Revenue Service (the "Service") that it will be classified as a partnership and
not as an association taxable as a corporation for federal income tax purposes.
Furthermore,
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there is the possibility that Units may be considered to be "publicly traded,"
thereby resulting in the Fund being taxed as a corporation. The Manager will
cause the Fund to contest any contention by the Service that the Fund
constitutes an association taxable as a corporation, but Holders should be aware
that this may result in additional representation expenses (i.e., legal and
accounting fees). In the event that the Fund is treated for tax purposes as an
association, the effective yield on an investment in the Units would be
substantially reduced because certain tax benefits associated with the offering
would be unavailable. See "Federal Income Tax Consequences."
Certain Other Tax Considerations. In determining whether to invest in
the Units offered hereby, a prospective Holder should consider other possible
tax consequences thereof which may include, among others:
(a) the Service could disallow or reduce the Fund's
depreciation deductions or other deductions, or reallocate among the
Holders the items of Fund income, gain, deduction and loss in a manner
that is different from the provisions contained in the Operating
Agreement, in each case potentially resulting in less tax loss to
Holders, or additional taxable income to Holders without a
corresponding increase in cash Distributions;
(b) the investment by an exempt organization or a trustee or
custodian of a Qualified Plan or an IRA will result in unrelated
business taxable income to the exempt organization, Qualified Plan or
IRA;
(c) changes in the tax law or in the Regulations promulgated
under the Code may materially and adversely affect the Fund and the
Holders, including limiting the ability of entities such as the Fund to
generate passive income, and could adversely affect the value of
equipment in general, including the value of the Equipment acquired by
the Fund;
(d) the tax opinion of counsel is limited in scope and
qualified by certain assumptions;
(e) Holders may be subject to taxation of an amount in excess
of proceeds actually received on a sale of the Units and/or the
Equipment and on undistributed income;
(f) the taxable losses incurred by the Fund will be subject to
the passive loss limitation which will limit the deductibility of such
losses;
(g) possible audit of a Holder's tax return resulting from the
audit of the Fund's or another Holder's return; and
(h) Holders may be required to file tax returns and pay state,
local and/or foreign taxes as a result of an investment in the Fund.
See "Federal Income Tax Consequences" for further discussion with respect
to the above and other possible tax consequences of the ownership and sale of
Units.
EACH PROSPECTIVE PURCHASER OF UNITS IS URGED TO CONSULT HIS TAX ADVISOR
WITH SPECIFIC REFERENCE TO HIS OWN TAX SITUATION AND POTENTIAL CHANGES IN
APPLICABLE LAW.
Tax Opinion. The Fund has obtained an opinion from its tax counsel,
Jackson Tufts Cole & Black, LLP ("Tax Counsel"), concerning the Fund's
classification as a partnership for federal income tax purposes. See "Federal
Income Tax Consequences -- Classification as a Partnership." The opinion also
states that the summaries of federal income tax consequences set forth herein
under the headings "Risk Factors" and "Income Tax Consequences" have been
reviewed by Tax Counsel and, to the extent such summaries involve matters of
law, Tax Counsel is of the opinion that such statements of law are accurate
under the Code, the regulations promulgated thereunder and existing
interpretations thereof.
The opinion of Tax Counsel is based upon the facts described in this
Prospectus and upon the facts as they have been represented by the Manager.
Any alteration of the facts may
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<PAGE>
adversely affect the opinion rendered. Furthermore, the opinion of Tax Counsel
is based upon existing law and applicable current and proposed Treasury
Regulations, current published administrative positions of the Service contained
in Revenue Rulings and Revenue Procedures, and judicial decisions, all of which
are subject to change either prospectively or retroactively.
Each prospective investor should note that the opinions described
herein represent only Tax Counsel's best legal judgment and have no binding
effect or official status of any kind before the Service or the courts. In the
absence of a ruling from the Service, there can be no assurance that the Service
will not challenge such conclusions (or the tax positions taken by the Fund).
ERISA Considerations. In considering an investment of a portion of the
assets of a Qualified Plan or IRA in the Fund, a fiduciary should assess (i)
whether the investment satisfies the diversification requirements of Section
404(a)(1)(C) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (in the case of IRAs and Keogh Plans, fiduciaries should first
determine whether the investment is subject to ERISA requirements), (ii) whether
the investment is prudent, as it is unlikely that there will be a market created
in which the Qualified Plan or IRA can sell or otherwise dispose of the Units,
and (iii) whether the investment is made solely in the interest of the
participants in the Qualified Plan or IRA. Under certain circumstances, ERISA
and the Code, as interpreted by the Department of Labor, will apply a
"look-through" rule under which the assets of an entity in which a Qualified
Plan or IRA has made an equity investment may generally constitute "plan
assets." For this reason, the Fund is limiting sales to Qualified Plans and IRAs
to less than 25% in value of the total sale of Units at any time. In the event
that Qualified Plans or IRAs acquire more than 25% in value of the Units either
because the investors have misrepresented the status of their investment or
because of transfers made to Qualified Plans or IRAs the assets of the Fund
might be treated as "plan assets." ERISA also requires that the assets of a plan
be valued at their fair market value as of the close of the plan year. It may
not be possible to value the Units accurately from year to year, because there
will not be a secondary market for them and any change in the value of the
Equipment may not be reflected in the value of the Units.
WHO SHOULD INVEST
The Units represent a long-term investment, the primary benefit of
which is expected to be Distributions. A purchase of Units involves investment
risks and is suitable only for persons who meet the financial suitability
standards described herein and who have no need for liquidity from this
investment. See "Risk Factors." In order to subscribe for Units, each investor
must execute a Subscription Agreement, a specimen of which is included herein as
Exhibit C. The Subscription Agreement provided to the investor for execution
must be accompanied by a copy of this Prospectus, and each subscriber has the
right to cancel his or her subscription during a period of five business days
after the subscriber has submitted the executed Subscription Agreement to the
broker-dealer through which the Units are sold. The Fund and/or the selling
broker-dealer will send each investor a written confirmation of the acceptance
of the investor's subscription for Units upon admission to the Fund.
As a result of the relative lack of liquidity and the long-term nature
of the investment, the Fund has established suitability standards which require
that an investor (including subsequent transferees) (i) have an annual gross
income of at least $45,000 and a net worth (exclusive of home, home furnishings
and automobiles) of at least $45,000; or (ii) have a net worth (determined with
the same exclusions) of at least $150,000. Certain state securities
commissioners have established investor suitability standards different from
those set forth above for the marketing, sale or subsequent transfers of Units
within their respective jurisdictions, which standards are set forth below under
"Plan of Distribution - State Requirements" or will be set forth in a supplement
hereto. By executing the Subscription Agreement, an investor represents that he
meets the suitability standards applicable to him as set forth herein and in the
Subscription Agreement, and agrees that such
20
<PAGE>
standards may be applied to any proposed transferee of his Units.
Notwithstanding the foregoing, each participating broker-dealer who sells Units
has the affirmative duty to determine prior to the sale of Units that an
investment in Units is a suitable investment for its subscribing customer and
must maintain information concerning such suitability for at least six years
following the date of investment. The selling broker and the sponsor must make
every reasonable effort to determine that the purchase of Units is a suitable
and appropriate investment for each purchaser.
The minimum number of Units which an investor may purchase is 250,
representing a total minimum investment of $2,500, except that an Individual
Retirement Account ("IRA") or a qualified pension plan, profit-sharing plan,
stock bonus plan or Keogh Plan ("Qualified Plans") may purchase a minimum of 200
Units ($2,000). Additional investments may subsequently be made in a minimum
amount of 50 Units ($500) per subscription, and minimum additional increments of
one Unit ($10). Investors seeking to acquire additional Units after their
initial subscription need not complete a second subscription agreement. In
addition to restrictions on transfer imposed by the Fund, an investor seeking to
transfer his Units subsequent to his initial investment may be subject to the
securities or "Blue Sky" laws of the state in which the transfer is to take
place.
Because the Fund will be engaged in the business of equipment leasing,
the distributive share of Fund income realized by a Qualified Plan or IRA will
be taxable to such plan as "unrelated business taxable income" under the
Internal Revenue Code (the "Code"). Furthermore, in considering an investment in
the Fund, plan fiduciaries should consider, among other things, the
diversification requirements of Section 401(a)(1)(C) of the Code, additional
legal requirements under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and the prudent investment standards generally imposed on plan
fiduciaries. Additionally, in certain circumstances the assets of an entity in
which a Qualified Plan or IRA has made an equity investment may constitute "plan
assets." To the extent necessary to avoid this result, the Fund will limit the
sale and transfer of Units to Qualified Plans and IRAs so that less than 25% of
the total outstanding Units are held by Qualified Plans and IRAs at all times.
In order to satisfy such requirement, each investor must make a representation
at the time of his subscription as to the record and beneficial ownership of the
Units subscribed. See "Income Tax Consequences -- Investment by Qualified Plans
and IRAs."
Investors should also note that the Fund is required by the Operating
Agreement to distribute, to the extent available, Cash from Operations and Cash
from Sales or Refinancing in any year to the extent necessary to allow a Holder
in a 31% federal income tax bracket (but not a higher bracket) to pay the
federal income taxes due with respect to his interest in Fund Net Income for
such year. Accordingly, it is possible that a Holder subject to a higher
effective tax rate might not receive sufficient Distributions to pay such tax
liabilities. However, the Manager is also required to make Distributions in
certain minimum amounts during the Reinvestment Period prior to any reinvestment
in Equipment and must distribute all available revenues after the Reinvestment
Period. The Manager anticipates that such Distributions will be in amounts which
will exceed the expected tax liabilities resulting from allocations of Fund Net
Income regardless of the investors' respective tax brackets. See "Risk Factors -
Income and Distributions" and "Income, Losses and Distributions." In addition,
distributions to nonresident or foreign investors may be subject to withholding
taxes which would reduce the amount of cash actually received by such investors.
See "Income Tax Consequences - Taxation of Foreign Persons" and "State Taxes."
Under federal law, certain types of Equipment, including aircraft and
marine vessels, may not be operated unless they are owned by United States
Citizens or Resident Aliens. To assure that the Fund will not exceed relevant
federal limits on foreign ownership, the Manager will not permit in excess of
20% of the outstanding Units to be held by persons other than U.S. Citizens and
Resident Aliens, and may deny or condition any proposed subscription or transfer
in order to comply with such limitation. Furthermore, any Holder who ceases to
be a United States Citizen or Resident Alien may be required to tender his Units
to the Fund for repurchase at a price determined pursuant to the formula
described under "Summary of Operating Agreement - Repurchase of Units." A HOLDER
WHO FAILS TO CONFORM TO THE REPRESENTATIONS
21
<PAGE>
REGARDING UNIT OWNERSHIP AND CITIZENSHIP REQUIREMENTS OR MISREPRESENTS HIS UNIT
OWNERSHIP OR CITIZENSHIP MAY FORFEIT AND NO LONGER BE ENTITLED TO CASH
DISTRIBUTIONS, TAX ALLOCATIONS, RECEIPT OF REPORTS AND VOTING PRIVILEGES,
ALTHOUGH HE MAY REALIZE PROCEEDS UPON THE TRANSFER OF HIS UNITS TO AN ELIGIBLE
INVESTOR, WHO WOULD BE ENTITLED TO THE FULL ECONOMIC BENEFITS AND OTHER
PRIVILEGES ATTRIBUTABLE TO SUCH UNITS.
ESTIMATED USE OF PROCEEDS
Many of the figures set forth below are estimates, and consequently
should not be relied upon as a prediction of the actual use of the proceeds of
this offering. The Fund expects to commit approximately 87% of the Gross
Proceeds of this offering to the cash portion of the purchase price of Equipment
plus capital reserves.
<TABLE>
Minimum Offering Maximum Offering
Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C>
Gross Offering Proceeds(1)...... $1,200,000 100.00% $150,000,000 100.00%
Less Offering and
Organization
Expenses:
Selling Commissions(2)...... 114,000 9.50% 14,250,000 9.50%
Other Offering and Organ-
ization Expenses(3)...... 30,000 2.50% 5,250,000 3.50%
------------ ------ ------------- ------
Net Offering Proceeds 1,056,000 88.00% 130,500,000 87.00%
Capital Reserves(4)... 6,000 0.50% 750,000 0.50%
Amount Available for
Cash Payments for
Equipment(5) .. 1,050,000 87.50% 129,750,000 86.50%
--------- ------ ----------- ------
- -------------
<FN>
(1) The offering amounts shown do not include the Units purchased by
the initial Holders.
(2) The Fund will pay ATEL Securities Corporation (the "Dealer
Manager"), an Affiliate of the Manager, selling commissions equal to 9.5% of the
Gross Proceeds, and the Dealer Manager will in turn reallow to participating
broker-dealers selling commissions equal to 8% of the Gross Proceeds from Units
sold by them, retaining the balance of 1.5%. See "Plan of Distribution." Out of
the amounts retained by the Dealer Manager, it may pay one or more
broker-dealers for "wholesaling" services in connection with the offering.
Wholesaling services include coordinating the sales effort of participating
broker-dealers and training their personnel with respect to the offering. Total
selling commissions, disbursements and reimbursements to participating
broker-dealers may not exceed an amount equal to 10% of the Gross Proceeds,
except that an additional 1/2 of 1% of the Gross Proceeds may be paid for
accountable, bona fide due diligence expenses. If the Manager, the Dealer
Manager or the broker-dealers engaged by the Dealer Manager to sell the Units,
or any of their Affiliates or employees, purchase any Units in this offering,
the Dealer Manager, in its discretion, may reimburse to any such purchasers
selling commissions paid with respect to such Units. Sales to any such
purchasers on such terms would be for investment purposes only, and the Fund and
the Manager would not recognize any attempted transfer of such Units unless
certain conditions are satisfied. See "Plan of Distribution."
22
<PAGE>
(3) Consists of expenses incurred in connection with the organization
and formation of the Fund, legal, accounting and escrow fees, printing costs,
filing and qualification fees and disbursements and reimbursements to
participating broker-dealers in connection with the sale and distribution of
Units; provided, however, that total selling commissions, disbursements and
reimbursements to participating broker-dealers may not exceed the limitations
thereon set forth in footnote (2) above. See "Management Compensation." The
Manager has agreed to pay all Organization and Offering Expenses which exceed an
amount equal to 15% of the Gross Proceeds of the offering up to $25,000,000 plus
14% of all Gross Proceeds in excess of $25,000,000. Notwithstanding the
foregoing, in the event that the Fund's Gross Proceeds upon the termination of
the offering are in an amount less than $2,000,000, the Manager has agreed to
pay all Offering and Organization Expenses which exceed an amount equal to 12%
of the Gross Proceeds. Payment of such expenses by the Manager will be made
without recourse to or reimbursement by the Fund.
(4) The Fund will initially establish capital reserves in an amount
equal to 1/2 of 1% of Gross Proceeds for general working capital purposes. This
amount may fluctuate from time to time as the Manager determines the level of
reserves necessary for the proper operation of the Fund.
(5) Includes the amount available for the cash portion of the purchase
price to be paid for Equipment plus Acquisition Expenses of the Fund. The Fund
anticipates paying Acquisition Expenses in an amount equal to approximately
0.25% of the Gross Proceeds.
</FN>
</TABLE>
MANAGEMENT COMPENSATION
Summary Table
The following table includes estimates of the maximum amounts of all
compensation and other payments that the Manager and its Affiliates will
receive, directly or indirectly, in connection with the operations of the Fund,
all of which are described more completely below under "Narrative Description of
Compensation." It should be noted that the terms of compensation and amounts of
Distributions payable to the Manager and its Affiliates were not determined by
arm's-length negotiation. See "Conflicts of Interest - Non-Arm's-Length
Agreements" below. The Operating Agreement does not permit the Manager or its
Affiliates to receive fees or expenses in excess of the maximum amount stated
for each type of compensation described below by reclassifying such items under
a different category.
23
<PAGE>
Estimated Amount
Entity Receiving Assuming Maximum
Compensation Type of Compensation Units Sold
The Dealer Manager Selling Commissions (Up to 1.5% Total selling
of Gross Proceeds to be retained commissions to be
by the Dealer Manager) retained by the
Dealer Manager are
not expected to
exceed $2,250,000.
Manager and Affiliates Reimbursement of Organization $5,250,000(1)
and Offering Expenses (when
added to selling commissions, not
to exceed a total equal to 15% of
Gross proceeds up to $25 million
and 14% of any additional Gross
Proceeds)
OPERATIONAL STAGE
Manager and Affiliates Asset Management Fee (a fee equal Not determinable
to 4.5% of Operating Revenues, at this time (2)
subject to limitations based on
Fund operations) (3)
Manager and Affiliates Reimbursement of Operating Not determinable
Expenses, subject to certain at this time (2)
limitations (4)
CARRIED INTEREST IN FUND
Manager and Affiliates Interest equal to 7.5% of all Not determinable
allocations of Fund Net Income, at this time (2)
Net Loss and Distributions
(1) The estimated maximum amount excludes selling commissions, which will
be paid directly by the Fund, and will therefore not be reimbursed to
the Manager. Selling commissions are included as "Front End Fees" in
the calculation of the minimum Investment in Equipment described in
footnote (4) below. Total Organization and Offering Expenses payable or
reimbursable by the Fund, including selling commissions payable
directly by the Fund, may not exceed an amount equal to 15% of the
Gross Proceeds up to $25,000,000 plus 14% of all Gross Proceeds in
excess of $25,000,000. It is anticipated that substantially all of the
Organization and Offering Expenses, other than selling commissions,
will be paid by the Manager and reimbursed by the Fund, subject to such
limitations.
24
<PAGE>
(2) The Manager is unable to predict the amounts which may be realized. Any
such prediction would depend on the amount of Equipment acquired and
retained, the amount of debt incurred and other factors that would
necessarily involve assumptions of future events which cannot be made
at this time.
(3) The Asset Management Fee will be subject to the Asset Management Fee
Limit, based on an alternative fee schedule, as described in the
discussion below under "Limitations on Fees". In addition, pursuant to
Section 15.7 of the Operating Agreement, the Manager must commit not
less than 85.875% of the Gross Proceeds to "Investment in Equipment"
(which term includes the purchase price of Equipment, expenses such as
interest and taxes and amounts set aside for reserves, but excludes
Front End Fees). In the event the total amount of Investment in
Equipment would otherwise be insufficient, the Asset Management Fee
Limit will be adjusted, and the Asset Management Fee or the Manager's
Carried Interest would be decreased accordingly, as described in the
discussion below under "Limitations on Fees".
(4) Beginning with the first full year after the termination of this
offering, the total amount of Reimbursable Administrative Expenses
payable by the Fund for the remainder of its term may not exceed a
cumulative limit. This cumulative limit on such Reimbursable
Administrative Expenses will equal, as of any date, a maximum of (i)
0.5% of the Gross Proceeds per annum if the total Gross Proceeds are at
least 90% of the maximum Gross Proceeds; (ii) 0.75% of the Gross
Proceeds per annum if the total Gross Proceeds are at least 75%, but
less than 90%, of the maximum Gross Proceeds; and (iii) 1% of the Gross
Proceeds per annum if the total Gross Proceeds are less than 75% of the
maximum Gross Proceeds. In addition, beginning with the first full year
after the termination of this offering, the maximum amount of
Reimbursable Administrative Expenses payable by the Fund for any single
year shall be limited to an amount equal to 1% of the Gross Proceeds.
Narrative Description of Compensation
Selling Commissions. The Dealer Manager will receive selling
commissions on all sales of Units in an amount equal to 9.5% of Gross Proceeds.
The Dealer Manager will reallow to participating broker-dealers 8% of the Gross
Proceeds from Units sold by them, and may use a portion of the retained selling
commissions to compensate certain participating broker-dealers for wholesaling
services or reimburse certain selling expenses. It is not anticipated that the
Dealer Manager or other Affiliates of the Manager will directly effect any sales
of the Units, although the Dealer Manager will provide certain wholesaling
services. See "Plan of Distribution."
Reimbursement of Organization and Offering Expenses. The Manager and
its Affiliates will be reimbursed for certain expenses in connection with the
organization of the Fund and the offering of Units. Total Organization and
Offering Expenses payable or reimbursable by the Fund, including selling
commissions payable directly by the Fund, may not exceed an amount equal to 15%
of the Gross Proceeds up to $25,000,000 plus 14% of all Gross Proceeds in excess
of $25,000,000.
Asset Management Fee. The Fund will pay the Manager an Asset Management
Fee in an amount equal to 4.5% of Operating Revenues, which will include Gross
Lease Revenues and Cash From Sales or Refinancing. The Asset Management Fee will
be paid on a monthly basis. The amount of the Asset Management Fee payable in
any year will be reduced for that year to the extent it would otherwise exceed
the Asset Management Fee Limit, as described below. The Asset Management Fee
will be paid for services rendered by the Manager and its Affiliates in
determining portfolio and investment strategies (i.e., establishing and
maintaining the composition of the Equipment portfolio as a whole and the Fund's
overall debt structure) and generally managing or supervising the management of
the Equipment, and performing other ongoing services and activities, including,
among others, collection of lease revenues, monitoring compliance by
25
<PAGE>
lessees with the lease terms, assuring that Equipment is being used in
accordance with all operative contractual arrangements, paying operating
expenses and arranging for necessary maintenance and repair of Equipment in the
event a lessee fails to do so, monitoring property, sales and use tax compliance
and preparation of operating financial data. The Manager intends to delegate all
or a portion of its duties and the Asset Management Fee to one or more of its
Affiliates who are in the business of providing such services. See "Management".
Reimbursement of Operating Expenses. The Manager and its Affiliates may
be reimbursed for expenses advanced or incurred on the Fund's behalf, to the
extent permitted under the Operating Agreement. The Manager and its Affiliates
will be reimbursed (i) the actual cost to the Manager or its Affiliates of
services, goods and materials used for and by the Fund and obtained from
unaffiliated parties; (ii) administrative services necessary to the prudent
operation of the Fund, provided that reimbursement for administrative services
will be at the lower of (a) the actual cost of such services, or (b) the amount
which the Fund would be required to pay to independent parties for comparable
services. Beginning with the first full year after the termination of this
offering, the total amount of Reimbursable Administrative Expenses payable by
the Fund for the remainder of its term may not exceed a cumulative limit. If at
least 75% of the maximum Gross Proceeds are raised by the end of this offering,
the cumulative limit will be an amount equal to 0.5% of the gross proceeds per
annum as of any date. If less than 75% of the maximum Gross Proceeds is raised,
then the cumulative limit will be an amount equal to 1% of the Gross Proceeds
per annum. In addition, beginning with the first full year after the termination
of this offering, the maximum amount of Reimbursable Administrative Expenses
payable by the Fund for any single year shall be limited to an amount equal to
1% of the Gross Proceeds. The Manager estimates that the total amount of
Reimbursable Administrative Expenses during the Fund's first full year of
operations after completion of the offering, assuming receipt of the maximum
Gross Proceeds, may be approximately $400,000 to $500,000. See the footnotes to
Table III of Exhibit A - "Prior Performance Information" for information
concerning the reimbursement of operating expenses by prior programs sponsored
by the Manager and its Affiliates.
Carried Interest in Fund Net Income, Net Loss and Distributions. The
Fund Manager will have a Carried Interest in the Fund as a Member equal to 7.5%
of all allocations of Net Income, Net Loss and Distributions. The Carried
Interest in the Fund will compensate the Manager for organizing the Fund and
arranging for supervision of Fund administration (i.e., investor communications
and services, regulatory reporting, accounting and transfers of Units).
Limitations on Fees.
Asset Management Fee Limit. The Asset Management Fee will be subject to
the Asset Management Fee Limit. The Asset Management Fee Limit will be
calculated each year during the Fund's term by calculating the total fees that
would be paid to the Manager if the Manager were to be compensated on the basis
of an alternative fee schedule, to include an Equipment Management Fee,
Incentive Management Fee, and Equipment Resale/Re-Leasing Fee, plus the
Manager's Carried Interest, as described below. To the extent that the amount
paid to the Manager as the Asset Management Fee plus its Carried Interest for
any year would exceed the aggregate amount of fees calculated under this
alternative fee schedule for the year, the Asset Management Fee and/or Carried
Interest for that year will be reduced to equal the maximum aggregate fees under
the alternative fee schedule. To the extent any such fees are reduced, the
amount of such reduction will be accrued and deferred, and such accrued and
deferred compensation would be paid to the Manager in a subsequent period, but
only if and to the extent that such deferred compensation would be payable
within the Asset Management Fee Limit for the subsequent period.
Alternative Fee Schedule. For purposes of the Asset Management Fee
Limit, the Fund will calculate an alternative schedule of fees, including a
hypothetical Equipment Management Fee, Incentive Management Fee, Equipment
Resale/Re-Leasing Fee, and Carried Interest as follows:
26
<PAGE>
An Equipment Management Fee will be calculated to equal the
lesser of (i) 3.5% of annual Gross Revenues from Operating Leases and
2% of annual Gross Revenues from Full Payout Leases which contain Net
Lease Provisions), or (ii) the fees customarily charged by others
rendering similar services as an ongoing public activity in the same
geographic location and for similar types of equipment. If services
with respect to certain Operating Leases are performed by nonaffiliated
persons under the active supervision of the Manager or its Affiliate,
then the amount so calculated shall be 1% of Gross Revenues from such
Operating Leases.
An Incentive Management Fee will be calculated to equal 4% of
Distributions of Cash from Operations until Holders have received a
return of their Original Invested Capital plus a Priority Distribution,
and, thereafter, to equal a total of 7.5% of Distributions from all
sources, including Sale or Refinancing Proceeds. In subordinating the
increase in the Incentive Management Fee to a cumulative return of a
Holder's Original Invested Capital plus a Priority Distribution, a
Holder would be deemed to have received Distributions of Original
Invested Capital only to the extent that Distributions to the Holder
exceed the amount of the Priority Distribution.
An Equipment Resale/Re-Leasing Fee will be calculated in an
amount equal to the lesser of (i) 3% of the sale price of the
Equipment, or (ii) one-half the normal competitive equipment sale
commission charged by unaffiliated parties for resale services. Such
fee would apply only after the Holders have received a return of their
Original Invested Capital plus a Priority Distribution. In connection
with the re-leasing of Equipment to lessees other than previous lessees
or their Affiliates, the fee would be in an amount equal to the lesser
of (i) the competitive rate for comparable services for similar
equipment, or (ii) 2% of the gross rental payments derived from the
re-lease of such Equipment, payable out of each rental payment received
by the Fund from such re-lease.
A Carried Interest equal to 7.5% of all Distributions of Cash
from Operations and Cash from Sales or Refinancing.
Front End Fee Limitations. The compensation payable as described above
will be subject to further adjustment based on the limitations on Front End Fees
imposed under the North American Securities Administrators Association, Inc.
("NASAA") Statement of Policy concerning Equipment Programs, as amended through
October 24, 1991 (referred to herein as the "NASAA Guidelines"). The Manager
will first determine the effect, if any, of the Front End Fee limitations
described below and make any required adjustments to the Asset Management Fee
Limit. Then the Manager will apply the adjusted Asset Management Fee Limit to
the Asset Management Fee and the Manager's Carried Interest.
Under the NASAA Guidelines, the Fund is required to commit a minimum
percentage of the Gross Proceeds to Investment in Equipment, calculated as the
greater of: (i) 80% of the Gross Proceeds reduced by 0.0625% for each 1% of
indebtedness encumbering the Fund's Equipment; or (ii) 75% of such Gross
Proceeds. The Fund intends to incur total indebtedness equal to 50% of the
aggregate cost of its Equipment. The Operating Agreement requires the Fund to
commit at least 85.875% of the Gross Proceeds to Investment in Equipment. Based
on the formula in the NASAA Guidelines, the Fund's minimum Investment in
Equipment would equal 76.875% of Gross Proceeds (80% - [50% x .0625%] =
76.875%), and the Fund's minimum Investment in Equipment would therefore exceed
the NASAA Guideline minimum by 9%.
The NASAA Guidelines permit the Manager and its Affiliates to receive
compensation in the form of a carried interest in Fund Net Income, Net Loss and
Distributions equal to 1% for the first 2.5% of excess Investment in
27
<PAGE>
Equipment over the NASAA Guidelines minimum, 1% for the next 2% of such excess,
and 1% for each additional 1% of excess Investment in Equipment. With a minimum
Investment in Equipment of 85.875%, the Manager and its Affiliates may receive
an additional carried interest equal to 6.5% of Net Profit, Net Loss and
Distributions under the foregoing formula (2.5% + 2% + 4.5% = 9%; 1% + 1% + 4.5%
= 6.5%]. At the lowest permitted level of Investment in Equipment, the NASAA
Guidelines would permit the Manager and its Affiliates to receive a promotional
interest equal to 5% of Distributions of Cash from Operations and 1% of
Distributions of Sale or Refinancing Proceeds until Members have received total
Distributions equal to their Original Invested Capital plus an 8% per annum
cumulative return on their Adjusted Invested Capital, and, thereafter, the
promotional interest may increase to 15% of all Distributions.
With the additional carried interest calculated as described above, the
maximum aggregate fees payable to the Manager and Affiliates under the NASAA
Guidelines as carried interest and promotional interest would equal 11.5% of
Distributions of Cash from Operations (6.5% + 5% = 11.5%), and 7.5% of
Distributions of Sale or Refinancing Proceeds (6.5% + 1% = 7.5%), before the
subordination level was reached, and 21.5% of all Distributions thereafter. The
maximum amounts to be paid under the terms of the Operating Agreement are
subject to the application of the Asset Fee Limit provided in Section 8.3 of the
Agreement, which limits the annual amount payable to the Manager and its
Affiliates as the Asset Management Fee and the Carried Interest to an aggregate
not to exceed the total amount of fees that would be payable to the Manager and
its Affiliates under the alternative fee schedule set forth in Section 8.3. This
overall limitation on annual fees will include, in addition to an Equipment
Management Fee and Equipment Resale/Releasing Fee, amounts equal to 11.5% of
Distributions of Cash from Operations (4% as an Incentive Management Fee plus
7.5% as the Carried Interest in Fund Distributions) and 7.5% of Distributions of
Sale or Refinancing Proceeds (as the Fund Manager's 7.5% Carried Interest)
before the Priority Return, and 15% of all Distributions thereafter (7.5% as an
Incentive Management Fee plus 7.5% as the Carried Interest).
Upon completion of the offering of Units, final commitment of Net
Proceeds to acquisition of Equipment and establishment of final levels of
permanent portfolio debt encumbering such Equipment, the Manager shall calculate
the maximum carried interest and promotional interest payable to the Manager and
its Affiliates under the NASAA Guidelines and compare such total permitted fees
to the total of the Incentive Management Fees and Manager's Carried Interest. If
and to the extent that the fees calculated under the alternative fee schedule
provided in Section 8.3 as the Incentive Management Fee and the Manager's
Carried Interest should exceed the maximum promotional interest plus carried
interest permitted under the NASAA Guidelines, as described above, the fees
payable to the Manager and its Affiliates shall be reduced. In such event, the
Manager will reduce the amounts calculated for purposes of the Asset Management
Fee Limit as the Incentive Management Fee and/or the Carried Interest by an
amount sufficient to cause the total of such compensation to comply with the
limitations in the NASAA Guidelines on the aggregate of promotional interests
and carried interests. The adjusted Asset Management Fee Limit will then be
applied to the Asset Management Fee and Carried Interest as described above. A
comparison of the Front End Fees actually paid by the Fund and the NASAA
Guideline maximums shall be repeated, and any required adjustments shall be
made, at least annually thereafter.
Defined Terms Used in Description of Compensation
Definitions of certain capitalized terms used in the foregoing narrative
description of compensation payable to the Manager, and used in the alternative
fee schedule for purpose of calculating the Asset Management Fee Limitation, are
as follows:
28
<PAGE>
"Adjusted Invested Capital" means, as of any date, the Original Invested Capital
attributable to the Units held by any Person on or before such date, as
decreased (but not below zero) by the amount by which (i) all Distributions with
respect to such Units on or before the date of determination pursuant to any
provision of the Operating Agreement exceed (ii) the Priority Distribution
attributable to such Units for such period.
"Asset Management Fee Limit" means the total fees calculated pursuant to the
alternative fee schedule as set forth under "Limitations on Fees" above, equal
to the aggregate of a hypothetical Equipment Management Fee, Incentive
Management Fee, and Equipment Resale/Re-Leasing Fee, plus the Carried Interest,
determined in the manner described therein.
"Carried Interest" or "Interest in Distributions" shall mean the allocable share
of Fund Distributions of Cash from Operations and Cash from Sales or Refinancing
payable to the Manager, as a Member, pursuant to Sections 10.4 and 10.5 of the
Agreement.
"Cash from Operations" means the excess of Gross Lease Revenues (which excludes
revenues from Equipment sales or refinancing) over cash disbursements (including
an Equipment Management Fee and amounts reinvested by the Fund in Equipment)
without reduction for depreciation and amortization of intangibles such as
organization and underwriting costs but after a reasonable allowance for cash
for repairs, replacements, contingencies and anticipated obligations, as
determined by the Manager.
"Cash from Sales or Refinancing" means the net cash realized by the Fund from
the sale, refinancing or other disposition of any Equipment after payment of all
expenses related to the transaction (including an Equipment Resale Fee).
"Distributions" means any cash distributed to Holders and the Manager arising
from their respective interests in the Fund.
"Full Payout Lease" means a lease under which the non-cancellable rental
payments due during the initial term of the lease are at least sufficient to
cover the purchase price of the Equipment leased.
"Gross Lease Revenues" means all revenues from the operation and lease of
Equipment other than from security deposits paid by lessees, but excluding
revenues from the sale, refinancing or other disposition of Equipment.
"Net Income" or "Net Loss" means the taxable income or taxable loss of the Fund
as determined for federal income tax purposes, computed by taking into account
each item of Fund income, gain, loss, deduction or credit not already included
in the computation of taxable income and taxable loss, but does not mean
Distributions.
"Operating Lease" means a lease under which the aggregate rental payments due
during the initial term of the lease are less than the purchase price of the
Equipment leased.
"Operating Revenues" means the total for any period of all Gross Lease Revenues
plus all Cash from Sales or Refinancing.
"Original Invested Capital" means the amount in cash contributed by each Member
to the capital of the Fund for his interest in the Fund, which amount shall be
attributed to Units in the hands of a subsequent Holder.
"Priority Distribution" for any calendar year or other period means, with
respect to the Units held by any Person, the average Adjusted Invested Capital
with respect to such Units during each calendar year multiplied by 10% per annum
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(calculated on a cumulative basis, compounded daily, from the last day of the
calendar quarter in which the initial purchaser of such Units was admitted as a
Holder pursuant to the Operating Agreement and pro rated for any fraction of a
calendar year for which such calculation is made).
"Reimbursable Administrative Expenses" shall mean the ordinary recurring
administration expenses incurred by the Manager and reimbursed by the Fund. Such
expenses shall not include interest, depreciation, equipment maintenance or
repair, third party services or other non-administrative expenses.
See Article II of the Operating Agreement for more complete definitions
of the foregoing terms.
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INVESTMENT OBJECTIVES AND POLICIES
Principal Investment Objectives
The Fund's principal objectives are to invest in a diversified
portfolio of primarily low-technology, low- obsolescence Equipment which will
(i) preserve, protect and return the Fund's invested capital;
(ii) generate regular Distributions to Holders of Cash from
Operations and Cash From Sales or Refinancing, any balance remaining after
certain minimum Distributions to be used to purchase additional Equipment during
the Reinvestment Period; and
(iii) provide additional Distributions after the end of the
Reinvestment Period and until all Equipment has been sold.
Distributions will be made only to the extent cash is available after
payment of Fund obligations (including payment of Fund administrative expenses,
debt service and the Asset Management Fee) and allowance for necessary reserves.
There can be no assurance that any specific level of Distributions or any other
objectives will be attained.
General Policies
The Fund intends to acquire various types of Equipment for lease. See
the discussion below under "Types of Equipment." Generally, the Fund expects to
acquire newly-manufactured Equipment. However, the Fund may also invest in
desirable used Equipment and Equipment subject to pre-existing leases under
appropriate circumstances and where consistent with the Fund's overall
investment objectives.
The Fund's investment objective is to acquire primarily low-technology,
low-obsolescence equipment such as materials handling equipment, manufacturing
equipment, mining equipment, and transportation equipment. A portion of the
portfolio may include some more technology-dependent equipment such as certain
types of communications equipment, medical equipment and office equipment,
although the Fund will seek to invest in such equipment in a manner consistent
with its primary objective of acquiring equipment which is generally subject to
relatively low rates of technological obsolescence. The Operating Agreement does
not limit the Fund's ability to invest in high-technology Equipment. See Table
IV of Exhibit A, "Prior Performance Information," for information concerning the
composition of the equipment portfolios held by the four prior public programs
sponsored by the Manager and its Affiliates which have investment objectives and
policies similar to those of the Fund.
Like most goods, new equipment generally has a higher market value than
comparable used equipment, and capital equipment tends to lose value as it is
used over a period of time. An equipment lessor such as the Fund seeks to
negotiate lease terms based in part on its estimate of the value of the leased
equipment upon termination of the lease. The lessor will negotiate a lease rate
designed to generate sufficient rental revenues over the term of the lease so
that, when the total lease payments are added to the estimated value of the
equipment upon lease termination, the lessor will have achieved a return of the
capital used to purchase the equipment plus an overall profit on the investment.
There can be no assurance, however, that the lessor's assumptions regarding the
residual value of the equipment will be accurate or that its objective will be
achieved.
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The Manager will seek to maintain an appropriate balance in the types
of Equipment acquired and the types of leases entered into by the Fund. At least
a majority of the Fund's Equipment, based on the aggregate purchase price, will
be subject to High Payout Leases (with noncancellable lease payments returning
at least 90% of the Equipment Price through the term of the lease) upon final
investment of the Net Proceeds and completion of permanent financing for the
portfolio. In addition, the Manager will seek to invest not more than 20% of the
aggregate purchase price of Equipment in Equipment acquired from a single
manufacturer. However, the latter limitation is a general guideline only, and
the Manager may in its discretion cause the Fund to acquire Equipment from a
single manufacturer in excess of the stated percentage if it deems such a course
of action to be in the Fund's best interest. A number of factors will determine
the actual composition of the Fund's Equipment portfolio; for example, the
amount of Gross Proceeds actually received prior to the termination of the
offering will be a significant factor in determining the Fund's ability to
diversify its portfolio. Furthermore, the Manager cannot anticipate what types
of Equipment will be available and at what prices at the time the Fund is ready
to invest its funds.
As set forth above under "Principal Investment Objectives," it will be
the Fund's objective to reinvest in additional Equipment any Cash from
Operations and Cash from Sales or Refinancing remaining after payment of certain
minimum Distributions during the Reinvestment Period. The Fund will not acquire
Equipment after the Reinvestment Period, except to the extent necessary to
satisfy obligations entered into prior to the end of the Reinvestment Period or
to maintain or improve Equipment already owned at such time.
Other than as set forth below under "Identified Equipment Acquisitions"
and in any supplement to this Prospectus, the Fund has not invested in or
committed to purchase any Equipment, and, as a result, there can be no assurance
as to when the Net Proceeds from the offering will be fully invested.
Furthermore, prospective investors may not have an opportunity prior to
investing to evaluate all of the Equipment to be acquired. This Prospectus will
be supplemented to describe the Fund's acquisition, in any single transaction or
related series of transactions, of items of Equipment involving a cash payment
of more than 10% of the maximum Net Proceeds prior to the termination of this
offering.
Prior to final funding of any acquisition of a single item of Equipment
which has a contract purchase price in excess of $1,000,000, the Manager will
cause the Fund to obtain a future value appraisal of the item of Equipment from
a qualified independent third party appraiser. The Manager may also, in its
discretion, obtain Equipment appraisals for certain smaller acquisitions if it
deems an appraisal to be appropriate because of the type of Equipment, the
overall size of a transaction or otherwise. It should be noted, however, that
any such appraisals would represent only the appraiser's opinion of the value of
the Equipment, and would not necessarily represent the actual amount which might
be realized by the Fund upon disposition of the Equipment.
The Manager or an Affiliate may purchase Equipment in its own name, the
name of an Affiliate or the name of a nominee, a trust or otherwise and hold
title thereto on a temporary or interim basis (generally not in excess of six
months) for the purpose of facilitating the acquisition of such Equipment or the
completion of manufacture of the Equipment or for any other purpose related to
the business of the Fund, provided, however that: (i) the transaction is in the
best interest of the Fund; (ii) such Equipment is purchased by the Fund for a
purchase price no greater than the cost of such Equipment to the Manager or
Affiliate (including any out-of-pocket carrying costs), except for compensation
permitted by the Operating Agreement; (iii) there is no difference in interest
terms of the loans secured by the Equipment at the time acquired by the Manager
or Affiliate and the time acquired by the Fund; (iv) there is no benefit arising
out of such transaction to the Manager or its Affiliate apart from the
compensation otherwise permitted by the Operating Agreement; and (v) all income
generated by, and all expenses associated with, Equipment so acquired shall be
treated as belonging to the Fund.
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Any of the Net Proceeds received by the Fund during the first twelve
months following the date hereof which have not been invested or committed to
investment in Equipment during the period ending eighteen months following the
date hereof, and any of the Net Proceeds received thereafter which have not been
invested or committed to investment in Equipment during the period ending six
months after the Final Closing Date (except, in either case, for amounts used to
pay Fund operating expenses or deemed to be required as capital reserves, as
determined in the sole discretion of the Manager and in accordance with the
Operating Agreement) will be distributed pro rata by the Fund to the Holders. In
addition, in order to refund to the Holders the amount of Front End Fees
attributable to such returned capital, the Manager has agreed to contribute to
the Fund, and the Fund shall distribute to the Holders pro rata, the amount by
which (x) the amount of unused capital so distributed, divided by (y) the
percentage of Gross Proceeds remaining after payment of all Front End Fees,
exceeds the unused capital so distributed. The Fund's funds will be available
for general use during the foregoing period and may be expended in operating the
Equipment which has been acquired. Net Proceeds will not be segregated or held
separate from other funds of the Fund pending investment, and no interest will
be payable to the Holders if uninvested Net Proceeds are returned to them. For
the purpose of the foregoing provision, Net Proceeds will be deemed to have been
committed to investment and will not be returned to the Holders to the extent
written agreements in principle or letters of understanding were executed at any
time prior to the end of such period, regardless of whether any such investment
is eventually consummated, and also to the extent any funds have been reserved
to make contingent payments in connection with any Equipment, regardless of
whether any such payments are ever made.
Identified Equipment Acquisitions
Set forth in the table below is a summary of the Equipment acquisitions
and leases identified by the Fund as of the date of this Prospectus. These
transactions have been committed and/or funded by the Manager or its Affiliates
and will be assigned to the Fund at such time as the Fund has sufficient capital
to acquire the Equipment. The Fund's ability to acquire the Equipment described
below will be dependent upon the amount of capital raised and the timing of the
Fund's capital raising efforts. In addition, the Manager will cause the Fund to
acquire these transactions only to the extent consistent with its investment
objectives at the time of each such acquisition. Therefore, there can be no
assurance that these transactions will be acquired as described.
EQUIPMENT ACQUISITIONS
Equipment Commence Acquisition Lease Lease
Lessee Type Date(s) (1) Price (2) Term (3) Type (4)
- ------ ---- ----------- --------- -------- --------
[to be provided by amendment]
In addition to the foregoing specified Equipment, as of the date hereof
ATEL Capital Group, the parent of the Manager, has been awarded lease
transactions representing equipment purchase costs in excess of $__ million
which are suitable for acquisition by the Fund as well as certain Affiliates of
the Fund. Some or all of these transactions may be allocated to the Fund,
subject to the discretion of the Manager and depending on future circumstances
and the factors discussed below in the second paragraph under "Conflicts of
Interest - Competition for Investments." ATEL Capital Group has the right to
allocate and assign participations in these transactions among its affiliates in
its discretion, and the Manager has the authority to determine what level of
participation, if any, is appropriate for each of the programs under its
management, including the Fund. There can be no assurance as to what, if any,
portion of these transactions awarded
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to ATEL Capital Group may be allocated and assigned to the Fund.
Types of Equipment
The Fund intends to acquire and lease a diversified portfolio of
Equipment. The Fund intends to invest primarily in what it deems to be
relatively low-technology, low-obsolescence types of equipment. These types of
equipment would include a variety of items which are not dependent on
high-technology design or applications for their usefulness to lessees, and are
therefore less subject to rapid obsolescence than types which are so dependent.
Equipment acquisition will be subject to the Manager or its agents
obtaining such information and reports, and undertaking such inspections and
surveys as the Manager may deem necessary and appropriate to determine the
probable economic life, reliability and productivity of the Equipment, its
competitive position with respect to other equipment and its suitability and
desirability as compared with other equipment. Purchases of new Equipment for
lease will typically be made directly from a manufacturer or its authorized
dealers, either pursuant to a purchase agreement relating to significant
quantities of such equipment, through lease brokers, or on an ad hoc basis to
meet the needs of a particular lessee. There can be no assurance that favorable
purchase agreements can be negotiated with equipment manufacturers or their
authorized dealers or lease brokers at the time the Fund commences operations.
In addition, the Fund may enter into sale/leaseback transactions pursuant to
which the Fund will purchase Equipment from companies which will simultaneously
lease the Equipment from the Fund.
The following is a more detailed description of the various types of
Equipment which the Fund may purchase and lease. The types of Equipment are
listed in alphabetical order, and the discussion is not intended to imply any
order of emphasis in the Fund's acquisition policies. The final mix of Equipment
types in the Fund's portfolio will depend on the factors discussed above under
"General Policies."
Aircraft. The Fund may invest in cargo and freight aircraft, corporate
aircraft and aircraft used for medical evacuation and rescue purposes. The Fund
may invest in commercial passenger aircraft, provided that not more than 10% of
the maximum Gross Proceeds will be committed to the purchase of commercial
passenger aircraft and provided further that any debt used to acquire or
maintain such Equipment will either be secured by the obligations of an
"investment grade" lessee, or will be non-recourse to the other assets of the
Fund. The Manager anticipates that the Fund's cash investments in all types of
aircraft will not exceed an amount equal to 20% of the maximum Gross Proceeds.
Cargo and freight aircraft are used by commercial freight carriers and national
and international mail and package delivery services exclusively for the hauling
of cargo. Corporate aircraft, including both helicopters and fixed-wing
aircraft, are used by many businesses to move employees from city to city or to
locations without scheduled air service and for the express delivery of
personnel, components and products at various manufacturing and service
facilities. Commercial passenger aircraft consist of aircraft used in the day to
day operation of scheduled passenger air carriers. All domestic corporate and
commercial aircraft are registered with the Federal Aviation Administration
("FAA").
Under the Federal Aviation Act of 1958, as amended (the "Act"), it is
unlawful to operate an unregistered aircraft in the United States. In order to
be eligible for registration, the rules and regulations of the FAA provide, in
effect, that aircraft is eligible for registration only if it is owned by a
United States Citizen or a Resident Alien. A literal reading of the Act could
lead to the conclusion that aircraft in which the Fund has an interest are not
eligible for registration because the term United States Citizen is defined in
the Act to include a partnership in which each member is an "individual" who is
a citizen of the United States or one of its possessions, and the Fund has a
corporate Manager. The FAA has indicated informally that it will permit
registration of an aircraft under the Federal Aviation Act of 1958 and the
regulations thereunder in the name of a trustee of a trust in which a
partnership is the sole beneficiary if the partnership's partners are
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United States Citizens (whether or not they are all individuals) or Resident
Aliens. However, such representations are not binding on the FAA; therefore, the
possibility exists that the FAA would challenge such a registration. In
addition, a registration may be challenged and rendered invalid if a Member is
not, contrary to his representation to the Fund, a United States Citizen or a
Resident Alien or if a Member ceases to be a United States Citizen or a Resident
Alien. Any challenge, if successful, could result in an inability to operate the
aircraft, substantial penalties, the premature sale of the aircraft, the loss of
the benefits of the central recording system under federal law thereby leaving
the aircraft exposed to liens or other interests not of record with the FAA, and
a breach by the Fund of lease agreements entered into in connection with the
aircraft. Accordingly, the Manager will limit the ownership of Units or
interests therein by any persons who are not United States Citizens or Resident
Aliens to not more than 20% of the outstanding Units.
It is anticipated that any aircraft lease will provide, as a condition
precedent to the transaction, that application for registration shall have been
duly made and that the prospective lessee shall have temporary or permanent
authority to operate the aircraft. If such authority were not obtainable because
of failure of registration, the lessee might be entitled to void the transaction
and the lease would not take effect.
Communications Equipment. Communications equipment is used for voice
and data transmission. Its applications include, but are not limited to,
telephone communication, radio and television broadcasting, cable television,
and satellite communications. The Fund may acquire and lease communications
equipment including telephone equipment and systems, data communication
terminals, cables, transmission wires, transmitters, control and amplification
equipment, repeaters, monitoring equipment, teleprinters, connector and
switching equipment, satellite and microwave transmission facilities and support
equipment.
Construction Equipment. Construction equipment includes bulldozers,
haulers, cranes, graders, backhoes, front-end loaders, scrapers and asphalt and
cement spreaders used in a wide variety of applications including building
construction and road, bridge and other civil engineering construction projects.
Energy Equipment. Energy equipment includes cogeneration facilities,
transmission lines, generation facilities, compression and pumping equipment and
other processing and treatment equipment, as well as energy management systems.
General Purpose Plant/Office Equipment. Plant/office equipment includes
racking, shelving, storage bins, portable steel storage sheds, furniture,
fixtures, tables, counters, desks, chairs, cabinets and numerous other items
generally used in manufacturing plants, storage and distribution facilities and
offices.
Graphic Processing Equipment. Graphic processing equipment includes
print setters, printing presses, automatic drafting machines and all equipment
which is used for the visual display of designs, drawings and printed matter.
Printing presses come in a variety of sizes depending on the applications for
which they are used. Some printing presses are of a single color, whereas others
can apply up to eight colors. Phototype setters are used for the setting of type
for publications such as newspapers and magazines. Computerized type-setters
have become common in recent years, as they simplify type-setting, correction of
mistakes and lay-out of printed pages. Automatic drafting machines are computer
controlled visual displays of drawings which enable designers to make changes in
engineering drawings without the time required to make a completely new drawing
by hand.
Machine Tools and Manufacturing Equipment. Machine tools and
manufacturing equipment include a wide variety of metalworking machinery, such
as lathes, drilling presses, turning mills, grinders, metal bending equipment,
metal slitting equipment and other metal forming equipment used in the
production of a variety of machinery and
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equipment. Some form of machine tool is used in virtually every production
process of a metal product or component. While some machine tools and
metalworking equipment are built for a particular end product, the majority of
machine tools can be used in a variety of applications.
Materials Handling Equipment. Materials handling equipment includes
many varieties of fork lift trucks. They are either battery-powered or
gas-powered, and are used in warehouses and factories for the movement of
products and materials from one work station to another or from a warehouse to a
truck for shipment, or for the storing of products and materials. The equipment
comes in a variety of styles, depending on the design of the items to be moved
and the design of the shipping or warehouse facility. However, this type of
equipment is generally of standard design and can be used by a variety of
industries.
Medical Equipment. Medical equipment includes a wide variety of testing and
diagnostic equipment including:
Radiology Equipment. This category includes x-ray equipment, CAT and MRI
scanners (i.e., body and head scanners) and other equipment to be used in the
radiology departments of hospitals and clinics.
Laboratory Equipment. This category includes blood analysis equipment and
other automated medical laboratory equipment.
Other Medical Equipment. This general category includes equipment using
ultrasound technology, patient monitoring systems and a variety of other
equipment used in hospitals, clinics and medical laboratories.
Photocopying Equipment. The Fund may acquire and lease photocopying and
other document duplicating or reproduction equipment.
Railroad Rolling Stock. Railroad rolling stock includes gondolas, tank
cars, boxcars, hopper cars, flatcars, locomotives and various other equipment
used by railroads in the maintenance of their tracks. Flatcars and boxcars have
a variety of designs, some of which are general purpose and some of which are
special purpose. Special purpose flatcars and boxcars are used for the shipment
of specific products whereas a general purpose car can be used for the shipment
of a wide variety of products. Many electric utilities lease hopper cars for the
shipment of coal from the mine to the generating plant. Tank cars are used to
transport liquids. Locomotives are the engines, generally diesel powered, that
drive trains of railcars from one location to another. Locomotives come in a
variety of designs which vary in the amount of horsepower produced.
Research and Experimentation Equipment. Research and experimentation
equipment include various types of analyzers, spectrometers, oscilloscopes,
measuring instruments, gas and liquid chromatographs, physical testing
centrifuges, graphic plotters and printers, laser equipment, digital-aided
design systems, scanning electron microscopes, dissolution sampling systems, and
other general laboratory instruments and equipment used in businesses for the
development of ongoing research programs.
Tractors, Trailers and Trucks. Tractors, trailers and trucks are used
for the shipment of various products and goods from one location to another.
Tractor-trailer rigs are often used for longer shipments and delivery of larger
pieces; whereas heavy-duty trucks are generally used for the more local delivery
of large products. A "tractor" refers to the power unit of a tractor-trailer
combination. The tractor cab is generally manufactured by one company and the
engine
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and drive train by another. The engine may use gasoline or diesel fuel. Trailers
are the container portion of a tractor- trailer rig and come in a variety of
sizes and designs depending on the product to be shipped. Trailers may be
designed for intermodal use so they can either be pulled by tractors or
transported on railroad flatcars. Trailers may be up to 45 feet long in most
states and most commonly have a set of twin axles (eight wheels) to carry the
load. A trailer may be enclosed on a flatbed for the shipment of large or
oversized products, and may be refrigerated for the shipment of perishable
products. The Fund intends to invest in trailers that can be used for the
shipment of a wide variety of goods and are not limited to specific
applications. Heavy-duty trucks are large trucks in which the engine and load
carrying components are mounted on a single frame. The trucks can be used for
the local delivery of large products or for the hauling of construction
materials.
Miscellaneous Equipment. The Fund may also acquire various other types
of equipment, including, but not limited to, oil drilling equipment, mining and
ore-processing equipment, electronic test equipment, office automation
equipment, furniture and fixtures, automobiles, dairy production equipment,
video projection and production equipment, store fixtures, display cases,
freezers and equipment used in production facilities.
Incidental Property Acquisitions. Incidental to an acquisition of
Equipment, the Fund may acquire certain interests in real property, mineral
rights or other tangible or intangible property or financial instruments. The
Fund may acquire ownership of an item of Equipment by acquiring the beneficial
interests of a trust or the equity interest in a special purpose corporation
which holds an asset sought by the Fund. Nothing in the Operating Agreement
prohibits the Fund from acquiring any such incidental property rights or
indirect ownership interest, provided that the primary purpose and objective is
the acquisition and leasing of equipment as described herein, the acquisition of
the incidental rights does not alter the essential character of the transaction
as an acquisition and lease which otherwise satisfies the investment objectives
and policies of the Fund, and the acquisition does not otherwise violate or
circumvent any provision of the Operating Agreement.
Prior Program Diversification
The prior public equipment leasing programs sponsored by the Manager
and its Affiliates have had equipment portfolio objectives substantially
identical to those of the Fund. See "Prior Performance Summary" below and the
Prior Performance Tables included as Exhibit A to this Prospectus for more
information concerning these prior programs. The first chart set forth below
(Figure 1) represents the actual equipment portfolio diversification by
equipment type for all prior ATEL public programs as of December 31, 1997; the
second chart set forth below (Figure 2) represents the actual equipment
portfolio diversification by lessee industry for all prior ATEL public programs
as of December 31, 1997; and the third chart set forth below (Figure 3)
represents the actual portfolio diversification by the lessees' geographic
location for all prior ATEL public programs as of December 31, 1997.
Diversification of the Fund's portfolio will depend on a number of variables,
including the amount of Gross Proceeds raised and market conditions, which
cannot be predicted in advance. Although there can be no assurance that the Fund
will achieve diversification similar to that of the prior programs, achieving
such diversification will be one of the primary investment objectives and
policies of the Fund.
[GRAPHICS OMITTED]
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Borrowing Policies
The Fund expects to incur debt to finance the purchase of a portion of
its Equipment portfolio. The amount of borrowing in connection with any
Equipment acquisition transaction will be determined by, among other things, the
credit of the lessee, the terms of the lease, the nature of the Equipment and
the condition of the money market. There is no limit on the amount of debt which
may be incurred in connection with any single acquisition of Equipment. However,
the Fund may not incur aggregate indebtedness in excess of 50% of the total cost
of Equipment as of the date of the final commitment of Net Proceeds and,
thereafter, as of the date any subsequent indebtedness is incurred. The Fund
intends to borrow amounts equal to such maximum debt level in order to fund a
portion of its Equipment acquisitions. While the Manager has obtained
commitments for certain short term lines of credit, there can be no assurance
that such short term credit or permanent financing will be available to the Fund
in the amounts desired or on terms considered reasonable by the Manager at the
time the Fund seeks to finance a specific Equipment acquisition.
Financing for the Fund is expected to be a combination of nonrecourse
and recourse debt. The Manager intends to use nonrecourse debt primarily to
finance assets leased to those lessees which, in the opinion of the Manager,
have a relatively higher potential risk of lease default than other lessees of
the Fund's Equipment. This use of nonrecourse debt will mitigate the risk of
loss due to default by such lessees.
Nonrecourse borrowing, in the context of the type of business to be
conducted by the Fund, means that the lender providing the funds would only be
able to look to the Equipment purchased with such funds and the proceeds derived
from the leasing or reselling of such Equipment as security; neither the Fund
nor any Member (including the Manager) will be liable for repayment of any such
loan, nor will any such loan be secured by other Equipment owned by the Fund.
Investors should note, however, that the presence of nonrecourse financing may
limit an investor's ability to claim losses from the Fund. See "Income Tax
Consequences - Limitation on Deduction of Losses - At Risk Rules." Furthermore,
a creditor may under some circumstances have recourse to the Fund's assets upon
establishing fraud or misrepresentation by the Fund.
The Fund expects to incur recourse debt in connection with short-term
bridge financing and asset securitization, as described below. Recourse debt, in
the context of the type of business to be conducted by the Fund, means that the
lender can look beyond the specific asset financed by the loan to all of the
assets of the borrower, or a specified pool of assets, as collateral for
repayment of its debt obligation.
The Fund expects to incur recourse debt in the context of temporary or
short-term bridge financing used to acquire equipment and which is intended to
be repaid through a combination of permanent financing, offering proceeds and/or
operating revenues. In addition, the Fund may participate with other affiliated
programs and the Manager in a common recourse debt facility to provide temporary
or short-term bridge financing of transactions approved for acquisition by the
Fund and such Affiliates. In such instances, lease transactions may be held in
the name of an Affiliate of ATEL for convenience, notwithstanding that the
transaction has been approved for one or more participants. The ultimate
acquisition of the financed transaction will depend on many factors, including
without limitation, the Fund's available cash, portfolio makeup, and investment
objectives at the time of closing. See the discussion under "Risk Factors" and
"Conflicts of Interest" above.
The Fund may also incur long-term recourse debt in the form of asset
securitization transactions in order to obtain lower interest rates or other
more desirable terms than may be available for individual nonrecourse debt
transactions. In an "asset securitization", the lender would receive a security
interest in a specified pool of "securitized"
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Fund assets or a general lien against all of the otherwise unencumbered assets
of the Fund. It is the intention of the Manager to use such asset securitization
primarily to finance assets leased to those credits which, in the opinion of the
Manager, have a relatively lower potential risk of lease default than those
lessees with Equipment financed with nonrecourse debt.
In the case of any recourse bridge financing or asset securitization,
however, the lender would not be entitled to look to the individual assets of
any Holder, or, in many cases, of the Manager, for repayment of such loans.
Thus, the liability of the Holders would be limited to their unreturned capital
contributions. See "Summary of the Operating Agreement - Liability of Holders"
for a discussion of potential liability of Holders for return of certain
Distributions. If, under tax principles, it is determined that the Manager or
one of its Affiliates bears the economic risk of loss for such recourse debt,
then the recourse debt will be allocated to the Manager or its Affiliate for tax
basis purposes and all deductions attributable to the recourse debt will be
allocated to the Manager or its Affiliate. See "Income Tax Consequences -
Limitation on Deduction of Losses - Tax Basis."
Other than in connection with short-term bridge financing, the Manager
will seek to avoid borrowing under terms which provide for a rate of interest
which may vary with the prime or reference rate of interest of a lender. The
Manager will attempt to limit such variable interest rate borrowing to
short-term debt or to those instances in which the lessee agrees to bear the
cost of any increase in the interest rate. If such debt is incurred without a
corresponding variable lease payment obligation, the Fund's interest obligations
could increase while lease revenues remain fixed. Accordingly, a rise in the
prime or reference rate may increase borrowing costs and reduce the amount of
income and cash available for Distributions. Historically, the prime rates
charged by major banks have fluctuated; as a result, the precise amount of
interest which the Fund may be charged under such circumstances cannot be
predicted.
Fund indebtedness may provide for amortization of the principal balance
over the term of the loan through regular payments of principal and interest or
may provide that all or a substantial portion of the principal due will be
payable in a single "balloon payment" upon maturity. Such balloon payment
indebtedness involves greater risks than fully amortizing debt. See "Risk
Factors - Balloon Payments."
In the event that the Fund does not have sufficient funds to purchase
an item of Equipment at the time it is acquired (including prior to the Fund's
Final Closing Date), the Fund may borrow such funds from third parties on a
short-term basis, and repay the loans out of the Net Proceeds derived from the
subsequent sale of Units. Any such short-term loans may be unsecured or secured
by the assets acquired and/or other assets of the Fund.
Although the Operating Agreement does not prohibit the Manager or its
Affiliates from lending to the Fund, the Fund does not have any intention or
arrangements to borrow from such Persons. In the event that any such borrowing
is incurred, the terms may not permit the Manager or any Affiliate to receive a
rate of interest or other terms which are more favorable than those generally
available from commercial lenders under the circumstances. In no event may the
Manager or its Affiliates provide financing to the Fund with a term in excess of
twelve months.
Description of Lessees
The Fund will only purchase Equipment for which a lease exists or for
which a lease will be entered into at the time of purchase.
The Fund's objective is to lease a minimum of 75% of the Equipment (by
cost) acquired with the Net Proceeds to lessees which (i) have an average credit
rating by Moody's Investor Service, Inc. of "Baa" or better, or the credit
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equivalent as determined by the Manager, with the average rating weighted to
account for the original Equipment cost for each item leased; or (ii) are
established hospitals with histories of profitability or municipalities. The
Manager may determine that the credit equivalent of a Moody's Baa rating applies
to those lessees which are not rated by Moody's, but which (i) have comparable
credit ratings as determined by other nationally recognized credit rating
services; (ii) although not rated by nationally recognized credit rating
services, are believed by the Manager to have comparable creditworthiness; or
(iii) in the Manager's opinion, as a result of guarantees provided, collateral
given, deposits made or other security interests granted, have provided such
safeguards of the Fund's interest in the Equipment that the risk is equivalent
to that involved in a lease to a company with a credit rating of Baa. The
balance of the original Equipment portfolio may include Equipment leased to
lessees which, although deemed creditworthy by the Manager, would not satisfy
the general credit rating criteria for the portfolio. If the risk of lessee
default is not deemed significant, and the potential return is deemed by the
Manager to justify the risk involved, the Fund may enter into leases with such
lessees for up to 25% of the Equipment acquired with the Net Proceeds.
In arranging lease transactions on behalf of corporate investors and
securing institutional financing for such transactions, the Manager and its
Affiliates have been required to analyze and evaluate the creditworthiness of
potential lessees. See "Exhibit A - Prior Performance Information." However,
neither the Manager nor any of its Affiliates is in the business of regularly
providing credit rating analyses as an independent activity. In order to analyze
whether a prospective lessee's credit risk is comparable or equivalent to a
Moody's Baa rating, the Manager will attempt to apply the standards applicable
to securities qualifying for the Baa rating. Such securities are generally
deemed to be of "investment grade," neither highly protected nor poorly secured,
with earnings and asset protection which appear adequate at present but which
may be questionable over any great length of time. Notwithstanding the Manager's
best efforts to assure the lessees' creditworthiness, there can be no assurance
that lease defaults will not occur.
It is not anticipated that the Fund's lessees will be located primarily
in any given geographic area. The Manager will use its best efforts to diversify
lessees by geography and industry. The Manager will seek to limit the amount
invested in Equipment leased to any single lessee to not more than 20% of the
aggregate purchase price of Equipment owned at any time during the Reinvestment
Period, although there can be no assurance that it will be successful in doing
so. The Operating Agreement provides, however, that in no event may the Fund's
equity investment in Equipment leased to a single lessee exceed an amount equal
to 20% of the maximum Gross Proceeds from the sale of Units offered hereunder
(or $30,000,000).
Foreign Leases
There is no limit on the amount of Equipment which may be leased to
foreign subsidiaries of United States corporations, to foreign lessees or which
may otherwise be permitted to be used predominantly outside the United States.
The Manager does not have any specific objective with regard to the amount of
Equipment to be subject to foreign leases, but intends to pursue desirable
foreign leasing opportunities for the Fund to the extent consistent with the
Fund's overall investment objectives.
Of the total Purchase Price of Equipment leased to foreign lessees, the
Manager will require that a minimum of 75% must represent Equipment leased to
lessees which have a credit risk equivalent to a credit rating by Moody's
Investor Service, Inc. of "Baa" (investment grade) or better, as determined by a
credit rating agency which is generally recognized in the financial services
industry or, if no such credit rating is available, as determined by the
Manager. Any leases to foreign lessees which do not meet the foregoing credit
standard will either be guaranteed by a U.S. parent company of the lessee, or
will involve lessees which have assets located in the United States with a value
equal to or greater than the original purchase cost of the Fund Equipment
subject to the lease.
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The Manager will seek to limit the aggregate amount of the Fund's
equity invested in all Equipment leased to foreign lessees or which is otherwise
to be used primarily outside the United States to not more than 20% of the Gross
Proceeds at any time during the Reinvestment Period. For this purpose, a lessee
under a lease guaranteed by a United States corporation will not be deemed a
foreign lessee.
Description of Leases
The Equipment will be leased to third parties primarily pursuant to
Operating Leases, including High Payout Leases. Operating Leases are leases
which will return to the lessor less than the purchase price of the subject
equipment from non-cancellable rentals payable during the initial term of the
lease. These include leases where rental payments are based upon equipment
usage. High Payout Leases are Operating Leases under which the non-cancellable
lease payments and other payment obligations of the lessee are equal to at least
90% of the original purchase price of the Equipment paid by the Fund. A majority
of the aggregate purchase price of the Fund's Equipment will represent Equipment
leased under High Payout Leases upon final investment of the Net Proceeds and
completion of permanent financing of the portfolio.
Generally, in a lease involving new Equipment, the lessee will express
an interest in lease financing for equipment and the Manager will attempt to
create a lease package for the prospective lessee. In formulating the lease
package, the Manager will consider the following factors, among others: the type
of Equipment and its anticipated residual value; the business of the lessee and
its credit rating; the cost of alternative financing services, and competitive
pricing and other market factors. The initial lease terms will vary as to the
type of Equipment, but will generally be for 36 months to 84 months. The Fund
may lease some Equipment to federal, state or local governments, or agencies
thereof. Many of such leases will be subject to renewal each year, because many
governmental lessees must obtain appropriations for funds for their leases on an
annual basis. In addition, the Fund may, under appropriate circumstances, engage
in other short-term or "per diem" leases when the Manager deems it in the best
interests of the Fund and consistent with its overall objectives.
Upon termination of the initial term of an Operating Lease, it is
necessary either to renew or extend the lease, lease the Equipment to a third
party, or sell the Equipment in order to obtain recovery of the purchase price.
If Equipment is sold at the end of the initial term of an Operating Lease, the
sale will likely result in a recapture of depreciation. Lease rentals during
comparable terms are ordinarily higher under Operating Leases than under Full
Payout Leases, and, accordingly, the Manager believes that well-structured
Operating Leases may help the Fund satisfy its investment objectives.
The Fund's objective will generally be to lease the Equipment for an
initial lease term during which the lessee may not cancel the lease or otherwise
avoid the lease obligation. However, where the Manager deems it to be in the
Fund's best interests, because of favorable lease terms, anticipated high demand
for particular items of Equipment or otherwise, it may permit an appropriate
cancellation clause.
The Manager believes that the Fund will be able to lease or dispose of
its purchased Equipment profitably in the aggregate after the initial lease
terms although no assurances can be given in this regard. The Fund's ability to
renew or extend the terms of its leases or to re-lease or sell the Equipment on
expiration of the initial lease terms is dependent on many factors, including
possible economic or technological obsolescence of the Equipment, competitive
practices and conditions and generally prevailing economic conditions.
It is anticipated that the leases which the Fund will enter into will
generally be "net leases," which provide that the lessee must bear the risk of
loss of the Equipment, provide adequate insurance, pay applicable taxes,
maintain the
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Equipment and indemnify the Fund from and against any liability which may arise
as the result of any act or omission by the lessee or its agents. In the case of
Operating Leases, the Fund may be responsible for certain of these obligations,
such as certain insurance and maintenance expenses, but generally only during a
period when the Equipment is not under lease.
The Fund's lease agreements, other than certain operating and per diem
leases, will generally require the respective lessees (i) to maintain casualty
insurance in an amount equal to the greater of the full value of the Equipment
or a specified amount set forth in the lease, and (ii) to maintain liability
insurance naming the Fund as an additional insured with a minimum limit of
$1,000,000 in coverage.
The Fund may enter into remarketing agreements with manufacturers of
Equipment on terms which are customary in the industry. A remarketing agreement
is an agreement whereby the manufacturer agrees with the lessor to assist the
lessor in finding a new lessee at the termination of the original lease. The
Manager will determine, in its sole discretion, whether to enter into such
agreements and with which manufacturers to do so. Most remarketing agreements
call for the manufacturer to find a second user only on a "best efforts" basis.
Thus, a remarketing agreement does not assure the lessor that the equipment can
or will be re-leased at the end of the initial lease term. In the case of an
Operating Lease, the manufacturer will not be required to repurchase Equipment,
but may, through the use of its sales force and contacts with its customers,
re-lease or sell such Equipment for the benefit of the Fund. The monthly rental
payments under a new lease or the sale price of such Equipment would be subject
to the final approval of the Manager. Under a remarketing agreement, the
manufacturer participates with the Fund in revenues on an incentive basis. The
manufacturer would typically receive a percentage of the revenue derived by the
Fund from Equipment subject to a remarketing agreement, which percentage would
increase substantially after the Fund derived a specified return on its
investment in such Equipment.
Competition
Leasing has become one of the major methods by which American
businesses finance their capital equipment needs. See Figure 4 below for a
graphic-presentation of the dollar amount of equipment investment and equipment
lease financing in the United States for each year since 1982 (according to the
Equipment Leasing Association, a leasing industry trade association). Please
note that this chart reflects the growth of equipment lease financing from all
sources, including manufacturers, financial institutions and private and public
lease financing companies, and not just public equipment leasing programs such
as the Fund. Such public direct participation programs represent only a
relatively small portion of the total lease financing industry.
[GRAPHIC OMITTED]
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In obtaining lessees the Fund will compete with manufacturers of
equipment which provide leasing programs and with established leasing companies
and equipment brokers. Manufacturers of equipment may offer certain incentives
including maintenance services and trade-in or replacement privileges which the
Fund cannot offer. The Fund may also be competing with manufacturers and others
who offer leases that provide for longer terms and lower rates than leases which
the Fund will offer. There are numerous other potential entities, including
entities organized and managed similarly to the Fund, seeking to purchase
equipment subject to leases, some of which have greater financial resources than
the Fund.
Joint Venture Investments
The Fund may purchase certain of its Equipment by acquiring a
controlling interest in a partnership, equipment trust or other form of joint
venture with a non-Affiliate which owns such Equipment or beneficial interest
therein. For purposes of determining the permissibility of a joint venture with
a non-Affiliate, the controlling interest requirement may be satisfied by
ownership of more than 50% of the venture's capital or profits or from
provisions in the governing agreement giving the Fund certain basic rights. For
example, control may take the form of the right to make or veto certain
management decisions or provide for certain predetermined benefits for the Fund
in the event that the other party or parties to the venture should make certain
decisions respecting the sale, refinancing or alteration of assets owned by the
venture. The Fund may not acquire Equipment jointly with others unless (i) the
joint venture agreement does not authorize or require the Fund to do anything
with respect to the Equipment which the Fund, or the Manager, could not do
directly because of the policies set forth in the Operating Agreement and (ii)
the transaction does not result in payment of duplicate fees.
The Fund may also acquire Equipment by joint venture or as co-owner
with an Affiliate. In such event, the following conditions must be met: (i) the
Affiliate will be required to have substantially identical investment objectives
to those of the Fund; (ii) there are no duplicate fees; (iii) the Affiliate must
make its investment on substantially the same terms and conditions as the Fund;
(iv) the Affiliate must have a compensation structure substantially identical to
that of the Fund; (v) the venture must be entered into in order to obtain
diversification or to relieve the Manager or Affiliates from commitments entered
into under Section 15.2.15 of the Operating Agreement or similar provisions
governing the Affiliate; and (vi) the Fund has a right of first refusal should a
co-venturer decide to sell the property owned by the venture. Because both the
Fund and such Affiliate will be required to approve decisions pertaining to the
Equipment, it is possible that an impasse will develop. If one party, but not
the other, wishes to sell the Equipment, the party not desiring to sell will
have a right of first refusal to purchase the other party's interest in the
Equipment. The Fund may not, however, be able to exercise its right of first
refusal unless it has the financial resources to do so, and there can be no
assurances that it will.
The investment by the Fund in joint ventures which own Equipment or as
a co-owner of Equipment, instead of investing directly in the Equipment itself
or as the sole owner, may under certain circumstances involve risks not
otherwise present, including, for example, risks associated with the possibility
that a Fund's co-venturer might become bankrupt, that the parties may reach an
impasse on joint venture decisions, or that each co-venturer may at any time
have economic or business interests or goals which are inconsistent with the
business interests or goals of the Fund. See "Risk Factors - Risks of Joint
Ventures."
General Restrictions
The Fund will not: (i) issue any Units after the Final Closing Date or
issue Units in exchange for property, (ii) make loans to the Manager or its
Affiliates, (iii) invest in or underwrite the securities of other issuers, (iv)
operate in such
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a manner as to be classified as an "investment company" for purposes of the
Investment Company Act of 1940, (v) except as set forth herein, purchase or
lease any Equipment from nor sell or lease property to the Manager or its
Affiliates, or (vi) except as expressly provided herein, grant the Manager or
any of its Affiliates any rebates or give-ups or participate in any reciprocal
business arrangements with such parties which would circumvent the restrictions
in the Operating Agreement, including the restrictions applicable to
transactions with Affiliates. See Article 15 of the Operating Agreement for a
description of additional investment limitations.
The Manager and its Affiliates, including their officers and directors,
may engage in other businesses or ventures that own, finance, lease, operate,
manage, broker or develop equipment, as well as businesses unrelated to
equipment leasing. See "Conflicts of Interest," "Management Compensation" and
"Management."
Changes in Investment Objectives and Policies
Holders have no voting rights with respect to the establishment or
implementation of the investment objectives and policies of the Fund, all of
which are the responsibility of the Manager. However, the Manager cannot make
any material changes in the investment objectives and policies described above
without first obtaining the written consent or approval of Members owning more
than 50% of the total outstanding Units entitled to vote.
CONFLICTS OF INTEREST
The Fund is subject to various conflicts of interest arising out of its
relationship with the Manager and Affiliates of the Manager. These conflicts
include, but are not limited to, the following:
Other Activities of the Manager. The Manager serves in the capacity of
Manager in other public programs engaged in the equipment leasing business, and
it and its Affiliates otherwise engage in the business of purchasing and selling
equipment and arranging leases for its own account and for the accounts of
others. See Exhibit A - "Prior Performance Information." The Manager will have
conflicts of interest in allocating management time, services and functions
among the prior programs, the Fund, any future investment programs and
activities for their own accounts. The Manager believes that it has or can
employ sufficient staff, equipment and other resources to discharge fully their
responsibilities to each such activity.
In addition, as Manager of prior and future programs, the Manager will
be contingently liable for obligations of such partnerships, except nonrecourse
indebtedness relating to the acquisition of equipment. Such obligations are
expected to consist primarily of normal operating and other current expenses,
and it is not believed this responsibility will materially affect the ability of
the Manager to satisfy its responsibilities to the Fund.
Competition for Investments. The Manager will have conflicts of
interest to the extent that its prior or future investment programs may compete
with the Fund for opportunities in the acquisition and leasing of equipment.
Prior public programs currently in operation include: ATEL Cash Distribution
Fund II ("ACDF II"), a California limited partnership; ATEL Cash Distribution
Fund III, L.P. ("ACDF III"), ATEL Cash Distribution Fund IV, L.P. ("ACDF IV"),
ATEL Cash Distribution Fund V, L.P. ("ACDF V"); ATEL Cash Distribution Fund VI,
L.P. ("ACDF VI"); and ATEL Capital Equipment Fund VII, L.P. ("ACEF VII")
(together collectively referred to as the "Prior Programs") have investment
objectives substantially identical to those of the Fund and may have funds
available for investment at the same time the Fund is seeking to acquire
Equipment. ACDF II completed a fully-subscribed public offering of $35,000,000
of its equity interests in January 1990. All of such gross offering proceeds
have been committed to equipment acquisitions, estimated organization and
offering expenses and capital reserves. ACDF III completed a public
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offering of its equity interests on January 3, 1992, pursuant to which it raised
total offering proceeds in the amount of approximately $73,900,000. All of such
gross offering proceeds have been committed to equipment acquisitions, estimated
organization and offering expenses and capital reserves. ACDF IV completed a
fully-subscribed public offering of $75,000,000 of its equity interests on
February 4, 1993. All of such gross offering proceeds had been committed to
equipment acquisitions, offering and organization expenses and capital reserves.
ACDF V completed a public offering of its equity interests in November 1994
pursuant to which it raised total offering proceeds in the amount of $125
million. All of such gross offering proceeds have been committed to equipment
acquisitions, offering and organization expenses and capital reserves. ACDF VI
completed a fully-subscribed public offering of $125 million of its equity
interests on November 22, 1996. All of such gross offering proceeds had been
committed to equipment acquisitions, offering and organization expenses and
capital reserves as of such date. ACEF VII commenced a public offering of $150
million of its equity interests on November 26, 1996, and had raised a total of
$118,425,120 in gross offering proceeds as of August 24, 1998. All of such gross
offering proceeds had been committed to equipment acquisitions, offering and
organization expenses and capital reserves as of such date.
One or more of the operating Prior Programs may have capital available
to invest in additional equipment at a time when the Fund is also active in
seeking to invest or reinvest in Equipment. Certain of the equipment owned and
to be acquired by the Prior Programs and the Fund may be similar and may be
purchased from the same manufacturers. Furthermore, the Manager and its
Affiliates may in the future form additional investment programs having similar
objectives, and accordingly, the Fund may be in competition with any such future
programs formed by the Manager.
Any time two or more investment programs (including the Fund)
affiliated with the Manager have funds available to acquire and lease the same
types of equipment, conflicts of interest may arise as to which of the programs
should proceed to acquire available items of equipment. In such situations, the
Manager will analyze the equipment already purchased by, and investment
objectives of, each program involved, and will determine which program will
purchase the equipment based upon such factors, among others, as (i) the amount
of cash available in each program for such acquisition and the length of time
such funds have been available, (ii) the current and long-term liabilities of
each program, (iii) the effect of such acquisition on the diversification of
each program's equipment portfolio, (iv) the estimated income tax consequences
to the investors in each program from such acquisition, and (v) the cash
distribution objectives of each program. If after analyzing the foregoing and
any other appropriate factors, the Manager determines that such acquisition
would be equally suitable for more than one program, then the Manager shall
purchase such equipment for the programs on the basis of rotation with the order
of priority determined by the length of time each program has had funds
available for investment, with the available equipment allocated first to the
program which has had funds available for investment the longest.
Receipt of Commissions, Fees and Other Compensation by the Manager and
its Affiliates. Fund operations will result in certain compensation to the
Manager and its Affiliates. See "Management Compensation." The Manager has
absolute discretion with respect to all decisions related to such operations.
Because the amount of such fees may depend, in part, on the debt structure of
Equipment acquisitions and the timing of such transactions, the Manager and its
Affiliates may be subject to conflicts of interest to the extent the
acquisition, retention, re-lease or sale of Equipment and the terms and
conditions thereof may be less advantageous to the Fund and more advantageous to
the Manager under certain circumstances. It should be noted that the Manager
intends to cause the Fund to incur aggregate acquisition debt in an amount
approximately equal to 50% of the total cost of Fund Equipment.
In all cases where the Manager or its Affiliate may have a conflict of
interest in determining the terms or timing of a transaction by the Fund, it
will exercise its discretion strictly in accordance with its fiduciary duty to
the Fund and the Holders. See "Fiduciary Duty of the Manager."
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Non-Arm's-Length Agreements. Any agreements and arrangements relating
to compensation between the Fund and the Manager or any of its Affiliates will
not be the result of arm's-length negotiations and the performance thereof by
the Manager and its Affiliates will not be supervised or enforced at
arm's-length.
Distribution of Units. No independent managing underwriter has been
engaged for the distribution of the Units. Furthermore, ATEL Securities
Corporation (the "Dealer Manager"), an Affiliate of the Manager which may sell
Units and will perform certain wholesaling services for the Fund, may not be
expected to have performed due diligence in the same manner as an independent
broker-dealer. The Dealer Manager has acted in the same capacity in prior
offerings sponsored by the Manager and its Affiliates and is expected to do so
in any future offerings that the Manager and its Affiliates may conduct.
Lack of Separate Representation. The Fund, the Manager and prospective
Holders have not been represented by separate counsel in connection with the
formation of the Fund, drafting of the Operating Agreement or the offering of
Units. The attorneys, accountants and other professionals who perform services
for the Fund all perform similar services for the Manager and its Affiliates and
it is contemplated that such dual representation will continue in the future.
However, should a dispute arise between the Fund and the Manager, the Manager
will cause the Fund to retain separate counsel in connection with such matters.
Joint Ventures with Affiliates of the Manager. The Fund may enter into
joint ownership or joint venture agreements for the acquisition and leasing of
Equipment with other persons, including programs managed by the Manager or its
Affiliates. See "Investment Objectives and Policies - Joint Venture
Investments." Should any such joint ventures be consummated, the Manager may
face certain conflicts of interest inasmuch as it may control and owe fiduciary
duties to both the Fund and, through such Affiliates, the affiliated
co-venturer. For example, because of the differing financial positions of the
co-venturers, it may be in the best interest of one entity to sell the
jointly-held Equipment at a time when it is in the best interest of the other to
hold such Equipment. Nevertheless, such joint ventures are restricted to
circumstances where the co-venturer's investment objectives are comparable to
the Fund's, the Fund's investment is on substantially the same terms as the
co-venturer and the compensation to be received by the Manager and its
Affiliates from each co-venturer is substantially identical.
Maintenance of Reserves. The Manager will have the discretion to
determine the amount of reserves to be maintained by the Fund. The Manager is
required by the Operating Agreement to establish an initial working capital
reserve equal to one-half of 1% of the Gross Proceeds. This amount may fluctuate
from time to time as the Manager determines the appropriate amount of reserves
for the Fund to maintain. The Manager may be subject to conflicts of interest to
the extent that its interests may be served by the Fund maintaining higher
reserves in order to avoid the Manager's personal liability for Fund obligations
when such reserves might otherwise be distributed to Holders. Any personal
liability incurred by the Manager for Fund obligations, however, would generally
be reimbursable to the Manager by the Fund. As a result, the Manager does not
believe any such potential conflict will have a material impact on the Fund or
the Holders.
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ORGANIZATIONAL DIAGRAM
The following diagram (Figure 5) shows the relationships among the
Fund, the Manager and certain of Affiliates of the Manager which may perform
services for the Fund (solid lines denote ownership and dotted lines denote
other relationships).
Figure 5
ATEL Capital Group ("ACG")
ATEL Equipment ATEL Financial ATEL Investor ATEL Leasing
Corporation ("AEC") Corporation ("Fund Services ("AIS") Corporation
Manager" or "AFC") ("ALC")
ATEL Securities Corporation
(the "Dealer Manager")
ATEL Capital Equipment Fund VIII, LLC
(the "Fund")
ATEL Capital Group's capital stock is owned 75% by A.J. Batt and 25% by
Dean L. Cash. ATEL Capital Group owns 100% of the outstanding capital stock of
each of the Manager, ALC, AIS and AEC. The Manager owns 100% of the outstanding
capital stock of the Dealer Manager. See "Management" for further information
concerning the above entities and their respective officers and directors.
FIDUCIARY DUTY OF THE MANAGER
The Manager is accountable to the Fund as a fiduciary and,
consequently, is required to exercise good faith and integrity in all dealings
with respect to Fund affairs.
Under California law and subject to certain conditions, a Member may
institute legal action on behalf of the Fund (a derivative action) to recover
damages from a third party or to recover damages resulting from a breach by a
Manager of its fiduciary duty. In addition, a Member may institute a legal
action on behalf of himself and all other similarly situated Members (a class
action) to recover damages for a breach by a Manager of its fiduciary duty,
subject to procedural rules generally applicable to class actions. This area of
the law is complex and rapidly changing, and investors who have questions
regarding the duties of a Manager and the remedies available to Members should
consult
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with their counsel.
The Operating Agreement does not exculpate the Manager from liability
or provide it with any defenses for breaches of its fiduciary duty. However, the
fiduciary duty owed by a Manager is similar in many respects to the fiduciary
duty owed by directors of a corporation to its shareholders, and is subject to
the same rule, commonly referred to as the "business judgment rule," that
directors are not liable for mistakes in the good faith exercise of honest
business judgment or for losses incurred in the good faith performance of their
duties when performed with such care as an ordinarily prudent person would use.
As a result of the business judgement rule, a Manager may not be held liable for
mistakes made or losses incurred in the good faith exercise of reasonable
business judgment. Accordingly, provision has been made in the Operating
Agreement that the Manager shall have no liability to the Fund for losses
arising out of any act or omission by the Manager, provided that the Manager
determined in good faith that its conduct was in the best interest of the Fund
and, provided further, that its conduct did not constitute fraud, negligence or
misconduct. As a result, purchasers of Units may have a more limited right of
action in certain circumstances than they would in the absence of such a
provision in the Operating Agreement specifically defining the Manager's
standard of care.
The Operating Agreement also provides that, to the extent permitted by
law, the Fund shall indemnify the Manager and its Affiliates providing services
to the Fund against liability and related expenses (including attorneys' fees)
incurred in dealings with third parties, provided that the conduct of the
Manager is consistent with the standards described in the preceding paragraph. A
successful claim for such indemnification would deplete Fund assets by the
amount paid. The Manager shall not be indemnified against any liabilities
arising under the Securities Act of 1933. The Fund shall not pay for any
insurance covering liability of the Manager or any other persons for actions or
omissions for which indemnification is not permitted by the Operating Agreement.
Subject to the fiduciary relationship, the Manager has broad
discretionary powers to manage the affairs of the Fund under the terms of the
Operating Agreement and under the California Act. Generally, actions taken by
the Manager are not subject to vote or review by the Holders, except to the
limited extent provided in the Operating Agreement and under California law.
(See "Summary of the Operating Agreement.")
MANAGEMENT
The Manager
The Manager is ATEL Financial Corporation (the "Manager" or "AFC"), a
California corporation formed in 1977 under the name All Type Equipment Leasing,
Inc. The Manager's offices are located at 235 Pine Street, 6th Floor, San
Francisco, California 94104, and its telephone numbers are 415/989-8800 and
800/543-ATEL. Its officers have extensive experience with transactions involving
the acquisition, leasing, financing and disposition of equipment, as more fully
described below and in Exhibit A hereto. The Manager and its Affiliates are
sometimes collectively referred to below as "ATEL" for convenience.
Since its organization in 1977, ATEL has been active in several areas
within the equipment leasing industry, including: (i) originating and financing
leveraged and single investor lease transactions for corporate investors, (ii)
acting as a broker/packager by arranging equity and debt participants for
equipment lease transactions originated by other leasing companies, and (iii)
consulting on the pricing and structuring of equipment lease transactions for
banks, leasing companies and corporations. The Manager has organized seven prior
public limited partnerships to acquire and lease equipment. During the past 16
years, ATEL has participated in structuring and/or arranging lease transactions
involving aggregate equipment costs in excess of $1 billion.
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All of the outstanding capital stock of ATEL Financial Corporation is
held by ATEL Capital Group ("ACG"). The outstanding capital stock of ATEL
Capital Group is owned 75% by A.J. Batt and 25% by Dean L. Cash. Each of ATEL
Leasing Corporation ("ALC"), ATEL Equipment Corporation ("AEC") and ATEL
Investor Services ("AIS") is a wholly-owned subsidiary of ATEL Capital Group
which will perform services for the Fund under the direction of the Manager.
Acquisition services will be performed for the Fund by ALC, equipment management
and asset disposition services will be performed by AEC, and AIS will perform
partnership management, administration and investor services. Finally, the
Dealer Manager, ATEL Securities Corporation ("ASC"), is a wholly-owned
subsidiary of ATEL Financial Corporation. See the chart included under the
caption "Organizational Diagram" above for more information in this regard.
The officers and directors of ATEL Capital Group, ATEL Financial
Corporation and their Affiliates are as follows:
Name Positions
A.J. Batt .................Chairman of the Board of Directors of ACG,
AFC, ALC, AEC, AIS and ASC; President
and Chief Executive Officer of ACG, AFC, and
AEC
Dean L. Cash ............. Director, Executive Vice President and Chief
Operating Officer of ACG, AFC and AEC;
Director, President and Chief Executive
Officer of ALC, AIS and ASC
F. Randall Bigony..........Chief Financial Officer of ACG, AFC, ALC,
AIS and AEC
Donald E. Carpenter........Controller of ACG, AFC, ALC, AEC and AIS;
Chief Financial Officer of ASC
Vasco H. Morais........... General Counsel for ACG, AFC, ALC, AIS and
AEC
William J. Bullock.........Director of Asset Management of AEC
Carl W. Magnuson.......... Vice President - Syndication of ALC
Barbara F. Medwadowski.. Vice President - Syndication of ALC
Russell H. Wilder......... Vice President - Credit of ALC
John P. Scarcella..........Senior Vice President of ASC
A. J. Batt, age 62, founded ATEL in 1977 and has been its president and
chairman of the board of directors since its inception, and a director of the
Dealer Manager since its organization in October, 1985. From 1973 to 1977, he
was employed by GATX Leasing Corporation as manager-data processing and equity
placement for the lease underwriting department, which was involved in equipment
financing for major corporations. From 1967 to 1973 Mr. Batt was a senior
technical representative for General Electric Corporation, involved in sales and
support services for computer time-sharing applications for corporations and
financial institutions. Prior to that time, he was employed by North American
Aviation as an engineer involved in the Apollo project. Mr. Batt received a
B.Sc. degree with honors in mathematics and physics from the University of
British Columbia in 1961. Mr. Batt is qualified as a registered principal with
the NASD.
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Dean L. Cash, age 48, joined ATEL as director of marketing in 1980 and
has been a vice president since 1981, executive vice president since 1983 and a
director since 1984. He has been a director of the Dealer Manager since its
organization and its president since 1986. Prior to joining ATEL, Mr. Cash was a
senior marketing representative for Martin Marietta Corporation, data systems
division, from 1979 to 1980. From 1977 to 1979, he was employed by General
Electric Corporation, where he was an applications specialist in the medical
systems division and a marketing representative in the information services
division. Mr. Cash was a systems engineer with Electronic Data Systems from 1975
to 1977, and was involved in maintaining and developing software for commercial
applications. Mr. Cash received a B.S. degree in psychology and mathematics in
1972 and an M.B.A. degree with a concentration in finance in 1975 from Florida
State University. Mr. Cash is an arbitrator with the American Arbitration
Association and is qualified as a registered principal with the NASD.
F. Randall Bigony, age 40, joined ATEL in 1992 and became chief
financial officer in 1994. From 1987 until joining AFC, Mr. Bigony was president
of F. Randall Bigony & Co., a consulting firm that provided financial and
strategic planning services to emerging growth companies. From 1983 to 1987, he
was a manager with the accounting firm of Ernst & Whinney, serving clients in
its management consulting practice. Mr. Bigony received a B.A. degree in
business from the University of Massachusetts and an M.B.A. degree in finance
from the University of California, Berkeley. He is a founding board member and
acting treasurer of the I Have a Dream Foundation - Bay Area Chapter.
Donald E. Carpenter, age 49, joined ATEL in 1986 as controller. Prior
to joining the corporate Manager, Mr. Carpenter was employed as an audit
supervisor with Laventhol & Horwath, certified public accountants in San
Francisco, California, from 1983 to 1986. From 1979 to 1983, Mr. Carpenter was
employed by Deloitte Haskins & Sells, certified public accountants in San Jose,
California. From 1971 to 1975, Mr. Carpenter was a supply officer in the U.S.
Navy. Mr. Carpenter received a B.S. degree in mathematics (magna cum laude) from
California State University, Fresno in 1971 and completed a second major in
accounting in 1978. Mr. Carpenter has been a California certified public
accountant since 1981. He is qualified as a registered principal with the NASD.
Vasco H. Morais, age 40, joined ATEL in 1989 as general counsel. Mr.
Morais manages ATEL's legal department, which provides legal and contractual
support in the negotiating, drafting, documenting, reviewing and funding of
lease transactions. In addition, Mr. Morais advises on general corporate law
matters, and assisting on securities law issues. From 1986 to 1989, Mr. Morais
was employed by the BankAmeriLease Companies, Bank of America's equipment
leasing subsidiaries, providing in-house legal support on the documentation of
tax-oriented and non-tax oriented direct and leveraged lease transactions,
vendor leasing programs and general corporate matters. Prior to the
BankAmeriLease Companies, Mr. Morais was with the Consolidated Capital Companies
in the Corporate and Securities Legal Department involved in drafting and
reviewing contracts, advising on corporate law matters and securities law
issues. Mr. Morais received a B.A. degree in 1982 from the University of
California in Berkeley; a J.D. degree in 1986 from Golden Gate University Law
School; and an M.B.A. (Finance) degree from Golden Gate University in 1997. Mr.
Morais has been an active member of the State Bar of California since 1986.
William J. Bullock, age 34, is a vice president of asset management. He
joined ATEL in 1991. Mr. Bullock is responsible for the disposition maturing
assets, remarketing of off-lease equipment, supervision of lessee maintenance
practices, equipment inspection and residual valuation analysis on new lease
transactions. Prior to joining ATEL, Mr. Bullock was a senior member of the
asset management department at Boeing Capital (formerly known as McDonnell
Douglas Finance Corporation). While there, Mr. Bullock was involved in
negotiating sales, residual valuation and equipment appraisal and inspection for
MDFC's $ 4 billion portfolio of leases. Prior to joining MDFC in 1989, Mr.
Bullock was the senior negotiator at ELLCO Leasing (since acquired by GE Capital
Equipment Corporation). At ELLCO, he was responsible for end-of-lease
negotiations and equipment dispositions of a $500 million diversified
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portfolio of equipment. Mr. Bullock has been a member of the Equipment
Lessors Association ("ELA") since 1987 and a member of ELA's equipment
management committee since 1994. Mr. Bullock received a B.S. degree in Finance
in 1987 from San Diego State University.
Carl W. Magnuson, age 55, joined ATEL in 1994 and is Vice President -
Syndication for ALC. Mr. Magnuson is responsible for acquiring third party lease
transactions and debt placement. Prior to joining ATEL he was a Regional Group
Manager and Portfolio Sales Manager for Bell Atlantic Systems Leasing for 10
years. From 1983 to 1984 he was Vice President and Chief Financial Officer of
the Handi-Kup Company, a plastics manufacturer, and from 1981 to 1982 he was
Controller for the Cyclotron Corporation, engaged in nuclear medicine research
and development. From 1978 to 1981 he was Executive Vice President of Shannon
Financial Corporation, a middle market leasing corporation. From 1975 to 1978 he
was a Deputy Program Manager for the Watkins Johnson Company. From 1968 to 1973
Mr. Magnuson was an engineering duty officer in the U. S. Navy. Mr. Magnuson
received a B.S. in Engineering Science and an M.S. in Applied Mathematics from
the Rensselaer Polytechnic Institute, an MS in Industrial Engineering/Operations
Research from Stanford University, and an M.B.A. from the University of
California at Berkeley.
Barbara F. Medwadowski, age 59, joined ATEL in 1997 and is vice president -
syndication for ALC. Ms. Medwadoski is responsible for acquiring thrid party
lease transactions. Prior to joining ATEL, she was a syndications manager for
Mellon US Leasing (successor to USL Capital and U.S. leasing Corporation) for
nine years. From 1985 to 1987, she was a vice president with Great Western
Leasing wehre she acquired lease and loan transactions from intermediaries. From
1982 through 1984, she was a portfolio manager with U.S. Leasing Corporation.
Ms. Medwadowski received an M.B.A. degree from the University of California at
Berkeley in 1982. From 1964 through 1979, she was a senior researcher in lipids
and lipoproteins at the University of California at Berkeley. In 1964, she
earned an M.S. degree in nutrition and in 1961 a B.S. degree in child
development, each from the University of California at Berkeley
Russell H. Wilder, age 44, joined ATEL in 1992 as Vice President of
ATEL Business Credit. Immediately prior to joining ATEL, Mr. Wilder was a
personal property broker specializing in equipment leasing and financing and an
outside contractor in the areas of credit and collections. From 1985 to 1990 he
was Vice President and Manager of Leasing for Fireside Thrift Co., a Teledyne
subsidiary, and was responsible for all aspects of setting up and managing the
department, which operated as a small ticket lease funding source. From 1983 to
1985 he was with Wells Fargo Leasing Corporation as Assistant Vice President in
the credit department where he oversaw all credit analysis on transactions in
excess of $2 million. From 1978 to 1983 he was a District Credit Manager with
Westinghouse Credit Corporation's Industrial Group and was responsible for all
non-marketing operations of various district offices. Mr. Wilder holds a B.S.
with Honors in Agricultural Economics and Business Management from the
University of California at Davis. He has been awarded the Certified Lease
Professional designation by the Western Association of Equipment Lessors.
John P. Scarcella, age 37, joined the Dealer Manager as vice president
of broker dealer relations in 1992. He is involved in the marketing of
securities offered by the Dealer Manager. Prior to joining ATEL Securities
Corporation, from 1987 to 1991, he was employed by Landsing Pacific Fund, a real
estate investment trust in San Mateo, California and acted as director of
investor relations. From 1984 to 1987, Mr. Scarcella acted as broker dealer
representative for Landsing Capital Corporation, where he was involved in the
marketing of partnerships and REITs. Mr. Scarcella received a B.S.C. degree with
an emphasis in investment finance in 1983 and an M.B.A. degree with a
concentration in marketing in 1991 from Santa Clara University.
51
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Selection and Management of Investments
An Affiliate of the Manager, ATEL Leasing Corporation, will have
primary responsibility for selecting and negotiating potential acquisitions and
leases of Equipment, subject to the Manager's supervision and approval. The
Manager's Investment Committee will approve any acquisition before it is
consummated. The Investment Committee currently consists of A.J. Batt, Dean L.
Cash, Donald E. Carpenter and F. Randall Bigony.
ATEL Equipment Corporation will manage the Fund's portfolio of
Equipment, subject to the Manager's supervision. Management services to be
provided by AEC include collection of lease payments from the lessees of
Equipment, re-leasing services upon termination of leases, inspection of
Equipment, acting as a liaison between lessees and vendors, general supervision
of lessees and vendors to ensure that the Equipment is being properly used and
operated by lessees, arranging for maintenance and related services with respect
to the Equipment and the supervision, monitoring and review of others performing
services for the Fund. Third parties may participate in managing or may
separately manage Equipment for which they will receive a fee from the Fund.
Management Compensation
The Fund is not required to pay the officers or directors of the
Manager or its Affiliates any remuneration. However, the Fund will pay the
Manager and its Affiliates the Asset Management Fee for their services to the
Fund and the Manager will have a Carried Interest in the Fund as a Member equal
to 7.5% of Fund allocations of Distributions, Net Income and Net Loss.
Furthermore, the Fund will reimburse the Manager and its Affiliates for certain
costs incurred on behalf of the Fund, including the cost of certain personnel
(excluding controlling persons of the Manager) who will be engaged by the
Manager to perform administrative, accounting, secretarial, transfer and other
services required by the Fund. Such individuals may also perform similar
services for the Manager, its Affiliates and other investment programs to be
formed in the future. See "Management Compensation."
Changes in Management
The Operating Agreement provides that the Manager may be removed as
Manager at any time upon the vote of Holders owning more than 50% of the total
outstanding Units entitled to vote, and Holders have the right to elect a
successor Manager in place of the removed Manager by a similar vote. The Manager
may only withdraw voluntarily from the Fund with the approval of Holders owning
in excess of 50% of the Units entitled to vote on Fund matters. The Holders have
no voice in the election of directors or appointment of officers of the Manager
or its parent, ATEL Capital Group, and the capital stock of such entities can be
transferred without the consent of the Fund or the Holders.
The by-laws of the Manager provide for a maximum of three directors.
The by-laws can be amended to increase the number of directors either by a vote
of stockholders or of directors. In the event of a vacancy or increase in the
number of members of the board of directors, the remaining directors may elect
the members to serve until the next annual meeting of directors. Directors are
otherwise elected annually by vote of the stockholders, and the directors
appoint corporate officers to serve at the will of the board.
The Dealer Manager
ATEL Securities Corporation (the "Dealer Manager") was organized in
October 1985 principally for the purpose of participating in and facilitating
the distribution of securities of partnerships to be sponsored by the Manager
and its Affiliates. The Dealer Manager became a member of the NASD in February
1986. The Dealer Manager is a wholly-owned subsidiary of ATEL.
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<PAGE>
The Dealer Manager will provide certain wholesaling services to the
Fund in connection with the distribution of the Units offered hereby. (See "Plan
of Distribution.") The executive officers and directors of the Dealer Manager
are discussed above under "The Manager."
PRIOR PERFORMANCE SUMMARY
THE INFORMATION PRESENTED IN THIS SECTION AND IN THE TABLES INCLUDED AS
EXHIBIT A TO THIS PROSPECTUS REPRESENTS THE HISTORICAL RESULTS OF PRIOR
EQUIPMENT LEASING PROGRAMS SPONSORED BY THE MANAGER AND ITS AFFILIATES.
INVESTORS IN THE FUND SHOULD NOT ASSUME THAT THEY WILL EXPERIENCE INVESTMENT
RESULTS COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN SUCH PRIOR PROGRAMS.
Since July 28, 1977, the Manager and its Affiliates have financed,
structured or arranged equity and debt participations for equipment leasing
transactions involving total equipment costs in excess of $1 billion. The
Manager sponsored and syndicated seven prior public equipment leasing programs.
See Exhibit A - Prior Performance Tables for more detailed information
concerning the prior public programs (collectively referred to herein as the
"Prior Programs").
The first Prior Program, ATEL Cash Distribution Fund ("ACDF"),
commenced a public offering of up to $10,000,000 of its equity interests on
March 11, 1986. ACDF terminated its offering on December 18, 1987 after raising
a total of $10,000,000 in offering proceeds from a total of approximately 1,000
investors, all of which proceeds were committed to equipment acquisitions,
organization and offering expenses and capital reserves. ACDF public acquired a
variety of types of equipment with a total purchase cost of approximately
$11,133,679. See Table V - "Acquisition of Equipment by Prior Programs" in
Exhibit A for further information concerning the types of equipment acquired by
ACDF. All of such equipment had been sold and the partnership was terminated as
of December 31, 1997. See Table IV - "Results of Completed Program and Table VI
- - "Sales or Disposals of Equipment" in Exhibit A. Through December 31, 1997,
ACDF had made cash distributions to its investors in the aggregate amount of
$1,121.03 per $1,000 invested. Of this amount a total of $244.89 represents
investment income and $876.14 represents return of capital.
The second Prior Program, ATEL Cash Distribution Fund II ("ACDF II"),
commenced a public offering of up to $25,000,000 (with an option to increase the
offering to $35,000,000) of its equity interests on January 4, 1988. ACDF II
terminated its offering on January 3, 1990 after raising a total of $35,000,000
in offering proceeds from a total of approximately 3,100 investors, all of which
proceeds have been committed to equipment acquisitions, organization and
offering expenses and capital reserves. ACDF II had acquired a variety of types
of equipment with a total purchase cost of approximately $52,270,536 as of
December 31, 1997. See Table V - "Acquisition of Equipment by Prior Programs" in
Exhibit A for further information concerning the types of equipment acquired by
ACDF II. Of such equipment, items representing an original purchase cost of
approximately $40,977,271 had been sold as of December 31, 1997. See Table VI -
"Sales or Disposals of Equipment" in Exhibit A. Through December 31, 1997, ACDF
II had made cash distributions to its investors in the aggregate amount of
$1,082.31 per $1,000 invested. Of this amount a total of $278.65 represents
investment income and $803.66 represents return of capital.
The third Prior Program, ATEL Cash Distribution Fund III ("ACDF III"),
commenced a public offering of up to $50,000,000 (with an option to increase the
offering to $75,000,000) of its equity interests on January 4, 1990. ACDF III
terminated its offering on January 3, 1992 after raising a total of $73,855,840
in offering proceeds from a total of
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<PAGE>
approximately 4,822 investors, all of which proceeds have been committed to
equipment acquisitions, estimated organization and offering expenses and capital
reserves. ACDF III had acquired a variety of types of equipment with a total
purchase cost of approximately $99,629,941 as of December 31, 1997. See Table V
- - "Acquisition of Equipment by Prior Programs" in Exhibit A for further
information concerning the types of equipment acquired by ACDF III. Of such
equipment, items representing an original purchase cost of approximately
$56,050,601 had been sold as of December 31, 1997. See Table VI - "Sales or
Disposals of Equipment" in Exhibit A. Through December 31, 1997, ACDF III had
made cash distributions to its investors in the aggregate amount of $936.88 per
$1,000 invested. Of this amount a total of $252.26 represents investment income
and $684.62 represents return of capital.
The fourth Prior Program, ATEL Cash Distribution Fund IV ("ACDF IV"),
commenced a public offering of up to $75,000,000 of its equity interests on
February 4, 1992. ACDF IV terminated its offering on February 3, 1993 after
raising a total of $75,000,000 in offering proceeds from a total of
approximately 4,873 investors, all of which proceeds have been committed to
equipment acquisitions, estimated organization and offering expenses and capital
reserves. ACDF IV had acquired a variety of types of equipment with a total
purchase cost of approximately $108,734,880 as of December 31, 1997. See Table V
- - "Acquisition of Equipment by Prior Programs" in Exhibit A for further
information concerning the types of equipment acquired by ACDF IV. Of such
equipment, items representing an original purchase cost of approximately
$48,709,482 had been sold as of December 31, 1997. See Table VI - "Sales or
Disposals of Equipment" in Exhibit A. Through December 31, 1997, ACDF IV had
made cash distributions to its investors in the aggregate amount of $727.87 per
$1,000 invested. Of this amount a total of $138.04 represents investment income
and $589.83 represents return of capital. See Table III - "Operating Results of
Prior Programs" in Exhibit A for further information concerning such
distributions.
The fifth Prior Program, ATEL Cash Distribution Fund V ("ACDF V"),
commenced a public offering of up to $125,000,000 of its equity interests In
February 1993. ACDF V terminated its offering in November 1994, after raising a
total of $125,000,000 in offering proceeds, all of which proceeds have been
committed to equipment acquisitions, estimated organization and offering
expenses and capital reserves. ACDF V had acquired a variety of types of
equipment with a total purchase cost of approximately $186,897,181 as of
December 31, 1997. See Table V - "Acquisition of Equipment by Prior Programs" in
Exhibit A for further information concerning the types of equipment acquired by
ACDF V. Of such equipment, items representing an original purchase cost of
approximately $23,090,535 had been sold as of December 31, 1997. See Table VI -
"Sales or Disposals of Equipment" in Exhibit A. Through December 31, 1997, ACDF
V had made cash distributions to its investors in the aggregate amount of
$462.12 per $1,000 invested. Of this amount a total of $58.04 represents
investment income and $404.08 represents return of capital. See Table III
"Operating Results of Prior Programs" in Exhibit A for further information
concerning such distributions.
The sixth Prior Program, ATEL Cash Distribution Fund VI ("ACDF VI"),
commenced a public offering of up to $125,000,000 of its equity interests in
November 1994. ACDF VI terminated its offering in November 1996, after raising a
total of $125,000,000 in offering proceeds, all of which proceeds have been
committed to equipment acquisitions, estimated organization and offering
expenses and capital reserves. ACDF VI had acquired a variety of types of
equipment with a total purchase cost of $208,277,121 as of December 31, 1997.
See Table V - "Acquisition of Equipment by Prior Programs" in Exhibit A for
further information concerning the types of equipment acquired by ACDF VI. Of
such equipment, items representing an original purchase cost of approximately
$2,185,150 had been sold as of December 31, 1997. See Table VI - "Sales or
Disposals of Equipment" in Exhibit A. Through December 31, 1997, ACDF VI had
made cash distributions to its investors in the aggregate amount of $271.11 per
$1,000 invested. All of this amount represents return of capital. See Table III
- - "Operating Results of Prior Programs" in Exhibit A for further information
concerning such distributions.
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<PAGE>
The seventh Prior Program, ATEL Capital Equipment Fund VII ("ACEF
VII"), commenced a public offering of up to $150,000,000 of its equity interests
in November 1996. ACEF VII has not terminated its offering as of the date
hereof, and anticipates closing its offering on or about November 26, 1998. As
of December 31, 1997, $67,168,460 of offering proceeds had been received, all of
which proceeds have been committed to equipment acquisitions, estimated
organization and offering expenses and capital reserves. ACEF VII had acquired a
variety of types of equipment with a total purchase cost of $149,543,976 as of
December 31, 1997. See Table V - "Acquisition of Equipment by Prior Programs" in
Exhibit A for further information concerning the types of equipment acquired by
ACEF VII. Of such equipment, items representing an original purchase cost of
approximately $134,000 had been sold as of December 31, 1997. See Table VI -
"Sales or Disposals of Equipment" in Exhibit A. Through December 31, 1997, ACEF
VII had made cash distributions to its investors in the aggregate amount of
$79.42 per $1,000 invested. All of this amount represents return of capital. See
Table III - "Operating Results of Prior Programs" in Exhibit A for further
information concerning such distributions.
Although certain of the Prior Programs have experienced lessee defaults
in the ordinary course of business, none of the Prior Programs has experienced
an unanticipated rate of default or other major adverse business developments
which the Manager believes will impair its ability to meet its investment
objectives. As of June 30, 1998, the Prior Programs have acquired equipment with
a total purchase cost of approximately $787 million during a period of over
twelve years since the date the first Prior Program commenced operations.
Aggregate losses from material lessee defaults on these transactions have been
approximately $1.2 million, or approximately 0.16% of the assets acquired,
substantially less than the amount assumed by the Manager and its Affiliates in
structuring these portfolios as the losses to be anticipated in the ordinary
course of leasing business.
The Prior Programs have investment objectives which are similar to
those of the Fund. The factors considered by the Manager in determining that the
investment objectives of the prior programs were similar to those of the Fund
include the types of equipment to be acquired, the structure of the leases to
such equipment, the credit criteria for lessees, the intended investment cycles,
the reinvestment policies and the investment goals of each program. Therefore
all of the information set forth in the tables included in Exhibit A - "Prior
Performance Information" may be deemed to relate to programs with investment
objectives similar to those of the Fund.
In Tables I through III information is presented with respect to all
Prior Programs sponsored by the Manager and its Affiliates which completed their
offerings of interests within the five-year period ending December 31, 1997,
except that ACDF VII has not completed its public offering as of the date
hereof. Accordingly, the tabular information concerning ACDF VII does not
reflect results of an operating period after completion of its funding. Table V
includes information regarding all acquisitions of equipment by Prior Programs.
Table VI includes information regarding all dispositions of equipment by Prior
Programs during the five year period ending December 31, 1997. Table IV includes
information concerning the one Prior Program that had completed its operations
as of December 31, 1997.
The following is a list of the tables set forth in Exhibit A:
Table I - Experience in Raising and Investing Funds
Table II - Compensation to the Manager and Affiliates
Table III - Operating Results of Prior Programs
Table IV - Results of Completed Program
Table V - Acquisition of Equipment by Prior Programs
Table VI - Sales or Disposals of Equipment
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The Manager will provide to any investor, upon written request and without
charge, copies of the most recent Annual Reports on Form 10-K filed with the
Securities and Exchange Commission by each of the Prior Programs, and will
provide to any investor, for a reasonable fee, copies of the exhibits to such
reports. Investors may request such information by writing to ATEL Investor
Services, Inc. at 235 Pine Street, 6th Floor, San Francisco, CA 94104 or by
calling the Manager at (415) 989-8800.
INCOME, LOSSES AND DISTRIBUTIONS
The taxable income and taxable loss of the Fund (the "Net Income and
Net Loss") and all Fund cash distributions shall be allocated 92.5% to investors
and 7.5% to the Manager as the Carried Interest.
Allocations of Net Income and Net Loss
The Fund will close its books as of the end of each quarter and
allocate Net Income, Net Loss and cash distributions on a daily basis, i.e.,
Fund items will be allocated to the investors in the ratio in which the number
of Units held by each of them bears to the total number of Units held by all as
of the last day of the fiscal quarter with respect to which such Net Income, Net
Loss and Distributions are attributable; provided, however, that, with respect
to Net Income, Net Loss and cash distributions attributable to the offering
period of the Units (including the full quarter in which the offering
terminates), such Net Income, Net Loss and cash distributions shall be
apportioned in the ratio in which (i) the number of Units held by each investor
multiplied by the number of days during the period the investor owned the Units
bears to (ii) the amount obtained by totaling the number of Units outstanding on
each day during such period. No Net Income, Net Loss and cash distributions with
respect to any quarter shall be allocated to Units repurchased by the Fund
during such quarter, and such Units shall not be deemed to have been outstanding
during such quarter for purposes of the foregoing allocations. Transfers of
Member interests will not be effective for any purpose until the first day of
the following quarter.
Timing of Distributions
Fund cash distributions are generally made and allocated to Holders on
a quarterly basis. However, the Manager will determine amounts available for
distributions on a monthly rather than quarterly basis. All investors will be
entitled to elect to receive distributions monthly rather than quarterly by
designating such election in a written request delivered to the Manager. An
initial election to receive monthly rather than quarterly distributions may be
made at the time of subscription by designating such election on the
Subscription Agreement. Thereafter, each investor may during each fiscal quarter
designate an election to change the timing of distributions payable to the
investor for the ensuing fiscal quarter by delivering to the Manager a written
request. Investors who have previously elected monthly distributions may at such
time elect to return to quarterly distributions and those receiving quarterly
distributions may elect monthly distributions for the following quarter.
Allocations of Distributions
Distributions allocated to the investors as described below will be
allocated among them on the same basis as Net Income and Net Loss is to be
allocated, as described under "Allocations of Net Income and Net Loss" above.
Amounts to be distributed will be determined after payment of Fund operating
expenses, establishment or restoration of Capital reserves deemed appropriate by
the Manager, and, to the extent permitted as described below, reinvestment in
additional Equipment.
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It is anticipated that income taxes on a portion of distributions will
be deferred by depreciation available from Equipment purchased by the Fund. To
the extent Net Income is reduced by depreciation deductions, distributions will
be considered return of capital for tax purposes and income tax will be deferred
until subsequent years. Furthermore, until investors receive aggregate
distributions equal to their original capital, a portion of each distribution
will be deemed a return of capital rather than a return on capital.
Notwithstanding the foregoing, however, the Manager intends to make
distributions only out of cash from operations and cash from sales or
refinancing and not out of capital reserves or offering proceeds held pending
investment.
The Fund is intended to be self-liquidating in nature. After the
expiration of the Reinvestment Period, the Fund will distribute any available
cash, subject to the establishment of reserves deemed reasonably required by the
Manager for the proper operation of the business of the Fund, which may include
reserves for the upgrading of Equipment in order to preserve its rental or sales
value or for purchasing Equipment for which the Fund has committed funds prior
to the end of the Reinvestment Period.
Upon liquidation of the Fund, the proceeds of liquidation will be
distributed, after creditors of the Fund (including investors who may be
creditors) have been paid or provision has been made for their payment, in
accordance with each Member's positive Capital Account balance. As a result, if
cash distributions are made during the period between the date investors are
first admitted to the Fund and the end of the offering of Units, it is likely
that different amounts would be distributable upon liquidation to the different
investors, depending on their then Capital Account balances. This difference
will be substantially reduced or eliminated by the special allocation of gain
from the sale or other disposition of Equipment to the investors which will
equalize their respective Capital Account balances. In particular, if
distributions made during the offering period to investors who were admitted at
the initial admission date reflect a return of capital (or to the extent that
such investors receive allocations of net losses relating to the offering
period), such investors will receive less on liquidation of the Fund than those
who were admitted at the final admission date. Furthermore, to the extent that
those investors who were admitted at the first admission date receive
allocations of net profits relating to the offering period in excess of the
distributions of cash for that same period, such investors will receive more
distributions on liquidation than those investors who are admitted at end of the
offering. As noted above, any such differences will be substantially reduced or
eliminated to the extent the Manager equalizes Capital Accounts through the use
of special allocations of gain from the sale or other disposition of Equipment.
Reinvestment
Subject to the limitations set forth herein, the Manager has the right
to reinvest on behalf of the Fund cash from operations and cash from sales or
refinancing during the Reinvestment Period (which ends six years after the last
day of the year in which the offering of Units terminates). Notwithstanding the
foregoing, however, the Manager shall, at a minimum, distribute, to the extent
available, such amounts of cash from sales or refinancing and cash from
operations as may be sufficient to allow an investor in a 31% federal income tax
bracket (but not a higher bracket) to meet the federal and state income taxes
due with respect to income derived by him from the operations of the Fund. See
"Risk Factors Income in Excess of Distributions" for a discussion of the risk
that a Holder in a higher tax bracket may, under some circumstances, be required
to pay certain tax liabilities out of his personal funds rather than out of
amounts distributed by the Fund.
Furthermore, through the end of the Reinvestment Period the Fund may
reinvest cash from operations and cash from sales or refinancing, but only after
the Manager has caused the Fund to distribute to the investors:
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(i) prior to the end of the year the offering of Units terminates, an
amount equal to the lesser of (a) 10% per annum on their original capital
investment, or (b) 90% of the total amounts available for distributions; and
(ii) in each of the six years after the end of the year the offering
terminates, an amount equal to 10% of their original capital investment.
Distributions will be made only to the extent cash is available to
distribute after payment of Fund obligations and allowance for necessary
reserves. There can be no prediction as to any future rate of return on original
capital investment nor assurance that any specific amount of cash distributions
can be attained. Distributions may in any year be in amounts less than the
amounts stated above.
Return of Unused Capital
Any portion of the net offering proceeds received by the Fund during
the first twelve months following the date hereof which has not been invested or
committed to Investment in Equipment during the period ending eighteen months
from the date hereof, and any of the net offering proceeds received thereafter
which have not been invested or committed to Investment in Equipment during the
period ending six months after the end of the offering (except, in either case,
for amounts used to pay Fund operating expenses or deemed by the Manager to be
required as capital reserves) will be distributed to investors pro rata as a
return of capital. In addition, in order to refund to the investors the amount
of Front End Fees attributable to such returned capital, the Manager has agreed
to contribute to the Fund, and the Fund shall distribute to investors pro rata,
the amount by which (x) the amount of unused capital so distributed, divided by
(y) the percentage of offering proceeds remaining after payment of all Front End
Fees, exceeds the unused capital so distributed.
Cash from Reserve Account
The Operating Agreement requires that the Fund initially establish a
cash reserve for general working capital purposes in an amount equal to not less
than 1/2 of 1% of the offering proceeds (equal to $6,000 if the minimum Units
are sold and $750,000 if the maximum Units are sold). Any cash reserves used as
provided herein need not be restored, and, if restored, shall be restored from
the operating revenues of the Fund. When Equipment is sold or otherwise disposed
of, all cash reserves specifically allocated to such Equipment may be
distributed to the Holders as a return of original capital investment or be
applied as a reserve for other Equipment. Distributions of cash reserves will be
allocated and distributed in the same manner as cash proceeds from sales or
refinancing of equipment. Cash reserves which the Manager deem no longer
reasonably required to be maintained as reserves may be distributed or invested
by the Fund, subject to the limitations described herein. No distributions or
investments will be made from Fund reserve accounts during the three-year period
following the date investors are first admitted to the Fund; thereafter, no
distributions or investments will be made unless the Manager determines that the
reserves of the Fund, in any fiscal quarter, are in excess of the amount deemed
sufficient in connection with the Fund's operations.
Sources of Distributions - Accounting Matters
During the initial years, the Fund may experience a Net Loss in
accordance with generally accepted accounting principles, and it is anticipated
that a substantial portion of any such Net Loss would be caused by depreciation
which is a non-cash expense. As a result, distributions, if any, made in the
initial years of the Fund may be considered to be a return of capital and not
investment income.
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Without regard to the accounting method adopted, to the extent
Equipment is not producing revenues in excess of operating expenses, debt
service and other contractual obligations related to such Equipment,
distributions may be considered a return of capital.
CAPITALIZATION
The capitalization of the Fund, as of the date of this Prospectus and
as adjusted to reflect the issuance and sale of the Units offered hereby
assuming the minimum 120,000 Units and the maximum 15,000,000 Units are sold is
as follows:
As of Minimum Maximum
the Date 120,000 15,000,000
hereof(2) Units Units
Manager's
Capital Contribution(1) $ 100 $ 100 $ 100
Units of Limited
Fund Interest
($10 per Unit) 500 1,200,500 150,000,500
------- --------- -----------
Total Capitalization $ 600 $1,200,600 $150,000,600
Less Estimated Organization
and Offering Expenses - 144,000 20,250,000
------ -------- ----------
Net Capitalization $ 600 $1,056,600 $129,750,600
------- --------- -----------
- ---------------
(1) See "Management Compensation" and "Income, Losses and
Distributions" for a description of the fees and compensation payable to the
Manager and its Affiliates.
(2) The Fund was originally capitalized with $600, representing a
cash contribution to the Fund of $100 by the Manager and $500 from the initial
Holders.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Until receipt and acceptance of subscriptions for 120,000 Units, the
Fund will not commence active operations.
Following achievement of such funding level, subscription proceeds
will be released to the Fund from escrow and applied to the payment or
reimbursement of Organization and Offering Expenses, leaving estimated net
proceeds available for investment and operations of $1,056,000. Thereafter, the
Fund will experience a relative increase in liquidity as additional
subscriptions for Units are received, and a relative decrease in liquidity as
Net Proceeds are expended in connection with the acquisition and leasing of
Equipment.
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The Fund will acquire Equipment with cash offering proceeds and
indebtedness. The Fund may borrow on a secured or unsecured basis amounts up to
50% (and intends to borrow the maximum amount permitted) of the aggregate
purchase price of Equipment as of the date of the final investment of Net
Proceeds and, thereafter, on the date any subsequent indebtedness is incurred.
The Fund currently has no arrangements with, or commitments from, any lender
with respect to such financing. The Manager anticipates that any acquisition
financing or other borrowing will be obtained from institutional lenders. See
"Investment Objectives and Policies - Borrowing Policies."
Until required for the acquisition or operation of Equipment, the
Net Proceeds will be held in short-term, liquid investments. The Fund is
required by the Operating Agreement to establish an initial working capital
reserve in the amount of 1/2 of 1% of the Gross Proceeds. See also "Summary of
the Operating Agreement - Reserves."
For financial reporting purposes, Fund Equipment on operating leases
will generally be depreciated using the straight-line method, over periods equal
to the terms of the related leases to the Equipment, down to an amount equal to
the estimated residual value of the Equipment at the end of the related leases.
The treatment for financial reporting purposes differs from cost recovery for
tax purposes (generally, the Modified Accelerated Cost Recovery System or
"MACRS"), in which the Service prescribes certain useful lives for each type of
equipment and the Code provides specific accelerated rates of depreciation over
those useful lives. See "Income Tax Consequences - Depreciation".
The potential effects of inflation on the Fund are difficult to
predict. If the general economy experiences significant rates of inflation,
however, it could affect the Fund in a number of ways. The cost of equipment
acquisitions could increase with inflation, but such cost increases could be
offset by the Fund's ability to increase lease rates in an inflationary market.
Revenues from existing leases would not generally increase with inflation, as
the Fund does not generally expect to provide for rent escalation clauses tied
to inflation in its leases. Nevertheless, the anticipated residual values to be
realized upon the sale or re-lease of equipment upon lease terminations (and
thus the overall cash flow from the Fund's leases) may be expected to increase
with inflation as the cost of similar new and used equipment increases.
Fluctuations in prevailing interest rates could also affect the
Fund. The cost of capital reflected in interest rates is a significant factor in
determining market lease rates and the pricing of lease financing generally.
Higher interest rates could affect the cost of Fund borrowing, reducing its
yield on leveraged investments or reducing the desirability of leverage. The
Fund would also expect that increases or decreases in prevailing interest rates
would generally result in corresponding increases or decreases in available
lease rates on new leases. Interest rate fluctuations would generally have
little or no effect on existing leases, as rates on such leases would generally
be fixed without any adjustment related to interest rates.
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 affecting its own operations. The Manager does
not expect the Fund to incur significant costs as a result of the year 2000
issue.
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FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of all material federal income tax
considerations which may be relevant to a prospective Holder. However, it is
impractical to set forth in this Prospectus all aspects of federal, state, local
and foreign tax law which may affect a Holder's participation in the Fund.
Furthermore, the discussion of various aspects of federal, state, local and
foreign taxation contained herein is based on the Internal Revenue Code of 1986,
as amended (the "Code"), existing laws, judicial decisions and administrative
regulations, rulings and practice, all of which are subject to change. Each
prospective Holder should consult his own tax counsel to satisfy himself as to
the tax consequences of his investment.
Jackson Tufts Cole & Black, LLP ("Tax Counsel") as tax counsel to
the Fund, will not prepare or review the Fund's income tax information returns,
which will be prepared by the management and independent accountants for the
Fund. The Fund will make a number of decisions on such tax matters as the
expensing or capitalizing of particular items, the proper period over which
capital costs may be depreciated or amortized, the allocation of acquisition
costs between Equipment and management fees and many other similar items. Such
matters will be handled by the Fund, often with the advice of independent
accountants retained by the Fund, and usually will not be reviewed by Tax
Counsel.
Summary
The following is a summary of, and is qualified by, the more
extensive discussion of the federal income tax consequences set forth in this
section.
Opinion of Counsel. Tax Counsel has delivered its opinion to the Fund
concerning the likely outcome on the merits of a challenge to the Fund's
position on certain material tax issues. There are certain issues upon which Tax
Counsel cannot express an opinion. (See "Opinion of Counsel.")
Classification as a "Partnership". Tax Counsel has rendered its opinion
that the Fund will be classified as a partnership for federal income tax
purpose. (See "Classification as a Partnership.")
Allocations of Profits and Losses. In Tax Counsel's opinion it is more
likely than not that the tax allocation provisions in the Operating Agreement
will not be significantly modified by the Internal Revenue Service (the
"Service") and that each Holder's distributive share of income, gain, loss and
deduction will be determined and allocated substantially in accordance with the
Operating Agreement. (See "Allocations of Profits and Losses.")
Income Recognition. The Fund's tax returns will be prepared using the
accrual method of accounting. Under such method, the Fund will include in income
items such as rentals and interest as and when earned by the Fund, whether or
not received. (See "Income Recognition.") It is possible that a Holder's tax
liabilities may exceed cash distributions to him in corresponding years. (See
"Income Recognition" and "Tax Liabilities in Later Years.")
Taxation of Holders of Units. A Holder's share of Fund income generally
will not be identical to the Holder's share of Distributions. Any Distributions
in excess of a Holder's adjusted tax basis in his Units will cause such Holder
to recognize such excess as taxable income. (See "Taxation of Holders of
Units.")
Limitations on Deduction of Losses. There are certain limitations that will
restrict the ability of a Holder to utilize his distributive share of losses
from the Fund to offset income from other sources. (See "Limitations on
Deduction of Losses.")
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Tax Status of Leases. In order for the Fund and Holders to be
entitled to depreciation deductions, a lease of Equipment must be treated as a
lease rather than a sale or financing for federal income tax purposes. The
Manager has represented that any initial lease of an item of Equipment acquired
with the Net Proceeds will comply or will substantially comply with the
equipment leasing guidelines of the Service if the cost of such item exceeds 10%
of the Gross Proceeds of this offering. Furthermore, the Manager has agreed to
use its best efforts to cause any other lease entered into by the Fund to
satisfy such guidelines. (See "Tax Status of Leases.")
Deductibility of Management Fees. The Fund intends to deduct the
Asset Management Fee for services performed by the Manager or its Affiliates.
The Service may challenge the deductibility of all or a portion of the Asset
Management Fee. (See "Deductibility of Management Fees.")
Sale or Exchange of Fund Equipment. The Fund's gain or loss on sale
or disposition of an item of Equipment will equal the difference between sale
proceeds (including the amount of any indebtedness to which the Equipment is
subject) and the Fund's adjusted tax basis in the Equipment. In certain
circumstances, the amount of tax payable by a Holder on his share of gain on
sale of Equipment may exceed his share of cash proceeds therefrom. (See "Sales
or Exchanges of Fund Equipment.")
Disposition of Units. On sale or disposition of Units, a Holder will
recognize gain equal to the excess, if any, of cash received (plus the Holder's
share of any Fund liabilities) over the Holder's tax basis in the Units. Such
gain will be taxed at ordinary income tax rates to the extent of depreciation
recapture. In certain circumstances, the amount of tax payable by a Holder on
the gain realized from a sale or disposition of his Units may exceed the cash
received therefrom. (See "Disposition of Units.")
Fund Elections. The Fund is not expected to file an election under
Section 754 of the Code. The absence of such election may have an adverse
effect on the marketability and sale price of Units. (See "Fund Elections.")
Investment by Qualified Plans and IRAs. The Fund will generate
unrelated business taxable income to Holders who are Qualified Plans or IRAs,
with the result that the Fund income will be subject to tax to the extent that
the Qualified Plan's or IRA's unrelated business taxable income from all sources
exceeds $1,000. (See "Investment by Qualified Plans and IRAs.")
Alternative Minimum Tax. The tax preference items and adjustments
under the alternative minimum tax that may be present in the Fund include the
excess of depreciation deductions claimed over deductions that would be
allowable if the Equipment were subject to depreciation using the 150%
declining balance method, switching to the straight-line method in later years.
(See "Alternative Minimum Tax.")
Opinion of Counsel
The Fund has obtained an opinion from Jackson Tufts Cole & Black,
LLP ("Tax Counsel") concerning the likely outcome on the merits of a challenge
to the Fund's position on certain federal income tax issues. The opinion states
that the summary of federal income tax consequences to the Holders set
forth in this Prospectus under the headings "Risk Factors - Partnership Status,"
"Risk Factors - Certain Other Tax Considerations," "Risk Factors - Tax Opinion"
and "Federal Income Tax Consequences" has been reviewed by Tax Counsel and,
to the extent such summaries involve matters of law, Tax Counsel is of the
opinion that such statements of law are accurate under the Code, the
Treasury Regulations and existing interpretations thereof.
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<PAGE>
The opinion of Tax Counsel is based upon the facts described in this
Prospectus, upon facts as they have been represented by the Manager to Tax
Counsel, and upon the assumption that the Fund will operate its business as
described in the Prospectus. Any alteration of the facts may adversely affect
the opinion rendered. Furthermore, the opinion is based on the Code, current and
proposed Treasury Regulations, current published administrative positions of the
Service contained in Revenue Rulings and Revenue Procedures, and judicial
decisions, which are subject to change either prospectively or retroactively.
In the preparation and rendition of its opinion, Tax Counsel has
considered and addressed in the offering materials all of the material tax
issues which Tax Counsel believes involve the reasonable possibility of a
challenge by the Service.
Each prospective Holder should note that the opinion described
herein represents only Tax Counsel's best legal judgment and has no binding
effect or official status of any kind. Thus, in the absence of a ruling from the
Service, there can be no assurance that the Service will not challenge the
conclusion or propriety of any of Tax Counsel's opinions or that legislative or
administrative changes or court decisions may not be forthcoming which would
significantly modify the statements expressed herein. Any such changes may or
may not be retroactive with respect to transactions prior to the date of such
changes.
Treasury Regulations and certain ethical standards require specific
opinions to be rendered in connection with an opinion of counsel regarding the
federal tax consequences of a "tax shelter" investment. For this purpose, a "tax
shelter" is an investment that has, as a significant or intended feature, the
generation of tax losses or tax credits to shelter taxable income or tax
liability from other sources. The Fund is not a "tax shelter" within the meaning
of the Treasury Regulations and said ethical standards. Therefore, although Tax
Counsel is rendering its opinion on certain material federal income tax issues
relating to an investment in the Fund, such opinion will not follow the
standards applicable to opinions with respect to "tax shelters."
It should also be noted that there are certain issues upon which Tax
Counsel cannot express an opinion because: (i) the issue is subject to facts
that are not presently known and cannot readily be determined, (ii) the issue is
subject to future events, or (iii) the issue involves a question of law on which
there is insufficient judicial or other authority upon which a conclusive
opinion can be based. For example, except for certain expenses that Tax Counsel
has indicated must be capitalized, no opinion is expressed as to whether certain
fees will be deductible as ordinary and necessary expenses reasonable in amount
in relation to services rendered, and no opinion is expressed as to the proper
allocation of various fees and expenses, the proper periods for their deduction
or amortization, or whether certain fees are properly allocable to the cost
recovery basis of the Equipment. In addition, no opinion is expressed on the
issue of whether the Fund will be determined to be a "dealer" with respect to
the Equipment.
Classification as a "Partnership"
Provided that the Fund does not elect to be treated as a corporation
for federal income tax purposes, under the default provisions of the Treasury
Regulations issued under Code Section 7701 (the so-called "check-the-box"
rules), the Fund will be classified as a partnership and will not be treated as
an association taxable as a corporation for federal income tax purposes. The
Manager has represented to Tax Counsel that the Fund will not make such an
election.
The treatment of the Fund as a partnership for federal income tax
purposes is based upon the present provisions of the Code, the Treasury
Regulations, and existing judicial and administrative interpretations thereof,
all of which are subject to change. If the applicable Treasury Regulations were
to be amended, it is possible that the Fund
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would not qualify as a partnership under the amended regulations.
Notwithstanding the two preceding two paragraphs, if Units are
considered "publicly traded," the Fund will be treated as a corporation under
the publicly traded partnership provisions of Code Section 7704. (Being
classified as a publicly traded partnership also may have other adverse tax
consequences. See "Limitation on Deduction of Losses Passive Loss Limitation"
below.) The Fund will be treated as publicly traded if Units are traded on an
established securities market or are readily tradable on a secondary market or
the substantial equivalent thereof. An established securities market includes a
securities exchange as well as a regular over-the-counter market. Treasury
Regulations under Code Section 7704 state that a secondary market is generally
indicated by the existence of a person standing ready to make a market in the
interests of the entity, or where the holder of an interest has a readily
available, regular and ongoing opportunity to sell or exchange his interest
through a public means of obtaining or providing information on offers to buy,
sell or exchange interests. Complicity or participation of a fund is relevant in
determining whether there is public trading of its units. A fund will be
considered as participating in public trading where trading in its units is in
fact taking place and the fund's governing documents impose no meaningful
limitation on holders' ability to readily transfer their units. A fund's right
to refuse to recognize transfers is not a meaningful limitation unless such
right is exercised (except in the case of transfers by reason of death, divorce
or gift and occasional accommodation transfers).
Whether the Units will become readily tradable on a secondary market
or the substantial equivalent thereof cannot be predicted with certainty. The
Units will not be deemed "readily tradable on a secondary market (or the
substantial equivalent thereof)" if any of the safe harbors provided for in the
Treasury Regulations under Code Section 7704 is satisfied. One of these is the
"2% safe harbor." It provides that a secondary market or its equivalent will not
exist if the sum of the interests in capital or profits attributable to those
interests that are sold or otherwise transferred during a fund's taxable year
does not exceed 2% of the total interests in capital or profits.
Although neither the Fund nor the Manager will have any control over
an independent third person establishing a secondary market in Units, the
Operating Agreement requires that the Holders obtain the consent of the Manager
prior to any transfers of Units. The Manager intends to exercise its discretion
in granting and withholding its consent to transfers in such a manner as to fall
within the parameters of the 2% safe harbor articulated in the Treasury
Regulations. Accordingly, based on representations of the Manager of its
intention to comply with the 2% safe-harbor provision of the Treasury
Regulations, Tax Counsel is of the opinion that, more likely than not, the Fund
will not be considered a "publicly traded" partnership.
If the Fund were treated for federal income tax purposes as an
association taxable as a corporation in any taxable year, (i) it would be
required to pay federal income taxes upon its taxable income, rather than there
being no tax on income at the Fund level; (ii) state and local income taxes
could be imposed on the Fund; (iii) losses of the Fund would not be reportable
by the Holders on their personal income tax returns; and (iv) any Distributions
would be taxable to a Holder as ordinary income to the extent of current or
accumulated earnings and profits or treated as gain from the sale of the
Holder's Units to the extent any Distribution exceeded such earnings and profits
and the tax basis of such Holder for the Units. In addition, Distributions from
the Fund would be classified as portfolio income and, thus would not be
available to offset passive activity losses of any Holder. (See "Limitation on
Deduction of Losses - Passive Loss Limitation" below.) If after a period of
operations the Fund were deemed to have become an association taxable as a
corporation for federal income tax purposes, such change in status would result
in taxable income to a Holder measured by the excess, if any, of his share of
the liabilities of the Fund over the adjusted basis of his Units. The effect of
the foregoing would be to substantially reduce the effective yield on an
investment in Units.
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THE FOLLOWING DISCUSSION IS BASED UPON THE ASSUMPTION THAT THE FUND
WILL BE CLASSIFIED AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES.
Allocations of Profits and Losses
Under Section 704(b) of the Code, a holder's distributive share of
fund income, gain, deduction or loss will be determined in accordance with the
operating agreement, unless the allocations contained therein do not have
"substantial economic effect," in which case the distributive shares will be
determined in accordance with the holders' interests in the fund.
An allocation has "economic effect" under the Treasury Regulations
if: (i) each holder's share of fund items, including certain nondeductible
expenditures (such as syndication expenses), is reflected by an increase or
decrease in the capital account established for the holder; (ii) liquidation
proceeds are distributed in accordance with capital account balances; and (iii)
any holder with a capital account deficit following the distribution of
liquidation proceeds is required to restore such deficit to the fund. In
addition, an allocation can have economic effect even if a holder is not
required to restore a deficit balance in his capital account, but only (i) to
the extent the allocation does not reduce his capital account balance below zero
(after reducing the capital account for certain adjustments, allocations or
distributions in excess of income which are reasonably expected in the future)
and (ii) if the operating agreement contains a "qualified income offset." A
operating agreement contains a "qualified income offset" if it provides that a
holder who unexpectedly receives such an adjustment, allocation or distribution
that reduces his capital account below zero will be allocated income or gain in
an amount and manner sufficient to eliminate his deficit capital account balance
as quickly as possible.
With respect to allocations of loss and deductions attributable to
nonrecourse debt, such allocations will be respected under the Treasury
Regulations if the holders who were allocated the deductions bear the burden of
the future income related to the previous deductions. In particular, the
following additional elements must be satisfied: (i) the operating agreement
must provide for allocations of nonrecourse deductions in a manner consistent
with allocations, which have substantial economic effect, of some other
significant fund item attributable to the property securing the nonrecourse
liability; and (ii) the operating agreement must contain a "minimum gain
chargeback." An operating agreement contains a "minimum gain chargeback" if it
provides that, if there is a net decrease in fund "minimum gain" during a fund
taxable year, all holders will be allocated items of fund income and gain for
such year (and, if necessary, subsequent years) in proportion to, and to the
extent of, an amount equal to the portion of such holder's share of the net
decrease in fund minimum gain. The amount of fund minimum gain is determined by
computing the amount of gain (of whatever character), if any, that would be
realized by the fund if it disposed of the fund property subject to the
nonrecourse liability in full satisfaction thereof.
The Operating Agreement prohibits losses from being allocated to the
Holders that would cause deficit Capital Accounts in excess of their share of
Fund Minimum Gain. Nonrecourse deductions (if any) will be allocated in the same
manner as operating profits and losses. The Operating Agreement contains a
minimum gain chargeback provision and a qualified income offset provision that
are intended to comply with the provisions of the Treasury Regulations under
Section 704(b) of the Code. The Operating Agreement provides that Capital
Accounts of the Holders will be maintained in accordance with the provisions of
the Treasury Regulations and proceeds on liquidation will be distributed in
accordance with the positive Capital Account balances of the Holders. Therefore,
Tax Counsel is of the opinion that it is more likely than not that the
allocations included in the Operating Agreement would not be significantly
modified if challenged by the Service.
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Under Section 704(b), the economic effect of the Fund allocations
also must be "substantial." Tax Counsel notes that the meaning and scope of the
substantiality requirements are unclear at this time. Based on the existing
language of the Treasury Regulations, Tax Counsel does not believe the Fund
allocations present any material substantiality issues. Consequently, as stated
above, Tax Counsel is of the opinion that it is more likely than not that the
allocations to the Holders would not be significantly modified by the Service.
However, Tax Counsel cautions that no assurance can be given that the Service
will not interpret the Regulations in a manner that could cause those
allocations to be treated as lacking substantiality. If the Service were
successful in challenging the Fund's method of allocating profits and losses,
then this may decrease the Holders' shares of taxable loss or increase the
Holders' shares of taxable income.
Income Recognition
The Fund's tax returns will be prepared using the accrual method of
accounting. Under the accrual method, the Fund will include in income items such
as interest and rentals as and when earned by the Fund, whether or not received.
Thus, the Fund may be required to recognize income sooner than would be the case
under the cash receipts and disbursements method of accounting.
In certain circumstances, where a lease provides for varying rental
payments increasing in the later years of the lease (step rentals), Section 467
of the Code requires the lessor to take the rental payments into income as if
the rent accrued at a constant level rate. This provision applies to certain
sale-leaseback transactions and certain long-term leases. The Manager expects
that certain of the Fund's Equipment leases may provide for rental payments that
increase or decrease in the later years of such leases, and Section 467 may
operate to require the Fund to accrue the rental payments on such leases at a
constant level rate. This could result in Holders receiving increased
allocations of taxable income (or reduced allocations of loss) in earlier years,
without any increase in Distributions until subsequent years. An additional
consequence could be a conversion of a portion of the Fund's rental income
(passive income) from any such lease to interest income (portfolio income).
Taxation of Holders of Units
As long as the Fund is treated as a partnership for federal income
tax purposes, it will not be subject to any federal income taxes, although it
will file federal partnership information tax returns for each calendar year.
Within 75 days after the end of each calendar year, Holders will be provided
with federal income tax information relevant to the Fund and their own federal
income tax returns. Each Holder will be required to report on his own federal
income tax return his share of Fund items of income, gain, loss, deduction, or
credit and, accordingly, may be subject to tax on his distributive share of Fund
income whether or not any Distribution is made to him.
If the amount of a Distribution to a Holder for any year exceeds the
Holder's share of the Fund's taxable income for the year, the excess will
constitute a return of capital. A return of capital is applied first to reduce
the tax basis (as described below) of the Holder's Units, and any amounts in
excess of such tax basis will generally be taxable as a gain from the sale of a
capital asset. However, a distribution of money or property which is received by
a Holder in exchange for an interest in "inventory items" which have
substantially appreciated in value or "unrealized receivables" (as defined in
Code Section 751) will generally result in the receipt of ordinary income to the
extent that such distributions are in excess of the Holder's pro rata share of
the Fund's tax basis in such property. The term "unrealized receivables" under
Section 751 includes depreciable property subject to depreciation recapture, but
only to the extent of the amount which would be treated as ordinary income upon
a sale of the property. (See "Disposition of Units" below.)
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Limitation on Deduction of Losses
There will be certain limitations on the ability of a Holder to
utilize his distributive share of losses of the Fund to offset income from other
sources: (1) losses will be limited to the extent of a Holder's tax basis in his
Units; (2) losses will be limited to the amounts for which a Holder is deemed
"at risk"; (3) losses derived from investments in "passive activities" will be
limited to a Holder's income from such activities; and (4) losses attributable
to "activities not engaged in for profit" will also be limited. These
limitations are described below.
Tax Basis. Generally, each Holder's tax basis for his Units will be
equal to the price paid therefor plus his share of those liabilities of the Fund
with respect to which none of the Holders nor the Fund has any personal
liability. (See "Investment Objectives and Policies - Borrowing Policies.") Each
Holder will increase (or decrease) the tax basis of his Units by the amount of
his allocable share of the Fund's taxable income (or loss) for any year and
reduce the tax basis of his Units by the amount of any Distributions (including
any reduction in his share of Fund nonrecourse debts) made by the Fund to him
during such year. If the tax basis of a Holder's Units should be reduced to
zero, the amount of any Distributions (including any reduction in Fund
nonrecourse debts) in excess of his share of the income reported by the Fund for
any year will be treated as gain from the sale or exchange of the Holder's
Units.
On his own federal income tax return each Holder may, subject to the
limitations discussed below, deduct his share of the Fund's taxable loss, if
any, to the extent of the tax basis for his Units; Fund losses which exceed his
tax basis may be carried over indefinitely and, subject to the limitations
discussed below, deducted in any year to the extent his tax basis is increased
above zero.
At Risk Rules. Under Code Section 465, the amount of losses which
may be claimed by an individual investor or a closely-held corporation (a
corporation of which more than 50% in value of its shares is owned directly or
indirectly by not more than five individuals) in equipment leasing activities is
limited to the amount which the investor has "at risk" with respect to such
activities. For purposes of the at risk rules, the amount at risk is generally
equal to the sum of money and the adjusted basis of property contributed to the
activity plus borrowed amounts for which the taxpayer is personally liable.
The total amount of money paid by each Holder for his Units will be
considered at risk, but any Fund borrowings are not expected to be considered at
risk. Accordingly, subject to the passive loss rules discussed below, a Holder
will only be able to deduct his share of Fund losses in an amount equal to the
purchase price of his Units (as adjusted for Fund income, losses and
Distributions). A Holder's at risk amount will be decreased by his share of Fund
losses and Distributions, and will be increased by his share of Fund income. Any
losses in excess of a Holder's at risk amount will be treated as a deduction in
succeeding taxable years, again subject to the at risk limitations. Recapture of
previously allowed losses will be required if a Holder's amount at risk at the
end of the year is reduced below zero (e.g., by Distributions from the Fund).
Under the Code, the Fund will be permitted to aggregate its
equipment leasing activities only with respect to Equipment placed in service
during the same taxable year. Therefore, the "at risk" rules will be applied to
the net taxable income or loss resulting from leasing Equipment which is placed
in service during the same taxable year. This could result in a Holder's
deduction for losses with respect to certain Equipment being limited by the "at
risk" rules, even though he must recognize income with respect to other
Equipment.
Passive Loss Limitation. Code Section 469 imposes a limitation
(the "passive loss limitation") on the amount of losses that a taxpayer may
claim from an activity in which the taxpayer does not materially participate.
Under the
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passive loss limitation, net losses from a passive activity, such as the leasing
activity of the Fund, may not be used to offset active income (e.g.,
compensation) or portfolio income (e.g., interest and dividends). Passive losses
may, however, be used to offset passive income from any other passive activity
carried on by the taxpayer.
The equipment leasing activities of the Fund will constitute a
passive activity. As a result, the losses incurred by the Fund will constitute
passive losses and may thus be offset by a Holder's passive income from other
activities but not active or portfolio income from other activities. Any excess
passive losses for a particular year will be "suspended" and carried forward
indefinitely. Suspended passive losses may be used to offset passive income in
future years and may be claimed in full (even to offset active income) if a
Holder disposes of all of his Units in a fully taxable transaction and the
transferee is not a related person to the Holder.
The passive loss limitation is applied after the "at risk"
limitation. Thus, if a loss is disallowed under the "at risk" rules for a
particular year, it will not again be disallowed by the passive loss limitation
for such year. Rather, for the year in which the Holder becomes "at risk" in the
activity, the suspended "at risk" loss will become subject to the passive loss
limitation, and, as a result, even if a loss is permitted under the "at risk"
rules, it may still be disallowed under the passive loss rules.
Section 469(k) of the Code provides that income and loss from
"publicly traded" partnerships which are not taxable as corporations for Federal
income tax purposes will be treated as separate from income and loss from any
other publicly traded partnerships and also as separate from any income or loss
from passive activities. This provision should not apply to the Fund since the
Fund should not be considered to be publicly traded; if it were to be so
considered, it would be taxable as a corporation. (See "Classification as a
'Partnership'" above.)
Hobby Losses. Under Section 183 of the Code, certain losses from
activities not engaged in for profit are not allowed as deductions from other
income. Although one of the objectives of the Fund is to provide Holders with
Distributions (see "Investment Objectives and Policies"), there can be no
assurance that the Fund will be deemed to be engaged in an activity for profit
because the applicable test is based on the facts and circumstances from time to
time. It is conceivable that the Service may assert that the Fund is not engaged
in an activity for profit, notwithstanding any "profit objective" which the Fund
purports to have. Prospective Holders should consult their own tax advisers
regarding the impact of Code Section 183 on their particular situations.
Tax Status of Leases
The decision as to whether a specific lease is to be categorized as
a lease rather than as a sale for federal income tax purposes involves a factual
determination, and, accordingly, no assurance can be given that, upon audit by
the Service, the leases of Equipment would be treated as such for federal income
tax purposes. If they are treated as sales or financings rather than leases, the
Fund and the Holders would not be entitled to depreciation deductions with
respect to such leases. On the other hand, a portion of the lease rental
payments (otherwise fully taxable), would be deemed to constitute amortization
of such financing or sales proceeds which would not be taxable to the Fund.
The Fund does not intend to apply to the Service for a ruling that
any leases of Equipment which conform to the Service guidelines will be treated
as leases for federal income tax purposes. However, Service guidelines are set
forth in Revenue Procedures 75-21, 1975-1 C.B. 715, 75-28, 1975-1 C.B. 752,
76-30, 1976-2 C.B. 647 and 79-48, 1979-2 C.B. 529, which provide that, unless
other facts and circumstances indicate a contrary intent, for advance ruling
purposes only, the Service will consider the lessor in a leveraged lease
transaction to be the owner of property if:
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(a) the lessor has a minimum unconditional investment in the
property at all times during the lease of at least 20% of the cost of the
property and can demonstrate that the estimated residual value of the property
is at least 20% of the cost of the property;
(b) the lessee does not have an option to purchase the property
(other than at fair market value) and the lessor does not have the right to
require anyone to purchase the property;
(c) no part of the cost of the property subject to the lease is
furnished by the lessee other than for full consideration;
(d) the lessee does not lend the lessor any of the funds necessary
to purchase the property; and
(e) the lessor expects to receive a profit from the transaction
apart from tax benefits.
The Manager has represented that any initial lease of an item of
Equipment acquired with the Net Proceeds will meet the foregoing guidelines if
the amount of Net Proceeds used to acquire such item exceeds an amount equal to
10% of the maximum Gross Proceeds of this offering. Although, as stated above,
determination of lease status is made on a case-by-case basis, Tax Counsel is of
the opinion that any lease satisfying the foregoing guidelines should more
likely than not qualify as a lease for federal income tax purposes.
Depreciation
MACRS . Under the "Modified Accelerated Cost Recovery System"
("MACRS"), the cost of depreciable personal property placed in service after
1986 ( so-called "recovery property") may be depreciated using certain specified
depreciation methods (referred to as "recovery methods") over specified
depreciable lives (referred to as "recovery periods") generally ranging from
three to 20 years. Under MACRS the methods of recovery and the recovery periods
apply equally to new and used property.
The cost of MACRS property is recovered over the applicable recovery
period using the 200% declining balance method, except for 15- or 20-year
recovery property for which the 150% declining balance method is utilized.
The Code contains "anti-churning" provisions to prevent taxpayers
from utilizing MACRS on property placed in service prior to January 1, 1987.
These provisions generally attempt to reach situations where personal property
used during 1986 is transferred without a real change in the owner or user of
such property and MACRS depreciation would be more favorable than depreciation
under prior law. The Fund may acquire used Equipment which will be leased back
to the owner or continued under lease to the original lessee. If the Fund is not
able to use MACRS with respect to such Equipment, the depreciation deductions
thereon will be determined under the rules in effect prior to 1987 ("ACRS"). In
such cases, depreciation deductions allowed with respect to such Equipment could
be less in the early years and greater in later years than the depreciation
deductions allowable under MACRS, and the Holders' share of Fund losses in the
early years could be reduced.
It should be noted that the amount by which the depreciation deductions on
Equipment using the 200% declining balance method exceeds the amount that would
have been allowed had depreciation deductions been calculated using the 150%
declining balance method will effectively be an item of tax preference. (See
"Alternative Minimum Tax.")
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Recapture. All depreciation deductions with respect to the
Equipment will be subject to recapture at ordinary income rates upon the
disposition of the Equipment. ( See "Sales or Exchanges of Fund Equipment.")
Basis. The tax basis of the Equipment for depreciation purposes
will include reasonable costs payable in connection with the acquisition of the
Equipment.
Limitations on the Use of MACRS. Under certain circumstances, in
addition to those set forth above, a taxpayer is required to recover the cost of
property over a period longer than its MACRS recovery period. The relevant
restrictions include the use of the property predominantly outside the United
States and the use of equipment by a foreign or "tax-exempt" entity. These
limitations are described below.
(1) Property Used Predominantly Outside the United States. The MACRS
provisions of the Code contain special rules for recovering the cost of personal
property used predominantly outside the United States. Under Code Section
168(g), the cost of such property is to be recovered using the straight-line
method over a period equal to the property's "asset depreciation range midpoint
life as set forth in Treasury Regulations under Code Section 167 (the "ADR
Midpoint Life"), utilizing a half-year convention and no salvage value. If the
Treasury Regulations do not provide an ADR Midpoint Life, a 12-year period is
used.
Section 168(g)(4) of the Code provides an exception to the
predominant use limitation described above. Under this subsection of the Code,
certain types of property which are used predominantly outside the United States
will qualify for the normal MACRS cost recovery rules; the exceptions include,
among others, aircraft registered by the administrator of the Federal Aviation
Agency which are operated to and from the United States with some degree of
frequency.
(2) Tax-Exempt Leasing. Section 168 of the Code provides that the
use of personal property by a tax-exempt entity (including (i) certain foreign
persons or entities, (ii) certain governmental units, and (iii) certain other
tax-exempt organizations) will result in a reduction of the tax benefits which
would otherwise be available. The portion of such "tax-exempt use property"
leased to a tax-exempt entity must be depreciated using the straight-line method
over the greater of (i) the ADR Midpoint Life (12 years if there is no ADR
Midpoint Life assigned to such property), or (ii) 125% of the lease term.
If any property which is not otherwise tax-exempt use property is
owned by a fund which has both a tax-exempt entity and a person who is not a
tax-exempt entity as a holder, such tax-exempt entity's proportionate share of
such property is treated as tax-exempt use property unless (i) all allocations
to the tax-exempt entity of fund items are qualified; or (ii) the income derived
from such share of the property is subject to the unrelated business tax.
Income derived by tax-exempt entities other than foreign entities
from the Fund should be subject to the unrelated business tax (see "Investment
by Qualified Plans and IRAs," below); thus, admission of such Qualified Plans
and IRAs as Holders should not, in and of itself, cause any of the Equipment to
be treated as tax-exempt use property. If the Service successfully asserted that
the income of the Fund is not subject to the unrelated business tax, then the
Fund would be required to maintain separate depreciation systems for its
Equipment subject to MACRS, and, as a result, depreciation deductions available
to Holders in the early years of operations of the Fund would be reduced.
Deductibility of Management Fees
The Fund intends to deduct the Asset Management Fee for services
performed by the Manager or its Affiliates. It is possible that the Service may
challenge the deductibility of all or a portion of the Asset Management Fee on
the
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basis that (i) the amount thereof is excessive, (ii) that all or a portion of
the Asset Management Fee should properly be considered payment for other
services performed by, or other value provided by, the recipient thereof, or
(iii) that payments for such services rendered are not deductible. If such a
challenge by the Service were successful, the asserted deductions could be
reduced or eliminated. This would result in a proportionate increase in the
taxable income, or decrease in tax loss, of the Holders resulting in the Holders
being required to pay additional tax.
Tax Liabilities in Later Years
After some years of Fund operations, a Holder's tax liabilities may
exceed cash distributions to him in corresponding years. Such situations will
typically arise at the "cross-over point," i.e., the point in time when the
Fund's nondeductible loan amortization payments on its Equipment exceed its
depreciation deductions. This is principally due to (i) the short periods over
which Equipment can be depreciated under MACRS and (ii) the annual increases in
the amount of nondeductible principal amortization payments and the
corresponding decreases in the amount of deductible interest payments which will
typically occur on level payment obligations secured by the Equipment. To the
extent a Holder's tax liabilities exceed cash distributions, such excess will be
a nondeductible out-of-pocket expense to a Holder.
Sales or Exchanges of Fund Equipment
Gain realized by the Fund on a sale of any Equipment will, to the
extent of all depreciation deductions claimed thereon, be subject to recapture
and taxed as ordinary income. Unless the Fund is a "dealer" in the property
sold, any gain realized by the Fund in excess of such depreciation recapture
will, generally, be treated as long-term capital gain (if the property has been
held for more than one year) under Code Section 1231. Any loss realized upon a
sale will generally be treated as an ordinary loss (if the property has been
held for more than one year) under Code Section 1231.
A "dealer" is one who holds property "primarily for sale to
customers in the ordinary course of business". Under existing law, whether
property is so held is a question of fact, depending upon all of the facts and
circumstances of the particular transactions. The Fund intends to purchase
Equipment for investment only, to engage in the business of owning and operating
such Equipment, and to make such occasional sales thereof as in the opinion of
the Manager is consistent with the Fund's investment objectives. Accordingly,
the Fund does not anticipate that it will be treated as a dealer with respect to
any of its Equipment, although there is no assurance that the Service will not
take the contrary position.
If the Fund were to sell an item of Equipment on an installment
basis, all depreciation recapture income would be recognized at the time of sale
whether or not payments were to be made in succeeding taxable years.
Furthermore, if the Fund were to sell an item of Equipment on an installment
basis, the "original issue discount" rules might apply to the sale. (See
"Original Issue Discount".)
Unless the Equipment is found to be "dealer property" as discussed
above, and assuming the Equipment has been held for more than one year, any gain
or loss generally will be treated as "Section 1231" gain or loss, except to the
extent of recapture of certain cost recovery or depreciation deductions, which
will be taxed as ordinary income. A Holder's allocable share of Fund Section
1231 gains or losses, if any, for the particular year will be netted with the
Holder's other Section 1231 gains and losses; a "net" Section 1231 loss will be
treated as an ordinary loss. A net Section 1231 gain will be treated as a
long-term capital gain, except to the extent of the taxpayer's "non-recaptured"
net Section 1231 loss (generally, the excess of net Section 1231 losses over net
Section 1231 gains for the five preceding taxable years), to which extent the
net Section 1231 gain will be treated as ordinary income.
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Because the Fund's gain on a sale of Equipment will be measured by
the difference between the sales proceeds (including the amount of any
indebtedness to which the property is subject) received upon the sale and the
Fund's adjusted tax basis of the Equipment, the amount of tax payable by a
Holder in respect of his share of such Fund gain may in some cases exceed his
share of the cash proceeds therefrom. In the event of a foreclosure of a debt on
Equipment owned by the Fund, the Fund may realize gain equal to the excess of
such indebtedness over its adjusted tax basis of the Equipment, and the Holders
may realize taxable income although they may not receive any cash distributions
as a result of the foreclosure.
Disposition of Units
The amount of gain which a Holder will realize upon the sale or
other disposition of his Units will equal the excess, if any, of (i) the amount
realized by the Holder for the Units over (ii) the Holder's tax basis in the
Units. The amount of any loss which a Holder will realize on the sale or other
disposition of the Holder's Units will equal the excess, if any, of (i) the
Holder's tax basis over (ii) the amount realized for the Units. For this
purpose, the amount realized on the sale of the Units will include the Holder's
share of any Fund liabilities. As a result, a sale or disposition of Units by a
Holder may result in a tax liability in excess of cash proceeds received on the
sale or other disposition of such Units.
Gain or loss realized by a Holder on the sale of Units generally
will have the character of capital gain or loss, and, in the case of an
individual Holder, any such gain will be subject to tax at a maximum rate of 20%
if the Units have been held for more than 18 months and 28% if the Units have
been held for more than 12 months but not more than 18 months (as opposed to the
maximum rate of 39.6% imposed on ordinary income and short-term capital gain).
However, any gain realized on the sale or other disposition of a Unit by a
Holder which is attributable to (i) unrealized receivables, e.g., the Holder's
share of previous Fund depreciation deductions (computed as if the Equipment of
the Fund had been sold at its fair market value on the date the Units are sold)
or (ii)inventory items, will be taxed at ordinary income rates. A Holder must
recognize such depreciation recapture upon the sale or other disposition of a
Unit in the year of sale or disposition, regardless of the amount of sale
proceeds received in the year of sale or disposition.
Original Issue Discount
The original issue discount ("OID") rules apply to seller-provided
financing furnished to a purchaser of property. If the interest rate paid by the
buyer in connection with such financing is not at least equal to an established
federal rate, interest will be imputed at that rate (the "applicable federal
rate"). In addition, the payee of deferred interest on an OID obligation is
required to recognize such interest income ratably as it accrues. The applicable
federal rate is equal to the interest rate of U.S. government securities of
comparable maturity.
If the Fund were to sell an item of Equipment and provide financing
to the buyer bearing interest at a rate less than the applicable federal rate,
the Fund's gain on sale would be reduced by the application of that rate. Such a
reduction in gain on the sale would be offset, in whole or in part, by interest
income exceeding the nominal interest received by the Fund, and the interest
income generally would be taxable at a higher rate.
Fund Elections
The Code permits entities such as the Fund to elect to adjust the
tax basis of fund property upon the transfer of units by sale or exchange or on
the death of a holder, and on the distribution of property by the fund to a
holder (Section 754 election). The general effect of such an election is that
transferees of the units will be treated, for the purpose of depreciation and
gain, as though they had acquired a direct interest in the fund assets, and the
fund will be treated for
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such purposes, upon certain distributions to holders, as though it had newly
acquired an interest in the fund assets and therefore acquired a new cost basis
for such assets. Any such election, once made, may not be revoked without the
consent of the Service.
As a result of the complexities and added expense of the tax
accounting required to implement such an election, the Manager does not intend
to cause the Fund to make a Section 754 election. Accordingly, upon the sale of
Equipment subsequent to the transfer of a Unit, taxable gain or loss to the
transferee of the Unit will be measured by the difference between his share of
the gross proceeds of such sale and his share of the Fund's tax basis in the
Equipment (which, in the absence of a Section 754 election, will be unchanged by
the transfer of the Unit to him), rather than by the difference between his
share of the amount realized and the portion of his purchase price for his Units
that was allocable to the Equipment. As a consequence, such transferee will be
subject to tax upon a portion of the proceeds which, as to such transferee,
constitutes a return of capital, if the purchase price of his Units exceeds his
share of the adjusted basis for all Equipment. As a result, any benefits which
might have been available to transferee Holders of Units by reason of a Section
754 election will not be available. Moreover, a Holder may have greater
difficulty in selling his Units since the purchaser will obtain no current tax
benefits from his investment to the extent that the purchaser's cost of such
Units exceeds his allocable share of the Fund's basis in its assets.
It is also important to note that the Fund may make various
elections for federal tax reporting purposes which could result in various items
of income, gain, loss, deduction and credit being treated differently for tax
purposes than for accounting purposes.
Treatment of Gifts of Units
Generally, no gain or loss is recognized for federal income tax
purposes as a result of a gift of property. However, if a gift of a Unit were
made at a time when the Holder's allocable share of the Fund's nonrecourse
indebtedness exceeded the adjusted tax basis of his Unit, such Holder would
realize gain for federal income tax purposes upon the transfer of such Unit to
the extent of such excess. A charitable contribution of Units by a Holder also
would result in income or gain to the extent that the Holder's share of
nonrecourse liabilities exceeds the adjusted tax basis in his Units. Gifts of
Units may also result in gift tax liability pursuant to the rules generally
applicable to all gifts of property.
Investment by Qualified Plans and IRAs
Qualified pension, profit-sharing, stock bonus plans, Keogh Plans
(collectively, "Qualified Plans") and Individual Retirement Accounts ("IRAs")
are generally exempt from taxation except to the extent that "unrelated business
taxable income" (determined in accordance with Sections 511-514 of the Code)
exceeds $1,000 during any fiscal year. Because the Fund will be engaged in the
business of equipment leasing, each Qualified Plan's or IRA's distributive share
of the Fund's taxable income will constitute "unrelated business taxable income"
("UBTI"). Therefore, a Qualified Plan or IRA that purchases Units in the Fund
will be required to report its pro rata share of the Fund's taxable income as
unrelated business taxable income if and to the extent that the Qualified Plan's
or IRA's unrelated business taxable income from all sources exceeds $1,000 in
any taxable year.
A portion of the income from property subject to acquisition
indebtedness also will be included in the unrelated business income of a
tax-exempt entity. For this purpose, indebtedness will constitute acquisition
indebtedness if it was incurred directly or indirectly in connection with the
acquisition or improvement of property.
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Except to the extent of gain or loss from the sale, exchange, or
other disposition of Equipment subject to acquisition indebtedness, and except
to the extent Equipment constitutes inventory or property held primarily for
sale to customers in the ordinary course of a trade or business, gains from the
sale or exchange of Equipment generally will be excluded from unrelated business
taxable income. However, any gain on the disposition of Equipment which is
characterized as ordinary income as a result of the recapture of depreciation
deductions in all events will constitute unrelated business taxable income of
Qualified Plans and IRAs. (See "Sales or Exchanges of Fund Equipment" above.)
If an IRA has UBTI in excess of the $1,000 exemption for any taxable
year, the IRA is subject to income tax on this excess at the same tax rates
applicable to trusts and estates. Even if an IRA is not subject to federal
income tax for any taxable year, if the gross income taken into account in
computing UBTI exceeds $1,000, the IRA customer is still obligated to file a tax
return for such year. Generally, this tax return must be filed with the Service
by April 15th of the following year.
Penalties may be imposed by the Service for failing to file this tax
return when required, and, if tax is due, additional penalties and interest may
be imposed if the tax is not paid in a timely manner. In addition, any tax due
should be paid directly from the IRA. Payment of the tax by the IRA customer may
have other adverse tax consequences.
AN IRA CUSTOMER WHO MAKES AN INVESTMENT IN HIS IRA WHICH MAY RESULT
IN THE REALIZATION OF UBTI IS URGED TO OBTAIN THE ADVICE OF A QUALIFIED TAX
ADVISOR ON THE EFFECT OF REALIZATION OF UBTI BY HIS IRA AND ANY OBLIGATION TO
FILE INCOME TAX RETURNS AND TO PAY TAX ON SUCH UBTI. FOR A DISCUSSION OF THE
ERISA CONSIDERATIONS OF AN INVESTMENT IN THE FUND BY A QUALIFIED PLAN OR IRA,
SEE "ERISA CONSIDERATIONS."
Individual Tax Rates
General. The highest individual tax rate currently is 39.6%. The
benefits of personal exemptions are phased out for taxpayers with an adjusted
gross income over certain thresholds. Further, otherwise allowable itemized
deductions (other than medical expenses, casualty and theft losses and
investment interest) are reduced by an amount equal to 3% of a taxpayer's
adjusted gross income over certain thresholds. In no event, however, are such
deductions reduced by more than 80%.
Capital Gains and Losses. Net capital gain (i.e., the excess of net
long-term capital gains over short-term capital losses) is taxed at a 28%
maximum rate. As a general matter, upon the sale or other disposition of their
Units at a gain, individual Holders who have held their Units for more than 12
but not more than 18 months will be subject to federal income tax at the maximum
tax rate of 28% (15% for individuals whose taxable income does not exceed a
certain threshold). Where an individual has held his Units for more than 18
months, the maximum tax rate on net capital gain will be 20% (10% for
individuals who would otherwise pay 15%). Effective for taxable years beginning
after December 31, 2000, the 20% rate will be reduced to 18% for Units that are
acquired after December 31, 2000 and held more than five years (and the 10% rate
will be reduced to 8% regardless of when the Units were acquired).
In the case of noncorporate Holders, capital losses, whether
long-term or short-term, will only be available to offset $3,000 of ordinary
income in a given taxable year. Any remaining capital loss may be carried
forward indefinitely.
Two Percent Floor on Miscellaneous Itemized Deductions. Noncorporate
Holders may deduct expenses paid or incurred for (a) the production or
collection of income, (b) the management, conservation, or maintenance of
property held for the production of income, or (c) in connection with the
determination, collection or refund of a tax, only to the
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extent such expenses exceed 2% of adjusted gross income. This rule is to apply
with respect to indirect deductions through pass-through entities (such as the
Fund) of amounts that would not be allowable as a deduction if paid or incurred
directly by an individual. Although it is not anticipated that the Fund will
incur any material expenses of this nature, the 2% limit described above may
cause certain expenses allocable to Holders to be nondeductible.
Alternative Minimum Tax
The alternative minimum tax ("AMT") rate for individuals is 26% of
so much of the taxable excess as does not exceed $175,000, plus 28% of so much
of the taxable excess as exceeds $175,000. For this purpose, "taxable excess"
means the amount by which alternative minimum taxable income ("AMTI") exceeds
the exemption amounts: $45,000 for married taxpayers filing jointly, $33,750 for
single individuals and $22,500 for married individuals filing separately or
trusts. (The foregoing exempt amounts are reduced for taxpayers with income in
excess of certain specified levels.) The alternative minimum tax is imposed to
the extent that such tax exceeds the taxpayer's "regular tax" liability for the
year.
AMTI is computed differently than taxable income for regular tax
purposes with respect to various "tax preference" items, including, among other
items, depreciation deductions. Deductions for depreciation of personal property
are computed using slower depreciation methods (i.e., a 150% declining balance
method rather than a 200% declining balance method). Because depreciation for
AMT purposes is not as front-loaded as for regular federal income tax purposes,
the basis of depreciated property for AMT purposes will be higher than its basis
for regular federal income tax purposes. Thus, upon disposition of the property,
the taxpayer may recognize less gain for AMT purposes than for regular federal
income tax purposes.
The tax preference items and adjustments that may be present in the
Fund include, with respect to an item of Equipment, the excess of depreciation
deductions claimed over deductions that would be allowable if the item of
Equipment were were permitted depreciation deductions using the 150% declining
balance method, switching to the straight line method in later years. No
additional items of tax preference are expected to be generated by the Fund, but
certain items of tax preference may apply in the case of certain Holders due to
their particular facts and circumstances unrelated to the Fund. The effect of
the AMT on each Holder will depend upon each Holder's particular circumstances.
Each prospective Holder should therefore consult his own tax advisor as to the
effect of the purchase of Units on his AMT liability.
Fund Tax Returns and Tax Information
The Manager will file the Fund's tax returns using the accrual
method of accounting and will adopt the calendar year as the Fund's taxable
year. The Fund will provide tax information to the Holders within 75 days after
the close of each Fund taxable year. If a Holder is required to file its tax
return on or before March 15, it may be necessary for the Holder to obtain an
extension to file if the tax information referred to above is not distributed
until the end of the 75-day period.
Holders will be required to file their returns consistent with the
information provided on the Fund's informational return or notify the Service of
any inconsistency. A failure to notify the Service of an inconsistent position
will allow the Service automatically to assess and collect the tax, if any,
attributable to the inconsistent treatment.
Under Section 6050K of the Code, a selling Holder will be required
to inform the Fund of the sale or exchange of the Holder's Units within 30 days
of the transaction or, if earlier, January 15 of the calendar year following the
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calendar year in which the transaction occurs. The Fund will be required to
inform the Service of each such transaction in connection with the filing of its
tax information return for the taxable year in which the transaction occurs.
Failure to provide these notices may result in substantial penalties. The Fund
will also be required to inform both the seller and the buyer of Units of the
proportionate interest of those Units in the unrealized receivables (including
potential depreciation recapture) and inventory items of the Fund. This
notification must be made prior to February 1 of the calendar year following the
calendar year in which the transaction occurs.
Interest and Penalties
With certain exceptions, a penalty will be assessed for each month
or fraction thereof (up to a maximum of five months) that the Fund fails to file
(or files an incomplete) federal information return. In addition, a penalty will
be assessed if the Fund fails to furnish to the Holders a correct Schedule K-1
to the federal income tax return for the Fund on or before the prescribed due
date (including any extension thereof).
All penalties related to the accuracy of tax returns will be
consolidated into one penalty equal to 20% of the portion of an understatement
resulting from one or more of the following: negligence or disregard of
applicable rules and regulations; any substantial valuation overstatement; and
any substantial understatement of federal income tax.
The penalty for underpayment of tax attributable to substantial
valuation overstatement applies only if (i) the value or adjusted basis of any
property as claimed on an income tax return exceeds 200% of the correctly
determined amount of its value or adjusted basis and (ii) the underpayment of
tax attributable to the substantial overvaluation exceeds $5,000 ($10,000 in the
case of a corporation other than an S corporation or personal holding company).
In the event an underpayment of tax is attributable to a gross valuation
misstatement, then the penalty is increased from 20% to 40%. A gross valuation
misstatement occurs only if (i) the value or adjusted basis of any property as
claimed on an income tax return exceeds 400% of the correctly determined amount
of its value or adjusted basis and (ii) the underpayment of tax attributable to
such gross valuation misstatement exceeds $5,000 ($10,000 in the case of a
corporation, other than an S corporation or personal holding company). All or
any part of the penalty may be waived by the Service upon the taxpayer's showing
that a reasonable basis existed for the valuation claimed on the return and that
the claim was made in good faith. If the Fund were to overstate the value of
Equipment, a Holder might be liable for this penalty.
There is a 20% penalty on the amount of an underpayment of tax
attributable to the "substantial understatement" of a tax liability. A
substantial understatement is defined as an understatement of federal income tax
for the taxable year that exceeds the greater of 10% of the required tax or
$5,000 ($10,000 for corporations other than personal holding companies and S
corporations). The penalty can be avoided either by (i) disclosing the
questionable item on the tax return and showing there was a reasonable basis for
the tax treatement of such item by the taxpayer, or (ii) by showing that there
was "substantial authority" for taking the position on the return. If a
questionable item is related to a tax shelter (defined as any entity, plan or
arrangement whose principal purpose is the avoidance or evasion of tax), the
understatement penalty can only be avoided by showing that the taxpayer
reasonably believed that the treatment of the item was "more likely than not"
the proper treatment. It should be noted that the Manager will not cause the
Fund to claim a deduction unless the Manager believes, based upon the advice of
its accountants or counsel, that substantial authority exists to support the
deduction.
All interest payable with respect to a federal income tax deficiency
will be compounded daily. Interest rates are redetermined quarterly and are
based on the federal short-term interest rate (the average rate of interest on
Treasury obligations maturing in less than three years) for the first month of
the preceding quarter plus 3%.
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Audit of Tax Returns
An audit of the Fund's information return may result in adjustments
to items of income, gain, deduction, loss or credit reported on such information
return. At a minimum such adjustments will result in a corresponding adjustment
to the federal income tax returns of individual Holders. Such an audit may also
result in a full audit of a Holder's individual tax return (and thereby result
in adjustments to non-Fund as well as Fund items).
The tax treatment of items of Fund income, loss, deduction or credit
will be determined at the Fund level in a unified Fund proceeding, rather than
in separate proceedings with the Holders. Similarly, only one judicial
proceeding contesting a Service determination may be filed on behalf of the Fund
and all Holders.
Provided that the Fund has more than 100 Holders, in the event of
proposed tax deficiency adjustments pursuant to an administrative proceeding at
the Fund level, in general, each Holder (other than a Holder owning less than a
1% profits interest in the Fund) whose name and address is furnished to the
Service (a "notice-holder") will receive notice of the commencement of the Fund
level audit as well as notice of the final Fund administrative adjustment. All
Holders will have the right to participate in the Fund audit proceeding. In
general, each Holder will be free to negotiate his own settlement of the Fund
items with the Service. If the Service were to enter into a settlement agreement
with any Holder, it would be required to offer the same settlement terms to the
other Holders who request settlement. The Fund must designate a "tax matters
partner" who may enter into a settlement on behalf of, and binding upon, Holders
owning less than a 1% profits interest in the Fund. The tax matters partner will
not be permitted to settle on behalf of Holders with less than a 1% profits
interest if (i) an aggregate of 5% or more of such Holders designate with the
Service a notice Holder to receive notice from the Service on behalf of the
group or (ii) such Holders notify the Service that the tax matters partner may
not settle on their behalf. Except for the above-described settlement power
granted the tax matters partner, any settlement entered into by any Holder
(including the tax matters partner) will not be binding on any Holder who does
not wish to be bound thereby. However, the tax matters partner may extend the
statute of limitations for assessment of a deficiency with respect to all
Holders. The Fund has designated the Manager as the tax matters partner.
Registration Provisions
Sections 6111 and 6112 of the Code require (i) registration of
certain tax shelters and (ii) the maintenance of lists of investors
participating in certain tax shelter investments, respectively.
Under Section 6111, anyone who organizes a "tax shelter" must
register such shelter with the Service not later than the day on which occurs
the first offering for sale of interests therein. A "tax shelter" is defined as
any investment with respect to which a person could reasonably infer from
representations made or to be made in connection with an offer for sale of any
interest that, as of the close of any of the first five years, the ratio with
respect to any investor of (A) the sum of the aggregate gross deductions and
350% of the credits potentially allowable to (B) the aggregate of the cash
invested and the adjusted basis of other property contributed by the investor
(reduced by any liability to which the property is subject) (the "tax-shelter
ratio) is greater than two to one.
The Manager has determined that, because of the limited amount of
leverage that will be placed on the Equipment, and because a significant amount
of the Equipment will be "net leased" by the Fund, the Fund is not expected to
generate a tax shelter ratio of greater than two to one. Based on this
determination, the Manager will not register the Fund as a tax shelter.
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Miscellaneous Fund Tax Aspects
Fees for the syndication of the Fund will be required to be
capitalized; Fund organization fees will be required to be capitalized and may
be amortized over a five-year period. Under Code Section 195, a taxpayer must
amortize "start-up expenditures" over a period of 60 months, beginning with the
date on which the business begins. Start-up expenditures are costs incurred in
investigating the creation or organization of a business, or in creating a
business, which would be deductible if incurred in connection with the expansion
of an existing business.
Foreign Tax Considerations
As noted above, the Fund may acquire Equipment which is operated
outside the United States. As a consequence, Holders may be required to file
returns and pay taxes in foreign jurisdictions with respect to the foreign
source income of the Fund. The income taxed by the foreign jurisdiction would in
such a case be calculated according to the tax laws of the foreign jurisdiction,
which may or may not correspond with applicable United States standards.
Holders who have foreign tax liabilities as a result of the purchase
of Units may be entitled to a foreign tax credit or to a deduction for foreign
taxes paid which can be utilized to reduce their United States tax liabilities
or taxable income, respectively. The calculation of the foreign tax credit is
quite complex and no assurance can be given that a credit will be available in
the amount of any foreign tax paid. In particular, prospective Holders should be
aware that United States law does not generally allow a foreign tax credit
greater than the taxpayer's United States federal income tax liability with
respect to the foreign source income of the taxpayer calculated according to
United States rather than the foreign jurisdiction's tax law. Because the United
States tax rate may be lower than the tax rate imposed by a foreign country, it
is possible that a foreign country might impose a tax in an amount greater than
the allowable foreign credit under United states law. In such a case, Holders
would be subject to a higher effective rate of taxation than if no foreign tax
had been imposed. Each Holder should consult his own tax advisor regarding the
applicability of foreign taxes to his own situation.
Prior to the Fund entering into an arrangement which contemplates
the use of Equipment outside the United States, the Manager will consult with
its counsel and with special tax advisor located in the foreign jurisdiction
concerning the possibility of structuring the transaction in a manner which will
enable the Holders to avoid being required to file income tax returns in the
foreign jurisdiction. The Manager has discretion to cause the Fund to enter into
any such arrangement.
Taxation of Foreign Persons
Special rules in the Code govern the U.S. federal income taxation of
nonresident alien individuals, foreign corporations, foreign partnerships and
other foreign investors ("foreign persons"). No attempt is made to provide
herein more than a brief summary of some of the relevant rules. Holders that are
foreign persons should consult their own tax advisors to fully determine the
impact to them of United States federal, state and local income tax laws.
Foreign persons who own Units will be considered to be engaged in a
trade or business in the United States because of the activities of the Fund and
such activities will be deemed to be conducted through a permanent establishment
within the meaning of potentially applicable tax treaties. Therefore, a foreign
person who becomes a Holder of Units will generally be required to file United
States tax returns on an annual basis on which he must report his distributive
share of the Fund's items of income, gain, loss, deduction and credit, and will
be required to pay United States taxes at regular rates on his share of any Fund
net income that is effectively connected with a United States trade
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or business, whether ordinary income or capital gains.
Because the Fund will be deemed engaged in a United States business,
it will be required to withhold with respect to a foreign Holder's distributive
share of the Fund's "effectively connected" income at the maximum regular rate
applicable to such foreign Holder (currently 39.6% for individual foreign
Holders and 35% for corporate foreign Holders). Amounts withheld will be
creditable by a foreign Holder against the foreign Holder's United States income
tax liability. Further, if any portion of a foreign Holder's distributive share
of Fund income is not effectively connected with a United States trade or
business, such income may, depending on its character, be subject to a 30%
United States withholding tax (or such lower rates as may be prescribed under an
applicable income tax treaty).
Foreign corporations that are Holders will also be subject to a
branch profits tax equal to 30% (subject to reduction or complete elimination by
an applicable tax treaty) of the foreign corporation's earnings and profits
effectively connected with a United States business that are withdrawn (or
deemed withdrawn) from investment in the United States.
This tax is payable in addition to the regular United States corporate tax.
A foreign Holder may also be subject to tax on his distributive
share of the Fund's income and gain in his country of nationality or residence
or elsewhere, against which the tax paid to the United States may in some
instances be creditable. The method of taxation in such jurisdictions may differ
considerably from the United States tax system described herein and may be
affected by the United States characterization of the Fund and its income.
Prospective foreign Holders should consult their own tax advisors with respect
to their potential tax liability in such jurisdictions, as well as in the United
States, on income derived from an investment in the Fund.
Future Federal Income Tax Changes
Neither the Manager nor Tax Counsel can predict what additional
legislation, if any, may be proposed by members of Congress by the current
administration, or by any subsequent administration, nor can either predict
which proposals, if any, might ultimately be enacted. Moreover, neither the
Manager nor Tax Counsel can predict what changes may be made to existing
Regulations, or what revisions may occur in the Service's ruling policies. Any
such changes may have a retroactive effect. Consequently, no assurance can be
given that the federal income tax consequences of an investment in Units will
continue to be as described in this Prospectus.
State and Local Taxes
In addition to the federal income tax considerations described
above, prospective Holders should consider applicable state and local taxes
which may be imposed by various jurisdictions. A Holder's distributive share of
the income, gain or loss of the Fund will be required to be included in
determining his reportable income for state or local tax purposes in the
jurisdiction in which he is a resident. Moreover, California and a number of
other states in which the Fund may do business impose taxes on nonresident
Holders, determined with reference to their pro rata share of Fund income
derived from such states; any tax losses associated with an investment in the
Fund from operations in one state may not be available to offset income from
other sources taxable in a different state.
California and a number of other states have adopted a withholding
tax procedure in order to facilitate the collection of taxes from nonresident
and foreign Holders on Fund income derived from such states. Any amounts
withheld would be deemed distributed to the nonresident or foreign Holder and
would therefore reduce the amount of cash actually received by the nonresident
or foreign Holder as a result of such distribution. Nonresidents may be allowed
a credit for the amount so withheld against any income tax imposed by their
state of residency. The Fund cannot, at
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present, estimate the percentage of its future income that will be from states
which have adopted such withholding tax procedures, and it cannot therefore
estimate the required withholding tax, if any. In addition, while the Fund may
apply to the applicable taxing authority of such states for a waiver (or a
partial waiver), if any, of such withholding requirements, no assurance can be
given that such waiver will ultimately be granted.
To the extent that a nonresident Holder pays tax to a state by
virtue of Fund operations within that state, he may be entitled to a deduction
or credit against tax owed to his state of residence with respect to the same
income. Furthermore, estate or inheritance taxes might be payable in such
jurisdiction upon the death of a Holder.
PROSPECTIVE HOLDERS SHOULD BE AWARE THAT, IN COMPUTING THEIR TAXABLE
INCOME FOR THE PURPOSE OF DETERMINING THEIR STATE INCOME TAX LIABILITIES, THEY
MAY BE SUBJECT TO RULES WHICH ARE LESS FAVORABLE THAN THOSE UNDER FEDERAL INCOME
TAX LAWS.
Need for Independent Advice
The foregoing summary is not intended as a substitute for careful
tax planning, particularly as the income tax consequences associated with an
investment in the Fund are complex and certain of them will not be the same for
all taxpayers. ACCORDINGLY, EACH PROSPECTIVE PURCHASER OF UNITS IS STRONGLY
URGED TO CONSULT HIS OWN TAX ADVISORS WITH SPECIFIC REFERENCE TO HIS OWN TAX
SITUATION.
ERISA CONSIDERATIONS
Prohibited Transactions Under ERISA and the Code
Section 4975 of the Code (which applies to all Qualified Plans and
IRAs) and Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (which does not apply to IRAs or to certain Qualified Plans
that are not subject to ERISA's fiduciary rules) prohibit Qualified Plans and
IRAs from engaging in certain transactions involving "plan assets" with parties
that are "disqualified persons" under the Code. "Disqualified persons" include
fiduciaries of the Qualified Plan or IRA, officers, directors, shareholders and
other owners of the company sponsoring the Qualified Plan and natural persons
and legal entities sharing certain family or ownership relationships with other
"disqualified persons."
"Prohibited transactions" include any direct or indirect transfer or
use of a Qualified Plan's or IRA's assets to or for the benefit of a
disqualified person, any act by a fiduciary that involves the use of a Qualified
Plan's or IRA's assets in the fiduciary's individual interest or for the
fiduciary's own account, and any receipt by a fiduciary of consideration for his
or her own personal account from any party dealing with a Qualified Plan or IRA.
Under ERISA, a disqualified person that engages in a prohibited transaction will
be required to disgorge any profits made in connection with the transaction and
will be required to compensate any Qualified Plan that was a party to the
prohibited transaction for any losses sustained by the Qualified Plan. Section
4975 of the Code imposes excise taxes on a disqualified person that engages in a
prohibited transaction with a Qualified Plan or IRA. Section 408(e)(2) of the
Code provides that an IRA will cease to be an IRA and will be treated as having
immediately distributed all of its assets, if it engages in a prohibited
transaction.
Plan Assets
If the Fund's assets were determined under ERISA or the Code to be
"plan assets" of Qualified Plans and/or
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IRAs holding Units, fiduciaries of such Qualified Plans and IRAs might under
certain circumstances be subject to liability for actions taken by the Manager
or its Affiliates, and certain of the transactions described in this Prospectus
in which the Fund might engage, including certain transactions with Affiliates
of the Fund, might constitute prohibited transactions under the Code and ERISA
with respect to such Qualified Plans and IRAs, even if their acquisition of
Units did not originally constitute a prohibited transaction. Moreover,
Qualified Plans (other than IRAs) might be deemed to have delegated their
fiduciary responsibility to the Manager in violation of ERISA.
Although under certain circumstances ERISA and the Code, as
interpreted by the Department of Labor in currently effective regulations, apply
a "look-through" rule under which the assets of an entity in which a Qualified
Plan or IRA has made an equity investment may generally constitute "plan
assets," the applicable regulations except from the application of the
"look-through" principle investments in entities in which equity participation
in the entity by benefit plan investors is not significant.
In order to qualify for the exception described above, "benefit plan
investors" must at all times hold less than 25% of the value of any class of
equity interest in the entity. For this purpose, the value of any equity
interests held by a person (other than a "benefit plan investor") who has
discretionary authority or control with respect to the assets of an entity or
any person who provides investment advice for a fee (direct or indirect) with
respect to such assets, or any affiliate of such a person, is disregarded. A
"benefit plan investor" is any of the following: (a) any employee benefit plan
(as defined in Section 3(3) of ERISA, which definition includes Qualified
Plans), whether or not it is subject to the provisions of Title I of ERISA, (b)
any plan described in Section 4975(e)(1) of the Code (which description includes
Qualified Plans and IRAs), and (c) any entity (such as a common or collective
trust fund of a bank) whose underlying assets include plan assets by reason of a
plan's investment in the entity. As described above under "Who Should Invest"
and below under "Summary of the Operating Agreement - Transferability of Units,"
the sale of Units during this offering and the subsequent transfer of Units will
be limited to the extent that the Manager deems it necessary to qualify for this
exception. Therefore, the Fund's assets should not be "plan assets" of any
Qualified Plan or IRA investor; and no prohibited transaction should occur based
on treatment of the Fund's underlying assets as "plan assets" of Qualified Plan
or IRA investors.
Other ERISA Considerations
In addition to the above considerations in connection with the "plan
asset" question, a fiduciary's decision to cause a Qualified Plan or IRA to
acquire Units should involve, among other factors, considerations that include
whether (a) the investment is in accordance with the documents and instruments
governing the Qualified Plan or IRA, (b) the purchase is prudent in light of the
potential difficulties that may exist in liquidating Units, (c) the investment
will provide sufficient cash distributions in light of the Qualified Plan's
likely required benefit payments, (d) after an acquisition of Units, the
Qualified Plan's investments taken as a whole are sufficiently diversified so as
to minimize the risk of large losses, (e) the investment is made solely in the
interests of plan participants, and (f) the fair market value of Units will be
sufficiently ascertainable, with sufficient frequency, to enable the Qualified
Plan to value its assets on an annual basis in accordance with the Qualified
Plan's rules and policies. Prospective Qualified Plan investors should note
that, with respect to the diversification of assets requirement, the legislative
history of ERISA and a Department of Labor advisory opinion indicate that in
determining whether the assets of a Qualified Plan that has invested in an
entity such as the Fund are sufficiently diversified, it may be relevant to look
through the Qualified Plan's interest in the entity to the underlying portfolio
of assets owned by the entity, regardless of whether the entity's underlying
assets are treated as "plan assets" for the purpose of ERISA's and the Code's
prohibited transaction and other fiduciary duty rules.
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SUMMARY OF THE OPERATING AGREEMENT
The Operating Agreement (attached hereto as Exhibit B) is the
governing instrument establishing the Fund's right under the laws of the State
of California to operate as a limited liability company, and contains the rules
under which the Fund will be operated. The Operating Agreement will be executed
on behalf of each subscriber upon his admission to the Fund by the Manager
acting pursuant to the power of attorney contained in the Subscription
Agreement.
The following is a brief summary of certain provisions of the
Operating Agreement. It does not purport to be complete and it is recommended
that each prospective investor review the Operating Agreement carefully in its
entirety. Aspects of the Operating Agreement relating to allocations of Net
Income, Net Loss and Distributions to Holders and reports to the Members are
summarized elsewhere in this Prospectus. See "Income, Losses and Distributions"
and "Reports to Holders."
The Duties of the Manager
ATEL Financial Corporation is Manager of the Fund and has the
exclusive management and control of all aspects of the business of the Fund.
Affiliates of the Manager will perform certain Equipment acquisition, leasing,
management and disposition services, as well as certain administrative services,
for the Fund. In the course of its management, the Manager may, in its absolute
discretion, acquire, hold title to, sell, re-lease or otherwise dispose of
Equipment and interests therein when and upon such terms as it determines to be
in the best interest of the Fund and employ such persons, including Affiliates
of the Manager, as it deems necessary for the efficient operation of the Fund.
However, prior to the sale or other disposition of Substantially All of the
Assets of the Fund in any single 12-month period, except upon liquidation of the
Fund, Holders owning more than 50% of the total outstanding Units must consent
to such sale or other disposition.
Liability of Holders
A Holder's capital is subject to the risks of the Fund's business.
He is not permitted to take any part in the management or control of the
business and he may not be required to contribute additional capital at any
time. Under the California Act, a Holder will not be liable for Fund obligations
in excess of his unreturned capital contribution and share of undistributed
profits. Notwithstanding the foregoing, a Holder will be liable to the Fund in
an amount equal to any Distribution made by the Fund to such Holder to the
extent that, immediately after the Distribution is made, all liabilities of the
Fund, other than liabilities to Members on account of their interest in the Fund
and liabilities as to which recourse of creditors is limited to specified
property of the Fund, exceed the fair value of the Fund assets, provided that
the fair value of any property that is subject to a liability as to which
recourse of creditors is so limited is included in the Fund assets only to the
extent that the fair value of the property exceeds such liability.
Term and Dissolution
The Fund will continue for a maximum period ending December 31,
2019, but may be dissolved at an earlier date if certain contingencies occur.
The Fund intends to liquidate its assets and distribute the proceeds thereof
beginning after the Reinvestment Period expires (at the end of the sixth full
year following the year during which the Final Closing Date occurs) with final
liquidation expected to occur approximately ten to eleven years after the Final
Closing Date. A Holder may not withdraw from the Fund prior to dissolution, but
may assign his Units to others or may, under certain circumstances, request that
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the Fund repurchase his Units. See "Repurchase of Units" below under this
caption. The contingencies whereupon the Fund may be dissolved are as follows:
(a) The Fund becomes insolvent or bankrupt;
(b) The removal, adjudication of bankruptcy, insolvency, disability
or incompetence or dissolution or death of a Manager unless (i) there is a
remaining Manager, and the remaining Manager, within 45 days of the date of such
event, elects to continue the business of the Fund or (ii) if, upon removal of
the last remaining Manager, the Members holding in excess of 50% of the
outstanding Units elect a successor Manager prior to the effective date of
removal and such successor Manager elects to continue the business of the Fund;
(c) An election to dissolve upon the vote of Members owning more
than 50% of the total outstanding Units; or
(d) The disposition of all interests in Equipment and other assets
of the Fund and the receipt by the Fund of the proceeds of such disposition.
Voting Rights of Members
In any vote of the Members, each Member will be entitled to cast one
vote for each Unit which such Member owns as of the date designated as the
record date for such vote. Notwithstanding the foregoing, Units held by the
Manager or any Affiliate of the Manager will not be entitled to vote, and will
not be deemed to be "outstanding" for purposes of any vote, upon matters which
involve a conflict between the interests of the Manager and the Fund, including,
but not limited to, any vote on the proposed removal or withdrawal of the
Manager as Manager or any proposed amendment to the Operating Agreement which
would expand or extend the rights, authorities or powers of the Manager. The
Members have the right, by vote of Members owning more than 50% of the total
outstanding Units, to vote upon:
(a) Removal or voluntary withdrawal of the Manager;
(b) Election of a successor Manager;
(c) Termination and dissolution of the Fund;
(d) Amendment of the Operating Agreement, provided such amendment is
not for the purpose of reflecting the addition or substitution of Members, the
reduction of Capital Accounts or for any other purposes prohibited under the
Operating Agreement as described below;
(e) The sale or other disposition of Substantially All of the Assets
in a single sale, or in multiple sales in the same twelve-month period, except
in the liquidation and winding up of the business of the Fund upon its
termination and dissolution; and
(f) The extension of the term of the Fund.
Without the consent of the Members to be adversely affected by the
amendment, the Operating Agreement may not be amended so as to (i) convert a
Holder into a Manager; (ii) modify the limited liability of a Holder; (iii)
alter the interest of the Members in Net Income, Net Loss and Distributions; or
(iv) affect the status of the Fund as a partnership for federal income tax
purposes.
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Dissenters' Rights and Limitations on Mergers and Roll-ups
Section 16.7 of the Operating Agreement provides that Members
holding not less than 90% of the outstanding Units must approve any proposal
that involves an acquisition, conversion, merger or consolidation transaction in
which the Holders are issued new securities in the resulting entity. The rights
of any dissenting Holders will be as provided under Section 16.7 and Sections
17600 through 17613 of the California Act. Such provisions generally give a
dissenting Member the right, subject to certain procedural requirements, to
require that the company repurchase the dissenting Member's interest at a price
equal to its fair market value.
Meetings
The Manager may at any time call a meeting of the Members or a vote
of the Members without a meeting, on matters on which they are entitled to vote,
and shall call such meeting or for a vote without a meeting following receipt of
a written request therefore of Members holding 10% or more of the total
outstanding Units. Upon such written request of Members holding 10% or more of
the total outstanding Units, such Members may propose a vote by all Members on
any matter on which Members are entitled to vote under the Operating Agreement.
Books of Account and Records
The Manager is responsible for keeping books of account and records
of the Fund reflecting all of the contributions to the capital of the Fund and
all of the expenses and transactions of the Fund. Such books of account and
records will include the following:
(i) A current list of the full name and last known business
or residence address of each Member set forth in alphabetical order
together with the Original Invested Capital, the Units held and the
share in Net Income and Net Loss of each Member;
(ii) A copy of the articles of organization and all
amendments;
(iii) Copies of the Fund's federal, state and local income
tax or information returns and reports, if any, for the six most recent taxable
years;
(iv) Copies of the original of the Operating Agreement and
all amendments;
(v) Financial statements of the Fund for the six most recent
fiscal years; and
(vi) The Fund's books and records for at least the current
and past three fiscal years.
Such books of account and records will be kept at the principal
place of business of the Fund in the State of California, and each Member and
his authorized representatives shall have, at all times during reasonable
business hours, free access to and the right to inspect and copy at their
expense such books of account and all records of the Fund. Upon the request of a
Member, the Manager shall promptly deliver to such Member at the expense of the
Fund a copy of the information described in (i), (ii) and (iv) above. In the
event a Member is required to compel the Manager to produce the foregoing
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records as a result of the Manager's breach of its obligation to deliver such
information, the Manager shall reimburse the Member for all reasonable costs
actually incurred in compelling production.
Status Of Units
Each Unit will be fully paid and nonassessable and all Units have
equal voting and other rights, except as noted above with respect to the voting
of Units held by the Manager or its Affiliates.
Transferability of Units
The Manager may condition the effectiveness of any proposed transfer
of Units or an interest in Units on such representations, warranties, opinions
of counsel, and other assurances as it considers appropriate as to:
(i) such assignment or transfer not resulting, in the opinion of
counsel for the Fund, in the Fund being considered to have
terminated within the meaning of Section 708 of the Code;
(ii) the transferee not being a minor or an incompetent;
(iii) the transfer or assignment not violating federal or state
securities laws;
(iv) the transferor or the transferee not holding Units
representing Original Invested Capital of less than $2,500
($2,000 in the case of IRAs and Keogh Plans);
(v) such assignee or transferee being a Citizen of the United
States;
(vi) such assignment or transfer not constituting a transfer "on a
secondary market (or the substantial equivalent thereof)"
within the meaning of Section 7704 of the Code or otherwise
adversely affecting the tax status of the Fund;
(vii) such assignment or transfer not causing Fund assets to be
deemed Plan Assets under ERISA; and
(viii) the transferor filing with the Fund a duly executed and
acknowledged counterpart of the instrument effecting such
assignment or transfer, which instrument evidences the
written acceptance by the assignee or transferee of all of
the terms and provisions of the Operating Agreement, contains
a representation that such assignment or transfer was
made in accordance with all applicable laws and regulations
(including any investor suitability requirements) and in all
other respects is satisfactory in form and substance to the
Manager.
In connection with state securities laws restrictions on transfer,
Section 260.141.11 of the Rules of the California Commissioner of Corporations
states:
(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6, 260.141.10
or 260.534 of the Rules of the California Corporations Commissioner
shall cause a copy of this section to be delivered to each issuee or
transferee of such security at the time the certificate evidencing
the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest
therein, without the prior written consent of the Commissioner
(until this condition is removed pursuant to Section 260.141.12 of
the Rules of the California Corporations Commissioner), except: (1)
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to the issuer; (2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Corporations Code of the State of California or Section
260.105.14 of the Rules of the California Corporations Commissioner;
(4) to the transferor's ancestors, descendants, or spouse, or any
custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee
by a trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants, or spouse; (5) to holders of
securities of the same class of the same issuer; (6) by way of gift
or donation inter vivos or on death; (7) by or through a
broker-dealer licensed under the Corporations Code of the State of
California (either acting as such or as a finder) to a resident of a
foreign state, territory, or country who is neither domiciled in the
State of California to the knowledge of the broker-dealer, nor
actually present in the State of California if the sale of such
securities is not in violation of any securities law of the foreign
state, territory, or country concerned; (8) to a broker-dealer
licensed under the Corporations Code of the State of California in a
principal transaction, or as an underwriter or member of an
underwriting syndicate or selling group; (9) if the interest sold or
transferred is a pledge or other lien given by the purchaser to the
seller upon a sale of the security for which the California
Corporations Commissioner's written consent is obtained or is not
required under Section 260.141.11 of the Rules of the California
Corporations Commissioner; (10) by way of a sale qualified under
Section 25111, 25112, 25113, or 25121 of the Corporations Code of
the State of California, of the securities to be transferred,
provided that no order under Section 25140 or subdivision (a) of
Section 25143 of the Corporations Code of the State of California is
in effect with respect to such qualification; (11) by a corporation
to a wholly-owned subsidiary of such corporation, or by a
wholly-owned subsidiary of a corporation to such corporation; (12)
by way of an exchange qualified under Section 25111, 25112, or 25113
of the Corporations Code of the State of California, provided that
no order under Section 25140 or subdivision (a) of Section 25143 of
the Corporations Code of the State of California is in effect with
respect to such qualification; (13) between residents of foreign
states, territories, or countries who are neither domiciled nor
actually present in the State of California; (14) to the California
State Controller pursuant to the Unclaimed Property Law or to the
administrator of the unclaimed property law of another state; or
(15) by the California State Controller pursuant to the Unclaimed
Property Law or by the administrator of the unclaimed property law
of another state if, in either such case, such person (i) discloses
to potential purchasers at the sale that transfer of the securities
is restricted under Section 260.141.11 of the Rules of the
California Corporations Commissioner, (ii) delivers to each
purchaser a copy of Section 260.141.11 of the Rules of the
California Corporations Commissioner, and (iii) advises the
California Corporations Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall
contain the legend required by Section 260.141.11 of the Rules of
the California Corporations Commissioner; or (17) by way of an offer
and sale of outstanding securities in an issuer transaction that is
subject to the qualification requirement of Section 25110 of the
Corporations Code but exempt from that qualification requirement by
subdivision (f) of Section 25102.
(c) The certificates representing such securities subject to
such a restriction on transfer, whether upon initial issuance or
upon any transfer thereof, shall bear on their face a legend,
prominently stamped or printed thereon in capital letters of not
less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES."
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Any assignment, sale, exchange or other transfer in contravention of
any of the provisions of the Operating Agreement shall be void and ineffectual,
and shall not bind or be recognized by the Fund.
An Assignee of Record will be entitled to receive allocations and
Distributions from the Fund attributable to the Units acquired by reason of such
assignment from and after the effective date of the assignment of such Units to
him; provided, however, the Fund and the Manager will be entitled to treat the
assignor of such Units as the absolute owner thereof in all respects, and will
incur no liability for allocations of Net Income, Net Loss or Distributions, or
transmittal of reports and notices requested to be given to Holders which are
made in good faith to such assignor until such time as the written instrument of
assignment has been received by the Fund and recorded on its books and the
effective date of an assignment of Units has passed. The effective date of an
assignment of Units and the date on which the Assignee shall be deemed an
Assignee of Record shall be the first day of the first full fiscal quarter
following the later of (i) the date set forth on the written instrument of
assignment, or (ii) the date on which the Fund has actual notice of the
assignment.
All costs and expenses incurred by the Fund in connection with the
transfer of a Unit shall be paid by the transferring Holder.
An Assignee may only be substituted as a Member in the place of the
assignor with the prior consent of the Manager, which consent may be withheld in
the Manager's sole discretion. Any substituted Member must also agree to be
bound by the provisions of the Operating Agreement. The Manager shall cause the
Operating Agreement to be amended to reflect the substitution of Members at
least once in each fiscal quarter.
The Manager will, with respect to any Units owned by it, enjoy all
of the rights, other than the right to request that the Fund repurchase any such
Units, and be subject to all of the obligations and duties of a Member, except
as noted above under "Voting Rights of Members."
Repurchase of Units
In the event a Holder ceases to be a United States Citizen or Resident
Alien for any reason, he must immediately notify the Fund and may be required to
tender his Units to the Fund for repurchase in order to protect the Fund's
interest in certain leases. The Fund will have the absolute right, but no
obligation, to repurchase the Units for a price equal to the Unit Holder's
capital account, computed in accordance with federal tax accounting principles,
allocable to the repurchased Units as of the last day of the quarter during
which the precipitating event occurs.
Upon any repurchase of Units by the Fund, the Units will be canceled
and will no longer be deemed to represent an interest in the Fund, and the
interests of all other Unit holders will be adjusted accordingly. The Manager
may, in its discretion and on such terms as it deems appropriate, repurchase
Units in the event that it deems such repurchase in the best interests of the
Fund, but the Fund is in no event required to make any such repurchase. No such
repurchase may be effected if it would impair the capital of the Fund or cause
the Fund or any remaining Unit holder to suffer a material adverse tax
consequence.
Indemnification of the Manager
The Operating Agreement provides that the Manager and its affiliates
who perform services for the Fund will be indemnified against any liability or
loss arising out of any act or omission by any such Person when acting in
connection with the business of the Fund, provided that such Person determines
in good faith that its conduct was in the best interest of the Fund and,
provided further, that its conduct did not constitute fraud, negligence, breach
of fiduciary duty or misconduct. The Operating Agreement also provides that, to
the extent permitted by law, the Fund will indemnify the Manager against
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liability and related expenses (including attorneys' fees) incurred in dealing
with third parties, provided that the conduct of the Manager is consistent with
the standards described in the preceding sentence. A successful claim for such
indemnification would deplete the Fund's capital assets by the amount paid.
The Manager will not be indemnified against liabilities arising
under the Securities Act of 1933. Furthermore, the Manager has agreed to
indemnify the Fund against any loss or liability it may incur as a result of any
violation of state or federal securities laws by the Manager or its Affiliates.
The Fund will not pay for any insurance covering liability of the Manager or any
other persons for actions or omissions for which indemnification is not
permitted by the Operating Agreement, provided, however, that this will not
preclude the naming of the Manager or any Affiliates as additional insured
parties on policies obtained for the benefit of the Fund to the extent that
there is no additional cost to the Fund.
The Manager will have fiduciary responsibility for the safekeeping
and use of all funds and assets of the Fund. See "Fiduciary Duty of the
Manager."
PLAN OF DISTRIBUTION
Distribution
The Units will be offered and sold on a "best efforts
minimum/maximum" basis through ATEL Securities Corporation (the "Dealer
Manager"), a broker-dealer which is an Affiliate of the Manager (see "Conflicts
of Interest" and "Management"), and through other participating broker-dealers
who are members of the National Association of Securities Dealers, Inc.
("NASD"). The Dealer Manager will manage the selling group and provide certain
wholesaling services. Although the Dealer Manager may participate in the
offering on the same basis as other broker-dealers, it has not in the past
effected, nor does it anticipate in this offering directly effecting, any
significant sales of the Units. The Dealer Manager is a wholly-owned subsidiary
of ATEL formed solely to manage offerings sponsored by ATEL and its Affiliates.
The minimum offering amount is $1,200,000 (120,000 Units) and the
maximum is $150,000,000 (15,000,000 Units).
The minimum subscription is 250 Units ($2,500); provided that an IRA
or Keogh Plan may subscribe for a minimum of 200 Units ($2,000). Additional
investments may subsequently be made in a minimum amount of 50 Units ($500), and
additional one-Unit ($10) increments.
The broker-dealers are not obligated to obtain any subscriptions,
and there is no assurance that any Units will be sold.
Subscriptions will be effective only on acceptance by the Manager
and the right is reserved to reject any subscription in whole or in part. The
Subscription Agreement provided to the investor for execution must be
accompanied by a copy of this Prospectus, and each subscriber has the right to
cancel his or her subscription during a period of five business days after the
subscriber has submitted the executed Subscription Agreement to the
broker-dealer through which the Units are sold. The Fund and/or the selling
broker-dealer will send each investor a written confirmation of the acceptance
of the investor's subscription for Units upon admission to the Fund.
The offering will terminate on a date not later than two years from
the date of this Prospectus. The offering of Units after the end of one year
from the date hereof will be subject to renewal or requalification in all those
jurisdictions requiring such renewal or requalification. However, the offering
may be terminated at any time by the Manager. If subscriptions for a minimum of
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120,000 Units have not been received and accepted prior to a date one year from
the date hereof, all funds received will be promptly returned together with any
interest earned thereon.
Selling Compensation and Certain Expenses
The Dealer Manager will receive selling commissions in an amount
equal to 9.5% of the Gross Proceeds, and will reallow to participating
broker-dealers selling commissions equal to 8% of the Gross Proceeds
attributable to Units sold by them. Out of the 1.5% of the selling commissions
retained by the Dealer Manager, it will pay wholesaling compensation in the form
of salaries and commissions to its personnel and certain participating
broker-dealers, reimburse certain wholesaling expenses incurred by participating
broker-dealers and reimburse amounts which may be advanced by ATEL for certain
overhead expenses of the Dealer Manager and its personnel.
The Dealer Manager (out of its compensation equal to 1.5% of the
Gross Proceeds) or the Fund (up to a maximum amount equal to 0.5% of the Gross
Proceeds) may pay or reimburse participating dealers a portion of their actual
expenses in connection with this offering (including expenses incurred in
coordinating their sales efforts, training their personnel and expenses
incurred, by such broker-dealers as the Dealer Manager shall designate, in
performing "wholesaling" functions). The Fund may also pay or reimburse
participating dealers for their due diligence expenses. Subject to NASD approval
and compliance with Rule 2810(b)(4)(E) of the NASD's Conduct Rules, the Fund,
the Manager or the Dealer Manager may establish noncash sales incentive programs
for sales representatives of participating dealers, provided that the aggregate
value of any noncash incentive awards to any individual by the Manager or any of
its Affiliates during any year does not exceed the sum of $100. The total of all
selling compensation, including sales commissions, wholesaling salaries and
commissions, retail and wholesaling expense reimbursements, broker dealer and
investment seminar expenses, non-cash incentive payments and any other forms of
compensation paid to the Dealer Manager or other participating broker-dealers
(including any unreimbursed overhead costs of the Dealer Manager advanced by
ATEL), will not exceed 10% of the Gross Proceeds, except that up to an
additional 0.5% of the Gross Proceeds may, in the sole discretion of the
Manager, be paid in connection with accountable, bona fide due diligence
activities.
The Manager has agreed to indemnify the participating
broker-dealers, including the Dealer Manager, against certain liabilities
arising under the Securities Act of 1933, as amended.
At various times during the offering period the Manager may elect to
pay a portion of the set-up fees for IRAs which purchase Units. The Manager will
pay a maximum of $25 toward such fees for each IRA which purchases the minimum
number of Units or more.
The Fund will not pay referral or similar fees to any accountants,
attorneys or other persons in connection with the distribution of Units.
Escrow Arrangements
Until the minimum number of subscriptions are received and the
initial subscribers are admitted to the Fund, subscription checks will be made
payable to, and subscription funds will be held in an escrow account at, U.S.
Bank, National Association, San Francisco, California (the "Bank"). Until such
time all participating broker-dealers will forward subscription checks to the
Dealer Manager promptly but in no event later than noon of the next business day
following receipt thereof, and the Dealer Manager will forward such
subscriptions to the bank escrow agent promptly, but in no event later than noon
of the second business day following receipt thereof by the Dealer Manager.
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Subscription proceeds held in the escrow account will be invested in
United States government securities, including Treasury bills, securities issued
or guaranteed by United States government agencies, certificates of deposit and
time or demand deposits in banks and savings and loan associations which are
insured by United States government agencies or deposits in members of the
Federal Home Loan Bank System, as directed by the Manager. Subscribers may not
withdraw funds from the escrow account. Upon the earlier of termination of the
offering or satisfaction of the escrow condition, any interest which accrues on
funds held in escrow will be distributed to subscribers and allocated among them
on the basis of the respective amounts of the subscriptions and the number of
days that such amounts were on deposit in the escrow account.
Notwithstanding the foregoing, subscriptions received from
Pennsylvania subscribers will be placed in a separate escrow account and will
not be counted toward satisfaction of the minimum escrow condition. Instead,
such Pennsylvania subscriptions will be released to the Fund only at such time
as total subscription proceeds received by the Fund from all subscribers,
including the escrowed Pennsylvania subscriptions, equal not less than $7.5
million in Gross Proceeds.
The Original Invested Capital of the initial subscribers will be
transferred from escrow to the Fund at any time after subscriptions for the
minimum of 120,000 Units have been accepted by the Manager and received and
collected by the bank escrow agent, and such subscribers will be admitted to the
Fund within 15 days thereafter. Subsequent subscribers will have their
subscriptions accepted or rejected within 30 days after receipt. Investors whose
subscriptions are accepted will be admitted to the Fund promptly after such
acceptance, but not later than 30 days thereafter. Rejected subscription funds
will be promptly returned.
The Bank's sole role in this offering is that of escrow holder and
as such it has not reviewed any of the offering materials and makes no
representations whatsoever as to the nature of this offering or its compliance
or lack thereof with any applicable state or federal laws, rules or regulations.
The Bank neither endorses, recommends nor guarantees any aspect of an investment
in the Units. The Bank does not represent the interests of the Members or
potential investors. Its duties are limited as expressly set forth in the Escrow
Agreement and interested parties may request a copy of the Escrow Agreement from
the Manager. Pursuant to the terms of the Escrow Agreement, the Fund has
directed the Bank to distribute to the subscribers any interest earned on funds
held in escrow as described above under this caption.
Investments By Certain Persons
The Manager and its Affiliates may, but do not currently intend to,
acquire such number of Units as they determine. Except as noted below, any Units
purchased by the Manager or its Affiliates will be purchased on the same terms
as the other Units offered hereby. Such Units will be acquired solely for
investment and not with a view to or for distribution. Any Units acquired by
such Persons will not be applied to the requirement that a minimum of 120,000
Units be purchased by all subscribers.
The Manager, the Dealer Manager or the broker-dealers engaged by the
Dealer Manager to sell the Units, or any of their Affiliates or employees, may
purchase Units in this offering net of the 8% retail selling commissions at a
per Unit price of $9.20. In addition, clients of an investment advisor which is
registered under the Investment Advisors Act of 1940 and is an Affiliate of a
participating broker-dealer may also purchase Units with reduced selling
commissions, subject to the express approval of such participating broker-dealer
Affiliate, if the client (i) has been advised by such advisor over a continuous
course of time on investments other than the purchase of Units, and (ii) is not
being charged by the advisor or its Affiliates, through the payment of
commissions or otherwise, for the advice rendered by such advisor specifically
in connection with the purchase of Units. In no event will the net contribution
to the Fund by such persons be less than $9.20 per Unit. The Dealer Manager may
require that any investor claiming the right to purchase on the foregoing terms
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demonstrate the basis for such right through reasonable documentation and
certification. Sales to any such purchasers on such terms would be for
investment purposes only, and the Fund and the Manager would not recognize any
attempted transfer of such Units unless the Manager is satisfied that the
original purchase was not made with a view to distribution of the securities and
that any proposed transfer was in compliance with all applicable laws and
regulations, including the NASD's Rules of Fair Practice.
State Requirements
In addition to the investor suitability and minimum investment
standards established by the Fund and described under "Who Should Invest" above,
the securities administrators of certain states have imposed more restrictive
standards on investments in Units effected within their jurisdictions. Any such
additional requirements imposed after the date of this Prospectus will be
reflected in a supplement hereto, and investors are urged to review any such
supplement to ascertain whether more restrictive standards are applicable to
their investment.
The following states have imposed additional conditions on
investments in such jurisdictions:
Iowa. The minimum investment for all IRAs in Iowa is $2,500
(250 Units).
Maine. The minimum amount which may be invested by a Maine
investor on any subscription, whether an initial investment or any subsequent
investment, is $2,500 (250 Units), or $2,000 (200 Units) for IRAs and Qualified
Plans.
Michigan. An investor in Michigan may not invest in Units any
amount in excess of 10% of the investor's net worth (exclusive of home, home
furnishings and automobiles)
Missouri. Each Missouri investor must (i) have an annual gross
income of at least $60,000 and a net worth (exclusive of home, home furnishings
and automobiles) of at least $60,000 in excess of his Original Invested Capital;
or (ii) have a net worth (determined with the same exclusions) of at least
$225,000 in excess of his Original Invested Capital.
Nebraska. The minimum investment for all investors in Nebraska,
except IRAs and Keogh Plans, is $5,000 (500 Units).
North Carolina. Each North Carolina investor must (i) have an annual
gross income of at least $60,000 and a net worth (exclusive of home, home
furnishings and automobiles) of at least $60,000 in excess of his Original
Invested Capital; or (ii) have a net worth (determined with the same exclusions)
of at least $225,000 in excess of his Original Invested Capital.
Pennsylvania. In addition to the investor suitability standards set
forth under "Who Should Invest," an investor in Pennsylvania may not invest in
Units an amount in excess of 10% of the investor's net worth (with such net
worth calculated exclusive of home, home furnishings and automobiles).
Furthermore, Pennsylvania subscriptions will be subject to a separate escrow and
will be released to the Fund only when the Fund has received aggregate
subscriptions from all investors equal to not less than $7.5 million. See
"Escrow Arrangements" above.
REPORTS TO HOLDERS
The Fund fiscal year will be the calendar year; provided, however,
that the Manager may, subject to the approval of applicable taxing authorities,
adopt another fiscal year if they deem it to be in the Fund's best interest.
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The Fund will furnish to each Holder certain reports, statements
and tax information, as set forth in Article 14 of the Operating Agreement. The
Manager shall have prepared and distributed at least annually, at the Fund's
expense, (i) a statement of cash flow, (ii) Fund information necessary in the
preparation of each Holder's federal income tax returns; (iii) a report of the
business of the Fund; (iv) a statement as to the compensation received by the
Manager and its Affiliates from the Fund during the year; (v) a report
identifying the sources of all Fund Distributions for the year; and (vi) a
special report containing an opinion of a certified public accounting firm and a
breakdown of the costs reimbursed by the Fund to the Manager or its Affiliates.
Following the close of each taxable year of the Fund, the Fund will distribute
to the Holders copies of the annual report and annual financial statements
(balance sheet, statement of income or loss, statement of members' equity and
statement of cash flow, accompanied by a report containing an opinion of
independent certified public accountants) within 120 days thereafter, and such
statements will be prepared on an accrual basis in accordance with generally
accepted accounting principals; and all Fund information necessary in the
preparation of their federal income tax returns within 75 days after the end of
each fiscal year. The Manager does not intend to cause the Fund to prepare and
distribute any reconciliation between the financial information contained in the
foregoing reports and the information furnished to Holders for income tax
purposes.
During the offering period and until the Fund is fully invested, the
Fund will also furnish to each Holder, at least quarterly, information
concerning the investments of the Fund.
The Fund will also furnish to each Holder a quarterly report
covering each of the first three quarters of Fund operations in each calendar
year, including unaudited financial statements (each of which shall include a
balance sheet, statement of income or loss for said quarterly period and
statement of Cash from Operations and Cash from Sales or Refinancing for said
quarterly period) and a statement of other pertinent information regarding the
Fund and its activities during the quarterly period covered by the report.
Copies of such statements and other pertinent information shall be distributed
to each Holder within 60 days after the close of the quarterly period covered by
the report of the Fund.
SUPPLEMENTAL SALES MATERIAL
In addition to and apart from this Prospectus, the Fund may use
certain sales material in connection with the offering of Units. In certain
jurisdictions such sales material may not be available. This material will
include information relating to this offering, the Manager and its Affiliates
and brochures and articles and publications concerning equipment leasing.
The Fund will use only sales material which has been approved by
such appropriate regulatory bodies as may be required. The offering is made only
by means of this Prospectus. Although the information contained in such sales
material does not conflict with any of the information contained in this
Prospectus, such material does not purport to be complete, and should not be
considered as part of this Prospectus or the registration statement of which
this Prospectus is a part, or as incorporated by reference in this Prospectus or
said registration statement or as forming the basis of the offering of Units
which are offered hereby.
LEGAL OPINIONS
The legality of the Units has been passed upon by Derenthal &
Dannhauser, San Francisco, California, and the statements under the captions
"Income Tax Consequences" and "ERISA Considerations" as they relate to federal
income tax and ERISA matters have been reviewed and passed upon by Jackson,
Tufts, Cole & Black, San Francisco, California.
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EXPERTS
The consolidated balance sheet of ATEL Financial Corporation and
subsidiary at July 31, 1997 appearing in this Prospectus and Registration
Statement has been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and is included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Fund has filed with the Securities and Exchange Commission,
Washington, D.C., a registration statement under the Securities Act of 1933, as
amended, with respect to the Units offered pursuant to this Prospectus. For
further information, reference is made to the registration statement and the
exhibits thereto which are available for inspection at no fee in the principal
office of the Commission at 450 Fifth Street, Northwest, Washington, D.C. 20549.
Photostatic copies of the material containing this information may be obtained
from the Commission upon paying of the fees prescribed by the rules and
regulations of the Commission. This Prospectus contains a fair summary of the
material provisions of the exhibits filed with the Commission. This Prospectus
does not knowingly contain any untrue statement of a material fact or omit to
state any material fact required to be stated herein or necessary to make the
statements herein not misleading.
GLOSSARY
The following terms used in this Prospectus shall (unless otherwise
expressly provided herein or unless the context otherwise requires) have the
following respective meanings:
"Acquisition Expenses" shall mean expenses including, but not
limited to, legal fees and expenses, travel and communication expenses, costs of
appraisals, accounting fees and expenses, and miscellaneous expenses relating to
selection and acquisition of Equipment, whether or not acquired.
"Acquisition Fees" shall mean the total of all fees and commissions
paid by any party in connection with the initial purchase or manufacture of
Equipment. Included in the computation of such fees or commissions shall be any
commission, selection fee, financing fee, nonrecurring management fee, or any
fee of a similar nature, however designated.
"Adjusted Invested Capital" shall mean, as of any date, the
Original Invested Capital attributable to the Units held by any Person on or
before such date, as decreased (but not below zero) by the amount by which (i)
all Distributions with respect to such Units on or before the date of
determination pursuant to any provision of the Operating Agreement exceed (ii)
the Priority Distribution attributable to such Units for such period.
"Affiliate" of a Person shall mean (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling 10% or more of the outstanding voting
securities or beneficial interests of such Person, (iii) any officer, director,
trustee or partner of such Person and (iv) if such Person is an officer,
director, trustee, partner or holder of 10% or more of the voting securities or
beneficial interests of such Person, any other company for which such Person
acts in such capacity. However, such term shall not include a Person who is a
partner in a partnership or joint venture with the Fund if such Person is not
otherwise an Affiliate.
"Asset Management Fee" shall mean the fee payable to the Manager
and its Affiliates under the provisions of Section 8.2 of the Operating
Agreement. See "Management Compensation."
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"Asset Management Fee Limit" means the total fees calculated
pursuant to the alternative fee schedule set forth under Section 8.3 of the
Operating Agreement, equal to the aggregate of an Equipment Management Fee,
Incentive Management Fee, and Equipment Resale/Re-Leasing Fee, plus the Carried
Interest, determined in the manner described therein.
"Assignee" shall mean a Person who has acquired a beneficial
interest in one or more Units from a third party but who is neither a
substituted Holder nor an Assignee of Record.
"Assignee of Record" shall mean an Assignee who has acquired a
beneficial interest in one or more Units whose ownership has been recorded on
the books of the Fund and which ownership is the subject of a written instrument
of assignment, the effective date of which assignment has passed.
"ATEL" shall mean ATEL Financial Corporation, a California
corporation.
"California Act" shall mean the Beverly-Killea Limited Liability
Company Act, Title 2.5, Chapters 1-15, of the California Corporations Code, as
it may be amended from time to time.
"Capital Account" shall mean, with respect to any Member, such
Member's Capital Account determined in accordance with Section 6.7 of the
Operating Agreement.
"Carried Interest" shall mean the allocable share of Fund
Distributions of Cash from Operations and Cash from Sales or Refinancing payable
to the Manager, as a Member, pursuant to Sections 10.4 and 10.5 of the
Agreement.
"Cash from Operations" shall mean the excess of Gross Revenues
(which excludes revenues from Equipment sales or refinancing) over cash
disbursements (including the Equipment Management Fee and amounts reinvested by
the Fund in Equipment) without reduction for depreciation and amortization of
intangibles such as organization and underwriting costs but after a reasonable
allowance for cash for repairs, replacements, contingencies and anticipated
obligations, as determined by the Manager.
"Cash from Reserve Account" shall mean that portion of the Net
Proceeds not utilized in the acquisition of Equipment, including cash maintained
according to the provisions of Section 9.4 of the Operating Agreement.
"Cash from Sales or Refinancing" shall mean the net cash realized by
the Fund from the sale, refinancing or other disposition of any Equipment after
payment of all expenses related to the transaction.
"Closing Date" shall mean such date designated by the Manager for
the termination of the offering of Units, but not later than ___________, 2000
(two years from the initial date of the Fund's Prospectus). Extension of the
offering beyond one year from the date of the Prospectus shall be subject to the
qualification of the offering for any such extension in those jurisdictions
which may limit the offering period to one year. "Initial Closing Date" shall
mean the date on which subscribers for Units, other than the initial Holder, are
first admitted to the Fund as Holders. "Final Closing Date" shall mean the last
date on which subscribers for Units are admitted to the Fund as Holders.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent federal revenue laws.
94
<PAGE>
"Distributions" shall mean any cash distributed to Holders and the
Manager arising from their respective interests in the Fund.
"ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended.
"Equipment" shall mean the equipment acquired and owned by the Fund
to be leased by the Fund to others as well as any Fund interest in equipment,
including without limitation its rights, whether direct or indirect, in all
trusts, joint ventures, leases, chattel paper, options and other contract rights
with respect to equipment.
"Equipment Management Fee" shall mean an element of the alternative
fee schedule calculation to determine the Asset Management Fee Limit under the
provisions of Section 8.3.2 of the Operating Agreement. See "Management
Compensation."
"Equipment Re-leasing Fee" shall mean an element of the alternative
fee schedule calculation to determine the Asset Management Fee Limit under the
provisions of Section 8.3.2 of the Operating Agreement. See "Management
Compensation."
"Equipment Resale Fee" shall mean an element of the alternative fee
schedule calculation to determine the Asset Management Fee Limit under the
provisions of Section 8.3.2 of the Operating Agreement. See "Management
Compensation."
"Front-End Fees" shall mean fees and expenses paid by any party for
any services rendered during the Fund's organization and acquisition phase
including Organization and Offering Expenses, Leasing Fees, Acquisition Fees,
Acquisition Expenses, and any other similar fees, however designated.
Notwithstanding the foregoing, Front-End Fees shall not include any Acquisition
Fees or Acquisition Expenses paid by a manufacturer of Equipment to any of its
employees unless such Persons are Affiliates of the Manager.
"Full Payout Lease" shall mean a lease under which the
non-cancellable rental payments due during the initial term of the lease are at
least sufficient to cover the purchase price of the Equipment leased.
"Fund" shall mean ATEL Capital Equipment Fund VIII, LLC, the
California limited liability company created under the Operating Agreement.
"Fund Manager" or "Manager" shall mean ATEL Financial Corporation
("ATEL"), a California corporation, or any other Person or Persons which succeed
it in such capacity. The Manager is referred to throughout the Prospectus as
"ATEL" or the "Manager."
"Fund Minimum Gain" shall have the meaning set forth in Regulations
Section 1.704-2(d)(1).
"Gross Proceeds" shall mean the aggregate total of the Original
Invested Capital of the initial and all of the additional Holders.
"Gross Lease Revenues" shall mean all revenues from the operation
and lease of the Equipment other than from security deposits paid by lessees
thereof. The term "Gross Revenues" shall not include revenues from the sale,
refinancing or other disposition of Equipment.
"High Payout Lease" shall mean a lease under which the
noncancellable rental payments and other payment obligations of the lessee due
95
<PAGE>
through the initial term of the lease are equal to at least 90% of the original
purchase price paid by the Fund for the Equipment.
"Holders" shall mean owners of Units who are either Members or
Assignees of Record, and reference to a "Holder" shall be to any one of them.
The Manager shall not be considered to be a Holder except to the extent it also
owns Units.
"Incentive Management Fee" shall mean an element of the alternative
fee schedule calculation to determine the Asset Management Fee Limit under the
provisions of Section 8.3.2 of the Operating Agreement. See "Management
Compensation."
"IRA" shall mean an individual retirement account qualifying under
Section 408 of the Code.
"Investment in Equipment" shall mean the amount of Gross Proceeds
actually paid or allocated to the purchase of Equipment acquired by the Fund,
any amount of Gross Proceeds reserved pursuant to Section 9.4 of the Operating
Agreement up to a maximum of 3% of Gross Proceeds and other cash payments such
as interest and taxes, but excluding Front-End Fees.
"Members" shall mean the initial Members and any other Persons who
are admitted to the Fund as additional or substituted Members. Reference to a
"Member" shall refer to any one of them.
"Net Income" or "Net Loss" shall mean the taxable income or taxable
loss of the Fund as determined for federal income tax purposes, computed by
taking into account each item of Fund income, gain, loss, deduction or credit
not already included in the computation of taxable income and taxable loss, but
does not mean Distributions.
"Net Lease Provisions" shall mean contractual arrangements under
which the lessee assumes responsibility for, and bears the cost of, insurance,
taxes, maintenance, repair and operation of the leased asset and where
non-cancellable rental payments under the lease are absolutely net to the
lessor, notwithstanding that some minor costs or responsibilities remain with
the Fund as lessor or that the Fund retains the option to require and pay for a
higher standard of care or greater level of maintenance or insurance than would
be imposed on the lessee under the terms of the lease.
"Net Proceeds" shall mean the total Gross Proceeds less Organization
and Offering Expenses.
"Operating Lease" shall mean a lease under which the aggregate
rental payments due during the initial term of the lease are less than the
purchase price of the Equipment leased.
"Operating Revenues" means the total for any period of all Gross
Lease Revenues plus all Cash from Sales or Refinancing.
"Organization and Offering Expenses" shall mean those expenses
incurred in connection with preparing the Fund for registration and subsequently
offering and distributing Units to the public, including selling commissions and
all advertising expenses except advertising expenses related to the leasing of
Equipment.
"Original Invested Capital" shall mean the amount in cash
contributed by each Member to the capital of the Fund for his interest in the
96
<PAGE>
Fund, which amount shall be attributed to Units in the hands of a subsequent
Holder.
"Operating Agreement" or "Agreement" shall mean the Limited
Liability Company Operating Agreement of ATEL Capital Equipment Fund VIII, LLC,
as it may be amended from time to time.
"Person" shall mean any natural person, partnership, corporation,
association or other legal entity.
"Priority Distribution" shall mean a hypothetical amount determined
solely for purposes of the alternative fee schedule calculation to determine the
Asset Management Fee Limit under the provisions of Section 8.3 of the Operating
Agreement. Such amount will equal, for any calendar year or other period with
respect to the Units held by any Person, the average Adjusted Invested Capital
with respect to such Units during such period multiplied by 10% per annum
(calculated on a cumulative basis, compounded daily, from the last day of the
calendar quarter in which the capital contribution of the initial purchaser of
such Units was received by the Fund and pro rated for any fraction of a calendar
year for which such calculation is made).
"Prospectus" shall mean the final prospectus filed in connection
with the registration of the Units with the Securities and Exchange Commission
on Form S-1, as amended, together with any supplement thereto which may be
subsequently filed with such Commission.
"Purchase Price of Equipment" shall mean the price paid upon the
purchase or sale of a particular item of equipment including all liens and
mortgages on the equipment, but excluding points and prepaid interest.
"Qualified Plan" shall mean employee trusts (or employer individual
retirement accounts), Keogh Plans and corporate retirement plans qualifying
under Section 401(a) of the Code.
"Regulations" or "Treasury Regulations" shall mean the income tax
regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Reinvestment Period" shall mean the period commencing with the
Initial Closing Date and ending on a date 72 months after the last day of the
fiscal year during which the Final Closing Date occurs.
"Reimbursable Administrative Expenses" shall mean the ordinary
recurring administration expenses incurred by the Manager and reimbursed by the
Fund. Such expenses shall not include interest, depreciation, equipment
maintenance or repair, third party services or other non-administrative
expenses.
"Resident Alien" shall mean a resident alien as defined within the
Federal Aviation Act of 1958, as amended from time to time, or any successor
statute, or any regulations adopted pursuant to such Act or any successor
statute.
"Roll-Up" shall mean a transaction involving the acquisition,
merger, conversion or consolidation, either directly or indirectly, of the Fund
and the issuance of securities of a Roll-Up Entity. Such term does not include:
(a) any transaction if the securities of the Fund have
been for at least twelve months traded through the National
Association of Securities Dealers, Inc. Automated Quotation
National Market System; or
(b) a transaction involving the conversion to corporate,
trust or association form of only the Fund, if, as a consequence of
the transaction, there will be no significant adverse change in any
of the following
97
<PAGE>
(i) the Members voting rights;
(ii) the term of existence of the Fund;
(iii) the terms of compensation of the Manager and its
Affiliates;or (iv) the Fund's investment objectives.
"Service" shall mean the United States Internal Revenue Service or
its successor.
"Substantially All of the Assets" shall mean, unless the context
otherwise dictates, Equipment representing 66 2/3% or more of the net book value
of all Equipment as of the end of the most recently completed fiscal quarter.
"Unit" shall mean the interest in the Fund representing Original
Invested Capital in the amount of $10 and shall entitle the Holder thereof to
the rights herein provided.
"United States Citizen" shall mean a "citizen of the United States"
as defined within the Federal Aviation Act of 1958, as amended from time to
time, or any successor statute, or any regulations adopted pursuant to such Act
or any successor statute.
98
<PAGE>
FINANCIAL STATEMENTS
Set forth below are the following financial statements:
ATEL Financial Corporation and Subsidiary
Report of Independent Auditors F - 2
Consolidated Balance Sheet, July 31, 1997 F - 3
Notes to Consolidated Balance Sheet, July 31, 1997 F - 4
Consolidated Balance Sheet, December 31, 1997 (Unaudited) F - 10
Notes to Consolidated Balance Sheet, December 31, 1997 (Unaudited) F - 11
ATEL Capital Equipment Fund VIII, LLC
[Audited balance sheet to be filed by amendment]
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
ATEL Financial Corporation
We have audited the accompanying consolidated balance sheet of ATEL Financial
Corporation and subsidiary as of July 31, 1997. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free from material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of ATEL
Financial Corporation at July 31, 1997 in conformity with generally accepted
accounting principles.
Ernst & Young LLP
San Francisco, California
September 19, 1997
F-2
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JULY 31, 1997
ASSETS
Cash and cash equivalents $1,883,530
Accounts receivable, net of allowance for doubtful accounts
of $10,828 100,636
Amounts due from affiliated partnerships 1,798,472
Income taxes receivable (from affiliated companies) 858,942
Investments in leases 3,814,833
Cash surrender value of life insurance 300,000
Property and equipment, net of accumulated depreciation
of $986,890 563,193
Leasehold improvements, net of accumulated amortization
of $187,360 546,080
Other assets 186,931
----------------
$10,052,617
================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Non-recourse debt $1,491,451
Amounts due to affiliated companies 1,228,290
Accounts payable and accrued liabilities 722,441
Customer deposits 83,389
Deferred liabilities and credits:
Unearned acquisition fees 1,210,812
Deferred income taxes 1,712,657
----------------
Total liabilities 6,449,040
Shareholder's equity:
Common stock, 100,000 shares authorized, 666 1/2 shares issued
and outstanding 2,000
Additional paid-in capital 93,855
Retained earnings 3,507,722
----------------
Total shareholder's equity 3,603,577
----------------
$10,052,617
================
See accompanying notes.
F-3
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1997
1. Summary of significant accounting policies:
Organization and principles of consolidation:
The consolidated balance sheet includes the accounts of ATEL Financial
Corporation (ATEL) and its wholly owned subsidiary, ATEL Securities Corporation
(ASC). ATEL is a wholly owned subsidiary of ATEL Capital Group (ACG).
ATEL is a California corporation formed in July 1977 to engage in the brokering
and leasing of equipment for its own account and the account of affiliated
partnerships. ASC was formed in November 1985 and was registered as a securities
broker/dealer in February 1986. All significant intercompany balances have been
eliminated in consolidation.
ATEL organizes and sponsors limited partnerships (the "affiliated partnerships"
or the "programs") engaged in equipment leasing and sales activities. It also
acts as the corporate general partner in these affiliated partnerships. Through
these programs, ACG derives various fees and also receives reimbursements for
expenses incurred on behalf of these entities, of which certain fees and expense
reimbursements are allocated to ATEL and the balance is allocated to various
other affiliates. The basis for determination of the types and amounts of these
fees and reimbursements are provided in agreements with the various programs.
In addition, under the terms of the partnership agreements for certain of the
affiliated partnerships for which ATEL is a general partner, ATEL is entitled to
participate in net cash from operations and sales or refinancing of equipment
owned by the affiliated partnerships. A portion of ATEL's participation is
subordinated to the limited partners' full recovery of their initial invested
capital contributions plus a specified return on their investments. No earnings
or equity interests from such subordinated interests have been recognized
through July 31, 1997. The shareholders of ATEL Capital Group are also general
partners in certain of these affiliated partnerships.
Operating leases:
Assets on operating leases are stated at cost less accumulated depreciation.
Revenues from operating leases are recognized evenly over the terms of the
related leases. Depreciation is provided by the straight-line method over the
term of the lease to an amount equal to the equipment's estimated residual value
at lease termination.
Initial direct costs:
Initial direct costs are capitalized and amortized over the terms of the related
leases.
Investment in leveraged leases:
Leases which are financed principally with non-recourse debt at lease inception
and which meet certain other criteria are accounted for as leveraged leases.
Leveraged lease contracts receivable are stated net of the related non-recourse
debt service (which includes unpaid principal and aggregate interest on such
debt) plus estimated residual values. Unearned income represents the excess of
anticipated cash flows (after taking into account the related debt service and
residual values) over the investment in the lease and is amortized using a
constant rate of return applied to the net investment when such investment is
positive.
F-4
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1997
1. Summary of significant accounting policies (continued):
Residual interests:
Residual interests represent the present value of ATEL's proportionate interest
(calculated at the time of the transaction) in the estimated residual value of
equipment originally owned by ATEL and subsequently sold to a third party where
ATEL retains an unconditional right to participate in such residual value upon
the expiration of the related lease. This retained residual value is presented
as an asset until the ultimate liquidation of the underlying equipment and
realization of the participation.
Acquisition fees:
Acquisition fees received from the affiliated partnerships on equipment
purchased prior to 1995, generally 3.5% to 4.75% of the affiliated partnerships'
equipment cost, were deferred and are recognized as income as services are
provided in connection with the partnerships' acquisition of equipment and
leases. It is estimated that these services will be rendered over a period of
seven years. Beginning in 1995, acquisition services are performed by an
affiliate.
Property and equipment:
Property and equipment is stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the respective assets,
which range from three to seven years.
Leasehold improvements:
Leasehold improvements are stated at cost. Amortization is calculated using the
straight-line method over the lives of the related leases or estimated lives,
whichever is shorter.
Cash surrender value of life insurance
ATEL purchased two single premium key-man life insurance policies to cover its
two officer-shareholders. ATEL is a beneficiary under the contracts for $300,000
of cash surrender values and death benefits. The spouses are the beneficiaries
for amounts above $300,000.
Income taxes:
For federal and state income tax reporting, ATEL's taxable income is included in
the returns filed by its parent. For financial reporting, ATEL's income tax
provision is calculated on a separate return basis. The current portion is
included in the intercompany account with the parent. Deferred taxes are
calculated using the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Credit risk:
Financial instruments which potentially subject the Company to concentrations of
credit risk include cash and cash equivalents. The Company places its cash
deposits and temporary cash investments with creditworthy, high quality
financial institutions. The concentration of such deposits and temporary cash
investments is not deemed to create a significant risk to the Company.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-5
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1997
2. Investments in leases:
Investments in leases consist of the following:
Equipment on operating leases, net of accumulated depreciation $2,872,550
Residual interests 682,227
Assets held for sale or lease 3,523
Investment in leveraged leases 256,533
----------------
$3,814,833
================
Operating leases:
Equipment on operating leases consists of the following:
Electrical cogeneration plant (estimated useful life, 20 years) $2,565,815
Concrete hauling trucks (estimated useful life, 7 years) 1,793,410
----------------
4,359,225
Less accumulated depreciation (1,486,675)
----------------
Equipment on operating leases, net of accumulated depreciation $2,872,550
================
At July 31, 1997, the aggregate amounts of future minimum lease payments
receivable from operating leases are as follows:
Year ending July 31,
1998 $641,295
1999 286,590
2000 290,999
2001 290,999
2002 290,999
Thereafter 24,250
----------------
$1,825,132
================
Leveraged leases:
ATEL participates in leveraged lease transactions in which the cost of assets
leased to others is financed primarily by loans from financial institutions but
ownership of property is retained by ATEL. The lessees' rental obligations are
assigned to the financial institutions and the related property is pledged as
collateral for the loans and are without deficiency liability (non-recourse)
against ATEL. Equipment under leveraged leases includes coal mining and
processing equipment and over-the-road tractors and trailers. The net investment
in leveraged leases is as follows:
Aggregate rentals receivable $2,579,317
Aggregate principal and interest payable on non-recourse loans (2,579,317)
Estimated residual value of leased assets 381,000
Less unearned income (124,467)
----------------
Investment in leveraged leases 256,533
Deferred tax liability, included in the accompanying balance
sheet (322,747)
----------------
Net investment in leveraged leases ($66,214)
================
F-6
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1997
2. Investments in leases (continued):
General lease terms and concentration of credit risk:
Operating and leveraged leases generally provide that the lessee will be
responsible for maintenance, insurance and similar costs (referred to as net
leases).
ATEL leases equipment to lessees in diversified industries. As of July 31, 1997,
equipment representing 19% and 13% of total assets was leased to lessees in the
machine tool and heavy construction industries, respectively. Leases are subject
to the Company's credit committee review. The leases provide for the
repossession of the equipment in the event of default.
3. Non-recourse debt:
Non-recourse debt consists of the following:
Note payable to financial institution, interest at 9.6094% per
year, concrete hauling trucks and related leases pledged as
collateral, due in various installments through 2002 $1,112,412
Note payable to financial institution, interest at 10.87% per
year, cogeneration plant and related lease pledged as
collateral, due in quarterly installments of $100,801 through
July 1998 379,039
----------------
$1,491,451
================
The net book value of assets financed with non-recourse debt was $2,872,550 at
July 31, 1997.
Future minimum payments on non-recourse debt are as follows:
Principal Interest Total
Year ending July 31, Payments Payments Payments
1998 $516,173 $125,122 $641,295
1999 201,397 85,193 286,590
2000 226,437 64,562 290,999
2001 249,180 41,819 290,999
2002 274,207 16,792 290,999
Thereafter 24,057 193 24,250
---------------- ---------------- ----------------
$1,491,451 $333,681 $1,825,132
================ ================ ================
F-7
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 1997
4. Income taxes:
Deferred income taxes as of July 31, 1997 reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. At
July 31, 1997, deferred tax assets total $131,050 and deferred tax liabilities
total $1,843,707.
Deferred income taxes arise primarily from differences in the reporting of lease
income, depreciation, acquisition fees and valuation accounts for tax purposes
as compared to their treatment for financial reporting purposes.
5. Line of credit:
ATEL participates with ACG, certain other subsidiaries of ACG and with certain
affiliated partnerships, in a $90,000,000 line of credit facility with a lender
to be used in connection with warehousing lease transactions. The line expires
October 28, 1997. Included in this line of credit is a $1,000,000 facility
available for operations and working capital. At July 31, 1997, ATEL had no
borrowings related to the line of credit. At July 31, 1997, $1,000,000 was
borrowed under a separate small ticket lease facility by another subsidiary of
ACG relating to lease transactions. Interest is at the bank's prime rate (8.5%
at July 31, 1997) or at LIBOR plus 1.5% (7.14% at July 31, 1997).
These facilities, when used, are collateralized by (i) leases and equipment
owned by the specific borrower and financed by the lines and (ii) all other
assets owned by the borrower except equipment, lease receipts and residual
values specifically pledged to other equipment funding sources. ATEL's
borrowings under the facility are guaranteed by ACG and/or its shareholders.
In separate facilities under the line, the affiliated partnerships have borrowed
$8,000,000 as July 31, 1997. These funds are collateralized by the assets owned
by the affiliated partnerships, except equipment, lease receipts and residual
values specifically pledged to other equipment funding sources.
6. Commitments and contingencies:
Office lease:
ATEL occupies office space under operating leases expiring through December
2002. Future minimum payments for fiscal year periods under the leases are
$526,279 in 1998, $536,162 in 1999, $550,001 in 2000, $559,886 in 2001 and
$233,286 in 2002.
7. Reimbursements of operating costs:
The Limited Partnership Agreements of the affiliated partnerships allow for the
reimbursement of costs incurred by ACG and its subsidiaries in providing
administrative services to the Partnerships, of which a portion of such amounts
is allocated to ATEL. Administrative services provided include partnership
accounting, investor relations, legal counsel and lease and equipment
documentation. ACG and its subsidiaries are not reimbursed for services where
they are entitled to receive a separate fee as compensation for such services,
such as acquiring and overseeing the management of equipment. Reimbursable
operating costs incurred by ACG and its subsidiaries are allocated to the
Partnerships based upon actual time incurred by employees working on partnership
business and an allocation of rent and other costs based on utilization studies.
Accrual and payment of reimbursable costs and management fees due from ATEL Cash
Distribution Fund were voluntarily suspended in May 1994. As of July 31, 1997,
$1,798,472 remained outstanding from affiliated partnerships for reimbursable
operating and syndication costs and management fees.
F-8
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(Unaudited)
DECEMBER 31, 1997
ASSETS
Cash and cash equivalents $2,300,643
Accounts receivable, net of allowance for doubtful
accounts of $10,828 68,262
Amounts due from affiliated partnerships 1,560,859
Income taxes receivable (from affiliated companies) 1,482,034
Income taxes refundable 221,438
Investments in leases 3,711,870
Cash surrender value of life insurance 300,000
Property and equipment, net of accumulated depreciation
of $1,053,610 543,100
Leasehold improvements, net of accumulated amortization
of $224,335 552,506
Other assets 244,416
----------------
$10,985,128
================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Non-recourse debt $1,277,969
Amounts due to affiliated companies 3,962,207
Accounts payable and accrued liabilities 645,695
Customer deposits 92,919
Deferred liabilities and credits:
Unearned acquisition fees 808,628
Deferred income taxes 1,712,657
----------------
Total liabilities 8,500,075
Shareholder's equity:
Common stock, 100,000 shares authorized, 666 1/2shares
issued and outstanding 2,000
Additional paid-in capital 93,855
Retained earnings 2,389,198
----------------
Total shareholder's equity 2,485,053
----------------
$10,985,128
================
See accompanying notes.
F-9
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
(Unaudited)
DECEMBER 31, 1997
1. Summary of significant accounting policies:
Organization and principles of consolidation:
The consolidated balance sheet includes the accounts of ATEL Financial
Corporation (ATEL) and its wholly owned subsidiary, ATEL Securities Corporation
(ASC). ATEL is a wholly owned subsidiary of ATEL Capital Group (ACG).
ATEL is a California corporation formed in July 1977 to engage in the brokering
and leasing of equipment for its own account and the account of affiliated
partnerships. ASC was formed in November 1985 and was registered as a securities
broker/dealer in February 1986. All significant intercompany balances have been
eliminated in consolidation.
ATEL organizes and sponsors limited partnerships (the "affiliated partnerships"
or the "programs") engaged in equipment leasing and sales activities. It also
acts as the corporate general partner in these affiliated partnerships. Through
these programs, ACG derives various fees and also receives reimbursements for
expenses incurred on behalf of these entities, of which certain fees and expense
reimbursements are allocated to ATEL and the balance is allocated to various
other affiliates. The basis for determination of the types and amounts of these
fees and reimbursements are provided in agreements with the various programs.
In addition, under the terms of the partnership agreements for certain of the
affiliated partnerships for which ATEL is a general partner, ATEL is entitled to
participate in net cash from operations and sales or refinancing of equipment
owned by the affiliated partnerships. A portion of ATEL's participation is
subordinated to the limited partners' full recovery of their initial invested
capital contributions plus a specified return on their investments. No earnings
or equity interests from such subordinated interests have been recognized
through December 31, 1997. The shareholders of ATEL Capital Group are also
general partners in certain of these affiliated partnerships.
Operating leases:
Assets on operating leases are stated at cost less accumulated depreciation.
Revenues from operating leases are recognized evenly over the terms of the
related leases. Depreciation is provided by the straight-line method over the
term of the lease to an amount equal to the equipment's estimated residual value
at lease termination.
Initial direct costs:
Initial direct costs are capitalized and amortized over the terms of the related
leases.
Investment in leveraged leases:
Leases which are financed principally with non-recourse debt at lease inception
and which meet certain other criteria are accounted for as leveraged leases.
Leveraged lease contracts receivable are stated net of the related non-recourse
debt service (which includes unpaid principal and aggregate interest on such
debt) plus estimated residual values. Unearned income represents the excess of
anticipated cash flows (after taking into account the related debt service and
residual values) over the investment in the lease and is amortized using a
constant rate of return applied to the net investment when such investment is
positive.
F-10
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
(Unaudited)
DECEMBER 31, 1997
1. Summary of significant accounting policies (continued):
Residual interests:
Residual interests represent the present value of ATEL's proportionate interest
(calculated at the time of the transaction) in the estimated residual value of
equipment originally owned by ATEL and subsequently sold to a third party where
ATEL retains an unconditional right to participate in such residual value upon
the expiration of the related lease. This retained residual value is presented
as an asset until the ultimate liquidation of the underlying equipment and
realization of the participation.
Acquisition fees:
Acquisition fees received from the affiliated partnerships on equipment
purchased prior to 1995, generally 3.5% to 4.75% of the affiliated partnerships'
equipment cost, were deferred and are recognized as income as services are
provided in connection with the partnerships' acquisition of equipment and
leases. It is estimated that these services will be rendered over a period of
seven years. Beginning in 1995, acquisition services are performed by an
affiliate.
Property and equipment:
Property and equipment is stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the respective assets,
which range from three to seven years.
Leasehold improvements:
Leasehold improvements are stated at cost. Amortization is calculated using the
straight-line method over the lives of the related leases or estimated lives,
whichever is shorter.
Cash surrender value of life insurance
ATEL purchased two single premium key-man life insurance policies to cover its
two officer-shareholders. ATEL is a beneficiary under the contracts for $300,000
of cash surrender values and death benefits. The spouses are the beneficiaries
for amounts above $300,000.
Income taxes:
For federal and state income tax reporting, ATEL's taxable income is included in
the returns filed by its parent. For financial reporting, ATEL's income tax
provision is calculated on a separate return basis. The current portion is
included in the intercompany account with the parent. Deferred taxes are
calculated using the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
F-11
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
(Unaudited)
DECEMBER 31, 1997
1. Summary of significant accounting policies (continued):
Credit risk:
Financial instruments which potentially subject the Company to concentrations of
credit risk include cash and cash equivalents. The Company places its cash
deposits and temporary cash investments with creditworthy, high quality
financial institutions. The concentration of such deposits and temporary cash
investments is not deemed to create a significant risk to the Company.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Investments in leases:
Investments in leases consist of the following:
Equipment on operating leases, net of accumulated depreciation $2,748,441
Residual interests 682,227
Assets held for sale or lease 3,523
Investment in leveraged leases 277,679
----------------
$3,711,870
================
Operating leases:
Equipment on operating leases consists of the following:
Electrical cogeneration plant (estimated useful life,
20 years) $2,565,815
Concrete hauling trucks (estimated useful life, 7 years) 1,793,410
----------------
4,359,225
Less accumulated depreciation (1,610,784)
----------------
Equipment on operating leases, net of accumulated depreciation $2,748,441
================
At December 31, 1997, the aggregate amounts of future minimum lease payments
receivable from operating leases are as follows:
Year ending July 31,
1998 $374,609
1999 286,590
2000 290,999
2001 290,999
2002 290,999
Thereafter 24,250
----------------
$1,558,446
================
F-12
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
(Unaudited)
DECEMBER 31, 1997
2. Investments in leases (continued):
Leveraged leases:
ATEL participates in leveraged lease transactions in which the cost of assets
leased to others is financed primarily by loans from financial institutions but
ownership of property is retained by ATEL. The lessees' rental obligations are
assigned to the financial institutions and the related property is pledged as
collateral for the loans and are without deficiency liability (non-recourse)
against ATEL. Equipment under leveraged leases includes coal mining and
processing equipment and over-the-road tractors and trailers. The net investment
in leveraged leases is as follows:
Aggregate rentals receivable $2,489,714
Aggregate principal and interest payable on non-recourse
loans (2,489,714)
Estimated residual value of leased assets 381,000
Less unearned income (103,321)
----------------
Investment in leveraged leases 277,679
Deferred tax liability, included in the accompanying
balance sheet (322,747)
----------------
Net investment in leveraged leases ($45,068)
================
General lease terms and concentration of credit risk:
Operating and leveraged leases generally provide that the lessee will be
responsible for maintenance, insurance and similar costs (referred to as net
leases).
ATEL leases equipment to lessees in diversified industries. As of December 31,
1997, equipment representing 13% and 11% of total assets was leased to lessees
in the machine tool and heavy construction industries, respectively. Leases are
subject to the Company's credit committee review. The leases provide for the
repossession of the equipment in the event of default.
3. Non-recourse debt:
Non-recourse debt consists of the following:
Note payable to financial institution, interest at 9.6094%
per year, concrete hauling trucks and related leases
pledged as collateral, due in various installments
through 2002 $1,056,864
Note payable to financial institution, interest at 10.87% per
year, cogeneration plant and related lease pledged as
collateral, due in quarterly installments of $100,801
through July 1998 221,105
----------------
$1,277,969
================
The net book value of assets financed with non-recourse debt was $2,248,441 at
December 31, 1997.
F-13
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
(Unaudited)
DECEMBER 31, 1997
3. Non-recourse debt (continued):
Future minimum payments on non-recourse debt are as follows:
Principal Interest Total
Year ending July 31, Payments Payments Payments
1998 $302,691 $71,918 $374,609
1999 201,397 85,193 286,590
2000 226,437 64,562 290,999
2001 249,180 41,819 290,999
2002 274,207 16,792 290,999
Thereafter 24,057 193 24,250
---------------- ---------------- ----------------
$1,277,969 $280,477 $1,558,446
================ ================ ================
4. Income taxes:
Deferred income taxes as of December 31, 1997 reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. At
December 31, 1997, deferred tax assets total $131,050 and deferred tax
liabilities total $1,843,707.
Deferred income taxes arise primarily from differences in the reporting of lease
income, depreciation, acquisition fees and valuation accounts for tax purposes
as compared to their treatment for financial reporting purposes.
5. Line of credit:
ATEL participates with ACG, certain other subsidiaries of ACG and with certain
affiliated partnerships, in a $90,000,000 line of credit facility (which was
increased to $105,000,000 through March 31, 1998) with a lender to be used in
connection with warehousing lease transactions. The line expires October 28,
1998. Included in this line of credit is a $1,000,000 facility available for
operations and working capital. At December 31, 1997, ATEL had no borrowings
related to the line of credit. At December 31, 1997, $1,000,000 was borrowed
under a separate small ticket lease facility by another subsidiary of ACG
relating to lease transactions. At December 31, 1997, $37,104,727 was borrowed
under a separate warehousing facility by another subsidiary of ACG relating to
lease transactions. Interest is at the bank's prime rate (8 1/2% at December 31,
1997) or at LIBOR plus 1 1/2% (7.47% at December 31, 1997).
These facilities, when used, are collateralized by (i) leases and equipment
owned by the specific borrower and financed by the lines and (ii) all other
assets owned by the borrower except equipment, lease receipts and residual
values specifically pledged to other equipment funding sources. ATEL's
borrowings under the facility are guaranteed by ACG and/or its shareholders.
In separate facilities under the line, the affiliated partnerships have borrowed
$49,140,460 as December 31, 1997. These funds are collateralized by the assets
owned by the affiliated partnerships, except equipment, lease receipts and
residual values specifically pledged to other equipment funding sources.
F-14
<PAGE>
ATEL FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
(Unaudited)
DECEMBER 31, 1997
6. Commitments and contingencies:
Office lease:
ATEL occupies office space under operating leases expiring through December
2002. Future minimum payments for fiscal year periods under the leases are
$306,996 in 1998, $536,162 in 1999, $550,001 in 2000, $559,886 in 2001 and
$233,286 in 2002.
7. Reimbursements of operating costs:
The Limited Partnership Agreements of the affiliated partnerships allow for the
reimbursement of costs incurred by ACG and its subsidiaries in providing
administrative services to the Partnerships, of which a portion of such amounts
is allocated to ATEL. Administrative services provided include partnership
accounting, investor relations, legal counsel and lease and equipment
documentation. ACG and its subsidiaries are not reimbursed for services where
they are entitled to receive a separate fee as compensation for such services,
such as acquiring and overseeing the management of equipment. Reimbursable
operating costs incurred by ACG and its subsidiaries are allocated to the
Partnerships based upon actual time incurred by employees working on partnership
business and an allocation of rent and other costs based on utilization studies.
Accrual and payment of reimbursable costs and management fees due from ATEL Cash
Distribution Fund were voluntarily suspended in May 1994. As of December 31,
1997, $1,560,859 remained outstanding from affiliated partnerships for
reimbursable operating and syndication costs and management fees.
F-15
<PAGE>
- --------------------------------------------------------------------------------
PRIOR PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
ATEL Financial Corporation ("ATEL"), the General Partner of the Fund, and its
affiliates have extensive experience in the equipment leasing industry,
including: (i) originating and financing leveraged and single investor lease
transactions for corporate investors, (ii) acting as a broker/packager by
arranging equity and debt participants for equipment leasing transactions
originated by other companies, (iii) consulting on the pricing and structuring
of equipment lease transactions for banks, leasing companies and corporations,
(iv) organizing and offering individual ownership and limited partnership
investment leasing programs and (v) supervising and arranging for the
supervision of equipment management and marketing on leasing transactions
involving total equipment costs in excess of $1 billion. In addition to the
Fund, ATEL has sponsored six prior public and one private equipment leasing
limited partnership(s). See "Prior Performance Summary" for a summary of
information regarding such prior programs.
The first prior partnership, ATEL Lease Income Fund 1985-A ("ALIF"), completed a
private placement of $218,500 of its limited partnership interests in April 1986
from a total of 12 investors. ALIF had acquired a variety of equipment with a
total purchase cost of approximately $296,627 as of December 31, 1997. All such
equipment had been sold as of December 31, 1997 and the partnership has ceased
operations. See Table VI - "Sales or Disposals of Equipment" in this Exhibit A.
The second prior partnership, ATEL Cash Distribution Fund ("ACDF"), commenced a
public offering of up to $10,000,000 of its limited partnership interests on
March 11, 1986. ACDF terminated its offering on December 18, 1987 after raising
a total of $10,000,000 in offering proceeds from a total of approximately 1,000
investors, all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF acquired
a variety of types of equipment with a total purchase cost of approximately
$11,133,679 as of December 31, 1997. See Table V - "Acquisition of Equipment by
Prior Programs" in Exhibit A for further information concerning the types of
equipment acquired by ACDF. All such equipment had been sold as of December 31,
1997. See Table VI - "Sales or Disposals of Equipment" in Exhibit A. Through
December 31, 1997, ACDF had made cash distributions to its investors in the
aggregate amount of $1,121.03 per $1,000 invested. Of this amount a total of
$244.89 represents investment income and $876.14 represents return of capital.
See Table III - "Operating Results of Prior Programs" in this Exhibit A for
further information concerning such distributions. See Table IV - "Results of
Completed Program" in this Exhibit A for further information.
The third prior partnership, ATEL Cash Distribution Fund II ("ACDF II"),
commenced a public offering of up to $25,000,000 (with an option to increase the
offering to $35,000,000) of its limited partnership interests on January 4,
1988. ACDF II terminated its offering on January 3, 1990 after raising a total
of $35,000,000 in offering proceeds from a total of approximately 3,100
investors, all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF II had
acquired a variety of types of equipment with a total purchase cost of
approximately $52,270,536 as of December 31, 1997. See Table V "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF II. Of such equipment, items representing an
original purchase cost of approximately $40,977,271 had been sold as of December
31, 1997. See Table VI - "Sales or Disposals of Equipment" in Exhibit A. Through
December 31, 1997, ACDF II had made cash distributions to its investors in the
aggregate amount of $1,082.31 per $1,000 invested. Of this amount a total of
$278.64 represents investment income and $803.67 represents return of capital.
See Table III - "Operating Results of Prior Programs" in this Exhibit A for
further information concerning such distributions.
A-1
<PAGE>
The fourth prior partnership, ATEL Cash Distribution Fund III ("ACDF III"),
commenced a public offering of up to $50,000,000 (with an option to increase the
offering to $75,000,000) of its limited partnership interests on January 4,
1990. ACDF III terminated its offering on January 3, 1992 after raising a total
of $73,855,840 in offering proceeds from a total of approximately 4,822
investors, all of which proceeds have been committed to equipment acquisitions,
estimated organization and offering expenses and capital reserves. ACDF III had
acquired a variety of types of equipment with a total purchase cost of
approximately $99,629,941 as of December 31, 1997. See Table V "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF III. Of such equipment, items representing
an original purchase cost of approximately $56,050,601 had been sold as of
December 31, 1997. See Table VI - "Sales or Disposals of Equipment" in Exhibit
A. Through December 31, 1997, ACDF III had made cash distributions to its
investors in the aggregate amount of $936.88 per $1,000 invested. Of this amount
a total of $252.27 represents investment income and $684.61 represents return of
capital. See Table III - "Operating Results of Prior Programs" in this Exhibit A
for further information concerning such distributions.
The fifth prior partnership, ATEL Cash Distribution Fund IV ("ACDF IV"),
commenced a public offering of up to $75,000,000 of its limited partnership
interests on February 4, 1992. ACDF IV terminated its offering on February 3,
1993 after raising a total of $75,000,000 in offering proceeds from a total of
approximately 4,873 investors, all of which proceeds have been committed to
equipment acquisitions, estimated organization and offering expenses and capital
reserves. ACDF IV had acquired a variety of types of equipment with a total
purchase cost of approximately $108,734,880 as of December 31, 1997. See Table V
- - "Acquisition of Equipment by Prior Programs" in Exhibit A for further
information concerning the types of equipment acquired by ACDF IV. Of such
equipment, items representing an original purchase cost of approximately
$48,709,482 had been sold as of December 31, 1997. See Table VI - "Sales or
Disposals of Equipment" in Exhibit A. Through December 31, 1997, ACDF IV had
made cash distributions to its investors in the aggregate amount of $727.87 per
$1,000 invested. Of this amount a total of $138.04 represents investment income
and $589.83 represents return of capital. See Table III - "Operating Results of
Prior Programs" in this Exhibit A for further information concerning such
distributions.
The sixth prior partnership, ATEL Cash Distribution Fund V ("ACDF V"), commenced
a public offering of up to $125,000,000 of its limited partnership interests on
February 22, 1993. ACDF V terminated its offering on November 15, 1994. As of
that date, $125,000,000 of offering proceeds had been received. All of the
proceeds have been committed to equipment acquisitions, estimated organization
and offering expenses and capital reserves. ACDF V had acquired a variety of
types of equipment with a total purchase cost of $186,897,181 as of December 31,
1997. Of such equipment, items representing an original purchase cost of
approximately $23,090,535 had been sold as of December 31, 1997. Through
December 31, 1997, ACDF V had made cash distributions to its investors in the
aggregate amount of $462.12 per $1,000 invested. Of this amount a total of
$70.57 represents investment income and $391.55 represents return of capital.
See Table III - "Operating Results of Prior Programs" in this Exhibit A for
further information concerning such distributions. See Table V - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACDF V. See Table VI - "Sales or Disposals of
Equipment" in Exhibit A.
A-2
<PAGE>
The seventh prior partnership, ATEL Cash Distribution Fund VI ("ACDF VI"),
commenced a public offering of up to $125,000,000 of its limited partnership
interests on November 23, 1994. ACDF VI terminated its offering on November 22,
1996. As of that date, $125,000,000 of offering proceeds had been received. All
of the proceeds have been committed to equipment acquisitions, estimated
organization and offering expenses and capital reserves. ACDF VI had acquired a
variety of types of equipment with a total purchase cost of $208,277,121 as of
December 31, 1997. Of such equipment, items representing an original purchase
cost of approximately $2,185,150 had been sold as of December 31, 1997. Through
December 31, 1997, ACDF VI had made cash distributions to its investors in the
aggregate amount of $271.11 per $1,000 invested. All of this amount represents
return of capital. See Table III - "Operating Results of Prior Programs" in this
Exhibit A for further information concerning such distributions. See Table V -
"Acquisition of Equipment by Prior Programs" in Exhibit A for further
information concerning the types of equipment acquired by ACDF VI. See Table VI
- - "Sales or Disposals of Equipment" in Exhibit A.
Although certain of the Prior Programs have experienced lessee defaults in the
ordinary course of business, none of the Prior Programs has experienced an
unanticipated rate of default or major adverse business developments which the
Fund Manager believes will impair its ability to meet its investment objectives.
All of the Prior Programs have investment objectives that are similar to those
of the Fund. It should be noted, however, that the prior privately placed
program, ALIF, invested in equipment without the use of any acquisition debt,
while Prior Programs ("Prior Public Programs") were designed to use moderate
amounts of acquisition debt, as is the Fund. In addition, as in the case of the
Fund's portfolio objectives, the Prior Public Programs' equipment portfolios
placed greater emphasis on relatively low technology equipment than did ALIF.
The factors considered by the General Partner in determining that the investment
objectives of the prior programs were similar to those of the Fund include the
types of equipment to be acquired, the structure of the leases to such
equipment, the credit criteria for lessees, the intended investment cycles, the
reinvestment policies and the investment goals of each program. Therefore all of
the information set forth in Tables included in this Exhibit A - "Prior
Performance Information" may be deemed to relate to programs with investment
objectives similar to those of the Fund.
In Tables I through III information is presented with respect to all Prior
Programs sponsored by the General Partner and its Affiliates which closed their
offerings within the five year period ending December 31, 1997, except that ACDF
closed its offering December 18, 1987, ACDF II closed its offering January 3,
1990, ACDF III closed its offering January 3, 1992 and ACDF IV closed its
offering on February 3, 1993. Table VI includes information regarding all
dispositions of equipment by prior programs during the five year period ending
December 31, 1997. The following is a list of the tables set forth on this
Exhibit A:
TABLE I Experience in Raising and Investing Funds
TABLE II Compensation to ATEL and Affiliates
TABLE III Operating results of Prior Programs
TABLE IV Results of Completed Programs
TABLE V Acquisition of Equipment by Prior Programs
TABLE VI Sales or Disposals of Equipment
ATEL will provide to any investor, upon written request and without charge,
copies of the most recent Annual Reports on Form 10-K filed with the Securities
and Exchange Commission by each Prior Public Program and will provide to any
investor, for a reasonable fee, copies of the exhibits to such reports.
INVESTORS IN THE PARTNERSHIP WILL HAVE NO INTEREST IN THE INVESTMENTS DESCRIBED
IN THE FOLLOWING TABLES. PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE INCLUSION
OF THIS INFORMATION AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE PARTNERSHIP.
In additions to Tables I through VI, two summary charts are set forth
below. The following table is a summary of cumulative cash distributions
through June 30, 1997 be each Prior Public Program, expressed as a percentage
of an initial investors capital contribution and divided to portions of such
distributions which have been characterized in the Prior Programs' financial
statements as a return of capital, on the one hand, and net income on the other.
A-3
<PAGE>
[GRAPHIC OMITTED]
A-3a
<PAGE>
The following table illustrates the disposition of equipment after
expiration of the initial lease term for equipment coming off lease through
April 1, 1998 for all of the Prior Public Programs that had completed their
public offerings as of December 31, 1997. The dispositions are characterized
as (i) short term renewals by the lessee (for terms of less than 12 months),
(ii) long term renewals by the lessee (for terms of at least 12 months), (iii)
equipment purchased by the lessee, and (iv) equpiment returned by the lessee to
the Prior Public Program for sale or lease to another party.
A-3b
<PAGE>
{GRAPHIC OMITTED]
A-3c
<PAGE>
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
(on a percentage basis)
December 31, 1997
(Unaudited)
The following Table sets forth certain information concerning the experience of
the General Partners in raising and investing funds. A percentage analysis of
the application of the proceeds raised is presented.
<TABLE>
<CAPTION>
ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash
Distribution Distribution Distribution Distribution Distribution Distribution
Fund Fund II Fund III Fund IV Fund V Fund VI
---- -------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
EQUITY PROCEEDS
Dollar amount of
equity offered $10,000,000 $35,000,000 $75,000,000 $75,000,000 $125,000,000 $125,000,000
Dollar amount of
equity raised $10,000,000 $35,000,000 $73,855,840 $75,000,000 $125,000,000 $125,000,000
------------- ------------- --------------- ------------- -------------- --------------
Less: Offering expenses:
Selling commissions 9.50% 9.50% 9.50% 9.50% 9.50% 9.50%
Organization and
program
expenses (1) 4.00% 5.00% 4.25% 4.53% 4.60% 4.70%
Reserves 3.00% 1.50% 1.50% 1.50% 1.50% 1.50%
------------- ------------- --------------- ------------- -------------- --------------
Percent available for
investment 83.50% 84.00% 84.75% 84.47% 84.40% 84.30%
Acquisition costs:
Purchase price (2) 79.00% 79.25% 80.00% 79.71% 79.64% 79.80%
Acquisition fees 4.50% 4.75% 4.75% 4.76% 4.76% 4.50%
------------- ------------- --------------- ------------- -------------- --------------
83.50% 84.00% 84.75% 84.47% 84.40% 84.30%
------------- ------------- --------------- ------------- -------------- --------------
Percent leverage (9) 20.26% 40.93%(8) 43.04%(10) 43.50% 35.06% 46.12%
============= ============= =============== ============= ============== ==============
Date offering commenced: Mar. 1, 1986 Jan. 4, 1988 Jan. 4, 1990 Feb. 4, 1992 Feb. 22, 1993 Nov. 23, 1994
Length of offering 21 Months 24 Months 24 Months 12 Months 21 Months 24 Months
Months to invest 90% of
amount available for
investment (measured
from beginning of
offering) 30 Months (3) 27 Months (4) 30 Months (5) 20 Months (6) 22 Months(7) 24 Months (11)
</TABLE>
FOOTNOTES:
(1) Includes organization, legal, accounting, printing, binding, delivery and
other costs incurred by the General Partner.
(2) Represents amounts paid to unrelated third parties for purchase of equipment
under leases.
A-4
<PAGE>
(3) As of December 1988, 100% of the amount available for investment had been
invested.
(4) As of June 1990, 100% of the amount available for investment had been
invested.
(5) As of September 30, 1992, 100% of the amount available for investment had
been invested.
(6) As of December 31, 1993, the proceeds of the offering had been fully
invested.
(7) As of November 15, 1994, the Partnership's offering of Limited Partnership
Units was completed. As of December 31, 1994, the proceeds of the offering had
been fully committed.
(8) From January 4, 1988 through August 31, 1994, the maximum amount of leverage
at the end of any quarter was 37%. This was computed as the outstanding balance
of all debt divided by the original cost of all equipment owned by the
partnership as of the end of each period.
(9) The percentage leverage is calculated by dividing the initial principal
amount of debt incurred by the program through the date of this table by the
aggregate original cost of all equipment purchased by the program through such
date. It should be noted, however, that each program has acquired assets, has
made or will make principal amortizing debt service payments and/or has disposed
or will dispose of assets over a period of time extending from its first
investment in equipment. As a result, for each program the total cost of the
assets in its portfolio and the total principal amount of debt outstanding have
fluctuated from time to time. The percentage figure, therefore, does not reflect
the current leverage ratio or the debt ratio at any one point in time, but
constitutes an aggregate ratio for the life of the program through the date of
the table.
(10) From January 4, 1990 through December 31, 1997, the maximum amount of
leverage at the end of any quarter was less than 40%. This was computed as the
outstanding balance of all debt divided by the original cost of all equipment
owned by the partnership as of the end of each period.
(11) As of November 22, 1996, the Partnership's offering of Limited Partnership
Units was completed. As of that date, the proceeds of the offering had been
fully committed
A-5
<PAGE>
TABLE II
COMPENSATION TO THE GENERAL PARTNERS
December 31, 1997
(Unaudited)
The following Table sets forth certain information concerning the compensation
derived by the General Partner. Amounts paid are from two sources: proceeds of
the offering and gross revenues.
<TABLE>
<CAPTION>
ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash
Distribution Distribution Distribution Distribution Distribution Distribution
Fund Fund II Fund III Fund IV Fund V Fund VI
---- ------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Date offering commenced Mar. 1, 1986 Jan. 4, 1988 Jan. 4, 1990 Feb. 4, 1992 Feb. 22, 1993 Nov. 23, 1994
Date offering closed Dec. 18, 1987 Jan. 4, 1990 Jan. 3, 1992 Feb. 3, 1993 Nov. 15, 1994 Nov. 22, 1996
Dollar amount raised $10,000,000 $35,000,000 $73,855,840 $75,000,000 $125,000,000 $125,000,000
Amounts paid to General
Partners from proceeds of
offering:
Acquisition fees $450,000 $1,662,500 $3,558,700 $3,575,123 $5,956,319 $5,625,000
Organization and program costs $550,000 $1,751,422 $3,135,942 $3,394,652 $5,751,177 $5,875,000
Dollar amount of cumulative
cash generated from operations
before deducting payments to
the General Partner $9,166,349 $38,168,426 $65,534,292 $45,009,361 $58,929,376 $42,194,010
Cumulative amount paid to the
General Partner from operations:
Management fees $765,081 $2,808,061 $4,852,018 $3,610,352 $4,541,600 $1,424,437
Other operating expenses $475,740 $1,542,970 $2,455,670 $2,207,556 $2,476,427 $1,723,513
Aggregate payments to General
Partner: (1)
1993 $221,000 $741,295 $1,383,380 $4,178,039 $8,084,815
1994 54,739 551,300 1,339,355 2,007,562 15,675,132
1995 - 380,380 1,201,436 1,480,305 4,067,056 $12,837,117
1996 - 290,349 967,667 1,097,106 2,328,139 13,208,900
1997 - 212,148 909,024 1,113,697 2,053,274 1,969,649
------------- ------------- --------------- ------------- -------------- --------------
$275,739 $2,175,472 $5,800,862 $9,876,709 $32,208,416 $28,015,666
============= ============= =============== ============= ============== ==============
</TABLE>
FOOTNOTES:
(1) As of December 31, 1997. Includes payments of management fees,
reimbursements of syndication costs to general partner (and affiliates),
acquisition fees and reimbursements of administrative costs.
A-6
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
December 31, 1997
(Unaudited)
The following Table summarizes the operating results of Prior Programs (ACDF,
ACDF II, ACDF III, ACDF IV, ACDF V, ACDF VI and ACEF VII). The Programs' records
are maintained in accordance with generally accepted accounting principles for
financial statement purposes.
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund
Period Ended December 31,
-------------------------
1986 1987 1988 1989
---- ---- ---- ----
Months of operations 2 12 12 12
<S> <C> <C> <C> <C>
Gross revenue - lease and other $6,257 $375,072 $1,493,794 $1,761,021
- gain (loss) on sales of assets - - - 11,951
------------- --------------- ------------- --------------
6,257 375,072 1,493,794 1,772,972
Less Operating Expenses: (1)
Depreciation expense - 51,965 914,188 1,215,223
Amortization expense - 7,849 7,949 7,949
Interest expense 1,558 29,918 37,727 52,553
Administrative costs and reimbursements - 16,288 20,978 43,990
Legal/Professional fees - 15,105 16,586 39,712
Provision for doubtful accounts - - - -
Supplies - 10,507 6,414 -
Other 125 10,886 18,329 12,648
Management fee - 19,882 108,196 147,120
------------- --------------- ------------- --------------
Net income - GAAP basis (2) $4,574 $212,672 $363,427 $253,777
============= =============== ============= ==============
Taxable income (loss) from operations $3,972 ($208,962) ($414,155) ($294,778)
============= =============== ============= ==============
Cash generated by (used in) operations (3) $221,291 $160,581 $1,402,104 $1,521,502
Cash generated from sales - - - -
Cash generated from refinancing - - - -
Cash generated from other (3) - 104,143 183,679 221,151
------------- --------------- ------------- --------------
221,291 264,724 1,585,783 1,742,653
------------- --------------- ------------- --------------
Less cash distributions to investors:
From operating cash flow - 160,581 1,215,018 1,508,226
From sales - - - -
From refinancing - - - -
From other - 93,374 - -
------------- --------------- ------------- --------------
Total distributions - 253,955 1,215,018 1,508,226
------------- --------------- ------------- --------------
Cash generated (deficiency) after cash
distributions $221,291 $10,769 $370,765 $234,427
============= =============== ============= ==============
Tax and distribution data per $1,000 limited
partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $2.76 ($46.78) ($41.00) ($29.20)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income None $47.60 $35.98 $25.14
- Return of capital None 9.82 85.52 125.75
------------- --------------- ------------- --------------
None 57.42 121.50 150.89
--------------
--------------
Cash available for distribution, reinvested for
investors' accounts None 65.08 28.50 9.11
------------- --------------- ------------- --------------
Total None $122.50 $150.00 $160.00
============= =============== ============= ==============
Sources (on a cash basis)
Sales
Refinancing
Operations $77.46 $150.00 $160.00
Other 45.04 - -
------------- --------------- ------------- --------------
Total None $122.50 $150.00 $160.00
============= =============== ============= ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $467,071 $4,293,800 $8,139,130 $8,989,917
Amount invested in program equipment (book value) $488,090 $4,341,128 $7,244,935 $6,724,650
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment
purchased by the program)(4) 4.20% 38.57% 73.10% 80.75%
</TABLE>
(Footnotes follow on page A-21)
A-7
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund
Period Ended December 31,
-------------------------
1990 1991 1992 1993
---- ---- ---- ----
Months of operations 12 12 12 12
<S> <C> <C> <C> <C>
Gross revenue - lease and other $2,201,630 $1,816,898 $1,410,396 $895,012
- gain (loss) on sales of assets 8,766 4,998 15,909 9,929
------------- --------------- ------------- --------------
2,210,396 1,821,896 1,426,305 904,941
Less Operating Expenses: (1)
Depreciation expense 1,612,647 1,277,406 906,100 348,650
Amortization expense 7,949 7,849 - -
Interest expense 176,922 144,752 72,057 25,403
Administrative costs and reimbursements 37,163 55,293 126,664 140,984
Legal/Professional fees 35,231 41,141 41,459 44,256
Provision for doubtful accounts 96,682 42,870 5,731 -
Supplies - - - -
Other 11,786 25,922 35,839 21,664
Management fee 164,932 130,347 94,229 80,016
------------- --------------- ------------- --------------
Net income (loss) - GAAP basis (2) $67,084 $96,316 $144,226 $243,968
============= =============== ============= ==============
Taxable income (loss) from operations $150,104 $180,117 $1,105,467 $692,509
============= =============== ============= ==============
Cash generated by (used in) operations (3) $1,585,967 $1,424,425 $1,673,016 $574,077
Cash generated from sales 30,000 159,396 562,504 1,343,908
Cash generated from refinancing - - - -
Cash generated from other (3) 237,576 185,406 126,552 183,275
------------- --------------- ------------- --------------
1,853,543 1,769,227 2,362,072 2,101,260
------------- --------------- ------------- --------------
Less cash distributions to investors:
From operating cash flow 1,516,124 1,265,955 1,470,260 574,077
From sales - - - 524,806
From refinancing - - - -
From other - - - 183,275
------------- --------------- ------------- --------------
Total distributions 1,516,124 1,265,955 1,470,260 1,282,158
------------- --------------- ------------- --------------
Cash generated (deficiency) after cash
distributions $337,419 $503,272 $891,812 $819,102
============= =============== ============= ==============
Tax and distribution data per $1,000
limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $14.88 $17.83 $109.44 $68.55
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $6.66 $9.54 $14.30 $24.18
- Return of capital 145.17 117.24 132.94 104.22
------------- --------------- ------------- --------------
151.83 126.78 147.24 128.40
------------- --------------- ------------- --------------
Cash available for distribution, reinvested for
investors' accounts 18.17 14.46 31.00 (21.92)
------------- --------------- ------------- --------------
Total $170.00 $141.24 $178.24 $106.48
============= =============== ============= ==============
Sources (on a cash basis)
Sales $43.58
Refinancing
Operations $170.00 $141.24 $178.24 47.68
Other - - - 15.22
------------- --------------- ------------- --------------
Total $170.00 $141.24 $178.24 $106.48
============= =============== ============= ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $10,064,292 $8,607,852 $7,402,311 $3,620,293
Amount invested in program equipment (book
value) $5,961,158 $3,639,966 $2,147,253 $724,675
Amount remaining invested in program
equipment (Cost of equipment owned at
end of period as a percentage of cost
of all equipment purchased by the
program) (4) 90.40% 77.31% 66.49% 32.52%
</TABLE>
(Footnotes follow on page A-21)
A-8
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund
Period Ended December 31,
-------------------------
1994 1995 1996 1997
---- ---- ---- ----
Months of operations 12 12 12 12
<S> <C> <C> <C> <C>
Gross revenue - lease and other $264,117 $374,172 $169,765 $142,272
- gain (loss) on sales of assets 220,266 15,106 39,095 60,838
------------- --------------- ------------- --------------
484,383 389,278 208,860 203,110
Less Operating Expenses: (1)
Depreciation expense 98,835 29,324 62,028 36,917
Amortization expense - - - -
Interest expense 5,154 12,496 15,883 11,505
Administrative costs and reimbursements 34,380 - - -
Legal/Professional fees 20,391 15,443 10,606 14,959
Provision for losses - 3,768 2,088 -
Provision for doubtful accounts - - - -
Supplies - - - -
Other 20,697 17,552 16,712 14,962
Management fee 20,359 - - -
------------- --------------- ------------- --------------
Net income (loss) - GAAP basis (2) $284,567 $310,695 $101,543 $124,767
============= =============== ============= ==============
Taxable income (loss) from operations $745,274 $339,275 $193,822 ($311,342)
============= =============== ============= ==============
Cash generated by (used in) operations (3) $195,123 $200,234 $93,675 $114,354
Cash generated from sales 622,350 112,188 212,802 263,096
Cash generated from refinancing - - - -
Cash generated from other (3) 119,745 79,692 79,520 1,000
------------- --------------- ------------- --------------
937,218 392,114 385,997 378,450
------------- --------------- ------------- --------------
Less cash distributions to investors:
From operating cash flow 195,123 200,234 93,675 114,354
From sales 622,350 112,188 142,200 298,243
From refinancing - - - -
From other 412,143 174,165 - 1,000
------------- --------------- ------------- --------------
Total distributions 1,229,616 486,587 235,875 413,597
------------- --------------- ------------- --------------
Cash generated (deficiency) after cash
distributions ($292,398) ($94,473) $150,122 ($35,147)
============= =============== ============= ==============
Tax and distribution data per $1,000 limited
partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $73.92 $33.65 $19.22 ($30.88)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $28.22 $30.82 $10.07 $12.38
- Return of capital 94.96 17.91 13.55 29.06
------------- --------------- ------------- --------------
123.18 48.73 23.62 41.44
------------- --------------- ------------- --------------
Cash available for distribution, reinvested for
investors' accounts (23.66) (18.63) (3.62) (9.44)
------------- --------------- ------------- --------------
Total $99.52 $30.10 $20.00 $32.00
============= =============== ============= ==============
Sources (on a cash basis)
Sales $50.37 $6.94 $12.06 $23.07
Refinancing
Operations 15.79 12.39 7.94 8.85
Other 33.36 10.77 0.08
------------- --------------- ------------- --------------
Total $99.52 $30.10 $20.00 $32.00
============= =============== ============= ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $2,300,024 $2,825,287 $2,296,755 -
Amount invested in program equipment (book
value) $484,971 $552,050 $234,707 -
Amount remaining invested in program equipment
(Cost of equipment owned at end of period
as a percentage of cost of all equipment
purchased by the program) (4) 20.66% 25.38% 20.63% -
</TABLE>
(Footnotes follow on page A-21)
A-9
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund II
Period Ended December 31,
1988 1989 1990
Months of operations 9 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $1,001,065 $4,190,191 $8,619,546
- gain (loss) on sales of assets - - -
--------------- ------------- --------------
1,001,065 4,190,191 8,619,546
Less Operating Expenses: (1)
Depreciation expense 531,855 2,579,866 5,253,869
Provision for decline in value of commercial aircraft - - 1,083,834
Provision for doubtful accounts - - -
Interest expense 31,445 362,122 1,485,960
Administrative costs and reimbursements 19,284 107,082 95,474
Legal/Professional fees - 32,022 42,748
Other 7,799 41,448 58,465
Management fee 43,721 252,159 472,064
--------------- ------------- --------------
Net income - GAAP basis (5) $366,961 $815,492 $127,132
=============== ============= ==============
Taxable income (loss) from operations ($588,007) ($3,544,620) ($3,583,850)
=============== ============= ==============
Cash generated by (used in) operations (3) $1,044,176 $3,639,963 $6,823,453
Cash generated from sales
Cash generated from refinancing
Cash generated from other (3) 100,715 147,741 400,308
--------------- ------------- --------------
1,144,891 3,787,704 7,223,761
Less cash distributions to investors:
From operating cash flow 253,760 1,986,455 4,069,920
From sales - - -
From refinancing - - -
From other - - -
--------------- ------------- --------------
Total distributions 253,760 1,986,455 4,069,920
--------------- ------------- --------------
Cash generated (deficiency) after cash distributions $891,131 $1,801,249 $3,153,841
=============== ============= ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($96.15) ($158.82) ($101.37)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $41.91 $36.54 $3.60
- Return of capital - 53.37 112.69
--------------- ------------- --------------
41.91 89.91 116.29
Cash available for distribution, reinvested for
investors' accounts 37.47 30.09 13.71
--------------- ------------- --------------
Total $79.38 $120.00 $130.00
=============== ============= ==============
Sources (on a cash basis)
Operations $79.38 $120.00 $130.00
Sales - - -
Refinancing - - -
Other - - -
--------------- ------------- --------------
Total $79.38 $120.00 $130.00
=============== ============= ==============
Amount invested in program equipment (cost, excluding
acquisition fees $14,664,014 $30,309,212 $48,538,987
Amount invested in program equipment (book value) $14,661,074 $28,412,251 $40,154,353
Amount remaining invested in program equipment (Cost of
equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (4) 28.05% 57.99% 92.86%
</TABLE>
(Footnotes follow on page A-21)
A-10
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund II
Period Ended December 31,
1991 1992 1993
Months of operations 12 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $8,774,789 $8,148,565 $6,665,582
- gain (loss) on sales of assets (31,613) 111,809 184,599
--------------- ------------- --------------
8,743,176 8,260,374 6,850,181
Less Operating Expenses: (1)
Depreciation expense 5,546,000 5,285,315 4,285,373
Provision for decline in value of commercial - - -
aircraft - - -
Provision for doubtful accounts 30,400 4,064 -
Interest expense 1,353,033 1,171,105 860,663
Administrative costs and reimbursements 94,910 256,184 313,421
Legal/Professional fees 52,281 39,612 47,110
Other 38,337 70,316 49,725
Management fee 510,416 408,421 427,874
--------------- ------------- --------------
Net income - GAAP basis (5) $1,117,799 $1,025,357 $866,015
=============== ============= ==============
Taxable income (loss) from operations ($2,013,494) $1,686,207 $2,346,733
=============== ============= ==============
Cash generated by (used in) operations (3) $6,705,095 $6,601,157 $4,720,797
Cash generated from sales 223,447 767,749 2,643,336
Cash generated from refinancing - - -
Cash generated from other (3) 488,962 698,496 1,437,114
--------------- ------------- --------------
7,417,504 8,067,402 8,801,247
Less cash distributions to investors:
From operating cash flow 4,561,842 4,927,246 4,720,797
From sales - - -
From refinancing - - -
From other - - 794,270
--------------- ------------- --------------
Total distributions 4,561,842 4,927,246 5,515,067
--------------- ------------- --------------
Cash generated (deficiency) after cash distributions $2,855,662 $3,140,156 $3,286,180
=============== ============= ==============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($56.95) $47.69 $66.38
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $31.62 $29.01 $24.50
- Return of capital 98.72 111.77 133.07
--------------- ------------- --------------
130.34 140.78 157.57
Cash available for distribution, reinvested for
investors' accounts 9.66 9.22 2.43
--------------- ------------- --------------
Total $140.00 $150.00 $160.00
=============== ============= ==============
Sources (on a cash basis)
Operations $140.00 $150.00 $136.96
Sales - - -
Refinancing - - -
Other - - 23.04
--------------- ------------- --------------
Total $140.00 $150.00 $160.00
=============== ============= ==============
Amount invested in program equipment (cost, excluding
acquisition fees $47,181,808 $41,405,356 $36,692,677
Amount invested in program equipment (book value) $29,983,437 $23,667,996 $16,204,828
Amount remaining invested in program equipment (Cost of
equipment owned at end of period as a percentage of cost
of all equipment purchased by the program) (4) 90.26% 79.21% 70.20%
</TABLE>
(Footnotes follow on page A-21)
A-11
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund II
December 31,
1994 1995 1996 1997
---- ---- ---- ----
Months of operations 12 12 12 12
<S> <C> <C> <C> <C>
Gross revenue - lease and other $5,627,738 $3,191,834 $1,994,161 $1,189,141
- gain (loss) on sales of assets (3,239) 453,960 168,927 124,594
------------- --------------- ------------- --------------
5,624,499 3,645,794 2,163,088 1,313,735
Less Operating Expenses: (1)
Depreciation expense 2,963,445 1,451,193 885,426 364,425
Provision for doubtfull accounts - - - 17,072
Provision for losses 11,616 25,972 22,221 13,097
Interest expense 509,267 365,099 237,226 115,320
Administrative costs and reimbursements 238,185 157,444 132,994 127,992
Legal/Professional fees 37,647 44,864 21,173 24,303
Other 66,324 71,101 72,138 54,154
Management fee 313,115 222,936 157,355 84,156
------------- --------------- ------------- --------------
Net income - GAAP basis (5) $1,484,900 $1,307,185 $634,555 $513,216
============= =============== ============= ==============
Taxable income (loss) from operations $4,340,559 $3,101,835 $2,079,449 $1,357,072
============= =============== ============= ==============
Cash generated by (used in) operations (3) $3,921,897 $2,788,119 $1,288,526 $635,243
Cash generated from sales 2,959,549 2,304,367 1,298,116 778,928
Cash generated from refinancing - - - -
Cash generated from other (3) 1,311,673 875,730 877,510 816,922
------------- --------------- ------------- --------------
8,193,119 5,968,216 3,464,152 2,231,093
Less cash distributions to investors:
From operating cash flow 3,921,897 2,788,119 1,288,526 635,243
From sales 859,241 1,064,197 - -
From refinancing - - - -
From other 1,311,673 875,730 788,922 655,877
------------- --------------- ------------- --------------
Total distributions 6,092,811 4,728,046 2,077,448 1,291,120
------------- --------------- ------------- --------------
Cash generated (deficiency) after cash
distributions $2,100,308 $1,240,170 $1,386,704 $939,973
============= =============== ============= ==============
Tax and distribution data per $1,000 limited
partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $122.79 $87.76 $58.84 $38.40
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $42.01 $36.99 $17.95 $14.52
- Return of capital 132.10 98.14 41.42 22.38
------------- --------------- ------------- --------------
174.11 135.13 59.37 36.90
Cash available for distribution, reinvested for
investors' accounts (4.11) (30.13) (7.37) (6.90)
------------- --------------- ------------- --------------
Total $170.00 $105.00 $52.00 $30.00
============= =============== ============= ==============
Sources (on a cash basis)
Operations $109.43 $61.92 $32.25 $14.76
Sales 23.97 23.63 - -
Refinancing - - - -
Other 36.60 19.45 19.75 15.24
------------- --------------- ------------- --------------
Total $170.00 $105.00 $52.00 $30.00
============= =============== ============= ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $26,755,760 $21,031,914 $16,329,599 $11,293,265
Amount invested in program equipment (book value) $11,523,077 $7,459,980 $4,564,924 $2,740,429
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment
purchased by the program)(4) 51.19% 40.24% 31.24% 21.61%
</TABLE>
(Footnotes follow on page A-21)
A-12
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund III
Period Ended December 31,
-------------------------
1990 1991 1992 1993
---- ---- ---- ----
Months of operations 12 12 12 12
<S> <C> <C> <C> <C>
Gross revenue - lease and other $2,130,161 $7,760,246 $12,713,280 $13,970,227
- gain (loss) on sales of assets - (17,714) 1,202,188 (140,513)
------------- --------------- ------------- --------------
2,130,161 7,742,532 13,915,468 13,829,714
Less Operating Expenses: (1)
Depreciation expense 1,278,427 4,919,605 7,739,054 8,984,502
Provision for decline in value of
commercial aircraft 623,294 - - -
Interest expense 482,047 1,002,520 1,186,760 1,456,147
Administrative costs and reimbursements 70,775 239,667 542,510 468,005
Legal/Professional fees 7,600 52,746 31,691 58,809
Other 22,898 49,198 52,629 75,289
Management fee 83,245 391,494 839,909 915,375
------------- --------------- ------------- --------------
Net income - GAAP basis (6) ($438,125) $1,087,302 $3,522,915 $1,871,587
============= =============== ============= ==============
Taxable income (loss) from operations ($2,539,135) ($6,476,596) ($3,010,933) ($5,122,581)
============= =============== ============= ==============
Cash generated by (used in) operations (3) $1,572,921 $6,288,997 $9,564,446 $11,402,915
Cash generated from sales - - 4,006,080 269,479
Cash generated from refinancing - - - -
Cash generated from other (3) 125,093 14,587 181,746 719,701
------------- --------------- ------------- --------------
1,698,014 6,303,584 13,752,272 12,392,095
Less cash distributions to investors:
From operating cash flow 396,751 4,185,400 9,261,560 9,594,918
From sales - - - -
From refinancing - - - -
From other - - - -
------------- --------------- ------------- --------------
Total distributions 396,751 4,185,400 9,261,560 9,594,918
------------- --------------- ------------- --------------
Cash generated (deficiency) after cash
distributions $1,301,263 $2,118,184 $4,490,712 $2,797,177
============= =============== ============= ==============
Tax and distribution data per $1,000 limited
partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($282.13) ($200.01) ($40.37) ($68.68)
Recapture
Capital gain (loss) Cash distributions
to investors on a GAAP basis:
- Investment income $33.58 $47.23 $25.09
- Return of capital $44.53 96.98 78.19 104.86
------------- --------------- ------------- --------------
$44.53 $130.56 $125.42 $129.95
============= =============== ============= ==============
Sources (on a cash basis)
Sales
Refinancing
Operations $44.53 $130.56 $125.42 $129.95
Other - - - -
------------- --------------- ------------- --------------
Total $44.53 $130.56 $125.42 $129.95
============= =============== ============= ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $28,534,220 $52,188,848 $83,423,686 $91,612,304
Amount invested in program equipment (book value) $27,475,925 $44,531,829 $64,526,606 $63,434,911
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment
purchased by the program) (4) 28.64% 52.38% 83.73% 91.95%
</TABLE>
(Footnotes follow on page A-21)
A-13
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund III
Period Ended
December 31,
1994 1995 1996 1997
---- ---- ---- ----
Months of operations 12 12 12 12
<S> <C> <C> <C> <C>
Gross revenue - lease and other $14,212,777 $13,378,680 $10,565,963 $7,610,362
- gain (loss) on sales of assets 155,497 954,115 1,143,807 2,823,095
------------- --------------- ------------- --------------
14,368,274 14,332,795 11,709,770 10,433,457
Less Operating Expenses: (1)
Depreciation expense 9,734,408 9,037,450 7,051,625 4,560,013
Provision for losses 36,626 826,550 118,023 104,335
Interest expense 1,395,276 1,064,823 630,450 319,415
Administrative costs and reimbursements 340,269 300,952 245,242 248,250
Legal/Professional fees 60,552 59,237 38,522 31,985
Other 113,411 110,637 149,613 174,046
Management fee 999,086 900,484 722,425 660,774
------------- --------------- ------------- --------------
12,679,628 12,300,133 8,955,900 6,098,818
------------- --------------- ------------- --------------
Income before extraordinary items 1,688,646 2,032,662 2,753,870 4,334,639
Extrordinary gain on early extinguisment of debt - - 97,608 -
------------- --------------- ------------- --------------
Net income - GAAP basis (6) $1,688,646 $2,032,662 $2,851,478 $4,334,639
============= =============== ============= ==============
Taxable income (loss) from operations $635,990 $6,281,437 $8,404,788 $10,406,517
============= =============== ============= ==============
Cash generated by (used in) operations (3) $11,400,861 $10,333,228 $8,435,426 $6,535,498
Cash generated from sales 682,595 3,276,705 5,335,135 10,182,310
Cash generated from refinancing - - - -
Cash generated from other (3) 1,317,531 1,518,191 1,628,837 1,047,681
------------- --------------- ------------- --------------
13,400,987 15,128,124 15,399,398 17,765,489
Less cash distributions to investors:
From operating cash flow 10,201,485 10,333,228 8,435,426 $6,535,498
From sales - - - 35,201
From refinancing - - - -
From other - 4,961 777,879 1,047,681
------------- --------------- ------------- --------------
Total distributions 10,201,485 10,338,189 9,213,305 7,618,380
------------- --------------- ------------- --------------
Cash generated (deficiency) after cash
distributions $3,199,502 $4,789,935 $6,186,093 $10,147,109
============= =============== ============= ==============
Tax and distribution data per $1,000 limited
partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $8.53 $84.28 $112.76 $139.66
Recapture
Capital gain (loss) Cash distribution
to investors on a GAAP basis:
- Investment income $22.66 $27.27 $38.26 $58.17
- Return of capital 115.59 112.73 86.63 45.11
------------- --------------- ------------- --------------
$138.25 $140.00 $124.89 $103.28
============= =============== ============= ==============
Sources (on a cash basis)
Sales $0.48
Refinancing -
Operations $138.25 $139.93 $114.35 88.60
Other - 0.07 10.54 14.68
------------- --------------- ------------- --------------
Total $138.25 $140.00 $124.89 $103.76
============= =============== ============= ==============
Amount invested in program equipment (cost,
excluding acquisition fees) $87,442,745 $79,602,818 $64,700,440 $43,579,341
Amount invested in program equipment (book value) $52,479,724 $39,107,792 $26,203,009 $13,159,990
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment
purchased by the program) (4) 87.77% 79.90% 64.94% 43.74%
</TABLE>
(Footnotes follow on page A-21)
A-14
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund IV
Period Ended December 31,
1992 1993 1994
---- ---- ----
Months of operations 12 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $2,123,081 $10,510,289 $13,246,145
- gain (loss) on sales of assets - (38,429) (102,932)
------------- --------------- -------------
2,123,081 10,471,860 13,143,213
Less Operating Expenses: (1)
Depreciation and amortization expense 1,147,209 7,054,380 8,743,149
Provision for losses - - 34,505
Interest expense 91,577 81,437 1,332,542
Administrative costs and reimbursements 382,114 537,918 358,441
Legal/Professional fees 46,935 52,838 86,594
Other 25,988 57,575 114,376
Management fee 103,510 752,950 1,060,190
------------- --------------- -------------
Net income - GAAP basis $325,748 $1,934,762 $1,413,416
============= =============== =============
Taxable income (loss) from operations ($2,034,428) ($9,624,570) ($8,073,869)
============= =============== =============
Cash generated by (used in) operations (3) $3,560,891 $9,021,440 $10,366,325
Cash generated from sales - 98,752 5,648,425
Cash generated from refinancing - - -
Cash generated from other (3) - 220,258 1,522,609
------------- --------------- -------------
3,560,891 9,340,450 17,537,359
Less cash distributions to investors:
From operating cash flow 1,936,639 8,686,491 9,653,038
From sales - - -
From refinancing - - -
From other - - -
------------- --------------- -------------
Total distributions 1,936,639 8,686,491 9,653,038
------------- --------------- -------------
Cash generated (deficiency) after cash
distributions $1,624,252 $653,959 $7,884,321
============= =============== =============
Tax and distribution data per $1,000 limited
partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($76.67) ($127.78) ($106.64)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $12.28 $15.86 $18.67
- Return of capital 61.44 100.63 110.12
------------- --------------- -------------
$73.72 $116.49 $128.79
============= =============== =============
Sources (on a cash basis)
Sales
Refinancing
Operations $73.72 $116.49 $128.79
Other - - -
------------- --------------- -------------
Total $73.72 $116.49 $128.79
============= =============== =============
Amount invested in program equipment (cost,
excluding acquisition fees) $49,603,894 $82,896,683 $88,187,291
Amount invested in program equipment (book value) $49,801,834 $69,901,953 $65,252,553
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment
purchased by the program) (4) 45.62% 76.24% 81.10%
</TABLE>
(Footnotes follow on page A-21)
A-15
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund IV
Period Ended December 31,
1995 1996 1997
---- ---- ----
Months of operations 12 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $12,973,718 $11,664,408 $8,076,530
- gain (loss) on sales of assets 615,042 1,574,946 3,203,666
------------- --------------- -------------
13,588,760 13,239,354 11,280,196
Less Operating Expenses: (1)
Depreciation and amortization expense 8,740,231 7,849,010 4,846,725
Provision for losses 679,634 135,965 321,876
Interest expense 1,960,823 1,858,316 971,628
Administrative costs and reimbursements 349,663 275,778 303,642
Legal/Professional fees 76,365 46,419 35,746
Other 110,466 98,471 156,841
Management fee 872,374 821,328 810,055
------------- --------------- -------------
12,789,556 11,085,287 7,446,513
------------- --------------- -------------
Income before extraordinary items 799,204 2,154,067 3,833,683
Extrordinary gain on early extinguisment of debt - 112,546 -
------------- --------------- -------------
Net income - GAAP basis (6) $799,204 $2,266,613 $3,833,683
============= =============== =============
Taxable income (loss) from operations ($2,073,084) $1,101,252 $13,539,726
============= =============== =============
Cash generated by (used in) operations (3) $8,830,893 $7,511,884 $5,717,928
Cash generated from sales 2,722,954 4,376,555 20,594,019
Cash generated from refinancing - - -
Cash generated from other (3) 2,384,094 2,991,035 2,593,695
------------- --------------- -------------
13,937,941 14,879,474 28,905,642
Less cash distributions to investors:
From operating cash flow 8,830,893 7,511,884 $5,717,928
From sales - - 2,169,677
From refinancing - - -
From other 906,007 2,881,345 2,593,695
------------- --------------- -------------
Total distributions 9,736,900 10,393,229 10,481,300
------------- --------------- -------------
Cash generated (deficiency) after cash
distributions $4,201,041 $4,486,245 $18,424,342
============= =============== =============
Tax and distribution data per $1,000 limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($27.43) $14.56 $179.03
Recapture
Capital gain (loss) $0.04
Cash distributions to investors on a GAAP basis:
- Investment income $10.57 $29.97 $50.69
- Return of capital 119.50 108.83 89.31
------------- --------------- -------------
$130.07 $138.80 $140.00
============= =============== =============
Sources (on a cash basis)
Sales $28.98
Refinancing -
Operations $117.97 $100.32 76.38
Other 12.10 38.48 34.64
------------- --------------- -------------
Total $130.07 $138.80 $140.00
============= =============== =============
Amount invested in program equipment (cost,
excluding acquisition fees) $98,547,911 $92,543,075 $60,025,398
Amount invested in program equipment (book value) $63,967,204 $52,264,526 $27,375,489
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment
purchased by the program) (4) 90.63% 85.11% 55.20%
</TABLE>
(Footnotes follow on page A-21)
A-16
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund V
Period Ended December 31,
------------
1993 1994 1995
---- ---- ----
Months of operations 10 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $2,173,205 $10,806,892 $19,951,380
- gain (loss) on sales of assets - 2,564 933,289
------------- --------------- -------------
2,173,205 10,809,456 20,884,669
Less Operating Expenses: (1)
Depreciation and amortization expense 1,600,628 8,135,951 14,600,474
Provision for losses - 34,158 987,013
Interest expense 31,511 61,036 1,222,050
Administrative costs and reimbursements 373,089 706,324 535,812
Legal/Professional fees 13,746 65,028 110,744
Other 36,269 113,981 176,847
Management fee 178,583 1,013,448 1,623,818
------------- --------------- -------------
Net income - GAAP basis ($60,621) $679,530 $1,627,911
============= =============== =============
Taxable income (loss) from operations ($5,061,304) ($13,005,033) ($11,831,759)
============= =============== =============
Cash generated by (used in) operations (3) $1,795,722 $10,053,220 $15,800,948
Cash generated from sales - 22,572 6,930,477
Cash generated from refinancing - - -
Cash generated from other (3) - 1,513,782 2,498,923
------------- --------------- -------------
1,795,722 11,589,574 25,230,348
Less cash distributions to investors:
From operating cash flow 922,278 8,223,081 13,101,508
From sales - - -
From refinancing - - -
From other - - -
------------- --------------- -------------
Total distributions 922,278 8,223,081 13,101,508
------------- --------------- -------------
Cash generated (deficiency) after cash
distributions $873,444 $3,366,493 $12,128,840
============= =============== =============
Tax and distribution data per $1,000 limited
partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($219.75) ($152.59) ($93.72)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $8.05 $12.89
- Return of capital $40.45 89.41 91.93
------------- --------------- -------------
$40.45 $97.46 $104.82
============= =============== =============
Sources (on a cash basis)
Sales
Refinancing
Operations $40.45 $97.46 $104.82
Other - - -
------------- --------------- -------------
Total $40.45 $97.46 $104.82
============= =============== =============
Amount invested in program equipment (cost,
excluding acquisition fees) $34,699,207 $113,427,843 $161,866,626
Amount invested in program equipment (book value) $34,246,741 $100,762,242 $131,686,535
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment
purchased by the program) (4) 18.57% 60.69% 86.61%
</TABLE>
(Footnotes follow on page A-21)
A-17
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
ATEL Cash Distribution Fund V
Period Ended December 31,
1996 1997
Months of operations 12 12
Gross revenue - lease and other $23,662,790 $23,092,315
- gain (loss) on sales of assets 1,325,132 345,340
------------- ---------------
24,987,922 23,437,655
Less Operating Expenses: (1)
Depreciation and amortization expense 15,351,574 13,503,318
Provision for losses 255,294 1,801,707
Interest expense 3,962,860 3,599,776
Administrative costs and reimbursements 455,316 405,886
Legal/Professional fees 117,566 94,603
Other 428,631 571,546
Management fee 1,725,751 1,647,388
------------- ---------------
22,296,992 21,624,224
------------- ---------------
Income before extraordinary items 2,690,930 1,813,431
Extrordinary gain on early extinguisment of debt 160,955 -
------------- ---------------
Net income - GAAP basis (6) $2,851,885 $1,813,431
============= ===============
Taxable income (loss) from operations ($7,493,824) ($913,120)
============= ===============
Cash generated by (used in) operations (3) $14,733,366 $16,546,120
Cash generated from sales 5,900,451 3,136,926
Cash generated from refinancing - -
Cash generated from other (3) 4,855,093 4,476,163
------------- ---------------
25,488,910 24,159,209
Less cash distributions to investors:
From operating cash flow 13,672,825 13,744,875
From sales - -
From refinancing - -
From other -
------------- ---------------
Total distributions 13,672,825 13,744,875
------------- ---------------
Cash generated (deficiency) after cash
distributions $11,816,085 $10,414,334
============= ===============
Tax and distribution data per $1,000
limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($59.36) ($7.23)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $22.59 $14.51
- Return of capital 86.81 95.48
------------- ---------------
$109.40 $109.99
============= ===============
Sources (on a cash basis)
Sales
Refinancing
Operations $109.40 $109.99
Other -
------------- ---------------
Total $109.40 $109.99
============= ===============
Amount invested in program equipment (cost,
excluding acquisition fees) $168,575,337 $163,806,646
Amount invested in program equipment
(book value) $125,729,656 $104,863,156
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment
purchased by the program) (4) 90.20% 87.65%
(Footnotes follow on page A-21)
A-18
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ATEL Cash Distribution Fund VI
Period Ended December 31,
1995 1996 1997
---- ---- ----
Months of operations 12 12 12
<S> <C> <C> <C>
Gross revenue - lease and other $6,440,218 $25,837,343 $36,458,734
- gain (loss) on sales of assets 3,819 (107,873) 26,431
------------- --------------- -------------
6,444,037 25,729,470 36,485,165
Less Operating Expenses: (1)
Depreciation and amortization expense 4,976,075 19,298,500 27,596,548
Provision for losses 64,892 257,814 364,852
Interest expense 931,651 5,773,463 7,993,746
Administrative costs and reimbursements 539,009 748,745 435,759
Legal/Professional fees 50,962 186,724 91,625
Other 121,541 612,698 807,883
Management fee 362,581 1,061,856 1,492,716
------------- --------------- -------------
Net income (loss)- GAAP basis ($602,674) ($2,210,330) ($2,297,964)
============= =============== =============
Taxable income (loss) from operations ($11,625,618) ($27,319,391) ($22,433,132)
============= =============== =============
Cash generated by (used in) operations (3) $4,354,020 $13,940,220 $23,899,770
Cash generated from sales 54,156 636,397 406,362
Cash generated from refinancing - - -
Cash generated from other (3) 195,884 501,623 685,665
------------- --------------- -------------
4,604,060 15,078,240 24,991,797
Less cash distributions to investors:
From operating cash flow 2,484,971 8,719,731 12,475,238
From sales - - -
From refinancing - - -
From other - - -
------------- --------------- -------------
Total distributions 2,484,971 8,719,731 12,475,238
------------- --------------- -------------
Cash generated (deficiency) after cash
distributions $2,119,089 $6,358,509 $12,516,559
============= =============== =============
Tax and distribution data per $1,000 limited
partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($364.88) ($346.74) ($177.67)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income
- Return of capital $78.78 $92.53 $99.80
------------- --------------- -------------
$78.78 $92.53 $99.80
============= =============== =============
Sources (on a cash basis)
Sales
Refinancing
Operations $78.78 $92.53 $99.80
Other - - -
------------- --------------- -------------
Total $78.78 $92.53 $99.80
============= =============== =============
Amount invested in program equipment (cost,
excluding acquisition fees) $98,036,611 $204,553,244 $206,090,008
Amount invested in program equipment (book value) $92,802,029 $185,510,097 158,856,251
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment
purchased by the program) (4) 47.07% 98.21% 98.95%
</TABLE>
(Footnotes follow on page A-21)
A-19
<PAGE>
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS (CONTINUED)
December 31, 1997
(Unaudited)
ATEL Capital Equipment Fund VII
Period Ended
December 31,
1997
Months of operations 12
Gross revenue - lease and other $7,370,229
- gain (loss) on sales of assets 3,752
-----------------
7,373,981
Less Operating Expenses: (1)
Depreciation and amortization expense 5,847,827
Provision for losses 74,277
Interest expense 714,701
Administrative costs and reimbursements 645,437
Legal/Professional fees 90,305
Other 380,821
Management fee 358,846
-----------------
Net income (loss) - GAAP basis ($738,233)
=================
Taxable income (loss) from operations ($7,867,498)
=================
Cash generated by (used in) operations (3) $6,061,438
Cash generated from sales 130,413
Cash generated from refinancing -
Cash generated from other (3) 232,472
-----------------
6,424,323
Less cash distributions to investors:
From operating cash flow 2,684,635
From sales -
From refinancing -
From other -
-----------------
Total distributions 2,684,635
-----------------
Cash generated (deficiency) after cash distributions $3,739,688
=================
Tax and distribution data per $1,000
limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations ($230.41)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income
- Return of capital $79.42
-----------------
$79.42
=================
Sources (on a cash basis)
Sales
Refinancing
Operations $79.42
Other -
-----------------
Total $79.42
=================
Amount invested in program equipment (cost, excluding
acquisition fees) $149,409,976
Amount invested in program equipment (book value) $101,284,861
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (4) 99.91%
(Footnotes follow on page A-21)
A-20
<PAGE>
FOOTNOTES:
(1) Operating expenses include reimbursements to the corporate general partner
as follows:
<TABLE>
<CAPTION>
ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash ATEL Cash
Distribution Distribution Distribution Distribution Distribution Distribution
Year ended December 31, Fund Fund II Fund III Fund IV Fund V Fund VI
------------------------ ---- ------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
1986 $100
1987 15,100
1988 21,500 $3,000
1989 32,201 86,234
1990 37,163 95,474 $70,775
1991 48,195 71,289 239,667
1992 126,664 256,184 542,510 $382,114
1993 140,984 313,421 468,005 537,918 $373,089
1994 34,380 238,185 340,269 358,441 706,324
1995 - 157,444 300,952 349,663 535,812 $539,009
1996 - 132,994 245,242 275,778 455,316 748,745
1997 - 127,992 248,250 303,642 405,886 435,759
------------- ------------- --------------- ------------- -------------- --------------
$456,287 $1,482,217 $2,455,670 $2,207,556 $2,476,427 $1,723,513
============= ============= =============== ============= ============== ==============
</TABLE>
(2) A portion of the equipment owned by the Partnership is accounted for under
the direct financing method. Income under direct financing leases is
reported on the financing method where the income portion of each rental
payment is calculated so as to generate a constant rate of return on the
outstanding net investment. The effect is to recognize decreasing amounts
of income in later periods as the net investment declines. Net income was
also negatively impacted in 1990 by necessity for a provision for doubtful
accounts. Prior to 1990, there had been no such need. The decrease in net
income from 1988 to 1989 and from 1989 to 1990 is due to increasing debt
levels and interest expense. The decrease from 1992 to 1993 is due to
decreased lease revenues. Revenues have declined as equipment leases have
expired and as the related assets have been sold.
(3) Cash generated by (used in) operations does not include the principal
portion of lease rentals received under direct financing leases. In the
partnerships' statements of cash flows (under generally accepted accounting
principles), these amounts are included in the investing activities
section.
(4) The percentage is calculated as a fraction, the numerator of which is the
amount invested in program equipment (at cost) as of the end of the
indicated period and the denominator of which is the cumulative total of
the cost of all equipment acquired by the program through the end of the
latest period shown.
(5) Net income decreased from 1989 to 1990 due to the provision for decline
value of commercial aircraft ($1,083,834) included in net income in 1990.
Excluding the effect of that provision, net income per $1,000 invested
would have been $34.60. The results in 1990 are also effected by higher
depreciation rates used for more recent equipment purchases, resulting in
increased depreciation expense compared to lease revenues. The remaining
amount of the changes from 1988 to 1989 and from 1989 to 1990 are primarily
due to the timing of the acquisition of assets, the placement of debt
against certain assets and other operating factors.
(6) Net income increased from 1990 to 1991 due to the provision for decline
value of commercial aircraft ($623,294) included in net income in 1990. The
remaining amount of the changes from 1990 to 1991 and from 1991 to 1992 are
primarily due to the timing of the acquisition of assets, the placement of
debt against certain assets and other operating factors.
A-21
<PAGE>
TABLE IV
RESULTS OF COMPLETED PROGRAMS
December 31, 1997
(Unaudited)
Program name: ATEL Cash Distribution Fund
Dollar amount of equity raised: $10,000,000
Assets purchased (see Table 5 for detail listings): $11,133,679
Date of Closing of Offering: December 18, 1987
Date of first sale of property: May 1, 1989
Date of final sale of property: December 31, 1997
Taxand distribution data per $1,000 limited partner
investment through December 31, 1997:
Federal Income Tax Results:
Ordinary income (loss):
Operations $192.40
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $244.89
- Return of capital 876.14
-------------
1,121.03
Cash available for distribution, reinvested for
investors' accounts 89.05
-------------
Total $1,210.08
=============
Sources (on a cash basis)
Sales $136.03
Refinancing
Operations 969.59
Other 104.46
-------------
Total $1,210.08
=============
A-22
<PAGE>
TABLE V
ACQUISITION OF EQUIPMENT
BY PRIOR PROGRAMS
The following is a summary of Equipment acquisitions and Lessees by the six
prior publicly-registered programs sponsored by ATEL Financial Corporation and
its affiliates. Information concerning the prior programs' Equipment acquisition
is current through December 31, 1997, except for ATEL Capital Equipment Fund
VII, which is current through February 28, 1998.
<TABLE>
<CAPTION>
Lease
Commence Acquisition Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Fees (3) Leverage (4) Term (5) (6)
- ------ ----- -------------- ----------- -------- -------- ------------ -------- ----
ATEL Cash Distribution Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Acushnet Company Office Information Jan-87 $134,246 $6,041 60 FP
Systems
Alachua General Hospital, 7 Medical Jan-89 628,632 28,288 36 OL
Inc.
American Motors Corporation Lift Trucks Oct-87 to 622,632 28,018 48 OL
Jan-88
Anaheim Memorial Hospital Medical Jan-88 779,613 35,083 48.07% 60 FP
Campbell Soup Company Lift Trucks Mar-87 317,500 14,288 84 FP
Colour Graphics Corporation 8 Printing Jan-87 222,520 10,013 80.75% 84 FP
Enron Corp. Office Information
Systems Aug-88 244,488 11,002 36 FP
Financial News Network, Inc. 9 Studio and Apr-90 909,735 26,183 36 FP
Broadcasting
GAF Corporation 10 Manufacturing Oct-88 512,208 23,049 60 FP
GAF Corporation Lift Trucks Oct-87 439,866 19,794 60 OL
Galardi Group, Inc. Restaurant Furnitue
and Fixtures Jul-94 247,000 - 48 FP
Hartford Insurance Group Communication Mar-88 89,236 4,016 60 FP
Imperial Plastics, Inc. 11 Manufacturing Sep-87 to 526,270 23,682 69.63% 84 FP
Apr-88
Martin Marietta Corporation Communication May-88 425,670 19,155 48 OL
Nord Kaolin Company 12, 13 Mining, Processing Jul-87 to 358,710 16,734 60-62 FP
Jan-88
Nord Sil-Flo Company 12, 13 Material Handling Aug-89 to 28,113 673 86.27% 60 FP
Jan-88
Polaroid Corporation Office Information
Systems Jan-87 36,190 1,629 59 FP
Putnam County Hospital Medical May-88 110,000 4,950 60 FP
Rohr Industries, Inc. Motor Vehicle Apr-88 to 327,240 14,726 36-84 FP, OL
Oct-88
Teledyne Industries, Inc. 14 Lift Trucks Jan-88 to 1,653,596 74,412 36-84 FP, OL
Oct-89
The Dow Chemical Company Motor Vehicle May-88 217,908 9,805 74.86% 50 FP
Treasure Chest Advertising 15 Printing Apr-87 498,746 22,444 97.79% 60 FP
Company
TRW, Inc. Communication Apr-89 320,657 14,430 36 OL
United Technologies Office Information Jan-87 74,115 3,335 48 FP
Corporation, Pratt & Systems
Whitney Aircraft Group
Vista Chemical Company Railroad Rolling Mar-88 850,000 38,250 53.45% 60 FP
Stock
Vista Chemical Company Railroad Rolling Apr-93 350,000 - 60 OL
Stock,
Improvements
WSMP, Inc. Food Processing Jul-95 208,788 - 98.47% 60 FP
Equipment
---------------- ---------------
ATEL Cash Distribution Fund total: $11,133,679 $450,000
================ ===============
A-23
<PAGE>
ATEL Cash Distribution Fund II
A.O. Smith Corporation Office Information Jul-89 to $873,480 $5,878 11.59% 36-59 FP
Systems, Lift Feb-91
Trucks
Addwest Gold, Inc. 16 Mining Oct-88 1,100,717 52,284 60 FP
Alachua General Hospital, 7 Medical Jan-89 1,257,263 59,720 36 OL
Inc.
American Express Company Manufacturing May-89 276,775 13,147 48 FP
American President Trucking 17 Tractors Sep-88 2,890,840 137,315 84 FP
Co., Ltd.
Bristol-Myers Squibb Office Furniture Jul-92 324,310 - 24 OL
Company
Buffalo & Pittsburgh Locomotive Nov-93 108,127 - 37 FP
Railroad
Campbell Soup Company Lift Trucks Aug-88 350,772 16,662 84 FP
Chesebrough-Pond's Inc. Lift Trucks Jun-90 201,452 - 48-50 FP
Chrysler Corporation Material Handling Dec-93 103,620 - 12 OL
Colour Graphics Corporation Computer System Oct-88 33,805 1,606 60 FP
Cooper Tire & Rubber Company Lift Trucks Jan-89 576,326 27,375 84 FP
Delnor Community Hospital Medical Jul-88 449,956 21,373 36 OL
DJ Aerospace (Bermuda), Ltd. Executive Aircraft Jul-94 810,000 - 36 OL
Emanuel Hospital & Health Helicopter Oct-88 2,247,765 106,769 79.58% 144 FP
Center
Financial News Network, Inc. 9, 18 Studio and Apr-90 640,544 29,815 36 FP
Broadcasting
Fingerhut Corporation Binding, Printing Jan-89 to 1,441,690 68,481 60 FP
Mar-89
FMC Gold Company Material Handling Apr-90 761,129 36,154 36 OL
GAF Corporation Manufacturing Oct-88 to 682,310 32,410 60 FP
Apr-88
Galardi Group, Inc. Restaurant Furniture Jul-94 507,000 - 48 FP
and Fixtures
General Motors Corporation Video Projectors Jan-94 58,644 - 36 OL
Home Life Insurance Company Office Furniture/ Dec-88 425,658 20,219 60 FP
Lift Trucks/
Binding
Hudson Foods, Inc. Food Processing Dec-89 2,713,115 128,872 65.91% 57-59 FP
Inland Steel Company Scientific Measuring Sep-89 417,000 19,808 54 FP
International Paper Company 19 Delivery Trucks Jul-88 1,281,761 60,884 36-60 FP, OL
KeyCorp Office Furniture, Jul-89 1,618,337 76,870 40.09% 53-55 FP
Automated Teller
Machines
Koppers Industries, Inc. Material Handling Jun-90 639,120 - 60 FP
Liggett Group, Inc. 20 Manufacturing Dec-88 648,577 30,807 56 FP
Midway Airlines, Inc. 21 Commercial Aircraft Jun-90 4,592,040 - 68.85% 102 FP
National Semiconductor Manufacturing Apr-89 728,000 34,580 56 FP
Corporation
National Steel Corporation Material Handling May-89 606,153 28,792 87.63% 81 FP
National Union Electric 22 Communication Apr-89 459,893 21,845 60 FP
Corporation
Nissan Motor Corporation Office Information Jul-88 219,187 10,411 48 FP
In USA Systems
NMCS, Inc., d/b/a National 23 Office Furniture Apr-88 599,001 28,452 60 FP
Medical Group Services,
Inc.
Nord Kaolin Company 12 Drilling Apr-89 292,799 13,908 60 FP
Owens Corning Fiberglas Material Handling Jul-89 to 1,689,012 42,404 39.57% 36-84 FP, OL
Corporation Oct-90
Quaker Coal Company 24 Tractor Apr-94 558,301 - 24 OL
A-24
<PAGE>
Regents of the University Communication Dec-88 80,386 3,818 60 FP
of California
Rocky Mountain Helicopters, 25 Medical Aircraft Nov-89 2,150,000 102,125 81.86% 84 FP
Inc.
Rohr Industries, Inc. Motor Vehicles Jan-89 to 749,291 33,835 36-84 FP
Jan-90
Sebastiani Vineyards, Inc. Production Line, Jan-90 to 2,818,067 29,362 79.98% 60-84 FP
Wine Barrels Jan-91
Shell Mining Company 26 Mining Jul-90 3,736,965 104,055 21.46% 60-84 FP
Sherwood Rehabilitation 27 Medical Furniture/ Oct-90 1,814,036 - 97.36% 87 FP
Hospital, Inc. Fixtures & Eqt.
South Dade Nursing Home Ltd. 27 Physical Therapy & Jul-90 36,676 - 60 FP
Exercise Eqt.
St. Luke's-Roosevelt Hospital Medical Furniture/ Feb-90 1,075,795 50,428 84.68% 34-39 OL
Center Fixtures & Eqt.
The Budd Company Material Handling May-90 to 1,099,014 - 75.09% 55-80 FP
Jun-90
The Dow Chemical Company Material Handling Jun-88 1,532,061 72,773 74.86% 50 OL
Treasure Chest Advertising Printing Press Apr-93 850,000 - 95.59% 60 FP
Company
Treasure Chest Advertising Printing Equipment Feb-94 233,000 - 60 FP
Company
USX Corporation Haul Trucks Dec-89 2,910,766 138,261 83.41% 60 FP
---------------- ---------------
ATEL Cash Distribution Fund II total: $52,270,536 $1,661,498
================ ===============
ATEL Cash Distribution Fund III
A.O. Smith Corporation Material Handling Feb-91 $451,902 $21,465 60 FP
Alachua General Hospital, Medical Oct-92 2,074,989 - 36 OL
Inc.
Alachua General Hospital, Medical Apr-95 80,500 - 0.00% 18 FP
Inc.
Alumina Partners of Jamaica 28 Earth Moving Jun-93 2,057,133 - 60 FP
American President Trucking Tractors and Mar-90 to 4,859,181 230,811 68.08% 77-84 FP
Co., Ltd. Trailers Aug-90
AMOCO Corporation Trailers May-94 523,805 - 85.88% 66 FP
ARR, Inc. 29, 30 Corporate Aircraft Oct-92 5,275,000 - 84 OL
Barney's, Inc. 31 Retail Store Oct-93 2,041,222 - 60.04% 60 FP
Furniture and
Fixtures
Buffalo & Pittsburgh Locomotives Nov-93 792,657 - 37 FP
Railroad Company
Carrier Corporation Lift Trucks Jul-90 108,062 5,133 55 FP
Carrier Corporation Lift Trucks Jul-90 to 533,950 25,363 53 FP
Aug-90
Dean Foods Company Trailers Nov-90 to 1,213,190 57,627 75-84 FP
Apr-91
Fingerhut Corporation Offset Printing Apr-91 1,303,078 61,896 85 FP
Press
Fingerhut Corporation Printing Oct-91 to 2,074,915 14,464 48.47% 84-85 FP
Oct-92
FMC Gold Company Haul Truck Jul-90 534,828 25,404 48 OL
Fred Meyer, Inc. Point-of-Sale Oct-90 6,343,897 301,335 63.93% 58 FP
General American Life Office Furniture Jan-93 1,611,278 76,536 84 FP
Insurance
H.E. Butt Grocery Company Tractors and Trailers Jan-93 2,112,747 - 60-84 OL/FP
Ingersoll International, Communication System Dec-90 277,017 13,158 60 FP
Inc.
Kelly-Springfield Tire Material Handling Apr-92 to 127,834 6,072 60 FP
Company Jul-92
A-25
<PAGE>
Koppers Industries, Inc. Material Handling Oct-90 402,722 19,129 60 FP
Kraft General Foods, Inc. Lift Trucks May-91 to 1,621,541 77,023 48-72 FP
Nov-91
Midway Airlines, Inc. 21 Commercial Aircraft Jul-90 2,296,020 109,061 68.85% 102 FP
Mobil Oil Corporation Material Handling Jul-92 70,256 1,173 36 OL
Mobil Oil Corporation Electric Golf Carts Nov-93 280,119 - 36 OL
Nord Kaolin Company 32 Materials Processing Sep-90 391,116 18,578 60 FP
Ohio Coal Company 33 Mining Apr-92 10,630,130 504,931 84.48% 51-84 OL/FP
Pepsico, Inc., d/b/a/ PFS Material Handling Jul-90 to 539,330 25,618 45.63% 58-72 FP
Sep-90
Pilgrim's Pride Corporation Food Processing Nov-90 3,619,095 171,907 59 FP
Pittston Coal Group 34 Mining Jul-92 5,810,941 276,020 75.71% 60 FP
Portland General Electric 35 Power Generation Jun-90 2,710,359 128,742 70.25% 101 OL
Company
PSI Energy, Inc. Earth Moving Aug-90 842,013 39,996 72 FP
Quaker Coal Company Mining Jan-94 5,808,385 - 60 OL
Reliance Insurance Company Office Furniture Jul-92 1,222,297 50,135 51.90% 60 FP
Rohr Industries Motor Vehicle Oct-95 37,244 - 36 OL
Shell Mining Company Haul Trucks Jan-92 3,167,443 150,454 65.64% 60-84 FP
Stone Container Corporation Material Handling Nov-90 2,975,000 141,313 34.40% 26-57 OL
Teledyne Industries, Inc. Lift Trucks Feb-91 116,476 5,533 39 OL
Terex Corporation Manufacturing Apr-91 291,455 13,845 84 FP
The Dow Chemical Company Material Handling Nov-90 to 4,504,918 195,358 68.68% 53-60 OL/FP
Dec-92
The Helen Mining Company 36 Mining Shields Jul-91 5,270,314 250,340 60 FP
The Pillsbury Company Harvesting Jan-93 2,327,946 110,577 59.93% 60 OL
Treasure Chest Advertising Flying High Speed Apr-93 239,171 - 87 FP
Company Paster
Treasure Chest Advertising Printing Stackers Oct-95 139,600 - 84 FP
Company
Truck-Lite Company, Inc. 36 Project Line Oct-91 to 6,875,715 308,441 81.76% 69-84 FP
Jan-93
USS/Kobe Steel Company 37 Lift Trucks Sep-19 to 408,410 19,399 36-60 OL/FP
Nov-91
Utilicorp United, Inc. 38 Power Generation Sep-91 1,086,934 51,629 75.65% 105 FP
Wal-Mart, Inc. Trailers / Forklifts May-94 490,255 - 95.09% 20-38 OL/FP
West Penn Power Company Storage Tanks Sep-91 1,057,551 50,234 97.86% 87 FP
---------------- ---------------
ATEL Cash Distribution Fund III total: $99,629,941 $3,558,700
================ ===============
ATEL Cash Distribution Fund IV
ARR, Inc. 29, 30 Corporate Aircraft Oct-92 to $9,635,969 $337,259 84 OL
Dec-92
ATS, Automatic Tooling Machine Tools Mar-95 434,904 123,410 86.98% 60 FP
Systems
ATS, Automatic Tooling Machine Tools Mar-95 175,974 6,545 86.98% 60 FP
Systems
Barney's, Inc. 31 Retail Store Oct-93 2,353,608 82,376 60.05% 60 FP
Furniture and
Fixtures
Buffalo & Pittsburgh Locomotives Nov-93 849,216 29,723 37 FP
Railroad
Burlington Air Exress Materials Handling Apr-95 622,663 21,793 78.25% 84 FP
Burlington Air Exress Materials Handling Jul-95 505,325 - 80.23% 84 FP
Burlington Northern 39 Locomotives Jan-93 7,950,000 278,250 24 OL
Railroad Company
Chrysler Corporation Tractors & Trailers Dec-93 3,253,000 113,855 84.13% 71-72 FP
Clinchfield Coal Company Drill, Endloader, Jan-94 985,203 34,482 65.79% 73 1/2-91 1/2 FP
Diesel Generator
A-26
<PAGE>
DJ Aerospace (Bermuda), Executive Aircraft Jul-94 1,890,000 66,150 36 OL
Ltd.
Federal Paper Board Co., Office Equipment Jul-95 77,950 - 36 FP
Inc.
Foodmaker, Inc. Restaurant Furniture Oct-94 to 2,651,356 92,797 60 FP
and Fixtures Jan-95
Galardi Group, Inc. Restaurant Furniture Jul-94 546,000 19,110 48 FP
and Fixtures
GE Industrial & Power Office Automation Mar-95 138,130 4,835 36 FP
Systems
GE Industrial & Power Machine Center Jun-95 457,670 - 84 FP
Systems
H.E. Butt Grocery Company Trailers Oct-92 to 5,709,369 199,828 72.48% 60-84 OL/FP
Jan-93
H.E. Butt Grocery Company Trailers Jun-93 1,404,302 49,151 75.71% 84 FP
Holston Mining, Inc. 40 Endloader, Dozer Jan-94 584,617 20,462 91 1/2 FP
Kraft General Foods, Inc. Tractors Dec-93 964,315 33,751 71.69% 31 FP
Liquid Carbonic Industrial/ 41 Air Separation Plant Dec-93 9,500,897 332,531 54.21% 99 FP
Medical Corporation
Midwest Power Systems, Inc. Coal Hopper Cars Jan-93 2,240,000 78,400 28.36% 36 OL
Mobil Oil Corporation Tractors/ Oct-92 to 2,760,175 95,786 27-60 OL
Construction/ Apr-94
Earth Moving
Nabisco, Inc. Office Automation Aug-95 337,594 - 36 FP
National Steel Corporation Construction Jan-95 2,208,510 77,298 76.55% 60-84 FP
Equipment
National Steel Corporation Construction Apr-95 3,675,997 83,148 88.15% 85-91 FP
Equipment
Omnicom Group Inc. Office Automation Oct-95 901,849 - 36 FP
Omnicom Group Inc. Computers & Related Aug-96 32,599 - 36 FP
Equipment
Paramount Coal Corporation 40 Drill, Dozer Jan-94 595,800 20,853 65.79% 61 1/2-91 1/2 FP
Pepsico, Inc. Materials Handling Jan-94 146,926 5,142 48-60 OL/FP
Pepsico, Inc. Materials Handling Jul-93 to 458,017 16,031 48-60 OL/FP
Sep-93
Pittston Coal Group 34 Mining Jul-92 846,883 29,641 78.76% 60 FP
Pittston Coal Group 34 Mining Mar-95 819,349 28,677 65.79% 60 FP
Quaker Coal Company 24 Rail Car Mover Nov-95 263,984 - 48 FP
Rochelle Coal Company 42 Mining Jan-93 6,303,701 220,630 70.34% 84 FP
Sebastiani Vineyards, Inc. Wine Barrels Apr-94 189,855 6,645 60 FP
Sebastiani Vineyards, Inc. Wine Barrels Apr-95 180,253 6,309 60 FP
Sebastiani Vineyards, Inc. Wine Barrels Apr-94 to 454,721 15,915 36 FP
Jul-94
Signature Flight Support Air Support Jan-95 1,142,400 39,200 84 FP
Corporation Equipment
Tarmac America, Inc. 43 Crawler Dozer, Aug-94 385,443 13,491 75.64% 60-84 FP
Wheel Loader
Tarmac America, Inc. 43 Construction Jan-95 210,438 7,365 80.90% 84 FP
Equipment
Tarmac America, Inc. 43 Construction Jul-95 to 1,309,300 - 79.82% 97 FP
Equipment Aug-95
TASC, Inc. Office Automation Jan-95 131,008 4,585 36 FP
TASC, Inc. Office Automation Oct-95 to 601,701 - 36 FP
Apr-96
The Dow Chemical Company Material Handling, Dec-92 2,221,228 77,743 74.80% 60-84 FP
Research
The Dow Chemical Company Research Feb-93 102,149 3,575 87.94% 60 FP
The Dow Chemical Company Boom Lift May-93 66,900 2,342 75.81% 60 FP
The Helen Mining Company 36 Mining Jan- to 3,816,507 133,578 32.62% 60 FP
May-92
A-27
<PAGE>
The Kendall Company Office Automation Nov-94 166,835 5,839 36 FP
The Kendall Company Office Automation Jan-95 86,108 3,014 36 FP
The Kendall Company Office Automation Apr-95 434,705 15,071 36 FP
The Kendall Company Office Automation Oct-95 to 568,370 - 24 - 36 FP
Jan-96
The Stop & Shop Supermarket Bakery Labeling Feb-96 368,500 - 60 FP
Company Machines
Trans Ocean Container 44 Intermodal Oct-93 3,001,930 105,068 120 FP
Corporation Containers
Treasure Chest Advertising Bin Stackers and Dec-93 to 753,419 26,370 84-86 FP
Company Trimmers Apr 94
Treasure Chest Advertising Printing Press Dec-93 3,478,749 121,756 88.28% 84 FP
Company
Treasure Chest Advertising Printing Press & Aug-93 2,075,000 72,625 89.99% 66 FP
Company Associated
Equipment
Treasure Chest Advertising Printing Press & Feb-95 511,907 17,917 84 FP
Company Associated
Equipment
Union Pacific Corporation Intermodal Jan-93 1,453,096 50,858 46.85% 60 OL
Union Tank Car Company Rail Sep-92 to 6,460,600 225,666 23.25% 25-51 OL
Oct-92
USS/Kobe Steel Company 37 Materials Handling Jul-94 35,920 1,257 60 FP
USS/Kobe Steel Company 37 Dump Truck Aug-92 256,000 8,960 84 FP
USX Corporation Materials Handling Jun-93 3,061,376 107,148 83.67% 54-69 FP
Xerox Corporation Materials Handling Feb-95 26,092 913 44 OL
Xerox Corporation AKT PVD System Jan-97 77,518 - 54 FP
Upgrade
Xerox Corporation AKT PVD System Jul-96 2,825,000 - 85.74% 60 FP
---------------- ---------------
ATEL Cash Distribution Fund IV total: $108,734,880 $3,575,123
================ ===============
ATEL Cash Distribution Fund V
Armco, Inc. Phone Mail System Jan-96 $459,835 $16,094 84 FP
Armco, Inc. Telephone System Jan-97 31,932 - 72 FP
Upgrade
The Atchison, Topeka & Santa Containers Jan-95 1,926,930 67,443 62.75% 84 OL
Fe Railroad Company
The Atchison, Topeka & Santa Rail Car Containers Jul-94 7,812,200 273,427 55.89% 84 OL
and Chassis
Fe Railroad Company
The Atchison, Topeka & Santa 45 Tank Containers Nov-93 744,875 26,071 84 FP
Fe Railroad Company
Barney's, Inc. 31 Retail Store Oct-93 3,365,947 117,808 60.04% 60 FP
Furniture and
Fixtures
BJ's Wholesale Club 46 Materials Handling Oct-94 613,998 21,490 62 FP
BNMC Leasing, Inc. Over-the-road May-94 141,540 4,954 35.62% 8 OL
Tractors
Burlington Air Express Materials Handling Jan-95 to 1,720,008 60,200 75.87% 84 FP
Apr-95
Burlington Northern Railroad Locomotives Jan-95 12,350,000 432,250 28 OL
Burlington Northern Railroad 47 Covered Hopper Rail Apr-96 9,344,563 60,848 21 FP
Cars
Burris Foods, Inc. Over-the-road May-94 245,296 8,585 21.16% 5 OL
Trailers
Canadian Pacific Limited 47 Covered Hopper Rail Apr-96 1,798,388 - 13 FP
Cars
A-28
<PAGE>
Cargill, Inc. 47 Covered Hopper Rail Apr-96 282,100 - 36 FP
Cars
CF Industries, Inc. 47 Covered Hopper Rail Apr-96 528,938 - 12 FP
Cars
Chrysler Corporaion Materials Handling Dec-94 to 1,300,286 45,510 76.79% 60 OL
Mar-95
Chrysler Corporation Over-the-road Dec-93 1,379,490 48,282 54.62% 60 OL
Tractors
Chrysler Corporation Materials Handling Apr-96 9,296 - 60 OL
Chrysler Corporation Forklifts Jul-96 25,162 - 60 OL
Chrysler Corporation Materials Handling Apr-95 to 166,069 5,812 30.07% 60 OL
Jun-95
Chrysler Corporation Materials Handling Nov-93 to 1,303,039 45,606 58.69% 60 OL
Jan-94
CITGO Petroleum Corp. Over-the-road May-94 837,904 29,327 74.10% 36 OL
Tractors
Clark Oil & Refining Retail Store Jan-94 1,268,656 44,403 36 OL
Corporation Fixtures
Denver and Rio Grande Auto Racks May-94 7,180,000 251,300 44 FP/OL
Western Railroad
Emerson Electric Company Over-the-road May-94 237,149 8,300 27.39% 80 FP
Trailers
Federal Paper Board Materials Handling Jan-95 1,315,911 46,057 36 OL
Company, Inc.
Federal Paper Board Materials Handling Apr-95 930,814 32,578 36 OL
Company, Inc.
Federal Paper Board Forklifts, Oct-94 167,791 5,873 36 OL
Company, Inc. Wheeloader
Foodmaker, Inc. Fixtures and Jan-94 to 6,042,382 211,489 15.63% 60 FP
Fittings
and Trailers Oct-94
General Electric Company Injection Molding Feb-96 1,470,000 51,450 76.28% 120 FP
General Motors Corporation Materials Handling Jan-94 to 3,023,173 105,811 62.16% 60 OL
(Service Parts Operation May-94
Division)
General Motors Corporation Materials Handling Jul-94 893,382 31,268 73.33% 60 OL
(Truck and Bus Division)
IBM Corporation Office Furniture Aug-93 1,825,710 63,900 48 OL
Illinois Central Railroad 47 Covered Hopper Rail Apr-96 1,234,188 - 12 - 40 FP
Company Cars
Ingersoll International, Machine Tools Jun-94 1,196,355 41,872 72 FP
Inc.
Kaiser Cement Corporation Tractor and Dump Oct-93 984,671 34,463 60 OL
Truck
Kraft, Inc. Over-the-road May-94 1,000,353 35,012 91.49% 56 FP
Trailers
McDonnell Douglas Helicopter Office Automation Aug-95 110,320 3,861 36 FP
Systems
Minteq International, Inc. 48 Turbo Laser May-96 347,430 - 36 FP
Minteq International, Inc. 48 Turbo Laser Feb-94 461,800 16,163 60 FP
Mobil Administrative 49 Helicopter Jun-93 844,525 29,558 24 OL
Services Company, Inc.
Mobil Oil Corporation Environmental Jul-93 423,000 14,805 36 OL
Ejector Systems
Mobil Oil Corporation Wheel Loader Oct-93 70,200 2,457 36 OL
Mobil Oil Corporation Materials Handling Jan-95 853,093 29,858 60 OL
Mobil Oil Corporation Liquid Petroleum Oct-95 to 12,863,591 450,226 75.74% 240 FP
Tank Cars Jan-96
A-29
<PAGE>
Montana Rail Link, Inc. 47 Covered Hopper Rail Apr-96 846,300 - 12 FP
Cars
Nabisco, Inc. Office Automation Mar-95 426,420 14,925 36 OL
Nabisco, Inc. Office Automation Oct-95 190,442 6,665 36 FP
National Steel Corporation Wheel Loader Oct-94 253,527 8,873 55.74% 60 FP
National Steel Corporation Materials Handling Oct-94 64,650 2,263 46.63% 49 OL
National Steel Corporation Materials Handling Jan-95 1,649,465 57,731 59.70% 61 OL
National Steel Corporation Materials Handling Jan-95 66,134 2,315 51.26% 36 OL
National Steel Corporation Materials Handling Apr-95 873,161 30,561 63.31% 61 OL
National Steel Corporation Materials Handling Apr-95 609,500 21,333 56.28% 49 OL
National Steel Corporation Bulldozer / Crane Oct-95 2,137,183 74,801 78.44% 90 FP
Occidental Chemical Barges Aug-94 2,798,303 97,941 56.31% 16 OL
Corporation
Omnicom Group, Inc. 50 Office Automation & Jan-96 1,458,896 51,061 36 - 60 FP
Office Furniture
Owens Corning Fiberglas Materials Handling Aug-93 157,462 5,511 36 OL
Corp.
Pegasus Gold Corporation 51 Surface Mining Jan-96 7,280,747 254,826 79.77% 84 FP
Praxair, Inc. Over-the-road May-94 668,114 23,384 52.77% 27 OL
Tractors
Primark Corporation Office Automation Jul-95 to 143,449 5,021 36 FP
Apr-96
PV Trucking Over-the-road May-94 75,332 2,637 18 FP
Tractors
Quaker Coal Company 24 Haul Truck & Oct-94 2,626,953 91,943 24-30 OL
Crawler Tractor
Quaker Coal Company 24 Mining Equipment Jan-95 3,000,000 105,000 24 OL
Quaker Coal Company 24 Haul Trucks & Tractor Oct-95 2,877,672 100,719 48 - 60 FP
Quantum Restaurant Group, 52 Restaurant Furniture, Jun-96 436,331 - 60 FP
Inc. Fixtures &
Equipment
Quantum Restaurant Group, 52 Restaurant Furniture, Jul-96 499,131 - 60 FP
Inc. Fixtures &
Equipment
Quantum Restaurant Group, 52 Restaurant Furniture, Sep-96 450,273 - 60 FP
Inc. Fixtures &
Equipment
Quantum Restaurant Group, 52 POS System Sep-96 33,023 - 60 FP
Inc.
Quantum Restaurant Group, 52 POS System Oct-96 36,185 - 60 FP
Inc.
Quantum Restaurant Group, 52 Restaurant Furniture, Oct-97 432,328 15,131 60 FP
Inc. Fixtures &
Equipment
Quantum Restaurant Group, 52 Restaurant Furniture, Oct-97 425,437 14,890 60 FP
Inc. Fixtures &
Equipment
Quantum Restaurant Group, 52 Restaurant Furniture, Oct-97 205,981 7,209 60 FP
Inc. Fixtures &
Equipment
Roper Corporation Forklifts Jan-96 243,659 8,528 84 FP
Roper Corporation Industrial Batteries Sep-96 30,882 - 76 FP
Schwegmann Giant Super 53 Fixtures & Equipment Jul-95 5,058,331 176,161 60 FP
Markets, Inc.
Sebastiani Vineyards, Inc. Bottling Equipment Apr-94 113,673 3,979 48 OL
Sebastiani Vineyards, Inc. Wine Barrels Apr-95 95,848 3,355 36 FP
Smitty's Super Valu, Inc. 54 Retail Store Jan-96 4,709,326 164,826 64.27% 60 FP
Furniture
& Fixtures
A-30
<PAGE>
Soo Line Railroad Company 47 Covered Hopper Rail Apr-96 1,586,813 - 12 FP
Cars
Star Enterprise Over-the-road May-94 923,533 32,324 59.16% 32 OL
Tractors
Tarmac America, Inc. 43 Concrete Trucks with Sep-94 to 5,937,371 207,808 76.81% 48 FP
Mixers Oct-94
Tarmac America, Inc. 43 Construction Sep-95 to 1,491,348 52,197 70.16% 84 FP
Equipment Jan-96
Tarmac America, Inc. 43 Concrete Trucks with Sep-95 to 1,982,071 69,372 75.27% 97 FP
Mixers Oct-95
TASC, Inc. Office Automation Jan-95 237,685 8,319 18 OL
TASC, Inc. Office Automation Apr-96 522,280 16,716 18 - 36 FP
Texaco Trading and Over-the-road May-94 4,485,676 156,999 60.91% 32-68 FP/OL
Transportation, Inc. Tractors &
Trailers
The Dow Chemical Company Copiers Jul-94 272,809 9,548 36 OL
The Dow Chemical Company Office Equipment Apr-95 122,800 4,298 36 FP
The Dow Chemical Company Office Automation Oct-94 to 377,702 13,220 36 OL/FP
Jan-95
The Kendall Company Office Automation Oct-96 3,735 131 36 FP
The Pillsbury Company Harvesting Equipment Oct-94 1,643,101 57,509 84.91% 60 FP/OL
The Pittston Company 34 Construction & Jan-94 to 14,037,683 491,319 38.93% 49-61 OL/FP
Mining
Equipment Dec-94
Tom's Foods, Inc. Over-the-road May-94 259,102 9,069 35.23% 9 OL
Tractors
Trans Ocean Container 44 Intermodal Oct-93 5,000,683 175,024 120 OL
Corporation Containers
Treasure Chest Advertising Printing Press & Oct-93 2,069,950 72,448 77.94% 60 - 84 FP
Company, Inc. Associated
Equipment
Treasure Chest Advertising Printing Press & Aug-96 287,320 9,051 84 FP
Company, Inc. Associated
Equipment
Treasure Chest Advertising Printing Press & Jul-95 to 2,325,000 81,375 46.50% 66 FP
Company, Inc. Associated Nov-95
Equipment
Tyson Foods, Inc. Tractors / Trailers Jul-93 to 5,785,000 202,475 26.95% 36 - 84 OL
Aug-93
Union Carbide Corporation Rail Tank Cars Aug-95 4,835,759 140,000 39.30% 68 - 92 FP
USS / Kobe Steel Company 37 Wheel loader, Crane Jan-94 603,352 21,117 60 - 84 FP/OL
& Lift Truck
---------------- ---------------
ATEL Cash Distribution Fund V total: $186,897,181 $5,956,319
================ ===============
ATEL Cash Distribution Fund VI
A T & T Communications, Inc. 55 Printers Aug-95 to $1,578,500 $46,200 36 OL
Nov-95
A T & T Communications, Inc. 55 Printers Jul-96 to 1,171,302 17,192 34 OL
Dec-96
A T & T Communications, Inc. 55 Printers Nov-97 912,252 28 - 32 OL
A T & T Communications, Inc. 55 Printers Jun-96 to 540,181 15,752 28 - 34 OL
Jul-96
American President Trucking 17 Tractors and Nov-95 759,092 22,773 30.18% 8 OL
Company, Ltd. trailers
Applied Magnetics Manufacturing Sep-96 to 7,435,380 223,061 71.50% 60 OL/FP
Corporation Oct-96
A-31
<PAGE>
Applied Magnetics Sputter Jul-96 3,274,642 98,239 78.86% 60 FP
Corporation
Armco, Inc. Link-Belt Oct-95 388,993 11,670 36 OL
Scrapmaster
Armco, Inc. Data processing Nov-95 67,829 2,035 37 FP
Armco, Inc. Office Automation Jul-96 109,416 3,282 30 FP
Armco, Inc. Office Automation Jan-97 60,655 72 FP
AT&L Railroad Company 47 Covered Hopper Rail Apr-96 35,263 1,050 12 FP
Cars
Atchison, Topeka & Santa Containers Oct-94 to 9,196,811 298,896 60.53% 84 OL
Fe Railroad Company Jan-95
ATS Automation Tooling Machine Tools Apr-96 to 379,551 77,093 60 FP
Systems, Inc. Oct-96
ATS Automation Tooling Machine Center Oct-96 to 330,901 3,513 60 FP
Systems, Inc. Jan-97
BJ's Wholesale Club 46 Materials Handling Jul-95 931,635 30,278 63 OL
Burlington Northern Railroad 47 Covered Hopper Rail Apr-96 13,223,438 396,703 21 FP
Cars
Canadian Pacific Limited 47 Covered Hopper Rail Apr-96 2,433,113 72,450 13 FP
Cars
Cargill, Inc. 47 Covered Hopper Rail Apr-96 352,625 10,500 36 FP
Cars
Certified Grocers of Materials Handling Oct-96 637,702 19,131 60 OL
California
CF Industries, Inc. 47 Covered Hopper Rail Apr-96 705,250 21,000 12 FP
Cars
Chrysler Corporation Materials Handling Feb-96 to 1,749,200 52,476 69.99% 53 - 60 OL
Jul-96
Chrysler Corporation Materials Handling Mar-95 to 5,925,384 184,233 66.83% 60 OL
Dec-95
Chrysler Corporation Materials Handling May-96 to 2,419,598 69,832 69.93% 52 - 60 OL/FP
Oct-96
Consolidated Rail Locomotives Sep-95 22,353,332 668,372 57.02% 60 OL
Corporation
Consolidated Rail Intermodal Container Jan-96 2,502,750 75,083 60 OL
Corporation Chassis
Coors Transportation Company 56 Refrigerated Trailers Nov-95 797,704 23,931 47.35% 21 OL
Fairmont Homes, Inc. Materials Handling Apr-96 644,565 19,337 60 OL
Federal Paper Board Company Materials Handling Apr-96 to 1,740,861 52,226 70.43% 36 - 60 OL
Jun-96
Federal Paper Board Company Materials Handling Jul-95 to 5,401,765 166,124 57.05% 36 - 84 OL/FP
Jan-96
General Electric Company - Office Filing Jan-97 101,685 60 FP
Aircraft Engines System
General Motors Corporation Manufacturing Jul-95 652,232 19,567 36 OL
Equipment
Gerber Products Company Materials Handling Oct-96 197,035 5,911 60 FP
Hastings Leasing Limited 57 Trucks & Aug-96 20,242,332 607,270 90.58% 80 FP
Miscellaneous
Illinois Central Railroad 47 Covered Hopper Rail Apr-96 1,692,600 50,400 12 - 40 FP
Company Cars
IMC Fertilizer, Inc. Rail Tank Cars Sep-95 1,266,374 37,991 27 OL
Mobil Oil Corporation Tractor Jul-96 78,327 2,350 36 OL
Mobil Oil Corporation Materials Handling Oct-96 185,726 5,256 36 OL
Mobil Oil Corporation Hydraulic Crane Oct-96 160,773 4,823 84 OL
Mobil Oil Corporation Liquid Petroleum Jan-96 to 16,110,807 483,324 75.44% 240 FP
Tank Cars Feb-96
Montana Rail Link, Inc. 47 Covered Hopper Rail Apr-96 1,198,925 35,700 12 FP
Cars
A-32
<PAGE>
Nabisco, Inc. Office Automation Apr-95 709,572 23,061 36 OL
National Steel Corporation Hydraulic Shovels Jul-96 6,245,062 187,352 69.96% 60 OL
National Steel Corporation Steel Yard Equipemt Jan-97 948,705 14,543 48 - 60 OL/FP
National Steel Corporation Steel Yard Equipemt Oct-96 338,674 10,160 75.58% 60 FP
National Steel Corporation Wheel Loaders & Jan-96 to 4,710,131 141,304 59.68% 36 - 90 OL/FP
Forklifts Apr-96
National Steel Corporation Materials Handling, Jul-95 to 1,525,887 49,517 66.05% 60 - 90 OL/FP
Tractors & Oct-95
Trailers
National Steel Corporation Cranes & Loaders Jul-96 to 1,099,210 32,976 72.33% 36 - 84 FP/OL
Oct-96
NEC Electronics, Inc. 58 Manufacturing Jan-96 18,320,603 66.67% 51 OL/FP
NVR, Inc. Roof Truss Assembly Jul-96 78,484 2,355 84 FP
Omnicom Group, Inc. 50 Office Automation Apr-95 to 2,232,559 68,290 36 - 60 OL/FP
Oct-95
Omnicom Group, Inc. 50 Television Jul-96 to 1,080,056 4,819 48 FP
Production Oct-96
Equipment
Overnite Transportation Tractors Apr-96 2,140,643 62,961 36 OL
Company
Peerless Eagle Coal Company 59 Haul Trucks & Jul-95 5,184,875 168,508 59.29% 48 OL
Construction
Perdue Transportation 60 Freightliner Nov-95 536,740 16,102 62.74% 24 OL
Incorporated Tractors
Quaker Coal Company 24 Wheel Loaders, Jan-96 3,298,935 98,968 48 FP
Drill & Grader
Quantum Restaurant Group, 52 Restaurant Oct-96 253,676 7,610 60 FP
Inc. Furniture &
Fixtures
Quantum Restaurant Group, 52 POS System Nov-96 33,815 60 FP
Inc.
Sebastiani Vineyards, Inc. Bottle Labeler Feb-96 317,520 9,526 60 OL
Signature Flight Support Fuel Trucks Jan-97 1,085,000 85.01% 96 - 132 FP
Corporation
Soo Line Railroad Company 47 Covered Hopper Rail Apr-96 2,256,800 67,200 12 FP
Cars
Tarmac America, Inc. 43 Dragline Jul-96 1,441,764 43,253 84 FP
Tarmac America, Inc. 43 Concrete Mixer Jul-96 to 4,787,890 143,637 96 FP
Trucks Sep-96
Tarmac America, Inc. 43 Construction Oct-94 to 3,114,870 101,233 71.69% 97 FP
Equipment Nov-94
TASC, Inc. Office Automation Jan-96 to 1,018,030 30,542 36 FP
Jul-96
TASC, Inc. Office Automation May-95 to 1,567,339 50,413 18 - 36 OL/FP
Oct-95
TASC, Inc. OfficeAutomation Oct-96 to 2,654,244 11,629 36 FP
Jul-97
Trans Ocean Container 44 Intermodal Jan-96 9,995,127 299,854 120 FP
Corporation Containers
Tyson Foods, Inc. Office Automation Jun-95 563,411 18,311 24 OL
Xerox Corporation Binding & Finishing Feb-95 to 646,466 19,981 48 OL
Equipment Jun-95
Xerox Corporation Materials Handling May-95 to 144,527 4,456 44 OL
Aug-95
---------------- ---------------
ATEL Cash Distribution Fund VI total: $208,277,121 $5,623,585
================ ===============
A-33
<PAGE>
ATEL Capital Equipment Fund VII:
Applied Magnetics Manufacturing Jul-97 $4,152,810 - 85.33% 63 FP
Corporation
A.P.Moller (Maersk) 61 Intermodal Jan-98 2,280,100 - 52 OL
Containers
Applied Magnetics Wafer Fabrication Dec-97 to 7,975,841 - 60 - 63 FP
Corporation Equipment Jan-98
Archer Daniels 62 Rail Tank Cars Jan-98 42,875 - 6 OP
Midland Company
Atmel Corporation Semiconductor Jan-98 4,114,596 - 96 FP
Manufacturing
Equipment
Blue Star Line Ltd. 61 Intermodal Jan-98 3,573,462 - 60 OL
Containers
Burlington Northern 63 Locomotives Dec-96 5,010,960 - 13 OL
Railroad Co.
Cargill, Incorporated 64 Covered Hopper Cars Jan-97 6,534,000 - 72 FP
Chrysler Corporation Materials Handling Oct-96 to 982,293 - 60 OL/HP
Dec-96
Columbus & Greenville 64 Covered Hopper Cars Jan-97 667,000 - 16 FP
Railway Company
Consolidated Rail Containers & Chassis Sep-97 to 3,314,000 - 84 HP
Corporation Nov-97
Dole Fresh Fruit 61 Intermodal Jan-98 3,876,170 - 44 OL
Company Containers
Far Eastern Shipping 61 Intermodal Jan-98 2,257,299 - 75 HP
Company Containers
Farmland Hydro, L.P. 62 Rail Tank Cars Jan-98 370,808 - 16 OL
General Electric Blow Molding System Jan-97 906,370 - 24 OL
Company - Plastics
General Electric Office Automation Sep-97 306,545 - 60 FP
Company - Plastics
General Electric Railcar Mover Mar-97 166,602 - 60 OL
Company - Plastics
Grand Trunk Western 65 Remanufactured High Jan-98 3,342,139 - 56.64% 24 OL
Railroad Cube Boxcars
Incorporated
Great Salt Lake 62 Rail Tank Cars Jan-98 481,261 - 7 OL
Minerals
Corporation
Hambros Vendor 66 Vehicles and
Finance Limited Sanitation Trucks Sep-97 5,381,076 - 78.56% 30 - 66 FP
Hastings Leasing 67 Trucks & Oct-97 28,811,289 - 88.85% 29 - 113 FP
Limited Miscellaneous
Hastings Leasing 67 Medical Equipment Oct-97 8,014,488 - 91.66% 25 - 81 FP
Limited
Illinois Central 64 Covered Hopper Cars Jan-97 1,610,000 - 36 FP
Railroad Company
Federal Paper Board 68 Rail Log Cars Oct-97 5,624,724 - 51 OL
Company, Inc.
International Paper Knuckle Boom /
Company Wheel Loaders Sep-97 to 926,964 - 48 - 60 OL/HP
Oct-97
International Paper Knuckleboom Loader Jul-97 275,000 - 60 HP
Company
International Paper Trackmobile Jan-97 248,952 - 60 OL
Company
A-34
<PAGE>
International Paper CAT Wheel Loader Feb-97 240,000 - 48 HP
Company
International Paper Knuckleboom Loader Feb-97 213,095 - 72 FP
Company
International Paper CAT Wheel Loader Jan-97 177,700 - 48 OL
Company
International Paper CAT Hydraulic
Company Excavator Jun-97 150,493 - 60 OL
International Paper Industrial Truck Jul-97 73,595 - 60 HP
Company
International Paper Linde-Baker Forklift Jul-97 40,350 - 60 FP
Company
Kawasaki Kisen 61 Intermodal Jan-98 2,614,728 - 52 OL
Kaisha, Ltd. Containers
(K-Line)
Koppers Industries, 62 Rail Tank Car Jan-98 5,400 - 6 OL
Inc.
Kraft Foods, Inc. Steelcase Office Nov-97 to 1,130,681 - 84 FP
Furniture & Jan-98
Fixtures
Kraft Foods, Inc. Telephone System Nov-97 to 539,196 - 60 FP
Jan-98
Maxtor Corporation 69 Testing Equipment Sep-97 533,698 - 36 HP
Minteq International, Laser Profiling Jan-97 to 1,708,935 - 36 HP
Inc. System Jan-98
Mobil Business 70 Helicopters Nov-96 1,650,000 - 36 OL
Resources
Corporation
Mobil Business 70 Helicopter Oct-97 1,160,000 - 36 OL
Resources
Corporation
Mobil Oil Wheel Loader Jan-98 92,773 - 36 OL
Corporation
National Steel Steel Yard Equipment Jul-97 3,666,101 - 60 OL
Corporation
National Steel Steel Yard Equipment Oct-97 1,747,828 - 60 HP
Corporation
National Steel Steel Yard Equipment Apr-97 734,730 - 75.36% 60 HP
Corporation
National Steel Omega Forklift & Apr-98 1,286,210 - 48 HP
Corporation Loader
National Steel Crane & Wheel Loader Jan-98 861,344 - 48 OL
Corporation
Nippon Yusen Kaisha 61 Intermodal Jan-98 8,715,760 - 96 FP
Ltd. (N.Y.K.Line) Containers
NVR, Inc Home Manufacturing Aug-97 to 728,967 - 84 FP
Nov-97
Omnicom Group, Inc. 71 Office Furniture Jan-98 1,007,401 - 60 FP
Omnicom Group, Inc. 71 Office Furniture Jul-97 20,292 - 60 FP
PCS Phosphate 62 Rail Tank Cars Jan-98 175,000 - 25 OL
Company, Inc.
Pioneer Chlor 62 Rail Tank Cars Jan-98 1,614,144 - 15 - 60 OL/HP
Alkali Company
PVS Technologies, 62 Rail Tank Cars Jan-98 672,388 - 6 - 24 OL
Inc.
Riceland Foods, Inc. 62 Rail Tank Cars Jan-98 130,032 - 4 OL
Seaboard Commodity 62 Rail Tank Cars Jan-98 525,618 - 6 - 22 OL
Trading Company
Sebastiani Vineyards, Wine Barrels Jan-98 872,061 - 36 - 60 HP/FP
Inc.
A-35
<PAGE>
Sematech, Inc. Manufacturing Apr-98 1,800,000 - 36 OL
Equipment
Sematech, Inc. Research Equipment Oct-97 1,303,600 - 36 HP
Sierra Pacific Power 68 Coal Hopper Rail Dec-97 2,600,000 - 67 OL
Company & Idaho Cars
Power Company
Signature Flight Fuel Trucks Apr-97 760,000 - 132 FP
Support
Corporation
Signature Flight Fuel Trucks Jan-98 620,000 - 96 - 132 FP
Support
Corporation
Signature Flight Fuel Truck & Deicer Apr-98 518,997 - 96 FP
Support
Corporation
Sisston Milbank 64 Covered Hopper Cars Jan-97 330,000 - 36 FP
Railroad, Inc.
Sony Pictures Sony Monitors Mar-98 193,140 - 36 HP
Entertainment,
Inc.
Southern Illinois 64 Covered Hopper Cars Jan-97 462,000 - 48 FP
Railcar Co.
Tarmac America, Inc. 72 Loaders Apr-97 350,000 - 18 OL
TASC, Inc. Office Automation Oct-97 to 1,169,828 - 36 HP/FP
Jan-98
TASC, Inc. Office Automation Apr-98 533,617 - 36 HP
UltraBeam 73 Technical Instrument Dec-97 to 345,882 - 48 HP
Lithography, Confocal Metrology Apr-98
Inc. System
UltraBeam 73 Steag PBS Develop Dec-97 to 220,887 - 48 HP
Lithography, HME System Apr-98
Inc.
Xerox Corporation FPD Inspection Jan-98 3,521,046 - 60 HP
System
First Union Rail 62, Rail Tank Cars N/A 478,836 - N/A N/A
Corporation 74
----------------- ---------------
Total funded as of February 28, 1998 $149,543,976 $0
================= ===============
TOTALS OF ALL FUNDS: $816,487,314 $20,825,225
================ ===============
</TABLE>
A-36
<PAGE>
TABLE V ACQUISITION OF EQUIPMENT FOOTNOTES
(1) In many cases, a Lease transaction is funded over a period of time
according to the Lessee's requirements. Therefore "Commencement Date (s)"
expressed as a range represents multiple commencement dates occurring or
anticipated under the same Lease line.
(2) "Acquisition Cost" includes either amounts committed to Lessees for
funding by the program, or the actual Equipment acquisition cost, less any
Acquisition Fees. All figures are rounded.
(3) "Acquisition Fees" include fees accrued by the program as of the
Preparation Date. For partially funded Lease lines, additional fees may be
expended by the program for future acquisitions made pursuant to the terms of
the Lease.
(4) "Percent Leverage" represents the percent ratio of the original
principal amount of the debt acquired or assumed by the program, to the
Acquisition Cost of the Equipment. The Equipment may be "leveraged" (where a
portion of the Equipment Acquisition Cost is financed using non-recourse debt
financing) at the time of, or subsequent to, the acquisition of the Equipment by
the program. Therefore, actual leverage ratios may be more or less than
indicated due to the timing of the acquisition of the Equipment in relation to
the amortization of the principal amounts of the debt.
(5) "Lease Term" is expressed in terms of months, although the actual Lease
Term may be expressed as monthly, quarterly, semiannual or annual.
(6) A designation of "FP" indicates that the aggregate rents to be received
during the Lease Term exceed or are equal to the Acquisition Cost of the
Equipment. A designation of "OL" indicates that the aggregate rentals to be
received during the Lease Term are less than the Acquisition Cost.
(7) The interest in this transaction is held 1/3 by ATEL Cash Distribution
Fund and 2/3 by ATEL Cash Distribution Fund II.
(8) Guaranteed by both Fingerhut Corporation and by Primerica Corporation,
as successor in interest to American Can Company.
(9) In March 1992, Financial News Network ("FNN"), a lessee of ATEL Lease
Income Fund, ATEL Cash Distribution Fund and ATEL Cash Distribution Fund II,
filed for protection under Chapter 11 of the U.S. Bankruptcy Act. Subsequent
competitive bidding between CNBC (a division of General Electric Company) and a
partnership consisting of Dow Jones, Inc. and Group W (Westinghouse) developed
for the purchase of FNN assets. This bidding resulted in the sale of certain FNN
assets, principally its subscribers, to CNBC for $145 million in cash and the
assumption of $9.3 million in liabilities. The proceeds from the sale were
distributed beginning in June 1992 resulting in the recovery of substantially
all of the programs' remaining investment in the Equipment.
(10) A 34.41% interest in this transaction was acquired by ATEL Cash
Distribution Fund. The remaining 65.59% was acquired by ATEL Cash Distribution
Fund II.
(11) Guaranteed by Fingerhut Corporation.
(12) Credit support provided by an Investment Agreement of Nord Kaolin
Corporation and of Nord Resources Corporation.
A-37
<PAGE>
(13) These transactions are all leveraged under one non-recourse note with
Sogelease Corporation.
(14) Leased to Teledyne Wah Chang Albany, a division of Teledyne
Industries, Inc.
(15) ATEL Cash Distribution Fund holds a one-half interest in this
transaction, the remaining half interest was acquired by ATEL Financial
Corporation on identical terms.
(16) Guaranteed by Addington Resources.
(17) Guaranteed by American President Companies.
(18) A 97.75% interest in Equipment Schedule No. 2 was acquired by ATEL
Cash Distribution Fund II. The remaining 2.25% interest in that Schedule was
acquired by ATEL Lease Income Fund.
(19) Lease originally with Hammermill Paper Company as lessee and
subsequently assumed by International Paper Company.
(20) Lease assigned to and assumed by Liggett & Meyers Tobacco Company,
with recourse retained against the original Lessee.
(21) On January 1, 1991 Midway Airlines, Inc., the lessee of the DC9-32 in
which ATEL Cash Distribution Fund II and ATEL Cash Distribution Fund III owned
interests, suspended payments on its debt and aircraft leases. On March 26,
1991, the Lessee filed for protection under Chapter 11 of the U.S. Bankruptcy
Act. On September 4, 1991, the non-recourse lender, John Hancock Leasing
Corporation, exercised its right to foreclose on the aircraft. As this
investment represents a relatively small portion of the programs' total equity
and anticipated cash flow, the General Partners do not believe that the adverse
developments with respect to this investment will have a material effect on
their respective operations, cash flows or rates of cash distributions. The
beneficial interest in the Equipment was held two-thirds by ATEL Cash
Distribution Fund II and one-third by ATEL Cash Distribution Fund III.
(22) Equipment operated by the Eureka Company, a division of Lessee, an
indirect subsidiary of AB Electrolux, Sweden.
(23) Guaranteed by Reynolds and Reynolds.
(24) On December 31, 1997, this lessee requested a moratorium on lease
payments from January through March 1998. ATEL Cash Distribution Fund V is
currently negotiating a settlement with the lessee.
(25) On October 13, 1993 the lessee, Rocky Mountain Helicopters, Inc.,
filed for protection under Chapter 11 of the U. S. Bankruptcy Act. The aircraft
which was the subject of the lease was delivered to ATEL Cash Distribution Fund
II, prior to the petition for bankruptcy and was sold by the lessor. The
proceeds of the sale satisfied in full the non-recourse debt obligation owed to
USX Credit Corporation and the excess was applied to mitigate the lessor's claim
against the lessee. The lessor subsequently filed and was allowed an unsecured
claim in the amount of $776,542. Through June 30, 1997, the lessor has received
$310,617 on this claim, representing 40% of the allowed claim. The sum of the
proceeds from the rents, sale of the aircraft and the claim filed in bankruptcy
has resulted in a recovery exceeding the lessor's original investment in the
aircraft.
A-38
<PAGE>
(26) Assigned to and assumed by various subsidiaries of Lessee. Recourse
retained against Lessee. Lessee subsequently changed its name to SMC Mining
Corporation.
(27) Guaranteed by Continental Medical Systems, Inc.
(28) An indirect subsidiary and joint venture of Kaiser Aluminum & Chemical
Corporation and Norsk Hydro.
(29) Guaranteed by United States Surgical Corporation.
(30) Acquisition Cost represents one-half of the total Equipment
Acquisition Cost. Title to this Equipment is held in an equipment trust where
one-half of the beneficial interest in the Equipment is owned by ATEL Cash
Distribution Fund III and one-half by ATEL Cash Distribution Fund IV.
(31) On January 10, 1996, Barney's, Inc., a lessee of ATEL Cash
Distribution Fund III, ATEL Cash Distribution Fund IV and ATEL Cash Distribution
Fund V filed for protection under Chapter 11 of the U. S. Bankruptcy Act. In
July of 1996, the lessors sold their unsecured claim in the bankruptcy for an
amount equal to approximately 73% of the unsecured claim, which, after
satisfaction of the non-recourse loan due to the CIT Group/Equipment Financing,
Inc. (and taking into account all prior rents received, security deposits
retained and loan proceeds previously received), resulted in proceeds to the
lessors in excess of their original investments in the equipment.
(32) Guaranteed by Nord Resources Corporation. Subsequently the lease was
assigned without recourse to DBK Minerals, Inc. with a guarantee of Dry Branch
Kaolin Company.
(33) Lessee indicated is the parent of Central Ohio Coal Company and
Southern Ohio Coal Company. The Lease transaction represents three distinct
leases with subsidiary companies. Credit support is provided by the parent, Ohio
Power Company by an Inducement Letter.
(34) The Lessee name is indicated for convenience only. The actual Lessees
are Paramount Coal Corporation, Clinchfield Coal Company, Heartland Resources,
Inc., Motivation Coal Company, Elkay Mining Company, Holston Mining, Inc. and
Meadow River Coal Company, all subsidiaries of The Pittston Company. The Lease
is guaranteed by The Pittston Company.
(35) Title to the Equipment and Lease transaction is held by an equipment
trust. A divisible 1/2 beneficial interest in the equipment trust is owned by
the program. The remaining divisible 1/2 beneficial interest in the equipment
trust is owned by a non-affiliate.
(36) Guaranteed by Quaker State Corporation. This lease was susequently
assigned to Costain Coal Company on a recourse basis. In 1996, the assignee
defaulted on a lease payment, which default was subsequently cured. The lessor
is currently negotiating a settlement with the assignee, lessee and guarantor.
(37) Lessee is a partnership formed by United States Steel Corporation and
Kobe Steel Corporation.
(38) Title to the Equipment and Lease transaction is held by an equipment
trust. Partnership owns a 17.3199% beneficial interest in the equipment trust.
(39) Subject to a remarketing agreement with General Motors -
Electro-Motive division.
A-39
<PAGE>
(40) Guaranteed by The Pittston Company.
(41) Guaranteed by CBI Industries, Inc. Subsequently guaranteed by Praxair,
Inc.
(42) Guaranteed by Peabody Holding Company, Inc.
(43) Tarmac America, Inc.; Tarmac Mid-Atlantic, Inc.; and Tarmac Florida,
Inc. are co-lessees. Guaranteed by Tarmac PLC, a British Limited Liability
Company.
(44) The equipment is subject to operating leases and managed by the lessee
under a pooled management arrangement. Rentals are variable. Average monthly
lease payments are estimated based on the minimum lease payments to be received
on similar Equipment owned by a prior program.
(45) Lessee has limited option to terminate at 36 months and 60 months,
subject to a remarketing agreement with Bond International (US), Inc.
(46) A division of Waban, Inc.
(47) Equipment is subject to a full payout management agreement with MRXX
Corporation.
(48) Guaranteed by Mineral Technologies, Inc.
(49) Guaranteed by Mobil Corporation.
(50) Guaranteed by Omnicom Group, Inc. Actual lessees are various
subsidiaries of Omnicom Group Inc.: DDB Needham Worldwide Communications Group
Inc.; Griffin Bacal Inc.; DDB Needham Chicago Inc.; DDB Needham Dallas, Inc.;
PGC Advertising, Inc.; The Focus Agency, LP.; Elgin DDB Inc.; Group Management
Services; and TLP, Inc.
(51) This lessee filed for protection under Chapter 11 of the United States
Bankruptcy Code on January 16, 1998. As this lease has been leveraged using
non-recourse secured debt, the General Partner does not feel that the effect of
the bankruptcy will have a material adverse impact on the performance of ATEL
Cash Distribution Fund V.
(52) The lessee name represents the guarantor of the lease obligations
(which has since changed its name to the Morton's Restaurant Group, Inc.).
Actual lessees are various subsidiaries of the guarantor.
(53) This lessee defaulted on a portion of its lease payments in October
1997. ATEL Cash Distribution Fund V is currently negotiating a possible
sttlement with the lessee.
(54) Guaranteed by Smith's Food & Drug Centers.
(55) Subject to a remarketing/residual sharing agreement with AT&T Credit
Corporation.
(56) Guaranteed by Adolf Coors Company.
(57) The end-users of the Equipment are various governmental entities in
the United Kingdom.
(58) Guaranteed by NEC Corporation.
A-40
<PAGE>
(59) Guaranteed by A.T. Massey Coal Company, Inc.
(60) Guaranteed by Perdue Farms, Inc.
(61) Subject to a management agreement with Transamerica Leasing, Inc.
(62) Subject to a management agreement with First Union Rail Corporation.
(63) Title to the Equipment and Lease is held by an equipment trust. A
divided beneficial interest in the trust representing 24 of 34 of the
diesel-electric locomotives is owned by the program. A divided beneficial
interest in the trust representing the remaining 10 diesel-electric locomotives
has been assigned to a non-affiliate, however, such interest continues to be
managed by an affiliate of the program.
(64) The equipment is subject to a full payout management agreement with
MRXX Corporation.
(65) Title to the equipment is held in a trust. A divided beneficial
interest in the trust representing 130 of 291 boxcars is owned by the program. A
divided interest in the trust representing the remaining 161 boxcars continues
to be owned by the seller of the program's interest, which seller is a
non-affiliate.
(66) The underlying leases in this transaction are to various
municipalities in the United Kingdom. The underlying leases are being managed by
Hambros Vendor Finance Limited and include a residual sharing agreement.
(67) The underlying leases in this transaction are to various
municipalities in the United Kingdom. The underlying leases are being managed by
Hastings Leasing Limited and include a residual sharing agreement.
(68) Title to the equipment is held in a trust. The program has a 100%
undivided beneficial interest in the trust.
(69) Guaranteed by Hyundai Electronics Industries Co., Ltd.
(70) Guaranteed by Mobil Corporation.
(71) Guaranteed by Omnicom Group, Inc. Actual lessees are various
subsidiaries of Omnicom Group Inc.: The DDB Needham Worldwide Communications
Group Inc.; Griffin Bacal Inc.; DDB Needham Chicago, Inc.; DDB Needham Dallas,
Inc.; PGC Advertising, Inc.; The Focus Agency, LP.; Elgin DDB Inc.; Group
Management Services and TLP, Inc.
(72) Tarmac America, Inc.; Tarmac Mid-Atlantic, Inc.; and Tarmac Florida,
Inc. are co-lessees. Guaranteed by Tarmac PLC, a British Limited Liability
Company.
(73) Co-lessee under the lease with Ultratech Stepper, Inc., UltraBeam
Lithography, Inc. and Verdant Technologies, Inc. as additional co-lessees.
(74) The lessee name represents the manager of the rail tank cars. These
rail tank cars are not currently subject to a fixed term lease.
A-41
<PAGE>
TABLE VI
SALES OR DISPOSALS OF EQUIPMENT
ATEL Lease Income Fund, ATEL Cash Distribution Fund, ATEL Cash Distribution Fund
II, ATEL Cash Distribution Fund III, ATEL Cash Dsitribution Fund IV, ATEL Cash
Distribution Fund V and ATEL Cash Distribution Fund VI have disposed of
equipment in their portfolios as of December 31, 1997. Set forth below is a
summary of equipment sales and dispositions as of such date. Sales were for
consideration unless otherwise noted. Interim rent (rent paid prior to formal
commencement of a lease), hold-over rent (rent received after termination of the
initial lease term, but before formal extension or disposition) and extension
rent (rent paid after formal extension of a lease) are included in the "Excess
of Rents Over Expenses" column. "Equipment Acquisition Price" includes
acquisition fees. Dispositions are shown on a per asset basis.
<TABLE>
<CAPTION>
Excess of
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4) Notes
- ------ ----------------- -------- --------- --------- --------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C>
ATEL LEASE INCOME FUND 1985-A
Colour Graphics Computer system Feb-87 $34,500 Oct-93 $2,525 $44,483
Colour Graphics Office Information Systems Jul-88 45,000 Jan-94 11,200 55,777
Educational Loan Services, Office Information Systems May-86 33,050 Oct-90 900 31,350
Inc.
Federal Home Loan Bank of Office Information Systems May-86 39,127 Apr-90 870 36,800
New York
Financial News Network, Inc. Studio and Broadcasting Feb-90 14,777 Jun-92 11,493 2,027 5
Gorham, Inc. Office Information Systems May-86 38,799 Mar-90 2,300 45,180
Long Lake Staionary, Inc. Binding Equipment May-87 4,023 Jul-92 1 6,242
Philip Morris, U.S.A. Office Information Systems May-86 13,297 Jan-89 3,600 12,400
Philip Morris, U.S.A. Office Information Systems May-86 21,584 Aug-92 - 22,050
Polaroid Corporation Office Information Systems May-86 48,028 Jan-90 4,500 45,000
Rohr Industries, Inc. Motor Vehicle Jan-89 12,451 Apr-95 6,400 17,843
Rohr Industries, Inc. Motor Vehicle Apr-89 8,376 Jul-92 4,723 8,558
------------- ------------ --------------
$313,012 $48,512 $327,710
============= ============ ==============
ATEL CASH DISTRIBUTION FUND
Acushnet Company Office Information Systems Jan-87 $140,287 Dec-91 $4,545 $156,000
Alachua General Hospital MRI Scanner Jan-89 641,593 Jan-95 1 699,453
Alachua General Hospital Tractor Jan-89 15,327 Sep-92 9,000 15,900 6
American Motors Corporation Lift Trucks Oct-87 217,066 Jun-97 57,000 229,029
American Motors Corporation Lift Trucks Oct-87 109,751 Mar-93 31,800 141,636
American Motors Corporation Lift Trucks Oct-87 55,579 Apr-93 15,956 71,727
American Motors Corporation Lift Truck Oct-87 34,494 May-89 30,818 10,117
American Motors Corporation Lift Trucks Oct-87 25,754 Sep-92 6,200 31,306
American Motors Corporation Lift Trucks Oct-87 15,201 Feb-94 4,500 22,886
American Motors Corporation Lift Trucks Oct-87 12,877 Jan-93 3,200 15,863
American Motors Corporation Hoist Mill Truck Dec-87 104,834 Mar-93 18,000 131,164
American Motors Corporation Lift Truck Dec-87 29,709 Jun-97 - 21,189
American Motors Corporation Lift Trucks Jan-88 45,385 Dec-92 7,000 63,268
Anaheim Memorial Hospital CAT Scanner Jan-88 814,696 Apr-93 88,000 839,938
Campbell Soup Company Reach / Walkie Trucks Mar-87 79,248 Sep-93 2,700 89,216
Campbell Soup Company Lift Truck Battery Mar-87 37,127 Aug-93 12,435 38,812
Chargers
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<PAGE>
Campbell Soup Company Lift Truck Mar-87 34,790 Jun-90 30,000 19,575
Campbell Soup Company Lift Truck Mar-87 25,668 Jul-94 5,022 31,663
Campbell Soup Company Lift Truck Mar-87 19,763 Oct-95 2,000 27,283
Campbell Soup Company Lift Truck Mar-87 19,491 May-95 - 25,976
Campbell Soup Company Batteries / Chargers Mar-87 12,417 Dec-93 4,250 13,977
Campbell Soup Company Lift Trucks Mar-87 10,584 Dec-97 11,000 36,430
Campbell Soup Company Lift Truck Apr-87 24,550 Apr-91 17,764 17,765
Campbell Soup Company Lift Truck Apr-87 4,997 Apr-91 3,616 3,616
Campbell Soup Company Lift Truck Apr-87 63,153 Dec-97 20,873 71,540
Color Graphics Corporation 645-MSS Output Scanning Dec-86 232,533 Mar-94 20,000 303,307
Station
Enron Corp. Office Information Systems Jun-88 88,364 Jun-91 17,857 90,326
Enron Corp. Office Information Systems Jun-88 87,399 Feb-92 10,650 85,140
Enron Corp. Office Information Systems Jun-88 79,726 Mar-92 8,000 76,968
Financial News Network, Inc. Studio and Broadcasting Mar-90 935,918 Jun-92 747,617 123,050 7
GAF Corporation Lift Trucks Oct-87 459,660 Nov-92 94,575 457,460
GAF Corporation Joy Filler Mar-88 535,257 Dec-97 44,525 822,498
Galardi Group Restaurant FF&E Jun-94 247,000 Oct-96 147,148 173,042
Hartford Insurance Group Communication Jul-88 93,252 Jul-93 3,618 106,785
Imperial Plastics, Inc. Injection Molding Jun-87 137,247 Apr-94 67,000 147,445
Imperial Plastics, Inc. Injection Molding Dec-87 150,879 Apr-94 64,000 170,530
Imperial Plastics, Inc. Injection Molding Jan-88 194,944 Apr-94 77,000 229,797
Imperial Plastics, Inc. Air Compressor Temperature Mar-88 66,883 Apr-94 17,000 71,949
Control Unit
Martin Marietta Corporation Communication Apr-88 296,550 Aug-93 500 277,184
Martin Marietta Corporation Communication Apr-88 148,275 Jun-92 16,000 138,592
Nord Kaolin Company Hydraulic Excavator May-87 163,490 Mar-93 45,000 184,567
Nord Kaolin Company Komatsu Crawler Tractor Aug-87 50,693 Jul-96 12,000 36,492
Nord Kaolin Company Lift Trucks Sep-87 15,633 Oct-95 3,500 27,386
Nord Kaolin Company Magnetic Separator Oct-87 160,669 Dec-96 25,000 150,087
Nord Kaolin Company Industrial Truck Oct-89 13,745 Oct-97 3,000 20,856
Polaroid Corporation Office Information Systems Mar-87 37,819 Apr-92 2,475 41,005
Putnam County Hospital Spectrum Analyzer May-88 114,950 May-94 2,000 158,780
Rohr Industries, Inc. Motor Vehicle Jul-87 14,790 Feb-93 4,175 17,080
Rohr Industries, Inc. Motor Vehicle Jan-88 9,346 Aug-96 3,232 11,495
Rohr Industries, Inc. Motor Vehicle Feb-88 12,060 Aug-96 1,502 14,896
Rohr Industries, Inc. Motor Vehicle Mar-88 16,421 Feb-93 4,575 19,073
Rohr Industries, Inc. Motor Vehicle Apr-88 16,183 Aug-93 3,977 18,986
Rohr Industries, Inc. Motor Vehicle Apr-88 16,052 Feb-96 5,000 21,252
Rohr Industries, Inc. Motor Vehicle Apr-88 14,630 Apr-91 5,725 13,106
Rohr Industries, Inc. Motor Vehicle Apr-88 14,028 Dec-95 4,630 20,629
Rohr Industries, Inc. Motor Vehicle Apr-88 13,330 Oct-92 2,530 15,081
Rohr Industries, Inc. Motor Vehicle Apr-88 12,932 Apr-91 4,380 11,585
Rohr Industries, Inc. Motor Vehicle Apr-88 12,060 Apr-91 3,498 10,804
Rohr Industries, Inc. Motor Vehicle Apr-88 12,060 Apr-91 3,198 10,804
Rohr Industries, Inc. Motor Vehicle Apr-88 9,356 Aug-96 3,332 12,647
Rohr Industries, Inc. Motor Vehicle May-88 13,981 Sep-95 3,900 20,280
Rohr Industries, Inc. Motor Vehicle Jul-88 29,656 Nov-92 7,135 31,553
Rohr Industries, Inc. Motor Vehicle Jul-88 25,755 Mar-96 9,000 33,051
Rohr Industries, Inc. Motor Vehicle Jul-88 11,566 Jul-91 4,075 10,517
Rohr Industries, Inc. Motor Vehicle Jul-88 11,566 Jul-91 4,850 10,517
Rohr Industries, Inc. Motor Vehicle Jul-88 11,566 Jul-91 3,890 10,517
Rohr Industries, Inc. Motor Vehicle Aug-88 17,829 Nov-96 6,590 23,532
Rohr Industries, Inc. Motor Vehicle Aug-88 16,538 May-93 2,622 18,710
Rohr Industries, Inc. Motor Vehicle Aug-88 14,662 Oct-93 3,435 16,587
Rohr Industries, Inc. Motor Vehicle Oct-89 15,460 Dec-97 2,750 33,297
Teledyne Industries, Inc. Lift Truck Oct-87 160,930 Feb-93 48,000 162,751
Teledyne Industries, Inc. Lift Truck Oct-87 147,345 Nov-92 20,000 149,763
Teledyne Industries, Inc. Lift Truck Oct-87 87,258 Jan-93 19,000 89,166
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<PAGE>
Teledyne Industries, Inc. Lift Truck Jan-88 147,345 Nov-91 41,000 137,956
Teledyne Industries, Inc. Lift Truck Jan-88 52,250 Apr-91 15,000 47,775
Teledyne Industries, Inc. Lift Truck Jan-88 39,188 Apr-91 10,000 35,832
Teledyne Industries, Inc. Lift Truck Feb-88 173,330 Feb-93 58,000 150,644
Teledyne Industries, Inc. Lift Truck Mar-88 50,160 May-93 11,000 51,896
Teledyne Industries, Inc. Lift Truck Apr-88 55,907 Feb-93 20,000 58,088
Teledyne Industries, Inc. Lift Truck Jul-88 147,345 Oct-92 20,000 134,726
Teledyne Industries, Inc. Lift Truck Aug-88 42,845 Jan-94 9,000 46,240
Teledyne Industries, Inc. Lift Truck Nov-88 38,278 Mar-94 11,000 41,481
Teledyne Industries, Inc. Lift Truck Nov-88 35,530 Jan-94 10,390 36,406
Teledyne Industries, Inc. Lift Trucks Aug-89 32,771 Nov-94 7,896 33,173
Teledyne Industries, Inc. Lift Truck Sep-89 68,970 Oct-92 10,000 67,300
Teledyne Industries, Inc. Lift Truck Nov-89 218,133 Jan-93 44,000 204,009
Teledyne Industries, Inc. Lift Truck Nov-89 58,374 Mar-94 12,500 63,256
Teledyne Industries, Inc. Lift Truck Jan-90 57,487 Mar-94 13,000 55,978
Teledyne Industries, Inc. Lift Trucks Jan-90 57,350 Jan-95 15,000 58,052
Teledyne Industries, Inc. Lift Trucks Jan-90 57,350 Jan-95 15,000 58,052
The Dow Chemical Company Truck Jul-87 111,288 Jun-93 17,500 102,367
The Dow Chemical Company Trucks Jul-87 91,216 Jul-93 26,000 80,985
The Dow Chemical Company Mack Truck Jul-87 25,210 Aug-92 7,500 24,846
Treasure Chest Advertising Printing Press Mar-87 521,190 Dec-92 311,844 523,950
Company, Inc.
TRW, Inc. Communication Apr-89 257,130 Jul-93 8,400 235,080
TRW, Inc. Communication Apr-89 77,957 May-92 19,800 70,704
United Technologies Office Information Systems Dec-86 77,450 Mar-91 20,000 80,985
Corporation
Vista Chemical Company Tank cars Mar-88 1,238,250 Dec-93 885,000 1,090,493
WSMP, Inc. Vacuum Pkg. Machine Apr-95 208,788 Dec-97 150,314 129,870
------------- ------------ --------------
$11,583,679 $3,768,290 $11,146,398
============= ============ ==============
ATEL CASH DISTRIBUTION FUND II
A.O. Smith Corporation Office Automation Equipment Dec-90 $723,258 Sep-94 $75,017 $763,652
A.O. Smith Corporation Lift Truck Jul-89 80,717 Jun-94 34,000 81,198
A.O. Smith Corporation Lift Truck Jul-89 26,910 Jun-95 6,250 51,147
A.O. Smith Corporation Lift Truck Jul-89 17,616 Jul-95 1,500 23,346
A.O. Smith Corporation Personnel Carrier Jul-89 4,381 Jul-94 500 4,407
A.O. Smith Corporation Machinery Jul-91 26,475 Jan-93 18,360 15,660
Addwest Gold, Inc. Portable Jaw Crusher Plant Sep-88 1,153,001 Nov-94 301,000 1,104,720
Alachua General Hospital MRI Scanner Jan-89 1,286,256 Jan-95 1 1,683,244
Alachua General Hospital Tractor Jan-89 30,727 Sep-92 18,000 31,801 6
American Express Company Manufacturing May-89 289,922 May-93 10,000 293,040
American President Trucking Tractors Sep-88 60,326 Jan-94 15,500 55,808
Co., Ltd.
American President Trucking Tractors Sep-88 60,326 Apr-94 16,400 61,125
Co., Ltd.
American President Trucking Tractors Sep-88 60,326 Apr-94 16,200 61,571
Co., Ltd.
American President Trucking Tractors Sep-88 60,326 Apr-94 16,400 55,808
Co., Ltd.
American President Trucking Tractors Sep-88 60,325 Sep-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Dec-93 16,000 52,752
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Jan-94 16,000 60,854
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Jan-94 16,000 58,674
Co., Ltd.
American President Trucking Tractors Oct-88 61,513 Apr-94 17,000 59,724
Co., Ltd.
A-44
<PAGE>
American President Trucking Tractors Oct-88 60,326 Dec-93 15,000 51,734
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Jan-94 15,500 56,701
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Apr-94 16,400 58,570
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Apr-94 16,400 58,145
Co., Ltd.
American President Trucking Tractors Oct-88 60,326 Apr-94 19,000 58,595
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jun-93 45,041 47,171
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Dec-93 15,926 59,573
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jan-94 16,000 59,369
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jan-94 16,000 56,907
Co., Ltd.
American President Trucking Tractors Nov-88 61,513 Jun-96 8,500 71,279
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 May-93 44,172 44,957
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-94 17,461 58,772
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-94 15,500 55,808
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Apr-94 19,000 55,809
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Apr-94 16,400 58,570
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,350 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,282 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,350 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jan-96 10,350 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Apr-96 10,565 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 May-96 10,390 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jun-96 9,500 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Jul-96 9,995 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Sep-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Sep-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Sep-96 7,700 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Oct-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Oct-96 7,700 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Oct-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Oct-96 7,905 69,903
Co., Ltd.
A-45
<PAGE>
American President Trucking Tractors Nov-88 60,326 Oct-96 7,700 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,326 Nov-96 7,600 69,903
Co., Ltd.
American President Trucking Tractors Nov-88 60,325 Dec-95 11,522 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Jun-96 9,500 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Aug-96 7,200 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Sep-96 7,700 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Sep-96 7,700 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Sep-96 7,905 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Nov-96 7,600 69,903
Co., Ltd.
American President Trucking Tractors Dec-88 60,326 Nov-96 7,600 69,903
Co., Ltd.
American President Trucking Tractors Mar-89 61,513 Feb-96 10,488 71,279
Co., Ltd.
Bistol-Meyers Squib Office furniture Jun-92 324,310 Oct-95 89,834 340,960
Buffalo & Pittsburgh Locomotives Nov-93 108,127 Nov-96 103,500 109,471
Railroad
Campbell Soup Company Lift Trucks Jul-88 237,980 Oct-95 33,000 304,036
Campbell Soup Company Life plus charger Jul-88 28,056 Aug-95 6,000 34,608
Campbell Soup Company Lift Truck Jul-88 26,604 Oct-95 2,500 33,597
Chesebrough-Pond's Inc. Lift Trucks May-90 109,901 Aug-94 42,000 124,236
Chesebrough-Pond's Inc. Motorized Lowlift Walk/Ride May-90 38,303 Aug-94 4,800 43,452
Trucks
Chesebrough-Pond's Inc. Lift Truck May-90 35,029 Aug-94 12,950 39,270
Chesebrough-Pond's Inc. Lift Truck May-90 18,220 Aug-94 6,750 20,502
Chrysler Corporation C-Line Industrial Battery Dec-93 7,202 Oct-97 2,221 85,182
Chrysler Corporation Battery Charger Dec-93 4,798 Oct-97 1,479 56,748
Colour Graphics Corporation Computer system Jul-88 35,411 Oct-93 2,475 41,767
Continental Medical Systems, Physical therapy Jun-90 36,676 Jun-95 11,750 45,485
Inc.
Cooper Tire & Rubber Company Lift Trucks Nov-88 33,296 Jan-96 10,600 37,698
Cooper Tire & Rubber Company Forklifts Apr-89 to 87,906 Jul-96 15,760 107,895
Jun-89
Cooper Tire & Rubber Company Forklifts Jan-89 to 482,499 Oct-96 89,200 598,468
Mar-89
Delnor Community Hospital Medical Apr-88 89,081 Dec-91 35,000 87,406
Delnor Community Hospital Medical Jul-88 263,473 Apr-91 45,000 247,586
Delnor Community Hospital Medical Jul-88 118,775 Apr-91 17,850 106,513
DJ Aerospace Limited Executive Aircraft Apr-94 810,000 Jan-97 436,309 681,820
Financial News Network, Inc. Studio and Broadcasting Feb-90 670,359 Jun-92 534,432 148,788 8
Fingerhut Corporation Pacesetter Saddlebinder Dec-89 233,268 Dec-94 110,000 258,130
FMC Gold Company Material Handling Apr-90 417,082 Jul-93 155,000 361,891
FMC Gold Company Material Handling Apr-90 380,201 May-93 105,000 322,256
GAF Corporation Manufacturing Mar-88 433,267 Jun-95 1 657,024
Galardi Group Restaurant FF&E Jun-94 507,000 Oct-96 302,042 355,190
General Motors Corporation Video Projectors Dec-93 52,128 Jun-97 11,613 59,207
Hudson Foods, Inc. Chicken Processing Jul-89 326,880 Aug-94 120,215 373,808
Hudson Foods, Inc. Waste Water Pre-treatment Aug-89 331,070 Aug-94 121,600 377,895
Plant
Hudson Foods, Inc. Chicken Processing Dec-89 1,102,591 Sep-94 333,006 1,182,678
Equipment
A-46
<PAGE>
Hudson Foods, Inc. Chicken Processing Dec-89 890,708 Sep-94 272,280 959,784
Equipment
Hudson Foods, Inc. Chicken Processing Dec-89 190,739 Sep-94 56,897 205,202
Equipment
Inland Steel Company Laser Measuring System Sep-89 436,808 Apr-94 105,000 487,179
International Paper Company Truck Jun-88 25,080 Nov-92 14,653 28,446
International Paper Company Trucks Jul-88 32,039 Nov-91 7,412 31,840
International Paper Company Truck Sep-88 42,161 Dec-95 11,120 73,774
International Paper Company Van Sep-88 39,626 Nov-94 11,325 37,872
International Paper Company Trucks Sep-88 37,910 May-92 17,372 33,220
International Paper Company Truck Sep-88 35,302 Sep-94 8,500 36,360
International Paper Company Trucks Sep-88 28,114 Dec-93 7,750 30,848
International Paper Company Truck Sep-88 20,850 Dec-95 11,924 39,114
International Paper Company Trucks Nov-88 165,175 Aug-91 118,185 90,831
International Paper Company Truck with power lift gate Nov-88 32,691 Dec-94 10,000 36,079
International Paper Company Truck with power lift gate Nov-88 32,691 Feb-95 9,500 36,079
International Paper Company Motor Vehicle Dec-88 13,873 Apr-97 5,500 22,610
International Paper Company Motor Vehicle Jan-89 33,029 Jul-96 4,000 58,146
International Paper Company Motor Vehicle Feb-89 41,080 Jun-97 4,250 65,533
International Paper Company Trucks Mar-89 48,783 May-95 26,000 40,150
International Paper Company Truck Mar-89 24,458 Apr-95 11,000 25,968
International Paper Company Cargo Van Mar-89 13,910 Jan-95 2,740 16,189
International Paper Company Trucks Apr-89 76,873 May-95 20,000 86,592
International Paper Company Truck Jun-89 29,079 May-95 9,000 31,744
International Paper Company Trucks Jun-89 27,457 Apr-94 4,500 32,538
International Paper Company Truck Aug-89 27,249 Apr-96 7,000 37,622
International Paper Company Cut-away Van Aug-89 19,484 Dec-94 5,750 19,095
International Paper Company Trucks Oct-89 116,589 May-92 83,477 63,595
International Paper Company Cab & chassis Oct-89 25,374 Dec-95 9,477 38,797
International Paper Company Trucks Nov-89 33,587 Mar-94 9,000 34,975
International Paper Company Trucks Dec-89 123,513 Apr-95 50,750 139,088
International Paper Company Trucks Mar-90 76,300 May-92 54,047 34,906
KeyCorp Office Furniture and Aug-89 913,120 Apr-94 245,000 1,014,508
Equipment
Keycorp ATM's Aug-89 251,385 Dec-96 23,500 287,781
KeyCorp ATM Machines Aug-89 195,522 Apr-96 18,650 211,431
KeyCorp ATM Machines Aug-89 139,658 Jan-94 41,250 146,802
Keycorp ATM's Aug-89 139,658 Jun-97 10,000 213,512
KeyCorp ATM Machines Aug-89 55,864 Aug-94 14,500 66,333
Koppers Industries, Inc. Hydraulic loader & end Jun-90 639,120 Jun-95 317,500 793,198
loader
Midway Airlines, Inc. Commercial Aircraft Jun-90 4,592,040 Sep-91 3,444,589 463,076 9
National Semiconductor Wafer Processing System Apr-89 762,580 Jan-94 82,000 869,955
Corporation
National Steel Corporation Wheel Loader Dec-89 380,203 Jul-96 134,512 476,098
National Steel Corporation Forklifts Dec-89 85,296 Jun-97 25,000 109,159
National Union Electric Phone System Aug-89 481,738 Mar-94 130,000 507,722
Corporation
Nissan Motor Corporation Office Information Systems Jul-88 229,598 Jul-93 3,700 221,328
In USA
NMCS, Inc. , d/b/a National Office Furniture Jun-88 627,453 Mar-94 1 747,640
Medical Group Services,
Inc.
Nord Kaolin Company Water Tank Trucks Feb-89 229,795 Nov-96 31,800 191,762
Nord Kaolin Company Ford Truck & Truck Crane Apr-89 76,913 Mar-97 28,000 109,219
Owens Corning Fiberglas Corp. Automobile Nov-88 15,822 Apr-95 3,650 20,000
Owens Corning Fiberglas Corp. Material Handling Jul-89 175,098 Jul-92 41,020 154,944
Owens Corning Fiberglas Corp. Material Handling Oct-89 151,207 Mar-93 47,000 139,317
Owens Corning Fiberglas Corp. Material Handling Oct-89 56,733 Sep-94 13,000 62,760
A-47
<PAGE>
Owens Corning Fiberglas Corp. Material Handling Oct-89 31,192 Sep-94 9,000 34,524
Owens Corning Fiberglas Corp. Material Handling Dec-89 21,331 May-96 4,100 27,834
Owens Corning Fiberglas Corp. Material Handling Feb-90 100,985 Oct-95 35,000 119,560
Owens Corning Fiberglas Corp. Lift Truck Mar-90 18,288 Mar-95 6,500 19,851
Owens Corning Fiberglas Corp. Material Handling Apr-90 122,130 Apr-94 36,600 126,827
Owens Corning Fiberglas Corp. Material Handling Apr-90 118,092 Apr-95 44,500 128,182
Owens Corning Fiberglas Corp. Material Handling Apr-90 101,775 Jun-93 29,100 92,836
Owens Corning Fiberglas Corp. Material Handling May-90 57,956 Jun-93 13,500 62,821
Owens Corning Fiberglas Corp. Material Handling May-90 18,972 Apr-94 4,800 20,165
Owens Corning Fiberglas Corp. Material Handling Jun-90 152,935 Oct-95 56,000 179,186
Owens Corning Fiberglas Corp. Material Handling Jun-90 16,179 Aug-96 5,000 19,670
Owens Corning Fiberglas Corp. Forklift Truck Jul-90 22,422 Jul-97 1 36,338
Owens Corning Fiberglas Corp. Material Handling Aug-90 123,102 Aug-93 41,000 113,082
Owens Corning Fiberglas Corp. Lift Truck Aug-90 59,786 Dec-94 20,000 59,404
Owens Corning Fiberglas Corp. Forklift Aug-90 25,601 Oct-96 5,050 31,106
Owens Corning Fiberglas Corp. Material Handling Aug-90 20,858 Aug-95 10,750 22,911
Owens Corning Fiberglas Corp. Material Handling Aug-90 20,858 Sep-95 10,750 22,911
Owens Corning Fiberglas Corp. Forklift Truck Aug-90 19,000 Jul-97 4,000 24,084
Owens Corning Fiberglas Corp. Mobile Rail Car Mover Oct-90 114,900 Sep-97 70,000 142,436
Owens Corning Fiberglas Corp. Material Handling Oct-90 22,750 Nov-95 7,000 29,948
Owens Corning Fiberglas Corp. Material Handling Oct-90 21,920 Oct-95 10,750 24,521
Owens Corning Fiberglas Corp. Sweeper Nov-90 27,592 Dec-93 6,600 26,638
Owens Corning Fiberglas Corp. Material Handling Nov-90 11,302 Mar-95 1 15,881
Pre Press Group Digital Color Scanner Nov-88 1,276,903 Nov-97 9,000 1,529,568
Quaker Coal Company Crawler Dozer Feb-94 558,301 Apr-96 255,000 356,875
Ran-Bar Corporation Boom lift Aug-93 7,950 Sep-95 1 19,152
Regents of the University of Communication Jan-89 84,204 Dec-93 25,500 87,434
California
Rocky Mountain Helicopters, Aircraft Oct-89 2,252,125 Dec-93 1,472,413 1,383,000 10
Inc.
Rohr Industries, Inc. Motor Vehicles Oct-88 47,524 Aug-93 19,095 61,845
Rohr Industries, Inc. Motor Vehicles Oct-88 24,450 May-93 5,534 24,406
Rohr Industries, Inc. Motor Vehicles Oct-88 11,370 Dec-93 3,977 13,300
Rohr Industries, Inc. Motor Vehicle Oct-88 8,742 Aug-96 3,482 12,950
Rohr Industries, Inc. Motor Vehicles Dec-88 99,553 Jan-93 22,012 99,184
Rohr Industries, Inc. Auto Dec-88 15,642 Jan-95 3,077 21,521
Rohr Industries, Inc. Motor Vehicles Dec-88 15,569 Dec-93 4,777 17,664
Rohr Industries, Inc. Motor Vehicles Jan-89 14,990 Feb-92 3,509 12,925
Rohr Industries, Inc. Motor Vehicles Jan-89 14,990 May-92 5,538 13,776
Rohr Industries, Inc. Motor Vehicles Jan-89 9,532 Apr-94 3,300 12,375
Rohr Industries, Inc. Motor Vehicles Feb-89 9,359 Aug-94 3,177 12,851
Rohr Industries, Inc. Motor Vehicle Feb-89 8,952 Aug-96 - 14,280
Rohr Industries, Inc. Motor Vehicles Apr-89 72,014 Jul-92 20,088 68,396
Rohr Industries, Inc. Motor Vehicles Apr-89 36,263 Apr-89 7,667 35,328
Rohr Industries, Inc. Motor Vehicles Apr-89 35,762 Apr-92 9,019 34,793
Rohr Industries, Inc. Motor Vehicles Apr-89 24,343 Jul-92 5,146 23,683
Rohr Industries, Inc. Motor Vehicles Apr-89 21,759 Jul-94 8,500 25,267
Rohr Industries, Inc. Motor Vehicles Apr-89 12,393 Jan-92 2,313 12,086
Rohr Industries, Inc. Motor Vehicles Apr-89 11,921 May-92 3,058 11,597
Rohr Industries, Inc. Motor Vehicles Apr-89 11,920 Jul-92 2,973 11,597
Rohr Industries, Inc. Motor Vehicles May-89 16,760 Jul-94 3,677 18,710
Rohr Industries, Inc. Motor Vehicles May-89 11,920 May-93 2,772 12,955
Rohr Industries, Inc. Motor Vehicles Jul-89 18,477 Feb-93 11,810 14,614
Rohr Industries, Inc. Motor Vehicles Jul-89 17,801 Jul-92 3,823 15,948
Rohr Industries, Inc. Motor Vehicles Aug-89 14,570 Dec-93 3,695 15,270
Rohr Industries, Inc. Motor Vehicle Sep-89 8,702 Aug-96 3,979 12,557
Rohr Industries, Inc. Motor Vehicles Nov-89 16,378 May-92 13,340 9,100
Rohr Industries, Inc. Motor Vehicle Nov-89 15,863 Aug-96 4,422 20,605
Rohr Industries, Inc. Pickup Truck Nov-89 9,652 Jan-95 4,100 10,720
A-48
<PAGE>
Rohr Industries, Inc. Motor Vehicles Mar-90 15,065 Feb-93 6,756 12,658
Sebastiani Vineyards, Inc. Wine Barrels Oct-88 143,804 Jun-96 6,535 188,158
Sebastiani Vineyards, Inc. Wine Barrels May-89 67,314 Jun-96 2,700 81,120
Sebastiani Vineyards, Inc. Wine Barrels May-89 33,919 Jun-94 4,340 41,682
Shell Mining Company Crawler Tractor Oct-89 1,013,257 Dec-94 390,000 1,048,122
Shell Mining Company Miner Machine Feb-90 640,995 Mar-95 130,000 648,032
Shell Mining Company Miner Machine Feb-90 640,427 Mar-95 130,000 647,458
St. Luke's-Roosevelt Hospital Medical Furniture, Feb-90 1,126,223 Apr-93 404,654 1,116,417
Center Fixtures & Equipment
The Budd Company Electric Forklifts May-90 426,589 Sep-97 68,742 491,609
The Budd Company Forklifts May-90 90,919 Jul-97 27,600 104,777
The Budd Company Industrial Batteries May-90 85,100 Oct-97 - 98,071
The Budd Company Industrial Batteries May-90 70,128 Sep-97 17,190 80,817
The Budd Company Electric Tow Tractors May-90 42,589 Jul-97 5,400 49,080
The Budd Company Electric Tuggers May-90 22,342 Jul-97 4,000 25,747
The Budd Company Chargers May-90 19,394 Sep-97 5,441 22,350
The Budd Company Walkie Reach Truck May-90 15,903 Sep-97 3,887 18,327
The Budd Company Electric Cart May-90 2,793 Sep-97 682 3,218
The Budd Company Lift Trucks May-90 154,260 Mar-96 29,000 158,330
The Dow Chemical Company Material Handling Jul-87 990,448 Aug-92 382,160 877,628
The Dow Chemical Company Rail car Mover Jul-87 145,822 Jan-93 43,650 125,152
The Dow Chemical Company Lift Truck Jul-87 26,198 Aug-92 4,300 25,820
The Dow Chemical Company Material Handling May-88 294,792 Jul-93 74,300 290,517
The Dow Chemical Company Material Handling May-88 55,516 Sep-95 - 73,736
The Dow Chemical Company Material Handling May-88 33,943 Jun-94 10,900 32,539
The Dow Chemical Company Material Handling May-88 33,119 Jan-95 10,000 39,517
The Dow Chemical Company Material Handling May-88 17,045 Jan-94 5,800 16,340
USX Steel Corporation Haul Truck Dec-89 1,017,631 Dec-94 324,300 1,003,483
USX Steel Corporation Haul Truck Dec-89 1,017,631 Dec-94 324,300 1,003,483
USX Steel Corporation Haul Truck Dec-89 1,013,766 Dec-94 324,300 999,671
------------- ------------ --------------
$42,279,771 $14,633,236 $38,934,443
============= ============ ==============
ATEL CASH DISTRIBUTION FUND III
A. O. Smith Corporation Forklifts Nov-90 $33,752 Feb-97 $8,100 $40,198
A. O. Smith Corporation Side loaders Nov-90 230,591 Feb-97 62,000 266,272
A.O. Smith Corporation Towmotors Nov-90 120,865 Jan-96 44,000 124,614
A.O. Smith Corporation Lift trucks Nov-90 25,315 Jan-96 8,250 26,100
A.O. Smith Corporation Lift trucks Nov-90 22,516 Jan-96 9,000 23,215
A.O. Smith Corporation Carton Clamps Nov-90 22,469 Jan-96 9,000 26,166
A.O. Smith Corporation Lift trucks Nov-90 17,860 Mar-96 3,950 18,414
American President Trucking Tractors May-90 129,021 Jul-97 24,085 183,461
Co., Ltd.
American President Trucking Tractor Jun-90 64,510 Jul-97 12,043 71,710
Co., Ltd.
American President Trucking Utility Curtainsiders Jul-90 163,482 Aug-97 60,000 189,348
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Nov-96 10,000 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Nov-96 18,788 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Nov-96 10,000 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Nov-96 10,000 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Nov-96 10,000 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Dec-96 15,473 74,845
Co., Ltd.
A-49
<PAGE>
American President Trucking Tractors Feb-90 64,862 Dec-96 11,894 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Dec-96 9,900 76,859
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Feb-97 15,993 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Feb-97 15,455 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 64,862 Feb-97 15,073 74,845
Co., Ltd.
American President Trucking Tractors Feb-90 64,510 May-96 19,738 62,791
Co., Ltd.
American President Trucking Tractors Feb-90 64,510 Jun-96 18,738 62,791
Co., Ltd.
American President Trucking Tractors Feb-90 64,510 Nov-96 15,443 74,622
Co., Ltd.
American President Trucking Tractors Feb-90 64,510 Dec-96 15,443 74,622
Co., Ltd.
American President Trucking Tractors Feb-90 64,510 Dec-96 15,443 74,622
Co., Ltd.
American President Trucking Tractors Feb-90 64,510 Dec-96 15,443 74,622
Co., Ltd.
American President Trucking Tractors Feb-90 64,510 Dec-96 9,900 76,442
Co., Ltd.
American President Trucking Tractors Feb-90 64,863 Jun-96 18,788 63,134
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Nov-96 15,472 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Nov-96 15,472 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Nov-96 14,572 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Nov-96 15,472 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Dec-96 15,534 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Dec-96 15,372 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Dec-96 15,372 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Dec-96 15,372 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Apr-97 14,396 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Apr-97 14,072 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Apr-97 14,072 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Apr-97 14,072 73,663
Co., Ltd.
A-50
<PAGE>
American President Trucking Tractors Mar-90 63,685 Apr-97 15,598 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 May-97 13,972 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Jun-97 13,772 73,663
Co., Ltd.
American President Trucking Tractors Mar-90 63,685 Jun-97 13,772 73,663
Co., Ltd.
American President Trucking Tractors Apr-90 64,510 Nov-96 15,543 72,620
Co., Ltd.
American President Trucking Tractors Apr-90 64,510 Dec-96 15,443 72,620
Co., Ltd.
American President Trucking Tractors Apr-90 64,510 Dec-96 15,443 72,620
Co., Ltd.
American President Trucking Tractors Apr-90 322,551 Jun-96 97,892 300,307
Co., Ltd.
American President Trucking Tractors May-90 64,510 Nov-96 15,543 71,710
Co., Ltd.
American President Trucking Tractors May-90 64,510 Nov-96 15,543 71,710
Co., Ltd.
American President Trucking Tractors May-90 64,510 Dec-96 15,543 71,710
Co., Ltd.
American President Trucking Tractors May-90 64,510 Feb-97 15,543 71,710
Co., Ltd.
American President Trucking Tractors May-90 64,510 Feb-97 15,543 68,070
Co., Ltd.
American President Trucking Tractors May-90 387,062 Jun-96 150,839 343,988
Co., Ltd.
American President Trucking Tractors May-90 129,021 Jun-96 37,934 120,123
Co., Ltd.
Barney's, Inc. Retail Store FF&E Sep-93 2,009,077 Jul-96 1,033,020 967,060 11
Buffalo & Pittsburgh Locomotives Nov-93 792,657 Nov-96 713,100 802,504
Railroad
Carrier Corporation Lift trucks Jun-90 359,305 Apr-95 89,800 369,875
Carrier Corporation Lift trucks Jun-90 113,195 Apr-95 27,950 114,228
Carrier Corporation Lift trucks Aug-90 200,008 Apr-95 43,100 203,148
Central Ohio Coal Company CAT Scrapers Mar-92 2,713,694 Jul-96 1,048,730 2,580,680
Central Ohio Coal Company 160 Ton Coal Hauler Mar-92 2,280,162 Dec-97 972,955 2,936,837
Central Ohio Coal Company Billdozer Mar-92 396,549 Oct-96 53,000 392,373
Dean Foods Company Trailer Oct-90 34,996 Nov-96 20,461 35,617
FMC Gold Company Haul Truck Jun-90 560,232 Jan-94 295,000 427,663
Fred Meyer, Inc. Data Processing Oct-90 3,244,649 Aug-95 1,060,276 3,608,683
Fred Meyer, Inc. Data Processing Nov-90 3,340,551 Dec-92 2,715,033 2,338,583
Koppers Industries, Inc. Material Handling Jul-90 54,156 Sep-95 23,000 64,020
Koppers Industries, Inc. Material Handling Aug-90 45,485 Jan-94 33,383 31,471
Koppers Industries, Inc. Material Handling Dec-90 200,911 Dec-95 102,500 237,614
Koppers Industries, Inc. Hydraulic Excavator Mar-91 114,492 Apr-96 57,500 129,848
Kraft General Foods, Inc. Material Handling Jul-91 46,694 Aug-94 24,248 22,701
Midway Airlines, Inc. Commercial Aircraft Jun-90 2,405,081 Sep-91 1,656,694 226,541 12
Mobil Oil Corporation Material Handling Apr-92 35,662 Jun-95 13,040 29,673
Mobil Oil Corporation Material Handling Jul-92 36,249 Jun-95 10,611 30,163
Mobil Oil Corporation Golf Carts Jun-93 142,464 Jul-97 74,800 98,983
Mobil Oil Corporation Golf Carts Jun-93 137,654 Jul-96 80,800 95,642
Nord Kaolin Company Lab Equipment Aug-90 409,694 Oct-97 91,000 110,806
Pepsico, Inc. Material Handling Jul-90 208,042 Sep-96 16,000 254,225
Pepsico, Inc. Material Handling Sep-90 228,666 Oct-96 21,000 266,447
Pepsico, Inc. Material Handling Sep-90 32,885 Sep-96 1,200 41,214
Pepsico, Inc., d/b/a/ PFS Material Handling Jul-90 73,050 Jun-95 8,470 52,933
Pilgrim's Pride Corporation Chicken Processing Dec-90 3,791,002 Oct-95 1,400,000 4,000,050
A-51
<PAGE>
PSI Energy, Inc. Wheel Tractor Scraper Jul-90 842,013 Sep-96 295,000 923,917
Reliance Insurance Company Office Furniture Jun-92 1,133,854 Jun-97 287,622 1,213,841
Reliance Insurance Company Office Furniture Sep-92 137,047 Sep-97 37,346 159,007
Reliance Insurance Company Offset Press Sep-92 29,780 Sep-97 8,338 35,093
Shell Mining Company Crawler Dozer Oct-91 776,000 Dec-96 350,000 801,763
Southern Ohio Coal Company Mining Mar-92 3,795,152 Jun-92 4,469,135 207,307
Southern Ohio Coal Company Shuttle Cars Mar-92 767,590 Apr-97 120,000 851,419
Southern Ohio Coal Company Power Center Mar-92 102,826 Apr-97 15,000 114,056
Stone Container Corporation Material Handling Nov-90 299,787 Aug-93 115,700 301,446
Stone Container Corporation Material Handling Nov-90 227,384 May-93 54,500 163,622
Stone Container Corporation Material Handling Nov-90 216,936 Jun-95 72,500 199,500
Stone Container Corporation Material Handling Nov-90 183,825 Jul-95 105,500 188,712
Stone Container Corporation Tractor Nov-90 137,327 Mar-95 75,842 124,820
Stone Container Corporation Material Handling Nov-90 136,838 Jun-96 60,670 164,020
Stone Container Corporation Material Handling Nov-90 116,700 Jul-95 23,750 133,201
Stone Container Corporation Material Handling Nov-90 110,836 Jul-95 21,750 125,403
Stone Container Corporation Material Handling Nov-90 96,611 Jun-95 29,500 107,181
Stone Container Corporation Forklifts Nov-90 83,200 Aug-97 21,555 110,823
Stone Container Corporation Material Handling Nov-90 68,950 Mar-96 21,500 85,665
Stone Container Corporation Material Handling Nov-90 63,433 Sep-95 14,000 69,970
Stone Container Corporation Tractor Nov-90 53,694 Jan-95 30,500 50,456
Stone Container Corporation Material Handling Nov-90 51,420 Jun-95 14,500 54,541
Stone Container Corporation Material Handling Nov-90 50,097 Oct-94 17,735 52,700
Stone Container Corporation Material Handling Nov-90 49,232 Jul-95 14,500 54,618
Stone Container Corporation Material Handling Nov-90 46,928 May-96 8,400 57,267
Stone Container Corporation Forklifts Nov-90 46,681 Jul-96 13,375 67,363
Stone Container Corporation Material Handling Nov-90 46,492 Mar-96 13,500 41,148
Stone Container Corporation Material Handling Nov-90 45,669 Apr-94 17,500 45,093
Stone Container Corporation Material Handling Nov-90 43,850 Apr-93 9,000 36,268
Stone Container Corporation Material Handling Nov-90 33,498 Mar-95 14,500 35,136
Stone Container Corporation Forklifts Nov-90 32,261 Nov-96 9,100 47,409
Stone Container Corporation Forklifts Nov-90 26,256 Apr-97 9,000 55,930
Stone Container Corporation Material Handling Nov-90 25,898 Jul-95 12,000 26,586
Stone Container Corporation Material Handling Nov-90 23,674 Oct-93 5,800 24,262
Stone Container Corporation Material Handling Nov-90 22,561 Jan-96 2,000 29,525
Stone Container Corporation Material Handling Nov-90 22,308 Jul-95 5,500 23,453
Stone Container Corporation Material Handling Nov-90 18,611 Jul-94 3,500 16,737
Stone Container Corporation Material Handling Nov-90 17,250 Jul-95 5,500 15,176
Stone Container Corporation Tractor Nov-90 17,227 Jan-95 6,000 18,431
Stone Container Corporation Material Handling Nov-90 17,124 Jul-95 4,300 19,535
Stone Container Corporation Material Handling Nov-90 15,984 Mar-93 5,500 14,058
Stone Container Corporation Material Handling Nov-90 15,810 Jul-95 8,500 16,230
Stone Container Corporation Material Handling Nov-90 15,625 Feb-95 4,000 14,480
Stone Container Corporation Sweeper Nov-90 14,203 Oct-95 2,100 10,440
Stone Container Corporation Material Handling Nov-90 12,949 Jul-95 6,000 13,293
Stone Container Corporation Material Handling Apr-91 128,314 Dec-93 117,236 59,610
Teledyne Industries, Inc. Material Handling Nov-90 56,635 Jan-94 13,714 52,309
Teledyne Industries, Inc. Material Handling Nov-90 41,301 Apr-96 15,000 42,464
Teledyne Industries, Inc. Material Handling Nov-90 24,073 Apr-94 11,100 22,234
Terex Corporation KW-KC Induction Unit Apr-91 68,088 Aug-97 29,428 75,403
Terex Corporation Shape Cutting Machine Jul-91 237,213 Aug-97 89,660 262,698
The Dow Chemical Company Research Equipment Apr-91 222,801 Mar-97 6,000 231,500
The Dow Chemical Company Research Equipment Apr-91 56,295 Oct-96 25,000 61,271
The Dow Chemical Company Research Equipment Apr-91 930,833 Feb-96 214,500 1,013,116
The Dow Chemical Company Research Equipment Oct-91 649,269 Nov-96 to 125,030 748,348
Dec-96
The Dow Chemical Company Research Equipment Oct-91 61,615 Dec-96 2,200 68,479
The Dow Chemical Company Material Handling Oct-91 50,478 Aug-93 12,000 47,859
The Dow Chemical Company Research Equipment Jan-92 937,459 Jan-97 217,000 1,031,519
A-52
<PAGE>
The Dow Chemical Company Research Equipment Jan-92 468,214 Jan-97 94,875 512,287
The Dow Chemical Company Dozer Jul-92 158,778 Jun-97 79,389 160,540
The Helen Mining Company Mining Jun-91 222,801 Aug-93 14,321 227,537 13
The Helen Mining Company Mining Shields Sep-93 149,536 Jan-97 - 149,536
The Kelly Springfield Tire Trackmobile Mar-92 86,943 Mar-97 65,000 86,246
Co.
The Kelly Springfield Tire Mail Sorter Mar-92 28,452 Mar-97 5,432 30,512
Co.
The Kelly Springfield Tire Forklifts May-92 18,512 Jun-97 5,000 20,139
Co.
The Pillsburry Company Stripper Combines May-92 1,023,718 Dec-97 428,375 857,137
The Pillsburry Company Self Propelled Pods (3) Jun-92 1,012,828 Dec-97 423,819 848,020
The Pillsburry Company Corn Harvesters (3) Jun-92 385,217 Dec-97 148,172 341,077
The Pillsburry Company Dump Cart Jun-92 10,475 Dec-97 4,029 9,275
The Pillsburry Company Poclain Motors Jun-92 6,285 Dec-97 2,418 5,565
The Pittston Company MECD Conveyor System Apr-92 1,766,809 Sep-97 116,000 1,753,821
The Pittston Company Simmons Rand Un-A-Hauler Apr-92 729,550 Oct-97 75,000 724,187
The Pittston Company Fletcher Bolter Apr-92 190,154 Jul-97 36,000 188,756
The Pittston Company Versatrack Apr-92 183,104 Jun-97 31,500 188,826
The Pittston Company Versatrack Apr-92 159,207 Oct-96 83,321 147,150
The Pittston Company Simmons Rand Scoup Apr-92 136,531 Jun-97 18,000 141,702
The Pittston Company Stamler Feeder Apr-92 131,697 Sep-97 15,000 130,729
The Pittston Company Personnel Carrier Apr-92 61,549 Jun-97 12,000 63,880
The Pittston Company Compressor Car Apr-92 34,253 Jun-97 7,000 35,550
The Pittston Company Continuous Miner Jun-92 949,110 Feb-97 437,995 945,758
The Pittston Company LWPC & Controls Jun-92 252,060 Sep-97 5,000 251,170
The Pittston Company Un-a-hauler Jun-92 247,104 Jun-97 35,000 246,915
The Pittston Company Locomotive Jun-92 125,394 Jun-97 28,000 125,298
Truck-Lite Company Project Line Equipement Sep-91 414,720 Jun-97 224,054 397,993
Truck-Lite Company Project Line Equipement Dec-91 699,062 Jun-97 380,946 656,930
US Surgical Corp./ARR, Inc. Falcon 50 Aircraft Oct-97 5,275,000 Oct-97 5,200,000 4,421,201
USS/KOBE Steel Corporation Forklift Trucks Aug-91 197,211 Aug-97 45,700 241,284
USS/KOBE Steel Corporation Material Handling Nov-91 82,769 Oct-97 12,000 92,719
USS/KOBE Steel Corporation Hyster Lift Truck Nov-91 34,079 Nov-97 6,200 61,723
Wal-Mart Stores, Inc. Dryvan Trailer Jun-94 300,624 Aug-97 248,000 337,232
Wal-Mart Stores, Inc. Forklifts, Trucks & Trailers Jun-94 189,632 Jan-96 165,000 188,817
------------- ------------ --------------
$58,052,685 $28,693,081 $50,957,363
============= ============ ==============
ATEL CASH DISTRIBUTION FUND IV
Barney's, Inc. Retail Store FF&E Sep-93 $2,316,543 Jul-96 $1,191,112 $1,115,058 11
Buffalo & Pittsburgh Locomotives Nov-93 849,216 Nov-96 729,200 859,766
Railroad
Burlington Northern Railroad Locomotives Dec-92 7,950,000 Dec-94 5,595,000 4,161,000
Canadian Pacific Limited Rail Car Oct-92 5,704 Apr-96 21,772 520
Canadian Pacific Limited Boxcar Oct-92 5,474 May-97 20,466 3,942
DJ (Aeorspace) Limited Executive Aircraft Apr-94 1,890,000 Jan-97 1,018,053 1,590,913
Galardi Group Restaurant FF&E Jun-94 546,000 Oct-96 325,276 382,513
H. E. Butt Grocery Company Refrigerated Trailers Oct-92 2,128,029 Mar-97 1,174,703 1,410,730
H. E. Butt Grocery Company Refrigerated Trailers Nov-92 1,897,830 Mar-97 1,079,789 1,246,977
H. E. Butt Grocery Company Refrigerated Trailers Nov-92 1,645,554 Mar-97 610,258 1,299,522
H. E. Butt Grocery Company Trailers Nov-92 37,957 Jan-96 35,624 18,607
H. E. Butt Grocery Company Refrigerated Trailers May-93 1,404,302 Mar-97 831,127 790,395
Kraft General Foods, Inc. Tractors Dec-93 419,267 Jan-95 363,510 337,986
Kraft General Foods, Inc. Tractors Dec-93 545,048 Jul-96 139,956 581,119
Midwest Power Systems, Inc. Coal Hopper Car Dec-92 2,222,500 Apr-96 1,730,291 1,993,170
Midwest Power Systems, Inc. Coal Hopper Car Dec-92 17,500 Sep-93 20,543 3,915
Mobil Oil Corporation John Deere Loader Rops Apr-92 74,977 Dec-97 30,000 94,050
Mobil Oil Corporation Manlift Jul-92 67,304 Jul-97 31,000 89,177
A-53
<PAGE>
Mobil Oil Corporation Bobcat Loader Jul-92 15,289 Jul-97 9,000 20,258
Mobil Oil Corporation Tractors Nov-92 436,136 Sep-96 137,900 536,101
Mobil Oil Corporation Material Handling Equipment Dec-92 69,000 Dec-97 50,000 65,419
Mobil Oil Corporation Tractor Accessories Oct-93 3,541 Sep-96 - 979
Mobil Oil Corportion Tractors Nov-92 182,949 Jun-96 48,000 136,246
Mobil Oil Corportion Boom Trucks Nov-92 69,903 Jan-94 46,026 19,329
Mobil Oil Corportion Tractors Nov-92 62,312 Jan-96 25,500 43,963
Mobil Oil Corportion Tractors Nov-92 62,312 Mar-96 25,500 43,963
Mobil Oil Corportion Tractors Dec-92 23,500 Feb-96 8,950 21,126
Nabisco, Inc. Computers and Related Jul-95 211,104 Jul-97 to 63,855 100,306
Equipment Nov-97
Nabisco, Inc. Computers and Related Jul-95 72,622 Jul-97 to 26,909 34,506
Equipment Dec-97
Nabisco, Inc. Computers & Related Jul-95 43,423 Dec-96 to 34,799 21,684
Equipment Jun-97
Nabisco, Inc. Computers & Related Jul-95 10,447 Dec-96 to 8,590 5,071
Equipment Jun-97
National Steel Corporation Wheel Loader Oct-94 2,180,730 May-97 1,259,019 1,080,629
National Steel Corporation Forklift Oct-94 27,780 May-97 21,495 11,992
National Steel Corporation Scrap Loader Jan-95 242,595 May-97 193,044 92,425
National Steel Corporation Dump Haul Trucks Mar-95 3,433,402 May-97 2,783,959 1,145,594
Pepsico, Inc. Pallet Trucks and Related Jun-93 103,258 Jul-97 10,000 97,740
Equipment
Pepsico, Inc. Battery Connector Jan-94 3,352 Sep-97 2,506 2,787
Pepsico, Inc. Pallet Trucks and Related
Equipment Jul-93 to 31,376 Oct-97 1,950 29,700
Aug-93
Rochelle Coal Company Haul Truck Nov-92 1,429,807 Jun-97 772,200 1,022,764
Rochelle Coal Company Loader Dec-92 1,988,931 Jun-97 1,074,250 1,403,767
Rochelle Coal Company Haul Truck Dec-92 1,429,807 Jun-97 772,200 1,008,524
Rochelle Coal Company Haul Truck Jan-93 1,455,158 Jun-97 800,500 1,002,462
The Helen Mining Company Mining Mar-92 333,458 Mar-92 72,385 347,258
The Helen Mining Company Battery Locomotive Apr-92 185,249 May-97 39,131 198,041
The Helen Mining Company Mining May-92 641,854 Aug-93 44,235 679,436
The Kendall Company Computers Aug-94 21,819 Nov-97 8,184 24,926
The Kendall Company Computers Aug-94 21,581 Dec-97 3,099 24,654
The Kendall Company Computers Oct-94 45,471 Nov-97 14,322 51,946
The Kendall Company Computers Oct-94 17,206 Dec-97 2,360 19,656
The Kendall Company Computer Oct-94 4,735 Dec-96 2,233 3,822
The Kendall Company Computers Dec-94 20,067 Nov-97 5,924 32,675
The Kendall Company Computers Dec-94 8,586 Dec-97 2,112 13,980
The Kendall Company Centillion Speedswitch(s) Mar-95 43,770 Oct-97 18,906 51,335
The Kendall Company Computers Mar-95 9,553 Dec-96 5,817 6,304
The Kendall Company Computers Jun-95 11,771 Oct-97 to 5,993 9,856
Dec-97
The Kendall Company Computers Jan-95 to 34,449 Nov-97 14,009 40,403
Mar-95
The Pittston Company Drill Nov-93 387,000 Apr-97 184,092 254,059
The Pittston Company Wheel Loader Nov-93 382,831 Apr-97 243,561 169,890 13
The Pittston Company Wheel Loader Nov-93 381,922 Apr-97 223,879 198,841
The Pittston Company Drill Nov-93 358,831 Apr-97 203,034 203,113
The Pittston Company Diesel Generator Nov-93 244,450 Apr-97 156,164 114,774
The Pittston Company Crawler Tractor Nov-93 208,800 Apr-97 136,878 98,035
The Pittston Company Crawler Tractor Nov-93 201,786 Apr-97 132,280 94,742
The Pittston Company Continuous Miner Mar-95 819,349 Apr-97 546,207 346,748
The Stop & Shop Supermarket Bakery Labeling Machine Dec-95 2,750 Mar-97 2,568 759
Co.
Trans Ocean Container Intermodal Containers Sep-93 65,073 Oct-96 to 53,512 24,637
Apr-97
Corporation
A-54
<PAGE>
Trans Ocean Container Intermodal Containers Sep-93 23,074 Dec-97 14,130 23,576
Corporation
Trans Ocean Container Intermodal Containers Sep-93 13,870 Dec-95 10,608 5,537
Corporation
Trans Ocean Container Intermodal Containers Sep-93 13,223 Apr-95 12,095 3,016
Corporation
Trans Ocean Container Intermodal Containers Sep-93 10,196 Oct-95 6,112 3,595
Corporation
Trans Ocean Container Intermodal Containers Sep-93 6,744 Jul-94 7,398 825
Corporation
Trans Ocean Container Intermodal Containers Sep-93 6,706 Jul-95 6,394 2,069
Corporation
Union Tank Car Company Box Car Oct-92 25,000 Feb-95 23,158 21,678
Union Tank Car Company Rail Car Oct-92 1,222,542 Jul-95 1,383,118 601,100
Union Tank Car Company Rail Car Oct-92 389,367 Sep-95 441,332 203,680
Union Tank Car Company Rail Car Oct-92 389,367 Oct-95 442,564 209,760
Union Tank Car Company Rail Car Oct-92 26,000 Apr-96 21,695 18,920
Union Tank Car Company Box Car Oct-92 13,000 Aug-97 9,829 12,805
Union Tank Car Company Boxcar Oct-92 13,000 Nov-96 8,979 11,220
Union Tank Car Company Boxcar Oct-92 13,000 Apr-97 9,829 12,100
Union Tank Car Company Rail Car Oct-92 12,000 Apr-95 11,088 12,752
Union Tank Car Company Rail Car Oct-92 12,000 Jan-96 10,371 8,202
Union Tank Car Company Rail Car Dec-92 13,000 Jan-93 14,569 880
US Surgical Corp./ARR, Inc. Falcon 50 Air Craft Aug-92 5,275,000 Oct-97 5,200,000 4,417,201
USX Steel Company Material Handling Jun-93 711,679 Oct-97 175,000 776,136
Equipment
------------- ------------ --------------
$50,253,068 $33,052,986 $33,281,637
============= ============ ==============
ATEL CASH DISTRIBUTION FUND V
Barney's, Inc Retail Store FF&E Sep-93 $3,312,940 Jul-96 $1,703,435 $1,594,669 11
Burlington Northern Railroad Covered Hopper Cars Mar-96 35,000 Dec-96 22,425 619
Company
Burlington Northern Railroad Covered Hopper Cars Mar-96 35,000 Jan-97 36,367 -
Company
Burris Foods Trailers Apr-94 108,442 Dec-95 121,000 53,210
Clark Oil & Refining Refrigeration Units Aug-93 1,268,656 Dec-96 560,000 1,164,635
Corporation
IBM Corporation Office Furniture Aug-93 1,131,815 Nov-97 431,901 1,087,248
IBM Corporation Office furniture Sep-93 693,896 Jun-95 516,291 666,576
International Paper Company Utility Hand Truck Sep-94 4,300 Nov-97 1,415 3,314
Mobil Administrative Helicopter Jun-93 844,525 Mar-95 920,000 308,000
Services Company
Mobil Oil Corporation Environmental Ejector May-93 423,000 Apr-97 88,000 458,067
Systems
Mobil Oil Corporation Wheel Loader Oct-93 70,200 Oct-96 39,000 50,579
Nabisco, Inc. Computers Aug-95 to 123,509 Aug-97 to 100,813 51,414
Oct-95 Nov-97
Nabisco, Inc. Computers & Related Aug-95 to 66,932 Dec-96 to
Oct-95 Jun-97 54,102 29,697
Owens Corning Fiberglas Forklifts Jul-93 157,462 May-97 31,800 157,273
Corp.
Praxair, Inc. Tractors Jun-94 576,685 Sep-96 to 214,000 340,982
Apr-97
Praxair, Inc. Tractors Jun-94 91,429 Aug-97 to 23,028 54,060
Sep-97
PV Trucking Tractors Jun-94 75,333 Jan-96 50,000 36,000
Quaker Coal Company Mining equipment Jun-94 1,118,880 Jun-95 930,251 347,926
A-55
<PAGE>
Quaker Coal Company Crawler Dozer Jun-94 913,073 Oct-96 425,000 732,192
Quaker Coal Company Mining equipment Jun-94 595,000 Jun-95 505,775 173,253
Quaker Coal Company Mining equipment Dec-94 3,000,000 Jun-95 2,696,718 794,600
Schwegmann Giant Retail Store FF&E Jun-95 574,703 Oct-96 527,405 167,353
Supermarkets, Inc.
Schwegmann Giant Retail Store FF&E Jun-95 309,024 Dec-96 272,109 101,701
Supermarkets, Inc.
Star Enterprise Tractors Jun-94 887,041 Jan-97 to 331,750 649,727
Apr-97
Star Enterprise Tractors Jun-94 36,492 Aug-97 12,850 26,827
TASC, Inc. Computers & Related Equipment Dec-94 237,685 Jul-96 70,000 226,989
Texaco Trading & Tractors Jun-94 983,717 Jul-97 to 361,500 757,569
Transportation Nov-97
Texaco Trading & Tractors Jun-94 983,294 Feb-97 to 370,000 742,508
Transportation Jun-97
Texaco Trading & Tractors Jun-94 338,992 Aug-97 to 120,000 274,077
Transportation Nov-97
Texaco Trading & Tractors & Trailers Jun-94 156,645 Apr-97 55,000 120,533
Transportation
Texaco Trading & Tractors Jun-94 138,783 Feb-97 to 59,250 94,571
Transportation Mar-97
Texaco Trading & Tank Trailers Jun-94 73,805 Aug-97 to 25,000 59,672
Transportation Nov-97
The Atchison Topeka & Santa Intermodal Containers Apr-94 9,787 Jan-96 9,612 1,832
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers May-94 9,787 Jan-96 9,612 1,832
Fe Railroad Company
The Atchison Topeka & Santa
Fe Railroad Company Intermodal Containers Jun-94 9,787 Jan-95 10,107 611
The Atchison Topeka & Santa Intermodal Containers Jun-94 9,787 Jan-96 9,612 1,832
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Oct-94 9,635 Jan-95 10,123 306
Fe Railroad Company
The Burlington Northern & Intermodal Containers May-94 9,787 Jul-96 9,337 2,548
Santa Fe Railway Co.
The Burlington Northern & Intermodal Containers Jun-94 9,787 Jul-96 9,337 2,843
Santa Fe Railway Co.
The Burlington Northern &
Santa Fe Railway Co. Intermodal Containers Jun-94 9,787 Jan-97 8,991 2,843
The Burlington Northern & Intermodal Containers Nov-94 9,634 Jul-96 9,462 1,993
Santa Fe Railway Co.
The Dow Chemical Company Copiers Jul-94 42,694 Jul-95 31,150 13,588
The Dow Chemical Company Copiers Jul-94 195,975 Jan-96 139,400 224,830
The Dow Chemical Company Copiers Oct-94 230,577 Jan-96 204,000 76,459
The Dow Chemical Company Copiers Jan-95 37,493 Dec-95 20,750 12,437
The Dow Chemical Company Copiers Jan-95 110,900 Jan-96 98,750 38,074
The Dow Chemical Company Copiers Apr-95 13,455 Dec-95 14,080 2,199
The Dow Chemical Company Staplers Apr-95 109,800 Jan-96 119,000 18,576
The Kendall Company Computer Mar-96 3,735 Jan-97 4,112 686
Tom's Food, Inc. Tractors Jun-94 197,195 Aug-96 to 77,000 181,009
Feb-97
Tom's Foods, Inc. Tractors Jun-94 61,908 Feb-96 36,800 49,982
Trans Ocean Container Intermodal Containers Sep-93 53,507 Dec-95 46,560 21,970
Corporation
Trans Ocean Container Intermodal Containers Sep-93 25,925 Apr-96 19,257 10,817
Corporation
Trans Ocean Container Intermodal Containers Sep-93 22,868 Jul-97 to 21,673 13,976
Corporation Dec-97
Trans Ocean Container Intermodal Containers Sep-93 18,054 Jul-94 18,898 2,371
Corporation
A-56
<PAGE>
Trans Ocean Container Intermodal Containers Sep-93 10,116 Apr-95 5,246 2,345
Corporation
Trans Ocean Container Intermodal Containers Sep-93 5,814 Jul-95 5,263 1,866
Corporation
Trans Ocean Container Intermodal Containers Sep-93 4,647 Oct-95 4,405 850
Corporation
Trans Ocean Container Intermodal Containers Sep-93 3,372 Oct-94 3,675 1,674
Corporation
Trans Ocean Container Intermodal Containers Sep-93 2,245 Jun-96 2,468 1,041
Corporation
Trans Ocean Container Intermodal Containers Sep-93 62,100 Oct-96 to 51,749 21,640
Corporation Apr-97
Tyson Foods, Inc. Tractors Jun-93 1,585,000 Jul-96 637,500 1,027,080
Tyson Foods, Inc. Tractors Aug-93 1,575,000 Jul-96 637,500 1,022,490
------------- ------------ --------------
$23,826,416 $13,961,614 $14,088,442
============= ============ ==============
ATEL CASH DISTRIBUTION FUND VI
American President Trucking Tractors Nov-95 $759,092 Jul-96 to $327,062 $225,942
Co., Ltd. Apr-97
The Burlington Northern Utility Refrigerated Trailers Nov-95 312,145 Sep-97 to 144,951 161,813
Railroad Company Dec-97
The Burlington Northern Covered Hopper Cars Mar-96 70,526 Sep-97 to 67,033 10,100
Railroad Company Dec-97
The Burlington Northern Covered Hopper Cars Mar-96 70,000 Dec-96 to
Railroad Company Jan-97 59,553 619
Mobil Oil Corporation Petroleum Wax Car Feb-96 59,953 Jan-97 64,717 3,597
Perdue Transportation Tractors Nov-95 47,038 Feb-96 45,838 3,900
Incorporated
The Atchison Topeka & Santa Intermodal Containers Jan-94 20,068 Jan-95 21,084 567
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Sep-94 10,034 Jan-95 10,446 335
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Sep-94 20,068 Jan-96 19,973 2,543
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Nov-94 10,034 Feb-95 10,446 1,159
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Nov-94 10,034 Jan-96 10,113 968
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Nov-94 9,633 Apr-96 9,588 1,240
Fe Railroad Company
The Atchison Topeka & Santa Intermodal Containers Nov-94 6,453 Apr-96 6,567 788
Fe Railroad Company
The Burlington Northern & Ext. Post Container Nov-94 9,633 Oct-97 8,767 3,379
Santa Fe Railway Company
The Burlington Northern & Intermodal Container Sep-94 10,034 Jul-96 9,717 2,225
Santa Fe Railway Company
The Burlington Northern & Intermodal Container Nov-94 10,034 Jul-96 9,855 1,614
Santa Fe Railway Company
Tracy Locke, Inc. Printers Mar-95 12,470 Sep-95 12,179 1,662
Trans Ocean Container Intermodal Containers Dec-95 11,063 Jul-97 to 12,070 1,986
Corporation Dec-97
Trans Ocean Container Intermodal Containers Dec-95 17,748 Oct-96 to 20,730 1,107
Corporation Jan-97
Trans Ocean Container Intermodal Containers Dec-95 9,529 Jun-96 11,167 700
Corporation
Tyson Foods, Inc. Computers Jun-95 563,411 Jun-97 to 66,323 522,877
Nov-97
Tyson Foods, Inc. Computers & Related Equipment Jun-95 195,152 Jun-97 23,080 181,113
------------- ------------ --------------
$2,244,152 $971,259 $1,130,235
============= ============ ==============
ATEL CAPITAL EQUIPMENT FUND VII
Tarmac America, Inc. Tractors Mar-97 $35,000 Aug-97 $33,666 $6,119
MRXX - Cargill, Inc. Rail Cars Jan-97 99,000 May-97 96,747 9,415
to Oct-97
------------- ------------ --------------
$134,000 $130,413 $15,534
============= ============ ==============
TOTALS OF ALL FUNDS: $188,686,783 $95,259,391 $149,881,762
============= ============ ==============
</TABLE>
A-57
<PAGE>
TABLE VI SALES OR DISPOSALS OF EQUIPMENT FOOTNOTES
(1) "Acquisition Date" is the date the Equipment was acquired by the prior
program.
(2) "Equipment Acquisition Price" is the actual cost of the item of Equipment,
including Acquisition Fees, and any other expenditures incurred by the
prior program in the acquisition of the Equipment.
(3) "Sale Price" is the actual cash received for the purchase, early
termination or casualty of the Equipment upon Lease termination, net of any
direct out-of-pocket closing costs incurred by the prior program as a
result of such termination.
(4) "Excess of Rents Over Expenses" is a total amount of Lease rents, less any
applicable direct out-of-pocket costs incurred by the prior program during
the term of the Lease for the particular Lease transaction.
(5) "Sale Price" represents cash and non-cash amounts distributed by Lessee as
a result of U.S. Bankruptcy Court-approved Chapter 11 Reorganization Plan.
Distributions were as follows: Cash $9,512; Senior Secured Notes $1,000;
Convertible Subordinated Notes $700; Common Stock $296 (market value as of
7/16/92).
(6) The original lease included a mobile MRI unit and a tractor. The tractor
leased under the original lease was sold to the lessee. The MRI unit has
been leased to a third party on a 24 month term with a bargain purchase
option to be exercised at the end of the lease term. The Equipment under
this lease is owned 1/3 by ATEL Cash Distribution Fund and 2/3 By ATEL Cash
Distribution Fund II.
(7) "Sale Price" represents cash and non-cash amounts distributed by Lessee as
a result of U.S. Bankruptcy Court-approved pre-packaged Chapter 11 Plan.
Distributions were as follows: Cash $602,435; Senior Secured Notes $72,800;
Convertible Subordinated Notes $50,900; Common Stock $21,482 (market value
as of 7/16/92).
(8) "Sales Price" represents cash and non-cash amounts distributed by Lessee as
a result of U.S. Bankruptcy Court-approved pre-packaged Chapter 11 Plan.
Distributions were as follows: Cash $431,499; Senior Secured Notes $51,600;
Convertible Subordinated Notes $36,100; Common Stock $15,233 (market value
as of 7/16/92).
(9) "Equipment Acquisition Price" represents a 2/3 beneficial interest in the
transaction. The Equipment was foreclosed in September 1990 by the
non-recourse lender, John Hancock Leasing. Actual cash/equity amount paid
by the prior program for the Equipment was $1,430,345, the balance of the
Acquisition Price was financed with non-recourse debt. "Sale Price"
represents the amount of the non-recourse debt written off at the time of
foreclosure.
(10) The "Sales Price" represents the sum of cash received from the sale of the
aircraft pre-bankruptcy petition, plus all amounts received by the lessor
under its unsecured claim filed in the lessee's Chapter 11 reorganization,
through the date of this table. Through September 30, 1996, such claim
payments have amounted to 40% of the allowed claim amount of $776,542, or
$310,617.
A-58
<PAGE>
(11) On January 10, 1996, Barney's, Inc., a lessee of ATEL Cash Distribution
Fund III, ATEL Cash Distribution Fund IV and ATEL Cash Distribution Fund V
filed for protection under Chapter 11 of the U. S. Bankruptcy Act. In July
of 1996, the lessors sold their unsecured claim in the bankruptcy for an
amount equal to approximately 73% of the unsecured claim, which, after
satisfaction of the non-recourse loan due to the CIT Group/Equipment
Financing, Inc. (and taking into account all prior rents received, security
deposits retained and loan proceeds previously received), resulted in
proceeds to the lessors in excess of their original investments in the
equipment.
(12) "Equipment Acquisition Price" represents a 1/3 beneficial interest in the
transaction. The Equipment was foreclosed in September 1990 by the
non-recourse lender, John Hancock Leasing. Actual cash/equity amount paid
by the prior program for the Equipment was $715,172, the balance of the
Acquisition Price was financed with non-recourse debt. "Sale Price"
represents the amount of the non-recourse debt written off at the time of
foreclosure.
(13) The remaining equipment originally leased to The Helen Mining Company is
now leased to Costain Coal. Quaker State Corporation continued to guarantee
payments through the original lease term. The new lease also includes a two
year extension of the lease term.
A-59
<PAGE>
EXHIBIT B
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
July 31, 1998
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
TABLE OF CONTENTS
Page
1. NAME AND PRINCIPAL PLACE OF BUSINESS.................................B-1
2. DEFINITIONS...........................................................B-1
3. BUSINESS AND PURPOSE..................................................B-7
4. TERM..................................................................B-8
5. MANAGER...............................................................B-8
6. INITIAL AND ADDITIONAL MEMBERS........................................B-8
Section 6.1 Initial Members........................................B-8
Section 6.2 Additional Members.....................................B-8
Section 6.3 Conditions to Admission................................B-8
Section 6.4 Admission as a Member..................................B-8
Section 6.5 Limitation on Additional Insurance.....................B-8
Section 6.6 Escrow.................................................B-9
Section 6.7 Capital Account........................................B-9
7. LIABILITY AND STATUS OF MEMBERS.......................................B-9
8. COMPENSATION TO THE MANAGER AND/OR AFFILIATES.........................B-9
Section 8.1 General Limitation.....................................B-9
Section 8.2 Asset Management Fee...................................B-9
Section 8.3 Asset Management Fee Limit ............................B-9
Section 8.4 Other Services........................................B-11
Section 8.5 Payment of Fees on Removal............................B-11
Section 8.6 Employment of Broker-Dealers...........................B-11
9. FUND EXPENSES AND RESERVES...........................................B-11
Section 9.1 Reimbursement of Manager..............................B-11
Section 9.2 Limitation on Reimbursement...........................B-12
Section 9.3 Fund Expenses.........................................B-12
Section 9.4 Reserves..............................................B-13
10. ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS.........................B-13
Section 10.1 Allocation of Net Income and Net
Loss Prior to Initial Closing Date.................B-13
Section 10.2 Allocation of Net Income and Net
Loss After Initial Closing Date....................B-13
ii
<PAGE>
Section 10.3 Special Allocations..................................B-13
Section 10.4 Distribution of Cash From Operations.................B-15
Section 10.5 Distribution of Cash From Sales or Refinancing......B-15
Section 10.6 Distributions of Cash From Reserve Account..........B-15
Section 10.7 Determination of Amounts to be Distributed..........B-15
Section 10.8 Consent to Allocations..............................B-16
Section 10.9 Limitation on Distributions.........................B-16
Section 10.10 Allocation to Manager...............................B-16
Section 10.11 Return of Unused Capital............................B-16
Section 10.12 Distributions in Kind...............................B-16
Section 10.13 Withholding Taxes...................................B-17
11. ASSIGNMENT OF FUND INTERESTS.........................................B-17
Section 11.1 Limitations on Transfer..............................B-17
Section 11.2 Distributions and Effective Date of Transfer.........B-18
Section 11.3 Governmental Restrictions............................B-18
Section 11.4 Non-Complying Transfers..............................B-18
Section 11.5 Misrepresentations and Forfeit.......................B-18
12. SUBSTITUTED MEMBERS..................................................B-19
Section 12.1 Limitations on Substitution..........................B-19
Section 12.2 Consent to Admission.................................B-19
Section 12.3 Amendment of Agreement...............................B-19
13. REPURCHASE OF FUND INTERESTS.........................................B-19
14. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS..............................B-20
Section 14.1 Books of Account and Records.........................B-20
Section 14.2 Audited Annual Financial Statements..................B-21
Section 14.3 Other Annual Reporting...............................B-21
Section 14.4 Quarterly Reports....................................B-22
Section 14.5 Unaudited Quarterly Financial Statements.............B-22
Section 14.6 Other Quarterly Reports..............................B-22
Section 14.7 Tax Returns..........................................B-22
Section 14.8 Governmental Reports.................................B-23
Section 14.9 Maintenance of Suitability Records...................B-23
15. RIGHTS, AUTHORITY, POWERS AND RESPONSIBILITIES
OF THE MANAGER.................................................B-23
Section 15.1 Services of the Manager..............................B-23
Section 15.2 Authority of the Manager.............................B-23
Section 15.3 General Powers and Fiduciary Duty....................B-26
Section 15.4 Limitations on General Partner's Authority...........B-26
Section 15.5 Limitation on Manager's Liability....................B-29
Section 15.6 Tax Matters Partner..................................B-29
Section 15.7 Minimum Investment in Equipment /Maximum Front-End
Fees.................................................B-29
Section 15.8 Reliance on Manager's Authority......................B-30
iii
<PAGE>
16. RIGHTS, POWERS AND VOTING RIGHTS OF THE MEMBERS......................B-31
Section 16.1 Limitation on Member Authority.......................B-31
Section 16.2 Voting Rights........................................B-31
Section 16.3 Voting Procedures....................................B-31
Section 16.4 Limitations on Member Rights.........................B-32
Section 16.5 Limitations on Power to Amend Agreement..............B-33
Section 16.6 Member List..........................................B-33
Section 16.7 Dissenters' Rights and Limitations on Mergers and
Roll-ups.............................................B-33
17. TERMINATION OF A MANAGER AND TRANSFER OF A
MANAGER'S INTEREST.................................................B-34
Section 17.1 Removal or Withdrawal................................B-34
Section 17.2 Other Terminating Events.............................B-34
Section 17.3 Election of Successor Manager; Continuation of Fund
Business.............................................B-35
Section 17.4 Admission of Successor or Additional Manager.........B-35
Section 17.5 Effect of a Terminating Event........................B-35
Section 17.6 Election of Additional Manager.......................B-36
Section 17.7 Assignment of General Partner's Interest.............B-36
Section 17.8 Members' Participation in Manager's Bankruptcy.......B-36
18. CERTAIN TRANSACTIONS.................................................B-36
19. TERMINATION AND DISSOLUTION OF THE FUND..............................B-37
Section 19.1 Termination and Dissolution..........................B-37
Section 19.2 Accounting and Liquidation...........................B-37
20. SPECIAL POWER OF ATTORNEY............................................B-38
Section 20.1 Execution of Power of Attorney.......................B-38
Section 20.2 Special Power of Attorney............................B-38
21. INDEMNIFICATION......................................................B-39
Section 21.1 Indemnification of the Manager.......................B-39
Section 21.2 Limitations on Indemnification.......................B-39
Section 21.3 Insurance............................................B-39
22. MISCELLANEOUS........................................................B-40
Section 22.1 Counterparts.........................................B-40
Section 22.2 Successors and Assigns...............................B-40
Section 22.3 Severability.........................................B-40
Section 22.4 Notices..............................................B-40
Section 22.5 Captions.............................................B-40
Section 22.6 Number and Pronouns..................................B-40
Section 22.7 Manager Address......................................B-40
Section 22.8 Member Address.......................................B-40
Section 22.9 Construction.........................................B-40
Section 22.10 Qualification to Do Business.........................B-41
iv
<PAGE>
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF ATEL CAPITAL EQUIPMENT FUND VIII, LLC
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (the "Agreement"), entered
into as of the 31st day of July, 1998, by and between ATEL Financial Corporation
("ATEL"), a California Corporation, as the Managing Member (the "Manager"), and
Eliza Cash and Linda Batt as the initial Members, whereby the parties together
agree to form a limited liability company pursuant to the California Limited
Liability Company Act, as set forth below:
1. NAME AND PRINCIPAL PLACE OF BUSINESS
The name of the Fund shall be ATEL Capital Equipment Fund VIII, LLC or
such other name as the Manager shall hereafter designate in writing to the
Members. The Fund's principal place of business shall be 235 Pine Street, 6th
Floor, San Francisco, California 94104, or such other place or places in the
State of California as the Manager may hereafter determine.
2. DEFINITIONS
The following terms used in this Agreement shall (unless otherwise
expressly provided herein or unless the context otherwise requires) have the
following respective meanings:
"Acquisition Expenses" shall mean expenses including, but not limited
to, legal fees and expenses, travel and communication expenses, costs of
appraisals, accounting fees and expenses, and miscellaneous expenses relating to
selection and acquisition of Equipment, whether or not acquired.
"Acquisition Fees" shall mean the total of all fees and commissions
paid by any party in connection with the initial purchase or manufacture of
Equipment. Included in the computation of such fees or commissions shall be any
commission, selection fee, financing fee, nonrecurring management fee, or any
fee of a similar nature, however designated.
"Adjusted Capital Account Deficit" shall mean, with respect to any
Member, the deficit balance if any, in such Member's Capital Account as of the
end of the Fund taxable year, after giving effect to the following adjustments:
(a) Crediting to such Capital Account any amounts which such Member is obligated
to restore or is deemed to be obligated to restore pursuant to Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (b) Debiting from such Capital
Account the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4),(5)
and (6). This definition is intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.
"Adjusted Invested Capital" shall mean, as of any date, the Original
Invested Capital attributable to the Units held by any Person on or before such
date, as decreased (but not below zero) by the amount which (i) all
Distributions from Cash from Operations and Cash from Sales and Refinancing with
respect to such Units on or before the date of determination pursuant to any
provision of this Agreement exceed (ii) the Priority Distribution attributable
to such Units for such period.
B-1
<PAGE>
"Affiliate" of a Person shall mean (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling 10% or more of the outstanding voting
securities or beneficial interests of such Person, (iii) any officer, director,
trustee or partner of such Person and (iv) if such Person is an officer,
director, trustee, partner or holder of 10% or more of the voting securities or
beneficial interests of such Person, any other company for which such Person
acts in such capacity. However, such term shall not include a Person who is a
partner in a partnership or joint venture with the Fund if such Person is not
otherwise an Affiliate.
"Asset Management Fee" shall mean the fee payable to the Manager and
its Affiliates under the provisions of Section 8.2 of this Agreement.
"Asset Management Fee Limit" means the total fees calculated pursuant
to the alternative fee schedule set forth under Section 8.3 of this Agreement,
equal to the aggregate of an Equipment Management Fee, Incentive Management Fee,
and Equipment Resale/Re-Leasing Fee, plus the Manager's Carried Interest,
determined in the manner described herein.
"Assignee" shall mean a Person who has acquired a beneficial interest
in one or more Units from a third party but who is neither a substituted Holder
nor an Assignee of Record.
"Assignee of Record" shall mean an Assignee who has acquired a
beneficial interest in one or more Units whose ownership has been recorded on
the books of the Fund and which ownership is the subject of a written instrument
of assignment, the effective date of which assignment has passed.
"ATEL" shall mean ATEL Financial Corporation, a California corporation.
"California Act" or "California Limited Liability Company Act" shall
mean the Beverly-Killea Limited Liability Company Act, Title 2.5, Chapters 1-15,
of the California Corporations Code, as it may be amended from time to time.
"Capital Account" shall mean, with respect to any Member, such Member's
Capital Account determined in accordance with Section 6.7.
"Carried Interest" shall mean the allocable share of Fund Distributions
of Cash from Operations and Cash from Sales or Refinancing payable to the
Manager, as Manager, pursuant to Sections 10.4 and 10.5 of this Agreement.
"Cash from Operations" shall mean the excess of Gross Revenues over
cash disbursements (including the Asset Management Fee and amounts reinvested by
the Fund in Equipment in compliance with Section 15.4.18) without reduction for
depreciation and amortization of intangibles such as organization and
underwriting costs but after a reasonable allowance for cash for repairs,
replacements, contingencies and anticipated obligations, as determined by the
General Partner. Cash from Operations shall not include Cash from Sales or
Refinancing or Cash from Reserve Account.
"Cash from Reserve Account" shall mean that portion of the Net Proceeds
not utilized in the acquisition of Equipment, including cash maintained
according to the provisions of Section 9.4.
"Cash from Sales or Refinancing" shall mean the net cash realized by
the Fund from the sale, refinancing or other disposition of any Equipment
(including insurance proceeds or lessee indemnity
B-2
<PAGE>
payments arising from the loss or destruction of any Equipment through casualty)
after payment of all expenses related to the transaction; provided, however that
Cash from Sales or Refinancing shall not include Cash from Reserve Account or
Cash from Operations.
"Closing Date" shall mean such date designated by the Manager for the
termination of the offering of Units, but not later than ______________, 2000.
Extension of the offering beyond one year from the date of the Prospectus shall
be subject to the qualification of the offering for any such extension in those
jurisdictions which may limit the offering period to one year. "Initial Closing
Date" shall mean the date on which subscribers for Units, other than the initial
Holders, are first admitted to the Fund as Holders. "Final Closing Date" shall
mean the last date on which subscribers for Units are admitted to the Fund as
Holders.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent federal revenue laws.
"Distributions" shall mean any cash, tax credits or other property
allocated to or distributed to Holders and the Manager arising from their
respective interests in the Fund, but shall not include any compensation payable
to the Manager under the provisions of Article 8 or Article 9, except as
otherwise provided herein.
"ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended.
"Equipment" shall mean the equipment acquired and owned by the Fund to
be leased by the Fund to others as well as any Fund interest in equipment,
including without limitation its rights, whether direct or indirect, in all
trusts, joint ventures, leases, chattel paper, options and other contract rights
with respect to equipment.
"Equipment Management Fee" shall mean an element of the alternative fee
schedule calculation to determine the Asset Management Fee Limit under the
provisions of Section 8.3 of this Agreement as provided therein.
"Equipment Re-lease Fee" shall mean an element of the alternative fee
schedule calculation to determine the Asset Management Fee Limit under the
provisions of Section 8.3 of this Agreement as provided therein.
"Equipment Resale Fee" shall mean an element of the alternative fee
schedule calculation to determine the Asset Management Fee Limit under the
provisions of Section 8.3 of this Agreement as provided therein.
"Front-End Fees" shall mean fees and expenses paid by any party for any
services rendered during the Fund's organization and acquisition phase including
Organization and Offering Expenses, Leasing Fees, Acquisition Fees, Acquisition
Expenses, and any other similar fees, however designated. Notwithstanding the
foregoing, Front-End Fees shall not include any Acquisition Fees or Acquisition
Expenses paid by a manufacturer of Equipment to any of its employees unless such
Persons are Affiliates of the Manager.
"Full Payout Lease" shall mean a lease under which the non-cancellable
rental payments due during the initial term of the lease are at least sufficient
to cover the purchase price of the Equipment
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leased.
"Fund" shall mean the limited liability company created under this
Agreement.
"Fund Minimum Gain" shall have the meaning ascribed to the term
"partnership minimum gain" in Regulations Section 1.704-2(d)(1).
"Gross Income" shall mean the gross income of the Fund within the
meaning of section 61(a) of the Code.
"Gross Proceeds" shall mean the aggregate total of the Original
Invested Capital of the initial and all of the additional Holders.
"Gross Lease Revenues" shall mean all revenues from the operation and
lease of the Equipment other than from security deposits paid by lessees
thereof. The term "Gross Lease Revenues" shall not include revenues from the
sale, refinancing or other disposition of Equipment.
"High Payout Lease" shall mean a lease under which the noncancellable
rental payments and other payment obligations of the lessee due through the
initial term of the lease are equal to at least 90% of the original purchase
price paid by the Fund for the Equipment.
"Holders" shall mean owners of Units who are either Members or
Assignees of Record, and reference to a "Holder" shall be to any one of them.
The Manager shall not be considered to be a Holder except to the extent it also
owns Units.
"Incentive Management Fee" shall mean an element of the alternative fee
schedule calculation to determine the Asset Management Fee Limit under the
provisions of Section 8.3 of the Operating Agreement as provided therein.
"Independent Expert" shall mean a person with no current material or
prior business or personal relationship with the Manager or any of its
Affiliates who is engaged to a substantial extent in the business of rendering
opinions regarding the value of assets of the type held by the Fund, and who is
qualified to perform such work.
"IRA" shall mean an individual retirement account qualifying under
Section 408 of the Code.
"Investment in Equipment" shall mean the amount of Gross Proceeds
actually paid or allocated to the purchase of Equipment acquired by the Fund,
any amount of Gross Proceeds reserved pursuant to Section 9.4 hereof up to a
maximum of 3% of Gross Proceeds and other cash payments such as interest and
taxes, but excluding Front-End Fees.
"Leasing Fees" shall mean the total of all fees and commissions paid by
any party in connection with the initial lease of equipment acquired by the
Fund.
"Manager" or "Managing Member" shall mean ATEL Financial Corporation
("ATEL"), a California corporation, or any other Person or Persons which succeed
it in such capacity.
"Members" shall mean the Manager, the initial Members and any other
Persons who are admitted
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to the Fund as additional or substituted Members. Reference to a "Member"
shall refer to any one of them.
"Member Nonrecourse Debt" has the meaning ascribed to the term "partner
nonrecourse debt" in Regulations Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" shall have the meaning ascribed
to the term "partner nonrecourse debt minimum gain" in Regulations Sections
1.704-2(i)(2).
"Net Income" or "Net Loss" shall mean the taxable income or taxable
loss of the Fund (including the Fund's share of income or loss of any
partnership, venture or other entity which owns a particular item of Equipment),
as determined for federal income tax purposes, computed by taking into account
each item of Fund income, gain, loss, deduction or credit not already included
in the computation of taxable income and taxable loss.
"Net Lease Provisions" shall mean contractual arrangements under which
the lessee assumes responsibility for, and bears the cost of, insurance, taxes,
maintenance, repair and operation of the leased asset and where non-cancellable
rental payments under the lease are absolutely net to the lessor,
notwithstanding that some minor costs or responsibilities remain with the Fund
as lessor or that the Fund retains the option to require and pay for a higher
standard of care or greater level of maintenance or insurance than would be
imposed on the lessee under the terms of the lease.
"Net Proceeds" shall mean the total Gross Proceeds less Organization
and Offering Expenses.
"Nonrecourse Deductions" shall mean items of Fund loss, deductions or
Code Section 705(a)(2)(B) expenditures which are attributable to Nonrecourse
Liabilities.
"Nonrecourse Liability" means a Fund liability with respect to which no
Member or Related Person bears the economic risk of loss.
"Operating Agreement" or "Agreement" shall mean this Limited Liability
Company Operating Agreement of ATEL Capital Equipment Fund VIII, LLC, as it may
be amended from time to time.
"Operating Lease" shall mean a lease under which the aggregate rental
payments due during the initial term of the lease are less than the purchase
price of the Equipment leased.
"Operating Revenues" means the total for any period of all Gross Lease
Revenues plus all Cash from Sales or Refinancing.
"Organization and Offering Expenses" shall mean those expenses incurred
in connection with preparing the Fund for registration and subsequently offering
and distributing Units to the public, including selling commissions and all
advertising expenses except advertising expenses related to the leasing of
Equipment.
"Original Invested Capital" shall mean the amount in cash contributed
by each Partner to the capital of the Fund for his interest in the Fund, which
amount shall be attributed to Units in the hands of a subsequent Holder.
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"Person" shall mean any natural person, partnership, corporation,
association or other legal entity.
"Priority Distribution" shall mean a hypothetical amount determined
solely for purposes of the alternative fee schedule calculation to determine the
Asset Management Fee Limit under the provisions of Section 8.3 of this
Agreement. Such amount will equal, for any calendar year or other period with
respect to the Units held by any Person, the average Adjusted Invested Capital
with respect to such Units during such period multiplied by 10% per annum
(calculated on a cumulative basis, compounded daily, from the last day of the
calendar quarter in which the capital contribution of the initial purchaser of
such Units was received by the Fund and pro rated for any fraction of a calendar
year for which such calculation is made).
"Prospectus" shall mean the final prospectus filed in connection with
the registration of the Units with the Securities and Exchange Commission on
Form S-1, as amended, together with any supplement thereto which may be
subsequently filed with such Commission.
"Purchase Price of Equipment" shall mean the price paid upon the
purchase or sale of a particular item of equipment, including the amount of
Acquisition Fees and all liens and mortgages on the equipment, but excluding
points and prepaid interest.
"Qualified Plan" shall mean employee trusts (or employer individual
retirement accounts), Keogh Plans and corporate retirement plans qualifying
under Section 401(a) of the Code.
"Regulations" shall mean the income tax regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Reimbursable Administrative Expenses" shall mean the ordinary
recurring administration expenses incurred by the Manager and reimbursed by the
Fund. Such expenses shall not include interest, depreciation, equipment
maintenance or repair, third party services or other non-administrative
expenses.
"Reinvestment Period" shall mean the period commencing with the Initial
Closing Date and ending on a date 72 months after the last day of the fiscal
year during which the Final Closing Date occurs.
"Related Person" means a Person having a relationship with a Member
that is described in Regulations Section 1.752-4(b).
"Resident Alien" shall mean a resident alien as defined within the
Federal Aviation Act of 1958, as amended from time to time, or any successor
statute, or any regulations adopted pursuant to such Act or any successor
statute.
"Roll-Up" shall mean a transaction involving the acquisition, merger,
conversion or consolidation, either directly or indirectly, of the Fund and the
issuance of securities of a Roll-Up Entity.
Such term does not include:
(a) any transaction if the securities of the Fund have been for at
least twelve months traded through the National Association of Securities
Dealers, Inc. Automated Quotation National Market
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System; or
(b) a transaction involving the conversion to corporate, trust or
association form of only the Fund, if, as a consequence of the transaction,
there will be no significant adverse change in any of the following:
(i) the Members voting rights;
(ii) the term of existence of the Fund;
(iii) the terms of compensation of the Manager
and its Affiliates; or
(iv) the Fund's investment objectives.
"Roll-Up Entity" means the partnership, trust, corporation or other
entity that would be created or would survive after the successful completion of
a proposed Roll-Up transaction.
"Service" shall mean the United States Internal Revenue Service or its
successor.
"Sponsor" shall mean any Person directly or indirectly instrumental in
organizing, wholly or in part, a Program or any Person who will manage or
participate in the management of a Program, and any Affiliate of any such
Person. Sponsor does not include the Program itself or a Person whose only
relation with the Program is that of an independent equipment manager and whose
only compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants and underwriters whose only compensation
is for professional services rendered in connection with the offering of Program
interests.
"Substantially All of the Assets" shall mean, unless the context
otherwise dictates, Equipment representing 66 2/3% or more of the net book value
of all Equipment as of the end of the most recently completed fiscal quarter.
"Unit" shall mean the interest in the Fund representing Original
Invested Capital in the amount of $10 and shall entitle the Holder thereof to
the rights herein provided.
"United States Citizen" shall mean a "citizen of the United States" as
defined within the Federal Aviation Act of 1958, as amended from time to time,
or any successor statute, or any regulations adopted pursuant to such Act or any
successor statue.
3. BUSINESS AND PURPOSE
The primary purpose of the Fund is to purchase, own, lease and sell
various types of Equipment pursuant to such arrangements as the Manager in its
discretion may enter into on behalf of the Fund. The Fund may enter into
ventures, partnerships and other business arrangements with respect to Equipment
to the extent deemed prudent by the Manager in order to achieve successful
operations for the Fund, subject to the provisions of Section 15.4.8. The Fund
may also engage in such other lawful activities as may be deemed by the Manager
to be incident to its primary purpose or prudent and in the Fund's best
interest. The Fund's investment objectives shall be those set forth in the
Prospectus, and the Manager may not make any material change to such investment
objectives without first obtaining the written consent or approval of Members
owning more than 50% of the total outstanding Units entitled to vote.
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4. TERM
The Fund commenced as of the ___ day of July 1998 and shall continue
until the 31st day of December, 2019, unless previously terminated in accordance
with the provisions of this Agreement.
5. MANAGER
5.1 The Manager has contributed $100 in cash to the Fund and at all
times during the existence of the Fund the Manager shall have a present and
continuing interest in Net Income, Net Losses and Distributions according to the
provisions of Article 10.
5.2 In the event that, immediately prior to the dissolution of the Fund
referred to in Article 19, the Manager shall have a deficiency in its Capital
Account as determined in accordance with generally accepted accounting
principles, then the Manager shall contribute in cash to the capital of the Fund
an amount equal to the lesser of (a) the deficiency in the Manager's Capital
Account or (b) 1.01% of the Original Invested Capital which has not been
returned pursuant to Section 10.12. This Section 5.2 is intended to comply with
Regulation Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such regulation.
6. INITIAL AND ADDITIONAL MEMBERS
6.1 Initial Members. Linda Batt and Eliza Cash, as the initial Members,
have each contributed the sum of $250 to the capital of the Fund and each has
received 25 Units in return therefor.
6.2 Additional Members. The Fund intends to sell and issue to Holders
not less than 120,000 nor more than 15,000,000 additional Units and to admit as
additional Members the Persons who contribute cash to the capital of the Fund
for such Units.
6.3 Conditions to Admission. Subject to the provisions of Section 6.6,
each Person who acquires any such additional Units shall become a Member in the
Fund at such time as he has: (i) purchased 250 or more Units (200 Units in case
of an IRA or Keogh Plan), (ii) contributed the sum of $10 in cash for each Unit
purchased (or such lesser net amount as may be provided in accordance with the
terms described in the Prospectus under "Plan of Distribution"), (iii) executed
and filed with the Fund a written instrument which sets forth an intention to
become a Member and requests admission to the Fund in that capacity, together
with such other instruments as the Manager may deem necessary or desirable to
effect such admission, including the written acceptance and adoption by such
Person of the provisions of this Agreement, and the execution, acknowledgment
and delivery to the Manager of a special power of attorney, the form, style and
content of which are more fully described herein, and (iv) the Manager accepts
such Person as a Member in the Fund.
6.4 Admission as a Member. Each Person who subscribes for Units under
Section 6.2 shall be admitted to the Fund promptly after the Manager's
acceptance of such subscription, but, except as provided in Section 6.6, in no
event later than 30 days after the receipt by the Fund of such subscription.
6.5 Limitation on Additional Issuance. The Fund shall not issue any
additional Units after the Final Closing Date.
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6.6 Escrow. All Original Invested Capital of Holders shall be received
by the Fund in trust, and shall be deposited in an escrow account with a banking
institution designated by the Manager as escrow holder for the Original Invested
Capital, until such time as subscriptions for a total of 120,000 Units, in
addition to the Unit purchased by the initial Holder, representing Original
Invested Capital of $1,200,000 have been deposited therein. Not less than 15
days after receipt of a minimum of $1,200,000 of such additional Original
Invested Capital, the Fund will admit subscribers into the Fund as additional
Holders. At the time a subscriber is admitted as a Holder, the escrow holder
shall transfer the subscriber's Original Invested Capital to the Fund. If the
$1,200,000 minimum is not obtained on or before a date one year from the date of
the Prospectus, all Original Invested Capital will be promptly refunded to the
investors. In any event, any interest earned on Original Invested Capital while
in escrow shall be paid to investors.
6.7 Capital Account. An individual Capital Account shall be maintained
for each Member. The Capital Account of a Member shall consist of the Original
Invested Capital of such Member, increased by (i) any additional contributions
to capital and (ii) such Member's share of Fund Net Income, and decreased by (i)
Distributions to such Member and (ii) such Member's share of Fund Net Loss. In
the event a Member transfers all or a portion of his Units, the Assignee shall
succeed to the Capital Account of the transferor (as adjusted for all events
preceding the date the transferee is deemed admitted to the Fund under Section
10.3.1) according to the number of Units, and the allocable portion of the
transferor's Capital Account, so transferred. No Holder shall have the
obligation to restore any deficit in his Capital Account upon termination or
dissolution of the Fund. The foregoing provisions of this Section 6.7 are
intended to comply with Regulation Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations.
7. LIABILITY AND STATUS OF MEMBERS
Holders shall not be bound by, or be personally liable for, the
expenses, liabilities or obligations of the Fund, except to the extent, but only
to the extent, a Holder would be required to return any Distribution from the
Fund pursuant to Section 17254(e) of the California Act.
8. COMPENSATION TO THE MANAGER AND/OR AFFILIATES
8.1 General Limitation. The Manager and its Affiliates shall receive
compensation only as specified by this Agreement. In addition to the
compensation provided herein, the Manager will hold the Carried Interest and be
entitled to receive Distributions as provided in Article 10, and receive
reimbursement of costs and expenses advanced as provided in Article 9. The
Manager may delegate to its Affiliates all or a portion of its management duties
hereunder, as described in the Prospectus, and may assign all or a portion of
its compensation hereunder to one or more such Affiliates or other parties in
its discretion.
8.2 Asset Management Fee. The Fund will pay the Manager an Asset
Management Fee in an amount equal to 4.5% of Operating Revenues as compensation
for the Manager's services in establishing and supervising management of the
Fund's portfolio of Equipment and its operations. The Asset Management fee will
be paid on a monthly basis. The amount of the Asset Management Fee payable in
any year will be reduced for that year to the extent it would otherwise exceed
the Asset Management Fee Limit.
8.3 Asset Management Fee Limit. The Asset Management Fee Limit will be
calculated each year during the Fund's term by calculating the total fees that
would be paid to the Manager for the year in
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question if the Manager were to be compensated on the basis of an alternative
fee schedule, to include an Equipment Management Fee, Incentive Management Fee,
and Equipment Resale/Re-Leasing Fee, together with the Carried Interest, as
provided herein. To the extent that the total amount paid to the Manager for the
year as the Asset Management Fee and the Carried Interest would exceed the
aggregate amount of fees that would have been payable as calculated under this
alternative fee schedule for that year, the Asset Management Fee for that year
will be reduced to equal the maximum aggregate fees under the alternative fee
schedule. The limitations set forth in this Section 8.3 will be subject to
adjustment pursuant to the limitations imposed under Section 15.7 relating to
the Minimum Investment in Equipment. Under Section 15.7, a separate calculation
will be performed upon completion of the offering of Units, final commitment of
Net Proceeds to acquisition of Equipment and establishment of final levels of
permanent portfolio debt encumbering such Equipment, and then annually
thereafter. To the extent required under the provisions of Section 15.7, the
alternative fee schedule set forth below will first be adjusted as provided
therein. Thereafter, the Asset Fee Limitation, using the alternative fee
schedule as so adjusted, will be imposed under this Section 8.3 and applied to
the total Asset Management Fee and Carried Interest for the year. The
alternative fee schedule to be used for calculating the Asset Management Fee
Limit shall include:
8.3.1 An Equipment Management Fee calculated for each fiscal
quarter and in an amount equal to (i) 3.5% of the Gross Lease Revenues from
Operating Leases, except that if the services are performed by nonaffiliated
Persons under the active supervision of the Manager or its Affiliate, then the
amount payable to the Manager or such Affiliate shall be 1% of the Gross
Revenues from such Operating Leases, and (ii) 2% of Gross Revenues from Full
Payout Leases which contain Net Lease Provisions;
8.3.2 An Equipment Resale/Re-Leasing Fee calculated in an
amount equal to the following: for resale services, the lesser of (i) 3% of the
sales price of the Equipment, or (ii) one-half the normal competitive equipment
sale commission charged by unaffiliated parties for such services, but in either
case payable only after the Holders have received a return of their Original
Invested Capital plus a Priority Distribution; plus, for re-leasing services, an
amount equal to the lesser of (i) the competitive rate for comparable services
for similar equipment, or (ii) 2% of gross rental payments derived from the
re-lease of such Equipment after the time the re-lease is consummated as a
result of the recipient's efforts, payable as each rental payment is received by
the Fund over the term of the re-lease. No such re-lease fee will be calculated
in connection with the re-lease of Equipment to a previous lessee or its
Affiliates; and such fee will be calculated only to the extent the Manager or
its Affiliates have rendered substantial re-leasing services in connection with
such re-lease;
8.3.3 An Incentive Management Fee will be calculated in an
amount equal to (i) 4% of all Distributions of Cash from Operations until such
time as the Holders have received aggregate Distributions in an amount equal to
their Original Invested Capital plus a Priority Distribution, and (ii)
thereafter, in an amount equal to 7.5% of all Distributions of Cash from
Operations and Cash from Sales or Refinancing. For the purposes of calculating
the Incentive Management Fee for any period during which the Fund has available
both Cash from Operations and Cash from Sales or Refinancing, Distributions to
Holders shall first be treated as consisting of Cash from Operations unless
specifically designated otherwise by the Manager; and
8.3.4 The alternative fee schedule will include the Carried
Interest in Distributions provided in Article 10.
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8.4 Other Services. Except as set forth in this Article 8 and Article 9
hereof, no other services may be performed by the Manager or its Affiliates for
the Fund except in extraordinary circumstances (which shall be defined as an
emergency situation requiring immediate action by the Manager or its Affiliate
and the service is not immediately available from an unaffiliated party). Any
such other services must meet the following criteria: (i) the compensation,
price or fee therefor must be comparable and competitive with the compensation,
price or fee of any other Person who is rendering comparable services or selling
or leasing comparable goods which could reasonably be made available to the Fund
and shall be on competitive terms, (ii) the fees and other terms of the contract
shall be fully disclosed to Holders, (iii) the Manager or its Affiliates must be
previously engaged in the business of rendering such services or selling or
leasing such goods, independently of the Fund and as an ordinary and ongoing
business and at least 75% of such Person's gross revenues from such activity
must be derived from other than Affiliates of the Manager, and (iv) all services
for which the Manager or its Affiliates are to receive compensation shall be
embodied in a written contract which precisely describes the services to be
rendered and all compensation to be paid, which contract may only be modified by
a vote of the majority of the Holders. Said contract shall contain a clause
allowing termination without penalty on 60 days notice.
8.5 Payment of Fees on Removal. Should the Manager be removed from the
Fund according to provisions of Article 17, any portion of any fee payable to
the Manager according to the provisions of this Article 8 which is then accrued
and due, but not yet paid, shall be paid by the Fund to the Manager in cash
within 30 days of the date of expulsion as stated in the written notice of
expulsion.
8.6 Employment of Broker-Dealers. The Fund may employ underwriters and
selected broker-dealers, including Affiliates of the Manager as set forth in the
Prospectus, for the sale of Units.
9. FUND EXPENSES AND RESERVES
9.1 Reimbursement of Manager. Except as set forth in this Article 9,
all of the Fund's expenses shall be billed directly to and paid by the Fund. The
Manager and its Affiliates may be reimbursed for the following Fund expenses:
(i) Organization and Offering Expenses not in excess of 15% of Gross Proceeds up
to $25,000,000 plus 14% of all Gross Proceeds in excess of $25,000,000 (or an
amount equal to 12% of the Gross Proceeds if, upon termination of the offering
of Units, the total Gross Proceeds are in an amount less than $2,000,000); (ii)
the actual cost of goods and materials used for and by the Fund and obtained
from entities unaffiliated with the Manager; and (iii) administrative services
necessary to the prudent operation of the Fund, provided that such reimbursement
for administrative services will be at the lower of (A) the actual cost of such
services, or (B) the amount which the Fund would be required to pay independent
parties for comparable administrative services in the same geographic location;
provided further that, beginning with the first full year after the termination
of the offering of Units, the total amount of Reimbursable Administrative
Expenses payable by the Fund for the remainder of its term may not exceed a
cumulative limit. This cumulative limit on such Reimbursable Administrative
Expenses will equal, as of any date, a maximum of (i) 0.5% of the Gross Proceeds
per annum if the total Gross Proceeds are at least 90% of the maximum Gross
Proceeds; (ii) 0.75% of the Gross Proceeds per annum if the total Gross Proceeds
are at least 75%, but less than 90%, of the maximum Gross Proceeds; and (iii) 1%
of the Gross Proceeds per annum if the total Gross Proceeds are less than 75% of
the maximum Gross Proceeds. In addition, beginning with the first full year
after the termination of the offering of Units, the maximum amount of
Reimbursable Administrative Expenses payable by the Fund for any single year
shall be limited to an amount equal to 1% of the Gross Proceeds.
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9.2 Limitation on Reimbursement. The Manager and its Affiliates will
not be reimbursed by the Fund for the following expenses:
9.2.1 Services for which the Manager or its Affiliates are
entitled to compensation in the form of a separate fee pursuant to Article 8
hereof;
9.2.2 Rent or depreciation, utilities or capital equipment and
other administrative items of the Sponsor;
9.2.3 Salaries, fringe benefits, travel expenses or
administrative items incurred by or allocated to any Controlling Person of the
Manager or its Affiliates. For purposes of this subparagraph, "Controlling
Person" shall mean any person, regardless of title, who performs executive or
senior management functions for the Manager or its Affiliates similar to those
of executive management or senior management, and directors, or those holding 5%
or more equity interest in the Manager or its Affiliates; or persons having the
power to direct or cause the direction of the Manager or Affiliates through
ownership of voting securities, by contract or otherwise. It is not intended
that every person who carries a title such as vice president, senior vice
president, secretary, controller or treasurer be considered a Controlling
Person;
9.2.4 Organization and Offering Expenses of the Fund to the
extent such Organization and Offering Expenses exceed 15% of the Gross Proceeds
up to $25,000,000 plus 14% of all Gross Proceeds in excess of $25,000,000 (or an
amount equal to 12% of the Gross Proceeds if, upon termination of the offering
of Units, the total Gross Proceeds are in an amount less than $2,000,000), and
the Manager guarantees payment of any such excess expenses, which guarantee is
without recourse to, or reimbursement by, the Fund; and
9.2.5 All other expenses which are unrelated to the business
of the Fund.
9.3 Fund Expenses. Subject to Sections 9.1 and 9.2, the Fund shall pay
all expenses of the Fund which may include, but are not limited to: (i) all
costs of personnel employed by the Fund and involved in the business of the Fund
(which may include personnel who are employed by a Manager or one or more
Affiliates), (ii) all taxes and assessments on Equipment and other taxes
applicable to the Fund, (iii) legal, appraisal, audit, accounting, brokerage and
other fees, (iv) printing, engraving and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, registration and recording
of documents evidencing ownership of an interest in the Fund or in connection
with the business of the Fund, (v) fees and expenses paid to independent
contractors, brokers and servicers, leasing agents, consultants, equipment lease
brokers, insurance brokers and other agents, (vi) expenses in connection with
the acquisition, disposition, replacement, alteration, repair, leasing and
operation of Equipment (including the costs and expenses of insurance premiums,
equipment lease brokerage and leasing commissions and of maintenance of such
Equipment), (vii) the cost of insurance as required in connection with the
business of the Fund, (viii) expenses of organizing, revising, amending,
converting, modifying or terminating the Fund, (ix) the cost of preparation and
dissemination of the informational material and documentation relating to
potential sale or other disposition of Equipment, (x) costs incurred in
connection with any litigation in which the Fund is involved, as well as the
examination, investigation or other proceedings conducted by any regulatory
agency, including legal and accounting fees incurred in connection therewith,
(xi) costs of any computer equipment or services used for or by the Fund, (xii)
costs of any accounting, or statistical bookkeeping equipment necessary for the
maintenance of the books and records of the Fund, and (xiii) the costs of
supervision and expenses of professionals
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employed by the Fund in connection with any of the foregoing, including
attorneys, accountants and appraisers; provided, however, that the cost of any
services relating to items (vi) or (vii) above must either be attributable to
services performed by Persons other than the Manager or its Affiliates, be
compensated by a specific fee described in Article 8 (and thus would not be
reimbursable by the Fund, as provided in Section 9.2.1) or comply with the
requirements for compensation for "other services" as provided in Section 8.3.5.
9.4 Reserves. The Fund shall initially establish a cash reserve for
general working capital purposes in an amount equal to at least one-half of 1%
of the Gross Proceeds. Upon the disposition of each item of Equipment, any cash
reserve which was specifically allocated to that Equipment need not be
maintained thereafter, but may be applied as reserves for other Equipment. Any
cash reserve used as aforesaid need not be restored and if restored, may be
restored out of Gross Lease Revenues.
10. ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS
10.1 Allocation of Net Income and Net Loss Prior to Initial Closing
Date. From the commencement of the Fund until the Initial Closing Date Net
Income and Net Loss shall be allocated 99% to the Manager and 1% to the initial
Holders.
10.2 Allocation of Net Income and Net Loss After Initial Closing Date.
10.2.1 Commencing with the Initial Closing Date, Net Income
and Net Loss shall be allocated 92.5% to the Holders and 7.5% to the Manager.
10.2.2 Notwithstanding Section 10.2.1 of this Agreement, items
of Net Loss arising out of the Fund's payment of expenditures classified as
syndication expenses pursuant to Regulations section 1.709-2(b) with respect to
each Unit shall be specially allocated to the Holder who acquires such Unit.
10.3 Special Allocations
10.3.1 Except as provided in section 10.3.2, Net Income, Net
Loss and Distributions allocable to the Holders shall be determined on a
quarterly basis and shall be allocated among the Holders in the ratio in which
the number of Units held by each of them bears to the total number of Units held
by all Holders as of the last day of the fiscal quarter with respect to which
such Net Income, Net Loss and Distributions are attributable; provided, however,
that, with respect to Net Income, Net Loss and Distributions attributable to the
offering period of the Units (including the full quarter in which the offering
terminates), such Net Income, Net Loss and Distributions shall be apportioned
among the Holders in the ratio in which (i) the number of Units held by each
Holder multiplied by the number of days during such period that such Holder was
the owner of such Units bears to (ii) the amount obtained by totaling the number
of Units outstanding on each day during such period. No Net Income, Net Loss or
Distributions with respect to any quarter shall be allocated to Units
repurchased by the Fund during such quarter, and such Units shall not be deemed
to have been outstanding during such quarter for purposes of the foregoing
allocations.
10.3.2 Notwithstanding anything in this Agreement to the
contrary, the following items of Fund income and loss shall be specially
allocated to the Members in the manner described below:
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(i) Gain characterized as recapture income under Sections 1245
or 1250 of the Code shall be allocated to those Members who
claimed the deductions giving rise to such recapture income.
(ii) Except as provided in Section 10.3.2(iii)and 10.3.2(iv),
in the event any Member unexpectedly receives any adjustments,
allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations or any
other event creates an Adjusted Capital Account Deficit for
such Member, items of Fund gross income and gain (consisting
of a pro rata portion of each item of the Fund's income,
including gross income, and gain for such year) shall be
allocated to such Member in an amount and manner sufficient to
eliminate, to the extent required by Regulations, the Adjusted
Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible. This
Section 10.3.2(ii) is intended to comply with the qualified
income offset requirement in Section 1.704-1(b)(2)(ii)(d) of
the Regulations and shall be interpreted consistently
therewith.
(iii) If there is a net decrease in Member Nonrecourse Debt
Minimum Gain, each Member with a share of the Member
Nonrecourse Debt Minimum Gain (as determined in accordance
with Regulations Section 1.704-2(i)(5)) shall be specially
allocated items of Fund income and gain for such year (and, if
necessary, subsequent years) in proportion to, and to the
extent of, an amount equal to the portion of such Member's
share of the net decrease in Member Nonrecourse Debt Minimum
Gain during such year. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-
2(i)(4). This Section 10.3.2(iii) is intended to comply with
the minimum gain chargeback requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted
consistently therewith.
(iv) If there is a net decrease in Fund Minimum Gain during
any Fund taxable year, each Member shall be specially
allocated items of Fund income and gain for such year (and, if
necessary, subsequent years) in proportion to, and to the
extent of, an amount equal to the portion of such Member's
share of the net decrease in Fund Minimum Gain during such
year (within the meaning of Section 1.704-2(g)(2) of the
Regulations). The items to be so allocated shall be determined
in accordance with Section 1.704-2(f) of the Regulations. This
Section 10.3.2(iv) is intended to comply with the minimum gain
chargeback requirement contained in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
(v) After giving effect to the allocations set forth in
Sections 10.3.2(ii), (iii) and (iv), in the event any Member
receives any actual or deemed distribution (i.e., under
section 752 of the Code) during a taxable year which exceeds
the adjusted tax basis of such Member's Units at the end of
such taxable year (determined immediately before giving effect
to such distribution), such Member shall be allocated an
amount of gross income or gain equal to such excess.
(vi) In the event any fee to which the Manager or an Affiliate
thereof is entitled is treated as a Fund distribution by the
Service, a special allocation of Fund gross income shall be
made annually to the Manager or an Affiliate thereof in an
amount equal to any such recharacterized fee for that taxable
year.
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(vii) The Manager will specifically allocate items of gain
from the sale or other disposition of items of Equipment for
any year in which the sale or disposition of any item of
Equipment occurs (and, if necessary, subsequent years) to any
Holder in such amounts and in such manner so as to equalize
the Capital Account balances of the Holders; provided,
however, that such allocations are reasonably consistent with,
and reasonably supportable under, the Code.
(viii) Net Loss shall not be allocated to any Holder if such
allocation would cause or increase an Adjusted Capital Account
Deficit for such Holder at the end of any Fund taxable year,
and any such Net Loss shall instead be allocated to the
Manager. This limitation shall be applied on a Holder by
Holder basis so as to allocate the maximum permissible Net
Loss to each Holder under Section 1.704-1(b)(2)(ii)(d) of the
Regulations.
(ix) To the extent an adjustment is made to the adjusted tax
basis of any Fund asset pursuant to Code Section 734(b) or
Code Section 743(b), the Members, Capital Accounts shall be
adjusted as provided in Regulations Section
1.704-1(b)(2)(iv)(m).
(x) Except as otherwise provided herein, Nonrecourse
Deductions shall be allocated 92.5% to the Holders and 7.5% to
the Manager.
(xi) Any deduction attributable to Member Nonrecourse Debt
shall be allocated to the Members that bear the economic risk
of loss for the Member Nonrecourse Debt.
10.4 Distribution of Cash From Operations. Cash from Operations shall
be distributed 92.5% to the Holders and 7.5% to the Manager.
10.5 Distribution of Cash From Sales or Refinancing. Cash from Sales or
Refinancing shall be distributed 92.5% to the Holders and 7.5% to the Manager.
Notwithstanding anything to the contrary herein, however, no cash
Distribution shall be made to a Holder to the extent that, after giving effect
to all allocations under sections 10.1, 10.2 and 10.3 which would accompany such
Distribution (including allocations of gross income and gain under section
10.3.2(iv)), such Distribution would exceed the tax basis of the Holder to whom
such Distribution is otherwise payable.
10.6 Distributions of Cash from Reserve Account. Distributions of Cash
from Reserve Account, if any, shall be distributed in the same manner as Cash
from Sales or Refinancing.
10.7 Determination of Amounts to be Distributed. The Manager shall have
sole discretion in determining the amount of any Distributions. Subject to
provisions of Section 15.4.18 of this Agreement, the Manager may use any funds
of the Fund not distributed to Holders to purchase additional Equipment during
the Reinvestment Period or otherwise as permitted by this Agreement; provided,
however, that the Manager will not reinvest in Equipment, but will distribute,
subject to payment of any obligations of the Fund, such available Cash from
Operations and Cash from Sales or Refinancing as may be necessary to cause total
Distributions to Holders to equal the following amounts for the specified
periods:
10.7.1 Prior to the end of the year in which the Final
Closing Date occurs, an amount
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equal to the lesser of (i) a 10% per annum noncumulative, noncompounded return
on their Original Invested Capital, or (ii) 90% of such amounts which are
available for Distributions;
10.7.2 In each of the six years after the end of the year in
which the Final Closing Date occurs, an amount equal to a noncumulative and
noncompounded return on the Holders' Original Invested Capital of 10% per annum;
and
10.7.3 Such amounts with respect to each year which are
sufficient to allow a Holder in a 31% federal income tax bracket (but not a
higher bracket) to pay the federal income taxes and state income taxes due with
respect to Net Income derived by him from the Fund for such year.
10.8 Consent to Allocations. The methods hereinabove set forth by which
Distributions and allocations of Net Income and Net Loss are made and
apportioned are hereby expressly consented to by each Member as an express
condition to becoming a Member.
10.9 Limitation on Distributions. All Distributions are subject to the
payment of Fund expenses and to maintenance and repair of Equipment.
10.10 Allocation to Manager. To the extent that the Fund shall be
entitled to any deduction for federal income tax purposes as a result of any
interest in Net Income or Net Loss granted to a Manager, such deduction shall be
allocated for federal income tax purposes to such Manager.
10.11 Return of Unused Capital. In the event that any portion of the
Net Proceeds received by the Fund during the first twelve months after the date
of the Prospectus is not invested or committed for investment within eighteen
months of the date of the Prospectus, or in the event any portion of the Net
Proceeds received by the Fund thereafter is not invested or committed for
investment within six months from the Final Closing Date (except for any amounts
used to pay Fund operating expenses, including amounts set aside for reserves as
set forth in Section 9.4), such portion of the Net Proceeds shall be distributed
to the Holders pro rata by the Fund as a return of capital. In addition, the
Manager shall contribute to the Fund, and the Fund shall distribute pro rata to
the Holders, the amount by which (x) the amount of unused capital distributed
pursuant to the foregoing sentence, divided by (y) the percentage of the Gross
Proceeds which remain after payment of all Front End Fees, exceeds the unused
capital so distributed. For the purposes of this Section 10.11, funds will be
deemed to have been committed to investment and will not be returned to the
Holders to the extent written agreements in principle or letters of
understanding were executed at any time prior to the end of said period,
regardless of whether any such investment is actually consummated, and to the
extent any funds have been reserved to make contingent payments in connection
with any Equipment, regardless of whether any such payment is actually made.
10.12 Distributions in Kind. Distributions in kind shall not be
permitted except upon dissolution and liquidation, and then only to a
liquidating trust which has been established for the purpose of the liquidation
of the assets of the Fund, and the distribution of cash in accordance with the
terms of the Agreement.
10.13 Withholding Taxes.
10.13.1 In the event the Fund pays to any federal, state or
local government authority any amount of tax, penalty, interest, fee or other
expenditure which is attributable to the particular status
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of one or more Holders including, without limitation, the status of a Holder as
a nonresident of California or any other state imposing such a charge, the
Manager shall treat such tax, penalty, interest or fee, and in its discretion
may treat other related Fund expenditures, as a distribution of Cash from
Operations or Cash from Sales or Refinancing as appropriate, to such Holders.
Such a distribution shall reduce the amount of Cash from Operations or Cash from
Sales or Refinancing otherwise payable by the Fund to such Holders. Such Holders
shall be distributed any refund of any such tax, penalty, interest or other
amounts received by the Fund; provided, however, that the distribution due such
Holders shall be reduced by any Fund expenses (and such expenses shall be
specially allocated to such Holders) incurred in connection with the payment or
obtaining of the refund of such taxes, penalties, interest or other amounts and
the Fund shall have no duty or obligation to seek to obtain or collect any such
refund or expend any amount to reduce the amount of any withholding, penalty,
interest or other amount otherwise payable to any government authority. The
Manager may require from a Holder the appropriate documentation with respect to
any distribution hereunder.
10.13.2 As security for any withholding tax or other amount
referred to in section 10.14.1 or other liability or obligation to which the
Fund may be subject as a result of any act or status of any Holder, the Fund
shall have (and each Holder hereby grants to the Fund) a security interest in
all Cash from Operations or Cash from Sales or Refinancing distributable to such
Holder to the extent of the amount of such withholding tax or other liability or
obligation. The Fund shall have a right of set-off against any such
distributions of Cash from Operations or Cash from Sales or Refinancing in the
amount of such withholding tax or other liability or obligation.
11. ASSIGNMENT OF FUND INTERESTS
11.1 Limitations on Transfer. A Holder may not transfer all or part of
his legal and equitable interest in his Units except in compliance with the
provisions of this Agreement. The Manager may condition any proposed transfer on
receipt by the Fund of such representations and warranties of the transferor and
the assignee, opinions of counsel for the Fund and other assurances as it may
deem necessary and appropriate to ensure that:
11.1.1 such assignments or transfers do not result, in the
opinion of counsel for the Fund, in the Fund being considered to have terminated
within the meaning of Section 708 of the Code;
11.1.2 the assignee is not a minor or an incompetent;
11.1.3 the transfer or assignment does not violate federal
or state securities laws;
11.1.4 the transferor or the assignee does not hold Units
representing Original Invested Capital of less than $2,500 ($2,000 in the case
of IRAs and Keogh Plans);
11.1.5 such assignee is a Citizen of the United States;
11.1.6 such assignment or transfer does not cause the assets
of the Fund to be deemed "plan assets" for ERISA purposes;
11.1.7 such assignment or transfer does not constitute a
transfer "on a secondary market (or the substantial equivalent thereof)" within
the meaning of Section 7704 of the Code or otherwise adversely affecting the tax
status of the Fund; and
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<PAGE>
11.1.8 the transferor files with the Fund a duly executed and
acknowledged counterpart of the instrument effecting such assignment or
transfer, which instrument evidences the written acceptance by the assignee or
transferee of all of the terms and provisions of this Agreement, contains a
representation that such assignment or transfer was made in accordance with all
applicable laws and regulations (including any investor suitability
requirements) and in all other respects being satisfactory in form and substance
to the Manager.
11.2 Distributions and Effective Date of Transfer. An Assignee of
Record shall be entitled to receive Distributions from the Fund attributable to
the Units acquired by reason of such assignment from and after the effective
date of the assignment of such Units; provided, however, that notwithstanding
anything herein to the contrary, the Fund and the Manager shall be entitled to
treat the assignor of such Units as the absolute owner thereof in all respects,
and shall incur no liability for allocations of Net Income, Net Loss or
Distributions, or transmittal of reports and notices required to be given to
Holders hereunder, which are made in good faith to such assignor until such time
as the written instrument of assignment has been received by the Fund and
recorded on its books and the effective date of the assignment has passed. The
effective date of such assignment on which the Assignee shall be deemed an
Assignee of Record shall be the last day of the first full calendar month
following the later of (i) the date set forth on the written instrument of
assignment or (ii) the date on which the Fund has actual notice of the
assignment of Units and has received complete documentation of the assignment.
Notwithstanding anything to the contrary contained herein, no Distributions
shall be made in any calendar quarter with respect to Units repurchased by the
Fund during such calendar quarter.
11.3 Governmental Restrictions. No assignment, sale, transfer, exchange
or other disposition of Units may be made except in compliance with the then
applicable rules of any other applicable governmental authority. All Units
originally issued pursuant to qualification under the California Corporate
Securities Law of 1968 shall be subject to, and all documents of assignment and
transfer evidencing such securities shall bear, the following legend condition:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
No transfer of any such Unit shall be made unless the transferor shall have
obtained, if necessary, the written consent of the California Commissioner of
Corporations to such transfer.
11.4 Non-Complying Transfers. Any assignment, sale, exchange or other
transfer in contravention of any of the provisions of this Article 11 shall be
void and shall not bind or be recognized by the Fund.
11.5 Misrepresentation and Forfeit. Subject to the discretion of the
Manager, in the event a Holder who originally obtained Units in the Fund's
offering misrepresented that he was a Citizen of the United States, or that it
was not an IRA or Qualified Plan or purchasing on behalf of an IRA or Qualified
Plan, such person fails to remain a Citizen of the United States, or a
subsequent transferee of Units is not or fails to remain a Citizen of the United
States, such Person may, in the Manager's discretion if it deems that the Fund
will fail certain citizenship requirements with respect to its Equipment, be
required to forfeit such Units to the Fund and no longer be entitled to cash
Distributions or allocations of the Fund, receipt of Fund reports and voting
privileges, although he may realize proceeds upon the transfer of his
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<PAGE>
Units to a Citizen of the United States, which subsequent transferee would be
entitled to the full economic benefits and other privileges attributable to such
Units.
12. SUBSTITUTED MEMBERS
12.1 Limitations on Substitution. No Assignee shall have the right to
become a substituted Member of the Fund in place of his assignor unless all of
the following conditions are first satisfied:
12.1.1 A duly executed and acknowledged written instrument of
assignment covering no less than 250 Units (200 in the case of an IRA or Keogh
Plan) shall have been filed with the Fund, which instrument shall specify the
number of Units being assigned and set forth the intention of the assignor that
the Assignee succeed to the assignor's interest as a substituted Member.
12.1.2 The assignor and Assignee shall have executed and
acknowledged such other instruments as the Manager may deem necessary or
desirable to effect such substitution, including the written acceptance and
adoption by the Assignee of the provisions of this Agreement, as the same may be
amended and his execution, acknowledgment and delivery to the Manager of a
special power of attorney, the form and content of which are described herein;
12.1.3 The written consent of the Manager to such substitution
shall have been obtained, the granting of which may be withheld by the Manager
in its sole discretion, and any exercise of such discretion intended to preserve
the tax consequences of Unit ownership shall presumptively be deemed reasonable;
12.1.4 A transfer fee not to exceed $100 shall have been paid
to the Fund to cover all reasonable expenses connected with such substitution;
and
12.1.5 The provisions of Section 11.1 and 11.3 of this
Agreement are complied with.
12.2 Consent to Admission. By executing or adopting this Agreement,
each Holder hereby consents to the admission of additional or substituted
Holders by the Manager and to any Assignee becoming a substituted Holder, in
accordance with the provisions herein.
12.3 Amendment of Agreement. The Manager shall cause this Agreement to
be amended to reflect the admission and/or substitution of Members at least once
in each fiscal quarter.
13. REPURCHASE OF FUND INTERESTS
13.1 In the event a Holder ceases to be a United States Citizen or
Resident Alien for any reason whatsoever, he may be required, in the Manager's
discretion, to tender his Units to the Fund for repurchase as of the date of
such event. The Fund will have the absolute right to purchase such Units at a
price equal to 100% of the Holder's Capital Account as of such date, in all
cases determined as of the last day of the quarter prior to the fiscal quarter
during which such Units are repurchased. IT SHOULD BE NOTED THAT THE FUND WILL
NOT BE OBLIGATED TO PURCHASE UNITS FROM HOLDERS WHO CEASE TO BE UNITED STATES
CITIZENS OR RESIDENT ALIENS.
13.2 The Manager may otherwise use available Reserves to repurchase
Units, in its discretion and on terms it determines to be appropriate under
given circumstances, in the event the Fund Manager
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deems such repurchase to be in the best interest of the Fund; provided, the Fund
shall never be required to repurchase any Units. Upon the repurchase of any
Units by the Fund, the tendered Units shall be canceled and shall no longer be
deemed to represent an interest in the Fund; and, provided further, that any
such repurchase shall not impair the capital of the Fund, or cause the Fund or
any of its remaining Members to incur an adverse tax consequence as a result of
such repurchase.
13.3 The Manager shall cause this Agreement to be amended to reflect
the change in the interests of the Holders (including the person whose Units
were repurchased) in the Net Income, Net Loss and Distributions of the Fund at
least once in each fiscal quarter.
13.4 Neither the Manager nor its Affiliates may request the Fund to
repurchase any Units owned by them.
14. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS
14.1 Books of Account and Records. The Manager shall, for income tax
purposes, keep on an accrual basis adequate books of account and records of the
Fund wherein shall be recorded and reflected all of the contributions to the
capital of the Fund and all of the expenses and transactions of the Fund.
14.1.1 Such books of account and records shall include the
following:
(i) A current list of the full name and last known
business or residence address and business telephone
number of each Member set forth in alphabetical order
together with the Original Invested Capital, the
Units held and the share in Net Income and Net Loss
of each Member, which list shall be updated at least
quarterly to reflect changes in the information
contained therein;
(ii) A copy of the Articles of Organization and all
amendments, together with executed copies of any
powers of attorney pursuant to which any certificate
has been executed;
(iii) Copies of the Fund's federal, state and local
income tax or information returns and reports, if
any, for the six most recent taxable years;
(iv) Copies of the original of this Agreement and all
amendments;
(v)Financial statements of the Fund for the six most
recent fiscal years; and
(vi) The Fund's books and records for at least the
current and past three fiscal years.
14.1.2 Such books of account and records shall be kept at the
principal place of business of the Fund in the State of California, and each
Member and his authorized representatives shall have, at all times during normal
business hours and at any other reasonable time, free access to and the right to
inspect and copy at their expense such books of account and all records of the
Fund.
14.1.3 Upon the request of a Member, the Manager shall mail
to such Member within ten days of the request a copy of the information
described in Section 14.1.1(i), (ii) and (iv). The
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information described in Section 14.1.1(i) shall be printed in alphabetical
order, on white paper, and in a readily readable type size (in no event smaller
than ten-point type). The Fund may require payment of a reasonable charge for
copy work.
14.1.4 If the Manager neglects or refuses to exhibit, produce
or mail a copy of the information in Section 14.1.1(i) above as requested and
required under this Agreement, the Manager shall be liable to the Member
requesting the information for the costs, including attorneys' fees, incurred by
the Member for compelling production of the information and for actual damages
suffered by the Member by reason of such refusal or neglect. It shall be a
defense that the actual purpose and reason for the requests for inspection or
for a copy of the information is to secure the list of Members or other
information for the purpose of selling such list or copies thereof, or of using
the same for a commercial purpose other than in the interest of the requesting
person as a Member relative to the affairs of the Fund. The Manager may require
that a Member requesting the information in Section 14.1.1(i) above represent
that the list is not requested for a commercial purpose unrelated to the
Member's interest in the Fund. The remedies provided hereunder to Members
requesting copies of the information in Section 14.1.1(i) above are in addition
to, and shall not in any way limit, other remedies available to Limited Members
under federal law or the laws of any state.
14.1.5 Subject to any change pursuant to Section 15.2.8, all
books and records of the Fund shall be kept on the basis of an annual accounting
period ending December 31, except for the final accounting period which shall
end on the dissolution or termination of the Fund. All references herein to a
"year of the Fund" are to such an annual accounting period, and all references
to a Fund "quarter" shall refer to a calendar quarter unless and until such
periods are changed by an amendment hereto. Accelerated methods of depreciation
with respect to Fund assets and other elections available to the Fund may be
used by the Fund for purposes of reporting federal or state income taxes.
14.2 Audited Annual Financial Statements. The Manager shall have
prepared and distributed to the Holders at least annually, at Fund expense,
financial statements (each of which shall include a balance sheet, statement of
income or loss, statement of Members' equity, and statement of cash flow)
prepared in accordance with generally accepted accounting principles and
accompanied by a report thereon containing an opinion of an independent
certified public accounting firm. Such opinion shall also state that reported
"Cash from Operations" is consistent with the definition of Cash from Operations
herein. Copies of such statements and report shall be distributed to each Holder
within 120 days after the close of each taxable year of the Fund.
14.3 Other Annual Reporting. The Manager shall have prepared and
distributed to the Holders at least annually, at Fund expense: (i) a statement
of cash flow, (ii) Fund information necessary in the preparation of the Holders'
and Assignees' federal income tax returns; (iii) a report of the business of the
Fund, which shall include for each piece of Equipment which individually
represents at least 10% of the Fund's total investment in Equipment, a status
report to indicate: (a) the condition of the Equipment, (b) how the Equipment is
being used as of the end of the year (leased, operated, held for lease, repair,
or sale), (c) the remaining term of the Equipment leases, (d) the projected use
of Equipment for the next year (renewal of lease, re-lease, retirement, or
sale), and (e) such other information relevant to the value or use of the
Equipment as the Manager deems appropriate, including the method used as basis
for valuation; (iv) a statement as to the compensation received by the Manager
and its Affiliates from the Fund during the year, which statement shall set
forth the services rendered or to be rendered by the Manager and its Affiliates
and the amount of fees received; (v) a report identifying Distributions from:
(a) Cash from Operations for that year, (b) Gross Revenues of prior years held
in reserves, (c) Cash from
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Sales or Refinancing, and (d) Cash from Reserve Account and other sources; and
(vi) a special report prepared in accordance with the American Institute of
Certified Public Accountants United States Auditing Standards relating to
special reports, containing an opinion of an independent certified public
accounting firm, to report the breakdown of the costs reimbursed by the Fund to
the Manager or its Affiliates. Such special report shall at a minimum provide:
(a) a review of the time records of individual employees, the costs of whose
services were reimbursed, and (b) a review of the specific nature of the work
performed by each such employee. The additional costs of such special report
shall be itemized by the auditors among all programs sponsored by the Manager
and its Affiliates on a program-by-program basis and may be reimbursed to the
Manager or its Affiliates to the extent that such reimbursement, when added to
the cost for administrative services rendered, does not exceed the competitive
rate for comparable services performed by independent parties in the same
geographic location. Copies of the reports hereunder shall be distributed to
each Holder within 120 days after the close of each taxable year of the Fund;
provided, however, that all Fund information necessary in the preparation of the
Holders' and Assignees' federal income tax returns shall be distributed to each
Holder and Assignee not later than 75 days after the close of each taxable year
of the Fund.
14.4 Quarterly Reports. The Manager shall have prepared quarterly, at
Fund expense, commencing with the first full quarter after the Closing Date: (i)
a statement as to the compensation received by the Manager during such quarter
from the Fund which statement shall set forth the services rendered or to be
rendered by the Manager during such quarter from the Fund and the amount of fees
received, and (ii) other relevant information. Copies of such statements shall
be distributed to each Holder within 60 days after the end of each quarterly
period.
14.5 Unaudited Quarterly Financial Statements. The Manager shall have
prepared, at Fund expense, a quarterly report covering each of the first three
quarters of Fund operations in each calendar year, unaudited financial
statements (each of which shall include a balance sheet, statement of income or
loss for said quarterly period and statement of Cash from Operations and Cash
from Sales or Refinancing for said quarterly period) and a statement of other
pertinent information regarding the Fund and its activities during the quarterly
period covered by the report. Copies of such statements and other pertinent
information shall be distributed to each Holder within 60 days after the close
of the quarterly period covered by the report of the Fund.
14.6 Other Quarterly Reports. The Manager shall have prepared, at Fund
expense, after the end of each quarter in which Equipment is acquired and until
the Net Proceeds are fully invested or returned to investors, a notice which
shall describe therein: (i) a statement of the actual purchase price of the
Equipment, including the terms of the purchase, (ii) a statement of the total
amount of cash expended by the Fund to acquire such items of Equipment
(including and itemizing all commissions, fees, expenses and the name of each
payee), and (iii) a statement of the amount of proceeds in the Fund which remain
unexpended or uncommitted. Copies of such notice shall be distributed to each
Holder within 60 days after the end of such quarter. If deemed appropriate by
the Manager such notice may be prepared and distributed to each Holder more
frequently than quarterly.
14.7 Tax Returns. The Manager, at Fund expense, shall cause income tax
returns for the Fund to be prepared and timely filed with appropriate
authorities.
14.8 Governmental Reports. The Manager, at Fund expense, shall cause to
be prepared and timely filed with appropriate federal and state regulatory and
administrative bodies, all reports required to be filed with such entities under
then current applicable laws, rules and regulations. Such reports shall
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be prepared on the accounting or reporting basis required by such regulatory
bodies. Any Holder shall be provided with a copy of any such report upon request
without expense to him.
14.9 Maintenance of Suitability Records. The Manager, at Fund expense,
shall maintain for a period of at least four years, a record of the information
obtained to indicate that a Holder meets the suitability standards set forth in
the Prospectus.
15. RIGHTS, AUTHORITY, POWERS AND RESPONSIBILITIES OF THE MANAGER.
15.1 Services of the Manager. The Manager shall be responsible for
providing the following services to the Fund:
15.1.1 Supervising the organization of the Fund and the
offering and sale of Units;
15.1.2 Supervising Fund management, which includes (i)
establishing policies for the operation of the Fund; (ii) causing the Fund's
agents or employees to arrange for the provision of services necessary to the
operation of the Fund (including Equipment management and investor, accounting
and legal services, and services relating to Distributions by the Fund); (iii)
approving actions to be taken by the Fund; (iv) providing advice, consultation,
analysis and supervision with respect to the functions of the Fund as an owner
of the Equipment (including, without limitation, decisions regarding adjustments
to rental schedules, the sale or disposition of Equipment and compliance with
federal, state and local regulatory requirements and procedures); (v) executing
documents on behalf of the Fund; (vi) having a fiduciary responsibility for the
safekeeping and use of all funds of the Fund, whether or not in the Manager's
immediate possession or control; and (vii) making all decisions as to accounting
matters; and
15.1.3 Approval of the terms of the sale or other disposition
of Equipment, including establishing the terms for and arranging any such
transaction.
15.2 Authority of the Manager. The conduct of the Fund's business shall
be controlled solely by the Manager in accordance with this Agreement. The
Manager shall have fiduciary responsibility for the safekeeping and use of all
funds and assets of the Fund, whether or not in its immediate possession or
control, and shall have all authority, rights and powers conferred by law and
those required or appropriate to the management of the Fund business which, by
way of illustration but not by way of limitation, shall, subject only to the
provisions of Section 15.4, include the right, authority and power:
15.2.1 To acquire, lease, sell, hold and dispose of Equipment,
interests therein or appurtenances thereto, as well as personal or mixed
property connected therewith, including the purchase, lease, improvement,
maintenance, exchange, trade or sale of such Equipment, at such price, rental or
amount, for cash, securities (in compliance with appropriate securities
regulations) or other property, and upon such terms, as the Manager deems in its
sole discretion, to be in the best interest of the Fund; provided that, as of
the date of the final investment of Net Proceeds and completion of the permanent
financing of the Equipment portfolio, at least 50% of the Fund's Equipment, by
aggregate purchase cost, shall be subject to initial leases which are High
Payout Leases.
15.2.2 To place record title to, or the right to use Fund
assets in, the name or names of a nominee or nominees, trustee or trustees for
any purpose convenient or beneficial to the Fund;
15.2.3 To acquire and enter into any contract of insurance
which the Manager deems
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<PAGE>
necessary or appropriate for the protection of the Fund and the Manager, for
the conservation of Fund assets, or for any purpose convenient or beneficial to
the Fund;
15.2.4 To employ Persons in the operation and management of
the business of the Fund including, but not limited to, supervisory managing
agents, insurance brokers and equipment lease brokers and Persons to perform, on
behalf of the Fund, the activities enumerated in Section 15.2.1, on such terms
and for such compensation as the Manager shall determine, subject, however, to
the limitations with respect thereto as set forth in Article 8; provided that no
Person is employed to provide duplicative services; and provided further that
agreements with the Manager or their Affiliates for the services set forth in
Article 8 shall contain the terms and limitations as to fees and expenses as set
forth in said Article 8 and any of such agreements shall be terminable
immediately upon dissolution of the Fund under Section 19.1;
15.2.5 To prepare or cause to be prepared reports, statements
and other relevant information for distribution to Holders, as provided in
Article 14 and as they otherwise deem appropriate;
15.2.6 To open accounts and deposit and maintain funds in the
name of the Fund in banks or savings and loan associations; provided, however,
that the Fund funds shall not be commingled with the funds of any other Person;
15.2.7 To cause the Fund to make or revoke any of the
elections referred to in the Code;
15.2.8 To select as the Fund's accounting year a calendar year
or such fiscal year as approved by the Service;
15.2.9 To determine the appropriate accounting method or
methods to be used by the Fund;
15.2.10 To offer and sell Units in the Fund directly or
through any licensed Affiliate of the Manager or nonaffiliate and to employ
personnel, agents and dealers for such purpose;
15.2.11 To amend this Agreement to reflect the addition or
substitution of Holders, the reduction of capital accounts upon the return of
capital to Members or the change in the interests of the Holders in the Net
Income, Net Loss and Distributions of the Fund after the repurchase of Units;
15.2.12 To require in all Fund obligations that the Manager
shall not have any personal liability thereon but that the Person contracting
with the Fund is to look solely to the Fund and its assets for satisfaction of
such obligations; and in the event that the Manager has personal liability with
respect to any such obligation, the Manager may require its satisfaction prior
to obligations with respect to which the Manager has no personal liability;
provided, however, that the inclusion of the aforesaid provisions shall not
materially affect the cost of the service or material being supplied and all
Fund obligations are satisfied in accordance with prudent business practices as
to the time and manner of payment;
15.2.13 To execute and file certificates of amendment and
cancellation of the articles of organization, and certificates of dissolution of
the Fund;
15.2.14 Subject to the provisions of Article 10, to determine
the amount of Cash from
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<PAGE>
Operations and Cash from Sales or Refinancing used to purchase additional
Equipment and to make Distributions;
15.2.15 To purchase Equipment in its own name, the name of an
Affiliate or in the name of a nominee, a trust or a corporation or otherwise and
hold title thereto on a temporary or interim basis (generally not in excess of
six months) for the purpose of facilitating the acquisition of such Equipment or
completion of manufacture of the Equipment, or any other purpose related to the
business of the Fund; provided, however that: (i) the transaction is in the best
interest of the Fund; (ii) such Equipment is purchased by the Fund for a
purchase price no greater than the cost of such Equipment to the Manager or
Affiliate (including any out-of-pocket carrying costs), except for compensation
permitted by this Agreement; (iii) there is no difference in interest terms of
the loans secured by the Equipment at the time acquired by the Manager or
Affiliate and the time acquired by the Fund; (iv) there is no benefit arising
out of such transaction to the Manager or its Affiliate apart from the
compensation otherwise permitted by this Agreement; and (v) all income generated
by, and all expenses associated with, Equipment so acquired shall be treated as
belonging to the Fund.
15.2.16 Subject to Sections 15.4.21 and 15.4.22, to borrow
money and, if security is required therefor, to mortgage or subject any
Equipment to any other security device, to obtain replacements of any mortgage
or other security device, and to prepay, in whole or in part, refinance,
increase, modify, consolidate or extend any mortgage or other security device,
all of the foregoing at such terms and in such amounts as the Manager, in its
sole discretion, deems to be in the best interests of the Fund;
15.2.17 To invest (i) the Gross Proceeds or Net Proceeds
temporarily prior to investment in Equipment, (ii) other funds of the Fund prior
to the investment in Equipment or the distribution to Holders and (iii) the
Fund's capital reserves, in short-term, highly liquid investments where there is
appropriate safety of principal;
15.2.18 In addition to any amendments otherwise authorized
herein, this Agreement may be amended from time to time by the Manager, without
the consent of any of the Holders
(i) to add to the representations, duties or obligations of
the Manager or its Affiliates or surrender any right or power
granted to the Manager or its Affiliates herein, for the
benefit of the Holders;
(ii) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect
to matters or questions arising under this Agreement which
will not be inconsistent with the provisions of this Agreement
provided that no amendment hereunder will change the voting
rights of Holders;
(iii) to delete or add any provision of this Agreement
required to be so deleted or added by the staff of the
Securities and Exchange Commission or by a state "Blue Sky"
administrator or similar such official, which addition or
deletion is deemed by such staff or official to be for the
benefit or protection of the Holders; or
(iv) to amend the provisions of Article 10 of this Agreement
relating to the allocations of Net Income, Net Loss and
Distributions among Members or any other provisions hereof
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<PAGE>
if the Fund is advised at any time by the Fund's accountants
or legal counsel that the allocations or such other provisions
set forth in this Agreement are unlikely to be respected,
either because of promulgation of Regulations under Sections
704 or 706 of the Code or other developments in the law, but
only to the minimum extent necessary in accordance with such
advice of accountants and/or counsel to cause such provisions
of this Agreement to be respected. Such amendment or
amendments made by the Manager in reliance upon the advice of
the accountants or counsel described above shall be deemed to
be made pursuant to the fiduciary obligation of the Manager to
the Fund and the Holders, and no such amendment or amendments
shall give rise to any claim or cause of action by any Holder.
15.2.19 To execute, acknowledge and deliver any and all
instruments to effectuate the foregoing, and to take all such action in
connection therewith as the Manager shall deem necessary or appropriate.
15.3 General Powers and Fiduciary Duty. The Manager shall, except as
otherwise provided in this Agreement, have all the rights and powers and shall
be subject to all the restrictions and liabilities provided for the manager of a
limited liability company under the California Act. Notwithstanding any other
provision of this Agreement, in no event may the Manager modify or compromise,
by contract or otherwise, its fiduciary duty to the Fund or the Holders, whether
such duty is imposed under the common law or by statute.
15.4 Limitations on Manager's Authority. Neither the Manager nor any
Affiliate shall have the authority to:
15.4.1 Enter into contracts with the Fund which would bind the
Fund after the expulsion, adjudication of bankruptcy or insolvency of a Manager,
or continue the business of the Fund with Fund assets after the occurrence of
such an event;
15.4.2 Grant to the Manager or any Affiliate an exclusive
listing for the sale of Fund assets, including Equipment;
15.4.3 Sell Substantially All of the Assets in a single sale,
or in multiple sales in the same twelve-month period, except in the orderly
liquidation and winding up of the business of the Fund upon its termination and
dissolution;
15.4.4 Pledge or encumber Substantially All of the Assets in a
single transaction or in multiple transactions in the same twelve-month period
other than in connection with the acquisition or improvement of assets or the
refinancing of existing obligations;
15.4.5 Alter the primary purpose of the Fund as set forth in
Article 3;
15.4.6 Receive from the Fund a rebate or give-up or
participate in any reciprocal business arrangements which would circumvent the
provisions of this Agreement, nor shall any such person permit any reciprocal
business arrangement which would circumvent the restrictions herein against
dealing with the Manager and its Affiliates;
15.4.7 Sell or lease any Equipment to any entity in which a
Manager or any Affiliate has
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<PAGE>
an interest, other than a joint venture or similar program which complies with
the conditions set forth in Section 15.4.8 hereof;
15.4.8 Cause the Fund to invest in any program, partnership or
other venture unless: (i) the other Member or joint owner is not a Manager (but
it may be an Affiliate of a Manager, provided the Affiliate is formed and
operated for the primary purpose of investment in and operation of or gain from
an interest in equipment, and has substantially identical investment objectives
to those of the Fund); (ii) such joint venture owns and operates particular
Equipment and the Fund or the Fund and Affiliate, as the case may be, acquire
the controlling interest in such partnership, or joint venture; (iii) the
agreement of joint venture does not authorize the Fund to do anything as a
Member or joint venturer with respect to the Equipment which the Fund, or a
Manager, could not do directly because of the provisions of this Agreement; (iv)
the Fund's investment is on substantially the same terms and conditions as the
investment of any Affiliate; (v) no compensation (other than as provided for by
this Agreement) is received in connection therewith by the Manager or any of its
Affiliates, there are no duplicate equipment management or any other duplicate
fees and such investment shall not result in the impairment, abrogation or
circumvention of any of the terms or provisions of this Agreement; (vi) the
joint venture is in the best interest of both co-venturers; and (vii) in joint
venture arrangements with an Affiliate of a Manager, if all of the following
additional conditions are met: the compensation of the Manager is substantially
identical to that received by the sponsor of such Affiliate, the Fund has a
right of first refusal to buy, if such Affiliate wishes to sell, equipment held
in the joint venture, and the joint venture is established either for the
purpose of effecting appropriate diversification of the Fund's investment
portfolio or for the purpose of relieving the Manager or its Affiliates or
nominees from a commitment entered into pursuant to Section 15.2.15 of this
Agreement; for the purposes of this Section, a controlling interest shall
include: (1) ownership of more than 50% of the venture's capital or profits; or
(2) provisions in the venture agreement giving the Fund effective control;
15.4.9 Except as provided in the Sections 15.2.15, 15.4.7 and
15.4.8, purchase or lease Equipment from the Fund or sell or lease Equipment to
the Fund;
15.4.10 Cause the Fund to loan any funds or property to any
Manager or Affiliate of a Manager;
15.4.11 Cause the Fund to borrow from any of the Manager or
its Affiliates on terms which provide for interest, financing charges or fees in
excess of the amounts charged by unrelated lending institutions on comparable
loans for the same purpose, or in excess of the ledger's cost of funds, or, in
any event, to cause the Fund to obtain "permanent financing" (defined as
financing with a term in excess of 12 months) from any such Person;
15.4.12 Cause the Fund to exchange Units for property other
than cash;
15.4.13 Do any action in contravention of this Agreement or
which would make it impossible to carry on the ordinary business of the Fund;
15.4.14 Confess a judgment against the Fund in connection with
any threatened or pending legal action;
15.4.15 Possess any Equipment or assign the rights of the Fund
in specific Equipment for other than a Fund purpose;
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<PAGE>
15.4.16 Admit a Person as a Manager except with the consent of
the Holders as provided in Article 17 hereof;
15.4.17 Perform any act (other than an act required by this
Agreement or any act taken in good faith reliance upon counsel's opinion) which
would, at the time such act occurred, subject any Holder to liability as a
Manager in any jurisdiction;
15.4.18 Reinvest any funds of the Fund after the end of the
Reinvestment Period other than to invest in Equipment pursuant to commitments
entered into prior to the expiration of the Reinvestment Period or in Equipment
to be used in connection with Equipment under an existing lease, or reinvest any
funds of the Fund during the Reinvestment Period unless such reinvestment is
effected for all Holders on the same terms and is otherwise in compliance with
Section 10.7 hereof;
15.4.19 Invest any of the Gross Proceeds in Equipment which
is non-income producing;
15.4.20 Employ, or permit any Person to employ, the funds or
assets of the Fund in any manner except for the exclusive benefit of the Fund;
this provision shall not prohibit the Manager from causing Fund funds to be
deposited in a separate Fund account with a bank or other financial institution
which aggregates all funds held on behalf of the Manager and its Affiliates in
calculating qualifying balances for purposes of discounts on service charges or
other account benefits, provided that the Fund benefits on a pro rata basis from
any such discounts or other favorable terms, and, provided further, that no
creditor of any party other than the Fund shall have any recourse to funds held
in the Fund's separate account;
15.4.21 Incur any indebtedness wherein the lender will have or
acquire, at any time as a result of making the loan, any direct or indirect
interest in the profit, capital or property of the Fund other than as a secured
creditor; or incur any indebtedness specifically for the purpose of funding
operating distributions, provided however that the Fund may enter into
refinancing transactions with respect to its Equipment and distribute net
proceeds from any such refinancing to the extent consistent with its investment
objectives;
15.4.22 Incur aggregate Fund borrowings which, as of the date
of the final investment of the Net Proceeds and, thereafter, on the date any
subsequent indebtedness is incurred, are in excess of 50% of the purchase price
of all Equipment on a combined basis. "Purchase price" for purposes of this
Section 15.4.22 shall mean the sum of the cash downpayment and any indebtedness
incurred in connection with the acquisition of an item of Equipment by the Fund,
or to which the Equipment is taken subject, plus any Acquisition Fees paid, but
does not include loan points, prepaid interest, or other prepaid expenses;
15.4.23 Commingle Fund funds with those of any other Person;
15.4.24 Except as otherwise provided herein, cause the Fund to
enter into any transaction with any other partnership in which a Manager or any
of its Affiliates have an interest, including, but not limited to, any
transaction involving the sale, lease or purchase of any Equipment to or from
the Fund, the rendering of services to or from the Fund, or the lending of any
monies or other property to or from the Fund;
15.4.25 Directly or indirectly pay or award any finder's
fees, commissions or other
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<PAGE>
compensation to any Person engaged by a potential investor for investment advice
as an inducement to such advisor to advise the purchaser regarding the purchase
of Units; provided, however, that the Manager shall not be prohibited from
paying the normal sales commissions payable to a registered broker-dealer or
other properly-licensed Person for selling Units;
15.4.26 Operate the Fund in such a manner as to have the Fund
classified as an "investment company" for purposes of the Investment Company Act
of 1940;
15.4.27 Except as provided herein, invest any of the Gross
Proceeds in units of limited partnership interest, junior mortgages, deeds of
trust or other similar instruments or obligations;
15.4.28 Cause the Fund to enter into any agreements with a
Manager or any Affiliate of a Manager which are not subject to termination
without penalty by either party upon not more than 60 days' written notice,
except for agreements which comply with the provisions of Section 15.2.15 or
those which comply with the provisions of Section 15.4.8 and relate to the
purchase of Equipment by the Fund and an Affiliate as joint venturers;
15.4.29 Cause the Fund to acquire any single item of Equipment
that has a contract purchase price in excess of $1,000,000 unless prior to final
funding of the acquisition it obtains a future value appraisal of the Equipment
from a qualified independent third party appraiser;
15.4.30 Cause the Fund to invest cash in an aggregate amount
in excess of $30,000,000 in Equipment leased to a single lessee.
15.5 Limitation on Manager's Liability. The Manager shall have no
personal liability for the repayment of the Original Invested Capital of any
Holder or to repay the Fund any portion or all of any negative balance in its
Capital Account, except as otherwise provided in Section 5.2.
15.6 Tax Matters Member. ATEL is hereby designated as the "Tax Matters
Member" in accordance with Section 6231(a)(7) of the Code and, in connection
therewith and in addition to all other powers given therein, shall have all
other powers needed to perform fully hereunder including, without limitation,
the power to retain all attorneys and accountants of its choice and the right to
settle any audits without the consent of Members. The designation made in this
paragraph is hereby consented to by each Member as an express condition to
becoming a Member. The Fund hereby indemnifies ATEL from and against any damages
or losses (including attorney's fees) arising out of or incurred in connection
with any action taken or omitted to be taken by it in carrying out its
responsibilities as tax matters Member, subject to the same conditions under
which indemnification is provided the Manager in Article 21 hereof.
15.7 Minimum Investment in Equipment / Maximum Front-End Fees. The
Manager must commit not less than 85.875% of the Gross Proceeds to Investment in
Equipment, with the balance thereof available to pay Organization and Offering
Expenses and Front End Fees, however designated. Under the North American
Securities Administrators Association, Inc. ("NASAA") Statement of Policy
concerning Equipment Programs, as amended through October 24, 1991 (referred to
herein as the "NASAA Guidelines"), the Fund is required to commit a minimum
percentage of the Gross Proceeds to Investment in Equipment, calculated as the
greater of: (i) 80% of the Gross Proceeds reduced by 0.0625% for each 1% of
indebtedness encumbering the Fund's Equipment; or (ii) 75% of such Gross
Proceeds. Based on the formula in the NASAA Guidelines, with 50% portfolio
leverage the Fund's minimum Investment in Equipment would equal 76.875% of Gross
Proceeds (80% - [50% x .0625%] =
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<PAGE>
76.875%), and the Fund's minimum Investment in Equipment would therefore exceed
the NASAA Guideline minimum by 9%. The NASAA Guidelines permit the Manager and
its Affiliates to receive compensation in the form of a carried interest in Fund
Net Income, Net Loss and Distributions equal to 1% for the first 2.5% of excess
Investment in Equipment over the NASAA Guidelines minimum, 1% for the next 2% of
such excess, and 1% for each additional 1% of excess Investment in Equipment.
With a minimum Investment in Equipment of 85.875% and 50% leverage, the Manager
and its Affiliates may receive an additional carried interest equal to 6.5% of
Net Profit, Net Loss and Distributions under the foregoing formula (2.5% + 2% +
4.5% = 9%; 1% + 1% + 4.5% = 6.5%]. At the lowest permitted level of minimum
Investment in Equipment, the NASAA Guidelines would permit the Manager and its
Affiliates to receive a promotional interest equal to 5% of Distributions of
Cash from Operations and 1% of Distributions of Sale or Refinancing Proceeds
until Members have received total Distributions equal to their Original Invested
Capital plus an 8% per annum cumulative return on their Adjusted Invested
Capital, and, thereafter, the promotional interest could increase to 15% of all
Distributions. With the additional carried interest calculated as described
above, the maximum aggregate fees payable to the Manager and Affiliates under
the NASAA Guidelines as carried interest and promotional interest would equal
11.5% of Distributions of Cash from Operations (6.5% + 5% = 11.5%), and 7.5% of
Distributions of Sale or Refinancing Proceeds (6.5% + 1% = 7.5%), before the
subordination level was reached, and 21.5% of all Distributions thereafter. The
maximum amounts to be paid under the terms of this Agreement are subject to the
application of the Asset Management Fee Limit provided in Section 8.3, which
limits the annual amount payable to the Manager and its Affiliates as the Asset
Management Fee and the Carried Interest to an aggregate not to exceed the total
amount of fees that would be payable to the Manager and its Affiliates under the
alternative fee schedule set forth in Section 8.3. This overall limitation on
annual fees will include, in addition to the Equipment Management Fee and
Equipment Resale/Releasing Fee, amounts equal to 11.5% of Distributions of Cash
from Operations (4% as an Incentive Management Fee plus 7.5% as the Fund
Manager's Carried Interest) and 7.5% of Distributions of Sale or Refinancing
Proceeds (as the Fund Manager's 7.5% Carried Interest) before the Priority
Return, and 15% of all Distributions thereafter (7.5% as an Incentive Management
Fee plus 7.5% as the Carried Interest). Upon completion of the offering of
Units, final commitment of Net Proceeds to acquisition of Equipment and
establishment of final levels of permanent portfolio debt encumbering such
Equipment, the Manager shall calculate the maximum carried interest and
promotional interest payable to the Manager and its Affiliates under the NASAA
Guidelines and compare such total permitted fees to the total of the Incentive
Management Fees and Carried Interest. If and to the extent that the fees
calculated under the alternative fee schedule provided in Section 8.3 as the
Incentive Management Fee and the Carried Interest should exceed the maximum
promotional interest plus carried interest permitted under the NASAA Guidelines,
as described above, the fees payable to the Manager and its Affiliates shall be
reduced as described herein. In such event, Section 8.3 of this Agreement shall
be amended immediately to reduce the amounts calculated as the Incentive
Management Fee and/or the Carried Interest by an amount sufficient to cause the
total of such compensation to comply with the limitations in the NASAA
Guidelines on the aggregate of promotional interests and carried interests. A
comparison of the Front End Fees actually paid by the Fund and the NASAA
Guideline maximums shall be repeated, and any required adjustments shall be
made, at least annually thereafter.
15.8 Reliance on Manager's Authority. The Manager shall conduct the
business of the Fund, devoting such time thereto as it, in its sole discretion,
shall determine to be necessary to manage the Fund business and affairs in an
efficient manner. Any Person dealing with the Fund or the Manager may rely upon
a certificate signed by the Manager as authority with respect to: (i) the
identity of the Manager or any Holder hereof; (ii) the existence or
non-existence of any fact or facts which constitute a condition precedent to
acts by the Manager or are in any other manner germane to the affairs of the
Fund; (iii) the
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<PAGE>
Persons who are authorized to execute and deliver any instrument or document on
behalf of the Fund; or (iv) any act or failure to act by the Fund as to any
other matter whatsoever involving the Fund or any Members.
16. RIGHTS, POWERS AND VOTING RIGHTS OF THE MEMBERS
16.1 Limitation on Member Authority. Members shall take no part in the
control, conduct or operation of the Fund and shall have no right or authority
to act for or bind the Fund except as expressly provided herein.
16.2 Voting Rights. Members shall have the right, by the vote of
Members who own more than 50% of the total outstanding Units entitled to vote (a
"majority-in-interest"), to approve the following matters affecting the basic
structure of the Fund:
16.2.1 Removal or withdrawal of a Manager;
16.2.2 Subject to the further requirements of Article 17,
continuation of the Fund and election of a successor Manager upon the
termination of a Manager;
16.2.3 Termination and dissolution of the Fund;
16.2.4 Amendment of this Agreement, provided such amendment is
not for any of the purposes set forth in Sections 16.4 or 16.5, and provided,
further, that the Members shall have the right to approve or disapprove by
separate vote each proposed amendment to this Agreement;
16.2.5 The pledge or granting of a security interest in, or
sale of, Substantially All of the Assets in a single transaction, or in multiple
transactions in the same twelve-month period, except in the liquidation and
winding up of the business of the Fund upon its termination and dissolution; and
16.2.6 The extension of the term of the Fund.
16.3 Voting Procedures. In any vote of the Members, each Member shall
be entitled to cast one vote for each Unit which he owns as of the designated
record date. Notwithstanding any other provision of this Agreement, any Units
held by a Manager or an Affiliate of a Manager will not be entitled to vote, and
will not be considered to be "outstanding" Units for purposes of any vote, upon
matters which involve a conflict between the interests of such Manager and the
Fund, including, but not limited to, any vote on the proposed removal or
withdrawal of such Manager or on any proposed amendment to this Agreement which
would expand or extend the rights, authorities or powers of such Manager.
16.3.1 Meetings of the Members to vote upon any matters as to
which the Members are authorized to take action under this Agreement, as the
same may be amended from time to time, may be called at any time by the Manager
or by one or more Members holding more than 10% of the outstanding Units by
delivering written notice, either in person or by registered mail, of such
meeting to the Manager. Promptly, but in any event within 10 days following
receipt of such request, the Manager shall cause a written notice, either in
person or by certified mail, to be given to the Members entitled to vote at such
meeting, which notice shall state that a meeting will be held at a time and
place fixed by the Manager, which is to be convenient to the Members as a group,
and which is not less than 15 days nor more than 60 days after the mailing of
the notice of the meeting; provided, however, that such maximum period for
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<PAGE>
the giving of notice and the holding of meetings may be extended for an
additional 60 days if such extension is necessary to obtain the qualification
with the California Commissioner of Corporations of the matters to be acted upon
at such meeting, the clearance by the Securities and Exchange Commission or
other appropriate governing agency of the solicitation materials to be forwarded
to Members in connection with such meeting or any other administrative
authorizations which may be required. Included with the notice of a meeting
shall be a detailed statement of the action proposed, including a verbatim
statement of the wording of any resolution proposed for adoption by the Members
and of any proposed amendment to this Agreement. All expenses of the meeting and
notification shall be borne by the Fund.
16.3.2 In order to establish the Members of record entitled to
act upon matters by vote or written consent, the Manager or Members holding more
than 10% of the Units may fix in advance a record date (the "Record Date") which
is not more than 60 nor less than 10 days prior to the date of the meeting or
the date upon which written consents are to be delivered. If no Record Date is
fixed in the notice of meeting or action by written consent, the Record Date
shall be deemed to be at the close of business on the business day next
preceding the date on which notice is given. A new Record Date shall be fixed if
a meeting is adjourned for more than 45 days from the date set for the original
meeting.
16.3.3 Upon adjournment of a meeting to another time or place,
notice of the new time or place shall be announced at the meeting at which
adjournment is taken. If the adjournment is for more than 45 days or if, after
the adjournment, a new Record Date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each Member of record entitled to
vote at the meeting.
16.3.4 Personal presence of the Members at a meeting shall not
be required, provided that sufficient Units are represented at the meeting, by
Members appearing in person and/or by duly executed proxies, to take any action
proposed for a vote at such meeting. Attendance by a Member at any meeting and
voting in person shall revoke any proxies of such Member submitted with respect
to action proposed to be taken at such meeting. Submission of a later proxy with
respect to any action shall revoke an earlier one as to such action. Only the
votes, whether in person or by proxy, of Members holding Units as of the Record
Date established for such meeting shall be counted.
16.3.5 Any matter as to which the Members are authorized to
take action under this Agreement or under law may be taken by the Members
without a meeting and shall be as valid and effective as action taken by the
Members at a meeting duly assembled, if written consents to such action by the
Members are (i) signed by the Members entitled to vote upon such action at a
meeting who held, as of the Record Date for such actions, the number of Units
required to authorize such action and (ii) delivered to the Manager as of the
date set for such action. Any action taken without a meeting shall be effective
15 days after the required minimum number of Members have signed the consent and
shall be effective immediately if the Manager and Limited Members holding at
least 90% of the outstanding Units as of the Record Date have signed the
consent.
16.3.6 In the event that there shall be no Manager, the
Members may take action without a meeting by the written consent of Members
having the requisite voting power of the Members entitled to vote.
16.4 Limitations on Member Rights. No Holder shall have the right or
power to: (i) withdraw or reduce his contribution to the capital of the Fund
except as a result of the repurchase of the Units as provided in Article 13, the
dissolution of the Fund or as otherwise provided by law, (ii) bring an action
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for partition against the Fund, (iii) cause the termination and dissolution of
the Fund by court decree or otherwise, except as set forth in this Agreement, or
(iv) demand or receive property other than cash in return for his contribution.
No Holder shall have priority over any other Holder either as to the return of
contributions of capital or as to Net Income, Net Loss or Distributions. Other
than upon the termination and dissolution of the Fund as provided by this
Agreement there has been no time agreed upon when the contribution of each
Holder may be returned.
16.5 Limitations on Power to Amend Agreement. Except as provided in
Section 15.2.18, and notwithstanding anything to the contrary contained in this
Agreement, this Agreement may not, without the consent of each of the Members
who would be adversely affected thereby, be amended to:
16.5.1 Convert a Holder into a Manager;
16.5.2 Modify the limited liability of a Holder;
16.5.3 Alter the interest of any Member in Net Income, Net
Loss or Distributions; or
16.5.4 Affect the status of the Fund as a partnership for
federal income tax purposes.
16.6 Member List. Upon the written request of a Member and for any
non-commercial purpose reasonably related to the exercise of rights under this
Agreement, the Manager will furnish to such Member or his representative, at his
expense, a list containing the name and address of the Units held of record by
each Member, as provided in Section 14.1.3.
16.7 Dissenters' Rights and Limitations on Mergers and Roll-ups.
16.7.1 Any proposal that the Fund enter into a Roll-Up will
require approval by Members of not less than 90% of the outstanding Units.
Members who dissent with respect to a Roll-Up proposal will have the rights of a
dissenting Member as provided under Sections 15679.1 through 15679.14 of the
California Act. The Fund shall not reimburse the sponsor of a proposed Roll-Up
for the costs of its proxy contest in the event the Roll-Up is not approved by
the Members as provided herein.
16.7.2 In connection with a proposed Roll-Up, an appraisal of
all Fund assets shall be obtained from a competent, independent expert (defined
as a Person with no current material or prior business or personal relationship
with the Manager or its Affiliates who is engaged to a substantial extent in the
business of rendering opinions regarding the value of assets of the type held by
the Fund, and who is qualified to perform such work). If the appraisal will be
included in a Prospectus used to offer the securities of a Roll-Up Entity, the
appraisal shall be filed with the SEC and the states as an Exhibit to the
Registration Statement for the offering. Accordingly, an issuer using the
appraisal shall be subject to liability for violation of Section 11 of the
Securities Act of 1933 and comparable provisions under state laws for any
material misrepresentations or material omissions in the appraisal. Fund assets
shall be appraised on a consistent basis. The appraisal shall be based on an
evaluation of all relevant information, and shall indicate the value of the
Fund's assets as of a date immediately prior to the announcement of the proposed
Roll-Up transaction. The appraisal shall assume an orderly liquidation of Fund
assets over a 12-month period. The terms of the engagement of the Independent
Expert shall clearly state that the engagement is for the benefit of the Fund
and its Holders. A summary of the independent appraisal, indicating all material
assumptions underlying the appraisal, shall be included in a report to the
Holders in connection with a proposed Roll-Up transaction.
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16.7.3 In connection with a proposed Roll-Up, the Person
sponsoring the Roll-Up transaction shall offer to Holders who vote "no" on the
proposal the choice of:
(a) accepting the securities offered in the proposed Roll-Up
transaction; or
(b) one of the following:
(i) remaining as Holders in the Fund, and
preserving their interests therein on the same terms and conditions as existed
previously; or
(ii) receiving cash in an amount equal to the
Holders' pro-rata share of the
appraised value of the net assets of the Fund.
16.7.4 The Fund shall not participate in any proposed Roll-Up
transaction which would result in Holders having democracy rights which are less
than those provided for under this Agreement. If the resulting entity is a
corporation, the voting rights of Holders shall correspond to the voting rights
provided for in this Agreement to the greatest extent possible.
16.7.5 The Fund shall not participate in any proposed Roll-Up
transaction which includes provisions which would operate to materially impede
or frustrate the accumulation of shares by any purchaser of the securities of
the Roll-Up Entity (except to the minimum extent necessary to preserve the tax
status of the entity). The Fund shall not participate in any proposed Roll-Up
transaction which would limit the ability of a Holder to exercise the voting
rights of the securities of the Roll-Up Entity on the basis of the number of
Units held by that Holder.
16.7.6 The Fund shall not participate in any proposed Roll-Up
Transaction in which Holders' rights of access to the records of the Roll-Up
Entity will be less than those provided for under this Agreement.
17. TERMINATION OF A MANAGER AND TRANSFER OF THE MANAGER'S INTEREST
17.1 Removal or Withdrawal. The following conditions shall govern the
voluntary withdrawal or removal of the Manager:
17.1.1 The Manager may not voluntarily withdraw from the Fund
without the approval of Members holding more than 50% of the total outstanding
Units entitled to vote.
17.1.2 The Manager may be removed upon a vote of Holders
owning more than 50% of the total outstanding Units entitled to vote. Written
notice of removal of the Manager shall be served either by certified or by
registered mail, return receipt requested, or by personal service. Such notice
shall set forth the date upon which the removal is to become effective.
17.2 Other Terminating Events. In the event of the adjudication of
bankruptcy, filing of a certificate of dissolution, death or adjudication of
insanity or incompetency of the Manager (each of such events, as well as
removal, resignation and withdrawal of a Manager, being herein referred to as a
"Terminating Event"), the Fund shall be dissolved and shall be liquidated under
the provisions of Article 19, subject to the provisions of Section 17.3.
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17.3 Election of Successor Manager; Continuation of Fund Business. The
following provisions shall govern the election of a successor Manager and
continuation of the business of the Fund upon the occurrence of a Terminating
Event with respect to a Manager (the "Retiring Manager"):
17.3.1 If at the time of a Terminating Event the Fund has one
or more Managers other than the Retiring Manager, any remaining Manager or a
majority-in-interest of the Limited Members may elect, within 90 days
thereafter, to continue the Fund business, in which case the Fund shall not
dissolve. So long as there is at least one remaining Manager which so elects, or
if a majority-in-interest of the Members so elect and a remaining Manager does
not so elect, any remaining Manager which is not willing to elect to continue
the Fund business will be deemed to have been removed from the Fund by vote of
the Members.
17.3.2 If at the time of a Terminating Event the Retiring
Manager is the sole remaining Manager, the Fund shall be dissolved unless a
majority-in-interest of the Members elect to continue the Fund business. In the
event of such election, the Fund business may be continued if the Members making
such election, within 90 days after the occurrence of the Terminating Event,
elect a successor Manager and continue the Fund's business on the same terms and
conditions as are contained herein, but with a name which does not include or in
any way refer to the name of any Retiring Manager.
17.4 Admission of Successor or Additional Manager. The following
conditions shall be satisfied before any Person shall become a successor Manager
or an additional Manager:
17.4.1 Such Person shall have been elected in accordance with
Section 17.3 or 17.6;
17.4.2 Such Person shall have accepted and agreed to be bound
by all the terms and provisions of this Agreement;
17.4.3 If such Person is a corporation, it shall have provided
the Fund with evidence satisfactory to counsel for the Fund of its authority to
become a Manager and to be bound by this Agreement; and
17.4.4 Any amendments and filings required or appropriate
under the California Act shall have been made.
17.5 Effect of a Terminating Event. Upon the occurrence of a
Terminating Event, the following provisions shall be applicable:
17.5.1 The Retiring Manager shall immediately cease to be a
Manager and shall not have any right to participate in the management of the
affairs of the Fund or to receive any fees under this Agreement not already paid
or earned; provided, however, that the Retiring Manager shall receive all
amounts then accrued and payable by the Fund and shall be, and shall remain,
liable as a Manager for all obligations and liabilities incurred by the Fund
prior to the effective date of the Terminating Event, but shall be free from any
obligation or liability incurred on account of the activities of the Fund from
and after such time.
17.5.2 If the business of the Fund is continued, as aforesaid,
the Retiring Manager shall be entitled to receive from the Fund the then present
fair market value of its interest in the Fund, determined by agreement of the
Retiring Manager and the remaining or new Managers, or, if they cannot
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agree, by arbitration in accordance with the then current rules of the American
Arbitration Association. The expense of such arbitration shall be borne equally
by the Fund and the Retiring Manager, and such arbitration shall be conducted in
San Francisco, California unless otherwise agreed by both parties. The Fund
shall forthwith pay to the Retiring Manager an amount equal to the then present
fair market value of the interest so determined. If the Retiring Manager has
voluntarily withdrawn from the Fund, payment shall be in the form of a
non-interest bearing unsecured promissory note with principal payable, if at
all, out of Distributions the Retiring Manager would otherwise have received
under this Agreement had such Manager not been terminated. If the Retiring
Manager has been terminated involuntarily, the payment shall be in the form of
an interest bearing promissory note payable in equal annual installments over a
term of not less than five years. Such payment when made shall constitute
complete and full discharge of all amounts to which the Retiring Manager is
entitled in respect to such interest.
17.5.3 All executory contracts between the Fund and the
Retiring Manager or any Affiliate thereof (unless such Affiliate is also an
Affiliate of the remaining or new Manager or Members) may be terminated by the
Fund effective upon written notice to the party so terminated. The Retiring
Manager or any Affiliate thereof (unless such Affiliate is also an Affiliate of
the remaining or new Manager or Members) may also terminate and cancel any such
executory contract effective upon 60 days' prior written notice of such
termination and cancellation given to the remaining or new Manager or Members,
if any, or to the Fund.
17.6 Election of Additional Manager. Members owning in excess of 50% of
the outstanding Units may at any time and from time to time elect an additional
Manager, and, upon satisfaction of the conditions set forth in Section 17.4, the
Person so elected shall be admitted as an additional Manager. Admission of an
additional Manager shall not cause dissolution of the Fund.
17.7 Assignment of Manager's Interest. The Manager may not transfer its
Membership in the Fund without the consent of Members owning in excess of 50% of
the total outstanding Units, unless such an assignment is to an entity which
succeeds to all of the assets of the assigning Manager and of which at least 80%
of the voting and beneficial interest is controlled by Persons controlling 80%
or more of the voting and beneficial interest of the assigning Manager. Any
entity to which the entire interest of a Manager in the Fund is assigned in
compliance with this Section 17.7 shall be substituted as a Manager by the
filing of appropriate amendments to this Agreement. Notwithstanding the
foregoing, the Manager may delegate to any of its subsidiaries or other
Affiliates responsibility for specific services to be performed for the Fund and
may assign all or a portion of the compensation due the Manager to such
subsidiaries or other Affiliates.
17.8 Members' Participation in Manager's Bankruptcy. In the event the
Manager is subject to a voluntary or involuntary petition for reorganization or
liquidation under the federal Bankruptcy Act, the Manager will cause separate
counsel to be retained on behalf of the Fund, at Fund expense, to represent the
Members' interests in the bankruptcy action. In such event, the Fund will also
bear any reasonable and necessary expenses of a duly appointed committee of
Members incurred while acting on behalf of all of the Members as a group in
connection with such bankruptcy action.
18. CERTAIN TRANSACTIONS
18.1 The Manager and its Affiliates, the Holders, any shareholder,
officer, director, Member or employee thereof, or any Person owning a legal or
beneficial interest therein, may engage in or possess an interest in any other
business or venture of every nature and description, independently or with
others,
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including, but not limited to, the ownership, financing, leasing, operation,
management and brokerage of equipment. Except as described in the Prospectus,
and subject to their fiduciary duties to the Fund, neither the Manager nor its
Affiliates shall be obligated to present to the Fund any particular investment
opportunity, regardless of whether such opportunity is of such character that
the Fund could take advantage thereof if it were presented to the Fund, and the
Manager and its Affiliates shall have the right to take for their own accounts
(individually or otherwise) or to recommend to others any such investment
opportunity.
19. TERMINATION AND DISSOLUTION OF THE FUND
19.1 Termination and Dissolution. The Fund shall be terminated and
dissolved upon the earliest to occur of the following:
19.1.1 The withdrawal, removal, adjudication of bankruptcy,
insolvency, insanity or incompetency, death or dissolution of a Manager unless a
remaining Manager or a majority-in-interest of the Members, within 90 days of
the date of such event, elects to continue the business of the Fund, and, if
necessary, elects a replacement Manager, in the manner provided in Article 17;
provided that expenses incurred on behalf of the Manager and/or Members in the
continuation or reformation, or attempted continuation or reformation, of the
Fund hereunder shall be deemed expenses of the Fund;
19.1.2 The Members owning more than 50% of the total
outstanding Units vote in favor of dissolution and termination of the Fund;
19.1.3 The term of the Fund expires; or
19.1.4 The Fund disposes of all interests in Equipment and its
other assets and receives final payment in cash of the proceeds of such
dispositions.
19.2 Accounting and Liquidation. Upon the dissolution and termination
of the Fund for any reason, the Manager shall take full account of the Fund
assets and liabilities, shall liquidate the assets as promptly as is consistent
with obtaining the fair value thereof, and shall apply and distribute the
proceeds therefrom in the following order:
19.2.1 To the payment of creditors of the Fund but excluding
secured creditors whose obligations will be assumed or otherwise transferred on
the liquidation of Fund assets;
19.2.2 To the repayment of any outstanding loans made by the
Manager to the Fund; and
19.2.3 To the Manager and Holders in accordance with their
respective Capital Account balances, after giving effect to all allocations
described in Article 10 of this Agreement; provided, however, that prior to any
allocation under Section 10 of this Agreement, Gross Income shall be specially
allocated to the Manager to the extent, if any, necessary to cause its Capital
Account balance to be zero as of the close of such final taxable year (after
crediting the Manager's Capital Account with the Manager's share of Fund Minimum
Gain). For purposes of making the foregoing allocation, Net Income and Net Loss
for the final taxable year of the Fund shall first tentatively be computed by
including all Gross Income as an element thereof; then, to the extent, if any,
that the Capital Account balance of the Manager is negative as of the close of
such final taxable year (after giving effect to all Fund
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<PAGE>
distributions), Gross Income shall be separately stated and allocated away from
the Holders and to the Manager pursuant to this Section 19.2.3.
19.2.4 Distributions in liquidation shall be made by the end
of the taxable year in which the liquidation occurs or, if later, within 90 days
of the liquidating event and shall otherwise comply with Regulations Section
1.704-1(b).
20. SPECIAL POWER OF ATTORNEY
20.1 Execution of Power of Attorney. By executing this Agreement, each
Holder is hereby granting to the Manager a special power of attorney irrevocably
making, constituting and appointing ATEL, its duly appointed officers, and any
one of them, as the attorney-in-fact for such Holder, with power and authority
to act alone in his name and on his behalf to execute, acknowledge and swear to
the execution, acknowledgement and filing of the following documents:
20.1.1 This Agreement, the Articles of Organization, any
separate certificates, as well as any amendments to the foregoing which, under
the laws of the State of California or the laws of any other state, are required
to be filed or which the Manager deems advisable to file;
20.1.2 Any other instrument or document which may be required
to be filed by the Fund under the laws of any state or by any governmental
agency, or which the Manager deems advisable to file; and
20.1.3 Any instrument or document which may be required to
effect the continuation of the Fund, the admission of an additional or
substituted Holder, or the dissolution and termination of the Fund (provided
such continuation, admission or dissolution and termination are in accordance
with the terms of this Agreement), or to reflect any reductions in amount of
contributions of Members.
20.2 Special Power of Attorney. The special power of attorney being
granted hereby:
20.2.1 Is a special power of attorney coupled with an
interest, is irrevocable, shall survive the death or legal incapacity of the
granting Holder, and is limited to those matters herein set forth;
20.2.2 May be exercised by the Manager acting alone for each
Holder by a facsimile signature of such Manager or by one of its officers, or by
listing all of the Holders executing any instrument with a single signature of a
Manager, or of one of the Manager's officers, acting as attorney-in-fact; and
20.2.3 Shall survive an assignment by a Holder of all or any
portion of his Units except that, where the Assignee of the Units owned by a
Holder has been approved by the Manager for admission to the Fund as a
substituted Holder, the special power of attorney shall survive such assignment
for the sole purpose of enabling the Manager to execute, acknowledge and file
any instrument or document necessary to effect such substitution.
21. INDEMNIFICATION
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21.1 Indemnification of the Manager. The Fund, its receiver or its
trustee, shall indemnify, save harmless and pay all judgments and claims against
the Manager and any of its Affiliates who perform services for the Fund from any
liability, loss or damage incurred by them or the Fund by reason of any act
performed or omitted to be performed by them when acting in connection with the
business of the Fund, including costs and attorneys' fees and any amounts
expended in the settlement of any claims or liability, loss or damage; provided,
however, that, if such liability, loss or claim arises out of any action or
inaction of the Manager or Affiliates who perform services for the Fund, the
Manager or Affiliates who perform services for the Fund must have determined, in
good faith, that such course of conduct was in the best interest of the Fund and
did not constitute fraud, negligence, breach of fiduciary duty or misconduct by
the Manager or Affiliates who perform services for the Fund; and provided
further, that any such indemnification shall be recoverable only from the assets
of the Fund and not from the assets of the Holders. All judgments against the
Fund and the Manager, wherein a Manager is entitled to indemnification, must
first be satisfied from Fund assets before such Manager may be held responsible.
Persons entitled to indemnification hereunder shall be entitled to receive
advances for attorney's fees and other legal costs and expenses arising out of
claims made against them, provided that (i) no such advances may be made for
such fees, costs or expenses resulting from claims made by Holders; and (ii)
advances for such fees and expenses relating to claims made by parties other
than Holders may only be made if the action relates to the performance of duties
or services by the indemnified party on behalf of the Fund, the indemnified
party obtains an opinion of independent counsel that such party will be entitled
to indemnification pursuant to this Agreement under the specific circumstances
of the claim in question, and the indemnified party undertakes in writing prior
to receipt of such advances that such party will repay in full any such advanced
funds together with interest thereon in the event that, upon the ultimate
disposition of the claim, the party would not be entitled to indemnification
hereunder. Nothing contained herein shall constitute a waiver by a Holder of any
right which he may have against any party under federal or state securities
laws.
21.2 Limitations on Indemnification. Notwithstanding anything to the
contrary contained in the foregoing Section 21.1, neither the Manager nor any of
its Affiliates performing services for the Fund nor any party acting as a
broker-dealer shall be indemnified from any liability, loss or damage incurred
by them in connection with (i) any claim or settlement involving violations of
state or federal securities laws by the Manager or by any Affiliate performing
services for the Fund; or (ii) any liability imposed by law, such as liability
for fraud, bad faith or negligence; provided, however, that indemnification will
be allowed for settlements and related expenses of lawsuits alleging securities
law violations, and for expenses incurred in successfully defending such
lawsuits, provided that a court either (x) approves the settlement and finds
that indemnification of any payment in settlement and related costs should be
made; or (y) approves indemnification of litigation costs if a successful
defense is made, or a dismissal with prejudice is obtained, as to the indemnitee
on the merits of each count involving alleged securities law violations; and (z)
the parties seeking indemnification apprise the court of the positions of the
securities law administrators of any state in which the Units were offered or
sold, including the Massachusetts Securities Division, and the Securities and
Exchange Commission with respect to indemnification for securities laws
violations before seeking court approval for indemnification. Furthermore, the
Manager shall indemnify the Fund against any loss or liability which it may
incur as a result of the violation by the Manager or any of its Affiliates
performing services for the Fund of any state or federal securities laws.
21.3 Insurance. The Fund shall not pay for any insurance covering
liability of the Manager or any of its Affiliates for actions or omissions for
which indemnification is not permitted hereunder; provided, however, that
nothing contained herein shall preclude the Fund from purchasing and paying for
such types of insurance, including extended coverage liability and casualty and
worker's compensation,
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as would be customary for any Person owning comparable Equipment and engaged in
a similar business or from naming the Manager and any of its Affiliates as
additional insured parties thereunder, provided that such addition does not add
to the premiums payable by the Fund.
22. MISCELLANEOUS
22.1 Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on all
parties hereto, notwithstanding that all of the parties are not signatory to the
original or the same counterpart.
22.2 Successors and Assigns. The terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the successors and
assigns of the respective Members.
22.3 Severability. In the event any sentence or paragraph of this
Agreement is declared by a court of competent jurisdiction to be void, such
sentence or paragraph shall be deemed severed from the remainder of this
Agreement and the balance of this Agreement shall remain in effect.
22.4 Notices. All notices under this Agreement shall be in writing and
shall be given to the Person entitled thereto, by personal service or by mail,
posted to the address maintained by the Fund for such Person or at such other
address as he may specify in writing.
22.5 Captions. Article and section titles or captions contained in this
Agreement are inserted only as a matter of convenience and for reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement nor the intent of any provision hereof.
22.6 Number and Pronouns. Whenever required by the context hereof, the
singular shall include the plural, and vice-versa; the masculine gender shall
include the feminine and neuter genders, and vice-versa.
22.7 Manager Address. The address of the Manager is:
ATEL Financial Corporation
235 Pine Street, 6th Floor
San Francisco, California 94104
22.8 Member Addresses. The names, addresses and capital contributions
of the Members are set forth on Exhibit I attached hereto, which exhibit shall
be maintained at the principal place of business of the Fund.
22.9 Construction. Notwithstanding the place where this Agreement may
be executed by any of the parties hereto, the parties expressly agree that all
the terms and provisions hereof shall be construed under the laws of the State
of California and that the Fund shall be governed by the California Act, as
amended, governing limited liability companies formed under California law.
22.10 Qualification to Do Business. In the event the business of the
Fund is carried on or conducted in states in addition to the State of
California, then the parties agree that this Fund shall exist under the laws of
each state in which business is actually conducted by the Fund, and they
severally
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agree to execute such other and further documents as may be required or
requested in order that the Manager may qualify the Fund to conduct business in
such states. The power of attorney granted to the Manager by each Holder in
Article 20 shall constitute authority for the Manager to perform the
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ministerial duty of qualifying the Fund under the laws of any state in which it
is necessary to file documents or instruments of qualification. A Fund office or
principal place of business in a state may be designated from time to time by
the Manager.
INITIAL MEMBERS:
ATEL FINANCIAL CORPORATION, Manager
By:________________________________
__________________________________
Linda Batt
__________________________________
Eliza Cash
atel8-1/operating3.ag
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EXHIBIT I
Schedule of Members
Capital
Name Address Contribution
Linda Batt $250/25 Units
c/o ATEL Financial Corporation
235 Pine Street
6th Floor
San Francisco, CA 94104
Eliza Cash $250/25 Units
c/o ATEL Financial Corporation
235 Pine Street
6th Floor
San Francisco, CA 94104
ATEL Financial Corporation $100
235 Pine Street
6th Floor
San Francisco, CA 94104
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<PAGE>
EXHIBIT C
HOW TO INVEST
TO THE INVESTOR:
Prior to the satisfaction of the escrow condition (sale of 120,000 Units), make
your check payable to "U.S. Bank - ACEF VIII Escrow". Thereafter, make your
check payable to"ATEL Capital Equipment Fund VIII". Investments must be made in
increments of $10, minimum of $2,500 (or $2,000 for an IRA, Keogh or qualified
plan) in most states. See the discussion under Plan of Distribution-State
Requirements in the prospectus for exceptions.
IMPORTANT INSTRUCTIONS:
- ----------------------
Fully complete sections 1, 2, and 3 of the Subscription Agreement.
All subscribers must:
1) sign each appropriate section where indicated, 2) initial each appropriate
section (sections 3A - 3D) where indicated on the bottom of the subscription
agreement.
If you would like your distributions sent to an address other than your own
(mutual fund, bank, etc.). please fill in the optional check address section
(section 6).
ADD-ON INVESTMENTS
The subscription agreement accompanying additional investments in Fund VIII must
have an authorized signature of a Broker/Dealer, but does not require the
signature of the investor. Add-on investments must bear the exact name in which
the previous investment was registered, or a new signed subscription form will
be required.
FOREIGN INVESTOR OPTION
As described in the Prospectus, the Manager has elected to permit limited
investment in Units by nonresident alien investors. In section 1 of the
Subscription Agreement there are three boxes, one of which must be checked to
indicate whether an investor is a resident alien, nonresident alien or U.S.
citizen residing outside the United States. If none of the three boxes is
checked, the executed Subscription Agreement will constitute the investor's
representation that he or she is a U.S. citizen residing in the United States.
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TO THE SELLING REPRESENTATIVE:
Please complete the Broker/Dealer Information section (Box 7) using your office
address rather than the home office address. This section must be completed for
all investments, including add-on investments by previous subscribers. Please
make sure that the exact same name is used for the registered owner if the
investment is an additional subscription.
Please have the subscription document signed by your branch manager or other
authorized signatory.
Mail original white, pink and yellow copies
Retain blue copy for Broker/Dealer
Retain green copy for the investor unless otherwise specified by your home
office, (all IRA investments must be submitted directly to the custodian and
they will then forward the subscription on to ATEL) to:
ATEL SECURITIES CORPORATION
SUBSCRIPTION PROCESSING DESK
235 PINE STREET, Suite 600
SAN FRANCISCO, CA 94104
(415) 989-8800
(800) 543-ATEL
E-mail: [email protected]
- --------------------------------------------------------------------------
The investor whose signature appears in Section 2 on the reverse side hereof
(the "Investor") hereby subscribes for the number of Units of ATEL Capital
Equipment Fund VIII, LLC (the "Fund") set forth in Section I of this
subscription Agreement in the manner described in the prospectus to which this
agreement is an exhibit (the "Prospectus"). Prior to the satisfaction of the
escrow condition (sale of 120,000 Units), there is transmitted herewith as the
subscription price a check payable to "U.S. Bank - ACEF VIII Escrow" in the
amount required to purchase such Units ($10 per Unit). Such funds will be
promptly transmitted (as defined in Rule 15c2-4 under the Securities Exchange
Act of 1934 and NASD Notice to members 84-64). No subscription funds will be
released to the Fund unless and until subscriptions for a minimum of 120,000
units have been received and collected by the escrow agent prior to a date 12
months after the date of the Prospectus. After the escrow condition of 120,000
Units sold has been satisfied, checks should be made payable to "ATEL Capital
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Equipment Fund VIII". Minimum initial investment is 250 Units (200 Units for
Individual Retirement Accounts or Qualified Plans).
The Investor agrees that if this subscription is accepted it will be held,
together with the accompanying payment, on the terms described in the Prospectus
and that, if accepted as a holder of the Units ("Holder"), the Investor shall be
bound by the terms and conditions of the Operating Agreement set forth as
Exhibit B to the Prospectus, including the special power of attorney set forth
therein. The subscription may be cancelled by the subscriber at any time during
a period of five days after the subscriber has submitted this executed
subscription agreement to the Fund.
The assignability and transferability of the Units will be governed by the
Agreement and all applicable laws, and the Investor must have adequate means of
providing for his current needs and personal contingencies and must have no need
for liquidity in this investment.
The Investor may not be able to consummate a sale or transfer of the Units, or
any interest therein, or receive any consideration therefor, without the prior
written consent of the Commissioner of Corporations of the State of California,
except as permitted in the Commissioner's Rules, and the Units, or any document
of assignment or transfer evidencing the Units, will bear a legend reflecting
the substance of the foregoing understanding if such Units have been issued
pursuant to qualification under the California Corporate Securities Law of 1968.
INSTRUCTIONS FOR COMPLETING THE SUBSCRIPTION AGREEMENT Note- Please type or
print legibly when completing the Subscription Agreement.
Section 1: Units Purchased.
- - Fill in the total dollar amount and the number of Units to be acquired.
Please note there are no fractional Units. All purchases must be in
increments of $10.
- - Indicate whether this is an original investment in the Fund or an
additional investment to an existing Fund account with the exact same
registration by checking the appropriate box. Please note the minimum
requirements. Only the dollar amount, subscriber name and broker/dealer
information sections of the subscription forms need be completed for
additional subscriptions by the same investor.
Section 2: Registered Owner.
- - Fill in the name(s) and addresses for the investment as they should
appear in the registration.
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- - Check the applicable citizen status boxes.
- - Enter the appropriate taxpayer identification number for this
investment, depending on the type of ownership. For IRAs and Keoghs
please include both the custodian's taxpayer identification and
investor's social security number.
- - Check whether monthly or quarterly distributions are desired.
- - Please read the Subscription Agreement, then sign and date the form.
- - Single Ownership - one signature required - Joint Tenants - all
parties must sign - Community Property - one signature required -
Tenants in Common - all parties must sign - Tenants in Entirety - one
signature required
- - In all other cases, the custodian, trustee, general partner or
authorized corporate officer must sign. Where the documents
establishing such representative capacity require more than one
signature for execution of instruments on behalf of the represented
entity, then all signatures required by such documents are required
here.
Section 3: Subscriber Confirmation of Suitability
- - Each item must be initialed.
Section 4: Legal Form of Ownership.
- - Mark only one box. Fill in any information requested and note whose
signature(s) is (are) required in Section 2.
Section 5: Investor Mailing Addresses.
- - Fill in name and address if different from Section 1, as with IRAs and
Keoghs.
Section 6: Optional Check Addresses.
- - Complete this section only if you want your distribution checks mailed
to an address other than that shown in Section 2.
Section 7: Broker/Dealer Information.
- - Fill in the name of the licensed Broker/Dealer firm, the name of the
Account Executive, and the telephone number and mailing address of the
Account Executive. The name, address and phone number of the Account
Executive are required so he/she can receive copies of all investor
communications.
- - An authorized Branch Manager or Registered Principal of the
Broker/Dealer firm must sign the form. Orders cannot be accepted
without Broker/Dealer authorization.
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<PAGE>
Mailing Address.
- - Mail the completed form with a check payable as indicated in Section 1 to:
ATEL Securities Corporation
Attention: Subscription Processing Desk
235 Pine Street, Suite 600
San Francisco, CA 94104
If you have any additional questions about completing this Subscription
Agreement, please call ATEL Securities Corporation Subscription Processing
Desk at (800) 543-ATEL.
- ---------------------------------------------------------------------------
ATEL CAPITAL EQUIPMENT FUND VIII, LLC - SUBSCRIPTION AGREEMENT
Please type or print the following information: 1.UNITS PURCHASED Make checks
payable to "ATEL Capital Equipment Fund VIII" $_________ is for the purchase, as
a Holder, of _______ Units
and should be registered as indicated in the Registered Owner section
below.
2. REGISTERED OWNER.
Name(s) and addresses will be recorded exactly as printed below.
(Include custodial address if applicable.)
___Mr. ___Ms. ___Mr. and Mrs. ___Mrs.
Investor(s) Name and/or
Custodian/Nominee_________________________________________________________
Investor Name(s)__________________________________________________________
Address___________________________________________________________________
City ______________________________________State_____ZipCode______________
Investor Phone Number (____)______________E-mail__________________________
Investor Account # (if any)_______________________________________________
X______________________________________________Date_______________________
Subscriber's Signature
X______________________________________________Date_______________________
Subscriber/Custodian/Nominee or Authorized Signature
___INITIAL INVESTMENT $10 per unit ($2,500/250 Unit Minimum, $2,000/200 Unit
Minimum for IRA or Qualified Plan, unless a higher minimum is required in the
investor's state - see the Prospectus)
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___ ADDITIONAL INVESTMENT ($500/50 Units, unless a higher minimum is required
in the investor's state - see the Prospectus)
___ Check if you are a resident alien.
___ Check if you are a nonresident alien (please include W-8 form).
___ Check if you are a U.S. citizen residing outside the U.S.
TAXPAYER IDENTIFICATION NUMBER
Note: If the account is in more than one name, the number should be that of
the first person listed.
- -- -- -- -- -- -- -- -- --
Include BOTH numbers for IRAs and Keoghs.
SOCIAL SECURITY NUMBER
- -- -- -- -- -- -- -- -- --
HAVE YOU INVESTED IN ANY PRIOR ATEL FUND?
___YES ___NO
DISTRIBUTION OPTION (check one)
___ Quarterly ___Monthly
No representations should be relied upon other than those contained in the
Prospectus, as amended and/or supplemented. The subscriber represents, warrants
and agrees as set forth on the reverse side of this signature page; further, the
undersigned declares under penalty of perjury that to the best of his knowledge
the information supplied above is true and correct and may be relied upon by the
Manager and the Fund in connection with his investment as a Holder in the Fund.
The subscriber hereby subscribe(s) for the purchase of fully-paid and
nonassessable Units of the Fund as indicated.
3. SUBSCRIBER AGREES AS FOLLOWS (EACH ITEM MUST BE INITIALED): In order to
induce the Manager to accept this subscription, the Investor hereby represents
to you as follows (initial in the space provided):
A. The Investor has (a) a net worth of at least $150,000 in excess of his
investment in Units, or (b) has a net worth of at least $45,000 in excess of his
investment in Units and had during the last tax year or estimates that he will
have during the current tax year a minimum of $45,000 annual gross income. In
all cases net worth is exclusive of home, home furnishings and automobiles. The
Investor further represents that he/she satisfies any other minimum income
and/or net worth standards imposed by the jurisdiction in which he/she resides,
if any different standards are set
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<PAGE>
forth in the Prospectus or any supplement thereto.
INITIAL HERE________
B. If the undersigned is acting in a representative capacity for a corporation,
partnership, trust or other entity, or as agent for any person or entity, he
hereby represents and warrants that he has full authority to enter into this
agreement in such capacity. INITIAL HERE________
C. If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the representations and warranties herein shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing. INITIAL HERE________
D. Under the penalties of perjury, the undersigned certifies that (l) the number
provided herein is his correct Taxpayer Identification Number; and (2) he is not
subject to backup withholding either because he has not been notified that he is
subject to backup withholding as a result of a failure to report all interest or
dividends, or the Internal Revenue Service has notified him that he is no longer
subject to backup withholding. (If the undersigned is currently subject to
backup withholding, he has stricken the language under clause (2) above before
signing). INITIAL HERE________
4. LEGAL FORM OF OWNERSHIP (Check Only One) ___ Single Ownership ___ Joint
Tenants With Rights of Survivorship ___ Husband and Wife as Community Property
___ Tenants in Common ___ Tenants in Entirety ___ Sep IRA ___ IRA __regular
__rollover ___ Trust - Trust Date (Month/Day/Year) ___/___/___ ___ Custodian ___
Custodian for___________________________________ ___ UGMA / UTMA - State
of:_______ ___ Pension Plan ___ Profit Sharing Plan ___ Corporation ___
Partnership ___ Non-Profit Organization ___ Other__________________
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<PAGE>
5. INVESTOR MAILING ADDRESS
(if different from above, as with IRAs and Keoghs)
Name________________________________________________________________________
Name________________________________________________________________________
Address_____________________________________________________________________
City__________________________________________State_____Zip Code____________
Investor Phone Number (_____)_______________________________________________
6. OPTIONAL CHECK ADDRESS If you would like your distribution checks mailed to
an address other than registered owner's address, please complete.
___ Designated for all Units or,
___ Designated for Partial Units ________
Receiving Entity____________________________________________________________
Address_____________________________________________________________________
City__________________________________________State_____Zip Code____________
Fund Name______________________________Account Number_______________________
7. BROKER/DEALER INFORMATION The Broker/Dealer must sign below to complete
order. Broker/Dealer hereby warrants that it is a duly licensed Broker/Dealer
and may lawfully offer Units in the state designated as the Investor's residence
and, further, that it has reasonable grounds to believe, based on information
obtained from the Subscriber concerning his investment objectives, other
investments, financial situation and needs and any other information known by
the Broker/Dealer, that investment in the Fund is suitable for the Subscriber in
light of his/her financial position, net worth and other suitability
characteristics, and that the Broker/Dealer has informed the Subscriber as to
the limited liquidity and marketability of the Units. The undersigned
Broker/Dealer warrants that a current Prospectus was delivered to the
Subscriber.
Licensed Firm Name__________________________________________________________
Account Executive Name_________________________________B/D Rep #____________ A/E
Mailing Address____________________________________________Suite#_______
City__________________________________________State_____Zip Code____________
Telephone(____)____________________ NumberFax(____)_________________________
E-mail______________________________________________________________________
X_____________________________________________________Date__________________
Authorized signature (Branch Manager or Registered Principal).
Order cannot be accepted without signature.
This transaction, for Blue Sky purposes, took place in the State of ______.
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<PAGE>
ACCEPTANCE BY MANAGER
FOR MANAGER'S USE ONLY
Received and Subscription Accepted
ATEL Financial Corporation, Manager
By__________________________________________________________________________
Amount___________________________ Date______________ B/D Rep #______________
RETURN TOP 3 COPIES: WHITE - ATEL COPY, YELLOW - BROKER/DEALER COPY,
PINK - INVESTOR COPY
RETAIN: BLUE - BROKER/DEALER COPY, GREEN - INVESTOR COPY
ATEL SECURITIES CORPORATION
235 PINE STREET - 6th FLOOR - SAN FRANCISCO, CA 94104
(800) 543-2835 - E-Mail: [email protected]
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Assuming the offer and sale of the maximum offering of Units,
estimated expenses in connection with the issuance and distribution of the
Units, other than Sales Commissions, in the aggregate are as follows:
Registration fee .........................$ 43,103
Printing costs............................ 450,000
Advertising expenses...................... 450,000
Legal fees and expenses .................. 200,000
Accounting fees........................... 125,000
Blue Sky fees and expenses................ 250,000
NASD fees and expenses.................... 13,000
Travel, telephone and
mailing expenses....................... 450,000
Broker-Dealer due
diligence reimbursements............... 625,000
Broker-Dealer seminars.................... 415,000
Investor seminar expense reimbursements... 125,000
Other wholesaling fees and expense
reimbursements.................. 500,000
Other..................................... 558,897
Total........................... $4,205,000
----------------
ITEM 14. Indemnification of Directors and Officers.
(a) The directors and officers of ATEL Financial Corporation,
the Registrant's Manager, may be indemnified by such corporation for certain
liabilities, including liabilities under the Securities Act of 1933 and the
Securities Exchange Act of 1934, pursuant to its Articles of Incorporation and
Bylaws and Section 317 of the California Corporations Code.
Generally, directors and officers of ATEL Financial
Corporation may seek indemnification from the corporation for liabilities,
damages, costs, attorney's fees and other charges assessed or otherwise payable
by them arising in connection with the discharge of their duties as directors or
officers (unless such liabilities arise as the result of willful or deliberate
misconduct) under one or more of the governing instruments referenced above.
(b) The Registrant has agreed, pursuant to the Limited
Liability Company Operating Agreement included as Exhibit B to the Prospectus,
to indemnify the Manager and its Affiliates against certain liabilities,
excluding liabilities under the Securities Act of 1933.
II-1
<PAGE>
ITEM 15. Recent Sales of Unregistered Securities.
The Registrant has recently been formed but has not issued any
securities other than (i) The Manager's interest to ATEL Financial Corporation,
for a capital contribution of $100, and (ii) 25 units of limited liability
company interest issued to each of Linda Batt and Eliza Cash as the original
Members of the Registrant, for a price of $10 per Unit. These sales occurred in
August 1998 in reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933, as amended. These sales were for the
purpose of organizing the Registrant as a limited liability company and for
investment purposes and not with a view to the distribution of such securities.
ITEM 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
Number Exhibits
1.1 Form of Dealer Manager Agreement
1.2 Form of Selected Dealer Agreement
3.1 Limited Liability Company Operating Agreement
(incorporated by reference to Exhibit B to
Prospectus)
5.1 Opinion regarding legality
8.1 Opinion regarding tax matters
10.1 Form of Escrow Agreement
23.1 Consent of Ernst & Young
23.2 Consent of Derenthal & Dannhauser (included in
Exhibit 5.1 to this Registration Statement)
23.3 Consent of Jackson, Tufts, Cole & Black (included in
Exhibit 8.1 to this Registration Statement)
24.1 Powers of Attorney are set forth in this Part II of
the Registration Statement on Form S-1
(b) Financial Statements Included in the Prospectus.
ATEL Capital Equipment Fund VIII, LLC
[TO BE PROVIDED BY AMENDMENT]
II-2
<PAGE>
ATEL Financial Corporation
Report of Independent Auditors
Balance Sheet, July 31, 1997
Notes to Balance Sheet
Balance Sheet, December 31, 1997 (Unaudited)
Notes to Balance Sheet (Unaudited)
ITEM 17. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of this Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in this Registration Statement or any material change to such
information in this Registration Statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4) That all post-effective amendments will comply
with the applicable forms, rules and regulations of the commission in effect at
the time such post-effective amendments are filed.
(5) To send to each Member at least on an annual
basis a detailed statement of any transactions with the Manager or its
affiliates, and of fees, commissions, compensation and other benefits paid, or
accrued to the Manager or its affiliates for the fiscal year completed, showing
the amount paid or accrued to each recipient and the services performed.
II-3
<PAGE>
(6) To send to the Members, within 45 days after
the close of each quarterly fiscal period, the information specified by the Form
10-Q, if such report is required to be filed with the Commission.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to the Manager of the Registrant (or
controlling persons of the Manager or of the Registrant) pursuant to the
provisions described under Item 14 above or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by the Manager or controlling person of
the Registrant in the successful defense of any action suit or proceeding) is
asserted by any such Manager or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California, on the 28th day of August, 1998.
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
By: ATEL Financial Corporation,
a California corporation,
Manager
By: /s/ A.J. BATT
A. J. Batt
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS that the undersigned each hereby
constitutes and appoints A.J. Batt and Dean L. Cash jointly and severally, their
true and lawful attorneys-in-fact, each with power of substitution, for them in
any and all capacities, to do any and all acts or things and to execute any and
all instruments which said attorneys, or any of them, may deem necessary or
advisable to enable ATEL Capital Equipment Fund VIII, LLC (the "Fund"), to
comply with the Securities Act of 1933, as amended (the "Act"), and any rules
and regulations thereunder, in connection with the registration under the Act of
up to 15,000,000 Units of limited liability company interest in the Fund (the
"Units"), including, but not limited to, the power and authority to sign the
name of the undersigned, in any and all capacities, to a Registration Statement
on Form S-1 relating to the Units to be filed with the Securities and Exchange
Commission, to any and all amendments thereto, and to any and all documents or
instruments filed in connection therewith; and the undersigned each hereby
ratifies and confirms all that each of said attorneys, or his substitute or
substitutes, shall do or cause to be done by virtue hereof.
Signature Capacity Date
/s/ A. J. BATT Principal executive August 28, 1998
A. J. Batt officer of
Registrant; chief
executive officer
and director of
ATEL Financial
Corporation
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<PAGE>
/s/ DEAN L. CASH Director and August 28, 1998
Dean L. Cash Executive Vice
President of ATEL
Financial Corporation
/s/ F. RANDALL BIGONY Principal financial August 28, 1998
F. Randall Bigony officer and principal
accounting officer of
Registrant; chief
financial officer and
chief accounting officer
of ATEL Financial
Corporation
II-6
<PAGE>
INDEX TO EXHIBITS
Exhibit Sequentially
Number Exhibit Numbered Page
1.1 Form of Dealer Manager Agreement
1.2 Form of Selected Dealer Agreement
3.1 Limited Liability Company Operating
Agreement (incorporated by reference to
Exhibit B to Prospectus)
5.1 Opinion regarding legality
8.1 Opinion regarding tax matters
10.1 Form of Escrow Agreement
23.1 Consent of Ernst & Young
23.2 Consent of Derenthal & Dannhauser (included
in Exhibit 5.1 to this Registration
Statement)
23.3 Consent of Jackson, Tufts, Cole &
Black (included in Exhibit 8.1 to
this Registration Statement)
24.1 Powers of Attorney are set forth
in Part II of the Registration
Statement on Form S-1
- ---------------------
EXHIBIT 1.1
<PAGE>
$150,000,000
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
15,000,000 Limited Liability Company Member Units at $10 per Unit
Best Efforts
SELLING AGREEMENT
_________, 199_
ATEL Securities Corporation
235 Pine Street, 6th Floor
San Francisco, California 94104
as Dealer-Manager for the
above-described Units
Gentlemen:
ATEL Financial Corporation ("ATEL" or the "Manager") as Manager and on behalf of
ATEL Capital Equipment Fund VIII, LLC, a California limited liability company
(the "Fund") pursuant to the Limited Liability Company Operating Agreement (the
"Operating Agreement") set forth as Exhibit B to the Prospectus (as hereinafter
defined), hereby confirms its agreement with you as follows:
l.Description of Units. Subject to the terms hereof the Fund proposes to issue
and to offer for sale an aggregate of 15,000,000 of its limited liability
company member units (the "Units"), at a price of $10 per Unit through you and
those licensed brokers, if any, designated by you.
2.Representations, Warranties and Agreements of the Fund and the Manager. The
Fund and the Manager, jointly and severally, represent and warrant to, and agree
with, you as follows:
(a) The Fund has prepared and filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement and amendments thereto, on Form S-l
(File No. 333-_____) covering the registration of the Units under the Securities
Act of 1933 (the "Securities Act"), including the related preliminary
prospectus. Such preliminary prospectus bears, and any amended prospectus will
bear, the legend required by the rules and regulations of the Commission under
the Securities Act (the "Rules and Regulations"). Such Registration Statement,
as amended, at the time it becomes effective, and the final prospectus included
therein, are herein respectively called the "Registration Statement" and the
"Prospectus."
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<PAGE>
(b) The Registration Statement and the Prospectus, and all amendments or
supplements thereto, will contain all statements which are required to be stated
therein in accordance with the Securities Act and the Rules and Regulations, and
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will contain any untrue statement of a material fact or omit
any material fact required to be stated therein or necessary to make the
statements therein not misleading. In this connection, it is understood by the
Fund and the Manager that Rule 2810(b)(3) of the Conduct Rules of the National
Association of Securities Dealers, Inc. requires that you determine that all
material facts relating to the subject offering are adequately and accurately
disclosed to prospective subscribers and provide a basis for evaluating the
offering, and the Fund and the Manager therefore specifically represent and
warrant that:
(i) all items of compensation payable to them and their affiliates are and will
be set forth in the Prospectus under the caption "Management Compensation";
(ii) all types of equipment to be acquired by the Fund are and will be described
in the Prospectus under the caption "Investment Objectives and Policies - Types
of Equipment" or in a supplement to be included inside the back cover of the
Prospectus;
(iii) all material tax aspects are and will be set forth in the Prospectus under
the captions "Income Tax Consequences" and "Risk Factors";
(iv) the financial position and business experience of the Manager and of those
affiliates of the Manager who are of relevance to the subject offering are and
will be accurately and adequately reflected in the Prospectus under the captions
"Management" and "Prior Performance Summary";
(v) all material conflicts of interest and risk factors are and will be set
forth in the Prospectus under the captions "Conflicts of Interest" and "Risk
Factors"; and
(vi) all pertinent facts relating to the liquidity and marketability of the
Units are and will be set forth in the Prospectus under the captions "Risk
Factors - Limited Transferability of Units" and "Summary of the Operating
Agreement - Transferability of Units."
(c) The accountants who have certified or shall certify the audited financial
statements filed and to be filed with the Commission as parts of the
Registration Statement and the Prospectus are independent accountants as
required by the Act and the Rules and Regulations.
2
<PAGE>
(d) The financial statements filed with and as part of the Registration
Statement present fairly the respective financial positions of the Fund and ATEL
as of the date of such financial statements, in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
period involved.
(e) Except as set forth in or contemplated by the Registration Statement and the
Prospectus, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any material
adverse change in the condition, financial or otherwise, of the Manager or the
Fund; and except as set forth in or contemplated by the Registration Statement
and the Prospectus, neither the Manager nor the Fund have incurred any liability
or obligation or entered into any transaction since the date as of which
information is given in the Registration Statement and the Prospectus, otherwise
than in the ordinary course of business, which is material to the financial
condition of the Manager or the Fund.
(f) The Units conform to the description thereof contained in the Prospectus in
all material respects.
(g) Neither the issuance nor the sale of the Units, nor the consummation of any
other of the transactions herein contemplated, nor the fulfillment of the terms
hereof, will conflict with, result in a breach of or constitute a default under
the terms of any indenture, or other material agreement or instrument to which
the Manager or the Fund are, or will be, a party or are, or will be, bound, or,
to the best of the knowledge of the Manager, any order or regulation applicable
to the Manager or the Fund of any court, regulatory body, administrative agency
or governmental body having jurisdiction over the Manager or the Fund or any of
their respective assets or operations.
(h) The Units, when issued, will be duly authorized, validly issued, fully paid
and nonassessable.
(i) The Fund has been duly formed pursuant to the California Act (as defined in
the Operating Agreement) and is validly existing as a limited liability company
in good standing under the laws of the State of California with full power and
authority to own properties (or interests therein) and conduct its business as
described in the Prospectus. The Fund is qualified to do business as a limited
liability company or similar entity offering limited liability in those
jurisdictions where such qualification is necessary to assure limited liability
for the members. The Manager has been duly incorporated, is validly existing and
in good standing, under the laws of the State of California with full power and
authority to act as Manager of the Fund and conduct its business as described in
the Prospectus.
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<PAGE>
(j) The person or persons who have signed this Selling Agreement on behalf of
the Fund and the Manager are duly authorized so to sign, and this Selling
Agreement has been duly executed and delivered by, and is the valid, legal and
binding agreement of, the Fund and the Manager, enforceable in accordance with
its terms.
3. Representations and Warranties of the Dealer Manager. You represent and
warrant to and agree with the Fund as follows:
(a) You are a member in good standing of the National Association of Securities
Dealers, Inc., and will maintain such membership throughout the term of this
Agreement.
(b) You will comply with all federal laws pertaining to the sale of securities,
the laws of the jurisdictions in which you sell the Units, the Rules and
Regulations of the Commission and the Constitution, By-Laws and Rules of the
National Association of Securities Dealers, Inc., specifically including and
Rule 15c2-4 under the Securities Exchange Act of 1934, as interpreted in NASD
Notice to Members 84-64 (which requires that during the escrow period checks be
transmitted by you to the escrow agent as soon as practicable, but in any event
by noon of the second business day following receipt by you).
(c) You will make no sale of the Units unless such sale is preceded or
accompanied by the Prospectus.
(d) You will assist the Fund in qualifying the Units for sale under the laws of
the State of California and such other jurisdictions as the Dealer Manager and
the Manager shall mutually agree.
(e) You will (i) diligently make inquiries as required by law of all prospective
investors in order to ascertain whether a purchase of Units is suitable for the
investors and (ii) inform each prospective investor of all pertinent facts
relating to the liquidity and marketability of the Units during the term of the
investment. In recommending a purchase, sale or exchange of the Units you shall:
(1) have reasonable grounds to believe, on the basis of information obtained
from the participant concerning his investment objectives, other instruments,
financial situation and needs, and any other information known by you, that:
(i) the participant is or will be in a financial position appropriate to enable
him to realize to a significant extent the benefits described in the Prospectus;
(ii) the participant has a fair market net worth sufficient to sustain the risks
inherent in the program, including loss of
4
<PAGE>
investment and lack of liquidity; and
(iii) the program is otherwise suitable for the participant; and
(2) maintain in your files for at least six years documents disclosing the basis
upon which the determination of suitability was reached as to each participant.
(f) All Subscription Agreements shall be promptly transmitted to the Fund in
accordance with instructions set forth in the Subscription Agreements, and all
funds received by you with respect to any Subscription Agreement shall be
promptly transmitted to the Fund , provided, however, that pending sale of a
minimum of 120,000 Units, all subscription checks shall be made payable to, and
all Subscription Agreements and funds shall be promptly transmitted by you to,
such bank as may be selected to act as escrow agent for the Fund . As used
herein, the term "promptly transmitted" shall have the meaning set forth in Rule
15c2-4 under the Securities Exchange Act of 1934.
(g) You will maintain copies of all Subscription Agreements in your records for
the longer of the periods prescribed by either (i) Rule 17a-4 of the Securities
Exchange Act of 1934 or (ii) applicable state blue sky laws.
(h) You will execute no transaction in a discretionary account without prior
written approval of the transaction by the investor.
4. Sale of Units. On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, you agree
to sell the Units on a "best efforts" basis, as agent for the Fund. You are
authorized to enlist other members of the National Association of Securities
Dealers, Inc. ("Soliciting Dealers"), acceptable to the Fund, to sell the Units.
As compensation for these services, the Fund agrees that it will pay you a
selling commission in an amount equal to 9.5% of the offering price of the Units
sold pursuant to the terms of this Agreement, from which you may reallow a
dealer commission of up to 8% of such offering price. You will pay wholesaling
compensation to your personnel out of the selling commissions you will receive
hereunder. You will reimburse the Manager for overhead costs advanced by the
Manager, including salaries and other costs of persons involved in wholesaling
activities. All of such costs will be reimbursed out of wholesaling commissions
and expense reimbursements received by you from the Fund. The Fund may, in the
Manager's sole discretion, reimburse expenses and compensate you and certain
Soliciting Dealers for wholesaling activities in connection with the offering,
provided that the aggregate amount of such reimbursements and compensation, when
added to all other selling compensation paid in connection with the offering,
does not
5
<PAGE>
exceed a total equal to 10% of the Gross Proceeds, plus an additional one-half
of 1% as provided in the following sentence. The Fund may, in the Manager's sole
discretion, reimburse the Soliciting Dealers for their bona fide and accountable
expenses for due diligence purposes, in an amount not to exceed one-half of l%
of the offering price of the Units sold pursuant to this Agreement. In addition
to the selling compensation described above, the Fund may establish a non-cash
sales incentive program as described in the Prospectus, subject to the prior
review and approval of the NASD and compliance with all applicable NASD rules
and procedures.
Notwithstanding the foregoing, however, it is understood and agreed that the
Manager has reserved the right to accept or reject any subscriptions for Units
as set forth in the Prospectus and no selling commission will be payable to you
or any of the Soliciting Dealers with respect to the tender of any Subscription
Agreement which is rejected by you or the Manager as aforesaid. Furthermore, no
subscription will be deemed binding until at least five days following delivery
of a Prospectus.
The Fund further agrees that it will pay the foregoing selling commission with
respect to the purchase price of each of the Units upon the Manager's acceptance
of the order for such Units; provided, however, that none of such commissions
will be payable or paid until release to the Fund from the escrow account in
which they are to be deposited of proceeds from subscriptions for a minimum of
120,000 Units.
It is understood and agreed that you may, in your discretion, rebate to a
purchaser of Units the selling commissions otherwise payable in connection with
any investment in Units by you, the Manager, a Soliciting Dealer or any
Affiliate or employee of any of the foregoing or certain clients of registered
investment advisors, as more specifically described in the Prospectus under
"Plan of Distribution - Investments by Certain Persons." Any such rebate to you,
the Manager, a Soliciting Dealer or any Affiliate or employee of such person
will only be made if and to the extent that any Soliciting Dealer which would
otherwise be entitled to a selling commission on any such transaction agrees to
such rebate.
5. Certain Covenants of the Fund and the Manager. The Fund and the Manager
covenant and agree with you as follows:
(a) The Fund will not at any time file or make any amendment or supplement to
the Registration Statement or Prospectus of which you shall not have previously
been advised and furnished a copy, or to which you or any Soliciting Dealer
shall object in writing.
(b) The Fund will advise you and each Soliciting Dealer immediately, and confirm
the advice in writing, (i) when the
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<PAGE>
Registration Statement shall have become effective with the Commission, (ii)
when any post-effective amendment to the Registration Statement shall have
become effective, or any supplement to the Prospectus or any amended Prospectus
shall have been filed, (iii) of any request of the Commission for amendment or
supplementation of the Registration Statement or Prospectus or for additional
information, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Units for offering or sale in any
jurisdiction, or of the institution of any proceedings for any such purposes.
The Fund will use its best efforts to prevent the issuance of any such stop
order or of any order preventing or suspending such use and to obtain as soon as
possible the lifting thereof, if issued.
(c) The Fund will deliver to you and each Soliciting Dealer without charge, and
when requested, such number of copies of the preliminary and amended preliminary
prospectus, and the Prospectus (as supplemented or amended, if the Fund shall
have made any supplements or amendments to the Prospectus) as you and each
Soliciting Dealer may reasonably request.
(d) The Fund will comply to the best of its ability with the Securities Act and
the Rules and Regulations so as to permit the continuance of sales of and
dealings in the Units under the Securities Act. If at any time when a prospectus
is required to be delivered under the Securities Act, an event shall have
occurred as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein not untrue or misleading or
to make the Prospectus comply with the Securities Act, the Fund will notify you
and each Soliciting Dealer promptly thereof and will furnish to you an amendment
or supplement which will correct such statement in accordance with the
requirements of Section l0 of the Securities Act.
(e) The Fund will use its best efforts to qualify the Units for sale under the
laws of the State of California and such other jurisdictions as the Manager and
you shall mutually agree and will comply to the best of its ability with such
laws so as to permit the continuance of sales of and dealings in the Units
thereunder.
(f) The Fund will furnish to you and each Soliciting Dealer with copies of all
such documents, reports and information as shall be of general interest and are
furnished by the Fund to investors in the Units generally.
(g) The Fund and the Manager will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement, preliminary and amended
7
<PAGE>
preliminary prospectus and Prospectus and amendments or supplements thereto,
including fees of legal counsel for the Fund , the qualifying of the Units under
the laws of certain jurisdictions as aforesaid, including filing fees and fees
and disbursements of counsel in connection therewith, and the cost of furnishing
to you and the Soliciting Dealers copies of the Registration Statement,
preliminary and amended preliminary prospectus and Prospectus as herein
provided.
6. Conditions to Dealer Manager's Obligations. Within a period of five days
after the effective date of the Prospectus (the "Effective Date"), there shall
be furnished to you the following:
(a) The favorable opinion of Derenthal & Dannhauser, counsel for the Fund and
the Manager, dated the Effective Date, in form and substance satisfactory to
your legal counsel, to the effect that:
(i) The Registration Statement has become effective under the Securities Act
and, to the best of the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or are contemplated under
the Securities Act.
(ii) The Registration Statement, the Prospectus, and each amendment or
supplement thereto (except for the financial statements, as to which such
counsel need express no opinion) comply as to form in all material respects with
the requirements of the Securities Act and the Rules and Regulations.
(iii) Such counsel have participated in the preparation of the Registration
Statement and Prospectus and no facts have come to the attention of such counsel
to lead them to believe that either the Registration Statement or the Prospectus
or any such amendment or supplement (except for the financial statements, as to
which such counsel need express no opinion) contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(iv) The description in the Registration Statement and Prospectus of the
contracts and other documents therein described are accurate and fairly
represent the information required to be shown.
(v) Such counsel do not know of any statutes or regulations or legal or
governmental proceedings required to be described in the Prospectus which are
not described as required, nor of any contract or documents of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement which are not described and
filed as required.
8
<PAGE>
(vi) This Agreement has been duly executed and delivered by the Manager; and
(upon the assumption that the Registration Statement complies with the
Securities Act) this Agreement is a valid and binding agreement of the Manager
in accordance with its terms.
(b) A certificate, dated the Effective Date, signed by the Manager, to the
effect that: (i) the representations and warranties of the Fund and the Manager
contained in this Agreement are correct; and (ii) the signers of said
certificate have carefully examined the Registration Statement and the
Prospectus, and in their opinion (A) neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto contains any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (B)
there are no material legal or governmental proceedings to which the Fund or
Manager are a party or of which the business or assets of the Fund or Manager
are the subject which are not disclosed in the Registration Statement and the
Prospectus.
(c) A letter addressed to you from Ernst & Young dated not earlier than the
business day immediately preceding the Effective Date, stating that:
(i) With respect to the Fund , they are "independent public accountants" as such
term is defined in the Securities Act and the Rules and Regulations, and they
were not employed by the Fund on a contingent basis and they (and their partners
and associates individually) do not, either at the time of the preparation of
financial statements reported upon by them or at any time thereafter, have
substantial interest in the Fund or any of its parents (as such term is defined
in Rule 405(n) of the Commission) or have any connection with the Fund as a
promoter, underwriter, voting trustee, director, officer, partner or employee.
(ii) In their opinion, the balance sheets of the Fund and ATEL reported upon by
them and included in the Registration Statement comply in all material respects
with all of the accounting requirements contained in the Securities Act and the
Rules and Regulations with respect to Registration Statements on Form S-1.
(iii) On the basis of a reading of the audited balance sheets of the Fund and
ATEL included in the Registration Statement and upon inquiries of officers of
the Fund responsible for financial and accounting matters and other specified
procedures, nothing has come to their attention which caused them to believe
that (a) said balance sheets: (x) do not comply as to form in all material
respects with the applicable requirements of the Securities Act and the Rules
and Regulations with respect to Registration Statements on Form S-1 and (y) are
not fairly presented in conformity with generally accepted accounting principles
applied
9
<PAGE>
on a consistent basis; or (b) as of the date of the latest available unaudited
interim balance sheets prepared by the Fund or ATEL, there was any material
change from the amounts shown in the balance sheets included in the Prospectus,
except in all instances for changes or decreases which the Prospectus discloses
have occurred or may occur.
(iv) On the basis of inquiries of officers of the Fund responsible for financial
and accounting matters and such other procedures as they have deemed adequate in
connection with said opinion, nothing has come to their attention which caused
them to believe that at a specific date within five days of the date of such
letter there was any material change from amounts shown on the balance sheet
included in the Prospectus except in all instances for changes or decreases
which the Prospectus discloses have occurred or may occur.
7. Indemnification.
(a) The Manager shall indemnify and hold you and any Soliciting Dealers harmless
against any losses, claims, damages or liabilities, joint or several:
(i) to which you or any Soliciting Dealer may become subject under the
Securities Act, the various State securities laws or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus or any
amendment or supplement thereto or in any sales literature furnished by us, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; or
(ii) to which you or any Soliciting Dealer may become subject due to the
misrepresentation by the Fund or the Manager or its agents (other than you or
any Soliciting Dealer) of material facts in connection with the sale of the
Units, unless the misrepresentation of such material facts was the direct result
of misleading information provided to the Fund or the Manager or its agents by
you; or
(iii) to which you or any Soliciting Dealer may become subject as a result of
any breach by the Fund or the Manager of the representations, warranties, and
covenants contained herein.
The Manager will reimburse you and any Soliciting Dealers for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such loss, claim, damage or liability (or actions in respect thereof); provided,
however, that the Manager shall not be liable in any such case to the
10
<PAGE>
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, the Prospectus, or such amendment
or supplement or in any sales literature, in reliance upon and in conformity
with written information furnished to the Fund or the Manager by you
specifically for use in the preparation thereof. This indemnity agreement shall
be in addition to any liabilities which the Fund or the Manager may otherwise
have in connection with this offering.
The foregoing indemnity agreement shall extend upon the same terms and
conditions to, and shall inure to the benefit of, each person, if any, who
controls you or any Soliciting Dealer within the meaning of the Securities Act.
(b) You agree and each Soliciting Dealer will agree to indemnify and hold
harmless the Fund and the Manager against any losses, claims, damages or
liabilities, joint or several, to which the Fund or the Manager may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto or in any sales literature, or arise out of or are based upon
the omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Prospectus, or such amendment or supplement or in
any sales literature, in reliance upon and in conformity with written
information furnished to the Fund or the Managers by you specifically for use in
the preparation thereof; and will reimburse the Fund and the Manager for any
legal or other expenses reasonably incurred in connection with investigating or
defending any such loss, claim, damage or liability (or action in respect
thereof). This indemnity agreement shall be in addition to any liabilities which
you or any Soliciting Dealer may otherwise have in connection with this
offering.
The foregoing indemnity agreement shall extend upon the same terms and
conditions to, and shall inure to the benefit of, each person, if any, who
controls the Fund or the Manager within the meaning of the Securities Act.
(c) Promptly after receipt by an indemnified party of notice of the commencement
of any action, such indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under subparagraphs (a) and (b) of this
Paragraph 7, notify the indemnifying party in writing of the commencement
thereof;
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<PAGE>
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party otherwise than under
such subparagraph. In case any such action shall be brought against such
indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, jointly with any other indemnifying
party, similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnifying and indemnified parties, and after the
indemnified party shall have received notice from the agreed upon counsel that
the defense has been so assumed, in the event that the indemnified party
nonetheless elects to participate in the defense of any such action for any
reason other than the presence of a conflict of interest, the indemnifying party
shall not be responsible for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof.
8. Non-Circumvention. Neither the Manager, the Fund , nor any affiliates
thereof, will (a) notify or actively solicit any Soliciting Dealer's clients
with respect to any further transactions, or (b) release the name and/or account
information for any of any Soliciting Dealer's clients to any other party unless
required by court order, an authorized governmental or self-regulatory entity,
or by the Operating Agreement to do so. For purposes of this paragraph "notify
or solicit" shall not be deemed to include any direct and unassisted contact by
a broker-dealer other than the Manager, the Dealer Manager or the Fund . The
provisions of this section shall survive any termination of this Selling
Agreement.
9. Termination. This Agreement shall automatically be terminated, and the Fund
shall have no liability for the payment of any commissions or fees hereunder, in
the event of the failure of you and the Soliciting Dealers to sell at least
120,000 of the Units prior to the termination of the offering by the Manager.
10. Applicable Law. This Agreement shall be construed in accordance with the
laws of the State of California.
11. Notices. Except as otherwise provided in this Agreement, (a) whenever notice
is required by the provisions of this Agreement to be given to the Fund or the
Manager, such notice shall be in writing addressed to the Fund or the Manager,
or both, as the case may be, at 235 Pine Street, 6th Floor, San Francisco,
California 94104 and (b) whenever notice is required by the provisions of this
Agreement to be given to the Dealer Manager or the Soliciting Dealers, such
notice shall be in writing addressed to you at 235 Pine Street, 6th Floor, San
Francisco, California 94104.
12. Benefit. This Agreement shall be binding upon and inure to
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<PAGE>
the benefit of the respective successors and assigns of the
parties hereto.
If the foregoing correctly sets forth your understanding, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.
Very truly yours,
ATEL CAPITAL EQUIPMENT FUND VIII, LLC,
a California limited liability company
By: ATEL Financial Corporation,
a California corporation,
Manager
By: ____________________________
Accepted this ______ day of __________, 199_:
ATEL SECURITIES CORPORATION,
a California corporation, Dealer Manager
By: __________________________
13
EXHIBIT 1.2
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
SELECTED DEALERS AGREEMENT
San Francisco, California
..................., 199_
Gentlemen:
The undersigned, ATEL Securities Corporation (the "Dealer Manager"),
has entered into an agreement (the "Selling Agreement") with ATEL CAPITAL
EQUIPMENT FUND VIII, LLC, a California limited liability company (the "Fund")
and its manager pursuant to which the undersigned has agreed to use its best
efforts to form and manage, as Dealer Manager, a group of securities dealers
(the "Soliciting Dealers") for the purpose of soliciting offers for the purchase
of units of limited liability company interest ("Units") in the Fund. The terms
of the offering are set forth in the Fund's Registration Statement No.
__________, on Form S-1 which was filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Act of 1933, as amended
(the "1933 Act"). Such registration statement in the form in which it became
effective is referred to herein as the "Registration Statement" and the
prospectus included therein, in the form in which it became effective and in the
form as first filed with the Commission pursuant to its Rule 424, is referred to
herein as the "Prospectus." The terms used but not otherwise defined in this
Agreement have the same meanings as in the Prospectus.
You are invited to become one of the Soliciting Dealers and by your
confirmation hereof you agree to act in such capacity and to use your best
efforts, in accordance with the following terms and conditions, to find
purchasers for the Units. You hereby confirm that you are a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD").
l. You hereby agree to solicit, as an independent contractor and not as
our agent or as an agent of the Fund or its Manager, persons acceptable to the
Manager to enter into the Subscription Agreement in the form attached to the
Prospectus. Until such time as subscription proceeds for a total of not less
than 120,000 Units are received, accepted and deposited with the escrow agent,
all subscription checks shall be payable to "U. S. Bank - ACEF VIII Escrow." All
Subscription Agreements solicited by you shall be transmitted promptly to the
Dealer Manager in accordance with the instructions set forth in the Subscription
Agreements, and all funds received by you with respect to any Subscription
Agreement shall be promptly transmitted to the Dealer Manager. As used herein
the term "promptly transmitted" shall have the meaning set forth in Rule 15c2-4
under the Securities Exchange Act of 1934 (the "1934 Act"), as interpreted in
NASD Notice to Members 84-64. You hereby agree to comply in full with such NASD
Notice to Members 84-64, as it may be amended from time to time. We in turn will
transmit subscriptions and funds received during the escrow period to the escrow
agent not later than noon of the second business day following receipt of same
by us. After subscriptions for a minimum of 120,000 Units have been received,
accepted and deposited with the escrow agent, and subscription proceeds are
thereafter released to the Fund pursuant to the terms of the escrow agreement,
all further subscription checks shall be payable directly to the Fund. No
Subscription Agreement shall be effective unless and until accepted by the
Manager, and in no event will a subscription be effective until five days after
the investor has received a Prospectus.
You agree that you will:
(a) (i) diligently make inquiries as required by law of all
prospective investors in order to ascertain whether a purchase
of Units is suitable for the investors and (ii) inform each
prospective investor of all pertinent facts relating to the
liquidity and marketability of the Units during the term of
the investment;
<PAGE>
(b) have reasonable grounds to believe, on the basis of
information obtained from the participant concerning his
investment objectives, other investments, financial situation
and needs, and any other information known by you, that:
(i) the participant is or will be in a
financial position appropriate to enable
him to realize to a significant extent the benefits
described in the Prospectus;
(ii) the participant has a fair market net
worth sufficient to sustain the risks inherent in the
program, including loss of investment and lack of
liquidity; and
(iii) the program is otherwise suitable
for the participant;
(c) maintain copies of all Subscription Agreements and
information relating to suitability determinations in your
records for the longer of (i) six years from the date of
investment, (ii) the period prescribed by Rule 17a-4 under the
1934 Act, or (iii) the period required by applicable state
blue sky laws;
(d) execute no transaction in a discretionary account without
prior written approval of the transaction by the investor; and
(e) comply in all respects with the Conduct Rules of the NASD
in the conduct of the offering of Units.
Furthermore, you expressly agree to be bound by the escrow agreement
executed by the Fund for the deposit of subscription proceeds pending receipt
and acceptance of subscriptions for a minimum of 120,000 Units.
All subscriptions solicited by you will be strictly subject to
confirmation by us and acceptance thereof by the Fund and we, the Fund and its
Manager, reserve the right in our and its uncontrolled discretion to reject any
such subscription and to accept or reject subscriptions in the order of their
receipt by the Fund or otherwise. A sale of a Unit shall be deemed to be
completed only after (i) the Fund receives a properly completed subscription
agreement from the Soliciting Dealer, together with payment of the full purchase
price of each purchased Unit from a buyer who satisfies each of the terms and
conditions of the Registration Statement and Prospectus; (ii) a period of five
days has passed following the receipt by the investor of a Prospectus; and (iii)
such subscription agreement has been accepted in writing by the Manager. Neither
you nor any other person is authorized to give any information or make any
representation other than those contained in the Prospectus or in any
supplemental sales literature furnished by the Dealer Manager or the Fund for
use in making solicitations in connection with the offer and sale of the Units.
Upon release by us, you may offer the Units at the public offering
price, subject to the terms and conditions hereof.
2. We understand that the Fund will provide you with such number of
copies of the enclosed Prospectus and such number of copies of amendments and
supplements thereto as you may reasonably request. In this connection, the Fund
and its Manager have represented and warranted to us that the Registration
Statement and the Prospectus, and all amendments or supplements thereto, will
contain all statements which are required to be stated therein in accordance
with the 1933 Act and the Rules and Regulations thereunder, and neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will contain any untrue statement of a material fact or omit any
material fact required to be stated therein or necessary to make the statements
therein not misleading. It is understood by the Fund and its Manager that
Section (b)(3) of Rule 2810 of the Conduct Rules of the NASD requires that you
determine that all material facts relating to the subject offering are
adequately and accurately disclosed to prospective subscribers and provide a
basis for evaluating the offering, and the Fund and its Manager therefore have
specifically represented and warranted to us that:
2
<PAGE>
(i) all items of compensation payable to them and their affiliates are
and will be set forth in the Prospectus under the caption "Management
Compensation";
(ii) all types of Equipment to be acquired by the Fund are and will be
described in the Prospectus under the caption "Investment Objectives
and Policies - Types of Equipment" or in a supplement to be included
inside the back cover of the Prospectus;
(iii) all material tax aspects are and will be set forth in the
Prospectus under the captions "Income Tax Consequences" and "Risk
Factors";
(iv) the financial position and business experience of the Manager and
of those affiliates of the Manager who are of relevance to the subject
offering are and will be accurately and adequately reflected in the
Prospectus under the captions "Management" and "Prior Performance
Summary";
(v) all material conflicts of interest and risk factors are and will be
set forth in the Prospectus under the captions "Conflicts of Interest"
and "Risk Factors"; and
(vi) all pertinent facts relating to the liquidity and marketability of
the Units are and will be set forth in the Prospectus under the
captions "Risk Factors - Limited Transferability of Units" and "Summary
of the Limited Liability Company Operating Agreement - Transferability
of Units."
We also understand that the Fund may provide you with certain
supplemental sales material to be used by you in connection with the
solicitation of Units in the Fund. We will comply with the filing requirements
of Section 2210(c)(2) of the NASD Conduct rules with respect to any
advertisements or sales literature to be used as supplemental sales material in
connection with the solicitation of Units. You agree not to use any
advertisement or sales literature, as those terms are defined in Section 2210(a)
of the NASD Conduct Rules, as supplemental sales literature in the solicitation
of Units except to the extent such materials are provided by us or we have given
our prior written approval for use of such materials. In the event you elect to
use supplemental sales material, you agree that such material shall not be used
in connection with the solicitations of Units unless accompanied or preceded by
the Prospectus as then currently in effect and as it may be amended or
supplemented in the future, unless you are notified by us that such material has
been prepared and cleared for use in compliance with the SEC's Rule 134. Upon
your request, we will furnish to you information necessary to confirm the
continued fairness, accuracy, and completeness of the Prospectus in all material
respects during the offering period.
We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the offering. We shall be
under no liability to you except for lack of good faith and for obligations
expressly assumed by us in this Agreement. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not
constitute, a waiver by you of compliance with any provision of the 1933 Act, or
of the rules and regulations thereunder.
You confirm that you are familiar with Securities Act Release No. 4968
and Rule l5c2-8 under the 1934 Act, relating to the distribution of preliminary
and final prospectuses, and confirm that you have complied and will comply
therewith. We will make available to you, to the extent they are made available
to us by the Fund, such number of copies of the Prospectus as you may reasonably
request for the purposes contemplated by the 1933 Act and the applicable rules
and regulations thereunder.
You agree that you will exercise due diligence in determining that all
material facts are adequately and accurately disclosed in the Prospectus. For
purposes of compliance with Sections (b)(3)(A) and (B) of Rule 2810 of the
Conduct Rules of the NASD regarding due diligence, it is understood and agreed
that you may rely upon the results of an inquiry conducted by another member or
members of the NASD, provided that:
3
<PAGE>
(1) you have reasonable grounds to believe that such inquiry
was conducted with due care;
(2) the results of the inquiry were provided to you with the
consent of the member or members conducting or directing the inquiry;
and
(3) no member that participated in the inquiry is a sponsor
of the Fund or an Affiliate of such sponsor.
3. We will be entitled to receive from the Fund a selling commission
equal to 9.5% of the Gross Proceeds. For your services hereunder, subject to the
condition that Subscription Agreements for a minimum of 120,000 Units have been
received and accepted by the Manager by the termination date of the offering,
you will receive from us a selling commission equal to 8% of the proceeds from
all Subscription Agreements solicited by you and accepted by the Manager. No
other payment or reimbursement of selling compensation or expenses will be made
hereunder unless and until we have executed an addendum to this Agreement
setting forth the terms of such payment or reimbursement.
In the event that a sale of Units for which you have solicited a
Subscription Agreement shall not occur, whether by reason of the failure of any
condition specified herein or in the Subscription Agreement or the Selling
Agreement, rejection of the subscription by the Fund or otherwise, no payment
with respect to such Unit shall be made to you. Further, it is understood and
agreed that we shall be under no obligation to make payment to you, and you
expressly waive payment, of any commission hereunder except to the extent that
we shall have first received from the Fund the selling commission to which we
are entitled in connection with the subject transaction. Any payment to you will
be payable only with respect to transactions lawful in the jurisdictions where
they occur.
We as Dealer Manager may, in our discretion, rebate to a purchaser of
Units the selling commissions otherwise payable in connection with any
investment in Units by the Manager, a Soliciting Dealer or any Affiliate or
employee of the foregoing. Any such rebate will only be made if and to the
extent that the Soliciting Dealer which would otherwise be entitled to a selling
commission on any such transaction agrees to such rebate. Therefore, we will by
separate letter agreement establish the amount of selling commission rebate, if
any, on transactions for which you would otherwise be entitled to the full
selling commission, but which are eligible for the rebate. It shall be your
responsibility to notify your Affiliates and employees as to the amount, if any,
which you agree to rebate.
As described in the Prospectus, we may from time to time during the
offering establish a non-cash sales incentive bonus program, subject to prior
NASD approval and compliance with all applicable NASD rules and procedures.
4. This Agreement may be terminated by us or by you at any time upon
five days' written notice.
5. In soliciting persons to acquire the Units, you agree to comply with
any applicable requirements of the 1933 Act, the 1934 Act, the published rules
and regulations thereunder and the Conduct Rules of the NASD and, in particular,
you agree that you will not give any information or make any representation
other than those contained in the Prospectus and in any supplemental sales
literature furnished to you by the Fund or us for use in making such
solicitations. You further confirm and agree that, in connection with any
assistance you may provide in the sale or transfer of Units, you will fulfill
your obligations pursuant to Sections (b)(2)(B) and (b)(3)(D) of Rule 2810 of
the Conduct Rules of the NASD.
6. We assume no obligation or responsibility in respect of the
qualification of the Units under the laws of any jurisdiction. The Blue Sky
Memorandum enclosed, or to be promptly furnished to you, indicates the states in
which it is believed by the Fund that the Units are exempt from, or have been
qualified under, the applicable state securities or "blue sky" laws and the
restrictions, if any, on the rights of dealers to solicit sales thereof. It is
understood that under no circumstances will you engage in any activities
hereunder in any state which is not listed in said Blue Sky Memorandum as a
state in which the Units are exempt from, or qualified under, the state
securities or "blue sky" laws.
4
<PAGE>
Solicitations are to be made only by Soliciting Dealers qualified to act as such
for such purpose within the states in which they make such solicitations.
7. Nothing contained herein shall constitute the Soliciting Dealers and
us, or any of them, an association, partnership, unincorporated business, or
other separate entity. We shall be under no liability to make any payment to you
except out of funds received by us from the Fund as hereinabove provided, and we
shall not be under any liability for or in respect of the value or validity of
the Subscription Agreements, the Units, or the performance by anyone of any
agreement on its part, or for, or in respect of any matters connected with this
Agreement. Notwithstanding the previous sentence, we shall be fully liable to
you for any damages or harm suffered by you as a direct result of our lack of
good faith, or for obligations expressly assumed by us in this Agreement.
8. It is expressly understood that the Dealer Manager may cooperate
with other broker dealers who are licensed members of the NASD, registered as
broker dealers with the SEC and duly licensed by the appropriate regulatory
agency of each state in which they will offer and sell the Units of the Fund.
Such other NASD members may be employed by the Dealer Manager as Soliciting
Dealers on terms and conditions identical or similar to this Agreement and shall
receive such rates of commission as are agreed to between the Dealer Manager and
the respective other Soliciting Dealers and as are in accordance with the terms
of the Registration Statement, and to that extent such other Soliciting Dealers
shall compete with you in the sale of the Units.
9. Under the Selling Agreement, the Manager has agreed to indemnify us,
the Soliciting Dealers and each person, if any, who controls us or any
Soliciting Dealer within the meaning of the 1933 Act against certain liabilities
under such Act. Each Soliciting Dealer agrees to indemnify the Manager and the
Fund as provided in Paragraph 7 of the Selling Agreement and to indemnify us and
each other Soliciting Dealer to the same extent and in the same manner as such
Soliciting Dealer agrees to indemnify the Manager and the Fund. In the execution
of the Selling Agreement, we shall be deemed to have acted as a representative
of each of the Soliciting Dealers, and the Soliciting Dealers shall be deemed to
be in privity of contract with the Manager and the Fund.
10. Neither the Dealer Manager, the Fund or its Manager, nor any
affiliates thereof, will (a) notify or actively solicit your clients with
respect to any further transactions, or (b) release the name and/or account
information or any of your clients to any other party unless required by court
order, an authorized governmental or self-regulatory entity, or by the Limited
Liability Company Operating Agreement to do so. For purposes of this paragraph
"notify or solicit" shall not be deemed to include any direct and unassisted
contact by a broker-dealer other than the sponsor, the Dealer Manager or the
Fund. The provisions of this section shall survive any termination of the
Selling Agreement or this Agreement.
11. We acknowledge that you may form opinions regarding the Dealer
Manager, the Fund, or its Manager, regarding the Units including but not limited
to evaluations of the Dealer Manager's, the Fund's or its Manager's personnel,
track record, financial statements, and terms of the offering. This evaluation
may differ from the Dealer Manager's, the Fund's or its Manager's assessment and
may be negative in nature. The Dealer Manager, the Fund and its Manager
acknowledge that said evaluation shall not prohibit you from satisfying your
"best efforts" obligation under the sales agreement. We hereby grant you the
right to communicate to others your evaluations so long as such evaluations are
made in good faith and the communication concerning the evaluations are
consistent with such evaluations and are limited in scope to the extent
reasonably deemed necessary by you to serve your customers and otherwise to
conduct your securities business. We waive any rights of action which may arise
from the circumstances described in this Paragraph 11.
12. Any controversy or claim arising out of this agreement shall be
settled by arbitration in California in accordance with the then current rules
of the NASD, if appropriate, and otherwise with the then current rules of the
American Arbitration Association. Judgment upon the arbitration award may be
entered in any court having jurisdiction. Reasonable expenses, attorney's fees,
and costs incurred therein shall be paid in accordance with the award of the
arbitrators. The prevailing party shall be reimbursed for the reasonable costs
of the investigation, attorney's fees
5
<PAGE>
and court costs.
13. Any notice from us to you as Soliciting Dealer shall be deemed to
have been duly given if mailed or telegraphed to you at your address set forth
below.
Please confirm this agreement to solicit persons to acquire Units on
the foregoing terms and conditions by signing and returning the form enclosed
herewith.
Very truly yours,
ATEL SECURITIES CORPORATION
By: ______________________________
6
<PAGE>
ATEL Securities Corporation
235 Pine Street, 6th Floor
San Francisco, California 94104
RE: ATEL Capital Equipment Fund VIII, LLC
Gentlemen:
The undersigned confirms its agreement to act as a Soliciting Dealer as
referred to in the foregoing Soliciting Dealers Agreement, subject to the terms
and conditions of such Agreement. The undersigned confirms that it is a member
in good standing of the National Association of Securities Dealers, Inc.
PLEASE NOTE: The undersigned further confirms that its registered
representatives (check one):
__ are authorized
__ are not authorized
to subscribe for Units for their own account on terms which include a rebate of
commissions otherwise payable on their investment, as described in the
Prospectus under "Plan of Distribution."
Dated: ________, 199_. ________________________________________
(Print Name of Firm)
By: ____________________________________
(Authorized Representative)
_______________________________________
(Print Name of Authorized Representative)
Address___________________________
----------------------------------
Phone Number (___)________________
Send Due Diligence Information To: Send Marketing Information To:
- -------------------------------- ------------------------------
- -------------------------------- ------------------------------
Send Commission Checks To:
-----------------------
7
EXHIBIT 5.1
<PAGE>
August 27, 1998
ATEL Capital Equipment Fund VIII, LLC
235 Pine Street, 6th Floor
San Francisco, California 94104
RE: Registration Statement on Form S-1
Gentlemen:
We have examined the above-referenced Registration Statement to be
filed with the Securities and Exchange Commission on or about the date hereof,
in connection with the registration under the Securities Act of 1933, as
amended, of 15,000,000 of your limited liability company member units (the
"Securities"). The Securities are to be offered and sold by and through the
broker-dealers described in said Registration Statement on a "best-efforts"
basis.
As your counsel in connection with this transaction, we have examined
the proceedings taken and are familiar with the proceedings proposed to be taken
by you in connection with said sale and issuance of the Securities.
It is our opinion that upon completion of the proposed additional
proceedings being taken or contemplated by us, as your counsel, to be taken
prior to the issuance of the Securities and upon completion of the proceedings
being taken in order to permit such transactions to be carried out in accordance
with state securities laws where required, the Securities when issued and sold
in the manner referred to in the Registration Statement will be legally and
validly issued, fully paid and nonassessable.
We hereby consent to the reference to our firm under "Legal Opinions"
in the prospectus which is a part of said Registration Statement, and to the use
of this opinion as an exhibit thereto.
Very truly yours,
DERENTHAL & DANNHAUSER
ATEL 8-1/10.LO
EXHIBIT 8.1
<PAGE>
August 27, 1998
Atel Capital Equipment Fund VIII, LLC
235 Pine Street, 6th Floor
San Francisco, CA 94104
Re: Tax and ERISA Consequences
Ladies and Gentlemen:
You have requested our opinions as to certain federal income tax and
ERISA aspects of Atel Capital Equipment Fund VIII, LLC (the "Fund"), a limited
liability company formed under the California Beverly-Killea Limited Liability
Act. In rendering our opinions, we have reviewed and relied upon (a) information
and representations that the Manager of the Fund has furnished to us; (b) the
Registration Statement; and (c) the Operating Agreement. Capitalized terms not
defined herein have the meanings set forth in the Prospectus which is a part of
the Registration Statement.
We hereby confirm to you that those portions of the Prospectus entitled
"Risk Factors - Partnership Status," "Risk Factors - Certain Other Income Tax
Considerations," "Risk Factors - Tax Opinion," "Risk Factors - ERISA
Considerations," "Federal Income Tax Consequences," and "ERISA Considerations"
accurately describe our opinions, subject to the assumptions, representations,
qualifications and uncertainties discussed therein.
We consent to the use of this opinion letter as an Exhibit to the
Registration Statement and to the use of our name under the headings "Federal
Income Tax Consequences" and "Risk Factors - Tax Opinion," and "Legal Opinions"
in the Prospectus which is part of the Registration Statement.
Very truly yours,
JACKSON TUFTS COLE & BLACK, LLP
EXHIBIT 10.1
<PAGE>
ATEL CAPITAL EQUIPMENT FUND VIII, LLC
ESCROW AGREEMENT
___________, 1998
U. S. Bank
San Francisco, California
Gentlemen:
ATEL Capital Equipment Fund VIII, LLC, a California limited liability
company (the "Fund"), proposes to make a public offering through ATEL Securities
Corporation (the "Dealer Manager") and other registered broker-dealers (the
"Selected Dealers") of not to exceed 15,000,000 of its units of limited
liability company member interest (the "Units") at $10 per Unit. The offering
shall be conducted on a best-efforts all-or-none basis for the first 120,000
Units and thereafter on a best-efforts basis for the remaining Units. The
offering shall commence at such time as the Fund's registration statement on
Form S-1 with respect thereto (the "Registration Statement") is declared
effective by the Securities and Exchange Commission ("SEC") which is currently
expected to occur on or about ________________, 1998. We are requesting that you
consent to act as Depository in connection with the offering.
As Depository, you shall receive, hold in escrow and disburse
subscription funds in accordance with the terms and conditions set forth in this
letter and in the "Plan of Distribution" section of the prospectus included in
the Registration Statement, as amended or supplemented (such prospectus in the
form first filed with the SEC pursuant to Rule 424 under the Securities Act of
1933, as amended, and any supplement or amendment to such prospectus thereafter
so filed pursuant to such Rule 424 are hereinafter collectively called the
"Prospectus").
Upon request of ATEL Financial Corporation (the "Manager") or the
Dealer Manager, you shall provide reports to the Fund and the Dealer Manager as
to the number and amount of subscriptions received by you.
The terms and conditions of your engagement as Depository shall be as
follows:
1. On or before the date of commencement of the offering you shall
establish an interest-bearing escrow account which shall be entitled "ACEF VIII
Escrow Account" (the "Escrow Account"). The Dealer Manager and Selected Dealers
shall instruct subscribers to
atel8-1/esc.1
1
<PAGE>
make checks payable to the order of the Depository. You shall return any checks
received that are made payable to a party other than the Depository to the
Dealer Manager or Selected Dealer who submitted the check.
2. The Dealer Manager and the Selected Dealers shall promptly deliver
all monies received for the payment of Units to the Depository for deposit in
the Escrow Account. You shall receive and hold deposits of subscription funds in
the amount of $10 per Unit. The minimum subscription shall be 200 Units ($2,000)
for IRAs and Keogh Plans (as those terms are defined in the Prospectus) and 250
Units ($2,500) for all others, subject, however, to such higher minimum
subscriptions as are described in the Prospectus as being applicable in certain
circumstances. Each deposit shall be accompanied by a Subscription Agreement in
the form of that attached as Exhibit C to the Prospectus identifying by name and
address the subscriber whose funds are deposited and the amount of the funds
deposited by such subscriber.
3. Deposits in the form of checks which fail to clear the bank upon
which they are drawn shall be returned by the Depository to the subscriber,
together with the copy of the Subscription Agreement. You shall concurrently
furnish to the Manager and the Dealer Manager a copy of any such Subscription
Agreement and check so returned. The Depository shall have no further liability
therefor.
If the Fund rejects any subscription for which the Depository has
already collected funds, the Depository shall promptly issue a refund check to
the rejected subscriber. If the Fund rejects any subscription for which the
Depository has not yet collected funds but has submitted the subscriber's check
for collection, the Depository shall promptly issue a check in the amount of the
subscriber's check to the rejected subscriber after the Depository has cleared
such funds. If the Depository has not yet submitted a rejected subscriber's
check for collection, the Depository shall promptly remit the subscriber's check
directly to the subscriber.
4. You shall place funds from the Escrow Account only in the following
interest-bearing accounts and short-term obligations as the Fund shall direct:
short-term United States government securities, including Treasury bills,
securities issued or guaranteed by United States government agencies,
certificates of deposit and time or demand deposits in banks and savings and
loan associations which are insured by United States government agencies or
deposits in members of the Federal Home Loan Bank System; provided, however,
that you shall not be required to place any such funds in a manner which is
inconsistent with the Prospectus. As Depository you shall not be liable for any
loss of interest in the event funds are withdrawn prior to maturity. Interest
accrued on subscription funds held in the Escrow Account shall not be an asset
of the Fund, but shall either (i) be paid to the respective
2
<PAGE>
subscribers upon return of subscription proceeds to subscribers pursuant to
paragraph 5 of this Agreement in the event the Minimum Subscriptions (as defined
in paragraph 5) are not received prior to termination of the offering); or (ii)
be paid to the Fund upon release of subscription proceeds to the Fund for
disbursement by the Fund to subscribers, in either case to be divided among the
subscribers on a pro rata basis according to the respective numbers of days
between the time of deposit of their payments into the Escrow Account and the
release of such payments to the Fund or the return thereof to the subscribers,
and in either case with the amounts of interest allocated among subscribers to
be calculated by the Manager.
5. If and at such time as amounts in collected funds representing
subscriptions for not less than 120,000 Units shall have been deposited with you
under this Agreement (the "Minimum Subscriptions"), you shall so notify the
Manager and the Dealer Manager and upon receipt of written instructions from
each of the Fund and the Dealer Manager, you shall disburse to the Fund all
subscription funds held by you. If the offering is terminated prior to receipt
of collected funds representing the Minimum Subscriptions, or if collected funds
representing the Minimum Subscriptions have not been received on or before the
date which is one year from the date that the Registration Statement is declared
effective by the SEC, you shall promptly disburse all subscription funds to the
subscribers who transmitted them without deduction, penalty or expense to the
subscriber, and you shall advise the Fund and the Dealer Manager that you have
done so. The subscription funds returned to each subscriber shall be free and
clear of any and all claims of the Fund or any of its creditors. In any case,
all interest earned on subscription proceeds held by you shall be disbursed to
subscribers as provided in paragraph 4, with the Manager providing the
Depository with the calculation of interest payable to each subscriber. After
all disbursements under this Agreement have been completed, the escrow shall be
terminated; provided, however, that an agreement with a branch of Depository
will be effective upon escrow holder notifying the branch that the Minimum
Subscriptions have been reached and escrow is closed. The branch will agree to
facilitate transfers of subscription funds to the Fund in the event subscribers
make checks payable to the Depository after the date Minimum Subscriptions have
been received. The branch's sole function in such event shall be to endorse any
such subscription checks to the account of the Fund.
For purposes of the foregoing, the term "collected funds" shall mean
all funds received by the Depository which have cleared normal banking channels
and are in the form of cash.
Notwithstanding the foregoing, any and all subscription proceeds from
Pennsylvania investors deposited with the Depositary will be maintained in a
separate escrow account entitled "ACEF VIII Pennsylvania Escrow Account." The
terms of the escrow for
3
<PAGE>
Pennsylvania subscriptions will be the same as provided for all subscription
proceeds under this Agreement, except as expressly stated in the following
paragraphs.
The amount of subscription proceeds held in the Pennsylvania Escrow
Account will not be counted in determining the Minimum Subscriptions defined
above in this Section 5, unless the Pennsylvania Minimum (as defined below) is
reached prior to the date that the amount of the Minimum Subscriptions is
received from non-Pennsylvania subscribers. The funds in the Pennsylvania Escrow
Account will be retained in such account, and will not be released to the Fund
upon the release of other escrowed funds at the time the Minimum Subscriptions
are reached under the Agreement unless the conditions for release of
Pennsylvania subscriptions set forth in this paragraph are first satisfied. If
and at such time as the Fund and the Dealer Manager deliver to the Depositary a
certificate, together with any other documentation that the Depositary may
reasonably require, which demonstrates that the Fund has received a total amount
in collected funds which, when added to the total amount held in the
Pennsylvania Escrow Account, represent aggregate subscriptions for not less than
750,000 Units (the "Pennsylvania Minimum"), and upon receipt of written
instructions from each of the Fund and the Dealer Manager, the Depositary shall
disburse to the Fund all subscription funds held in the Pennsylvania Escrow
Account.
If the offering is terminated prior to receipt of collected funds
representing the Pennsylvania Minimum, or if collected funds representing the
Pennsylvania Minimum have not been received on or before the date which is 120
days after the date hereof, the Fund and the Dealer Manager will notify each
Pennsylvania investor whose subscription proceeds are held in the Pennsylvania
Escrow Account within 10 calendar days following the end of such period that
such investor has the right to have the escrowed subscription proceeds returned
to the investor by notifying the Depositary that such return is desired within
10 calendar days after receipt of such notification of the right to such return.
The subscription proceeds held for investors so requesting a return, together
with any interest accrued thereon, will be promptly forwarded to such investors,
but in no event later than 15 calendar days following receipt by the Depositary
of the notice requesting such return.
Any subscription proceeds from Pennsylvania investors which remain in
the escrow after the expiration of the periods described in the foregoing
paragraph will be held until the earlier of the satisfaction of the Pennsylvania
Minimum condition or the termination of the offering; provided that at the end
of each subsequent 120-day period of the escrow, the investors whose
subscription proceeds remain in the escrow will be offered the return rights
described in the foregoing paragraph; and provided further that, if the
Pennsylvania Minimum is not satisfied within one year from the date that the
Registration Statement is declared
4
<PAGE>
effective by the SEC, the Depositary shall promptly disburse all subscription
funds in the Pennsylvania Escrow Account to the subscribers who transmitted them
without deduction, penalty or expense to the subscriber, and the Depositary
shall advise the Fund and the Dealer Manager that the Depositary has done so.
Any such disbursements to Pennsylvania investors will be on the same terms as
all disbursements under this Agreement.
6. All fees, costs, and charges of the Depository shall be paid by the
Fund. Escrow fees shall be as set forth in Exhibit A hereto. No fees, costs,
charges, indemnification for damages suffered by the Depository or any monies
whatsoever shall be paid out of or chargeable to the funds on deposit in the
Escrow Account.
7. The Fund and the Dealer Manager hereby represent and warrant that
neither they nor any of their affiliates has made, nor will any such person
make, any representation which might imply that you in any way endorse or
recommend an investment in Units or guarantee any obligations relating to the
Units except those expressly undertaken as Depositary under this Agreement.
In consideration of your acting as Depository herein, it is agreed that
you shall in no case or event be liable for the failure of any of the conditions
of this Agreement or damage caused by the exercise of your discretion in any
particular manner, or for any other reason, except gross negligence or willful
misconduct with reference to the Escrow Account, and you shall not be liable or
responsible for your failure to ascertain the terms or conditions, or to comply
with any of the provisions of, any agreement, contract or other document filed
herewith or referred to herein, nor shall you be liable or responsible for
forgeries or false personation.
It is further agreed that if any controversy arises between the parties
hereto or with any third person with respect to the subject matter of this
Agreement, or its terms or conditions, you are entitled at your option to refuse
to comply with any claim or demand, so long as such controversy continues and in
so doing you shall not be or become liable for damages or interest to any party
for your failure or refusal to comply with any conflicting or adverse demands.
You shall be entitled to continue so to refrain and refuse so to act until:
A. The rights of the adverse claimants have been finally
adjudicated in a court assuming and having jurisdiction of the parties
and the money, papers and property involved herein or affected hereby;
and/or
B. All differences shall have been adjusted by agreement and
you shall have been notified thereof in writing by all of the persons
interested.
5
<PAGE>
In the event of any such controversy, you, in your discretion, may file
a suit in interpleader for the purpose of having the respective rights of the
claimants adjudicated, and deposit with the court all documents and property
held hereunder, and the Fund agrees to pay all costs and counsel fees incurred
by you in such action and said costs and fees shall be included in the judgment
in any such action.
You shall not be required to take or be bound by notice of any default
of any person, or to take any action with respect to such default involving any
expense or liability, unless notice of such default is given to you in writing
by the Manager and unless you are indemnified in a manner satisfactory to you
against such expense or liability.
You shall be protected in acting upon any notice, request, waiver,
consent, receipt or other paper or document reasonably believed by you to be
signed by the proper party or parties.
You may consult with legal counsel if any controversy arises, and you
shall incur no liability and shall be fully protected in acting in accordance
with the opinion and instructions of counsel.
In the event that you perform any service not specifically provided
hereinabove, or there is any assignment or attachment of any interest in the
subject matter of this Agreement or modification thereof, or any controversy
arises hereunder, or you are named a party to, or are required to intervene in,
any litigation pertaining to this escrow or the subject matter thereof, you
shall be reasonably compensated therefor and reimbursed for all costs and
expenses, including attorney's fees, occasioned thereby.
8. The Depository may resign upon the giving of 30 days' written notice
to the Manager and the Dealer Manager. The Depository may be removed by the
Manager and the Dealer Manager, acting jointly, upon 30 days' prior written
notice to the Depository. In such event, it shall be the obligation of the
Manager, with the consent of the Dealer Manager, to appoint a successor
Depository. The Depository shall turn over to such successor, at the direction
of the Fund, all funds, accounts and records held by the Depository pursuant to
this Agreement.
Any change in the aforesaid terms and conditions shall require the
consent of the Dealer Manager. In the event that any questions arise as to the
interpretation of such terms and conditions, you shall be authorized to rely
upon telegraphic or written instructions from the Dealer Manager and the
Manager.
If you consent and agree to act as Depository on the terms and
conditions set forth above, please so signify by causing a duly authorized
officer or employee to sign the enclosed copy of this letter as indicated below
and return it to the undersigned,
6
<PAGE>
whereupon the terms and conditions of this letter shall constitute an agreement
between us. This agreement may be signed in separate counterparts, each of which
when so executed and delivered shall be an original for all purposes, but all
such counterparts shall constitute one and the same instrument.
Very truly yours,
ATEL CAPITAL EQUIPMENT FUND VIII, LLC,
a California limited liability company
By: ATEL Financial Corporation,
a California corporation,
Manager
By: ___________________________
A.J. Batt,
Chairman of the Board
ATEL SECURITIES CORPORATION,
a California corporation, Dealer Manager
By: ___________________________
Dean L. Cash,
President
We hereby consent to act as Depository on the terms and conditions set forth
above. Executed this ___ day of ________, 1998.
U. S. Bank
By: ____________________________
____________________________
(Name and Title)
7
EXHIBIT 23.1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated September 19, 1997 with respect to the consolidated
balance sheet of ATEL Financial Corporation and subsidiary at July 31, 1997 in
the Registration Statement (Form S-1 to be filed on August 27, 1998) and related
Prospectus of ATEL Capital Equipment Fund VIII, LLC for the registration of
15,000,000 limited liability company units.
Ernst & Young, LLP
San Francisco, California
August 25, 1998
