UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 2-72177
SEI II L.P.
(formerly Shearson Equipment Investors - II)
Exact name of registrant as specified in its charter
New York 13-3064636
State or other jurisdiction of incorporation or organization
I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor
New York, NY Attn.: Andre Anderson 10285
Address of principal executive offices zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
Title of Class
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
Documents incorporated by reference: None
PART I
Item 1. Business
(a) General development of business
SEI II L.P. (the "Partnership" or the "Registrant") (formerly
known as Shearson Equipment Investors - II) is a limited
partnership organized April 6, 1981 under the Partnership Law of
the State of New York to engage in the acquisition of various
types of equipment and other property. The Partnership acquired,
through direct forms of ownership, various types of equipment
which do not incorporate high levels of technology and are
therefore not likely to be subject to technological obsolescence.
A Registration Statement on Form S-1, Registration No. 2-72177,
filed with the Securities and Exchange Commission and relating to
the public offering (the "Offering") of the limited partnership
interests in the Partnership (the "Interests"), became effective
on June 25, 1981, the date on which the Partnership's operations
commenced. The Offering was completed as of October 2, 1981. As
of that date, there were 3,614 Interests outstanding, (including
22 Interests purchased by the general partner and two Interests
each purchased by the two initial limited partners) which
represent aggregate capital contributions to the Partnership of
$18,059,950.
The general partner of the Partnership is SEI II Equipment Inc.
(the "General Partner") (formerly Shearson Equipment Management
Corporation), a Delaware corporation which is an affiliate of
Lehman Brothers Inc. ("LB"). Under the Partnership Agreement,
the General Partner has exclusive authority to manage the
operations and affairs of the Partnership and to make all
decisions regarding the business of the Partnership; but the
acquisition, sales, financing or refinancing of any item of
equipment must be approved by a majority of the members of the
investment committee, whose members are designated by the
President of the General Partner. For a discussion of the
investment committee, see Item 10. "Directors and Executive
Officers of the Registrant."
At December 31, 1982, the Partnership had completed the
acquisition of its equipment portfolio. Equipment acquired by
the Partnership is either operated by or on behalf of the
Partnership under operating agreements.
Commencing January 1, 1993, the General Partner engaged a new
marine equipment operator, Midwest Marine Management Company
("Midwest Marine"), to manage the Partnership's barge fleet,
pursuant to the terms of a Management Agreement. The Management
Agreement expired December 31, 1996, but was renewed at maturity,
as provided for under the terms of the Management Agreement. The
Management Agreement now expires December 31, 1997.
(b) Financial information about industry segments
As of December 31, 1996, the Partnership's business consisted of
one segment, the investment in a fleet of 25 covered hopper river
barges. With the exception of such services as are provided by
the Partnership to users of its equipment, the Partnership does
not engage in sales of goods or services.
(c) Narrative description of business
See Paragraphs (a) and (b) above and Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
(d) Employees
The Partnership has no employees.
Item 2. Properties
During the period ended December 31, 1982, the Partnership
acquired various items of equipment which together constitute the
Partnership's entire equipment portfolio. No equipment purchases
were made subsequent to December 31, 1982, nor does the
Partnership expect that it will acquire any additional equipment.
All of the equipment has been pledged as collateral under the
credit agreement described in Note 4 to the Partnership's
financial statements. Commencing in 1987, the Partnership sold
the following assets: two 2 offshore supply vessels, a drilling
rig, and 82 railcars, with the proceeds being used to repay
Partnership debt. The Partnership currently owns 25 covered
river hopper barges which are engaged in the intercoastal
waterway transportation of goods.
Item 3. Legal Proceedings
In March 1996, a purported class action, on behalf of all Limited
Partners, was brought against the Partnership, Lehman Brothers
Inc., Smith Barney Holdings Inc., and a number of other limited
partnerships in New York State Supreme Court. The complaint
alleges claims of common law fraud and deceit, negligent
misrepresentation, breach of fiduciary duty and breach of implied
covenant of good faith and fair dealing. The defendants intend
to defend the action vigorously.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the limited partners for a vote
during the fourth quarter of the year for which this report is
filed.
PART II
Item 5. Market for the Registrant's Limited Partnership
Interests and Related Security Holder Matters
(a) Market Price Information
The only outstanding or authorized securities of the Registrant
are the Interests. There is no market for the Interests, nor is
one expected to develop. The Partnership Agreement imposes
substantial restrictions on the transfer of an Interest.
(b) Holders
The number of holders of Interests as of December 31, 1996 was
1,442.
(c) Cash Distributions per Interest
To the extent that funds are available and subject to the
provisions of the Partnership Agreement, the Partnership will
make cash distributions from operations to holders of Interests
on a quarterly basis. Cash distributions from operations are
made at the sole discretion of the General Partner. The
Partnership Agreement prohibits the investment of cash available
for distributions from operations in other than temporary money
market investments or United States government securities. Cash
distributions from operations are paid 99% to the limited
partners and 1% to the General Partner and are distributed to
each limited partner entitled to such distribution in the ratio
in which the number of Interests owned by such limited partner
bears to the total number of Interests issued, outstanding and
held by limited partners entitled to such distribution.
No cash distributions have been made to the partners since the
third quarter of 1982.
Item 6. Selected Financial Data
The information set forth below should be read in conjunction
with the Partnership's financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," also included herein.
Years Ended December 31, 1996 1995 1994 1993 1992
Operating revenues $2,579,822 $2,892,077 $1,852,384 $1,710,410 $2,268,236
Income from operations 592,153 882,829 383,191 64,416 246,662
Interest and
miscellaneous income 271,734 220,098 93,874 61,143 59,164
Other income -- -- -- -- --
Interest expense (653,375) (692,302) (547,495) (470,340) (489,937)
Net Income (Loss) 210,512 410,625 (70,430) (344,781) (184,111)
Net Income (Loss)
Per Interest 57.67 112.48 (19.29) (94.45) (50.43)
Total Assets at
Period-End 9,432,600 8,539,370 7,413,095 6,919,509 6,888,038
Long-term Debt at
Period-End 7,839,000 7,839,000 7,839,000 7,839,000 7,839,000
Accrued interest expense
due to affiliate 9,311,189 8,657,814 7,965,512 7,418,017 6,947,677
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(a) Liquidity and Capital Resources
The interest rate of the Partnership's note payable obligation
(the "Note") was 8.25% at December 31, 1996, compared to 8.75% at
December 31, 1995. No interest was paid relating to the Note for
the 12 months ended December 31, 1996, and, as a result, the
Partnership's accrued and deferred interest increased to
$9,824,043 at December 31, 1996, compared to $9,170,668 at
December 31, 1995. Accrued and deferred interest is payable at
maturity of the Note. The Note had a maturity date of January 3,
1997, and on that date the amount of accrued and unpaid interest
on the Note was $9,829,360. On January 3, 1997, the maturity date
of the Note was extended until January 2, 1998, or the date on
which the Partnership sells the barges, and the terms of the Note
were modified as described below.
On January 3, 1997, the Partnership entered into a First Amended
and Restated Credit Note ("Amended Note") with Buttonwood Leasing
Corporation. At that time, a principal payment of $5,500,000 was
made by the Partnership reducing the principal amount from
$7,839,000 to $2,339,000.
In accordance with the Amended Note, the Partnership is required
to pay quarterly installments of principal only on April 1, 1997,
July 1, 1997, and October 1, 1997 (each a "Payment Date") in an
amount equal to the amount of interest accrued on the unpaid
principal balance from the later of January 3, 1997 or the
immediately preceding Payment Date. In addition, the Partnership
is required to pay interest on the unpaid principal balance on
the Amended Note at maturity. Interest on the outstanding
principal balance of the Amended Note shall be computed using
simple interest at a rate equal to the Prime Rate as charged by
Bank America Illinois.
In addition to the quarterly principal installments, the
Partnership is required to make a cash sweep payment, which is
applied to principal, on or before the 60th day after the end of
each calendar quarter commencing March 31, 1997. The amount of
each cash sweep payment will be equal to 90% of Net Operating
Income (as defined in the Amended Note) minus the scheduled
principal installments paid on any debt permitted by Section 9(c)
of the Credit Agreement (as defined in the Amended Note) for the
immediately preceding calendar quarter of the Partnership.
During 1996, the Partnership's fleet of 25 covered hopper river
barges continued to operate on the inland waterways of the United
States. Although Partnership operations in the first half of
1996 were relatively stronger than usual due to the lingering
effects of an abundant harvest in 1994, conditions for barge
traffic deteriorated in the second half of the year as a result
of a comparatively smaller 1995 harvest. Because the crops
harvested in one year are typically shipped in the following
year, the smaller 1995 harvest did not impact the Partnership's
operations until 1996. Additionally, many farmers had shipped
all of their previously held crop inventories by mid-1996,
further reducing the quantity of goods available for shipment in
the third and fourth quarters of last year. These factors
decreased the demand for barges and led to intensified
competition among barge owners and, consequently, lower barge
revenue rates in the second half of 1996. As a result,
Partnership operating revenues and net income were lower than the
year before. Although last year's harvest was relatively strong,
it is anticipated that it will not likely be transported until
mid-1997, after farmers have replenished their depleted crop
inventories. The General Partner is currently exploring the
potential of commencing efforts to sell the Partnership's barge
fleet during 1997. The ability to sell, however, will be
dictated by market conditions and there can be no assurance that
a sale will occur. Furthermore, it is highly unlikely that the
barges will be sold for an amount which is equal to or in excess
of the Partnership's existing indebtedness.
The Partnership's cash and cash equivalents balance totaled
$5,703,859 at December 31, 1996, compared to $4,238,441 at
December 31, 1995. The increase is primarily due to cash flow
provided by operating activities. At December 31, 1996, the
amount due from the Partnership's equipment manager was $425,549,
compared to $673,652 at December 31, 1995. The decrease is
primarily due to the timing of the distributions of net revenues
from the equipment manager.
(b) Results of Operations
1996 versus 1995
For the year ended December 31, 1996, the Partnership generated
net income of $210,512, compared to $410,625 for the year ended
December 31, 1995. The decrease in net income is mainly the
result of lower operating revenues.
Operating revenues for the year ended December 31, 1996 totaled
$2,579,822, compared to $2,892,077 for the year ended
December 31, 1995. The decrease in operating revenues was
primarily attributable to a decrease in the average barge revenue
rate during the latter half of 1996.
Interest and miscellaneous income was $271,734 for the year ended
December 31, 1996, compared to $220,098 for the year ended
December 31, 1995. The increase is mainly due to an increase in
interest income due to a higher cash balance invested.
Operating costs decreased slightly to $1,438,584 for the year
ended December 31, 1996, compared to $1,454,871 for the year
ended December 31, 1995. Interest expense for the year ended
December 31, 1996 was $653,375 compared with $692,302 for the
year ended December 31, 1995. The reduction is due to a decrease
in the prime rate charged on the outstanding principal amount of
the Note.
1995 versus 1994
For the year ended December 31, 1995, the Partnership generated
net income of $410,625, compared to a net loss of $70,430 for the
year ended December 31, 1994. The difference is primarily
attributable to increased operating revenues.
Operating revenues for the year ended December 31, 1995 totaled
$2,892,077, compared to $1,852,384 for the year ended
December 31, 1994. The increase is primarily attributable to an
increase in barge utilization. The record harvest of soybeans in
1994 positively impacted revenue during 1995 as there was a
greater quantity of goods to transport. Strong U.S. exports in
1995 also contributed to increased barge utilization.
Furthermore, revenues were lower than usual in 1994 as a result
of the 1993 floods which damaged crops and reduced utilization.
Interest and miscellaneous income increased to $220,098 for the
year ended December 31, 1995, compared to $93,874 for the year
ended December 31, 1994. The increase is mainly due to an
increase in interest income due to a higher cash balance invested
and higher interest rates.
Operating costs for the year ended December 31, 1995 were
$1,454,871, compared to $949,093 for the year ended
December 31, 1994. The increase is primarily attributable to
increased towing costs as a result of greater utilization in
1995, and lower than normal towing costs for the first three
quarters of 1994.
Interest expense for the year ended December 31, 1995 totaled to
$692,302 compared with $547,495 for the year ended
December 31, 1994. The increase is due to an increase in the
prime rate charged on the outstanding principal amount of the
Note.
Item 8. Financial Statements and Supplementary Data
See item 14 "Exhibits, Financial Statement Schedules, and Reports
on Form 8-K" for a listing of the financial statements filed with
this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no officers or directors and its affairs are
managed by its General Partner, SEI II Equipment Inc. Decisions
as to which items of equipment should be acquired, sold, financed
or refinanced by the Partnership and whether such acquisitions
should be direct or indirect, are made by an investment committee
designated by the President of the General Partner. The
investment committee has the right, power and authority to
utilize the services of affiliates of the General Partner for
assistance in evaluating the suitability of equipment for
investment by the Partnership.
Certain officers and directors of the General Partner are now
serving (or in the past have served) as officers or directors of
entities which act as general partners of a number of limited
partnerships which have sought protection under the provisions of
the federal Bankruptcy Code. The partnerships which have filed
bankruptcy petitions own assets which have been adversely
affected by the economic conditions in the markets in which that
asset is located and, consequently, the partnerships sought
protection of the bankruptcy laws to protect the partnerships'
assets from loss through foreclosure.
The following is a brief description of the directors and
executive officers of the General Partner:
Name Office
Rocco F. Andriola President and Director
Regina M. Hertl Vice President and Chief Financial Officer
Michael T. Marron Vice President
Rocco F. Andriola, 38, is a Managing Director of Lehman Brothers
in its Diversified Asset Group and has held such position since
October 1996. Since joining Lehman Brothers in 1986, Mr.
Andriola has been involved in a wide range of restructuring and
asset management activities involving real estate and other
direct investment transactions. From June 1991 through September
1996, Mr. Andriola held the position of Senior Vice President in
Lehman's Diversified Asset Group. From June 1989 through May
1991, Mr. Andriola held the position of First Vice President in
Lehman's Capital Preservation and Restructuring Group. From 1986-
89, Mr. Andriola served as a Vice President in the Corporate
Transactions Group of Shearson Lehman Brothers' office of the
general counsel. Prior to joining Lehman Brothers, Mr. Andriola
practiced corporate and securities law at Donovan Leisure Newton
& Irvine in New York. Mr. Andriola received a B.A. from Fordham
University, a J.D. from New York University School of Law, and an
LLM in Corporate Law from New York University's Graduate School
of Law.
Regina M. Hertl, 38, is a First Vice President of Lehman Brothers
in its Diversified Asset Group and is responsible for the
investment management of commercial and residential real estate,
and a venture capital portfolio. From January 1988 through
December 1988, Ms. Hertl was Vice President of the Real Estate
Accounting Group within the Controller's Department of Shearson
Lehman Brothers. From September 1986 through December 1987, she
was an Assistant Vice President responsible for real estate
accounting analysis within the Controller's Department at
Shearson. From September 1981 to September 1986, Ms. Hertl was
employed by the accounting firm of Coopers & Lybrand. Ms. Hertl,
who is a Certified Public Accountant, graduated from Manhattan
College in 1981 with a B.S. degree in Accounting.
Michael T. Marron, 33, is a Vice President of Lehman Brothers and
has been a member of the Diversified Asset Group since 1990 where
he has actively managed and restructured a diverse portfolio of
syndicated limited partnerships. Prior to joining Lehman
Brothers, Mr. Marron was associated with Peat Marwick Mitchell &
Co. serving in both its audit and tax divisions from 1985 to
1989. Mr. Marron received a B.S. degree from the State
University of New York at Albany in 1985 and is a Certified
Public Accountant.
Item 11. Executive Compensation
Neither of the General Partners nor any of their directors and
officers received any compensation from the Partnership. See
Item 13 below with respect to a description of certain
transactions of the General Partners and their affiliates with
the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) Security ownership of certain beneficial owners
No person (including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) is known to the
Partnership to be the beneficial owner of more than 5% of the
outstanding Interests as of December 31, 1996.
(b) Security ownership of management
Under the terms of the Limited Partnership Agreement, the
Partnership's affairs are managed by the General Partner. An
affiliate of the General Partner owns 22 interests and shares in
the profits, losses and distributions of the Partnership.
(c) Changes in Control
None.
Item 13. Certain Relationships and Related Transactions
Pursuant to a Management Agreement dated June 25, 1981 between
the Partnership and the General Partner, the General Partner is
entitled to receive equipment management fees for services
rendered in the management of equipment owned by the Partnership.
The amount of the equipment management fees charged is the lesser
of (i) the aggregate of amounts customarily charged by third
parties for similar services or (ii) 5% of annual gross revenues,
however, in the event the General Partner subcontracts to third
parties for services to be rendered in the management of the
equipment, any management fee paid to a third party will reduce
the fee otherwise earned by the General Partner, but not below 1%
of gross revenues. For the year ended December 31, 1996,
equipment management fees aggregating $149,771 were expensed by
the Partnership. Of this amount, $123,973 was due or paid by the
Partnership to an independent, third-party operator, and $25,798
was earned by the General Partner. The fee as earned by the
General Partner added to uncollected fees for prior years and, as
of December 31, 1996, $696,999 remains to be paid to the General
Partner. In accordance with the Partnership Agreement, the
General Partner has deferred its rights to receive such fees
until such time as the Partnership is in a position to make cash
distributions to all partners.
The General Partner is also entitled to receive, for services
rendered, a Partnership management fee equal to 5% of cash
distributions from operations. Such services relate to
decision-making as to the terms of acquisitions and dispositions
of equipment, selecting, retaining and supervising consultants,
engineers, lenders and others, maintaining the books and records
of the Partnership and otherwise generally managing the
day-to-day operations of the Partnership. The Partnership
management fees are payable at the same time as, but only if and
when, cash distributions from operations are paid to the limited
partners. Partnership management fees are in addition to all
other fees, commissions or compensation paid or permitted to be
paid to the General Partner or its affiliates. For the year
ended December 31, 1996, no Partnership management fees were paid
to the General Partner.
First Data Investor Services Group, formerly The Shareholder
Services Group, provides partnership accounting and investor
relations services for the Registrant. The Registrant's transfer
agent and certain tax reporting services are provided by Service
Data Corporation. Both First Data Investor Services Group and
Service Data Corporation are unaffiliated companies. For
additional information regarding fees paid and reimbursed to the
General Partner or its affiliates during 1996, 1995 and 1994, see
Note 4 to the Financial Statements in Item 14, "Exhibits,
Financial Statement Schedules, and Reports on Form 8-K."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a)(1) Financial statements:
SEI II L.P.
INDEX TO FINANCIAL STATEMENTS
Page
Number
Balance Sheets at December 31, 1996 and 1995 F-1
Statements of Partners' Deficit for the years ended
December 31, 1996, 1995 and 1994 F-1
Statements of Operations for the years ended December 31,
1996, 1995, and 1994 F-2
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994 F-2
Notes to the Financial Statements F-3
Report of Independent Public Accountants F-7
(2) Financial Statement Schedules:
No schedules are presented because the information is not
applicable or is included in the Financial Statements or the
notes thereto.
(3) Exhibits:
3.1 Agreement of Limited Partnership dated June 25, 1981 (filed
as Exhibit 3b to Registration Statement on Form S-1 as filed
with the Securities and Exchange Commission on May 7, 1981,
No. 2-72177 and incorporated herein by reference).
3.1 Certificate of Limited Partnership of the Partnership as
filed in the office of the County Clerk of New York County
on April 6, 1981(filed as Exhibit 3a to Registration
Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 7, 1981, No. 2-72177 and
incorporated herein by reference).
10.1 Acquisition Services Agreement between the Partnership
and the General Partner dated June 25, 1981 (filed as
Exhibit 12c to Registration Statement on Form S-1 as filed
with the Securities and Exchange Commission on May 7, 1981,
No. 2-72177 and incorporated herein by reference).
10.2 Management Agreement between the Partnership and the
General Partner dated June 25, 1981 (filed as Exhibit 12d to
Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on May 7, 1981, No.
2-72177 and incorporated herein by reference).
10.3 Agreement for Financial Advisory Services between the
Partnership and Shearson Leasing Corporation dated June 25,
1981 (filed as Exhibit 12e to Registration Statement on Form
S-1 as filed with the Securities and Exchange Commission on
May 7, 1981, No. 2-72177 and incorporated herein by
reference).
10.4 First Amended and Restated Credit Agreement between SEI
2 L.P. and Buttonwood Leasing Corporation dated January 3, 1997.
10.5 First Amended and Restated Credit Note between SEI 2
L.P. and Buttonwood Leasing Corporation dated January 3, 1997.
27.0 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
the year for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SEI II L.P.
BY: SEI II EQUIPMENT INC.
General Partner
Date: March 27, 1997 BY: /s/ Rocco F. Andriola
Name: Rocco F. Andriola
Title: President and Director
Date: March 27, 1997 BY: /s/ Regina Hertl
Name: Regina Hertl
Title: Vice President and Chief Financial Officer
Date: March 27, 1997 BY: /s/ Michael T. Marron
Name: Michael T. Marron
Title: Vice President
Balance Sheets At December 31, At December 31,
1996 1995
Assets
Property:
Equipment $ 8,306,724 $8,306,724
Less accumulated depreciation (5,011,716) (4,679,447)
Net Equipment 3,295,008 3,627,277
Cash and cash equivalents 5,703,859 4,238,441
Due from equipment manager 425,549 673,652
Other assets 8,184 --
Total Assets $ 9,432,600 $8,539,370
Liabilities and Partners' Deficit
Liabilities:
Accounts payable and accrued expenses $ 34,173 $ 30,628
Accrued interest expense due to affiliate 9,311,189 8,657,814
Deferred interest payable to affiliate 512,854 512,854
Due to General Partner 696,999 671,201
Note payable to affiliate 7,839,000 7,839,000
Total Liabilities 18,394,215 17,711,497
Partners' Deficit:
General Partner (251,806) (253,911)
Limited Partners (3,614 units outstanding) (8,709,809) (8,918,216)
Total Partners' Deficit (8,961,615) (9,172,127)
Total Liabilities and Partners' Deficit $9,432,600 $8,539,370
Statements of Partners' Deficit
For the years ended December 31, 1996, 1995 and 1994
General Limited
Partner Partners Total
Balance at December 31, 1993 $(257,313) $(9,255,009) $(9,512,322)
Net Loss (704) (69,726) (70,430)
Balance at December 31, 1994 (258,017) (9,324,735) (9,582,752)
Net Income 4,106 406,519 410,625
Balance at December 31, 1995 (253,911) (8,918,216) (9,172,127)
Net Income 2,105 208,407 210,512
Balance at December 31, 1996 $(251,806) $(8,709,809) $(8,961,615)
Statements of Operations
For the years ended December 31, 1996 1995 1994
Revenues
Operating revenues $2,579,822 $2,892,077 $1,852,384
Operating Expenses
Operating costs 1,438,584 1,454,871 949,093
Depreciation 332,269 332,269 332,269
Professional and other expenses 50,201 44,660 48,422
Equipment management fee -
Operators 123,973 131,683 105,558
General Partner 25,798 28,921 18,524
Insurance 16,844 16,844 15,327
Total Operating Expenses 1,987,669 2,009,248 1,469,193
Income from operations 592,153 882,829 383,191
Other Income (Expense):
Interest and miscellaneous income 271,734 220,098 93,874
Interest expense (653,375) (692,302) (547,495)
Total Other Expense (381,641) (472,204) (453,621)
Net Income (Loss) $ 210,512 $ 410,625 $ (70,430)
Net Income (Loss) Allocated:
To the General Partner $ 2,105 $ 4,106 $ (704)
To the Limited Partners 208,407 406,519 (69,726)
$ 210,512 $ 410,625 $ (70,430)
Per limited partnership unit
(3,614 outstanding) $57.67 $112.48 $(19.29)
Statements of Cash Flows
For the years ended December 31, 1996 1995 1994
Cash Flows From Operating Activities
Net Income (Loss) $210,512 $410,625 $(70,430)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 332,269 332,269 332,269
Increase (decrease) in cash arising from
changes in operating assets and liabilities
Due from equipment manager 248,103 (151,569) (162,238)
Other assets (8,184) -- --
Accounts payable and accrued expenses 3,545 (5,573) (2,003)
Accrued interest expense due to affiliate 653,375 692,302 547,495
Due to General Partner 25,798 28,921 18,524
Net cash provided by operating activities 1,465,418 1,306,975 663,617
Net increase in cash and cash equivalents 1,465,418 1,306,975 663,617
Cash and cash equivalents,
beginning of period 4,238,441 2,931,466 2,267,849
Cash and cash equivalents,
end of period $5,703,859 $4,238,441 $2,931,466
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
1. Organization
SEI II L.P. (the "Partnership") was organized under the
Partnership Act of the State of New York on April 6, 1981. The
term of the Partnership will continue through December 31, 2011,
unless terminated and dissolved sooner pursuant to the
Partnership Agreement.
The general partner is SEI II Equipment Inc. (the "General
Partner"), formerly Shearson Equipment Management Corp., an
affiliate of Lehman Brothers Inc. On July 31, 1993, certain of
Shearson Lehman Brothers Inc.'s domestic retail brokerage and
management businesses were sold to Smith Barney, Harris Upham &
Co. Inc. Included in the purchase was the name "Shearson."
Consequently, the General Partner's name was changed to SEI II
Equipment Inc. to delete any reference to "Shearson."
The Partnership's business consists of one segment, the
investment in a fleet of 25 covered hopper river barges which are
engaged in the intercoastal waterway transportation of goods.
With the exception of such services as are provided by the
Partnership to users of its equipment, the Partnership does not
engage in the sales of goods or services.
Upon formation of the Partnership, an affiliate of the General
Partner contributed $1,000 and purchased 22 partner units for
$100,650. The initial Limited Partners contributed $18,300 for
four partner units. An additional 3,588 limited partnership
units were then sold at a price of $5,000 per unit. The offering
was completed as of October 2, 1981. As of that date, there
were 3,614 interests outstanding, (including 22 interests
purchased by an affiliate of the General Partner and two
interests each purchased by the two initial limited partners)
which represent aggregate capital contributions to the
Partnership of $18,059,950.
The General Partner has entered into an agreement with an
independent equipment manager for the operation of the
Partnership's equipment. The results of such operations are
reported to the General Partner by the independent equipment
manager and have been reflected in the accompanying financial
statements.
2. Significant Accounting Policies
Basis of Accounting - The accompanying financial statements have
been prepared on the accrual basis of accounting in accordance
with generally accepted accounting principles. Revenues are
recognized as earned and expenses are recorded as obligations are
incurred.
Equipment Manager - On January 1, 1993, the Partnership transferred
management of its assets to a new equipment manager, Midwest
Marine Management Company ("Midwest Marine"). Midwest Marine
operates the barge fleet and provides for pooling of all owners'
assets. Due to this pooling, the Partnership is entitled to a
proportion of the pooled net revenues; therefore, the Partnership
does not record operating assets or liabilities other than the
balance due from Midwest Marine.
Equipment and Depreciation - The equipment balance at December 31,
1996 and 1995 consisted of 25 covered hopper river barges, stated
at cost. Depreciation for financial reporting purposes is
computed on a straight-line basis over the estimated useful lives
of 25 years.
Accounting for Impairment - In March 1995, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of "
("FAS 121"), which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets'
carrying amount. FAS 121 also addresses the accounting for long-
lived assets that are expected to be disposed of. The
Partnership adopted FAS 121 in the fourth quarter of 1995.
Cash Equivalents - Cash equivalents consist of short-term highly
liquid investments with maturities of three months or less from
the date of purchase. The carrying amount approximates fair
value because of the short maturity of these investments.
Concentration of Credit Risk Financial instruments which
potentially subject the Partnership to a concentration of credit
risk principally consist of cash in excess of the financial
institution's insurance limits. The Partnership invests
available cash with high credit quality financial institutions.
Fair Value of Financial Instruments - Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments" ("FAS 107"), requires that the Partnership
disclose the estimated fair values of its financial instruments.
Fair values generally represent estimates of amounts at which a
financial instrument could be exchanged between willing parties
in a current transaction other than in forced liquidation.
Fair Value estimates are subjective and are dependent on a number
of significant assumptions based on management's judgment
regarding future expected loss experience, current economic
conditions, risk characteristics of various financial
instruments, and other factors. In addition, FAS 107 allows a
wide range of valuation techniques, therefore, comparisons
between entities, however similar, may be difficult.
Income Taxes - No provision for income taxes has been made in the
accompanying financial statements since such taxes are the
responsibility of the individual partners rather than that of the
Partnership.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
3. Partnership Allocations
The Partnership Agreement substantially provides for the
following:
Distribution of Partnership Funds - Net cash from operations shall
be distributed at the discretion of the General Partner, 99% to
the Limited Partners and 1% to the General Partner.
Cash from sales or refinancings shall be allocated and paid first
to all partners until the amount of all distributions received by
them equals their positive capital account balances. Any balance
will be allocated to the Limited Partners until the cumulative
amount of distributions made to them equals their Original
Invested Capital plus a cumulative 10% per annum return as
defined. Thereafter, cash will be distributed 85% to the Limited
Partners and 15% to the General Partner. The cumulative amount
of distributions to date does not exceed the required
distributions as of December 31, 1996.
Cash distributions to the partners are presently prohibited by
the amended credit agreement with the Partnership's lender (Note
4). No cash distributions have been made by the General Partner
since the third quarter of 1982.
Allocation of Income and Losses - All operating profits and losses
and losses from sales or refinancings shall be allocated 1% to
the General Partner and 99% to the Limited Partners. Profits
from sales or refinancings shall be allocated to the General
Partner based on the greater of either 1% of such profits or the
amount distributable to the General Partner, as defined in the
Partnership Agreement. Any remaining profits shall be allocated
to the Limited Partners.
4. Related Party Transactions
General Partner Fees - The Partnership Agreement specifies that the
General Partner will receive (a) an equipment management fee in
an amount that will not exceed 5% of the annual gross revenues of
all equipment owned by the Partnership; (b) in the event the
General Partner subcontracts to third parties for services to be
rendered in the management of the equipment, any management fee
paid to a third party will reduce the fee otherwise earned by the
General Partner, but not below 1% of gross revenues. As of
December 31, 1996, $696,999 in equipment management fees earned
by the General Partner remains to be paid to the General Partner.
In accordance with the Partnership Agreement, the General Partner
has deferred its rights to receive such fees until such time as
the Partnership is in a position to make cash distributions to
all partners.
Cash and Cash Equivalents - Cash and cash equivalents reflected on
the Partnership's balance sheet at December 31, 1995 were on
deposit with an affiliate of the General Partner. As of December
31, 1996, no cash and cash equivalents were on deposit with an
affiliate of the General Partner or the Partnership.
Long-term Debt - On May 30, 1986, the Partnership restructured its
long-term debt which had been in default since June 1985.
Buttonwood Leasing Corporation (the "Purchaser"), which is a
corporation affiliated with the General Partner, purchased from
the Partnership's lenders (the "Banks") the Promissory Note dated
December 9, 1981 (the "Note") originally executed by the
Partnership in favor of the Banks. The Purchaser agreed to waive
enforcement of certain financial covenants contained in the loan
documentation, covenants of which the Partnership was not in
compliance. Subsequent to the Note purchase, the Purchaser
entered into an understanding with the Partnership on the
following terms and conditions. First, the principal amount of
the loan would remain the same. Second, interest would be
charged on the outstanding principal amount of the Note at a rate
equal to the prime rate charged by Bank America Illinois,
formerly Continental Illinois National Bank, which was 8.25% at
December 31, 1996, 8.75% at December 31, 1995 and 7.75% at
December 31, 1994. Accrued and deferred interest is payable at
maturity of the Note. The Note had a maturity date of January 3,
1997, and on that date the amount of accrued and unpaid interest
on the Note was $9,829,360.
On January 3, 1997, the Partnership entered into a First Amended
and Restated Credit Note ("Amended Note") with Buttonwood Leasing
Corporation which extended the maturity date of the Note from
January 3, 1997 to the earlier of January 2, 1998, or the date on
which the Partnership sells the barges. At that time, a
principal payment of $5,500,000 was made on the Note, reducing
the principal amount from $7,839,000 to $2,339,000.
In accordance with the Amended Note, the Partnership is required
to pay quarterly installments of principal only on April 1, 1997,
July 1, 1997, and October 1, 1997 (each a "Payment Date") in an
amount equal to the amount of interest accrued on the unpaid
principal balance from the later of January 3, 1997 or the
immediately preceding Payment Date. In addition, the Partnership
is required to pay interest on the unpaid principal balance at
maturity on January 2, 1998. Interest on the outstanding
principal balance of the Amended Note shall be computed using
simple interest at a rate equal to the Prime Rate as charged by
Bank America Illinois.
In addition to the quarterly principal installments, the
Partnership is required to make a cash sweep payment, which is
applied to principal, on or before the 60th day after the end of
each calendar quarter commencing March 31, 1997. The amount of
each cash sweep payment will be equal to 90% of Net Operating
Income (as defined in the Amended Note) minus the scheduled
principal installments paid on any debt permitted by Section 9(c)
of the Credit Agreement (as defined in the Amended Note) for the
immediately preceding calendar quarter of the Partnership.
The fair market value of the Amended Note is substantially less
than its carrying amount. It is not practicable for the
Partnership to estimate the fair value of this financial
instrument as no quoted market price exists and the cost of
obtaining an independent valuation appears excessive to the
Partnership.
5. Litigation
In March 1996, a purported class action, on behalf of all Limited
Partners, was brought against the Partnership, Lehman Brothers
Inc., Smith Barney Holdings Inc., and a number of other limited
partnerships in New York State Supreme Court. The complaint
alleges claims of common law fraud and deceit, negligent
misrepresentation, breach of fiduciary duty and breach of implied
covenant of good faith and fair dealing. The defendants intend
to defend the action vigorously.
6. Reconciliation of Differences between Financial Statements and
the Partnership's Tax Return
Net income, as reported in 1996 $ 210,512
Adjustments-
Depreciation differential between the Accelerated
Cost Recovery System (ACRS) and depreciation
for financial reporting 332,269
Increase in accrued operating expenses 3,545
Management fee expense 25,798
Increase in accrued interest expense
due to affiliate 653,375
Total adjustments 1,014,987
Net income per the Partnership's 1996 tax return $ 1,225,499
Net income allocation:
Limited Partners (3,614 interests) $ 1,213,244
General Partner 12,255
$ 1,225,499
Per Limited Partnership interest $335.71
Partners' deficit, as reported December 31, 1996 $(8,961,615)
Adjustments, as above 1,014,987
Adjustments, prior years 6,245,235
Syndication expenses 1,740,961
Partners' deficit, per the Partnership's 1996 tax return $ 39,568
The partners' deficit reported on the Partnership's tax return is
allocable to the partners as follows:
Limited Partners (3,614 interests) $ (159,695)
General Partner 199,263
$ 39,568
The Partnership's tax returns and the amounts of distributable
Partnership income or loss are subject to examination by federal
and state taxing authorities. In the event of an examination of
the Partnership's tax return, the tax liability of the partners
could be changed if an adjustment in the Partnership's income or
loss is ultimately sustained by the taxing authorities.
Report of Independent Public Accountants
To the Partners of
SEI II L.P.:
We have audited the accompanying statements of financial
condition of SEI II L.P. (a New York limited partnership) as of
December 31, 1996 and 1995, and the related statements of
operations, partners' deficit and cash flows for each of the
three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of SEI II L.P. as of December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the three years
in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 5,703,859
<SECURITIES> 0
<RECEIVABLES> 425,549
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,137,592
<PP&E> 8,306,724
<DEPRECIATION> 5,011,716
<TOTAL-ASSETS> 9,432,600
<CURRENT-LIABILITIES> 34,173
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 8,961,615
<TOTAL-LIABILITY-AND-EQUITY> 9,432,600
<SALES> 0
<TOTAL-REVENUES> 2,851,556
<CGS> 0
<TOTAL-COSTS> 1,987,669
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 653,375
<INCOME-PRETAX> 210,512
<INCOME-TAX> 0
<INCOME-CONTINUING> 210,512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 210,512
<EPS-PRIMARY> 57.67
<EPS-DILUTED> 57.67
</TABLE>
FIRST AMENDED AND
RESTATED CREDIT AGREEMENT
dated as of January 3, 1997
between
SEI II L.P., formerly known as
Shearson Equipment Investors-II,
a New York limited partnership
(the "Partnership")
and
BUTTONWOOD LEASING CORPORATION,
a Delaware corporation, as Lender
(the "Lender")
FIRST AMENDED AND RESTATED CREDIT AGREEMENT THIS FIRST AMENDED AND RESTATED
CREDIT AGREEMENT, is dated as of January 3, 1997, by and among SEI II L.P.,
formerly known as Shearson Equipment Investors-II, a New York Limited
Partnership c/o SEI II Equipment, Inc., General Partner, c/o Lehman Brothers,
Inc., 3 World Financial Center, 29th Floor, New York, New York 10285-2900
(herein called the "Partnership"); and BUTTONWOOD LEASING CORPORATION, a
Delaware corporation (herein called the "Lender"), assignee of The First
National Bank of Maryland (the "Original Lender"), having an address at c/o
Lehman Brothers, Inc., 3 World Financial Center, 24th Floor, New York, New York
10285-2900.
W I T N E S S E T H T H A T:
WHEREAS, the Partnership was formed to purchase and operate
transportation, marine, production, and other types of machinery and
equipment. The Partnership arranged for loans to the Partnership to
finance up to 55% of the Cost of Equipment, to a maximum of $17,000,000
aggregate principal amount at any time outstanding.
WHEREAS, the Partnership heretofore executed and delivered to the
Original Lender that certain Credit Note dated December 9, 1981, in the
original principal amount of Seventeen Million Dollars ($17,000,000)
(the "Original Note"), which Original Note was entered into subject to
the terms and conditions contained in that certain Credit Agreement
dated December 9, 1981 (the "Original Credit Agreement"), among the
Partnership, the Original Lender and The First National Bank of
Maryland, not in its individual capacity but as Trustee under that
certain Participation and Trust Agreement dated as of November 30, 1981
(herein called the "Trustee").
WHEREAS, the Partnership, the Original Lender and the Trustee amended
the Original Credit Agreement pursuant to that certain Amendment
Agreement dated June 30, 1983, among the Partnership, the Original
Lender and the Trustee (the "Amendment Agreement").
WHEREAS, the Original Lender sold and assigned the Original Note and
the Original Credit Agreement to the Lender on May 30, 1986.
WHEREAS, on May 30, 1986, the Partnership and the Lender agreed (i)
that the principal amount of the Original Note was to remain constant;
and (ii) to decrease the rate of interest on the Original Note from one
and one quarter percent (1.25%) plus the Prime Rate (as defined in the
Original Note) to a rate equal to the prime rate charged by Bank
America Illinois, formerly Continental Illinois National Bank.
WHEREAS, the Partnership and the Lender have agreed on an annual basis
to extend the maturity date of the Original Note, and the current
maturity date of the Original Note is January 3, 1997.
WHEREAS, prior to January 3, 1997, the Partnership made payments to the
Lender to reduce the outstanding principal amount of the Original Note
from Seventeen Million Dollars ($17,000,000) to Seven Million Eight
Hundred Thirty Nine Thousand Dollars ($7,839,000).
WHEREAS, the Partnership and the Lender have agreed to further extend
the maturity of the Original Note to the earlier of January 2, 1998, or
the date on which the Partnership sells the 25 covered hopper river
barges that are owned by the Partnership.
WHEREAS, as of January 3, 1997, immediately following the application
of the principal payment in the amount of Five Million Five Hundred
Thousand Dollars ($5,500,000) made by the Partnership to the Lender on
such date, the outstanding principal amount of the Original Note will
be reduced from Seven Million Eight Hundred Thirty Nine Thousand
Dollars ($7,839,000) to Two Million Three Hundred Thirty Nine Thousand
Dollars ($2,339,000).
WHEREAS, as of January 3, 1997, the amount of accrued and unpaid
interest of the Original Note is [Nine Million Eight Hundred
Twenty-Nine Thousand Three Hundred Sixty] Dollars ($[9,829,360]) and
such amount remains due and owing.
WHEREAS, the Partnership and the Lender desire to restate the Original
Credit Agreement as previously amended by the Amendment Agreement and
as amended hereby.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants hereinafter set forth and intending to be legally bound
hereby, agree as follows:
Section 1. Certain Definitions. In addition to words and terms defined
elsewhere in this Agreement, the following words and terms as used
herein shall have the following meanings, respectively, unless the
context hereof clearly requires otherwise. Terms used in the singular
form shall include the plural and vice versa:
(a) "Agreement" shall mean this First Amended and Restated Credit
Agreement, as the same may from time to time be further supplemented
or amended.
(b) "Aircraft" [intentionally omitted].
(c) "Aircraft Security Agreement" [intentionally omitted].
(d) "Assignment" shall mean each assignment to the Lender of an
Operating Agreement, as the same may from time to time be supplemented
or amended.
(e) "Borrowing Base" [Intentionally omitted].
(f) "Business Days" shall mean days other than a Saturday, Sunday
or any other day on which banking institutions in the state of New
York are authorized or obligated to remain closed.
(g) "Cash Sweep Payment Amount" for each date that such a payment
is due shall be an amount equal to 90% of the aggregate Free Cash (as
hereinafter defined) of the Partnership as of the last day of the
immediately preceding calendar quarter of the Partnership.
(h) "Closing Date" shall mean the date on which this Agreement is
signed by the parties hereto.
(i) "Contract Assignment" [intentionally omitted].
(j) "Cost of Equipment" shall mean, with respect to each Item of
Equipment, the actual purchase price payable or paid by the
Partnership pursuant to agreements for the purchase, construction or
building of any Item of Equipment or to invoices and/or bills of sale
issued under the same plus all shipping, assembly, storage and similar
costs and applicable excise, sales or use taxes, but excluding any
fees paid to General Partner in connection with such purchase.
(k) "Credit Advance" [intentionally omitted].
(l) "Current Assets" shall mean the current assets of the
Partnership, determined in accordance with generally accepted
accounting principles.
(m) "Current Liabilities" shall mean the current liabilities of the
Partnership determined in accordance with generally accepted
accounting principles.
(n) "Current Debt" shall mean any obligation for borrowed money
(and any notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed money)
payable on demand or within a period of one year from the date of the
creation thereof; provided that any obligation shall be treated as
Funded Debt, regardless of its term, if such obligation is renewable
at the option of the Partnership pursuant to the terms thereof or of a
revolving credit or similar agreement effective for more than one year
after the date of the creation of such obligation, or may be payable
out of the proceeds of a similar obligation pursuant to the terms of
such obligation or of any such agreement.
(o) "Debt" shall mean Funded Debt or Current Debt, as the case may
be. Any obligation secured by a Lien on, or payable out of the
proceeds of production from or sale of, property of the Partnership
shall be deemed to be Funded or Current Debt, as the case may be, of
the Partnership even though such obligation shall not be assumed by
the Partnership.
(p) "Default" shall mean any of the events specified in Section 10
hereof, whether or not any requirement for the giving of notice or the
lapse of time or the happening of any further event, condition or act
shall have been satisfied.
(q) "Equipment", or "Item of Equipment", or "Item" shall mean those
items of personal property of the Partnership described in Schedule A
hereto (whether or not such property is characterized as equipment or
inventory under the Uniform Commercial Code or otherwise) and such
other items of personal property which are not described on Schedule A
hereto but which are acceptable to the Lender as collateral security
for the Loan and are described in any of the Security Documents.
(r) "Events of Default" shall mean any of the events specified in
Section 10 hereof; provided that there has been satisfied any
requirement in connection with such event for the giving of notice,
the lapse of time or the happening of any further event, condition or
act.
(s) "Free Cash" shall mean the amount (provided such amount is
greater than zero) equal to the Net Operating Income of the
Partnership minus the scheduled principal installments paid on any
Debt permitted by Section 9(c) of this Agreement for the immediately
preceding calendar quarter of the Partnership.
(t) "Funded Debt" shall mean any obligation payable more than one
year from the date of the creation thereof, which under generally
accepted accounting principles is shown on the balance sheet as a
liability (excluding reserves for deferred income taxes and other
reserves to the extent that such reserves do not constitute an
obligation).
(u) "General Administrative Expenses" shall mean the total amount
of all costs and expenses actually paid in cash during such time
period by the Partnership such as but not limited to audit/accounting
fees, legal fees, transfer agent fees, printing and postage fees, out
of pocket costs and any other cost or expenses paid in connection with
the management and administration of the Partnership.
(v) "General Partner" shall mean SEI II Equipment, Inc., formerly
known as Shearson Equipment Management Corporation, a Delaware
Corporation, its successors and assigns.
(w) "General Partner's Certificate" shall mean a certificate signed
in the name of the General Partner by its President, one of its Vice
Presidents, or its chief financial officer which certificate shall
state, in addition to the specific information required by the terms
of this Agreement or the Security Documents, (i) that the individual
signing the same has made or caused to be made such investigations as
are necessary in order to permit him to verify the accuracy of the
information set forth therein and (ii) that to the best of such
individual's knowledge, the certificate does not misstate any fact or
omit to state any fact necessary to make the certificate not
misleading.
(x) "Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional
sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction).
(y) "Loan" shall mean, as of any time, the then unpaid principal
balance of the Note, plus accrued interest thereon.
(z) "Net Operating Income" shall mean Total Revenue (including
Other Income) minus Operating Expenses and General and Administrative
Expenses minus capital required by future operations as determined by
the General Partner of the Partnership (but not to exceed $300,000)
plus depreciation and amortization taken.
(aa) "Note" shall mean the First Amended and Restated Credit Note of
the Partnership, as defined in Section 2, executed and delivered under
this Agreement, and all extensions, renewals, replacements and
modifications thereof.
(bb) "Obligations" shall mean the Loan, and all other indebtedness
now or hereafter owed by the Partnership to the Lender, whether under
the Agreement, the Security Documents, the Note or otherwise.
(cc) "Operating Agreement" shall mean an agreement or arrangement
providing for the operation, use, management or control of any Item of
Equipment by any Person other than the Partnership including, without
limitation, a management agreement, operating agreement, maintenance
contract, rental agreement, lease, charter, assigned service contract,
affreightment or transportation agreement.
(dd) "Operating Expenses" shall mean the total amount of all costs
and expenses actually paid in cash during such time period by the
Partnership (or by the property manager on behalf of the Partnership)
for the management, maintenance, repair, insurance or operation of the
Barges, exclusive of expenses for depreciation and amortization.
(ee) "Other Income" shall mean for any period of time, all cash
actually received by the Partnership, other than total revenue as
defined, including, without limitation, reimbursement or refunds,
interest and other receipts incidental to operating the Partnership.
(ff) "Participant" [intentionally omitted].
(gg) "Participation Agreement" [intentionally omitted].
(hh) "Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization
and a government or any department or agency thereof.
(ii) "Prime Rate" shall mean, as of any date, (i) the announced or
published Prime Rate at the Bank America Illinois of Chicago,
Illinois, or its successors, or (ii) in the absence of an announced or
published Prime Rate by Bank America Illinois or its successor, the
Prime Rate reported in the Money Rates Column of The Wall Street
Journal, currently defined as being the base rate on corporate loans
posted by at least 75% of the nation's thirty largest banks
(regardless of whether such rate has actually been charged by any such
bank); provided that, in the event The Wall Street Journal (y)
publishes more than one prime rate, the highest of such rates shall be
the "Prime Rate", or (z) publishes a retraction or correction of any
such rate, the rate reported in such retraction or correction shall be
the "Prime Rate."
(jj) "Security Agreement" shall mean the Security Agreement of the
Partnership in substantially the form of Exhibit C hereto, as the same
may from time to time be supplemented or amended.
(kk) "Security Documents" shall mean collectively any and all
documents and instruments signed and delivered to the Lender for the
purpose of securing the payment of the Loan including, without
limitation, the Security Agreement, the Ship Mortgage, and the
Assignment.
(ll) "Ship Mortgage" shall mean a First Preferred Mortgage of
Documented Vessels in substantially the form of Exhibit B hereto, duly
executed, delivered and recorded, as the same may from time to time be
supplemented or amended.
(mm) "Special Counsel" shall mean Thompson Coburn, St. Louis,
Missouri.
(nn) "Tangible Net Worth" shall mean the total assets of the
Partnership, exclusive of intangible assets such as goodwill,
trademarks, trade names, licenses or rights in respect thereof and any
other items which are treated as intangibles under generally accepted
accounting principles, minus the total liabilities including, without
limitation, subordinated indebtedness of the Partnership, all as
determined in accordance with generally accepted accounting
principles.
(oo) "Total Revenue" shall mean for any period of time, all cash
actually received by the Partnership in connection with the management
and operation of the Barges, including, without limitation, all rents
and fees from the rental of the Barges.
(pp) "Vessel" shall mean any vessel eligible for documentation as a
Vessel of the United States.
(qq) "Working Capital" shall mean the excess of Current Assets of
the Partnership over its Current Liabilities, all as determined in
conformity with generally accepted accounting principles.
Section 2. Credit Availabilities.
(a) Commitment. [Intentionally omitted].
(b) The Note. All advances hereunder to the Partnership shall be
evidenced by a single First Amended and Restated Credit Note (the "Note"), duly
executed, payable to the order of the Lender, in substantially the form of the
Note attached hereto as Exhibit A. The Note is an extension and modification
of the Original Note. The Note shall be dated the Closing Date, shall evidence
the obligation of the Partnership to pay the aggregate unpaid principal amount
of the Loan and shall bear interest from the date thereof on the unpaid
balances of principal until maturity, payable at maturity. Interest on the
outstanding principal balance shall be computed using simple interest at a rate
per annum (based on a year of 360 days for the actual number of days elapsed)
which shall be equal to the Prime Rate, such interest rate to change
automatically from time to time effective as of the effective date of each
change in the Prime Rate, and after maturity until fully paid, payable on de
terly payments in an amount equal to the amount of interest accrued on the
unpaid principal balance of the Note shall be due on April 1, 1997, July 1,
1997 and October 1, 1997 and shall be applied to the outstanding principal
balance of the Note. The principal amount of the Note and accrued interest
shall be repaid in full on the earlier of January 2, 1998, or the date on which
the Partnership sells the 25 covered hopper river barges owned by the
Partnership.
(c) Credit Advance Procedures. [intentionally omitted].
(d) Evidentiary Provisions. The date and amount of each payment of
principal shall be recorded by the Lender on the Schedule attached to the Note,
but any failure of the Lender to record such dates or amounts shall not relieve
the Partnership of its obligations hereunder or under such Note.
(e) Notwithstanding anything to the contrary in the Note, the
Security Documents or this Agreement, neither the Lender nor the successors or
assigns of the Lender shall have any claim, remedy or right to proceed against
the Partnership, any limited partner of the Partnership, or against the
General Partner in its individual corporate capacity, or any incorporator or
any past, present or future subscriber to the capital stock of, or
stockholder, officer or director of the said General Partner, for the payment
of any deficiency or any other sum owing on account of the Obligations from
any source other than the Vessels and the collateral securing the Note under
this Agreement and the Security Documents; and the Lender, by acceptance
hereof, waives and releases any personal liability of the Partnership, any
limited partner of the Partnership, and the General Partner in its individual
corporate capacity and any incorporator or any past, present or future
subscriber to the capita or stockholder, officer or director of the said
General Partner for and on account of such indebtedness or such liability, and
agrees to look solely to the said Vessels and the other collateral security
for the payment of the Obligations and the satisfaction of such liability;
provided, however, nothing herein contained shall limit, restrict or impair
the rights of the Lender to accelerate the maturity of the Note upon a default
under this Agreement, to bring suit and obtain a judgement against the
Partnership on the Note, to exercise all rights and remedies provided under
this Agreement (including, without limitation, the rights granted pursuant to
Section 12.(b) hereof) and the Security Documents or to otherwise realize upon
the Vessels and the collateral securing the Obligations.
Section 3. Facilities Fee. [Intentionally omitted].
Section 4. Special Provisions Relating to Collateral Security.
(a) Security Documents. The Note and all other Obligations of the
Partnership will be secured by all assets, properties, rights and interests of
the Partnership under the following Security Documents:
(i) Ship Mortgage. The Ship Mortgage covering the Vessels.
(ii) Security Agreement. The Security Agreement covering
Equipment other than Vessels.
(iii) Aircraft Security Agreement. [Intentionally omitted].
(iv) Contract Assignments. [Intentionally omitted].
(v) Assignment. One or more Assignments covering all
Operating Agreements.
(b) Non-Designated Equipment. [Intentionally omitted].
(c) Permitted Sales of Equipment. If no Event of Default or
Default has occurred and is continuing, the Partnership may at any time and
from time to time sell or otherwise dispose of any Item or Items of Equipment
free and clear of the Lender's lien thereon under the Security Documents,
provided that (i) the Partnership shall give the Lender not less than 10
Business Days' notice of such proposed sale or disposition, (ii) the Lender
shall have consented to such sale or disposition in writing, (iii) such sale or
disposition shall be an arm's length transaction with an unaffiliated third
party for fair consideration, and (iv) the Partnership shall make a prepayment
on the Note on the effective date of such sale or disposition in an amount
equal to the net proceeds from such sale or disposition (i.e., the net cash
realized by the Partnership from such sale or disposition, after the payment of
all direct expenses related thereto (excluding any cash distributions payable
to the rtner by reason of such sale or disposition), but prior to the repayment
of any related indebtedness thereon to the Lender under this Agreement;
provided, however, in the event that such sale or disposition results in the
sale or disposition of all Items of Equipment owned by the Partnership, then
the General Administrative Expenses incurred in liquidating the Partnership
shall also be deducted from the net cash realized from the Partnership from
such sale or disposition).
(d) Equipment Contracts. It is understood and agreed that all
Equipment owned by the Partnership will be managed by the General Partner or by
third parties and may be operated by the Partnership or leased to third parties
on a short or long term basis. The Partnership shall execute and deliver in
favor of the Lender an Assignment relating to and covering all management,
operating, rental, lease, utilization or similar contracts for such Item of
Equipment; and the Partnership agrees not to substitute or replace any such
manager, operator or lessee of an Item of Equipment without the prior written
consent of the Lender, which consent shall not be unreasonably withheld.
(e) Additional Collateral. To further secure the payment of the
Obligations, the Partnership hereby assigns to and grants to the Lender a
continuing lien upon and a security interest in all of the Partnership's money,
letters of credit, instruments, securities, negotiable documents, chattel paper
and all other cash equivalents, together with all proceeds thereof (all of the
foregoing are hereinafter collectively referred to as the "Cash Equivalents"),
now or hereafter actually or constructively held or received by or for the
Lender for any purpose (including safekeeping, custody, pledge and collection),
and the Lender shall have a continuing lien and/or right of set-off for the
amount of the Obligations upon all of the Partnership's deposits and credits
with the Lender (individually and collectively, the "Collateral Security").
The Lender shall use reasonable care in the custody of the Collateral Security
in its possession. The Partnership hereby further covenants and ag e request
of Lender, (i) to deliver to the Lender at all times all of its then existing
and thereafter arising Cash Equivalents (except that the Partnership or its
General Partner shall be permitted to maintain a deposit account for capital
required by future operations (which account balance shall at no time exceed
$300,000)), (ii) that it shall not pledge or otherwise encumber any of the
Collateral Security and (iii) that upon and after any default under this
Agreement and consequent acceleration of the Note, the Lender shall have the
right (without limiting any other rights or remedies available to it) to
realize upon the Collateral Security; provided, however, that the foregoing
shall not be construed to prevent the Partnership from using such Cash
Equivalents to meet its ordinary business expenses.
Section 5. Prepayments and Other Payments.
(a) Optional. The Partnership shall have the right, at its option,
to prepay the Note outstanding hereunder in whole at any time or in
part from time to time, without premium or penalty. Each partial
prepayment shall be in the aggregate principal amount of $10,000 or an
integral multiple thereof. Any partial prepayments shall be applied
first to the unpaid principal amount of the Note and then to accrued
and unpaid interest. The Lender shall be entitled to receive written
or telegraphic notice of each prepayment at least 5 Business Days prior
thereto, which notice shall specify the aggregate principal amount of
the Note to be prepaid on the prepayment date. Notice of prepayment
having been given by the Partnership as aforesaid, the principal amount
of the Note specified in such notice, together with interest accrued
and unpaid on the amount of such prepayment to the date of prepayment,
shall become due and payable on such prepayment date.
(b) Mandatory.
(i) If any Item of Equipment shall be sold or otherwise
disposed of by the Partnership then, unless otherwise agreed by the
Lender in writing, the Partnership shall prepay the Loan in the manner
and in the amounts set forth in Section 4(c) hereof. Any such
prepayment shall be applied to the unpaid principal amount of the Note.
(ii) The Partnership shall pay to the order of Lender on or
before the 60th day (or the next succeeding Business Day) after the end
of each calendar quarter commencing March 31, 1997, a mandatory
prepayment of principal on the Note in an amount equal to the Cash
Sweep Payment Amount for such date; provided however, that in the event
that the Cash Sweep Payment Amount is less than $10,000, then no such
mandatory prepayment shall be due. All mandatory prepayments of
principal made as required under this paragraph shall be applied to the
unpaid principal amount of the Note and shall not be subject to any
prepayment fees.
(iii) In the event (A) of the actual or constructive total
loss or an agreed or compromised total loss of any Item of Equipment
occurring through any event whatsoever, (B) that title to or ownership
of any Item of Equipment shall be requisitioned, purchased or taken by
any government of any country or any department, agency or
representative thereof and such condition shall continue for 30 days
thereafter, (C) that any such governmental authority shall requisition,
charter or in any manner take over the use of any Vessel and such
condition shall continue for 30 days thereafter, or (D) that any Item
shall sustain damage to an extent which, in the opinion of the
Partnership, as determined in good faith by a duly authorized officer
of the General Partner, makes repair of such Item uneconomical (any
such event hereinabove specified in clauses (A), (B), (C) or (D) being
herein called a "Casualty Event"), then the Partnership shall promptly
notify the Lender of such Casualt ess the Partnership shall elect to
replace said Item of Equipment in conformity with the provisions of the
Security Documents, the Partnership shall make a prepayment on account
of outstanding principal of the Note, on a date not later than the
earlier of (X) 90 days after the occurrence of such Casualty Event, or
(Y) not more than 5 Business Days after the date of receipt of the
insurance or other proceeds from such Casualty Event, which prepayment
shall be in an amount equal to the product obtained by multiplying the
then outstanding principal amount of the Note by a fraction the
numerator of which is the Cost of Equipment involved in such Casualty
Event and the denominator of which is the aggregate Cost of Equipment
for all Equipment (including the Item of Equipment suffering such
Casualty Event) then under the Security Documents.
(c) Method of Payment. All payments and prepayments made in
accordance with the provisions of this Agreement or of the Note shall
be made to the Lender not later than 4:00 P.M. local time on the date
of payment in lawful money of the United States of America by check or
by wire transfer in immediately available funds at the office of the
Lender specified in Section 12 hereof.
Section 6. Representations and Warranties. The Partnership represents and
warrants to the Lender that:
(a) Organization and Qualification. The Partnership is a limited
partnership duly organized and existing in good standing under the
laws of the State of New York and has the power to own its properties
and to carry on its business as now being conducted and as proposed to
be conducted.
(b) Power and Authority. The Partnership has full partnership
power and authority to execute, deliver and carry out the provisions
of this Agreement and the Security Documents, to incur indebtedness
hereunder, to grant security interests in and otherwise encumber the
Equipment, to execute and deliver the Note and to perform its
obligations hereunder and under the Note, and all such action has been
duly authorized by all necessary proceedings on its part. This
Agreement and the Security Documents have been (and will be) duly and
validly executed and delivered by the Partnership and constitute (and
will constitute) the legal, valid and binding contract of the
Partnership, enforceable in accordance with their respective terms,
and the Note, when duly executed and delivered pursuant to the
provisions hereof, will constitute the legal, valid and binding
obligations of the Partnership enforceable in accordance with the
terms thereof and of this Agreement.
(c) General Partner. The General Partner is a corporation duly
organized and existing in good standing under the laws of the State of
Delaware and has the corporate power to own its properties and to
carry on its businesses as now being conducted and as proposed to be
conducted. The General Partner is duly qualified to do business as a
foreign corporation and is in good standing in the State of New York,
and has not failed to qualify in any other jurisdiction in which the
nature of the business conducted by it makes such qualification
necessary or in which the failure to qualify might materially
adversely affect the conduct of the General Partner's business in such
jurisdiction. The General Partner has the corporate power and
authority to execute, deliver and carry out the provisions of this
Agreement and the Security Documents on behalf of the Partnership and
all such action has been duly authorized by all necessary corporate
proceedings on its part.
(d) Financial Statements. The Partnership has furnished the Lender
with the Partnership's financial statements as of December 31, 1995
and September 30, 1996.
(e) Public Offering of Partnership Interests. Pursuant to the
public offering of 4,000 limited partnership interests in the
partnership, duly registered with the Securities and Exchange
Commission, there are outstanding a total of 3,614 such limited
partnership interests. A post-effective amendment was duly filed with
the Securities and Exchange Commission and became effective on
November 4, 1981. No further offering of limited partnership interests
in the Partnership is presently contemplated. The Partnership is not
subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or redeem any of the limited partnership interests
except as provided in the partnership agreement and the subscription
agreements signed by such limited partners. All documents required to
be filed under the Securities Exchange Act of 1934 and related
statutes, in connection with the offering of limited partnership
interests or any other class of debt or equity securiti Partnership,
have been duly and properly filed; such documents are true and
complete and in accordance with all applicable laws, rules and
regulations.
(f) Actions Pending. Except as disclosed in writing to the Lender,
there is no action, suit or proceeding pending at law or in equity or,
to the best of the knowledge of the Partnership, threatened against or
affecting the Partnership or the General Partner or any properties or
rights of the Partnership or General Partner before any court,
arbitrator or administrative or governmental body which might result
in any material adverse change in the business, condition or
operations of the Partnership.
(g) Outstanding Debt. The Partnership has no outstanding Funded or
Current Debt.
(h) Title to Properties. The Partnership has good and marketable
title to its properties and assets including, without limitation, the
Equipment and those properties and assets reflected in the balance
sheet of the Partnership, free and clear of all Liens other than Liens
arising under the Security Documents.
(i) Taxes. All federal and state income and other tax returns with
respect to the income, properties and business of the Partnership that
are required to be filed have been filed. All taxes shown on said
returns as required to be paid by the Partnership have been paid.
(j) Conflicting Agreements and Other Matters. Neither the
Partnership nor the General Partner is a party to any contract or
agreement or subject to any charter or other corporate restriction
that materially adversely affects its business, property or assets, or
financial condition. The execution, delivery and performance of this
Agreement, the Security Documents and the Note will not conflict with,
result in a breach of, or constitute a default under, result in any
violation of, result in any Lien upon the properties of either the
Partnership or the General Partner pursuant to, or require consent or
other action by or any notice to or filing with any court or
administrative or governmental body pursuant to, (i) its partnership
agreement or its charter or by-laws, as the case may be, (ii) any
award of any arbitrator or (iii) any agreement, instrument, order,
judgement, decree, statute, law, rule or regulation to which it is
subject. Neither the Partnership nor the General s presently in
default in respect of or in violation of any such award, agreement,
instrument, order, judgement, decree, statute, law, rule or
regulation.
(k) Patents, etc. No patents, trademarks, trade names, copyrights,
registrations or applications are necessary for the conduct of the
business of the Partnership as now conducted. The Partnership is not
a licensor in respect of any patents, trademarks, trade names,
copyrights or registrations or applications therefor. The Partnership
is not in violation of any patent, patent license, trade name,
trademark, or copyright of others.
(l) Regulation U. Neither the Partnership nor the General Partner
owns or presently intends to acquire any "margin stock" as defined in
Regulation U (12 CFR Part 221) of the Board of Governors of the
Federal Reserve System (herein called a "margin stock"). None of the
proceeds of the Note hereunder will be used by the Partnership,
directly or indirectly, for the purpose of purchasing or carrying any
margin stock or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a
margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of said Regulation
U. Neither the Partnership nor the General Partner has taken or will
take any action that might cause this Agreement or the Note to violate
Regulation U or any other regulation of the Board of Governors of the
Federal Reserve System or to violate the Securities Exchange Act of
1934, in each case as in effect now or as the same may hereafter be in
effect.
(m) Employee Retirement Income Security Act of 1974. The
Partnership and the General Partner is and has at all times been in
compliance with all applicable provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA") and other federal and state
statutes relating to employee benefit plans.
(n) ICC Regulation. The Partnership is not a certificated carrier
or subject to certification or other regulation by the Interstate
Commerce Commission and will not, by virtue of the transactions
contemplated hereunder, be subject to such certification or
regulation.
(o) Citizenship. The Partnership, the General Partner and (on the
basis of written representations made in 1981 as to citizenship filed
with the Partnership) each of the limited partners is a "citizen of
the United States" within the meaning of Section 2 of the Shipping
Act, 1916, as amended (46 U.S.C. Sec. 802).
Section 7. Conditions of Lending. On or before the Closing Date, the
Partnership shall deliver to the Lender or confirm to the satisfaction
of the Lender the following:
(a) Representations and Warranties. The representations and
warranties contained in Section 6 hereof (except as affected by
transactions contemplated by this Agreement) shall be true and
accurate; no Event of Default or Default shall have occurred and be
continuing or shall exist as of such date; and the Partnership shall
deliver to the Lender a General Partner's Certificate to the foregoing
effect.
(b) Official Action. There shall be delivered to the Lender (A)
copies of all documents evidencing partnership action taken by the
Partnership relative to this Agreement and the Note in form and
substance satisfactory to the Lender and to Special Counsel, and (B) a
certificate, dated the Closing Date and signed by the Secretary or an
Assistant Secretary of the General Partner, certifying to the Lender
the signature of the officer or officers of the General Partner
authorized to sign the Note to be issued hereunder, together with the
true signatures of such officer or officers, and the Lender may
conclusively rely on such certificate.
(c) Consummation of Transactions. All partnership, organizational
and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incident thereto
shall be satisfactory in form and substance to the Lender and to
Special Counsel, and the Lender and said Special Counsel shall have
received all such counterpart originals or certified or other copies of
such documents as the Lender or Special Counsel may reasonably request.
(d) Documentation. The following documents, fully executed, shall
be delivered to the Lender:
(i) This Agreement;
(ii) The Note;
(iii) The Security Documents as required by the terms of this
Agreement;
(iv) Certified Resolutions of Board of Directors of the
General Partner authorizing the General Partner to act in
behalf of the Partnership in respect of the transactions
contemplated herein; and
(v) Uniform Commercial Code financing statements and/or
amendments in form and substance satisfactory to the Lender and
to Special Counsel.
Section 8. Affirmative Covenants. The Partnership covenants and agrees that,
so long as it may borrow hereunder and until payment in full of the
Note issued hereunder and interest thereon and of all other amounts due
hereunder, it will:
(a) Books and Records. Maintain and keep proper books of account
and records in accordance with generally accepted accounting
principles consistently applied.
(b) Financial Statements and Reports.
(i) Furnish to the Lender:
(A) as soon as practicable and in any event within 60 days
after the end of each quarterly accounting period in each
fiscal year, a statement of income and retained earnings and
changes in financial position of the Partnership for such
quarterly period and for the period from the beginning of the
current fiscal year to the end of such quarterly period, and a
balance sheet of the Partnership as at the end of such
quarterly period, setting forth in each case, in comparative
form, figures for the corresponding periods in the preceding
fiscal year, all in reasonable detail and certified by the
president, any vice-president or chief financial officer of the
General Partner, subject to changes resulting from year-end
adjustments;
(B) as soon as practicable and in any event not later than
April 15 of each fiscal year, a statement of income and
retained earnings and changes in financial position of the
Partnership for the immediately preceding fiscal year, and a
balance sheet of the Partnership as at the end of such
preceding fiscal year, setting forth in each case in
comparative form corresponding figures for the period covered
by the preceding annual audit all in reasonable detail,
together with an opinion (which opinion need not cover pro
forma figures, if any) with respect to such financial
statements addressed to the Partnership by Arthur Andersen &
Co., or independent public accountants of similar recognized
national standing selected by the Partnership, whose opinion
shall be in scope and substance reasonably satisfactory to the
Lender.
(C) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, and reports as the
Partnership shall send to its limited partners and copies of
all registration statements (with exhibits) and all regular,
special or periodic reports which the Partnership files with
the Securities and Exchange Commission (or any governmental
body or agency succeeding to the functions of the Security and
Exchange Commission) or with any national stock exchange on
which any of its securities are listed and of all press
releases and other statements made available generally by the
Partnership to the public concerning material developments in
the business of the Partnership; and
(D) with reasonable promptness, such other financial data
as the Lender may reasonably request from time to time
including, without limitation, operating statements, proposed
budgets, cash flow analyses and Partnership income tax returns.
(ii) Together with each delivery of financial statements and
reports required by clauses (i)(A) and (i)(B) above, the
Partnership will deliver to the Lender a General Partner's
Certificate stating that there exists no Event of Default or
Default or, if any Event of Default or Default exists,
specifying the nature thereof, the period of existence thereof
and what action the Partnership proposes to take with respect
thereto.
(iii) Forthwith upon the chief executive officer, president
or chief financial officer (or, if there is no chief financial
officer, the controller) of the General Partner obtaining
knowledge of any Event of Default or Default, it will deliver
to the Lender a General Partner's Certificate specifying the
nature thereof, the period of existence thereof, and what
action is proposed to be taken with respect thereto. The
Lender is hereby authorized to deliver a copy of any financial
statement delivered to it pursuant to this Section 8(b) to any
regulatory body having jurisdiction over it.
(c) Inspection of Books. Permit any Person designated in writing
by the Lender, at the Lender's expense, to examine the records of the
Partnership and make copies thereof or extracts therefrom, and to
discuss the affairs, finances and accounts of the Partnership with the
principal officers of the General Partner, all at such reasonable
times and as often as the Lender may reasonably request.
(d) Conduct of Business, Licenses and Permits, Maintenance of
Properties. At all times (i) cause to be done all things necessary to
maintain, preserve and renew its existence as a limited partnership
organized under the laws of the State of New York; (ii) preserve and
keep in force and effect all licenses and permits necessary to the
conduct of its businesses; (iii) conduct the business of the
Partnership in conformity with all applicable laws, rules and
regulations; and (iv) maintain and keep its properties in good repair,
working order and condition, and from time to time make all necessary
and proper repairs, renewals and replacements, so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times.
(e) Debt. Duly and punctually pay or cause to be paid the
principal of and the interest on all Debt heretofore or hereafter
incurred or assumed by the Partnership, when and as the same shall
become due and payable, unless such Debt be renewed or extended, and
faithfully observe, perform and discharge all the covenants,
conditions and obligations which are imposed on the Partnership, by
any and all indentures and other agreements securing or evidencing
such Debt or pursuant to which such Debt is issued, and not permit to
occur any act or omission which is or may be declared to be a default
thereunder; provided, however, that the Partnership shall not be
required to make any payment or to take any other action by reason of
the provisions of this Section 8(e) at any time while it shall be
contesting in good faith its obligations to make such payment or to
take such action, and the Partnership shall have set aside on its
books adequate reserves with respect thereto.
(f) Insurance. Without any cost or expense to the Lender, maintain
or cause to be maintained in effect for so long as the Loan remains
outstanding, with insurers of recognized responsibility, insurance on
all of its properties and assets against physical loss, damage by
fire, explosion and such other risks, liability for bodily injury and
third-party damage, product liability insurance, marine insurance, and
such further coverages as shall be required by provisions of the
Security Documents. All such insurances shall be reasonably
acceptable to the Lender in form, substance and coverage. At the
request of the Lender, the Partnership shall promptly make available
to the Lender, as the case may be, certificates, policies or other
evidence reasonably satisfactory to the Lender, as the case may be, of
compliance with this Section 8(f).
(g) Taxes. Duly pay and discharge all taxes, assessments and
governmental charges upon or against the Partnership or its properties
or any part thereof or upon the income or profits therefrom, as well
as all claims for labor, materials or supplies which if unpaid might
by law become a Lien upon any property of the Partnership before the
same shall become delinquent and before penalties accrue thereon,
unless and to the extent that the same are being contested in good
faith and by appropriate proceedings and the Partnership shall have
set aside on its books adequate reserves with respect thereto.
(h) Working Capital. Maintain at all times Working Capital in an
amount not to exceed $300,000.
(i) Debt to Worth Ratio. Maintain at all times a ratio of Debt to
Tangible Net Worth of not higher than 1.4 to 1.
(j) Actions or Proceedings. Promptly notify the Lender of the
institution of any action, suit or proceeding affecting or which might
affect the Partnership or any of its properties or rights, before any
court, arbitrator or administrative or governmental body, which, if
adversely determined, might materially adversely affect the
properties, assets and/or business or financial condition of the
Partnership.
(k) Further Assurances. Execute, acknowledge and deliver any and
all such further assurances, mortgages, pledges, assignments, security
documents and other instruments, and take such other actions and
furnish such opinions of counsel as may reasonably be requested by the
Lender (and as may be satisfactory in form and substance to it) in
order to perfect, safeguard and protect the rights, interest, benefits
and powers of the Lender in respect of and under this Agreement and
all documents executed in connection herewith and supplementary hereto
(including, without limitation, the Security Documents).
(l) Cash Flow Schedules. Upon the Lender's request, furnish to the
Lender, (i) on or before April 30 of each year, a cash flow schedule,
prepared on an accrual accounting basis, setting forth its cash flow
projections for each of the 12 consecutive months beginning with April
of that year; and (ii) as soon as available but in no event later than
60 days after the end of each quarter, (A) a cash flow schedule,
prepared on an accrual accounting basis, setting forth its actual cash
flow for that month and (B) equipment manager statements of income and
expenses of assets managed for each of the Vessels.
Section 9. Negative Covenants. The Partnership covenants and agrees that,
until payment in full of the Note issued hereunder and interest thereon
and of all other amounts due hereunder, it will not:
(a) Restrictions on Distributions. Directly or indirectly make any
payment or distribution of any kind to any general or limited partner
of the Partnership or to any of their respective Affiliates (as
hereinafter defined), without the expressed prior written consent of
the Lender. As used herein, a partner's "Affiliate" is any entity or
person who directly or indirectly through one or more intermediaries
controls, is controlled by or is under common control with such
partner.
(b) Liens. Create, assume or suffer any Lien upon any of its
property or assets, whether now owned or hereafter acquired, or upon
the income or profits therefrom, except
(i) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings diligently
conducted;
(ii) other Liens incidental to the conduct of its business
or the ownership of its property and assets which are not
incurred in connection with the borrowing of money or the
obtaining of advances or credit, and which do not in the
aggregate materially detract from the value of its property or
assets or materially impair the use thereof in the operation of
its business; and
(iii) Liens arising under or created by the terms of the
Security Documents.
(c) Debt. Create, incur, assume or suffer to exist any Funded Debt
or Current Debt, except
(i) Funded Debt or Current Debt comprised of the
Obligations; and
(ii) Debt in favor of the General Partner of the Partnership
which is subordinated to the Obligations.
(d) Loans, Advances, Investment and Contingent Liabilities. Make
or permit to remain outstanding any loan to, or guarantee, endorse or
otherwise be or become liable, directly or indirectly, in connection
with the obligations, stock or dividends of, or own, purchase or
acquire any stock, obligations or securities of, or any other interest
in, or make any capital contribution to, any other Person, except that
(i) the Partnership may own, purchase or acquire (A) commercial paper
maturing not in excess of one year from the date of acquisition and
rated P1 by Moody's Investors Service, Inc. or A1 by Standard & Poor's
Corporation on the date of acquisition, (B) certificates of deposit
maturing not in excess of one year from the date of acquisition,
eligible banker's acceptances and repurchase agreements, issued by
United States commercial banks having total assets in excess of
$500,000,000, and (C) obligations of the United States Government or
any agency thereof and obligations d by the United States Government,
maturing in each case, not in excess of one year from the date of
acquisition; (ii) the Partnership may endorse negotiable instruments
in the ordinary course of business for deposit or collection; and
(iii) the Partnership may make advances to officers and employees not
to exceed $2,000 at any time outstanding.
(e) Sale of Assets; Liquidation; Dissolution. Merge or consolidate
with any other entity or sell, lease or transfer or otherwise dispose
of all or a substantial part of its assets to any Person, or otherwise
effect any liquidation or dissolution of the Partnership; provided,
however, that SEI II Equipment, Inc. may cease to act as General
Partner of the Partnership so long as the limited partners of the
Partnership replace said SEI II Equipment, Inc. with a successor
General Partner reasonably acceptable to the Lender in writing within
60 days thereafter in accordance with the provisions of the
Partnership Agreement.
(f) Certain Contracts. Enter into or be a party to
(i) any contract providing for the making of loans,
advances or capital contributions to any Person or for the
purchase of any property or services from any Person, in each
case in order primarily to enable such Person to maintain
working capital, net worth or any other balance sheet condition
or to pay debts, dividends or expenses;
(ii) any contract for the purchase of materials, supplies or
other property or services if such contract (or any related
document) requires that payment for such materials, supplies,
or other property or services shall be made regardless of
whether or not delivery of such materials, supplies or other
property or services is ever made or tendered;
(iii) any contract to rent or lease (as lessee) real or
personal property if such contract (or any related document)
provides that the obligation to make payments thereunder is
absolute and unconditional under conditions not customarily
found in commercial leases then in general use or requires that
the lessee purchase or otherwise acquire securities or
obligations of the lessor;
(iv) any contract for the sale or use (as vendor, lessor or
hirer) of materials, supplies or other property, or the
rendering of services, if such contract (or any related
document) requires that payment for such materials, supplies or
other property, or the use thereof, or payment for such
services, shall be subordinated to any indebtedness (of the
purchaser or user of such materials, supplies or other property
or the Person entitled to the benefit of such services) owed or
to be owed to any Person; or
(v) any other contract which, in economic effect, is
substantially equivalent to a guaranty.
(g) Fiscal Year. Change the fiscal year of the Partnership.
(h) Material Change. Make any material change in the character of
the business of the Partnership or materially amend the Agreement of
Limited Partnership of the Partnership.
Section 10. Events of Default. If any one or more of the following events
shall occur and be continuing or shall exist for any reason whatsoever
(and whether such occurrence shall be voluntary or involuntary or come
about or be effected by operation of law or otherwise):
(a) The Partnership shall default in the payment of any installment
of principal of the Note when the same shall become due and payable and
such default shall continue for a period of more than 10 days;
(b) The Partnership shall default in the payment of any interest on
the Note when the same shall become due and payable and such default
shall continue for a period of more than 5 Business Days;
(c) The Partnership shall default in any payment of principal of or
interest on any other liability or obligation having a balance in
excess of $50,000, for money borrowed or received (or any obligation
under any conditional sale or other title retention agreement or any
obligation issued or assumed as full or partial payment for property
whether or not secured by purchase money mortgage or any obligation
under notes payable or drafts accepted representing extensions of
credit) beyond any period of grace provided with respect thereto, or
shall default in the performance of any other agreement, term or
condition contained in any agreement under which any such obligation is
created (or if any other obligation under any such agreement shall
occur and be continuing) if the consequence of such default is to
cause, or to permit the holder or holders of such obligation (or a
trustee on behalf of such holder or holders) to cause, such obligation
to become due prior to its stated ma
(d) Any representation or warranty made by the Partnership herein
or in any writing furnished in connection with or pursuant to this
Agreement shall be false in any material respect on the date as of
which made;
(e) The Partnership shall default in the performance or due
observance of any covenant or agreement contained in Section 4(e),
Section 8(f), Section 8(l) or Section 9 hereof;
(f) The Partnership shall default in the performance or observance
of any other agreement, covenant, term or condition contained herein
and such default shall not have been remedied within 30 days after
written notice thereof shall have been received by the Partnership;
(g) The Partnership shall default in the performance of, compliance
with or observance of any of the provisions of any Security Document;
(h) The Partnership shall make a general assignment for the benefit
of creditors or admit in writing its inability to pay its debts
generally as they become due;
(i) An order for relief under Title 11 of the United States Code
shall be entered against the Partnership;
(j) The Partnership shall petition or apply to any tribunal for the
appointment of a trustee, receiver, custodian or liquidator, or shall
commence any proceedings under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in
effect;
(k) Any such petition or application shall be filed, or any such
proceedings shall be commenced, against the Partnership, and the
Partnership shall either, by any act indicate its approval thereof,
consent thereto or acquiescence therein, or shall fail to have such
petition, application or proceeding dismissed within 30 days, or an
order, judgement or decree shall be entered appointing any such lender,
receiver, custodian or liquidator, or approving the petition in any
such proceedings, and such order, judgement or decree shall remain
unstayed and in effect for more than 30 days;
(l) Any order, judgement or decree shall be entered in any
proceedings against the Partnership decreeing the dissolution of the
Partnership which requires the divestiture of a substantial part of the
assets of the Partnership or which requires the divestiture of assets
that shall have contributed 5% or more of net earnings of the
Partnership for any of the three fiscal years most recently ended, and
such order, judgement or decree remains unstayed and in effect for more
than 30 days;
(m) A final judgement that, with other outstanding final judgements
against the Partnership, exceeds an aggregate of $100,000, shall be
rendered against the Partnership and, within 60 days after entry
thereof, such judgement shall not have been discharged or execution
thereof stayed pending appeal, or, within 60 days after the expiration
of any such stay, such judgement shall not have been discharged; or
(n) SEI II Equipment, Inc. shall no longer be the General Partner
of the Partnership, and the limited partners of the Partnership shall
not have replaced said SEI II Equipment, Inc. with a successor General
Partner reasonably acceptable to the Lender in writing within 60 days
thereafter in accordance with the provisions of the Partnership
Agreement;
then, and in any such event, the Lender may, by written notice to the
Partnership, declare the Note and interest accrued thereon and all other
liabilities of the Partnership hereunder and thereunder to be immediately due
and payable, and the same shall thereupon become immediately due and payable
without presentment, demand, protest or notice of any kind to the Partnership,
all of which are hereby expressly waived. Upon such notice the Lender may, at
its option, resort to any or all other remedies contained in the Security
Documents, in any order, all without releasing the Partnership from any
liability hereunder or under the Note. The Lender shall not be required to
marshall any present or future security for, or guaranties of, the Loan, or to
resort to any such security or guaranties in any particular order and the
Partnership hereby waives, to the fullest extent that it lawfully can, (a) any
right it may have to require the Lender or the Trustee to pursue any particular
remedy bef ore proceeding against it, and (b) any right to the benefit of, or
to direct the application of the proceeds of, any such collateral security
under the Security Documents until the Note and all other Obligations have been
paid in full.
Section 11. Participation and Trust. [Intentionally omitted].
Section 12. Miscellaneous.
(a) No delay or failure of the Lender in exercising any right,
remedy, power or privilege hereunder shall affect such right, remedy,
power or privilege; nor shall any single or partial exercise thereof or
any abandonment or discontinuance of steps to enforce such a right,
remedy, power or privilege preclude any further exercise thereof or of
any other right, remedy, power or privilege. The rights and remedies
of the Lender hereunder are cumulative and not exclusive of any rights
or remedies which they or any of them would otherwise have. Any
waiver, permit, consent or approval of any kind or character on the
part of the Lender of any breach or default under this Agreement or any
such waiver of any provision or condition of this Agreement must be in
writing and shall be effective only to the extent in such writing
specifically set forth.
(b) If any one or more of the Events of Default or Defaults
described in Section 10 of this Agreement shall occur, the Lender shall
have the right to set-off against the unpaid balance of its interest in
the Note any debt owing to the Partnership by the Lender, including,
without limitation, any funds in any deposit account now or hereafter
maintained by the Partnership with the Lender, and for such purposes
the Lender shall have and there is hereby granted to and created in
favor of the Lender a possessory security interest in all such deposit
accounts. The Partnership hereby confirms the Lender's right of
banker's lien and set-off, and nothing in this Agreement shall be
deemed any waiver or prohibition of the Lender's right of banker's lien
or set-off.
(c) All representations, warranties, covenants and agreements
contained herein or made in writing in connection herewith shall
survive the execution and delivery of this Agreement and the issuance
of the Note.
(d) The Partnership agrees, whether or not any of the transactions
hereby contemplated shall be consummated, to pay and save the Lender
harmless against liability for the payment of all out-of-pocket
expenses of the Lender arising in connection with the preparation,
execution, putting into effect, administration, amendment, enforcement
and collection of this Agreement and the transactions herein
contemplated, including the reasonable expenses and fees of Special
Counsel and including stamp or other tax liability, together with
interest and penalties, if any, which may be payable or determined to
be payable in respect of the execution and delivery of the Note or this
Agreement. In the event of any action at law or suit in equity in
relation to this Agreement or the Note or any other instrument or
agreement relating to the Loan, or in the event of any judicial,
administrative or governmental proceeding, investigation or inquiry in
relation thereto, the Partnership agrees to nable sum for attorneys'
fees incurred by the Lender in connection with any such action or suit.
The obligations under this Section 12(d) shall survive the payment of
the Note.
(e) Any notice or other communication in connection with this
Agreement shall be deemed to have been given or made when deposited in
the mail, postage prepaid, or, in the case of telegraphic notice, when
delivered to the telegraph company, charges prepaid, or in the case of
notice by Telex when dispatched from any Telex terminal, or in the case
of overnight delivery, when deposited with the overnight delivery
carrier, charges prepaid, addressed, if to the Lender c/o Lehman
Brothers, Inc., Attention: Michael Milversted, 3 World Financial
Center, 24th Floor, New York, New York 10285-2900, with copy to Jan
Robey Alonzo, Thompson Coburn, One Mercantile Center, St. Louis,
Missouri 63101; if to the Partnership, c/o SEI II Equipment, Inc.,
General Partner, c/o Lehman Brothers, Inc., Attention: Regina Hertl, 3
World Financial Center, 29th Floor, New York, New York 10285-2900; or
in accordance with the latest unrevoked written direction from any
party to the other parties hereto.
(f) This Agreement, the Security Documents and the Note shall be
deemed to be contracts under the laws of the State of New York and for
all purposes shall be governed by and construed in accordance with the
laws of said State. Any suit, action or proceeding instituted against
the Partnership with respect to this Agreement, the Security Documents
and the Note may be brought in any court of competent jurisdiction
located in the State of New York, and, by the execution and delivery of
this Agreement, the Partnership irrevocably waives any objection it may
have or hereafter acquire to, or any right of immunity on the ground of
venue, the convenience of the forum or the jurisdiction of such courts
or from the execution of judgements resulting therefrom, and
irrevocably accepts and submits to the jurisdiction of the aforesaid
courts in any suit, action or proceeding, hereby irrevocably
designating Thompson Coburn, Attention: Jan Robey Alonzo, One
Mercantile Center, St. Louis, M 01 as its authorized agent for service
of process in connection with any suit, action or proceeding to enforce
this Agreement.
(g) If any provision of this Agreement or the Note shall for any
reason be held invalid or unenforceable by any court or governmental
agency of competent jurisdiction, such invalidity or unenforceability
shall not affect any other provision hereof or thereof, but this
Agreement or the Note, as the case may be, shall be construed as if
such invalid or unenforceable provision had never been contained herein
or therein.
(h) The section and other headings contained in this Agreement are
for reference purposes only and shall not limit or otherwise affect the
meaning or interpretation of this Agreement.
(i) This Agreement may be executed in any number of counterparts
and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all
such counterparts shall together constitute one and the same
instrument; provided, however, that this Agreement shall become
effective only upon its execution by both parties to this Agreement.
(j) This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and assigns; the
Partnership may not assign or transfer any of its rights or Obligations
hereunder without the prior written consent of the Lender.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year
first above written.
ATTEST: SEI II L.P., Partnership
By: SEI II Equipment, Inc., General Partner
By: /s/ Regina Hertl
Regina Hertl, Vice President
BUTTONWOOD LEASING CORPORATION, Lender
By: /s/ Steven J. Gorey
Steven J. Gorey, President
Exhibit A
Form of First Amended and Restated Credit Note
Exhibit B
Form of Ship Mortgage
Exhibit C
Form of Security Agreement
Schedule A
Description of Vessels
BARGE NAME OFFICIAL NUMBER
SEI 2001 BF 641143
SEI 2002 BF 641144
SEI 2003 BF 641145
SEI 2004 BF 641146
SEI 2005 BF 641147
SEI 2006 BF 641148
SEI 2007 BF 641149
SEI 2008 BF 641150
SEI 2009 BF 641151
SEI 2010 BF 641152
SEI 2011 BF 641153
SEI 2012 BF 641154
SEI 2013 BF 641155
SEI 2014 BF 641156
SEI 2015 BF 641157
SEI 2016 BF 641158
SEI 2017 BF 641159
SEI 2018 BF 641160
SEI 2019 BF 641161
SEI 2020 BF 641162
SEI 2021 BF 641163
SEI 2022 BF 641164
SEI 2023 BF 641165
SEI 2024 BF 641166
SEI 2025 BF 641167
FIRST AMENDED AND
RESTATED CREDIT NOTE
THIS FIRST AMENDED AND RESTATED CREDIT NOTE (hereinafter called the
"Note") is made and entered into as of the third (3rd) day of January,
1997, by and between SEI II L.P., formerly known as Shearson Equipment
Investors - II, a New York limited partnership (the "Partnership"), and
BUTTONWOOD LEASING CORPORATION, a Delaware corporation (the "Lender"),
assignee of The First National Bank of Maryland (the "Original
Lender").
WHEREAS, the Partnership heretofore executed and delivered to the
Original Lender that certain Credit Note dated December 9, 1981, in the
original principal amount of Seventeen Million Dollars ($17,000,000)
(the "Original Note"); and
WHEREAS, the Original Lender sold and assigned the Original Note to the
Lender on May 30, 1986; and
WHEREAS, on May 30, 1986, the Partnership and the Lender agreed (i)
that the principal amount of the Original Note shall remain constant;
and (ii) to decrease the rate of interest on the Original Note from one
and one quarter percent (1.25%) plus the Prime Rate (as defined in the
Original Note) to a rate equal to the prime rate charged by Bank
America Illinois, formerly Continental Illinois National Bank; and
WHEREAS, the Partnership and the Lender have agreed on an annual basis
to extend the maturity date of the Original Note, and the current
maturity date of the Original Note is January 3, 1997; and
WHEREAS, prior to January 3, 1997, the outstanding principal amount of
the Original Note was reduced from Seventeen Million Dollars
($17,000,000) to Seven Million Eight Hundred Thirty Nine Thousand
Dollars ($7,839,000); and
WHEREAS, the Partnership and the Lender have agreed to further extend
the maturity of the Original Note to the earlier of January 2, 1998, or
the date on which the Partnership sells the 25 covered hopper river
barges that are owned by the Partnership (the "Barges"); and
WHEREAS, as of January 3, 1997, immediately following the application
of the principal payment in the amount of Five Million Five Hundred
Thousand Dollars ($5,500,000) made by the Partnership to the Lender on
such date, the outstanding principal amount of the Original Note will
be reduced from Seven Million Eight Hundred Thirty Nine Thousand
Dollars ($7,839,000) to Two Million Three Hundred Thirty Nine Thousand
Dollars ($2,339,000); and
WHEREAS, as of January 3, 1997, the amount of accrued and unpaid
interest of the Original Note is Nine Million Eight Hundred Twenty-Nine
Thousand Three Hundred Sixty Dollars ($9,829,360) and such amount
remains due and owing; and
WHEREAS, the Partnership and the Lender desire to restate the Original
Note, as amended hereby;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree, as between the Partnership and
the Lender, to amend and restate the Original Note to read as follows:
$2,339,000 January 3, 1997
FOR VALUE RECEIVED, the Partnership promises to pay to the order of
BUTTONWOOD LEASING CORPORATION (the "Lender") at the main office of the Lender
at c/o Lehman Brothers, Inc., 3 World Financial Center, 29th Floor, New York,
New York 10285-2900 or at such other place as the Lender may from time to time
designate, the Principal Sum of Two Million Three Hundred Thirty Nine Thousand
Dollars ($2,339,000) plus accrued interest as of the date hereof of Nine
Million Eight Hundred Twenty-Nine Thousand Three Hundred Sixty Dollars
($9,829,360) and agrees to pay quarterly installments of principal from the
date hereof until maturity, payable on April 1, 1997, July 1, 1997, and October
1, 1997 (each a "Payment Date") in an amount equal to the amount of interest
accrued on the unpaid principal balance from the later of the date hereof or
the immediately preceding Payment Date. The Partnership further agrees to pay
interest on the unpaid balances of principal hereunder from the date hereof
aturity, payable in arrears at maturity on January 2, 1998. Interest on the
outstanding principal balance shall be computed using simple interest at a
fluctuating interest rate per annum (based on a year of 360 days for the actual
number of days elapsed) at all times equal to the "Prime Rate" (as hereinafter
defined), which interest rate shall change automatically from time to time
effective as of the effective date of each change in the Prime Rate. "Prime
Rate" shall mean, as of any date, (i) the announced or published prime rate at
the Bank America Illinois of Chicago, Illinois, or its successor, or (ii) in
the absence of an announced or published prime rate by Bank America Illinois or
its successor, the Prime Rate reported in the Money Rates Column of The Wall
Street Journal, currently defined as being the base rate on corporate loans
posted by at least 75% of the nation's thirty largest banks (regardless of
whether such rate has actually been charged by any such bank); provided that,
in the event The Wall Street Journal (y) publishes more than one prime rate,
the highest of such rates shall be the "Prime Rate", or (z) publishes a
retraction or correction of any such rate, the rate reported in such retraction
or correction shall be the "Prime Rate." The outstanding Principal Sum and
accrued interest shall be repaid on the earlier of January 2, 1998 or the date
on which the Partnership sells the Barges.
All payments on account of the principal hereof shall be noted by the Lender on
the Schedule attached hereto and made part hereof; provided, however, that the
failure of the Lender to make any such notation shall not limit or otherwise
affect the obligations of the Partnership hereunder or under the Credit
Agreement (as hereinafter defined).
Payments of both principal and interest shall be made not later than 4:00 P.M.
local time on each Payment Date at c/o Lehman Brothers, Inc., 3 World Financial
Center, 29th Floor, New York, New York 10285-2900, in lawful money of the
United States of America by check or by wire transfer in immediately available
funds. Funds received after 4:00 P.M. may, at the election of the Lender, be
treated as received on the next succeeding Business Day. All payments received
by the Lender shall be applied first to the payment of principal and the
balance to the payment of accrued interest.
The Partnership promises to pay to the order of Lender on or before the 60th
day (or the next succeeding Business Day) after the end of each calendar
quarter commencing March 31, 1997, a mandatory prepayment of principal on this
Note in an amount equal to the Cash Sweep Payment Amount (as hereinafter
defined) for such date. For purposes of this Note, the "Cash Sweep Payment
Amount" for each date that such a payment is due shall be an amount equal to
90% of the aggregate Free Cash (as hereinafter defined) of the Partnership as
of the last day of the immediately preceding calendar quarter of the
Partnership. For purposes of this Note, "Free Cash" shall mean the amount
(provided such amount is greater than zero) equal to the Net Operating Income
of the Partnership minus the scheduled principal installments paid on any Debt
permitted by Section 9(c) of the Credit Agreement for the immediately preceding
calendar quarter of the Partnership. "Net Operating Income" shall mean Total
(including Other Income) minus Operating Expenses and General Administrative
Expenses minus capital required by future operations as determined by the
general partner of the Partnership (but not to exceed $300,000) plus
depreciation and amortization taken. The following capitalized terms used in
this Note shall have the meanings hereafter ascribed to them: "Total Revenue"
shall mean for any period of time, all cash actually received by the
Partnership in connection with the management and operation of the Barges,
including, without limitation, all rents and fees from the rental of the
Barges; "Other Income" shall mean for any period of time, all cash actually
received by the Partnership, other than total revenue as defined, including,
without limitation, reimbursement or refunds, interest and other receipts
incidental to operating the Partnership; "Operating Expenses" shall mean the
total amount of all costs and expenses actually paid in cash during such time
period by the Partnershi p (or by the property manager on behalf of the
Partnership) for the management, maintenance, repair, insurance or operation of
the Barges, exclusive of expenses for depreciation and amortization; and
"General Administrative Expenses" shall mean the total amount of all costs and
expenses actually paid in cash during such time period by the Partnership such
as but not limited to audit/accounting fees, legal fees, transfer agent fees,
printing and postage fees, out of pocket costs and any other cost or expenses
paid in connection with the management and administration of the Partnership.
All mandatory prepayments of principal made as required under this paragraph
shall be applied to the principal balance of this Note and shall not be subject
to any prepayment fees.
Except as otherwise defined herein, all capitalized terms used and not
otherwise defined in this Note shall have the meanings ascribed to them in that
certain Credit Agreement dated as of December 9, 1981, between the Partnership
and the Original Holder (in its capacities both as lender and as trustee), as
amended by that certain Amendment Agreement dated June 30, 1983, between the
Partnership and the Original Holder, as amended and restated by that certain
First Amended and Restated Credit Agreement dated as of the date hereof between
the Partnership and the Lender, and as the same may from time to time be
further amended, modified, extended or renewed (the "Credit Agreement").
Notwithstanding anything to the contrary in this Note, the Security Documents
or the Credit Agreement, neither the Lender nor the successors or assigns of
the Lender shall have any claim, remedy or right to proceed against the
Partnership, any limited partner of the Partnership, the general partner of the
Partnership in its individual corporate capacity, or any incorporator or any
past, present or future subscriber to the capital stock of, or stockholder,
officer or director of the said general partner, for the payment of any
deficiency or any other sum owing on account of the indebtedness evidenced by
this Note from any source other than the Barges and the collateral securing
this Note under the Credit Agreement and the Security Documents; and the
Lender, by acceptance hereof, waives and releases any personal liability of the
Partnership, any limited partner of the Partnership, the general partner of the
Partnership in its individual corporate capacity and any incorporator or t,
present or future subscriber to the capital stock of, or stockholder, officer
or director of the said general partner, for and on account of such
indebtedness or such liability, and agrees to look solely to the said Barges
and the collateral security for the satisfaction of such liability; provided,
however, nothing herein contained shall limit, restrict or impair the rights of
the Lender to accelerate the maturity of this Note upon a default under the
Credit Agreement, to bring suit and obtain a judgment against the Partnership
on this Note, to exercise all rights and remedies provided under the Credit
Agreement (including, without limitation, the rights granted pursuant to
Section 12(b) therein) and the Security Documents or otherwise realize upon the
Barges and the collateral securing this Note.
This Note is a "Note" referred to in, and is entitled to the benefits of, said
Credit Agreement, which Credit Agreement contains provisions, among others, for
the acceleration of the maturity hereof upon the happening of certain stated
events and also for prepayments on account of the principal hereof prior to
maturity upon the terms and conditions therein specified. This Note is secured
by the Security Documents.
The Partnership hereby waives presentment, demand, notice of dishonor, protest
and all other demands and notices whatsoever in connection with delivery,
acceptance, performance and enforcement of this Note.
The Partnership shall pay all costs and expenses, including reasonable
attorneys' fees, incurred by the Lender in enforcing the obligations of the
Partnership hereunder and in the collection of this Note.
This Note shall be governed by and construed in accordance with the internal
laws of the State of New York.
If any provision of this Note, the Credit Agreement or of any other instrument
between the Partnership and the Lender shall be determined by judicial or
governmental authority to permit the collection of or to require payment of any
amount of interest in excess of the maximum amount permitted by applicable
laws, then, notwithstanding any provision hereof to the contrary, this Note and
all charges or payments made in connection herewith, shall be held subject to
reduction or rebate, as the case may be, to the maximum amount permitted under
said applicable laws.
The Partnership shall have the right, at its option, to prepay this
Note in whole or in part from time to time, without premium or penalty. Each
partial prepayment shall be in the aggregate principal amount of $10,000 or an
integral multiple thereof. Any partial prepayments made by the Partnership
shall be applied first to the unpaid principal amount of this Note and then to
accrued and unpaid interest. The Lender shall be entitled to receive written
or telegraphic notice of each prepayment at least 5 Business Days prior
thereto, which notice shall specify the aggregate principal amount of this Note
to be prepaid on the prepayment date. Notice of prepayment having been given
by the Partnership as aforesaid, the principal amount of this Note specified in
such notice, together with interest accrued and unpaid on the amount of such
prepayment to the date of prepayment, shall be due and payable on such
prepayment date. This Note shall become effective only upon its execution b
parties to this Note.
This Note has been executed as of the day and year first above written.
SEI II L.P., a New York Limited Partnership
ATTEST: By: SEI II Equipment, Inc., General Partner,
By: /s/ Regina Hertl
Regina Hertl, Vice President
Accepted this 3rd day of January, 1997 by
BUTTONWOOD LEASING CORPORATION
By: /s/ Steven J. Gorey
Steven J. Gorey, President
SCHEDULE
to First Amended and Restated Credit Note
dated as of January 3, 1997
of SEI II L.P.
to Buttonwood Leasing Corporation
PAYMENTS ON ACCOUNT OF PRINCIPAL
Amount of Unpaid Principal Notation
Principal Paid Balance Made by
