UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the fiscal quarter ended June 30, 1996.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934
For the transition period from to
Commission file number 1-9670
-------------------------------
PLM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3041257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower,
Suite 900, San Francisco, CA 94105-1301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 974-1399
----------------------------------------------------------------------
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 such 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: Common Stock - $.01
Par Value; Outstanding as of August 5, 1996 - 9,181,361 shares
<PAGE>
<TABLE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1996 1995
----------------------------------------
(in thousands)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 3,545 $ 13,764
Receivables 4,067 4,931
Receivables from affiliates 7,702 8,690
Investment in direct finance leases, net 30,720 --
Assets held for sale 952 719
Equity interest in affiliates 30,886 28,208
Equipment held for operating leases 105,043 112,732
Less accumulated depreciation (55,882) (64,892)
----------------------------------------
49,161 47,840
Restricted cash and cash equivalents 15,805 10,621
Other, net 11,487 11,440
----------------------------------------
Total assets $ 154,325 $ 126,213
========================================
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities:
Short-term secured debt $ 24,849 $ --
Senior secured debt 35,000 35,000
Other secured debt 1,084 1,353
Subordinated debt 8,625 11,500
Nonrecourse securitization facility 8,185 --
Payables and other liabilities 11,103 13,884
Deferred income taxes 15,697 15,493
----------------------------------------
Total liabilities 104,543 77,230
Minority interest 370 363
Shareholders' Equity:
Common stock, $.01 par value, 50,000,000 shares authorized, 10,743,761
issued and outstanding at June 30, 1996 and 10,833,161 at December 31,
1995 (excluding 1,852,630 and 1,753,230 shares held
in treasury at June 30, 1996 and
December 31, 1995, respectively) 117 117
Paid-in capital, in excess of par 77,778 77,743
Treasury stock (6,279) (5,931)
----------------------------------------
71,616 71,929
Accumulated deficit (22,204) (23,309)
----------------------------------------
Total shareholders' equity 49,412 48,620
----------------------------------------
Total liabilities, minority interest,
and shareholders' equity $ 154,325 $ 126,213
========================================
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
1996 1995 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Operating leases $ 4,111 $ 6,223 $ 9,157 $ 12,631
Management fees 2,893 2,631 5,446 5,322
Partnership interests and other fees 300 1,732 1,292 2,329
Acquisition and lease negotiation fees 1,109 1,790 2,664 2,330
Finance lease income 724 -- 1,046 --
Commissions -- 293 -- 1,322
Aircraft brokerage and services 729 1,295 1,416 2,317
Gain on the sale or disposition of assets, net 993 594 1,793 5,181
Other 697 278 1,143 522
---------------------------------------------------------------
Total revenues 11,556 14,836 23,957 31,954
Costs and expenses:
Operations support 6,308 5,732 11,421 12,552
Depreciation and amortization 2,907 2,166 5,616 4,387
Commissions -- 327 -- 1,468
General and administrative 1,464 2,397 3,559 5,067
---------------------------------------------------------------
Total costs and expenses 10,679 10,622 20,596 23,474
---------------------------------------------------------------
Operating income 877 4,214 3,361 8,480
Interest expense 1,541 1,616 2,983 3,931
Other income (expense), net 416 (27 ) 390 (54 )
Interest income 286 247 523 925
---------------------------------------------------------------
Income before income taxes 38 2,818 1,291 5,420
Provision for (benefit from) income taxes (223 ) 1,210 238 2,325
---------------------------------------------------------------
Net income to common shares $ 261 $ 1,608 1,053 $ 3,095
===============================================================
Earnings per common share outstanding $ 0.02 $ 0.13 0.10 $ 0.26
===============================================================
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY For the Year Ended December 31, 1995 and the Six
Months Ended June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
Common Stock
-------------------------------------------
Paid-in Retained
Capital in Earnings Total
At Excess Treasury Accumulated Shareholders'
Par of Par Stock (Deficit) Equity
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1994 $ 117 $ 77,699 $ (2,831 ) (29,290 ) $ 45,695
Net income 6,048 6,048
Common stock repurchases (3,100 ) (3,100 )
Exercise of stock options 44 44
Translation loss (67 ) (67 )
---------------------------------------------------------------------------
Balances, December 31, 1995 117 77,743 (5,931 ) (23,309 ) 48,620
Net income 1,053 1,053
Common stock repurchases (348 ) (348 )
Exercise of stock options 35 35
Translation gain 52 52
===========================================================================
Balances, June 30, 1996 $ 117 $ 77,778 $ (6,279 ) (22,204 ) $ 49,412
===========================================================================
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the six months
ended June 30,
1996 1995
-------------------------------
<S> <C> <C>
Operating activities:
Net income $ 1,053 $ 3,095
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,616 4,387
Finance lease income (1,046 ) --
Foreign currency translation 52 (7)
Increase in deferred income taxes 222 2,157
Gain on sale or disposition of assets, net (1,793 ) (5,181)
Undistributed residual value interests 294 (112)
Minority interest in net income of subsidiaries 7 1
Decrease in payables and other liabilities (2,723 ) (1,035)
Decrease (increase) in receivables and receivables from affiliates 2,252 (3,750 )
Cash distributions from affiliates in excess of income accrued 1,342 393
Increase in other assets (478 ) (272 )
-------------------------------
Net cash provided by (used in) operating activities 4,798 (324 )
-------------------------------
Investing activities:
Additional investment in affiliates (4,956 ) (4,284 )
Purchase of residual option -- (200 )
Investment in direct finance leases (33,614 ) --
Purchase of equipment (33,287 ) (24,855 )
Proceeds from sale of transportation equipment for lease 6,254 16,506
Proceeds from sale of assets held for sale 1,431 27,241
Proceeds from sale of commercial and industrial equipment to
offshore investment program 18,074 --
Proceeds from the sale of commercial and industrial equipment to
third parties 6,086 --
Proceeds from the sale of leveraged leased assets -- 4,530
Proceeds from the disposition of residual options -- 2,059
Sale of investment in subsidiary 372 --
Increase in restricted cash and restricted cash equivalents (5,184 ) (5,314 )
-------------------------------
Net cash (used in) provided by investing activities (44,824 ) 15,683
-------------------------------
</TABLE>
(Continued)
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
For the six months
ended June 30,
1996 1995
-------------------------------
<S> <C> <C>
Financing activities:
Borrowings under bridge facility $ 33,444 $ 9,800
Repayment of bridge facility (8,595 ) (16,204 )
Proceeds from long-term equipment loans -- 85
Principal payments under long-term equipment loans (39 ) (33 )
Borrowings under securitization facility 15,866 --
Repayment of securitization facility (7,681 ) --
Repayment of subordinated debt (2,875 ) --
Payments received from ESOP Trustee -- 928
Repurchase of treasury stock (348 ) (494 )
Proceeds from exercise of stock options 35 2
-------------------------------
Net cash provided by (used in) financing activities 29,807 (5,916 )
-------------------------------
Net (decrease) increase in cash and cash equivalents (10,219 ) 9,443
Cash and cash equivalents at beginning of period 13,764 16,131
===============================
Cash and cash equivalents at end of period 3,545 $ 25,574
===============================
Supplemental information:
Interest paid during the period 2,688 $ 3,380
===============================
Income taxes paid during the period 1,283 $ 378
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
1. General
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the Company's
financial position as of June 30, 1996, the statements of income for the three
and six months ended June 30, 1996 and 1995, the statements of cash flows for
the six months ended June 30, 1996 and 1995, and the statements of changes in
shareholders' equity for the year ended December 31, 1995 and the six months
ended June 30, 1996. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from the accompanying
consolidated financial statements. For further information, reference should be
made to the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K/A for the year ended December 31, 1995, on file with
the Securities and Exchange Commission.
2. Reclassifications
Certain amounts in the 1995 financial statements have been reclassified to
conform to the 1996 presentation.
3. Finance Lease Activities
In 1995, the Company established a new wholly-owned equipment leasing and
management subsidiary, American Finance Group, Inc. (AFG), and entered into an
agreement to manage certain operations of Boston-based, privately-held American
Finance Group, L.P. (AFG, L.P.). During 1995, the Company provided management
services for investor programs of AFG, L.P. for which the Company earned
management fees and other revenues. In January 1996, the agreement was modified
to exclude management of AFG, L.P.'s investor programs. The modified agreement
allowed the Company to assume the lease origination and servicing operations,
the rights to manage a significant offshore leasing investment program and
certain furniture, computers, and software of AFG, L.P. AFG is originating and
managing lease transactions on new commercial and industrial equipment that will
be financed by a securitization facility, for the Company's own account, or sold
to the offshore investment program or other investors. Certain of these leases
will be accounted for as direct finance leases. Periodically, the Company will
use its short-term loan facility to finance the acquisition of the assets
subject to these leases prior to sale or permanent financing by the
securitization facility.
4. Equipment
Equipment held for operating leases includes transportation equipment and
commercial and industrial equipment purchased by AFG which are depreciated over
their estimated useful lives.
The Company classifies assets as held for sale if the particular asset is
subject to a pending contract for sale or is held for sale to an affiliated
partnership. Transportation equipment held for sale is valued at the lower of
depreciated cost or estimated net realizable value. As of June 30, 1996, the
Company had 16 railcars and one commuter aircraft held for sale to third parties
with an aggregate net book value of $1.0 million. As of December 31, 1995, the
Company had 1 marine container and 69 railcars, subject to pending contracts for
sale for a total of $0.7 million, with an aggregate net book value of $0.7
million.
Periodically, the Company will purchase groups of assets whose ownership may be
allocated among affiliated partnerships and the Company. Generally in these
cases, only assets that are on-lease will be purchased by the affiliated
partnerships. The Company will generally assume the ownership and remarketing
risks associated with off-lease equipment. Allocation of the purchase price will
be determined by a combination of the Company's knowledge and assessment of the
relevant equipment market, third party industry sources, and recent transactions
or published fair market value references. During the six months ended June 30,
1996, the Company realized $0.7 million of gains on the sale of 69 railcars
purchased by the Company as part of a group of assets in 1995. These assets were
included in assets held for sale at December 31, 1995.
<PAGE>
5. Debt
Assets acquired and held on an interim basis for placement with affiliated
partnerships or purchased with the intent of permanent financing through the
Company's securitization facility have, from time to time, been partially funded
by a $35.0 million short-term equipment acquisition loan facility. The Company
amended this facility on May 31, 1996. The amendment extended the availability
of the facility until May 23, 1997 and added the Company's AFG subsidiary as a
borrower.
This facility, which is shared with Equipment Growth Funds (EGFs) III, IV, V,
VI, VII and Professional Lease Management Income Fund I, L.L.C. (Fund I), allows
the Company to purchase equipment prior to the designated program or partnership
being identified, or prior to its having raised sufficient capital to purchase
the equipment. This facility provides 80% financing for transportation assets
and the lesser of 100% of the present value of the lease stream or 85% of the
original equipment cost on commercial and industrial equipment purchased for
placement in a securitization facility, if the Company is the borrower and
working capital is used for the nonfinanced costs of these acquisitions. The
Company can hold purchased assets under this bridge facility for up to 150 days.
Interest accrues at prime or LIBOR plus 2.5% at the option of the borrower at
the time of the advance under the facility. The Company retains the net lease
revenue earned and is liable for the interest expense during the interim holding
period since its capital is at risk. As of June 30, 1996, the Company had
borrowed $24.8 million and EGF VI had borrowed $9.0 million. Borrowings by the
EGFs or Fund I are guaranteed by the Company.
The Company entered into a securitization facility on July 1, 1995 which made
available for one year up to $80 million on a nonrecourse basis that is secured
primarily by direct finance leases which generally have terms of four to five
years. Repayment of the facility matches the terms of the underlying leases. The
securitized debt bears interest equivalent to average U.S. treasury rates plus
1%. As of June 30, 1996, there were $8.2 million in borrowings outstanding under
this facility. The Company extended this facility in July 1996 on similar terms
for up to a one year period.
6. Shareholders' Equity
In November 1995, the Company announced that its Board of Directors had
authorized the repurchase of up to $5.0 million of the Company's common stock.
The shares may be purchased in the open market or through private transactions,
with working capital and existing cash reserves. Shares may be used for
corporate purposes, including option plans, or they may be retired. The Company
purchased 99,400 shares under this program for $0.3 million during the six
months ended June 30, 1996. As of June 30, 1996, 834,596 shares were purchased
under this program for $2.6 million.
During the six months ended June 30, 1996, 40,000 options were granted under the
Director's 1995 Non-Qualified Stock Option Plan at $3.50 per share.
During the six months ended June 30, 1996, 99,400 common shares were repurchased
by the Company, and options for 10,000 shares were exercised. Consequently, the
total common shares outstanding decreased to 10,743,761 at June 30, 1996, from
the 10,833,161 outstanding at December 31, 1995. Net income per common share was
computed by dividing net income to common shares by common stock equivalents
which included the weighted average number of shares and stock options deemed
outstanding during the period. The weighted average number of shares and stock
options deemed outstanding during the three months ended June 30, 1996 and 1995,
were 10,947,381 and 11,751,359, respectively. The weighted average number of
shares and stock options deemed outstanding during the six months ended June 30,
1996 and 1995, were 10,996,981 and 11,806,322, respectively.
<PAGE>
7. Syndication Activities
On May 14, 1996, the Company announced the halt of syndication of equipment
leasing programs with the May 13, 1996 close of Professional Lease Management
Income Fund I (Fund I). The Company recognized a one-time $1.4 million charge in
the quarter ended June 30, 1996 mainly related to severance pay associated with
this decision.
Through May 13, 1996, Fund I had raised $100 million in equity and is in the
equipment investment phase of the program.
8. Sale of Subsidiary
In January 1996, the Company sold its 100% ownership interest in Austin Aero FBO
Ltd. to a third party for $923,000. The Company recorded a $2,000 loss on the
sale, net of the tax benefit. During the year ended 1995, revenues and expenses
related to Austin Aero FBO Ltd. were $2.3 million and $2.1 million,
respectively, representing net income of $0.2 million or net income per common
share of $0.01.
9. Profit Sharing and 401(k) Plan
In February 1996, the Company adopted the PLM International, Inc. Profit Sharing
and 401(k) Plan (the Plan). The Plan provides for deferred compensation as
described in Section 401(k) of the Internal Revenue Code. The Plan is a
contributory plan available to essentially all full-time employees of the
Company. Employees who participate in the Plan can elect to defer and contribute
to the trust established under the Plan up to 9% or $9,500 of pre-tax salary or
wages in 1996. The Company will match up to a maximum of $4,000 of employee
contributions per annum to vest in four equal installments over a four-year
period. Existing employees were partially or fully vested based on previous
years of employment when the plan was implemented.
10. Legal Matters
The Company is involved as plaintiff or defendant in various legal actions
incident to its business. Management does not believe that any of these actions
will be material to the financial condition of the Company.
In November 1995, James F. Schultz (Plaintiff), a former employee of PLM
International, filed and served on PLMI, a first amended complaint (the
Complaint) in the United States District Court for the Northern District of
California (Case No. C-95-2957 MMC) against the Company, the PLM International,
Inc. Employee Stock Ownership Plan (the ESOP), the ESOP's trustee, and certain
individual employees, officers and/or directors of PLM International. The
Complaint contains claims for relief alleging breaches of fiduciary duties and
various violations of the Employee Retirement Income Security Act of 1974
(ERISA) arising principally from purported defects in the structure, financing
and termination of the ESOP and for interference with Plaintiff's rights under
ERISA. Plaintiff seeks monetary damages, rescission of the preferred stock
transactions with the ESOP and/or restitution of ESOP assets, and attorneys'
fees and costs under ERISA. In January 1996, PLMI and other defendants filed a
motion to dismiss the Compliant for lack of subject matter jurisdiction, arguing
the plaintiff lacked standing. The motion was granted and on May 30, 1996, the
Court entered a judgment dismissing the Complaint for lack of subject matter
jurisdiction. Plaintiff has appealed to the U.S. Court of Appeals for the Ninth
Circuit, seeking a reversal of District Court's judgment. The parties are
required to complete briefing on the appeal by November 11, 1996.
11. Purchase Commitments
As of June 30, 1996, the Company, through its AFG subsidiary, had committed to
purchase $70.2 million of equipment for its commercial and industrial equipment
lease portfolio.
<PAGE>
12. Note Agreement
On June 28, 1996, the Company completed a floating rate senior secured note
agreement which allows the Company to borrow up to $27.0 million within a one
year period. No borrowings were outstanding at June 30, 1996 under this
facility. The facility bears interest at three-month LIBOR plus 240 basis
points. The Company has pledged substantially all of its management, acquisition
and lease negotiation fees, and certain partnership distributions as collateral
to the facility. The facility provides that management, acquisition and lease
negotiation fees, and the partnership distributions be deposited into a lockbox
account. The Company has access to a certain amount of the cash in this lockbox
account after monthly borrowing base requirements have been met. The facility
requires quarterly interest only payments through August 15, 1997, with
principal plus interest payments beginning November 15, 1997. Principal payments
are payable quarterly in 20 equal amounts through termination of the loan on
August 15, 2002.
13. Subsequent Events
The Company borrowed $18.0 million under the floating rate senior secured note
agreement during July 1996. (Refer to Note 12.)
During July 1996, the Company prepaid in its entirety the $8.6 million balance
of its subordinated debt and incurred prepayment penalties of approximately $0.7
million.
During July 1996, the Company repurchased 1.6 million shares of the Company's
common stock for $6.1 million. The shares were acquired through private
transactions at a price of 3 13/16 per share.
During July and August 1996, the Company, through its AFG subsidiary, funded
$9.0 million of commitments outstanding for its commercial and industrial
equipment lease portfolio at June 30, 1996, and entered into new commitments for
$11.7 million.
During July 1996, the Company sold one commuter aircraft with a net book value
of $0.5 million, for $0.7 million, and 16 railcars with an aggregate net book
value of $0.5 million, for $0.6 million. The aircraft and railcars were included
in assets held for sale as of June 30, 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company owns a diversified portfolio of transportation equipment from which
it earns operating lease revenue and incurs operating expenses. The Company's
transportation equipment held for operating leases, which consists of aircraft,
marine containers, trailers, and storage equipment at June 30, 1996, is mainly
equipment built prior to 1988. As equipment ages, the Company continues to
monitor the performance of its assets on lease and current market conditions for
leasing equipment in order to seek the best opportunities for investment.
Failure to replace equipment may result in shorter lease terms and higher costs
of maintaining and operating aged equipment and, in certain instances, limited
remarketability.
The Company has syndicated investment programs from which it earns various fees
and equity interests. The Professional Lease Management Income Fund I (Fund I)
was structured as a limited liability company with a no front-end fee structure.
The previously syndicated limited partnership programs allowed the Company to
receive fees for the acquisition and initial lease of the equipment. The Fund I
program does not provide for acquisition and lease negotiation fees. The Company
invests the equity raised through syndication in transportation equipment which
is then managed on behalf of the investors. The equipment management activities
for these types of programs generate equipment management fees for the Company
over the life of the program, typically 10 to 12 years. The limited partnership
agreements generally entitle the Company to receive a 1% or 5% interest in the
cash distributions and earnings of the partnership subject to certain allocation
provisions. The Fund I agreement entitles the Company to a 15% interest in the
cash distributions and earnings of the program subject to certain allocation
provisions which will increase to 25% after the investors have received
distributions equal to their original invested capital.
On May 14, 1996, the Company announced the halt of public syndication
of equipment leasing programs with the May 13, 1996 close of Fund I. As a result
of this decision, revenues earned from managed programs which include management
fees, partnership interests and other fees, and acquisition and lease
negotiation fees will be reduced in the future as the older programs begin
liquidation and the managed equipment portfolio becomes permanently reduced.
The Company is engaged in the funding and management of longer-term direct
finance leases and operating leases through its AFG subsidiary. Master lease
agreements are entered into with predominately investment-grade lessees and
serve as the basis for marketing efforts. The underlying assets represent a
broad range of commercial and industrial equipment, such as data processing,
communications, materials handling and construction equipment. This is an
important new growth area for the Company as it marks the entry into the very
substantial industrial and commercial equipment fields and yet allows the
Company to apply much of the same equipment leasing and management experience
gained from its many years in the transportation sector. Through AFG, the
Company is also engaged in the management of an offshore leasing investment
program for which it originates leases and receives acquisition and management
fees.
<PAGE>
For the Three Months Ended June 30, 1996 versus June 30, 1995
The following analysis reviews the operating results of the Company:
<TABLE>
<CAPTION>
Revenue: For the three months
ended June 30,
1996 1995
------------------------------
(in thousands)
<S> <C> <C>
Operating leases $ 4,111 $ 6,223
Management fees 2,893 2,631
Partnership interests and other fees 300 1,732
Acquisition and lease negotiation fees 1,109 1,790
Finance lease income 724 --
Commissions -- 293
Aircraft brokerage and services 729 1,295
Gain on the sale or disposition of assets, net 993 594
Other 697 278
------------------------------
Total revenues 11,556 $ 14,836
</TABLE>
The fluctuations in revenues for the three months ended June 30, 1996 from the
same period in 1995 are summarized and explained below.
Operating lease revenue:
<TABLE>
<CAPTION>
For the three months
ended June 30,
1996 1995
----------------------------
(in thousands)
<S> <C> <C>
By equipment type or subsidiary:
Trailers $ 1,802 $ 2,625
Aircraft 1,139 1,516
Marine vessels -- 535
Marine containers 92 146
Storage equipment 282 243
Railcars 18 421
Commercial and industrial 778 737
-----------------------------
$ 4,111 $ 6,223
</TABLE>
As of June 30, 1996, the Company owned transportation equipment held for
operating leases or held for sale with an original cost of $96.8 million, which
was $25.2 million less than the original cost of equipment owned and held for
operating leases or held for sale at June 30, 1995. The reduction in equipment,
on an original cost basis, is a consequence of the Company's strategic decision
to dispose of certain underperforming and nonperforming transportation assets
resulting in a 100% reduction in its marine vessel fleet, a 26% net reduction in
its marine container portfolio, a 30% net reduction in its aircraft portfolio, a
68% net reduction in its railcar portfolio, and a 10% net reduction in its
trailer portfolio, compared to June 30, 1995. Operating lease revenue includes
revenues generated from assets held for operating leases, assets held for sale
that are on lease, and rents received during short-term holding periods on
operating leased assets. The reduction in transportation equipment available for
lease is the primary reason marine vessel, trailer, railcar, marine container,
and aircraft revenue were all reduced as compared to the prior year. In
addition, trailer lease revenue decreased due to lower utilization.
The decrease in operating lease revenues as a result of the reduction in
equipment available for lease was offset by $0.1 million in operating lease
revenues generated from higher storage equipment utilization and by commercial
and industrial equipment leases on owned equipment and revenues generated on
leases prior to being sold to third parties.
<PAGE>
Management fees:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. The managed equipment portfolio grew
correspondingly with new syndication activity. Affiliated partnership and
investment program surplus operating cash flows and loan proceeds invested in
additional equipment favorably influence management fees. The $0.3 million
increase in management fees during the quarter ended June 30, 1996, compared to
the comparable prior year quarter, resulted from an increase in management fees
related to Fund I, while management fees from other programs remained relatively
constant. With the termination of syndication activities, management fees are
expected to decrease in the future as the older programs begin liquidation and
the managed equipment portfolio becomes permanently reduced. This future
decrease will be offset, in part, by management fees earned from the offshore
leasing investment program managed by the Company's AFG subsidiary.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of the
Company's affiliated programs. The net earnings and distribution levels from the
affiliated programs were $0.3 million and $1.7 million for the quarters ended
June 30, 1996 and 1995, respectively. In 1996, the revenue included net
decreases of $0.4 million in the Company's recorded residual values related to
equipment owned by the Equipment Growth Fund programs. In 1995, the equity
interest recorded was impacted by net increases of $0.9 million in the Company's
residual values which resulted mainly from residual income recorded for the
equipment purchased for Fund I, which did not occur during the second quarter of
1996. Residual income is recognized on residual interests based upon the general
partner's share of the present value of the estimated disposition proceeds of
the equipment portfolio of the affiliated partnership. Net decreases in the
recorded residual values result when partnership assets are sold and the
reinvestment proceeds are less than the original investment in the sold
equipment.
Acquisition and lease negotiation fees:
During the quarter ended June 30, 1996, a total of $17.4 million of equipment
was purchased on behalf of the equipment growth funds compared to $24.2 million
during the same quarter of the prior year, resulting in a $0.4 million decrease
in acquisition and lease negotiation fees. In addition, acquisition and lease
negotiation fees related to AFG purchases for managed programs decreased $0.3
million in the quarter ended June 30, 1996, as compared to the quarter ended
June 30, 1995. As a result of the Company's decision to halt syndication of
equipment leasing programs with the close of Fund I on May 13, 1996, and because
Fund I had a no front-end fee structure, acquisition and lease negotiation fees
will be reduced in the future.
Finance lease income:
The Company earns finance lease income for certain leases originated by its AFG
subsidiary. During the quarter ended June 30, 1996, the Company managed direct
finance lease transactions on equipment it purchased for $32.0 million, financed
by both a warehousing credit facility and a securitization facility. These
direct finance lease transactions resulted in $0.7 million in earned income for
the second quarter of 1996, which represented income earned on the lease stream.
There were no similar transactions in the comparable prior year period.
Commissions:
Commission revenue represents syndication placement fees, generally 9%
of equity raised for the equipment growth funds, earned upon the sale of
partnership units to investors. During the quarter ended June 30, 1996, there
was no program equity raised for the equipment growth funds compared to $3.2
million of equity raised during the quarter ended June 30, 1995, resulting in a
$0.3 million decrease in placement commissions. The Company closed PLM Equipment
Growth & Income Fund VII (EGF VII) syndication activities on April 30, 1995. As
a result of the Company's decision to halt syndication of equipment leasing
programs on May 14, 1996, and due to Fund I having a no front-end fee structure,
commission revenue since the close of EGF VII was eliminated.
Aircraft brokerage and services:
Aircraft brokerage and services revenue, which represents revenue
earned by Aeromil Holdings, Inc. (Aeromil), the Company's aircraft leasing and
spare parts brokerage subsidiary, decreased $0.6 million during the quarter
ended June 30, 1996, compared to the comparable prior year quarter. The decrease
was attributable to the sales of the subsidiary's ownership interests in
Aeromech Pty. Ltd. and Austin Aero FBO Ltd. to third parties in December 1995
and January 1996, respectively.
Gain on the sale or disposition of assets, net:
During the quarter ended June 30, 1996, the Company recorded $0.6
million in gains which resulted mainly from the sale or disposition of 5
commuter aircraft, 50 marine containers, 2 railcars, 1 storage unit and 138
trailers. In addition, the Company recorded $0.4 million in gains related to AFG
equipment sales. During the quarter ended June 30, 1995, the Company purchased
two commuter aircraft for a total of $1.5 million and sold both aircraft for a
gain of $0.3 million, net of selling costs. Additional net gains on the sales or
dispositions of assets for the quarter ended June 30, 1995 of $0.3 million
resulted mainly from the sales or dispositions of 363 marine containers, 1
commuter aircraft, 2 railcars, 10 storage units, and 225 trailers.
Other:
Other revenues increased $0.4 million during the quarter ended June 30,
1996, compared to the comparable prior year quarter, due to increased revenue
earned for data processing services provided to the Company's affiliated
programs and due to an increase in brokerage fees.
Costs, Expenses, and Other:
<TABLE>
<CAPTION>
For the three months
ended June 30,
1996 1995
----------------------------
(in thousands)
<S> <C> <C>
Operations support $ 6,308 $ 5,732
Depreciation and amortization 2,907 2,166
Commissions -- 327
General and administrative 1,464 2,397
Interest expense 1,541 1,616
Other income (expense), net 416 (27)
Interest income 286 247
</TABLE>
Operations support:
Operations support expense (including salary and office-related expenses for
operational activities, provision for doubtful accounts, equipment insurance,
repair and maintenance costs, and equipment remarketing costs) increased $0.6
million (10%) for the quarter ended June 30, 1996, from the same quarter in
1995. The increase resulted mainly from a one-time $1.4 million charge related
to the termination of syndication activities, offset partially by an $0.8
million decrease in compensation expenses related to headcount reductions during
the fourth quarter of 1995 and the first quarter of 1996.
Depreciation and amortization:
Depreciation and amortization expense increased $0.7 million (34%) for
the quarter ended June 30, 1996, as compared to the quarter ended June 30, 1995.
The increase resulted from amortization of costs associated with the formation
of AFG and depreciation of AFG assets held for operating leases and
administrative assets, offset partially by the reduction in depreciable
transportation equipment discussed in the operating lease revenue section.
Commissions:
Commission expenses are primarily incurred by the Company in connection
with the syndication of investment partnerships and represent payments to
brokers and financial planners for sales of investment program units.
Commissions are also paid to certain of the Company's employees directly
involved in syndication and leasing activities. Commission expenses for the
quarter ended June 30, 1996, decreased $0.3 million (100%) from the same period
in 1995. The reduction is the result of no syndicated equity raised for the
equipment growth funds during the quarter ended June 30, 1996, versus $3.2
million in syndicated equity raised for Equipment Growth and Income Fund VII
during the same quarter in 1995. Commission costs related to Fund I were
capitalized as part of the Company's investment in the program. With the
termination of syndication activities, there will be no more commission costs
incurred in the future.
General and administrative:
General and administrative expense decreased $0.9 million (39%) during the
quarter ended June 30, 1996, compared to the same period in 1995, due primarily
to a $0.2 million decrease in compensation related to the reductions in
headcount, a $0.4 million decrease in bonus expenses, and a $0.3 million
decrease in estimated accruals.
Interest expense:
Interest expense decreased $0.1 million (5%) during the quarter ended
June 30, 1996, compared to the same period in 1995, due to the reduction in
subordinated debt levels partially offset by increased borrowings on the
short-term equipment acquisition loan facility and the securitization facility.
Other income (expense), net:
Other income increased $0.4 million during the quarter ended June 30, 1996,
compared to the same quarter in 1995, due to the sale of 32 wind turbines during
the second quarter of 1996 which had previously been written off.
Income taxes:
For the three months ended June 30, 1996, the benefit for income taxes was $0.2
million, which reflected an adjustment for taxes related to the Employee Stock
Ownership Plan. For the same period in 1995, the provision for income taxes was
$1.2 million, which represented an effective rate of 43% and higher income
before tax.
Net income:
As a result of the foregoing, for the three months ended June 30, 1996,
net income was $0.3 million resulting in net income per common share of $0.02.
For the same period in 1995, net income was $1.6 million resulting in net income
per common share of $0.13.
<PAGE>
For the Six Months Ended June 30, 1996 versus June 30, 1995
The following analysis reviews the operating results of the Company:
Revenue:
<TABLE>
<CAPTION>
For the six months
ended June 30,
1996 1995
------------------------------
(in thousands)
<S> <C> <C>
Operating leases $ 9,157 $ 12,631
Management fees 5,446 5,322
Partnership interests and other fees 1,292 2,329
Acquisition and lease negotiation fees 2,664 2,330
Finance lease income 1,046 --
Commissions -- 1,322
Aircraft brokerage and services 1,416 2,317
Gain on the sale or disposition of assets, net 1,793 5,181
Other 1,143 522
------------------------------
Total revenues $ 23,957 $ 31,954
</TABLE>
The fluctuations in revenues for the six months ended June 30, 1996 from the
same period in 1995 are summarized and explained below.
Operating lease revenue:
<TABLE>
<CAPTION>
For the six months
ended June 30,
1996 1995
----------------------------
(in thousands)
<S> <C> <C>
By equipment type or subsidiary:
Trailers $ 3,958 $ 5,380
Aircraft 2,565 3,073
Marine vessels -- 1,092
Marine containers 219 300
Storage equipment 544 500
Railcars 73 1,263
Commercial and industrial 1,798 1,023
------------------------------
$ 9,157 $ 12,631
</TABLE>
As of June 30, 1996, the Company owned transportation equipment held for
operating leases or held for sale with an original cost of $96.8 million, which
was $25.2 million less than the original cost of equipment owned and held for
operating leases or held for sale at June 30, 1995. The reduction in equipment,
on an original cost basis, is a consequence of the Company's strategic decision
to dispose of certain underperforming and nonperforming transportation assets
resulting in a 100% reduction in its marine vessel fleet, a 26% net reduction in
its marine container portfolio, a 30% net reduction in its aircraft portfolio, a
68% net reduction in its railcar portfolio, and a 10% net reduction in its
trailer portfolio, compared to June 30, 1995. Operating lease revenue includes
revenues generated from assets held for operating leases, assets held for sale
that are on lease, and rents received during short-term holding periods on
operating leased assets. The reduction in transportation equipment available for
lease is the primary reason marine vessel, trailer, railcar, marine container,
and aircraft revenue were all reduced as compared to the prior year comparable
period. In addition, trailer lease revenue decreased due to lower utilization.
The decrease in operating lease revenues as a result of the reduction in
equipment available for lease was offset by a $0.8 million increase in operating
lease revenues generated by higher storage equipment utilization and by
commercial and industrial leases on owned equipment and revenues generated on
leases prior to being sold to third parties.
<PAGE>
Management fees:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. The managed equipment portfolio for new
programs grows correspondingly with new syndication activity. Affiliated
partnership and investment program surplus operating cash flows and loan
proceeds invested in additional equipment favorably influence management fees.
Management fees increased $0.1 million during the six months ended June 30, 1996
as compared to the same period of the prior year. Although management fees
related to Fund I increased, management fees from the remaining older programs
decreased due to a net decrease in managed equipment and a decrease in lease
rates for certain types of equipment in those programs and the elimination of
management of the AFG, L.P. programs. With the termination of syndication
activities, management fees are expected to decrease in the future as older
programs begin liquidation and the managed equipment portfolio becomes
permanently reduced. This future decrease will be offset, in part, by management
fees earned from the offshore leasing investment program managed by the
Company's AFG subsidiary.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of the
Company's affiliated programs. The net earnings and distribution levels from the
affiliated programs were $1.3 million and $2.3 million for the six months ended
June 30, 1996 and 1995, respectively. In 1996, the revenue included net
decreases of $0.2 million in the Company's recorded residual values related to
the Equipment Growth Fund programs offset partially by residual income for
equipment purchased for Fund I. In 1995, the equity interest recorded was
impacted by net increases of $0.6 million in the Company's recorded residual
values which resulted mainly from residual income for equipment purchased for
Fund I. Residual income is recognized on residual interests based upon the
general partner's share of the present value of the estimated disposition
proceeds of the equipment portfolio of the affiliated partnership. Net decreases
in the recorded residual values result when partnership assets are sold and the
reinvestment proceeds are less than the original investment in the sold
equipment.
Acquisition and lease negotiation fees:
During the six months ended June 30, 1996, a total of $41.2 million of equipment
was purchased on behalf of the equipment growth funds compared to $28.6 million
during the same period of the prior year, resulting in a $0.7 million increase
in acquisition and lease negotiation fees. This increase was partially offset by
a $0.4 million decrease in acquisition and lease negotiation fees related to AFG
purchases for managed programs. As a result of the Company's decision to halt
syndication of equipment leasing programs with the close of Fund I on May 13,
1996, and because Fund I had a no front-end fee structure, acquisition and lease
negotiation fees will be reduced in the future.
Finance lease income:
The Company earns finance lease income for certain leases originated by its AFG
subsidiary. During the six months ended June 30, 1996, the Company originated
and managed direct finance lease transactions on equipment it purchased for
$32.0 million, financed by both a warehousing credit facility and a
securitization facility. These direct finance lease transactions resulted in
$1.0 million in earned income for the six months ended June 30, 1996, which
represented income earned on the lease stream. There were no similar
transactions in the comparable prior year period.
Commissions:
Commission revenue represents syndication placement fees, generally 9%
of equity raised for the equipment growth funds, earned upon the sale of
partnership units to investors. During the six months ended June 30, 1996, there
was no program equity raised for the equipment growth funds compared to $11.4
million of equity raised during the six months ended June 30, 1995, resulting in
a $1.3 million decrease in placement commissions. The Company closed PLM
Equipment Growth & Income Fund VII (EGF VII) syndication activities on April 30,
1995. As a result of the Company's decision to halt syndication of equipment
leasing programs on May 14, 1996, and because Fund I had a no front-end fee
structure, commission revenue since the close of EGF VII was eliminated.
Aircraft brokerage and services:
Aircraft brokerage and services revenue, which represents revenue
earned by Aeromil Holdings, Inc. (Aeromil), the Company's aircraft leasing and
spare parts brokerage subsidiary, decreased $0.9 million during the six months
ended June 30, 1996, compared to the comparable prior year period. The decrease
was attributable to the sales of the subsidiary's ownership interests in
Aeromech Pty. Ltd. and Austin Aero FBO Ltd. to third parties in December 1995
and January 1996, respectively.
Gain on the sale or disposition of assets, net:
During the six months ended June 30, 1996, the Company recorded $1.4
million in gains which resulted mainly from the sale or disposition of 5
commuter aircraft, 124 marine containers, 69 railcars, 6 storage units, and 205
trailers. In addition, the Company recorded $0.4 million in gains related to AFG
equipment sales. The $5.2 million net gain recorded during the same period in
1995 resulted mainly from a net gain of $3.1 million from the sale or
disposition of 1 marine vessel, 510 marine containers, 2 commercial aircraft, 1
commuter aircraft, 1 helicopter, 216 railcars, 10 storage units, and 355
trailers, and from the sale of 3 option contracts, for railcar equipment, for a
net gain of $1.8 million. Additionally during the six months ended June 30,
1995, the Company purchased two commuter aircraft for a total of $1.5 million
and sold both aircraft for a gain of $0.3 million, net of selling costs.
Other:
Other revenues increased $0.6 million during the six months ended June
30, 1996, compared to the comparable prior year period, due to increased revenue
earned for data processing services provided to the Company's affiliated
programs, and due to increased underwriting income and brokerage fees.
Costs, Expenses, and Other:
<TABLE>
<CAPTION>
For the six months
ended June 30,
1996 1995
----------------------------
(in thousands)
<S> <C> <C>
Operations support $ 11,421 $ 12,552
Depreciation and amortization 5,616 4,387
Commissions -- 1,468
General and administrative 3,559 5,067
Interest expense 2,983 3,931
Other income (expense), net 390 (54)
Interest income 523 925
</TABLE>
Operations support:
Operations support expense (including salary and office-related expenses for
operational activities, provision for doubtful accounts, equipment insurance,
repair and maintenance costs, and equipment remarketing costs) decreased $1.1
million (9%) for the six months ended June 30, 1996, from the same period in
1995. The decrease resulted from a $0.9 million decrease in operating and repair
and maintenance costs due to the sale of the Company's entire owned vessel
portfolio and the sale of other equipment, a $1.8 million decrease in
compensation and bonus expense due to headcount reductions and lower accrued
compensation expense primarily to compensate employees for lost benefits
resulting from the termination of the 401(k) plan during 1995, offset partially
by a one-time $1.4 million charge related to the termination of syndication
activities, and a $0.2 million increase in bad debt expense.
<PAGE>
Depreciation and amortization:
Depreciation and amortization expense increased $1.2 million (28%) for
the six months ended June 30, 1996, as compared to the six months ended June 30,
1995. The increase resulted from amortization of costs associated with the
formation of AFG and depreciation of AFG assets held for operating leases and
administrative assets, offset partially by the reduction in depreciable
transportation equipment discussed in the operating lease revenue section.
Commissions:
Commission expenses are primarily incurred by the Company in connection
with the syndication of investment partnerships and represent payments to
brokers and financial planners for sales of investment program units.
Commissions are also paid to certain of the Company's employees directly
involved in syndication and leasing activities. Commission expenses for the six
months ended June 30, 1996, decreased $1.5 million (100%) from the same period
in 1995. The reduction is the result of no syndicated equity raised for the
equipment growth funds during the six months ended June 30, 1996, versus $14.6
million in syndicated equity raised for the equipment growth funds during the
same period in 1995. Commission costs related to Fund I were capitalized as part
of the company's investment in the program. With the termination of syndication
activities, there will be no more commission costs incurred in the future.
General and administrative:
General and administrative expense decreased $1.5 million (30%) during the six
months ended June 30, 1996, compared to the same period in 1995, due to a $1.0
million decrease in compensation expenses primarily related to terminated
employees and lower 1996 bonus expense (primarily related to the compensation of
employees during 1995 for lost benefits resulting from the termination of the
401(k) plan), a $0.3 million decrease in estimated accruals, and a $0.2 million
decrease in computer services expenses.
Interest expense:
Interest expense decreased $0.9 million (24%) during the six months
ended June 30, 1996, compared to the same period in 1995 mainly due to the
reduction in subordinated debt levels.
Other income (expense), net:
Other income increased $0.4 million during the six months ended June 30, 1996,
compared to the same period of 1995, due to the sale of 32 wind turbines during
the second quarter of 1996 which had previously been written off.
Interest income:
Interest income decreased $0.4 million (43%) in the six months ended
June 30, 1996, compared to the same quarter in 1995 from a reduction in interest
income earned on the ESOP cash collateral account which related to the
termination of the Company's ESOP and due to a decrease in interest income as a
result of lower cash balances in 1996 compared to 1995.
Income taxes:
For the six months ended June 30, 1996, the provision for income taxes was $0.2
million, which represented an effective rate of 18% and reflected an adjustment
for taxes related to the Employee Stock Ownership Plan. For the same period in
1995, the provision for income taxes was $2.3 million, which represented an
effective rate of 43% and higher income before taxes.
<PAGE>
Net income:
As a result of the foregoing, for the six months ended June 30, 1996,
net income was $1.1 million resulting in net income per common share of $0.10.
For the same period in 1995, net income was $3.1 million resulting in net income
per common share of $0.26.
Liquidity and Capital Resources:
Cash requirements historically have been satisfied through cash flow
from operations, borrowings, or sales of transportation equipment.
Liquidity in 1996 will depend, in part, on continued remarketing of the
equipment portfolio at similar lease rates, management of existing sponsored
programs, effectiveness of cost control programs, possible additional equipment
sales and the volume of commercial and industrial equipment leasing transactions
for which the Company earns fees and a spread. Management believes the Company
can accomplish the preceding and will have sufficient liquidity and capital
resources for the future. Specifically, future liquidity is influenced by the
following:
(a) Debt Financing:
Senior Debt: The Company's senior loan facility with a syndicate of
insurance companies provides that equipment sale proceeds, from pledged
equipment, or cash deposits be placed into collateral accounts or used to
purchase additional equipment. The facility requires quarterly interest only
payments through June 30, 1997, with quarterly principal payments of $2.1
million plus interest charges beginning June 30, 1997, through the termination
of the loan in June 2001.
On June 28, 1996, the Company closed a floating rate senior secured note
agreement which allows the Company to borrow up to $27.0 million within a one
year period. The facility bears interest at LIBOR plus 240 basis points. During
July 1996, the Company borrowed $18.0 million under this agreement. The Company
has pledged substantially all of its management, acquisition and lease
negotiation fees, and certain partnership distributions as collateral to the
facility. The facility provides that management, acquisition and lease
negotiation fees, and the partnership distributions be deposited into a lockbox
account. The Company has access to a certain amount of the cash in this lockbox
account after monthly borrowing base requirements have been met. The facility
requires quarterly interest only payments through August 15, 1997, with
principal plus interest payments beginning November 15, 1997. Principal payments
are payable quarterly in 20 equal amounts through termination of the loan on
August 15, 2002.
Bridge Financing: Assets acquired and held on an interim basis for
placement with affiliated partnerships or purchased for placement in the
Company's securitization facility have, from time to time, been partially funded
by a $35.0 million short-term equipment acquisition loan facility. The Company
amended this facility on May 31, 1996. The amendment extended the facility until
May 23, 1997, and provides for a $5.0 million letter of credit facility as part
of the $35.0 million facility.
This bridge facility, which is shared with Equipment Growth Funds
(EGFs) III, IV, V, VI, VII, and Fund I, allows the Company to purchase equipment
prior to the designated program or partnership being identified, or prior to
having raised sufficient capital to purchase the equipment. This facility
provides 80% financing for transportation assets and the lesser of 100% of the
present value of the lease stream or 85% of the original equipment cost on
assets purchased for placement in a securitization facility, if the Company is
the borrower and working capital is used for the nonfinanced costs of these
acquisitions. The Company can hold assets under this bridge facility for up to
150 days. Interest accrues at prime or LIBOR plus 2.5% at the option of the
borrower at the time of the advance under the facility. The Company retains the
difference between the net lease revenue earned and the interest expense during
the interim holding period since its capital is at risk. As of August 2, 1996,
the Company had $22.6 million in outstanding borrowings and EGF VI had $9.0
million in outstanding borrowings.
Subordinated Debt: In February 1996, the Company made its scheduled
$2.9 million debt payment as required by the loan agreement.
In July 1996, the Company prepaid in its entirety the $8.6 million balance of
its subordinated debt and incurred prepayment penalties of approximately $0.7
million.
Securitized Debt: The Company entered into a securitization facility on July 1,
1995, which made available for one year up to $80 million on a nonrecourse basis
that is secured by direct finance and operating leases which generally have
terms of four to five years. Repayment of the facility matches the terms of the
underlying leases. The securitized debt bears interest equivalent to average
U.S. treasury rates plus 1%. As of June 30, 1996, there were $8.2 million in
borrowings outstanding under this facility. In July 1996, the Company extended
this facility on similar terms for up to a one year period.
Interest Rate Swap Contracts: The Company attempts to minimize its interest rate
exposure through the purchase of fixed rate interest rate swap contracts.
(b) Portfolio Activities:
During the six months ended June 30, 1996, the Company generated proceeds of
$7.7 million from the sales of owned transportation equipment. These net
proceeds were placed in a collateral account as required by the senior loan
facility agreement. In March 1996, the lender consented to the Company's request
to release $1.9 million in funds from the cash collateral account relating to
asset sales in 1996 and 1995. The request to release funds and the subsequent
approval were based on the appraised fair market value of the equipment
portfolio and the related collateral coverage ratio.
Over the last four years, the Company has downsized the transportation
equipment portfolio through the sale or disposal of underperforming and
nonperforming assets. The Company will continue to identify underperforming and
nonperforming assets for sale or disposal as necessary.
(c) Syndication Activities:
On May 14, 1996, the Company's Board of Directors approved a decision
to halt the syndication of transportation equipment leasing programs effective
with the close of its then current offering, Professional Lease Management
Income Fund I, on May 13, 1996. The Company will no longer be required to fund
the front-end investment requirement of this no front-end fee structured
program. From May 1995 through May 14, 1996, Fund I raised $100 million in
equity investment from the public. The Company recognized a one-time $1.4
million charge in the second quarter of 1996 mainly related to severance pay
associated with this decision to halt syndication activities.
The Company earned fees from syndication activities related to EGF VII
during the first four months of 1995. Total equity raised since inception for
this partnership was $107.4 million through April 30, 1995, when the program
closed. There will be no more equity raised for this partnership.
(d) Commercial Equipment Leasing Activities:
The Company earns finance lease or operating lease income for leases originated
and retained by its AFG subsidiary. The funding of leases requires the Company
to retain an equity interest in all leases financed through the securitization
facility. Lease originations funded through July 31, 1996, equal $50.6 million,
on an original equipment cost basis. A portion of these leases has been
financed, on an interim basis, through the Company's bridge financing facility.
Some equipment subject to leases ($25.8 million) is sold to an offshore leasing
investment program for which the Company serves as the Manager. Placement fees
and management fees are received for the sale and subsequent management of these
leases. The Company believes this lease origination operation is a growth area
for the future.
Management believes that through debt and equity financing, possible
sales of transportation equipment, and cash flows from operations, the Company
will have sufficient liquidity and capital resources to meet its projected
future operating needs.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 10 of Notes to Consolidated Financial Statements.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
10.1$27,000,000 Floating Rate Senior Secured Notes Agreement, dated as of
June 28, 1996.
10.2 Warehousing Credit Agreement among American Finance Group, Inc. and
First Union National Bank of North Carolina, dated as of May 31, 1996.
(B) Reports on Form 8-K
May 15, 1996 - Announcement regarding PLM International to halt syndication and
expand its trailer leasing business.
June 10, 1996 - Announcement regarding Allen V. Hirsch's termination of
employment and resignation as a member of the Board of Directors of the Company.
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.
PLM INTERNATIONAL, INC.
/s/ David J. Davis
----------------------------
David J. Davis
Vice President and Corporate Controller
Date: August 5, 1996
WAREHOUSING CREDIT AGREEMENT
AMONG
AMERICAN FINANCE GROUP, INC.
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
and Such Other Financial Institutions
as Shall Become LENDERS Hereunder
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent
May 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.............................................1
1.1 Defined Terms...........................................1
1.2 Accounting Terms........................................18
1.3 Other Terms.............................................18
1.4 Schedules and Exhibits..................................18
SECTION 2. AMOUNT AND TERMS OF CREDIT..............................18
2.1 Commitment to Lend......................................18
2.1.1 Revolving Facility............................18
(a) Facility Commitments..................19
(b) Each Loan.............................20
2.1.2 Funding.......................................20
2.1.3 Utilization of the Loans......................20
2.2 Repayment and Prepayment................................20
2.2.1 Repayment.....................................20
2.2.2 Voluntary Prepayment..........................21
2.3 Calculation of Interest; Post-Maturity Interest.........21
2.4 Manner of Payments......................................21
2.5 Payment on Non-Business Days............................21
2.6 Application of Payments.................................22
2.7 Procedure for the Borrowing of Loans....................22
2.7.1 Notice of Borrowing...........................22
2.7.2 Unavailability of LIBOR Loans.................22
2.8 Conversion and Continuation Elections...................22
2.8.1 Election......................................22
2.8.2 Notice of Conversion..........................23
2.8.3 Interest Period...............................23
2.8.4 Unavailability of LIBOR Loans.................23
2.9 Discretion of Lenders as to Manner of Funding...........23
2.10 Distribution of Payments................................24
2.11 Agent's Right to Assume Funds Available for Advances....24
2.12 Agent's Right to Assume Payments Will be Made by Borrower.24
2.13 Capital Requirements....................................25
2.14 Taxes...................................................25
2.14.1 No Deductions.................................25
2.14.2 Miscellaneous Taxes...........................25
2.14.3 Indemnity.....................................25
2.14.4 Required Deductions...........................26
2.14.5 Evidence of Payment...........................26
2.14.6 Foreign Persons...............................26
2.14.7 Income Taxes..................................27
2.14.8 Reimbursement of Costs........................27
2.14.9 Jurisdiction..................................27
2.15 Illegality..............................................28
2.15.1 LIBOR Loans...................................28
2.15.2 Prepayment....................................28
2.15.3 Prime Rate Borrowing..........................28
2.16 Increased Costs.........................................28
2.17 Inability to Determine Rates............................28
2.18 Prepayment of LIBOR Loans...............................29
SECTION 3. CONDITIONS PRECEDENT....................................29
3.1 Effectiveness of this Agreement.........................29
3.1.1 Corporate Documents...........................29
3.1.2 Note..........................................30
3.1.3 Security Documents............................30
3.1.4 Opinion of Counsel............................30
3.1.5 Guaranty......................................30
3.1.6 Growth Fund Agreement.........................30
3.1.7 TEC AcquiSub Amendment........................30
3.1.8 Bringdown Certificate.........................30
3.1.9 Lockbox Agreement.............................30
3.1.10 Fees..........................................30
3.1.11 Insurance.....................................30
3.1.12 Other Documents...............................31
3.2 All Loans...............................................31
3.2.1 Notice of Borrowing...........................31
3.2.2 No Event of Default...........................31
3.2.3 Officer's Certificate.........................31
3.2.4 Officer's Certificate - Leases................31
3.2.5 Insurance.....................................32
3.2.6 Other Instruments.............................32
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES...............32
4.1 Existence and Power.....................................32
4.2 Loan Documents and Note Authorized; Binding Obligations.33
4.3 No Conflict; Legal Compliance...........................33
4.4 Financial Condition.....................................33
4.5 Executive Offices.......................................33
4.6 Litigation..............................................34
4.7 Consents and Approvals..................................34
4.8 Other Agreements........................................34
4.9 ERISA...................................................34
4.10 Labor Matters...........................................34
4.11 Margin Regulations......................................34
4.12 Taxes...................................................35
4.13 Environmental Quality...................................35
4.14 Trademarks, Patents, Copyrights, Franchises and Licenses.36
4.15 Full Disclosure.........................................36
4.16 Other Regulations.......................................36
4.17 Solvency................................................36
4.18 Survival of Representations and Warranties..............36
4.19 Eligible Leases.........................................36
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS........................37
5.1 Records and Reports.....................................37
5.1.1 Quarterly Statements..........................37
5.1.2 Annual Statements.............................38
5.1.3 Borrowing Base Certificate....................38
5.1.4 Compliance Certificate........................38
5.1.5 Reports.......................................38
5.1.6 Insurance Reports.............................38
5.1.7 Certificate of Responsible Officer............38
5.1.8 Employee Benefit Plans........................39
5.1.9 ERISA Notices.................................39
5.1.10 Pension Plans.................................39
5.1.11 SEC Reports...................................39
5.1.12 Tax Returns...................................39
5.1.13 Additional Information........................39
5.2 Existence; Compliance with Law..........................40
5.3 Insurance...............................................40
5.4 Taxes and Other Liabilities.............................40
5.5 Inspection Rights; Assistance...........................41
5.6 Maintenance of Facilities; Modifications; Performance of
Leases............................... 41
5.6.1 Maintenance of Facilities.....................41
5.6.2 Performance of Leases.........................41
5.7 Supplemental Disclosure.................................41
5.8 Further Assurances......................................41
5.9 Lockbox.................................................41
5.10 Environmental Laws......................................42
SECTION 6. BORROWER'S NEGATIVE COVENANTS...........................42
6.1 Liens; Negative Pledges; and Encumbrances...............42
6.2 Limitations on Indebtedness.............................42
6.3 Disposition of Assets...................................43
6.4 Restricted Payments.....................................43
6.5 Restriction on Fundamental Changes......................43
6.6 Transactions with Affiliates............................43
6.7 No Loans to Affiliates..................................43
6.8 No Investment...........................................43
6.9 Maintenance of Business.................................43
6.10 No Subsidiaries.........................................44
6.11 Events of Default.......................................44
6.12 ERISA...................................................44
6.13 No Use of Any Lender's Name.............................44
6.14 Certain Accounting Changes..............................44
SECTION 7. FINANCIAL COVENANT OF BORROWER..........................44
7.1 Minimum Consolidated Tangible Net Worth.................45
SECTION 8. EVENTS OF DEFAULT AND REMEDIES..........................45
8.1 Events of Default.......................................45
8.1.1 Failure to Make Payments......................45
8.1.2 Other Agreements..............................45
8.1.3 Breach of Covenants...........................46
8.1.4 Breach of Representations or Warranties.......46
8.1.5 Failure to Cure...............................46
8.1.6 Insolvency....................................46
8.1.7 Bankruptcy Proceedings........................46
8.1.8 Material Adverse Effect.......................46
8.1.9 Judgments, Writs and Attachments..............46
8.1.10 Legal Obligations...............................47
8.1.11 Growth Fund Agreement...........................47
8.1.12 TEC AcquiSub Agreement........................47
8.1.13 Criminal Proceedings............................47
8.1.14 Action by Governmental Authority................47
8.1.15 Governmental Decrees............................47
8.2 Waiver of Default.......................................48
8.3 Remedies................................................48
8.4 Set-Off.................................................48
8.5 Rights and Remedies Cumulative..........................49
SECTION 9. AGENT...................................................49
9.1 Appointment.............................................49
9.2 Delegation of Duties....................................50
9.3 Exculpatory Provisions..................................50
9.4 Reliance by Agent.......................................50
9.5 Notice of Default.......................................51
9.6 Non-Reliance on Agent and Other Lenders.................51
9.7 Indemnification.........................................51
9.8 Agent in Its Individual Capacity........................52
9.9 Resignation and Appointment of Successor Agent..........52
SECTION 10. EXPENSES AND INDEMNITIES................................52
10.1 Expenses................................................52
10.2 Indemnification.........................................53
10.2.1 General Indemnity.............................53
10.2.2 Environmental Indemnity.......................53
10.2.3 Survival; Defense.............................54
SECTION 11. MISCELLANEOUS...........................................54
11.1 Survival................................................54
11.2 No Waiver by Agent or Lenders...........................54
11.3 Notices.................................................54
11.4 Headings................................................55
11.5 Severability............................................55
11.6 Entire Agreement; Construction; Amendments and Waivers..55
11.7 Reliance by Lenders.....................................56
11.8 Marshalling; Payments Set Aside.........................56
11.9 No Set-Offs by Borrower.................................56
11.10 Binding Effect, Assignment..............................56
11.11 Counterparts............................................57
11.12 Equitable Relief........................................58
11.13 Written Notice of Claims; Claims Bar....................58
11.14 Waiver of Punitive Damages..............................58
11.15 Governing Law...........................................58
11.16 Consent to Jurisdiction.................................58
11.17 Waiver of Jury Trial....................................59
<PAGE>
WAREHOUSING CREDIT AGREEMENT
THIS WAREHOUSING CREDIT AGREEMENT is entered into as of May 31, 1996,
by and between AMERICAN FINANCE GROUP, INC., a Delaware corporation
("Borrower"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("FUNB") and each
other financial institution which may hereafter execute and deliver an
instrument of assignment with respect to this Agreement pursuant to Section
11.10 (any one individually, a "Lender," and collectively, "Lenders"), and FUNB,
as agent on behalf of Lenders (not in its individual capacity, but solely as
agent, "Agent").
RECITALS
A. Borrower desires to obtain from Lenders a revolving credit facility
with an aggregate principal availability up to but not to exceed the maximum
amount set forth on Schedule A for the purpose of financing the purchase of
finance leases for periods up to one hundred eighty (180) days, all as more
particularly described below; and
B. Lenders have agreed to make such credit available to Borrower, but
only upon the terms and subject to the conditions hereinafter set forth and in
reliance on the representations and warranties set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants hereinafter set forth, and intending to be legally bound, the
parties hereto agree as follows:
<PAGE>
. 1. DEFINITIONS
. As used herein, the following terms have the following meanings:
"Acquisition" means any transaction, or any series of related
transactions, by which Borrower directly or indirectly (a) acquires any ongoing
business or all or substantially all of the assets of any Person or any division
thereof, whether through a purchase of assets, merger or otherwise, or (b)
acquires (in one transaction or as the most recent transaction in a series of
transactions) control of at least a majority of the stock of a corporation
having ordinary voting power for the election of directors, or (c) acquires
control of at least a majority of the ownership interests in any partnership,
limited liability company or joint venture.
"Adjustable LIBOR" means, for each Interest Period in respect of LIBOR
Loans, an interest rate per annum (rounded upward to the nearest 1/16th of one
percent (0.0625%)) determined pursuant to the following formula:
Adjusted LIBOR = LIBOR divided by 1.00 - Eurodollar Reserve Percentage
1The Adjusted LIBOR shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Administrative Lease" means any Investment Grade Lease which would
otherwise constitute an Eligible Lease but for the fact that payments thereunder
are more than ninety (90) days delinquent, but no more than one hundred eighty
(180) days delinquent, for reasons determined by Borrower to be unrelated to the
lessee's financial ability to make scheduled lease payments. For purposes of
this Agreement, Administrative Leases shall be considered Eligible Leases.
"Advance" means any Advance made or to be made by any Lender to
Borrower as set forth in Section 2.1.1.
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, through one or more intermediaries, owns or controls,
whether beneficially or as a trustee, guardian or other fiduciary, five percent
(5.0%) or more of the stock having ordinary voting power in the election of
directors of such Person or of the ownership interests in any partnership or
joint venture, (b) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person, or (c) each of
such Person's officers, directors, joint venturers and partners; provided,
however, that in no case shall any Lender or Agent be deemed to be an Affiliate
of Borrower for purposes of this Agreement. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"AFG Master Trust Program" means the program for the sale of Leases
under the Pooling and Servicing Agreement and Indenture of Trust dated as of
July 1, 1995, by and among AFG Credit Corporation, as transferor, Borrower, as
servicer, and Bankers Trust Company, as trustee and collateral trustee on behalf
of the AFG Master Trust.
"Agent" means FUNB solely when acting in its capacity as the Agent
under this Agreement or any of the other Loan Documents, and any successor
Agent.
"Agent's Side Letter" means the side letter agreement dated as of the
date hereof, by and among Borrower, TEC AcquiSub, each of the Growth Funds and
Agent.
"Agreement" means this Warehousing Credit Agreement dated as of May 31,
1996, including all amendments, modifications and supplements hereto, renewals,
extensions or restatements hereof, and all appendices, exhibits and schedules to
any of the foregoing, and shall refer to the Agreement as the same may be in
effect from time to time.
"Applicable Margin" means:
(a) with respect to Prime Rate Loans, zero percent
(0.00%); and
(b) with respect to LIBOR Loans, two percent (2.00%).
"Assignment and Acceptance" has the meaning set forth in Section
11.11.2.
"Bank Affiliate" means a Person engaged primarily in the business of
commercial banking and that is an Affiliate of a Lender or of a Person of which
a Lender is an Affiliate.
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended, as
codified under Title 11 of the United States Code, and the Bankruptcy Rules
promulgated thereunder, as the same may be in effect from time to time.
"Borrowing Base" means, as at and for any date of determination, an
amount not to exceed the lesser of:
<PAGE>
(c) an amount equal to one hundred percent (100.0%)
of the aggregate Discounted Present Value of all Eligible Leases then owned of
record by Borrower, computed (i) with respect to any requested Loan, as of the
requested Funding Date (and shall include the aggregate Discounted Present Value
of all Eligible Leases to be acquired with the proceeds of the requested Loan),
and (ii) with respect to the delivery of any monthly Borrowing Base Certificate
to be furnished pursuant to Section 5.1.3, as of the last day of the calendar
month for which such Borrowing Base Certificate is furnished; provided, however,
that there shall be excluded from the calculation under this clause (a), (x) the
aggregate Discounted Present Value in excess of $2,000,000 of otherwise Eligible
Leases that are not Investment Grade Leases, (y) the aggregate Discounted
Present Value in excess of $1,000,000 of Administrative Leases; or
(d) an amount equal to eighty-five percent (85.0%) of
the aggregate Invoice Price of all Eligible Equipment subject to an Eligible
Lease then owned of record by Borrower computed (i) with respect to any
requested Loan, as of the requested Funding Date (and shall include the item(s)
of Eligible Equipment leased pursuant to all Eligible Leases to be acquired with
the proceeds of the requested Loan), and (ii) with respect to the delivery of
any monthly Borrowing Base Certificate to be furnished pursuant to Section
5.1.3, as of the last day of the calendar month for which such Borrowing Base
Certificate is furnished.
"Borrowing Base Certificate" means a certificate with appropriate
insertions setting forth the components of the Borrowing Base as of the last day
of the month for which such certificate is submitted or as of a requested
Funding Date, as the case may be, which certificate shall be substantially in
the form set forth in Exhibit B and certified by a Responsible Officer of
Borrower.
"Business Day" means any day which is not a Saturday, Sunday or a legal
holiday under the laws of the States of California or North Carolina or is not a
day on which banking institutions located in the States of California or North
Carolina are authorized or permitted by law or other governmental action to
close and, with respect to LIBOR Loans, means any day on which dealings in
foreign currencies and exchanges may be carried on by Agent and Lenders in the
London interbank market.
"Cash Equivalents" means:
<PAGE>
(e) securities issued or unconditionally guaranteed
or insured by the United States Government or any agency or any State thereof
and backed by the full faith and credit of the United States or such State
having maturities of not more than six (6) months from the date of acquisition;
(f) certificates of deposit, time deposits,
Eurodollar time deposits, repurchase agreements, reverse repurchase agreements,
or bankers' acceptances, having in each case a tenor of not more than six (6)
months, issued by any Lender, or by any nationally or state chartered commercial
bank or any branch or agency of a foreign bank licensed to conduct business in
the United States having combined capital and surplus of not less than
$100,000,000 whose short-term securities are rated at least A-1 by Standard &
Poor's Corporation and P-1 by Moody's Investors Service, Inc.; and
(g) commercial paper of an issuer rated at least A-1
by Standard & Poor's Corporation or P-1 by Moody's Investor Service, Inc., and
in either case having a tenor of not more than six (6) months.
"Casualty Loss" means any of the following events with respect to any
item of Equipment: (a) the actual total loss or compromised total loss of such
item of Equipment; (b) such item of Equipment shall become lost, stolen,
destroyed, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever; (c) the seizure of such item of Equipment for a period
exceeding sixty (60) days or the condemnation or confiscation of such item of
Equipment; or (d) such item of Equipment shall be deemed under its Lease to have
suffered a casualty loss as to the entire item of Equipment.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes, levies, assessments, charges or claims, in
each case then due and payable, upon or relating to (a) the Loans hereunder, (b)
Borrower's employees, payroll, income or gross receipts, (c) Borrower's
ownership or use of any of its Properties or assets, or (d) any other aspect of
Borrower's business.
"Closing" means the time at which each of the conditions precedent set
forth in Section 3 to the making of the first Loan hereunder shall have been
duly fulfilled or satisfied by Borrower.
"Closing Date" means the date on which Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, the
Treasury Regulations adopted thereunder and the Treasury Regulations proposed
thereunder (to the extent Requisite Lenders, in their sole discretion,
reasonably determine that such proposed regulations set forth the regulations
that apply in the circumstances), as the same may be in effect from time to
time.
"Collateral" means the Collateral described in the Security Agreement.
"Commitment" means with respect to each Lender the amounts set forth on
Schedule A and "Commitments" means all such amounts collectively, as each may be
amended from time to time upon the execution and delivery of an instrument of
assignment pursuant to Section 11.10, which amendments shall be evidenced on
Schedule 1.1.
"Commitment Termination Date" means May 23, 1997.
"Compliance Certificate" means a certificate signed by a Responsible
Officer of Borrower, substantially in the form set forth in Exhibit C, with such
changes therein as the Required Lenders may from time to time reasonably request
for the purpose of having such certificate disclose the matters certified
therein and the method of computation thereof.
"Consolidated Intangible Assets" means, for any Person, as measured at
any date of determination on a consolidated basis, all intangible assets of such
Person.
"Consolidated Net Worth" means, for any Person, as measured at any date
of determination, the difference between Consolidated Total Assets and
Consolidated Total Liabilities.
"Consolidated Tangible Net Worth" means, for any Person, as measured at
any date of determination, the difference between Consolidated Net Worth and
Consolidated Intangible Assets.
"Consolidated Total Assets" means, for any Person, as measured at any
date of determination on a consolidated basis, all assets of such Person.
"Consolidated Total Liabilities" means, for any Person, as measured at
any date of determination on a consolidated basis, all liabilities of such
Person.
"Contingent Obligation" means, as to any Person, (a) any Guaranty
Obligation of that Person and (b) any direct or indirect obligation or
liability, contingent or otherwise, of that Person, (i) in respect of any letter
of credit or similar instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings, (ii) with
respect to the Indebtedness of any partnership or joint venture of which such
Person is a partner or a joint venturer, (iii) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered, or (iv) in respect of any interest rate protection contract that is
not entered into in connection with a bona fide hedging operation that provides
offsetting benefits to such Person. The amount of any Contingent Obligation
shall (subject, in the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty Obligation") be deemed equal to the maximum reasonably
anticipated liability in respect thereof, and shall, with respect to clause
(b)(iv) of this definition, be marked to market on a current basis.
"Default Rate" has the meaning set forth in Section 2.3.
"Designated Deposit Account" means a demand deposit account maintained
by Borrower with FUNB designated by written notice from Borrower to Agent.
"Discounted Present Value" means, with respect to a Lease, the present
value of the unpaid balance of the total rent for the remaining Lease term,
discounted at the then effective two-year U.S. Treasury Bill rate plus 2.45%.
"Dollars" and the sign "$" means lawful money of the United States of
America.
"EGF" means PLM Equipment Growth Fund, a California limited
partnership.
"EGF II" means PLM Equipment Growth Fund II, a California limited
partnership.
"EGF III" means PLM Equipment Growth Fund III, a California limited
partnership.
"EGF IV" means PLM Equipment Growth Fund IV, a California limited
partnership.
"EGF V" means PLM Equipment Growth Fund V, a California limited
partnership.
"EGF VI" means PLM Equipment Growth Fund VI, a California limited
partnership.
"EGF VII" means PLM Equipment Growth Fund VII, a California limited
partnership.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000, (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United States, and
(c) any Bank Affiliate.
"Eligible Equipment" means any item of Equipment other than commercial
jet aircraft designed to carry more than fifty (50) passengers or self-powered
ocean-going vessels.
"Eligible Lease" means any Lease in respect of which the lessee and
Lease terms (including, without limitation, as to credit quality, rental rate,
maturity and insurance coverage) are acceptable to Agent, in its sole
discretion, and otherwise comply with the following requirements:
<PAGE>
(h) the original term shall be less than or equal to
eighty-four (84) months;
(i) the lessee shall not be a Governmental Authority;
(j) Lease payments shall be due in United States
Dollars;
(k) the lessee shall not be in default under the
Lease (except as permitted by clause (f), below) or subject to bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings for
relief under any bankruptcy or similar insolvency law;
(l) neither the Lease nor the Equipment leased
thereunder shall be subject to any Lien of any nature other than the Lien
granted in favor of Agent on behalf of Lenders under the Security Agreement and
the other Security Documents;
(m) amounts due under the Lease shall be less than
sixty (60) days delinquent at the time of the Funding Date related to the Lease
and remain at all times less than ninety (90) days delinquent, unless such Lease
is an Administrative Lease;
(n) the Lease shall contain a "hell or highwater"
provision which unconditionally obligates the lessee to maintain the Equipment
in good working order, bear all costs of operating such Equipment and make
periodic Lease payments, including, without limitation, taxes, notwithstanding
damage to or destruction of the Equipment leased thereunder or any other event;
(o) the Lease shall not be subject to cancellation by
the lessee and shall not permit early termination unless the lessee pays an
amount not less than the Discounted Present Value of the Lease;
(p) payments under the Lease shall be absolute,
unconditional obligations of the lessee without the right to offset for any
reason;
(q) the Lease shall require the lessee to maintain
the Equipment in good working order and to bear the costs of operating and
maintaining the Equipment, including, without limitation, taxes and insurance;
(r) the Lease shall permit the lessor to accelerate
all Lease payments in the event of the lessee's default;
(s) payments under the Lease shall be made no less
frequently than quarterly;
<PAGE>
( (t) ( the Lease shall provide that in the event of
a Casualty Loss, the lessor shall have the option, at the lessee's sole cost and
expense, to
(i) repair the Equipment to good condition
and working order,
(ii) replace the Equipment with like
Equipment of the same or later model in good repair, condition and working
order, or
(iii) require the lessee to pay to the
lessor the Stipulated Loss Value of the Equipment; and
<PAGE>
(u) the Equipment subject to the Lease shall be
Eligible Equipment. Any Lease which is an Eligible Lease will cease to be an
Eligible Lease at any time it no longer meets all of the foregoing requirements.
"Employee Benefit Plan" means any Pension Plan and any employee welfare
benefit plan, as defined in Section 3(1) of ERISA, that is maintained for the
employees of Borrower or any ERISA Affiliate of Borrower.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from Property,
whether or not owned by Borrower, or (b) any other circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all foreign, federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act and the Emergency Planning and
Community Right-to-Know Act.
"Environmental Permit" has the meaning set forth in Section 4.15.2.
"Equipment" means the assets (including office or other equipment)
leased to a lessee pursuant to a Lease.
"Equipment Growth Funds" means any and all of EGF, EGF II, EGF III, EGF
IV, EGF V, EGF VI, EGF VII and Income Fund I.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, as the same may be in effect from time to time, and any successor
statute.
"ERISA Affiliate" means, as applied to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Code.
"Eurodollar Reserve Percentage" means the maximum reserve percentage
(expressed as a decimal, rounded upward to the nearest 1/100th of one percent
(0.01%)) in effect from time to time (whether or not applicable to any Lender)
under regulations issued by the Federal Reserve Board for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency liabilities having a
term comparable to such Interest Period.
"Event of Default" means any of the events set forth in Section 8.1.
"Facility" means the total Commitments described in Schedule A, as such
Schedule A may be amended from time to time as set forth on Schedule 1.1, for
the revolving credit facility described in Section 2.1.1 to be provided by
Lenders to Borrower according to each Lender's Pro Rata Share.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective Rate". If on
any relevant day the appropriate rate for such previous day is not yet published
in either H.15(519) or the Composite 3:30 p.m. Quotation, the rate for such day
will be the arithmetic mean of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System and any successor thereto.
"Fee Letter" means the fee letter agreement dated as of the date
hereof, by and among Borrower, TEC AcquiSub, each of the Growth Funds and Agent,
on behalf and for the benefit of Lenders, in form and substance satisfactory to
Lenders.
"Form 1001" has the meaning set forth in Section 2.14.6.
"Form 4224" has the meaning set forth in Section 2.14.6.
"FSI" means PLM Financial Services, Inc., a Delaware corporation.
"Funding Date" means with respect to any proposed borrowing hereunder,
the date funds are advanced to Borrower for any Loan.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar function of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means (a) any federal, state, county,
municipal or foreign government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.
"Growth Funds" means any and all of EGF III, EGF IV, EGF V, EGF VI, EGF
VII and Income Fund I.
"Growth Fund Agreement" means the Second Amended and Restated
Warehousing Credit Agreement dated as of the date hereof by and among each of
the Growth Funds, Lenders and Agent, as the same may from time to time be
amended, modified, supplemented, renewed, extended or restated.
"Guarantor" means any Person who executes a written guaranty of the
Obligations, including, without limitation, FSI under the Guaranty.
"Guaranty" means that certain Guaranty dated as of the date hereof,
substantially in the form of Exhibit E hereto, executed by FSI in favor of
Lenders and Agent.
"Guaranty Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease for
capital equipment other than Equipment under an Eligible Lease, dividend, letter
of credit or other obligation (the "primary obligations") of another Person (the
"primary obligor"), including any obligation of that Person, whether or not
contingent, (a) to purchase, repurchase or otherwise acquire such primary
obligations or any property constituting direct or indirect security therefor,
or (b) to advance or provide funds (i) for the payment or discharge of any such
primary obligation, or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, or (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) otherwise
to assure or hold harmless the holder of any such primary obligation against
loss in respect thereof. The amount of any Guaranty Obligation shall be deemed
equal to the stated or determinable amount of the primary obligation in respect
of which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect thereof.
"Hazardous Materials" means all those substances which are regulated
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"Income Fund I" means Professional Lease Management Income Fund I,
L.L.C., a Delaware limited liability company.
"Indebtedness" means, as to any Person, (a) all indebtedness of such
Person for borrowed money, (b) all leases of equipment of such Person as lessee,
(c) to the extent not included in clause (b), above, all capital leases of such
Person as lessee, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than trade or other accounts payable in the
ordinary course of business and not more than ninety (90) days past due), (e)
any obligation of such Person that is secured by a Lien on assets of such
Person, whether or not that Person has assumed such obligation or whether or not
such obligation is non-recourse to the credit of such Person, (f) obligations of
such Person arising under acceptance facilities or under facilities for the
discount of accounts receivable of such Person and (g) any obligation of such
Person to reimburse the issuer of any letter of credit issued for the account of
such Person upon which a draw has been made.
"Indemnified Liability" has the meaning set forth in Section 10.2.1.
"Indemnified Person" has the meaning set forth in Section 10.2.1.
"Interest Differential" means, with respect to any prepayment of a
LIBOR Loan on a day other than an Interest Payment Date on which such LIBOR Loan
matures, the difference between (a) the per annum interest rate payable with
respect to such LIBOR Loan as of the date of the prepayment and (b) the Adjusted
LIBOR on, or as near as practicable to, the date of the prepayment for a LIBOR
Loan commencing on such date and ending on the last day of the applicable
Interest Period. The determination of the Interest Differential by Agent shall
be conclusive in the absence of manifest error.
"Interest Payment Date" means, with respect to any LIBOR Loan, the last
day of each Interest Period applicable to such Loan and, with respect to Prime
Rate Loans, the first Business Day of each calendar month following the Funding
Date of such Prime Rate Loan.
"Interest Period" means, with respect to any LIBOR Loan, the one-month,
two-month or three-month period selected by the Borrower pursuant to Section 2,
in each instance commencing on the applicable Funding Date of the Loan;
provided, however, that any Interest Period which would otherwise end on a day
that is not a Business Day shall end on the next succeeding Business Day except
that in the instance of any LIBOR Loan, if such next succeeding Business Day
falls in the next calendar month, the Interest Period shall end on the next
preceding Business Day.
"Investment" means, when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities of any other Person or by means of loan
or advance (other than advances to employees for moving or travel expenses,
drawing accounts and similar expenditures in the ordinary course of business),
capital contribution, guaranty or other debt or equity participation or
interest, or otherwise, in any other Person, including any partnership and joint
venture interests of such Person in any other Person or in any item of
transportation-related equipment, owned by a Person unaffiliated with Borrower
and on lease to another third party, in which Borrower acquires a right to
share, directly or indirectly.
"Investment Company Act" means the Investment Company Act of 1940, as
amended (15 U.S.C. ss. 80a-1 et seq.), as the same may be in effect from time to
time, or any successor statute thereto.
"Investment Grade Lease" means an Eligible Lease under which the lessee
has a minimum investment grade rating by Moody's Investors Service, Inc. of
Baa-, Standard & Poor's Corporation of BBB- or the equivalent under the Alcar
Debt Rater System.
"Invoice Price" means the sum of the purchase price (including
modifications, as applicable), delivery charges, third party brokerage fees and
other reasonable closing costs, if any (provided that delivery charges, third
party brokerage fees and closing costs shall be included in the computation of
the "Invoice Price" only to the extent that they do not, in the aggregate,
exceed five percent (5.0%) of the total purchase price), and all applicable
taxes, paid by Borrower for or with respect to any item of Equipment.
"IRS" means the Internal Revenue Service and any successor thereto.
"Lease" means each and every item of chattel paper, installment sales
agreement, equipment lease or rental agreement (including progress payment
authorizations) relating to an item of Equipment of which Borrower is the
lessor. The term "Lease" includes (a) all payments to be made thereunder, (b)
all rights of Borrower therein, and (c) any and all amendments, renewals,
extensions or guaranties thereof.
"Lease Sale Program" means any lease sale program established by a
Subsidiary of Borrower, so long as any debt incurred by such Subsidiary is
non-recourse to Borrower, including, without limitation, the AFG Master Trust
Program and the United Bank of Kuwait Program.
"Lending Office" means, with respect to any Lender, the office or
offices of the Lender specified as its lending office opposite its name on the
applicable signature page hereto, or such other office or offices of the Lender
as it may from time to time notify Borrower and Agent.
"LIBOR" means, with respect to any Loan to be made, continued as or
converted into a LIBOR Loan, the London Inter-Bank Offered Rate (determined
solely by Agent), rounded upward to the nearest 1/16th of one percent (0.0625%),
at which Dollar deposits are offered to Agent by major banks in the London
interbank market at or about 11:00 a.m., London time, on the second Business Day
prior to the first day of the related Interest Period with respect to such Loan
in an aggregate amount approximately equal to the amount of such Loan and for a
period of time comparable to the number of days in the applicable Interest
Period. The determination of LIBOR by Agent shall be conclusive in the absence
of manifest error.
"LIBOR Loan" means a Loan that bears interest based on Adjusted LIBOR.
"Lien" means any mortgage, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any Property, including any agreement to grant any of the foregoing,
any conditional sale or other title retention agreement, any lease in the nature
of a security interest, and the filing of or agreement to file or deliver any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
"Loan" has the meaning set forth in Section 2.1.1(a)(i).
"Loan Document" when used in the singular and "Loan Documents" when
used in the plural means any and all of this Agreement, the Note, the Security
Agreement, the Lockbox Agreement and the Guaranty and any and all other
agreements, documents and instruments executed and delivered by or on behalf or
support of Borrower to Agent or any Lender or any of their respective authorized
designees evidencing or otherwise relating to the Advances and the Liens granted
to Agent, on behalf of Lenders, with respect to the Advances, as the same may
from time to time be amended, modified, supplemented or renewed.
"Lockbox" has the meaning set forth in Section 5.9.
"Lockbox Agreement" means the Agreement of even date herewith between
Borrower, FUNB and Agent on behalf of Lenders, substantially in the form of
Exhibit G, relating to the Lockbox.
"Material Adverse Effect" means any set of circumstances or events
which (a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of any Loan Document, (b)
is or could reasonably be expected to be material and adverse to the condition
(financial or otherwise) or business operations of Borrower or Guarantor, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower or Guarantor to perform its Obligations, or (d) materially
impairs or could reasonably be expected to materially impair the ability of
Agent or any Lender to enforce any of its or their legal remedies pursuant to
the Loan Documents.
"Maximum Availability" has the meaning set forth in Section 2.1.1.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, and to which Borrower or any ERISA Affiliate of Borrower is
making, or is obligated to make, contributions or has made, or been obligated to
make, contributions within the preceding five (5) years.
"Note" has the meaning set forth in Section 2.1.1(a)(i), and any and
all replacements, extensions, substitutions and renewals thereof.
"Notice of Borrowing" means a notice given by Borrower to Agent in
accordance with Section 2.7, substantially in the form of Exhibit H, with
appropriate insertions.
"Notice of Conversion/Continuation" means a notice given by Borrower to
Agent in accordance with Section 2.8, substantially in the form of Exhibit I,
with appropriate insertions.
"Obligations" means all loans, advances, liabilities and obligations
for monetary amounts owing by Borrower to any Lender or Agent, whether due or to
become due, matured or unmatured, liquidated or unliquidated, contingent or
non-contingent, and all covenants and duties regarding such amounts, of any kind
or nature, arising under any of the Loan Documents. This term includes, without
limitation, all principal, interest (including interest that accrues after the
commencement of a case or proceeding against Borrower under the Bankruptcy
Code), fees, including, without limitation, any and all prepayment fees,
facility fees, commitment fees, arrangement fees, agent fees and attorneys' fees
and any and all other fees, expenses, costs or other sums chargeable to Borrower
under any of the Loan Documents.
"Opinion of Counsel" means the favorable written legal opinion of
Stephen Peary, general counsel of Borrower and Guarantor substantially in the
form of Exhibit F, together with copies of any officer's certificate or legal
opinion of another counsel or law firm specifically identified and expressly
relied upon by such counsel in its opinion.
"Other Taxes" has the meaning set forth in Section 2.14.2.
"Overadvance" has the meaning set forth in Section 2.1.1(a)(iii).
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Pension Plan" means any employee pension benefit plan, as defined in
Section 3(2) of ERISA, that is maintained for the employees of Borrower or any
ERISA Affiliate of Borrower, other than a Multiemployer Plan.
"Permitted Liens" has the meaning set forth in Section 6.1.
"Permitted Rights of Others" means, as to any Property in which a
Person has an interest, (a) an option or right to acquire a Lien that would be a
Permitted Lien, (b) the reversionary interest of a lessor under a lease of such
Property, and (c) an option or right of the lessee under a lease of such
Property to purchase such Property at fair market value.
"Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or Governmental Authority.
"PLMI" means PLM International, Inc., a Delaware corporation, of which
Borrower is a wholly owned subsidiary.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, will constitute an Event of Default.
"Prepayment Date" has the meaning set forth in Section 2.2.2.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by FUNB as its prime rate. Each change in
the Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by FUNB as its Prime Rate is an index or base rate and shall
not necessarily be its lowest rate charged to FUNB's customers or other banks.
"Prime Rate Loan" means any borrowing which bears interest at a rate
determined with reference to the Prime Rate.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"Pro Rata Share" means, for any Lender, the proportion such Lender's
Commitment with respect to the Facility has to the aggregate of all Commitments
with respect to the Facility.
"Public Utility Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended (15 U.S.C. ss. 79 et seq.) as the same shall be
in effect from time to time, and any successor statute thereto.
"Regulations G, T, U and X" means, collectively, Regulations G, T, U
and X adopted by the Federal Reserve Board (12 C.F.R. Parts 207, 220, 221 and
224, respectively) and any other regulation in substance substituted therefor.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule, regulation, guideline or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property is
subject.
"Requisite Lenders" means any combination of Lenders whose combined Pro
Rata Share (and voting interest with respect thereto) of all amounts outstanding
under this Agreement, or, in the event there are no amounts outstanding, the
Commitments, is greater than sixty-six and two-thirds percent (66_%) of all such
amounts outstanding or the total Commitments, as the case may be.
"Responsible Officer" means any of the President, Executive Vice
President, Chief Financial Officer, Secretary or Corporate Controller of
Borrower having authority to request Loans or perform other duties required
hereunder.
"SEC" means the Securities and Exchange Commission and any successor
thereto.
"Security Agreement" means that certain Security Agreement dated as of
the date hereof, between Borrower and Agent, on behalf of Lenders, substantially
in the form of Exhibit D hereto, including all amendments, modifications and
supplements thereto and all appendices, exhibits and schedules to any of the
foregoing, and shall refer to the Security Agreement as the same may be in
effect from time to time.
"Security Documents" means the Security Agreement, each chattel
mortgage, ship mortgage or similar security agreement, mortgage or other
agreement or document entered into with respect to this Agreement, each UCC-1
financing statement delivered pursuant hereto and any and all other related
documents.
"Solvent" means, as to any Person at any time, that (a) the fair value
of the Property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code; (b) the present fair saleable value of the
Property in an orderly liquidation of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
Property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute unreasonably small capital.
"Stipulated Loss Value" means, with respect to any Lease, the amount
payable by the lessee after a Casualty Loss with respect to the Equipment
subject thereto.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company (other than Equipment Growth
Funds) or other business entity of which an aggregate of fifty percent (50.0%)
or more of the beneficial interest (in the case of a partnership) or fifty
percent (50.0%) or more of the outstanding stock, units, or other voting
interest having ordinary voting power to elect a majority of the directors,
managers or trustees of such Person (irrespective of whether, at the time, the
stock, units or other voting interest of any other class or classes of such
Person shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person.
"Taxes" has the meaning set forth in Section 2.14.1.
"TEC" means PLM Transportation Equipment Corporation, a California
corporation and a wholly-owned Subsidiary of FSI and of which TEC AcquiSub is a
special purpose Subsidiary.
"TEC AcquiSub" means TEC AcquiSub, Inc., a California special purpose
corporation and a wholly-owned Subsidiary of TEC.
"TEC AcquiSub Agreement" means the Amended and Restated Warehousing
Credit Agreement dated as of September 27, 1995, by and among TEC AcquiSub and
Lenders and Agent, as amended by the TEC AcquiSub Amendment, and as the same
from time to time may be further amended, modified, supplemented, renewed,
extended or restated.
"TEC AcquiSub Amendment" means the Amendment No.1 to Amended and
Restated Warehousing Credit Agreement dated as of the date hereof, by and among
TEC AcquiSub and Lenders and Agent.
"Termination Event" means (a) a "reportable event" described in Section
4043 of ERISA and the regulations issued thereunder (other than a reportable
event not subject to the provision for 30-day notice to the PBGC under such
regulations), or (b) the withdrawal of Borrower, FSI or any of FSI's other
Subsidiaries or any of their ERISA Affiliates from a Pension Plan during a plan
year in which any of them was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate a
Pension Plan or the treatment of a Pension Plan amendment as a termination under
Section 4041 of ERISA, or (d) the institution of proceedings to terminate a
Pension Plan by the PBGC, or (e) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of North Carolina; provided, however, in the
event that, by reason of mandatory provisions of law, any and all of the
attachment, perfection or priority of the Lien of Agent, on behalf of Lenders,
in and to the Collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than the State of North Carolina, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
"United Bank of Kuwait Program" means the program for the sale of
Leases under the Master Purchase Agreement dated as of January 30, 1996, by and
between Borrower and AFG/Eireann Limited Partnership II, a limited partnership
organized under the laws of the Commonwealth of Massachusetts.
<PAGE>
. Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial data required to be submitted by this
Agreement shall be prepared and computed, unless otherwise specifically provided
herein, in accordance with GAAP. That certain terms or computations are
explicitly modified by the phrase "in accordance with GAAP" shall in no way be
construed to limit the foregoing.
. All other undefined terms contained in this Agreement shall, unless
the context indicates otherwise, have the meanings provided for by the UCC to
the extent the same are used or defined therein. The words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole, including the Exhibits and Schedules hereto, all of which are by this
reference incorporated into this Agreement, as the same may from time to time be
amended, modified or supplemented, and not to any particular section, subsection
or clause contained in this Agreement. The term "including" shall not be
limiting or exclusive, unless specifically indicated to the contrary. The term
"or" is disjunctive; the term "and" is conjunctive. The term "shall" is
mandatory; the term "may" is permissive. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and plural, and pronouns stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and the neuter.
. Any reference to a "Sections," "Subsection," "Exhibit," or "Schedule"
shall refer to the relevant Section or Subsection of or Exhibit or Schedule to
this Agreement, unless specifically indicated to the contrary.
. 2. AMOUNT AND TERMS OF CREDIT
. 1 Commitment to Lend
. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Borrower set forth herein,
Lenders hereby agree to make Advances (as defined below) of immediately
available funds to Borrower, on a revolving basis, from the Closing Date until
the Business Day immediately preceding the Commitment Termination Date, in the
aggregate principal amount outstanding at any time not to exceed the lesser of
(a) the total Commitments for the Facility less the aggregate principal amount
then outstanding under the Growth Fund Agreement and the TEC AcquiSub Agreement
or (b) the Borrowing Base (such lesser amount being the "Maximum Availability"),
as more fully set forth in this Section 2.1.1.
. (a) Facility Commitments
(i) On the Funding Date requested by Borrower,
after Borrower shall have satisfied all applicable conditions precedent set
forth in Section 3, each Lender shall advance immediately available funds to
Agent (each such advance being an "Advance") evidencing such Lender's Pro Rata
Share of a loan ("Loan"). Agent shall immediately advance such immediately
available funds to Borrower at the Designated Deposit Account (or such other
deposit account at FUNB or such other financial institution as to which Borrower
and Agent shall agree at least three (3) Business Days prior to the requested
Funding Date) on the Funding Date with respect to such Loan. Borrower shall pay
interest accrued on the Loan at the rates and in the manner set forth in Section
2.1.1(b). Subject to the terms and conditions of this Agreement, the unpaid
principal amount of each Loan and all unpaid interest accrued thereon, together
with all other fees, expenses, costs and other sums chargeable to Borrower
incurred in connection therewith shall be due and payable no later than the
Commitment Termination Date. Each Loan advanced hereunder shall be evidenced by
Borrower's revolving promissory note, substantially in the form of Exhibit A
(the "Note").
(ii) The obligation of Lenders to make any Loan
from time to time hereunder shall be limited to the then applicable Maximum
Availability. For the purpose of determining the amount of the Borrowing Base
available at any one time, the amount available shall be the total amount of the
Borrowing Base as set forth in the Borrowing Base Certificate delivered to Agent
pursuant to Section 3.2.1 with respect to each requested Loan. Nothing contained
in this Agreement shall under any circumstance be deemed to require any Lender
to make any Advance under the Facility which, in the aggregate principal amount,
either (1), taking into account such Lender's Pro Rata Share of the principal
amounts outstanding under this Agreement and the making of such Advance, exceeds
the lesser of (A) such Lender's Commitment for the Facility and (B) such
Lender's Pro Rata Share of the Borrowing Base, or (2), taking into account such
Lender's Pro Rata Share of the principal amounts outstanding under this
Agreement, under the Growth Fund Agreement and under the TEC AcquiSub Agreement
and the making of such Advance, exceeds such Lender's Commitment for the
Facility.
(iii) If at any time and for any reason the
aggregate principal amount of the Loan(s) then outstanding shall exceed the
Maximum Availability (the amount of such excess, if any, being an
"Overadvance"), Borrower shall immediately, and in no event more than two (2)
Business Days thereafter, repay the full amount of such Overadvance, together
with all interest accrued thereon.
(iv) Amounts borrowed by Borrower under this
Facility may be repaid and, prior to the Commitment Termination Date and subject
to the applicable terms and conditions precedent to borrowings hereunder,
reborrowed; provided, however, that no Loan shall mature later than the
Commitment Termination Date.
(v) Each request for a Loan hereunder shall
constitute a reaffirmation by Borrower and the Responsible Officer requesting
the same that the representations and warranties contained in this Agreement are
true, correct and complete in all material respects to the same extent as though
made on and as of the date of the request, except to the extent such
representations and warranties specifically relate to an earlier date, in which
event they shall be true, correct and complete in all material respects as of
such earlier date.
. Each Loan made by Lenders hereunder shall, at
Borrower's option in accordance with the terms of this Agreement, be either in
the form of a Prime Rate Loan or a LIBOR Loan. Subject to the terms and
conditions of this Agreement, each Loan shall bear interest on the sum of the
unpaid principal balance thereof outstanding on each day from the date when
made, continued or converted until such Loan shall have been fully repaid at a
rate per annum equal to the Prime Rate, as the same may fluctuate on a daily
basis, or the Adjusted LIBOR, plus, in each case, the Applicable Margin.
Interest on each Loan funded hereunder shall be due and payable in arrears on
each Interest Payment Date, with all accrued but unpaid interest on such Loan
being due and payable on the date such Loan is repaid, whether by prepayment or
at maturity, and with all accrued but unpaid interest being due and payable on
the Commitment Termination Date.
Each Advance made by a Lender as part of a Loan hereunder and all
repayments of principal with respect to such Advance shall be evidenced by
notations made by such Lender on the books and records of such Lender; provided,
however, that the failure by such Lender to make such notations shall not limit
or otherwise affect the obligations of Borrower with respect to the repayments
of principal or payments of interest on any Advance or Loan. The aggregate
unpaid amount of each Advance set forth on the books and records of a Lender
shall be presumptive evidence of such Lender's portion of the principal amount
owing and unpaid under the Note.
. Promptly following the receipt of such documents required
pursuant to Section 3.2.1 and approval of a Loan by the Agent, Agent shall
notify by telephone, telecopier, facsimile or telex each Lender of the principal
amount (including Lender's Pro Rata Share thereof) and Funding Date of the Loan
requested by Borrower. Not later than 1:00 p.m., North Carolina time, on the
Funding Date for any Loan, each Lender shall make an Advance to Agent for the
account of Borrower in the amount of its Pro Rata Share of the Loan being
requested by Borrower. Upon satisfaction of the applicable conditions precedent
set forth in Section 3, all Advances shall be credited in immediately available
funds to the Designated Deposit Account.
. The Loans made under the Facility may be used solely for the
purpose of acquiring the specific Eligible Leases pending the sale of such
Leases under a Lease Sale Program.
. 2 Repayment and Prepayment
. Unless prepaid pursuant to Section 2.1.1.(a)(iii) or Section
2.2.2, the principal amount of each Loan hereunder shall be repaid by Borrower
to Lenders not later than the Commitment Termination Date.
. Subject to Section 2.18, Borrower may in the ordinary course
of Borrower's business, upon at least three (3) Business Days' written notice,
or telephonic notice promptly confirmed in writing to Agent, which notice shall
be irrevocable, prepay any Loan in whole or in part. Such notice of prepayment
shall specify the date and amount of such prepayment and whether such prepayment
is of Prime Rate Loans or LIBOR Loans, or any combination thereof. Such
prepayment of Loans, together with any amounts required pursuant to Section
2.18, shall be in immediately available funds and delivered to Agent not later
than 1:00 p.m., North Carolina time, on the date for prepayment stated in such
notice (the "Prepayment Date"). With respect to any prepayment under this
Section 2.2.2, all interest on the amount prepaid accrued up to but excluding
the date of such prepayment shall be due and payable on the Prepayment Date.
. Interest on the Loans shall be computed on the basis of a 365/366-day
year for all Prime Rate Loans and a 360-day year for all LIBOR Loans and the
actual number of days elapsed in the period during which such interest accrues.
In computing interest on any Loan, the date of the making of such Loan shall be
included and the date of payment shall be excluded. Each change in the interest
rate of the Prime Rate Loans based on changes in the Prime Rate and each change
in the Adjusted LIBOR based on changes in the Eurodollar Reserve Percentage
shall be effective on the effective date of such change and to the extent of
such change. Agent shall give Borrower notice of any such change in the Prime
Rate; provided, however, that any failure by Agent to provide Borrower with
notice hereunder shall not affect Agent's right to make changes in the interest
rate of any Loan based on changes in the Prime Rate. Upon the occurrence and
during the continuation of any Event of Default under this Agreement, Advances
under this Agreement will at the option of Requisite Lenders bear interest at a
rate per annum which is determined by adding two percent (2.0%) to the
Applicable Margin for such Loan (the "Default Rate"). This may result in the
compounding of interest. The imposition of a Default Rate will not constitute a
waiver of any Event of Default.
. All repayments or prepayments of principal and all payments of
interest, fees, costs, expenses and other sums chargeable to Borrower under this
Agreement, the Note or any of the other Loan Documents shall be in lawful money
of the United States of America in immediately available funds and delivered to
Agent, for the account of Lenders, not later than 1:00 p.m., North Carolina
time, on the date due at First Union National Bank of North Carolina, One First
Union Center, 301 South College Street, Charlotte, North Carolina 28288,
Attention: Elisha Sabido or such other place as shall have been designated in
writing by Agent.
. Whenever any payment to be made under this Agreement, the Note or any
of the other Loan Documents shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in the computation of the
payment of interest thereon; provided, however, that no Loan shall have remained
outstanding after the Commitment Termination Date.
. All payments to or for the benefit of Lenders hereunder shall be
applied in the following order: (a) at the direction of Borrower or upon prior
notice given to Borrower by Agent, then due and payable fees, expenses and
costs; (b) then due and payable interest payments and mandatory prepayments; and
(c) then due and payable principal payments and optional prepayments; provided
that if an Event of Default shall have occurred and be continuing, Lenders shall
have the exclusive right to apply any and all such payments against the then due
and owing Obligations of Borrower as Lenders may deem advisable. To the extent
Borrower fails to make payment required hereunder or under any of the other Loan
Documents, each Lender is authorized to, and at its sole option may, make such
payments on behalf of Borrower. To the extent permitted by law, all amounts
advanced by any Lender hereunder or under other provisions of the Loan Documents
shall accrue interest at the same rate as Loans hereunder.
. 7 Procedure for the Borrowing of Loans
. Each borrowing of Loans shall be made upon Borrower's
irrevocable written notice delivered to Agent in the form of a Notice of
Borrowing, executed by a Responsible Person of Borrower, with appropriate
insertions (which Notice of Borrowing must be received by Lender prior to 12:00
noon, Charlotte, North Carolina time, three (3) Business Days prior to the
requested Funding Date) specifying:
(a) the amount of the requested borrowing,
which, if a LIBOR Loan is requested, shall be not less than One Million Dollars
($1,000,000);
(b) the requested Funding Date, which shall
be a Business Day;
(c) whether the borrowing is to be comprised
of one or more LIBOR Loans or Prime Rate Loans; and
(d) the duration of the Interest Period
applicable to any such LIBOR Loans included in such Notice of Borrowing. If the
Notice of Borrowing shall fail to specify the duration of the Interest Period
for any borrowing comprised of LIBOR Loans, such Interest Period shall be one
(1) month.
. Unless Agent shall otherwise consent, during the existence
of an Event of Default or Potential Event of Default, Borrower may not elect to
have a Loan made as a LIBOR Loan.
. 8 Conversion and Continuation Elections
. Borrower may, upon irrevocable written notice to Agent:
(a) elect to convert on any Business Day,
any Prime Rate Loan (or any portion thereof in an amount equal to at least One
Million Dollars ($1,000,000) into a LIBOR Loan; or
(b) elect to convert on any Interest Payment
Date any LIBOR Loan maturing on such Interest Payment Date (or any portion
thereof) into a Prime Rate Loan; or
(c) elect to continue on any Interest
Payment Date any LIBOR Loan maturing on such Interest Payment Date (or any
portion thereof in an amount equal to at least One Million Dollars ($1,000,000);
provided, that if the aggregate amount of LIBOR Loans outstanding to Borrower
shall have been reduced, by payment, prepayment, or conversion of portion
thereof, to be less than $1,000,000, such LIBOR Loans shall automatically
convert into Prime Rate Loans, and on and after such date the right of Borrower
to continue such Loans as, and convert such Loans into, LIBOR Loans shall
terminate.
. Each conversion or continuation of Loans shall be made upon
Borrower's irrevocable written notice delivered to Agent in the form of a Notice
of Conversion/Continuation, executed by a Responsible Person of Borrower, with
appropriate insertions (which Notice of Conversion/Continuation must be received
by Lender prior to 12:00 noon, Charlotte, North Carolina time, at least three
(3) Business Days in advance of the proposed conversion date or continuation
date specifying:
(a) the proposed conversion date or
continuation date;
(b) the aggregate amount of Loans to be
converted or continued;
(c) the nature of the proposed conversion or
continuation; and
(d) the duration of the requested Interest
Period.
. If upon the expiration of any Interest Period applicable to
any LIBOR Loan, Borrower has failed to select a new Interest Period to be
applicable to such LIBOR Loan, Borrower shall be deemed to have elected to
convert such LIBOR Loan into a Prime Rate Loan effective as of the last day of
such current Interest Period.
. Unless Agent shall otherwise consent, during the existence
of an Event of Default or Potential Event of Default, Borrower may not elect to
have a Loan converted into or continued as a LIBOR Loan.
. Notwithstanding any provision of this Agreement to the contrary, each
Lender shall be entitled to fund and maintain its funding of all or any part of
its LIBOR Loans in any manner it elects, it being understood, however, that for
the purposes of this Agreement all determinations hereunder shall be made as if
such Lender actually funded and maintained each LIBOR Loan through the purchase
of deposits having a maturity corresponding to the maturity of the LIBOR Loan
and bearing an interest rate equal to the LIBOR rate (whether or not, in any
instance, Lender shall have granted any participations in such Loan). Each
Lender may, if it so elects, fulfill any commitment to make LIBOR Loans by
causing a foreign branch or affiliate to make or continue such LIBOR Loans;
provided, however, that in such event such Loans shall be deemed for the
purposes of this Agreement to have been made by such Lender, and the obligation
of Borrower to repay such Loans shall nevertheless be to such Lender and shall
be deemed held by such Lender, to the extent of such Loans, for the account of
such branch or affiliate.
. Agent shall immediately distribute to each Lender, at such address as
each Lender shall designate, its respective interest in all repayments and
prepayments of principal and all payments of interest and all fees, expenses and
costs received by Agent on the same day and in the same type of funds as payment
was received. In the event Agent does not distribute such payments on the same
day received, if such payments are received by Agent by 1:00 p.m., North
Carolina time, or if received after such time, on the next succeeding Business
Day, such payment shall accrue interest at the Federal Funds Rate.
. Unless Agent shall have been notified by any Lender no later than the
Business Day prior to the respective Funding Date of a Loan that such Lender
does not intend to make available to Agent an Advance in immediately available
funds equal to such Lender's Pro Rata Share of the total principal amount of
such Loan, Agent may assume that such Lender has made such Advance to Agent on
the date of the Loan and Agent may, in reliance upon such assumption, make
available to Borrower a corresponding Advance. If Agent has made funds available
to Borrower based on such assumption and such Advance is not in fact made to
Agent by such Lender, Agent shall be entitled to recover the corresponding
amount of such Advance on demand from such Lender. If such Lender does not
promptly pay such corresponding amount upon Agent's demand, Agent shall notify
Borrower and Borrower shall repay such Advance to Agent. Agent also shall be
entitled to recover from such Lender interest on such Advance in respect of each
day from the date such Advance was made by Agent to Borrower to the date such
corresponding amount is recovered by Agent at the Federal Funds Rate. Nothing in
this Section 2.11 shall be deemed to relieve any Lender from its obligation to
fulfill its Commitment or to prejudice any rights which Agent or Borrower may
have against such Lender as a result of any default by such Lender under this
Agreement.
. Unless Agent shall have been notified by Borrower prior to the date
on which any payment to be made by Borrower hereunder is due that Borrower does
not intend to remit such payment, Agent may, in its sole discretion, assume that
Borrower has remitted such payment when so due and Agent may, in its sole
discretion and in reliance upon such assumption, make available to each Lender
on such payment date an amount equal to such Lender's Pro Rata Share of such
assumed payment. If Borrower has not in fact remitted such payment to Agent,
each Lender shall forthwith on demand repay to Agent the amount of such assumed
payment made available to such Lender, together with interest thereon in respect
of each date from and including the date such amount was made available by Agent
to such Lender to the date such amount is repaid to Agent at the Federal Funds
Rate.
. If any Lender determines that compliance with any law or regulation
or with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law) has or would have the effect
of reducing the rate of return on the capital of such Lender or any corporation
controlling such Lender as a consequence of, or with reference to, such Lender's
Commitment or its making or maintaining its Pro Rata Share of the Loans below
the rate which such Lender or such other corporation could have achieved but for
such compliance (taking into account the policies of such Lender or corporation
with regard to capital), then Borrower shall from time to time, upon written
demand by such Lender (with a copy of such demand to Agent), immediately pay to
such Lender such additional amounts as shall be sufficient to compensate such
Lender or other corporation for such reduction. A certificate submitted by such
Lender to Borrower, stating that the amounts set forth as payable to such Lender
are true and correct, shall be conclusive and binding for all purposes, absent
manifest error. Each Lender agrees promptly to notify Borrower and Agent of any
circumstances that would cause Borrower to pay additional amounts pursuant to
this section, provided that the failure to give such notice shall not affect
Borrower's obligation to pay any such additional amounts.
. 14 Taxes
. Subject to Subsection 2.14.7, any and all payments by
Borrower to each Lender or Agent under this Agreement shall be made free and
clear of, and without deduction or withholding for, any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and
Agent, such taxes (including income taxes or franchise taxes) as are imposed on
or measured by each Lender's net income (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes").
. In addition, Borrower shall pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Documents (hereinafter referred to as "Other Taxes").
. Subject to Subsection 2.14.7, Borrower shall indemnify and
hold harmless each Lender and Agent for the full amount of Taxes or Other Taxes
(including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender or Agent and any liability
(including penalties, interest, additions to tax and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within
thirty (30) days from the date any Lender or Agent makes written demand
therefor.
. If Borrower shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable hereunder to any
Lender or Agent, then, subject to Subsection 2.14.7:
(a) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14) such Lender or
Agent, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made;
(b) Borrower shall make such deductions, and
(c) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
. Within thirty (30) days after the date of any payment by
Borrower of Taxes or Other Taxes, Borrower shall furnish to Agent the original
or a certified copy of a receipt evidencing payment thereof, or other evidence
of payment satisfactory to Agent.
. Each Lender which is a foreign person (i.e., a person other
than a United States person for United States Federal income tax purposes)
shall:
(a) No later than the date upon which such
Lender becomes a party hereto deliver to Borrower through Agent two (2) accurate
and complete signed originals of IRS Form 4224 or any successor thereto ("Form
4224"), or two accurate and complete signed originals of IRS Form 1001 or any
successor thereto ("Form 1001"), as appropriate, in each case indicating that
such Lender is on the date of delivery thereof entitled to receive payments of
principal, interest and fees under this Agreement free from withholding of
United States Federal income tax;
(b) If at any time such Lender makes any
changes necessitating a new Form 4224 or Form 1001, with reasonable promptness
deliver to Borrower through Agent in replacement for, or in addition to, the
forms previously delivered by it hereunder, two accurate and complete signed
originals of Form 4224; or two accurate and complete signed originals of Form
1001, as appropriate, in each case indicating that the Lender is on the date of
delivery thereof entitled to receive payments of principal, interest and fees
under this Agreement free from withholding of United States Federal income tax;
(c) Before or promptly after the occurrence
of any event (including the passing of time but excluding any event mentioned in
(ii) above) requiring a change in or renewal of the most recent Form 4224 or
Form 1001 previously delivered by such Lender, deliver to Borrower through Agent
two accurate and complete original signed copies of Form 4224 or Form 1001 in
replacement for the forms previously delivered by the Lender; and
(d) Promptly upon Borrower's or Agent's
reasonable request to that effect, deliver to Borrower or Agent (as the case may
be) such other forms or similar documentation as may be required from time to
time by any applicable law, treaty, rule or regulation in order to establish
such Lender's tax status for withholding purposes.
. Borrower will not be required to pay any additional amounts
in respect of United States Federal income tax pursuant to Subsection 2.14.4 to
Lender for the account of any Lending Office of such Lender:
(a) If the obligation to pay such additional
amounts would not have arisen but for a failure by such Lender to comply with
its obligations under Subsection 2.14.6 in respect of such Lending Office;
(b) If such Lender shall have delivered to
Borrower a Form 4224 in respect of such Lending Office pursuant to Subsection
2.14.6 and such Lender shall not at any time be entitled to exemption from
deduction or withholding of United States Federal income tax in respect of
payments by Borrower hereunder for the account of such Lending Office for any
reason other than a change in United States law or regulations or in the
official interpretation of such law or regulations by any Governmental Authority
charged with the interpretation or administration thereof (whether or not having
the force of law) after the date of delivery of such Form 4224; or
(c) If such Lender shall have delivered to
Borrower a Form 1001 in respect of such Lending Office pursuant to Subsection
2.14.6, and such Lender shall not at any time be entitled to exemption from
deduction or withholding of United States Federal income tax in respect of
payments by Borrower hereunder for the account of such Lending Office for any
reason other than a change in United States law or regulations or any applicable
tax treaty or regulations or in the official interpretation of any such law,
treaty or regulations by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) after the date of delivery of such Form 1001.
. If, at any time, Borrower requests any Lender to deliver any
forms or other documentation pursuant to Subsection 2.14.6(d), then Borrower
shall, on demand of such Lender through Agent, reimburse such Lender for any
costs and expenses (including reasonable attorney fees) reasonably incurred by
such Lender in the preparation or delivery of such forms or other documentation.
. If Borrower is required to pay additional amounts to any
Lender or Agent pursuant to Subsection 2.14.4, then such Lender shall use its
reasonable good faith efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by Borrower which may thereafter accrue if
such change in the judgment of such Lender is not otherwise disadvantageous to
such Lender.
. 15 Illegality
. If any Lender shall determine that the introduction of any
Requirement of Law, or any change in any Requirement of Law or in the
interpretation or administration thereof, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for such Lender or its Lending Office to make LIBOR Loans, then, on notice
thereof by Lender to Borrower, the obligation of such Lender to make LIBOR Loans
shall be suspended until such Lender shall have notified Borrower that the
circumstances giving rise to such determination no longer exists.
. If a Lender shall determine that it is unlawful to maintain
any LIBOR Loan, Borrower shall prepay in full all LIBOR Loans of such Lender
then outstanding, together with interest accrued thereon, either on the last day
of the Interest Period thereof if such Lender may lawfully continue to maintain
such LIBOR Loans to such day, or immediately, if such Lender may not lawfully
continue to maintain such LIBOR Loans, together with any amounts required to be
paid in connection therewith pursuant to Section 2.18.
. If Borrower is required to prepay any LIBOR Loan immediately
as provided in Section 2.2.3, then concurrently with such prepayment, Borrower
shall borrow, in the amount of such prepayment, a Prime Rate Loan.
. If any Lender shall determine that, due to either (a) the
introduction of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the LIBOR) in or
in the interpretation of any Requirement of Law or (b) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Lender of agreeing to make or making, funding or maintaining any
LIBOR Loans, then Borrower shall be liable, and shall from time to time, upon
demand therefor by such Lender, pay to such Lender such additional amounts as
are sufficient to compensate such Lender for such increased costs.
. If Agent shall have determined that for any reason adequate and
reasonable means do not exist for ascertaining the LIBOR for any requested
Interest Period with respect to a proposed LIBOR Loan or that the LIBOR
applicable for any requested Interest Period with respect to a proposed LIBOR
Loan does not adequately and fairly reflect the cost to Lenders of funding such
Loan, Agent will forthwith give notice of such determination to Borrower and
each Lender. Thereafter, the obligation of Lenders to make or maintain LIBOR
Loans, as the case may be, hereunder shall be suspended until Agent, upon
instruction from the Requisite Lenders, revokes such notice in writing. Upon
receipt of such notice, Borrower may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted. If Borrower does not revoke such notice,
Lenders shall make, convert or continue the Loans, as proposed by Borrower, in
the amount specified in the applicable notice submitted by Borrower, but such
Loans shall be made, converted or continued as Prime Rate Loans instead of LIBOR
Loans, as the case may be.
. Borrower agrees that in the event that Borrower prepays or is
required to prepay any LIBOR Loan by acceleration or otherwise or fails to draw
down or convert to a LIBOR Loan after giving notice thereof, it shall reimburse
each Lender for its funding losses due to such prepayment or failure to draw.
Borrower and Lenders hereby agree that such funding losses shall consist of the
sum of the discounted monthly differences for each month during the applicable
or requested Interest Period, calculated as follows for each such month:
.1 Principal amount of such LIBOR Loan times (number
of days between the date of prepayment and the last day in the applicable
Interest Period divided by 360), times the applicable Interest Differential,
plus
.2 all actual out-of-pocket expenses (other than
those taken into account in the calculation of the Interest Differential)
incurred by Lenders and Agent (excluding allocation of any expense internal to
Lenders and Agent) and reasonably attributable to such payment, prepayment or
failure to draw down or convert as described above; provided that no prepayment
fee shall be payable (and no credit or rebate shall be required) if the product
of the foregoing formula is not a positive number.
. 3. CONDITIONS PRECEDENT
. The effectiveness of this amended and restated Agreement is subject
to the satisfaction of the following conditions precedent:
. Agent shall have received, in form and substance
satisfactory to Lenders and their respective counsel, the following:
(a) A certified copy of the records of all
actions taken by each of Borrower and Guarantor, including all corporate
resolutions of each of Borrower and Guarantor authorizing or relating to the
execution, delivery and performance of the Loan Documents and the consummation
of the transactions contemplated hereby and thereby;
(b) A certificate of a Responsible Officer
each of Borrower and Guarantor, respectively, stating that (i) the certified
copies of the Certificate of Incorporation and Bylaws of Borrower or Guarantor,
as the case may be, attached as Exhibits A and B to the Certificate of American
Finance Group, Inc. and the Certificate of PLM Financial Services, Inc., as the
case may be, each dated as of even date herewith, are true and accurate, remain
in full force and effect and have not been amended since the date thereof, and
(ii) each of Borrower and Guarantor are in good standing under the laws of the
state of its formation and each other jurisdiction where its ownership of
Property and assets or conduct of its business requires such qualification.
(c) Certificates of incumbency and
signatures with respect to the authorized representatives of Borrower and
Guarantor executing the Loan Documents and requesting Loans; and
(d) Such other documents relating to
Borrower or Guarantor as Lenders reasonably may request.
. Agent shall have received the Note, in form and substance
satisfactory to Lenders, duly executed and delivered by Borrower.
. Agent shall have received the Security Documents in form and
substance satisfactory to Lenders, duly executed and delivered by Borrower.
. Agent shall have received an originally executed legal
opinion of Stephen Peary, general counsel of Borrower and Guarantor, on behalf
of Borrower and Guarantor, in form and substance satisfactory to Lenders, dated
as of the Closing Date and addressed to Lenders, together with copies of any
officer's certificate or legal opinion of other counsel or law firm specifically
identified and expressly relied upon by such counsel.
. Agent shall have received the Guaranty, in form and
substance satisfactory to Lenders, duly executed and delivered by Guarantor.
. Agent shall have received the Growth Fund Agreement, duly
executed and delivered by each of the Growth Funds and all conditions precedent
to the effectiveness of the Growth Fund Agreement shall have been satisfied.
. Agent shall have received the TEC AcquiSub Amendment,
executed and delivered by TEC AcquiSub and all conditions precedent to the
effectiveness of the TEC AcquiSub Amendment shall have been satisfied.
. A certificate or certificates, dated as of the Closing Date,
of the Chief Financial Officer or Corporate Controller of Borrower to the effect
that (i) the representations and warranties of Borrower contained in Section 4
are true, accurate and complete in all material respects as of the Closing Date
as though made on such date and (ii) no Event of Default or Potential Event of
Default under this Agreement has occurred.
. Agent shall have received the Lockbox Agreement in form and
substance satisfactory to Lenders, duly executed by Borrower.
. Agent shall have received the Fee Letter and the Agent's
Side Letter, duly executed by Borrower, Guarantor, each of the Growth Funds and
TEC AcquiSub, and the arrangement fee and the Agent's fee described in the Fee
Letter and the Agent's Side Letter, respectively.
. Agent shall have received the certificates, binders and
other instruments or documents evidencing the insurance coverages and limits
maintained by Borrower in compliance with the insurance requirements of Section
5.3.
. Agent shall have received such other documents, information
and items from Borrower and Guarantor as reasonably requested by Agent.
. Unless waived in writing by Requisite Lenders, the obligation of any
Lender to make any Advance is subject to the satisfaction of the following
further conditions precedent:
. At least three (3) Business Days before each Loan hereunder
with respect to any acquisition of Leases by Borrower, Agent shall have received
(a) a Notice of Borrowing; (b) a Borrowing Base Certificate; and (c) other
information as may be requested by the Agent to confirm that such Lease
satisfies the criteria for Eligible Leases.
. No event shall have occurred and be continuing or would
result from the making of any Loan on such Funding Date which constitutes an
Event of Default or Potential Event of Default under this Agreement or under
(and as separately defined in) the Growth Fund Agreement or under (and as
separately defined in) the TEC AcquiSub Agreement, or which with notice or lapse
of time or both would constitute an Event of Default or Potential Event of
Default under this Agreement or under the Growth Fund Agreement or under the TEC
AcquiSub Agreement.
. Agent shall have received a certificate, dated as of the
Funding Date, of the Chief Financial Officer or Corporate Controller of Borrower
to the effect that all representations and warranties contained in the Loan
Documents are true, accurate and complete in all material respects with the same
effect as though such representations and warranties had been made on and as of
such Funding Date (except to the extent such representations and warranties
specifically relate to an earlier date, in which case they shall be true,
accurate and complete in all material respects as of such earlier date).
. Agent shall have received a certificate, dated as of the
Funding Date of the Chief Financial Officer or Corporate Controller of Borrower
with respect to each Eligible Lease being financed with such Loan to the effect
that:
(a) Borrower has in its possession each of
the following: (i) valid lease documentation, including, without limitation, the
original master lease agreement, or a copy thereof and original lease schedules,
including all amendments, modifications, supplements or addenda made thereto;
(ii) the purchase agreement and assignment of lease, or bill of sale, as
applicable; (iii) invoices with respect to the Equipment subject to the Lease
against which the Loan is to be made, together with evidence of payment to the
vendor or supplier of the Equipment; (iv) the original equipment acceptance
executed by the obligor under the Lease; and (v) certificates of title for the
Equipment subject to the Lease, if applicable;
(b) The Lease constitutes the entire
agreement of the parties thereto and no party thereto shall be bound except in
accordance therewith, and no amendments, modifications, supplements or addenda
have been made to, or schedules attached to, the Lease except as disclosed in
such certificate;
(c) No material default exists under the
Lease as of the date of the Loan; provided that a payment delinquency under the
Lease of less than sixty (60) days shall not constitute a material default;
(d) The Lease constitutes the valid contract
of Borrower and each lessee that is a party to the Lease, and shall at all times
be enforceable against each such lessee in accordance with its terms, subject to
the limitations on enforceability imposed by bankruptcy and creditors' rights
laws and the general principles of equity, and each party thereto has executed
the Lease with full power, authority and capacity to contract;
(e) Upon delivery of the purchase price and
the executed bill of sale or similar instrument of title, a true and correct
copy of which is to be attached, Borrower shall acquire good title to the
Equipment subject to the Eligible Lease against which the Loan is to be made,
free and clear of all Liens and other encumbrances on title (other than
Permitted Liens);
(f) The lessee is responsible for the
payment of all taxes, insurance and similar charges so that all Lease payments
will be net to Borrower; and
(g) No rentals, fees, costs, expenses or
charges paid or payable by any lessee under the Lease violate any known statute,
rule, regulation, court ruling or other regulation or limitation relating to the
maximum fees, costs, expenses or charges permitted in any state in which the
Equipment is located or in which the lessee is located, resides or is domiciled,
or in which the transaction was consummated, or in any other state which has
jurisdiction of the Equipment, Lease or lessee.
. The insurance required to be maintained by Borrower pursuant
to the Loan Documents shall be in full force and effect.
. Agent shall have received such other instruments and
documents as it may have reasonably requested from Borrower in connection with
the Loans to be made on such date.
. 4. BORROWER'S REPRESENTATIONS AND WARRANTIES
Borrower hereby warrants and represents to Agent and each Lender as
follows, and agrees that each of said warranties and representations shall be
deemed to continue until full, complete and indefeasible payment and performance
of the Obligations and shall apply anew to each borrowing hereunder:
. Borrower is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Delaware and is duly qualified and
licensed as a foreign corporation and authorized to do business in each
jurisdiction within the United States where its ownership of Property and assets
or conduct of business requires such qualification. Borrower has the corporate
power and authority, rights and franchises to own its Property and assets and to
carry on its business as now conducted. Borrower has the corporate power and
authority to execute, deliver and perform the terms of the Loan Documents (to
the extent either is a party thereto) and all other instruments and documents
contemplated hereby or thereby.
. The execution, delivery and performance of this Agreement and each of
the other Loan Documents to which Borrower is a party and payment of the Note
have been duly authorized by all necessary and proper corporate action on the
part of Borrower. The Loan Documents constitute legally valid and binding
obligations of Borrower, enforceable against Borrower, to the extent Borrower is
a party thereto, in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights generally.
. The execution, delivery and performance of this Agreement, and each
of the other Loan Documents and the execution, delivery and payment of the Note
will not: (a) contravene any provision of Borrower's certificate of
incorporation or bylaws; (b) contravene, conflict with or violate any applicable
law or regulation, or any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority, which contravention,
conflict or violation, in the aggregate, may have a Material Adverse Effect; or
(c) violate or result in the breach of, or constitute a default under any
indenture or other loan or credit agreement, or other agreement or instrument to
which Borrower is a party or by which Borrower, or its Property and assets may
be bound or affected. Borrower is not in violation or breach of or default under
any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any contract, agreement, lease, license, indenture or
other instrument to which it is a party, the non-compliance with, the violation
or breach of or the default under which would, with reasonable likelihood, have
a Material Adverse Effect.
. Borrower's and Guarantor's audited consolidated financial statements
as of December 31, 1995, and Borrower's and Guarantor's unaudited consolidated
financial statements as of March 31, 1996, copies of which heretofore have been
delivered to Agent by Borrower, and all other financial statements and other
data submitted in writing by Borrower to Agent or any Lender in connection with
the request for credit granted by this Agreement, are true, accurate and
complete in all material respects, and said financial statements and other data
fairly present the consolidated financial condition of Guarantor, as of the date
thereof, and have been prepared in accordance with GAAP, subject to fiscal
year-end audit adjustments. There has been no material adverse change in the
business, properties or assets, operations, prospects, profitability or
financial or other condition of Borrower or Guarantor since December 31, 1995.
. The current location of Borrower's chief executive offices and
principal places of business is set forth on Schedule 4.5.
. Except as set forth in Schedule 4.6, there are no claims, actions,
suits, proceedings or other litigation pending or, to the best of Borrower's
knowledge, after due inquiry, threatened against Borrower, at law or in equity
before any Governmental Authority or, to the best of Borrower's knowledge, after
due inquiry, any investigation by any Governmental Authority of Borrower's
Properties or assets. Borrower has no Contingent Obligations.
. No approval, authorization or consent of any trustee or holder of any
indebtedness or obligation of Borrower or of any other Person under any such
material agreement, contract, lease or license or similar document or instrument
to which Borrower is a party or by which Borrower is bound, is required to be
obtained by Borrower in order to make or consummate the transactions
contemplated under the Loan Documents. Except as set forth in Schedule 4.7, all
consents and approvals of, filings and registrations with, and other actions in
respect of, all Governmental Authorities required to be obtained by Borrower in
order to make or consummate the transactions contemplated under the Loan
Documents have been, or prior to the time when required will have been,
obtained, given, filed or taken and are or will be in full force and effect.
. Borrower is not a party to and is not bound by any agreement,
contract, lease, license or instrument, and is not subject to any restriction
under its respective charter or formation documents, which has, or is likely in
the foreseeable future to have, a Material Adverse Effect. Borrower has not
entered into and, as of the Closing Date does not contemplate entering into, any
material agreement or contract with any Affiliate of Borrower on terms that are
less favorable to Borrower than those that might be obtained at the time from
Persons who are not such Affiliates.
. All Employee Benefit Plans of Borrower are listed on Schedule 4.9.
All Pension Plans of Borrower, including terminated Pension Plans, that are
intended to be qualified under Section 401(a) of the Code have been determined
by the IRS to be qualified. All Pension Plans existing as of the date hereof
continue to be so qualified. No "reportable event" (as defined in Section 4043
of ERISA) has occurred and is continuing with respect to any Pension Plan for
which the thirty-day notice requirement may not be waived other than those of
which the appropriate Governmental Authority has been notified. All Employee
Benefit Plans of the Borrower have been operated in all material respects in
accordance with their terms and applicable law, including ERISA, and no
"prohibited transaction" (as defined in ERISA and the Code) that would result in
any material liability to the Borrower has occurred with respect to any such
Employee Benefit Plan.
. There are no strikes or other labor disputes against or threatened
against Borrower. All payments due from Borrower on account of employee health
and welfare insurance which would, with reasonable likelihood, have a Material
Adverse Effect if not paid have been paid or, if not due, accrued as a liability
on the books of Borrower.
. Borrower does not own any "margin security", as that term is defined
in Regulations G and U of the Federal Reserve Board, and the proceeds of the
Loans under this Agreement will be used only for the purposes contemplated
hereunder. None of the Loans will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security, for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans under this Agreement to be considered a "purpose credit" within the
meaning of Regulations G, T, U and X. Borrower will not take or permit any agent
acting on its behalf to take any action which might cause this Agreement or any
document or instrument delivered pursuant hereto to violate any regulation of
the Federal Reserve Board.
. All federal, state, local and foreign tax returns, reports and
statements required to be filed by Borrower have been filed with the appropriate
Governmental Authorities where failure to file would, with reasonable
likelihood, have a Material Adverse Effect, and all material Charges and other
impositions shown thereon to be due and payable by Borrower have been paid prior
to the date on which any fine, penalty, interest or late charge may be added
thereto for nonpayment thereof, or any such fine, penalty, interest, late charge
or loss has been paid, or Borrower is contesting its liability therefore in good
faith and has fully reserved all such amounts according to GAAP in the financial
statements provided to Agent pursuant to Section 5.1. Borrower has paid when due
and payable all material Charges upon the books of Borrower and no Government
Authority has asserted any Lien against Borrower with respect to unpaid Charges.
Proper and accurate amounts have been withheld by Borrower from its employees
for all periods in full and complete compliance with the tax, social security
and unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
Governmental Authorities.
. 13 Environmental Quality
.1 Except as specifically disclosed in Schedule 4.13,
the on-going operations of Borrower comply in all material respects with all
Environmental Laws.
.2 Except as specifically disclosed in Schedule 4.13,
Borrower has obtained all licenses, permits, authorizations and registrations
required under any Environmental Law ("Environmental Permits") and necessary for
its ordinary course operations, all such Environmental Permits are in good
standing, and Borrower is in compliance with all material terms and conditions
of such Environmental Permits.
.3 Except as specifically disclosed in Schedule 4.13,
neither Borrower nor any of its present Property or operations is subject to any
outstanding written order from or agreement with any Governmental Authority nor
subject to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material.
.4 There are no Hazardous Materials or other
conditions or circumstances existing with respect to any Property, or arising
from operations prior to the Closing Date, of Borrower that would reasonably be
expected to give rise to any Environmental Claim with a potential liability of
Borrower in excess of $100,000 in the aggregate from any such condition,
circumstance or Property.
. Borrower possesses and owns all necessary trademarks, trade names,
copyrights, patents, patent rights, franchises and licenses which are material
to the conduct of its business as now operated.
. As of the Closing Date, no information contained in this Agreement,
the other Loan Documents or any other documents or written materials furnished
by or on behalf of Borrower to Agent or any Lender pursuant to the terms of this
Agreement or any of the other Loan Documents contains any untrue or inaccurate
statement of a material fact or omits to state a material fact necessary to make
the statement contained herein or therein not misleading in light of the
circumstances under which made.
. Borrower is not: (a) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding company," or
an "affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act or (b) an "investment company," or an
"affiliated person" of, or a "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act.
The making of the Loans hereunder and the application of the proceeds and
repayment thereof by Borrower and the performance of the transactions
contemplated by this Agreement and the other Loan Documents will not violate any
provision of the Investment Company Act or the Public Utility Holding Company
Act, or any rule, regulation or order issued by the SEC thereunder.
Borrower is Solvent.vency.
. So long as any of the Commitments shall be available and until
payment and performance in full of the Obligations, the representations and
warranties contained herein shall have a continuing effect as having been true
when made.
. With respect to each Eligible Lease financed by a Loan:
.1 Borrower maintains in its possession each of the
following: (a) valid lease documentation, including, without limitation, the
original master lease agreement, or a copy thereof and original lease schedules,
together with all amendments, modifications, supplements or addenda made, or
schedules attached, thereto; (b) the purchase agreement and assignment of lease,
or bill of sale, as applicable; (c) invoices with respect to Equipment subject
to the Lease, together with evidence of payment to the vendor or supplier of the
Equipment; (d) the original equipment acceptance executed by the obligor under
the Lease; and (e) certificates of title for the Equipment subject to the Lease,
if applicable;
.2 No material default exists under the Lease;
provided that a payment delinquency under the Lease of less than sixty (60) days
shall not constitute a material default;
.3 The Lease constitutes the valid contract of
Borrower and each lessee that is a party to the Lease, and shall at all times be
enforceable against each such lessee in accordance with its terms, subject to
the limitations on enforceability imposed by bankruptcy and creditors' rights
laws and the general principles of equity, and each party thereto has executed
the Lease with full power, authority and capacity to contract;
.4 Borrower has good title to the Equipment subject
to the Eligible Lease, free and clear of all Liens and other encumbrances on
title (other than Permitted Liens);
.5 The lessee is responsible for the payment of all
taxes, insurance and similar charges so that all Lease payments will be net to
Borrower; and
.6 No rentals, fees, costs, expenses or charges paid
or payable by any lessee under the Lease violate any known statute, rule,
regulation, court ruling or other regulation or limitation relating to the
maximum fees, costs, expenses or charges permitted in any state in which the
Equipment is located or in which the lessee is located, resides or is domiciled,
or in which the transaction was consummated, or in any other state which has
jurisdiction of the Equipment, Lease or lessee.
. 5. BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
shall be available and until full, complete and indefeasible payment and
performance of the Obligations, unless Requisite Lenders shall otherwise consent
in writing, Borrower shall do or cause to have done all of the following:
. Maintain a system of accounting administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP, and deliver to Agent or caused to be delivered to Agent:
. As soon as practicable and in any event within sixty (60)
days after the end of each quarterly accounting period of Borrower, Guarantor
and PLMI, except with respect to the final fiscal quarter of each fiscal year,
in which case as soon as practicable and in any event within one hundred twenty
(120) days after the end of such fiscal quarter, consolidating balance sheets of
Guarantor and Borrower as at the end of such period and the related consolidated
statements of income, stockholders' equity and cash flows of PLMI (and, as to
statements of income only, consolidating) for such quarterly accounting period,
setting forth in each case in comparative form the consolidated figures for the
corresponding periods of the previous year, all in reasonable detail and
certified by the Chief Financial Officer or Corporate Controller of Borrower,
Guarantor and PLMI that they (i) are complete and fairly present the financial
condition of Borrower, Guarantor and PLMI as at the dates indicated and the
results of their operations and changes in their cash flow for the periods
indicated, (ii) disclose all liabilities of Borrower, Guarantor and PLMI that
are required to be reflected or reserved against under GAAP, whether liquidated
or unliquidated, fixed or contingent, and (iii) have been prepared in accordance
with GAAP, subject to changes resulting from audit and normal year-end
adjustment;
. As soon as practicable and in any event within one hundred
twenty (120) days after the end of each fiscal year of Guarantor and PLMI,
consolidated and consolidating balance sheets of Guarantor and PLMI and the
related consolidated (and, as to statements of income only for Guarantor and
PLMI, consolidating) statements of income, stockholders' equity and cash flows
of Guarantor and PLMI for such fiscal year, setting forth in each case, in
comparative form the consolidated figures for the previous year, all in
reasonable detail and (i) in the case of such consolidated financial statements,
accompanied by a report thereon of an independent public accountant of
recognized national standing selected by Guarantor and PLMI and satisfactory to
Agent, which report shall contain an opinion which is not qualified in any
manner or which otherwise is satisfactory to Requisite Lenders, in their sole
discretion, and (ii) in the case of such consolidating financial statements,
certified by the Chief Financial Officer or Corporate Controller of Guarantor
and PLMI;
. As soon as practicable, and in any event not later than
fifteen (15) days after the end of each calendar month in which a Loan has been,
or is outstanding, a Borrowing Base Certificate dated as of the last day of such
month, duly executed by a Chief Financial Officer or Corporate Controller of
Borrower, with appropriate insertions;
. As soon as practicable, and in any event not later than
sixty (60) days after the end of each fiscal quarter of Borrower, a Compliance
Certificate dated as of the last day of such fiscal quarter, duly executed by
the Chief Financial Officer or Corporate Controller of Borrower, with
appropriate insertions;
. At Agent's request, promptly upon receipt thereof, copies of
all reports submitted to Borrower, Guarantor or PLMI by independent public
accountants in connection with each annual, interim or special audit of the
financial statements of Borrower, Guarantor or PLMI made by such accountants;
. (i) On the date six (6) months after the Closing Date and
thereafter upon Agent's reasonable request, which request shall not be made more
than once during any calendar year (unless an Event of Default shall have
occurred and be continuing, in which event such limitation shall not apply), a
report from Borrower's insurance broker, in such detail as Agent may reasonably
request, as to the insurance maintained or caused to be maintained by Borrower
pursuant to this Agreement, demonstrating compliance with the requirements
hereof and thereof, and (ii) as soon as possible and in no event later than
fifteen (15) days prior to the expiration date of any insurance policy of
Borrower, a written confirmation that such policy is in process of renewal and
is not terminated or subject to a notice of non-renewal from such Borrower's
insurance broker; provided, however, that Borrower shall give Agent prompt
written notice if changes affecting risk coverage will be made to such policy or
if the policy will be canceled;
. Promptly upon any officer of Borrower obtaining knowledge
(i) of any condition or event which constitutes an Event of Default or Potential
Event of Default under this Agreement, (ii) that any Person has given any notice
to Borrower, Guarantor or PLMI or taken any other action with respect to a
claimed default or event or condition of the type referred to in Section 8.1.2,
(iii) of the institution of any litigation or of the receipt of written notice
from any Governmental Authority as to the commencement of any formal
investigation involving an alleged or asserted liability of Borrower of any
amount and of Guarantor or PLMI equal to or greater than $500,000 or any adverse
judgment in any litigation involving a potential liability of Borrower of any
amount and of Guarantor or PLMI equal to or greater than $500,000, or (iv) of a
material adverse change in the business, operations, properties, assets or
condition (financial or otherwise) of Borrower, Guarantor or PLMI, a certificate
of a Responsible Officer of Borrower, specifying the notice given or action
taken by such Person and the nature of such claimed default, Event of Default,
Potential Event of Default, event or condition and what action Borrower,
Guarantor or PLMI has taken, is taking and proposes to take with respect
thereto;
. Promptly upon becoming aware of the occurrence of any (i)
Termination Event in connection with any Pension Plan or (ii) "prohibited
transaction" (as such term is defined in ERISA and the Code) in connection with
any Employee Benefit Plan or any trust created thereunder, a written notice
specifying the nature thereof, what action Borrower or any of its ERISA
Affiliates has taken, is taking or proposes to take with respect thereto, and,
when known, any action taken or threatened by the IRS or the PBGC with respect
thereto;
. With reasonable promptness, copies of (i) all notices
received by Borrower or any of its ERISA Affiliates of the PBGC's intent to
terminate any Pension Plan or to have a trustee appointed to administer any
Pension Plan, (ii) each Schedule B (Actuarial Information) to the annual report
(Form 5500 Series) filed by Borrower or any of its ERISA Affiliates with the IRS
with respect to each Pension Plan covering employees of Borrower, and (iii) all
notices received by Borrower or any of its ERISA Affiliates from a Multiemployer
Plan sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA;
. Promptly upon receipt by Borrower any challenge by the IRS
to the qualification under Section 401 or 501 of the Code of any Pension Plan;
. As soon as available and in no event later than five (5)
days after the same shall have been filed with the SEC, a copy of each Form 8-K
Current Report, Form 10-K Annual Report, Form 10-Q Quarterly Report, Annual
Report to Shareholders, Proxy Statement and Registration Statement of PLMI;
. Upon the request of Agent, copies of all federal, state,
local and foreign tax returns and reports in respect of income, franchise or
other taxes on or measured by income (excluding sales, use or like taxes) filed
by or on behalf of Borrower, Guarantor and PLMI; and
. Such other information respecting the condition or
operations, financial or otherwise, of Borrower and PLMI and its Subsidiaries as
Agent or any Lender may from time to time reasonably request, and such
information regarding the lessees under Leases as Borrower from time to time
receives or Agent or any Lender reasonably requests.
All financial statements of Borrower, Guarantor and PLMI to be
delivered by Borrower, Guarantor and PLMI to Agent pursuant to this Section 5.1
will be complete and correct and present fairly the financial condition of
Borrower, Guarantor and PLMI as of the date thereof; will disclose all
liabilities of Borrower, Guarantor and PLMI that are required to be reflected or
reserved against under GAAP, whether liquidated or unliquidated, fixed or
contingent; and will have been prepared in accordance with GAAP. All tax returns
submitted to Agent by Borrower, Guarantor and PLMI will, to the best of
Borrower's, Guarantor's and PLMI's knowledge, after due inquiry, be true and
correct. Borrower, Guarantor and PLMI hereby agree that each time either submits
a financial statement or tax return to Agent, Borrower, Guarantor and PLMI shall
be deemed to represent and warrant to Lenders that such financial statement or
tax return complies with all of the preceding requirements set forth in this
paragraph.
. Borrower shall preserve and maintain its existence and all of its
licenses, permits, governmental approvals, rights, privileges and franchises
necessary or desirable in the normal conduct of its business as now conducted or
presently proposed to be conducted (including, without limitation, its
qualification to do business in each jurisdiction in which such qualification is
necessary or desirable in view of its business); to conduct its business in an
orderly and regular manner; and comply with (a) the provisions of its articles
of incorporation and bylaws and (b) the requirements of all applicable laws,
rules, regulations or orders of any Governmental Authority and requirements for
the maintenance of Borrower's insurance, licenses, permits, governmental
approvals, rights, privileges and franchises, except, in either case, to the
extent that the failure to comply therewith would not, in the aggregate, with
reasonable likelihood, have a Material Adverse Effect.
. Borrower shall maintain and keep in force insurance of the types and
in amounts then customarily carried in lines of business similar to that of
Borrower including, but not limited to, property insurance coverage for Borrower
under the existing blanket policies of insurance for PLMI and its Subsidiaries,
and all such policies of property insurance shall carry endorsements naming
Agent as principal loss payee as to any property owned by Borrower; and public
liability insurance, which shall carry endorsements naming Agent and each Lender
as an additional insured, and in each case indicating that (i) any loss
thereunder shall be payable to Agent or Lenders, as the case may be,
notwithstanding any action, inaction or breach of representation or warranty by
Borrower; (ii) there shall be no recourse against any Lender for payment of
premiums or other amounts with respect thereto, and (iii) at least fifteen (15)
days' prior written notice of cancellation, lapse or material change in coverage
shall be given to Agent by the insurer. In addition, Borrower shall require each
lessee under each Eligible Lease that is not an Investment Grade Lease to
maintain and keep in force property insurance covering the Equipment subject to
such Eligible Lease.
. Promptly pay and discharge all material Charges when due and payable,
except (a) such as may be paid thereafter without penalty or (b) such as may be
contested in good faith by appropriate proceedings and for which an adequate
reserve has been established and is maintained in accordance with GAAP. Borrower
shall promptly notify Agent of any material challenge, contest or proceeding
pending by or against Borrower or against PLMI or any of its other Subsidiaries
before any taxing authority.
. At any reasonable time and from time to time during normal business
hours, permit Agent or any Lender or any agent, representative or employee
thereof, to examine and make copies of and abstracts from the financial records
and books of account of Borrower and other documents in the possession or under
the control of Borrower relating to any obligation of Borrower arising under or
contemplated by this Agreement, and to visit the offices of Borrower to discuss
the affairs, finances and accounts of Borrower with any of the officers of
Borrower, and, upon reasonable notice and during normal business hours (unless
an Event of Default or Potential Event of Default shall have occurred and be
continuing, in which event no notice is required) to conduct audits of and
appraise the Equipment. Such audits and appraisals shall be subject to the
lessee's right to quiet enjoyment as set forth in the respective Lease.
. 6 Maintenance of Facilities; Modifications; Performance of Leases
. Borrower shall keep its Properties which are useful or
necessary to Borrower in good repair and condition, normal wear and tear
excepted, and from time to time make necessary repairs thereto, and renewals and
replacements thereof so that Borrower's Properties shall be fully and
efficiently preserved and maintained.
. Borrower shall timely perform in all material respects each
of its covenants and obligations under the Eligible Leases to which it is a
party.
. From time to time as may be necessary (in the event that such
information is not otherwise delivered by Borrower to Agent or Lenders pursuant
to this Agreement), so long as there are Obligations outstanding hereunder,
disclose to Agent in writing any material matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described by Borrower in this Agreement or any of the other Loan
Documents (including all Schedules and Exhibits hereto or thereto) or which is
necessary to correct any information set forth or described by Borrower
hereunder or thereunder or in connection herewith which has been rendered
inaccurate thereby.
. In addition to the obligations and documents which this Agreement
expressly requires Borrower to execute, deliver and perform, Borrower shall
execute, deliver and perform any and all further acts or documents which Agent
or Lenders may reasonably require to effectuate the purposes of this Agreement
or any of the other Loan Documents.
. Borrower shall unless otherwise directed in writing by Agent, cause
all remittances made by the obligor under any Lease to be made to a lock box
(the "Lockbox") maintained with FUNB pursuant to the Lockbox Agreement. Unless
otherwise directed by Agent in writing, all invoices and other instructions
submitted by Borrower to the obligor relating to Lease payments shall designate
the Lockbox as the place to which such payments shall be made.
. Borrower shall conduct its operations and keep and maintain its
Property in material compliance with all Environmental Laws.
. 6. BORROWER'S NEGATIVE COVENANTS
So long as any of the Commitments shall be available and until full,
complete and indefeasible payment and performance of the Obligations, unless
Requisite Lenders shall otherwise consent in writing, Borrower covenants and
agrees as follows:
. Borrower shall not create, incur, assume or suffer to exist any Lien
of any nature upon or with respect to any of their respective Property, whether
now or hereafter owned, leased or acquired, except (collectively, the "Permitted
Liens"):
.1 Liens granted in favor of Agent on behalf of
Lenders under the Security Agreement and the other Security Documents;
.2 Liens for Charges if payment shall not at the time
be required to be made in accordance with Section 5.4;
.3 Liens in respect of pledges, obligations or
deposits (i) under workers' compensation laws, unemployment insurance and other
types of social security or similar legislation, (ii) in connection with surety,
appeal and similar bonds incidental to the conduct of litigation, (iii) in
connection with bid, performance or similar bonds and mechanics', laborers' and
materialmen's and similar statutory Liens not then delinquent, or (iv)
incidental to the conduct of the business of Borrower and which were not
incurred in connection with the borrowing of money or the obtaining of advances
or credit; provided that the Liens permitted by this Section 6.1.3 do not in the
aggregate materially detract from the value of any assets or property of or
materially impair the use thereof in the operation of the business of Borrower;
and provided further that the adverse determination of any claim or liability,
contingent or otherwise, secured by any of such Liens would not either
individually or in the aggregate, with reasonable likelihood, have a Material
Adverse Effect; and
.4 Permitted Rights of Others.
. Borrower shall not create, incur, assume or suffer to exist, any
Indebtedness or Contingent Obligation; provided, however, that this Section 6.2
shall not be deemed to prohibit the Obligations to Lenders and Agent arising
under this Agreement and the other Loan Documents.
. Borrower shall not sell, assign or otherwise dispose of any of its
assets, except for full, fair and reasonable consideration, or enter into any
sale and leaseback agreement covering any of its fixed or capital assets.
. Borrower shall not make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account of any
shares of any class of its capital stock, or purchase, redeem or otherwise
acquire for value any shares of its capital stock or any warrants, rights or
options to acquire such shares, now or hereafter outstanding, if such payment
would cause an Event of Default or a prospective Event of Default to occur.
. Borrower shall not enter into any transaction of Acquisition, merger,
consolidation or recapitalization, directly or indirectly, whether by operation
of law or otherwise, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
part of its business, Property or assets, whether now owned or hereafter
acquired, or acquire by purchase or otherwise all or substantially all the
business, Property or assets of, or stock or other evidence of beneficial
ownership of, any Person, except for the acquisition or resale of Leases and
Equipment in the ordinary course of business and as contemplated by this
Agreement.
. Borrower shall not directly or indirectly, enter into or permit to
exist any transaction (including, without limitation, the purchase, sale, lease
or exchange of any property or the rendering of any service) with any of its
Affiliates on terms that are less favorable to Borrower than those that might be
obtained at the time from Persons who are not such Affiliates.
. Borrower shall not make any loans to any of its Affiliates.
. Borrower shall not make or suffer to exist any Investments, except
for:
(a) Investments in Cash Equivalents;
(b) subject to Section 6.10, Investments in
new Subsidiaries for the purpose of capitalizing Lease Sale Programs; and
(c) extensions of credit in the nature of
accounts receivable or notes receivable arising form the sale or lease of goods
or services in the ordinary course of Borrower's business.
. Borrower shall not engage in any business other than the originating
and purchase of leases of equipment and the operation, remarketing and resale of
such leases and equipment.
. Except for such existing Subsidiaries listed in Schedule 6.10, and
such future Subsidiaries as Borrower may create after providing the Agent with
prior written notice of its intention to do so and so long as any Indebtedness
or other obligations or liabilities of any Subsidiary shall be non-recourse to
Borrower, Borrower shall not create any Subsidiaries.
. Borrower shall not take or omit to take any action, which act or
omission would, with the lapse of time, or otherwise constitute (a) a default,
event of default or Event of Default under any of the Loan Documents or (b) a
default or an event of default under any other material agreement, contract,
lease, license, mortgage, deed of trust or instrument to which it is a party or
by which it or any of its Properties or assets is bound, which default or event
of default would, with reasonable likelihood, have a Material Adverse Effect.
. 12 ERISA
.1 Borrower shall not incur any obligation to
contribute to a Pension Plan required by a collective bargaining agreement or as
a consequence of the acquisition of an ERISA Affiliate, unless (i) Borrower
shall notify Agent in writing that it intends to incur such obligation and (ii)
after Agent's receipt of such notice, Requisite Lenders consent to the
establishment or maintenance of, or Borrower's incurring an obligation to
contribute to, the Pension Plan, which consent may not unreasonably be withheld
but may be subject to such reasonable conditions as Requisite Lenders may
require.
.2 If Borrower or any ERISA Affiliate of Borrower
incurs any obligation to contribute to any Pension Plan, then Borrower shall not
(i) terminate, or permit such ERISA Affiliate to terminate, any Pension Plan so
as to result in any liability that would, with reasonable likelihood, have a
Material Adverse Effect or (ii) make or permit such ERISA Affiliate to make a
complete or partial withdrawal (within the meaning of Section 4201 of ERISA)
from any Multiemployer Plan so as to result in any liability that would, with
reasonable likelihood, have a Material Adverse Effect.
. Borrower shall not use or authorize others to use any Lender's name
or marks in any publication or medium, including, without limitation, any
prospectus, without such Lender's advance written authorization.
. Borrower shall not change its fiscal year end from December 31, nor
make any change in its accounting treatment and reporting practices except as
permitted by GAAP.
. 7. FINANCIAL COVENANT OF BORROWER
Borrower covenants and agrees that, so long as the Commitment hereunder
shall be available, and until full, complete and indefeasible payment and
performance of the Obligations, including, without limitation, all Loans
evidenced by the Note, unless Requisite Lenders shall otherwise consent in
writing, Borrower shall perform the following financial covenant. Borrower
agrees and understands that (except as expressly provided herein) the covenant
under this Section 7 shall be subject to quarterly compliance or compliance as
of the date of any request for a Loan pursuant to Section 3.2.1 (as measured on
the last day of each fiscal quarter of Borrower or as of the date of any request
for a Loan pursuant to Section 3.2.1), and in each case review by Lenders of the
respective fiscal quarter's consolidated financial statements delivered to Agent
by Borrower pursuant to Section 5.1.
. Borrower shall maintain a Consolidated Tangible Net Worth of not less
than $6,000,000.
. 8. EVENTS OF DEFAULT AND REMEDIES
. The occurrence of any one or more of the following shall constitute
an Event of Default:
. Borrower or Guarantor fails to pay any sum due to Lenders or
Agent arising under this Agreement, the Note or any of the other Loan Documents
when and as the same shall become due and payable, whether by acceleration or
otherwise and such failure shall not have been cured to Lenders' satisfaction
within five (5) calendar days; or
. (a) Borrower defaults in the repayment of any principal of
or the payment of any interest on any Indebtedness of Borrower, or breaches any
term of any evidence of such Indebtedness or defaults in any payment in respect
of any Contingent Obligation, (b) Guarantor defaults in the repayment of any
principal of or the payment of any interest on any Indebtedness of Guarantor, or
breaches any term of any evidence of such Indebtedness or defaults in any
payment in respect of any Contingent Obligations (excluding, as to Guarantor,
any Contingent Obligations of Guarantor arising solely as a result of
Guarantor's status as a general partner of any Person), in each case exceeding,
in the aggregate outstanding principal amount, $2,000,000, (c) Borrower or
Guarantor breaches or violates any term or provision of any evidence of such
Indebtedness or Contingent Obligation or of any such loan agreement, mortgage,
indenture, guaranty or other agreement relating thereto if the effect of such
breach is to permit acceleration under the applicable instrument, loan
agreement, mortgage, indenture, guaranty or other agreement and such failure
shall not have been cured within the applicable cure period, or there is an
acceleration under the applicable instrument, loan agreement, mortgage,
indenture, guaranty or other agreement, or (d) PLMI defaults in the repayment of
any principal of or the payment of any interest on any Indebtedness or defaults
in any payment in respect of any Contingent Obligation, in each case exceeding,
in the aggregate outstanding principal amount, $2,000,000, or PLMI breaches or
violates any term or provision of any evidence of such Indebtedness or
Contingent Obligation or of any such loan agreement, mortgage, indenture,
guaranty or other agreement relating thereto with the result that such
Indebtedness or Contingent Obligation becomes or is caused to become then due
and payable in its entirety, whether by acceleration of otherwise; or
. Borrower fails or neglects to perform, keep or observe any
of the covenants contained in Sections 2.1.3, 5.2, 5.3, 5.9, 6.2, 6.3, 6.4, 6.5,
6.6, 6.7, 6.8, 6.9, 6.10 and 7.1 of this Agreement; or
. Any representation or warranty made by or on behalf of
Borrower or Guarantor in this Agreement or any statement or certificate at any
time given in writing pursuant hereto or in connection herewith shall be false,
misleading or incomplete in any material respect when made; or
. Except as provided in Sections 8.1.1 and 8.1.3, Borrower or
Guarantor fails or neglects to perform, keep or observe any covenant or
provision of this Agreement or of any of the other Loan Documents or any other
document or agreement executed by Borrower or Guarantor in connection therewith
and the same has not been cured to Requisite Lenders' satisfaction within thirty
(30) calendar days after Borrower or Guarantor shall become aware thereof,
whether by written notice from Agent or any Lender or otherwise; or
. Borrower, Guarantor, PLMI or any other guarantor of any of
Borrower's or Guarantor's obligations to Lenders shall (i) cease to be Solvent,
(ii) admit in writing its inability to pay its debts as they mature, (iii) make
an assignment for the benefit of creditors, or (iv) apply for or consent to the
appointment of a receiver, liquidator, custodian or trustee for it or for a
substantial part of its Properties or business, or such a receiver, liquidator,
custodian or trustee otherwise shall be appointed and shall not be discharged
within sixty (60) days after such appointment; or
. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower, Guarantor,
PLMI or any other guarantor of any of Borrower's or Guarantor's obligations to
Lenders or any order, judgment or decree shall be entered against Borrower,
Guarantor, PLMI or any other guarantor of any of Borrower's or Guarantor's
obligations to Lenders decreeing its dissolution or division; provided, however,
with respect to an involuntary petition in bankruptcy, such petition shall not
have been dismissed within sixty (60) days after the filing of such petition; or
. There shall have been a change in the assets, liabilities,
financial condition, operations, affairs or prospects of Borrower, Guarantor,
PLMI or any other guarantor of any of Borrower's or Guarantor's obligations to
Lenders which, in the reasonable determination of Requisite Lenders has, either
individually or in the aggregate, had a Material Adverse Effect; or
. There shall be a money judgment, writ or warrant of
attachment or similar process entered or filed against Borrower or Guarantor
which (net of insurance coverage) remains unvacated, unbonded, unstayed or
unpaid or undischarged for more than sixty (60) days (whether or not
consecutive) or in any event later than five (5) calendar days prior to the date
of any proposed sale thereunder, which, together with all such other unvacated,
unbonded, unstayed, unpaid and undischarged judgments or attachments against
Borrower in any amount; against Guarantor exceeds in the aggregate $500,000; or
against any combination of the foregoing Persons exceeds in the aggregate
$1,000,000; or
. Any of the Loan Documents shall for any reason other than
the full, complete and indefeasible satisfaction of the Obligations thereunder
cease to be, or be asserted by Borrower or Guarantor, not to be, a legal, valid
and binding obligation of Borrower or Guarantor, respectively, enforceable
against such Person in accordance with its terms; or
. Without limiting the generality of, and in addition to the
events described in this Section 8.1, the occurrence of any "Event of Default"
as defined under the Growth Fund Agreement or any other loan or security
document related to the Growth Fund Agreement; or
. Without limiting the generality of, and in addition to the
events described in this Section 8.1, the occurrence of any "Event of Default"
as defined in the TEC AcquiSub Agreement or any other loan or security document
related to the TEC AcquiSub Agreement; or
. A criminal proceeding shall have been filed in any court
naming Borrower as a defendant for which forfeiture is a potential penalty under
applicable federal or state law which, in the reasonable determination of
Requisite Lenders, may have a Material Adverse Effect; or
. Any Governmental Authority enters a decree, order or ruling
("Government Action") which will materially and adversely affect Borrower's,
Guarantor's or PLMI's financial condition, operations or ability to perform or
pay such party's obligations arising under this Agreement or any instrument or
agreement executed pursuant to the terms of this Agreement. Borrower or
Guarantor shall have thirty (30) days from the earlier of the date (a) Borrower
or Guarantor, as applicable, first discovers it is the subject of Government
Action or (b) a Lender or any agency gives notice of Government Action to take
such steps as are necessary to obtain relief from the Government Action. For the
purpose of this paragraph, "relief from Government Action" means to discharge or
to obtain a dismissal of or release or relief from (i) any Government Action so
that the affected party or parties do not incur (v) any monetary liability in
the case of Borrower, (x) monetary liability of more than $500,000 in the case
of Guarantor, (y) monetary liability of more than $250,000 in the case of TEC
AcquiSub, (y) monetary liability of more than $1,000,000 in the case of PLMI, or
(z) monetary liability of more than $1,000,000, in the aggregate, in the case of
any combination of the foregoing Persons, or (ii) any disqualification of or
other limitation on the operation of Borrower, Guarantor and PLMI, or any of
them, which in the reasonable determination of the Requisite Lenders may have a
Material Adverse Effect; or
. Any Governmental Authority, including, without limitation,
the SEC, shall enter a decree, order or ruling prohibiting the Equipment Growth
Funds from releasing or paying to Guarantor any funds in the form of management
fees, profits or otherwise which, in the reasonable determination of Requisite
Lenders, may have a Material Adverse Effect.
. An Event of Default may be waived only with the written consent of
Requisite Lenders, or if expressly provided, of all Lenders. Any Event of
Default so waived shall be deemed to have been cured and not to be continuing;
but no such waiver shall be deemed a continuing waiver or shall extend to or
affect any subsequent like default or impair any rights arising therefrom.
. Upon the occurrence and continuance of any Event of Default or
Potential Event of Default, Lenders shall have no further obligation to advance
money or extend credit to or for the benefit of Borrower.
In addition, upon the occurrence and during the continuance of an Event
of Default, Lenders or Agent, on behalf of Lenders, may, at the option of
Requisite Lenders, do any one or more of the following, all of which are hereby
authorized by Borrower:
.1 Declare all or any of the Obligations of Borrower
under this Agreement, the Note, the other Loan Documents and any other
instrument executed by Borrower pursuant to the Loan Documents to be immediately
due and payable, and upon such declaration such obligations so declared due and
payable shall immediately become due and payable; provided that if such Event of
Default is under Section 8.1.6 or 8.1.7, then all of the Obligations shall
become immediately due and payable forthwith without the requirement of any
notice or other action by Lenders or Agent;
.2 Terminate this Agreement as to any future
liability or obligation of Agent or Lenders; and
.3 Exercise in addition to all other rights and
remedies granted hereunder, any and all rights and remedies granted under the
Loan Documents or otherwise available at law or in equity.
. 4 Set-Off
.1 During the continuance of an Event of Default, any
deposits or other sums credited by or due from any Lender to Borrower or
Guarantor (exclusive of deposits in accounts expressly held in the name of third
parties or held in trust for benefit of third parties) may be set-off against
the Obligations and any and all other liabilities, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter arising, of
Borrower or Guarantor to Lenders. Each Lender agrees to notify promptly Borrower
or Guarantor and Agent of any such set-off; provided, that the failure to give
such notice shall not affect the validity of any such set-off.
.2 Each Lender agrees that if it shall, whether by
right of set-off, banker's lien or similar remedy pursuant to Section 8.4.1,
obtain any payment as a result of which the outstanding and unpaid principal
portion of the Commitments of such Lender shall be less than such Lender's Pro
Rata Share of the outstanding and unpaid principal portion of the aggregate of
all Commitments, such Lender receiving such payment shall simultaneously
purchase from each other Lender a participation in the Commitments held by such
Lenders so that the outstanding and unpaid principal amount of the Commitments
and participations in Commitments of such Lender shall be in the same proportion
to the unpaid principal amount of the aggregate of all Commitments then
outstanding as the unpaid principal amount under the Commitments of such Lender
outstanding immediately prior to receipt of such payment was to the unpaid
principal amount of the aggregate of all Commitments outstanding immediately
prior to such Lender's receipt of such payment; provided, however, that if any
such purchase shall be made pursuant to this Section 8.4.2 and the payment
giving rise thereto shall thereafter be recovered, such purchase shall be
rescinded to the extent of such recovery and the purchase price restored without
interest. Borrower expressly consents to the foregoing arrangements and agrees
that any Lender holding a participation in a Commitment deemed to have been so
purchased may exercise any and all rights of set-off, banker's lien or similar
remedy with respect to any and all moneys owing by Borrower to such Lender as
fully as if such Lender held a Commitment in the amount of such participation.
. The enumeration of the rights and remedies of Agent and Lenders set
forth in this Agreement is not intended to be exhaustive and the exercise by
Agent and Lenders of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder or under the Loan
Documents or that may now or hereafter exist in law or in equity or by suit or
otherwise. No delay or failure to take action on the part of Agent and Lenders
in exercising any right, power or privilege shall operate as a waiver hereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any Event of Default
or Potential Event of Default. No course of dealing between Borrower, Agent or
any Lender or their respective agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or any of the Loan Documents
or to constitute a waiver of any Event of Default or Potential Event of Default.
. 9. AGENT
. Each of the Lenders hereby irrevocably designates and appoints First
Union National Bank of North Carolina as the Agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes First Union National Bank of North Carolina as the Agent for such
Lender to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Agent by the terms of this Agreement and such
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the other Loan Documents or otherwise exist against Agent. To the
extent any provision of this Agreement permits action by Agent, Agent shall,
subject to the provisions of this Section 9, take such action if directed in
writing to do so by the Requisite Lenders.
. Agent may execute any of its duties under this Agreement and the
other Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
. Neither Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or the other Loan Documents (except for its or such Person's own
gross negligence or willful misconduct), or (b) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by
Borrower or any officer thereof contained in this Agreement or the other Loan
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by Agent under or in connection with, this
Agreement or the other Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the other Loan
Documents or for any failure of Borrower to perform its obligations hereunder or
thereunder. Agent shall not be under any obligation to any Lender to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement, or to inspect the Properties,
books or records of Borrower.
. Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to Borrower), independent accountants and other experts
selected by Agent. Agent may deem and treat the payee of any promissory note
issued pursuant to this Agreement as the owner thereof for all purposes unless
such promissory note shall have been transferred in accordance with Section
11.10 hereof. Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Requisite Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action except for its own gross
negligence or willful misconduct. Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement in accordance with a
request of the Requisite Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all Lenders.
. Agent shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default or Potential Event of Default hereunder
unless Agent has received notice from a Lender or Borrower referring to this
Agreement, describing such Event of Default or Potential Event of Default and
stating that such notice is a "notice of default". In the event that Agent
receives such a notice, Agent shall promptly give notice thereof to Lenders. The
Agent shall take such action with respect to such Event of Default or Potential
Event of Default as shall be reasonably directed by the Requisite Lenders;
provided that unless and until Agent shall have received such directions, Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Event of Default or Potential Event of Default
as it shall deem advisable in the best interests of Lenders.
. Each Lender expressly acknowledges that neither Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by Agent hereinafter
taken, including any review of the affairs of Borrower, shall be deemed to
constitute any representation or warranty by Agent to any Lender. Each Lender
represents to Agent that it has, independently and without reliance upon Agent
or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of Borrower and Guarantor and made its own decision to make its
Loans hereunder and enter into this Agreement. Each Lender also represents that
it will, independently and without reliance upon Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of Borrower and Guarantor. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by Agent
hereunder or by the other Loan Documents, Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of Borrower and Guarantor which may come into the possession of
Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
. Each Lender agrees to indemnify Agent in its capacity as such (to the
extent not reimbursed by Borrower and without limiting the obligation of
Borrower to do so), ratably according to the respective amounts of their Pro
Rata Share of the Commitments, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against Agent in any way relating to or
arising out of this Agreement or the other Loan Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by Agent under or
in connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's bad faith, gross negligence or willful misconduct.
The agreements in this Section 9.7 shall survive the repayment of the Loans and
all other amounts payable hereunder.
. Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with Borrower or Guarantor as though
Agent were not Agent hereunder. With respect to Advances made or renewed by it,
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not
Agent, and the terms "Lender" and "Lenders" shall include Agent in its
individual capacity.
. Agent may resign at any time by giving thirty (30) days' prior
written notice thereof to Lenders and Borrower; provided, however, that the
retiring Agent shall continue to serve until a successor Agent shall have been
selected and approved pursuant to this Section 9.9. Upon any such notice, Agent
shall have the right to appoint a successor Agent; provided, however, that if
such successor shall not be a signatory to this Agreement, such appointment
shall be subject to the consent of Requisite Lenders. Agent may be replaced by
the Requisite Lenders, with or without cause; provided, however, that any
successor agent shall be subject to Borrower's consent, which consent shall not
be unreasonably withheld. Upon the acceptance of any appointment as an Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 9 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement.
. 10. EXPENSES AND INDEMNITIES
. Borrower agrees to pay promptly on demand, and, in any event, within
thirty (30) days of the invoice date therefor, (a) all costs, expenses, charges
and other disbursements (including, without limitation, all reasonable
attorneys' fees and allocated expenses of outside counsel and in-house legal
staff) incurred by or on behalf of Agent or any Lender in connection with the
preparation of the Loan Documents and all amendments and modifications thereof,
extensions thereto or substitutions therefor, and all costs, expenses, charges
or other disbursements incurred by or on behalf of Agent or any Lender
(including, without limitation all reasonable attorney's fees and allocated
expenses of outside counsel and in-house legal staff) in connection with the
furnishing of opinions of counsel (including, without limitation, any opinions
requested by Lenders as to any legal matters arising hereunder) and of
Borrower's performance of and compliance with all agreements and conditions
contained herein or in any of the other Loan Documents on its part to be
performed or complied with; (b) all other costs, expenses, charges and other
disbursements incurred by or on behalf of Agent or any Lender in connection with
the negotiation, preparation, execution, administration, continuation and
enforcement of the Loan Documents, and the making of the Loans hereunder; (c)
all costs, expenses, charges and other disbursements (including, without
limitation, all reasonable attorney's fees and allocated expenses of outside
counsel and in-house legal staff) incurred by or on behalf of Agent or FUNB in
connection with the assignment or attempted assignment to any other Person of
all or any portion of any Lender's interest under this Agreement pursuant to
Section 11.10; and (d) regardless of the existence of an Event of Default or
Potential Event of Default, all legal, appraisal, audit, accounting, consulting
or other fees, costs, expenses, charges or other disbursements incurred by or on
behalf of Agent or any Lender in connection with any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Lenders, Agent,
Borrower or any other Person) seeking to enforce any Obligations of, or
collecting any payments due from, Borrower under this Agreement and the Note,
all of which amounts shall be deemed to be part of the Obligations.
Notwithstanding anything to the contrary contained in this Section 10.1, so long
as no Event of Default or Potential Event of Default shall have occurred and be
continuing, all appraisals of the Eligible Leases shall be at the expense of
Lenders. If an Event of Default or Potential Event of Default shall have
occurred and be continuing, such appraisals shall be at the expense of Borrower.
. Whether or not the transactions contemplated hereby shall be
consummated:
. Borrower shall pay, indemnify, and hold each Lender, Agent
and each of their respective officers, directors, employees, counsel, agents and
attorneys-in-fact (each, an "Indemnified Person") harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses or disbursements (including
reasonable attorney's fees and the allocated cost of in-house counsel) of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and any other Loan Documents,
or the transactions contemplated hereby and thereby, and with respect to any
investigation, litigation or proceeding (including any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate proceeding) related to this Agreement or the Loans or
the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that Borrower shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities arising from the gross negligence
or willful misconduct of such Indemnified Person.
. .2 Environmental Indemnity
(a) Borrower hereby agrees to indemnify,
defend and hold harmless each Indemnified Person, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses or disbursements (including reasonable attorneys' fees
and the allocated cost of in-house counsel and internal environmental audit or
review services), which may be incurred by or asserted against such Indemnified
Person in connection with or arising out of any pending or threatened
investigation, litigation or proceeding, or any action taken by any Person, with
respect to any Environmental Claim arising out of or related to any Property
owned, leased or operated by Borrower. No action taken by legal counsel chosen
by Agent or any Lender in defending against any such investigation, litigation
or proceeding or requested remedial, removal or response action (except for
actions which constitute fraud, willful misconduct, gross negligence or material
violations of law) shall vitiate or in any way impair Borrower's obligation and
duty hereunder to indemnify and hold harmless Agent and each Lender. Agent and
Lenders agree to use reasonable efforts to cooperate with Borrower respecting
the defense of any matter indemnified hereunder, except insofar as and to the
extent that their respective interests may be adverse to Borrower's, in Agent's
and each Lenders' sole discretion.
(b) In no event shall any site visit,
observation, or testing by Agent or any Lender be deemed a representation or
warranty that Hazardous Materials are or are not present in, on, or under the
site, or that there has been or shall be compliance with any Environmental Law.
Neither Borrower nor any other Person is entitled to rely on any site visit,
observation, or testing by Agent or any Lender. Except as otherwise provided by
law, neither Agent nor any Lender owes any duty of care to protect Borrower or
any other Person against, or to inform Borrower or any other party of, any
Hazardous Materials or any other adverse condition affecting any site or
Property. Neither Agent nor any Lender shall be obligated to disclose to
Borrower or any other Person any report or findings made as a result of, or in
connection with, any site visit, observation, or testing by Agent or any Lender.
. The obligations in this Section 10.2 shall survive payment
of all other Obligations. At the election of any Indemnified Person, Borrower
shall defend such Indemnified Person using legal counsel satisfactory to such
Indemnified Person in such Person's sole discretion, at the sole cost and
expense of Borrower. All amounts owing under this Section 10.2 shall be paid
within thirty (30) days after written demand.
. 11. MISCELLANEOUS
. All covenants, agreements, representations and warranties made herein
shall survive the execution and delivery of the Loan Documents and the making of
the Loans hereunder.
. No failure or delay on the part of Agent or any Lender in the
exercise of any power, right or privilege under this Agreement, the Note or any
of the other Loan Documents shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.
. Except as otherwise provided in this Agreement, any notice or other
communication herein required or permitted to be given shall be in writing and
may be delivered in person, with receipt acknowledged, or sent by telex,
facsimile, telecopy, computer transmission or by United States mail, registered
or certified, return receipt requested, or by Federal Express or other
nationally recognized overnight courier service, postage prepaid and
confirmation of receipt requested, and addressed as set forth on the signature
pages to this Agreement or at such other address as may be substituted by notice
given as herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly given or served on the date on which the same
shall have been personally delivered, with receipt acknowledged, or sent by
telex, facsimile, telecopy or computer transmission (with appropriate
answerback), three (3) Business Days after the same shall have been deposited in
the United States mail or on the next succeeding Business Day if the same has
been sent by Federal Express or other nationally recognized overnight courier
service. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication.
. Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
. Whenever possible, each provision of this Agreement, the Note and
each of the other Loan Documents shall be interpreted in such a manner as to be
valid, legal and enforceable under the applicable law of any jurisdiction.
Without limiting the generality of the foregoing sentence, in case any provision
of this Agreement, the Note or any of the other Loan Documents shall be invalid,
illegal or unenforceable under the applicable law of any jurisdiction, the
validity, legality and enforceability of the remaining provisions, or of such
provision in any other jurisdiction, shall not in any way be affected or
impaired thereby.
. 6 Entire Agreement; Construction; Amendments and Waivers
.1 This Agreement, the Note and each of the other
Loan Documents dated as of the date hereof, taken together, constitute and
contain the entire agreement among Borrower, Lenders and Agent and supersede any
and all prior agreements, negotiations, correspondence, understandings and
communications between the parties, whether written or oral, respecting the
subject matter hereof.
.2 This Agreement is the result of negotiations
between and has been reviewed by each of Borrower, the Lenders executing this
Agreement as of the Closing Date and Agent and their respective counsel;
accordingly, this Agreement shall be deemed to be the product of the parties
hereto, and no ambiguity shall be construed in favor of or against Borrower,
Lenders or Agent. Borrower, Lenders and Agent agree that they intend the literal
words of this Agreement and the other Loan Documents and that no parol evidence
shall be necessary or appropriate to establish Borrower's, any Lender's or
Agent's actual intentions.
.3 No amendment, modification, discharge or waiver of
or consent to any departure by Borrower or Guarantor from, any provision in this
Agreement or any of the other Loan Documents relating to (i) the definition of
"Borrowing Base" or "Requisite Lenders," (ii) any increase of the amount of any
Commitment, (iii) any reduction of principal, interest or fees payable
hereunder, (iv) any postponement of any date fixed for any payment or prepayment
of principal or interest hereunder or (v) this Section 11.6.3 shall be effective
without the written consent of all Lenders. Any and all other amendments,
modifications, discharges or waivers of, or consents to any departures from any
provision of this Agreement or of any of the other Loan Documents shall not be
effective without the written consent of the Requisite Lenders. Any waiver or
consent with respect to any provision of the Loan Documents shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, waiver or consent effected in accordance with this
Section 11.6 shall be binding upon each Lender then party hereto and each
subsequent Lender, and on Borrower.
. All covenants, agreements, representations and warranties made herein
by Borrower shall, notwithstanding any investigation by Lenders or Agent be
deemed to be material to and to have been relied upon by Lenders.
. Lenders shall be under no obligation to marshall any assets in favor
of Borrower or any other person or against or in payment of any or all of the
Obligations. To the extent that Borrower makes a payment or payments to Lenders
or Agent, or Lenders or Agent, on behalf of Lenders, enforce their or its Liens
or exercises their or its rights of set-off, and such payment or payments or the
proceeds of such enforcement or set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under Title 11 of the United
States Code or under any other similar federal or state law, common law or
equitable cause, then to the extent of such recovery the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or set-off had not occurred.
. All sums payable by Borrower pursuant to this Agreement, the Note or
any of the other Loan Documents shall be payable without notice or demand and
shall be payable in United States Dollars without set-off or reduction of any
manner whatsoever.
. 10 Binding Effect, Assignment
.1 This Agreement, the Note and the other Loan
Documents shall be binding upon and shall inure to the benefit of the parties
hereto and thereto and their respective successors and assigns, except that
neither Borrower nor Guarantor may assign its rights hereunder or thereunder or
any interest herein or therein without the prior written consent of each Lender.
Each Lender shall (i) have the right in accordance with this Section 11.10 to
sell and assign to any Eligible Assignee all or any portion of its interest
(provided that any such partial assignment shall not be for a principal amount
of less than Five Million Dollars ($5,000,000)) under this Agreement, the Note
and the other Loan Documents (as separately described and defined in those
agreements), subject to the prior written consent of Borrower, which consent
shall not be unreasonably withheld, and (ii) to grant any participation or other
interest herein or therein, except that each potential participant to which a
Lender intends to grant any rights under Sections 2.9, 2.10, 5.1 or 10.2 shall
be subject to the prior written consent of Borrower, which consent shall not be
unreasonably withheld; provided, however, that no such sale, assignment or
participation grant shall result in requiring registration under the Securities
Act of 1933, as amended, or qualification under any state securities law.
.2 Subject to the limitations of this Section
11.10.2, each Lender may sell and assign, from time to time, all or any portion
of its Pro Rata Share of the Commitments to any of its Affiliates or, with the
approval of Borrower (which approval shall not be unreasonably withheld), to any
other financial institution acceptable to Agent, subject to the assumption by
such assignee of the share of the Commitments so assigned. The assignment to
such Affiliate or other financial institution shall be evidenced by an
instrument of Assignment and Assumption in the form of Exhibit J (the
"Assignment and Acceptance") executed by the assignor Lender (hereinafter from
time to time referred to as the "Assignor Lender") and such Affiliate or other
financial institution (which, upon such assignment shall become a Lender
hereunder (hereinafter from time to time referred to as the "Assignee Lender")).
The Assignment and Assumption need not include any of the economic or financial
terms upon which such Assignee Lender receives the assignment from the Assignor
Lender, and such terms need not be disclosed to or approved by Borrower;
provided only that such terms do not diminish the obligations undertaken by such
Assignee Lender in the Assignment and Assumption or increase the obligations of
Borrower under this Agreement. Upon execution of an Assignment and Assumption,
(i) the definition of "Commitments" in Section 1 hereof and the Pro Rata Shares
set forth therein shall be deemed to be amended to reflect each Lender's share
of the Commitments, giving effect to the assignment and (ii) the Assignee Lender
shall, from the effective date of the Assignment and Assumption, be subject to
all of the obligations, and entitled to all of the rights, of a Lender
hereunder, except as may be expressly provided to the contrary in the Assignment
and Assumption. To the extent the obligations hereunder of the Assignor Lender
are assumed by the Assignee Lender, the Assignor Lender shall be relieved of
such obligations. Upon the assignment of any interest by any Assignor Lender
pursuant to this Section 11.10.2, such Assignor Lender agrees to supplement
Schedule 1.1 to show the date of such assignment, the Assignor Lender, the
Assignee Lender, the Assignee Lender's address for notice purposes and the
amount of the Commitments so assigned.
.3 Subject to the limitations of this Section
11.10.3, any Lender may also grant, from time to time, participation interests
in the interests of such Lender under this Agreement, the Note and the other
Loan Documents to any other financial institution without notice to, or approval
of, Borrower. The grant of such a participation interest shall be on such terms
as the granting Lender determines are appropriate, provided only that (i) the
holder of such participation interest shall not have any of the rights of a
Lender under this Agreement except, if the participation agreement expressly
provides, rights under Sections 2.9, 2.10, 5.1 and 10.2, and (ii) the consent of
the holder of such a participation interest shall not be required for amendments
or waivers of provisions of the Loan Documents other than, if the participation
agreement expressly provides, those which (A) increase the monetary amount of
any Commitment, (B) decrease any fee or any other monetary amount payable to
Lenders, or (C) extend the date upon which any monetary amount is payable to
Lenders.
. This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts, and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute
but one and the same instrument. Each such agreement shall become effective upon
the execution of a counterpart hereof or thereof by each of the parties hereto
or thereto, delivery of each such counterpart to Agent.
. Borrower recognize that, in the event Borrower fails to perform,
observe or discharge any of its obligations or liabilities under this Agreement,
the Note or any of the other Loan Agreements, any remedy at law may prove to be
inadequate relief to Lenders or Agent; therefore, Borrower agrees that Lenders
or Agent, if Lenders or Agents so request, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
. BORROWER HEREBY AGREES THAT IT SHALL GIVE PROMPT WRITTEN NOTICE OF
ANY CLAIM OR CAUSE OF ACTION IT BELIEVES IT HAS, OR MAY SEEK TO ASSERT OR ALLEGE
AGAINST ANY LENDER OR AGENT, WHETHER SUCH CLAIM IS BASED IN LAW OR EQUITY,
ARISING UNDER OR RELATED TO THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN
DOCUMENTS OR TO THE LOANS CONTEMPLATED HEREBY OR THEREBY OR ANY ACT OR OMISSION
TO ACT BY ANY LENDER OR AGENT WITH RESPECT HERETO OR THERETO, AND THAT IF IT
SHALL FAIL TO GIVE SUCH PROMPT NOTICE TO AGENT WITH REGARD TO ANY SUCH CLAIM OR
CAUSE OF ACTION, IT SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED
FROM BRINGING OR ASSERTING SUCH CLAIM OR CAUSE OF ACTION IN ANY SUIT, ACTION OR
PROCEEDING IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY.
. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT,
BORROWER HEREBY AGREES THAT IT SHALL NOT SEEK FROM LENDERS OR AGENT, UNDER ANY
THEORY OF LIABILITY, INCLUDING, WITHOUT LIMITATION, ANY THEORY IN TORTS, ANY
PUNITIVE DAMAGES.
. Except as otherwise expressly provided in any of the Loan Documents,
in all respects, including all matters of construction, validity and
performance, this Agreement and the Obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of North Carolina applicable to contracts made and performed in such
state, without regard to the principles thereof regarding conflict of laws, and
any applicable laws of the United States of America.
. Borrower hereby irrevocably consents to the personal jurisdiction of
the state and federal courts located in Mecklenburg County, North Carolina, in
any action, claim or other proceeding arising out of any dispute in connection
with this Agreement, the Note and the other Loan Documents, any rights or
obligations hereunder or thereunder, or the performance of such rights and
obligations. Borrower hereby irrevocably consents to the service of a summons
and complaint and other process in any action, claim or proceeding brought by
Agent or any Lender in connection with this Agreement or the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations, on behalf of itself or its Property, in the
manner specified in Section 11.3. Nothing in this Section 11.16 shall affect the
right of the Agent or any Lender to serve legal process in any other manner
permitted by applicable law or affect the right of Agent or any Lender to bring
any action or proceeding against Borrower or its properties in the courts of any
other jurisdictions.
. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND GUARANTOR, BY
EXECUTION HEREOF, AND THE AGENT AND EACH LENDER, BY ACCEPTANCE HEREOF,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS AGREEMENT, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED
TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE AGENT
AND EACH LENDER TO ACCEPT THIS AGREEMENT AND THE NOTES EXECUTED AND DELIVERED BY
BORROWER PURSUANT TO THIS AGREEMENT.
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORROWER AMERICAN FINANCE GROUP, INC.
By:
J. Michael Allgood
Chief Financial Officer
Notice to be sent to:
AMERICAN FINANCE GROUP, INC.
One Market
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: J. Michael Allgood,
Chief Financial Officer
Telephone: (415) 905-7228
Facsimile: (415) 905-7256
AGENT FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:
Bill A. Shirley
Vice President
Notice to be sent to:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: (704) 383-5164
Facsimile: (704) 374-4092
LENDERS FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:
Bill A. Shirley
Vice President
Notice to be sent to:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: (704) 383-5164
Facsimile: (704) 374-4092
<PAGE>
SCHEDULE A
(COMMITMENTS)
<TABLE>
<CAPTION>
Pro
Rate
Lender Commitment Share
<S> <C> <C>
First Union National Bank $35,000,000 100.0%
of North Carolina
</TABLE>
<PAGE>
ix.
INDEX OF EXHIBITS
Exhibit A Form of Revolving Promissory Note
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Compliance Certificate
Exhibit D Form of Security Agreement
Exhibit E Form of Guaranty
Exhibit F Form of Opinion of Counsel (Stephen Peary)
Exhibit G Form of Lockbox Agreement
Exhibit H Form of Notice of Borrowing
Exhibit I Form of Notice of Conversion/Continuation
Exhibit J Form of Assignment and Acceptance
<PAGE>
INDEX OF SCHEDULES
Schedule A Commitments
Schedule 1.1 Amendments to Schedule A
Schedule 4.5 Executive Offices and Principal Places of Business
Schedule 4.6 Litigation
Schedule 4.7 Material Contracts
Schedule 4.8 Consent and Approvals
Schedule 4.10 Employment and Labor Agreements
Schedule 4.11 Employee Benefit Plans
Schedule 4.15 Environmental Disclosures
Schedule 6.1 Existing Liens
Schedule 6.11 Subsidiaries
NOTE AGREEMENT
Dated as of June 28, 1996
Up to $27,000,000 Floating Rate Senior Secured Notes
Due August 15, 2002
<PAGE>
TABLE OF CONTENTS
Section Heading Page
1. DESCRIPTION OF NOTES AND DEFINITIONS 1
1.1 Description of Notes 1
1.2 Terms; Security 2
1.3 Definitions 2
2. ISSUANCE AND DELIVERY OF NOTES 22
2.1 Registration of Notes 22
2.2 Exchange of Notes 23
2.3 Transfer of Notes 23
2.4 General Rules 23
2.5 Valid Obligations 23
2.6 Replacement of Notes 24
3. PAYMENT OF NOTES, COLLATERAL AND LOCK BOX ACCOUNT 24
3.1 Direct Payment 24
3.2 Issuance Taxes 25
3.3 Scheduled Principal Payments 25
3.4 Mandatory Prepayment due to Borrowing Base 25
3.5 Optional Prepayments 26
3.6 Notice of Prepayments 26
3.7 Allocation of Prepayments 27
3.8 Payments by Collateral Agent 27
3.9 Collateral 27
3.10 Lock Box Account 27
4. EVIDENCE OF ACTS OF NOTE HOLDERS 30
4.1 Execution by Note Holders or Agents30
4.2 Future Holders Bound 30
5. DEFAULTS - REMEDIES 30
5.1 Events of Default 30
5.2 Notice of Claimed Default 34
5.3 Acceleration of Maturities34
5.4 Rescission of Acceleration34
5.5 Default Remedies 35
5.6 Other Enforcement Rights 36
5.7 Effect of Sale, etc. 37
5.8 Delay or Omission; No Waiver 37
5.9 Restoration of Rights and Remedies 37
5.10 Application of Sale Proceeds 38
5.11 Cumulative Remedies 38
5.12 Limitations on Suits 39
5.13 Suits for Principal and Interest 39
5.14 Undertakings 39
5.15 Waiver by the Company 40
6. CERTAIN COVENANTS 40
6.1 Existence, Etc 40
6.2 Insurance 40
6.3 Taxes, Claims for Labor and Materials, Compliance with Laws 41
6.4 Maintenance, Etc. 41
6.5 Agreement to Deliver Security Documents 41
6.6 Payment of Notes and Maintenance of Office 42
6.7 Nature of Business 42
6.8 Use of Proceeds 42
6.9 Minimum Consolidated Total Net Worth 43
6.10 Minimum Consolidated EBITDA to Debt Service Ratio 43
6.11 Maximum Consolidated Debt to Total Net Worth Ratio 43
6.12 Restricted Payments 43
6.13 Limitation on Liens 43
6.14 Mergers, Consolidations, Etc. 44
6.15 Transactions with Affiliates 45
6.16 Repurchase of Notes 45
6.17 Investments 45
6.18 Notice of Default and Event of Default; Notice of Certain
Other Matters 46
6.19 Reports and Rights of Inspection 47
6.20 Amendment of Note Documents 51
6.21 Subordinated Debt 51
6.22 Distributions by Subsidiaries 51
6.23 Further Assurances 51
6.24 Independence of Covenants 52
6.25 Borrowing Base Certificates 52
6.26 Appraisals 53
7. COLLATERAL AGENT 54
8. AMENDMENTS, WAIVERS AND CONSENTS 55
8.1 Consent Required 55
8.2 Effect of Amendment or Waiver 55
9. MISCELLANEOUS; EXPENSES, TAXES AND INDEMNIFICATION 55
9.1 Successors and Assigns 55
9.2 Partial Invalidity 56
9.3 Communications 56
9.4 Governing Law 57
9.5 Maximum Interest Payable 57
9.6 Counterparts 58
9.7 Headings, Etc. 58
9.8 Amendments 58
9.9 Benefits of Agreement Restricted to Parties and Note
Holders 58
9.10 Waiver of Notice 58
9.11 Holidays 58
9.12 Accounting Principles 58
9.13 Directly or Indirectly 58
9.14 Exhibits 59
9.15 Satisfaction and Discharge of Agreement 59
9.16 Conflicts with Security Documents 59
9.17 Expenses of Transaction 59
9.18 Taxes, Etc. 60
9.19 Indemnification 60
9.20 Entire Agreement 61
<PAGE>
Attachments to Note Agreement:
Schedules
Schedule 1 - Names, Addresses and Payment Instructions of
Initial Purchasers
Schedule 2 - Independent Appraiser
Exhibits
Exhibit A - Form of Note
Exhibit B - Form of Borrowing Base Certificate
Exhibit C - [Intentionally Deleted]
Exhibit D - Compliance Certificate
Exhibit E - Form of Data Processing Contract
Exhibit F - Form of Management Contract
Exhibit G - Form of Security Agreement (Master)
Exhibit H - Security Agreement (Lock Box)
Exhibit I - Form of Management Fee Release Request
Exhibit J - Form of Quarterly Release Request
Exhibit K - Form of Equipment Services Contract
<PAGE>
- 1 -
NOTE AGREEMENT
Up to $27,000,000 Floating Rate Senior Secured Notes
Due August 15, 2002
Dated as of
June 28, 1996
To the purchasers named in
Schedule I attached hereto
Ladies and Gentlemen:
The undersigned, PLM International, Inc., a Delaware corporation (the
"Company" or a "Guarantor"), PLM Financial Services, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company ("FSI"), and PLM
Investment Management, Inc., a California corporation and a wholly owned
subsidiary of FSI ("IMI"), agree with SunAmerica Life Insurance Company and each
affiliate of SunAmerica designated by SunAmerica to purchase any Notes and their
respective successors and assigns and subsequent holders of the Notes (the
Purchasers of the first issuance of Notes being identified on Schedule 1
hereto), as follows:
.ECTION 1. DESCRIPTION OF NOTES AND DEFINITIONS
. (a) FSI and IMI have authorized the issuance and sale, pursuant to the Note
Purchase Agreement (the "Note Purchase Agreement") of even date herewith between
the Purchasers, FSI and IMI and joined in by the Company, of up to U.S.
$27,000,000 aggregate principal amount of floating rate Senior Secured Notes to
be dated the date of issue, to bear interest on the outstanding principal amount
thereof from time to time at a floating rate equal to the Applicable Libor Rate
plus 240 basis points, subject to increase as set forth in the immediately
following sentence (individually, a "Note" and collectively the "Notes,"
including any notes issued in substitution or replacement of any thereof). If at
any time any Note is rated NAIC 3 or lower by the NAIC, then effective upon the
date of such downgrading and continuing until such Note is rated higher than
NAIC 3, such rate as it applies to all such Notes that have been downgraded will
be automatically increased by 100 basis points. Interest on the Notes will be
payable quarterly on November 15, February 15, May 15, and August 15 in each
year (commencing November 15, 1996) and principal of the Notes will be payable
quarterly on November 15, February 15, May 15, and August 15 in each year
(commencing November 15, 1997), and at maturity. The Notes will bear interest on
overdue payments at the rate specified therein and will be substantially in the
form attached hereto as Exhibit A. Interest on the Notes shall be computed on
the basis of a 360-day year of twelve 30-day months.
(b) Subject to the other terms and conditions of this
Agreement and the terms and conditions of the Note Purchase Agreement, the
Purchasers have agreed to purchase Notes having an aggregate original principal
amount not to exceed U.S. $27,000,000. The original principal amount of each
Note shall be determined pursuant to its related Note Purchase Agreement.
(c) The Obligations of each Issuer shall constitute and be
full recourse obligations of such Issuer.
. The Notes are subject to the terms of, and secured pursuant to, this Agreement
and the other Note Documents. In addition, payment and performance of all Notes
and other Obligations of all Issuers are guaranteed by the Company, and payment
and performance of the Notes issued by IMI and the other Obligations of IMI are
guaranteed by FSI.
. For purposes of this Agreement, the following terms shall have the respective
meanings set forth below or provided for in the section or other part of this
Agreement referred to following such term (such definitions to be equally
applicable to both the singular and plural forms of the terms defined):
"Acceptable Security Interest" in any property shall mean a
Lien granted pursuant to a Note Document (i) which exists in favor of
the Collateral Agent for the benefit of itself and the other Persons to
be secured thereby as specified in the Note Document creating such
Lien, (ii) which is first priority, (iii) which secures only the
obligations secured thereby as specified in the Note Document creating
such Lien, and (iv) which is perfected and is enforceable by the
Collateral Agent, for the benefit of itself and the other Persons
specified in the Note Document creating such Lien, against the grantor
thereof.
"Affiliate" means, with respect to any Person, (i) each other
Person that, directly or indirectly, through one or more
intermediaries, owns or controls, whether beneficially or as a trustee,
guardian or other fiduciary, ten percent (10%) or more of the Stock
having ordinary voting power in the election of directors of such
Person, (ii) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person and
(iii) each of such Person's officers, directors, joint venturers and
partners; provided, (A) except with respect to Section 6.15, this
definition of "Affiliate" shall be deemed to exclude the Growth Funds
and (B) in no case shall the Collateral Agent or any Note holder be
deemed to be an Affiliate of the Company for purposes of this
Agreement. For the purpose of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Note Agreement, as it may from
time to time be supplemented or amended in accordance with the
provisions hereof.
"Applicable Libor Rate" shall mean commencing on the first
issuance of Notes and on each November 15, February 15, May 15, and
August 15 thereafter until the Notes are paid in full, the Libor Rate
for such day (provided, if any such day is not a day on which The Wall
Street Journal is published, then the immediately preceding day on
which The Wall Street Journal is published shall be used. "Libor Rate"
shall mean as of any Quarterly Payment Date the rate quoted in the
"Money Rates" section of the Wall Street Journal on such date as the
three-month London Interbank Offered Rate or, if the Wall Street
Journal ceases to publish the three-month London Interbank Offered
Rate, the rate quoted on the Bloomberg Screen on such date as the
three-month London Interbank Offered Rate. The Libor Rate determined on
each Quarterly Payment Date shall apply from such date through the date
immediately preceding the next Quarterly Payment Date.
"Appraisal Report" shall mean the most recent Company
Appraisal report or Independent Appraisal report required under this
Agreement.
"Appraised Value" shall mean, with respect to an item of
Equipment, the expected proceeds realizable upon a "non-distressed"
arm's-length sale of the Equipment, less commissions, fees and other
costs and expenses normally incurred (other than by the acquiror) in
connection with the sale of such Equipment, assuming that such
Equipment is sold within 180 days. If any item of Equipment is subject
to a Lease wherein the Lessee is granted the option to purchase such
Equipment for a predetermined amount (as compared to a purchase price
being equal to the fair market value of such item of Equipment as of
the expiration of the lease), the Appraised Value of such item of
Equipment shall not be greater than such predetermined amount. In no
event shall the value of the rental payments under any lease of
Equipment be included in determining the Appraised Value of such item
of Equipment.
"Approved Subordinated Debt" means at any time the Debt
outstanding under the Principal Mutual Note Agreement and all Debt of
the Company subordinate in right of payment to the Obligations of the
Company to the Note holders and the Collateral Agent, the terms of
which Debt shall have been approved in writing by the Required
Noteholders, and any refinancing of the same in a principal amount not
greater than the outstanding principal amount of such Debt as of the
date of refinancing.
"Bank of America" shall mean Bank of America National Trust
and Savings Association.
"Borrowing Base Certificate" means a certificate, duly
executed by a Responsible Officer of the Company, FSI and IMI,
appropriately completed and in substantially in the form of Exhibit B.
"Business Day" shall mean any day other than (i) a Saturday or
Sunday or (ii) a day on which banks in the Cities of San Francisco, New
York or Texas are authorized or required to be closed.
"Capital Lease" means a lease with respect to which the lessee
is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person
and a Capital Lease, the amount of the obligation of such Person as the
lessee under such Capital Lease which would, in accordance with GAAP,
appear as a liability on a balance sheet of such Person.
"Capitalized Cost" shall mean, with respect to any item or
items of equipment, the aggregate capitalized cost for such equipment,
net of any acquisition or other fees paid or payable by the Company to
FSI or any Affiliate of the Company or FSI.
"Casualty Loss" means any of the following events with respect
to any item of Equipment: (i) the actual total loss or constructive
total loss of such item of Equipment, (ii) such item of Equipment shall
become lost, stolen, destroyed, damaged beyond repair or permanently
rendered unfit for use for any reason whatsoever, (iii) the seizure or
deprivation of use of such item of Equipment for a period and under
circumstances resulting in a claim for loss under applicable insurance
policies for a period exceeding 180 days or the condemnation or
confiscation of such item of Equipment or (iv) such item of equipment
shall be deemed under its Lease to have suffered a casualty loss as to
the entire item of Equipment.
"Charges" means all federal, state, county, city, municipal,
local, foreign or other governmental taxes, levies, assessments,
charges or claims, in each case then due and payable, upon or relating
to (i) any Property of the Company or any Issuer, (ii) the Notes, (iii)
the Company or any Issuer's employees, payroll, income or gross
receipts, (iv) the Company or any Issuer's ownership or use of any of
its respective Property, or (v) any other aspect of the Company or any
Issuer's business.
"Closing" means the consummation of the first purchase of
Notes under the Note Purchase Agreements.
"Closing Date" means June 28, 1996.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, any successor statute, and the rules and regulations issued
thereunder as from time to time in effect.
"Collateral" shall mean any and all Property in which the
Collateral Agent has been granted a security interest or other interest
to secure the Obligations pursuant to the Note Documents.
"Collateral Agent" shall mean SunAmerica and any successor
thereto as Collateral Agent under the Collateral Agency Agreement.
"Collateral Agency Agreement" shall mean a Collateral Agency
Agreement between SunAmerica, as the initial Collateral Agent, or its
designated successor and the holders of the Notes.
"Company" shall have the meaning set forth in the first
sentence.
"Company Appraisal" with respect to any item or items of
Equipment means any report showing Appraised Value prepared by the
Company.
"Company Appraised Value" with respect to any item or items of
Equipment means the Appraised Value determined by the Company in good
faith and otherwise in a manner consistent with the terms of this
Agreement.
"Compliance Certificate" means a certificate signed by the
Company's Chief Financial Officer or Corporate Controller,
substantially in the form set forth in Exhibit D, with such changes
therein as the Collateral Agent may from time to time reasonably
request for the purpose of having such certificate disclose the matters
certified therein and the method of computation thereof.
"Consolidated Debt" means, as of any date of determination,
the total of all Debt of the Company and its Subsidiaries outstanding
on such date (excluding Non-Recourse Secured Debt), after eliminating
(in accordance with GAAP) all offsetting debits and credits between the
Company and its Subsidiaries and all other items required to be
eliminated in the course of the preparation of consolidated financial
statements of the Company and its Subsidiaries.
"Consolidated Debt to Total Net Worth Ratio" means, as
measured as of the last day of each fiscal quarter of the Company, the
ratio of (a) Consolidated Debt to (b) Consolidated Total Net Worth.
"Consolidated EBITDA to Debt Service Ratio" means, as measured
quarterly as of the last day of each fiscal quarter of the Company the
ratio, expressed as a percentage, of (a) EBITDA for the preceding four
fiscal quarters including the fiscal quarter in which such measurement
date occurs to (b) Debt Service for the four fiscal quarter period next
following such measurement date (and for purposes of this definition,
the interest rate will be deemed to be the Debt Rate in effect as of
such measurement date).
"Consolidated Net Income" means, with reference to any period,
the net income (or loss) of the Company and its Subsidiaries for such
period (taken as a cumulative whole), as determined in accordance with
GAAP, after eliminating all offsetting debits and credits between the
Company and its Subsidiaries and all other items required to be
eliminated in the course of the preparation of consolidated financial
statements of the Company and its Subsidiaries in accordance with GAAP,
provided that there shall be excluded:
(a) the income (or loss) of any Person accrued prior to the
date it becomes a Subsidiary or is merged into or consolidated with the
Company or a Subsidiary, and the income (or loss) of any Person,
substantially all of the assets of which have been acquired in any
manner, realized by such other Person prior to the date of acquisition,
(b) the income (or loss) of any Person (other than a
Subsidiary) in which the Company or any Subsidiary has an ownership
interest, except to the extent that any such income has been actually
received by the Company or such Subsidiary in the form of cash
dividends or similar cash distributions,
(c) the undistributed earnings of any Subsidiary to the extent
that the declaration or payment of dividends or similar distributions
by such Subsidiary is not at the time permitted by the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Subsidiary,
(d) any restoration to income of any contingency reserve
(other than Equipment maintenance reserves), except to the extent that
provision for such reserve was made out of income accrued during such
period,
(e) any gains resulting from any write-up of any assets (but
not any loss resulting from any write-down of any assets),
(f) any net gain from the collection of the proceeds of life
insurance policies,
(g) any gain arising from the acquisition of any Security, or
the extinguishment, under GAAP, of any Debt, of the Company or any
Subsidiary,
(h) any net income or gain (but not any net loss) during such
period from (i) any change in accounting principles in accordance with
GAAP, (ii) any prior period adjustments resulting from any change in
accounting principles in accordance with GAAP, (iii) any extraordinary
items, or (iv) any discounted operations or the disposition thereof,
(i) any deferred credit representing the excess of equity in
any Subsidiary at the date of acquisition over the cost of the
investment in such Subsidiary,
(j) in the case of a successor to the Company by consolidation
or merger or as a transferee of its assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer
of assets, and
(k) any portion of such net income that cannot be freely
converted into United States Dollars.
"Consolidated Total Net Worth" means, on a consolidated basis,
as at any date of determination, the difference between Consolidated
Total Assets and Consolidated Total Liabilities.
"Consolidated Total Assets" means, on a consolidated basis, as
at any date of determination, all assets of the Company and its
Subsidiaries, as determined and computed in accordance with GAAP,
excluding the investment by the Company or any Subsidiary in any and
all Joint Ventures nonconsolidated with the Company and which have
Indebtedness for Borrowed Money, as determined and computed in
accordance with GAAP (except to the extent the exclusion of Joint
Venture assets pursuant to the preceding provisions is inconsistent
with GAAP) and excluding any assets securing Non-Recourse Secured Debt
to the extent of the lesser of such Non-Recourse Secured Debt and the
Appraised Value of such assets. Solely for purposes of this definition,
the phrase "an item of Equipment" as used in the definition of
"Appraised Value" shall be deemed to refer to "an asset".
"Consolidated Total Liabilities" means, on a consolidated
basis, as at any date of determination, the sum of (i) Consolidated
Debt and (ii) all other liabilities of the Company and its Subsidiaries
(as to this clause (ii), as determined and computed in accordance with
GAAP), but excluding all Non-Recourse Secured Debt.
"Data Processing Contracts" means collectively those certain
agreements each entitled "Data Processing Servicing Agreement" entered
into by each Growth Fund and IMI, a representative copy of the same
being attached as Exhibit E.
"Debt," with respect to any Person shall mean, without
duplication (and in particular, the Debt of any Subsidiary of the
Company which is covered by a Guaranty given by the Company or any
other Subsidiary of the Company shall only be counted once for
determining the total Debt of the Company and its Subsidiaries on a
consolidated basis):
(i) its liabilities for borrowed money;
(ii) liabilities secured by any Lien existing on
Property or assets owned by such Person (regardless of whether
such liabilities have been assumed);
(iii) its capitalized lease obligations;
(iv) any other obligations (other than deferred taxes
and other noncurrent liabilities) that are required by GAAP to
be shown as liabilities on its balance sheet; and
(v) all obligations of such Person guaranteeing or in
effect guaranteeing any debt, dividend, distribution, or other
obligation of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without
limitation, obligations incurred through an agreement,
contingent or otherwise, by such Person (A) to purchase such
debt or obligation or any property or assets constituting
security therefor; (B) to advance or supply funds to purchase
or pay such debt or obligation or to maintain working capital
or other balance sheet condition or any income statement
condition or otherwise to advance or make available funds for
the purchase or payment of such debt or obligation; (C) to
lease property or to purchase securities or other property or
services primarily for the purpose of assuring the owner of
such debt or obligation of the ability of the primary obligor
to make payment of the debt or obligation; or (D) otherwise to
assure the owner of such debt or obligation of the primary
obligor against loss in respect thereof (any of the foregoing
in this paragraph (v), a "Guaranty").
"Debt Rate" means, as of any date of determination, the
interest rate then in effect in respect of the Notes pursuant to
Section 1.1 of this Agreement.
"Debt Service" means, with respect to any period, the sum of
the following: (a) Interest Charges for such period and (b) all
payments of principal in respect of Debt of the Company and its
Subsidiaries (including the principal component of any payments in
respect of Capital Lease Obligations) paid or payable during such
period after eliminating all offsetting debits and credits between the
Company and its Subsidiaries and all other items required to be
eliminated in the course of the preparation of consolidated financial
statements of the Company and its Subsidiaries in accordance with GAAP,
but excluding payments of principal in respect of Non-Recourse Secured
Debt.
"Default" shall mean any event or condition, the occurrence of
which would, with the lapse of time or the giving of notice, or both,
constitute an Event of Default.
"Defaulted Lease" means any Lease as to which FSI or the
Growth Fund that owns such Lease has reasonably determined, in
accordance with customary servicing procedures applicable to the Leases
owned by the Growth Funds, that such Lease is in material default;
provided, each Lease as to which the Lessee thereunder is delinquent in
an aggregate amount equal to the Scheduled Payments due thereunder
during a 90 day period shall automatically be deemed a Defaulted Lease
unless and until all defaults thereunder have been cured.
"Disposition" or to "Dispose" means the sale, lease, transfer,
assignment, condemnation, or other disposition (including pursuant to
any Casualty Loss) of Equipment, other than a Lease incurred in the
ordinary course of business of the Company or its Subsidiaries.
"EBITDA" means, for any period, the sum, determined (without
duplication) on a consolidated basis for the Company and its
Subsidiaries of (i) Consolidated Net Income for such period plus (ii)
interest expense for such period (excluding interest expense
attributable to Non-Recourse Debt) to the extent deducted in the
determination of such net income (or loss) plus (iii) depreciation,
amortization and other similar non-cash items to the extent deducted in
the determination of such net income (or loss) plus (iv) all taxes
accrued for such period on or measured by income to the extent deducted
in the determination of such net income (or loss) and plus (v) the
amount (if any) by which the line item identified as "equity interests
in affiliates" on the Company's balance sheet has been reduced during
such period by virtue of the Company's receipt of cash in respect of
such line item.
"Eligible Data Processing Expense Reimbursements" means as of
any date of determination the present value of the expense
reimbursements/fees due or to become due to IMI under the terms of the
Data Processing Contracts and in which there is an Acceptable Security
Interest and such fees and the rights of IMI thereto subject to no
other Liens, but excluding (a) in the case of any Data Processing
Contract that has not been renewed or has been terminated or notice of
termination has been given, any fees that would be attributable to any
period on or after the date of such termination, (b) any portion of
such fees that are subject to any action or proceeding asserting any
reduction, abatement, set-off or diminution thereof, and (c) any fees
the payment of which is more than 90 days past due; in each case as
such present value is calculated using the Debt Rate and assuming (i)
all payments are due on the last day of the relevant monthly period;
(ii) payments are discounted on a monthly basis using a 30 day month
and 360 day year; and (iii) payments are discounted to the last day of
the calculation period in which the date of determination falls.
"Eligible General Partner Interest" means the ownership
interest held by FSI in Growth Fund VII and No Load Growth Fund as the
general partner or manager and (a) in which there is an Acceptable
Security Interest and such interest shall be subject to no other Liens
and (b) as to which there is not pending against FSI any action or
proceeding asserting any reduction, abatement, set-off or other
diminution of any material part of the distributions and other payments
due and to become due in respect of such interest.
"Eligible Lease Negotiation and Acquisition Fees" means, as of
any date of determination, the lease negotiation fees and equipment
acquisition fees due or to become to IMI under the terms of the
Equipment Services Contracts (limited to and measured by the Purchase
Account Amounts then contained in the Purchase Accounts) and in which
there is an Acceptable Security Interest and such fees and the rights
of IMI thereto subject to no other Liens, but excluding (a) in the case
of any Equipment Services Contract that has not been renewed or has
been terminated or notice of termination has been given, any fees that
would be attributable to any period on or after the date of such
termination, (b) any portion of such fees that are subject to any
action or proceeding asserting any reduction, abatement, set-off or
diminution thereof, and (c) any fees the payment of which is more than
90 days past due.
"Eligible Leases" means a Lease owned by a Growth Fund (in
which such Growth Fund is the owner and lessor of the Equipment covered
by such Lease) and which is not a Defaulted Lease.
"Eligible Management Fees" means, as of any date of
determination, the present value of the management fees due and to
become due to IMI under the terms of the Management Contracts based on
(x) the Scheduled Payments of Eligible Leases in existence as of such
date of determination and (y) Projected Renewal Rentals as of such date
of determination, in which there is an Acceptable Security Interest and
such management fees and the rights of IMI thereto shall be subject to
no other Liens, but excluding (a) in the case of any Management
Contract that has not been renewed or has been terminated or notice of
termination has been given, any management fees that would be
attributable to any Schedule Payments or Projected Renewal Rentals due
on or after the date of such termination, (b) any portion of such
management fees that are subject to any action or proceeding asserting
any reduction, abatement, set-of or diminution thereof, and (c) any
management fees the payment of which is more than 90 days past due; in
each case as such present value is calculated using the Debt Rate and
assuming (i) all payments are due on the last day of the relevant
monthly period; (ii) payments are discounted on a monthly basis using a
30 day month and 360 day year; and (iii) payments are discounted to the
last day of the calculation period in which the date of determination
falls.
"Environmental Laws" means all Requirements of Law, including,
without limitation, all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements with,
any Governmental Agency, in each case relating to environmental,
health, safety and land use matters, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Clean Air Act, the Federal Water Pollution Control Act of
1972, the Solid Waste Disposal Act, the Federal Resource Conservation
and Recovery Act, the Toxic Substances Control Act, the Emergency
Planning and Community Right-to-Know Act, the California Hazardous
Waste Control Law, the California Solid Waste Management, Resource,
Recovery and Recycling Act, the California Water Code and the
California Health and Safety Code.
"Equipment" means any and all items of transportation-related
tangible personal property (including parts) owned by the Growth Funds;
in each case held for sale, lease or rental to third parties.
"Equipment Assets" means any item of Equipment and any other
item of tangible personal property acquired by the Company or any
Subsidiary for the purpose of lease or sale in connection with the
business of the Company or such Subsidiary.
"Equipment Services Contracts" means collectively those
certain agreements each entitled "Equipment Service Agreements" entered
into by each of the Growth Funds and IMI, a representative copy of the
same being attached as Exhibit K.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, any successor statute, and the rules and regulations
issued thereunder as from time to time in effect.
"ERISA Affiliate" means each trade or business, including the
Company, whether or not incorporated, which together with the Company
would be treated as a single employer under Section 4001 of ERISA or
subsections (b), (c), (m) or (o) of Section 414 of the Code.
"ESOP" means the PLM International, Inc. Employee Stock
Ownership Plan adopted effective as of August 17, 1989, and the PLM
International, Inc. Employee Stock Ownership Plan Trust established
pursuant to the PLM International, Inc. Employee Stock Ownership Plan
Trust Agreement effective as of August 17, 1989, between the Company
and SSBTC, as trustee.
"Event of Default" means any of the events set forth in
Section 5.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Existing Senior Debt" means the Debt from time to time
outstanding pursuant to that certain Note Agreement dated as of June
30, 1994 between the Company, Sun Life Insurance Company of America,
American Life and Casualty Insurance Company, Alexander Hamilton Life
Insurance Company of America and Republic Western Insurance Company, as
heretofore or hereafter amended.
"FDIC" means the Federal Deposit Insurance Corporation and any
successor thereto.
"FSI Borrowing Base" means the sum of 65% of the FSI General
Partner Interest Amount, in each case determined as of the date of the
Borrowing Base Certificate then most recently delivered pursuant to
this Agreement.
"FSI Funds" means, as of any date of determination, those
funds (and any interest or investment income thereon) contained in the
Lock Box Account and designated by the Collateral Agent as being
traceable to Collateral in which FSI has granted to the Collateral
Agent a Security Lien.
"FSI General Partner Amount" means, as of any date of
determination, the sum of the General Partner Amount for each Eligible
General Partner Interest.
"FSI Guaranty" means the Guaranty Agreement executed by FSI in
favor of the holders of the Notes and the Collateral Agent.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board which are applicable to the circumstances of the date of
determination.
"General Partner Amount" means, as of any date of
determination, the sum of (a) the product resulting from the
multiplication of (i) the Appraised Value of all Equipment then owned
by Growth Fund VII provided FSI owns an Eligible General Partner
Interest in Growth Fund VII, excluding Equipment that has suffered a
Casualty Loss, less all Debt of Growth Fund VII, times (ii) 5% and (b)
the product resulting from the multiplication of (i) the Appraised
Value of all Equipment then owned by No Load Growth Fund provided FSI
owns an Eligible General Partner Interest in No Load Growth Fund,
excluding Equipment that has suffered a Casualty Loss, less all Debt of
No Load Growth Fund, times (ii) 15%.
"Governmental Agency" means (i) any federal, state, county,
municipal or foreign government, or political subdivision thereof, (ii)
any governmental or quasi-governmental agency, authority, board,
bureau, commission, department, instrumentality or public body, (iii)
any court or administrative tribunal, or (iv) with respect to any
Person, any arbitration tribunal or other non-governmental authority to
whose binding jurisdiction that Person has consented.
"Growth Funds" means, collectively, PLM Equipment Growth Fund,
a California limited partnership, PLM Equipment Growth Fund II, a
California limited partnership, PLM Equipment Growth Fund III, a
California limited partnership, PLM Equipment Growth Fund IV, a
California limited partnership, PLM Equipment Growth Fund V, a
California limited partnership, PLM Equipment Growth Fund VI, a
California limited partnership, and PLM Equipment Growth & Income Fund
VII, a California limited partnership, and Professional Lease
Management Income Fund I, a California limited liability company.
"Growth Fund VII" means PLM Equipment Growth & Income Fund
VII, a California limited partnership.
"Guarantor" means the Company or FSI as the context requires.
"Guaranty" shall have the meaning set forth in paragraph (v)
of the definition of Debt.
"IMI Borrowing Base" means the sum of (a) 50% of the Eligible
Management Fees covered by clause (x) of the definition of Eligible
Management Fees, (b) 25% of the Eligible Management Fees covered by
clause (y) of the definition of Eligible Management Fees (but in no
event to exceed the Renewal Cap Amount), (c) 50% of the Eligible Data
Processing Expense Reimbursements, and (d) 50% of the Eligible Lease
Negotiation and Acquisition Fees, in each case determined as of the
date of the Borrowing Base Certificate most recently delivered pursuant
to this Agreement.
"IMI Funds" means, as of any date of determination, those
funds (and any interest or investment income thereon) contained in the
Lock Box Account and designated by the Collateral Agent as being
traceable to Collateral in which IMI has granted to the Collateral
Agent a Security Lien.
"Indebtedness for Borrowed Money" of any Person shall mean
without duplication (i) all Debt of such Person for borrowed money or
which has been incurred by such Person in connection with the
acquisition of assets, (ii) all Capitalized Lease Obligations of such
Person, (iii) all Guaranties by such Person of Indebtedness for
Borrowed Money of others, and (iv) all obligations and liabilities
secured by a Security Lien (excluding Security Liens arising by
operation of law) on any asset owned by such Person, irrespective of
whether such obligation or liability is assumed, to the extent of the
lesser of such obligation or liability or the fair market value of such
asset.
"Indemnified Matters" has the meaning set forth in Section
9.19.
"Indemnitees" has the meaning set forth in Section 9.19.
"Independent Appraisal" with respect to any item or items of
Equipment shall mean any report showing Appraised Value prepared by the
Independent Appraiser consistent with the terms of this Agreement.
"Independent Appraised Value" shall mean the Appraised Value
of any item or items of Equipment determined by the Independent
Appraiser.
"Independent Appraiser" shall mean any one or more of the
qualified independent appraisal firms listed on Schedule 2 or any other
qualified independent appraisal firm approved by the Required
Noteholders from time to time.
"Independent Public Accountants" shall mean any of (i) Arthur
Andersen & Co., (ii) Deloitte & Touche, (iii) Coopers & Lybrand, (iv)
Ernst & Young, (v) KPMG Peat Marwick and (vi) Price Waterhouse or (vii)
any other qualified independent accounting firm of national stature
approved by the Required Noteholders.
"Interest Charges" means, with respect to any period, the sum
(without duplication) of the following (in each case, eliminating all
offsetting debits and credits between the Company and its Subsidiaries
and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP): (a) all interest in respect of
Debt of the Company and its Subsidiaries, including imputed interest on
Capital Lease Obligations, deducted in determining Consolidated Net
Income for such period (excluding, however, any such interest on
Non-Recourse Secured Debt), together with all interest capitalized or
deferred during such period and not deducted in determining
Consolidated Net Income for such period (excluding, however, any such
interest on Non-Recourse Secured Debt), and (b) all debt discount and
expense amortized or required to be amortized in the determination of
Consolidated Net Income for such period (excluding, however, all such
debt discount and expense attributable to Non-Recourse Secured Debt).
"Investment" means, when used in connection with any Person,
any investment by or of that Person, whether by means of purchase or
other acquisition of Stock or other securities of any other Person or
by means of loan or advance (other than advances to employees for
moving or travel expenses, drawing accounts and similar expenditures in
the ordinary course of business), capital contribution, guaranty or
other debt or equity participation or interest, or otherwise, in any
other Person, including any partnership and joint venture interests of
such Person in any other Person or in any Participation Equipment. The
amount of any Investment shall be determined and computed in accordance
with GAAP.
"Investment Company Act" means the Investment Company Act of
1940, as amended (15 U.S.C. ss. 80a-1 et seq.), as the same may be in
effect from time to time, or any successor statute thereto.
"IRS" means the U.S. Department of Treasury, Internal Revenue
Service, and any successor thereto.
"Issuer" means FSI and IMI, either individually or
collectively as the context requires.
"Lease" means a written lease by a Growth Fund or any trustee
under any trust that is the holder of legal or record title for the
benefit of a Growth Fund to a Lessee of any item of Equipment and shall
include all new Leases, Marine Container Pooling Arrangements, Marine
Vessel Pooling Arrangements, charters of marine vessels and any other
agreement designated by the Collateral Agent in writing as a Lease;
provided, any lease agreement which represents any conditional sales
transaction or similar transaction and which is in accordance with GAAP
is carried on the books of a Growth Fund as something other than an
operating lease or finance lease shall not constitute a "Lease".
"Lessee" means, with respect to each Lease, the Lessee or
charterer thereunder, including in the case of each Marine Container
Pooling Arrangement or Marine Vessel Pooling Arrangement, the Person
leasing marine containers or marine vessels owned by the applicable
Growth Fund under such pooling arrangement.
"Lien" shall mean any mortgage, pledge, priority, security
interest, encumbrance, contractual deposit arrangement, lien (statutory
or otherwise) or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and filing of or agreement
to give any financing statement under the Uniform Commercial Code of
any jurisdiction) or any other type of preferential arrangement for the
purpose, or having the effect of, protecting a creditor against loss or
securing the payment or performance of an obligation.
"Lock Box Account" means the account required to be
established pursuant to the terms of the Security Agreement (Lock Box).
"Make-Whole Amount" shall mean an amount calculated by the
applicable Issuer and set forth in a certificate from such Issuer (or
if such Issuer fails to make such calculation, as calculated by the
Required Noteholders), determined as of the date of any prepayment
pursuant to Sections 3.4 or 3.5 or the date of any acceleration
pursuant to Section 5.3 in respect of each Note (or the portion
thereof) to be prepaid or each Note being accelerated. The Make-Whole
Amounts on each Note shall be equal to 0.75% of the outstanding
principal amount prepaid.
"Management Contracts" means collectively those certain
agreements each entitled "Equipment Management Agreement" entered into
by each of the Growth Funds and IMI, a representative copy of the same
being attached as Exhibit F.
"Marine Container Pooling Arrangement" means any written
agreement, however denominated, pursuant to which (i) marine containers
owned by a Growth Fund are leased to a Person who incorporates such
containers into a pool of marine containers that are subleased to
others and (ii) such Person agrees to pay to the Growth Fund, on a
periodic basis, a percentage of the aggregate net revenues received in
respect of any and all of the marine containers comprising such pool.
"Marine Vessel Pooling Arrangement" means any written
agreement, however denominated, pursuant to which (i) marine vessels
owned by a Growth Fund are leased to a Person who incorporates such
marine vessels into a pool of marine vessels that are subleased to
others and (ii) such pool or Person agrees to pay to the Growth Fund on
a periodic basis, a percentage of the aggregate net revenues received
in respect of any and all of the marine vessels comprising such pool.
"Material Adverse Effect" shall mean a material and adverse
effect on the properties, business, financial condition or prospects of
the Company or any Issuer or on its ability to perform its obligations.
"Multiemployer Plan" shall mean a plan described in Section
3(37) or Section 4001(a)(3) of ERISA to which the Company or any ERISA
Affiliate is required to contribute on behalf of any of its employees.
"NAIC" shall mean the National Association of Insurance
Commissioners.
"No Load Growth Fund" means Professional Lease Management
Income Fund I, a California limited liability company.
"Non-Recourse Secured Debt" means Debt with respect to which
(a) none of the Company or any Subsidiary has or will have under any
circumstances (except fraud in the making), any personal or recourse
liability for the repayment of such Debt (whether directly as the
primary obligor or indirectly as a guarantor) and (b) the proceeds of
such Debt are used to pay the acquisition price for Equipment Assets
and the repayment thereof is secured by a Security Lien on the
Equipment Assets so acquired and the proceeds of such Equipment Assets.
"Note Documents" shall mean this Agreement, the Note Purchase
Agreements, the Notes, the Security Documents, the PLM Guaranty, the
FSI Guaranty, all documents (in the respective forms thereof as
executed) the forms of which are referenced in or appended to the Note
Purchase Agreements or this Agreement as exhibits or schedules, and all
other documents or instruments executed and delivered in connection
with the Note Purchase Agreements or this Agreement, except for the
Collateral Agency Agreement.
"Note Purchase Agreement" shall mean the Note Purchase
Agreement of even date herewith between FSI, IMI and SunAmerica (and
joined in by the Company).
"Notes" shall have the meaning set forth in Section 1.1.
"NRSRO" means a Nationally Recognized Statistical Rating
Organization.
"Obligations" shall mean as to each Issuer the payment of all
indebtedness and performance of all obligations of such Issuer now or
hereafter existing under this Agreement, the Notes issued by such
Issuer and the other Note Documents to which such Issuer is a party or
bound, whether for principal, interest, Make-Whole Amounts, fees,
expenses or otherwise.
"Outstanding" shall mean with respect to the Notes at any
time, all Notes which have been duly authorized, issued and delivered
(except Notes for which new Notes have been issued pursuant to Section
2.2, Section 2.3 or Section 2.6); provided, with respect to any
approval or consent required or permitted to be given by any one or
more of the holders of Notes under this Agreement or any other Note
Document, "Outstanding" Notes shall be exclusive of any Notes then
owned (beneficially or otherwise) by the Company or any Affiliate or
any Notes which have been paid in full.
"Participation Equipment" means an item of equipment, owned by
a Person unaffiliated with the Company and on lease to another third
party, in which the Company acquires a right to share, directly or
indirectly, in a specified percentage of the residual value thereof
upon the lease, re-lease or sale of such item of equipment after the
original lease maturity date.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto.
"Permitted Affiliate Insurance" means marine vessel war risk
insurance, marine vessel increased value insurance and marine vessel
hull and machinery insurance issued by Transportation Equipment
Indemnity Company, Ltd., an insurance company organized under the laws
of the Commonwealth of Bermuda ("TEI"), if and only if, upon the
issuance of such insurance and at all times during which such insurance
remains outstanding, TEI retains no more than 5% of the insurance
liability and obtains reinsurance for the remaining 95% of the
insurance liability with financially sound and reputable insurance
companies that are not Affiliates of the Company.
"Permitted Liens" shall have the meaning set forth in Section
6.13.
"Person" shall mean an individual, general partnership,
limited partnership, corporation, limited liability company, trust,
unincorporated organization, government, governmental agency or
governmental subdivision.
"Plan" means any plan (other than a Multiemployer Plan)
subject to Title IV of ERISA which (i) is currently or hereafter
sponsored, maintained or contributed to by the Company or any ERISA
Affiliate or (ii) was at any time during the five preceding years
sponsored, maintained or contributed to by the Company or any of its
ERISA Affiliates.
"PLM Guaranty" means the Guaranty Agreement executed by PLM in
favor of the holders of the Notes and the Collateral Agent.
"PLM Security Agreement" means the Security Agreement executed
by PLM in favor of the holders of the Notes and the Collateral Agent.
"Portfolio Assets" means a portfolio, group or collection of
Equipment Assets.
"Principal Mutual Note Agreement" means the Note Agreement
dated as of January 15, 1989, between the Company and Principal Mutual
Life Insurance Company, as amended.
"Prohibited Transaction" means any transaction described in
Section 406 of ERISA which is not exempt by reason of Section 408 of
ERISA or the transitional rules set forth in Section 414(c) of ERISA or
any transaction described in Section 4975(c) of the Code which is not
exempt by reason of Section 4975(c)(2) or Section 4975(d) of the Code,
or the transitional rules of Section 2003(c) of ERISA.
"Projected Renewal Rentals" means, as of any date of
determination, and without duplication of any Scheduled Payment, the
Company's most recent good faith estimate prepared in the ordinary
course of business (taking into account matters typically considered by
the Company including, without limitation, age and condition of the
Equipment, legal requirements, and market conditions) and reflected in
the records of the Company kept for purpose of memorializing such
estimates of the rental payments (excluding any portion of any such
payment which is for taxes or similar charges and excluding any payment
for the purchase of any Equipment, whether such purchase is mandatory
or optional) that will be realized in respect of the Equipment
following the expiration of the then existing firm term of the Lease
covering such Equipment.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, and whether tangible or
intangible.
"Purchase Account" means for each Growth Fund the actual bank
account, or book entry account maintained on such [Growth Funds] books
of account, maintained for the purpose of holding or recording (as
applicable) (a) sales proceeds from the sale of Equipment owned by such
Growth Fund that are intended to be utilized to purchase additional
Equipment for such Growth Fund and (b) equity contributions by limited
partners of such Growth Fund that are intended to be utilized to
purchase additional Equipment for such Growth Fund.
"Purchase Account Amount" means, as to each Purchase Account
as of any date of determination, the sum of the sales proceeds from the
sale of Equipment owned by such Growth Fund and equity contributions by
limited partners of such Growth Fund contained in the Purchase Account
for such Growth Fund less any portion thereof already identified by the
Company to be utilized for a purpose other than to purchase additional
Equipment for such Growth Fund.
"Purchasers" means every purchaser of the Notes.
"Quarterly Payment Date" means each quarterly payment date on
which any principal and/or accrued interest is required to be paid on
any Note pursuant to the terms of this Agreement.
"Quarterly Period" means the period from the first issuance of
Notes to November 14, 1996, and each succeeding November 15 to February
14 period, February 15 to May 14 period, May 15 to August 14 period,
and August 15 to November 14 period, as applicable.
"Rating Agency" shall mean Duff & Phelps Credit Rating Co. and
any other NRSRO that hereafter issues a rating in respect of the Notes.
"Renewal Cap Amount" means for any period through December 31,
1997, $6,000,000, and for the calendar quarter commencing January 1,
1998 and each subsequent calendar quarter means $5,750,000 less $83,333
for each calendar month that has elapsed since January 1, 1998.
"Rental Yard Trailers" means, collectively, any and all
Equipment constituting piggy-back trailers on lease through the
Kankakee, Beaverville, and Southern Railroad and trailers designated by
the Company as being maintained at, or being transferred to, rental
yards for short-term rentals.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, the withdrawal
of the Company or any ERISA Affiliate from a Plan during a plan year in
which it was a "substantial employer" as defined in section 4001(a)(2)
of ERISA, the filing of a notice of intent to terminate a Plan or a
Multiemployer Plan or the treatment of an amendment to a Plan as a
termination under section 4041 of ERISA, the institution of proceedings
to terminate a Plan or a Multiemployer Plan by the PBGC, any other
event or condition which might constitute grounds under Tile IV of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or Multiemployer Plan, the partial or complete
withdrawal of the Company or any ERISA Affiliate from a Multiemployer
Plan, an amendment to a Plan necessitating the posting of security
under Section 401(a)(29) of the Code, or a failure by the Company or an
ERISA Affiliate to make a payment required by Section 412(m) of the
Code and Section 302(e) of ERISA when due.
"Required Noteholders" shall mean the holder or holders of at
least 51% in aggregate principal amount of the then
Outstanding Notes.
"Requirements of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Agency, in each case applicable to
or binding upon the Person or any of its Property or to which the
Person or any of its Property is subject.
"Residual Interest" means, with respect to any Person and
expressed in terms of the amount so invested, a purchased right to
share, or the option to acquire the right to share, directly or
indirectly, in a specified percentage of the Residual Value (which
percentage shall reflect the excess of the Residual Value above the
Strike Price) of any item of Participation Equipment.
"Responsible Officer" shall mean with respect to any
corporation or company, the President, Executive Vice President, Senior
Vice President or any Vice President; and with respect to Bankers
Trust, as Collateral Agent, any officer within the Corporate Trust and
Agency Group (or any successor group thereto) of the Collateral Agent
including any Vice President, Assistant Vice President, Secretary,
Assistant Secretary or any other officer of the Collateral Agent
customarily performing functions similar to those performed by any of
the above designated officers and, with respect to a particular matter,
any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject; and
with respect to any Person which is a corporation or national or state
banking association (other than Bankers Trust, as Collateral Agent),
any Vice President, corporate trust officer or other officer, in each
case employed by such entity.
"Scheduled Payments" means, with respect to any Lease as of
any date of determination, each regularly scheduled periodic (typically
monthly) rental payment (excluding any portion of any such payment
which is for taxes or similar charges) required to be paid by the
Lessee under such Lease after such date of determination without
abatement or set-off and excluding any payment for the purchase of the
Equipment covered by such Lease (whether such purchase is mandatory or
optional) and excluding any rental payment attributable to any renewal
or extension term of such Lease unless such renewal or extension term
has been irrevocably exercised and then only to the extent of each
rental payment is required to be paid by the Lessee during such renewal
or extension term without abatement or set-off.
"Security" has the meaning set forth in Section 2(1) of the
Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security Agreement" shall mean collectively and individually,
as the context requires, the Security Agreement (Master) executed by
each Issuer in favor of the Collateral Agent of even date herewith in
substantially the form of Exhibit G.
"Security Agreement (Lock Box)" shall mean the Security
Agreement (Lock Box) executed by each Issuer in favor of the Collateral
Agent of even date herewith in substantially the form of Exhibit H.
"Security Documents" shall mean (i) each Security Agreement,
the Security Agreement (Lock Box Account) and the PLM Security
Agreement and (ii) all other security agreements, mortgages, chattel
mortgages, pledges, guaranties, financing statements, continuation
statements, extension agreements and other agreements or instruments
now, heretofore, or hereafter delivered by any Issuer or Guarantor to
the Collateral Agent in connection with this Agreement or any
transaction contemplated hereby to secure or guarantee the payment of
any part of the Notes or the performance of Issuers', Guarantors' or
any other obligations under the Note Documents.
"Security Lien" shall mean with respect to any Property or
assets, any right or interest therein of a creditor to secure Debt owed
to it or any other arrangement with such creditor (i) which provides
for the payment of such Debt out of such Property or assets or (ii)
which allows it to have such Debt satisfied out of such Property or
assets, in either case prior to the general creditors of any owner
thereof, including without limitation any lien, mortgage, deed of
trust, assignment of production, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or
conditional sale agreement or lease substantially equivalent thereto,
or any other charge or encumbrance for security purposes, whether
arising by law or agreement or otherwise, but excluding any right of
offset which arises in the ordinary course of business.
"Short-Term Warehouse Debt" shall mean the Indebtedness for
Borrowed Money under the Warehousing Credit Agreement dated September
27, 1995, as amended, among TEC Acquisub, Inc. the named Lenders
thereunder and First Union National Bank of North Carolina, as agent,
and the Warehousing Credit Agreement dated May 31, 1996 among American
Finance Group, Inc., the named Lenders thereunder, and First Union
National Bank of North Carolina, as agent, such facilities have an
aggregate maximum principal amount of $35,000,000 (the "Existing
Short-Term Warehouse Debt"), and any amendments thereto or refinancings
thereof up to $35,000,000 for all such Debt, in the aggregate, which
amendments or refinancings (i) shall be substantially similar to the
terms of the Existing Short-Term Warehouse Debt and (ii) shall not
contain any terms more onerous to the Company, the Collateral Agent, or
the Note holders than under the Existing Short-Term Warehouse Debt.
"Stock" means all shares, options, warrants, interests,
participations or other equivalents (regardless of how designated) of
or in a corporation or equivalent entity, whether voting or nonvoting,
including common stock, preferred stock, or any other "equity security"
(as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under
the Exchange Act).
"Strike Price" means the amount in excess of which a Person
will participate in the Residual Value of any item of Participation
Equipment.
"Subsidiary" means, with respect to any Person, any
corporation, association, partnership (other than the Growth Funds) or
other business entity (i) of which an aggregate of more than fifty
percent (50%) of the outstanding Stock or other voting interest having
ordinary voting power to elect a majority of the directors, managers or
trustees of such Person (irrespective of whether, at the time, Stock or
other voting interest of any other class or classes of such Person
shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person or one or more Subsidiaries of such Person
or (ii) that is otherwise consolidated with the Company in accordance
with GAAP.
"SunAmerica" means SunAmerica Life Insurance Company, an
Arizona corporation.
"TEC" means PLM Transportation Equipment Corporation, a
California corporation.
"Voting Stock" shall mean securities of any class or classes,
the holders of which are ordinarily, in the absence of contingencies,
entitled to elect a majority of the corporate directors (or Persons
performing similar functions).
.ECTION 2. ISSUANCE AND DELIVERY OF NOTES
. All Notes purchased under the Note Purchase Agreements shall be registered
Notes. Each Issuer shall cause to be kept at its office or agency, maintained
pursuant to Section 6.6, a register for the registration and transfer of Notes
issued by such Issuer. The name and address of each holder of record of one or
more Notes, each registration of transfer thereof and the name and address of
each transferee of one or more Notes shall be registered in the applicable
register. The Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes of this Agreement,
and the Issuer of such Note shall not be affected by any notice or knowledge to
the contrary. Each Issuer shall furnish to the Collateral Agent within 60 days
after the end of each calendar year a correct and complete list of all holders
of Notes issued by such Issuer and a description of the interests so held. Upon
the request from time to time of any holder of an Outstanding Note or the
Collateral Agent, each Issuer shall promptly furnish to such requesting party a
correct and complete list of all holders of the then Outstanding Notes issued by
such Issuer and a description of the interests so held.
. Upon surrender of any Note at the office or agency of an Issuer maintained
pursuant to Section 6.6, such Issuer, at the request of the holder thereof, will
execute and deliver, at such Issuer's expense (except as provided below), one or
more new Notes payable to such holder in exchange therefor, for a like aggregate
principal amount in denominations of not less than $3,000,000 in original
principal amount.
. Any Outstanding Note may be transferred at the office or agency of the Issuer
of such Note maintained pursuant to Section 6.6, by surrendering such Note for
cancellation, together with a written notice specifying the denomination or
denominations of the new Notes (which shall not be less than $3,000,000 in
original principal amount) and the name and address of the Person in whose name
such Note or Notes are to be registered; provided, the holders of the Notes
shall not have the right to transfer any of the Notes to Bank of America without
the consent of the Issuers. Such notice shall be accompanied by a written
instrument of transfer in a form satisfactory to the Issuer of the applicable
Note (which must specify the taxpayer identification number of the transferee),
duly executed by the holder of such Note or by such holder's attorney duly
authorized in writing, and such Issuer may require evidence satisfactory to it
as to the compliance of any such transfer with the Securities Act, and all other
Requirements of Law. Thereupon such Issuer, at its expense, shall issue in the
name of the transferee or transferees, and deliver in exchange therefor, a new
Note or Notes, for a like aggregate principal amount, in authorized
denominations. Any transfer of a Note shall comply with applicable federal and
state securities or blue sky laws and all other Requirements of Law or be
subject to an applicable exemption therefrom.
. All transfers, exchanges or replacements of Notes pursuant to Section 2.2,
Section 2.3, or Section 2.6 shall be without expense to the holder of the Notes,
except that any taxes or other governmental charges required to be paid with
respect to the same shall be paid by the holder of the Note requesting such
transfer, exchange or replacement as a condition precedent to the exercise of
such privilege. All Notes surrendered for transfer, exchange or replacement
shall be cancelled by the Issuer of such Note. Each new Note delivered pursuant
to Section 2.2 or Section 2.3 shall be dated and bear interest from the most
recent date to which interest has been paid on the surrendered Note or Notes, or
dated the date of the surrendered Note or Notes if no interest has been paid
thereon. Each Issuer shall make a notation on each new Note delivered to it
pursuant to Section 2.2, Section 2.3 or Section 2.6 of the amount of all
payments of principal previously made on the old Note or Notes with respect to
which such new Note is issued.
. All Notes executed and delivered in exchange for, upon transfer of, or in
replacement of, other Notes as provided in this Agreement shall be the valid
obligations of the Issuer of such Note, evidencing the same debt as such other
Notes, and shall be entitled to the benefits of this Agreement to the same
extent as the Notes in exchange for or upon transfer or replacement of which
they were executed and delivered.
. Upon receipt by an Issuer of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of any Note issued
by such Issuer and
(a) in the case of loss, theft or destruction, of an indemnity
agreement signed by the holder of the Note in form and substance
reasonably satisfactory to such Issuer, or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
such Issuer, at its own expense, will execute and deliver in lieu thereof, a new
Note of like tenor, and of the same series, dated and bearing interest from the
date to which interest has been paid on such lost, stolen, destroyed or
mutilated Note or dated the date of such lost, stolen, destroyed or mutilated
Note if no interest has been paid thereon. If, after the delivery of a new Note,
a bona fide purchaser of the original Note in lieu of which such new Note was
issued presents for payment such original Note, such Issuer shall be entitled to
recover such new Note from the Person to whom it was delivered or any Person
taking therefrom, except a bona fide purchaser, and shall be entitled to recover
upon the indemnity provided therefor (which shall be unsecured) to the extent of
any loss, damage, cost or expense incurred by such Issuer in connection
therewith.
.ECTION 3. PAYMENT OF NOTES, COLLATERAL AND LOCK BOX ACCOUNT
. Notwithstanding anything in this Agreement or in the Notes to the contrary,
but subject to the provisions of Section 9.5 hereof, each Issuer will pay all
amounts payable with respect to the Notes issued by such Issuer and held by each
Purchaser or other registered holder of such Notes (without any presentment of
any such Notes and without any notation of such payment being made thereon) by
crediting before noon, local time, of the place of payment of each such Note, as
otherwise specified, by bank wire transfer of immediately available funds, to
the account of such holder in any bank in the United States as may be designated
in writing by such holder (including in such writing the ABA number of such
holder's bank), or in such manner as may be directed or to such other address in
the United States as may be designated in writing by such holder. The addresses
and other instructions of each Purchaser set forth in Schedule I shall be deemed
to constitute notice, direction or designation (as appropriate) to each Issuer
with respect to direct payment as aforesaid. The holder of each Note to which
this Section 3.1 applies agrees, by its acceptance of such Note, that in the
event it shall sell or transfer such Note it will, prior to the delivery of such
Note (unless it has already done so), make a notation thereon of all principal,
if any, paid on such Note and will also note thereon the date to which interest
has been paid on such Note.
. Each Issuer will pay all taxes, assessments and charges in connection with the
issuance and sale of the Notes issued by such Issuer and in connection with any
modification of such Notes and will indemnify and save each holder of such Notes
harmless, without limitation as to time, against any and all liabilities with
respect to all such taxes, assessments and charges. The obligations of each
Issuer under this Section 3.2 shall survive the prepayment or payment of the
Notes and the termination of this Agreement and continue in favor of the holders
of the Notes.
. Principal on each Note will be payable in 20 equal quarterly payments
commencing as of the 15th day of November, 1997 and continuing thereafter on the
15 day of each succeeding February, May, and August until August 15, 2002, being
the final maturity of each Note; provided, if any such date is not a Business
Day, the applicable amortization amount shall become due and payable on the
first Business Day after such date. No premium shall be payable in connection
with any mandatory principal payment made pursuant to the first sentence of this
Section 3.3. Each Issuer shall also make required prepayments in accordance with
Section 3.4. No acquisition or purchase of any Notes by any Issuer or any
Affiliate thereof shall relieve such Issuer from or reduce its obligation to
make the required principal payments provided for in this Section 3.3.
. (a) If at any time the aggregate of the outstanding principal amount of all
Outstanding Notes issued by FSI is in excess of the FSI Borrowing Base, then and
in each such event (but subject to Section 4(c)), FSI shall immediately pay to
the Purchasers, as a prepayment on the principal of the Outstanding Notes issued
by FSI, the amount of such excess and shall pay to such Purchasers all accrued
interest on the principal amount so paid and the Make-Whole Amount based on such
principal payment.
(b) If at any time the aggregate of the outstanding principal
amount of all Outstanding Notes issued by IMI is in excess of the IMI Borrowing
Base, then and in each such event (but subject to Section 4(c)), IMI (or FSI as
Guarantor of IMI's Obligations) shall immediately pay to the Purchasers, as a
prepayment on the principal of the Outstanding Notes issued by IMI, the amount
of such excess and shall pay to such Purchasers all accrued interest on the
principal amount so paid and the Make-Whole Amount based on such principal
payment.
(c) If pursuant to Sections 3.4(a) or (b) a prepayment of the
Notes is required, then such prepayment may be deferred and not paid until the
earlier to occur of (i) the Quarterly Payment Date next occurring after the date
such prepayment is due pursuant to Section 3.4(a) or (b) and (ii) 60 days
following the date such prepayment is due pursuant to Section 3.4(a) or (b),
subject in each case to the satisfaction of the following conditions:
(1) In the case of a prepayment due on any Notes
issued by FSI, at all times during such deferral period the Lock Box
Account shall contain FSI Funds (calculated after taking into effect
any withdrawal pursuant to Section 3.10(e)) in an amount not less than
the sum of (x) the aggregate prepayments on such Notes then being
deferred and (y) any FSI Funds utilized under clause (2) immediately
following;
(2) In the case of a prepayment due on any Notes
issued by IMI, at all times during such deferral period the Lock Box
Account shall contain funds (whether FSI Funds, IMI Funds or both, but
calculated after taking into effect any withdrawal pursuant to Section
3.10(e)) in an amount not less than the aggregate prepayment on such
Notes being deferred; and
(3) No Default or Event of Default shall exist or
occur during such deferral period.
For purposes of this Section 3.4(c), FSI or the Company may deposit funds in the
Lock Box Account (all such funds to be deemed to be FSI Funds). If at any time
during such deferral period a Default or Event of Default shall occur, then all
prepayments then deferred shall become immediately due and payable. If the
Borrowing Base Certificate required to be delivered in connection with the
Quarterly Payment Date referred to in clause (i) above reflects that all or a
portion of such deferred prepayment would not be due based on such Borrowing
Base Certificate (the "Eliminated Portion"), then such deferred prepayment shall
be deemed reduced by the Eliminated Portion. Each partial prepayment of Notes
pursuant to this Section 3.4(c) shall be applied to reduce, prorata, the
scheduled principal payments on the Notes so prepaid.
(d) The provisions of this Section 3.4 shall not limit (by
implication or otherwise) the rights of the holders of the Notes and
the Collateral Agent under Section 5.
. Upon compliance with Section 3.6 and subject to Section 3.7 and the following
limitations, in addition to the scheduled and mandatory principal payments
required by Sections 3.3 and 3.4 each Issuer shall have the privilege, at any
time and from time to time, of prepaying any or all of the Outstanding Notes
issued by such Issuer, either in whole or in part (but if in part then in units
of $1,000,000), by payment of the principal amount of the Notes or portion
thereof to be prepaid, together with accrued interest thereon, plus, to the
extent permitted by law, the Make-Whole Amount (based on such principal amount).
Each partial prepayment of Notes pursuant to this Section 3.5 shall be applied
to reduce, pro rata, the scheduled principal payments on the Notes so prepaid.
Each Issuer acknowledges that the right of the holders of the Notes to maintain
their investment free and clear of prepayment (except as specifically provided
in Section 3.4 and this Section 3.5) is a valuable right and the provision for
payment of the Make-Whole Amount by the Issuers if the Notes issued by such
Issuer are prepaid under Section 3.4 and this Section 3.5 or accelerated under
Section 5.3 as a result of an Event of Default is intended to provide
compensation for the deprivation of such right under such circumstances.
. Each Issuer will give notice of any prepayment of the Notes issued by such
Issuer to each holder thereof pursuant to Section 3.5 not less than ten days nor
more than 30 days before the date fixed for such optional prepayment. Each such
notice and each such prepayment shall be accompanied by a certificate from a
Responsible Officer (a) stating the principal amount to be prepaid, (b) stating
the proposed date of prepayment, (c) stating the accrued interest on each such
Note to such date through the date of prepayment, and (d) stating the Make-Whole
Amounts required under Section 3.5.
. All partial prepayments by a particular Issuer or otherwise in respect of the
Notes shall be applied on all Outstanding Notes issued by such Issuer ratably in
accordance with the unpaid principal amounts thereof but only in units of
$1,000, and to the extent that such ratable application shall not result in an
even multiple of $1,000, adjustment may be made by such Issuer to the end that
successive applications shall result in substantially ratable payments.
. If upon the exercise of any remedy provided herein or provided in any of the
Note Documents or otherwise the Collateral Agent comes into possession of any
monies properly owing to the Collateral Agent or the holders of the Notes, it
shall distribute such monies pursuant to Section 5.10. All payments to be made
on account of any Note shall be made by the Collateral Agent by check mailed to
the address of the holder thereof as shown in the register maintained in
accordance with Section 6.6; provided, the Collateral Agent shall make any
payment on account of any Note held by an institutional holder thereof by wire
transfer to the account of such holder in any bank in the United States
specified in a written request (which shall be no later than two Business Days
prior to such payment) given to the Collateral Agent by such holder. The address
of each Purchaser set forth in Schedule I under the heading "Payment
Instructions" shall be deemed to constitute such a written request with respect
to such Purchaser.
. The Obligations are secured by the Collateral. Each Issuer and each Guarantor
will comply with its obligations under the Note Documents.
. 3.10 Lock Box Account
(a) Within 15 days following the Closing Date the Company and
each Issuer will enter into the Security Agreement (Lock Box) with a national
bank or other financial institution designated by the Collateral Agent and the
Lock Box Account will be established. Pursuant to the Security Agreement (Lock
Box), all partnership distributions, fees and other amounts payable to each
Issuer by each of the Growth Funds (excluding partnership distributions
applicable to FSI's partnership interest in each of the Growth Funds other than
Growth Fund VII and No Load Growth Fund) will be deposited into the Lock Box
Account and held in trust for the Collateral Agent and the holders of the Notes
issued by such Issuer. FSI shall instruct Growth Fund VII and No Load Growth
Fund in writing in connection with the Closing (such instructions to not be
revoked or revocable unless consented to in writing by the Collateral Agent) to
make payments of partnership distributions payable to FSI to the Lock Box
Account. IMI shall instruct each Growth Fund in writing in connection with the
Closing (such instructions to not be revoked or revocable unless consented to in
writing by the Collateral Agent) to make all payments of management fees, data
processing expense reimbursements/fees and lease negotiation and acquisition
fees payable to IMI by each Growth Fund to the Lock Box Account. Pursuant to the
Security Agreement (Lock Box), the Collateral Agent shall have the sole right to
disburse funds from the Lock Box Account.
(b) The Collateral Agent shall use reasonable efforts to
maintain records identifying the particular Issuer on whose behalf each payment
was made to the Lock Box Account, and the Issuers will assist the Collateral
Agent in making such determinations.
(c) On each Quarterly Payment Date and on or about each date
that a prepayment is required to be made by an Issuer on its Outstanding Notes,
the Collateral Agent shall disburse to the holders of the Outstanding Notes out
of funds then contained in the Lock Box Account the following:
(i) From the FSI Funds, to the holders of the
Outstanding Notes issued by FSI an amount of FSI Funds equal to all
accrued and unpaid interest (including interest on past due amounts) on
such Outstanding Notes;
(ii) From the IMI Funds, to the holders of the
Outstanding Notes issued by IMI, an amount of IMI Funds equal to all
accrued and unpaid interest (including interest on past due amounts) on
such Outstanding Notes;
(iii) To the extent the amount of IMI Funds
distributed pursuant to clause (ii) preceding is not sufficient to pay
all accrued and unpaid interest (including interest on past due
amounts) on the Outstanding Notes issued by IMI, from the remaining FSI
Funds to the holders of such Outstanding Notes issued by IMI an amount
equal to such deficiency;
(iv) From the remaining FSI Funds, to the holders of
the Outstanding Notes issued by FSI an amount equal to the principal
payments (including prepayments) due on such Outstanding Notes;
(v) From the remaining IMI Funds, to the holders of
the Outstanding Notes issued by IMI an amount equal to the principal
payments (including any prepayments) due on such Outstanding Notes;
(vi) To the extent the amount of IMI Funds
distributed pursuant to clause (v) preceding is not sufficient to pay
all principal payments (including prepayments) due on the Outstanding
Notes issued by IMI, from the remaining FSI Funds to the holders of
such Outstanding Notes issued by IMI an amount equal to such
deficiency;
(vii) As to any remaining FSI Funds, to FSI; and
(viii) As to any remaining IMI Funds, to IMI.
If as of any such date of payment the amount of FSI Funds
contained in the Lock Box Account are not sufficient to cover the payments then
due on the Outstanding Notes issued by FSI, then FSI shall pay such deficiency
directly to the applicable holders of such Notes. If as of any such date of
payment the amount of IMI Funds contained in the Lock Box Account are not
sufficient to cover the payments then due on the Outstanding Notes issued by
IMI, then IMI (or FSI as Guarantor of IMI's Obligations) shall pay such
deficiency directly to the applicable holders of such Notes.
(d) Notwithstanding anything to the contrary, after the
receipt by the Collateral Agent of any notice that a Default or Event of Default
has occurred and during the continuance of any Default or Event of Default, the
Collateral Agent shall apply all funds of each Issuer in the Lock Box Account to
prepay the Outstanding Notes issued by such Issuer. If there are any FSI Funds
remaining after the payment of all amounts (principal and interest) owed on the
Outstanding Notes issued by FSI, then to the extent necessary the remaining FSI
Funds shall be applied to prepay the Outstanding Notes issued by IMI until all
amounts on such Notes are paid.
(e) From time to time FSI may elect in accordance with the
applicable partnership agreement or operating agreement to declare (such
declaration to be evidenced by notice from FSI to Collateral Agent setting forth
the amount of such distribution and the scheduled payment date thereof) a
distribution to all partners (both limited and general) of Growth Fund VII or No
Load Growth Fund (as each such declaration as it applies to the related Growth
Fund, a "Distribution Declaration"). If during any Quarterly Period one or more
Distribution Declarations occur and the distributions covered by such
declaration(s) are required to be paid no later than the Business Day preceding
the Quarterly Payment Date next following such Quarterly Period and provided
that FSI's portion of the distributions covered by such Distribution Declaration
exceed the sum of (i) the aggregate of the principal payments due on the
Quarterly Payment Date next following such Quarterly Period and (ii) the amount
(if any) required to be maintained in the Lock Box Account pursuant to Section
3.4(c), then by notice in the form of Exhibit I given to the Collateral Agent
and SunAmerica, IMI may withdraw from the Lock Box Account prior to the
Quarterly Payment Date next following such Quarterly Period an amount up to (but
not in excess of) the total management fees of IMI then contained in the Lock
Box Account; provided, no such withdrawal may occur if a Default or Event of
Default exists or if at any time prior to such date the distributions covered by
any Distribution Declaration have failed to be paid on or before the date such
distributions were to be paid by the terms of the related declaration (and each
such declaration shall contain such a payment date) and the principal and
interest payments due on the related Quarterly Payment Date were not paid by the
expiration of the grace period described in Sections 5.1(a) and (b).
(f) On each Quarterly Payment Date each Issuer may withdraw
its funds contained in the Lock Box Account only (i) if and to the extent there
are any funds of such Issuer remaining in the Lock Box Account after the
Collateral Agent has made the payments then due on the Outstanding Notes of such
Issuer and any of the other Obligations of such Issuer then due but unpaid, and
(ii) no Default or Event of Default exists and, after giving effect to such
withdrawal, no Default or Event of Default shall occur. The applicable Issuer
withdrawing such funds shall deliver to the Collateral Agent together with any
request for a release of funds from the Lock Box Account a certificate with
respect to the foregoing provisions of this Section 3.11(f) in the form of
attached Exhibit J signed by a Responsible Officer of such Issuer.
(g) If any Issuer or the Company receives any payment in
respect of or proceeds resulting from the Collateral or any part thereof, such
party shall deposit such payment or proceeds into the Lock Box Account promptly
after the receipt thereof.
.ECTION 4. EVIDENCE OF ACTS OF NOTE HOLDERS
. Any request, consent, demand, authorization, notice, waiver or other action
required or permitted by this Agreement to be given or taken by the holders of
the Notes may be embodied in and evidenced by one or more instruments of
substantially similar tenor and may be signed or executed by such holders in
person or by agent or agents duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to each Issuer and the Collateral Agent.
. Any request, consent, demand, authorization, notice, waiver or other action of
the holder of any Note shall bind every future holder of the same Note and the
holder of every Note issued in exchange therefor or in lieu thereof, in respect
of anything done or suffered to be done by an Issuer in pursuance of such action
irrespective of whether or not any notation in regard thereto is made upon such
Note.
.ECTION 5. DEFAULTS - REMEDIES
. Any one or more of the following shall constitute an "Event of Default" as the
term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall become due and such default shall continue for more
than five Business Days; or
(b) Default shall occur in the payment of any scheduled
principal on any Note and such default shall continue for more than
five Business Days; or
(c) Default shall occur in the payment of any mandatory
prepayment on any Note and such default shall continue for more than
five Business Days; or
(d) Default shall occur in the payment of any Make-Whole
Amount; or
(e) Default shall occur in the observance or performance by
one or more Issuers or either Guarantor of any covenant or agreement
contained in Section 6.8, 6.14 or 6.16; in each case, to be performed
by one or more Issuers or either Guarantor; or
(f) Default shall occur in the observance or performance by
one or more Issuers or either Guarantor of any provision of this
Agreement (excluding defaults described in clauses (a) through (e)
above) or any other Note Document; in each case, to be performed by any
one or more of the Issuers or either Guarantor which is not remedied to
the satisfaction of the Required Noteholders within 30 days after the
occurrence thereof, or any of the Note Documents shall cease to be in
full force and effect; or
(g) Any representation or warranty made by any one or more of
the Issuers or either Guarantor herein, or made by any one or more of
the Issuers or either Guarantor in any statement or certificate
furnished by any one or more of the Issuers in connection with the
consummation of the sale or delivery of the Notes or furnished by any
one or more of the Issuers or either Guarantor pursuant hereto, is
untrue in any material respect as of the date of the issuance or making
thereof; or
(h) (i) Default shall occur in the repayment of any principal
of or the payment of any interest on any Approved Subordinated Debt and
such default shall not be cured within any applicable grace or cure
period (if any) or breach shall occur in any term of any evidence of
such Debt and such breach shall not be cured within any applicable
grace or cure period (if any) and the effect of such breach is to
permit acceleration of such Approved Subordinated Debt, (ii) default
shall occur in the repayment of any principal of or the payment of any
interest on any Debt of the Company other than any Approved
Subordinated Debt, or breach shall occur in any term of any evidence of
such Debt, in each case exceeding, in the aggregate outstanding
principal amount, $1,000,000 (including undrawn committed or available
amounts and including amounts owing to all creditors under a syndicated
or combined credit arrangement) and such default or breach shall not be
cured within any applicable grace or cure period (if any), or (iii)
breach or violation of any term or provision of any evidence of Debt
referred to in the preceding clause (ii) and of any other loan
agreement, mortgage, indenture, guaranty or other agreement relating
thereto shall occur, the effect of which is to permit acceleration
under the applicable instrument, loan agreement, mortgage, indenture,
guaranty or other agreement, whether or not waived by the note holder
or obligee, and such failure shall not have been cured within the
applicable cure or grace period, or there is an acceleration under the
applicable instrument, loan agreement, mortgage, indenture, guaranty or
other agreement; or
(i) (i) Default shall occur in the repayment of any principal
of or the payment of any interest on any Debt of the Growth Fund, or
breach shall occur in any term of any evidence of such Debt, and in
each case $1,000,000 or more of outstanding principal shall be
immediately due and payable or shall have been accelerated and become
immediately due and payable; or
(j) There shall have occurred a change in the assets,
liabilities, financial condition, operations, affairs or prospects of
the Company or any Issuer, which, in the reasonable determination of
Required Noteholders, has, either individually or in the aggregate, had
a Material Adverse Effect; or
(k) (i) Any corporation or Person, or a group of related
corporations or Persons, shall acquire (A) beneficial ownership of in
excess of fifty percent (50%) of the outstanding Stock or other voting
interest having ordinary voting power to elect a majority of the
directors, managers or trustees of the Company (irrespective of whether
at the time stock of any other class or classes shall have or might
have voting power by reason of the happening of any contingency) or (B)
all or substantially all of the Property of the Company, or (ii) a
majority of the board of directors of the Company, at any time, shall
be composed of Persons other than (A) Persons who were members of the
board of directors of the Company on the date of this Agreement, or (B)
Persons who subsequently become members of the board of directors of
the Company and who either (1) are appointed or recommended for
election with the affirmative vote of a majority of the directors in
office as of the date of this Agreement or (2) are appointed or
recommended for election with the affirmative vote of a majority of the
board of directors of the Company who are described in clauses (ii)(A)
and (ii)(B)(1) above, or (iii) during any consecutive 24-month period
more than two out of the top five Company's senior management as of the
date of this Agreement shall have ceased to devote substantially all of
their business time to managing the Company; or
(l) (i) Any Reportable Event or a Prohibited Transaction shall
occur with respect to any Plan or Multiemployer Plan; (ii) a notice of
intent to terminate a Plan or Multiemployer Plan under Title IV of
ERISA shall be filed (excluding the termination of the ESOP which has
previously occurred); (iii) a notice shall be received by the plan
administrator of a Plan or Multiemployer Plan that the PBGC has
instituted proceedings to terminate such plan or appoint a trustee to
administer such plan; (iv) any other event or condition shall exist
which might, in the opinion of the Required Noteholders, constitute
grounds under Title IV of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan or Multiemployer Plan;
(v) the Company or any ERISA Affiliate shall withdraw from a
Multiemployer Plan; (vi) any accumulated funding deficiency within the
meaning of section 302 of ERISA or section 412 of the Code, whether or
not waived, shall exist with respect to any Plan; (vii) the actuarial
present value of the benefit liabilities under any Plan shall exceed
the current value of the assets (computed on a plan termination basis
in accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities (for this purpose, the term "actuarial present
value of the benefit liabilities" shall have the meaning specified in
section 4041 of ERISA); (viii) a liability to or on account of a Plan
or Multiemployer Plan is incurred under sections 515, 4062, 4063, 4064,
4201 or 4204 of ERISA; or (ix) a Plan amendment shall result in an
increase in current liability such that the Company or any ERISA
Affiliate is required to provide security to such Plan under section
401(a)(29) of the Code; and in case of the occurrence of one or more
events or conditions described in clauses (i) through (ix) above, such
events or conditions are more likely than not to result in an aggregate
liability of the Company and ERISA Affiliates, as determined in good
faith by the Required Noteholders, in excess of five percent (5%) of
Consolidated Tangible Net Worth, and such liability shall not be
covered in full, for the benefit of the Company, by insurance
maintained with financially sound and reputable insurance companies
that are not Affiliates; or
(m) Final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 is or are outstanding against any
of the Company, any of its Subsidiaries or any Issuer or against any of
its property or assets, and any one of such judgments has remained
unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a
period of 30 days from the date of its entry; or
(n) Any of the Company, any of its Subsidiaries or any Issuer
causes or suffers an order for relief to be entered with respect to it
under applicable federal bankruptcy law or applies for or consents to
the appointment of a custodian, trustee or receiver for it or for the
major part of its property; or
(o) A custodian, trustee or receiver is appointed for any of
the Company, any of its Subsidiaries or any Issuer, or for the major
part of its property and is not discharged within 30 days after such
appointment; or
(p) Bankruptcy, reorganization, insolvency proceedings, or
other proceedings for relief under any bankruptcy or similar law or
laws for the relief of debtors, are instituted by or against any of the
Company, or any of its Subsidiaries or any Issuer and, if instituted
against it, are consented to or are not dismissed within 60 days after
such institution; or
(q) A default shall occur under the PLM Guaranty or the FSI
Guaranty and such default shall not be cured within any applicable
grace or cure period expressly provided in PLM Guaranty or FSI
Guaranty, as applicable; or
(r) FSI shall resign, withdraw, be removed or transfer its
interest as the general partner or manager of any one or more of the
Growth Funds; or
(s) FSI's or IMI's (as applicable) rights to receive
partnership distributions in respect of the general
partnership/membership interest of FSI in either of Growth Fund VII or
No Load Growth Fund or data processing fees/reimbursements, management
fees or lease negotiation and acquisition fees in respect of any Growth
Fund are abated, reduced, set-off against or terminated other than in
connection with the dissolution or winding up of a Growth Fund not
caused by the resignation, withdrawal or removal of FSI as the general
partner or general manager of the Growth Fund or the dissolution or
bankruptcy of FSI.
. If the holder of any Note or of any other evidence of Debt of the Company or
any Issuer gives any notice or takes any other action with respect to a claimed
default, the Company and each Issuer agrees to give written notice within three
Business Days of such event to the Collateral Agent and all holders of the then
Outstanding Notes.
. When any Event of Default described in Section 5.1(a), (b), (c) or (d) has
happened and is continuing, any holder of any Note may, and when any Event of
Default described in Sections 5.1(e) through (m), inclusive, or described in
Sections 5.1(q), (r) or (s) has happened and is continuing, the Required
Noteholders may, by notice to the Issuers, declare the entire principal and all
interest accrued on all Notes to be, and all Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event of
Default described in Sections 5.1(n), (o) or (p) has occurred, then all of the
then Outstanding Notes shall immediately become due and payable without
presentment, demand or notice of any kind. The Notes are not prepayable except
as provided in Article 3. Accordingly, any acceleration following an Event of
Default shall be deemed to be a breach of Article 3, and the Issuer of each
Outstanding Note shall pay to each holder of the such Outstanding Note the
entire principal balance of, and accrued interest on, such Note plus, to the
extent permitted by law, the Make-Whole Amount as liquidated damages reasonably
calculated to compensate such holder for loss of its bargain and not as a
penalty. Each Issuer acknowledges that the right of the holders of the Notes to
maintain their investment free and clear of prepayment (except as specifically
provided in Section 3.6) is a valuable right and the provision for payment of
the Make-Whole Amounts by the Issuers if the Notes are accelerated as a result
of an Event of Default is intended to provide compensation for the deprivation
of such right under such circumstances. Without limiting the provisions of
Section 9.17, each Issuer further agrees, to the extent permitted by law, to pay
to the holders of the then Outstanding Notes issued by such Issuer all costs and
expenses incurred by them in the collection of such Notes upon any default
hereunder or thereon, including reasonable compensation to such holders'
attorneys for all services rendered in connection therewith.
. The provisions of Section 5.3 are subject to the condition that if the
principal of and accrued interest on all or any of the then Outstanding Notes
have been declared immediately due and payable by reason of the occurrence of
any Event of Default described in Sections 5.1(e) through (m), inclusive, or
described in Sections 5.1(q), (r) or (s) the Required Noteholders may, by
written instrument given to the Issuers and the Collateral Agent, rescind and
annul such declaration and the consequences thereof; provided, at the time such
declaration is annulled and rescinded:
(a) No judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement; (b) All arrears
of interest upon all the Notes and all other sums payable under the
Notes and under this Agreement (except any principal, interest or
Make-Whole Amounts on the Notes which have become due and payable
solely by reason of such declaration under Section 5.3) shall have been
duly paid; and
(c) Each and every other Default and Event of Default shall
have been made good, cured or waived pursuant to Section 8.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
. 5.5 Default Remedies
(a) The exercise of remedies under this Agreement and the
other Note Documents are granted to the holders from time to time of the
Outstanding Notes and are delegated by such holders to the Collateral Agent to
the extent set forth in this Agreement, the Collateral Agency Agreement, and the
other Note Documents. Pursuant to the Collateral Agency Agreement, the
Collateral Agent shall exercise such remedies for the equal and proportionate
benefit and security of the holders from time to time of the Outstanding Notes
and for the enforcement of the prompt and complete payment when due of all sums
due in connection with this Agreement, the Notes and each of the other Note
Documents and for the performance and observance by the Company and the Issuers
of the covenants, obligations and conditions to be performed and observed by the
Company and the Issuers and all other parties, other than the Collateral Agent
and the holders of Outstanding Notes, to this Agreement and each of the other
Note Documents.
(b) If an Event of Default exists, the Collateral Agent may
exercise all of the rights and remedies delegated or granted to it under this
Agreement, the Collateral Agency Agreement or any of the other Note Documents,
and all of the rights and remedies herein or therein conferred, it being
expressly understood that no such remedy is intended to be exclusive of any
other remedy or remedies; but each and every remedy shall be cumulative and
shall be in addition to every other remedy given herein or therein or now or
hereafter existing at law or in equity or by statute, and may be exercised from
time to time as often as may be deemed expedient by the Collateral Agent.
(c) If an Event of Default exists, the Collateral Agent, to
the extent it may lawfully do so, may also, with or without proceeding with sale
or foreclosure or demanding payment of the Notes, without notice, appropriate
and apply to the payment of the Obligations all or any portion of the Collateral
in its possession and any and all balances, credits, deposits accounts, reserves
or other monies due or owing to the Issuers held by or for the benefit of the
Collateral Agent under this Agreement, any of the other Note Documents or
otherwise.
(d) All covenants, conditions, provisions, warranties,
guaranties, indemnities and other undertakings of the Company and the Issuers
contained in this Agreement, or in any document referred to herein or in any
agreement supplementary hereto or in any of the other Note Documents, shall be
deemed cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements of the Company and the Issuers contained
herein.
. 5.6 Other Enforcement Rights
(a) The Collateral Agent may (but unless first requested so to
do by the Required Noteholders and furnished with indemnity satisfactory to it
pursuant to the Collateral Agency Agreement shall not be under any obligation
to) proceed to protect and enforce this Agreement, the Notes and each other Note
Document by suit or suits or proceedings in equity, at law or in bankruptcy, and
whether for the specific performance of any covenant or agreement herein
granted, or for foreclosure thereunder, or for the appointment of a receiver or
receivers for the foreclosure thereunder, or for the appointment of a receiver
or receivers for the Collateral or any part thereof, for the recovery of
judgment for the Obligations or for the enforcement of any other proper legal or
equitable remedy available under Requirements of Law.
(b) In the event that an Event of Default has occurred and is
continuing and there shall be pending any case or proceeding for the bankruptcy
or for the reorganization or arrangement of the Company or any Issuer under the
federal bankruptcy laws or any other Requirements of Law, or in connection with
the insolvency of the Company or any Issuer, or in the event that a custodian,
receiver or trustee shall have been appointed for the Company, any Issuer or any
of their respective Properties, or in the event of any other proceedings in
respect of the Company, any Issuer or any of their respective Properties, (i)
the Collateral Agent may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Collateral
Agent and of the holders of the Notes allowed in any judicial proceedings
relative to the Company, any Issuer or their respective Properties, and (ii)
irrespective of whether the principal of all of the Notes shall then be due and
payable as therein expressed, by proceedings for the payment thereof, by
declaration or otherwise, the Collateral Agent shall be entitled and empowered
to file and prove a claim for the whole amount of principal, Make-Whole Amounts
(if any) and interest owing and unpaid in respect of the Notes, and any other
sum or sums owing thereon or pursuant thereto or hereto, and to collect and
receive any monies or other Property payable or deliverable on any such claim,
and to distribute the same after the deduction of all amounts due it hereunder,
under the other Note Documents and the Collateral Agency Agreement; and any
receiver, custodian, assignee or trustee in bankruptcy, trustee or debtor in
reorganization or trustee or debtor in any proceedings for the adoption of an
arrangement is hereby authorized by each holder of each Note, by the acceptance
of the Note or Notes held by it, to make such payments to the Collateral Agent,
and, if the Collateral Agent shall consent to the making of such payments
directly to the holders of the Notes, to pay to the Collateral Agent all amounts
due it hereunder and under the other Note Documents or the Collateral Agency
Agreement.
(c) Notwithstanding anything in this Agreement or any other
Note Document to the contrary, the Required Noteholders shall have the right, at
any time, by an instrument or instruments in writing executed and delivered to
the Collateral Agent and providing for indemnity satisfactory to it pursuant to
the Collateral Agency Agreement, to direct the method and place of conducting
all proceedings to be taken in connection with the enforcement of the terms and
conditions hereof and thereof; provided, such direction shall not be otherwise
than in accordance with the provisions of Requirements of Law.
5.7 Effect of Sale, etc.
(a) To the maximum extent permitted by law, any sale or sales
pursuant to the provisions hereof or of any other Note Document, whether under
the power of sale granted thereby or pursuant to any legal proceedings, shall
operate to divest the Company or the applicable Issuer, as the case may be, of
all right, title, interest, claim and demand whatsoever, either at law or in
equity, of, in and to the Collateral, or any part thereof, so sold, and any
Property so sold shall be free and clear of any and all rights of redemption by,
through or under the Company or any Issuer. At any such sale the holder of any
Note may bid for and purchase the Property sold and may make payment therefor as
set forth below, and any holder of Notes so purchasing any such Property, upon
compliance with the terms of sale, may hold, retain and dispose of such Property
without further accountability.
(b) The receipt by the Collateral Agent or by any Person
authorized under any judicial proceedings to make any such sale, of the proceeds
of any such sale shall be a sufficient discharge to any purchaser of the
Collateral, or of any part thereof, sold as aforesaid; and no such purchaser
shall be bound to see to the application of such proceeds, or be bound to
inquire as to the authorization, necessity or propriety of any such sale. In the
event that, at any such sale, any holder of Notes is the successful purchaser,
it shall be entitled, for the purpose of making settlement or payment, to use
and apply its Notes by crediting thereon the amount apportionable and applicable
thereto out of the net proceeds of such sale.
. No course of dealing on the part of the Collateral Agent or any holder of
Notes nor any delay, omission or failure on the part of the Collateral Agent or
any holder of Notes to exercise any right or power shall exhaust or impair such
right or power or operate as a waiver of such right or power or prevent its
exercise during the continuance of a default or otherwise prejudice the
Collateral Agent's or such holder's rights, powers and remedies. Every right and
remedy given by this Article 5 or by law to the Collateral Agent or any holder
of Notes may be exercised from time to time as often as may be deemed expedient
by the Collateral Agent's or such holder's rights, powers and remedies.
. If the Collateral Agent shall have instituted any proceeding to enforce any
right or remedy under this Agreement and such proceeding shall have been
continued or abandoned for any reason, or shall have been determined adversely
to the Collateral Agent, then and in every such event, the Collateral Agent, the
Company, the Issuers and the holders of the Notes shall, to the maximum extent
permitted by law and subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter rights and remedies of the Collateral Agent shall continue as though
no such proceeding had been instituted.
. The proceeds of any exercise of rights with respect to the Collateral, or any
part thereof, and the proceeds and the avails of any remedy hereunder shall be
paid to and applied as follows:
(a) First, to the payment of (i) costs and expenses of
foreclosure or suit or other exercise of a right or remedy, if any, and
(ii) all fees, expenses, liabilities and advances, including legal
expenses and attorneys' fees, incurred or made hereunder, the
Collateral Agency Agreement or under any of the other Note Documents by
the Collateral Agent or the holders of the Notes and (iii) all taxes or
assessments superior to the Security Lien held by the Collateral Agent
hereunder, except any taxes or assessments subject to which said sale
may have been made;
(b) Second, to the payment to the holders of the Notes of the
amounts then due, owing or unpaid on the Notes for principal, interest
and Make-Whole Amounts, if any; and in case such proceeds shall be
insufficient to pay in full the whole amount so due, owing or unpaid
upon the Notes, then ratably according to the aggregate of such
principal and the accrued and unpaid interest and Make-Whole Amounts,
if any, with application on each Note to be made, first, to unpaid
interest thereon, second, to unpaid Make-Whole Amounts, if any, and
third, to the unpaid principal thereof; and
(c) Third, to the payment of the surplus, if any, to the
Issuers (divided among the Issuers according to the relative value of,
as evidenced by sales proceeds received in respect of, the Collateral
sold).
If there is a deficiency in respect of any Note, Guarantors and the
Issuer of such Note shall remain liable therefor and shall forthwith pay the
amount of any such deficiency to the Collateral Agent to be distributed in the
same order set forth above in this Section 5.10.
. No waiver by the Collateral Agent or by the holder of any Note of any default,
whether such waiver be full or partial, shall extend to or be taken to affect
any subsequent default, or to impair the rights resulting therefrom except as
may be otherwise expressly provided herein. No remedy hereunder is intended to
be exclusive of any other remedy, but each and every remedy shall be cumulative
and in addition to any and every other remedy given hereunder or otherwise
existing, nor shall the giving, taking or enforcement of any other or additional
security, collateral or guaranty for the payment of or performance of the
Obligations secured pursuant to this Agreement operate to prejudice, waive or
affect the security of this Agreement or any other Note Document or any rights,
powers or remedies hereunder or thereunder, nor shall the Collateral Agent or
any holder of any Note be required to first look to, enforce or exhaust such
other or additional security, collateral or guaranties.
. 5.12 Limitations on Suits
(a) No holder of any Note shall have the right to institute
any suit, action or proceeding at law or in equity, for the execution of any
power of this Agreement or for any other remedy under or upon this Agreement or
any other Note Document, unless (i) the Required Noteholders shall have made
written request upon the Collateral Agent to exercise the remedies granted to it
under this Agreement; (ii) such holders shall have offered to the Collateral
Agent the indemnity satisfactory to it as provided under the Collateral Agency
Agreement; and (iii) the Collateral Agent shall have refused or omitted to
comply with such request for a period of 15 days after such written request
shall have been received by it.
(b) Such notification, request, offer of indemnity and refusal
or omission are hereby declared, in every case, to be conditions precedent to
the exercise by any holder of a Note of any remedy hereunder; it being
understood and intended that no one or more holders of Notes shall have any
right in any manner whatever by its or their action to enforce any right under
this Agreement, except in the manner herein provided, and that all judicial
proceedings to enforce any provision of this Agreement shall be instituted, had
and maintained in the manner herein provided and for the equal benefit of all
holders of the then Outstanding Notes.
. Nothing in any provision of this Agreement, the Notes or any other Note
Document shall affect or impair the obligation of each Issuer (as to the Notes
issued by such Issuer), which obligation is absolute and unconditional, to pay
the principal of and Make-Whole Amounts (if any) and interest on the Notes to
the respective holders of the then Outstanding Notes on the dates when due, and
at the place in such Notes expressed, whether upon acceleration or otherwise, or
affect or impair the right of action, which is also absolute and unconditional,
of such holders to institute suit to enforce such payment by virtue of the
contract embodied in the Notes.
. Each of the parties to this Agreement and to each other Note Document agrees,
and each holder of any Note by its acceptance thereof shall be deemed to have
agreed, that any court may in its discretion require in any suit for the
enforcement of any right or remedy under this Agreement or such other Note
Document, or in any suit against the Collateral Agent for any action taken or
omitted by it as the Collateral Agent, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claim or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
Collateral Agent, to any suit instituted by any Note holder, or group of Note
holders, holding more than 33% in aggregate principal amount of the then
Outstanding Notes, or to any suit instituted by any Note holder for the
enforcement of the payment of the principal of, or interest or Make-Whole
Amounts (if any) on, any Note, on or after the date when such Note or portion
thereof shall have become due.
. To the extent it lawfully may do so, each Guarantor and each Issuer hereby
covenants that it will not at any time insist upon or plead, or in any manner
claim or take the benefit or advantage of, any stay (except in connection with a
pending appeal), valuation, appraisal, redemption or extension law now or at any
time hereafter in force which, but for this waiver, might be applicable to any
sale made under any judgment, order or decree based on any of the Notes or this
Agreement or any other Note Document; and, to the extent it lawfully may do so,
each Guarantor and each Issuer hereby expressly waives and relinquishes all
benefit and advantage of any and all such laws and hereby covenants that it will
not hinder, delay or impede the execution of any power herein granted to the
holders of the Notes or delegated to the Collateral Agent, but it will suffer
and permit the execution of every such power as though no such law or laws had
been made or enacted.
.ECTION 6. CERTAIN COVENANTS
. The Company and each Issuer agrees to preserve and keep in force and effect
(i) its company existence, (ii) all licenses and permits necessary to the proper
conduct of its business and (iii) all qualifications in each jurisdiction where
the nature of its business or the Property owned by it makes such qualification
necessary. FSI agrees to not resign or otherwise consent to its removal as the
general partner or manager of each Growth Fund, and FSI agrees to not consent to
or join in any amendment or any instrument whereby FSI's ownership interest in
Growth Fund VII or No Load Growth Fund would be reduced or FSI's rights to
receive partnership distributions, fees or other amounts in respect of Growth
Fund VII or No Load Growth Fund would be reduced, abated, suspended or
terminated. IMI agrees to not resign or terminate its status as the party
providing the services relating to, and as the party entitled to receive,
management fees, data processing fees/reimbursements and lease negotiation and
acquisition fees from each Growth Fund, and IMI agrees to not consent to or join
in any amendment or any instrument whereby IMI's rights to receive fees or other
amounts in respect of a Growth Fund would be reduced, abated, suspended or
terminated. IMI shall continue to be a wholly owned subsidiary of FSI, and FSI
shall continue to be a wholly owned subsidiary of the Company.
. 6.2 Insurance
(a) The Company will maintain and keep in force, or will cause to be
maintained and kept in force (to the extent not otherwise maintained and kept in
force in compliance with any Note Document, but without limiting in any manner
the insurance required to be maintained and kept in force under any such Note
Document) insurance of the types and in amounts then customarily carried in
lines of business similar to that of the Company and its Subsidiaries, including
fire, extended coverage, public liability, property damage, environmental hazard
and workers' compensation, in each case carried with financially sound and
reputable insurance companies, excluding in any event all Affiliates of the
Company except to the extent of Permitted Affiliate Insurance (subject to
commercial reasonableness as to each type of insurance). Without limiting the
foregoing, the insurance coverage required to be maintained under this Section
6.2(a) shall insure all Equipment constituting Collateral at not less than the
greater of the applicable Lease stipulation value or the Appraised Value.
(b) The Company shall provide to the Collateral Agent within 30 days
following the Closing Date and on or before January 1 of each year thereafter, a
certificate evidencing the maintenance by it of policies for such insurance.
. The Company and each Issuer will (and the Company will cause its other
Subsidiaries to) promptly pay and discharge all Charges imposed upon it or upon
or in respect of all or any part of its Property or business, all trade accounts
payable in accordance with usual and customary business terms, and all claims
for work, labor or materials, which if unpaid might become a Lien upon any of
its Property; provided, it shall not be required to pay any such Charge, account
payable or claim if (i) the validity, applicability or amount thereof is being
contested in good faith by appropriate actions or proceedings which will prevent
the forfeiture or sale of any of its Property or any material interference with
the use thereof by it, and (ii) if required under GAAP, the Company, the Issuer
or the applicable Subsidiary shall set aside on its books reserves deemed by it
to be adequate with respect thereto. The Company and each Issuer will (and the
Company will cause its other Subsidiaries to) promptly comply in all material
respects with all Requirements of Law, including without limitation, all
Requirements of Law relating to health, safety or the environment.
The Company and each Issuer will maintain, preserve and keep its assets
(whether owned in fee or a leasehold or other interest) in good repair and
working order in accordance with industry standards and from time to time will
make all repairs, replacements, and restorations as are consistent with industry
standards for prudent operation.
. 6.5 Agreement to Deliver Security Documents
(a) Each Guarantor and each Issuer shall from time to time
take all steps necessary or advisable to validate, perfect or maintain the
security interest of the Collateral Agent for the benefit of itself and the
holders of the Notes, in, or to defeat the assertion by any third party of any
material adverse claim with respect to, any interest, right or remedy of the
Collateral Agent or the holders of the Notes in, to or under all or any part of
the Collateral. In addition, each Guarantor and each Issuer hereby irrevocably
authorizes the Collateral Agent, to the extent permitted by law, to execute and
deliver, in the particular Guarantor's name and on the particular Guarantor's
behalf or in the particular Issuer's name and on such Issuer's behalf, such
instruments and documents as may, in the Collateral Agent's or the Required
Noteholders' reasonable judgment, be necessary or desirable to evidence or
protect the Collateral Agent's duly perfected, first priority security interest
in and to the Collateral, subject only to the Permitted Liens, and to execute
and file, in the particular Guarantor's name and on such Guarantor's behalf or
in the particular Issuer's name and on such Issuer's behalf, financing
statements (including amendments and continuation statements) and other security
perfection documentation in such jurisdictions where it may be necessary or
appropriate to validate, perfect or maintain the Collateral Agent's first
priority security interest in and to the Collateral, subject only to the
Permitted Liens. Each Guarantor and each Issuer shall also take such further
action with respect to the Collateral Agent's security interest in the
Collateral as shall be reasonably required by the Collateral Agent or the
Required Noteholders from time to time.
. Each Issuer will punctually pay or cause to be paid the principal and interest
(and Make-Whole Amounts, if any) to become due in respect of the Notes issued by
such Issuer according to the terms thereof. Each Guarantor and each Issuer will
maintain an office where notices, presentations and demands in respect of this
Agreement or the Notes may be made. Each such office shall be maintained at the
address specified for such party in or pursuant to Section 9.3 until 30 days
after such time as such party shall notify the holders of the Notes of any
change of location of such office. Each Issuer will also maintain an office or
agency where the Notes issued by such Issuer may be presented for registration
of transfer, exchange or replacement as provided in Article 2. Each Issuer
hereby initially designates the principal corporate office of such Issuer in San
Francisco, California as its agency for such purpose. Each Issuer will give to
the holders of the Notes prior written notice of any change of location of any
such office or agency. If either Guarantor or any Issuer shall fail to maintain
any such office or agency (and this sentence shall not be deemed to waive such
failure), such presentations may be made at the address specified for such
Guarantor or such Issuer in or pursuant to Section 9.3.
. 6.7 Nature of Business
(a) The Company will not engage in any business other than as
is directly related to the management, ownership, brokerage, investment in,
lease and maintenance of equipment held for lease or sale and the public and
private syndication of investment programs in any of the foregoing businesses.
(b) Each of FSI and IMI shall not engage in any business other
than the business currently conducted by such party.
. Each Issuer may use the proceeds for the sale of the Notes issued by such
Issuer solely for the purpose of making loans to the Company (as evidenced by
loan documentation satisfactory to the Collateral Agent). The Company shall use
such loan proceeds (i) first, to retire the outstanding indebtedness owed on the
Principal Mutual Note Agreement (which retirement shall not occur later than 30
days following the first issuance of Notes) (ii) second, to purchase from time
to time outstanding capital stock of the Company, and (iii) third, as to the
remainder of such proceeds, for other legal purposes in the ordinary course of
business of the Company and its Subsidiaries, subject to all provisions of the
Note Documents. No proceeds from the sale of the Notes shall be used for any
other purpose.
. The Company and its Subsidiaries shall maintain at all times a Consolidated
Total Net Worth of not less than $45,000,000 plus the sum of 50% of Consolidated
Net Income for all periods commencing on and after July 1, 1996.
. The Company and its Subsidiaries shall maintain a minimum Consolidated EBITDA
to Debt Service Ratio of not less than 150%.
. The Company and its Subsidiaries shall maintain a Consolidated Debt to Total
Net Worth Ratio, as at the last day of any of the Company's fiscal quarters, of
no greater than 2 to 1.
. 6.12 Restricted Payments
(a) The Company will not declare any dividend which is payable
more than 60 days after the date of declaration thereof.
(b) None of the Company, any of its Subsidiaries or any Issuer
shall make any Investment in any Person nonconsolidated with the Company for the
purpose of or having the effect of repaying Debt of such Person.
. None of the Company, any of its Subsidiaries or any Issuer will, without the
prior written consent of the Required Noteholders, create or incur, or suffer to
be incurred or to exist, any Lien on its Property, whether now owned or
hereafter acquired, or upon any income or profits therefrom, or transfer any
Property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its general creditors, or pledge the Stock of any
Subsidiary, except for the following Liens ("Permitted Liens"):
(a) Liens for Charges or levies and liens securing claims or
demands of mechanics and materialmen, provided that payment thereof is
not at the time required by Section 6.3;
(b) Liens of or resulting from any judgment or award, the time
for the appeal or petition for rehearing of which shall not have
expired, or in respect of which it shall at any time in good faith be
prosecuting an appeal or proceeding for a review and in respect of
which a stay of execution pending such appeal or proceeding for review
shall have been secured;
(c) Liens incidental to the conduct of business or the
ownership of property or assets (including warehousemen's and
attorneys' liens and statutory landlords' liens), or to secure
statutory obligations, or other liens of like general nature incurred
in the ordinary course of business and not in connection with the
borrowing of money, provided in each case, the obligation secured is
not overdue or, if overdue, is being contested in good faith by
appropriate actions or proceedings;
(d) Reservations, exceptions, easements, rights-of-way,
conditions, restrictions, leases, and other similar title exceptions or
encumbrances affecting real property that were not incurred in the
borrowing of money and that, individually and in the aggregate, do not
materially detract from the value of such property or materially
interfere with the use in the ordinary conduct of its business as such
business is proposed to be conducted;
(e) Liens granted to the holders of the Notes or the
Collateral Agent, securing the Notes or other Obligations;
(f) Liens securing the Existing Senior Debt;
(g) Liens securing the Short Term Warehouse Debt (which Liens
shall encumber only the Equipment Assets acquired with the Short Term
Warehouse Debt and the proceeds of such assets); and
(h) Liens securing Non-Recourse Secured Debt (which Liens
shall encumber only the Equipment Assets acquired with such
Non-Recourse Secured Debt and the proceeds of such assets).
Without limiting the foregoing, no Lien shall be permitted to exist in respect
of the partnership interests owned by FSI in respect of the Growth Funds
(excluding PLM Equipment Growth Fund VII and Professional Lease Management
Income Fund, L.L.C.) or in any partnership distributions or proceeds applicable
to such partnership interests.
None of the Company, any of its Subsidiaries or any Issuer will, without the
prior written consent of the Required Noteholders, (i) consolidate with or be a
party to a merger with any other Person or (ii) Dispose, directly or indirectly,
in one transaction or a series of transactions, of all or substantially all of
its assets or (iii) form or own any interest in any subsidiary, partnership or
other entity except as permitted under Section 6.17; provided, the Company may
merge with one or more of its wholly-owned Subsidiaries if the Company is the
survivor of the merger; provided further, the Company may effect clause (i) or
(ii) preceding if the successor entity or acquiror (as applicable) has a debt
rating of BBB (or equivalent) or better issued by a NRSRO and the successor or
acquiror agrees to assume all of the Company's and Issuers' obligations under
the Note Documents in form satisfactory to the Required Noteholders. If the
Required Noteholders fail to notify the Company that they are refusing their
consent to a transaction for which their consent is required under this Section
on or before the 60th day after the Company requests such consent in writing,
the Required Noteholders will be deemed to have consented to such transaction.
If the Required Noteholders consent (or are deemed to consent) to a transaction
covered by this Section 6.14, (A) if the closing of such transaction does not
occur with 60 days after such consent (or deemed consent) the Company must
request consent to such transaction again, and (B) no transaction covered by
clauses (i) or (ii) of this Section 6.14 shall become effective unless and until
the successor or acquiror agrees to assume all of the Company's and Issuers
obligations under the Note Documents in form satisfactory to the Required
Noteholders.
. None of the Company, any of its Subsidiaries or any Issuer will enter into or
be a party to any transaction or arrangement with any Affiliate (including
without limitation, the purchase from, sale to or exchange of property with, or
the rendering of any service by or for, any Affiliate), except upon fair and
reasonable terms no less favorable to it than would be obtained in a comparable
arm's-length transaction with a Person other than an Affiliate.
. None of the Company, any of its Subsidiaries or any Issuer may repurchase or
make any offer to repurchase any Notes unless the offer has been made to
repurchase Notes, pro rata, from all holders of the then Outstanding Notes at
the same time and upon the same terms. In case the Company, any of it
Subsidiaries or any Issuer repurchases any Notes, such Notes shall thereafter be
cancelled and no Notes shall be issued in substitution therefor.
. The Company shall not make or suffer to exist, or permit or suffer any of its
Subsidiaries or any Issuer to make or suffer to exist, any Investments in any
Person, except the following:
(a) Investments existing on the Closing Date;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any
agency or any state thereof maturing within 180 days from the date of
acquisition thereof; (ii) commercial paper maturing no more than 180
days form the date of creation thereof and currently rated at least
"A-1" by Standard & Poor's Ratings Group or "P-1" by Moody's Investors
Service, Inc.; (iii) certificates of deposit, maturing no more than 180
days from the date of investment therein, issued by commercial banks
incorporated under the laws of the United States of America, or any
State thereof, and each having combined capital, surplus and undivided
profits of not less than $200,000,000 and currently rated at least
"A-1" by Standard & Poor's Ratings Group or "P-1" by Moody's Investors
Service, Inc.; (iv) time deposits, maturing no more than 180 days from
the date of creation thereof, with commercial banks having membership
in the FDIC and in amounts not exceeding the maximum amounts of
insurance thereunder; and (v) demand deposits on deposit in accounts
maintained at any FDIC insured bank;
(c) Investments in the form of intercompany loans or advances
to or in the Company, by any Subsidiary of the Company if and only if,
at the request of the Required Noteholders, the Subsidiary making such
loan or advance executes a subordination agreement subordinating such
Debt to the Notes and the Obligations;
(d) Deposits on, or Investments in, Equipment Assets by the
Company;
(e) Investments by the Company consisting of the acquisition
of the Voting Stock or all or substantially all of the assets of
Persons engaged in businesses similar to the business of the Company;
(f) Investments by the Company consisting of the acquisition
of Portfolio Assets;
(g) Investments by the Company or FSI consisting of capital
contributions to PLM Securities Corp., solely to the extent necessary
to enable PLM Securities Corp., to comply with the net capital
requirements to which it is subject as a broker-dealer registered with
the National Association of Securities Dealers;
(h) Investments by the Company consisting of capital
contributions to Transportation Equipment Indemnity Company, Ltd.,
solely to the extent necessary at the time such Investment is made,
based on financial calculations performed by KPMG Peat Marwick, or of
other independent public accountants of recognized national standing,
to enable Transportation Equipment Indemnity Company, Ltd. to comply
with the Bermuda insurance code or any governmental regulations
pertaining thereto;
(i) Investments by FSI or TEC in existence as of February 1,
1988;
(j) Investments by FSI or TEC in any limited partnership of
which FSI or TEC is the general partner or in any corporation or
limited liability company of which FSI or TEC is manager; provided that
(i) without limiting the other provisions of this Section 6, all Debt
of such Person shall be Non-Recourse to the Company and its
Subsidiaries except FSI or TEC, as applicable, and (ii) such Person
shall be engaged in a business reasonably similar to any of the
businesses engaged in by the Company and its Subsidiaries as of the
date of this Agreement;
(k) Investments by the Company or TEC in Residual Interests;
and
(l) Investments by the Company in leveraged leases.
. (a) Immediately upon the Company or any Issuer becoming aware of the existence
of any condition or event which constitutes a Default or an Event of Default,
the Company or such Issuer shall deliver to the Collateral Agent and the holders
of the then Outstanding Notes a written notice specifying the nature and period
of existence thereof and what action the Company or the Issuer is taking or
proposes to take with respect thereto.
(b) Promptly following the commencement of an action, suit or
proceeding against (or upon the knowledge of the Company or any Issuer of an
action, suit or proceeding threatened against or affecting) the Company or any
Issuer before any court, arbitrator or governmental body, agency or official (i)
which in any manner draws into question the validity or enforceability of this
Agreement or any other Note Document, (ii) which involves the resignation,
withdrawal, removal or transfer of its interest by FSI as a general partner or
manager of any Growth Fund or the conversion of FSI's general partnership
interest in a Growth Fund to a limited partnership interest, (iii) which
involves the actual or threatened suspension, abatement, reduction, set-off
against or termination of any fee, partnership interest distributions or other
monies to which any Issuer would be entitled to receive but for such action,
(iv) which involves the actual or threatened resignation, withdrawal, removal or
termination of IMI as the equipment manager of or provider of data processing,
lease negotiation or equipment acquisition services to any Growth Fund, or (v)
which involves any breach of any state or federal securities laws in respect of
any Growth Fund or any breach of fuduciary duty on the part of FSI as general
partner or manager of any Growth Fund, the Company or any Issuer shall deliver
to the Collateral Agent and the holders of the then Outstanding Notes a written
notice specifying the nature and period of existence thereof and what action the
Company or the Issuer is taking or proposes to take with respect thereto.
. The Company and each Issuer will keep proper books of record and account in
which full and correct entries will be made of all dealings or transactions of
or in relation to the business and affairs of the Company, such Subsidiary and
such Issuer, in accordance with generally accepted principles of accounting
consistently maintained (except for changes disclosed in the financial
statements furnished pursuant to this Section 6.19 and concurred in by the
Independent Public Accountants referred to in Section 6.19(b)), and will furnish
to each holder of the then Outstanding Notes and the Collateral Agent (in
duplicate if so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any
event within 45 days after the end of each quarterly fiscal period
(except the last) of each calendar year, copies of:
(i) consolidated balance sheets of the Company and
its Subsidiaries and their respective successors as of the close of
such period, and
(ii) consolidated statements of income, cash flows
and owners' equity of the Company and its Subsidiaries and their
respective successors for the portion of the calendar year ending with
such period,
in each case setting forth in comparative form the figures for the
corresponding period of the preceding calendar year, all in reasonable
detail and certified as complete and correct, subject to changes
resulting from year-end adjustments, by an authorized financial officer
of the Company;
(b) Annual Statements. As soon as available and in any event
within 120 days after the end of each calendar year, copies in
duplicate of:
(i) consolidated balance sheets of the Company and
its Subsidiaries and their respective successors as of the close of
such calendar year, and
(ii) consolidated statements of income, cash flows
and owners' equity of the Company and its Subsidiaries and their
respective successors for such calendar year, in each case setting
forth in comparative form the figures for the preceding calendar year,
all in reasonable detail and accompanied by an unqualified opinion
thereon of a firm of an Independent Public Accountant selected by the
Company to the effect that the financial statements have been prepared
in accordance with generally accepted accounting principles and that
the examination of such accountants in connection with such financial
statements has been made in accordance with GAAP and, accordingly,
includes such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit, if any, of the Company made by
independent accountants;
(d) Compliance Certificates. As soon as practicable and in any
event within 60 days after the end of each fiscal quarter of the
Company (including, without limitation, the fiscal quarter of the
Company most recently completed prior to the date hereof), except with
respect to the final fiscal quarter of each fiscal year, in which case
as soon as possible and in any event within 120 days after the end of
such fiscal quarter, a Compliance Certificate dated on the execution
date thereof but effective as of the last day of such fiscal quarter,
duly executed by a Responsible Officer of the Company, with appropriate
insertions satisfactory to the Required Noteholders, in their sole
discretion;
(e) SEC Filings. As soon as available and in no event later
than five Business Days after the same shall have been filed with the
SEC, a copy of each Form 8-K Current Report, Form 10-K Annual Report,
Form 10-Q Quarterly Report, Annual Report to Shareholders, Proxy
Statement or Registration Statement of the Company or any of its
Subsidiaries;
(f) Master Lease Summary Report. Within 45 days after the last
day of each calendar quarter, a report listing each item of Equipment
and the Capitalized Cost thereof, and including with respect to each
such item (other than with respect to (i) Rental Yard Trailers, (ii)
marine vessels subject to a Marine Vessel Pooling Arrangement, and
(iii) marine containers subject to a Marine Container Pooling
Arrangement), showing the Lease with respect thereto and describing, as
to each such Lease, the Lessee thereunder, the then current monthly
rental payment thereunder, the initial term thereof, the scheduled
expiration date thereof and such other information relating to such
Lease as the Required Noteholders may reasonably require, and listing
separately with respect to all (1) Rental Yard Trailers, (2) marine
containers subject to Marine Container Pooling Arrangements and (3)
marine vessels subject to Marine Vessel Pooling Arrangements, the
aggregate utilization thereof and the aggregate lease or rental revenue
obtained therefrom, in each case based on the best information then
reasonably available to the Company;
(g) ERISA. (i) Promptly and in any event within ten days after
the Company or any Subsidiary knows or has reason to know of the
occurrence of a Reportable Event with respect to a Plan with regard to
which notice must be provided to the PBGC, a copy of such materials
required to be filed with the PBGC with respect to such Reportable
Event and in each such case a statement of a Responsible Officer of the
Company or any Subsidiary setting forth details as to such Reportable
Event and the action which the Company or an ERISA Affiliate, as
appropriate, proposes to take with respect thereto; (ii) promptly and
in any event within ten days after the Company or any Subsidiary knows
or has reason to know of the occurrence of any Prohibited Transaction
that could result in liability, directly or indirectly, to the Company
or an ERISA Affiliate, a written notice signed by a Responsible Officer
of the Company or any Subsidiary specifying the nature thereof, what
action the Company or the ERISA Affiliate, as appropriate, is taking or
proposes to take with respect thereto, and, when known, any action
taken or proposed by the IRS, the Department of Labor or the PBGC with
respect thereto, (iii) promptly after receipt of each actuarial report
for any Plan and each annual report for any Multiemployer Plan, true
and complete copies of each such report, (iv) immediately upon becoming
aware that a Multiemployer Plan has been terminated, that the
administrator or plan sponsor of a Multiemployer Plan intends to
terminate a Multiemployer Plan, or that the PBGC has instituted or
intends to institute proceedings under Title IV of ERISA to terminate a
Multiemployer Plan, a written notice signed by a Responsible Officer of
the Company or any Subsidiary specifying the nature of such occurrence
and any other information relating thereto requested by the Collateral
Agent, (v) promptly and in any event within ten days after the Company
or any Subsidiary knows or has reason to know of any condition existing
with respect to a Plan that presents a material risk of termination of
the Plan, imposition of an excise tax, requirement to provide security
to the Plan or incurrence of other liability by the Company or any
ERISA Affiliate a statement of a Responsible Officer of the Company or
any Subsidiary describing such condition; (vi) at least ten days prior
to the filing by any plan administrator of a Plan of a notice of intent
to terminate such Plan, a copy of such notice; (vii) at least ten days
prior to the filing thereof with the Secretary of the Treasury, a copy
of any application by the Company or an ERISA Affiliate for a waiver of
the minimum funding standard under Section 412 of the Code; (viii)
promptly and in no event more than ten days after the filing thereof
with the IRS, copies of each annual report which is filed on Form 5500,
together with certified financial statements for the Plan (if any) as
of the end of the applicable plan year and actuarial statements on
Schedule B to such Form 5500; (ix) promptly and in any event within ten
days after it knows or has reason to know of any event or condition
that might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
Plan, a statement of a Responsible Officer of the Company or any ERISA
Affiliate describing such event or condition; (x) promptly and in no
event more than ten days after receipt thereof by the Company or any
ERISA Affiliate, a copy of each notice received by the Company or an
ERISA Affiliate concerning the imposition of any withdrawal liability
with respect to a Multiemployer Plan; (xi) promptly after receipt
thereof a copy of any notice the Company or any ERISA Affiliate may
receive from the PBGC or the IRS with respect to any Plan or
Multiemployer Plan;
(h) Supplemental Information; Notice of Material Adverse
Effect, Default or Event of Default. Immediately upon becoming aware of
any event that has resulted in or could reasonably be expected to
result in a Material Adverse Effect, Default or Event of Default,
notice with respect thereto, and if no notice under this Section
6.19(h) or Section 6.18 is given within any calendar year, within 60
days after the end of each such calendar year, a certificate by a
Responsible Officer of the Company and of each Issuer stating that no
Material Adverse Effect, Default or Event of Default has occurred
during such calendar year and that the Company and each Issuer was in
compliance with the covenants contained in Article 6 during such
calendar year;
(i) Supplemental Disclosure. Immediately upon becoming aware
of any material matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be
set forth or described by the Company or any Issuer in this Agreement
or any of the other Note Documents (including all Schedules and
Exhibits hereto or thereto) or which is necessary to correct any
information set forth or described by the Company or any Issuer
hereunder or thereunder or in connection herewith which has been
rendered inaccurate thereby;
(j) Requested Information. With reasonable promptness, such
other data and information as the Collateral Agent, the Rating Agency
or any holder of the then Outstanding Notes may reasonably request; and
(k) Information Required by Rule 144A. The Company and each
Issuer will, upon the request of the holder of any Outstanding Note
issued by such Issuer, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule
144A under the Securities Act in connection with the resale of Notes,
except at such times as the Company is subject to the reporting
requirements of section 13 or 15(d) of the Exchange Act. For the
purpose of this paragraph, the term "qualified institutional buyer"
shall have the meaning specified in Rule 144A under the Securities Act.
Without limiting the foregoing, the Company and each Issuer will permit each
holder of a then Outstanding Note that is a financial institution or an
insurance company or that represents holders of at least 10% in aggregate
principal amount of the Outstanding Notes (or such Persons as any of them may
designate), (in each case while a Default or Event of Default has occurred and
is continuing at the Company's or the Issuer's expense with respect to
out-of-pocket expenses) to visit and inspect, the Company's and each Issuer's
books of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss the Company's and each Issuer's affairs, finances and
accounts with its respective officers, employees, and independent public
accountants (and by this provision the Company and each Issuer's authorizes said
accountants to discuss with such holders and their respective designees the
finances and affairs of the Company and each Issuer's) all at such reasonable
times and as often as may be reasonably requested.
. Without the prior written consent of the Required Noteholders, none of the
Company or any Issuer will not amend in any material respect any one or more of
the Note Documents.
. The Company shall have the right to make payments in respect of any Approved
Subordinated Debt including regularly scheduled installments of principal,
interest and fees, and prepayments; provided, no such payment shall be made if,
as of the date of such payment, any Event of Default or Default shall have
occurred and be continuing or if, immediately after giving effect to such
payment, any Event of Default or Default would have occurred.
. The Company shall cause each Subsidiary to distribute to the Company all of
its available cash to the extent it is not reasonably necessary for the
operation of such Subsidiary's business, subject to the provisions of the Note
Documents applicable to each Issuer.
. In addition to the obligations and documents that this Agreement requires the
Company or an Issuer to perform, the Company and each Issuer shall (and the
Company shall cause any of its Subsidiaries to) promptly upon request by the
Collateral Agent or the Required Noteholders do, execute, acknowledge, deliver,
record, re-record, file, re-file, register and re-register, any and all such
further acts, deeds, conveyances, security agreements, mortgages, assignments,
estoppel certificates, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments as the Collateral Agent or the Required
Noteholders, as the case may be, may reasonably require from time to time in
order (i) to effectuate the purposes of this Agreement or any other Note
Document, (ii) to perfect and maintain the validity, effectiveness and priority
of any of the Note Documents and the Security Liens intended to be created
thereby, and (iii) to assure, convey, grant, assign, transfer, preserve, protect
and confirm to the Collateral Agent and the Required Noteholders the rights
granted or now or hereafter intended to be granted to the Collateral Agent or
the Required Noteholders under any Note Document or the Collateral Agency
Agreement or under any other document executed in connection therewith.
. All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or otherwise fall within the
limitations of, another covenant, shall not avoid the occurrence of a Default or
Event of Default if such action is taken or condition exists.
. 6.25 Borrowing Base Certificates
(a) As soon as available and in any event not later than 15
days after the end of each calendar month or as may be otherwise required
pursuant to the terms hereof, a Borrowing Base Certificate (prepared as of the
end of the calendar month immediately preceding the date such Borrowing Base
Certificate is delivered to the Collateral Agent, in the case of monthly
Borrowing Base Certificates, and as of the most recent date feasible in the case
of other Borrowing Base Certificates), substantially in the form of Exhibit B or
another form agreed to by Collateral Agent, in each case certified by a
Responsible Officer of the Company and each Issuer. The portion of each
Borrowing Base Certificate relating to the General Partner Amount shall be based
on the most recently prepared Company Appraisal, and each Company Appraisal
prepared immediately following the preparation of an Independent Appraisal shall
reflect (as to the Equipment covered by such Independent Appraisal) Appraised
Values not to exceed those contained in such Independent Appraisal.
(b) If FSI shall resign or withdraw or be removed or transfer
its interest as the general partner or manager of any one or more of the Growth
Funds, then upon the occurrence thereof the Company or FSI shall give written
notice of such event to the Collateral Agent and the holders of the Outstanding
Notes. In such event the Company and each Issuer shall prepare and deliver to
the Collateral Agent and the holders of the Outstanding Notes a revised and
updated Borrowing Base Certificate, within 15 days following such event, each
such certificate to be prepared on the basis of excluding from the FSI Borrowing
Base and the IMI Borrowing Base any Equipment owned or management fees, data
processing expense reimbursements/fees or lease negotiation or acquisition fees
payable by each such Growth Fund as to which such event has occurred.
(c) If any Data Processing Contract, Management Contract or
Equipment Services Contract shall be terminated, then upon the occurrence
thereof the Company or IMI shall give written notice to the Collateral Agent and
the holders of the Outstanding Notes of such event. In such event the Company
and each Issuer shall prepare and deliver to the Collateral Agent and the
holders of the Outstanding Notes a revised and updated Borrowing Base
Certificate, within 15 days following such event, such certificate to be
prepared on the basis of excluding from the IMI Borrowing Base any fees or other
amounts payable under such contract.
(d) The Company and each Issuer shall provide to the
Collateral Agent such information as may be requested by the Collateral Agent
from time to time in respect of the data relied upon by the Company or the
Issuers in preparing any part of a Borrowing Base Certificate.
(e) Within 120 days following the end of each calendar year
(commencing with calendar year 1996), the Company shall cause the Company's
Independent Public Accountants to perform a review on a sampling basis of the
Company's and each Issuer's books and records to determine the accuracy of the
Borrowing Base Certificates prepared by the Company during such year. No later
than 30 days following the Closing Date the Company and SunAmerica shall agree
upon (and set forth in writing) the procedure to be followed by the Company's
Independent Accountants in performing such review (as agreed to, the "Borrowing
Base Review Procedures").
(f) In preparing estimates of Projected Renewal Rentals, the
Company agrees (i) to prepare and update such estimates on a regular basis (no
less frequently than quarterly) and in good faith and in the ordinary course of
business (taking into account matters typically considered by the Company,
including, without limitation, age and condition of the Equipment, legal
regulations and market environment) and (ii) to memorialize such estimates in
records of the Company specifically kept for such purpose.
. 6.26 Appraisals
(a) The Company has delivered (or will within five days
following the Closing Date) to the Collateral Agent a Company Appraisal covering
all of the Equipment owned by the Growth Funds as of the Closing Date. Within 60
days following the Closing Date the Company will cause an Independent Appraisal
to be prepared and delivered to the Collateral Agent in respect of the Equipment
contained in each of the following categories: vessels, aircraft and railcars.
(b) Commencing with calendar year 1997, once during each
calendar year the Collateral Agent may by notice to the Company require an
Independent Appraisal to be performed with respect to all Equipment.
(c) On no less than a quarterly basis the Company will update
the books and records maintained in respect of the Equipment to reflect the
Company's good faith determination of the Appraised Value of the Equipment on an
item by item basis. If an item of Equipment has been sold within the six month
period preceding the date of a Company Appraisal or Independent Appraisal
(provided such sale is on an arms length basis in a negotiated or bid
transaction rather than pursuant to a stipulated price previously agreed to by
the seller and the buyer [the preceding term stipulated price shall not be
deemed to cover a fair market value purchase option granted to a Lessee under a
Lease]), then the Company or Independent Appraiser (as applicable) shall apply
the sales price of such item of Equipment (net of customary sales costs) to any
other comparable item of Equipment with necessary adjustments for differences in
age, mileage, usage, number of cycles, recent market conditions and other
similar factors; provided, the Company may elect to use as the Appraised Value
of such comparable Equipment a value that is less than such net sales price.
(d) The Company shall make available to the Collateral Agent
from time to time upon request copies of the Company's or the Issuers' records
reflecting the Appraised Value of the Equipment as established by the Company.
In addition, in the event of any material write down in the Appraised Value of a
category of Equipment or an item of Equipment with an Appraised Value (prior to
such write down) of $7,500,000 or more (as to a category of Equipment) or
$1,000,000 or more (as to an item of Equipment), the Company shall provide to
the Collateral Agent a reasonably detailed description of the reason for such
write down. In determining the Appraised Value of each item of Equipment, the
Company and the Independent Appraiser shall assume that such item of Equipment
is sold within 180 days following the date of such appraisal.
.ECTION 7. COLLATERAL AGENT
By its purchase of a Note, each Purchaser appoints SunAmerica as the
initial Collateral Agent. The Company and the Issuers jointly and severally
hereby covenant and agree to pay the Collateral Agent from time to time, and the
Collateral Agent shall be entitled to, compensation as agreed for all services
rendered by it hereunder and under the other Note Documents and in the exercise
and performance of any of its powers and duties hereunder and thereunder, which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust, and the Company and each Issuer
jointly and severally covenant and agree to pay or reimburse the Collateral
Agent upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Collateral Agent in accordance with the provisions of
this Agreement, the Collateral Agency Agreement or the other Note Documents
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all the Persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its gross negligence or
wilful misconduct. Except as is expressly set forth in this Agreement or the
Note Documents, the Collateral Agent agrees that it shall have no right against
any holder for the payment of compensation for its services hereunder or under
any of the Note Documents or any expenses or disbursements incurred in
connection with the exercise and performance of its powers and duties hereunder
or thereunder or any indemnification against liability that it may incur in the
exercise and performance of such powers and duties, but on the contrary shall,
subject to the provisions hereof, look solely to the Company and the Issuers for
such payment and indemnification. THE COMPANY AND EACH ISSUER JOINTLY AND
SEVERALLY HEREBY INDEMNIFY THE COLLATERAL AGENT FOR, AND HOLD IT HARMLESS
AGAINST, ANY LOSS, LIABILITY OR EXPENSE INCURRED WITHOUT GROSS NEGLIGENCE OR
WILFUL MISCONDUCT ON ITS PART, ARISING OUT OF OR IN CONNECTION WITH THE
ACCEPTANCE OR ADMINISTRATION OF THIS AGREEMENT, THE OTHER NOTE DOCUMENTS OR THE
COLLATERAL AGENCY AGREEMENT, INCLUDING THE COSTS AND EXPENSES OF DEFENDING
ITSELF AGAINST ANY CLAIM OR LIABILITY IN CONNECTION WITH THE EXERCISE OR
PERFORMANCE OF ANY OF ITS POWERS OR DUTIES HEREUNDER AND UNDER THE NOTE
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY LOSS, LIABILITY OR EXPENSE
RELATING TO FEDERAL, STATE, LOCAL, OR FOREIGN LAW, INCLUDING SECURITIES,
ENVIRONMENTAL LAW AND COMMERCIAL LAW OR OTHER REQUIREMENTS OF LAW, WHICH ARISES
UNDER COMMON LAW OR AT EQUITY OR IN CONTRACT OR OTHERWISE. THE FOREGOING
INDEMNITY SHALL COVER LOSSES, LIABILITIES OR EXPENSES RESULTING FROM THE
ORDINARY NEGLIGENCE OF THE COLLATERAL AGENT, WHETHER SOLE, JOINT, CONTRIBUTORY
OR CONCURRENT.
.ECTION 8. AMENDMENTS, WAIVERS AND CONSENTS
. Any term, covenant, agreement or condition of this Agreement may, with the
consent of the Company and the Issuers, be amended or compliance therewith may
be waived (either generally or in a particular instance and either retroactively
or prospectively), if and only if the consent in writing of the Required
Noteholders shall have been obtained; provided, without the written consent of
the holders of all of the then Outstanding Notes, no such waiver, modification,
alteration or amendment shall be effective (i) which will extend the time of
payment of the principal of or the interest on any Note or reduce the principal
amount thereof or change the rate of interest thereon, or (ii) which will change
any of the provisions with respect to optional prepayments, or (iii) which will
change the percentage of holders of the Notes required to consent to any such
amendment, alteration or modification or to take any other action or give any
other consent under this Agreement; and further provided, without the consent in
writing of the Collateral Agent, no such waiver, modification, alteration or
amendment shall be effective which will change Section 5.10(a), Article 7 or
this Section 8.1.
. Any such amendment or waiver shall apply equally to all of the holders of the
then Outstanding Notes and shall be binding upon them, upon each future holder
of any Note and upon the Company and the Issuers, whether or not such Note shall
have been marked to indicate such amendment or waiver. No such amendment or
waiver shall extend to or affect any obligation not expressly amended or waived
or impair any right consequent thereon.
.ECTION 9. MISCELLANEOUS; EXPENSES, TAXES AND INDEMNIFICATION
. Neither this Agreement nor any of the rights or obligations hereunder can be
assigned by the Company or any Issuer without the prior written consent of the
Required Noteholders. Subject to the immediately preceding sentence, whenever
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all the covenants,
promises and agreements in this Agreement contained by or on behalf of the
Company and each Issuer shall bind and inure to the benefit of the respective
successors and assigns of such parties whether so expressed or not.
. The unenforceability or invalidity of any provision or provisions of this
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
. All communications provided for herein shall be in writing and shall be
(unless otherwise required by the specific provision hereof in respect of any
matter) delivered personally, deposited in the United States mail, first class,
or sent by telecopy or telefax and confirmed by United States first class mail,
addressed as follows:
If to the Company:
PLM International, Inc.
One Market
Steuart Street Tower, Suite 900
San Francisco, CA 94105-1301
Attn: Chief Financial Officer and General Counsel
Telecopy: (415) 905-7256
Telephone number: (415) 974-1399
If to FSI:
c/o PLM International, Inc.
One Market
Steuart Street Tower, Suite 900
San Francisco, CA 94105-1301
Attn: Chief Financial Officer and General Counsel
Telecopy: (415) 905-7256
Telephone number: (415) 974-1399
If to IMI:
c/o PLM International, Inc.
One Market
Steuart Street Tower, Suite 900
San Francisco, CA 94105-1301
Attn: Chief Financial Officer and General Counsel
Telecopy: (415) 905-7256
Telephone number: (415) 974-1399
If to the holders of the Notes, to the addresses set forth on
Schedule 1.
If to the Collateral Agent:
SunAmerica Life Insurance Company
c/o SunAmerica Corporate Finance
700 Louisiana, Suite 3905
Houston, Texas 77002
Attention: Tom Denkler
Telecopy: (713) 222-1402
Telephone number: (713) 222-9019
or to any such party at such other address as any such party may designate by
notice duly given in accordance with this Section to the other parties. All
notices shall be effective only upon receipt.
. This Agreement and the Notes shall be construed in accordance with and
governed by the laws of the State of Texas and applicable federal law.
. Each Issuer and each of the holders of the Notes specifically intend and agree
to contractually limit the amount of interest payable under this Agreement, the
Notes and all other Note Documents to the maximum rate or amount of interest
permitted under applicable law. If applicable law is ever construed so as to
render usurious any amounts called for under this Agreement, the Notes or any
other Note Document, or contracted for, charged, taken, reserved or received
with respect to the extension of credit evidenced hereby and thereby, or if
acceleration of maturity of any of the Notes or if any prepayment by an Issuer
results in such Issuer having paid, or demand having been made on such Issuer to
pay, any interest in excess of that permitted by applicable law, then all excess
amounts theretofore received by the holder or holders of the Notes shall be
credited on the principal balances of the Notes (or, if the Notes have been or
would thereby be repaid in full, refunded to such Issuer), and the provisions of
this Agreement, the Notes and the other Note Documents and any demand on such
Issuer shall immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder shall immediately be reduced, without the
necessity of the execution of any new document, so as to comply with applicable
law, but so as to permit the recovery of the fullest amount otherwise called for
hereunder and thereunder. The right to accelerate maturity of the Notes does not
include the right to accelerate any interest which has not otherwise accrued on
the date of such acceleration, and no holder of the Notes intends to collect any
unearned interest in the event of acceleration. All sums paid or agreed to be
paid to any holders of the Notes, for the use, forbearance or detention of the
indebtedness evidenced hereby and thereby shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such indebtedness until payment in full so that the rate or amount of
interest on account of such indebtedness does not exceed the applicable usury
ceiling. As used herein, the term "interest" means interest as determined under
applicable law, regardless of whether denominated as interest in this Agreement,
the Notes or the other Note Documents. The provisions of this Section 9.5 shall
control over all other provision of this Agreement, any Notes and any other Note
Documents. . This Agreement may be executed, and delivered in any number of
counterparts, each of such counterparts constituting an original but all
together only one Agreement.
Any headings or captions preceding the text of the several sections hereof are
intended solely for convenience of reference and shall not constitute a part of
this Agreement nor shall they affect its meaning, construction or effect. All
references herein or in any other Note Document to the masculine, feminine or
neuter gender shall also include and refer to each other gender not so referred
to.
. This Agreement may, subject to the provisions of Article 8 hereof, from time
to time and at any time, be amended or supplemented by an instrument or
instruments in writing executed by the parties hereto.
. Nothing in this Agreement expressed or implied is intended or shall be
construed to give to any Person other than the Company, the Issuers, the holders
of the Notes and the Collateral Agent and their respective permitted successors
and assigns any legal or equitable right, remedy or claim under or in respect of
this Agreement or any covenant, condition or provision herein contained; and all
such covenants, conditions and provisions are and shall be held to be for the
sole and exclusive benefit of the Company, the Issuers, the holders of the Notes
and the Collateral Agent and their respective permitted successors and assigns.
. Whenever in this Agreement the giving of notice by mail or otherwise is
required, the giving of such notice may be waived only in writing by the Person
or Persons entitled to receive such notice.
. In any case where the date of maturity of interest or principal on the Notes
or the date fixed for any payment (in whole or in part) of any Note or the day
for performance of any act or the exercising of any right, as provided herein,
shall not be a Business Day, then payment of such interest on or principal of
the Notes may be made or such act performed or right exercised, on the next
succeeding Business Day, with the same force and effect as if done on the
nominal date provided herein.
. Where the character or amount of any asset or liability or item of income or
expense is required to be determined or any consolidation or combination or
other accounting computation is required to be made for the purposes of this
Agreement, it shall be done in accordance with GAAP, consistently applied, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
. Where any provision in this Agreement refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person. .
All references herein to Exhibits or Schedules shall be to the Exhibits and
Schedules attached to this Agreement unless the context otherwise requires
reference to an exhibit or schedule to another document. All Exhibits and
Schedules attached to this Agreement are made a part hereof for all purposes.
. If at any time (a) the Issuers shall pay and discharge the entire indebtedness
on all Notes hereunder by paying or causing to be paid the principal of, and
Make-Whole Amounts (if any) and interest on, all Notes hereunder, as and when
the same become due and payable or (b) all such Notes shall have been cancelled
as herein provided (other than any Notes which shall have been destroyed, lost
or stolen and which shall have been replaced as provided in Section 2.6); and if
the Company or the Issuers shall also pay and perform or cause to be paid and
performed all other Obligations, then and in that case this Agreement shall
cease, terminate, and become null and void, and thereupon the Collateral Agent
shall, upon written request of the Issuers and any other relevant party to the
Note Documents forthwith execute proper instruments acknowledging satisfaction
of and discharging this Agreement and releasing all Liens held by it pursuant to
the terms hereof; provided, the provisions of Article 7, Sections 9.17 and 9.19
and this Section 9.15 shall survive the satisfaction and discharge of this
Agreement.
. In the event that any covenants of the Company or the Issuers contained herein
conflict directly with any covenants of the Company contained in any other Note
Document, this Agreement shall control. It is the intent of the parties hereto
that any apparent conflict between any Note Document and this Agreement shall be
construed, to the greatest extent possible, to avoid any such conflict.
. The Company and each Issuer jointly and severally agree to pay and to
indemnify and hold each Note holder harmless in respect of all of the following:
(a) all costs and expenses incurred by the Note holders in
connection with the development, preparation, delivery, administration
and execution of, and any amendment, supplement, waiver or modification
to, this Agreement or any other Note Documents or any document
contemplated by or referred to herein or therein or the consummation of
the transactions contemplated hereby and thereby, including the
reasonable attorneys' fees and expenses (for its regular or special
counsel and local counsel as appropriate), incurred by the Note holders
with respect thereto;
(b) all costs and expenses incurred by the Note holders in
connection with the enforcement, attempted enforcement, or preservation
of any rights or remedies (including in connection with any "workout"
or restructuring regarding the Notes) under this Agreement or any other
Note Documents, or any document contemplated by or referred to herein
or therein, including reasonable attorneys' fees and expenses (for its
regular or special counsel and local counsel as appropriate), incurred
by the Note holders;
(c) appraisal, audit, environmental inspection and review,
search and filing costs, fees and expenses, incurred or sustained in
connection with the matters referred to under paragraphs (a) and (b) of
this section; and
(d) fees, costs and expenses, if any, incurred by the Note
holders with respect to the Collateral Agent or to the Rating Agency
and the NAIC to maintain ratings therefrom.
Without limiting the generality of the foregoing, the Company and the Issuers
jointly and severally agree to shall pay, within 30 days after receipt thereof,
all invoices of special counsel to the Note holders with respect to the Closing.
The Company and the Issuers jointly and severally agree to pay all
governmental taxes, assessments and other Charges (except income, gross
receipts, ad valorem, intangibles, franchise or other similar taxes imposed on
the Collateral Agent or the Note holders), including any interest or penalties
thereon, at any time payable or ruled to be payable in respect of the existence,
execution or delivery of the Note Documents or the issuance of the Notes by
reason of any existing or hereafter enacted federal, state, local or foreign
statute, and to indemnify and hold the Collateral Agent and the Note holders and
each of their successors and assigns harmless against liability in connection
with any such taxes, assessments or other Charges.
. To the fullest extent permitted by applicable law, the Company and the Issuers
jointly and severally agree to protect, indemnify, defend and hold harmless each
Note holder and each of their respective directors, officers, employees and
agents and any Person who controls any Note holder within the meaning of the
Securities Act (each an "Indemnitee" and collectively, the "Indemnitees") from
and against any liabilities, losses, obligations, damages, penalties, expenses
or costs of any kind or nature and from any suits, judgments, claims or demands
(including in respect of or for all reasonable attorneys' fees and expenses and
other fees and disbursements of consultants of such Indemnitees in connection
with any investigative, administrative or judicial proceedings, whether or not
such Indemnitees shall be designated a party thereto) based on any federal,
state, local or foreign law or other statutory regulation, including securities,
environmental law and commercial law or other Requirement of Law, which arises
under common law or at equity or on contract or otherwise on account of or in
connection with any matter or thing or any action or failure to act by the
Indemnitees, or any of them arising out of or relating to this Agreement or any
other Note Documents, or any document contemplated by or referred to herein or
therein, except none of the Company or any Issuer shall have no liability under
this Section 9.19 to any Indemnitee to the extent such liability arises from the
willful misconduct or gross negligence of such Indemnitee (collectively, the
"Indemnified Matters"). THE FOREGOING INDEMNITY SHALL COVER LOSSES, LIABILITIES
OR EXPENSES RESULTING FROM THE ORDINARY NEGLIGENCE OF THE INDEMNITEES, WHETHER
SOLE, JOINT, CONTRIBUTORY OR CONCURRENT. Upon receiving notice of any suit,
claim or demand asserted by any Person that any Note holder believes is covered
by this indemnity, such Note holder shall give the Company and each Issuer
notice of the matter and an opportunity to defend it, at the sole cost and
expense of the Company and the Issuers, with legal counsel reasonably
satisfactory to such Note holder. The obligations of the Company and the Issuers
under this Section 9.19 shall survive the payment and performance of the
Obligations and the termination of this Agreement. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section 9.19
may be unenforceable because it is violative of any law or public policy, the
Company and the Issuers jointly and severally agree to contribute the maximum
portion which it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all Indemnified Matters incurred by the Indemnitees.
. 9.20 Entire Agreement
(a) This Agreement, together with the Schedules and Exhibits
hereto, and the other Note Documents constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and thereof and
supersede any prior agreements or understandings with respect thereto, including
without limitation, the "PLM International, Inc. - Senior Secured Notes -
Summary of Principal Terms and Conditions" attached to letter dated May 23, 1996
from SunAmerica to Mr. J. Michael Allgood as Vice President and Chief Financial
Officer of the Company.
(b) THE NOTE DOCUMENTS ARE A WRITTEN LOAN AGREEMENT UNDER
SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE.
(c) SUCH WRITTEN LOAN AGREEMENT (BEING ALL OF THE NOTE
DOCUMENTS) REPRESENTS THE FINAL AGREEMENT AMONG THE ISSUERS, THE
GUARANTORS, THE PURCHASERS AND THE COLLATERAL AGENT AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
(d) THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
PLM INTERNATIONAL, INC.
By:
Stephen Peary, Senior Vice President
PLM FINANCIAL SERVICES, INC.
By:
PLM INVESTMENT MANAGEMENT, INC.
By:
SUNAMERICA LIFE INSURANCE COMPANY
By:
Sam Tillinghast, Authorized Agent
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,545
<SECURITIES> 0
<RECEIVABLES> 4,067
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 105,043
<DEPRECIATION> (55,882)
<TOTAL-ASSETS> 154,325
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 71,616
0
0
<OTHER-SE> (22,204)
<TOTAL-LIABILITY-AND-EQUITY> 154,325
<SALES> 0
<TOTAL-REVENUES> 23,957
<CGS> 0
<TOTAL-COSTS> 20,596
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,983
<INCOME-PRETAX> 1,291
<INCOME-TAX> 238
<INCOME-CONTINUING> 1,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,053
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
