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 September 30, 1997
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 800, 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 October 24, 1997 - 9,046,200 shares.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Operating leases $ 4,429 $ 4,351 $ 12,087 $ 13,508
Finance lease income 2,638 1,532 6,436 2,578
Management fees 2,792 2,752 8,450 8,198
Partnership interests and other fees 162 1,430 1,155 2,722
Acquisition and lease negotiation fees 986 2,596 1,749 5,260
Aircraft brokerage and services 479 621 1,814 2,037
Gain on the sale or disposition of assets, net 649 257 3,250 2,050
Other 794 521 2,329 1,664
------------------------------------------------------------
Total revenues 12,929 14,060 37,270 38,017
------------------------------------------------------------
Costs and expenses:
Operations support 3,901 4,938 12,123 16,159
Depreciation and amortization 2,315 2,887 6,661 8,503
General and administrative 2,709 2,250 7,435 6,009
------------------------------------------------------------
Total costs and expenses 8,925 10,075 26,219 30,671
------------------------------------------------------------
Operating income 4,004 3,985 11,051 7,346
Interest expense (2,466 ) (2,117 ) (7,460 ) (5,100 )
Interest income 390 368 1,228 891
Other income (expense), net 15 (738 ) (9 ) (348 )
------------------------------------------------------------
Income before income taxes 1,943 1,498 4,810 2,789
Provision for income taxes 624 133 1,562 371
------------------------------------------------------------
Net income to common shares $ 1,319 $ 1,365 $ 3,248 $ 2,418
============================================================
Earnings per weighted-average common share
outstanding $ 0.14 $ 0.14 $ 0.34 $ 0.23
============================================================
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------------------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 6,145 $ 7,638
Receivables 5,976 5,286
Receivables from affiliates 4,938 6,019
Investment in direct finance leases, net 80,417 69,994
Loans receivable 5,002 5,718
Equity interest in affiliates 27,716 30,407
Assets held for sale 520 6,222
Transportation equipment held for operating leases 58,556 66,546
Less accumulated depreciation (34,124 ) (41,750 )
----------------------------------------
24,432 24,796
Commercial and industrial equipment held for
operating leases 15,770 15,930
Less accumulated depreciation (4,113 ) (2,302 )
----------------------------------------
11,657 13,628
Restricted cash and cash equivalents 18,164 17,828
Other, net 10,056 11,213
----------------------------------------
Total assets $ 195,023 $ 198,749
========================================
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities:
Short-term secured debt $ - $ 30,966
Senior secured loan 22,059 25,000
Senior secured notes 25,098 18,000
Other secured debt 474 618
Nonrecourse securitization facility 68,507 45,392
Payables and other liabilities 12,922 16,757
Deferred income taxes 16,735 15,334
----------------------------------------
Total liabilities 145,795 152,067
Minority interest 349 362
Shareholders' equity:
Common stock ($0.01 par value, 50,000,000 shares
authorized, 9,047,566 issued and outstanding at
September 30, 1997 and 9,142,761 at December 31, 1996) 117 117
Paid-in capital, in excess of par 77,778 77,778
Treasury stock (3,548,825 and 3,453,630 shares at
respective dates) (12,918 ) (12,382 )
----------------------------------------
64,977 65,513
Accumulated deficit (16,098 ) (19,193 )
----------------------------------------
Total shareholders' equity 48,879 46,320
----------------------------------------
Total liabilities, minority interest, and shareholders' equity $ 195,023 $ 198,749
========================================
</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, 1996
and the Nine Months Ended September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------
Paid-in
Capital in Total
At Excess Treasury Accumulated Shareholders'
Par of Par Stock Deficit Equity
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1995 $ 117 $ 77,743 $ (5,931 ) $ (23,309 ) $48,620
Net income 4,095 4,095
Common stock repurchases (6,451 ) (6,451 )
Exercise of stock options 35 35
Translation gain 21 21
-------------------------------------------------------------------------------
Balances, December 31, 1996 117 77,778 (12,382 ) (19,193 ) 46,320
Net income 3,248 3,248
Common stock repurchases (775 ) (775 )
Reissuance of treasury stock 239 (38 ) 201
Redemption of shareholder rights (92 ) (92 )
Translation loss (23 ) (23 )
===============================================================================
Balances, September 30, 1997 $ 117 $ 77,778 $ (12,918 ) $ (16,098 ) $48,879
===============================================================================
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
-------------------------------
<S> <C> <C>
Operating activities:
Net income $ 3,248 $ 2,418
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,661 8,503
Foreign currency translation (23 ) 68
Increase in deferred income taxes 1,401 348
Gain on sale or disposition of assets, net (3,250 ) (2,050 )
Undistributed residual value interests 508 (405 )
Minority interest in net (loss) income of subsidiaries (13 ) 9
Decrease in payables and other liabilities (662 ) (1,966 )
Decrease in receivables and receivables from affiliates 391 3,260
Cash distributions from affiliates in excess of income accrued 2,183 2,086
Decrease (increase) in other assets 757 (368 )
-------------------------------
Net cash provided by operating activities 11,201 11,903
-------------------------------
Investing activities:
Additional investment in affiliates - (4,972 )
Principal payments received on finance leases 12,627 2,603
Principal payments received on loans 1,493 -
Investment in direct finance leases (60,996 ) (57,295 )
Investment in loans receivable (777 ) (3,006 )
Purchase of equipment (40,459 ) (40,759 )
Proceeds from the sale of transportation equipment for lease 10,761 7,288
Proceeds from the sale of assets held for sale 24,710 2,052
Proceeds from the sale of commercial and industrial equipment 44,988 35,902
Sale of investment in subsidiary - 372
Increase in restricted cash and restricted cash equivalents (336 ) (11,066 )
-------------------------------
Net cash used in investing activities (7,989 ) (68,881 )
-------------------------------
</TABLE>
(continued)
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
--------------------------------
<S> <C> <C>
Financing activities:
Borrowings of short-term secured debt $ 76,427 59,390
Repayment of short-term secured debt (107,393 ) (31,599 )
Repayment of senior secured loan (2,941 ) -
Proceeds from other secured debt - 90
Repayment of other secured debt (144 ) (39 )
Borrowings under senior secured notes 9,000 18,000
Repayment of senior secured notes (1,902 ) -
Borrowings under securitization facility 36,055 29,989
Repayment of securitization facility (12,940 ) (7,681 )
Repayment of subordinated debt - (11,500 )
Purchase of treasury stock (775 ) (6,451 )
Redemption of shareholder rights (92 ) -
Proceeds from exercise of stock options - 35
----------------------------------
Net cash (used in) provided by financing activities (4,705 ) 50,234
----------------------------------
Net decrease in cash and cash equivalents (1,493 ) (6,744 )
Cash and cash equivalents at beginning of period 7,638 13,764
==================================
Cash and cash equivalents at end of period $ 6,145 $ 7,020
==================================
Supplemental information - net cash paid for:
Interest $ 7,088 $ 4,188
==================================
Income taxes $ 759 $ 1,285
==================================
</TABLE>
See accompanying notes to these consolidated financial
statements.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
1. General
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary, consisting primarily of normal
recurring accruals, to present fairly PLM International, Inc.'s (the Company's)
financial position as of September 30, 1997 and December 31, 1996; statements of
income for the three and nine months ended September 30, 1997 and 1996;
statements of changes in shareholders' equity for the year ended December 31,
1996 and the nine months ended September 30, 1997; and statements of cash flows
for the nine months ended September 30, 1997 and 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 for the year ended
December 31, 1996, on file with the Securities and Exchange Commission.
2. Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share," which requires the Company to replace its presentation of
primary earnings per share with a presentation of basic earnings per share, and
requires dual presentation of basic and diluted earnings per share on the face
of the income statement. The principal difference between primary earnings per
share under current accounting standards and basic earnings per share under the
new statement is that basic earnings per share does not consider common stock
equivalents such as stock options and warrants. Diluted earnings per share under
the new statement will include potential dilution of convertible securities,
stock options, and warrants. The statement is effective for the Company's first
quarter of fiscal 1998 and requires restatement of all prior periods presented.
Under the new statement, basic earnings per share would have been $0.14 and
$0.15 for the three months ended September 30, 1997 and 1996, respectively, and
$0.35 and $0.23 for the nine months ended September 30, 1997 and 1996,
respectively. Under the new statement, diluted earnings per share for those
periods would have been the same as net income per common and common equivalent
share presented on the income statement.
In June 1997, the Financial Accounting Standards Board issued two new
statements: SFAS No. 130, "Reporting Comprehensive Income," which requires
enterprises to report, by major component and in total, all changes in equity
from nonowner sources; and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for a public company's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the Company's fiscal year 1999 with earlier
application permitted. The effect of adoption of these statements will be
limited to the form and content of the Company's disclosures and will not impact
the Company's results of operations, cash flow, or financial position.
3. Reclassifications
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
4. Financing Transaction Activities
The Company's wholly-owned subsidiary, American Finance Group, Inc. (AFG),
originates and manages lease and loan transactions on primarily new commercial
and industrial equipment. While the majority of these leases are accounted for
as finance leases, some are accounted for as loans or operating leases. During
the nine months ended September 30, 1997, the Company funded $61.0 million in
equipment that was placed on finance lease. Also during the nine months ended
September 30, 1997, the Company sold equipment on finance lease with an original
equipment cost of $37.3 million, resulting in a net gain of $1.7 million. During
the nine months ended September 30, 1997, the Company funded loans of $0.8
million that were secured by commercial and industrial equipment.
<PAGE>
5. Equipment
Equipment held for operating lease includes transportation equipment, which is
depreciated over its estimated useful lives, and commercial and industrial
equipment, which is depreciated over the lease term to an estimated residual.
During the nine months ended September 30, 1997, the Company funded $8.9 million
in commercial and industrial equipment, which was placed on operating lease.
During the nine months ended September 30, 1997, the Company sold commercial and
industrial equipment that was on operating lease with an original cost of $7.5
million for a net gain of $0.2 million.
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. Equipment held for sale is valued at the lower of the depreciated
cost or the fair value less costs to sell. As of December 31, 1996, the Company
had a 25.5% interest in a mobile offshore drilling unit (rig) with a net book
value of $5.1 million that was held for sale to an affiliated program. Also as
of December 31, 1996, two commuter aircraft with a combined net book value of
$1.1 million were held for sale. The rig was sold to an affiliated program at
its original cost in March 1997. The two commuter aircraft were sold in February
1997 for their approximate net book value to an unaffiliated third party.
During the first nine months of 1997, the Company purchased a mobile offshore
drilling unit for $10.5 million and a marine vessel for $19.0 million, which
were resold to affiliated programs at cost. Also during the nine months ended
September 30, 1997, the Company purchased two commercial aircraft for $5.0
million and trailers for $6.1 million. The aircraft were subsequently sold to an
unaffiliated third party for a gain of $0.8 million. Other transportation
equipment was sold for net gains of $0.6 million during the nine months ended
September 30, 1997. As of September 30, 1997, the Company had one commuter
aircraft with a net book value of $0.5 million held for sale to a third party.
Periodically, the Company purchases groups of assets whose ownership may be
allocated among affiliated programs and the Company. Generally in these cases,
only assets that are on lease are purchased by affiliated programs. The Company
generally assumes the ownership and remarketing risks associated with off-lease
equipment. Allocation of the purchase price is determined by a combination of
third-party industry sources, recent transactions, and published fair market
value references. During the nine months ended September 30, 1996, the Company
realized $0.7 million of gains from the sale of 69 railcars to an unaffiliated
third party. These railcars were originally purchased as part of a group of
assets by the Company in 1994 that had been allocated to PLM Equipment Growth
Funds (EGFs) IV and IV, PLM Equipment Growth & Income Fund VII (EGF VII),
Professional Lease Management Income Fund I, LLC (Fund I), and the Company.
6. Debt
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 $50.0 million short-term
secured debt facility. The Company amended this facility on October 3, 1997 to
extend its availability until November 3, 1997. The facility, which is shared
with EGFs IV, V, VI, and VII, and Fund I, allows the Company to purchase
equipment prior to its designation to a specific program or partnership. As of
September 30, 1997, the Company had no borrowings under this facility and EGFs V
and VI had $9.1 million and $10.0 million in borrowings, respectively. All
borrowings under this facility are guaranteed by the Company. The Company
believes it will be able to extend the facility prior to its expiration on
similar terms.
The Company has available a securitization facility to be used to acquire assets
on a nonrecourse basis, secured by direct finance leases, operating leases, and
loans on commercial and industrial equipment that generally have terms from two
to seven years. The Company amended this facility on October 14, 1997,
increasing the facility from $80.0 million to $125.0 million and extending the
availability of the facility until October 13, 1998. As of September 30, 1997,
outstanding borrowings totaled $68.5 million under this facility, payable
through 2004.
<PAGE>
7. Shareholders' Equity
On March 3, 1997, the Company announced that the Board of Directors had
authorized the repurchase of up to $5.0 million of the Company's common stock.
As of September 30, 1997, 155,198 shares had been repurchased under this plan,
for a total of $0.8 million.
During the nine months ended September 30, 1997, 60,003 shares (net of forfeited
shares) were issued from treasury stock as part of the senior management bonus
program. During the nine months ended September 30, 1997, 155,198 shares were
repurchased. Consequently, the total common shares outstanding decreased to
9,047,566 as of September 30, 1997 from the 9,142,761 outstanding as of December
31, 1996. Net income per weighted-average common share outstanding was computed
by dividing net income to common shares by the weighted-average number of shares
deemed outstanding during the period. The weighted-average number of shares
deemed outstanding for the earnings-per-share calculation during the three
months ended September 30, 1997 and 1996 was 9,405,003 and 9,505,195,
respectively. The weighted-average number of shares deemed outstanding for the
earnings-per-share calculation during the nine months ended September 30, 1997
and 1996 was 9,419,206 and 10,499,605, respectively.
On March 12, 1989, the Company distributed rights as a dividend on each
outstanding share of common stock. Upon the occurrence of certain events,
characterized as unsolicited or abusive attempts to acquire control of the
Company, the rights would have become exercisable. On June 10, 1997, the Company
announced the redemption of these rights for $0.01 per right. Shareholders of
record as of June 24, 1997 were paid a total of $0.1 million for the redemption
of these rights on July 24, 1997.
8. Legal Matters
As more fully described by the Company in its Form 10-K for the year ended
December 31, 1996, in November 1995, a former employee of PLM International
filed and served 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
(ESOP), the ESOP's trustee, and certain individual employees, officers, and
directors of the Company. In January 1996, PLMI and other defendants filed a
motion to dismiss the Complaint 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 appealed to the U.S. Court of Appeals for the Ninth
Circuit, seeking a reversal of the District Court's judgment, and oral argument
was heard on September 17, 1997. The Company is currently waiting for the 9th
Circuit court's decision in this matter.
As more fully described by the Company in its Form 10-K for the year ended
December 31,1996, the Company and various of its affiliates are named as
defendants in a lawsuit filed as a class action on January 22, 1997 in the
Circuit Court of Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch
action). On March 6, 1997, the defendants removed the Koch action from the state
court to the United States District Court for the Southern District of Alabama,
Southern Division (Civil Action No. 97-0177-BH-C), following which plaintiffs
filed a motion to remand the action to the state court. On September 24, 1997,
the district court denied plaintiffs' motion and dismissed without prejudice the
individual claims of the California class representative, reasoning that he had
been fraudulently joined as a plaintiff. On October 3, 1997, plaintiffs filed a
motion requesting that the district court reconsider its ruling, or in the
alternative, that the court modify its order dismissing the California
plaintiff's claims so that it is a final appealable order, as well as certify
for an immediate appeal to the Eleventh Circuit Court of Appeals that part of
its order denying plaintiffs' motion to remand. On October 7, 1997, the district
court denied each of these motions. On October 10, 1997, defendants filed a
motion to compel arbitration of plaintiffs' claims and to stay further
proceedings pending the outcome of such arbitration. The Company believes that
the allegations of the Koch action are completely without merit and intends to
defend this matter vigorously.
<PAGE>
8. Legal Matters (continued)
On June 5, 1997, the Company and the affiliates who are also defendants in the
Koch action were named as defendants in another purported class action filed in
the San Francisco Superior Court, San Francisco, California, Case No. 987062
(the Romei action). The named plaintiff has alleged the same facts and the same
nine causes of action as is in the Koch action (as described in the Company's
Form 10-K for the year ended December 31, 1996), plus five additional causes of
action against all of the defendants, as follows: violations of California
Business and Professions Code Sections 17200, et seq. for alleged unfair and
deceptive practices, a claim for constructive fraud, a claim for unjust
enrichment, a claim for violations of California Corporations Code Section 1507,
and a claim for treble damages under California Civil Code Section 3345. The
plaintiff is an investor in PLM Equipment Growth Fund V, and filed the complaint
on her own behalf and on behalf of all class members similarly situated who
invested in certain California limited partnerships sponsored by PLM Securities,
for which PLM Financial Services, Inc. acts as the general partner, including
PLM Equipment Growth Funds IV, V, and VI, and PLM Equipment Growth & Income Fund
VII.
The Company and the other defendants removed the Romei action to the United
States District Court for the Northern District of California (Case No.
C-97-2450 SC) on June 30, 1997, based on the federal court's diversity
jurisdiction. The defendants then filed a motion to compel arbitration of the
plaintiffs' claims, based on an agreement to arbitrate contained in the PLM
Equipment Growth Fund V limited partnership agreement, to which plaintiff is a
party. Pursuant to an agreement with plaintiff, the Company and the other
defendants withdrew their petition for removal of the Romei action and their
motion to compel arbitration, and on July 31, 1997, filed with the district
court for the Northern District of California (Case No. C-97-2847 WHO) a
petition under the Federal Arbitration Act seeking to compel arbitration of
plaintiff's claims and for an order staying the state court proceedings pending
the outcome of the arbitration. In connection with this agreement, plaintiff
agreed to a stay of the state court action pending the district court's decision
on the petition to compel arbitration. On October 7, 1997, the district court
denied the Company's petition to compel and indicated that a memorandum decision
would follow. To date such memorandum setting forth the court's reason(s) for
denying the petition has not been filed by the district court. On August 22,
1997, the plaintiff filed an amended complaint with the state court alleging two
new causes of action for violations of the California Securities Law of 1968
(California Corporations Code Sections 25400 and 25500), and for violation of
California Civil Code Section 1709 and 1710. The Company will soon be required
to respond to the amended complaint, and a status conference has been set for
December 5, 1997. The Company believes that the allegations of the amended
complaint in the Romei action are completely without merit and intends to defend
this matter vigorously.
The Company is involved as plaintiff or defendant in various other 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.
9. Purchase Commitments
As of September 30, 1997, the Company, through its AFG subsidiary, had committed
to purchase $102.5 million of equipment for its commercial and industrial
equipment lease portfolio, to be held by the Company or sold to the Company's
institutional leasing investment program or to third parties.
From October 1, 1997 to October 24, 1997, the Company, through its AFG
subsidiary, funded $5.4 million of the commitments outstanding as of September
30, 1997 for its commercial and industrial equipment lease portfolio.
As of October 24, 1997, the Company had committed to purchase $145.3 million of
equipment for its commercial and industrial equipment lease portfolio.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
A major activity of the Company is the funding and management of longer-term
direct finance leases, operating leases, and loans through its American Finance
Group, Inc. (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. Through AFG, the Company is also engaged
in the management of an institutional leasing investment program for which it
originates leases and receives acquisition and management fees.
The Company operates 10 trailer rental facilities that engage in short-term and
mid-term operating leases. Equipment operated in these facilities consists of
dry van trailers leased to a variety of customers and refrigerated trailers used
primarily in the food distribution industry. The Company is selling certain of
its older trailers and is replacing them with new or late-model used trailers.
The Company has syndicated investment programs from which it earns various fees
and equity interests. The Professional Lease Management Income Fund I, LLC (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 it then manages 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 a 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 a partnership, subject to
certain allocation provisions. The Fund I agreement entitles the Company to a
15% interest in the cash distributions and earnings of a 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 suspension 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 also owns a portfolio of transportation equipment, in addition to
the dry van and refrigerated over-the-road trailers mentioned above, from which
it earns operating lease revenue and incurs operating expenses. The Company's
transportation equipment held for operating lease, which consists of aircraft,
marine containers, intermodal trailers, and storage equipment as of September
30, 1997, is equipment mainly built prior to 1988. As equipment ages, the
Company continues to monitor the performance of its assets on lease and the
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, higher costs of maintaining and operating aged equipment, and, in
certain instances, limited remarketability.
<PAGE>
For the Three Months Ended September 30, 1997 versus September 30, 1996
The following analysis reviews the operating results of the Company:
Revenues
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1997 1996
-----------------------------------------
(in thousands)
<S> <C> <C>
Operating leases $ 4,429 $ 4,351
Finance lease income 2,638 1,532
Management fees 2,792 2,752
Partnership interests and other fees 162 1,430
Acquisition and lease negotiation fees 986 2,596
Aircraft brokerage and services 479 621
Gain on the sale or disposition of assets, net 649 257
Other 794 521
-----------------------------------------
Total revenues $12,929 $14,060
</TABLE>
The fluctuations in revenues for the three months ended September 30, 1997,
compared to the same period in 1996, are summarized and explained below.
Operating lease revenues by equipment type:
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1997 1996
-----------------------------------------
(in thousands)
<S> <C> <C>
Trailers $2,187 $1,807
Commercial and industrial equipment 1,510 1,071
Marine vessel 501 -
Storage equipment 95 276
Aircraft 69 1,111
Marine containers 61 70
Railcars 6 16
-----------------------------------------
Total operating lease revenues $4,429 $4,351
</TABLE>
Operating lease revenues include revenues generated from assets held for
operating leases and assets held for sale that are on lease. As of September 30,
1997, the Company owned transportation equipment held for operating lease or
held for sale with an original cost of $60.9 million, which was $31.9 million
less than the original cost of transportation equipment owned and held for
operating lease or held for sale as of September 30, 1996. The reduction in
equipment, on an original cost basis, is a consequence of the Company's
strategic decision to dispose of certain underperforming transportation assets,
and resulted in an 81% net reduction in its aircraft portfolio and a 25% net
reduction in its marine container portfolio, compared to these portfolios as of
September 30, 1996. The reduction in transportation equipment available for
lease is the primary reason aircraft and marine container revenues were reduced,
compared to the prior year. The $0.2 million decrease in storage equipment lease
revenue is due to an agreement the Company entered into in January 1997 to lease
all of its storage equipment assets to a third party on a triple-net operating
lease, as opposed to short-term operating leases, resulting in both lower
storage equipment operating lease revenues and operating expenses.
The decrease in operating lease revenues as a result of the reduction in
transportation equipment available for lease and the storage equipment agreement
was partially offset by a $0.4 million increase in operating lease revenues as a
result of an increase in commercial and industrial equipment owned and
<PAGE>
on operating lease and by a $0.4 million increase in trailer lease revenues as a
result of higher lease rates received on new trailer additions. In addition,
during the third quarter of 1997, the Company owned a 47.5% interest in an
entity that owns a marine vessel, which generated $0.5 million in lease revenue.
Finance lease income:
The Company earns finance lease income for certain leases originated by its AFG
subsidiary that are either retained for long-term investment or sold to third
parties or to an institutional leasing investment program. Finance lease income
increased $1.1 million in the third quarter of 1997, compared to the same period
in 1996, reflecting an increase in commercial and industrial assets owned and on
finance lease. For the quarter ended September 30, 1997, the average investment
in direct finance leases was $73.5 million, compared to $38.9 million for the
third quarter of 1996.
Management fees:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. Management fees were $2.8 million for
both the quarters ended September 30, 1997 and 1996. Although management fees
related to Fund I and the institutional leasing investment program managed by
the Company's AFG subsidiary increased, this increase was offset by a decline in
management fees from the remaining older programs due to a decrease in managed
equipment and due to lower lease rates. With the termination of syndication
activities in 1996, management fees are expected to decrease in the future as
the older programs begin liquidation and the managed equipment portfolio becomes
permanently reduced. This decrease has been and is expected to continue to be
offset, in part, by management fees earned from the institutional 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 $0.5 million and $0.6 million for the quarters ended
September 30, 1997 and 1996, respectively. In addition, a decrease of $0.3
million in the Company's residual interests in the programs was recorded during
the quarter ended September 30, 1997. A net increase of $0.8 million in the
Company's residual interests in the programs was recorded during the quarter
ended September 30, 1996. Residual income is based on the general partner's
share of the present value of the estimated disposition proceeds of the
equipment portfolio of affiliated partnerships when the equipment is purchased.
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 September 30, 1997, the Company, on behalf of the
equipment growth funds, purchased trailer equipment and a 47.5% interest in an
entity that owns a marine vessel for $12.7 million, compared to $45.1 million of
equipment purchased on behalf of the equipment growth funds during the same
quarter of the prior year, resulting in a $1.8 million decrease in acquisition
and lease negotiation fees. Also during the quarter ended September 30, 1997,
equipment purchased for the institutional leasing investment program managed by
AFG was $10.2 million, compared to $4.3 million for the same period in 1996,
resulting in an increase in acquisition and lease negotiation fees of $0.2
million. Because of the Company's decision to suspend syndication of equipment
leasing programs with the close of Fund I on May 13, 1996, and because Fund I
has a no front-end fee structure, acquisition and lease negotiation fees will be
substantially reduced in the future.
Aircraft brokerage and services:
Aircraft brokerage and services revenue, which represents revenue
earned by Aeromil Holdings, Inc., the Company's aircraft leasing and spare parts
brokerage subsidiary, decreased $0.1 million during the quarter ended September
30, 1997, compared to the same period of the prior year, due to a decrease in
spare parts sales.
<PAGE>
Gain on the sale or disposition of assets, net:
During the quarter ended September 30, 1997, the Company recorded a
$0.6 million net gain on the sale of commercial and industrial equipment. During
the quarter ended September 30, 1996, the Company recorded a $0.3 million net
gain on the sale or disposition of assets. Of this gain, $0.4 million resulted
from the sale or disposition of trailers, marine containers, a commuter
aircraft, railcars, and storage units, and $0.3 million related to the sale of
commercial and industrial equipment. These gains were partially offset by a $0.4
million adjustment to decrease the estimated net realizable value of certain
aircraft.
Other:
Other revenue increased $0.3 million during the quarter ended September
30, 1997, compared to the same period of the prior year, due to increased
revenue earned from financing income and brokerage fees.
Costs and Expenses
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1997 1996
-----------------------------------------
(in thousands)
<S> <C> <C>
Operations support $ 3,901 $ 4,938
Depreciation and amortization 2,315 2,887
General and administrative 2,709 2,250
-----------------------------------------
Total costs and expenses $ 8,925 $10,075
</TABLE>
Operations support:
Operations support expense (including salary and office-related expenses for
operational activities, equipment insurance, repair and maintenance costs,
equipment remarketing costs, costs of goods sold, and provision for doubtful
accounts) decreased $1.0 million (21%) for the quarter ended September 30, 1997,
compared to the same quarter in 1996. The decrease resulted from a $0.3 million
decrease in compensation and benefits expense due to staff reductions, a $0.3
million decrease in equipment operating costs due to sales of the Company's
transportation equipment, a $0.2 million increase in allocable expenses due to
system improvements that now enable program expenses to be allocated in the
month incurred rather than one month in arrears, and a $0.2 million decrease in
other fees.
Depreciation and amortization:
Depreciation and amortization expenses decreased $0.6 million (20%) for
the quarter ended September 30, 1997, compared to the quarter ended September
30, 1996. The decrease resulted from the reduction in depreciable transportation
equipment (discussed in the operating lease revenue section), and was partially
offset by increased depreciation of commercial and industrial equipment on
operating lease.
General and administrative:
General and administrative expenses increased $0.5 million (20%) during the
quarter ended September 30, 1997, compared to the same quarter in 1996,
primarily due to a $0.6 million increase in expense related to the redemption of
stock options and to a $0.3 million increase in legal fees related to the Koch
and Romei actions (refer to Note 8 to the consolidated financial statements).
These expenses were partially offset by a $0.4 million decrease in compensation
and benefits expenses.
<PAGE>
Other Income and Expenses
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
1997 1996
-----------------------------------------
(in thousands)
<S> <C> <C>
Interest expense $(2,466 ) $(2,117 )
Interest income 390 368
Other income (expense), net 15 (738 )
Provision for income taxes 624 133
</TABLE>
Interest expense:
Interest expense increased $0.3 million (16%) during the quarter ended
September 30, 1997, compared to the same period in 1996, due to an increase in
borrowings on the nonrecourse securitization facility and the senior secured
notes facility. The increase in interest expense caused by these increased
borrowings was partially offset by lower interest expense resulting from the
reduction in the amount outstanding on the senior secured loan and the
short-term secured debt facility.
Other income (expense), net:
During the third quarter of 1996, the Company prepaid the $8.6 million balance
of its subordinated debt and incurred prepayment penalties of $0.7 million. No
similar amounts were recorded during the quarter ended September 30, 1997.
Provision for income taxes:
For the three months ended September 30, 1997, the provision for income taxes
was $0.6 million, representing an effective rate of 32%. For the three months
ended September 30,1996, the provision for income taxes was $0.1 million,
representing an effective rate of 9%. Tax-planning strategies, an adjustment for
state tax apportionment factors, and an adjustment related to the Employee Stock
Option Plan (ESOP) resulted in a reduction in the Company's effective tax rate
for the third quarter of 1996.
Net Income
As a result of the foregoing, for the three months ended September 30, 1997, net
income was $1.3 million, resulting in net income per weighted-average common
share outstanding of $0.14. For the same period in 1996, net income was $1.4
million, resulting in net income per weighted-average common share outstanding
of $0.14.
<PAGE>
For the Nine Months Ended September 30, 1997 versus September 30, 1996
The following analysis reviews the operating results of the Company:
Revenues
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
-----------------------------------------
(in thousands)
<S> <C> <C>
Operating leases $12,087 $13,508
Finance lease income 6,436 2,578
Management fees 8,450 8,198
Partnership interests and other fees 1,155 2,722
Acquisition and lease negotiation fees 1,749 5,260
Aircraft brokerage and services 1,814 2,037
Gain on the sale or disposition of assets, net 3,250 2,050
Other 2,329 1,664
-----------------------------------------
Total revenues $37,270 $38,017
</TABLE>
The fluctuations in revenues for the nine months ended September 30, 1997,
compared to the same period in 1996, are summarized and explained below.
Operating lease revenues by equipment type:
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
-----------------------------------------
(in thousands)
<S> <C> <C>
Trailers $ 6,047 $ 5,765
Commercial and industrial equipment 3,933 2,869
Mobile offshore drilling units 603 -
Aircraft 521 3,676
Marine vessel 501 -
Storage equipment 294 820
Marine containers 165 289
Railcars 23 89
-----------------------------------------
Total operating lease revenues $12,087 $13,508
</TABLE>
Operating lease revenues include revenues generated from assets held for
operating leases and assets held for sale that are on lease. As of September 30,
1997, the Company owned transportation equipment held for operating leases or
held for sale with an original cost of $60.9 million, which was $31.9 million
less than the original cost of transportation equipment owned and held for
operating leases or held for sale as of September 30, 1996. The reduction in
equipment, on an original cost basis, is a consequence of the Company's
strategic decision to dispose of certain underperforming transportation assets,
and resulted in an 81% net reduction in its aircraft portfolio and a 25% net
reduction in its marine container portfolio, compared to these portfolios as of
September 30, 1996. The reduction in transportation equipment available for
lease is the primary reason aircraft and marine container revenue were reduced,
compared to the prior year's comparable period. The $0.5 million decrease in
storage equipment lease revenue is due to an agreement the Company entered into
in January 1997 to lease all of its storage equipment assets to a third party on
a triple-net operating lease, as opposed to short-term operating leases,
resulting in both lower storage equipment operating lease revenues and operating
expenses.
The decrease in operating lease revenues as a result of the reduction in
transportation equipment available for lease and the storage equipment agreement
was partially offset by a $1.1 million increase in operating lease revenues as a
result of an increase in commercial and industrial equipment owned and on
operating lease and by a $0.3 million increase in trailer lease revenues as a
result of higher lease rates received on new trailer additions. In addition,
during the nine months ended September 30, 1997, the Company owned one mobile
offshore drilling unit as well as a 25.5% interest in another mobile offshore
drilling unit, which together generated $0.6 million in lease revenue, and owned
a 47.5% interest in a marine vessel, which generated $0.5 million in lease
revenue. Both of the drilling units and the marine vessel were sold at the
Company's cost to affiliated programs during the nine months ended September 30,
1997.
Finance lease income:
The Company earns finance lease income for certain leases originated by its AFG
subsidiary that are either retained for long-term investment or sold to third
parties or to an institutional leasing investment program. Finance lease income
increased $3.9 million during the nine months ended September 30, 1997, compared
to the same period in 1996, due to an increase in commercial and industrial
assets owned and on finance lease. For the nine months ended September 30, 1997,
the average investment in direct finance leases was $70.4 million, compared to
$28.1 million for the same period of 1996.
Management fees:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. Management fees increased $0.3 million
during the nine months ended September 30, 1997, compared to the same period of
the prior year. Although management fees related to Fund I and the institutional
leasing investment program managed by the Company's AFG subsidiary increased,
management fees from the remaining older programs declined due to a net decrease
in managed equipment and due to lower lease rates. With the termination of
syndication activities in 1996, management fees are expected to decrease in the
future as older programs begin liquidation and the managed equipment portfolio
becomes permanently reduced. This decrease has been and is expected to continue
to be offset, in part, by management fees earned from the institutional 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 $1.7 million and $2.1 million for the nine months ended
September 30, 1997 and 1996, respectively. In addition, a decrease of $0.5
million in the Company's residual interests in the programs was recorded during
the nine months ended September 30, 1997, and a $0.6 million increase in the
Company's residual interests in the programs was recorded during the same period
of 1996. Residual income is based on the general partner's share of the present
value of the estimated disposition proceeds of the equipment portfolio of the
affiliated partnership when the equipment is purchased. 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 nine months ended September 30, 1997, the Company, on behalf of the
equipment growth funds, purchased trailer equipment and an entity that owns a
marine vessel for $22.7 million, compared to $86.3 million of equipment
purchased on behalf of the equipment growth funds during the same period of the
prior year, resulting in a $3.5 million decrease in acquisition and lease
negotiation fees. Acquisition fees related to equipment purchased for the
institutional leasing investment program managed by AFG were $0.5 million for
both the nine months ended September 30, 1997 and 1996. Because 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 has a no front-end fee structure,
acquisition and lease negotiation fees will be substantially reduced in the
future.
<PAGE>
Aircraft brokerage and services:
Aircraft brokerage and services revenue, which represents revenue
earned by Aeromil Holdings, Inc., the Company's aircraft leasing and spare parts
brokerage subsidiary, decreased $0.2 million during the nine months ended
September 30, 1997, compared to the same period of the prior year, due to a
decrease in spare parts sales and due to the sale of the subsidiary's ownership
interest in Austin Aero FBO Ltd. to third parties in January 1996.
Gain on the sale or disposition of assets, net:
During the nine months ended September 30, 1997, the Company recorded
$3.3 million in net gains on the sale or disposition of assets. Of this gain,
$0.6 million resulted from the sale or disposition of trailers, storage units,
marine containers, commuter aircraft, and railcars. Also during the nine months
ended September 30, 1997, the Company purchased and subsequently resold two
commercial aircraft to an unaffiliated third party for a net gain of $0.8
million and earned $1.9 million from the sale of commercial and industrial
equipment. During the nine months ended September 30, 1996, the Company recorded
a $2.1 million net gain on the sale or disposition of assets. Of this gain, $1.9
million resulted from the sale or disposition of trailers, marine containers,
railcars, storage units, and commuter aircraft, and $0.6 million related to the
sale of commercial and industrial equipment. These gains were partially offset
by a $0.4 million adjustment to decrease the estimated net realizable value of
certain aircraft.
Other:
Other revenues increased $0.7 million during the nine months ended
September 30, 1997, compared to the comparable prior year's period, due to
increased revenue earned from financing income and brokerage fees.
Costs and Expenses
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
-----------------------------------------
(in thousands)
<S> <C> <C>
Operations support $12,123 $16,159
Depreciation and amortization 6,661 8,503
General and administrative 7,435 6,009
-----------------------------------------
Total costs and expenses $26,219 $30,671
</TABLE>
Operations support:
Operations support expense (including salary and office-related expenses for
operational activities, equipment insurance, repair and maintenance costs,
equipment remarketing costs, costs of goods sold, and provision for doubtful
accounts) decreased $4.0 million (25%) for the nine months ended September 30,
1997, compared to the same period in 1996. The decrease resulted from a $1.4
million charge related to the termination of syndication activities recorded
during the nine months ended September 30, 1996, a $1.1 million decrease in
compensation and benefits expense due to staff reductions, a $0.8 million
decrease in equipment operating costs due to sales of the Company's
transportation equipment, a $0.5 million decrease in other office expenses, and
a $0.2 million increase in allocable expenses due to system improvements that
now enable program expenses to be allocated in the month incurred rather than
one month in arrears.
Depreciation and amortization:
Depreciation and amortization expenses decreased $1.8 million (22%) for
the nine months ended September 30, 1997, compared to the nine months ended
September 30, 1996. The decrease resulted from the reduction in depreciable
transportation equipment (discussed in the operating lease revenue section), and
was partially offset by increased depreciation of commercial and industrial
equipment on operating lease.
<PAGE>
General and administrative:
General and administrative expenses increased $1.4 million (24%) during the nine
months ended September 30, 1997, compared to the same period in 1996, due to a
$0.6 million increase in expense related to the redemption of stock options, a
$0.5 million increase in legal fees related to the Koch and Romei actions (refer
to Note 8 to the consolidated financial statements), a $0.5 million increase in
costs related to a submission of matters to a vote of security holders, a $0.3
million credit recorded in the second quarter of 1996 related to the ESOP, and a
$0.2 million increase in compensation and benefits expenses. These expenses were
partially offset by a $0.5 million decrease in office-related expenses and a
$0.2 million decrease in consulting expense.
Other Income and Expenses
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1997 1996
-----------------------------------------
(in thousands)
<S> <C> <C>
Interest expense $(7,460 ) $(5,100 )
Interest income 1,228 891
Other income (expense), net (9 ) (348 )
Provision for income taxes 1,562 371
</TABLE>
Interest expense:
Interest expense increased $2.4 million (46%) during the nine months
ended September 30, 1997, compared to the same period in 1996, due to an
increase in borrowings on the nonrecourse securitization facility, the senior
secured notes facility, and the short-term secured debt facility. The increase
in interest expense caused by these increased borrowings was partially offset by
lower interest expense resulting from the retirement of the subordinated debt
and the reduction in the amount outstanding on the senior secured loan.
Interest income:
Interest income increased $0.3 million (38%) in the nine months ended
September 30, 1997, compared to the same period in 1996, as a result of higher
average cash balances for the nine months ended September 30, 1997, compared to
the same period in 1996.
Other income (expense), net:
During the nine months ended September 30, 1996, the Company prepaid the $8.6
million balance of its subordinated debt and incurred prepayment penalties of
$0.7 million, which was partially offset by other income of $0.4 million due to
the sale of 32 wind turbines during the second quarter of 1996 that had
previously been written off. No similar amounts were recorded during the nine
months ended September 30, 1997.
Provision for income taxes:
For the nine months ended September 30, 1997, the provision for income taxes was
$1.6 million, representing an effective rate of 32%. For the same period in
1996, the provision for income taxes was $0.4 million, representing an effective
rate of 13%. Tax-planning strategies, an adjustment for state tax apportionment
factors, and an adjustment related to the ESOP resulted in a reduction in the
Company's effective tax rate for 1996.
<PAGE>
Net Income
As a result of the foregoing, for the nine months ended September 30,
1997, net income was $3.2 million, resulting in net income per weighted-average
common share outstanding of $0.34. For the same period in 1996, net income was
$2.4 million, resulting in net income per weighted-average common share
outstanding of $0.23.
Liquidity and Capital Resources
Cash requirements historically have been satisfied through cash flow
from operations, borrowings, or sales of equipment.
Liquidity in 1997 and beyond will depend, in part, on the continued
remarketing of the equipment portfolio at similar lease rates, the management of
existing sponsored programs, the effectiveness of cost control programs, the
purchase and sale of equipment, 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 that it will
have sufficient liquidity and capital resources for the future. Future liquidity
is influenced by the factors summarized below.
Debt financing:
Senior Debt: The Company's $22.1 million senior loan 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 to the extent required to meet certain debt covenants. As
of September 30, 1997, the cash collateral balance was $13.3 million. The
facility required quarterly interest payments through March 31, 1997, with
quarterly principal payments of $1.47 million plus interest charges beginning
June 30, 1997 through termination of the loan in June 2001.
Senior Notes: On June 28, 1996, the Company closed a floating-rate senior
secured note agreement that allowed the Company to borrow up to $27.0 million
within a one-year period. During the nine months ended September 30, 1997, the
Company drew down $9.0 million and prepaid $1.9 million on this facility. The
outstanding balance as of October 24, 1997 was $25.1 million. Beginning in
November 1997, the Company will be required to make quarterly principal payments
of $1.25 million.
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 $50.0 million short-term secured debt facility. The Company amended this
facility on October 3, 1997 to extend its availability until November 3, 1997.
The facility, which is shared with PLM Equipment Growth Funds (EGFs) IV, V, and
VI, PLM Equipment Growth & Income Fund VII, and Professional Lease Management
Fund I, LLC, allows the Company to purchase equipment prior to its designation
to a specific program or partnership. As of October 24, 1997, the Company had
$1.5 million in borrowings, and EGF V and EGF VI had $9.1 million and $10.0
million in outstanding borrowings, respectively, under this facility. The
Company believes it will be able to extend this facility prior to its expiration
on similar terms.
Securitized Debt: The Company has available a securitization facility to
be used to acquire assets on a nonrecourse basis, secured by direct finance
leases, operating leases, and loans on commercial and industrial equipment that
generally have terms from two to seven years. The Company amended this facility
on October 14, 1997, increasing the facility from $80.0 million to $125.0
million and extending the availability of the facility until October 13, 1998.
As of October 24, 1997, there were $72.1 million in borrowings outstanding under
this facility.
Interest-Rate Swap Contracts: The Company has entered into interest-rate swap
agreements in order to manage the interest-rate exposure associated with its
securitized debt. As of September 30, 1997, the swap agreements had remaining
terms averaging 2.76 years, corresponding to the terms of the related debt. At
September 30, 1997, a notional amount of $68.5 million of interest-rate swap
agreements effectively fixed interest rates at an average of 7.16% on such
obligations. For the nine months ended September 30, 1997, interest expense
increased by $0.2 million due to these arrangements.
<PAGE>
Commercial and industrial equipment 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. AFG also originated loans in which it takes a security interest in the
assets. From January 1, 1997 through October 24, 1997, the Company purchased
commercial and industrial equipment with an original equipment cost of $75.3
million. A portion of these transactions was financed, on an interim basis,
through the Company's bridge-financing facility. Some equipment subject to
leases is sold to an institutional leasing investment program for which the
Company serves as the manager. Acquisition and management fees are received for
the sale and subsequent management of these leases. The Company believes that
this lease origination operation is a growth area for the future.
As of September 30, 1997, the Company, through its AFG subsidiary, had
committed to purchase $102.5 million of equipment for its commercial and
industrial equipment lease portfolio, to be held by the Company or sold to the
Company's institutional leasing investment program or to third parties.
From October 1, 1997 through October 24, 1997, the Company, through its AFG
subsidiary, funded $5.4 million of commitments outstanding as of September 30,
1997 for its commercial and industrial equipment lease portfolio.
As of October 24, 1997, the Company had committed to purchase $145.3 million of
equipment for its commercial and industrial equipment lease portfolio.
Transportation equipment activities:
During the nine months ended September 30, 1997, the Company generated proceeds
of $10.8 million from the sale of owned transportation equipment. The net
proceeds on the sale of assets that were collateralized as part of the senior
loan facility were placed in a collateral account.
The Company operates 10 trailer rental facilities that engage in short-term and
mid-term operating leases. Equipment operated in these facilities consists of
dry van trailers leased to a variety of customers and refrigerated trailers used
primarily in the food distribution industry. The Company is selling certain of
its older trailers and is replacing them with new or late-model used trailers.
The new trailers will be placed in existing rental facilities or in new yards.
Over the last four years, the Company has downsized its transportation
equipment portfolio through the sale or disposal of underperforming assets. The
Company will continue to analyze its transportation equipment portfolio for
underperforming assets to sell or dispose of as necessary.
Management believes that through debt and equity financing, possible sales of
equipment, and cash flows from operations, the Company will have sufficient
liquidity and capital resources to meet its projected future operating needs.
Forward-looking information:
Except for historical information contained herein, the discussion in this Form
10-Q contains forward-looking statements that contain risks and uncertainties,
such as statements of the Company's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Company's actual results could differ materially from
those discussed here.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 8 to the consolidated financial statements.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
10.1 Second Amendment to Warehousing Credit Agreement among American Finance
Group Inc., First Union National Bank of North Carolina, and Fleet Bank, N.A.,
dated as of October 3, 1997.
10.2 Third Amendment to Amended and Restated Warehousing Credit Agreement among
TEC AcquiSub, Inc., First Union National Bank of North Carolina, and Fleet Bank,
N.A., dated as of October 3, 1997.
10.3 Third Amendment to Pooling and Servicing Agreement and Indenture of Trust
among AFG Credit Corporation, American Finance Group, Inc. and Bankers Trust
Company, dated as of October 14, 1997.
10.4 Series 1997-1 Supplemental Indenture to Pooling and Servicing Agreement and
Indenture of Trust among AFG Credit Corporation, American Finance Group, Inc.,
First Union Capital Markets Corp., and Bankers Trust Company, dated as of
October 14, 1997.
10.5 Note Purchase Agreement among AFG Credit Corporation, Variable Funding
Capital Corporation, and First Union Capital Markets Corp., dated as of October
14, 1997.
(B) Reports on Form 8-K
July 28, 1997 - Announcement regarding the retirement of two members of PLM
International's Board of Directors, J. Alec Merriam and Robert L. Pagel.
September 3, 1997 - Announcement regarding the election of Robert N.
Tidball as Chairman of the Board of Directors of the Company and the election of
Randall L.W. Caudill as a Class II director of the Board of Directors of the
Company.
<PAGE>
<PAGE>
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/Richard Brock
--------------------
Richard Brock
Vice President and
Corporate Controller
Date: October 24, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,145
<SECURITIES> 0
<RECEIVABLES> 5,976
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 74,326
<DEPRECIATION> (38,237)
<TOTAL-ASSETS> 195,023
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 64,977
0
0
<OTHER-SE> (16,098)
<TOTAL-LIABILITY-AND-EQUITY> 195,023
<SALES> 0
<TOTAL-REVENUES> 37,270
<CGS> 0
<TOTAL-COSTS> 26,219
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,460
<INCOME-PRETAX> 4,810
<INCOME-TAX> 1,562
<INCOME-CONTINUING> 3,248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,248
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
EXECUTION COPY
AMENDMENT NO. 3 TO
POOLING AND SERVICING AGREEMENT AND INDENTURE OF TRUST
THIRD AMENDMENT, dated as of October 14, 1997 (the "Amendment") to the
Pooling and Servicing Agreement and Indenture of Trust, dated as of July 1,
1995, as amended by Amendment No. 1 thereto dated as of September 1, 1995, and
Amendment No. 2 thereto dated as of December 5, 1995 (the "Agreement"), among
AFG CREDIT CORPORATION, a Delaware corporation, as Transferor, AMERICAN FINANCE
GROUP, INC., a Delaware corporation ("AFG"), as Servicer, and BANKERS TRUST
COMPANY, a banking corporation organized and existing under the laws of the
State of New York, as Trustee (in such capacity, the "Trustee") and as
Collateral Trustee (in such capacity, the "Collateral Trustee").
WHEREAS, the Transferor, AFG, the Trustee and the Collateral Trustee
wish to amend the Agreement in the manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The definition of "Aggregate Net Pool Balance" in Section 1.1 of the
Agreement is amended by deleting the definition in its entirety and replacing it
with the following text:
"Aggregate Net Pool Balance" means, on any date of determination, the
excess of (x) the Aggregate Pool Balance over (y) the sum of the Excess
Concentration Amounts, in each case of such date of determination.
2. The definition of "Applicable Discount Rate" in Section 1.1 of the
Agreement is amended by deleting the text "actively traded" and substituting in
its place the text "two year" and by deleting the text immediately after "U.S.
Treasury securities" and substituting in its place the text "plus (x) 150 basis
points".
3. The definition of "Collections" in Section 1.1 of the Agreement is
amended by inserting the text "(including any Residual Value Insurance
Proceeds), any cash payments made in connection with a substitution under
Section 2.7," after the text "Insurance Proceeds," therein.
4. Section 1.1 of the Agreement is amended by deleting the definition
of "Crossover Date" in its entirety.
5. The definition of "Defaulted Lease" in Section 1.1 of the Agreement
is amended by deleting the text in its entirety and substituting in its place
the following text:
"Defaulted Lease" means an Included Lease as to which (i) the Servicer
has determined in its sole discretion, in accordance with its customary
servicing procedures, that such Lease is not collectible, or (ii) such
Lease is more than three (3) Scheduled Payments past due.
6. The definition of "Delinquent Lease" in Section 1.1 of the Agreement
is amended by deleting the text in its entirety and substituting in its place
the following text:
"Delinquent Lease" shall mean, on any date of determination, each
Included Lease with respect to which more than two (2) Scheduled
Payments are past due.
7. The definition of "Discounted Lease Balance" in Section 1.1 of the
Agreement is amended by adding at the end of such definition the following text:
For the purposes of computing the Aggregate Pool Balance, the
Discounted Lease Balance of Scheduled Payments due more than 84 months
after the date of such computation of such Aggregate Pool Balance,
shall be equal to zero.
8. The definition of "Distribution Date" in Section 1.1 of the
Agreement is amended by adding the words "commencing in February, 1996" after
the words "the fifteenth day of each month" therein.
9. The definition of "Eligible Lease" in Section 1.1 of the Agreement
is amended by deleting subsections (a), (c), (l) and (n) in their entirety and
substituting in each of their places the following text:
(a) which is payable in United States dollars, or, if the Lessee of
such Lease is a Foreign Lessee that is an Eligible Lessee as defined in
clause (B)(ii)(y) of the definition of "Eligible Lessee", meets the
requirement of such clause (B)(ii)(y);
(c) which is not either (i) a Defaulted Lease as of the related Cut Off
Date or (ii) a Delinquent Lease as of such date of determination;
(l) which provides to the Lessee the option, upon a Casualty Loss, to
do one or more of the following: (i) at the Lessee's expense to repair
the Equipment, (ii) to replace the Equipment with similar Equipment of
equal or greater value or (iii) to require that the Lessee pay to the
lessor the Stipulated Loss Value;
(n) which, as of the related Cut Off Date, had a lease term of not less
than 6 months;
10. The definition of "Eligible Lessee" in Section 1.1 of the Agreement
is amended by deleting the text in its entirety and substituting in its place
the following text:
"Eligible Lessee" shall mean at any date of determination, a Lessee
that either (A) (i) has provided a billing address for the related
Lease in the United States of America or (ii) is organized under the
laws of the Unites States of America or any State thereof, or that is
organized under the laws of Canada or any province thereof, or (B) (i)
with respect to which the Lessee is rated investment grade by Moody's
or Standard and Poor's and (ii) with respect to which the Lessee's
related Lease is either (x) denominated in United States Dollars or (y)
denominated in the Lessee's local currency if the lease payments
thereunder are subject to a currency swap acceptable to the Deal Agent
that converts such local currency payments to United States Dollars.
For purposes of this definition, any Lessee the obligations of which
under the related Lease are fully and unconditionally guaranteed by an
entity that would be an Eligible Lessee under the preceding sentence,
shall be deemed to be an Eligible Lessee.
11. Section 1.1 of the Agreement is amended by adding the following
definition after "Floating Pool" and before "Governmental Authority";
"Foreign Lessee" shall mean an Eligible Lessee that (i) has not
provided a billing address for the related Lease in the United States
of America or (ii) is not organized under the laws of the United States
of America or any State thereof, or that is not organized under the
laws of Canada or any province thereof.
12. Section 1.1 of the Agreement is amended by adding the following
definition after "Responsible Officer" and before "Retransfer Agreement":
"Restricted Note" shall have the meaning specified in Section 6.13.
13. The definition of "Servicing Fee Percentage" in Section 1.1 of the
Agreement is amended by deleting the text in its entirety and substituting in
its place the following text:
"Servicing Fee Percentage" shall mean .40%.
14. Section 1.1 of the Agreement is amended by adding the following
definition after "Target Repayment Percentage" and before "Tax Collections":
"Targeted Holder" shall mean each holder of a Restricted Note, each
holder of a participation with respect to a Restricted Note, and each
holder of a right to receive any amount in respect of the Transferor
Interest; provided, however, that any Person holding more than one
interest, each of which would cause such Person to be a Targeted
Holder, shall be treated as a single Targeted Holder.
15. Subsection 2.1(d)(ii)(A) of the Agreement is amended by deleting
the words "and stamp the related Lease Files or otherwise mark such Leases with
a legend to the effect that such Leases have been transferred to the Trust for
the benefit of the Noteholders and the Holder of the Transferor Interest".
16. Section 2.5(q) of the Agreement is amended in its entirety to read
as follows:
The Transferor shall maintain a net worth, exclusive of the
Transferor Interest, that is, at any date of determination, at
least equal to 5% of the sum of the original cost of the
Equipment relating to all Included Leases.
17. Section 2.6(b)(i) of the Agreement is amended by deleting the word
"fifth" in the first line therein and inserting in its place the word "third".
18. Section 2.6(b)(viii) of the Agreement is deleted in its entirety.
19. Section 2.7(a) of the Agreement is amended by adding the text
"and/or cash" after the text "a Lease and the related Equipment" in the first
sentence therein.
20. Section 2.7(c)(iii) of the Agreement is amended by adding the text
", except to the extent that cash or additional Substitute Leases has been
contributed equal to any deficiency" after the word "replaced" therein.
21. Section 2.7(c)(iv) of the Agreement is deleted in its entirety.
22. Section 6.1 of the Agreement is amended by adding the text
"Notwithstanding the above, Notes issued pursuant to a Variable Funding Series
may be issued in an amount equal to the maximum commitment of each Purchaser, as
specified in the appropriate Supplement." to the end of the paragraph therein.
23. Subsection 6.13(a) of the Agreement is amended by:
(a) adding the text "if, after such transfer, the value of the
transferee's interest (direct or indirect) in the Trust will exceed 50%
of the total value of such transferee" to the end of the second
sentence thereof.
(b) adding the text "(i)" between the words "Transfer creates" in the
third sentence thereof and adding the text "or (ii) would cause there
to be more than one hundred Targeted Holders. Any transfer that would
cause the number of Targeted Holders to exceed one hundred shall be
deemed void" to the end of the third sentence thereof.
(c) deleting the text "(i)" in the second paragraph thereof and
deleting the text following the words "disseminated firm buy or sell
quotations" and replacing it with the text ".".
24. Subsection 6.14(a) of the Agreement is amended by:
(a) adding the following text to the end of the first sentence thereof:
"; provided, however that any such issuance or reallocation shall not
cause the number of Targeted Holders to exceed one hundred."
(b) deleting the last sentence thereof.
25. Sections 11.6 and 11.24 of the Agreement are amended by deleting
the text "each Rating Agency" therein and substituting in its place the text
"Moody's and Standard and Poor's".
26. Subsection 13.1(c) of the Agreement is amended by deleting the text
"provided" and substituting in its place the text "provided, that such amendment
will not cause the Trust to be classified as an association taxable as a
corporation for federal income tax purposes; provided, further,".
27. Subsection 13.2(d)(ii) of the Agreement is amended by deleting the
text "Exhibit J" and substituting in its place the text "Exhibits C and J".
28. Paragraph 1(d) of Schedule 3 to the Agreement is amended by
deleting the text "25% of the Aggregate Pool Balance" and substituting in its
place the text "(i) 35% of the Aggregate Pool Balance as long as the Aggregate
Pool Balance is less than $50,000,000 or (ii) 25% of the Aggregate Pool Balance
as long as the Aggregate Pool Balance exceeds $50,000,000, provided that to the
extent a Lease was an Included Lease when the Aggregate Pool Balance was less
than $50,000,000, it shall remain an Included Lease when the Aggregate Pool
Balance exceeds $50,000,000."
29. Paragraph 2(a) of Schedule 3 to the Agreement is hereby amended by
replacing the chart therein with the chart attached hereto as Exhibit I.
30. Paragraph 2(b) of Schedule 3 to the Agreement is amended by
deleting the text "$10,000,000" and adding the text "10% of the Asset Base."
31. Paragraph 3 of Schedule 3 to the Agreement is amended by deleting
the text in its entirety and substituting in its place the following text:
Other Lease Requirements: Utilizing the Definition of "Eligible Lease"
in the Pooling and Servicing Agreement and Indenture of Trust; (a) the
sum of the Discounted Lease Balances of all Included Leases, calculated
for each Lease at the date of origination of each such Lease by AFG,
would not, on a cumulative basis, exceed 90% of the sum of the original
cost of the Equipment relating to all Included Leases; (b) Leases
having remaining terms greater than 72 months, as of the related Cut
Off Date, may not comprise greater than 15% of the Asset Base; and (c)
Leases of Foreign Lessees may not exceed 10% of the Asset Base.
32. Section 3(d) of Exhibit B to the Agreement is amended by deleting
the words "and to stamp such Leases or otherwise mark such Leases with a legend
to the effect that such Leases have been transferred to the Trust for the
benefit of the Noteholders and the Holder of the Transferor Interest".
33. Section 6(d) of Exhibit B to the Agreement is deleted in its
entirety.
34. Exhibit C to the Agreement is amended by deleting the text
"2.6(b)(viii)" from the heading of such Exhibit and substituting in its place
the text "13.2(d)(ii)".
35. Pages 2 and 3 of Exhibit H to the Agreement is hereby amended and
replaced to substantially conform with Exhibit H attached as Exhibit II hereto.
36. Except as expressly amended, modified and supplemented hereby, the
provisions of the Agreement are and shall remain in full force and effect.
37. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, PROVIDED, HOWEVER,
THAT THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE TRUSTEE AND THE COLLATERAL
TRUSTEE SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
38. Capitalized terms used in this Amendment without definition shall
have the meanings assigned to them in the Agreement.
39. This Amendment may be executed in two or more counterparts (and by
different parties on separate counterparts), each or which shall be an original,
but all of which together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective officers as of the day and year first above
written.
AFG CREDIT CORPORATION,
as Transferor
By:
Title:
AMERICAN FINANCE GROUP, INC.
as Servicer
By:
Title:
BANKERS TRUST COMPANY,
as Trustee
By:
Title:
BANKERS TRUST COMPANY,
as Collateral Trustee
By:
Title:
<PAGE>
Exhibit I
- -------------------------------------------------- ============================
Percentage of Aggregate
Pool Balance
Category
- -------------------------------------------------- ============================
1. Included Leases of any individual Lessee that
are rated AA- or higher by Standard & Poor's
and Aa3 or higher by Moody's 20%
- -------------------------------------------------- ============================
- -------------------------------------------------- ============================
2. Included Leases of any individual Lessee that
are rated between investment grade and (i)
AA- by Standard & Poor's and (ii) Aa3 by 9%
Moody's
- -------------------------------------------------- ============================
- -------------------------------------------------- ============================
3. Included Leases of any individual Lessee that
are not rated investment grade by Moody's and 3%
Standard & Poor's
- -------------------------------------------------- ============================
- -------------------------------------------------- ============================
4. Included Leases of all Lessees that operate 40%
in the same industry.*
- -------------------------------------------------- ============================
- -------------------------------------------------- ============================
5. Included Leases that relate to the same type 40%
of Equipment**
- -------------------------------------------------- ============================
- -------------------------------------------------- ============================
6. Included Leases for which the Scheduled 10%
Payments are payable semi-annually
- -------------------------------------------------- ============================
* Based upon Primary Standard Industrial Classification Code Number.
** As determined by AFG Credit Corporation in accordance with its
customary procedures.
EXECUTION COPY
AFG CREDIT CORPORATION,
Transferor,
AMERICAN FINANCE GROUP, INC.,
Servicer,
FIRST UNION CAPITAL MARKETS CORP.,
Deal Agent
and
BANKERS TRUST COMPANY,
Trustee and Collateral Trustee
on behalf of the Series 1997-1 Noteholders
SERIES 1997-1 SUPPLEMENTAL INDENTURE
Dated as of October 14, 1997
to
POOLING AND SERVICING AGREEMENT AND INDENTURE OF TRUST
Dated as of July 1, 1995
$125,000,000
AFG MASTER TRUST
Series 1997-1
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Designation. 1
Section 2. Definitions. 1
Section 3. The Notes. 6
Section 4. [Reserved]. 6
Section 5. [Reserved] 7
Section 6. Delivery. 7
Section 7. Procedure for Increasing the Principal Amount............7
Section 8. Procedure for Decreasing the Principal Amount............8
Section 9. [Reserved]. 8
Section 10. [Reserved]. 8
Section 11. Interest. 8
Section 12. Indemnification by Transferor...........................8
Section 13. Article IV of Agreement.................................9
Section 14. Article V of the Agreement.............................12
Section 15. Accelerated Payment Events; Series 1997-1 Pay Out Events..14
Section 16. Funding Costs. 15
Section 17. Conditions Precedent to Effectiveness of Supplement.......18
Section 18 Representation and Warranties of the Transferor and the Servicer..20
Section 19. Covenants of the Transferor......................................22
Section 20. Covenants of the Servicer........................................22
Section 21. Covenants of the Trustee.........................................23
Section 22. Obligations Unaffected...........................................23
Section 23. [Reserved]. 23
Section 24. Payments. 23
Section 25. Costs and Expenses..............................................23
Section 26. Amendments. 24
Section 27. Successors and Assigns...........................................25
Section 28. [Reserved]. 25
Section 29. Repurchase by Servicer...........................................25
Section 30. Repurchase by Transferor.........................................26
Section 31. Permitted Successor Servicer.....................................26
Section 32. Option to Repurchase.............................................26
Section 33. Final Distribution...............................................26
Section 34. [Reserved]. 26
Section 35. Ratification of Agreement........................................27
Section 36. Counterparts. 27
Section 37. GOVERNING LAW. 27
Section 38. The Trustee. 27
Section 39. Instructions in Writing..........................................27
EXHIBITS
Exhibit A:........ Form of Note
Exhibit B:........ [Reserved]
Exhibit C:........ Form of Monthly Noteholder's Statement
Exhibit D:........ Form of Purchaser's Certification
Exhibit E:........ Form of Seller's Certification
Exhibit F:........ Form of Commitment Transfer Supplement
SCHEDULES
Schedule 1........ Schedule of Purchasers' Commitments
<PAGE>
SERIES 1997-1 SUPPLEMENTAL INDENTURE, dated as of October 14, 1997
(this "Supplement") among AFG CREDIT CORPORATION, a Delaware corporation, as
Transferor, AMERICAN FINANCE GROUP, INC., a Delaware corporation, as Servicer,
FIRST UNION CAPITAL MARKETS CORP., a North Carolina corporation and BANKERS
TRUST COMPANY, as Trustee (in such capacity, the "Trustee") and as Collateral
Trustee (in such capacity, the "Collateral Trustee") under the AFG Master Trust
Pooling and Servicing Agreement and Indenture of Trust dated as of July 1, 1995
among the Transferor, the Servicer, and the Trustee and Collateral Trustee (as
amended, supplemented or otherwise modified from time to time, the "Agreement").
Section 6.12 of the Agreement provides, among other things, that the
Transferor and the Trustee may at any time and from time to time enter into a
supplement to the Agreement for the purpose of authorizing the delivery by the
Transferor to the Trustee for execution and authentication of one or more Series
of Notes.
Pursuant to this Supplement, the Transferor shall create a new Series
of Notes and shall specify the principal terms thereof.
Section 1. Designation.
There is hereby created a Series of Notes to be issued pursuant to the
Agreement and this Supplement to be known as the "Series 1997-1 Notes". Series
1997-1 shall be a Variable Funding Series. The Series 1997-1 Notes shall be
issued in definitive form.
Section 2. Definitions.
In the event that any term or provision contained herein shall conflict
with or be inconsistent with any provision contained in the Agreement, the terms
and provisions of this Supplement shall govern. All Article, Section or
subsection references herein shall mean Articles, Sections or subsections of the
Agreement, as amended or supplemented by this Supplement, except as otherwise
provided herein. All capitalized terms not otherwise defined herein are used
herein as defined in the Agreement. Each capitalized term defined herein shall
relate only to the Series 1997-1 Notes and no other Series of Notes issued by
the Trust.
Accelerated Funding Requirement: Shall mean, on any Distribution Date after an
Accelerated Payment Event has occurred, the Principal Amount, after giving
effect to the application of any amounts allocated under the Target Repayment
Amount.
Accelerated Payment Date: Shall mean the date on which an Accelerated Payment
Event is deemed to occur pursuant to Section 15(a) of this Supplement.
Accelerated Payment Event: Shall have the meaning set forth in Section 15(a) of
this Supplement.
Adjusted Principal Amount: Shall mean, on any date of determination, the excess
of the Principal Amount over the
Distribution Account Balance at the end of such date of determination.
Aggregate Commitment Amount: Shall mean, as of any date, the sum of the
Commitments of all Purchasers on such date.
Amortization Period: The period from but excluding the last day of the Revolving
Period through the day on which the Principal Amount of the Series 1997-1 Notes,
all accrued Series 1997-1 Note Interest and all other amounts owed to the Series
1997-1 Noteholders are indefeasably paid in full.
Average Principal Amount: Shall mean for any period the sum of the Principal
Amounts on each day of such period divided by the number of days in such period.
Change in Law: Shall have the meaning specified Section 16(c) hereof.
Closing Date: Shall mean the date on which the Principal Amount is first
increased to above zero.
Commitment: Shall mean, as to any Purchaser, its obligation to maintain and,
subject to the conditions set forth in Section 7 hereof and the Note Purchase
Agreement, increase its Principal Amount, in an aggregate amount not to exceed
at any one time outstanding the amount set forth in the Note Purchase Agreement;
collectively, as to all such Purchasers, the "Commitments".
Commitment Percentage: Shall mean, as to any Purchaser and as of any date, the
percentage equivalent of a fraction, the numerator of which is such Purchaser's
Commitment as set forth on Schedule 1 and the denominator of which is the
Aggregate Commitment Amount as of such date.
Deal Agent: First Union Capital Markets Corp., in its capacity as deal agent
under the Note Purchase Agreement.
Decrease: Shall have the meaning assigned in Section 8 hereof.
Distribution Account: Shall have the meaning specified in Section 4.2B.
Distribution Account Balance: Shall mean, on any date of determination, the
amount on deposit in the Distribution Account on such date (excluding investment
income for the Monthly Period which includes such date of determination and
amounts designated to pay Series 1997-1 Note Interest).
Effective Date: Shall have the meaning specified in Section 17 hereof.
Facility Amount: $125,000,000.
Facility Fee: Has the meaning given to such term in the Fee Letter.
Fee Letter: The fee letter agreement between the Transferor, the Servicer, the
Deal Agent and First Union, as liquidity agent, dated October 14, 1997, as
amended, modified or supplemented from time to time.
First Union: First Union National Bank, with its principal office in Charlotte,
North Carolina, and its successors and assigns.
Increase: Shall have the meaning assigned in Section 7(a) hereof.
Increase Amount: Shall have the meaning assigned in Section 7(a) hereof.
Increase Date: Shall have the meaning assigned in Section 7(a) hereof.
Increased Costs: Shall mean any amounts owing to the Purchasers pursuant to
Section 16(b) hereof.
Initial Principal Amount: Shall mean $72,133,000.
Monthly Sale Date: Shall mean (i) each Distribution Date and (ii) the last
Business Day of each month.
Noteholder: Shall mean the holder of record of any Series 1997-1 Note.
Notes: Shall mean the Series 1997-1 Notes issued pursuant to this Supplement.
Note Purchase Agreement: Shall mean the Note Purchase Agreement, dated as of
August __, 1997, among the Transferor, the Servicer, VFCC, certain investors
named therein, First Union, as liquidity agent and the Deal Agent, as amended
from time to time and relating to the Series 1997-1 Notes.
Notes: Shall have the meaning assigned in the preamble.
Optional Series 1997-1 Pay Down Amount: Shall mean on a Distribution Date, the
amount designated by the Servicer and available pursuant to Section 4.3(g)(i) in
respect of such Distribution Date.
Paired Series: Shall mean any series of Notes that is paired with Series 1997-1
in the related Supplement.
Pay Out Commencement Date: Shall mean the date on which a Trust Pay Out Event is
deemed to occur pursuant to Section 9.1 of the Agreement or a Series 1997-1 Pay
Out Event is deemed to occur pursuant to this Supplement.
Principal Amount: Shall mean, with respect to the Series 1997-1 Notes and as of
any date, an amount equal to (a) the Initial Principal Amount plus (b) all
Increase Amounts pursuant to Section 7 minus (c) the amount of any distributions
made pursuant to Section 8 and all distributions made in reduction of the
Principal Amount pursuant to Section 5.lA prior to such date of determination.
Program Agreements: Shall have the meaning specified in Section 17(a) hereof.
Program Fee: Has the meaning given to such term in the Fee Letter.
Purchaser: Shall mean each purchaser of the Series 1997-1 Notes.
Rating Agencies: Shall mean, collectively, each nationally recognized
statistical rating agency which, at the request of the Transferor or the
Servicer, has assigned a rating to one or more classes of the Series 1997-1
Notes; provided that so long as no such agency is currently rating a particular
Class of Series 1997-1, the requirement to satisfy the Rating Agency Condition
with respect to such Class shall be deemed to be a requirement to obtain the
consent of the Required Purchasers of such Class.
Record Date: Shall mean, with respect to any Distribution Date, the close of
business on the last Business Day of the preceding month.
Register: Shall mean a register maintained by the Deal Agent for recording (i)
transfers of interests in the Series 1997-1 Notes, and (ii) the date, type, and
amount of each Increase or Decrease made pursuant to this Supplement and the
date and amount of each payment or prepayment of principal thereof.
Required Purchasers: Shall mean, on any day, Purchasers having, in the
aggregate, Voting Percentages of at least 66-2/3%.
Revolving Noteholders' Interest: Shall have the meaning specified in Section 3
hereof.
Revolving Period: Shall mean the period from and including the Closing Date to
and including the earliest of (i) the latest Distribution Date that falls within
364 days after the Closing Date, (ii) the Pay Out Commencement Date and (iii)
the Accelerated Payment Date.
Scheduled Series 1997-1 Termination Date: Shall mean the Distribution Date which
occurs 12 months after the last Scheduled Payment under any Included Lease in
the Amortizing Pool related to Series 1997-1.
Series Accounts: Shall mean the Distribution Account with respect to Series
1997-1.
Series Available Amount: Shall mean on any Distribution Date the amount
allocable to Series 1997-1 in accordance with Section 4.3(e) or (f) and Section
4.3(g) or (h) of the Agreement, as the case may be.
Series Asset Base: Shall mean, on any date of determination, the Series
Percentage of the Asset Base on such date.
Series Percentage: Shall mean, on any date of determination:
(a) prior to a Pay Out Event, the percentage equivalent of a fraction
the numerator of which shall be the Adjusted Principal Amount on the preceding
Business Day and the denominator of which shall be the Aggregate Adjusted
Principal Amount on such day;
(b) after a Pay Out Event, the percentage equivalent of a fraction the
numerator of which shall be the Adjusted Principal Amount as of the end of the
day on the last day of the Revolving Period and the denominator of which shall
be the Aggregate Adjusted Principal Amount on such day.
Series 1997-1: Shall mean the Series of the AFG Master Trust represented by the
Series 1997-1 Notes.
Series 1997-1 Note Interest: Shall have the meaning specified in Section 4.4A
(a)(i).
Series 1997-1 Pay Out Event: Shall have the meaning prescribed in Section 15(b)
of this Supplement.
Series Termination Date: Shall mean the earlier to occur of (i) the day after
the Distribution Date on which the Series 1997-1 Notes are repaid in full, or
(ii) the Scheduled Series 1997-1 Termination Date.
Target Repayment Percentage: Shall mean 100%.
Taxes: Shall have the meaning specified in Section 16(d) hereof.
Unpaid Series 1997-1 Note Interest: Shall have the meaning specified in Section
11(a) hereof.
VFCC: Variable Funding Capital Corporation, a Delaware corporation, and its
successors and assigns.
VFCC's Cost of Funds: Shall have the meaning specified in the Note Purchase
Agreement.
Voting Percentage: Shall mean with respect to any Purchaser, during the
Revolving Period, the percentage equivalent of a fraction the numerator of which
equals such Purchaser's Commitment and the denominator of which equals the
Aggregate Commitment Amount and thereafter, the percentage equivalent of a
fraction the numerator of which equals such Purchaser's Principal Amount and the
denominator of which equals the Principal Amount.
Working Day: Shall mean any Business Day on which dealings in foreign currencies
and exchanges between banks may be carried on in London, England.
Section 3. The Notes.
(a) The Series 1997-1 Notes shall represent indebtedness secured by the
Trust Assets and an obligation to pay the Noteholders' Note Interest and Note
Principal out of the Trust Assets, consisting of the right of the Noteholders to
receive (i) the applicable share of Collections and (ii) all other funds on
deposit in the Collection Account allocable to the holders of the Series 1997-1
Notes and (iii) all funds on deposit in the Distribution Account (the "Revolving
Noteholders' Interest"). The Transferor Interest and any other Series of Notes
outstanding shall represent the interest in the remainder of the Trust Assets
not allocated pursuant hereto to the Revolving Noteholders' Interest.
(b) The Series 1997-1 Notes shall be issued, substantially in the form
of Exhibit A, and shall, upon issue, be executed by the Trust and delivered to
the Trustee for authentication and redelivery as provided in Section 6 hereof
and Section 6.3 of the Agreement.
(c) The Series 1997-1 Notes have not been registered under the United
States Securities Act of 1933, as amended (the "Securities Act"). By accepting
its Note, each Purchaser shall be deemed to acknowledge that it is purchasing
the Notes for investment purposes and is not acquiring the Notes with a view to,
or for offer or sale in connection with, any distribution in violation of the
Securities Act.
(d) The Purchaser of the Series 1997-1 Notes is authorized to endorse
on the schedules annexed thereto and made a part thereof or on a continuation
thereof which shall be attached thereto and made a part thereof the date, type,
and amount of each Increase or Decrease made pursuant to this Supplement and the
date and amount of each payment or prepayment of principal thereof.
(e) The Deal Agent shall maintain the Register and a subaccount therein
for each Noteholder, in which shall be recorded the date, type, and amount of
each Increase or Decrease made pursuant to this Supplement and the date and
amount of each payment or prepayment of principal thereof.
(f) The entries made in the Register and the endorsements made by each
Noteholder on the schedules attached to each Series 1997-1 Note maintained
pursuant to subsection 3(c) hereof shall, to the extent permitted by applicable
law, be prima facie evidence of the (A) existence and amounts of the obligations
of the Trust therein recorded; provided, however, that the failure of any
Noteholder or the Deal Agent to maintain the Register or any such schedule, or
any error therein, shall not in any manner affect the obligation of the Trust to
repay (with applicable interest) the Commitments made to such Trust by such
Noteholder in accordance with the terms of this Supplement.
Section 4. [Reserved].
Section 5. [Reserved]
Section 6. Delivery.
(a) On the Closing Date, the Trust shall execute and the Trustee shall
duly authenticate Series 1997-1 Notes in an aggregate denomination equal to the
Initial Principal Amount.
(b) The Trustee shall deliver the Series 1997-1 Notes when
authenticated in accordance with Section 6.2 of the Agreement.
Section 7. Procedure for Increasing the Principal Amount.
(a) Subject to subsection 7(b) hereof, on any Monthly Sale Date during
the Revolving Period, the Principal Amount may be increased by increasing each
Purchaser's pro rata share of the Principal Amount (an "Increase"), up to an
amount not exceeding each Purchaser's Commitment upon the request of the
Servicer, on behalf of the Trust, (each date on which an increase in the
Principal Amount occurs hereunder being herein referred to as the "Increase
Date"); provided that the Servicer shall have given the Deal Agent irrevocable
written notice (effective upon receipt) of such request as provided in the Note
Purchase Agreement. Such notice shall state the Increase Date, the proposed
amount of such Increase (the "Increase Amount"), and otherwise conform to the
requirements of the Note Purchase Agreement.
(b) The Purchasers shall be obligated to make an Increase only on the
terms set forth in the Note Purchase Agreement and the Purchasers shall not be
obligated to increase their respective Principal Amounts on any Increase Date
hereunder if:
(i) the related Increase Amount is less than $250,000;
(ii) after giving effect to the Increase, the Principal Amount
of any Purchaser would exceed its Commitment (determined as of the date
the notice of such Increase is given);
(iii) a Pay Out Event or an event which, with the passage of
time or the giving of notice, or both, would be a Pay Out Event, has
occurred;
(iv) an Accelerated Payment Event, or an event which, with the
passage of time or the giving of notice, would be an Accelerated
Payment Event, has occurred and is continuing; and
(v) the representations and warranties set forth in the
Agreement, this Supplement and the Asset Purchase Agreement are not
true and correct in all material respects on the Increase Date.
Section 8. Procedure for Decreasing the Principal Amount.
On any one or more Monthly Sale Dates during the Revolving Period, upon
request of the Servicer on behalf of the Trust, the Aggregate Principal Amount
may be reduced (a "Decrease") by (A)(i) a deposit by the Transferor to the
Distribution Account of the amount of such reduction or (ii) the allocation to
the Distribution Account of any amounts available pursuant to Section 4.3(g) of
the Agreement or (iii) any combination of (i) and (ii). The Servicer shall give
the Deal Agent written notice (effective upon receipt) prior to 12:00 Noon (New
York City time) three Business Days prior to the date of any Decrease stating
the amount of such Decrease; provided that each such Decrease shall be in an
amount equal to or greater than $250,000.
Section 9. [Reserved].
Section 10. [Reserved].
Section 11. Interest.
(a) Interest shall accrue in respect of each day in each Accrual Period
for the Series 1997-1 Notes at a rate equal to VFCC's Cost of Funds applicable
to such day. Interest accrued during each Accrual Period on the Series 1997-1
Notes shall be payable on the Distribution Date immediately following the last
day of such Accrual Period. If any interest that accrues on the Series 1997-1
Notes during an Accrual Period is not paid on the related Distribution Date in
accordance with the preceding sentence ("Unpaid Series 1997-1 Note Interest"),
such Unpaid Series 1997-1 Note Interest shall be payable on the immediately
following Distribution Date, plus interest thereon for the additional Accrual
Period calculated at VFCC's Cost of Funds.
(b) Calculations of per annum rates and fees under this Supplement
shall be made on the basis of a 360-day year for actual days elapsed. Each
determination of VFCC's Cost of Funds hereunder and under the Note Purchase
Agreement by the Deal Agent shall be conclusive and binding upon each of the
parties hereto in the absence of manifest error. Any change in interest payable
hereunder resulting from a change in any of the interest rates upon which VFCC's
Cost of Funds is based shall become effective as of the opening of business on
the day on which such change is announced.
Section 12. Indemnification by Transferor.
The Transferor hereby agrees to pay, and to indemnify and hold
harmless, the Deal Agent, each Purchaser, the Trustee and the Collateral Trustee
and each officer, director, employee and agent thereof from (a) all claims,
disputes, damages, penalties and losses arising from the entering into or
management of Leases or the acquisition, management or operation of the related
Equipment (including any product warranty-related claims, but excluding losses
arising out of a lessee's failure to make timely lease payments or other credit
losses) or the transactions contemplated by this Supplement or the subject
matter thereof, (b) any taxes which may at any time be asserted in respect of
this transaction or the subject matter thereof (including, without limitation,
any sales, gross receipts, general corporation, personal property, privilege or
license taxes, but not including taxes imposed upon the Deal Agent, any such
Purchaser, the Trustee or the Collateral Trustee with respect to its income
arising out of this transaction and imposed in any jurisdiction) and (c) costs,
expenses and reasonable counsel fees in defending against the same, whether
arising by reason of the acts to be performed by the Transferor or the Servicer
hereunder or imposed against the Deal Agent, any Purchaser, the Trustee, the
Collateral Trustee or any officer, director, employee or agent thereof, or the
Transferor, the property involved or otherwise (regardless of whether the Deal
Agent, the Trustee, any Purchaser, or any officer, employee or director thereof
is a party thereto); provided, however, that the Transferor shall not be liable
to or indemnify or hold harmless the Deal Agent, each Purchaser, the Trustee or
the Collateral Trustee and each officer, director and employee or agent thereof
as to any claims, disputes, damages, penalties and losses suffered or sustained
by reason of gross negligence or willful misconduct on the part of the Deal
Agent, each Purchaser, the Trustee or the Collateral Trustee, as the case may
be, or any of their respective officers, directors, employees or agents.
Section 13. Article IV of Agreement.
Sections 4.1 through 4.5, inclusive, of the Agreement shall read in
their entirety as provided in the Agreement and Sections 4.2B and Section 4.4A
shall read in their entirety as provided in this Series 1997-1 Supplement to the
Agreement. The remainder of Article IV of the Agreement shall read in its
entirety as follows and shall be applicable only to the Series 1997-1 Notes:
ARTICLE IV
RIGHTS OF NOTEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.2B The Series 1997-1 Distribution Account.
The Servicer, for the benefit of the Series 1997-1 Noteholders, shall
cause to be established and maintained in the name of the Collateral Trustee, on
behalf of the Trust, with an office or branch of a Qualified Institution a
segregated demand deposit account maintained in the corporate trust department
of such Qualified Institution, and held in trust by such Qualified Institution
(the "Distribution Account") bearing a designation clearly indicating that the
funds deposited therein are held in trust for the benefit of the Series 1997-1
Noteholders. The Paying Agent shall have the revocable authority to make
withdrawals from the Distribution Account. Funds on deposit in the Distribution
Account shall at all times be invested by the Collateral Trustee, at the written
direction of the Servicer, in Permitted Investments. Any such investments shall
mature and such funds shall be available for withdrawal on the Transfer Date
preceding the Distribution Date on which such funds are to be distributed
hereunder; provided, however, that any Permitted Investment in short-term U.S.
treasury securities may mature one day after such Transfer Date and may be sold
on such Transfer Date.
Section 4.4A Allocations.
(a) Allocations During the Revolving Period. On each Determination Date
during the Revolving Period, the Servicer shall instruct the Collateral Trustee
to deposit, and on the succeeding Distribution Date, the Collateral Trustee,
acting in accordance with such instructions, shall deposit to the Distribution
Account, the amounts required to be deposited pursuant to this Section in order
to make the following payments from the Series Available Amount for the related
Distribution Date (in each case, such deposit or payment to be made only to the
extent funds remain available therefor after all prior payments and deposits for
such Distribution Date have been made), in the following order of priority:
(i) allocate to the Distribution Account for the benefit of
the Noteholders an amount equal to interest accrued in respect of the
Series 1997-1 Notes in accordance with the provisions of Section 11
hereof ("Series 1997-1 Note Interest") for the Accrual Period ending on
such Distribution Date, together with any such amounts that accrued in
respect of prior Accrual Periods for which no allocation was previously
made, plus interest on any such amounts calculated at VFCC's Cost of
Funds;
(ii) pay to the Deal Agent, the Facility Fee and the Program
Fee for the preceding Accrual Period, together with any amounts in
respect of such fees that were due in respect of prior Accrual Periods
that remain unpaid;
(iii) allocate to the Distribution Account for the benefit of
the Noteholders an amount equal to the Optional Series 1997-1 Pay Down
Amount for such Distribution Date;
(iv) pay to each Hedging Counterparty any Hedge Termination
Payments;
(v) allocate to the Distribution Account for the benefit of
the Noteholders an amount equal to any amounts then due and payable in
respect of Increased Costs in respect of the Series 1997-1 Notes
accrued during the Accrual Period ending on such Distribution Date;
(vi) pay to the appropriate parties an amount equal to any
amounts then due and payable in respect of other fees and expenses
owing thereto in respect of Series 1997-1; and
(vii) allocate any remaining Series Available Amount to the
Excess Funding Account.
(b) Allocations During the Amortization Period and Prior to the Pay Out
Commencement Date or Accelerated Payment Date. On each Determination Date during
the Amortization Period and prior to the Pay Out Commencement Date or the
Accelerated Payment Date, the Servicer shall instruct the Trustee to deposit,
and on the succeeding Distribution Date the Trustee acting in accordance with
such instructions shall deposit to the Distribution Account, the amounts
required to be deposited pursuant to this Section in order to make the following
payments from the Series Available Amount for the related Distribution Date (in
each case, such deposit or payment to be made only to the extent funds remain
available therefor after all prior payments and deposits for such Distribution
Date have been made), in the following order of priority:
(i) allocate to the Distribution Account for the benefit of
the Noteholders an amount equal to accrued in respect of the Series
1997-1 Notes for the Accrual Period ending on such Distribution Date,
together with any such amounts that accrued in respect of prior Accrual
Periods for which no allocation was previously made, plus interest on
any such amounts calculated at VFCC's Cost of Funds;
(ii) pay to the Deal Agent, the Facility Fee and the Program
Fee for the preceding Accrual Period, together with any amounts in
respect of such fees that were due in respect of prior Accrual Periods
that remain unpaid;
(iii) allocate to the Distribution Account for the benefit of
the Noteholders an amount equal to the Percentage of the Target
Repayment Amount for Series 1997-1 for such Distribution Date, together
with any such amounts that were due on prior Distribution Dates for
which no deposit was previously made;
(iv) pay to each Hedging Counterparty any Hedge Termination
Payments;
(v) allocate to the Distribution Account for the benefit of
the Noteholders an amount equal to any amounts then due and payable in
respect of Increased Costs in respect of the Series 1997-1 Notes
accrued during the Accrual Period ending on such Distribution Date;
(vi) pay to the appropriate parties an amount equal to any
amounts then due and payable in respect of other fees and expenses
owing thereto in respect of Series 1997-1; and
(vii) allocate any remaining Series Available Amount to the
Excess Funding Account.
(c) Allocations After Pay Out Commencement Date or Accelerated Payment
Date. On each Determination Date occurring after the Pay Out Commencement Date
or the Accelerated Payment Date, the Servicer shall instruct the Trustee to
deposit, and on the succeeding Distribution Date the Trustee acting in
accordance with such instructions shall deposit to the Distribution Account, the
amounts required to be deposited pursuant to this Section in order to make the
following payments from the Series Available Amount for the related Distribution
Date (in each case, such deposit or payment to be made only to the extent funds
remain available therefor after all prior payments and deposits for such
Distribution Date have been made), in the following order of priority:
(i) allocate to the Distribution Account for the benefit of
the Noteholders an amount equal to Series 1997-1 Note Interest accrued
in respect of the Series 1997-1 Notes for the Accrual Period ending on
such Distribution Date, together with any such amounts that accrued in
respect of prior Accrual Periods for which no allocation was previously
made, plus interest on any such amounts calculated at VFCC's Cost of
Funds;
(ii) pay to the Deal Agent, the Facility Fee and the Program
Fee for the preceding Accrual Period, together with any amounts in
respect of such fees that were due in respect of prior Accrual Periods
that remain unpaid;
(iii) allocate to the Distribution Account for the benefit of
the Noteholders an amount equal to the remaining Aggregate Principal
Amount;
(iv) pay to each Hedging Counterparty any Hedge Termination
Payments;
(v) allocate to the Distribution Account for the benefit of
the Noteholders an amount equal to any amounts then due and payable in
respect of Increased Costs in respect of the Series 1997-1 Notes
accrued during the Accrual Period ending on such Distribution Date;
(vi) pay to the appropriate parties an amount equal to any
amounts then due and payable in respect of other fees and expenses
owing thereto in respect of Series 1997-1; and
(vii) allocate any remaining Series Available Amount to the
Excess Funding Account.
Section 14. Article V of the Agreement.
Article V of the Agreement shall read in its entirety as follows and
shall be applicable only to the Series 1997-1 Notes:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
NOTEHOLDERS
Section 5.lA Distributions.
On each Distribution Date, the Paying Agent shall distribute,
in immediately available funds, to the Deal Agent, at the account specified
pursuant to the Note Purchase Agreement on behalf of the Purchasers (in
accordance with the certificate delivered by the Servicer to the Trustee
pursuant to Section 5.2A(a) of amounts on deposit in the Distribution Account as
are payable with respect to the Series 1997-1 Notes pursuant to Section 4.4A on
such Distribution Date.
Section 5.2A Noteholders' Statements.
(a) Monthly Noteholders, Statement. On or before each Distribution
Date, the Paying Agent shall forward to the Deal Agent a statement substantially
in the form of Exhibit C to this Supplement prepared by the Servicer setting
forth among other things the following information with respect to such
Distribution Date (which, in the case of subclauses (i), (ii), (iii) and (v)
shall be stated on an aggregate basis and on the basis of an original principal
amount of $1,000 per Series 1997-1 Note):
(i) the total amount distributed;
(ii) the amount of such distribution allocable to Note
Principal;
(iii) the amount of such distribution allocable to Series
1997-1 Note Interest;
(iv) the Aggregate Commitment Amount, the Principal Amount and
the Average Principal Amount; and
(v) the Adjusted Principal Amount, the Series Asset Base, the
Aggregate Adjusted Principal Amount, the Asset Base, the Discounted
Lease Balances of Included Leases that were classified as Delinquent
Leases during each of the three preceding Monthly Periods, the
Aggregate Pool Balance on the last day of the three preceding Monthly
Periods and the Discounted Lease Balances of Included Leases that
became Defaulted Leases during each of the three preceding Monthly
Periods.
(b) Annual Noteholders' Tax Statement. On or before January 31 of each
calendar year, beginning with calendar year 1998, the Paying Agent shall
distribute on behalf of the Transferor, to the Deal Agent for delivery to each
Person who at any time during the preceding calendar year was a Series 1997-1
Noteholder, a statement prepared by the Servicer and delivered to the Trustee on
or before January 31 of each calendar year containing the information required
to be contained in the regular monthly report to Series 1997-1 Noteholders, as
set forth in subclauses (i), (ii), (iii) and (iv) above, aggregated for such
calendar year or the applicable portion thereof during which such Person was a
Series 1997-1 Noteholder, together with such other customary information
(consistent with the treatment of the Series 1997-1 Notes as debt) as the
Servicer deems necessary or desirable to enable the Series 1997-1 Noteholders to
prepare their tax returns consistent with the treatment of the Series 1997-1
Notes as debt instruments. Such obligations of the Transferor and the Paying
Agent shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Internal Revenue Code of 1986, as amended (the "Code") as
from time to time in effect.
(c) Monthly Statement. With respect to each Distribution Date and the
related Monthly Period, the Servicer shall provide to the Deal Agent a copy of
the Monthly Statement.
Section 15. Accelerated Payment Events; Series 1997-1 Pay Out
Events.
(a) Accelerated Payment Events. If any one of the following events
shall occur with respect to the Series 1997-1 Notes:
(i) for any two (2) consecutive Distribution Dates after
giving effect to all transactions and distributions to occur hereunder
on such dates, the Adjusted Principal Amount on such dates shall exceed
the Series Asset Base on such date; or
(ii) for any two (2) consecutive Distribution Dates after
giving effect to all transactions and distributions to occur hereunder
on such dates, the Aggregate Adjusted Principal Amount on such dates
shall exceed the Asset Base on such date; or
(iii) on any Distribution Date after giving effect to all
transactions and distributions to occur hereunder on such date, the
aggregate Discounted Lease Balances shall be less than $20,000,000; or
(iv) for any two (2) consecutive Distribution Dates after
giving effect to all transactions and distributions to occur hereunder
on such dates, the average of the Discounted Lease Balances of Included
Leases that were classified as Delinquent Leases on the last day of
each of the three preceding Monthly Periods exceeds 5% of the average
Aggregate Pool Balance on the last day of such three preceding Monthly
Periods; or
(v) for any two (2) consecutive Distribution Dates after
giving effect to all transactions and distributions to occur hereunder
on such dates, the Discounted Lease Balances of Included Leases that
became Defaulted Leases during the three preceding Monthly Periods
exceeds 4% of the average Aggregate Pool Balance on the last day of
such three preceding Monthly Periods; or
(vi) for any two (2) consecutive Distribution Dates, Series
1997-1 Note Interest shall not have been paid with respect to the
Series 1997-1 Notes; or
(vii) an Accelerated Payment Event, as defined in the related
Supplement, has occurred with respect to any other Series;
then, and in any such event after the applicable grace period set forth in such
subparagraphs, an accelerated payment event (an "Accelerated Payment Event")
shall occur as of the date of such notice.
(b) Series 1997-1 Pay Out Events. If the following event shall occur
with respect to the Series 1997-1 Notes:
(i) for any six (6) Distribution Dates, Series 1997-1 Note
Interest shall not have been paid with respect to the Series 1997-1
Notes;
then, and in any such event after the applicable grace period set forth in such
subparagraphs, an event of default (a "Series 1997-1 Pay Out Event") shall occur
as of the date of such notice.
Section 16. Funding Costs.
(a) Breakage. The Transferor agrees to indemnify each Purchaser and to
hold each Purchaser harmless from any loss or expense arising from interest or
fees payable by such Purchaser to lenders of funds obtained by it to purchase or
maintain that portion of its Commitment hereunder with respect to which VFCC's
Cost of Funds is determined by reference to the CP Rate (as defined in the Note
Purchase Agreement) or the LIBOR Rate (as defined in the Note Purchase
Agreement) as a consequence of (i) default by the Transferor in the performance
of its obligations hereunder or under the Agreement, (ii) the occurrence of a
Servicer Default or an event which would, with the giving of notice or the
passage of time, constitute a Servicer Default, (iii) default by the Transferor
in effecting an increase in the Aggregate Principal Amount on an Increase Date
after having given notice of such Increase, or (iv) any prepayment of the
Principal Amount prior to the termination of the applicable Tranche Period. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by any Purchaser to the Servicer shall show the additional
amounts payable in reasonable detail and shall be conclusive absent manifest
error.
(b) Increased Costs. If any law, treaty or governmental regulation, or
any change therein or in the interpretation or application thereof or compliance
by any Purchaser with any request or directive (whether or not having the force
of law) from any central bank or United States government (or any state or
political subdivision thereof) or any entity exercising executive, legislative,
regulatory or administrative functions of or pertaining to such government:
(i) does or shall subject any Purchaser to any tax of any kind
whatsoever with respect to this Supplement or such Purchaser's
Commitment hereunder, or change the basis of taxation of payments to
any Purchaser in respect of such Purchaser's portion of the amounts
payable hereunder (except for changes in the rate of tax on the overall
net income of such Purchaser imposed in the United States of America;
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirements
against assets held by, or deposits or other liabilities in or for the
account of, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of any Purchaser except as
provided in clause (iii) below; or
(iii) does or shall impose, modify or hold applicable any
reserves against "Eurocurrency liabilities" (including, without
limitation, basic, supplemental, marginal or emergency reserves) under
Regulation D of the Board of Governors of The Federal Reserve System
(or so long as such Purchaser may be required by such Board of
Governors or by any other Governmental Authority in the United States
having jurisdiction with respect thereto to maintain reserves
(including, without limitation, basic, supplemental, marginal or
emergency reserves) with respect to eurocurrency funding) in excess of
the amount thereof on the Closing Date; or
(iv) does or shall impose on any Purchaser any other
condition;
and the result of any of the foregoing is to increase the cost to such Purchaser
of purchasing or maintaining its portion of the Purchasers' Commitment by an
amount which such Purchaser deems to be material or to reduce the amount of any
payment by an amount which such Purchaser deems to be material, then, in any
such case, such Purchaser shall notify the Deal Agent, who will in turn notify
the Servicer and the Transferor, of such Increased Costs and the event giving
rise to such Increased Costs.
(c) Changes in Capital Requirements. In the event that any Purchaser
shall have determined that any Requirement of Law regarding capital adequacy or
interpretation or application thereof or compliance by such Purchaser with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any Governmental Authority (a "Change in Law") does or shall have
the effect of reducing the rate of return on such Purchaser's or such
corporation's capital as a consequence of its obligations hereunder to a level
below that which such Purchaser or such corporation could have achieved but for
such change or compliance (taking into consideration such Purchaser's or such
corporation's policies with respect to capital adequacy) by an amount deemed by
such Purchaser to be material, then from time to time, after submission by such
Purchaser to the Transferor (with a copy to the Deal Agent) of a written request
therefor, the Transferor shall indemnify such Purchaser such additional amount
or amounts as will compensate such for such reduction.
(d) Taxes on Payments
(i) All payments made under this Supplement shall be made free
and clear of, and without reduction for or on account of, any present
or future taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding, in the case of the
Deal Agent and each Purchaser, income and franchise taxes imposed on
the Deal Agent or such Purchaser (other than such income and franchise
taxes imposed by a jurisdiction other than the United States or a
subdivision thereof solely by reason of the location of the Equipment
in such jurisdiction) (such non-excluded taxes being called "Taxes").
If any Taxes are required to be withheld from any amounts payable to
the Deal Agent or any Purchaser hereunder, the amounts so payable to
the Deal Agent or such Purchaser shall be increased to the extent
necessary to yield to the Deal Agent or such Purchaser (after payment
of all Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Supplement. Whenever any
Taxes are payable by the Transferor, as promptly as possible
thereafter, the Transferor shall send to the Deal Agent for its own
account or for the account of such Purchaser, as the case may be, a
certified copy of an original official receipt showing payment thereof.
If the Transferor fails to remit to the Deal Agent the required
receipts or other required documentary evidence, the Transferor shall
indemnify the Deal Agent and the Purchasers for any incremental taxes,
interest or penalties that may become payable by the Deal Agent or any
Purchaser as a result of any such failure.
(ii) Each Purchaser agrees that prior to the Closing Date (or
if such Purchaser is not an Initial Purchaser, prior to or at the time
such Purchaser becomes a "Purchaser" hereunder) it will deliver to the
Transferor and the Deal Agent (A) either (1) a statement that it is
incorporated under the laws of the United States of America or a state
thereof or, (2) if its not so incorporated, two duly completed copies
of United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in each case
that such Purchaser is entitled to receive payments under this
Supplement in respect of its interest in the Series 1997-1 Notes
purchased hereunder, without deduction or withholding of any United
States federal income taxes and (B) an Internal Revenue Service Form
W-8 or W-9 or successor applicable form, as the case may be, to
establish an exemption from United States backup withholding tax. Each
such Purchaser which delivers to the Transferor and the Deal Agent any
such Form 1001 or 4224 and Form W-8 or W-9 further undertakes to
deliver to the Transferor and the Deal Agent two further copies of Form
1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or
other manner of certification, as the case may be, on or before the
date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Transferor and the Deal Agent and
such extensions or renewals thereof as may reasonably be requested by
the Transferor, certifying in the case of a Form 1001 or 4224 that such
Purchaser is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes,
unless in any such case an event (including, without limitation, any
change in treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Purchaser from duly
completing and delivering any such form with respect to it and such
Purchaser advises the Transferor that it is not capable of receiving
payments without any deduction or withholding of United States federal
income tax, and in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax.
(iii) The agreements in this Section 16(d) shall survive the
termination of this Supplement and the payment of all amounts payable
hereunder.
(iv) No increased amount on account of Taxes shall be payable
pursuant to this Section 16(d) to any Purchaser to the extent such
Taxes would not have been payable if such Purchaser had furnished a
form (properly and accurately completed in all material respects) which
it was otherwise required to furnish in accordance with clause (ii) of
this Section 16(d).
(v) Each Purchaser shall furnish the Deal Agent, and the Deal
Agent shall furnish the Transferor (to the extent received from the
Purchasers), with information necessary to enable the Transferor to
comply with United States federal income tax information reporting
requirements regarding payments of interest received by Purchasers
under this Supplement.
(e) Notwithstanding anything to the contrary set forth in this Section
16, the payment to the Purchasers for any amounts payable under this Section 16,
including Increased Costs, shall be limited to amounts available pursuant to
Section 4.4A and the Purchasers shall have no other recourse to the assets of
the Transferor, the Servicer, the Trust, the Trustee or the Collateral Trustee.
Section 17. Conditions Precedent to Effectiveness of Supplement.
This Supplement will become effective on the date (the "Effective
Date") on which the following conditions precedent have been satisfied:
(a) Documents. The Deal Agent shall have received an original executed
copy for each Purchaser, each executed and delivered in form and substance
satisfactory to the Deal Agent, of (i) the Agreement executed by a duly
authorized officer of each of the Transferor, the Servicer and the Trustee and
(ii) this Supplement executed by a duly authorized officer of each of the
Transferor, the Servicer, the Trustee and the Purchasers. Each of the Agreement,
the Asset Purchase Agreement, the Note Purchase Agreement and this Supplement
(collectively, the "Program Agreements") shall be in full force and effect.
(b) Corporate Proceedings of the Transferor and Servicer. The Deal
Agent shall have received, with a counterpart for each Purchaser, a copy of the
resolutions in form and substance reasonably satisfactory to the Deal Agent, of
the Board of Directors of each of the Transferor and of the Servicer authorizing
the execution, delivery and performance of each of the Program Agreements,
certified by the Secretary or an Assistant Secretary of the Transferor or the
Servicer, as the case may be, as of the date hereof, which certificate shall
state that the resolutions thereby certified have not been amended, modified,
revoked or rescinded as of the date of such certificate. All corporate
proceedings and other legal matters incident to the authorization, form and
validity of this Agreement, the Series 1997-1 Notes and the other Program
Agreements and all other legal matters relating to such agreements and the
transactions contemplated hereby and thereby shall be reasonably satisfactory in
all material respects to counsel for the Deal Agent.
(c) Corporate Documents. The Deal Agent shall have received, with a
counterpart for each Purchaser, true and complete copies of the certificate of
incorporation and by-laws of the Transferor and of the Servicer, certified as of
the date hereof as true, complete and correct copies thereof by the Secretary or
an Assistant Secretary of the Transferor or the Servicer, as the case may be.
(d) Good Standing Certificates. The Deal Agent shall have received,
with a counterpart for each Purchaser, copies of certificates dated as of a
recent date from the Secretary of State or other appropriate authority of such
jurisdiction, evidencing the good standing of the Transferor and the Servicer in
each State where the ownership, lease or operation of property or the conduct of
business requires it to qualify as a foreign corporation, except where the
failure to so qualify would not have a material adverse effect on the business,
operations, properties, condition (financial or otherwise) or prospects of the
Transferor or the Servicer, as the case may be.
(e) Consents, Licenses, Approvals, Etc. The Deal Agent shall have
received, with a counterpart for each Purchaser, certificates dated the date
hereof of the President, Vice Chairman, Chief Financial Officer or any Vice
President of the Transferor and of the Servicer either (i) attaching copies of
all material consents, licenses and approvals required in connection with the
execution, delivery and performance by the Transferor or the Servicer, as the
case may be, of this Supplement and the validity and enforceability against the
Transferor and the Servicer of this Supplement and the Agreement, and such
consents, licenses and approvals shall be in full force and effect or (ii)
stating that no such consents licenses or approvals are so required.
(f) Filings, Registrations and Recordings. Any documents (including,
without limitation, financing statements) required to be filed in order (i) to
perfect the sale of the Original Leases and the related Equipment by each
Originator to the Transferor pursuant to the Asset Purchase Agreement and (ii)
to create, in favor of the Trustee on behalf of the Trust, a perfected first
priority interest in the Trust Assets under the Agreement with respect to which
an interest may be perfected by a filing under the UCC and which shall, in each
case, have been properly filed in each office in each jurisdiction listed in the
Agreement or the Asset Purchase Agreement, as the case may be, and such filings
are the only ones required in order to perfect the sale of the Original Leases
and the related Equipment to the Transferor under the Asset Purchase Agreement
and the transfer of such assets to the Trust, under the Agreement, as the case
may be, in the jurisdictions listed therein. The Deal Agent shall have received
evidence reasonably satisfactory to it of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto.
(g) Lien Searches. The Deal Agent shall have received the results of a
recent search by a Person satisfactory to the Deal Agent, of UCC and other
filings with respect to the Transferor, each Originator and such other parties
as it deems necessary.
(h) Legal Opinions. The Deal Agent shall have received, with a
counterpart for each Purchaser, (i) a legal opinion of internal counsel to the
Transferor and the Servicer, dated the date hereof, addressing other customary
matters in form and substance satisfactory to the Deal Agent; and (ii) a legal
opinion of , counsel to the Trustee, dated the date hereof in form and substance
satisfactory to the Deal Agent. Each such legal opinion shall be addressed the
Deal Agent, as agent for the Purchasers under the Note Purchase Agreement; and
the opinion referred to in subclause (i) above shall also be addressed to the
Trustee, in its capacity as trustee hereunder and under the Agreement.
(i) Certificates. The Deal Agent shall have received certificates of
each of the Transferor and the Servicer, dated the Closing Date, of any two of
the Chairman of the Board, the President, any Vice President, the chief
financial officer and the Treasurer of the Transferor or the Servicer, as the
case may be, stating that (i) the representations and warranties of the
Transferor or the Servicer, as the case may be, contained in the Program
Agreements, are true and correct on and as of the Closing Date, (ii) the
Transferor or the Servicer, as the case may be, has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied hereunder
and under such agreements at or prior to the Closing Date, (iii) the absence of
any Pay Out Event on the Closing Date or the occurrence of any event that, with
the passage of time, could be a Pay Out Event and (iv) since June 30, 1997,
there has been no material adverse change in the financial position of the
Transferor or the Servicer, as the case may be, or the Trust or any change, or
any development including a prospective change, in or affecting the condition
(financial or otherwise), results of operations. business or prospects of the
Transferor or the Servicer, as the case may be, or the Trust except as described
therein. Any officer making such certification may rely upon his or her
knowledge as to the proceedings pending or threatened.
(j) Series Accounts. The Deal Agent shall have received evidence
satisfactory to it that the Series Accounts shall have been established.
(k) Fees and Expenses. All fees and expenses to be paid on the Closing
Date shall have been received by the appropriate Persons, provided that the
Servicer shall have received an invoice setting forth such fees and expenses in
reasonable detail.
(n) Cancellation of Series 1995-1 Notes. All amounts due with respect
to the Series 1995-1 Notes shall have been paid in full and such Series 1995-1
Notes, Classes A and B, shall have been canceled by the Trustee and such
cancellation has been confirmed in writing to the Deal Agent.
Section 18 Representation and Warranties of the
Transferor and the Servicer.
The Transferor and Servicer severally represent and warrant as follows:
(i) Each of the representations and warranties included in the
Program Agreements shall be true and correct in all material respects
as of the Closing Date.
(ii) Each of Transferor and the Servicer has the power and
authority to execute and deliver this Supplement, the Agreement and the
Series 1997-1 Notes and to perform their respective obligations
hereunder and thereunder, and all corporate action required to be taken
for the due and proper authorization, execution and delivery of this
Supplement, the Agreement and the Series 1997-1 Notes and the
consummation of the transactions contemplated by this Supplement, the
Agreement and the Series 1997-1 Notes have been duly and validly taken.
(iii) The Supplement constitutes the legal, valid and binding
obligations of the Servicer and the Transferor, enforceable in
accordance with its terms against each of them, except as such
enforceability may be limited by Debtor Relief Laws and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(iv) When authenticated by the Trustee in accordance with the
Agreement and delivered and paid for pursuant to this Supplement, the
Series 1997-1 Notes will be duly issued and entitled to the benefits
afforded by the Agreement and the Supplement.
(v) The execution, delivery and performance of this Supplement and the
consummation by the Transferor and the Servicer of the transactions
contemplated hereby shall not conflict with, result in any breach of
any of the terms and provisions of or constitute (with our without
notice or lapse of time) a default under, the certificate of
incorporation or by-laws of the Transferor or the Servicer, or any
indenture, agreement or other instrument to which the Transferor or the
Servicer is a party or by which it is bound, or violate and law or, to
either the Transferor's or Servicer's knowledge, any order, rule or
regulation applicable to such party of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over such party or any of its
properties; and no permit, consent, approval of, or declaration to or
filing with, any governmental authority is required in connection with
the execution, delivery and performance of this Supplement or the
consummation of the transactions contemplated hereby.
(vi) Neither the Transferor nor the Servicer (i) is in
violation of its certificate of incorporation or by-laws, (ii) is in
default, in any material respect, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in
the due performance or observance of any term, covenant or condition
contained in any indenture, agreement, mortgage, deed of trust or other
instrument to which the Transferor or the Servicer is a party or by
which the Transferor or the Servicer is bound or to which any of the
Transferor's or the Servicer's property or assets is subject or (iii)
is in violation in any respect of any law, order, rule or regulation
applicable to the Transferor or the Servicer or any of the Transferor's
or the servicer's property of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over it or any of its property,
except any violation or default that would not have a material adverse
effect on the condition (financial or otherwise), results of
operations, business or prospects of the Transferor or the Servicer.
(vii) Neither the Trust nor the Transferor is an "investment
company" or under the "control" of an "investment company" within the
meaning thereof as defined in the Investment Company Act of 1940, as
amended.
(vii) Any taxes, fees and other governmental charges imposed
upon the Transferor or the Servicer or on the assets of the Trust in
connection with the execution, delivery and issuance by the Transferor
or the Servicer of this Supplement, the Agreement, the Asset Purchase
Agreement and the Series 1997-1 Notes and which are due at or prior to
the Closing Date have been or will have been paid by the Transferor at
or prior to the Closing Date.
(ix) Each of the Transferor and the Servicer possesses all
material licenses, certificates, authorizations and permits issued by,
and has made all declarations and filings with, the appropriate state,
federal or foreign regulatory agencies or bodies which are necessary or
desirable for the ownership of its respective properties or the conduct
of its respective businesses, except where the failure to possess or
make the same would not have, singularly or in the aggregate, a
material adverse effect on its condition (financial or otherwise),
results of operations, business or prospects.
Section 19. Covenants of the Transferor.
The Transferor hereby agrees that:
(i) it shall observe each and every of its respective
covenants (both affirmative and negative) contained in the
Agreement and this Supplement in all material respects;
(ii) it shall not amend, supplement or otherwise
modify or terminate the Agreement, unless in strict compliance
with the terms thereof; and
(iii) it shall not change in any material respect its
current policies, practices or guidelines relating to the
extension of credit to Lessees or the terms or provisions of
the Leases so as to adversely effect the general quality of
the Included Leases without the prior written consent of the
Required Purchasers.
Section 20. Covenants of the Servicer.
The Servicer hereby agrees that:
(i) it shall observe each and every of its covenants (both
affirmative and negative) contained in the Agreement and this
Supplement in all material respects;
(ii) it shall not amend, supplement or otherwise modify or
terminate the Agreement or this Supplement, unless in strict compliance
with the terms thereof;
(iii) it shall give prior notice to the Deal Agent of the
delegation of any of its servicing, collection, enforcement or
administrative duties with respect to the Accounts and the Receivables;
(iv) it shall not change in any material respect its current
policies, practices or guidelines relating to the extension of credit
to Lessees or the terms or provisions of the Leases so as to adversely
effect the general quality of the Included Leases without the prior
written consent of the Required Purchasers;
(v) it shall provide to the Deal Agent, simultaneously with
delivery to the Trustee, all reports, certificates, statements and
other documents required to be delivered to the Trustee pursuant to the
Agreement;
(vi) it shall provide at any time and from time to time to the
Deal Agent access to documentation regarding the Included Leases,
including the Lease Files, such access being afforded without charge
but only (a) upon reasonable request, (b) during normal business hours,
(c) subject to the Servicer's normal security and confidentiality
procedures and (iv) at offices designated by the Servicer;
(vii) it shall provide notice to the Deal Agent of the
appointment of a Successor Servicer pursuant to Section 10.2 of the
Agreement or Section 31 of this Supplement; and
(viii) to the extent, if any, that the rating provided with
respect to the Series 1997-1 Notes by a Rating Agency is conditioned
upon the furnishing of documents or the taking of actions by the
Servicer, to furnish such documents and take any such other actions.
Section 21. Covenants of the Trustee.
The Trustee hereby agrees that it shall provide at any time and from
time to time to the Deal Agent access to documentation regarding the Included
Leases, such access being afforded without charge but only (a) upon reasonable
request, (b) during normal business hours, (c) subject to the Servicer's normal
security and confidentiality procedures and (d) at offices designated by the
Custodian or the Trustee.
Section 22. Obligations Unaffected.
The obligations of the Transferor and the Servicer to the Deal Agent,
the Trustee and the Purchasers under this Supplement shall not be affected by
reason of any invalidity, illegality or irregularity of any of the Included
Leases or the related Equipment or any sale of any of the Included Leases or the
related Equipment.
Section 23. [Reserved].
Section 24. Payments.
Each payment to be made hereunder shall be made on the required payment
date in lawful money of the United States and in immediately available funds,
for the account of the Purchasers at the office of the Deal Agent set forth from
time to time in the Note Purchase Agreement.
Section 25. Costs and Expenses.
The Transferor agrees to pay all out-of-pocket costs and expenses of
the Trustee, the Deal Agent, First Union and VFCC (including, without
limitation, in all of the following cases, reasonable fees and disbursements of
counsel to such parties) in connection with (a) the preparation, execution,
delivery, administration, waiver, amendment and modification of this Supplement,
the Agreement and the Series 1997-1 Notes, and (b) the enforcement by the
Purchasers of the obligations and liabilities of the Transferor and the Servicer
under the Agreement, this Supplement or any related document.
Section 26. Amendments.
(a) Notwithstanding the provisions of Section 13.1 of the Agreement,
this Supplement may be modified, amended, waived, supplemented or terminated in
writing by the Transferor, the Servicer, the Trustee, the Collateral Trustee and
the Required Purchasers; provided that no such amendment or waiver shall, unless
signed by all Purchasers, (i) reduce in any manner the amount of or delay the
timing of distributions for the account of any Purchaser under any provision of
this Supplement, (ii) subject any Purchaser to any additional obligation
(including, without limitation, any change in the determination of any amount
payable by any Purchaser), (iii) change the Aggregate Commitment Amount or the
number of Purchasers which shall be required for any action under this
subsection or any other provision of this Supplement or (iv) change the
definition of or the manner of calculating the Required Purchasers, Principal
Amount, Aggregate Principal Amount, Average Principal Amount or the Series
Percentage.
(b) This Supplement may be amended from time to time by the Servicer,
the Transferor, the Trustee and the Collateral Trustee, without the consent of
the Required Purchasers, (i) to cure any ambiguity, to revise any Exhibits or
Schedules, to correct or supplement any provisions herein or thereon or (ii) to
add any other provisions with respect to matters or questions raised under this
Supplement which shall not be inconsistent with the provisions of this
Supplement; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any of the Noteholders.
(c) Any amendment hereof can be effected without the Deal Agent being a
party thereto.
(d) With respect to any amendments to, or consents or waivers sought
under, the Pooling and Servicing Agreement and Indenture of Trust, unless the
Required Purchasers shall approve such amendment, consent, or waiver, as the
case may be, then 100% of the Principal Amount of Series 1997-1 will be deemed
to have voted in the negative with respect to such amendment, consent or waiver,
as the case may be. With respect to any such amendments, consents or waivers, if
the Required Purchasers shall approve such amendment, consent, or waiver, as the
case may be, then 100% of the Principal Amount of Series 1997-1 will be deemed
to have voted in the affirmative with respect to such amendment, consent or
waiver, as the case may be.
(e) Notwithstanding anything in this Section 26 to the contrary, no
amendment may be made to this Supplement without satisfaction of the Rating
Agency Condition.
Section 27. Successors and Assigns.
(a) This Supplement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
Transferor may not assign or transfer any of its rights under this Supplement
without the prior written consent of the Purchasers.
(b) The Transferor and the Servicer each authorizes each Purchaser to
disclose to any Participant or Acquiring Purchaser (each, a "Transferee") and
any prospective Transferee any and all financial information in such Purchaser's
possession concerning the Transferor or the Servicer which has been delivered to
such Purchaser by the Transferor or the Servicer pursuant to this Supplement or
which has been delivered to such Purchaser by or on behalf of the Transferor in
connection with such Purchaser's credit evaluation of the Transferor, the
Servicer, the Trust and the Trust Assets prior to becoming a party to this
Supplement; provided, however, if any such information is subject to a
confidentiality agreement between such Purchaser and the Transferor or the
Servicer, the Transferee or prospective Transferee shall have agreed to be bound
by the terms and conditions of such confidentiality agreement.
(c) If, pursuant to this subsection, any interest in this Supplement or
any Series 1997-1 Note is transferred to any Transferee which is organized under
the laws of any jurisdiction other than the United States or any State thereof,
the transferor Purchaser shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Purchaser
(for the benefit of the transferor Purchaser, the Deal Agent, the Transferor and
the Servicer) that under applicable law and treaties no taxes will be required
to be withheld by the Deal Agent, the Transferor, the Servicer or the transferor
Purchaser with respect to any payments to be made to such Transferee in respect
of such Series 1997-1 Note, (ii) to furnish to the transferor Purchaser (and, in
the case of any Acquiring Purchaser not registered in the Register, the Deal
Agent and the Transferor) either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service Form 1001 (wherein such Transferee claims entitlement
to complete exemption from U.S. federal withholding tax on all interest payments
hereunder) and (iii) to agree (for the benefit of the transferor Purchaser, the
Deal Agent, the Transferor and the Servicer) to provide the transferor Purchaser
(and, in the case of any Acquiring Purchaser not registered in the Register, the
Deal Agent, the Transferor and the servicer) a new Form 4224 or Form 1001 upon
the expiration or obsolescence of any previously delivered form and comparable
statements in accordance with applicable U.S. laws and regulations and
amendments duly executed and completed by such Transferee, and to comply from
time to time with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.
Section 28. [Reserved].
Section 29. Repurchase by Servicer.
Upon any repurchase of the Series 1997-1 Notes by the Servicer pursuant
to Section 10.1 of the Agreement, the Servicer shall pay, in addition to the
amounts set forth in Section 10.1 of the Agreement and any accrued and unpaid
Increased Costs and all other accrued and repaid costs, expenses or fees owing
to any Person hereunder, under any Series 1997-1 Note or under the Note Purchase
Agreement.
Section 30. Repurchase by Transferor.
Upon any repurchase of the Series 1997-1 Notes by the Transferor
pursuant to Section 2.6 or Section 12.2(a), as the case may be, of the
Agreement, the Transferor shall pay, in addition to the amounts set forth in
Section 2.6 or Section 12.2(a), as the case may be, of the Agreement and any
accrued and unpaid costs under Section 16 hereof and all other accrued and
repaid costs, expenses or fees owing to any Person hereunder, under any Series
1997-1 Note or under the Note Purchase Agreement.
Section 31. Permitted Successor Servicer.
With respect to Series 1997-1, any financial institution which does not
qualify as a permitted Successor Servicer under Section 10.2 of the Agreement
shall qualify as a permitted Successor Servicer if approved by the Required
Purchasers.
Section 32. Option to Repurchase.
Subject to the conditions set forth in Section 12.2 of the Agreement,
the Transferor may, but shall not be obligated to, on any Distribution Date on
or after the Distribution Date on which the Principal Amount is reduced to an
amount less than or equal to 10% of the highest Principal Amount outstanding
during the Revolving Period repurchase the Series 1997-1 Notes; provided that
such option shall not be exercisable upon the happening of an Insolvency Event
with respect to the Servicer or the Transferor. The deposit required in
connection with any such repurchase shall be equal to (a) the Principal Amount,
plus (b) the accrued and unpaid interest on the Series 1997-1 Notes through and
including the day preceding the day on which such repurchase occurs which will
be transferred to the Distribution Account and plus (c) all other accrued and
repaid costs, expenses or fees owing to any Person hereunder, under any Series
1997-1 Note or under the Note Purchase Agreement.
Section 33. Final Distribution.
Written notice of any termination, specifying the Distribution Date
upon which the Series 1997-1 Noteholders may surrender their Series 1997-1 Notes
for payment of the final distribution and cancellation shall be given by the
Trustee, at the written request of the Servicer, not later than the 60th day
immediately preceding the Distribution Date on which final payment of the Series
1997-1 Notes shall be made.
Section 34. [Reserved].
Section 35. Ratification of Agreement.
As supplemented by this Supplement, the Agreement is in all respects
ratified and confirmed and the Agreement as so supplemented by this Supplement
shall be read, taken and construed as one and the same instrument.
Section 36. Counterparts.
This Supplement may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same instrument.
Section 37. GOVERNING LAW.
THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, PROVIDED, HOWEVER,
THAT THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE TRUSTEE AND THE COLLATERAL
TRUSTEE SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Section 38. The Trustee.
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Supplement or for or in respect
of the recitals contained herein, all of which recitals are made solely by the
Transferor.
Section 39. Instructions in Writing.
All instructions given by the Servicer to the Trustee pursuant to this
Supplement shall be in writing, and may be included in a certificate delivered
pursuant to Section 3.4(b) of the Agreement.
[remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Series 1997-1
Supplement to be duly executed by their respective officers as of the day and
year first above written.
AFG CREDIT CORPORATION,
as Transferor
By:
Title:
AMERICAN FINANCE GROUP, INC.,
as Servicer
By:
Title:
BANKERS TRUST COMPANY,
as Trustee
By:
Title:
BANKERS TRUST COMPANY,
as Collateral Trustee
By:
Title:
FIRST UNION CAPITAL MARKETS CORP.,
as Deal Agent
By:
Title:
<PAGE>
EXHIBIT A
to
SERIES 1997-1 SUPPLEMENTAL INDENTURE
FORM OF SERIES 1997-1 NOTE
$ [New York, New York]
October ____, 1997
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED . NEITHER THIS NOTE NOR ANY PORTION HEREOF MAY BE OFFERED OR
SOLD EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS.
THIS NOTE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED, EXCHANGED OR OTHERWISE
PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE INDENTURE
REFERRED TO HEREIN.
AFG MASTER TRUST
SERIES 1997-1 NOTE
FOR VALUE RECEIVED, the undersigned, the AFG Master Trust (the
"Trust"), hereby promises to pay on the Scheduled Series 1997-1 Termination
Date, to the order of at the office of [ ] located at [ ], in lawful money of
the United States of America and in immediately available funds, the aggregate
unpaid principal amount of this Note.
The undersigned further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time at the applicable
rate per annum as specified in the Indenture (as defined below) until any such
amount shall become due and payable (whether at the stated maturity, by
acceleration or otherwise), and thereafter on such overdue amount at the rate
per annum set forth in the Indenture until paid in full.
This evidences that (the "Noteholder") is the holder of this Note
secured by the assets of the Trust, which include a portfolio of leases (the
"Leases"), the related Equipment, all monies due or to become due with respect
thereto, and the other assets and interest constituting the Trust Assets as
defined in the AFG Master Trust Pooling and Servicing Agreement and Indenture of
Trust, dated as of July 1, 1995, as supplemented by the Series 1997-1
Supplemental Indenture thereto (collectively, the "Indenture"), by and among,
American Finance Group, Inc. ("AFG"), AFG Credit Corporation, and Bankers Trust
Company, as trustee and as collateral trustee.
THIS NOTE IS AN OBLIGATION OF THE TRUST AND DOES NOT REPRESENT AN
OBLIGATION OF, OR AN INTEREST IN, AFG, THE TRUSTEE OR THE COLLATERAL TRUSTEE.
NONE OF THIS NOTE, THE LEASES, THE RELATED EQUIPMENT OR THE OTHER TRUST ASSETS
IS INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY. THIS NOTE
IS LIMITED IN RIGHT OF PAYMENT SOLELY TO CERTAIN COLLECTIONS RESPECTING THE
LEASES AND TO THE OTHER TRUST ASSETS, ALL AS MORE SPECIFICALLY SET FORTH IN THE
INDENTURE WITHOUT RECOURSE TO ANY OTHER ASSETS OR TO ANY OTHER PARTY, INCLUDING,
WITHOUT LIMITATION, AFG CREDIT CORPORATION.
AFG Credit Corporation has structured the Indenture and the Series
1997-1 Notes with the intention that the Series 1997-1 Notes will qualify under
applicable tax law as indebtedness, and each Series 1997-1 Noteholder by
acceptance of its Series 1997-1 Note agrees to treat and to take no action
inconsistent with the treatment of the Series 1997-1 Notes for purposes of
federal, state and local income or franchise taxes and any other tax imposed on
or measured by income, as indebtedness.
To the extent not defined herein, capitalized terms used herein have
the meanings assigned in the Indenture, which more specifically sets forth the
rights of the Noteholders. This Note is issued under and is subject to the
terms, provisions and conditions of the Indenture, and the terms set forth
herein are qualified thereby. The Noteholder by virtue of its acceptance hereof
assents to and is bound by the Indenture, as amended from time to time.
This Note is one of a series of Notes entitled "AFG Master Trust Series
1997-1 Notes" (the "Series 1997-1 Notes") which represents the right to receive
interest payments and a return of principal as described herein and in the
Indenture, including the right to receive the Collections and other amounts at
the times and in the amounts specified in the Indenture to be deposited in the
Series Accounts maintained for the benefit of such Notes or paid to the Series
1997-1 Noteholders.
Series 1997-1 Note Interest will be distributed monthly on the
fifteenth Business Day of each calendar month, or if such fifteenth day is not a
Business Day, the next succeeding Business Day (a "Distribution Date"). In the
case of the first interest payment, interest will accrue from the date of
issuance and in the case of subsequent interest payments, interest will accrue
from the preceding Distribution Date in each case to but excluding the date of
payment thereof (an "Accrual Period"). On each Distribution Date, the Paying
Agent shall pay to the Noteholder of record its pro rata share of the amount
deposited into the Distribution Account pursuant to the Indenture on the related
Transfer Date. On each Distribution Date occurring during the Amortization
Period, the Paying Agent shall pay to the Noteholder its pro rata share of the
Percentage of the Target Repayment Amount for Series 1997-1 for such
Distribution Date.
The Deal Agent is authorized to endorse on Schedule I attached to this
Note all increases and decreases in the principal amount of this Note, and all
payments made on account of the principal amount thereof, which endorsements
shall, in the absence of manifest error, be conclusive as to the outstanding
balance hereunder; provided, however, that the failure to make any such notation
shall not limit or otherwise affect the obligations of the undersigned under the
Indenture or this Note.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the Transferor, the Trustee or the Collateral Trustee in
connection herewith, against: (i) the Trustee or the Collateral Trustee in its
individual capacity; (ii) any owner of a beneficial interest in the Transferor;
or (iii) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the Trustee or the Collateral Trustee in their individual capacities,
any holder of a beneficial interest in the Transferor, the Trustee or the
Collateral Trustee or of any successor or assign of the Trustee or the
Collateral Trustee in their individual capacities (or any of their successors or
assigns), except as any such Person may have expressly agreed (it being
understood that the Trustee and the Collateral Trustee have no such obligations
in their individual capacities) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Subject to the limitations set forth herein, the transfer of this Note
shall be registered in the Register upon surrender of this Note for registration
of transfer at any office or agency maintained by the Transfer Agent and
Registrar accompanied by a written instrument of transfer in a form satisfactory
to the Trustee and the Transfer Agent and Registrar duly executed by the
Noteholder or such Noteholder's attorney duly authorized in writing, and
thereupon one or more new Notes of authorized denominations and for the same
aggregate principal amount will be issued to the designated transferee or
transferees.
The Trustee, the Paying Agent and the Transfer Agent and Registrar, and
any agent of any of them, may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, and neither the Trustee, the
Paying Agent, the Transfer Agent and Registrar nor any agent of any of them
shall be affected by notice to the contrary except in certain circumstances
described in the Indenture.
The rights evidenced by this Note created by the Indenture and the
Trust shall terminate on the earlier of (i) the day, if any, designated by AFG
Credit Corporation after the Distribution Date following the date on which funds
shall have been deposited in the Distribution Account sufficient to pay the
aggregate Principal Amount plus Series 1997-1 Note Interest accrued through such
Distribution Date in full and (ii) the day on which final payment is made under
the Notes, but in no event later than the Scheduled Series 1997-1 Termination
Date.
Upon the occurrence of any one or more of the Pay Out Events specified
in the Indenture all amounts then remaining unpaid on this Note shall become, or
may be declared to be, immediately due and payable all as provided therein.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS, PROVIDED, HOWEVER, THAT THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE TRUSTEE SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Unless the note of authentication hereon has been executed by or on
behalf of the Trustee, by manual or facsimile signature of a duly authorized
signatory, this Note shall not be entitled to any benefit under the Indenture,
or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Note to be duly executed.
AFG MASTER TRUST
By: BANKERS TRUST COMPANY,
not in its individual capacity but solely as
Trustee on behalf of the Trust
By:
Title:
<PAGE>
Trustee's Certificate of Authentication
This is one of the Series 1997-1 Notes referred to in the within
mentioned Indenture.
BANKERS TRUST COMPANY,
as Trustee
By:
<PAGE>
Date of Increase Principal Amount Principal Amount
Decrease, or of Increase of Decrease
Prepayment
Principal Amount Outstanding Principal
of Repayment Amount
EXECUTION COPY
NOTE PURCHASE AGREEMENT
Dated as of October 14, 1997
Among
AFG CREDIT CORPORATION
as Transferor
VARIABLE FUNDING CAPITAL CORPORATION
as a Purchaser
FIRST UNION CAPITAL MARKETS CORP.
as Deal Agent
AFG MASTER TRUST
Series 1997-1 Notes
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS........1
Section 1.1 Certain Defined Terms.................................1
Section 1.2 Other Terms...........................................4
Section 1.3 Computation of Time Periods...........................4
ARTICLE II PURCHASE OF THE NOTE...........................................5
Section 2.1 Sale and Delivery of the Note.........................5
Section 2.2 Acceptance and Custody of Note........................6
Section 2.3 Selection of Tranche Periods..........................6
ARTICLE III CONDITIONS OF PURCHASE........................................7
Section 3.1 Conditions Precedent..................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES.................................7
Section 4.1 Representations and Warranties of the Transferor......7
Section 4.2 Representations, Warranties and Agreements of the
Purchaser..................................9
ARTICLE V GENERAL COVENANTS..9
Section 5.1 General Covenants of the Transferor...................9
ARTICLE VI INDEMNIFICATION...10
Section 6.1 Indemnities by the Transferor.........................10
ARTICLE VII THE DEAL AGENT...11
Section 7.1 Authorization and Action of the Deal Agent............11
Section 7.2 Delegation of Duties..................................11
Section 7.3 Exculpatory Provisions................................11
Section 7.4 Reliance..............................................12
Section 7.5 Non-Reliance on Deal Agent and Other Purchasers.......12
Section 7.6 Deal Agent in its Individual Capacity.................12
Section 7.7 Successor Deal Agent..................................12
ARTICLE VIII MISCELLANEOUS...13
Section 8.1 Amendments and Waivers................................13
Section 8.2 Notices, Etc..........................................14
Section 8.3 No Waiver; Remedies...................................14
Section 8.4 Binding Effect........................................14
Section 8.5 Term of this Agreement................................14
Section 8.6 GOVERNING LAW.........................................15
Section 8.7 WAIVER OF JURY TRIAL..................................15
Section 8.8 Costs, Expenses and Taxes.............................15
Section 8.9 No Proceedings........................................16
Section 8.10 Recourse Against Certain Parties.....................16
Section 8.11 Ratable Payments.....................................16
Section 8.12 Confidentiality......................................17
Section 8.13 Execution in Counterparts; Severability; Integration..17
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT A Form of VFCC's Cost Funds Form
SCHEDULES
SCHEDULE I Conditions Precedent to Initial Purchase
<PAGE>
NOTE PURCHASE AGREEMENT (the "Agreement"), dated as of October 14,
1997, by and among:
(1) AFG CREDIT CORPORATION, a Delaware corporation (the
"Transferor");
(2) VARIABLE FUNDING CAPITAL CORPORATION, a Delaware
corporation (together with its successors and assigns,
"VFCC"); and
(3) FIRST UNION CAPITAL MARKETS CORP. ("FCMC"), as agent (the
"Deal Agent").
IT IS AGREED as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms.
(a)......Certain capitalized terms used throughout this Agreement are
defined above or in this Section 1.1. In addition, capitalized terms used but
not defined herein have the meanings given to such terms in the AFG Master Trust
Pooling and Servicing Agreement and Indenture of Trust dated as of July 1, 1995
(the "Base"), among the Transferor, American Finance Group, Inc., a Delaware
corporation, as Servicer, and Bankers Trust Company, as Trustee (in such
capacity, the "Trustee") and as Collateral Trustee (in such capacity, the
"Collateral Trustee"), as amended by Amendment No. 1, dated as of September 1,
1995, Amendment No. 2, dated as of December 5, 1995 and Amendment No. 3, dated
as of October 14, 1997 and as supplemented by the Series 1997-1 Supplemental
Indenture (the "Supplement"), dated as of October 14, 1997, by and among the
Transferor, the Servicer, the Deal Agent, the Collateral Trustee and the
Trustee. The Base, as amended, and the Supplement are collectively referred to
as the "Indenture."
(b)......As used in this Agreement and its exhibits, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
Act: The Securities Act of 1933, as amended, together with the rules and
regulations thereunder.
Base Rate: For any day, a rate per annum equal to the lesser of (a) the Prime
Rate in effect on such day and (b) the sum of the Federal Funds Effective Rate
in effect on such day and 1.00% per annum. Any change in the Base Rate due to a
change in the Prime Rate or the Federal Funds Effective Rate shall be effective
on the opening of business on the date of such change.
Collection Date: The date following the Termination Date on which the Principal
Amount has been reduced to zero, the Purchaser has received all amounts of
interest due in respect of the Note and other amounts due to the Purchaser in
connection with this Agreement and the Indenture and the Deal Agent has received
all amounts due to it in connection with this Agreement.
Commercial Paper: On any day, any commercial paper note issued by VFCC for the
purpose of financing or maintaining its investment in the Note, including all
such commercial paper notes so issued to re-finance matured commercial paper
notes issued by VFCC that were originally issued to finance VFCC's investment in
the Note.
CP Disruption Event: The inability of the Purchaser, at any time, whether as a
result of a prohibition, a contractual restriction or any other event or
circumstance whatsoever, to raise funds through the issuance of its commercial
paper notes (whether or not constituting Commercial Paper) in the United States
commercial paper market.
Deal Documents: This Agreement, the Indenture, the Liquidity Purchase Agreement
and each other document, agreement, certificate, schedule or other writing
entered into or delivered in connection with the foregoing, as the same may be
amended, supplemented, restated, replaced or otherwise modified from time to
time.
Eurodollar Reserve Percentage: For any Tranche Period, the reserve percentage
applicable during such Tranche Period (or, if more than one such percentage
shall be so applicable, the daily average of such percentages for those days in
such Tranche Period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for First Union National Bank with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities (as
defined in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time) and having a term equal to such Tranche Period.
Facility Termination Date: October 13, 1998 or such later date to which the
Facility Termination Date may be extended, if extended, in the sole discretion
of VFCC in accordance with the terms of Section 2.1(c).
Federal Funds Effective Rate: For any day, the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published on the next succeeding Business Day, the average of the quotations for
the day of such transactions received by the Deal Agent from three federal funds
brokers of recognized standing selected by it.
Fee Letter: The Transferor Fee Letter Agreement, dated as of October 13, 1997,
between the Transferor and the Deal Agent.
Investors: Has the meaning given to such term in the Liquidity Purchase
Agreement.
LIBOR: For any Tranche Period, a per annum interest rate determined pursuant to
the following formula:
LIBOR = LIBOR Rate
1 - Eurodollar Reserve Percentage
LIBOR Rate: With respect to any Tranche Period of one, two or three months and
for which VFCC's Cost of Funds is calculated by reference to LIBOR, an interest
rate per annum equal to the average (rounded upward to the nearest one-sixteenth
(1/16) of one percent) per annum rate of interest determined by First Union
National Bank at its principal office in Charlotte, North Carolina as its LIBOR
Rate (each such determination, absent manifest error, to be conclusive and
binding on all parties hereto and their assignees) as the rate at which deposits
in immediately available funds in U.S. dollars are being, have been, or would be
offered or quoted by First Union National Bank to major banks in the applicable
interbank market for Eurodollar deposits at or about 11:00 a.m. (Charlotte,
North Carolina time) on the Business Day which is the Business Day immediately
preceding the first day of such Tranche Period, for delivery on the first day of
such Tranche Period, for a term of equal to such Tranche Period and in an amount
approximately equal to the portion of the Principal Amount related to such
Tranche Period. If no such offers or quotes are generally available for such
amount, then the LIBOR Rate shall be the rate appearing on the Telerate Page
3750 as of 11:00 A.M. (London time) on the Business Day which is the Business
Day immediately preceding the first day of such Tranche Period for a term equal
to such Tranche Period.
Liquidity Agent: Has the meaning given to such term in the Liquidity Purchase
Agreement.
Liquidity Purchase: Any purchase made by an investor pursuant to the terms and
conditions of the Liquidity Purchase Agreement.
Liquidity Purchase Agreement: The Liquidity Purchase Agreement, dated as of
October 14, 1997, by and among VFCC, as seller thereunder, the Investors named
therein, FCMC, as Deal Agent and as Documentation Agent, and First Union
National Bank, as Liquidity Agent.
Person: An individual, partnership, corporation (including a business trust),
joint stock company, limited liability company, limited partnership, trust,
association, joint venture, any governmental authority or any other entity of
any nature.
Prime Rate: At any time, the rate of interest per annum publicly announced from
time to time by First Union National Bank at its principal office in Charlotte,
North Carolina 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 First
Union National Bank as its prime rate is an index or base rate and shall not
necessarily be its lowest or best rate charged to its customers or other banks.
Principal Limit: On any day, an amount equal to the product of (i) the Asset
Base on such day and (ii) the Series Percentage.
Purchase: The initial purchase of the Note.
Purchase Limit: $125,000,000; provided, however, that at all times, on or after
the Termination Date, the Purchase Limit shall mean the Principal Amount.
Purchaser: Collectively, VFCC and any other Person that may agree from time to
time to purchase any interest in the Note from VFCC and their respective
successors and assigns.
Termination Date: The earliest of (a) the Facility Termination Date, (b) the
occurrence of a Pay Out Event, (c) the occurrence of the Amortization Date or
(d) the occurrence of a Series Pay Out Event.
Tranche Period: For any portion of the Principal Amount, any period determined
pursuant to Section 2.3.
UCC: The Uniform Commercial Code as in effect in the applicable jurisdiction.
United States: The United States of America.
VFCC's Cost of Funds: For any Tranche Period and any portion of the Principal
Amount assigned thereto, VFCC's Cost of Funds (including fees paid or payable to
dealers in, or placement agents for, Commercial Paper, if applicable), as set
forth in the most recent VFCC's Cost of Funds Form, which shall be (A) if
Commercial Paper is available (as determined in the Deal Agent's sole
discretion), VFCC's Cost of Funds in connection with such Commercial Paper which
shall be calculated based upon the interest rate applicable to such Commercial
Paper, or if such Commercial Paper is sold at a discount, the interest rate per
annum resulting from converting such discount rate to an interest-bearing
equivalent rate, or (B) if Commercial Paper is not available for any reason (as
determined in the Deal Agent's sole discretion) and the Tranche Period is one,
two or three months, LIBOR, or (C) if Commercial Paper is not available for any
reason (as determined in the Deal Agent's sole discretion) and the Tranche
Period is less than one month, the Prime Rate.
VFCC's Cost of Funds Form: A certificate delivered to the Trustee by the Deal
Agent on behalf of VFCC substantially in the form of Exhibit B hereto.
Section 1.2 Other Terms.
All accounting terms not specifically defined herein shall be construed
in accordance with GAAP. All terms used in the UCC in effect in the State of New
York and not specifically defined herein are used herein as defined therein.
Section 1.3 Computation of Time Periods.
Unless otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."
ARTICLE II
PURCHASE OF THE NOTE
Section 2.1 Sale and Delivery of the Note.
(a)......On the basis of the representations and warranties and subject
to the terms and conditions herein set forth, the Transferor agrees to deliver
to the Purchaser, on the Closing Date, the Note, which Note shall be duly
executed by the Transferor, duly authenticated by the Trustee and registered in
the name of the Deal Agent, as agent for the Purchasers. The Note will be
delivered to the Deal Agent, as custodian for VFCC against payment of the
purchase price therefor to the Transferor in same day funds, by wire transfer to
the account specified to the Deal Agent by the Transferor in writing for the
purpose of.
(b)......On the terms and conditions hereinafter set forth, and subject
to the terms and conditions of the Supplement, the Transferor may, at its
option, request that the Purchasers make Increases. On each day prior to the
Termination Date and subject to the satisfaction of the terms and conditions
hereinafter set forth, VFCC agrees to make each such Increase on the date
requested by the Transferor in an amount not to exceed the sum (such amount
being the "Adjusted Increase Amount") of (i) the net proceeds from the sale of
Commercial Paper on such date plus (b) the proceeds of Liquidity Purchases on
such date. Notwithstanding anything to the contrary herein contained, VFCC shall
have no obligation to make any Increase (i) in an amount in excess of the
Adjusted Increase Amount or (ii) if, after giving effect to such Increase, the
Principal Amount would exceed the lesser of (x) the Purchase Limit or (y) the
Principal Limit. In addition, VFCC shall have no obligation to make available
any Adjusted Increase Amount if on the date such Adjusted Increase Amount would
be paid, (1) the sum of (A) the product of (I) the Asset Base and (II) the
Series Percentage and (B) accrued and unpaid interest on the Notes to such date
is less than (2) the sum of (A) the net proceeds of all Commercial Paper
outstanding in the case of Commercial Paper issued at a discount and the
principal balance of all Commercial Paper outstanding in the case of Commercial
Paper issued on an interest bearing basis and (B) accrued and unpaid discount to
such date in the case of Commercial Paper outstanding issued at a discount and
accrued and unpaid interest to such date in the case of Commercial Paper
outstanding issued on an interest bearing basis.
(c)......The Transferor may, within 60 days, but no later than 45 days,
prior to the then Facility Termination Date, by written notice to the Deal
Agent, make written request for VFCC and the Investors to extend the Facility
Termination Date for an additional period of 364 days. The Deal Agent will give
prompt notice to VFCC and to the Liquidity Agent under the Liquidity Purchase
Agreement of its receipt of such request for extension of the Facility
Termination Date. VFCC shall make a determination, in its sole discretion and
after a full credit review, not less than 15 days prior to the then applicable
Facility Termination Date as to whether or not it will agree to extend the
Facility Termination Date; provided, however, that the failure of VFCC to make a
timely response to the Seller's request for extension of the Facility
Termination Date shall be deemed to constitute a refusal by VFCC and the
Investors to extend the Facility Termination Date. The Facility Termination Date
shall only be extended upon the consent of both (i) VFCC and (ii) 100% of the
Investors.
Section 2.2 Acceptance and Custody of Note.
On the Closing Date, the Deal Agent shall take delivery of the Note and
maintain custody thereof on behalf of the Purchasers.
Section 2.3 Selection of Tranche Periods.
The Transferor may, subject to the Deal Agent's approval and the
limitations described below and in the Supplement, select Tranche Periods and
allocate a portion of the Principal Amount to each selected Tranche Period, so
that the full Principal Amount is at all times allocated to a Tranche Period.
Each subsequent Tranche Period shall commence on the last day of the immediately
preceding Tranche Period, and the duration of and interest applicable to such
subsequent Tranche Period shall be such as the Transferor has selected and the
Deal Agent has approved on the Business Day prior to such last day; provided,
however, that if the Deal Agent has not, by 3 p.m. (New York time) on the
Business Day immediately preceding the last day of a Tranche Period (i) received
from the Transferor notice of the Transferor's selection of the next Tranche
Period(s) and the amount of Principal Amount to be allocated thereto and (ii)
approved such selection and allocation, then the Deal Agent shall, in its sole
discretion, choose such Tranche Period(s) and make such allocation. Any Tranche
Period which would otherwise end on a day which is not a Business Day shall be
extended to the next succeeding Business Day; provided, however, that if such
next succeeding Business Day is in the next calendar month, then such Tranche
Period shall end on the next preceding Business Day. In addition, whenever any
Tranche Period commences on the last Business Day in a month or on a day for
which there is no numerically corresponding day in the month in which such
Tranche Period ends, the last day of such Tranche Period shall occur on the last
Business Day of the month in which such Tranche Period ends. Any Tranche Period
for which interest on the Note accrues at a rate based upon LIBOR shall have a
duration of one, two or three months only. In no event shall the duration of any
Tranche Period exceed [90] days. Furthermore, if a CP Disruption Event shall
have occurred and be continuing, the Purchaser, or the Deal Agent on its behalf,
may, upon notice to the Transferor and the Trustee, terminate any Tranche Period
then in effect if the Purchaser has funded any portion of the Principal Amount
allocated to such Tranche Period by issuing its commercial paper notes. Any
Tranche Period which commences before the Termination Date and would otherwise
end on a date occurring after the Termination Date shall end on the Termination
Date. On or after the Termination Date, the Deal Agent shall have the right to
allocate outstanding Principal Amount to Tranche Periods of such duration as
shall be selected by the Deal Agent. The Purchaser shall, on the first day of
each Tranche Period, notify the Deal Agent of the rate of interest upon which
VFCC's Cost of Funds will accrue for the Principal Amount allocated to such
Tranche Period.
ARTICLE III
CONDITIONS OF PURCHASE
Section 3.1 Conditions Precedent.
The Purchase hereunder is subject to the satisfaction, on or before the
date of such purchase, as determined by the Deal Agent, of each condition
precedent listed in Schedule I.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Transferor.
The Transferor represents and warrants as follows:
(a)......Organization. It is a company, duly organized and validly
existing in good standing under the laws of the State of Delaware, is duly
qualified and in good standing as a foreign entity and authorized to do business
in all other jurisdictions wherein the nature of its business or property makes
such qualification materially necessary, and has full power and authority to own
its properties and to conduct its business as presently conducted.
(b)......Licenses and Approvals. It has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of property
or the conduct of its business requires such licenses and approvals except where
the failure to have such licenses and approvals does not have a material adverse
affect on its financial condition or on its ability to perform its obligations
under the Deal Documents.
(c)......Authority. It has full power and authority to execute and
deliver, and perform each of its obligations under, each of the Deal Documents
to which it is a party, including the Transferor's use of the proceeds of
Purchases, and it has duly authorized the execution, delivery and performance of
each of the foregoing and the sale of the Note to the Purchaser by all necessary
corporate action.
(d)......Enforceability. Each of the Deal Documents to which it is a
party constitutes its legal, valid and binding obligations, enforceable against
it in accordance with its respective terms, except as limited by bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium and other similar
laws and equitable principles affecting creditors' rights and remedies.
(e)......No Conflicts. The consummation of the transactions
contemplated by the fulfillment of the terms of the Deal Documents will not
conflict with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice, lapse of time or both) a default under its
memorandum of association, by-laws or any indenture, agreement, mortgage, deed
of trust or other material instrument to which it is a party or by which it is
bound, or result in the creation or imposition of any Lien (other than as
contemplated by this Agreement or the Indenture) upon any of its properties
pursuant to the terms of such indenture, agreement, mortgage, deed of trust or
other such instrument, other than the Deal Documents, or violate any law, rule,
regulation or any order applicable to it of any court or of any regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over it or any of its properties.
(f)......Legal Proceedings. There are no proceedings or investigations
to which it is a party pending, or, to its best knowledge, threatened, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality (a) asserting the invalidity of the Deal Documents,
(b) seeking to prevent the consummation of any of the transactions contemplated
by the Deal Documents, (c) seeking any determination or ruling that would
materially and adversely affect the performance by it of its obligations under,
or the validity or enforceability of, the Deal Documents or (d) which would have
a material adverse effect on its ability to perform its obligations under the
Deal Documents.
(g)......Consents and Approvals. All approvals, authorizations,
consents, orders or other actions of any Person, corporation or other
organization, or of any court, governmental agency or body or official, required
in connection with the execution, delivery and performance of the Deal
Documents, have been received or taken, as the case may be.
(h)......Information. No information, exhibit, financial statement,
document, book, record or report furnished or to be furnished by it to the Deal
Agent or a Purchaser (i) is or will be inaccurate in any material respect as of
the date it is or shall be dated or (except as otherwise disclosed to the
recipient thereof at the time of delivery or thereafter) as of the date so
furnished and (ii) no such document contains or will contain any material
misstatement of fact or omits or shall omit to state a material fact necessary
to make the statements contained therein not misleading in light of the
statements made therein.
(i)......Accuracy of Representations and Warranties. Each
representation and warranty made by it contained herein or in any certificate or
other document furnished by it pursuant hereto or to any Deal Document or in
connection herewith or therewith is true and correct in all material respects.
(j)......Offer and Sale. Neither the Transferor nor any person acting
on its behalf has offered to sell the Note by any form of general solicitation
or general advertising. The Transferor has not offered or sold the Note or other
similar security in any manner that would render the issuance and sale of the
Note a violation of the Act, or require registration pursuant thereto, nor has
it authorized nor will it authorize any person to act in such manner.
(k)......Representations and Warranties. The Transferor hereby repeats
each of the representations and warranties made by it in the Indenture and made
in any officer's certificate of the Transferor delivered pursuant to the
Indenture as if each such representation and warranty was set forth herein.
Section 4.2 Representations, Warranties and Agreements of the
Purchaser.
The Purchaser hereby represents and warrants to, and agrees with, the
Transferor that:
(a)......The Purchaser understands that the Note purchased by it has
not been registered under the Act or the securities laws of any State and, if
the Note is not then registered under applicable federal and State securities
law (which registration the Transferor is not obligated to effect), it will not
offer to sell, transfer or otherwise dispose of the Note or any portion thereof
except in a transaction which is exempt from such registration.
(b)......The Purchaser is acquiring the Note for its own account, and
not as a nominee for any other person, and the Purchaser is not acquiring the
Note with a view to or for sale or transfer in connection with any distribution
of the Note under the Act, but subject, nevertheless, to any requirement of law
that the disposition of its property shall at all times be within its control.
(c)......The Purchaser is an "accredited investor" as defined in
Regulation D under the Act.
(d)......The Purchaser is not, and is not purchasing for, or on behalf
of, a "benefit plan investor" as such term is defined in 29 C.F.R. 2510.3-101,
unless the transfer to, or holding of the Note by, such Person will either: (i)
not result in any prohibited transaction under Title I of the Employee
Retirement Income Security Act of 1974, as amended, or excise taxes under
Section 4975 of the Internal Revenue Code of 1986, as amended, or (ii) result in
a prohibited transaction, but any such transaction will be eligible for
exemptive relief under Prohibited Transaction Class Exemption 91-38 (regarding
investments by bank collective trust funds), Prohibited Transaction Class
Exemption 90-1 (relating to investments by insurance company separate accounts),
Prohibited Transaction Class Exemption 95-60 (relating to investments by
insurance company general accounts), Prohibited Transaction Class Exemption
84-14 (relating to investments by qualified professional asset managers) or
Prohibited Transaction Class Exemption 96-23 (relating to investments by
in-house asset managers).
(e)......Neither the Purchaser nor any person acting on its behalf has
offered to sell the Note by any form of general solicitation or general
advertising. The Purchaser has not offered the Note in any manner that would
render the issuance and sale of the Note a violation of the Act, or require
registration pursuant thereto, nor has it authorized nor will it authorize any
person to act in such manner.
ARTICLE V
GENERAL COVENANTS
Section 5.1 General Covenants of the Transferor.
(a)......The Transferor hereby agrees to notify the Deal Agent, as soon
as possible, and in any event within five (5) days after notice to the
Transferor, of (a) the occurrence of any Pay Out Event and/or Series Pay Out
Event, (b) the occurrence of any Accelerated Payment Event, (c) any fact,
condition or event which, with the giving of notice or the passage of time or
both, could become a Pay Out Event and/or a Series Pay Out Event, (d) any fact,
condition or event which, with the giving of notice or the passage of time or
both, could become an Accelerated Payment Event, (e) the failure of the
Transferor to observe any of its material undertakings under the Deal Documents
or (f) any change in the status or condition of the Transferor or the Manager
that would reasonably be expected to adversely affect the Transferor's or the
Manager's ability to perform its obligations under the Deal Documents.
(b)......The Transferor agrees not to sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
the Act) that would be integrated with the sale of the Note in a manner that
would require the registration under the Act of the sale to the Purchaser of the
Note.
(c)......The Transferor agrees to deliver to the Deal Agent on each
Distribution Date a copy of the Monthly Statement related to such Distribution
Date.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnities by the Transferor.
Without limiting any other rights which the Deal Agent, the Purchasers
or any of their respective Affiliates may have hereunder or under applicable
law, the Transferor hereby agrees to indemnify each of the Deal Agent, the
Purchasers and each of their respective Affiliates, together with their
respective successors and permitted assigns (each of the foregoing Persons being
individually called an "Indemnified Party") from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
by any of them arising out of, or relating to this Agreement, any Deal Document
or the Note, excluding, however, Indemnified Amounts to the extent resulting
from gross negligence or willful misconduct on the part of such Indemnified
Party.
Any amounts subject to the indemnification provisions of this Section
6.1 shall be paid by the Transferor to the Deal Agent within ten (10) Business
Days following the Deal Agent's demand therefor.
ARTICLE VII
THE DEAL AGENT
Section 7.1 Authorization and Action of the Deal Agent.
Each Purchaser hereby designates and appoints FCMC as Deal Agent
hereunder, and authorizes the Deal Agent to take such actions as agent on its
behalf and to exercise such powers as are delegated to the Deal Agent by the
terms of this Agreement together with such powers as are reasonably incidental
thereto. The Deal Agent shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any
Purchaser, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities on the part of the Deal Agent shall be read into this
Agreement or otherwise exist for the Deal Agent. In performing its functions and
duties hereunder, the Deal Agent shall act solely as agent for the Purchasers
and does not assume nor shall be deemed to have assumed any obligation or
relationship of trust or agency with or for the Transferor or any of its
successors or assigns. The Deal Agent shall not be required to take any action
which exposes the Deal Agent to personal liability or which is contrary to this
Agreement, any other agreement by which the Deal Agent is bound or applicable
law. The appointment and authority of the Deal Agent hereunder shall terminate
on the Collection Date.
Section 7.2 Delegation of Duties.
The Deal Agent may execute any of its duties under this Agreement by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Deal Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
Section 7.3 Exculpatory Provisions.
Neither the Deal Agent nor any of its directors, officers, agents or
employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement (except for its,
their or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Purchasers for any recitals, statements,
representations or warranties made by the Transferor contained in this Agreement
or in any certificate, report, statement or other document referred to or
provided for in, or received under or in connection with, this Agreement or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other document furnished in connection herewith, or for
any failure of the Transferor to perform its obligations hereunder, or for the
satisfaction of any condition specified in Article III. The Deal Agent shall not
be under any obligation to any Purchaser to ascertain or to inquire as to the
observance or performance of any of the agreements or covenants contained in, or
conditions of, this Agreement, or to inspect the properties, books or records of
the Transferor. The Deal Agent shall not be deemed to have knowledge of any
Event of Default or Accelerated Payment Event unless the Deal Agent has received
written notice from the Transferor or a Purchaser.
Section 7.4 Reliance.
The Deal Agent shall in all cases be entitled to rely, and shall be
fully protected in relying, upon any 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 the Transferor), independent accountants and
other experts selected by the Deal Agent. The Deal Agent shall in all cases be
fully justified in failing or refusing to take any action under this Agreement
or any other document furnished in connection herewith unless it shall first
receive such advice or concurrence of VFCC or all of the Purchasers, as
applicable, as it deems appropriate or it shall first be indemnified to its
satisfaction by the Purchasers, provided that unless and until the Deal Agent
shall have received such advice, the Deal Agent may take or refrain from taking
any action, as the Deal Agent shall deem advisable and in the best interests of
the Purchasers. The Deal Agent shall in all cases be fully protected in acting,
or in refraining from acting, in accordance with a request of VFCC or all of the
Purchasers, as applicable, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Purchasers.
Section 7.5 Non-Reliance on Deal Agent and Other Purchasers.
Each Purchaser expressly acknowledges that none of the Deal Agent or
any of its respective officers, directors, employees, agents, attorneys-in-fact
or affiliates has made any representations or warranties to such Purchaser and
that no act by the Deal Agent hereafter taken, including, without limitation,
any review of the affairs of the Transferor, shall be deemed to constitute any
representation or warranty by the Deal Agent. Each Purchaser represents and
warrants to the Deal Agent that it has and will, independently and without
reliance upon the Deal Agent or any other Purchaser and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, prospects, financial and
other conditions and creditworthiness of the Transferor and made its own
decision to enter into this Agreement.
Section 7.6 Deal Agent in its Individual Capacity.
Any of the Deal Agent and its Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Transferor
or any Affiliate of the Transferor as though the Deal Agent were not the Deal
Agent hereunder. With respect to the acquisition of any Note pursuant to this
Agreement, each of the Deal Agent and its Affiliates shall have the same rights
and powers under this Agreement as any Purchaser and may exercise the same as
though it were not the Deal Agent and the terms "Purchaser" and "Purchasers"
shall include the Deal Agent in its individual capacity, if the Deal Agent shall
become a Purchaser hereunder.
Section 7.7 Successor Deal Agent.
The Deal Agent may, upon 5 days' notice to the Transferor and the
Purchasers, and the Deal Agent will, upon the direction of all of the Purchasers
(other than the Deal Agent, in its individual capacity), resign as Deal Agent.
If the Deal Agent shall resign, then VFCC during such 5-day period shall appoint
from among the Purchasers a successor Deal Agent. If for any reason no successor
Deal Agent is appointed by VFCC during such 5-day period, then effective upon
the termination of such five day period, the Purchasers shall perform all of the
duties of the Deal Agent hereunder and the Transferor shall for all purposes
shall deal directly with the Purchasers. After any retiring Deal Agent's
resignation hereunder as Deal Agent, the provisions of this Article VII and
Article VI shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Deal Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendments and Waivers.
(a) No amendment or modification of any provision of this Agreement
shall be effective without the written agreement of the Transferor, each of the
Purchasers and the Deal Agent, and no termination or waiver of any provision of
this Agreement or consent to any departure therefrom by the Transferor shall be
effective without the written concurrence of each of the Purchasers and the Deal
Agent. Any waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
(b)......No provision of this Agreement may be amended, supplemented,
modified or waived except in writing in accordance with the provisions of this
Section 8.1(b). VFCC, the Transferor and the Deal Agent may enter into written
amendments, modifications or waivers of any provisions of this Agreement,
provided, however, that no such amendment, modification or waiver shall:
(i) without the consent of each affected Purchaser, (A) reduce
the interest rate (or change any component thereof, including without
limit, the period for which such interest rate is calculated) or any
fee payable to the Deal Agent for the benefit of the Purchasers, (B)
consent to or permit the assignment or transfer by the Transferor of
any of its rights and obligations under this Agreement or the
Indenture, (C) consent to the amendment, modification or waiver of, or
otherwise agree to amend, modify or waive, any provision of the
Indenture requiring consent to the holder of the Note or (D) amend or
modify any defined term (or any defined term used directly or
indirectly in such defined term) used in clauses (A) through (C) above
in a manner which would circumvent the intention of the restrictions
set forth in such clauses; or
(ii) without the written consent of the then Deal Agent,
amend, modify or waive any provision of this Agreement if the effect
thereof is to affect the rights or duties of such Deal Agent.
Notwithstanding the foregoing, without the consents of any of the parties
hereto, the Deal Agent and each of the Purchasers may amend this Agreement
solely to add additional Persons as Purchasers hereunder. Any modification or
waiver shall apply to each of the Purchasers equally and shall be binding upon
the Transferor, the Purchasers and the Deal Agent.
(c)......The Deal Agent shall provide prompt written notice of the
nature of each amendment to this Agreement, and shall, simultaneously therewith,
deliver a copy of such amendment to each Rating Agency.
Section 8.2 Notices, Etc.
All notices and other communications provided for hereunder shall,
unless otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth under its name on the
signature pages hereof or at such other address as shall be designated by such
party in a written notice to the other parties hereto. All such notices and
communications shall be effective, upon receipt, or in the case of (a) notice by
mail, upon receipt, (b) notice by telex, when telexed against receipt of
answerback, or (c) notice by facsimile copy, when verbal communication of
receipt is obtained, except that notices and communications pursuant to Article
II shall not be effective until received with respect to any notice sent by mail
or telex.
Section 8.3 No Waiver; Remedies.
No failure on the part of the Deal Agent or a Purchaser to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 8.4 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Transferor, the Deal Agent, the Purchasers and their respective successors and
permitted assigns.
Section 8.5 Term of this Agreement.
This Agreement, including, without limitation, the Transferor's
obligations to observe its covenants and agreements set forth herein, shall
remain in full force and effect until the Collection Date; provided, however,
that the obligations of the Transferor under Section 2.2, the indemnification
and payment provisions of Article VI and the provisions of Section 8.9 and
Section 8.10 and the agreements of the parties contained in Sections 8.6, 8.7,
8.8 and 8.12 shall be continuing and shall survive any termination of this
Agreement.
Section 8.6 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES).
Section 8.7 WAIVER OF JURY TRIAL.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PURCHASERS, THE
TRANSFEROR AND THE DEAL AGENT WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 8.8 Costs, Expenses and Taxes.
In addition to the rights of indemnification granted to the Deal Agent,
the Purchasers and their respective Affiliates under Article VI hereof, the
Transferor agrees to pay on demand all costs and expenses incurred by a
Purchaser or the Deal Agent, and their respective Affiliates, successors or
assigns, with respect to enforcing their respective rights and remedies as
against the Transferor under this Agreement, the Indenture, any Note, any other
Deal Document and the other documents to be delivered hereunder or in connection
herewith provided, however, that none of the Deal Agent, any Purchaser or any
affiliate thereof shall be entitled to any such payment (and shall reimburse the
Transferor for any such payments previously received) if such person has been
determined by a court of competent jurisdiction to not be entitled to receive
indemnification pursuant to Article VI hereof in connection with such
enforcement. The Transferor also agrees to pay on demand all costs and expenses
of the Purchasers and the Deal Agent, and their respective Affiliates,
successors or assigns, if any (including reasonable counsel fees and expenses),
incurred in connection with the negotiation, execution, and delivery of this
Agreement and the transactions contemplated hereby, any removal of the Facility
and/or the enforcement, administration (including periodic auditing), amendment
or modification of, or any waiver or consent issued in connection with, this
Agreement, the Indenture, the Note, any other Deal Document and the other
documents to be delivered hereunder or thereunder, or in connection herewith or
therewith. The Transferor also agrees to pay on demand all reasonable
out-of-pocket costs and expenses incurred by a Purchaser in connection with the
administration (including rating agency requirements, modification and
amendment) of this Agreement, the Deal Documents and the other documents to be
delivered hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for Purchaser and the Deal Agent with respect
thereto and with respect to advising the Purchaser as to its rights and remedies
under this Agreement, the Deal Documents and the other agreements executed
pursuant hereto. Any amounts subject to the provisions of this Section 8.8 shall
be paid by the Transferor to the Deal Agent within ten (10) Business Days
following the Deal Agent's demand therefor.
Section 8.9 No Proceedings.
Each of the Transferor, the Deal Agent and the Purchasers hereby agrees
that it will not institute, or join any other Person in instituting, against
VFCC any bankruptcy, insolvency, winding up, dissolution, receivership,
conservatorship or other similar proceeding or action so long as any commercial
paper issued by VFCC shall be outstanding or there shall not have elapsed one
year and one day since the last day on which any such commercial paper shall
have been outstanding.
Section 8.10 Recourse Against Certain Parties.
No recourse under or with respect to any obligation, covenant or
agreement (including, without limitation, the payment of any fees or any other
obligations) of any of the Transferor, VFCC any Purchaser or the Deal Agent as
contained in this Agreement or any other agreement, instrument or document
entered into by it pursuant hereto or in connection herewith shall be had
against any administrator of such party or any incorporator, affiliate,
stockholder, officer, employee or director of such party or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of such party contained in this
Agreement and all of the other agreements, instruments and documents entered
into by it pursuant hereto or in connection herewith are, in each case, solely
the corporate obligations of such party, and that no personal liability
whatsoever shall attach to or be incurred by any administrator of such party or
any incorporator, stockholder, affiliate, officer, employee or director of such
party or of any such administrator, as such, or any of them, under or by reason
of any of the obligations, covenants or agreements of such party contained in
this Agreement or in any other such instruments, documents or agreements, or
which are implied therefrom, and that any and all personal liability of every
such administrator of such party and each incorporator, stockholder, affiliate,
officer, employee or director of such party or of any such administrator, or any
of them, for breaches by such party of any such obligations, covenants or
agreements, which liability may arise either at common law or at equity, by
statute or constitution, or otherwise, is hereby expressly waived as a condition
of and in consideration for the execution of this Agreement.
Section 8.11 Ratable Payments.
If any Purchaser, whether by setoff or otherwise, has payment made to
it with respect to any portion of any amount of the principal amount of the Note
or other amount owing to such Purchaser (other than payments received pursuant
to Article VI) in a greater proportion than that received by any other
Purchaser, such Purchaser agrees, promptly upon demand, to pay to the Deal
Agent, for distribution ratably to all other Purchasers the amount of such
excess such that all Purchasers shall receive their ratable portion of such
payment.
Section 8.12 Confidentiality.
(a)......Each of the Deal Agent, the Purchasers and the Transferor
shall maintain and shall cause each of its employees and officers to maintain
the confidentiality of this Agreement and the other confidential proprietary
information with respect to the other parties hereto and their respective
businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
each such party and its officers and employees may (i) disclose such information
to its external accountants and attorneys and as required by applicable law,
applicable accounting requirements or order of any judicial or administrative
proceeding and (ii) disclose the existence of this Agreement, but not the
financial terms thereof.
(b)......Anything herein to the contrary notwithstanding, the
Transferor hereby consents to the disclosure of any nonpublic information with
respect to it (i) to the Deal Agent, the Liquidity Agent, the Investors,
prospective Investors (provided that each such prospective Investor has entered
into a confidentiality agreement reasonably acceptable to both the Deal Agent
and the Transferor) or a Purchaser by each other, (ii) by the Deal Agent or the
Purchasers to any prospective or actual assignee or participant of any of them
or (iii) by the Deal Agent to any rating agency that provides a rating for the
Commercial Paper, Commercial Paper dealer or placement agent or provider of a
surety, guaranty or credit or liquidity enhancement to a Purchaser and to any
officers, directors, employees, outside accountants and attorneys of any of the
foregoing, provided each such Person is informed of the confidential nature of
such information and agrees to keep such information confidential pursuant to
the terms of this Section 8.12. In addition, the Purchasers, the Liquidity
Agent, the Investors and the Deal Agent may disclose any such nonpublic
information pursuant to any law, rule, regulation, direction, request or order
of any judicial, administrative or regulatory authority or proceedings (whether
or not having the force or effect of law). As used herein, the terms "Investors"
and the "Liquidity Agent" shall have their respective meanings as set forth in
the Liquidity Purchase Agreement.
Section 8.13 Execution in Counterparts; Severability; Integration.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings.
[Signatures to Follow]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE TRANSFEROR: AFG CREDIT CORPORATION
By
Title:
Attn:
Facsimile:
VFCC: VARIABLE FUNDING CAPITAL CORPORATION
By First Union Capital Markets
Corp., as attorney-in-fact
By
Title:
Variable Funding Capital Corporation
c/o First Union Capital Markets Corp.
One First Union Center, TW6
Charlotte, North Carolina 28288
Attention: Bo Weatherly
Facsimile No.: 704-383-6036
THE DEAL AGENT: FIRST UNION CAPITAL MARKETS CORP.
By
Title:
First Union Capital Markets Corp.
One First Union Center, TW6
Charlotte, North Carolina 28288
Attention: Darrell Baber
Facsimile No.: 704-383-6036
<PAGE>
SCHEDULE I
CONDITIONS PRECEDENT TO PURCHASE
As required by Section 3.1 of the Agreement, each of the
following items must be delivered to the Deal Agent prior to the date of the
Purchase:
(a) The Notes shall have been duly authorized, executed and
delivered by the Transferor and authenticated by the Trustee.
(b) A copy of this Agreement and the Supplement, each duly
executed by the Transferor and all other parties thereto.
(c) A certificate of the Secretary or Assistant Secretary of
the Transferor dated the Closing Date, certifying (i) the names and true
signatures of its respective incumbent officers authorized to sign this
Agreement and the other documents to be delivered by it hereunder (on which
certificate the Deal Agent and the Purchasers may conclusively rely until such
time as the Deal Agent shall receive from the Transferor a revised certificate
meeting the requirements of this paragraph (c), (ii) that copies of its
certificate of incorporation attached thereto are complete and correct copies
and that such certificate of incorporation has not been amended, modified or
supplemented and is in full force and effect, (iii) that the copy of its by-laws
attached thereto is a complete and correct copy and that such by-laws have not
been amended, modified or supplemented and are in full force and effect and (iv)
the resolutions of its board of directors approving and authorizing the
execution, delivery and performance by it of this Agreement and the documents
related hereto and thereto.
(d) Certified copies of the Transferor's certificate of
incorporation.
(e) Copies of the Indenture, and all other Deal Documents
(other than this Agreement), in form and substance satisfactory to the Deal
Agent, each duly executed and delivered by each party thereto.
(f) Copies of all certificates and opinions of counsel
delivered pursuant to or in connection with the execution and delivery of the
other Deal Documents, which shall be in form and content satisfactory to and
each addressed to the Trustee or to the Deal Agent for the benefit of the
Purchasers.
(g) An officer's certificate of a responsible officer of the
Transferor to the effect that each of the conditions to the initial Purchase
hereunder and to the authentication of the Note to be delivered on the Closing
Date has been satisfied.
(h) An opinion of counsel to the Trustee as to the due
organization of the Trustee, the enforceability of the Indenture and as to such
other matters as the Deal Agent may reasonably request.
(i) All fees and expenses required by this Agreement, the Fee
Letter and the other documents to be delivered hereunder or in connection
herewith to be paid on or before the Closing Date.
<PAGE>
EXHIBIT A
Form of VFCC's Cost of Funds Form
[to be provided]
AMENDMENT NO. 3
TO AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
(TEC AcquiSub, Inc.)
THIS AMENDMENT NO. 3 TO AMENDED AND RESTATED WAREHOUSING CREDIT
AGREEMENT dated as of October 3, 1997 (the "Amendment"), is entered into by and
among TEC ACQUISUB, INC., a California special purpose corporation ("Borrower"),
FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("FUNB"), FLEET BANK, N.A. ("Fleet")
and each other financial institution which may hereafter execute and deliver an
instrument of assignment pursuant to Section 11.10 of the Credit Agreement (as
defined below) (any one financial institution individually, a "Lender," and
collectively, "Lenders"), and FUNB, as agent on behalf of Lenders (not in its
individual capacity, but solely as agent, "Agent"). Capitalized terms used
herein without definition shall have the same meanings herein as given to them
in the Credit Agreement.
RECITALS
<PAGE>
A. Borrower, Lenders and Agent have entered into that Amended and
Restated Warehousing Credit Agreement dated as of September 27, 1995, as amended
by that Amendment No. 1 to Amended and Restated Credit Agreement dated as of May
31, 1996 and that Amendment No. 2 to Amended and Restated Credit Agreement dated
as of November 5, 1996 (as so amended, the "Credit Agreement"), by and among
Borrower, FUNB (as the sole Lender party thereto) and Agent pursuant to which
Lenders have agreed to extend and make available to Borrower certain advances of
money.
B. Borrower desires that Lenders and Agent amend the Credit Agreement
to extend the Commitment Termination Date from October 3, 1997 to November 3,
1997.
C. Subject to the representations and warranties of Borrower and upon
the terms and conditions set forth in this Amendment, Lenders and Agent are
willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
SECTION 1. AMENDMENT. SECTION 1. AMENDMENT. The definition of
"Commitment Termination Date" set forth in Section 1.1 of the Credit Agreement
is deleted and replaced with the following:
"Commitment Termination Date" means November 3, 1997.
SECTION 2. LIMITATIONS ON AMENDMENT2.LIMITATIONS ON AMENDMENT.
(a) The amendment set forth in Section 1, above, is effective
for the purposes set forth herein and shall be limited precisely as written and
shall not be deemed to (i) be a consent to any amendment, waiver or modification
of any other term or condition of any Loan Document or (ii) otherwise prejudice
any right or remedy which Lenders or Agent may now have or may have in the
future under or in connection with any Loan Document.
(b) This Amendment shall be construed in connection with and
as part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except as
herein waived or amended, are hereby ratified and confirmed and shall remain in
full force and effect.
SECTION 3. REPRESENTATIONS AND WARRANTIES
3. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders and Agent
to enter into this Amendment, Borrower represents and warrants to each Lender
and Agent as follows:
(a) Immediately after giving effect to this Amendment (i) the
representations and warranties contained in the Loan Documents (other than those
which expressly speak as of a different date) are true, accurate and complete in
all material respects as of the date hereof and (ii) no Default or Event of
Default, or event which constitutes a Potential Event of Default, has occurred
and is continuing;
(b) Borrower has the corporate power and authority to execute
and deliver this Amendment and to perform its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party;
(c) The articles of incorporation, bylaws and other
organizational documents of Borrower delivered to each Lender as a condition
precedent to the effectiveness of the Credit Agreement are true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
(d) The execution and delivery by Borrower of this Amendment
and the performance by Borrower of its Obligations under the Credit Agreement,
as amended by this Amendment, and each of the other Loan Documents to which it
is a party have been duly authorized by all necessary corporate action on the
part of Borrower;
(e) The execution and delivery by Borrower of this Amendment
and the performance by Borrower of its respective Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not and will not contravene (i) any law or regulation
binding on or affecting Borrower, (ii) the articles of incorporation, bylaws, or
other organizational documents of Borrower, (iii) any order, judgment or decree
of any court or other governmental or public body or authority, or subdivision
thereof, binding on Borrower or (iv) any contractual restriction binding on or
affecting Borrower;
(f) The execution and delivery by Borrower of this Amendment
and the performance by Borrower of its Obligations under the Credit Agreement,
as amended by this Amendment, and each of the other Loan Documents to which it
is a party do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and delivered by
Borrower and is the binding Obligation of Borrower, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors' rights.
SECTION 4. REAFFIRMATION.
SECTION 4. REAFFIRMATION. Borrower hereby reaffirms its Obligations
under each Loan Document to which it is a party.
SECTION 5. EFFECTIVENESS.
SECTION 5. EFFECTIVENESS. This Amendment shall become effective upon
the last to occur of:
(a) The execution and delivery of this Amendment, whether the
same or different copies, by Borrower, Lenders and Agent.
(b) Satisfaction, to the approval of Lenders and Agent, of all
conditions precedent to the effectiveness of Amendment No. 2 to Second Amended
and Restated Warehousing Credit Agreement dated as of the date hereof by and
among the Growth Funds, Lenders and Agent.
(c) Satisfaction, to the approval of Lenders and Agent, of all
conditions precedent to the effectiveness of Amendment No. 2 to Warehousing
Credit Agreement dated as of the date hereof by and among AFG, Lenders and
Agent.
SECTION 6. GOVERNING LAW.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA.
SECTION 7. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF.SECTION
7.CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF. BORROWER HEREBY
REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS NO KNOWLEDGE OF ANY
FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR RIGHT OF SET-OFF.
SECTION 8. COUNTERPARTS.
SECTION 8. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, and by different parties hereto in separate counterparts, with the
same effect as if the signatures to each such counterpart were upon a single
instrument. All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWER TEC ACQUISUB, INC.
By:
J. Michael Allgood
Chief Financial Officer
LENDERS FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:
Printed Name:
Title:
FLEET BANK, N.A.
By:
Printed Name:
Title:
AGENT FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Agent
By:
Printed Name:
Title:
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(PLMI/Tec AcquiSub)
<PAGE>
SECTION 1. PLM International, Inc. ("PLMI") hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amendment No. 3 to Amended and Restated Warehousing Credit Agreement
("Amendment").
SECTION 2. PLMI hereby consents to this Amendment and agrees that its
Guaranty of the Obligations of Borrower under the Credit Agreement shall
continue in full force and effect, shall be valid and enforceable and shall not
be impaired or otherwise affected by the execution of this Amendment or any
other document or instrument delivered in connection herewith.
SECTION 3. PLMI represents and warrants that, after giving effect to
this Amendment, all representations and warranties contained in its Guaranty are
true, accurate and complete as if made the date hereof.
GUARANTOR PLM INTERNATIONAL, INC.
By
J. Michael Allgood
Chief Financial Officer
AMENDMENT NO. 2
TO WAREHOUSING CREDIT AGREEMENT
(American Finance Group, Inc.)
THIS AMENDMENT NO. 2 TO WAREHOUSING CREDIT AGREEMENT dated as of
October 3, 1997 (the "Amendment"), is entered into by and among AMERICAN FINANCE
GROUP, a Delaware corporation ("Borrower"), FIRST UNION NATIONAL BANK OF NORTH
CAROLINA ("FUNB"), FLEET BANK, N.A. ("Fleet") and each other financial
institution which may hereafter execute and deliver an instrument of assignment
pursuant to Section 11.10 of the Credit Agreement (as defined below) (any one
financial institution individually, a "Lender," and collectively, "Lenders"),
and FUNB, as agent on behalf of Lenders (not in its individual capacity, but
solely as agent, "Agent"). Capitalized terms used herein without definition
shall have the same meanings herein as given to them in the Credit Agreement.
RECITALS
<PAGE>
A. Borrower, Lenders and Agent have entered into that Warehousing
Credit Agreement dated as of May 31, 1996, as amended by that Amendment No. 1 to
Warehousing Credit Agreement dated as of November 5, 1996 (as so amended, the
"Credit Agreement"), by and among Borrower, FUNB (as the sole Lender party
thereto), and Agent pursuant to which Lenders have agreed to extend and make
available to Borrower certain advances of money.
B. Borrower desires that Lenders and Agent amend the Credit Agreement
to extend the Commitment Termination Date from October 3, 1997 to November 3,
1997.
C. Subject to the representations and warranties of Borrower and upon
the terms and conditions set forth in this Amendment, Lenders and Agent are
willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
SECTION 1. AMENDMENT. The definition of "Commitment Termination Date"
set forth in Section 1.1 of the Credit Agreement is deleted and replaced with
the following:
"Commitment Termination Date" means November 3, 1997.
SECTION 2. LIMITATIONS ON AMENDMENT2.LIMITATIONS ON AMENDMENT.
(a) The amendment set forth in Section 1, above, is effective
for the purposes set forth herein and shall be limited precisely as written and
shall not be deemed to (i) be a consent to any amendment, waiver or modification
of any other term or condition of any Loan Document or (ii) otherwise prejudice
any right or remedy which Lenders or Agent may now have or may have in the
future under or in connection with any Loan Document.
(b) This Amendment shall be construed in connection with and
as part of the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except as
herein waived or amended, are hereby ratified and confirmed and shall remain in
full force and effect.
SECTION 3. REPRESENTATIONS AND WARRANTIES3. REPRESENTATIONS AND
WARRANTIES. In order to induce Lenders and Agent to enter into this Amendment,
Borrower represents and warrants to each Lender and Agent as follows:
(a) Immediately after giving effect to this Amendment (i) the
representations and warranties contained in the Loan Documents (other than those
which expressly speak as of a different date) are true, accurate and complete in
all material respects as of the date hereof and (ii) no Default or Event of
Default, or event which constitutes a Potential Event of Default, has occurred
and is continuing;
(b) Borrower has the corporate power and authority to execute
and deliver this Amendment and to perform its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party;
(c) The articles of incorporation, bylaws and other
organizational documents of Borrower delivered to each Lender as a condition
precedent to the effectiveness of the Credit Agreement are true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
(d) The execution and delivery by Borrower of this Amendment
and the performance by Borrower of its Obligations under the Credit Agreement,
as amended by this Amendment, and each of the other Loan Documents to which it
is a party have been duly authorized by all necessary corporate action on the
part of Borrower;
(e) The execution and delivery by Borrower of this Amendment
and the performance by Borrower of its respective Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not and will not contravene (i) any law or regulation
binding on or affecting Borrower, (ii) the articles of incorporation, bylaws, or
other organizational documents of Borrower, (iii) any order, judgment or decree
of any court or other governmental or public body or authority, or subdivision
thereof, binding on Borrower or (iv) any contractual restriction binding on or
affecting Borrower;
(f) The execution and delivery by Borrower of this Amendment
and the performance by Borrower of its Obligations under the Credit Agreement,
as amended by this Amendment, and each of the other Loan Documents to which it
is a party do not require any order, consent, approval, license, authorization
or validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and delivered by
Borrower and is the binding Obligation of Borrower, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors' rights.
SECTION 4. REAFFIRMATION
4. REAFFIRMATION. Borrower hereby reaffirms its Obligations under each
Loan Document to which it is a party.
SECTION 5. EFFECTIVENESS.
5. EFFECTIVENESS. This Amendment shall become effective upon the last
to occur of:
(a) The execution and delivery of this Amendment, whether the
same or different copies, by Borrower, Lenders and Agent.
(b) Satisfaction, to the approval of Lenders and Agent, of all
conditions precedent to the effectiveness of Amendment No. 2 to Second Amended
and Restated Warehousing Credit Agreement dated as of the date hereof by and
among the Growth Funds, Lenders and Agent.
(c) Satisfaction, to the approval of Lenders and Agent, of all
conditions precedent to the effectiveness of Amendment No. 3 to Amended and
Restated Warehousing Credit Agreement dated as of the date hereof by and among
TEC AcquiSub, Lenders and Agent.
SECTION 6. GOVERNING LAW
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA.
SECTION 7. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF. BORROWER
HEREBY REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS NO KNOWLEDGE
OF ANY FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR RIGHT OF
SET-OFF.
SECTION 8. COUNTERPARTS
8. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, and by different parties hereto in separate counterparts, with the
same effect as if the signatures to each such counterpart were upon a single
instrument. All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWER AMERICAN FINANCE GROUP, INC.
By
J. Michael Allgood
Chief Financial Officer
LENDERS FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By
Printed Name:
Title:
FLEET BANK, N.A.
By
Printed Name:
Title:
AGENT FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
By
Printed Name:
Title:
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(PLMI/AFG)
<PAGE>
SECTION 1. PLM International, Inc. ("PLMI") hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amendment No. 2 to Warehousing Credit Agreement ("Amendment").
SECTION 2. PLMI hereby consents to this Amendment and agrees that its
Guaranty of the Obligations of Borrower under the Credit Agreement shall
continue in full force and effect, shall be valid and enforceable and shall not
be impaired or otherwise affected by the execution of this Amendment or any
other document or instrument delivered in connection herewith.
SECTION 3. PLMI represents and warrants that, after giving effect to
this Amendment, all representations and warranties contained in its Guaranty are
true, accurate and complete as if made the date hereof.
GUARANTOR PLM INTERNATIONAL, INC.
By
J. Michael Allgood
Chief Financial Officer
