UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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
incorporation or (I.R.S. Employer Identification No.)
organization)
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
--------------------
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock, $0.01 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of
the Act:
None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of February 23, 1998 was $42,790,781.
The number of shares outstanding of the issuer's classes of common
stock as of February 23, 1998: Common Stock, $0.01 Par Value -- 8,373,583
shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1998 Annual Meeting of
Stockholders are incorporated by reference in Part III. -PAGE 32-
<PAGE>
PLM INTERNATIONAL, INC.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
Part I
Item 1 Business 2
Item 2 Properties 9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 11
Part II
Item 5 Market for the Company's Common Equity and Related
Stockholder Matters 11
Item 6 Selected Financial Data 12
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 8 Financial Statements and Supplemental Data 24
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 24
Part III
Item 10 Directors and Executive Officers of the Company 25
Item 11 Executive Compensation 25
Item 12 Security Ownership of Certain Beneficial Owners
and Management 25
Item 13 Certain Relationships and Related Transactions 25
Part IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 25
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction
(A) Background
PLM International, Inc. (PLM International or the Company or PLMI), a Delaware
corporation, is a diversified equipment leasing company providing services to
transportation, industrial, and commercial companies, both domestically and
internationally. Through May 1996, the Company also syndicated investment
programs organized to invest primarily in transportation and related equipment.
The Company operates and manages transportation, industrial, and commercial
equipment and related assets with an approximate cost of $1.2 billion for its
own account and various investment programs and third-party investors. An
organizational chart for PLM International indicating the relationships of
significant active legal entities is shown in Table 1:
TABLE 1
ORGANIZATIONAL CHART
PLM International, Inc., a Delaware corporation
Subsidiaries of PLM International, Inc.: PLM Financial Services Inc. (a
Delaware corporation); PLM Railcar Management Services, Inc. (a Delaware
corporation); PLM Rental, Inc. (a Delaware corporation); Aeromil Holdings, Inc.
(a California corporation); PLM Worldwide Management Services Limited (a Bermuda
corporation); American Finance Group, Inc. (a Delaware corporation)
Subsidiaries of PLM Financial Services, Inc.: PLM Investment Management, Inc. (a
California corporation); PLM Transportation Equipment Corporation (a California
corporation
Subsidiary of PLM Transportation Equipment Corporation: TEC Acquisub, Inc. (a
California corporation)
Subsidiary of Aeromil Holdings, Inc.: Aeromil Australia Pty. Ltd. (an Australia
corporation)
Subsidiary of PLM Worldwide Management Services Limited: Transportation
Equipment Indemnity Company, Ltd. (a Bermuda corporation)
Subsidiary of Transportation Equipment Indemnity Company, Ltd.: PLM Railcar
Management Services Canada, Limited (an Alberta, Canada corporation)
Subsidiary of American Finance Group, Inc.: AFG Credit Corp. (a Delaware
corporation)
<PAGE>
(B) Description of Business
PLM International, a Delaware corporation formed on May 20, 1987, owns or
manages a portfolio of commercial and industrial equipment, transportation
equipment, and related assets with a combined original cost of approximately
$1.2 billion (refer to Table 2). The Company manages equipment and related
assets for approximately 75,000 investors in various limited partnerships or
investment programs.
TABLE 2
EQUIPMENT AND RELATED ASSETS
December 31, 1997
(original cost in millions of dollars)
<TABLE>
<CAPTION>
Professional
Lease Equipment Other
Management Growth Investor
PLMI Income Fund I Funds Programs Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aircraft, aircraft engines, and rotables $ 1 $ 45 $ 299 $ 1 $ 346
Marine vessels -- 24 155 -- 179
Railcars -- 19 127 52 198
Trailers 49 15 81 5 150
Marine containers -- -- 62 -- 62
Mobile offshore drilling units -- 12 18 -- 30
Commercial and industrial equipment 161 -- -- -- 161
Other 18 19 47 5 89
-------------------------------------------------------------------------------
Total $ 229 $ 134 $ 789 $ 63 $ 1,215
===============================================================================
</TABLE>
(C) Owned Equipment
(1) Transportation Equipment:
The Company leases its owned transportation equipment to a wide variety of
lessees. In general, the equipment leasing industry is an alternative to direct
equipment ownership. It is a highly competitive industry offering lease terms
ranging from daily rates to a term equal to the economic life of the equipment
(full payout leases). Generally, leases for a term less than the economic life
of the equipment are known as operating leases because the aggregate lease
rentals accruing over the initial lease period are less than the cost of the
leased equipment. PLM International typically provides operating leases for its
transportation equipment. This type of lease usually commands a higher lease
rate than full payout leases because of the flexibility it affords the lessee.
This emphasis on operating leases requires highly experienced management and
support staff, as the equipment must be periodically re-leased to continue
generating rental income and thus maximize the long-term return on the
investment in the equipment. In the past, certain equipment, such as marine
containers and marine vessels, has been leased to utilization-type pools that
include equipment owned by unaffiliated parties. Revenues received by the
Company consisted of a specified percentage of the pro-rata share of lease
revenues generated by the pool operator from leasing the pooled equipment to its
customers, after deducting certain direct operating expenses of the pooled
equipment.
During the last few years, the Company has reduced the size of its owned
transportation equipment portfolio and has exited certain equipment markets by
selling or disposing of underperforming assets. With the exception of the
Company's aircraft and intermodal trailer fleet, the Company does not anticipate
continued substantial reductions in its owned equipment portfolio in 1998 and
beyond. Rather, the Company intends to expand its current trailer leasing and
management operations by purchasing trailers and opening new rental yards for
its subsidiary, PLM Rental, Inc. (PLM Rental).
<PAGE>
The Company markets over-the-road trailers on short-term leases through PLM
Rental's yards located in 10 major U.S. cities. These rental facilities provide
the Company with a base of operations in selected markets to facilitate its
operating lease strategy. The Company also markets intermodal trailers to
railroads and shippers on short-term arrangements through a licensing agreement
with a short-line railroad. In addition, the Company owns on-site storage units
protected by a patented security system. In January 1997, the Company entered
into an agreement to lease all of its storage equipment assets to a lessee for a
five-year period with a purchase option when the lease terminates.
Over the past five years, on average, approximately 95% of all owned and managed
transportation equipment was operating under lease agreements or in PLM trailer
rental yards.
(2) Commercial and Industrial Equipment:
The Company, through its American Finance Group, Inc. (AFG) subsidiary, serves
the capital equipment financing needs of predominantly investment-grade, Fortune
2000 companies. AFG originates and manages leases and loans for commercial and
industrial equipment, utilizing its transaction-structuring capabilities to
tailor financing solutions to meet the needs of its customers. The leases are
generally mid- to long term and range from one to seven years, with AFG holding
the residual position. AFG takes a security interest in the assets on which it
provides loans.
(D) Subsidiary Business Activities
(1) PLM Financial Services, Inc.:
Management of Investment Programs: PLM Financial Services, Inc. (FSI), along
with its primary subsidiaries, PLM Transportation Equipment Corporation (TEC)
and PLM Investment Management, Inc. (IMI), focus on the management of investment
programs, including a limited liability company, limited partnerships, and
private placement programs, which acquire and lease primarily used
transportation and related equipment. The objectives of each program differ
slightly. The programs feature various combinations of current cash flow and
income tax benefits through investments in long-lived, low-obsolescence
transportation and related equipment.
FSI has completed the offering of 17 public programs that have invested in
diversified portfolios of transportation and related equipment. From 1986
through April 1995, FSI offered the PLM Equipment Growth Fund (EGF) investment
series. From 1995 through May 1996, FSI offered Professional Lease Management
Income Fund I, a limited liability company (Fund I) with a no front-end fee
structure. In May 1996, the Company announced that it no longer planned to offer
publicly syndicated programs that invest in transportation equipment. The
Company plans to continue to manage the existing programs. Each of the EGF and
Fund I programs is designed to invest primarily in used transportation equipment
for lease in order to generate current operating cash flow for (a) distribution
to investors and (b) reinvestment into additional used transportation equipment.
An objective of the programs is to maximize the value of the equipment portfolio
and provide cash distributions to investors by acquiring and managing equipment
for the benefit of the investors. Cumulative equity raised by PLM International
for its affiliated investment programs is $1.7 billion.
Investment in and Management of the EGFs, Other Limited Partnerships, and
Private Placements: FSI earns revenues in connection with its management of the
limited partnerships and private placement programs. During the syndication of
each of the EGFs, placement fees and commissions representing approximately 9%
of the equity raised were generally earned upon the purchase by investors of
partnership units. A significant portion of these placement fees was reallowed
to the originating broker-dealer. Equipment acquisition, lease negotiation, and
debt placement fees are generally earned through the purchase, initial lease,
and financing of equipment, and are recognized as revenue when FSI has completed
substantially all of the services required to earn the fees, generally when
binding commitment agreements are signed.
Management fees are earned for managing the equipment portfolios and
administering investor programs as provided for in the various agreements, and
are recognized as revenue as they are earned.
As compensation for organizing a partnership investment program, FSI, as general
partner, is generally granted an interest (between 1% and 5%) in the earnings
and cash distributions of the program. FSI recognizes as partnership interests
its equity interest in the earnings of the partnerships, after adjusting such
earnings to reflect the use of straight-line depreciation and the effect of
special allocations of the program's gross income allowed under the respective
partnership agreements.
<PAGE>
FSI also recognizes as income its interest in the estimated net residual value
of the assets of the partnerships as they are purchased. The amounts recorded
are based on management's estimate of the net proceeds to be distributed upon
disposition of the partnership's equipment at the end of the respective
partnerships. As assets are purchased by the partnerships, these residual value
interests are recorded in partnership interests and other fees at the present
value of FSI's share of estimated disposition proceeds. As required by FASB
Technical Bulletin 1986-2, the discount on FSI's residual value interests is not
accreted over the holding period. FSI reviews the carrying value of its residual
interests at least annually in relation to expected future market values for the
underlying equipment in which it holds residual interests for the purpose of
assessing recoverability of recorded amounts. When a limited partnership is in
the liquidation phase, distributions received by FSI are treated as recoveries
of its equity interest in the partnership until the recorded residual is
eliminated. Any additional distributions received are treated as residual
interest income.
In accordance with certain investment program and partnership agreements, FSI
received reimbursement for organization and offering costs incurred during the
offering period, which was generally between 1.5% and 3% of the equity raised.
The investment programs reimbursed FSI ratably over the offering period of the
investment programs based on the equity raised. In the event organizational and
offering costs incurred by FSI, as defined by the partnership agreement,
exceeded the amounts allowed, the excess costs were capitalized as an additional
investment in the related partnership and are being amortized until the
projected start of the liquidation phase of the partnership. These additional
investments are reflected as equity interest in affiliates in the accompanying
consolidated balance sheets.
Investment in and Management of Limited Liability Company: From 1995 through May
1996, Fund I, a limited liability company with a no front-end fee structure, was
offered as an investor program. FSI serves as the manager for the program. No
compensation was paid to FSI or any of its subsidiaries for the organization and
syndication of interests, the acquisition of equipment, the negotiation of
leases, or the placement of debt in Fund I. FSI funded the cost of organization,
syndication, and offering through the use of operating cash and has capitalized
these costs as its investment in Fund I. FSI is amortizing its investment in
Fund I until the projected start of the liquidation phase of the program. In
return for its investment, FSI is generally entitled to a 15% interest in the
cash distributions and earnings of Fund I, subject to certain allocation
provisions. FSI's interest in the cash distributions and earnings of Fund I will
increase to 25% after the investors have received distributions equal to their
invested capital. FSI is also entitled to monthly fees for equipment management
services and reimbursement for providing certain accounting and administrative
services.
FSI also recognizes as income its interest in the estimated net residual value
of the assets of Fund I as they are purchased. The amounts recorded are based on
management's estimate of the net proceeds to be distributed upon disposition of
the program's equipment at the end of the program. As assets are purchased by
Fund I, these residual value interests are recorded in partnership interests and
other fees at the present value of FSI's share of estimated disposition
proceeds. When Fund I is in the liquidation phase, distributions received by FSI
will be treated as recoveries of its equity interest in the program until the
recorded residual is eliminated. Any additional distributions received will be
treated as residual interest income.
(2) PLM Transportation Equipment Corporation:
PLM Transportation Equipment Corporation (TEC) is responsible for the selection,
negotiation and purchase, initial lease and re-lease, and sale of equipment.
This process includes identifying prospective lessees; analyzing lessees'
creditworthiness; negotiating lease terms; negotiating with equipment owners,
manufacturers, or dealers for the purchase, delivery, and inspection of
equipment; preparing debt offering materials; and negotiating loans. TEC or its
wholly-owned subsidiary, TEC AcquiSub, Inc., also purchases transportation
equipment for PLM International's own portfolio and on an interim basis for
resale to third parties or various affiliated limited partnerships at the lower
of fair market value or cost.
(3) PLM Investment Management, Inc.:
PLM Investment Management, Inc. (IMI) manages equipment owned by the Company and
by investors in the various investment programs. The equipment consists of:
aircraft (commercial and commuter), aircraft engines and rotables, railcars,
trailers (highway and intermodal, refrigerated and nonrefrigerated), marine
containers (refrigerated and nonrefrigerated), marine vessels (dry bulk
carriers, marine feeder vessels, and product tankers), and mobile offshore
drilling units and drilling ships. IMI is obligated to invoice and collect
rents; arrange for the maintenance and repair of equipment; arrange for the
payment of operating expenses, debt service, and certain taxes; determine that
the equipment is used in accordance with all operative contractual arrangements;
arrange insurance as appropriate; provide or arrange for clerical and
administrative services necessary to the operation of the equipment; correspond
with program investors; prepare quarterly and annual financial statements and
tax information materials; and make distributions to investors. IMI also
monitors equipment regulatory requirements and compliance with investor program
debt covenants and terms of the limited partnership agreements.
(4) American Finance Group, Inc.:
In 1995, the Company established a wholly-owned equipment leasing and management
subsidiary, American Finance Group, Inc. (AFG), and entered into an agreement to
manage certain operations of Boston-based, privately held Equis Financial Group
(Equis). During 1995, the Company provided management services for Equis's
investor programs, for which the Company earned management fees and other
revenues. In January 1996, the agreement was modified to exclude management of
Equis's investor programs. Under the modified agreement the Company obtained
Equis's lease origination and servicing operations and the rights to manage an
institutional leasing investment program. Additionally, the agreement provided
for AFG to receive software, computers, and furniture that supported its
marketing and operations activities. AFG originates and manages lease and loan
transactions for commercial and industrial equipment, such as data processing,
communications, materials-handling, and construction equipment, for the Company
s own account or for sale to institutional investment programs or other
investors. The leases may be financed by nonrecourse debt. Periodically, AFG
will use its short-term secured debt facility to finance the acquisition of
assets prior to sale or permanent financing by nonrecourse debt. The leases are
accounted for as operating or direct finance leases. AFG also originates loans
in which it takes a security interest in the assets.
(5) PLM Railcar Management Services, Inc.:
PLM Railcar Management Services, Inc. (RMSI) markets and manages railcar fleets.
RMSI is also involved in negotiating the purchase and sale of railcars on behalf
of IMI.
(6) PLM Worldwide Management Services Limited:
PLM Worldwide Management Services Limited (WMS), a wholly-owned subsidiary of
PLM, is a Bermuda-based company that serves as the parent of several PLM-owned
foreign-operating entities and generates revenue from certain equipment leasing
and brokerage activities.
(7) Transportation Equipment Indemnity Company, Ltd.:
Transportation Equipment Indemnity Company, Ltd. (TEI), a wholly-owned
subsidiary of WMS, is a Bermuda-based insurance company licensed to underwrite a
full range of insurance products, including property and casualty risk. TEI's
primary objective is to minimize both the long-term and short-term cost of
insurance coverages for certain owned and managed equipment. A substantial
portion of the risks underwritten by TEI are reinsured with unaffiliated
underwriters.
(8) PLM Railcar Management Services Canada, Limited:
PLM Railcar Management Services Canada, Limited, a wholly-owned subsidiary of
TEI headquartered in Calgary, Alberta, Canada, provides fleet management
services to the managed railcars operating in Canada on behalf of IMI.
(9) PLM Rental, Inc.:
PLM Rental markets trailers owned by the Company and its affiliated investor
programs on short-term and mid-term operating leases through a network of rental
facilities. Presently, facilities are located in Conley, Georgia; Romeoville,
Illinois; Irving, Texas; Dearborn Heights, Michigan; Indianapolis, Indiana;
Kansas City, Kansas; Miami, Florida; Orlando, Florida; Tampa, Florida; and
Newark, New Jersey. The Company is planning to open additional rental yard
facilities in 1998.
All of the subsidiaries described above are 100% owned directly or indirectly by
PLM International.
<PAGE>
(10) Aeromil Holdings, Inc.:
Aeromil Holdings, Inc. (Aeromil) is 80% owned by the Company. Aeromil owns an
operating company located in Australia that is engaged in the brokerage of
corporate, commuter, and commercial aircraft and the sale of spare parts in
international markets.
(E) Equipment Leasing Markets
Within the equipment leasing industry, there are markets for essentially three
types of leases: the full payout lease, the short-term rental, and the mid-term
operating lease. The full payout lease, in which the combined rental payments
are sufficient to cover a lessor's investment and provide a return on the
investment, is a common form of leasing. This type of lease is sometimes
referred to, and qualifies as, a direct finance lease under United States
generally accepted accounting principles, and is accounted for by the lessee as
a purchase of the underlying asset. From the lessee's perspective, the election
to enter into a full payout lease is usually made on the basis of a
lease-versus-purchase analysis, which takes into account the lessee's ability to
utilize the depreciation tax benefits of ownership, its liquidity and cost of
capital, and financial reporting considerations.
Short-term rental lessors direct their services to users' short-term equipment
needs. This business requires a more extensive overhead commitment in the form
of marketing and operating personnel by a lessor/owner. There is normally less
than full utilization in a lessor's equipment fleet, as lessee turnover is
frequent. Lessors usually charge a premium for the additional flexibility
provided through short-term rentals. To satisfy lessees' short-term needs,
certain equipment may be leased through pooling arrangements or utilization
leases. For lessees, these arrangements can work effectively with respect to
interchangeable equipment, such as marine containers, trailers, and marine
vessels. From the lessors' perspective, these arrangements diversify risk.
Operating leases for transportation equipment generally run for a period of one
to six years. Operating lease rates are usually higher than full payout lease
rates but lower than short-term rental rates. From a lessee's perspective, the
advantages of a mid-term operating lease compared to a full payout lease are
flexibility in its equipment commitment and the fact that the rental obligation
under the lease need not be capitalized on its balance sheet. From a lessee's
perspective, the advantages of a mid-term operating lease compared to a
short-term rental, apart from the lower monthly cost, are greater control over
future costs and the ability to balance equipment requirements over a specific
period of time. The disadvantages of a mid-term operating lease from a lessee's
perspective are that the equipment may be subject to significant changes in
lease rates for future periods or will generally be required to be returned to
the lessor at the expiration of the initial lease. From the lessor's
perspective, the disadvantages of a mid-term operating lease (as well as a
short-term rental) compared to a full payout lease are that (a) the equipment
generally must be re-leased at the expiration of the initial lease term in order
for the lessor to recover its investment and (b) re-lease rates are subject to
changes in current market conditions.
PLM International, its subsidiaries, and affiliated investment programs lease
their transportation equipment primarily on mid-term operating leases and
short-term rentals. Many of its leases are net operating leases. In net
operating leases, expenses such as insurance, taxes, and maintenance are the
responsibility of the lessees. The effect of entering into net operating leases
is to reduce lease rates, compared to full-service lease rates for comparable
lease terms. However, the overall profitability of net operating leases is more
predictable and less risk is assumed over time, since the lessees absorb
maintenance costs that generally increase as equipment ages. Per diem rental
agreements are used mainly on equipment in the Company's trailer and marine
container rental operations. Per diem rentals for the most part require the
Company to absorb maintenance costs, which tend to increase as the equipment
ages.
AFG leases commercial and industrial equipment primarily on full payout and
mid-term triple net leases to investment-grade companies. AFG also originates
loans in which it takes a security interest in the assets. Expenses such as
insurance, taxes, and maintenance are the responsibility of the lessees. The
full payout leases AFG originates are classified as finance leases and the
mid-term triple net leases are classified as operating leases. The terms of
these leases and loans are generally one to seven years, depending on the
equipment type and the needs of the lessee. Lessees enter into full payout
leases or mid-term triple net leases after a lease-versus-buy analysis is
performed, which evaluates the utilization of the depreciation tax benefits of
ownership, liquidity and cost of capital, financial reporting considerations,
and capital budgeting constraints. AFG leases have an average term of 48 months.
These longer-term leases and loans, which are made to investment-grade, Fortune
2000 companies, provide a predictable cash stream with lower risk. Although AFG
leases a wide range of commercial and industrial equipment, as of December 31,
1997, the lease portfolio was concentrated primarily in materials-handling,
computer, and point-of-sale equipment; general plant and warehouse equipment;
mining and construction equipment; and communications equipment.
(F) Management Programs
FSI has also sponsored programs in which the equipment is individually owned by
the program investors. Management agreements, with initial terms ranging from 3
to 10 years, are typically employed to provide for the management of this
equipment. These agreements require that the Company or one of its subsidiaries
use its best efforts to lease the equipment and to otherwise perform all
managerial functions necessary for the operation of the equipment, including
arranging for maintenance and repair, collection of lease revenues, and
disbursement of operating expenses. Management agreements also require that the
Company correspond with program investors, prepare financial statements and tax
information, and make distributions to investors from available cash. Operating
revenues and expenses for equipment under management agreements are generally
pooled in each program and shared pro rata by the participants. IMI typically
receives management fees for these services based on a flat fee per month per
unit of equipment.
(G) Lessees
Lessees of equipment range from Fortune 2000 companies to small, privately held
corporations and entities. All equipment acquisitions, equipment sales, and
lease renewals relating to equipment having an original cost basis in excess of
$1.0 million must be approved by a credit committee. PLM Rental, which leases
equipment primarily on short-term rentals, follows guidelines set by the credit
committee in determining the creditworthiness of its respective lessees.
Deposits, prepaid rents, corporate and personal guarantees, and letters of
credit are utilized, when necessary, to provide credit support for lessees who
alone do not have a financial condition satisfactory to the credit committee. No
single lessee of the Company's equipment accounted for more than 10% of revenues
for the years ended December 31, 1997, 1996, or 1995.
(H) Competition
When marketing operating leases for transportation assets, the Company
encounters considerable competition from lessors offering full payout leases on
new equipment. In comparing lease terms for the same equipment, full payout
leases provide longer lease periods and lower monthly rent than the Company
offers. However, lower lease rates can generally be offered for used equipment
under operating leases than can be offered on similar new equipment under full
payout leases. The shorter length of operating leases also provides lessees with
flexibility in their equipment and capital commitments.
The Company competes with transportation equipment manufacturers who offer
operating leases and full payout leases. Manufacturers may provide ancillary
services that the Company cannot offer, such as specialized maintenance services
(including possible substitution of equipment), warranty services, spare parts,
training, and trade-in privileges.
The Company competes with many transportation equipment lessors, including
General Electric Capital Corporation, GATX Corporation, Associates Commercial
Corporation, Ryder Transportation Services, Inc., XTRA Corporation,
International Lease Finance Corporation, and certain limited partnerships, some
of which lease the same type of equipment.
AFG, which leases commercial and industrial equipment, competes with industrial
finance companies, regional banks, and money center banks, in addition to such
captive and independent leasing companies as General Electric Capital,
Caterpillar Financial, IBM Credit, AT&T Capital, Fleet Credit Corp., Pitney
Bowes, Comdisco, Charter One Bank, First Union National Bank, Bank of Boston,
ATEL, and Capital Associates. These companies all offer a wide array of
financial products to lessees, ranging from off- balance sheet loans and
synthetic leases to operating leases and vendor financing.
(I) Government Regulations
The transportation industry, in which the majority of the equipment owned and
managed by the Company operates, is subject to substantial regulation by various
federal, state, local, and foreign government authorities. For example, federal
regulations by the National Highway Transportation Safety Association will be
implemented in March 1998, requiring all new trailers to have antilock brake
systems installed, which will add 2% to 3% to the price of new trailers but
increase safety while also reducing tire and brake wear. In addition, the U.S.
Department of Transportation Aircraft Capacity Act of 1990 limits the operation
of commercial aircraft in the United States that do not meet certain noise,
aging, and corrosion criteria. Enactments like these could affect the
performance of equipment owned and managed by the Company. It is not possible to
predict the positive or negative effects of future regulatory changes in the
transportation industry.
<PAGE>
(J) Employees
As of February 23, 1998, the Company and its subsidiaries had 149 employees.
None of the Company's employees are subject to collective bargaining
arrangements. The Company believes that employee relations are good.
ITEM 2. PROPERTIES
As of December 31, 1997, the Company owned transportation equipment and related
assets and commercial and industrial equipment with an original cost of
approximately $229.0 million. The Company's principal offices are located in
leased office space at One Market, Steuart Street Tower, San Francisco,
California. The Company or its subsidiaries also lease business offices in
Boston, Massachusetts; Chicago, Illinois; and Calgary, Alberta, Canada. In
addition, the Company or its subsidiaries lease trailer equipment rental yard
facilities in Conley, Georgia; Romeoville, Illinois; Irving, Texas; Dearborn
Heights, Michigan; Indianapolis, Indiana; Kansas City, Kansas; Miami, Florida;
Tampa, Florida; Orlando, Florida; and Newark, New Jersey. The Company's Aeromil
subsidiary owns office space in Maroochydore, Queensland, Australia.
ITEM 3. LEGAL PROCEEDINGS
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. The complaint contains claims for relief alleging breaches of fiduciary
duties and various violations of the Employee Retirement Income Security Act of
1974 (ERISA) arising principally from purported defects in the structure,
financing, and termination of the ESOP, and for defendants' allegedly engaging
in prohibited transactions and interfering with plaintiff's rights under ERISA.
Plaintiff seeks monetary damages, rescission of the preferred stock transactions
with the ESOP and/or restitution of ESOP assets, and attorneys' fees and costs
under ERISA. In January 1996, PLMI and other defendants filed a motion to
dismiss the complaint for lack of subject matter jurisdiction, arguing the
plaintiff lacked standing under ERISA. The motion was granted and on May 30,
1996, the district 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 dismissal of his
ERISA claims, and in an opinion filed on October 23, 1997, the Ninth Circuit
reversed the decision of the district court and remanded the case to the
district court for further proceedings. PLMI filed a petition for rehearing on
November 6, 1997, which was denied on November 20, 1997. The Ninth Circuit
mandate was filed in the district court on December 1, 1997.
On January 12, 1998, plaintiff filed with the district court an expedited motion
for leave to file a second amended complaint in order to bring the fourth,
fifth, and sixth claims for relief as a class action on behalf of himself and
all similarly situated people. These claims allege that PLMI and the other
defendants breached their fiduciary duties and entered into prohibited
transactions in connection with the termination of the ESOP and by causing the
ESOP to sell or exchange the preferred shares held for the benefit of the ESOP
participants for less than their fair market value. The district court granted
the motion on February 9, 1998 and set a trial date of March 20, 1999. The
defendants are required to respond to the second amended complaint on or before
February 26, 1998. The Company does not believe the claims have any merit and
plans to continue to defend this matter vigorously.
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). The plaintiffs,
who filed the complaint on their own and on behalf of all class members
similarly situated, are six individuals who allegedly invested in certain
California limited partnerships (the Partnerships) for which FSI acts as the
general partner, including PLM Equipment Growth Fund IV, PLM Equipment Growth
Fund V, PLM Equipment Growth Fund VI, and PLM Equipment Growth & Income Fund
VII. The complaint asserts eight causes of action against all defendants, as
follows: fraud and deceit, suppression, negligent misrepresentation and
suppression, intentional breach of fiduciary duty, negligent breach of fiduciary
duty, unjust enrichment, conversion, and conspiracy. Additionally, plaintiffs
allege a cause of action against PLM Securities for breach of third party
beneficiary contracts in violation of the NASD rules of fair practice.
Plaintiffs allege that each defendant owed plaintiffs and the class certain
duties due to their status as fiduciaries, financial advisors, agents, general
partner, and control persons. Based on these duties, plaintiffs assert liability
against the defendants for improper sales and marketing practices, mismanagement
of the Partnerships, and concealing such mismanagement from investors in the
Partnerships. Plaintiffs seek unspecified compensatory and recissory damages, as
well as punitive damages, and have offered to tender their limited partnership
units back to the defendants.
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) based on the district court's diversity
jurisdiction, 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. In response to such denial, plaintiffs filed a petition for writ of
mandamus with the Eleventh Circuit, which was denied on November 18, 1997. On
November 24, 1997, plaintiffs filed with the Eleventh Circuit a petition for
rehearing and consideration by the full court of the order denying the petition
for a writ of mandamus, which petition was supplemented by plaintiffs on January
27, 1998.
On October 10, 1997, defendants filed a motion to compel arbitration of
plaintiffs' claims, based on an agreement to arbitrate contained in the limited
partnership agreement of each Partnership, and to stay further proceedings
pending the outcome of such arbitration. Notwithstanding plaintiffs' opposition,
the district court granted the motion on December 8, 1997. On December 15, 1997,
plaintiffs filed with the Eleventh Circuit a notice of appeal from the district
court's order granting defendants' motion to compel arbitration and to stay the
proceedings, and of the district court's September 24, 1997 order denying
plaintiffs' motion to remand and dismissing the claims of the California
plaintiff. Plaintiffs filed an amended notice of appeal on December 31, 1997.
The Company believes that the allegations of the Koch action are completely
without merit and intends to continue to defend this matter vigorously.
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 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 for
which FSI acts as the general partner, including the Partnerships. The complaint
alleges the same facts and the same nine causes of action as in the Koch action,
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, constructive fraud, unjust
enrichment, violations of California Corporations Code Section 1507, and a claim
for treble damages under California Civil Code Section 3345.
On July 31, 1997, the defendants 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 motion, plaintiff agreed to a stay of the
state court action pending the district court's decision on the petition to
compel arbitration. By memorandum and order dated October 23, 1997, the district
court denied the Company's petition to compel arbitration. On November 5, 1997,
the Company filed an expedited motion for leave to file a motion for
reconsideration of this order, which motion was granted on November 14, 1997.
The parties have agreed to have oral argument on the reconsideration motion set
for April 23, 1998. The state court action has been stayed pending the district
court's decision on this motion.
In connection with her opposition to the Company's petition to compel
arbitration, 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 Sections 1709 and 1710.
Plaintiff has also served certain discovery requests on defendants. Because of
the stay, no response to the amended complaint or to the discovery is currently
required. 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 legal actions
incident to its business. Management does not believe that any of these existing
actions will be material to the financial condition or, based on historical
trends, to the results of operations of the Company.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Special Meeting of Stockholders held November 26, 1997, one proposal was
submitted to a vote of the Company's security holders. The proposal to amend
Article Fourth of the Company's Certificate of Incorporation to effect a
1-for-200 reverse stock split followed by a 200-for-1 forward stock split of the
Company's common stock was approved. As a result of the stock splits, the number
of shares outstanding was reduced by 561,544 shares. The Company is repurchasing
these shares at $5.58 per share when the stock certificates are tendered to the
Company's transfer agent. The votes cast in the election were as follows:
Votes
- ------------------------------------------------------------
For Against Abstentions
7,060,732 307,390 72,357
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades (under the ticker symbol "PLM") on the
American Stock Exchange (AMEX). As of the date of this annual report, there are
8,373,583 common shares outstanding and approximately 3,677 shareholders of
record.
Table 3, below, sets forth the quarterly high and low prices of the Company's
common stock for 1997 and 1996 as reported by the AMEX:
TABLE 3
<TABLE>
<CAPTION>
Calendar Period High Low
- ------------------- --------- ---------
1997
<S> <C> <C>
1st Quarter $ 3.813 $ 3.000
2nd Quarter 6.375 3.500
3rd Quarter 6.000 5.500
4th Quarter 5.875 5.250
1996
1st Quarter $ 3.875 $ 3.250
2nd Quarter 3.813 3.250
3rd Quarter 3.563 3.188
4th Quarter 3.500 2.875
</TABLE>
In November 1997, the Company's stockholders approved a proposal to amend
Article Fourth of the Company's Certificate of Incorporation to effect a
1-for-200 reverse stock split followed by a 200-for-1 forward stock split. As a
result of the stock splits, the number of shares outstanding was reduced by
561,544 shares. The Company is repurchasing these shares at $5.58 per share when
the stock certificates are tendered to the Company's transfer agent.
In March 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. During 1997,
766,200 shares were purchased under this plan, at a total cost of $4.4 million.
During 1996, the Company purchased 1.7 million shares of its common stock for
$6.5 million. These purchases completed the $5.0 million common stock repurchase
program announced in November 1995, as well as an additional purchase of $3.7
million authorized by the Company's Board of Directors in July 1996.
Additional future repurchases may be made in the open market or through private
transactions.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Summary of Selected Financial Data
Years Ended December 31,
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of operations:
Revenue $ 49,665 $ 51,545 $ 60,073 $ 53,715 $ 67,431
Income (loss) before income taxes 6,515 3,893 7,868 (5,579) 7,737
Net income (loss) before cumulative
effect of accounting change 4,667 4,095 6,048 (1,511) 6,282
Cumulative effect of accounting change -- -- -- (5,130) --
Net income (loss) to common shares 4,667 4,095 6,048 (9,071) 1,432
Basic earnings per weighted-
average common share 0.51 0.41 0.52 (0.74) 0.14
Financial position:
Total assets 236,283 198,749 126,213 140,372 217,720
Short-term secured debt 23,040 30,966 -- 6,404 --
Long-term recourse debt 44,844 43,618 47,853 60,119 129,119
Long-term nonrecourse debt 81,302 45,392 -- -- --
Shareholders' equity 46,548 46,320 48,620 45,695 51,133
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Commercial and Industrial Equipment Leasing
A major activity of the Company is the funding and management of long-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 materials-handling, computer, point-of-sale,
general plant and warehouse, mining and construction, and communications
equipment. Through AFG, the Company is also engaged in the management of
institutional leasing investment programs for which it originates leases and
receives acquisition and management fees.
Trailer Leasing
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 (nonrefrigerated) trailers leased to a variety of customers and
refrigerated trailers used primarily in the foodservice distribution industry.
The Company is currently expanding the number of its rental yard facilities and
is selling certain of its older trailers and replacing them with new or
late-model used trailers.
Other Transportation Equipment Leasing, Management of Investment Programs, and
Other
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 a commuter
aircraft, a 20% interest in a commercial aircraft, an aircraft engine,
intermodal trailers, and storage equipment as of December 31, 1997, was mainly
built prior to 1988. As the equipment ages, the Company continues to monitor the
performance of its leased assets and current market conditions for leasing
equipment in order to seek the best opportunities for investment. Failure to
replace equipment may result in shorter lease terms, higher costs of maintaining
and operating aged equipment, and, in certain instances, limited
remarketability.
The Company also has an 80% interest in a company located in Australia involved
in aircraft brokerage and aircraft spare parts sales.
The Company has syndicated investment programs from which it earns various fees
and equity interests. 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 allow the Company to
receive fees for the acquisition and initial leasing 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 and related assets, 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, which is
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 the program, subject to certain allocation provisions, which will
increase to 25% after the investors have received distributions equal to their
original invested capital.
In 1996, the Company announced the suspension of public syndication of equipment
leasing programs with the 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.
<PAGE>
Comparison of the Company's Operating Results for the Years Ended December 31,
1997 and 1996
The following analysis reviews the operating results of the Company:
Revenues
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operating leases $ 15,777 $ 18,180
Finance lease income 8,685 4,186
Management fees 11,275 10,971
Partnership interests and other fees 1,306 3,811
Acquisition and lease negotiation fees 3,184 6,610
Aircraft brokerage and services 2,466 2,903
Gain on the sale or disposition of assets, net 3,720 2,282
Other 3,252 2,602
------------------------------------------------
Total revenues $ 49,665 $ 51,545
</TABLE>
The fluctuations in revenues between 1997 and 1996 are summarized and explained
below.
Operating lease revenues by equipment type:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------
(in thousands of dollars)
<S> <C> <C>
Trailers $ 8,622 $ 8,004
Commercial and industrial equipment 5,175 4,042
Aircraft and aircraft engine 655 4,444
Mobile offshore drilling units 603 123
Marine vessel 501 -
Storage equipment 4 1,076
Marine containers 188 392
Railcars 29 99
------------------------------------------------
Total operating lease revenues $ 15,777 $ 18,180
</TABLE>
Operating lease revenues include revenues generated from assets held for
operating leases and assets held for sale that are on lease. As of December 31,
1997, the Company owned transportation equipment held for operating leases with
an original cost of $50.3 million, which was $24.3 million less than the
original cost of transportation equipment owned and held for operating leases or
held for sale as of December 31, 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 exit certain
equipment markets, which has resulted in a 91% net reduction in its aircraft
portfolio and a 100% net reduction in its marine container portfolio, compared
to 1996. The reduction in transportation equipment available for lease is the
primary reason aircraft and marine container revenue was reduced, compared to
the prior year. The $1.1 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 finance lease, as opposed to
short-term operating leases.
Although operating lease revenues decreased as a result of the reduction in
transportation equipment available for lease and the storage equipment
agreement, this decrease was partially offset by a $1.1 million increase in
commercial and industrial operating lease revenues. Commercial and industrial
operating lease revenues increased as a result of an increase in commercial and
industrial equipment owned and on operating lease. Trailer lease revenues
increased $0.6 million as a result of higher utilization in the Company's
intermodal trailer fleet. In addition, during 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 in 1997.
<PAGE>
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 institutional leasing investment programs. Finance lease income
increased $4.5 million during 1997, compared to 1996, due to an increase in
commercial and industrial assets that were on finance lease. During 1997, the
average investment in direct finance leases was $76.2 million, compared to $30.5
million for 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 1997, compared to 1996, due to an increase in management fees earned from
the institutional leasing investment programs managed by the Company's AFG
subsidiary. Although management fees related to Fund I increased due to
additional asset purchases, net management fees from the remaining older
programs declined due to a net decrease in managed equipment and lower lease
rates. With the termination of syndication activities in 1996, management fees
from the older programs are expected to decrease in the future as they begin
liquidation and the associated 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 programs
managed by AFG.
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 $2.3 million and $2.7 million for 1997 and 1996,
respectively. In addition, a decrease of $1.0 million in the Company's residual
interests in the programs was recorded during 1997, compared to an $0.8 million
increase in the Company's residual interests in the programs during 1996. The
decrease in net earnings and distribution levels and residual interests in 1997,
compared to 1996, resulted mainly from the disposition of equipment in certain
of the PLM Equipment Growth Fund (EGF) programs. In addition, during 1996,
residual income of $1.8 million was recorded for Fund I purchases. As Fund I has
fully invested the proceeds raised from syndication, the Company will not record
additional residual interest income from this program until it reaches the
liquidation phase. 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. In 1996, the Company also earned $0.3 million in liquidation
sales fees for the sales of managed equipment. There were no similar fees in
1997.
Acquisition and lease negotiation fees:
During 1997, the Company, on behalf of the EGF programs, purchased trailer
equipment and a beneficial interest in a marine vessel and aircraft for $42.8
million, compared to $105.7 million of equipment purchased on behalf of the EGF
programs during 1996, resulting in a $3.4 million decrease in acquisition and
lease negotiation fees. Acquisition fees related to equipment purchased for the
institutional leasing investment programs managed by AFG were $0.8 million for
both 1997 and 1996. Because of the Company's decision to halt syndication of
equipment leasing programs with the close of Fund I in 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. (Aeromil), the Company's aircraft leasing,
spare part sales, and brokerage subsidiary, decreased $0.4 million in 1997,
compared to 1996, due to a decrease in spare parts sales, the sale of the
subsidiary's ownership interest in Austin Aero FBO Ltd. to third parties in
January 1996, and unfavorable exchange rate fluctuations during 1997.
Gain on the sale or disposition of assets, net:
During 1997, the Company recorded $3.7 million in net gains on the sale
or disposition of assets. Of this gain, $1.1 million resulted from the sale or
disposition of trailers, storage equipment, marine containers, and commuter
aircraft. Also during 1997, the Company purchased and subsequently sold two
commercial aircraft to an unaffiliated third party for a net gain of $0.8
million and earned $2.0 million from the sale of commercial and industrial
equipment. These gains were partially offset by a $0.2 million adjustment to
reduce the estimated net realizable value of certain trailers. During 1996, the
Company recorded a $2.3 million net gain on the sale or disposition of assets.
Of this gain, $2.1 million resulted from the sale or disposition of trailers,
marine containers, railcars, storage equipment, and commuter and commercial
aircraft, and $0.9 million related to the sale of commercial and industrial
equipment. These gains were partially offset by a $0.7 million adjustment to
reduce the estimated net realizable value of certain commuter aircraft ($0.4
million) and certain trailers ($0.3 million).
Other:
Other revenues increased $0.7 million during 1997, compared to 1996,
due to increased revenue earned from financing income and brokerage fees.
Costs and Expenses
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operations support $ 16,633 $ 21,595
Depreciation and amortization 8,447 11,318
General and administrative 9,472 7,956
------------------------------------------------
Total costs and expenses $ 34,552 $ 40,869
</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 $5.0 million (23%) for 1997, compared to 1996. The decrease
resulted from a $1.4 million charge recorded during 1996 related to the
termination of syndication activities, a $1.3 million decrease in compensation
and benefits expense due to staff reductions, a $0.7 million decrease in other
office-related expenses, a $0.6 million decrease in equipment operating costs
due to the sale of certain of the Company's transportation equipment, a $0.5
million decrease in administrative expenses, and a $0.5 million decrease in
professional services expenses.
Depreciation and amortization:
Depreciation and amortization expenses decreased $2.9 million (25%) for 1997,
compared to 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 $1.5 million (19%) for 1997,
compared to 1996, due to a $0.6 million increase in expenses 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 12 to the consolidated financial
statements), a $0.5 million increase in costs related to the Company's response
to shareholder-sponsored initiatives, and a $0.3 million credit recorded in the
second quarter of 1996 related to the Employee Stock Ownership Plan (ESOP).
These expenses were partially offset by a $0.4 million decrease in
office-related expenses due to a decrease in staffing and office space
requirements.
Other Income and Expenses
<TABLE>
<CAPTION>
1997 1996
------------------------------------------
(in thousands of dollars)
<S> <C> <C>
Interest expense $ (9,891) $ (7,341)
Interest income 1,635 1,228
Other expenses, net (342) (670)
</TABLE>
<PAGE>
Interest expense:
Interest expense increased $2.6 million (35%) for 1997, compared to 1996, due to
an increase in borrowings of nonrecourse debt to fund new lease originations 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 retirement of the subordinated debt in 1996, a decrease in
borrowings on the short-term secured debt facility, and the reduction in the
amount outstanding on the senior secured loan.
Interest income:
Interest income increased $0.4 million (33%) for 1997, compared to 1996, as a
result of higher average cash balances in 1997, compared to 1996.
Other expenses, net:
Other expenses of $0.3 million in 1997 represents an accrual for a litigation
settlement that was paid in 1998. During 1996, the Company prepaid the $8.6
million balance of its subordinated debt and $10.0 million of its senior secured
loan, and wrote off the associated loan fees and incurred prepayment penalties
of $1.0 million. These expenses were partially offset by other income of $0.4
million resulting from the 1996 sale of 32 wind turbines that had previously
been written off.
Provision for (Benefit from) Income Taxes
For 1997, the provision for income taxes was $1.8 million, representing an
effective rate of 28%. For 1996, the Company recognized a benefit for income
taxes of $0.2 million as a result of several items of a nonrecurring nature.
These included adjustments that reduced income tax expense arising from (a)
differences between the amount recognized in the 1995 financial statements and
the 1995 tax return as filed and (b) changes in state tax apportionment factors
used to record deferred taxes. In both 1997 and 1996, the Company's income tax
rate included the benefit of certain income earned from foreign activities that
has been permanently invested outside of the United States (refer to Note 11 to
the consolidated financial statements).
Net Income
As a result of the foregoing, 1997 net income was $4.7 million, resulting in
basic and fully diluted earnings per weighted-average common share outstanding
of $0.51 and $0.50, respectively. For 1996, net income was $4.1 million,
resulting in basic and fully diluted earnings per weighted-average common share
outstanding of $0.41 and $0.40, respectively.
Comparison of the Company's Operating Results for the Years Ended December 31,
1996 and 1995
The following analysis summarizes the operating results of the Company:
Revenues
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operating leases $ 18,180 $ 23,919
Finance lease income 4,186 -
Management fees 10,971 11,197
Partnership interests and other fees 3,811 4,978
Acquisition and lease negotiation fees 6,610 6,659
Aircraft brokerage and services 2,903 5,022
Gain on the sale or disposition of assets, net 2,282 4,912
Commissions - 1,322
Other 2,602 2,064
------------------------------------------------
Total revenues $ 51,545 $ 60,073
</TABLE>
<PAGE>
The fluctuations in revenues between 1996 and 1995 are summarized and explained
below.
Operating lease revenues by equipment type:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------
(in thousands of dollars)
<S> <C> <C>
Trailers $ 8,004 $ 10,582
Aircraft and aircraft engine 4,444 6,465
Commercial and industrial equipment 4,042 2,293
Storage equipment 1,076 1,056
Marine containers 392 635
Mobile offshore drilling units 123 -
Railcars 99 1,584
Marine vessel - 1,304
-------------------------------------------------
Total operating lease revenues $ 18,180 $ 23,919
</TABLE>
As of December 31, 1996, the Company owned transportation equipment held for
operating leases or held for sale with an original cost of $74.6 million, which
was $39.1 million less than the original cost of equipment owned and held for
operating leases or held for sale as of December 31, 1995. The reduction in
equipment, on an original cost basis, was a consequence of the Company's
strategic decision to dispose of certain underperforming transportation assets
and exit certain equipment markets, resulting in a 100% reduction in its marine
vessel fleet and railcar portfolio, a 34% reduction in its marine container
portfolio, a 67% net reduction in its aircraft portfolio, and a 12% net
reduction in its trailer portfolio, compared to 1995. The reduction in equipment
available for lease was the primary reason marine vessel, railcar, trailer,
marine container, and aircraft revenues were all reduced, as compared to the
prior year. In addition, trailer lease revenue decreased due to lower
utilization.
The decrease in operating lease revenues as a result of the reduction in
transportation equipment available for lease was partially offset by (a) a $0.1
million increase in mobile offshore drilling unit (rig) revenue in 1996 due to
the purchase of a rig held for sale to an affiliated program during the fourth
quarter of 1996 and (b) a $1.7 million increase in operating lease revenues
generated by commercial and industrial equipment leases on $15.9 million of
purchased equipment that was retained by the Company and revenues generated on
leased equipment purchased for $30.7 million prior to being sold to third
parties.
Finance lease income:
The Company earns finance lease income from 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. During 1996, the
Company earned direct finance lease income on average commercial and industrial
assets that were on finance lease of $30.5 million, which are financed by both
short-term secured debt and nonrecourse debt. These direct finance leases
resulted in $4.2 million in earned income for 1996, which represent income
earned on the lease payment stream. There were no similar transactions in 1995.
Management fees:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. Management fees were $11.0 million for
1996, compared to $11.2 million in 1995. Although management fees related both
to Fund I and the institutional leasing investment program managed by the
Company's AFG subsidiary increased, management fees from the remaining older
programs decreased due to a net decrease in managed equipment, a decrease in
lease rates for certain types of equipment in those programs, and the
elimination of management of the Equis programs. With the termination of
syndication activities in 1996, management fees from the older programs are
expected to decrease in the future, as they begin liquidation and the associated
equipment portfolio becomes permanently reduced. This decrease is expected to
continue to be offset in part by management fees earned from the institutional
leasing investment programs managed by AFG.
<PAGE>
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 $2.7 million and $3.3 million for 1996 and 1995,
respectively. In addition, net increases of $0.8 million and $1.7 million in the
Company's recorded residual values were recorded during 1996 and 1995,
respectively. In 1996, the equity interest recorded was impacted by $1.8 million
in residual income recorded for Fund I equipment purchases, offset partially by
decreases in residual values related to dispositions of equipment in certain of
the equipment growth funds. In 1995, the equity interest recorded was impacted
by $2.2 million in residual income recorded for Fund I equipment purchases and
$0.9 million in residual income from the Equis programs, which was offset
partially by a decrease in residual income related to other existing programs.
Residual income is recognized on residual interests based upon the general
partner's share of the present value of the estimated disposition proceeds of
the equipment portfolios of the affiliated partnerships. 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. In 1996, the Company also earned $0.3 million in liquidation sales
fees for the sale of managed equipment. There were no similar fees in 1995.
Acquisition and lease negotiation fees:
During 1996, a total of $105.7 million of equipment was purchased on behalf of
the EGF programs, compared to $100.0 million during 1995, resulting in a $0.3
million increase in acquisition and lease negotiation fees. This increase was
offset by a $0.3 million decrease in acquisition and lease negotiation fees
related to AFG purchases for managed programs. Due to the Company's decision to
halt syndication of equipment leasing programs with the close of Fund I in 1996,
and because Fund I has a no front-en 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, spare parts sales, and
brokerage subsidiary, decreased $2.1 million in 1996, from 1995. The decrease
was attributable to the sale of the subsidiary's ownership interest in Aeromech
Pty. Ltd. and Austin Aero FBO Ltd. to third parties in December 1995 and January
1996, respectively.
Gain on the sale or disposition of assets, net:
During 1996, the Company recorded $2.3 million in net gains on the sale
or disposition of assets. Of these gains, $2.1 million resulted from the sale or
disposition of commuter aircraft, commercial aircraft, marine containers,
railcars, storage equipment, and trailers, and $0.9 million related to the sale
of commercial and industrial equipment. These gains were partially offset by
adjustments totaling $0.7 million to write down the net book value of certain
commuter aircraft ($0.4 million) and certain trailers ($0.3 million) to their
estimated market value. A $4.9 million net gain was recorded during the year
ended December 31, 1995. Of this gain, $5.6 million related to the sale of three
option contracts for railcar equipment and the disposition of a marine vessel,
marine containers, commercial aircraft, commuter aircraft, helicopters,
railcars, storage equipment, and trailers. Also during 1995, the Company
purchased and sold to an unaffiliated third party three off-lease commuter
aircraft for an aggregate gain of $0.5 million, net of selling costs. In
addition, adjustments totaling $1.2 million were recorded to write down the net
book value of certain aircraft to their estimated net realizable value.
Commissions:
Commission revenue represents syndication placement fees, generally 9% of equity
raised for EGF programs, earned upon the sale of partnership units to investors.
During 1996, no program equity was raised for the EGF programs, compared to
$14.6 million of equity raised during 1995, resulting in a $1.3 million decrease
in placement commissions. The Company closed PLM Equipment Growth & Income Fund
VII (EGF VII) syndication activities in April 1995. As a result of the Company's
decision to suspend syndication of equipment leasing programs in May 1996, and
because Fund I had a no front-end fee structure, commission revenue has been
eliminated since the close of EGF VII.
Other:
Other revenues increased $0.5 million in 1996, from 1995, due to
increased underwriting income, brokerage fees, and financing income.
Costs and Expenses
<TABLE>
<CAPTION>
1996 1995
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operations support $ 21,595 $ 26,001
Depreciation and amortization 11,318 8,616
General and administrative 7,956 10,539
Commissions - 1,416
------------------------------------------------
Total costs and expenses $ 40,869 $ 46,572
</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 $4.4 million (17%) for 1996, from 1995. The
decrease resulted from a $1.7 million decrease in operating costs, cost of
sales, and repair and maintenance costs due to (a) the sale of some of the
Company's transportation equipment, and the sale of the Company's ownership
interests in Aeromech Pty. Ltd. and Austin Aero FBO Ltd. to third parties in
December 1995 and January 1996, respectively, (b) a $5.2 million decrease in
compensation and benefits expenses due to staffing reductions, and (c) higher
compensation expense in 1995 (primarily to compensate employees for lost
benefits resulting from the termination of the 401(k) plan during 1995.) The
decrease was partially offset by a $1.4 million charge in 1996 related to the
termination of syndication activities, a $0.3 million increase in bad debt
expense, and a $0.8 million decrease in allocated expenses to the Equis programs
(as the Company was no longer managing these programs) in 1996.
Depreciation and amortization:
Depreciation and amortization expenses increased $2.7 million (31%) for the year
ended 1996, as compared to 1995. The increase resulted from the amortization of
costs associated with AFG and the depreciation of AFG assets held for operating
leases and administrative assets, which was partially offset by the reduction in
depreciable equipment (discussed in the operating lease revenue section).
General and administrative:
General and administrative expenses decreased $2.6 million (25%) during the year
ended 1996, compared to 1995. The decrease resulted from a $0.8 million decrease
in compensation expenses primarily related to staffing reductions and lower 1996
bonus expense (primarily related to the compensation of employees during 1995
for lost benefits resulting from the termination of the 401(k) plan), a $0.3
million decrease in estimated accruals, a $0.7 million decrease in professional
services expenses, and a $0.8 million decrease in administrative expenses.
Commissions:
Commission expenses were incurred by the Company primarily in connection with
the syndication of investment partnerships, and represented payments to brokers
and financial planners for sales of investment program units. Commission
expenses for 1996 decreased $1.4 million (100%) from 1995. The reduction is the
result of no syndicated equity raised for the EGFs during 1996, versus $14.6
million in syndicated equity raised for the EGFs during 1995. Commission costs
related to Fund I were capitalized as part of the Company's investment in the
program. With the termination of syndication activities, no more commission
costs will be incurred in the future.
Other Income and Expenses
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------
(in thousands of dollars)
<S> <C> <C>
Interest expense $ (7,341) $ (7,110)
Interest income 1,228 1,973
Other expense, net (670) (496)
</TABLE>
<PAGE>
Interest expense:
Interest expense increased $0.2 million (3%) during 1996, compared to
1995, mainly due to an increase in borrowings of nonrecourse debt, the senior
secured notes facility, and the short-term secured debt facility, which was
partially offset by the retirement of the subordinated debt and the $10.0
million reduction of the senior secured loan.
Interest income:
Interest income decreased $0.7 million (38%) in 1996, compared to 1995,
from a reduction in interest income earned on the PLM International, Inc.
Employee Stock Option Plan (ESOP) cash collateral account, due to the
termination of the ESOP and a decrease in interest income as a result of lower
average cash balances in 1996 compared to 1995.
Other expenses, net:
Other expenses, net were $0.7 million during 1996, compared to $0.5 million in
1995. During 1996, the Company prepaid the remaining $8.6 million balance of its
subordinated debt and $10.0 million of its senior secured loan, and wrote off
the associated loan fees and incurred prepayment penalties totaling $1.0
million. These expenses were partially offset by other income of $0.4 million
due to the 1996 sale of 32 wind turbines that had previously been written off.
Other expenses, net were $0.5 million in 1995, due mainly to loan fees of $1.1
million related to the early retirement of $11.5 million of the Company's
subordinated debt, which was partially offset by the collection of an account
receivable that had previously been written off.
Provision for (Benefit from) Income Taxes
The Company recognized a benefit for income taxes in 1996 of $0.2 million as a
result of several items of a nonrecurring nature. These included adjustments
that reduced income tax expense relating to (a) differences between the amount
recognized in the 1995 financial statements and the 1995 tax return as filed and
(b) changes in state tax apportionment factors used to record deferred taxes.
For both 1996 and 1995, the Company's income tax rate included the benefit of
certain income earned from foreign activities that has been permanently invested
outside the United States (refer to Note 11 to the consolidated financial
statements). For 1995, the provision for income taxes was $1.8 million, which
represented an effective rate of 23%.
Net Income
As a result of the foregoing, 1996 net income was $4.1 million, resulting in
basic and fully diluted earnings per weighted-average common share of $0.41 and
$0.40, respectively. For 1995, net income was $6.0 million, resulting in basic
and fully diluted earnings per weighted-average common share of $0.52 and $0.51,
respectively.
Liquidity and Capital Resources
Cash requirements have historically been satisfied through cash flow from
operations, borrowings, and the sale of equipment.
Liquidity beyond 1997 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 Secured Loan: The Company's senior loan with a syndicate of insurance
companies, which had an outstanding balance of $20.6 million as of December 31,
1997 and February 23, 1998, 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 December 31, 1997, the cash collateral balance was $12.7
million and is included in restricted cash and cash equivalents on the Company's
balance sheet. 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.
<PAGE>
Senior Secured 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 1997, the Company drew down $9.0
million and repaid $3.2 million on this facility. The facility bears interest at
LIBOR plus 240 basis points. As of December 31, 1997, the Company had $23.8
million outstanding under this agreement. As of February 23, 1998, the Company
had $22.6 million outstanding under this agreement. The Company has pledged
substantially all of its management fees, acquisition and lease negotiation
fees, data processing fees, and certain partnership distributions as collateral
to the facility. The facility required quarterly interest only payments through
August 15, 1997, with principal plus interest payments beginning November 15,
1997. Principal payments are payable quarterly in 20 equal amounts through
termination of the loan on August 15, 2002.
Bridge Financing: Assets acquired and held on an interim basis for placement
with affiliated programs or sale to third parties or purchased for placement in
the Company's nonrecourse debt facility have, from time to time, been partially
funded by a $50.0 million short-term secured debt facility. During 1997, the
availability of this facility was extended until November 2, 1998. The Company
believes it will be able to renew this facility on substantially the same terms
upon its expiration.
This facility, which is shared with EGFs V, VI, and VII, and Fund I,
allows the Company to purchase equipment prior to its designation to a specific
program. This facility provides 80% financing of original equipment costs for
transportation assets of the Company and up to 100% financing for transportation
assets of the EGFs. The facility provides 100% of the discounted present value
of the lease stream, plus 100% of the allocated residual amount of all eligible
equipment up to 90% of the original equipment cost of the assets, and 100% of
the allocated residual amount of all master trust pooled equipment for
nonrecourse assets, if the Company is the borrower and working capital is used
for the nonfinanced costs of these acquisitions. The Company can hold
transportation assets in this facility for up to 150 days. Assets to be
transferred to the nonrecourse debt facility can be held under this facility
until the facility's expiration. Interest accrues at Prime or LIBOR plus 162.5
basis points at the option of the borrower at the time of the advance under the
facility. The Company retains the difference between the net lease revenue
earned and the interest expense during the interim holding period, since its
capital is at risk. As of December 31, 1997, the Company had $23.0 million
outstanding under this facility. As of February 23, 1998, the Company had $20.4
million in borrowings outstanding under this facility. There were no other
borrowings outstanding under this facility as of December 31, 1997 or February
23, 1998.
Nonrecourse Debt: The Company has available a nonrecourse debt facility for up
to $125.0 million, secured by direct finance leases, operating leases, and loans
on commercial and industrial equipment that generally have terms of one to seven
years. The facility is available for a one-year period expiring October 13,
1998. Repayment of the facility matches the terms of the underlying leases. The
nonrecourse debt facility bears interest equivalent to the lender's cost of
funds. As of December 31, 1997, $71.3 million in borrowings was outstanding
under this facility. As of February 23, 1998, $75.6 million in borrowings was
outstanding under this facility. The Company believes that it will be able to
renew this facility on substantially the same terms upon its expiration.
In addition to the $125.0 million nonrecourse debt facility discussed above,
the Company also has $10.0 million in nonrecourse notes payable secured by
direct finance leases on commercial and industrial equipment that have terms
corresponding to the note repayment schedule beginning November 1997 through
October 2001. The notes bear interest at 9.16% per annum.
Interest-Rate Swap Contracts: The Company has entered into interest-rate swap
agreements in order to manage the interest-rate exposure associated with its
nonrecourse debt. As of December 31, 1997, the swap agreements had remaining
terms averaging 2.5 years, corresponding to the terms of the related debt. As of
December 31, 1997, a notional amount of $72.5 million of interest-rate swap
agreements effectively fixed interest rates at an average of 7.27% on such
obligations. Interest expense increased by $0.3 million due to these
arrangements in 1997.
Commercial and industrial equipment leasing:
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 nonrecourse debt
facility. AFG also originates loans in which it takes a security interest in the
assets. During 1997, the Company purchased commercial and industrial equipment
with an original equipment cost of $122.5 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 institutional
leasing investment programs for which
<PAGE>
the Company serves as the manager. Acquisition and management fees are received
for the sale and subsequent management of these leases. The Company also
purchases equipment with the intent to sell to unaffiliated third parties. The
Company believes this lease origination operation is a growth area for the
future.
As of December 31, 1997, the Company had committed to purchase $153.8 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 January 1, 1998 through February 23, 1998, the Company funded $9.8 million
of commitments outstanding as of December 31, 1997 for its commercial and
industrial equipment lease portfolio.
As of February 23, 1998, the Company had committed to purchase $173.6 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.
Trailer leasing:
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 foodservice distribution industry. The Company intends to open
additional rental yard facilities in 1998. 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.
Other transportation equipment leasing, management of investment programs,
and other:
During 1997, the Company generated proceeds of $13.5 million from the sale of
owned transportation equipment. The net proceeds from the sale of assets that
were collateralized as part of the senior loan facility were placed in a
collateral account. During 1997, $8.5 million in funds were released to the
Company from the cash collateral account. The funds were released based on the
appraised fair market value of the equipment portfolio and the related
collateral coverage ratio. As of December 31, 1997, $12.7 million was on deposit
in the cash collateral account and is included in restricted cash and cash
equivalents on the Company's balance sheet.
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.
The Company also has an 80% interest in a company located in Australia involved
in aircraft brokerage and aircraft spare part sales.
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.
Year 2000 Compliance
The Company is currently addressing the Year 2000 computer software issue. The
Company is creating a timetable for carrying out any program modifications that
may be required.
Inflation
There was no significant impact on the Company's operations as a result of
inflation during 1997, 1996, or 1995.
Geographic Information
For a discussion of the geographic information, refer to Note 17 to the
consolidated financial statements.
New Accounting Pronouncements
For a discussion of the impact of new accounting pronouncements, refer to Note 1
to the consolidated financial statements.
<PAGE>
Forward-Looking Information
Except for historical information contained herein, the discussion in this Form
10-K contains forward-looking statements that involve risks and uncertainties,
such as statements of the Company's plans, objectives, expectations, and
intentions. The cautionary statements made in this Form 10-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Company's actual results could differ materially from
those discussed here.
Trends
The Company continues to seek opportunities for new businesses, markets, and
acquisitions. During 1995, the Company established its AFG subsidiary. AFG is
engaged in the funding and management of long-term direct finance-type leases,
operating leases, and loans. Master lease agreements are entered into with
predominantly 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. AFG is also engaged in the
management of institutional leasing investment programs for which it originates
leases and receives acquisition and management fees. During 1997, AFG funded
lease and loan transactions for commercial and industrial equipment with an
original cost of $124.7 million. Of this, the Company sold $58.3 million to the
institutional leasing investment programs or to third parties. During 1997, the
Company brokered commercial and industrial equipment with an original equipment
cost of $32.0 million. In the future, the Company intends to continue to develop
the portfolio of its AFG subsidiary.
The Company intends to expand its current trailer leasing and management
operations by purchasing trailers and opening new rental yards for its PLM
Rental, Inc. subsidiary. PLM Rental is one of the largest short-term, on-demand
refrigerated trailer rental operations in North America, and the Company
believes there are new opportunities in the refrigerated trailer leasing market.
During 1996, the Company announced the suspension of public syndication of
equipment leasing programs with the 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 programs begin liquidation and the
managed equipment portfolio becomes permanently reduced.
The Company has selectively reduced the size of its owned transportation
equipment portfolio over the past few years. In 1997, the Company sold $24.3
million of its owned transportation equipment (of which $8.0 million was
included in assets held for sale as of December 31, 1996), based on original
cost. As a result of the reduction in owned equipment over the past few years,
the Company's operating lease revenues have decreased, as well as the associated
depreciation, operating, and repair and maintenance costs. Over the last three
years, the Company used the proceeds from equipment sales and cash from
operations to reduce subordinated indebtedness by $23.0 million, resulting in
reduced interest costs. These reductions have helped offset the increased
borrowing activity and interest costs associated with the expansion of the AFG
lease portfolio. In addition, the reduction in transportation equipment lease
revenues will continue to be increasingly offset by lease revenues generated
from commercial and industrial equipment leases associated with AFG. With the
exception of the Company's aircraft and intermodal trailer fleet, the Company
does not anticipate continued substantial reductions in its owned equipment
portfolio in 1998 and beyond.
The Company continues to benefit from cost reduction measures, principally
reflecting reductions in total Company staffing since 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The response to this item is submitted as a separate section of this report. See
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A definitive Company proxy statement will be filed not later than 120 days after
the end of the fiscal year with the Securities and Exchange Commission. The
information set forth under "Identification of Directors and Officers,"
"Compensation of Executive Officers," and "Security Ownership of Certain
Beneficial Owners and Management" in such proxy statement is incorporated herein
by reference for Items 10, 11, and 12, above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements
(1) The consolidated financial statements listed in the accompanying
index to financial statements are filed as part of this Annual
Report on Form 10-K.
(2) Exhibits are listed at Item (c), below.
(b) Reports on Form 8-K Filed in Last Quarter of 1997
December 1, 1997: Announcement of approval on November 26, 1997 by vote of a
majority of the outstanding shares of the Company's common stock of an amendment
to Article Fourth of the Company's Certificate of Incorporation to effect a
1-for-200 reverse stock split followed by a 200-for-1 forward stock split of the
common stock.
(c) Exhibits
3.1 Certificate of Incorporation, incorporated by reference to the
Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission on April 2, 1990.
3.2 Bylaws, incorporated by reference to the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
April 2, 1990.
10.1 $45,000,000 Senior Secured Note Agreement, dated as of June 30,
1994, as amended, incorporated by reference to the Company's Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on March 15, 1995.
10.2 $27,000,000 Floating Rate Senior Secured Notes Agreement, dated as
of June 28, 1996, incorporated by reference to the Company's
Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 5, 1996.
10.3 Amended and Restated Warehousing Credit Agreement among American
Finance Group, Inc. and First Union National Bank of North
Carolina, Bank of Montreal, dated as of December 2, 1997.
10.4 Second Amended and Restated Warehousing Credit Agreement among TEC
AcquiSub, Inc. and First Union National Bank of North Carolina,
Bank of Montreal, dated as of December 2, 1997.
10.5 Form of Employment contracts for executive officers, incorporated
by reference to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1993.
10.6 Rights Agreement, as amended, filed with Forms 8-K on March 12,
1989, August 12, 1991, and January 23, 1993, and incorporated
herein by reference.
10.7 Directors' 1992 Nonqualified Stock Option Plan, incorporated by
reference to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1993.
10.8 Form of Company Nonqualified Stock Option Agreement, incorporated
by reference to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1993.
10.9 Directors' 1995 Nonqualified Stock Option Plan, incorporated by
reference to the Company's Annual Report on Form 10-K filed with
the Securities Exchange Commission on March 15, 1995.
10.10 PLM International, Inc. Mandatory Management Stock Bonus Plan,
incorporated by reference to the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission on February
24, 1997.
10.11 Form of Executive Deferred Compensation Agreement, incorporated by
reference to the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1993.
10.12 Asset Purchase Agreement, dated as of July 1, 1995, incorporated by
reference to the Company's Quarterly Report on Form 10-Q filed with
the Securities and Exchange Commission on November 1, 1995.
10.13 Pooling and Servicing Agreement and Indenture of Trust, dated as of
July 1, 1995, incorporated by reference to the Company's Quarterly
Report on Form 10-Q filed with the Securities and Exchange
Commission on November 1, 1995.
10.14 Office Lease for premises at One Market, San Francisco, California,
incorporated by reference to the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission on April 1,
1991.
10.15 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, incorporated by
reference to the Company's Form 10-Q filed with the Securities and
Exchange Commission on October 24, 1997.
10.16 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,
incorporated by reference to the Company's Form 10-Q filed with the
Securities and Exchange Commission on October 24, 1997.
10.17 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,
incorporated by reference to the Company's Form 10-Q filed with the
Securities and Exchange Commission on October 24, 1997.
10.18 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,
incorporated by reference to the Company's Form 10-Q filed with the
Securities and Exchange Commission on October 24, 1997.
10.19 Note Purchase Agreement among AFG Credit Corporation, Variable
Funding Capital Corporation, and First Union Capital Markets Corp.,
dated as of October 14, 1997, incorporated by reference to the
Company's Form 10-Q filed with the Securities and Exchange
Commission on October 24, 1997.
<PAGE>
10.20 Third Amendment to Warehousing Credit Agreement among American
Finance Group Inc. and First Union National Bank of North Carolina,
dated as of November 3, 1997.
10.21 Fourth Amendment to Amended and Restated Warehousing Credit
Agreement among TEC AcquiSub, Inc. and First Union National Bank of
North Carolina, dated as of November 3, 1997.
10.22 Assignment and assumption of $10,360,388 Notes Payable Agreement
among American Finance Group, Inc. and Varilease Corporation, dated
as of December 30, 1997.
11.1 Statement regarding computation of per share earnings.
21.1 Subsidiaries of the Company.
23.1 Consents of Independent Auditors.
24.1 Powers of Attorney.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: February 23, 1998 PLM International, Inc.
By: /s/ Robert N. Tidball
---------------------------
Robert N. Tidball
Chairman, President, and
Chief Executive Officer
By: /s/ J. Michael Allgood
--------------------------
J. Michael Allgood
Vice President and
Chief Financial Officer
By: /s/ Richard K Brock
-------------------------
Richard K Brock
Vice President and
Corporate Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company, in the
capacities and on the dates indicated.
* February 23, 1998
- -------------------------------------------- Director,
Douglas P. Goodrich Vice President
* Director February 23, 1998
- --------------------------------------------
Robert L. Witt
* Director February 23, 1998
- --------------------------------------------
Randall L.-W. Caudill
* Director February 23, 1998
- --------------------------------------------
Harold R. Somerset
* Susan C. Santo, by signing her name hereto, does sign this document on
behalf of the persons indicated above, pursuant to powers of attorney
duly executed by such persons and filed with the Securities and
Exchange Commission.
/s/ Susan C. Santo
----------------------
Susan C. Santo
Attorney-in-Fact
<PAGE>
INDEX TO FINANCIAL STATEMENTS
(Item 14(a)(1)(2))
Description Page
Independent Auditors' Report 30
Consolidated Statements of Income for Years Ended
December 31, 1997, 1996, and 1995 31
Consolidated Balance Sheets as of December 31, 1997 and 1996 32
Consolidated Statements of Changes in Shareholders' Equity
for Years Ended December 31, 1997, 1996, and 1995 33
Consolidated Statements of Cash Flows for Years
Ended December 31, 1997, 1996, and 1995 34-35
Notes to Consolidated Financial Statements 36-54
All schedules are omitted, since the required information is not pertinent or is
not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the consolidated financial
statements and notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
PLM International, Inc.
We have audited the consolidated financial statements of PLM International, Inc.
and subsidiaries as listed in the accompanying index. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of PLM International,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
- --------------------------------
KPMG PEAT MARWICK LLP
SAN FRANCISCO, CALIFORNIA
FEBRUARY 23, 1998
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------
<S> <C> <C> <C>
Revenues:
Operating leases (Note 6) $ 15,777 $ 18,180 $ 23,919
Finance lease income (Note 2) 8,685 4,186 --
Management fees (Note 1) 11,275 10,971 11,197
Partnership interests and other fees (Note 1) 1,306 3,811 4,978
Acquisition and lease negotiation fees (Note 1) 3,184 6,610 6,659
Aircraft brokerage and services 2,466 2,903 5,022
Gain on the sale or disposition of assets, net 3,720 2,282 4,912
Commissions (Note 1) -- -- 1,322
Other 3,252 2,602 2,064
---------------------------------------------------
Total revenues 49,665 51,545 60,073
Costs and expenses:
Operations support (Notes 12 and 15) 16,633 21,595 26,001
Depreciation and amortization (Note 1) 8,447 11,318 8,616
General and administrative (Notes 12 and 15) 9,472 7,956 10,539
Commissions (Note 1) -- -- 1,416
---------------------------------------------------
Total costs and expenses 34,552 40,869 46,572
---------------------------------------------------
Operating income 15,113 10,676 13,501
Interest expense (9,891) (7,341) (7,110 )
Interest income 1,635 1,228 1,973
Other expenses, net (342) (670) (496 )
---------------------------------------------------
Income before income taxes 6,515 3,893 7,868
Provision for (benefit from) income taxes (Note 11) 1,848 (202) 1,820
---------------------------------------------------
Net income to common shares $ 4,667 $ 4,095 $ 6,048
===================================================
Basic earnings per weighted-average common share
outstanding $ 0.51 $ 0.41 $ 0.52
===================================================
Fully diluted earnings per weighted-average common
share outstanding $ 0.50 $ 0.40 $ 0.51
===================================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31,
(in thousands of dollars, except share amounts)
ASSETS
<TABLE>
<CAPTION>
1997 1996
-------------------------------
<S> <C> <C>
Cash and cash equivalents $ 5,224 $ 7,638
Receivables 4,969 5,286
Receivables from affiliates (Note 4) 5,007 6,019
Investment in direct finance leases, net (Note 2) 119,613 69,994
Loans receivable (Note 3) 5,861 5,718
Equity interest in affiliates (Note 4) 26,442 30,407
Assets held for sale (Note 5) -- 6,222
Transportation equipment held for operating leases (Note 6) 50,252 66,546
Less accumulated depreciation (26,981) (41,750 )
----------------------------------
23,271 24,796
Commercial and industrial equipment held for operating leases 23,268 15,930
Less accumulated depreciation (4,816) (2,302 )
----------------------------------
18,452 13,628
Restricted cash and cash equivalents (Note 7) 18,278 17,828
Other, net 9,166 11,213
----------------------------------
Total assets $ 236,283 $ 198,749
==================================
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities:
Short-term secured debt (Note 8) $ 23,040 $ 30,966
Senior secured loan (Note 9) 20,588 25,000
Senior secured notes (Note 9) 23,843 18,000
Other secured debt (Note 9) 413 618
Nonrecourse debt (Note 10) 81,302 45,392
Payables and other liabilities 25,366 16,757
Deferred income taxes (Note 11) 14,860 15,334
----------------------------------
Total liabilities 189,412 152,067
Commitments and contingencies (Note 12)
Minority interest 323 362
Shareholders' equity (Note 13):
Common stock ($0.01 par value, 50,000,000
shares authorized, 8,436,564 and 9,142,761 shares
issued and outstanding as of December 31, 1997
and 1996, respectively) 112 117
Paid-in capital in excess of par 74,650 77,778
Treasury stock (3,598,283 and 3,453,630 shares at
respective dates) (13,435) (12,382 )
----------------------------------
61,327 65,513
Accumulated deficit (14,779) (19,193 )
----------------------------------
Total shareholders' equity 46,548 46,320
----------------------------------
Total liabilities, minority interest, and shareholders' equity $ 236,283 $ 198,749
==================================
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years Ended December 31, 1997, 1996, and 1995
(in thousands of dollars)
<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, 1994 $ 117 $ 77,699 $ (2,831) $ (29,290) $45,695
Net income 6,048 6,048
Common stock repurchases (3,100) (3,100)
Exercise of stock options 44 44
Translation loss (67) (67)
-----------------------------------------------------------------------------
Balances, December 31, 1995 117 77,743 (5,931) (23,309) 48,620
Net income 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 4,667 4,667
Common stock repurchases (5) (3,128) (1,268) (4,401)
Reissuance of treasury stock, net 215 (38) 177
Redemption of shareholder rights (92) (92)
Translation loss (123) (123)
-----------------------------------------------------------------------------
Balances, December 31, 1997 $ 112 $ 74,650 $ (13,435) $ (14,779) $46,548
=============================================================================
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 4,667 $ 4,095 $ 6,048
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,447 11,318 8,616
Foreign currency translations (123) 21 (67)
Deferred income tax benefit (474) (141) (672)
Gain on the sale or disposition of assets, net (3,720) (2,282) (4,912)
Undistributed residual value interests 1,052 (846) (445)
Minority interest in net loss of subsidiaries (39) (1) (37)
Increase in payables and other liabilities 3,459 2,881 2,839
Decrease (increase) in receivables and receivables
from affiliates 1,516 4,001 (1,825)
Amortization of organization and offering costs 2,913 2,977 1,087
Decrease (increase) in other assets 474 151 (1,807)
----------------------------------------------
Net cash provided by operating activities 18,172 22,174 8,825
----------------------------------------------
Investing activities:
Additional investments in affiliates -- (4,972) (10,477)
Purchase of residual option -- -- (200)
Principal payments received on finance leases 17,705 5,746 --
Principal payments received on loans 2,020 -- --
Investment in direct finance leases (103,592) (99,113) --
Investment in loans receivable (2,163) (5,718) --
Purchase of transportation equipment (34,564) (8,037) (45,930)
Purchase of commercial and industrial equipment held
for operating lease (18,915) (46,660) --
Proceeds from the sale of transportation equipment for lease 12,318 17,409 11,998
Proceeds from the sale of assets held for sale 25,857 2,052 55,362
Proceeds from the sale of commercial and industrial
equipment on finance lease 44,709 21,621 --
Proceeds from the sale of commercial and industrial
equipment on operating lease 11,772 30,270 --
Proceeds from the sale of leveraged leased assets -- -- 4,530
Proceeds from the disposition of residual options and
other investments -- -- 2,059
Sale of investment in subsidiary -- 372 --
Increase in restricted cash and cash equivalents (450) (7,207) (9,212)
----------------------------------------------
Net cash (used in) provided by investing activities (45,303) (94,237) 8,130
----------------------------------------------
</TABLE>
(continued)
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands of dollars)
(continued)
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Financing activities:
Borrowings of short-term secured debt $ 106,547 $ 109,254 $ 18,620
Repayment of short-term secured debt (114,473) (78,288 ) (25,024)
Repayment of senior secured loan (4,412) -- --
Proceeds from other secured debt -- 90 779
Repayment of other secured debt (205) (595 ) (69)
Borrowings under senior secured notes 9,000 18,000 --
Repayment of senior secured notes (3,157) (10,000 ) --
Borrowings of nonrecourse debt 121,716 56,024 --
Repayment of nonrecourse debt (85,806) (10,632 ) --
Repayment of subordinated debt -- (11,500 ) (11,500)
Payments received from ESOP trustee -- -- 928
Purchase of stock (4,401) (6,451 ) (3,100)
Redemption of shareholder rights (92) -- --
Proceeds from exercise of stock options -- 35 44
-----------------------------------------------------
Net cash provided by (used in) financing activities 24,717 65,937 (19,322)
-----------------------------------------------------
Net decrease in cash and cash equivalents (2,414) (6,126 ) (2,367)
Cash and cash equivalents at beginning of year 7,638 13,764 16,131
-----------------------------------------------------
Cash and cash equivalents at end of year $ 5,224 $ 7,638 $ 13,764
=====================================================
Supplementary schedule - net cash paid for:
Interest $ 9,395 $ 6,516 $ 6,371
=====================================================
Income taxes $ 1,119 $ 1,292 $ 603
=====================================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements contain all necessary
adjustments, consisting primarily of normal recurring accruals, to present
fairly the results of operations, financial position, changes in shareholders'
equity, and cash flows of PLM International, Inc. and its wholly- and
majority-owned subsidiaries (PLM International or the Company or PLMI). PLM
International and its consolidated group began operations on February 1, 1988.
All intercompany transactions among the consolidated group have been eliminated.
PLM International is a diversified equipment leasing and management company
providing services to transportation, industrial, and commercial companies. The
Company specializes in creating equipment leasing solutions for domestic and
international customers. PLM Financial Services, Inc., a wholly-owned
subsidiary, is the general partner or manager of the Company's diversified
equipment leasing programs for its investors.
These financial statements have been prepared on the accrual basis of accounting
in accordance with generally accepted accounting principles. This requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosures of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Leasing Operations
PLM International's leasing operations generally consist of operating and direct
finance leases on a variety of equipment types, primarily trailers and computer,
communications, and materials-handling equipment. Under the operating lease
method of accounting, the leased asset is recorded at cost and depreciated over
its estimated useful life. Rental payments are recorded as revenue over the
lease term.
Under the direct finance lease method of accounting, the leased asset is
recorded as an investment in direct finance leases and represents the minimum
net lease payments receivable plus the unguaranteed residual value of the
equipment, less unearned income. Rental payments, including principal and
interest on the lease, reduce the investment each month and the interest is
recorded as revenue over the lease term.
Equipment
Transportation equipment held for operating leases is stated at the lower of
depreciated cost or estimated fair value less cost to sell. Depreciation is
computed on the straight-line method down to its estimated salvage value,
utilizing the following estimated useful lives (in years): trailers, 8 to 18;
aircraft, 8 to 20; marine containers, 10 to 15; railcars, 15 to 18; and storage
equipment, 15. Commercial and industrial equipment are depreciated over the
lease term, generally ranging from 1 to 7 years. Salvage values for
transportation equipment are generally 15% of original equipment cost. Salvage
values for commercial and industrial equipment vary according to the type of
equipment.
In accordance with Financial Accounting Standards Board (FASB) Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" (SFAS 121), the Company reviews the carrying value of
its equipment at least annually in relation to expected future market conditions
for the purpose of assessing recoverability of the recorded amounts. If
projected undiscounted future lease revenues plus residual values are lower than
the carrying value of the equipment, the loss on revaluation is recorded as a
reduction in the gain on the sale or disposition of assets, net ($0.2 million in
1997, $0.7 million in 1996, and $1.2 million in 1995). 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 program. Equipment held for sale
is valued at the lower of depreciated cost or estimated fair value less cost to
sell.
Except for trailers operating out of the Company's short-term rental yards,
maintenance costs are usually the obligation of the lessee. If not covered by
the lessee, they are charged against operations as incurred. To meet the
maintenance obligations of certain aircraft engines and frames, escrow accounts
are generally prefunded by the lessees. The escrow accounts are included in the
consolidated balance sheet as cash and cash equivalents or restricted cash and
other liabilities. Repair and maintenance expenses were $2.7 million, $3.0
million, and $3.5 million for 1997, 1996, and 1995, respectively.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment in and Management of Equipment Growth Funds, Other Limited
Partnerships, and Private Placements
The Company earns revenues in connection with the management of the limited
partnerships and private placement programs. During the syndication of each of
the PLM Equipment Growth Funds (EGFs), placement fees and commissions,
representing approximately 9% of equity raised, were generally earned upon the
purchase by investors of the partnership units. A significant portion of these
placement fees was reallowed to the originating broker-dealer.
Equipment acquisition, lease negotiation, and debt placement fees are generally
earned through the purchase, initial lease, and financing of equipment, and are
generally recognized as revenue when the Company completes substantially all of
the services required to earn the fees, generally when binding commitment
agreements are signed.
Management fees are earned for managing the equipment portfolios and
administering investor programs as provided for in various agreements, and are
recognized as revenue over time as they are earned.
As compensation for organizing a partnership investment program, the Company was
generally granted an interest (between 1% and 5%) in the earnings and cash
distributions of the program for which PLM Financial Services, Inc. (FSI) is the
general partner. The Company recognizes as partnership interests its equity
interest in the earnings of the partnerships, after adjusting such earnings to
reflect the use of straight-line depreciation and the effect of special
allocations of the program's gross income allowed under the respective
partnership agreements.
The Company also recognizes as income its interest in the estimated net residual
value of the assets of the partnerships as they are purchased. The amounts
recorded are based on management's estimate of the net proceeds to be
distributed upon disposition of the partnership's equipment at the end of the
respective partnerships. As assets are purchased by the partnerships, these
residual value interests are recorded in other fees at the present value of the
Company's share of estimated disposition proceeds. When a limited partnership is
in the liquidation phase, distributions received by the Company will be treated
as recoveries of its equity interest in the partnership until the recorded
residual is eliminated. Any additional distributions received will be treated as
residual interest income.
In accordance with certain investment program and partnership agreements, the
Company received reimbursement for organization and offering costs incurred
during the offering period. The reimbursement was generally between 1.5% and 3%
of the equity raised. The investment program reimbursed the Company ratably over
the offering period of the investment program based on the equity raised. In the
event organizational and offering costs incurred by the Company, as defined by
the partnership agreement, exceeded amounts allowed, the excess costs were
capitalized as an additional investment in the related partnership and are being
amortized until the projected start of the liquidation phase of the partnership.
These additional investments are reflected as equity interest in affiliates in
the accompanying consolidated balance sheets.
Investment in and Management of Limited Liability Company
From May 1995 through May 1996, Professional Lease Management Income Fund I, LLC
(Fund I), a limited liability company with a no front-end fee structure, was
offered as an investor program. FSI serves as the manager for the program. No
compensation was paid to the Company for the organization and syndication of
interests, the acquisition of equipment, the placement of debt, or the
negotiation of leases in Fund I. The Company funded the costs of organization,
syndication, and offering through the use of operating cash and has capitalized
these costs as its investment in Fund I.
The Company is amortizing its investment in Fund I over eight years. In return
for its investment, the Company is generally entitled to a 15% interest in the
cash distributions and earnings of Fund I, subject to certain allocation
provisions. The Company's interest in the cash distributions and earnings of
Fund I will increase to 25% after the investors have received distributions
equal to their invested capital. The Company is entitled to monthly fees for
equipment management services and reimbursement for providing certain accounting
and administrative services.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment in and Management of Limited Liability Company (continued)
FSI also recognizes as income its interest in the estimated net residual value
of the assets of Fund I as they are purchased. The amounts recorded are based on
management's estimate of the net proceeds to be distributed upon disposition of
the program's equipment at the end of the program. As assets are purchased by
Fund I, these residual value interests are recorded in partnership interests and
other fees at the present value of FSI's share of estimated disposition
proceeds. When Fund I is in the liquidation phase, distributions received by FSI
will be treated as recoveries of its equity interest in the program until the
recorded residual is eliminated. Any additional distributions received will be
treated as residual interest income.
Residual Interests
The Company has residual interests in equipment owned by the managed programs,
which are recorded as equity interest in affiliates. Residual interests in
equipment on finance leases are recorded as investment in direct finance leases,
net. As required by FASB Technical Bulletin 1986SYMBOL 45 \f "Symbol" \s 102,
the discount on the Company's residual value interests in the equipment owned by
the managed programs is not accreted over the holding period. The Company
reviews the carrying value of its residual interests at least annually in
relation to expected future market values for the underlying equipment in which
it holds residual interests for the purpose of assessing recoverability of
recorded amounts.
Earnings Per Weighted-Average Common Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," which
required the Company to replace its presentation of primary earnings per share
with a presentation of basic and fully diluted earnings per share on the face of
the income statement, effective December 15, 1997. The principal difference
between primary earnings per share 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. Basic earnings per common share
is computed by dividing net income to common shares by the weighted-average
number of shares outstanding during the period. The computation of fully diluted
earnings per share is similar to the computation of basic earnings per share,
except for the inclusion of all potentially dilutive common shares. The
statement required restatement of all prior periods presented. Basic and fully
diluted earnings per share are presented below for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------
(in thousands of dollars, except per share data)
<S> <C> <C> <C>
Basic:
Net income $ 4,667 $ 4,095 $ 6,048
Weighted-average number of common shares outstanding 9,081 10,032 11,576
Basic earnings per common share $ 0.51 $ 0.41 $ 0.52
Fully diluted:
Net income $ 4,667 $ 4,095 $ 6,048
Shares:
Weighted-average number of common shares outstanding 9,081 10,032 11,576
Potentially dilutive common shares 227 166 186
Total shares 9,308 10,198 11,762
Fully diluted earnings per weighted-average common share $ 0.50 $ 0.40 $ 0.51
</TABLE>
Income Taxes
The Company recognizes income tax expense using the liability method. Deferred
income taxes are recognized for the tax consequences of "temporary differences"
by applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities.
Deferred income taxes arise primarily because of differences in the timing of
reporting equipment depreciation, partnership income, and certain reserves for
financial statement and income tax reporting purposes.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangibles
Intangibles are included in other assets on the balance sheet and consist
primarily of goodwill related to acquisitions and loan fees. Goodwill is being
amortized over 8 to 15 years from the acquisition date. The Company annually
reviews the valuation of goodwill based on projected future cash flows. Loan
fees are amortized over the life of the related loan.
Cash and Cash Equivalents
The Company considers highly liquid investments readily convertible into known
amounts of cash with original maturities of 90 days or less as cash equivalents.
Reclassifications
Certain prior-year amounts have been reclassified in order to conform to the
current year's presentation.
Accounting Pronouncements
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 ended December 31,
1998, 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.
Interest-Rate Swap Agreements
The Company has entered into interest-rate swap agreements to hedge its
interest-rate exposure on its nonrecourse debt facility obligation. The terms of
the swap agreements correspond to the hedged debt. The differential to be paid
or received under the swap agreement is charged or credited to interest expense.
2. FINANCING TRANSACTION ACTIVITIES
American Finance Group, Inc. (AFG), a wholly-owned subsidiary, originates and
manages lease and loan transactions on new commercial and industrial equipment
that are financed by nonrecourse debt, for the Company's own account, or sold to
institutional leasing investment programs or other investors. Periodically, the
Company uses its short-term loan facility to finance the acquisition of the
assets, subject to these leases, prior to sale or permanent financing by
nonrecourse debt. The majority of these leases is accounted for as direct
finance leases, while some transactions qualify as operating leases and loans.
During 1997, the Company funded $103.6 million in equipment that was placed on
finance lease. Also during 1997, the Company sold equipment on finance lease
with an original cost of $46.5 million, resulting in net gains of $1.8 million.
During 1996, the Company funded $99.1 million in equipment that was placed on
finance lease. Also during 1996, the Company sold equipment on finance lease
with an original cost of $22.5 million, resulting in net gains of $0.5 million.
The following lists the components of the investment in direct finance leases,
net, as of December 31 (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
--------------- ----------------
<S> <C> <C>
Total minimum lease payments receivable $ 122,508 $ 73,434
Estimated unguaranteed residual values
of leased properties 20,328 11,541
--------------- ----------------
142,836 84,975
Less unearned income (23,223) (14,981)
--------------- ----------------
Investment in direct finance leases, net $ 119,613 $ 69,994
=============== ================
</TABLE>
2. FINANCING TRANSACTION ACTIVITIES (continued)
Schedule of Minimum Lease
Payments (in thousands of
dollars):
1998 $ 37,772
1999 33,614
2000 26,632
2001 16,633
2002 7,736
Thereafter 121
---------------
Total minimum lease payments receivable $ 122,508
===============
3. LOANS RECEIVABLE
As of December 31, 1997, the Company had loans receivable outstanding with three
customers, totaling $5.9 million and with interest rates ranging from 8.70% to
10.81%, secured by commercial and industrial equipment. Future payments
receivable on the notes as of December 31, 1997 are as follows (in thousands of
dollars):
1998 $ 2,824
1999 2,816
2000 221
------------
Total loans receivable $ 5,861
============
As of December 31, 1997, the Company estimates, based on recent transactions,
that the fair market value of the $5.9 million loans receivable is $5.9 million.
4. EQUITY INTEREST IN AFFILIATES
FSI, a wholly-owned subsidiary of the Company, is the general partner in 23
limited partnerships and generally holds an equity interest in each ranging from
1% to 5%. Net earnings and distributions of the partnerships are generally
allocated 99% to the limited partners and 1% to the general partner, except for
EGFs II, III, IV, V, VI, and PLM Equipment Growth & Income Fund VII (EGF VII),
which are allocated 95% to the limited partners and 5% to the general partner.
As the manager of Fund I, FSI is entitled to a 15% interest in its cash
distributions and earnings, subject to certain allocation provisions. The
Company's interest in the cash distributions and earnings of Fund I will
increase to 25% after the investors have received distributions equal to their
invested capital.
Summarized combined financial data for these affiliates, reflecting
straight-line depreciation, is as follows (in thousands of dollars and
unaudited):
<TABLE>
<CAPTION>
1997 1996
-----------------------------
<S> <C> <C>
Financial position as of December 31:
Cash and other assets $ 87,205 $ 55,681
Transportation equipment and other assets,
net of accumulated depreciation of $186,295
in 1997 and $248,668 in 1996 585,762 700,304
---------------------------------
Total assets 672,967 755,985
Less liabilities, primarily long-term financings 196,464 215,974
---------------------------------
Partners' equity $ 476,503 $ 540,011
=================================
PLM International's share thereof, which amounts are recorded as equity interest
in affiliates:
Equity interest $ 14,578 $ 17,426
Estimated residual value interests in equipment 11,864 12,981
---------------------------------
Equity interest in affiliates $ 26,442 $ 30,407
=================================
</TABLE>
<PAGE>
4. EQUITY INTEREST IN AFFILIATES (continued)
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
Operating results for the years ended December 31:
Revenue from equipment leases and other $ 184,940 $ 198,226 $ 201,401
Equipment depreciation (54,634) (52,653) (100,652)
Other costs and expenses (69,795) (60,768) (88,944)
Reduction in carrying value of certain assets -- -- (1,084)
-----------------------------------------------------
Net income before provision for income taxes $ 60,511 $ 84,805 $ 10,721
=====================================================
PLM International's share of partnership interests
and other fees (net of related expenses) $ 1,306 $ 3,811 $ 4,978
=====================================================
Distributions received $ 5,818 $ 5,565 $ 4,590
=====================================================
</TABLE>
Most of the limited partnership agreements contain provisions for special
allocations of the partnerships' gross income.
While none of the partners, including the general partner, are liable for
partnership borrowings, and while the general partner maintains insurance
against liability for bodily injury, death, and property damage for which a
partnership may be liable, the general partner may be contingently liable for
nondebt claims against the partnership that exceed asset values.
5. ASSETS HELD FOR SALE
As of December 31, 1997, the Company had no assets held for sale. As of December
31, 1996, assets held for sale included a 25.5% interest in a mobile offshore
drilling unit (rig), with a net book value of $5.1 million, that was sold to an
affiliated program at its original cost in March 1997. Also as of December 31,
1996, two commuter aircraft with a combined net book value of $1.1 million were
held for sale. The two commuter aircraft were sold in February 1997 for their
approximate net book value to an unaffiliated third party.
During 1997, the Company purchased a mobile offshore drilling unit for $10.5
million and a 47.5% interest in an entity that owns a marine vessel for $9.1
million. This equipment was sold to affiliated programs at cost.
6. EQUIPMENT HELD FOR OPERATING LEASES
Equipment, at cost, held for operating lease as of December 31, 1997, is
represented by the following types (in thousands of dollars):
Trailers $ 48,716 66 %
Commercial and industrial equipment 23,268 32 %
Aircraft and aircraft engine 1,536 2 %
During 1997, the Company funded $18.9 million in commercial and industrial
equipment, which was placed on operating lease. During 1997, the Company sold
commercial and industrial equipment that was on operating lease with an original
cost of $11.8 million, for a net gain of $0.2 million. During 1996, the Company
funded $46.0 million in commercial and industrial equipment, which was placed on
operating lease. During 1996, the Company sold commercial and industrial
equipment that was on operating lease with an original cost of $30.7 million,
for a net gain of $0.4 million.
During 1997, the Company purchased two commercial aircraft for $5.0 million and
trailers for $9.1 million. The aircraft were subsequently sold to an
unaffiliated third party for a net gain of $0.8 million. Other transportation
equipment was sold for net gains of $1.1 million during 1997.
<PAGE>
6. EQUIPMENT HELD FOR OPERATING LEASES (continued)
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 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 by the Company in 1994 as part of a group of assets that
had been allocated to EGFs IV, VI, and VII, Fund I, and the Company. During
1995, the Company realized $1.3 million in gains on sales of railcars and
aircraft to unaffiliated third parties. This equipment was purchased by the
Company in 1994 and 1995 as part of a group of assets that had been allocated to
EGFs IV, V, VI, and VII, Fund I, and the Company.
Future minimum rentals receivable under noncancelable leases as of December 31,
1997 are approximately $5.8 million in 1998, $3.9 million in 1999, $2.5 million
in 2000, $1.3 million in 2001, and $1.0 million in 2002. In addition, per diem
and contingent rentals consisting of utilization rate lease payments included in
revenue amounted to approximately $8.5 million in 1997, $9.3 million in 1996,
and $13.0 million in 1995. As of December 31, 1997, the Company had committed
all of its trailer equipment to rental yard and per diem operations. Certain
equipment owned by the Company is leased and operated internationally.
7. RESTRICTED CASH
Restricted cash consists of bank accounts and short-term investments that are
subject to withdrawal restrictions as per lease or loan agreements. The
Company's senior loan agreement requires proceeds from the sale of pledged
assets to be deposited into a collateral bank account and the funds used to
purchase additional equipment to the extent required to meet certain debt
requirements or to reduce the outstanding loan balance (refer to Note 9). The
Company's senior notes require all management fees, acquisition and lease
negotiation fees, data processing fees, and certain partnership distributions to
be deposited into a collateral bank account, to the extent required to meet
certain debt requirements or to reduce the outstanding note balance (refer to
Note 9). Management fees can be withdrawn from the account monthly if the
collateral account amount is at certain defined levels. All of the cash is
released quarterly when the principal and interest payment is made. The
Company's nonrecourse debt facility requires all payments on pledged lease
receivables to be deposited into a restricted cash account. Principal, interest,
and related fees are paid monthly in arrears from this account. Cash remaining
after these payments may be released subject to certain debt covenant
limitations (refer to Note 10).
8. SHORT-TERM SECURED DEBT
The Company maintains a warehousing line of credit to be used to acquire assets
on an interim basis for placement with affiliated programs, for placement in the
Company's nonrecourse debt facility, or for sale to unaffiliated third parties.
The Company amended this facility during 1997 to extend the availability of the
facility until November 2, 1998. This facility, which is shared by EGFs V, VI,
and VII, and Fund I, allows the Company to purchase equipment prior to its
designation to a specific program or partnership or prior to having raised
sufficient capital to purchase the equipment. This facility provides 80%
financing for transportation assets of the Company and up to 100% financing for
transportation assets of the EGFs. The facility provides for 100% of the present
value of the lease stream plus 100% of the allocated residual amount of
commercial and industrial equipment, up to 90% of original equipment cost of the
assets, and 100% of the allocated residual amount of all master trust pooled
equipment for nonrecourse assets, if the Company is the borrower and working
capital is used for the nonfinanced costs of these acquisitions. The Company can
hold transportation assets under this facility for up to 150 days.
Assets to be transferred to the nonrecourse debt facility can be held under this
facility until the facility's expiration. Interest accrues at Prime or LIBOR
plus 162.5 basis points, at the option of the borrower at the time of the
advance under the facility. The weighted-average interest rates on the Company's
short-term secured debt were 7.61% and 7.78% for 1997 and 1996, respectively.
The Company retains the difference between the net lease revenue earned and the
interest expense during the interim holding period, since its capital is at
risk. As of December 31, 1997, the Company had $23.0 million in borrowings on
this facility. There were no other borrowings on this facility as of December
31, 1997. As of December 31, 1996, the Company had $31.0 million in borrowings
on this facility, and EGFs V, VI, and VII had $2.5 million, $1.3 million, and
$2.0 million in borrowings, respectively.
SHORT-TERM SECURED DEBT (continued)
As of December 31, 1997, the Company believes that the fair market value of the
$23.0 million short-term secured debt approximates the outstanding balance due
to the floating rate of interest.
9. LONG-TERM SECURED DEBT
Long-term secured debt consisted of the following as of December 31 (in
thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
-----------------------------------
<S> <C> <C>
Senior secured loan:
Institutional debt, bearing interest at 9.78%, interest due quarterly,
principal payments due quarterly beginning June 30, 1997 through June 30,
2001, secured by substantially all of the Company's transportation-related
equipment assets and associated leases, except the assets used as collateral
for other secured debt and cash in a cash collateral account $ 20,588 $ 25,000
Senior secured notes:
Institutional notes, bearing interest at LIBOR plus 2.40% per annum (8.34% and
7.90% as of December 31, 1997 and 1996, respectively), interest due
quarterly, principal payments due quarterly beginning November 15, 1997
through August 15, 2002, secured by management fees, acquisition and lease
negotiation fees, data processing fees, and certain partnership
distributions,
and cash in a cash collateral account 23,843 18,000
Other secured debt:
Notes payable, bearing interest from 10.75% to 12.37%, due in varying monthly
principal and interest installments through 2001, secured by equipment with
a net book value
of approximately $438,000 as of December 31, 1997 413 618
-----------------------------------
Total secured debt $ 44,844 $ 43,618
===================================
</TABLE>
During 1997, the Company prepaid $1.9 million of the senior secured notes.
The senior secured loan facility provides that equipment sale proceeds from
collateralized equipment or cash deposits be placed into cash collateral
accounts or used to purchase additional equipment to the extent required to meet
certain debt covenants. As of December 31, 1997, the cash collateral balance was
$12.7 million.
The institutional debt agreements contain financial covenants related to net
worth, ratios for leverage, interest coverage ratios, and collateral coverage,
all of which were met as of December 31, 1997. In addition, there are
restrictions on payment of dividends, purchase of stock, and certain investments
based on computations of tangible net worth, financial ratios, and cash flows,
as defined.
<PAGE>
9. LONG-TERM SECURED DEBT (continued)
Scheduled principal payments on long-term secured debt are (in thousands of
dollars):
1998 $ 11,025
1999 11,187
2000 10,906
2001 7,961
2002 3,765
-------------
Total $ 44,844
=============
As of December 31, 1997, the Company estimates, based on recent transactions,
that the fair market value of the $20.6 million fixed-rate 9.78% long-term
senior debt is $20.9 million. As of December 31, 1997, the Company believes that
the fair market value of the $23.8 million senior secured notes approximates the
outstanding balance due to the floating rate of interest.
10. NONRECOURSE DEBT
The Company has available a nonrecourse debt 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 one 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. Repayment of the
facility matches the terms of the underlying leases. The nonrecourse debt bears
interest equivalent to the lender's cost of funds based on commercial paper
market rates for the determined period of borrowing (7.27% and 7.23% as of
December 31, 1997 and 1996, respectively). As of December 31, 1997 and 1996,
there were $71.3 million and $45.4 million in borrowings under this facility,
respectively.
The Company also has $10.0 million in nonrecourse notes payable bearing interest
at 9.16% per annum. Principal and interest on the notes are due monthly
beginning November 1, 1997 through October 1, 2001. The notes are secured by
direct finance leases for commercial and industrial equipment that have terms
corresponding to the repayment of the notes.
Scheduled principal payments on long-term nonrecourse debt are (in thousands of
dollars):
1998 $ 28,944
1999 25,606
2000 16,301
2001 8,904
2002 1,481
Thereafter 66
-------------
Total $ 81,302
=============
As of December 31, 1997, the Company believes that the fair market value of the
$71.3 million debt on the nonrecourse debt facility approximates the outstanding
balance due to the floating rate of interest. As of December 31, 1997, the
Company believes that the fair market value of the $10.0 million fixed-rate
9.16% nonrecourse notes payable is $10.4 million.
<PAGE>
11. INCOME TAXES
The provision for (benefit from) income taxes attributable to income from
operations consists of the following (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
----------------------------------------------------- ----------------------------------------------------
Federal State Foreign Total Federal State Foreign Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current $ 2,255 $ 64 $ 3 $ 2,322 $ (262) $ 64 $ 155 $ (43)
Deferred (349) (125) -- (474) 470 (629) -- (159)
----------------------------------------------------- --------------------------------------------------------
$ 1,906 $ (61) $ 3 $ 1,848 $ 208 $ (565) $ 155 $ (202)
===================================================== ========================================================
</TABLE>
1995
------------------------------------------------------------
Federal State Foreign Total
------------------------------------------------------------
Current $ 2,406 $ 60 $ 26 $ 2,492
Deferred (941) 269 -- (672)
------------------------------------------------------------
$ 1,465 $ 329 $ 26 $ 1,820
============================================================
Amounts for the current year are based upon estimates and assumptions as of the
date of this report and could vary significantly from amounts shown on the tax
returns ultimately filed. Accordingly, the variances in classification, if any,
from the amounts previously reported for prior years are primarily the result of
adjustments to conform to the tax returns as filed.
The difference between the effective rate and the expected federal statutory
rate is reconciled below:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
Federal statutory tax expense rate 34% 34 % 34%
State income tax -- 1 3
Effect of foreign operations at lower rate (2) (20) (4)
Reversal of excess accrual -- (19) --
Tax adjustment related to ESOP termination -- (6) (10)
Abandonment of identifiable intangibles (5) -- --
Other 1 5 --
------------------------------------------------
Effective tax expense (benefit) rate 28% (5 )% 23%
================================================
</TABLE>
Net operating loss carryforwards for federal income tax purposes amounted to
$1.0 million and $0 as of December 31, 1997 and 1996, respectively. Alternative
minimum tax credit carryforwards as of December 31, 1997 are $9.2 million.
<PAGE>
INCOME TAXES (continued)
The tax effects of temporary differences that give rise to significant portions
of the deferred tax liabilities as of December 31 are presented below (in
thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
------------------------------
<S> <C> <C>
Deferred tax assets:
Tax credit carryforwards $ 9,224 $ 6,946
Net operating loss carryforwards 949 236
Federal benefit of state taxes 1,087 620
Total deferred tax assets 11,260 7,802
---------------------------------
Deferred tax liabilities:
Equipment, principally differences in depreciation 17,433 12,420
Partnership interests 5,343 7,495
Other 3,344 3,221
---------------------------------
Total deferred tax liabilities 26,120 23,136
---------------------------------
Net deferred tax liabilities $ 14,860 $ 15,334
=================================
</TABLE>
Management has reviewed all established tax interpretations of items reflected
in its consolidated tax returns and believes that these interpretations do not
require valuation allowances as described in SFAS No. 109. As of December 31,
1997, the deferred taxes not provided on cumulative earnings of consolidated
foreign subsidiaries that are designated as permanently invested were
approximately $2.0 million.
12. COMMITMENTS AND CONTINGENCIES
Litigation
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. The complaint contains claims for relief alleging breaches of fiduciary
duties and various violations of the Employee Retirement Income Security Act of
1974 (ERISA) arising principally from purported defects in the structure,
financing, and termination of the ESOP, and for defendants' allegedly engaging
in prohibited transactions and interfering with plaintiff's rights under ERISA.
Plaintiff seeks monetary damages, rescission of the preferred stock transactions
with the ESOP and/or restitution of ESOP assets, and attorneys' fees and costs
under ERISA. In January 1996, PLMI and other defendants filed a motion to
dismiss the complaint for lack of subject matter jurisdiction, arguing the
plaintiff lacked standing under ERISA. The motion was granted and on May 30,
1996, the district 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 dismissal of his
ERISA claims, and in an opinion filed on October 23, 1997, the Ninth Circuit
reversed the decision of the district court and remanded the case to the
district court for further proceedings. PLMI filed a petition for rehearing on
November 6, 1997, which was denied on November 20, 1997. The Ninth Circuit
mandate was filed in the district court on December 1, 1997.
On January 12, 1998, plaintiff filed with the district court an expedited motion
for leave to file a second amended complaint in order to bring the fourth,
fifth, and sixth claims for relief as a class action on behalf of himself and
all similarly situated people. These claims allege that PLMI and the other
defendants breached their fiduciary duties and entered into prohibited
transactions in connection with the termination of the ESOP and by causing the
ESOP to sell or exchange the preferred shares held for the benefit of the ESOP
participants for less than their fair market value. The district court granted
the motion on February 9, 1998 and set a trial date of March 20, 1999. The
defendants are required to respond to the second amended complaint on or before
February 26, 1998. The Company does not believe the claims have any merit and
plans to continue to defend this matter vigorously.
<PAGE>
12. COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
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). The plaintiffs,
who filed the complaint on their own and on behalf of all class members
similarly situated, are six individuals who allegedly invested in certain
California limited partnerships (the Partnerships) for which FSI acts as the
general partner, including PLM Equipment Growth Fund IV, PLM Equipment Growth
Fund V, PLM Equipment Growth Fund VI, and PLM Equipment Growth & Income Fund
VII. The complaint asserts eight causes of action against all defendants, as
follows: fraud and deceit, suppression, negligent misrepresentation and
suppression, intentional breach of fiduciary duty, negligent breach of fiduciary
duty, unjust enrichment, conversion, and conspiracy. Additionally, plaintiffs
allege a cause of action against PLM Securities for breach of third party
beneficiary contracts in violation of the NASD rules of fair practice.
Plaintiffs allege that each defendant owed plaintiffs and the class certain
duties due to their status as fiduciaries, financial advisors, agents, general
partner, and control persons. Based on these duties, plaintiffs assert liability
against the defendants for improper sales and marketing practices, mismanagement
of the Partnerships, and concealing such mismanagement from investors in the
Partnerships. Plaintiffs seek unspecified compensatory and recissory damages, as
well as punitive damages, and have offered to tender their limited partnership
units back to the defendants.
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) based on the district court's diversity
jurisdiction, 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. In responses to such denial, plaintiffs filed a petition for writ of
mandamus with the Eleventh Circuit, which was denied on November 18, 1997. On
November 24, 1997, plaintiffs filed with the Eleventh Circuit a petition for
rehearing and consideration by the full court of the order denying the petition
for a writ of mandamus, which petition was supplemented by plaintiffs on January
27, 1998.
On October 10, 1997, defendants filed a motion to compel arbitration of
plaintiffs' claims, based on an agreement to arbitrate contained in the limited
partnership agreement of each Partnership, and to stay further proceedings
pending the outcome of such arbitration. Notwithstanding plaintiffs' opposition,
the district court granted the motion on December 8, 1997. On December 15, 1997,
plaintiffs filed with the Eleventh Circuit a notice of appeal from the district
court's order granting defendants' motion to compel arbitration and to stay the
proceedings, and of the district court's September 24, 1997 order denying
plaintiffs' motion to remand and dismissing the claims of the California
plaintiff. Plaintiffs filed an amended notice of appeal on December 31, 1997.
The Company believes that the allegations of the Koch action are completely
without merit and intends to continue to defend this matter vigorously.
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 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 for
which FSI acts as the general partner, including the Partnerships. The complaint
alleges the same facts and the same nine causes of action as in the Koch action,
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, constructive fraud, unjust
enrichment, violations of California Corporations Code Section 1507, and a claim
for treble damages under California Civil Code Section 3345.
<PAGE>
12. COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
On July 31, 1997, the defendants 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 motion, plaintiff agreed to a stay of the
state court action pending the district court's decision on the petition to
compel arbitration. By memorandum and order dated October 23, 1997, the district
court denied the Company's petition to compel arbitration. On November 5, 1997,
the Company filed an expedited motion for leave to file a motion for
reconsideration of this order, which motion was granted on November 14, 1997.
The parties have agreed to have oral argument on the reconsideration motion set
for April 23, 1998. The state court action has been stayed pending the district
court's decision on this motion.
In connection with her opposition to the Company's petition to compel
arbitration, 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 Sections 1709 and 1710.
Plaintiff has also served certain discovery requests on defendants. Because of
the stay, no response to the amended complaint or to the discovery is currently
required. 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 legal actions
incident to its business. Management does not believe that any of these existing
actions will be material to the financial condition or, based on historical
trends, to the results of operations of the Company.
Lease Agreements
The Company and its subsidiaries have entered into operating leases for office
space and rental yard operations. The Company's total net rent expense was $2.1
million, $2.4 million, and $2.5 million in 1997, 1996, and 1995, respectively.
The portion of rent expense related to its principal office, net of sublease
income of $431,000 and $38,000 in 1997 and 1996, respectively, was $0.9 million,
$1.3 million, and $1.3 million in 1997, 1996, and 1995, respectively. The
remaining rent expense was related to other office space and rental yard
operations.
Annual lease commitments for all of the Company's locations total $2.6 million
in 1998, $2.3 million in 1999, $2.1 million in 2000, $0.9 million in 2001, and
$0.1 million in 2002.
Purchase Commitments
As of December 31, 1997, the Company had committed to purchase $153.8 million of
equipment for its commercial and industrial equipment lease portfolio. This
includes equipment that will be held by the Company and equipment that will be
sold to the institutional investment programs or third parties.
From January 1, 1998 through February 23, 1998, the Company funded $9.8 million
of commitments outstanding for its commercial and industrial lease portfolio as
of December 31, 1997 and entered into new commitments for $29.6 million.
Letter of Credit
As of December 31, 1997, the Company had a $327,000 open letter of credit to
cover its guarantee of the payment of the outstanding debt of a Canadian railcar
repair facility, in which the Company has a 10% equity interest. The Company
intends to renew this letter of credit in the first quarter of 1998.
<PAGE>
12. COMMITMENTS AND CONTINGENCIES (continued)
Other
The Company provides employment contracts to certain officers that provide for
certain payments in the event of a change of control and termination of
employment.
The Company has agreed to provide supplemental retirement benefits to 10 current
or former members of management. The benefits accrue over a maximum of 15 years
and will result in payments over 5 years based on the average base rate of pay
during the 60-month period prior to retirement, as adjusted for length of
participation. Expenses for these arrangements were $359,000 for 1997, $218,000
for 1996, and $316,000 for 1995. As of December 1997, the total estimated future
obligation relating to the current participants is $3.1 million, including
vested benefits of $1.7 million. In connection with these arrangements,
whole-life insurance contracts were purchased on the participants. Insurance
premiums of $250,000, $250,000, and $247,000 were paid during 1997, 1996, and
1995, respectively. Additionally, the Company has recorded $1.1 million in cash
surrender values relating to these contracts as of December 31, 1997 that are
included in other assets.
13. SHAREHOLDERS' EQUITY
Common Stock
In February 1995, the Company announced that its Board of Directors had
authorized the repurchase of up to $0.5 million of the Company's common stock.
The shares could be purchased in the open market or through private transactions
using working capital and existing cash reserves. Shares repurchased could be
used for corporate purposes, including option plans, or they could be retired.
The Company purchased 146,977 shares under this program for $0.5 million,
completing the repurchase in 1995.
In November 1995, the Company authorized the repurchase of up to $5.0 million of
the Company's common stock and, pursuant to such authorization, in 1995 the
Company repurchased 630,700 shares in private transactions for $2.2 million.
During 1996, the Company repurchased 1.7 million shares of its common stock for
$6.5 million. The repurchases completed the $5.0 million common stock repurchase
program announced in November 1995, as well as an additional repurchase of $3.7
million authorized by the Company's Board of Directors in July 1996.
In March 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. During 1997,
766,200 shares had been repurchased under this plan, for a total of $4.4
million.
In November 1997, the Company's stockholders approved a proposal to amend
Article Fourth of the Company's Certificate of Incorporation to effect a
1-for-200 reverse stock split followed by a 200-for-1 forward stock split. As a
result of the stock splits, the number of shares outstanding was reduced by
561,544 shares. The Company is repurchasing these shares at $5.58 per share when
the stock certificates are tendered to the Company's transfer agent.
The following table summarizes changes in common stock during 1996 and 1997:
<TABLE>
<CAPTION>
Issued Outstanding
Common Treasury Common
Shares Shares Shares
-------------------------------------------------------
<S> <C> <C> <C>
Shares as of December 31, 1995 12,586,391 1,753,230 10,833,161
Stock options exercised 10,000 -- 10,000
Stock repurchased -- 1,700,400 (1,700,400)
-----------------------------------------------------------
Shares as of December 31, 1996 12,596,391 3,453,630 9,142,761
Reissuance of treasury stock, net -- (60,003 ) 60,003
Stock repurchased (561,544) 204,656 (766,200)
-----------------------------------------------------------
Shares as of December 31, 1997 12,034,847 3,598,283 8,436,564
===========================================================
</TABLE>
<PAGE>
13. SHAREHOLDERS' EQUITY (continued)
Preferred Stock
PLM International has authorized 10,000,000 shares of preferred stock at $0.01
par value, none of which were outstanding as of December 31, 1997 or December
31, 1996.
Stock Option Plans
As of December 31, 1997, the Company had the stock option plans described below.
The granting of nonqualified stock options to key employees and directors is
provided for in plans that reserve up to 780,000 shares of the Company's common
stock. The price of the shares issued under an option must be at least 85% of
the fair market value of the common stock at the date of granting. All options
currently outstanding are exercisable at prices equal to the fair market value
of the shares at the date of granting. Vesting of options granted generally
occurs in three equal installments of 33.3% per year, initiating from the date
of the grant.
Stock option transactions during 1997, 1996, and 1995 are summarized as follows:
<TABLE>
<CAPTION>
Number of Average
Options/ Option Price
Shares Per Share
------------------------------------
<S> <C> <C>
Balance, December 31, 1994 607,295 $ 2.18
Granted 50,000 2.78
Canceled (37,834 ) 2.00
Exercised (15,661 ) 2.00
----------------------------------------
Balance, December 31, 1995 603,800 $ 2.24
Granted 246,000 3.16
Canceled (153,000 ) 2.07
Exercised (10,000 ) 2.00
----------------------------------------
Balance, December 31, 1996 686,800 $ 2.61
Granted 40,000 3.31
Canceled (252,244 ) 2.72
----------------------------------------
Balance, December 31, 1997 474,556 $ 2.62
========================================
</TABLE>
As of December 31, 1997, 1996, and 1995, respectively, 343,037, 381,633, and
484,547 of these options were exercisable.
The following table summarizes information about fixed stock options outstanding
as of December 31, 1997:
Options outstanding:
Range of exercise prices $2.00-3.50
Number outstanding, December 31, 1997 474,556
Weighted-average exercise price $2.62
Options exercisable:
Number exercisable, December 31, 1997 343,037
Weighted-average exercise price $2.45
<PAGE>
13. SHAREHOLDERS' EQUITY (continued)
Stock Option Plans (continued)
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized for its
fixed stock option plans. The fair value of each option grant is estimated on
the date of grant using an option-pricing model that computes the value of
employee stock options consistent with FASB Statement No.123. The following
weighted-average assumptions were used for grants in 1997, 1996, and 1995,
respectively: no dividend yield, expected lives of 3 years for the management
plan and 8 years for the director plan options, shorter-term adjustment of 6
years, and expected volatility of 30% for all years; and risk-free interest
rates of 5.575%, 5.53% and 5.53%. The weighted-average fair market value per
share of options granted during 1997, 1996, and 1995 was $1.38, $1.10, and
$0.93, respectively. Had compensation expense for the Company's stock-based
compensation plans been recorded consistent with FASB Statement No. 123, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below for the years ended December 31 (in thousands of
dollars):
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Net income As reported $ 4,667 $ 4,095 $ 6,048
Pro forma 4,562 3,997 6,027
Basic earnings per share As reported 0.51 0.41 0.52
Pro forma 0.50 0.40 0.52
Fully diluted earnings per share As reported 0.50 0.40 0.51
Pro forma 0.49 0.39 0.51
</TABLE>
Shareholder Rights
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.
14. PROFIT SHARING AND 401(k) PLAN
The Company adopted the PLM International, Inc. Profit Sharing and 401(k) Plan
(the Plan) effective as of February 1996. The Plan provides for deferred
compensation as described in Section 401(k) of the Internal Revenue Code. The
401(k) Plan is a contributory plan available to essentially all full-time
employees of the Company in the United States. In 1997, employees who
participated in the 401(k) Plan could elect to defer and contribute to the trust
established under the 401(k) Plan up to 9% of pretax salary or wages up to
$9,600. The Company matched up to a maximum of $4,000 of employees' 401(k)
contributions in 1997 and 1996 to vest in four equal installments over a
four-year period. The Company's total 401(k) contributions were $313,000 and
$348,000 for 1997 and 1996, respectively.
During 1996 and 1997, the Company accrued discretionary profit-sharing
contributions equal to $100,000 plus approximately 2% of pretax profit.
Profit-sharing contributions are allocated equally among the number of eligible
Plan participants. The Company's total profit-sharing contributions were
$244,000 and $162,000 for 1997 and 1996, respectively.
<PAGE>
15. TRANSACTIONS WITH AFFILIATES
In addition to various fees payable to the Company or its subsidiaries (refer to
Note 1), the affiliated programs reimburse the Company for certain expenses, as
allowed in the program agreements. Reimbursed expenses totaling $6.4 million,
$6.2 million, and $6.9 million in 1997, 1996, and 1995, respectively, have been
recorded as reductions of operations support or general and administrative
expenses. Outstanding amounts are paid under normal business terms.
16. RISK MANAGEMENT
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments and receivables
from loans, leases, and affiliated entities.
The Company places its temporary cash investments with financial institutions
and other creditworthy issuers and limits the amount of credit exposure to any
one party. Concentrations of credit risk with respect to lease and loan
receivables are limited due to the large number of customers comprising the
Company's customer base and their dispersion across different businesses and
geographic areas. The Company's involvement with management of the receivables
from affiliated entities limits the amount of credit exposure from affiliated
entities.
As of December 31, 1997 and 1996, management believes the Company had no
significant concentrations of credit risk.
Interest-Rate Risk Management
The Company has entered into interest-rate swap agreements in order to manage
the interest-rate exposure associated with its nonrecourse debt. As of December
31, 1997, the swap agreements had remaining terms averaging 2.5 years,
corresponding to the terms of the related debt. As of December 31, 1997, a
notional amount of $72.5 million of interest-rate swap agreements effectively
fixed interest rates at an average of 7.27% on such obligations. Interest
expense was increased by $0.3 million and $0.1 million due to these arrangements
in 1997 and 1996, respectively. The fair value to the Company of interest-rate
swap agreements as of December 31, 1997 was approximately $0.1 million, taking
into account interest rates in effect at the time.
17. GEOGRAPHIC INFORMATION
Financial information about the Company's foreign and domestic operations are as
follows for the years ended December 31 (in thousands of dollars):
Revenues
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------
<S> <C> <C> <C>
Domestic (including corporate) $ 45,802 $ 42,493 $ 54,482
International 3,863 9,052 5,591
---------------------------------------------------
Total revenues $ 49,665 $ 51,545 $ 60,073
===================================================
</TABLE>
Long-lived assets as of December 31, 1997, 1996, and 1995 are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------
<S> <C> <C> <C>
Domestic (including corporate) $ 192,057 $ 150,461 $ 82,855
International 1,938 3,085 2,356
---------------------------------------------------
Total long-lived assets $ 193,995 $ 153,546 $ 85,211
===================================================
</TABLE>
International operations are comprised primarily of international leasing,
brokerage, and other activities conducted primarily through the Company's
subsidiaries in Bermuda, Canada, and Australia.
<PAGE>
18. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1997 and 1996 (in thousands of dollars, except per share
amounts):
<TABLE>
<CAPTION>
Fully Diluted
Basic Earnings Earnings
per Weighted-Average per Weighted-Average
Income Common Share Common Share
Revenue Before Taxes Net Income Outstanding Outstanding
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 quarters:
First $ 12,451 $ 1,889 $ 1,281 $ 0.14 $ 0.14
Second 11,890 978 648 0.07 0.07
Third 12,929 1,943 1,319 0.14 0.14
Fourth 12,395 1,705 1,419 0.16 0.16
-----------------------------------------------------------------------------------------------
Total $ 49,665 $ 6,515 $ 4,667 $ 0.51 $ 0.50
===============================================================================================
1996 quarters:
First $ 12,401 $ 1,253 $ 792 $ 0.07 $ 0.07
Second 11,556 38 261 0.02 0.02
Third 14,060 1,498 1,365 0.15 0.14
Fourth 13,528 1,104 1,677 0.18 0.18
-----------------------------------------------------------------------------------------------
Total $ 51,545 $ 3,893 $ 4,095 $ 0.41 $ 0.40
===============================================================================================
</TABLE>
In the first quarter of 1997, the Company purchased and subsequently sold a
commercial aircraft to an unaffiliated third party for a net gain of $0.4
million, and recorded $0.1 million in legal fees related to the Koch action
(refer to Note 12).
In the second quarter of 1997, the Company purchased and subsequently sold a
commercial aircraft to an unaffiliated third party for a net gain of $0.4
million. In addition, the Company recorded a $0.1 million increase in legal fees
related to the Koch action (refer to Note 12) and a $0.5 million increase in
costs related to the Company's response to shareholder-sponsored initiatives.
In the third quarter of 1997, the Company recorded $0.3 million in legal fees
related to the Koch action (refer to Note 12).
In the fourth quarter of 1997, the Company accrued $0.3 million in expenses for
a litigation settlement that was paid in 1998.
In the second quarter of 1996, the Company recorded a $1.4 million charge
related to severance pay and other costs associated with suspension of the
syndication of equipment leasing programs.
In the third quarter of 1996, the Company's provision for income taxes was $0.1
million, which represents an effective rate of 9%. Tax-planning strategies, an
adjustment for state tax apportionment factors, and an adjustment related to the
ESOP resulted in the reduction in the Company's effective tax rate during the
third quarter of 1996.
In the fourth quarter of 1996, the Company's benefit for income taxes was $0.6
million, which reflects differences between the amount recognized in the 1995
financial statements and the 1995 tax return as filed, changes in state tax
apportionment factors used to record deferred taxes, and the benefit of certain
income being earned from foreign activities that has been permanently invested.
<PAGE>
19. SUBSEQUENT EVENT
In January 1998, the Company received a favorable decision in a lawsuit for
breach of contract that it filed in 1994 against a lessee and guarantor. The
decision includes an award of damages of approximately $790,000 plus interest
from August 1997, plus costs and attorneys' fees. A judgment on the decision
must be filed and entered before any award is enforceable. The Company expects
the defendant guarantor to appeal.
<PAGE>
EXHIBIT XI
PLM INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER WEIGHTED-AVERAGE COMMON SHARE<F1>
Years Ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------
(in thousands of dollars, except per share data)
<S> <C> <C> <C>
Basic<F2>
Earnings:
Net income $ 4,667 $ 4,095 $ 6,048
==================================================
Shares:
Weighted-average number of common shares outstanding 9,081 10,032 11,576
==================================================
Basic earnings per common share $ 0.51 $ 0.41 $ 0.52
==================================================
Fully Diluted<F2>
Earnings:
Net income $ 4,667 $ 4,095 $ 6,048
==================================================
Shares:
Weighted-average number of common shares outstanding 9,081 10,032 11,576
Potentially dilutive common shares 227 166 186
Total shares 9,308 10,198 11,762
==================================================
Fully diluted earnings per weighted-average common share $ 0.50 $ 0.40 $ 0.51
==================================================
<FN>
<F1> See accompanying notes to December 31, 1997, 1996, and 1995 consolidated
financial statements.
<F2> This calculation is submitted in accordance with Regulation S-K, Item
601(b)(11).
</FN>
</TABLE>
<PAGE>
Document Schedule
for Assignment of Lease and Sale of Equipment leased
under Schedule Nos. 83, 84, 85, and 86,
each as amended by Amendment No. 1 thereto ("Schedules")
to Master Lease Agreement dated December 14. 1995
between Varilease Corporation, as Lessor,
and America Online, Inc., as Lessee ("Master Lease")
PARTIES
Seller: Varilease Corporation
28525 Orchard Lake Road
Farmington Hills, Michigan 48334
Attention: Majorie Biglin
Telephone: (248) 488 - 0100
Telecopy: (248) 488 - 0162
Purchaser: American Finance Group, Inc.
24 School Street
Boston, MA 02108
Jason Howard, Account Manager
Telephone: (617) 557-9335
Telecopy: (617) 557-9348
E-mail:[email protected]
Lessee: America Online, Inc.
8619 Westwood Center Drive
Suite 2000
Vienna, Virginia 22180
Attention: __________________
Telephone: ___-___-____
Telecopy: ___-___-____
Lender: Interpool, Inc.
211 College Road East
Princeton, NJ 08540
Attention: Raoul J. Witteveen, President
Telecopy: (609) 951-0362
Closing: December 30, 1997 at 10:00 a.m., at the offices of American Finance
Group, Inc. in Boston or by mail. (All documents will be dated as of
the Closing Date except as indicated.)
<PAGE>
LEASE DOCUMENTS
1. Seller Certified copy of Master Lease Agreement dated as
of December 14, 1995, as amended by Amendment No. 1
thereto, between Seller as Lessor and Lessee.
2. Seller Certified copy of the below-listed Schedules each
between Seller as Lessor and Lessee, together with each
Amendment No. 1 thereto and each Acceptance Certificate.
a. Schedule No. 83
b. Schedule No. 84
c. Schedule No. 85
d. Schedule No. 86
3. Seller UCC-1 Financing Statements showing Lessee as Debtor
and Lender as Secured Party relating to the Equipment
leased pursuant to the Schedules.
4. Seller Copy of Opinion of Counsel of Lessee.
5. Seller Copy of Incumbency Certificate of Lessee.
6. Seller Insurance Certificate naming Purchaser as
additional insured and loss payee with respect to the
Schedule and the Equipment leased thereunder, as its
interests may appear.
TRANSFER DOCUMENTS
1. Purchaser Purchase & Sale Agreement.
2. Purchaser Assignment and Assumption Agreement and Bill of Sale.
3. Seller Letter of Instructions for Disbursement of Purchase
Price and Acquisition Fee.
4. Purchaser Lessee Notice and Acknowledgment of Assignment
(Consent & Agreement).
5. Seller Incumbency Certificate of the Assistant Secretary of
Seller.
6. Purchaser Incumbency Certificate of Purchaser
7. Seller Release of Lien from Seller
8. Seller UCC-1 financing statements between Seller, as Debtor and Purchaser, as
Secured Party.
9. Purchaser Resale Certificate for the all applicable states.
LOAN DOCUMENTS
1. Seller Certified copy of the Limited Recourse Loan and
Security Agreement dated September 30, 1997
between Seller as Debtor and Lender.
2. Seller Certified copy of the below-listed Limited
GRecourse Term Notes between Seller as Debtor and Lender,
to that certain Limited Recourse Loan and Security
Agreement with Amortization Schedule and Disbursement
Letter.
a. Term Note in the amount of $2,258,663.82 for
Schedule 83
b. Term Note in the amount of $2,015,220.47 for
Schedule 84
c. Term Note in the amount of $3,043,252.30 for
Schedule 85
d. Term Note in the amount of $3,043,252.30 for
Schedule 86
3. Seller Copy of Consent to Assignment and Agreement among Seller, Lender and
Lessee.
4. Seller Transferee Agreement among Lender, Seller and Purchaser.
MISCELLANEOUS DOCUMENTS
1. Seller Copies of vendor invoices, bills of sale and proof of
payment.
2. Seller Billing Instructions for Lessee invoices.
3. Seller Copies of tax filings or evidence of payment of taxes, if applicable.
4. Seller Lessee tax exemption certificates (if applicable)
5. Purchaser Equipment Appraisal and Inspection Report
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement") made as of December 30,
1997, by and between AMERICAN FINANCE GROUP, INC., a Delaware corporation having
a principal place of business at 24 School Street, 7th Floor, Boston,
Massachusetts 02108 ("Purchaser"), and VARILEASE CORPORATION, a Michigan
corporation having a principal place of business at 28525 Orchard Lake Road,
Farmington Hills, Michigan, 48334 ("Seller").
Background:
Seller, as lessor, has entered into Schedule Nos. 83, 84, 85 and 86 each
dated September 16, 1997 to the Master Lease Agreement (the "Master Lease")
dated as of December 14, 1995 (such Schedule and the Master Lease solely to the
extent incorporated therein by reference being hereinafter collectively referred
to as the "Lease") with America Online, Inc., as lessee ("Lessee"), with respect
to the leasing by Lessee of various Ascend and U.S.
Robotics Industrial Modems (as further described in the Lease, the "Equipment").
Seller has financed its purchase of the Equipment leased under the
Schedules with Interpool, Inc. (the "Lender") pursuant to those certain Limited
Recourse Term Notes each dated September 30, 1997 ("Notes"), to that certain
Limited Recourse Loan and Security Agreement dated September 30, 1997 ("Security
Agreement"), and that Notice and Acknowledgement dated September 25, 1997
("Consent") in the total original principal amounts of $10,360,388.89 (the
Notes, together with the Security Agreement and the Consent hereinafter
collectively referred to as the "Debt Documents") and the debt represented
thereby, the "Debt").
Seller now wishes to sell and assign, and Purchaser wishes to purchase
and assume, all of the Seller's right, title and interest in and to the
Equipment, and all of Seller's right, title, interest duties and obligations in,
to and under the Lease, subject to the Debt and the Lender's security interest
in and to the Schedule and the Equipment, all on the terms and conditions
hereinafter set forth.
Agreement:
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. ASSIGNMENT AND ASSUMPTION AGREEMENT AND BILL OF SALE. Seller hereby
agrees to sell, and hereby Purchaser agrees to purchase, all of Seller's right,
title and interest in and to the Equipment (including, but not limited to, the
residual value of the Equipment at the termination of the Lease), and Seller
hereby further agrees to assign, and Purchaser agrees to accept and assume, all
of Seller's right, title, interest, duties and obligations in, to and under the
Lease and all documents and instruments executed and delivered in connection
therewith (including, but not limited to, any and all agreements with the
vendors (if any) solely as they relate to the Equipment, opinions, certificates,
and other documents and instruments, collectively the "Lease Documents), subject
to the Debt. Simultaneously upon receipt by Seller of the Purchase Price of the
Equipment set forth below and delivery by Seller and Purchaser of the executed
documentation substantially in the form set forth as schedules hereto or
otherwise required hereunder, and satisfaction of the conditions precedent
specified in Section 7 hereof (the "Closing"), Seller will execute and deliver
to Purchaser on the Closing Date (as hereinafter defined) an Assignment and
Assumption Agreement and Bill of Sale (the "Assignment") in substantially the
form attached hereto as Schedule 1.
2. PURCHASE PRICE. The purchase price of the Equipment is $10,494,698.31
("Purchase Price"), payable in immediately available funds on the Closing Date
in the amount of $494,724.28, to be further described as $107,854.62 related to
Schedule No. 83, $96,229.84 related to Schedule No. 84, $145,319.91 related to
Schedule No. 85 and $145,319.91 related to Schedule No. 86, attributable to the
equity purchase price of the Equipment to be further described in the manner set
forth by Seller pursuant to a purchase price disbursement letter in
substantially the form attached hereto as Schedule 2; and by the assumption by
Purchaser of Seller's non-recourse liability to Lender pursuant to Transferee
Agreements in substantially the form attached hereto as Schedule 3 in the
aggregate principal amount of $2,180,089.93 related to Schedule No. 83,
$1,945,115.44 related to Schedule No. 84, $2,937,384.33 related to Schedule No.
85 and $2,937,384.33 related to Schedule No. 86, which non-recourse liability is
scheduled to be amortized and retired during the Base Term of the Master Lease
by the collateral assignment to Lender of the Lessee's rental obligations under
the Lease.
3. TAXES. Seller shall be responsible for all Taxes (as hereinafter
defined), payable or accrued, and for the submission for all necessary filings
to the applicable taxing authorities, relating to (i) its acquisition or
ownership, or Lessee's use or leasing of the Equipment, and (ii) the payment of
monthly rentals or other sums due under the Lease, including without limitation
all sales, use and property taxes, including interest and penalties thereon
("Taxes"), for all periods through and including the Closing Date. Accrued and
unpaid Taxes as of the Closing Date which are the responsibility of Seller
hereunder shall result in an adjustment to the Purchase Price as defined in
Section 2 hereof. As between Purchaser and Seller, Purchaser shall be
responsible for all Taxes and for the submission of all filings required by the
applicable taxing authorities with respect to Taxes after the Closing Date. All
Taxes of any nature whatsoever, including without limitation all sales or
transfer taxes arising out of or in connection with the sale or assignment of
the Lease or the Equipment contemplated herein, shall be solely for the account
of the Seller. Seller shall indemnify Purchaser from and against all costs,
claims or liabilities arising out of or relating to this Section 3 which result
from any obligation, liability, act, failure to act, or breach, violation or
untruth of any of the terms, conditions or covenants of this Section 3.
Purchaser shall provide to Seller a valid resale certificate for the applicable
states where the Equipment may be located, or other evidence reasonably
requested by Seller to establish that the sale of the Equipment is not subject
to tax.
4. SUBORDINATION. Purchaser and Seller acknowledge and agree that
Purchasers' right, title and interest in the Equipment, the Lease, and all
proceeds thereof and therefrom, will be subject and subordinate in all respects
to the Debt and Lender's security interest and the rights of the Lessee under
the Lease.
5. ASSUMPTION OF DEBT. Purchaser hereby agrees to assume the Debt
subject to the benefit of the non-recourse provisions thereof, and acknowledges
receipt of the Debt Documents. Notwithstanding anything to the contrary
contained herein, in no event shall Purchaser assume or incur any liability for
breaches by Seller of its representations, warranties, or covenants contained in
the Debt Documents. Each of Purchaser and Seller shall indemnify the other for
any recourse liability incurred by the indemnified party under the Debt
Documents as a result of any breach of the representations, warranties, or
covenants contained therein caused by the indemnifying party's acts or
omissions.
6. CONSENT OF LENDER. As a condition precedent to Closing hereunder,
Seller and Purchaser agree to execute and deliver on the Closing Date a
Transferee Agreement, which shall have been duly executed by Lender.
7. CONSENT OF LESSEE. As a condition precedent to Closing hereunder,
Seller agrees to deliver to Purchaser on the Closing Date a Notice and
Acknowledgment of Assignment of even date herewith in substantially the form
attached hereto as Schedule 4 (the "Notice") executed by the Lessee.
8. ADDITIONAL CONDITIONS PRECEDENT. Purchaser's obligations hereunder
are subject to satisfaction by Seller of the following conditions precedent on
or before the Closing Date:
A. Lessee shall have inspected, approved and accepted the
Equipment for lease pursuant to a Certificate of Acceptance under the Lease on
or before Closing Date;
B. Seller shall have delivered to Purchaser one certified copy of
the Lease and the Lease Documents (including the original executed copy of the
Schedule marked "Counterpart No. 1" and all schedules and attachments thereto,
the Certificate of Acceptance, and a certified true and complete copy of the
Master Lease, all as may have been amended from time to time up to and including
the Closing Date) in substantially the form that has been presented to
Purchaser, comprising all of the fully executed "originals" thereof except only
those in the possession of Lender or Lessee;
C. Seller shall have delivered to Purchaser documentation
reasonably supporting the validity and enforceability of Lessee's obligations
under the Lease, the Lease Documents and the Notice, which may include, without
limitation, a secretary's certificate regarding incumbency and corporate
resolutions and an opinion of counsel;
D. Seller shall have delivered to Purchaser documentation
reasonably supporting the validity and enforceability of Seller's obligations
under the Lease Documents and the Transfer Documents, which shall include,
without limitation, a secretary's certificate regarding incumbency and corporate
resolutions and an opinion of counsel;
E. Seller shall have delivered to Purchaser appropriate
"Lessee/Lessor" UCC-1 financing statements signed by Seller and Lessee, as
assigned to Purchaser;
F. Lessee shall not, between the date hereof and the Closing Date, have
(i) ceased doing business as a going concern or, in the reasonable opinion of
Purchaser, suffered a material adverse change in its financial or operating
condition through and including the Closing Date; (ii) made an assignment for
the benefit of creditors, admitted in writing its inability to pay its debts as
they mature or generally failed to pay its debts as they become due; (iii)
initiated any voluntary bankruptcy or insolvency proceeding; (iv) failed to
obtain the discharge of any bankruptcy or insolvency proceeding initiated
against it by others within 60 days of the date such proceedings were initiated;
or (v) requested or consented to the appointment of a trustee or receiver with
respect to itself or for a substantial part of Lessee's property.
G. Seller shall have provided Purchaser with (i) copies of vendor
invoices, (ii) purchase documentation, (iii) equipment specifications, (iv)
documentation evidencing Seller's payment to vendor for the Equipment and (v)
other materials reasonably requested by Purchaser establishing Seller's title in
and to the Equipment and supporting that the Purchase Price of the Equipment
does not exceed the fair market value thereof;
H. All required licenses, approvals, consents and notifications
necessary in respect of the transactions contemplated hereby shall have been
obtained or made, and executed or certified copies thereof shall have been
delivered to Purchaser;
I. Seller shall have performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing; and
J. Seller shall have provided Purchasers with documentation
requested by Purchasers confirming the filing and payment of all sales, use,
property and other taxes relating to the Equipment and the Lease.
9. REPRESENTATIONS AND WARRANTIES.
(A) Seller represents and warrants that:
(1) Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Michigan with adequate
power to enter into each of this Agreement, the Lease Documents, the
Assignment, and each instrument, document or agreement attached or
otherwise related hereto (hereinafter the "Transfer Documents") to which
it is a party and is duly qualified to do business in every jurisdiction
in which its failure to so qualify would have a material adverse effect
upon the business or property of Seller.
(2) The Transfer Documents executed by Seller have been duly
authorized, executed and delivered by Seller, and assuming their due
authorization, execution and delivery by each of the other parties
thereto, constitute a valid, legal and binding agreement, enforceable in
accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights.
(3) The entering into and performance by Seller of the Transfer
Documents executed by Seller does not violate any judgment, order, law
or regulation applicable to Seller or any provision of Seller's
Certificate of Incorporation or By-Laws or result in any breach of, or
constitute a default under any indenture, mortgage, deed of trust, bank
loan or credit agreement or other instrument to which Seller is a party.
(4) Seller is not in default under any indenture, mortgage, loan
agreement or other instrument, in each case of a material nature, to
which the Seller is a party, nor is Seller in violation of any law,
order, injunction, decree, rule or regulation applicable to Seller of
any court or administrative body, which default or violation materially
and adversely affects the business, property or assets, operations or
condition, financial or otherwise, of Seller. No Event of Default, as
defined in the Lease (or an event which, with the passage of time or the
giving of notice, or both, would constitute an Event of Default) would
occur upon the execution and delivery of each such Transfer Document.
(5) There is no litigation, proceedings or investigation pending
or, to the knowledge of Seller, threatened against or involving Seller
or its assets or properties that, individually or in the aggregate, if
adversely determined, would restrain, enjoin or materially frustrate the
consummation by Seller of the transactions contemplated herein, the
performance of the obligations contained herein or the enjoyment of the
benefits contained herein. There are no outstanding judgments, decrees,
orders of any courts or any governmental authority against Seller or
affecting Seller's ability to transfer and lease the Equipment.
(6) No approval, consent or withholding of objection is required
from any governmental authority with respect to the entering into or
performance by Seller of the Transfer Documents to which it is a party.
(7) Seller has good and marketable title to the Equipment, free
and clear of all liens, claims and encumbrances except such liens,
claims or encumbrances which Lessee is required to discharge pursuant to
the Lease and the security interest of, and prior assignment to, the
Lender. The purchase price for the Equipment has been paid in full.
Seller has not heretofore sold, assigned, or encumbered the title and
interest to be conveyed pursuant to this Agreement, except to the
Lender.
(8) The Master Lease, the Schedules and the Notice delivered to
Purchaser in connection herewith are true, correct and complete as of
the date hereof and such documents delivered to Purchaser contain the
entire agreement made between Seller and Lessee in connection with the
lease of the Equipment.
(9) To the best of Seller's knowledge based on Lessee's
secretary's certificate of incumbency and authority, the Lease was
executed by officers of the Lessee who had authority to execute the
same, and the Lease is valid, binding and enforceable in accordance with
its terms.
(10) No Event of Default (as such term is defined in the Lease)
or event which, with the giving of notice or the passage of time, or
both, would become an Event of Default, has occurred; all rentals due as
of the Closing Date have been or will be paid in full when due; there
has been no prepayment of rent and the aggregate amount of unpaid
rentals for the Lease is as specified in the Notice, and rentals are due
in scheduled payments following the Closing Date in accordance with the
terms of the Lease.
(11) All taxes which are the responsibility of Seller relating to
(i) the acquisition, ownership, use or leasing of the Equipment through
the closing date, and (ii) the payment of monthly rentals or other sums
due under the Lease, including without limitation all sales, use and
property taxes, including interest and penalties thereon, have been or
when due will promptly be remitted to the applicable taxing authorities
with the necessary filings.
(12) The representations and warranties of Seller contained in
the Debt Documents are true and correct as of the date hereof and no
Event of Default has occurred under the Security Agreement dated
September 30, 1997 between Lender and Seller.
(B) Purchaser represents and warrants that:
(1) Purchaser is a corporation duly organized and validly
existing under the laws of the State of Delaware, with adequate power to
enter into the Transfer Documents to which it is a party and is duly
qualified to do business in every jurisdiction in which its failure to
so qualify would have a material adverse effect upon the business or
property of Purchaser.
(2) The Transfer Documents executed by Purchaser have been duly
authorized, executed and delivered by Purchaser and, assuming their due
authorization, execution and delivery by each of the other parties
thereto, constitute a valid, legal and binding agreement, enforceable in
accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights.
(3) The entering into and performance by Purchaser of each of
this Agreement and each instrument, document or agreement attached or
otherwise related hereto executed by Purchaser does not violate any
judgment, order, law or regulation applicable to Purchaser or any
provision of Purchaser's Second Amended and Restated Partnership
Agreement, as amended or result in any breach of, or constitute a
default under any indenture, mortgage, deed of trust, bank loan or
credit agreement or other instrument to which Purchaser is a party.
(4) There is no litigation, proceedings or investigation pending
or, to the knowledge of Purchaser, threatened against or involving
Purchaser or its assets or properties that, individually or in the
aggregate, if adversely determined, would restrain, enjoin or materially
frustrate the consummation by Purchaser of the transactions contemplated
herein, the performance of the obligations contained herein or the
enjoyment of the benefits contained herein. There are no outstanding
judgments, decrees, orders of any courts or any governmental authority
against Purchaser or affecting Purchaser's ability to acquire the
Equipment.
(5) No approval, consent or withholding of objection is required
from any governmental authority of the United States of America or the
Commonwealth of Massachusetts with respect to the entering into or
performance by Purchaser of this Agreement and each instrument, document
or agreement attached or otherwise related hereto to which it is a
party.
(6) So long as there is no Event of Default under the Lease,
Purchaser shall not disturb the peaceful and quiet use and enjoyment of
the Equipment by Lessee.
10. INDEMNITY
Seller hereby agrees to indemnify, defend and hold Purchaser, its
officers, directors, shareholders, partners, employees, agents, trustees,
beneficial owners, executive committee members, successors and assigns
(collectively, the "Indemnities") harmless from and against any and all claims,
losses, damages or liabilities suffered or incurred by Purchaser resulting or
arising from the breach, violation or untruth of any of the terms, conditions,
representations or warranties binding upon or made by Seller contained in this
Agreement or any of the other Transfer Documents to which it is a party or any
instrument, document or agreement attached hereto or otherwise related hereto to
which Seller is a party, except any such claims, losses, damages or liabilities
resulting from Purchaser's negligence or misconduct. Purchaser hereby agrees to
indemnify, defend and hold Seller and its Indemnities harmless from and against
any and all claims, losses, damages or liabilities suffered or incurred by
Seller resulting or arising from the breach, violation or untruth of any of the
terms, conditions, representations or warranties binding upon or made by
Purchaser contained in this Agreement or any of the other Transfer Documents to
which it is a party or any instrument, document or agreement attached hereto or
otherwise related hereto to which Purchaser is a party, except any such claims,
losses, damages or liabilities resulting from Seller's negligence or misconduct.
11. ARBITRATION
In the event that any dispute arises under any of the Transfer Documents
including, without limitation, any claim of default or breach of a covenant or
representation hereunder, either party in the case of a dispute, or the claiming
party in the case of a claim of default or breach shall submit the matter for
arbitration in Boston, Massachusetts, by and pursuant to the rules of the
American Arbitration Association ("AAA"). The single arbitrator who hears the
case will be selected by AAA and AAA shall be advised that the parties have
agreed in advance that any matter submitted to AAA for resolution shall be heard
in a reasonably expeditious manner. The powers of the arbitrator shall expressly
include both the right to issue injunctive orders and to order the payment of
money damages. The resolution of the matter by arbitration shall be binding upon
the parties hereto and judgment upon the award of the arbitrator may be entered
in any court of competent jurisdiction. Costs of arbitration and legal fees
shall be awarded to the prevailing party; provided, however, that the arbitrator
shall have the power to make a different allocation of costs and legal fees
whenever it is fair or reasonable to do so as determined by the arbitrator.
<PAGE>
12. MISCELLANEOUS.
A. This Agreement, together with Schedules 1, 2, 3 and 4 hereto,
constitute the entire agreement between Seller and Purchaser with respect to the
proposed purchase and sale, and assignment and assumption, of the Equipment and
the Lease. Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any such
jurisdiction shall not invalidate or render unenforceable such provision in any
such jurisdiction.
B. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
C. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, including all
matters of construction, validity, performance and enforcement.
D. The titles appearing in this Agreement and in any other
documents relating to this transaction are inserted only as a matter of
convenience and in no way define, limit or describe the scope or intent of such
sections or articles nor in any way affect this agreement or any other documents
relating to this transaction.
E. The parties hereto agree to execute and deliver, or cause to
be executed and delivered, such further instruments or documents and take such
other action as may be reasonably required effectively to carry out the
transactions contemplated herein.
F. The parties hereto covenant and agree to promptly remit to the
other party payments incorrectly received by such party after the Closing Date.
Without the prior written consent of the other party, neither Seller nor
Purchaser shall take any action which impairs the rights of the other party (or
its assignee or successor) with respect to any Schedule executed pursuant to the
Master Lease in and to which such party has no right, title or interest,
provided, that the foregoing covenant shall not require either party to obtain
the consent of the other party prior to exercising any of its rights and
remedies under the Master Lease if such exercise relates solely to a Schedule
executed pursuant to the Master Lease then owned by such party. Purchaser may,
at all reasonable times after giving Seller prior written notice thereof,
inspect and audit such of Seller's books as are directly relevant to the lease.
G. This Agreement may be amended or rescinded only by written
instrument signed by all the parties hereto.
H. Notwithstanding any other conditions contained herein, it is
hereby agreed that the representations, warranties, indemnities and assurances
of each party hereto shall survive the expiration or termination of this
Agreement and inure to the benefit of and be binding upon each of the parties
hereto and their respective successors and assigns.
I. All notices and communications delivered hereunder or with
respect hereto shall be in writing and shall be forwarded by certified mail,
return receipt requested, postage prepaid, or personally delivered, and
addressed to Seller and Purchaser at the addresses set forth below or to such
other address as shall be provided to the parties:
<PAGE>
Notice (con't)
To Purchaser:
American Finance Group, Inc.
24 School Street
Boston, Massachusetts 02108
Attention: Operations
To Seller:
Varilease Corporation
28525 Orchard Lake Road
Farmington Hills, Michigan 48334
Attention: _____________
J. Whether or not the transaction contemplated hereby is
consummated, each of the Seller and Purchaser shall bear and be responsible for
its own costs and expenses incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement, and any documents
delivered pursuant or related hereto, and shall not have any right of
reimbursement or indemnity for such costs and expenses as against each other.
K. This Agreement may be executed in counterparts each of which
shall be deemed an original, but all of which together shall constitute one and
the same agreement.
L. This Agreement contemplates a sale of 100% ownership interest
in the Equipment and the lease and shall in no way be construed as an extension
of credit by Purchaser to Seller. Seller waives and releases any right, title or
interest that it may have (whether pursuant to a cross-collateralization
provision or otherwise) in and to the Equipment and/or the Lease.
13. RESIDUAL SHARING
Upon the expiration of the Base Term, Seller shall be entitled to fifty percent
(50%) of all net proceeds in excess of $1,057,103.16 to be further described as
$230,458.59 related to Schedule No. 83, $205,619.31 related to Schedule No. 84,
$310,512.63 related to Schedule No. 85 and $310,512.63 related to Schedule No.
86, (i) generated from the sale of the Equipment or (ii) from the present value
of future rentals pursuant to any lease or re-lease of the Equipment discounted
at 19.475% per annum.
In the event the Lease terminates early either by voluntary termination,
casualty, or otherwise ("Early Termination"), and the sum of the proceeds of any
such Early Termination, inclusive of termination proceeds, casualty proceeds and
penalties ("Termination Proceeds"), exceed the total amount owed under the lease
to the Lender, Seller shall be entitled to fifty percent (50%) of all
Termination Proceeds after Buyer has received a net annualized return of 19.475%
("Target Yield") on the cash portion of its Purchase Price, hereunder. The
dollar amount needed to meet the Target Yield shall be calculated by future
valuing the cash paid by Buyer to Seller on the Closing Date to the date the
Termination Proceeds are received.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and do each hereby warrant and represent that their respective
signatures appearing below have been and are on the date of this Agreement, and
will be on the Closing Date, duly authorized by all necessary and appropriate
action to execute this Agreement.
PURCHASER: SELLER:
AMERICAN FINANCE GROUP, INC. VARILEASE CORPORATION
BY:________________________ BY:_________________________
TITLE: Vice President TITLE:______________________
<PAGE>
Schedule 1
ASSIGNMENT AND ASSUMPTION AGREEMENT AND BILL OF SALE
ASSIGNMENT AND ASSUMPTION AGREEMENT AND BILL OF SALE ("Assignment")
dated as of December 30, 1997, by and between AMERICAN FINANCE GROUP, INC., a
Delaware corporation having a principal place of business at 24 School Street,
Boston, Massachusetts 02108 ("Purchaser"), and VARILEASE CORPORATION, a Michigan
corporation having a principal place of business at 28525 Orchard Lake Road,
Farmington Hills, Michigan 48334 ("Seller"). (Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in a Purchase
and Sale Agreement between Seller and Purchaser dated as of December 30, 1997).
l. ASSIGNMENT OF LEASE
Seller hereby assigns, transfers and sets over unto Purchaser, and
Purchaser hereby assumes, all of Seller's right, title, interest and obligations
in, to and under those certain Schedule Nos. 83, 84, 85 and 86, each as amended
by Amendment No. 1 thereto, to the Master Lease Agreement (the "Master Lease")
dated as of December 14, 1995, as amended by Amendment No. 1 thereto dated
October 1, 1996 (such Schedules and the Master Lease solely as incorporated
therein by reference hereinafter referred to as the "Lease") between Seller, as
lessor, and America Online, Inc., as lessee ("Lessee"), with respect to the
leasing by Lessee of various Ascend and U.S. Robotics Industrial Modems (as
further described in the Lease, the "Equipment"). Seller's assignment of its
right, title, interest and obligations in Schedules shall be subject to a
security interest in favor of Interpool, Inc. (the "Lender"), as referenced in
the Purchase and Sale Agreement among Seller and Purchasers of even date
herewith. Seller represents and warrants that, so long as no breach or event of
default, or event which, with the giving of notice or the passage of time or
both, would constitute an event of default, has occurred and is continuing under
the Lease, Seller shall warrant Lessee's right of quiet use and possession of
the Equipment thereunder against all persons claiming by or through Seller.
2. SALE OF THE EQUIPMENT
In consideration of the sum of $10,494,698.31 ("Purchase Price"),
payable in immediately available funds in the amount of $494,724.28, to be
further described as $107,854.62 related to Schedule No. 83, $96,229.84 related
to Schedule No. 84, $145,319.91 related to Schedule No. 85 and $145,319.91
related to Schedule No. 86, attributable to the equity purchase price of the
Equipment, and by the assumption by Purchaser of Seller's non-recourse liability
to Lender pursuant to the Transferee Agreement in the principal amount
$2,180,089.93 related to Schedule No. 83, $1,945,115.44 related to Schedule No.
84, $2,937,384.33 related to Schedule No. 85 and $2,937,384.33 related to
Schedule No. 86, Seller ereby sells and transfers to Purchaser all of its right,
title and interest in and to the Equipment, together with all warranties,
express or implied, received from the manufacturer or vendor thereof. Seller
hereby represents and warrants to Purchasers that Seller is conveying good title
to the Equipment, free and clear of all liens and encumbrances other than (i)
the leasehold estate of Lessee under the Lease, and (ii) the security interest
of the Lender in and to the Schedules and the Equipment leased thereunder.
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF SELLER
(a) Seller, in order to induce Purchaser to enter into this Agreement,
hereby represents and warrants to Purchaser that (i) each of this Agreement and
each agreement and instrument related hereto has been duly authorized, executed
and delivered by the Seller, and is enforceable against Seller in accordance
with their respective terms; (ii) the Lease, together with Lessee's Notice and
Acknowledgment of Assignment, represent the entire agreement between the Seller
as lessor and Lessee with respect to the leasing of the Equipment; (iii) of the
only duplicate originals of the Rental Schedule, one has been delivered to the
Lessee, one has been delivered to the Lender, and any other originals thereof
will be delivered to the Purchaser herewith; (iv) the Lease is in full force and
effect, without modification or amendment; (v) Lessee has accepted the Equipment
for lease and is thereby bound by the terms and conditions of the Lease; (vi) no
event of default has occurred and is continuing thereunder; (vii) the rents
payable under the Lease are not subject to any defenses, set-offs or
counterclaims; (viii) except for the security interest of Lender, Seller has not
granted any liens on the Equipment or made any assignment of the Lease; (ix) as
of the date hereof there are no sales taxes or other governmental charges due
with respect to the Equipment other than those payable by Lessee under the Lease
and excluding any taxes that are based on or measured by the net income of
lessor under the Lease; (x) beginning with and including the rental payment due
January 1, 1998, there are 46 payments of Base Monthly Rental due Purchaser from
Lessee under each Schedule; and (xi) there has been no prepayment of any rents
not yet due and payable. Purchaser agrees to provide Seller with a resale tax
exemption certificate for the applicable states where the Equipment may be
located.
(b) EXCEPT AS SPECIFICALLY SET FORTH HEREIN AND IN THE PURCHASE AND SALE
AGREEMENT OF EVEN DATE HEREWITH, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER CONCERNING THE EQUIPMENT,
INCLUDING, WITHOUT LIMITATION, THE SELECTION, QUALITY, OR CONDITION OF THE
EQUIPMENT, OR ITS MERCHANTABILITY, ITS SUITABILITY, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE OPERATION OR PERFORMANCE OF THE EQUIPMENT OR PATENT
INFRINGEMENT OR THE LIKE.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser, in order to induce Seller to enter into this Agreement,
hereby represents and warrants to Seller that each of this Agreement and each
agreement and instrument related hereto has been duly authorized, executed and
delivered by Purchaser, and is enforceable against it in accordance with their
respective terms.
5. ASSUMPTION OF THE LEASE BY PURCHASER
The Purchaser hereby assumes all the right, title and interest of the
Seller under the Lease.
6. GOVERNING LAW. EXECUTION IN COUNTERPARTS.
This Agreement is to be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts. This Agreement may be executed in
multiple counterparts, each of which, taken together, shall constitute one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption
Agreement and Bill of Sale to be executed and delivered as of the date first
above written.
AMERICAN FINANCE GROUP, INC. VARILEASE CORPORATION
PURCHASER: SELLER:
By: _______________________________ By:__________________________
Title: Vice President Title:_________________________
<PAGE>
Schedule 2
December 30, 1997
American Finance Group, Inc.
24 School Street
Boston, MA 02108
Attn: Vice President - Operations
RE: Instructions for Disbursement of Proceeds of sale and assignment
by Varilease Corporation ("Seller"), and purchase and assumption
by American Finance Group, Inc., of Schedule Nos. 83, 84, 85 and
86, each as amended by Amendment No. 1 thereto, to the Master
Lease Agreement dated as of December 14, 1995, as amended by
Amendment No. 1 dated October 1, 1996 between Seller, as lessor,
and America Online, Inc., as lessee ("Lessee") and Equipment
leased thereunder.
Ladies and Gentlemen:
The proceeds of the above-referenced sale and assignment payable by
American Finance Group, Inc. are $_______.__, payable in immediately available
funds in the amount of $_______.__ attributable to the equity purchase price of
the Equipment and $______.__ as an Acquisition Fee with respect thereto in the
manner set forth below. Please disburse the referenced equity proceeds directly
to the undersigned as follows:
AMOUNT WIRE TRANSFER
$---------- -----------------------
-----------------------
ABA #_________________
ACT # _________________
For the Account of:_______
-----------------------
Reference:______________
$ TOTAL
Very truly yours,
VARILEASE CORPORATION
By:_______________________________
Title:______________________________
<PAGE>
Schedule 3
TRANSFEREE AGREEMENT
<PAGE>
EXHIBIT A TO TRANSFEREE AGREEMENT
<PAGE>
Schedule 4
NOTICE AND ACKNOWLEDGEMENT OF ASSIGNMENT
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT AND BILL OF SALE
ASSIGNMENT AND ASSUMPTION AGREEMENT AND BILL OF SALE ("Assignment")
dated as of December 30, 1997, by and between AMERICAN FINANCE GROUP, INC., a
Delaware corporation having a principal place of business at 24 School Street,
Boston, Massachusetts 02108 ("Purchaser"), and VARILEASE CORPORATION, a Michigan
corporation having a principal place of business at 28525 Orchard Lake Road,
Farmington Hills, Michigan 48334 ("Seller"). (Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in a Purchase
and Sale Agreement between Seller and Purchaser dated as of December 30, 1997).
l. ASSIGNMENT OF LEASE
Seller hereby assigns, transfers and sets over unto Purchaser, and
Purchaser hereby assumes, all of Seller's right, title, interest and obligations
in, to and under those certain Schedule Nos. 83, 84, 85 and 86, each as amended
by Amendment No. 1 thereto, to the Master Lease Agreement (the "Master Lease")
dated as of December 14, 1995, as amended by Amendment No. 1 thereto dated
October 1, 1996 (such Schedules and the Master Lease solely as incorporated
therein by reference hereinafter referred to as the "Lease") between Seller, as
lessor, and America Online, Inc., as lessee ("Lessee"), with respect to the
leasing by Lessee of various Ascend and U.S. Robotics Industrial Modems (as
further described in the Lease, the "Equipment"). Seller's assignment of its
right, title, interest and obligations in Schedules shall be subject to a
security interest in favor of Interpool, Inc. (the "Lender"), as referenced in
the Purchase and Sale Agreement among Seller and Purchasers of even date
herewith. Seller represents and warrants that, so long as no breach or event of
default, or event which, with the giving of notice or the passage of time or
both, would constitute an event of default, has occurred and is continuing under
the Lease, Seller shall warrant Lessee's right of quiet use and possession of
the Equipment thereunder against all persons claiming by or through Seller.
2. SALE OF THE EQUIPMENT
In consideration of the sum of $10,494,698.31 ("Purchase Price"),
payable in immediately available funds in the amount of $494,724.28 attributable
to the equity purchase price of the Equipment , and by the assumption by
Purchaser of Seller's non-recourse liability to Lender pursuant to the
Transferee Agreement in the principal amount $2,180,089.93 related to Schedule
No. 83, $1,945,115.44 related to Schedule No. 84, $2,937,384.33 related to
Schedule No. 85 and $2,937,384.33 related to Schedule No. 86, Seller hereby
sells and transfers to Purchaser all of its right, title and interest in and to
the Equipment, together with all warranties, express or implied, received from
the manufacturer or vendor thereof. Seller hereby represents and warrants to
Purchasers that Seller is conveying good title to the Equipment, free and clear
of all liens and encumbrances other than (i) the leasehold estate of Lessee
under the Lease, and (ii) the security interest of the Lender in and to the
Schedules and the Equipment leased thereunder.
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF SELLER
(a) Seller, in order to induce Purchaser to enter into this Agreement,
hereby represents and warrants to Purchaser that (i) each of this Agreement and
each agreement and instrument related hereto has been duly authorized, executed
and delivered by the Seller, and is enforceable against Seller in accordance
with their respective terms; (ii) the Lease, together with Lessee's Notice and
Acknowledgment of Assignment, represent the entire agreement between the Seller
as lessor and Lessee with respect to the leasing of the Equipment; (iii) of the
only duplicate originals of the Rental Schedule, one has been delivered to the
Lessee, one has been delivered to the Lender, and any other originals thereof
will be delivered to the Purchaser herewith; (iv) the Lease is in full force and
effect, without modification or amendment; (v) Lessee has accepted the Equipment
for lease and is thereby bound by the terms and conditions of the Lease; (vi) no
event of default has occurred and is continuing thereunder; (vii) the rents
payable under the Lease are not subject to any defenses, set-offs or
counterclaims; (viii) except for the security interest of Lender, Seller has not
granted any liens on the Equipment or made any assignment of the Lease; (ix) as
of the date hereof there are no sales taxes or other governmental charges due
with respect to the Equipment other than those payable by Lessee under the Lease
and excluding any taxes that are based on or measured by the net income of
lessor under the Lease; (x) beginning with and including the rental payment due
January 1, 1998, there are 46 payments of Base Monthly Rental due Purchaser from
Lessee under each Schedule; and (xi) there has been no prepayment of any rents
not yet due and payable. Purchaser agrees to provide Seller with a resale tax
exemption certificate for the applicable states where the Equipment may be
located.
(b) EXCEPT AS SPECIFICALLY SET FORTH HEREIN AND IN THE PURCHASE AND SALE
AGREEMENT OF EVEN DATE HEREWITH, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER CONCERNING THE EQUIPMENT,
INCLUDING, WITHOUT LIMITATION, THE SELECTION, QUALITY, OR CONDITION OF THE
EQUIPMENT, OR ITS MERCHANTABILITY, ITS SUITABILITY, ITS FITNESS FOR ANY
PARTICULAR PURPOSE, THE OPERATION OR PERFORMANCE OF THE EQUIPMENT OR PATENT
INFRINGEMENT OR THE LIKE.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser, in order to induce Seller to enter into this Agreement,
hereby represents and warrants to Seller that each of this Agreement and each
agreement and instrument related hereto has been duly authorized, executed and
delivered by Purchaser, and is enforceable against it in accordance with their
respective terms.
5. ASSUMPTION OF THE LEASE BY PURCHASER
The Purchaser hereby assumes all the right, title and interest of the
Seller under the Lease.
6. GOVERNING LAW. EXECUTION IN COUNTERPARTS.
This Agreement is to be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts. This Agreement may be executed in
multiple counterparts, each of which, taken together, shall constitute one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption
Agreement and Bill of Sale to be executed and delivered as of the date first
above written.
AMERICAN FINANCE GROUP, INC. VARILEASE CORPORATION
PURCHASER: SELLER:
By: _______________________________ By:__________________________
Title: Vice President Title:_________________________
<PAGE>
SECOND AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
AMONG
TEC ACQUISUB, INC.
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
BANK OF MONTREAL
and Such Other Financial Institutions
as Shall Become LENDERS Hereunder
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent
December 2, 1997
<PAGE>
SECOND AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT is
entered into as of December 2, 1997, by and between TEC ACQUISUB, INC., a
California special purpose corporation ("Borrower"), and FIRST UNION NATIONAL
BANK OF NORTH CAROLINA ("FUNB"), BANK OF MONTREAL ("BMO") and each other
financial institution which may hereafter execute and deliver an instrument of
assignment with respect to this Agreement pursuant to Section 11.10 (any one
individually, a "Lender," and collectively, "Lenders"), and FUNB, as agent on
behalf of Lenders (not in its individual capacity, but solely as agent,
"Agent"). This Agreement amends, restates and supersedes the TEC AcquiSub
Agreement (as defined below) in its entirety.
RECITALS
A. Borrower, FUNB and Fleet Bank, N.A. (the "Prior Lenders") and Agent,
as agent for the Prior Lenders, entered into that Amended and Restated
Warehousing Credit Agreement dated as of September 21, 1995 as amended by that
Amendment No. 1 to Amended and Restated Warehousing Credit Agreement dated as of
May 31, 1996, each by and among Borrower, FUNB (as the sole Lender party
thereto) and Agent, and that Amendment No. 2 to Amended and Restated Warehousing
Credit Agreement dated as of November 5, 1996, that Amendment No. 3 to Amended
and Restated Warehousing Credit Agreement dated as of October 3, 1997 and that
Amendment No. 4 to Amended and Restated Warehousing Credit Agreement dated as of
November 3, 1997 (as so amended, the "TEC AcquiSub Agreement"), pursuant to
which the Prior Lenders have agreed to extend and make available to Borrower
certain advances of credit.
B. Borrower and FUNB, as the sole remaining Prior Lender having a
Commitment under the TEC AcquiSub Agreement, desire to amend and restate the TEC
AcquiSub Agreement to, among other things, increase the aggregate Commitments
set forth on Schedule A of the TEC AcquiSub Agreement, extend the Commitment
Termination Date and reduce the Applicable Margin, as more fully set forth
herein.
C. On the terms and conditions set forth below, BMO desires, as of and
from the Closing Date, to become a Lender under this Agreement.
D. Lenders have agreed to make such credit available to Borrower, but
only upon the terms and subject to the conditions hereinafter set forth and in
reliance on the representations and warranties set forth herein.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants hereinafter set forth, and intending to be legally bound, the
parties hereto agree as follows:
SECTION 1. DEFINITIONSSECTION 1. DEFINITIONS.
1.1 Defined Terms1.1 Defined Terms. As used herein, the following terms
have the following meanings:
"Acquisition" means any transaction, or any series of related
transactions, by which Borrower directly or indirectly (a) acquires any ongoing
business or all or substantially all of the assets of any Person or any division
thereof, whether through a purchase of assets, merger or otherwise, or (b)
acquires (in one transaction or as the most recent transaction in a series of
transactions) control of at least a majority of the stock of a corporation
having ordinary voting power for the election of directors, or (c) acquires
control of at least a majority of the ownership interests in any partnership or
joint venture.
[OBJECT OMITTED]
0 "Adjustable LIBOR" means, for each Interest Period in respect of LIBOR Loans,
an interest rate per annum (rounded upward to the nearest 1/16th of one percent
(0.0625%)) determined pursuant to the following formula:
The Adjusted LIBOR shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Advance" means any Advance made or to be made by any Lender to
Borrower as set forth in Section 2.1.1.
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, through one or more intermediaries, owns or controls,
whether beneficially or as a trustee, guardian or other fiduciary, five percent
(5.0%) or more of the stock having ordinary voting power in the election of
directors of such Person or of the ownership interests in any partnership or
joint venture, (b) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person, or (c) each of
such Person's officers, directors, joint venturers and partners; provided,
however, that in no case shall any Lender or Agent be deemed to be an Affiliate
of Borrower for purposes of this Agreement. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"AFG" means American Finance Group, Inc., a Delaware corporation and a
wholly-owned Subsidiary of PLMI.
"AFG Agreement" means the Amended and Restated Warehousing Credit
Agreement dated November 3, 1997, by and among AFG, Lenders and Agent, as the
same from time to time may be amended, modified, supplemented, renewed, extended
or restated.
"Agent" means FUNB solely when acting in its capacity as the Agent
under this Agreement or any of the other Loan Documents, and any successor
Agent.
"Agent's Side Letter" means the side letter agreement dated November 3,
1997, by and among Borrower, AFG, each of the Growth Funds and Agent.
"Agreement" means this Second Amended and Restated Warehousing Credit
Agreement dated as of November 3, 1997, including all amendments, modifications
and supplements hereto, renewals, extensions or restatements hereof, and all
appendices, exhibits and schedules to any of the foregoing, and shall refer to
the Agreement as the same may be in effect from time to time.
"Aircraft" means any corporate, commuter, or commercial aircraft or
helicopters, with modifications (as applicable) and replacement or spare parts
used in connection therewith, including, without limitation, engines, rotables
and propellers, and any engines, rotables or propellers used on a stand-alone
basis.
"Applicable Margin" means:
(a) with respect to Prime Rate Loans, zero percent (0.00%);
and
(b) with respect to LIBOR Loans, one and five-eighths percent
(1.625%).
"Assignment And Acceptance" has the meaning set forth in Section
11.10.2.
"Bank Affiliate" means a Person engaged primarily in the business of
commercial banking and that is an Affiliate of a Lender or of a Person of which
a Lender is an Affiliate.
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended, as
codified under Title 11 of the United States Code, and the Bankruptcy Rules
promulgated thereunder, as the same may be in effect from time to time.
"Borrowing Base" means, as at and for any date of determination, an
amount not to exceed the lesser of:
(a) an amount equal to eighty percent (80.0%) of the aggregate
Invoice Price of all Eligible Inventory then owned of record by Borrower or any
Marine Subsidiary or of record by an Owner Trustee for the beneficial interest
of Borrower or any Marine Subsidiary (provided, however, that there shall be
excluded from this clause (a) the aggregate Invoice Price of all items of
Eligible Inventory subject to a Lease under which any applicable lease or rental
payment is more than ninety (90) days past due), computed (1) with respect to
any requested Loan, as of the requested Funding Date (and shall include the
item(s) of Eligible Inventory to be acquired with the proceeds of the requested
Loan), and (2) with respect to the delivery of any monthly Borrowing Base
Certificate to be furnished pursuant to Section 5.1.3, as of the last day of the
calendar month for which such Borrowing Base Certificate is furnished (provided
that if any portion of Borrower's, such Marine Subsidiary's or such Owner
Trustee's ownership interest in any such item of Eligible Inventory is sold or
assigned to one or more of the Equipment Growth Funds such that Borrower, such
Marine Subsidiary or such Owner Trustee continues to retain less than the entire
record or beneficial ownership interest therein, then for the purpose of
computing the Borrowing Base under this clause (a), the Invoice Price of such
item of Eligible Inventory shall be deemed to be equal to Borrower's or such
Marine Subsidiary's ratable portion of the Invoice Price of such item of
Eligible Inventory); or
(b) an amount equal to one hundred percent (100.0%) of the
unrestricted cash available for purchase of Equipment by Equipment Growth Funds,
computed (x) with respect to any requested Loan, as of the requested Funding
Date (and shall include the aggregate Invoice Price of all item(s) of Eligible
Inventory to be acquired with the proceeds of the requested Loan), and (y) with
respect to the delivery of any monthly Borrowing Base Certificate to be
furnished pursuant to Section 5.1.3, as of the last day of the calendar month
for which such Borrowing Base Certificate is furnished (provided, that for the
purpose of computing the Borrowing Base, in the event that Borrower, any Marine
Subsidiary or any Owner Trustee shall own less than one hundred percent (100.0%)
of the record or beneficial interests in any item of Equipment, with one or more
of the other Equipment Growth Funds owning of record or beneficially the
remaining interests, there shall be included only Borrower's, such Marine
Subsidiary's or such Owner Trustee's, as the case may be, ratable interest in
such item of Equipment).
"Borrowing Base Certificate" means a certificate with appropriate
insertions setting forth the components of the Borrowing Base as of the last day
of the month for which such certificate is submitted or as of a requested
Funding Date, as the case may be, which certificate shall be substantially in
the form set forth in Exhibit B and certified by a Responsible Officer of
Borrower.
"Business Day" means any day which is not a Saturday, Sunday or a legal
holiday under the laws of the States of California or North Carolina or is not a
day on which banking institutions located in the States of California or North
Carolina are authorized or permitted by law or other governmental action to
close and, with respect to LIBOR Loans, means any day on which dealings in
foreign currencies and exchanges may be carried on by Agent and Lenders in the
London interbank market.
"Casualty Loss" means any of the following events with respect to any
item of Eligible Inventory: (a) the actual total loss or compromised total loss
of such item of Eligible Inventory; (b) such item of Eligible Inventory shall
become lost, stolen, destroyed, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever; (c) the seizure of such item of
Eligible Inventory for a period exceeding sixty (60) days or the condemnation or
confiscation of such item of Eligible Inventory; or (d) such item of Eligible
Inventory shall be deemed under its lease to have suffered a casualty loss as to
the entire item of Eligible Inventory.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes, levies, assessments, charges or claims, in
each case then due and payable, upon or relating to (a) the Loans hereunder, (b)
Borrower's employees, payroll, income or gross receipts, (c) Borrower's
ownership or use of any of its Properties or assets or (d) any other aspect of
Borrower's business.
"Closing" means the time at which each of the conditions precedent set
forth in Section 3 to the making of the first Loan hereunder shall have been
duly fulfilled or satisfied by Borrower.
"Closing Date" means the date on which Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, the
Treasury Regulations adopted thereunder and the Treasury Regulations proposed
thereunder (to the extent Requisite Lenders, in their sole discretion,
reasonably determine that such proposed regulations set forth the regulations
that apply in the circumstances), as the same may be in effect from time to
time.
"Collateral" means the Collateral described in the Security Agreement.
"Commitment" means with respect to each Lender the amounts set forth on
Schedule A and "Commitments" means all such amounts collectively, as each may be
amended from time to time upon the execution and delivery of an instrument of
assignment pursuant to Section 11.10, which amendments shall be evidenced on
Schedule 1.1.
"Commitment Termination Date" means November 2, 1998.
"Compliance Certificate" means a certificate signed by a Responsible
Officer of Borrower, substantially in the form set forth in Exhibit C, with such
changes therein as the Requisite Lenders may from time to time reasonably
request for the purpose of having such certificate disclose the matters
certified therein and the method of computation thereof.
"Consolidated Funded Debt" means for any Person, as measured at any
date of determination on a consolidated basis, the total amount of all interest
bearing obligations (including Indebtedness for borrowed money), capital lease
obligations as a lessee and the stated amount of all issued and undrawn letters
of credit.
"Consolidated Intangible Assets" means for any Person, on a
consolidated basis, as at any date of determination, all intangible assets of
such Person, as determined and computed in accordance with GAAP.
"Consolidated Net Worth" means, on a consolidated basis, as at any date
of determination, the difference between Consolidated Total Assets and
Consolidated Total Liabilities.
"Consolidated Tangible Net Worth" means, as at any date of
determination, the difference between Consolidated Net Worth and Consolidated
Intangible Assets.
"Consolidated Total Assets" means for any Person, on a consolidated
basis, as at any date of determination, all assets of such Person, as determined
and computed in accordance with GAAP.
"Consolidated Total Liabilities" means for any Person, on a
consolidated basis, as at any date of determination, all liabilities of such
Person, as determined and computed in accordance with GAAP.
"Contingent Obligation" means, as to any Person, (a) any Guaranty
Obligation of that Person and (b) any direct or indirect obligation or
liability, contingent or otherwise, of that Person, (i) in respect of any letter
of credit or similar instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings, (ii) with
respect to the Indebtedness of any partnership or joint venture of which such
Person is a partner or a joint venturer, (iii) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered, or (iv) in respect of any interest rate protection contract that is
not entered into in connection with a bona fide hedging operation that provides
offsetting benefits to such Person. The amount of any Contingent Obligation
shall (subject, in the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty Obligation") be deemed equal to the maximum reasonably
anticipated liability in respect thereof, and shall, with respect to clause
(b)(iv) of this definition, be marked to market on a current basis.
"Default Rate" has the meaning set forth in Section 2.3.
"Designated Deposit Account" means a demand deposit account maintained
by Borrower with FUNB designated by written notice from Borrower to Agent.
"Dollars" and the sign "$" means lawful money of the United States of
America.
"EGF" means PLM Equipment Growth Fund, a California limited
partnership.
"EGF II" means PLM Equipment Growth Fund II, a California limited
partnership.
"EGF III" means PLM Equipment Growth Fund III, a California limited
partnership.
"EGF IV" means PLM Equipment Growth Fund IV, a California limited
partnership.
"EGF V" means PLM Equipment Growth Fund V, a California limited
partnership.
"EGF VI" means PLM Equipment Growth Fund VI, a California limited
partnership.
"EGF VII" means PLM Equipment Growth & Income Fund VII, a California
limited partnership.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000, (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United States, and
(c) any Bank Affiliate.
"Eligible Inventory" means all Trailers (less than ten 10 years old),
Aircraft and Aircraft engines (complying with (a) Stage III noise reduction
requirements or (b) with Stage II noise reduction requirements if the present
value of the Lease payments with respect to such Aircraft, discounted at a rate
equal to the Prime Rate, exceeds seventy percent (70.0%) of the purchase price
for such Aircraft paid by Borrower); and Railcars (less than twenty (20) years
old), cargo containers (less than ten (10) years old), marine vessels (less than
fifteen (15) years old) and, if approved by the Requisite Lenders, other related
Equipment, in each case that (a) is owned of record by Borrower or a Marine
Subsidiary or, subject to the approval of Agent, any owner trust of which
Borrower is the sole beneficiary or owner, as applicable, or solely with respect
to any marine vessel registered in Liberia, the Bahamas, Hong Kong, Singapore or
other registry acceptable to Agent in its sole discretion, any nominee entity of
which Borrower or a Marine Subsidiary is the sole beneficiary or direct or
indirect owner; (b) is purchased in whole or in part by Borrower or such owner
trust of which Borrower is the sole beneficiary (or nominee entity of which
Borrower is the sole beneficiary or direct or indirect owner) with Loans from
Lenders under this Agreement; (c) is subject to a Lease acceptable to Agent in
its sole discretion (as reviewed in full in connection with each requested
borrowing hereunder), which Lease shall, at a minimum, (A) be non-cancelable,
(B) be with a lessee of acceptable credit quality as determined by Agent, and
(C) be of a firm term in excess of one (1) year, except that cargo-containers
and Trailers may be on Utilization Leases; (d) has a value and marketability
reasonably satisfactory to the Agent; (e) was not previously financed with the
proceeds of a Loan under this Agreement; (f) would, except for the fact such
item of Equipment is not owned of record or beneficially by any Growth Fund,
qualify as "Eligible Inventory" under and as defined in the Growth Fund
Agreement; and (g) is free and clear of all Liens, except (i) any interest of a
lessee thereof pursuant to a Lease entered into with Borrower or a Marine
Subsidiary or Borrower's or such Marine Subsidiary's predecessor in interest or
such owner trust or nominee entity, as lessor, or (ii) as otherwise permitted by
Section 6.1, provided that any Liens of the type permitted under clause (ii)
encumbering any item of Equipment shall not secure obligations in amounts which
materially impair the equity value in such item of Equipment. Requisite Lenders
in their sole discretion, on a case by case basis, may approve other items or
types of Equipment for credit under "Eligible Inventory" from time to time.
"Eligible Inventory" shall include only Equipment purchased by Borrower or such
owner trust (or nominee entity) of which Borrower is sole beneficiary, whether
by sale or assignment or otherwise, from independent third-parties not related
to PLMI or its Affiliates. Borrower may sell or assign a partial ownership
interest in any item of Eligible Inventory to one or more of the Equipment
Growth Funds in consideration of a purchase price, paid in cash, equal to the
ratable portion of the Invoice Price paid by Borrower for such item of Eligible
Inventory so sold or assigned without causing the underlying item of Equipment
to lose its status as Eligible Inventory by virtue of such sale on the condition
that, and only on the condition that, (x) a portion of the cash purchase price,
ratably related to the percentage of the Invoice Price of such item of Eligible
Inventory financed by a Loan advanced by Lenders hereunder, shall be used to
prepay such Loan in accordance with Section 2.2.3(c) and (y) Agent shall
continue to retain possession of the Lease in respect of such item of Equipment.
Subject to the immediately preceding sentence, Equipment which is Eligible
Inventory will cease to be Eligible Inventory at any time it no longer continues
to meet all of the above requirements. Eligible Inventory shall not include any
Equipment that was included in the borrowing base against which loans shall have
previously been made to Growth Funds under the Growth Fund Agreement.
"Employee Benefit Plan" means any Pension Plan and any employee welfare
benefit plan, as defined in Section 3(1) of ERISA, that is maintained for the
employees of Borrower or any ERISA Affiliate of Borrower.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from Property,
whether or not owned by Borrower, or (b) any other circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all foreign, federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act and the Emergency Planning and
Community Right-to-Know Act.
"Environmental Permit" has the meaning set forth in Section 4.15.2.
"Equipment" means all items of transportation-related equipment owned
directly or beneficially by Borrower, by any Marine Subsidiary or by any Growth
Fund and held for lease or rental, and shall include items of equipment legal or
record title to which is held by any owner trust or nominee entity in which
Borrower, any Marine Subsidiary or Growth Funds holds the sole beneficial
interest.
"Equipment Growth Funds" means any and all of EGF, EGF II, EGF III, EGF
IV, EGF V, EGF VI, EGF VII and Income Fund I.
"Equipment Purchase Agreement" means an equipment purchase agreement,
in form and substance satisfactory to Agent, between Borrower and any Growth
Fund, entered into for the benefit of Lenders, providing for the purchase by
such Growth Fund of the Equipment upon which a Loan has been made.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, as the same may be in effect from time to time, and any successor
statute.
"ERISA Affiliate" means, as applied to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Code.
"Eurodollar Reserve Percentage" means the maximum reserve percentage
(expressed as a decimal, rounded upward to the nearest 1/100th of one percent
(0.01%)) in effect from time to time (whether or not applicable to any Lender)
under regulations issued by the Federal Reserve Board for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency liabilities having a
term comparable to such Interest Period.
"Event of Default" means any of the events set forth in Section 8.1.
"Facility" means the total Commitments described in Schedule A, as such
Schedule A may be amended from time to time as set forth on Schedule 1.1, for
the revolving credit facility described in Section 2.1.1 to be provided by
Lenders to Borrower according to each Lender's Pro Rata Share.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective Rate". If on
any relevant day the appropriate rate for such previous day is not yet published
in either H.15(519) or the Composite 3:30 p.m. Quotation, the rate for such day
will be the arithmetic mean of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System and any successor thereto.
"Form 1001" has the meaning set forth in Section 2.14.6.
"Form 4224" has the meaning set forth in Section 2.14.6.
"FSI" means PLM Financial Services, Inc., a Delaware corporation of
which Borrower is an indirect Subsidiary.
"Funding Date" means with respect to any proposed borrowing hereunder,
the date funds are advanced to Borrower for any Loan.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar function of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means (a) any federal, state, county,
municipal or foreign government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.
"Growth Funds" means any and all of EGF IV, EGF V, EGF VI, EGF VII and
Income Fund I.
"Growth Fund Agreement" means the Third Amended and Restated
Warehousing Credit Agreement dated as of November 3, 1997, by among each of the
Growth Funds, FSI, Lenders and Agent, as the same may from time to time be
amended, modified, supplemented, renewed, extended or restated.
"Guaranty" means that certain Guaranty dated as of November 5, 1996,
executed by PLMI in favor of Lenders and Agent.
"Guaranty Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease for
capital equipment other than Eligible Inventory, dividend, letter of credit or
other obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person, whether or not contingent,
(a) to purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, or (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect thereof. The
amount of any Guaranty Obligation shall be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such Guaranty
Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof.
"Hazardous Materials" means all those substances which are regulated
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"Income Fund I" means Professional Lease Management Income Fund I,
L.L.C., a Delaware limited liability company.
"Indebtedness" means, as to any Person, (a) all indebtedness of such
Person for borrowed money, (b) all leases of equipment of such Person as lessee,
(c) to the extent not included in clause (b), above, all capital leases of such
Person as lessee, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than trade or other accounts payable in the
ordinary course of business and not more than ninety (90) days past due), (e)
any obligation of such Person that is secured by a Lien on assets of such
Person, whether or not that Person has assumed such obligation or whether or not
such obligation is non-recourse to the credit of such Person, (f) obligations of
such Person arising under acceptance facilities or under facilities for the
discount of accounts receivable of such Person and (g) any obligation of such
Person to reimburse the issuer of any letter of credit issued for the account of
such Person upon which a draw has been made.
"Indemnified Liability" has the meaning set forth in Section 10.2.1.
"Indemnified Person" has the meaning set forth in Section 10.2.1.
"Interest Differential" means, with respect to any prepayment of a
LIBOR Loan on a day other than an Interest Payment Date on which such LIBOR Loan
matures, the difference between (a) the per annum interest rate payable with
respect to such LIBOR Loan as of the date of the prepayment and (b) the Adjusted
LIBOR on, or as near as practicable to, the date of the prepayment for a LIBOR
Loan commencing on such date and ending on the last day of the applicable
Interest Period. The determination of the Interest Differential by Agent shall
be conclusive in the absence of manifest error.
"Interest Payment Date" means, with respect to any LIBOR Loan, the last
day of each Interest Period applicable to such Loan and, with respect to Prime
Rate Loans, the first Business Day of each calendar month following the Funding
Date of such Prime Rate Loan.
"Interest Period" means, with respect to any LIBOR Loan, the one-month,
two-month or three-month period selected by the Borrower pursuant to Section 2,
in each instance commencing on the applicable Funding Date of the Loan;
provided, however, that any Interest Period which would otherwise end on a day
that is not a Business Day shall end on the next succeeding Business Day except
that in the instance of any LIBOR Loan, if such next succeeding Business Day
falls in the next calendar month, the Interest Period shall end on the next
preceding Business Day.
"Investment" means, when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities of any other Person or by means of loan
or advance (other than advances to employees for moving or travel expenses,
drawing accounts and similar expenditures in the ordinary course of business),
capital contribution, guaranty or other debt or equity participation or
interest, or otherwise, in any other Person, including any partnership and joint
venture interests of such Person in any other Person or in any item of
transportation-related equipment, owned by a Person unaffiliated with Borrower
and on lease to another third party, in which Borrower acquires a right to
share, directly or indirectly.
"Investment Company Act" means the Investment Company Act of 1940, as
amended (15 U.S.C. ss.80a-1 et seq.), as the same may be in effect from time to
time, or any successor statute thereto.
"Invoice Price" means the sum of the purchase price (including
modifications, as applicable), delivery charges, third party brokerage fees and
other reasonable closing costs, if any (provided that delivery charges, third
party brokerage fees and closing costs shall be included in the computation of
the "Invoice Price" only to the extent that they do not, in the aggregate,
exceed five percent (5.0%) of the total purchase price), and all applicable
taxes, paid by Borrower for or with respect to any item of Eligible Inventory.
"IRS" means the Internal Revenue Service and any successor thereto.
"Lease" means each and every item of chattel paper, installment sales
agreement, equipment lease or rental agreement (including progress payment
authorizations) relating to an item of Equipment of which Borrower or any Growth
Fund is the lessor and in respect of which the lessee and lease terms
(including, without limitation, as to rental rate, maturity and insurance
coverage) are acceptable to Agent, in its reasonable discretion. The term
"Lease" includes (a) all payments to be made thereunder, (b) all rights of
Borrower therein, and (c) any and all amendments, renewals, extensions or
guaranties thereof.
"Lender's Side Letter" means the side letter agreement dated November
3, 1997, by and among Borrower, AFG, each of the Growth Funds and BMO.
"Lending Office" means, with respect to any Lender, the office or
offices of the Lender specified as its lending office opposite its name on the
applicable signature page hereto, or such other office or offices of the Lender
as it may from time to time notify Borrower and Agent.
"LIBOR" means, with respect to any Loan to be made, continued as or
converted into a LIBOR Loan, the London Inter-Bank Offered Rate (determined
solely by Agent), rounded upward to the nearest 1/16th of one percent (0.0625%),
at which Dollar deposits are offered to Agent by major banks in the London
interbank market at or about 11:00 a.m., London time, on the second Business Day
prior to the first day of the related Interest Period with respect to such Loan
in an aggregate amount approximately equal to the amount of such Loan and for a
period of time comparable to the number of days in the applicable Interest
Period. The determination of LIBOR by Agent shall be conclusive in the absence
of manifest error.
"LIBOR Loan" means a Loan that bears interest based on Adjusted LIBOR.
"Lien" means any mortgage, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any Property, including any agreement to grant any of the foregoing,
any conditional sale or other title retention agreement, any lease in the nature
of a security interest, and the filing of or agreement to file or deliver any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
"Loan" has the meaning set forth in Section 2.1.1(a)(i).
"Loan Document" when used in the singular and "Loan Documents" when
used in the plural means any and all of this Agreement, the Note, the Security
Agreement, the Lockbox Agreement and the Guaranties and any and all other
agreements, documents and instruments executed and delivered by or on behalf or
support of Borrower to Agent or any Lender or any of their respective authorized
designees evidencing or otherwise relating to the Advances and the Liens granted
to Agent, on behalf of Lenders, with respect to the Advances, as the same may
from time to time be amended, modified, supplemented or renewed.
"Lockbox" has the meaning set forth in Section 5.9.
"Lockbox Agreement" means the Lockbox Agreement dated May 31, 1996,
among Borrower, FUNB and Agent on behalf of Lenders, relating to the Lockbox.
"Marine Subsidiary" means a wholly-owned Subsidiary of Borrower
organized for the purpose of holding record or beneficial title to one or more
marine vessels or aircraft rotables and spare parts; provided that such
Subsidiary shall continue to be deemed a Marine Subsidiary if Borrower shall
thereafter sell and transfer partial, but not the entire, record or beneficial
ownership interest therein to one or more Equipment Growth Funds (but for
purposes of computing the Borrowing Base, such Marine Subsidiary's record or
beneficial title to its owned Equipment shall be deemed to be limited to
Borrower's continuing ratable ownership interest in such Marine Subsidiary).
"Material Adverse Effect" means any set of circumstances or events
which (a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of any Loan Document, (b)
is or could reasonably be expected to be material and adverse to the condition
(financial or otherwise) or business operations of Borrower, FSI or TEC (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower, FSI or TEC to perform its Obligations, or (d) materially
impairs or could reasonably be expected to materially impair the ability of
Agent or any Lender to enforce any of its or their legal remedies pursuant to
the Loan Documents.
"Maturity Date" means, with respect to each Loan advanced by Lenders
hereunder, the date which is one hundred fifty (150) days after the Funding Date
of such Loan or such earlier or later date as requested by Borrower and approved
by the Requisite Lenders, in their sole and absolute discretion; provided,
however, in no event shall any Maturity Date be a date which is later than the
Commitment Termination Date.
"Maximum Availability" has the meaning set forth in Section 2.1.1.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, and to which Borrower or any ERISA Affiliate of Borrower is
making, or is obligated to make, contributions or has made, or been obligated to
make, contributions within the preceding five (5) years.
"Note" has the meaning set forth in Section 2.1.1(a)(i), and any and
all replacements, extensions, substitutions and renewals thereof.
"Notice of Borrowing" means a notice given by Borrower to Agent in
accordance with Section 2.7, substantially in the form of Exhibit E, with
appropriate insertions.
"Notice of Conversion/Continuation" means a notice given by Borrower to
Agent in accordance with Section 2.8, substantially in the form of Exhibit F,
with appropriate insertions.
"Obligations" means all loans, advances, liabilities and obligations
for monetary amounts owing by Borrower to any Lender or Agent, whether due or to
become due, matured or unmatured, liquidated or unliquidated, contingent or
non-contingent, and all covenants and duties regarding such amounts, of any kind
or nature, arising under any of the Loan Documents. This term includes, without
limitation, all principal, interest (including interest that accrues after the
commencement of a case or proceeding against Borrower under the Bankruptcy
Code), fees, including, without limitation, any and all prepayment fees,
facility fees, commitment fees, arrangement fees, agent fees and attorneys' fees
and any and all other fees, expenses, costs or other sums chargeable to Borrower
under any of the Loan Documents.
"Operating Agreement" means the Fifth Amended and Restated Operating
Agreement of Income Fund I, entered into as of January 24, 1995.
"Opinion of Counsel" means the favorable written legal opinion of Susan
Santo, general counsel of Borrower and TEC, substantially in the form of Exhibit
D.
"Other Taxes" has the meaning set forth in Section 2.14.2.
"Overadvance" has the meaning set forth in Section 2.1.1(a)(iii).
"Owner Trustee" means any person acting in the capacity of (a) a
trustee for any owner trust or (b) a nominee entity, in each case holding title
to any Eligible Inventory pursuant to a trust or similar agreement with Borrower
or FSI.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Pension Plan" means any employee pension benefit plan, as defined in
Section 3(2) of ERISA, that is maintained for the employees of Borrower or any
ERISA Affiliate of Borrower, other than a Multiemployer Plan.
"Permitted Liens" has the meaning set forth in Section 6.1.
"Permitted Rights of Others" means, as to any Property in which a
Person has an interest, (a) an option or right to acquire a Lien that would be a
Permitted Lien, (b) the reversionary interest of a lessor under a lease of such
Property, and (c) an option or right of the lessee under a lease of such
Property to purchase such Property at fair market value.
"Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or Governmental Authority.
"PLMI" means PLM International, Inc., a Delaware corporation.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, will constitute an Event of Default.
"Prepayment Date" has the meaning set forth in Section 2.2.2.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by FUNB as its prime rate. Each change in
the Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by FUNB as its Prime Rate is an index or base rate and shall
not necessarily be its lowest rate charged to FUNB's customers or other banks.
"Prime Rate Loan" means any borrowing which bears interest at a rate
determined with reference to the Prime Rate.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"Pro Rata Share" means, for any Lender, the proportion such Lender's
Commitment with respect to the Facility has to the aggregate of all Commitments
with respect to the Facility.
"Public Utility Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended (15 U.S.C. ss. 79 et seq.) as the same shall be
in effect from time to time, and any successor statute thereto.
"Railcar" means all railroad rolling stock, including, without
limitation, all coal, timber, plastic pellet, tank, hopper, flat and box cars
and locomotives.
"Reaffirmation of Guaranty" means the Acknowledgement and Reaffirmation
of Guaranty dated as of November 3, 1997, executed by PLMI in favor of Lenders
reaffirming its obligations under the Guaranty.
"Regulations G, T, U and X" means, collectively, Regulations G, T, U
and X adopted by the Federal Reserve Board (12 C.F.R. Parts 207, 220, 221 and
224, respectively) and any other regulation in substance substituted therefor.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule, regulation, guideline or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property is
subject.
"Requisite Lenders" means any combination of Lenders whose combined Pro
Rata Share (and voting interest with respect thereto) of all amounts outstanding
under this Agreement, or, in the event there are no amounts outstanding, the
Commitments, is greater than sixty-six and two-thirds percent (66 2/3%) of all
such amounts outstanding or the total Commitments, as the case may be;
provided, however, that in the event there are only two (2) Lenders,
Requisite Lenders means both Lenders.
"Responsible Officer" means any of the President, Executive Vice
President, Chief Financial Officer, Secretary or Corporate Controller of
Borrower having authority to request Loans or perform other duties required
hereunder.
"SEC" means the Securities and Exchange Commission and any successor
thereto.
"Security Agreement" means the Security Agreement entered into as of
June 30, 1993, between Borrower and Agent, on behalf of Lenders, including all
amendments, modifications and supplements thereto and all appendices, exhibits
and schedules to any of the foregoing, and shall refer to the Security Agreement
as the same may be in effect from time to time.
"Security Documents" means the Security Agreement, each chattel
mortgage, ship mortgage or similar security agreement, mortgage or other
agreement or document entered into with respect to this Agreement, each UCC-1
financing statement delivered pursuant hereto and any and all other related
documents.
"Solvent" means, as to any Person at any time, that (a) the fair value
of the Property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code; (b) the present fair saleable value of the
Property in an orderly liquidation of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
Property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute unreasonably small capital.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company (other than Equipment Growth
Funds) or other business entity of which an aggregate of fifty percent (50.0%)
or more of the beneficial interest (in the case of a partnership) or fifty
percent (50.0%) or more of the outstanding stock, units, or other voting
interest having ordinary voting power to elect a majority of the directors,
managers or trustees of such Person (irrespective of whether, at the time, the
stock, units or other voting interest of any other class or classes of such
Person shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person.
"Taxes" has the meaning set forth in Section 2.14.1.
"TEC" means PLM Transportation Equipment Corporation, a California
corporation and a wholly-owned Subsidiary of FSI and of which Borrower is a
special purpose Subsidiary.
"Termination Event" means (a) a "reportable event" described in Section
4043 of ERISA and the regulations issued thereunder (other than a reportable
event not subject to the provision for 30-day notice to the PBGC under such
regulations), or (b) the withdrawal of Borrower, FSI or any of FSI's other
Subsidiaries or any of their ERISA Affiliates from a Pension Plan during a plan
year in which any of them was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate a
Pension Plan or the treatment of a Pension Plan amendment as a termination under
Section 4041 of ERISA, or (d) the institution of proceedings to terminate a
Pension Plan by the PBGC, or (e) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan.
"Trailer" means (a) vehicles having a minimum length of twenty (20)
feet used in trailer or freight car service and constructed for the transport of
commodities or containers from point to point and (b) associated equipment.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of North Carolina; provided, however, in the
event that, by reason of mandatory provisions of law, any and all of the
attachment, perfection or priority of the Lien of Agent, on behalf of Lenders,
in and to the Collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than the State of North Carolina, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
"Utilization Leases" means Leases for Equipment held for lease in
pooling or similar arrangements where the actual rental payments under such
Lease is based on and for the actual period of utilization of such item of
Equipment rather than the Lease term.
1.2 Accounting Terms1.2 Accounting Terms. Any accounting term used in
this Agreement shall have, unless otherwise specifically provided herein, the
meaning customarily given such term in accordance with GAAP, and all financial
data required to be submitted by this Agreement shall be prepared and computed,
unless otherwise specifically provided herein, in accordance with GAAP. That
certain terms or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing. In
the event that GAAP changes during the term of this Agreement such that the
covenants contained in Section 7 would then be calculated in a different manner
or with different components, (a) the parties hereto agree to amend this
Agreement in such respects as are necessary to conform those covenants as
criteria for evaluating Borrower's financial condition to substantially the same
criteria as were effective prior to such change in GAAP and (b) Borrower shall
be deemed to be in compliance with the covenants contained in the aforesaid
subsections during the sixty (60) day period following any such change in GAAP
if and to the extent that Borrower would have been in compliance therewith under
GAAP as in effect immediately prior to such change.
1.3 Other Terms1.3 Other Terms. All other undefined terms contained in
this Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein. The
words "herein," "hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole, including the Exhibits and Schedules hereto, all
of which are by this reference incorporated into this Agreement, as the same may
from time to time be amended, modified or supplemented, and not to any
particular section, subsection or clause contained in this Agreement. The term
"including" shall not be limiting or exclusive, unless specifically indicated to
the contrary. The term "or" is disjunctive; the term "and" is conjunctive. The
term "shall" is mandatory; the term "may" is permissive. Wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, feminine and
the neuter.
1.4 Schedules and Exhibits1.4 Schedules and Exhibits. Any reference to
a "Sections", "Subsection", "Exhibit", or "Schedule" shall refer to the relevant
Section or Subsection of or Exhibit or Schedule to this Agreement, unless
specifically indicated to the contrary.
SECTION 2. AMOUNT AND TERMS OF CREDIT
2.1 Commitment to Lend
2.1.1 Revolving Facility.2.1.1 Revolving Facility. Subject to
the terms and conditions of this Agreement and in reliance upon the
representations and warranties of Borrower set forth herein, Lenders hereby
agree to make Advances (as defined below) of immediately available funds to
Borrower, on a revolving basis, from the Closing Date until the Business Day
immediately preceding the Commitment Termination Date, in the aggregate
principal amount outstanding at any time not to exceed the lesser of (a) the
total Commitments for the Facility less the aggregate principal amount then
outstanding under the Growth Fund Agreement and under the AFG Agreement or (b)
the Borrowing Base or (c) $35,000,000 (such lesser amount being the "Maximum
Availability"), as more fully set forth in this Section 2.1.1.
(a) Facility Commitments
(i) On the Funding Date requested by Borrower, after Borrower shall
have satisfied all applicable conditions precedent set forth in Section 3, each
Lender shall advance immediately available funds to Agent (each such advance
being an "Advance") evidencing such Lender's Pro Rata Share of a loan ("Loan").
Agent shall immediately advance such immediately available funds to Borrower at
the Designated Deposit Account (or such other deposit account at FUNB or such
other financial institution as to which Borrower and Agent shall agree at least
three (3) Business Days prior to the requested Funding Date) on the Funding Date
with respect to such Loan. Borrower shall pay interest accrued on the Loan at
the rates and in the manner set forth in Section 2.1.1(b). Subject to the terms
and conditions of this Agreement, the unpaid principal amount of each Loan and
all unpaid interest accrued thereon, together with all other fees, expenses,
costs and other sums chargeable to Borrower incurred in connection therewith
shall be due and payable no later than the Commitment Termination Date. Each
Loan advanced hereunder by each Lender shall be evidenced by Borrower's
revolving promissory note, substantially in the form of Exhibit A (each, a
"Note").
(ii) The obligation of Lenders to make any Loan from time to time
hereunder shall be limited to the then applicable Maximum Availability. For the
purpose of determining the amount of the Borrowing Base available at any one
time, the amount available shall be the total amount of the Borrowing Base as
set forth in the Borrowing Base Certificate delivered to Agent pursuant to
Section 3.2.1 with respect to each requested Loan. Nothing contained in this
Agreement shall under any circumstance be deemed to require any Lender to make
any Advance under the Facility which, in the aggregate principal amount, either
(1) taking into account such Lender's portion of the principal amounts
outstanding under this Agreement and the making of such Advance exceeds the
lesser of (A) such Lender's Commitment for the Facility and (B) such Lender's
Pro Rata Share of the Borrowing Base, or (2) taking into account such Lender's
portion of the principal amounts outstanding under this Agreement, under the
Growth Fund Agreement, under the AFG Agreement and the making of such Advance
exceeds such Lender's Commitment for the Facility.
(iii) If at any time and for any reason the aggregate principal amount
of the Loan(s) then outstanding shall exceed the Maximum Availability (the
amount of such excess, if any, being an "Overadvance"), Borrower shall
immediately repay the full amount of such Overadvance, together with all
interest accrued thereon; provided, however, that if such Overadvance occurs
solely as a result of a decrease in the amount of the Borrowing Base due solely
to a decrease in the computation of the Borrowing Base under clause (b) of the
definition of Borrowing Base, as set forth on a Borrowing Base Certificate
delivered to Agent pursuant to Section 5.1.3, then, to the extent of such
decrease, Borrower shall not be required under this Section 2.1.1(a)(iii) to
prepay such Overadvance but Lenders shall have no obligation to make or fund any
Loans or extend any credit hereunder so long as such Overadvance condition shall
remain in effect.
(iv) Amounts borrowed by Borrower under this Facility may be repaid
and, prior to the Commitment Termination Date and subject to the applicable
terms and conditions precedent to borrowings hereunder, reborrowed; provided,
however, that no Loan shall have a Maturity Date which is later than the
Commitment Termination Date.
(v) Each request for a Loan hereunder shall constitute a reaffirmation
by Borrower and the Responsible Officer requesting the same that the
representations and warranties contained in this Agreement are true, correct and
complete in all material respects to the same extent as though made on and as of
the date of the request, except to the extent such representations and
warranties specifically relate to an earlier date, in which event they shall be
true, correct and complete in all material respects as of such earlier date.
(b) Each Loan made by Lenders hereunder shall, at Borrower's option in
accordance with the terms of this Agreement, be either in the form of a Prime
Rate Loan or a LIBOR Loan. Subject to the terms and conditions of this
Agreement, each Loan shall bear interest on the sum of the unpaid principal
balance thereof outstanding on each day from the date when made, continued or
converted until such Loan shall have been fully repaid at a rate per annum equal
to the Prime Rate, as the same may fluctuate on a daily basis or the Adjusted
LIBOR, as the case may be plus the Applicable Margin. Interest on each Loan
funded hereunder shall be due and payable in arrears on each Interest Payment
Date, with all accrued but unpaid interest on such Loan being due and payable on
the date such Loan is repaid, whether by prepayment or at maturity, and with all
accrued but unpaid interest being due and payable on the Maturity Date for such
Loan.
Each Advance made by a Lender as part of a Loan hereunder and all
repayments of principal with respect to such Advance shall be evidenced by
notations made by such Lender on the books and records of such Lender; provided,
however, that the failure by such Lender to make such notations shall not limit
or otherwise affect the obligations of Borrower with respect to the repayments
of principal or payments of interest on any Advance or Loan. The aggregate
unpaid amount of each Advance set forth on the books and records of a Lender
shall be presumptive evidence of such Lender's Pro Rata Share of the principal
amount owing and unpaid under the Note.
2.1.2 Funding2.1.2 Funding. Promptly following the receipt of
such documents required pursuant to Section 3.2.1 and approval of a Loan by the
Agent, Agent shall notify by telephone, telecopier, facsimile or telex each
Lender of the principal amount (including Lender's Pro Rata Share thereof) and
Funding Date of the Loan requested by Borrower. Not later than 1:00 p.m., North
Carolina time, on the Funding Date for any Loan, each Lender shall make an
Advance to Agent for the account of Borrower in the amount of its Pro Rata Share
of the Loan being requested by Borrower. Upon satisfaction of the applicable
conditions precedent set forth in Section 3, all Advances shall be credited in
immediately available funds to the Designated Deposit Account.
2.1.3 Utilization of the Loans.2.1.3 Utilization of the Loans.
The Loans made under the Facility may be used solely for the purpose of
acquiring the specific items of Eligible Inventory approved by Agent, in its
sole discretion, and against which Lenders have made Advances; provided,
however, in no event shall the proceeds of any Loan be used to finance more than
eighty percent (80.0%) of the Invoice Price of any item of Eligible Inventory to
be purchased with the proceeds of such Loan. The parties hereto understand and
contemplate that the Loans are being requested to finance the acquisition of
items of Eligible Inventory and that only upon the funding of such Loans and the
acquisition of record title by Borrower or a Marine Subsidiary or by an Owner
Trustee for the beneficial interest of Borrower or a Marine Subsidiary in a
single or back-to-back transaction will the ownership requirements of Eligible
Inventory be satisfied.
2.2 Repayment and Prepayment
2.2.1 Repayment2.2.1 Repayment. Unless prepaid pursuant to
Section 2.2.2, the principal amount of each Loan hereunder shall be repaid by
Borrower to Lenders not later than the Maturity Date of such Loan.
2.2.2 Voluntary Prepayment2.2.2 Voluntary Prepayment. Subject
to Section 2.18, Borrower may in the ordinary course of Borrower's business,
upon at least three (3) Business Days' written notice, or telephonic notice
promptly confirmed in writing to Agent, which notice shall be irrevocable,
prepay any Loan in whole or in part. Such notice of prepayment shall specify the
date and amount of such prepayment and whether such prepayment is of Prime Rate
Loans or LIBOR Loans, or any combination thereof. Such prepayment of Loans,
together with any amounts required pursuant to Section 2.18, shall be in
immediately available funds and delivered to Agent not later than 1:00 p.m.,
North Carolina time, on the date for prepayment stated in such notice (the
"Prepayment Date"). With respect to any prepayment under this Section 2.2.2, all
interest on the amount prepaid accrued up to but excluding the date of such
prepayment shall be due and payable on the Prepayment Date.
2.2.3 Mandatory Prepayments
(a) In the event that any item of Eligible Inventory shall be sold or
assigned by Borrower or any Marine Subsidiary, or the ownership interests
(whether Stock or otherwise) of Borrower in any Marine Subsidiary owning record
or beneficial title to any item of Eligible Inventory shall be sold or
transferred, then Borrower shall immediately prepay the Loan made with respect
to such Eligible Inventory so sold or assigned or with respect to the Eligible
Inventory owned by such Marine Subsidiary so sold or transferred, together with
accrued interest on such Loan to the date of prepayment and any amounts required
pursuant to Section 2.18. The sale or assignment of Eligible Inventory by an
Owner Trustee, or the sale or assignment of Borrower's or any Marine
Subsidiary's beneficial interest in any owner trust (or nominee entity) holding
title to Eligible Inventory shall be considered a sale or assignment, as the
case may be, of such Eligible Inventory by Borrower or such Marine Subsidiary,
as the case may be.
(b) In the event that any of the Eligible Inventory shall have
sustained a Casualty Loss, Borrower shall promptly notify Agent and Lenders of
such Casualty Loss and make arrangements reasonably acceptable to the Agent to
cause any and all cash proceeds received by Borrower to be paid to Lenders as a
prepayment hereunder. To the extent not so prepaid, the Loan funded with respect
to such Eligible Inventory will nevertheless be paid by Borrower as provided in
Section 2.2.1.
(c) In the event Borrower, any Marine Subsidiary or any Owner Trustee
shall sell or assign any partial (i.e., less than one hundred percent (100.0%))
interest in any item of Eligible Inventory pursuant to Section 6.5, Borrower
shall immediately prepay the Loan made with respect to such Eligible Inventory
in which an interest has been so sold or assigned in an amount equal to that
portion of the purchase price paid for such partial interest which is ratably
related to the percentage of the Invoice Price paid by Borrower, such Marine
Subsidiary or Owner Trustee for such item of Eligible Inventory when originally
financed by such Loan, together with all interest accrued on such Loan to the
date of prepayment. For example, if Borrower paid an Invoice Price of
$10,000,000 for an item of Eligible Inventory, of which $8,000,000 was financed
with a Loan hereunder, if Borrower subsequently sells to an Equipment Growth
Fund a forty percent (40.0%) interest in such item of Eligible Inventory for a
purchase price of $4,000,000, Borrower shall prepay the related Loan in the
principal amount of $3,200,000.
(d) In the event that the Growth Fund Agreement or the AFG Agreement
shall be terminated for any reason as to any one or more of the Growth Funds or
as to AFG, as the case may be, then Borrower shall immediately prepay any and
all amounts outstanding under this Agreement and the Lenders' Commitments shall,
without notice, immediately and automatically terminate.
2.3 Calculation of Interest; Post-Maturity Interest2.3 Calculation of
Interest; Post-Maturity Interest. Interest on the Loans shall be computed on the
basis of a 365/366-day year for all Prime Rate Loans and a 360-day year for all
LIBOR Loans and the actual number of days elapsed in the period during which
such interest accrues. In computing interest on any Loan, the date of the making
of such Loan shall be included and the date of payment shall be excluded. Each
change in the interest rate of the Prime Rate Loans based on changes in the
Prime Rate and each change in the Adjusted LIBOR based on changes in the
Eurodollar Reserve Percentage shall be effective on the effective date of such
change and to the extent of such change. Agent shall give Borrower notice of any
such change in the Prime Rate; provided, however, that any failure by Agent to
provide Borrower with notice hereunder shall not affect Agent's right to make
changes in the interest rate of any Loan based on changes in the Prime Rate.
Upon the occurrence and during the continuation of any Event of Default under
this Agreement, Advances under this Agreement will at the option of Requisite
Lenders bear interest at a rate per annum which is determined by adding two
percent (2.0%) to the Applicable Margin for such Loan (the "Default Rate"). This
may result in the compounding of interest. The imposition of a Default Rate will
not constitute a waiver of any Event of Default.
2.4 Manner of Payments2.4 Manner of Payments. All repayments or
prepayments of principal and all payments of interest, fees, costs, expenses and
other sums chargeable to Borrower under this Agreement, the Note or any of the
other Loan Documents shall be in lawful money of the United States of America in
immediately available funds and delivered to Agent, for the account of Lenders,
not later than 1:00 p.m., North Carolina time, on the date due at First Union
National Bank of North Carolina, One First Union Center, 301 South College
Street, Charlotte, North Carolina 28288, Attention: Hannah Carmody, or such
other place as shall have been designated in writing by Agent.
2.5 Payment on Non-Business Days2.5 Payment on Non-Business Days.
Whenever any payment to be made under this Agreement, the Note or any of the
other Loan Documents shall be stated to be due on a day which is not a Business
Day, such payment shall be made on the next succeeding Business Day and such
extension of time shall in such case be included in the computation of the
payment of interest thereon; provided, however, that no Loan shall have remained
outstanding after the Maturity Date of such Loan.
2.6Application of Payments. All payments to or for the benefit of
Lenders hereunder shall be applied in the following order: (a) at the direction
of Borrower or upon prior notice given to Borrower by Agent, then due and
payable fees, expenses and costs; (b) then due and payable interest payments and
mandatory prepayments; and (c) then due and payable principal payments and
optional prepayments; provided that if an Event of Default shall have occurred
and be continuing, Lenders shall have the exclusive right to apply any and all
such payments against the then due and owing Obligations of Borrower as Lenders
may deem advisable. To the extent Borrower fails to make payment required
hereunder or under any of the other Loan Documents, each Lender is authorized
to, and at its sole option may, make such payments on behalf of Borrower. To the
extent permitted by law, all amounts advanced by any Lender hereunder or under
other provisions of the Loan Documents shall accrue interest at the same rate as
Loans hereunder.
2.7 Procedure for the Borrowing of Loans.
2.7.1 Notice of Borrowing. Each borrowing of Loans shall be made upon
Borrower's irrevocable written notice delivered to Agent in the form of a Notice
of Borrowing, executed by a Responsible Person of Borrower, with appropriate
insertions (which Notice of Borrowing must be received by Lender prior to 12:00
noon, Charlotte, North Carolina time, three (3) Business Days prior to the
requested Funding Date) specifying:
(a) the amount of the requested borrowing, which, if
a LIBOR Loan is requested, shall be not less than One Million Dollars
($1,000,000);
(b) the requested Funding Date, which shall be a
Business Day;
(c) whether the borrowing is to be comprised of one
or more LIBOR Loans or Prime Rate Loans; and
(d) the duration of the Interest Period applicable to
any such LIBOR Loans included in such Notice of Borrowing. If the Notice of
Borrowing shall fail to specify the duration of the Interest Period for any
borrowing comprised of LIBOR Loans, such Interest Period shall be three (3)
months.
2.7.2 Unavailability of LIBOR Loans. Unless Agent
shall otherwise consent, during the existence of an Event of Default or
Potential Event of Default, Borrower may not elect to have a Loan made as a
LIBOR Loan.
2.8 Conversion and Continuation Elections.
2.8.1 Election. Borrower may, upon irrevocable
written notice to Agent:
(a) elect to convert on any Business Day, any Prime
Rate Loan (or any portion thereof in an amount equal to at least One Million
Dollars ($1,000,000) into a LIBOR Loan; or
(b) elect to convert on any Interest Payment Date any
LIBOR Loan maturing on such Interest Payment Date (or any portion thereof) into
a Prime Rate Loan; or
(c) elect to continue on any Interest Payment Date
any LIBOR Loan maturing on such Interest Payment Date (or any portion thereof in
an amount equal to at least One Million Dollars ($1,000,000); provided, that if
the aggregate amount of LIBOR Loans outstanding to Borrower shall have been
reduced, by payment, prepayment, or conversion of portion thereof, to be less
than $1,000,000, such LIBOR Loans shall automatically convert into Prime Rate
Loans, and on and after such date the right of Borrower to continue such Loans
as, and convert such Loans into, LIBOR Loans shall terminate.
2.8.2 Notice of Conversion2.8.2 Notice of Conversion. Each
conversion or continuation of Loans shall be made upon Borrower's irrevocable
written notice delivered to Agent in the form of a Notice of
Conversion/Continuation, executed by a Responsible Person of Borrower, with
appropriate insertions (which Notice of Conversion/Continuation must be received
by Lender prior to 12:00 noon, Charlotte, North Carolina time, at least three
(3) Business Days in advance of the proposed conversion date or continuation
date specifying:
(a) the proposed conversion date or continuation
date;
(b) the aggregate amount of Loans to be converted or
continued;
(c) the nature of the proposed conversion or
continuation; and
(d) the duration of the requested Interest Period.
2.8.3 Interest Period. If upon the expiration of any Interest
Period applicable to any LIBOR Loan, Borrower has failed to select a new
Interest Period to be applicable to such LIBOR Loan, Borrower shall be deemed to
have elected to convert such LIBOR Loan into a Prime Rate Loan effective as of
the last day of such current Interest Period.
2.8.4 Unavailability of LIBOR Loans. Unless Agent shall
otherwise consent, during the existence of an Event of Default or Potential
Event of Default, Borrower may not elect to have a Loan converted into or
continued as a LIBOR Loan.
2.9 Discretion of Lenders as to Manner of Funding2.9 Discretion of
Lenders as to Manner of Funding. Notwithstanding any provision of this Agreement
to the contrary, each Lender shall be entitled to fund and maintain its funding
of all or any part of its LIBOR Loans in any manner it elects, it being
understood, however, that for the purposes of this Agreement all determinations
hereunder shall be made as if such Lender actually funded and maintained each
LIBOR Loan through the purchase of deposits having a maturity corresponding to
the maturity of the LIBOR Loan and bearing an interest rate equal to the LIBOR
rate (whether or not, in any instance, Lender shall have granted any
participations in such Loan). Each Lender may, if it so elects, fulfill any
commitment to make LIBOR Loans by causing a foreign branch or affiliate to make
or continue such LIBOR Loans; provided, however, that in such event such Loans
shall be deemed for the purposes of this Agreement to have been made by such
Lender, and the obligation of Borrower to repay such Loans shall nevertheless be
to such Lender and shall be deemed held by such Lender, to the extent of such
Loans, for the account of such branch or affiliate.
2.10 Distribution of Payments2.10 Distribution of Payments. Agent shall
immediately distribute to each Lender, at such address as each Lender shall
designate, its respective interest in all repayments and prepayments of
principal and all payments of interest and all fees, expenses and costs received
by Agent on the same day and in the same type of funds as payment was received.
In the event Agent does not distribute such payments on the same day received,
if such payments are received by Agent by 1:00 p.m., North Carolina time, or if
received after such time, on the next succeeding Business Day, such payment
shall accrue interest at the Federal Funds Rate.
2.11 Agent's Right to Assume Funds Available for Advances2.11 Agent's
Right to Assume Funds Available for Advances. Unless Agent shall have been
notified by any Lender no later than the Business Day prior to the respective
Funding Date of a Loan that such Lender does not intend to make available to
Agent an Advance in immediately available funds equal to such Lender's Pro Rata
Share of the total principal amount of such Loan, Agent may assume that such
Lender has made such Advance to Agent on the date of the Loan and Agent may, in
reliance upon such assumption, make available to Borrower a corresponding
Advance. If Agent has made funds available to Borrower based on such assumption
and such Advance is not in fact made to Agent by such Lender, Agent shall be
entitled to recover the corresponding amount of such Advance on demand from such
Lender. If such Lender does not promptly pay such corresponding amount upon
Agent's demand, Agent shall notify Borrower and Borrower shall repay such
Advance to Agent. Agent also shall be entitled to recover from such Lender
interest on such Advance in respect of each day from the date such Advance was
made by Agent to Borrower to the date such corresponding amount is recovered by
Agent at the Federal Funds Rate. Nothing in this Section 2.11 shall be deemed to
relieve any Lender from its obligation to fulfill its Commitment or to prejudice
any rights which Agent or Borrower may have against such Lender as a result of
any default by such Lender under this Agreement.
2.12 Agent's Right to Assume Payments Will be Made by Borrower2.12
Agent's Right to Assume Payments Will be Made by Borrower. Unless Agent shall
have been notified by Borrower prior to the date on which any payment to be made
by Borrower hereunder is due that Borrower does not intend to remit such
payment, Agent may, in its sole discretion, assume that Borrower has remitted
such payment when so due and Agent may, in its sole discretion and in reliance
upon such assumption, make available to each Lender on such payment date an
amount equal to such Lender's Pro Rata Share of such assumed payment. If
Borrower has not in fact remitted such payment to Agent, each Lender shall
forthwith on demand repay to Agent the amount of such assumed payment made
available to such Lender, together with interest thereon in respect of each date
from and including the date such amount was made available by Agent to such
Lender to the date such amount is repaid to Agent at the Federal Funds Rate.
2.13 Capital Requirements. If any Lender determines that compliance
with any law or regulation or with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law)
has or would have the effect of reducing the rate of return on the capital of
such Lender or any corporation controlling such Lender as a consequence of, or
with reference to, such Lender's Commitment or its making or maintaining its Pro
Rata Share of the Loans below the rate which such Lender or such other
corporation could have achieved but for such compliance (taking into account the
policies of such Lender or corporation with regard to capital), then Borrower
shall from time to time, upon written demand by such Lender (with a copy of such
demand to Agent), immediately pay to such Lender such additional amounts as
shall be sufficient to compensate such Lender or other corporation for such
reduction. A certificate submitted by such Lender to Borrower, stating that the
amounts set forth as payable to such Lender are true and correct, shall be
conclusive and binding for all purposes, absent manifest error. Each Lender
agrees promptly to notify Borrower and Agent of any circumstances that would
cause Borrower to pay additional amounts pursuant to this section, provided that
the failure to give such notice shall not affect Borrower's obligation to pay
any such additional amounts.
2.14 Taxes.
2.14.1 No Deductions. Subject to Subsection 2.14.7, any and
all payments by Borrower to each Lender or Agent under this Agreement shall be
made free and clear of, and without deduction or withholding for, any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of each Lender
and Agent, such taxes (including income taxes or franchise taxes) as are imposed
on or measured by each Lender's net income (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes").
2.14.2 Miscellaneous Taxes2.14.2 Miscellaneous Taxes. In
addition, Borrower shall pay any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies which arise from
any payment made hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan Documents
(hereinafter referred to as "Other Taxes").
2.14.3 Indemnity2.14.3 Indemnity. Subject to Subsection
2.14.7, Borrower shall indemnify and hold harmless each Lender and Agent for the
full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this Section 2.14) paid by such
Lender or Agent and any liability (including penalties, interest, additions to
tax and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within thirty (30) days from the date any Lender
or Agent makes written demand therefor.
2.14.4 Required Deductions2.14.4 Required Deductions. If
Borrower shall be required by law to deduct or withhold any Taxes or Other Taxes
from or in respect of any sum payable hereunder to any Lender or Agent, then,
subject to Subsection 2.14.7:
(a) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.14) such Lender or Agent, as the
case may be, receives an amount equal to the sum it would have received had no
such deductions been made;
(b) Borrower shall make such deductions, and
(c) Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law.
2.14.5 Evidence of Payment2.14.5 Evidence of Payment. Within
thirty (30) days after the date of any payment by Borrower of Taxes or Other
Taxes, Borrower shall furnish to Agent the original or a certified copy of a
receipt evidencing payment thereof, or other evidence of payment satisfactory to
Agent.
2.14.6 Foreign Persons2.14.6 Foreign Persons. Each Lender
which is a foreign person (i.e., a person other than a United States person for
United States Federal income tax purposes) shall:
(a) No later than the date upon which such Lender
becomes a party hereto deliver to Borrower through Agent two (2) accurate and
complete signed originals of IRS Form 4224 or any successor thereto ("Form
4224"), or two accurate and complete signed originals of IRS Form 1001 or any
successor thereto ("Form 1001"), as appropriate, in each case indicating that
such Lender is on the date of delivery thereof entitled to receive payments of
principal, interest and fees under this Agreement free from withholding of
United States Federal income tax;
(b) If at any time such Lender makes any changes
necessitating a new Form 4224 or Form 1001, with reasonable promptness deliver
to Borrower through Agent in replacement for, or in addition to, the forms
previously delivered by it hereunder, two accurate and complete signed originals
of Form 4224; or two accurate and complete signed originals of Form 1001, as
appropriate, in each case indicating that the Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees under this
Agreement free from withholding of United States Federal income tax;
(c) Before or promptly after the occurrence of any
event (including the passing of time but excluding any event mentioned in (ii)
above) requiring a change in or renewal of the most recent Form 4224 or Form
1001 previously delivered by such Lender, deliver to Borrower through Agent two
accurate and complete original signed copies of Form 4224 or Form 1001 in
replacement for the forms previously delivered by the Lender; and
(d) Promptly upon Borrower's or Agent's reasonable
request to that effect, deliver to Borrower or Agent (as the case may be) such
other forms or similar documentation as may be required from time to time by any
applicable law, treaty, rule or regulation in order to establish such Lender's
tax status for withholding purposes.
2.14.7 Income Taxes2.14.7 Income Taxes. Borrower will not be
required to pay any additional amounts in respect of United States Federal
income tax pursuant to Subsection 2.14.4 to Lender for the account of any
Lending Office of such Lender:
(a) If the obligation to pay such additional amounts
would not have arisen but for a failure by such Lender to comply with its
obligations under Subsection 2.14.6 in respect of such Lending Office;
(b) If such Lender shall have delivered to Borrower a
Form 4224 in respect of such Lending Office pursuant to Subsection 2.14.6 and
such Lender shall not at any time be entitled to exemption from deduction or
withholding of United States Federal income tax in respect of payments by
Borrower hereunder for the account of such Lending Office for any reason other
than a change in United States law or regulations or in the official
interpretation of such law or regulations by any Governmental Authority charged
with the interpretation or administration thereof (whether or not having the
force of law) after the date of delivery of such Form 4224; or
(c) If such Lender shall have delivered to Borrower a
Form 1001 in respect of such Lending Office pursuant to Subsection 2.14.6, and
such Lender shall not at any time be entitled to exemption from deduction or
withholding of United States Federal income tax in respect of payments by
Borrower hereunder for the account of such Lending Office for any reason other
than a change in United States law or regulations or any applicable tax treaty
or regulations or in the official interpretation of any such law, treaty or
regulations by any Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law) after the date
of delivery of such Form 1001.
2.14.8 Reimbursement of Costs2.14.8 Reimbursement of Costs.
If, at any time, Borrower requests any Lender to deliver any forms or other
documentation pursuant to Subsection 2.14.6(d), then Borrower shall, on demand
of such Lender through Agent, reimburse such Lender for any costs and expenses
(including reasonable attorney fees) reasonably incurred by such Lender in the
preparation or delivery of such forms or other documentation.
2.14.9 Jurisdiction2.14.9 Jurisdiction. If Borrower is
required to pay additional amounts to any Lender or Agent pursuant to Subsection
2.14.4, then such Lender shall use its reasonable good faith efforts (consistent
with legal and regulatory restrictions) to change the jurisdiction of its
Lending Office so as to eliminate any such additional payment by Borrower which
may thereafter accrue if such change in the judgment of such Lender is not
otherwise disadvantageous to such Lender.
2.15 Illegality.
2.15.1LIBOR Loans. If any Lender shall determine that the
introduction of any Requirement of Law, or any change in any Requirement of Law
or in the interpretation or administration thereof, has made it unlawful, or
that any central bank or other Governmental Authority has asserted that it is
unlawful, for such Lender or its Lending Office to make LIBOR Loans, then, on
notice thereof by Lender to Borrower, the obligation of such Lender to make
LIBOR Loans shall be suspended until such Lender shall have notified Borrower
that the circumstances giving rise to such determination no longer exists.
2.15.2 Prepayment. If a Lender shall determine that it is
unlawful to maintain any LIBOR Loan, Borrower shall prepay in full all LIBOR
Loans of such Lender then outstanding, together with interest accrued thereon,
either on the last day of the Interest Period thereof if such Lender may
lawfully continue to maintain such LIBOR Loans to such day, or immediately, if
such Lender may not lawfully continue to maintain such LIBOR Loans, together
with any amounts required to be paid in connection therewith pursuant to Section
2.18.
2.15.3 Prime Rate Borrowing2.15.3Prime Rate Borrowing. If
Borrower is required to prepay any LIBOR Loan immediately as provided in Section
2.2.3, then concurrently with such prepayment, Borrower shall borrow, in the
amount of such prepayment, a Prime Rate Loan.
2.16 Increased Costs2.16 Increased Costs. If any Lender shall determine
that, due to either (a) the introduction of or any change (other than any change
by way of imposition of or increase in reserve requirements included in the
calculation of the LIBOR) in or in the interpretation of any Requirement of Law
or (b) the compliance with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Lender of agreeing to make or making,
funding or maintaining any LIBOR Loans, then Borrower shall be liable, and shall
from time to time, upon demand therefor by such Lender, pay to such Lender such
additional amounts as are sufficient to compensate such Lender for such
increased costs.
2.17 Inability to Determine Rates2.17 Inability to Determine Rates. If
Agent shall have determined that for any reason adequate and reasonable means do
not exist for ascertaining the LIBOR for any requested Interest Period with
respect to a proposed LIBOR Loan or that the LIBOR applicable for any requested
Interest Period with respect to a proposed LIBOR Loan does not adequately and
fairly reflect the cost to Lenders of funding such Loan, Agent will forthwith
give notice of such determination to Borrower and each Lender. Thereafter, the
obligation of Lenders to make or maintain LIBOR Loans, as the case may be,
hereunder shall be suspended until Agent, upon instruction from the Requisite
Lenders, revokes such notice in writing. Upon receipt of such notice, Borrower
may revoke any Notice of Borrowing or Notice of Conversion/Continuation then
submitted. If Borrower does not revoke such notice, Lenders shall make, convert
or continue the Loans, as proposed by Borrower, in the amount specified in the
applicable notice submitted by Borrower, but such Loans shall be made, converted
or continued as Prime Rate Loans instead of LIBOR Loans, as the case may be.
2.18 Prepayment of LIBOR Loans2.18 Prepayment of LIBOR Loans. Borrower
agrees that in the event that Borrower prepays or is required to prepay any
LIBOR Loan by acceleration or otherwise or fails to draw down or convert to a
LIBOR Loan after giving notice thereof, it shall reimburse each Lender for its
funding losses due to such prepayment or failure to draw. Borrower and Lenders
hereby agree that such funding losses shall consist of the sum of the discounted
monthly differences for each month during the applicable or requested Interest
Period, calculated as follows for each such month:
2.18.1 Principal amount of such LIBOR Loan times (number of
days between the date of prepayment and the last day in the applicable Interest
Period divided by 360), times the applicable Interest Differential, plus
2.18.2 all actual out-of-pocket expenses (other than those
taken into account in the calculation of the Interest Differential) incurred by
Lenders and Agent (excluding allocation of any expense internal to Lenders and
Agent) and reasonably attributable to such payment, prepayment or failure to
draw down or convert as described above; provided that no prepayment fee shall
be payable (and no credit or rebate shall be required) if the product of the
foregoing formula is not a positive number.
SECTION 3. CONDITIONS PRECEDENT.
3.1 Effectiveness of this Agreement3.1 Effectiveness of this Agreement.
The effectiveness of this amended and restated Agreement is subject to the
satisfaction of the following conditions precedent:
3.1.1 Corporate Documents3.1.1 Corporate Documents. Agent
shall have received, in form and substance satisfactory to Lenders and their
respective counsel, the following:
(a) A certified copy of the records of all actions
taken by Borrower and PLMI, including all corporate resolutions of Borrower and
PLMI authorizing or relating to the execution, delivery and performance of this
Agreement and the other Loan Documents and the consummation of the transactions
contemplated hereby and thereby;
(b) A certificate of a Responsible Officer of each of
Borrower and PLMI, stating that (A) the articles or certificate of
incorporation, as the case may be, bylaws and any other formation documents of
Borrower and PLMI previously delivered to Agent in relation to the TEC AcquiSub
Agreement are true and accurate, remain in full force and effect and have not
been amended since the date thereof and (B) each of Borrower and PLMI are in
good standing under the laws of the state of its formation and each other
jurisdiction where its ownership of Property and assets or conduct of business
requires such qualification;
(c) Certificates of incumbency and signature with
respect to the authorized representatives of Borrower and PLMI executing this
Agreement and the other Loan Documents and requesting Loans; and
(d) Such other documents relating to Borrower or PLMI
as Lenders reasonably may request.
3.1.2 Notes. Agent shall have received the Notes, in form and
substance satisfactory to Lenders, duly executed and delivered by Borrower,
which Notes shall replace and supersede the existing Notes dated as of November
5, 1996, issued by Borrower to FUNB and Fleet.
3.1.3 Opinion of Counsel3.1.3 Opinion of Counsel. Agent shall
have received an originally executed Opinion of Counsel on behalf of Borrower
and PLMI, in form and substance satisfactory to Lenders, dated as of the Closing
Date and addressed to Lenders, together with copies of any officer's certificate
or legal opinion of other counsel or law firm specifically identified and
expressly relied upon by such counsel.
3.1.4 Reaffirmation of Guaranty3.1.4 Reaffirmation of
Guaranty. Agent shall have received the Reaffirmation of Guaranty duly executed
and delivered by PLMI.
3.1.5 Growth Fund Agreement3.1.5Growth Fund Agreement. Agent
shall have received the Growth Fund Agreement, duly executed and delivered by
each of the Growth Funds, and all conditions precedent to the effectiveness of
the Growth Fund Agreement shall have been satisfied.
3.1.6 AFG Agreement.3.1.6 AFG Agreement. Agent shall have
received the AFG Amendment, duly executed and delivered by AFG, and all
conditions precedent to the effectiveness of the AFG Agreement shall have been
satisfied.
3.1.7Bringdown Certificate. A certificate or certificates,
dated as of the Closing Date, of the Chief Financial Officer or Corporate
Controller of Borrower to the effect that (i) the representations and warranties
of Borrower contained in Section 4 are true, accurate and complete in all
material respects as of the Closing Date as though made on such date and (ii) no
Event of Default or Potential Event of Default under this Agreement has
occurred.
3.1.8 Fees. Agent shall have received the Agent's Side Letter
and BMO shall have received the Lender's Side Letter, each duly executed by
Borrower, Guarantor, each of the Growth Funds and AFG, and Agent and BMO shall
have received the fees described in the Agent's Side Letter and the Lender's
Side Letter, respectively.
3.1.9 Other Documents. Agent shall have received such other
documents, information and items from Borrower and PLMI as reasonably requested
by Agent.
3.2 All Loans. Unless waived in writing by Requisite Lenders, the
obligation of any Lender to make any Advance is subject to the satisfaction of
the following further conditions precedent:
3.2.1 Notice of Borrowing. At least three (3) Business Days
before each Loan hereunder with respect to any acquisition of Equipment by
Borrower, Agent shall have received (a) a Notice of Borrowing; (b) a Borrowing
Base Certificate; (c) a description of the transaction, including (i) a listing
of all Equipment against which Borrower is requesting that a Loan be made,
identifying each item of Equipment by serial number, registration number or
other identifying mark, as applicable, and indicating whether each such item is
owned by Borrower or by an Owner Trustee for the benefit of Borrower (and if the
latter, identifying such Owner Trustee and date of any applicable trust or
similar agreement), (ii) the lessee, the date of the lease and the lease
termination date, (iii) lessee financial information, and (iv) the terms of the
underlying lease; and (d) other information as may be requested by the Agent to
confirm that such Equipment satisfies the criteria for Eligible Inventory.
3.2.2 Invoices. At least five (5) Business Days before each
Loan hereunder with respect to any acquisition of Equipment by Borrower, Agent
shall have received invoice and such other information related to the purchase
of each item of Equipment as Agent shall reasonably request to confirm that the
proceeds of the requested Loan will not be used to finance more than eighty
percent (80.0%) of the Invoice Price of such Equipment.
3.2.3 Title to Equipment. At least five (5) Business Days
before each Loan hereunder with respect to any acquisition of Equipment by
Borrower, Agent shall have received such documents and copies of instruments of
title as Agent shall reasonably request to confirm that upon the consummation of
such acquisition, Borrower shall have acquired of record (or if such Equipment
is to be acquired of record by an Owner Trustee, the beneficial interest in)
such Equipment, free and clear of any Liens or other encumbrances on title
(other than Permitted Liens).
3.2.4 Approval of Loan. Approval of such requested Loan by
Agent, after review of the lessee, Equipment, Lease and any other material
circumstances relating to the Loan.
3.2.5 Leases. Prior to the Funding Date of any such Loan, if
available, and in no event later than five (5) Business Days following such
Funding Date, Borrower shall have delivered to Agent, on behalf of Lenders, the
original executed counterparts of each Lease or schedules thereto or other
chattel paper, if any, relating to such Equipment and Eligible Inventory (other
than with respect to Railcars if such Railcars are leased pursuant to a master
lease, in which event Borrower shall deliver to Agent the applicable schedule(s)
to such master lease), against which the Loan is to be made.
3.2.6 No Event of Default3.2.6 No Event of Default. No event
shall have occurred and be continuing or would result from the making of any
Loan on such Funding Date which constitutes an Event of Default or Potential
Event of Default under this Agreement or under (and as separately defined in)
the Growth Fund Agreement, or which with notice or lapse of time or both would
constitute an Event of Default or Potential Event of Default under this
Agreement or under the Growth Fund Agreement.
3.2.7 Officer's Certificate3.2.7Officer's Certificate. Agent
shall have received a certificate, dated as of the Funding Date, of the Chief
Financial Officer or Corporate Controller of Borrower to the effect that (i) all
representations and warranties contained in the Loan Documents are true,
accurate and complete in all material respects with the same effect as though
such representations and warranties had been made on and as of such Funding Date
(except to the extent such representations and warranties specifically relate to
an earlier date, in which case they shall be true, accurate and complete in all
material respects as of such earlier date), (ii) Borrower shall have either
available cash or have received a capital contribution from TEC for the purpose
of funding at least twenty percent (20.0%) of the Invoice Price of the Equipment
to be financed with such requested Loan, and if such a capital contribution has
been made, attaching a certificate of the Chief Financial Officer or Corporate
Controller of TEC to the effect that the making of such capital contributions
has not caused TEC to cease to be Solvent and (iii) from the perspective of
prudent portfolio diversity and management, given the Growth Funds' then
existing portfolio, such Equipment is of a type, model, age and condition
consistent with the investment objectives of the Growth Funds.
3.2.8 Officer's Certificate - Leases3.2.8Officer's Certificate
- - Leases. Agent shall have received a certificate, dated as of the Funding Date
of the Chief Financial Officer or Corporate Controller of Borrower with respect
to each Lease relating to an item of Equipment being financed with such Loan to
the effect that:
(a) The Lease constitutes the entire agreement of the
parties thereto and no party thereto shall be bound except in accordance
therewith;
(b) No amendments, modifications, supplements or
addenda have been made to, or schedules attached to, the Lease except as
disclosed in such certificate and the sole original thereof having been
delivered to Agent;
(c) No material default exists under the Lease as of
the date of the Loan;
(d) The Lease constitutes the valid contract of
Borrower and each lessee that is a party to the Lease, and shall at all times be
enforceable against each such lessee in accordance with its terms, subject to
the limitations on enforceability imposed by bankruptcy and creditors' rights
laws and the general principles of equity, and each party thereto has executed
the Lease with full power, authority and capacity to contract;
(e) Borrower is the sole owner and lessor of the
Equipment covered by the Lease;
(f) The lessee is responsible for the payment of all
taxes, insurance and similar charges so that all Lease payments will be net to
Borrower (except with respect to Leases covering time charters for marine
vessels, railcars and trailers consistent with industry standards for such type
of leases);
(g) Borrower has not and will not give or loan to any
lessee that is a party to the Lease, directly or indirectly, any unpaid rent or
other amount due or to become due under the Lease; and
(h) No rentals, fees, costs, expenses or charges paid
or payable by any lessee under the Lease violate any known statute, rule,
regulation, court ruling or other regulation or limitation relating to the
maximum fees, costs, expenses or charges permitted in any state in which the
Equipment is located or in which the lessee is located, resides or is domiciled,
or in which the transaction was consummated, or in any other state which has
jurisdiction of the Equipment, Lease or lessee.
3.2.9 Insurance. The insurance required to be maintained by
Borrower pursuant to the Loan Documents shall be in full force and effect.
3.2.10 Warranty of TEC AcquiSub. Agent shall have received
from Borrower its written representation and warranty that upon delivery of the
purchase price and the executed bill of sale or similar instrument of title, a
true and correct copy of which is to be attached, Borrower (or if an Owner
Trustee or Marine Subsidiary is to acquire record title, such Owner Trustee or
Marine Subsidiary) shall acquire good title to the item of Equipment against
which the Loan is to be made, free and clear of all Liens and other encumbrances
on title (other than Permitted Liens).
3.2.11 Other Instruments. Agent shall have received such other
instruments and documents as it may have reasonably requested from Borrower in
connection with the Loans to be made on such date.
3.3 Further Conditions to All Loans. Notwithstanding anything to the
contrary contained in this Agreement, unless waived in writing by Requisite
Lenders, no Lender shall have any obligation hereunder to make any Advance if
any of the following events shall occur:
3.3.1 General Partner or Manager. FSI shall have ceased to be
the sole general partner of any Growth Fund or the sole manager of Income Fund
I, whether due to the voluntary or involuntary withdrawal, substitution, removal
or transfer of FSI from or of all or any portion of FSI's general partnership
interest in any Growth Fund or capital contribution in Income Fund I.
3.3.2 Removal of General Partner or Manager. Twenty five
percent (25.0%) or more of the limited partners (measured by such partners'
percentage interest) of any Equipment Growth Fund shall at any time vote to
remove FSI as the general partner of such Equipment Growth Fund or a majority in
interest of Class A members, as that term is defined in the Operating Agreement
of Income Fund I, of Income Fund I shall at any time vote to remove FSI as the
manager of Income Fund I, in each case, regardless of whether FSI is actually
removed.
3.3.3 Cash Balances. The Equipment Growth Funds of which FSI
is the sole general partner shall at any time fail to maintain unrestricted cash
balances totalling, in the aggregate, $10,000,000.
3.3.4 Purchaser. Borrower or its Subsidiaries, Growth Funds,
FSI or its Subsidiaries shall have ceased to be the purchaser of Eligible
Inventory for any Growth Fund.
4. BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower hereby warrants and represents to Agent and each Lender as
follows, and agrees that each of said warranties and representations shall be
deemed to continue until full, complete and indefeasible payment and performance
of the Obligations and shall apply anew to each borrowing hereunder:
4.1 Existence and Power. Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the State of California
and is duly qualified and licensed as a foreign corporation and authorized to do
business in each jurisdiction within the United States where its ownership of
Property and assets or conduct of business requires such qualification. Borrower
has the corporate power and authority, rights and franchises to own its Property
and assets and to carry on its business as now conducted. Borrower has the
corporate power and authority to execute, deliver and perform the terms of the
Loan Documents (to the extent it is a party thereto) and all other instruments
and documents contemplated hereby or thereby.
4.2 Loan Documents and Note Authorized; Binding Obligations. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents to which Borrower is a party and payment of the Note have been duly
authorized by all necessary and proper corporate action on the part of Borrower.
The Loan Documents constitute legally valid and binding obligations of Borrower,
enforceable against Borrower, to the extent Borrower is a party thereto, in
accordance with their respective terms, except as enforcement thereof may be
limited by bankruptcy, insolvency or other laws affecting the enforcement of
creditors' rights generally.
4.3 No Conflict; Legal Compliance. The execution, delivery and
performance of this Agreement, and each of the other Loan Documents and the
execution, delivery and payment of the Note will not: (a) contravene any
provision of Borrower's articles of incorporation or bylaws; (b) contravene,
conflict with or violate any applicable law or regulation, or any order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority, which contravention, conflict or violation, in the aggregate, may
have a Material Adverse Effect; or (c) violate or result in the breach of, or
constitute a default under any indenture or other loan or credit agreement, or
other agreement or instrument to which Borrower is a party or by which Borrower,
or its Property and assets may be bound or affected. Borrower is not in
violation or breach of or default under any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any contract, agreement,
lease, license, indenture or other instrument to which it is a party, the
non-compliance with, the violation or breach of or the default under which
would, with reasonable likelihood, have a Material Adverse Effect.
4.4 Financial Condition. FSI's audited consolidated financial
statements as of December 31, 1996, and Borrower's and FSI's unaudited
consolidated financial statements as of June 30, 1997, copies of which
heretofore have been delivered to Agent by Borrower, and all other financial
statements and other data submitted in writing by Borrower to Agent or any
Lender in connection with the request for credit granted by this Agreement, are
true, accurate and complete in all material respects, and said financial
statements and other data fairly present the consolidated financial condition of
FSI, as of the date thereof, and have been prepared in accordance with GAAP,
subject to fiscal year-end audit adjustments. There has been no material adverse
change in the business, properties or assets, operations, prospects,
profitability or financial or other condition of Borrower or FSI since December
31, 1996.
4.5 Executive Offices. The current location of Borrower's chief
executive offices and principal places of business is set forth on Schedule 4.5.
4.6 Litigation. Except as set forth in Schedule 4.6, there are no
claims, actions, suits, proceedings or other litigation pending or, to the best
of Borrower's knowledge, after due inquiry, threatened against Borrower, at law
or in equity before any Governmental Authority or, to the best of Borrower's
knowledge, after due inquiry, any investigation by any Governmental Authority of
Borrower's Properties or assets. Borrower has no Contingent Obligations.
4.7 Material Contracts. Schedule 4.7 lists all currently effective
contracts and agreements (whether written or oral) to which Borrower is a party.
There are no material defaults under any such contract or agreement by Borrower.
Borrower has delivered to Agent true and correct copies of all such contracts or
agreements (or, with respect to oral contracts or agreements, written
descriptions of the material terms thereof).
4.8 Consents and Approvals. No approval, authorization or consent of
any trustee or holder of any indebtedness or obligation of Borrower or of any
other Person under any such material agreement, contract, lease or license or
similar document or instrument to which Borrower is a party or by which Borrower
is bound, is required to be obtained by Borrower in order to make or consummate
the transactions contemplated under the Loan Documents. Except as set forth in
Schedule 4.8, all consents and approvals of, filings and registrations with, and
other actions in respect of, all Governmental Authorities required to be
obtained by Borrower in order to make or consummate the transactions
contemplated under the Loan Documents have been, or prior to the time when
required will have been, obtained, given, filed or taken and are or will be in
full force and effect.
4.9 Other Agreements. Borrower is not a party to and is not bound by
any agreement, contract, lease, license or instrument, and is not subject to any
restriction under its respective charter or formation documents, which has, or
is likely in the foreseeable future to have, a Material Adverse Effect. Borrower
has not entered into and, as of the Closing Date does not contemplate entering
into, any material agreement or contract with any Affiliate of Borrower on terms
that are less favorable to Borrower than those that might be obtained at the
time from Persons who are not such Affiliates.
4.10Employment and Labor Agreements. There are no employment agreements
covering management of Borrower and there are no collective bargaining
agreements or other labor agreements covering any employees of Borrower.
4.11 ERISA. Borrower does not have any Employee Benefit Plan which is
subject to ERISA.
4.12 Labor Matters. There are no strikes or other labor disputes
against or threatened against Borrower. All payments due from Borrower on
account of employee health and welfare insurance which would, with reasonable
likelihood, have a Material Adverse Effect if not paid have been paid or, if not
due, accrued as a liability on the books of Borrower.
4.13 Margin Regulations. Borrower does not own any "margin security",
as that term is defined in Regulations G and U of the Federal Reserve Board, and
the proceeds of the Loans under this Agreement will be used only for the
purposes contemplated hereunder. None of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans under this Agreement to be considered a "purpose
credit" within the meaning of Regulations G, T, U and X. Borrower will not take
or permit any agent acting on its behalf to take any action which might cause
this Agreement or any document or instrument delivered pursuant hereto to
violate any regulation of the Federal Reserve Board.
4.14 Taxes. All federal, state, local and foreign tax returns, reports
and statements required to be filed by Borrower have been filed with the
appropriate Governmental Authorities where failure to file would, with
reasonable likelihood, have a Material Adverse Effect, and all material Charges
and other impositions shown thereon to be due and payable by Borrower have been
paid prior to the date on which any fine, penalty, interest or late charge may
be added thereto for nonpayment thereof, or any such fine, penalty, interest,
late charge or loss has been paid, or Borrower is contesting its liability
therefore in good faith and has fully reserved all such amounts according to
GAAP in the financial statements provided to Agent pursuant to Section 5.1.
Borrower has paid when due and payable all material Charges upon the books of
Borrower and no Government Authority has asserted any Lien against Borrower with
respect to unpaid Charges. Proper and accurate amounts have been withheld by
Borrower from its employees for all periods in full and complete compliance with
the tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective Governmental Authorities.
4.15 Environmental Quality.
4.15.1 Except as specifically disclosed in Schedule 4.15, the
on-going operations of Borrower comply in all material respects with all
Environmental Laws.
4.15.2 Except as specifically disclosed in Schedule 4.15,
Borrower has obtained all licenses, permits, authorizations and registrations
required under any Environmental Law ("Environmental Permits") and necessary for
its ordinary course operations, all such Environmental Permits are in good
standing, and Borrower is in compliance with all material terms and conditions
of such Environmental Permits.
4.15.3 Except as specifically disclosed in Schedule 4.15,
neither Borrower nor any of its present Property or operations is subject to any
outstanding written order from or agreement with any Governmental Authority nor
subject to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material.
4.15.4 There are no Hazardous Materials or other conditions or
circumstances existing with respect to any Property, or arising from operations
prior to the Closing Date, of Borrower that would reasonably be expected to give
rise to any Environmental Claim with a potential liability of Borrower in excess
of $100,000 in the aggregate from any such condition, circumstance or Property.
4.16 Trademarks, Patents, Copyrights, Franchises and Licenses4.16
Trademarks, Patents, Copyrights, Franchises and Licenses. Borrower possesses and
owns all necessary trademarks, trade names, copyrights, patents, patent rights,
franchises and licenses which are material to the conduct of its business as now
operated.
4.17 Full Disclosure4.17 Full Disclosure. As of the Closing Date, no
information contained in this Agreement, the other Loan Documents or any other
documents or written materials furnished by or on behalf of Borrower to Agent or
any Lender pursuant to the terms of this Agreement or any of the other Loan
Documents contains any untrue or inaccurate statement of a material fact or
omits to state a material fact necessary to make the statement contained herein
or therein not misleading in light of the circumstances under which made.
4.18 Other Regulations4.18 Other Regulations. Borrower is not: (a) a
"public utility company" or a "holding company," or an "affiliate" or a
"subsidiary company" of a "holding company," or an "affiliate" of such a
"subsidiary company," as such terms are defined in the Public Utility Holding
Company Act or (b) an "investment company," or an "affiliated person" of, or a
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act. The making of the Loans
hereunder and the application of the proceeds and repayment thereof by Borrower
and the performance of the transactions contemplated by this Agreement and the
other Loan Documents will not violate any provision of the Investment Company
Act or the Public Utility Holding Company Act, or any rule, regulation or order
issued by the SEC thereunder.
4.19 Solvency. Borrower is Solvent.
4.20 Survival of Representations and Warranties4.20 Survival of
Representations and Warranties. So long as any of the Commitments shall be
available and until payment and performance in full of the Obligations, the
representations and warranties contained herein shall have a continuing effect
as having been true when made.
5. BORROWER'S AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any of the Commitments
shall be available and until full, complete and indefeasible payment and
performance of the Obligations, unless Requisite Lenders shall otherwise consent
in writing, Borrower shall do or cause to have done all of the following:
5.1 Records and Reports. Maintain a system of accounting administered
in accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP, and deliver to Agent or caused to be
delivered to Agent:
5.1.1 Quarterly Statements. As soon as practicable and in any
event within sixty (60) days after the end of each quarterly accounting period
of Borrower, FSI and PLMI, except with respect to the final fiscal quarter of
each fiscal year, in which case as soon as practicable and in any event within
one hundred twenty (120) days after the end of such fiscal quarter, consolidated
and consolidating balance sheets of FSI and PLMI and a balance sheet of Borrower
as at the end of such period and the related consolidated (and, as to statements
of income only for FSI, consolidating) statements of income and stockholders'
equity of Borrower and FSI and the related consolidated statements of income,
stockholders' equity and cash flows of PLMI (and, as to statements of income
only, consolidating) for such quarterly accounting period, setting forth in each
case in comparative form the consolidated figures for the corresponding periods
of the previous year, all in reasonable detail and certified by the Chief
Financial Officer or Corporate Controller of Borrower, FSI and PLMI that they
(i) are complete and fairly present the financial condition of Borrower, FSI and
PLMI as at the dates indicated and the results of their operations and changes
in their cash flow for the periods indicated, (ii) disclose all liabilities of
Borrower, FSI and PLMI that are required to be reflected or reserved against
under GAAP, whether liquidated or unliquidated, fixed or contingent and (iii)
have been prepared in accordance with GAAP, subject to changes resulting from
audit and normal year-end adjustment;
5.1.2 Annual Statements. As soon as practicable and in any
event within one hundred twenty (120) days after the end of each fiscal year of
Borrower, FSI and PLMI, consolidated and consolidating balance sheets of FSI and
PLMI and a balance sheet of Borrower as at the end of such year and the related
consolidated (and, as to statements of income only for FSI and PLMI,
consolidating) statements of income, stockholders' equity and cash flows of
Borrower, FSI and PLMI for such fiscal year, setting forth in each case, in
comparative form the consolidated figures for the previous year, all in
reasonable detail and (i) in the case of such consolidated financial statements,
accompanied by a report thereon of an independent public accountant of
recognized national standing selected by Borrower, FSI and PLMI and satisfactory
to Agent, which report shall contain an opinion which is not qualified in any
manner or which otherwise is satisfactory to Requisite Lenders, in their sole
discretion, and (ii) in the case of such consolidating financial statements,
certified by the Chief Financial Officer or Corporate Controller of FSI and
PLMI;
5.1.3 Borrowing Base Certificate. As soon as practicable, and
in any event not later than fifteen (15) days after the end of each calendar
month in which a Loan has been, or is outstanding, a Borrowing Base Certificate
dated as of the last day of such month, duly executed by a Chief Financial
Officer or Corporate Controller of Borrower, with appropriate insertions;
5.1.4 Compliance Certificate. As soon as practicable, and in
any event not later than forty-five (45) days after the end of each fiscal
quarter of Borrower, a Compliance Certificate dated as of the last day of such
fiscal quarter, duly executed by the Chief Financial Officer or Corporate
Controller of Borrower, with appropriate insertions;
5.1.5 Reports. At Agent's request, promptly upon receipt
thereof, copies of all reports submitted to Borrower, FSI, TEC or PLMI by
independent public accountants in connection with each annual, interim or
special audit of the financial statements of Borrower, FSI, TEC or PLMI made by
such accountants;
5.1.6 Insurance Reports. (i) On the date six (6) months after
the Closing Date and thereafter upon Agent's reasonable request, which request
shall not be made more than once during any calendar year (unless an Event of
Default shall have occurred and be continuing, in which event such limitation
shall not apply), a report from Borrower's insurance broker, in such detail as
Agent may reasonably request, as to the insurance maintained or caused to be
maintained by Borrower pursuant to this Agreement, demonstrating compliance with
the requirements hereof and thereof, and (ii) as soon as possible and in no
event later than fifteen (15) days prior to the expiration date of any insurance
policy of Borrower, a written confirmation that such policy is in process of
renewal and is not terminated or subject to a notice of non-renewal from such
Borrower's insurance broker; provided, however, that Borrower shall give Agent
prompt written notice if changes affecting risk coverage will be made to such
policy or if the policy will be canceled;
5.1.7 Certificate of Responsible Officer. Promptly upon any
officer of Borrower obtaining knowledge (i) of any condition or event which
constitutes an Event of Default or Potential Event of Default under this
Agreement, (ii) that any Person has given any notice to Borrower, FSI, TEC or
PLMI or taken any other action with respect to a claimed default or event or
condition of the type referred to in Section 8.1.2, (iii) of the institution of
any litigation or of the receipt of written notice from any Governmental
Authority as to the commencement of any formal investigation involving an
alleged or asserted liability of Borrower of any amount and of FSI, TEC or PLMI
equal to or greater than $500,000 or any adverse judgment in any litigation
involving a potential liability of Borrower of any amount and of FSI, TEC or
PLMI equal to or greater than $500,000, or (iv) of a material adverse change in
the business, operations, properties, assets or condition (financial or
otherwise) of Borrower, FSI, TEC or PLMI, a certificate of a Responsible Officer
of Borrower, specifying the notice given or action taken by such Person and the
nature of such claimed default, Event of Default, Potential Event of Default,
event or condition and what action Borrower, FSI, TEC or PLMI has taken, is
taking and proposes to take with respect thereto;
5.1.8 Employee Benefit Plans. Promptly upon becoming aware of
the occurrence of any (i) Termination Event in connection with any Pension Plan
or (ii) "prohibited transaction" (as such term is defined in ERISA and the Code)
in connection with any Employee Benefit Plan or any trust created thereunder, a
written notice specifying the nature thereof, what action Borrower or any of its
ERISA Affiliates has taken, is taking or proposes to take with respect thereto,
and, when known, any action taken or threatened by the IRS or the PBGC with
respect thereto;
5.1.9 ERISA Notices. With reasonable promptness, copies of (i)
all notices received by Borrower or any of its ERISA Affiliates of the PBGC's
intent to terminate any Pension Plan or to have a trustee appointed to
administer any Pension Plan, (ii) each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) filed by Borrower or any of its ERISA
Affiliates with the IRS with respect to each Pension Plan covering employees of
Borrower, and (iii) all notices received by Borrower or any of its ERISA
Affiliates from a Multiemployer Plan sponsor concerning the imposition or amount
of withdrawal liability pursuant to Section 4202 of ERISA;
5.1.10 Pension Plans. Promptly upon receipt by Borrower any
challenge by the IRS to the qualification under Section 401 or 501 of the Code
of any Pension Plan;
5.1.11SEC Reports. As soon as available and in no event later
than five (5) days after the same shall have been filed with the SEC, a copy of
each Form 8-K Current Report, Form 10-K Annual Report, Form 10-Q Quarterly
Report, Annual Report to Shareholders, Proxy Statement and Registration
Statement of PLMI;
5.1.12Tax Returns. Upon the request of Agent, copies of all
federal, state, local and foreign tax returns and reports in respect of income,
franchise or other taxes on or measured by income (excluding sales, use or like
taxes) filed by or on behalf of Borrower, FSI, TEC and PLMI; and
5.1.13 Additional Information. Such other information
respecting the condition or operations, financial or otherwise, of Borrower and
PLMI and its Subsidiaries as Agent or any Lender may from time to time
reasonably request, and such information regarding the lessees under Leases as
Borrower from time to time receives or Agent or any Lender reasonably requests.
All financial statements of Borrower, FSI and PLMI to be delivered by
Borrower, FSI and PLMI to Agent pursuant to this Section 5.1 will be complete
and correct and present fairly the financial condition of Borrower, FSI and PLMI
as of the date thereof; will disclose all liabilities of Borrower, FSI and PLMI
that are required to be reflected or reserved against under GAAP, whether
liquidated or unliquidated, fixed or contingent; and will have been prepared in
accordance with GAAP. All tax returns submitted to Agent by Borrower, FSI and
PLMI will, to the best of Borrower's, FSI's and PLMI's knowledge, after due
inquiry, be true and correct. Borrower, FSI and PLMI hereby agree that each time
either submits a financial statement or tax return to Agent, Borrower, FSI and
PLMI shall be deemed to represent and warrant to Lenders that such financial
statement or tax return complies with all of the preceding requirements set
forth in this paragraph.
5.2 Existence; Compliance with Law. Borrower shall preserve and
maintain its existence and all of its licenses, permits, governmental approvals,
rights, privileges and franchises necessary or desirable in the normal conduct
of its business as now conducted or presently proposed to be conducted
(including, without limitation, its qualification to do business in each
jurisdiction in which such qualification is necessary or desirable in view of
its business); to conduct its business in an orderly and regular manner; and
comply with (a) the provisions of its articles of incorporation and bylaws and
(b) the requirements of all applicable laws, rules, regulations or orders of any
Governmental Authority and requirements for the maintenance of Borrower's
insurance, licenses, permits, governmental approvals, rights, privileges and
franchises, except, in either case, to the extent that the failure to comply
therewith would not, in the aggregate, with reasonable likelihood, have a
Material Adverse Effect.
5.3 Insurance. Borrower shall maintain and keep in force insurance of
the types and in amounts then customarily carried in lines of business similar
to that of Borrower including, but not limited to, fire, extended coverage,
public liability, property damage, environmental hazard and workers'
compensation, in each case carried with financially sound Persons and in amounts
satisfactory to the Requisite Lenders (subject to commercial reasonableness as
to each type of insurance); provided, however, that the types and amounts of
insurance shall not provide any less coverage for Borrower than provided as of
the Closing Date by the existing blanket policies of insurance for PLMI and its
Subsidiaries. All such policies of property insurance carry endorsements naming
Agent as principal loss payee as to any property owned by Borrower and all such
policies as to liability insurance shall carry endorsements naming Agent and
each Lender as an additional insured, and in each case indicating that (i) any
loss thereunder shall be payable to Agent or Lenders, as the case may be,
notwithstanding any action, inaction or breach of representation or warranty by
Borrower; (ii) there shall be no recourse against any Lender for payment of
premiums or other amounts with respect thereto, and (iii) at least fifteen (15)
days' prior written notice of cancellation, lapse or material change in coverage
shall be given to Agent by the insurer.
5.4 Taxes and Other Liabilities. Promptly pay and discharge all
material Charges when due and payable, except (a) such as may be paid thereafter
without penalty or (b) such as may be contested in good faith by appropriate
proceedings and for which an adequate reserve has been established and is
maintained in accordance with GAAP. Borrower shall promptly notify Agent of any
material challenge, contest or proceeding pending by or against Borrower or
against PLMI or any of its other Subsidiaries before any taxing authority.
5.5 Inspection Rights; Assistance. At any reasonable time and from time
to time during normal business hours, permit Agent or any Lender or any agent,
representative or employee thereof, to examine and make copies of and abstracts
from the financial records and books of account of Borrower and other documents
in the possession or under the control of Borrower relating to any obligation of
Borrower arising under or contemplated by this Agreement, and to visit the
offices of Borrower to discuss the affairs, finances and accounts of Borrower
with any of the officers of Borrower, and, upon reasonable notice and during
normal business hours (unless an Event of Default or Potential Event of Default
shall have occurred and be continuing, in which event no notice is required) to
conduct audits of and appraise the Equipment. Such audits and appraisals shall
be subject to the lessee's right to quiet enjoyment as set forth in the
respective Lease.
5.6 Maintenance of Facilities; Modifications; Performance of Leases.
5.6.1 Maintenance of Facilities. Borrower shall keep its
Properties which are useful or necessary to Borrower in good repair and
condition, normal wear and tear excepted, and from time to time make necessary
repairs thereto, and renewals and replacements thereof so that Borrower's
Properties shall be fully and efficiently preserved and maintained.
5.6.2 Certain Modifications to the Equipment. Subject to
Section 5.6.1, Borrower shall promptly make, or cause to be made, all
modifications, additions and adjustments to the Eligible Inventory as may from
time to time be required by any Governmental Authority having jurisdiction over
the operation, safety or use thereof.
5.6.3Performance of Leases. Borrower shall timely perform in
all material respects each of its covenants and obligations under the Leases to
which it is a party.
5.7Supplemental Disclosure. From time to time as may be necessary (in
the event that such information is not otherwise delivered by Borrower to Agent
or Lenders pursuant to this Agreement), so long as there are Obligations
outstanding hereunder, disclose to Agent in writing any material matter
hereafter arising which, if existing or occurring at the date of this Agreement,
would have been required to be set forth or described by Borrower in this
Agreement or any of the other Loan Documents (including all Schedules and
Exhibits hereto or thereto) or which is necessary to correct any information set
forth or described by Borrower hereunder or thereunder or in connection herewith
which has been rendered inaccurate thereby.
5.8 Further Assurances. In addition to the obligations and documents
which this Agreement expressly requires Borrower to execute, deliver and
perform, Borrower shall execute, deliver and perform any and all further acts or
documents which Agent or Lenders may reasonably require to effectuate the
purposes of this Agreement or any of the other Loan Documents.
5.9 Lockbox. Borrower shall unless otherwise directed in writing by
Agent, cause all remittances made by the obligor under any Lease to be made to a
lock box (the "Lockbox") maintained with FUNB pursuant to the Lockbox Agreement.
Unless otherwise directed by Agent in writing, all invoices and other
instructions submitted by Borrower to the obligor relating to Lease payments
shall designate the Lockbox as the place to which such payments shall be made.
5.10 Environmental Laws. Borrower shall conduct its operations and keep
and maintain its Property in material compliance with all Environmental Laws.
5.11 Equipment Purchase Agreement. Borrower shall, upon the request of
Agent, which request may be made with respect to any Loan on or after the date
which is one hundred twenty (120) days after the Funding Date of such Loan,
deliver to Agent an Equipment Purchase Agreement with respect to the Equipment
against which such Loan was made.
6. BORROWER'S NEGATIVE COVENANTS.
So long as any of the Commitments shall be available and until full,
complete and indefeasible payment and performance of the Obligations, unless
Requisite Lenders shall otherwise consent in writing, Borrower covenants and
agrees as follows:
6.1 Liens; Negative Pledges; and Encumbrances. Borrower shall not
create, incur, assume or suffer to exist, and shall not permit any Marine
Subsidiary or Owner Trustee to create, incur, assume or suffer to exist, any
Lien of any nature upon or with respect to any of their respective Property,
whether now or hereafter owned, leased or acquired, except (collectively, the
"Permitted Liens"):
6.1.1 Liens granted in favor of Agent on behalf of Lenders
under the Security Agreement and the other Security Documents;
6.1.2 Liens for Charges if payment shall not at the time be
required to be made in accordance with Section 5.4;
6.1.3 Liens in respect of pledges, obligations or deposits (i)
under workers' compensation laws, unemployment insurance and other types of
social security or similar legislation, (ii) in connection with surety, appeal
and similar bonds incidental to the conduct of litigation, (iii) in connection
with bid, performance or similar bonds and mechanics', laborers' and
materialmen's and similar statutory Liens not then delinquent; or (iv)
incidental to the conduct of the business of Borrower, any Marine Subsidiary or
any Owner Trustee and which were not incurred in connection with the borrowing
of money or the obtaining of advances or credit; provided that the Liens
permitted by this Section 6.1.3 do not in the aggregate materially detract from
the value of any assets or property of or materially impair the use thereof in
the operation of the business of Borrower or any Owner Trustee; and provided
further that the adverse determination of any claim or liability, contingent or
otherwise, secured by any of such Liens would not either individually or in the
aggregate, with reasonable likelihood, have a Material Adverse Effect; and
6.1.4 Permitted Rights of Others.
6.2 Acquisitions6.2 Acquisitions. Borrower shall not, and shall not
permit any Marine Subsidiary to, make any Acquisition or enter into any
agreement to make any Acquisition, except with respect to the formation of
Marine Subsidiaries and the purchase of Equipment in the ordinary course of its
or their respective business.
6.3 Limitations on Indebtedness6.3 Limitations on Indebtedness.
Borrower shall not, and shall not permit any Marine Subsidiary or Owner Trustee
to, create, incur, assume or suffer to exist, any Indebtedness or Contingent
Obligation; provided, however, that this Section 6.3 shall not be deemed to
prohibit:
6.3.1 The Obligations to Lenders and Agent arising under this
Agreement and the other Loan Documents; and
6.3.2 With the prior written consent of Agent, Indebtedness
incurred in respect of the deferred purchase price for an item of Eligible
Inventory to be financed with the proceeds of a Loan hereunder, but only to the
extent that the incurrence of such Indebtedness is customary in the industry
with respect to the purchase of this type of equipment (provided that such
Indebtedness shall only be permitted under this clause (b) if, taking into
account the incurrence of such Indebtedness, Borrower shall not be in violation
of any of the financial covenants set forth in Section 7 if measured as of the
date of incurrence as determined by GAAP).
6.4 Use of Proceeds6.4 Use of Proceeds. Borrower and FSI shall not, and
shall not permit any Marine Subsidiary or Owner Trustee holding record title to
any Eligible Inventory for the beneficial interest of Borrower or FSI to, use
the proceeds of any Loan except for the purpose set forth in Recital B above and
shall not, and shall not permit any such Marine Subsidiary or such Owner Trustee
to, use the proceeds to repay any loans or advances made by any other Person.
6.5 Disposition of Assets6.5 Disposition of Assets. Borrower shall not,
and shall not permit any Marine Subsidiary or any Owner Trustee to, sell, assign
or otherwise dispose of, any of its or their respective assets, except for full,
fair and reasonable consideration, or enter or permit any Marine Subsidiary or
Owner Trustee to enter into any sale and leaseback agreement covering any of its
fixed or capital assets. In this regard, Borrower shall not sell, assign or
dispose of, and shall not permit any Marine Subsidiary or Owner Trustee to sell,
assign or dispose of, any partial record or beneficial ownership interest in any
Eligible Inventory, except upon the payment in cash of a purchase price equal to
the ratable portion of the Invoice Price paid by Borrower or such Marine
Subsidiary or Owner Trustee for such item of Eligible Inventory so sold,
assigned or otherwise disposed of, which cash purchase price will be subject to
mandatory prepayment pursuant to Section 2.2.3(c).
6.6 Restricted Payments6.6 Restricted Payments. Borrower shall not
declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of any shares of
any class of its capital stock, or purchase, redeem or otherwise acquire for
value any shares of its capital stock or any warrants, rights or options to
acquire such shares, now or hereafter outstanding; except that Borrower may, (a)
following the resale of any item of Eligible Inventory to PLMI, any Equipment
Growth Fund or any third party and after having repaid in full the Loan advanced
by Lender to finance the acquisition of such Eligible Inventory, dividend the
remaining proceeds of such resale to TEC and (b) no more frequently than monthly
and in no event prior to such time has Borrower shall have made payment in full
of all interest on the Loans funded hereunder accrued through the last day of
the previous calendar month, Borrower may dividend its net profits (revenues
less interest and operating expenses) to TEC.
6.7 Restriction on Fundamental Changes6.7 Restriction on Fundamental
Changes. Borrower shall not, and shall not permit any Marine Subsidiary to,
enter into any transaction of merger, consolidation or recapitalization,
directly or indirectly, whether by operation of law or otherwise, or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution), or
convey, sell, lease, assign, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or any part of its business,
Property or assets, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or substantially all the business, Property or assets
of, or stock or other evidence of beneficial ownership of, any Person, except
for the formation of Marine Subsidiaries, the sale and transfer of all of its
ownership interest (whether Stock or otherwise) in any Marine Subsidiary to an
Equipment Growth Fund and the acquisition or resale of Equipment in the ordinary
course of business and as contemplated by this Agreement.
6.8 Transactions with Affiliates6.8 Transactions with Affiliates.
Borrower shall not, and shall not permit any Marine Subsidiary to, directly or
indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any of its Affiliates on terms that are less
favorable to Borrower or such Marine Subsidiary than those that might be
obtained at the time from Persons who are not such Affiliates.
6.9 No Loans to Affiliates6.9 No Loans to Affiliates. Borrower shall
not make any loans to any of its Affiliates other than to its Marine
Subsidiaries.
6.10 No Investment6.10 No Investment. Borrower shall not make or suffer
to exist, or permit or suffer any of its Marine Subsidiaries to make or suffer
to exist, any Investment except the sharing arrangements with respect to
Equipment which are shared with Equipment Growth Funds.
6.11 Maintenance of Business6.11 Maintenance of Business. Borrower
shall not engage in any business other than the purchase of transportation
equipment and the operation, leasing, remarketing and resale of such equipment.
6.12 No Modification to Leases6.12 No Modification to Leases. Borrower
shall not modify or agree to modify any material term of any Lease to which it
is a party without the written consent of Agent, which consent will not be
unreasonably withheld. For purposes of this Section 6.12, material Lease terms
shall include, without limitation, terms relating to lease payments, maturity
and the amount and scope of the lessee's insurance coverage.
6.13 No Subsidiaries. Borrower shall not create any Subsidiaries except
Marine Subsidiaries.
6.14Amendments of Charter Documents. Borrower shall not amend its
articles of incorporation, bylaws and any other charter documents or permit any
Marine Subsidiary to amend its articles of incorporation, bylaws or other
charter documents.
6.15 Events of Default. Borrower shall not take or omit to take any
action, which act or omission would, with the lapse of time, or otherwise
constitute (a) a default, event of default or Event of Default under any of the
Loan Documents or (b) a default or an event of default under any other material
agreement, contract, lease, license, mortgage, deed of trust or instrument to
which it is a party or by which it or any of its Properties or assets is bound,
which default or event of default would, with reasonable likelihood, have a
Material Adverse Effect.
6.16 ERISA.
6.16.1 Borrower shall not incur any obligation to contribute
to a Pension Plan required by a collective bargaining agreement or as a
consequence of the acquisition of an ERISA Affiliate, unless (i) Borrower shall
notify Agent in writing that it intends to incur such obligation and (ii) after
Agent's receipt of such notice, Requisite Lenders consent to the establishment
or maintenance of, or Borrower's incurring an obligation to contribute to, the
Pension Plan, which consent may not unreasonably be withheld but may be subject
to such reasonable conditions as Requisite Lenders may require.
6.16.2 If Borrower or any ERISA Affiliate of Borrower incurs
any obligation to contribute to any Pension Plan, then Borrower shall not (i)
terminate, or permit such ERISA Affiliate to terminate, any Pension Plan so as
to result in any liability that would, with reasonable likelihood, have a
Material Adverse Effect or (ii) make or permit such ERISA Affiliate to make a
complete or partial withdrawal (within the meaning of Section 4201 of ERISA)
from any Multiemployer Plan so as to result in any liability that would, with
reasonable likelihood, have a Material Adverse Effect.
6.17 No Use of Any Lender's Name. Borrower shall not use or authorize
others to use any Lender's name or marks in any publication or medium,
including, without limitation, any prospectus, without such Lender's advance
written authorization.
6.18 Certain Accounting Changes. Borrower shall not change its fiscal
year end from December 31, nor make any change in its accounting treatment and
reporting practices except as permitted by GAAP; provided, however, that should
Borrower change its accounting treatment or reporting practices in a way that
would cause a change in the calculation, or in the results of a calculation, of
any of the financial covenants set forth in Section 7, below, then Borrower,
shall continue to calculate such covenants as if such accounting treatment or
reporting practice had not been changed unless otherwise agreed to by Requisite
Lenders.
7. FINANCIAL COVENANTS OF BORROWER.
Borrower covenants and agrees that, so long as the Commitments
hereunder shall be available, and until full, complete and indefeasible payment
and performance of the Obligations, including, without limitation, all Loans
evidenced by the Note, unless Requisite Lenders shall otherwise consent in
writing, Borrower shall perform the following financial covenants. Borrower
agrees and understands that (except as expressly provided herein) all covenants
under this Section 7 shall be subject to quarterly compliance (as measured on
the last day of each fiscal quarter of Borrower), and in each case review by
Lenders of the respective fiscal quarter's consolidated financial statements
delivered to Agent by Borrower pursuant to Section 5.1.
7.1 Minimum Consolidated Tangible Net Worth. Borrower shall at all
times maintain a Consolidated Tangible Net Worth of not less than twenty percent
(20.0%) of the net book value of Eligible Inventory.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 Events of Default. The occurrence of any one or more of the
following shall constitute an Event of Default:
8.1.1 Failure to Make Payments. Borrower, FSI or any Owner
Trustee fails to pay any sum due to Lenders or Agent arising under this
Agreement, the Note or any of the other Loan Documents when and as the same
shall become due and payable, whether by acceleration or otherwise and such
failure shall not have been cured to Lenders' satisfaction within five (5)
calendar days; or
8.1.2 Other Agreements. (a) Borrower or any Marine Subsidiary
or any Owner Trustee thereof defaults in the repayment of any principal of or
the payment of any interest on any Indebtedness of Borrower or such Marine
Subsidiary or Owner Trustee, or breaches any term of any evidence of such
Indebtedness or defaults in any payment in respect of any Contingent Obligation,
(b) FSI, TEC or any Owner Trustee thereof defaults in the repayment of any
principal of or the payment of any interest on any Indebtedness of FSI or TEC,
respectively, or breaches any term of any evidence of such Indebtedness or
defaults in any payment in respect of any Contingent Obligations (excluding, as
to FSI, any Contingent Obligations of FSI arising solely as a result of FSI's
status as a general partner of any Person other than Borrower), in each case
exceeding, in the aggregate outstanding principal amount, $2,000,000, (c)
Borrower, any Marine Subsidiary, FSI, TEC or any Owner Trustee breaches or
violates any term or provision of any evidence of such Indebtedness or
Contingent Obligation or of any such loan agreement, mortgage, indenture,
guaranty or other agreement relating thereto if the effect of such breach is to
permit acceleration under the applicable instrument, loan agreement, mortgage,
indenture, guaranty or other agreement and such failure shall not have been
cured within the applicable cure period, or there is an acceleration under the
applicable instrument, loan agreement, mortgage, indenture, guaranty or other
agreement, or (d) PLMI defaults in the repayment of any principal of or the
payment of any interest on any Indebtedness, including, without limitation,
Indebtedness arising under or in respect of the Senior Agreement or defaults in
any payment in respect of any Contingent Obligation, in each case exceeding, in
the aggregate outstanding principal amount, $2,000,000, or PLMI breaches or
violates any term or provision of any evidence of such Indebtedness or
Contingent Obligation or of any such loan agreement, mortgage, indenture,
guaranty or other agreement relating thereto with the result that such
Indebtedness or Contingent Obligation becomes or is caused to become then due
and payable in its entirety, whether by acceleration of otherwise; or
8.1.3 Breach of Covenants. Borrower fails or neglects to
perform, keep or observe any of the covenants contained in Sections 2.1.3, 5.2,
5.3, 5.9, 5.11, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.13
and 6.14, or any of the financial covenants contained in Section 7 of this
Agreement; or
8.1.4 Breach of Representations or Warranties. Any
representation or warranty made by or on behalf of Borrower or FSI in this
Agreement or any statement or certificate at any time given in writing pursuant
hereto or in connection herewith shall be false, misleading or incomplete in any
material respect when made; or
8.1.5 Failure to Cure. Except as provided in Sections 8.1.1
and 8.1.3, Borrower, FSI or any Marine Subsidiary or Owner Trustee fails or
neglects to perform, keep or observe any covenant or provision of this Agreement
or of any of the other Loan Documents or any other document or agreement
executed by Borrower, FSI or any Marine Subsidiary or Owner Trustee in
connection therewith and the same has not been cured to Requisite Lenders'
satisfaction within thirty (30) calendar days after Borrower, FSI or any Marine
Subsidiary or Owner Trustee shall become aware thereof, whether by written
notice from Agent or any Lender or otherwise; or
8.1.6 Insolvency. Borrower, any Marine Subsidiary, FSI, TEC,
PLMI or any Owner Trustee or any other guarantor of any of Borrower's or FSI's
obligations to Lenders shall (i) cease to be Solvent, (ii) admit in writing its
inability to pay its debts as they mature, (iii) make an assignment for the
benefit of creditors, (iv) apply for or consent to the appointment of a
receiver, liquidator, custodian or trustee for it or for a substantial part of
its Properties or business, or such a receiver, liquidator, custodian or trustee
otherwise shall be appointed and shall not be discharged within sixty (60) days
after such appointment; or
8.1.7 Bankruptcy Proceedings. Bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by
or against Borrower, any Marine Subsidiary, FSI, TEC, PLMI or any Owner Trustee
or any other guarantor of any of Borrower's or FSI's obligations to Lenders or
any order, judgment or decree shall be entered against Borrower, any Marine
Subsidiary, FSI, TEC, PLMI or any Owner Trustee or any other guarantor of any of
Borrower's or FSI's obligations to Lenders decreeing its dissolution or
division; provided, however, with respect to an involuntary petition in
bankruptcy, such petition shall not have been dismissed within sixty (60) days
after the filing of such petition; or
8.1.8 Material Adverse Effect. There shall have been a change
in the assets, liabilities, financial condition, operations, affairs or
prospects of Borrower, any Marine Subsidiary, FSI, TEC, PLMI or any Owner
Trustee or any other guarantor of any of Borrower's or FSI's obligations to
Lenders which, in the reasonable determination of Requisite Lenders has, either
individually or in the aggregate, had a Material Adverse Effect; or
8.1.9 Judgments, Writs and Attachments. There shall be a money
judgment, writ or warrant of attachment or similar process entered or filed
against Borrower, any Marine Subsidiary, FSI, TEC or any Owner Trustee which
(net of insurance coverage) remains unvacated, unbonded, unstayed or unpaid or
undischarged for more than sixty (60) days (whether or not consecutive) or in
any event later than five (5) calendar days prior to the date of any proposed
sale thereunder, which, together with all such other unvacated, unbonded,
unstayed, unpaid and undischarged judgments or attachments against Borrower or
any Marine Subsidiary in any amount; against FSI exceeds in the aggregate
$500,000; against TEC exceeds in the aggregate $500,000; or against any Owner
Trustee exceeds in the aggregate $1,000,000; or against any combination of the
foregoing Persons exceeds in the aggregate $1,000,000; or
8.1.10 Legal Obligations. Any of the Loan Documents shall for
any reason other than the full, complete and indefeasible satisfaction of the
Obligations thereunder cease to be, or be asserted by Borrower, FSI, TEC or any
Marine Subsidiary or Owner Trustee not to be, a legal, valid and binding
obligation of Borrower, FSI, TEC or any such Marine Subsidiary or Owner Trustee,
respectively, enforceable against such Person in accordance with its terms; or
8.1.11 Growth Fund Agreement. Without limiting the generality
of, and in addition to the events described in Section 8.1.1, the occurrence of
any "Event of Default" as defined under the Growth Fund Agreement or any other
loan or security document related to the Growth Fund Agreement; or
8.1.12 AFG Agreement. Without limiting the generality of, and
in addition to the events described in Section 8.1.1, the occurrence of any
"Event of Default" as defined under the AFG Agreement or any other loan or
security document related to the AFG Agreement.
8.1.13 Board of Directors. Borrower shall at any time fail
either (i) to have at least one member of its board of directors be an outside
independent director, not employed or otherwise engaged as an officer, employee,
consultant, director or in any other capacity by PLMI or any of its Subsidiaries
or (ii) to have (1) at least one member of its board of directors be a Person
who is not a member of the board of directors of PLMI or any of its other
Subsidiaries and (2) at least one additional member of its board of directors be
a Person who is not an inside director, whether employed as an officer or
employee, of PLMI or any of its other Subsidiaries and is not the Chairman of
the Board of PLMI; or
8.1.14 Criminal Proceedings. A criminal proceeding shall have
been filed in any court naming Borrower or any Marine Subsidiary or Owner
Trustee as a defendant for which forfeiture is a potential penalty under
applicable federal or state law which, in the reasonable determination of
Requisite Lenders, may have a Material Adverse Effect; or
8.1.15 Action by Governmental Authority. Any Governmental
Authority enters a decree, order or ruling ("Government Action") which will
materially and adversely affect Borrower's, any Marine Subsidiary's, FSI's,
TEC's, or PLMI's financial condition, operations or ability to perform or pay
such party's obligations arising under this Agreement or any instrument or
agreement executed pursuant to the terms of this Agreement or which will
similarly affect any Owner Trustee. Borrower or FSI shall have thirty (30) days
from the earlier of the date (a) Borrower or FSI, as applicable, first discovers
it is the subject of Government Action or (b) a Lender or any agency gives
notice of Government Action to take such steps as are necessary to obtain relief
from the Government Action. For the purpose of this paragraph, "relief from
Government Action" means to discharge or to obtain a dismissal of or release or
relief from (i) any Government Action so that the affected party or parties do
not incur (v) any monetary liability in the case of Borrower or any Marine
Subsidiary, (w) monetary liability of more than $500,000 in the case of FSI, (x)
monetary liability of more than $500,000 in the case of TEC, (y) monetary
liability of more than $1,000,000 in the case of PLMI, or (z) monetary liability
of more than $1,000,000, in the aggregate, in the case of any combination of the
foregoing Persons, or (ii) any disqualification of or other limitation on the
operation of Borrower, any Marine Subsidiary, FSI, TEC, and PLMI, or any of
them, which in the reasonable determination of the Requisite Lenders may have a
Material Adverse Effect; or
8.1.16 Governmental Decrees. Any Governmental Authority,
including, without limitation, the SEC, shall enter a decree, order or ruling
prohibiting the Equipment Growth Funds from releasing or paying to FSI any funds
in the form of management fees, profits or otherwise which, in the reasonable
determination of Requisite Lenders, may have a Material Adverse Effect.
8.2 Waiver of Default. An Event of Default may be waived only with the
written consent of Requisite Lenders, or if expressly provided, of all Lenders.
Any Event of Default so waived shall be deemed to have been cured and not to be
continuing; but no such waiver shall be deemed a continuing waiver or shall
extend to or affect any subsequent like default or impair any rights arising
therefrom.
8.3 Remedies. Upon the occurrence and continuance of any Event of
Default or Potential Event of Default, Lenders shall have no further obligation
to advance money or extend credit to or for the benefit of Borrower.
In addition, upon the occurrence and during the continuance of an Event
of Default, Lenders or Agent, on behalf of Lenders, may, at the option of
Requisite Lenders, do any one or more of the following, all of which are hereby
authorized by Borrower:
8.3.1 Declare all or any of the Obligations of Borrower under
this Agreement, the Note, the other Loan Documents and any other instrument
executed by Borrower pursuant to the Loan Documents to be immediately due and
payable, and upon such declaration such obligations so declared due and payable
shall immediately become due and payable; provided that if such Event of Default
is under Section 8.1.6 or 8.1.7, then all of the Obligations shall become
immediately due and payable forthwith without the requirement of any notice or
other action by Lenders or Agent;
8.3.2 Terminate this Agreement as to any future liability or
obligation of Agent or Lenders; and
8.3.3 Exercise in addition to all other rights and remedies
granted hereunder, any and all rights and remedies granted under the Loan
Documents or otherwise available at law or in equity.
8.4 Set-Off.
8.4.1 During the continuance of an Event of Default, any
deposits or other sums credited by or due from any Lender to Borrower, TEC or
FSI (exclusive of deposits in accounts expressly held in the name of third
parties or held in trust for benefit of third parties) may be set-off against
the Obligations and any and all other liabilities, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter arising, of
Borrower, TEC or FSI to Lenders. Each Lender agrees to notify promptly Borrower,
TEC or FSI and Agent of any such set-off; provided, that the failure to give
such notice shall not affect the validity of any such set-off.
8.4.2 Each Lender agrees that if it shall, whether by right of
set-off, banker's lien or similar remedy pursuant to Section 8.4.1, obtain any
payment as a result of which the outstanding and unpaid principal portion of the
Commitments of such Lender shall be less than such Lender's Pro Rata Share of
the outstanding and unpaid principal portion of the aggregate of all
Commitments, such Lender receiving such payment shall simultaneously purchase
from each other Lender a participation in the Commitments held by such Lenders
so that the outstanding and unpaid principal amount of the Commitments and
participations in Commitments of such Lender shall be in the same proportion to
the unpaid principal amount of the aggregate of all Commitments then outstanding
as the unpaid principal amount under the Commitments of such Lender outstanding
immediately prior to receipt of such payment was to the unpaid principal amount
of the aggregate of all Commitments outstanding immediately prior to such
Lender's receipt of such payment; provided, however, that if any such purchase
shall be made pursuant to this Section 8.4.2 and the payment giving rise thereto
shall thereafter be recovered, such purchase shall be rescinded to the extent of
such recovery and the purchase price restored without interest. Borrower
expressly consents to the foregoing arrangements and agrees that any Lender
holding a participation in a Commitment deemed to have been so purchased may
exercise any and all rights of set-off, banker's lien or similar remedy with
respect to any and all moneys owing by Borrower to such Lender as fully as if
such Lender held a Commitment in the amount of such participation.
8.5 Rights and Remedies Cumulative8.5 Rights and Remedies Cumulative.
The enumeration of the rights and remedies of Agent and Lenders set forth in
this Agreement is not intended to be exhaustive and the exercise by Agent and
Lenders of any right or remedy shall not preclude the exercise of any other
rights or remedies, all of which shall be cumulative, and shall be in addition
to any other right or remedy given hereunder or under the Loan Documents or that
may now or hereafter exist in law or in equity or by suit or otherwise. No delay
or failure to take action on the part of Agent and Lenders in exercising any
right, power or privilege shall operate as a waiver hereof, nor shall any single
or partial exercise of any such right, power or privilege preclude other or
further exercise thereof or the exercise of any other right, power or privilege
or shall be construed to be a waiver of any Event of Default or Potential Event
of Default. No course of dealing between Borrower, Agent or any Lender or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the Loan Documents or to constitute a
waiver of any Event of Default or Potential Event of Default.
SECTION 9. AGENT.
9.1 Appointment. Each of the Lenders hereby irrevocably designates and
appoints First Union National Bank of North Carolina as the Agent of such Lender
under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes First Union National Bank of North Carolina as the Agent
for such Lender to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and such other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or such other Loan Documents, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against Agent. To the extent any provision of this Agreement permits action by
Agent, Agent shall, subject to the provisions of this Section 9, take such
action if directed in writing to do so by the Requisite Lenders.
9.2 Delegation of Duties9.2 Delegation of Duties. Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
9.3 Exculpatory Provisions9.3 Exculpatory Provisions. Neither Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (a) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or the
other Loan Documents (except for its or such Person's own gross negligence or
willful misconduct), or (b) responsible in any manner to any Lender for any
recitals, statements, representations or warranties made by Borrower or any
officer thereof contained in this Agreement or the other Loan Documents or in
any certificate, report, statement or other document referred to or provided for
in, or received by Agent under or in connection with, this Agreement or the
other Loan Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or the other Loan Documents or
for any failure of Borrower to perform its obligations hereunder or thereunder.
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement, or to inspect the Properties, books or records of
Borrower.
9.4 Reliance by Agent9.4 Reliance by Agent. Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to
Borrower), independent accountants and other experts selected by Agent. Agent
may deem and treat the payee of any promissory note issued pursuant to this
Agreement as the owner thereof for all purposes unless such promissory note
shall have been transferred in accordance with Section 11.10 hereof. Agent shall
be fully justified in failing or refusing to take any action under this
Agreement and the other Loan Documents unless it shall first receive such advice
or concurrence of the Requisite Lenders as it deems appropriate or it shall
first be indemnified to its satisfaction by Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action except for its own gross negligence or
willful misconduct. Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request of the
Requisite Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all Lenders.
9.5 Notice of Default9.5 Notice of Default. Agent shall not be deemed
to have knowledge or notice of the occurrence of any Event of Default or
Potential Event of Default hereunder unless Agent has received notice from a
Lender or Borrower referring to this Agreement, describing such Event of Default
or Potential Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall promptly
give notice thereof to Lenders. The Agent shall take such action with respect to
such Event of Default or Potential Event of Default as shall be reasonably
directed by the Requisite Lenders; provided that unless and until Agent shall
have received such directions, Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Event of
Default or Potential Event of Default as it shall deem advisable in the best
interests of Lenders.
9.6 Non-Reliance on Agent and Other Lenders9.6 Non-Reliance on Agent
and Other Lenders. Each Lender expressly acknowledges that neither Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by Agent
hereinafter taken, including any review of the affairs of Borrower, shall be
deemed to constitute any representation or warranty by Agent to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of Borrower and FSI and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of Borrower and FSI. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by Agent hereunder
or by the other Loan Documents, Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, operations, property, financial and other condition or
creditworthiness of Borrower and FSI which may come into the possession of Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
9.7 Indemnification9.7 Indemnification. Each Lender agrees to indemnify
Agent in its capacity as such (to the extent not reimbursed by Borrower and
without limiting the obligation of Borrower to do so), ratably according to the
respective amounts of their Pro Rata Share of the Commitments, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Loans) be imposed on, incurred by or asserted against Agent in
any way relating to or arising out of this Agreement or the other Loan
Documents, or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from Agent's bad faith, gross
negligence or willful misconduct. The agreements in this Section 9.7 shall
survive the repayment of the Loans and all other amounts payable hereunder.
9.8 Agent in Its Individual Capacity9.8Agent in Its Individual
Capacity. Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with Borrower or FSI as though Agent
were not Agent hereunder. With respect to Advances made or renewed by it, Agent
shall have the same rights and powers under this Agreement and the other Loan
Documents as any Lender and may exercise the same as though it were not Agent,
and the terms "Lender" and "Lenders" shall include Agent in its individual
capacity.
9.9 Resignation and Appointment of Successor Agent9.9 Resignation and
Appointment of Successor Agent. Agent may resign at any time by giving thirty
(30) days' prior written notice thereof to Lenders and Borrower; provided,
however, that the retiring Agent shall continue to serve until a successor Agent
shall have been selected and approved pursuant to this Section 9.9. Upon any
such notice, Agent shall have the right to appoint a successor Agent; provided,
however, that if such successor shall not be a signatory to this Agreement, such
appointment shall be subject to the consent of Requisite Lenders. Agent may be
replaced by the Requisite Lenders, with or without cause; provided, however,
that any successor agent shall be subject to Borrower's consent, which consent
shall not be unreasonably withheld. Upon the acceptance of any appointment as an
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Section 9 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
SECTION 10.EXPENSES AND INDEMNITIES.
10.1 Expenses. Borrower agrees to pay promptly on demand, and, in any
event, within thirty (30) days of the invoice date therefor, (a) all costs,
expenses, charges and other disbursements (including, without limitation, all
reasonable attorneys' fees and allocated expenses of outside counsel and
in-house legal staff) incurred by or on behalf of Agent or any Lender in
connection with the preparation of the Loan Documents and all amendments and
modifications thereof, extensions thereto or substitutions therefor, and all
costs, expenses, charges or other disbursements incurred by or on behalf of
Agent or any Lender (including, without limitation all reasonable attorney's
fees and allocated expenses of outside counsel and in-house legal staff) in
connection with the furnishing of opinions of counsel (including, without
limitation, any opinions requested by Lenders as to any legal matters arising
hereunder) and of Borrower's performance of and compliance with all agreements
and conditions contained herein or in any of the other Loan Documents on its
part to be performed or complied with; (b) all other costs, expenses, charges
and other disbursements incurred by or on behalf of Agent or any Lender in
connection with the negotiation, preparation, execution, administration,
continuation and enforcement of the Loan Documents, and the making of the Loans
hereunder; (c) all costs, expenses, charges and other disbursements (including,
without limitation, all reasonable attorney's fees and allocated expenses of
outside counsel and in-house legal staff) incurred by or on behalf of Agent or
FUNB in connection with the assignment or attempted assignment to any other
Person of all or any portion of any Lender's interest under this Agreement
pursuant to Section 11.10; and (d) regardless of the existence of an Event of
Default or Potential Event of Default, all legal, appraisal, audit, accounting,
consulting or other fees, costs, expenses, charges or other disbursements
incurred by or on behalf of Agent or any Lender in connection with any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Lenders, Agent, Borrower or any other Person) seeking to enforce any Obligations
of, or collecting any payments due from, Borrower under this Agreement and the
Note, all of which amounts shall be deemed to be part of the Obligations.
Notwithstanding anything to the contrary contained in this Section 10.1, so long
as no Event of Default or Potential Event of Default shall have occurred and be
continuing, all appraisals of the Eligible Inventory shall be at the expense of
Lenders. If an Event of Default or Potential Event of Default shall have
occurred and be continuing, such appraisals shall be at the expense of Borrower.
10.2 Indemnification. Whether or not the transactions contemplated
hereby shall be consummated:
10.2.1 General Indemnity. Borrower shall pay, indemnify, and
hold each Lender, Agent and each of their respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including reasonable attorney's fees and the allocated cost of in-house
counsel) of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement and any
other Loan Documents, or the transactions contemplated hereby and thereby, and
with respect to any investigation, litigation or proceeding (including any case,
action or proceeding before any court or other Governmental Authority relating
to bankruptcy, reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate proceeding) related to this Agreement or the Loans or
the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that Borrower shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities arising from the gross negligence
or willful misconduct of such Indemnified Person.
10.2.2 Environmental Indemnity.
(a) Borrower hereby agrees to indemnify, defend and
hold harmless each Indemnified Person, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses or disbursements (including reasonable attorneys' fees and the
allocated cost of in-house counsel and internal environmental audit or review
services), which may be incurred by or asserted against such Indemnified Person
in connection with or arising out of any pending or threatened investigation,
litigation or proceeding, or any action taken by any Person, with respect to any
Environmental Claim arising out of or related to any Property owned, leased or
operated by Borrower. No action taken by legal counsel chosen by Agent or any
Lender in defending against any such investigation, litigation or proceeding or
requested remedial, removal or response action (except for actions which
constitute fraud, willful misconduct, gross negligence or material violations of
law) shall vitiate or in any way impair Borrower's obligation and duty hereunder
to indemnify and hold harmless Agent and each Lender. Agent and Lenders agree to
use reasonable efforts to cooperate with Borrower respecting the defense of any
matter indemnified hereunder, except insofar as and to the extent that their
respective interests may be adverse to Borrower's, in Agent's and each Lenders'
sole discretion.
(b) In no event shall any site visit, observation, or
testing by Agent or any Lender be deemed a representation or warranty that
Hazardous Materials are or are not present in, on, or under the site, or that
there has been or shall be compliance with any Environmental Law. Neither
Borrower nor any other Person is entitled to rely on any site visit,
observation, or testing by Agent or any Lender. Except as otherwise provided by
law, neither Agent nor any Lender owes any duty of care to protect Borrower or
any other Person against, or to inform Borrower or any other party of, any
Hazardous Materials or any other adverse condition affecting any site or
Property. Neither Agent nor any Lender shall be obligated to disclose to
Borrower or any other Person any report or findings made as a result of, or in
connection with, any site visit, observation, or testing by Agent or any Lender.
10.2.3 Survival; Defense. The obligations in this Section 10.2
shall survive payment of all other Obligations. At the election of any
Indemnified Person, Borrower shall defend such Indemnified Person using legal
counsel satisfactory to such Indemnified Person in such Person's sole
discretion, at the sole cost and expense of Borrower. All amounts owing under
this Section 10.2 shall be paid within thirty (30) days after written demand.
SECTION 11. MISCELLANEOUS.
11.1 Survival. All covenants, agreements, representations and
warranties made herein shall survive the execution and delivery of the Loan
Documents and the making of the Loans hereunder.
11.2 No Waiver by Agent or Lenders. No failure or delay on the part of
Agent or any Lender in the exercise of any power, right or privilege under this
Agreement, the Note or any of the other Loan Documents shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
11.3 Notices. Except as otherwise provided in this Agreement, any
notice or other communication herein required or permitted to be given shall be
in writing and may be delivered in person, with receipt acknowledged, or sent by
telex, facsimile, telecopy, computer transmission or by United States mail,
registered or certified, return receipt requested, or by Federal Express or
other nationally recognized overnight courier service, postage prepaid and
confirmation of receipt requested, and addressed as set forth on the signature
pages to this Agreement or at such other address as may be substituted by notice
given as herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly given or served on the date on which the same
shall have been personally delivered, with receipt acknowledged, or sent by
telex, facsimile, telecopy or computer transmission (with appropriate
answerback), three (3) Business Days after the same shall have been deposited in
the United States mail or on the next succeeding Business Day if the same has
been sent by Federal Express or other nationally recognized overnight courier
service. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication.
11.4 Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
11.5 Severability. Whenever possible, each provision of this Agreement,
the Note and each of the other Loan Documents shall be interpreted in such a
manner as to be valid, legal and enforceable under the applicable law of any
jurisdiction. Without limiting the generality of the foregoing sentence, in case
any provision of this Agreement, the Note or any of the other Loan Documents
shall be invalid, illegal or unenforceable under the applicable law of any
jurisdiction, the validity, legality and enforceability of the remaining
provisions, or of such provision in any other jurisdiction, shall not in any way
be affected or impaired thereby.
11.6 Entire Agreement; Construction; Amendments and Waivers.
11.6.1 This Agreement, the Note and each of the other Loan
Documents dated as of the date hereof, taken together, constitute and contain
the entire agreement among Borrower, Lenders and Agent and supersede any and all
prior agreements, negotiations, correspondence, understandings and
communications between the parties, whether written or oral, respecting the
subject matter hereof.
11.6.2 This Agreement is the result of negotiations between
and has been reviewed by each of Borrower, the Lenders executing this Agreement
as of the Closing Date and Agent and their respective counsel; accordingly, this
Agreement shall be deemed to be the product of the parties hereto, and no
ambiguity shall be construed in favor of or against Borrower, Lenders or Agent.
Borrower, Lenders and Agent agree that they intend the literal words of this
Agreement and the other Loan Documents and that no parol evidence shall be
necessary or appropriate to establish Borrower's, any Lender's or Agent's actual
intentions.
11.6.3 No amendment, modification, discharge or waiver of or
consent to any departure by Borrower or FSI from, any provision in this
Agreement or any of the other Loan Documents relating to (i) the definition of
"Borrowing Base" or "Requisite Lenders," (ii) any increase of the amount of any
Commitment, (iii) any reduction of principal, interest or fees payable
hereunder, (iv) any postponement of any date fixed for any payment or prepayment
of principal or interest hereunder or (v) this Section 11.6.3 shall be effective
without the written consent of all Lenders. Any and all other amendments,
modifications, discharges or waivers of, or consents to any departures from any
provision of this Agreement or of any of the other Loan Documents shall not be
effective without the written consent of the Requisite Lenders. Any waiver or
consent with respect to any provision of the Loan Documents shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, waiver or consent effected in accordance with this
Section 11.6 shall be binding upon each Lender then party hereto and each
subsequent Lender, and on Borrower.
11.7 Reliance by Lenders. All covenants, agreements, representations
and warranties made herein by Borrower shall, notwithstanding any investigation
by Lenders or Agent be deemed to be material to and to have been relied upon by
Lenders.
11.8Marshalling; Payments Set Aside. Lenders shall be under no
obligation to marshall any assets in favor of Borrower or any other person or
against or in payment of any or all of the Obligations. To the extent that
Borrower makes a payment or payments to Lenders or Agent, or Lenders or Agent,
on behalf of Lenders, enforce their or its Liens or exercises their or its
rights of set-off, and such payment or payments or the proceeds of such
enforcement or set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party under Title 11 of the United States Code
or under any other similar federal or state law, common law or equitable cause,
then to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or set-off had not
occurred.
11.9 No Set-Offs by Borrower. All sums payable by Borrower pursuant to
this Agreement, the Note or any of the other Loan Documents shall be payable
without notice or demand and shall be payable in United States Dollars without
set-off or reduction of any manner whatsoever.
11.10 Binding Effect, Assignment.
11.10.1 This Agreement, the Note and the other Loan Documents
shall be binding upon and shall inure to the benefit of the parties hereto and
thereto and their respective successors and assigns, except that no Borrower nor
FSI may assign its rights hereunder or thereunder or any interest herein or
therein without the prior written consent of each Lender. Each Lender shall (a)
have the right in accordance with this Section 11.10 to sell and assign to any
Eligible Assignee all or any portion of its interest (provided that any such
partial assignment shall not be for a principal amount of less than Five Million
Dollars ($5,000,000)) under this Agreement, the Notes and the other Loan
Documents, together with a ratable interest in the AFG Agreement and the Growth
Funds Agreement and the related Notes and other Loan Documents (as separately
described and defined in those agreements), subject to the prior written consent
of the affected Borrower, which consent shall not be unreasonably withheld, and
(b) to grant any participation or other interest herein or therein, except that
each potential participant to which a Lender intends to grant any rights under
Sections 2.9, 2.10, 5.1 or 10.2 shall be subject to the prior written consent of
the affected Borrower, which consent shall not be unreasonably withheld;
provided, however, that no such sale, assignment or participation grant shall
result in requiring registration under the Securities Act of 1933, as amended,
or qualification under any state securities law.
11.10.2 Subject to the limitations of this Section 11.10.2,
each Lender may sell and assign, from time to time, all or any portion of its
Pro Rata Share of the Commitments to any of its Affiliates or, with the approval
of the affected Borrower and FSI (which approval shall not be unreasonably
withheld), to any other financial institution acceptable to Agent, subject to
the assumption by such assignee of the share of the Commitments so assigned. The
assignment to such Affiliate or other financial institution shall be evidenced
by an Assignment and Assumption in the form of Exhibit G ("Assignment and
Acceptance") executed by the assignor Lender (hereinafter from time to time
referred to as the "Assignor Lender") and such Affiliate or other financial
institution (which, upon such assignment shall become a Lender hereunder
(hereinafter from time to time referred to as the "Assignee Lender")). The
Assignment and Assumption need not include any of the economic or financial
terms upon which such Assignee Lender receives the assignment from the Assignor
Lender, and such terms need not be disclosed to or approved by such Borrower or
FSI; provided only that such terms do not diminish the obligations undertaken by
such Assignee Lender in the Assignment and Assumption or increase the
obligations of Borrowers or FSI under this Agreement. Upon execution of such
Assignment and Assumption, (i) the definition of "Commitments" in Section 1
hereof and the Pro Rata Shares set forth therein shall be deemed to be amended
to reflect each Lender's share of the Commitments, giving effect to the
assignment and (ii) the Assignee Lender shall, from the effective date of the
instrument of assignment and assumption, be subject to all of the obligations,
and entitled to all of the rights, of a Lender hereunder, except as may be
expressly provided to the contrary in the Assignment and Assumption. To the
extent the obligations hereunder of the Assignor Lender are assumed by the
Assignee Lender, the Assignor Lender shall be relieved of such obligations. Upon
the assignment of any interest by any Assignor Lender pursuant to this Section
11.10.2, such Assignor Lender agrees to supplement Schedule 1.1 to show the date
of such assignment, the Assignor Lender, the Assignee Lender, the Assignee
Lender's address for notice purposes and the amount of the Commitments so
assigned.
11.10.3 Subject to the limitations of this Section 11.10.3,
any Lender may also grant, from time to time, participation interests in the
interests of such Lender under this Agreement, the Note and the other Loan
Documents to any other financial institution without notice to, or approval of,
Borrower. The grant of such a participation interest shall be on such terms as
the granting Lender determines are appropriate, provided only that (i) the
holder of such participation interest shall not have any of the rights of a
Lender under this Agreement except, if the participation agreement expressly
provides, rights under Sections 2.9, 2.10, 5.1 and 10.2, and (ii) the consent of
the holder of such a participation interest shall not be required for amendments
or waivers of provisions of the Loan Documents other than, if the participation
agreement expressly provides, those which (A) increase the monetary amount of
any Commitment, (B) decrease any fee or any other monetary amount payable to
Lenders, or (C) extend the date upon which any monetary amount is payable to
Lenders.
11.11 Counterparts. This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. Each such agreement
shall become effective upon the execution of a counterpart hereof or thereof by
each of the parties hereto or thereto, delivery of each such counterpart to
Agent.
11.12 Equitable Relief. Borrower recognize that, in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, the Note or any of the other Loan Agreements, any remedy
at law may prove to be inadequate relief to Lenders or Agent; therefore,
Borrower agrees that Lenders or Agent, if Lenders or Agents so request, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
11.13 Written Notice of Claims; Claims Bar. BORROWER HEREBY AGREES THAT
IT SHALL GIVE PROMPT WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES
IT HAS, OR MAY SEEK TO ASSERT OR ALLEGE AGAINST ANY LENDER OR AGENT, WHETHER
SUCH CLAIM IS BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO THIS
AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS OR TO THE LOANS
CONTEMPLATED HEREBY OR THEREBY OR ANY ACT OR OMISSION TO ACT BY ANY LENDER OR
AGENT WITH RESPECT HERETO OR THERETO, AND THAT IF IT SHALL FAIL TO GIVE SUCH
PROMPT NOTICE TO AGENT WITH REGARD TO ANY SUCH CLAIM OR CAUSE OF ACTION, IT
SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED FROM BRINGING OR
ASSERTING SUCH CLAIM OR CAUSE OF ACTION IN ANY SUIT, ACTION OR PROCEEDING IN ANY
COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY.
11.14 Waiver of Punitive Damages. NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN THIS AGREEMENT, BORROWER HEREBY AGREES THAT IT SHALL NOT
SEEK FROM LENDERS OR AGENT, UNDER ANY THEORY OF LIABILITY, INCLUDING, WITHOUT
LIMITATION, ANY THEORY IN TORTS, ANY PUNITIVE DAMAGES.
11.15 Governing Law. Except as otherwise expressly provided in any of
the Loan Documents, in all respects, including all matters of construction,
validity and performance, this Agreement and the Obligations arising hereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of North Carolina applicable to contracts made and performed in such
state, without regard to the principles thereof regarding conflict of laws, and
any applicable laws of the United States of America.
11.16 Consent to Jurisdiction. Borrower hereby irrevocably consents to
the personal jurisdiction of the state and federal courts located in Mecklenburg
County, North Carolina, in any action, claim or other proceeding arising out of
any dispute in connection with this Agreement, the Note and the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations. Borrower hereby irrevocably consents to the
service of a summons and complaint and other process in any action, claim or
proceeding brought by Agent or any Lender in connection with this Agreement or
the other Loan Documents, any rights or obligations hereunder or thereunder, or
the performance of such rights and obligations, on behalf of itself or its
Property, in the manner specified in Section 11.3. Nothing in this Section 11.16
shall affect the right of the Agent or any Lender to serve legal process in any
other manner permitted by applicable law or affect the right of Agent or any
Lender to bring any action or proceeding against Borrower or its properties in
the courts of any other jurisdictions.
11.17 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER AND FSI, BY EXECUTION HEREOF, AND THE AGENT AND EACH LENDER, BY
ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS
AGREEMENT, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL
INDUCEMENT TO THE AGENT AND EACH LENDER TO ACCEPT THIS AGREEMENT AND THE NOTES
EXECUTED AND DELIVERED BY BORROWER PURSUANT TO THIS AGREEMENT.
11.18 BMO as Lender. Upon the Closing, BMO shall be a Lender for all
purposes of this Agreement and the other Loan Documents, and shall be entitled
to the rights and benefits and be subject to the obligations of a Lender under
and in accordance with and subject to the terms of this Agreement and the other
Loan Documents.
<PAGE>
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORROWER TEC ACQUISUB, INC.
By
J. Michael Allgood
Chief Financial Officer
Notice to be sent to:
TEC AcquiSub, Inc.
One Market
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: J. Michael Allgood
Vice President of Finance
and Chief Financial Officer
Telephone: 415/896-1138
Facsimile: 415/882-0860
With a copy to:
TEC AcquiSub, Inc.
One Market
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: General Counsel
Telephone: 415/896-1138
Facsimile: 415/882-0860
<PAGE>
AGENT FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By
Printed Name:
Title:
Notice to be sent to:
First Union National Bank of North Carolina
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: 704/383-5164
Facsimile: 704/374-4092
LENDERS FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By
Printed Name:
Title:
Notice to be sent to:
First Union National Bank of North Carolina
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: 704/383-5164
Facsimile: 704/374-4092
<PAGE>
BANK OF MONTREAL
By
Printed Name:
Title:
Notice to be sent to:
Bank of Montreal
===========================
Attention: ________________
Telephone: ________________
Facsimile: ________________
<PAGE>
ACKNOWLEDGEMENT AND
REAFFIRMATION OF GUARANTY
SECTION 1. PLM International, Inc. ("PLMI") hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Agreement.
SECTION 2. PLMI hereby consents to this Agreement and agrees that its
Guaranty of the Obligations of Borrower under the 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 Agreement or any other document
or instrument delivered in connection herewith.
SECTION 3. PLMI represents and warrants that, after giving effect to
this Agreement, that 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
<PAGE>
SCHEDULE A
(COMMITMENTS)
Pro
Rate
Lender Commitment Share
First Union National Bank $35,000,000 70.0%
of North Carolina
Bank of Montreal $15,000,000 30.0%
<PAGE>
WAREHOUSING CREDIT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.........................................2
1.1 Defined Terms.......................................2
1.2 Accounting Terms....................................18
1.3 Other Terms.........................................18
1.4 Schedules and Exhibits..............................19
SECTION 2. AMOUNT AND TERMS OF CREDIT..........................19
2.1 Commitment to Lend..................................19
2.1.1 Revolving Facility........................19
(a) Facility Commitments..............19
(b) Each Loan.........................20
2.1.2 Funding...................................21
2.1.3 Utilization of the Loans..................21
2.2 Repayment and Prepayment............................21
2.2.1 Repayment.................................21
2.2.2 Voluntary Prepayment......................21
2.2.3 Mandatory Prepayments.....................22
2.3 Calculation of Interest; Post-Maturity Interest.....23
2.4 Manner of Payments..................................23
2.5 Payment on Non-Business Days........................23
2.6 Application of Payments.............................23
2.7 Procedure for the Borrowing of Loans................24
2.7.1 Notice of Borrowing.......................24
2.7.2 Unavailability of LIBOR Loans.............24
2.8 Conversion and Continuation Elections...............24
2.8.1 Election..................................24
2.8.2 Notice of Conversion......................25
2.8.3 Interest Period...........................25
2.8.4 Unavailability of LIBOR Loans.............25
2.9 Discretion of Lenders as to Manner of Funding.......25
2.10 Distribution of Payments............................25
2.11 Agent's Right to Assume Funds Available for Advances..26
2.12 Agent's Right to Assume Payments Will be Made by Borrower..26
2.13 Capital Requirements................................26
2.14 Taxes...............................................27
2.14.1 No Deductions.............................27
2.14.2 Miscellaneous Taxes.......................27
2.14.3 Indemnity.................................27
2.14.4 Required Deductions.......................27
2.14.5 Evidence of Payment.......................27
2.14.6 Foreign Persons...........................28
2.14.7 Income Taxes..............................28
2.14.8 Reimbursement of Costs....................29
2.14.9 Jurisdiction..............................29
2.15 Illegality..........................................29
2.15.1 LIBOR Loans...............................29
2.15.2 Prepayment................................29
2.15.3 Prime Rate Borrowing......................30
2.16 Increased Costs.....................................30
2.17 Inability to Determine Rates........................30
2.18 Prepayment of LIBOR Loans...........................30
SECTION 3. CONDITIONS PRECEDENT................................31
3.1 Effectiveness of this Agreement.....................31
3.1.1 Corporate Documents.......................31
3.1.2 Notes.....................................31
3.1.3 Opinion of Counsel........................31
3.1.4 Reaffirmation of Guaranty.................31
3.1.5 Growth Fund Agreement.....................32
3.1.6 AFG Agreement.............................32
3.1.7 Bringdown Certificate.....................32
3.1.8 Fees......................................32
3.1.9 Other Documents...........................32
3.2 All Loans...........................................32
3.2.1 Notice of Borrowing.......................32
3.2.2 Invoices..................................32
3.2.3 Title to Equipment........................33
3.2.4 Approval of Loan..........................33
3.2.5 Leases....................................33
3.2.6 No Event of Default.......................33
3.2.7 Officer's Certificate.....................33
3.2.8 Officer's Certificate - Leases............33
3.2.9 Insurance.................................34
3.2.10 Warranty of TEC AcquiSub..................34
3.2.11 Other Instruments.........................35
3.3 Further Conditions to All Loans.....................35
3.3.1 General Partner or Manager................35
3.3.2 Removal of General Partner or Manager.....35
3.3.3 Cash Balances.............................35
3.3.4 Purchaser.................................35
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES...........35
4.1 Existence and Power.................................35
4.2 Loan Documents and Note Authorized; Binding Obligations...36
4.3 No Conflict; Legal Compliance.......................36
4.4 Financial Condition.................................36
4.5 Executive Offices...................................36
4.6 Litigation..........................................36
4.7 Material Contracts..................................37
4.8 Consents and Approvals..............................37
4.9 Other Agreements....................................37
4.10 Employment and Labor Agreements.....................37
4.11 ERISA...............................................37
4.12 Labor Matters.......................................37
4.13 Margin Regulations..................................37
4.14 Taxes...............................................38
4.15 Environmental Quality...............................38
4.16 Trademarks, Patents, Copyrights, Franchises and Licenses...39
4.17 Full Disclosure.....................................39
4.18 Other Regulations...................................39
4.19 Solvency............................................39
4.20 Survival of Representations and Warranties..........39
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS....................39
5.1 Records and Reports.................................39
5.1.1 Quarterly Statements......................39
5.1.2 Annual Statements.........................40
5.1.3 Borrowing Base Certificate................40
5.1.4 Compliance Certificate....................40
5.1.5 Reports...................................40
5.1.6 Insurance Reports.........................41
5.1.7 Certificate of Responsible Officer........41
5.1.8 Employee Benefit Plans....................41
5.1.9 ERISA Notices.............................41
5.1.10 Pension Plans.............................42
5.1.11 SEC Reports...............................42
5.1.12 Tax Returns...............................42
5.1.13 Additional Information....................42
5.2 Existence; Compliance with Law......................42
5.3 Insurance...........................................42
5.4 Taxes and Other Liabilities.........................43
5.5 Inspection Rights; Assistance.......................43
5.6 Maintenance of Facilities; Modifications; Performance of
Leases............................................. 43
5.6.1 Maintenance of Facilities.................43
5.6.2 Certain Modifications to the Equipment....43
5.6.3 Performance of Leases.....................44
5.7 Supplemental Disclosure.............................44
5.8 Further Assurances..................................44
5.9 Lockbox.............................................44
5.10 Environmental Laws..................................44
5.11 Equipment Purchase Agreement........................44
SECTION 6. BORROWER'S NEGATIVE COVENANTS.......................44
6.1 Liens; Negative Pledges; and Encumbrances...........44
6.2 Acquisitions........................................45
6.3 Limitations on Indebtedness.........................45
6.4 Use of Proceeds.....................................45
6.5 Disposition of Assets...............................46
6.6 Restricted Payments.................................46
6.7 Restriction on Fundamental Changes..................46
6.8 Transactions with Affiliates........................46
6.9 No Loans to Affiliates..............................47
6.10 No Investment.......................................47
6.11 Maintenance of Business.............................47
6.12 No Modification to Leases...........................47
6.13 No Subsidiaries.....................................47
6.14 Amendments of Charter Documents.....................47
6.15 Events of Default...................................47
6.16 ERISA...............................................47
6.17 No Use of Any Lender's Name.........................48
6.18 Certain Accounting Changes..........................48
SECTION 7. FINANCIAL COVENANTS OF BORROWER.....................48
7.1 Minimum Consolidated Tangible Net Worth.............48
SECTION 8. EVENTS OF DEFAULT AND REMEDIES......................48
8.1 Events of Default...................................48
8.1.1 Failure to Make Payments..................48
8.1.2 Other Agreements..........................49
8.1.3 Breach of Covenants.......................49
8.1.4 Breach of Representations or Warranties...49
8.1.5 Failure to Cure...........................49
8.1.6 Insolvency................................50
8.1.7 Bankruptcy Proceedings....................50
8.1.8 Material Adverse Effect...................50
8.1.9 Judgments, Writs and Attachments..........50
8.1.10 Legal Obligations...........................50
8.1.11 Growth Fund Agreement.......................50
8.1.12 AFG Agreement.............................51
8.1.13 Board of Directors..........................51
8.1.14 Criminal Proceedings........................51
8.1.15 Action by Governmental Authority............51
8.1.16 Governmental Decrees........................51
8.2 Waiver of Default...................................52
8.3 Remedies............................................52
8.4 Set-Off.............................................52
8.5 Rights and Remedies Cumulative......................53
SECTION 9. AGENT...............................................53
9.1 Appointment.........................................53
9.2 Delegation of Duties................................54
9.3 Exculpatory Provisions..............................54
9.4 Reliance by Agent...................................54
9.5 Notice of Default...................................55
9.6 Non-Reliance on Agent and Other Lenders.............55
9.7 Indemnification.....................................55
9.8 Agent in Its Individual Capacity....................56
9.9 Resignation and Appointment of Successor Agent......56
SECTION 10. EXPENSES AND INDEMNITIES..................................56
10.1 Expenses............................................56
10.2 Indemnification.....................................57
10.2.1 General Indemnity.........................57
10.2.2 Environmental Indemnity...................57
10.2.3 Survival; Defense.........................58
SECTION 11.MISCELLANEOUS..............................................58
11.1 Survival............................................58
11.2 No Waiver by Agent or Lenders.......................58
11.3 Notices.............................................58
11.4 Headings............................................59
11.5 Severability........................................59
11.6 Entire Agreement; Construction; Amendments and Waivers...59
11.7 Reliance by Lenders.................................60
11.8 Marshalling; Payments Set Aside.....................60
11.9 No Set-Offs by Borrower.............................60
11.10 Binding Effect, Assignment..........................60
11.11 Counterparts........................................62
11.12 Equitable Relief....................................62
11.13 Written Notice of Claims; Claims Bar................62
11.14 Waiver of Punitive Damages..........................62
11.15 Governing Law.......................................62
11.16 Consent to Jurisdiction.............................62
11.17 Waiver of Jury Trial................................63
11.18 BMO as Lender.......................................63
<PAGE>
INDEX OF EXHIBITS
Exhibit A Form of Revolving Promissory Note
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Compliance Certificate
Exhibit D Form of Opinion of Counsel
Exhibit E Form of Notice of Borrowing
Exhibit F Form of Notice of Conversion/Continuation
Exhibit G Form of Assignment and Acceptance
<PAGE>
INDEX OF SCHEDULES
Schedule A Commitments
Schedule 1.1 Amendments to Schedule A
Schedule 4.5 Executive Offices and Principal Places of Business
Schedule 4.6 Litigation
Schedule 4.7 Material Contracts
Schedule 4.8 Consent and Approvals
Schedule 4.15 Environmental Disclosures
Schedule 6.1 Existing Liens
AMENDMENT NO. 3
TO WAREHOUSING CREDIT AGREEMENT
(American Finance Group, Inc.)
THIS AMENDMENT NO. 3 TO WAREHOUSING CREDIT AGREEMENT dated as of
November 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") 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
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 and that Amendment No.
2 to Warehousing Credit Agreement dated as of October 3, 1997 (as so amended,
the "Credit Agreement"), pursuant to which Lenders have agreed to extend and
make available to Borrower certain advances of money.
B. Borrowers desire that Lenders and Agent amend the Credit Agreement
to (i) extend the Commitment Termination Date from November 3, 1997 to December
2, 1997 and (ii) reduce the Commitments set forth on Schedule A to the Credit
Agreement from $50,000,000 to $35,000,000.
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. AMENDMENTS.
1.1 Commitment. The definition of "Commitment" set
forth in Section 1.1 of the Credit Agreement is amended by deleting Schedule A
in its entirety and replacing such schedule with a new Schedule A in the form
attached to this Amendment as Attachment I.
1.2 Commitment Termination Date. 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 December 2, 1997.
2. LIMITATIONS ON AMENDMENTS.
(a) The amendments set forth in Section 1, above, are
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.
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.
4. REAFFIRMATION. Borrower hereby reaffirms its Obligations under each
Loan Document to which it is a party.
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 each of Borrower, Lender and Agent.
(b) The execution and delivery of the Acknowledgment of
Amendment and Reaffirmation of Guaranty attached to this Amendment, by PLMI.
(c) The execution and delivery of an Assignment and Acceptance
by each of Fleet Bank, N.A., as an Assignor Lender, FUNB, as an Assignee Lender,
Borrowers and Agent, pursuant to which Fleet Bank, N.A. shall have assigned to
FUNB all of its Commitments under the Credit Agreement, which assignment shall
have been effected.
(d) Satisfaction, to the approval of Lenders and Agent, of all
conditions precedent to the effectiveness of Amendment No. 3 to Second Amended
and Restated Warehousing Credit Agreement dated as of the date hereof by and
among the Growth Funds, FSI, Lenders and Agent.
(e) Satisfaction, to the approval of Lenders and Agent, of all
conditions precedent to the effectiveness of Amendment No. 4 to Amended and
Restated Warehousing Credit Agreement dated as of the date hereof by and among
TEC AcquiSub, Lenders and Agent.
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.
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.
<PAGE>
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:
AGENT FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
By
Printed Name:
Title:
<PAGE>
ATTACHMENT I
[Revised Schedule A]
<PAGE>
SCHEDULE A
COMMITMENTS
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $35,000,000 35/35 x 100%
of North Carolina
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(PLMI/AFG)
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 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. 4
TO AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
(TEC AcquiSub, Inc.)
THIS AMENDMENT NO. 4 TO AMENDED AND RESTATED WAREHOUSING CREDIT
AGREEMENT dated as of November 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") 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
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, that Amendment No. 2 to Amended and Restated Credit Agreement dated as
of November 5, 1996 and that Amendment No. 3 to Amended and Restated Credit
Agreement dated as of October 3, 1997 (as so amended, the "Credit Agreement"),
pursuant to which Lenders have agreed to extend and make available to Borrower
certain advances of money.
B. Borrowers desire that Lenders and Agent amend the Credit Agreement
to (i) extend the Commitment Termination Date from November 3, 1997 to December
2, 1997 and (ii) reduce the Commitments set forth on Schedule A to the Credit
Agreement from $50,000,000 to $35,000,000.
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. AMENDMENTS.
1.1 Commitment. The definition of "Commitment" set
forth in Section 1.1 of the Credit Agreement is amended by deleting Schedule A
in its entirety and replacing such schedule with a new Schedule A in the form
attached to this Amendment as Attachment I.
1.2 Commitment Termination Date. 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 December 2, 1997.
2. LIMITATIONS ON AMENDMENTS.
(a) The amendments set forth in Section 1, above, are
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.
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. Borrower hereby reaffirms its Obligations
under each Loan Document to which it is a party.
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 each of Borrower, Lenders and Agent.
(b) The execution and delivery of the Acknowledgment of
Amendment and Reaffirmation of Guaranty attached to this Amendment, by PLMI.
(c) The execution and delivery of an Assignment and Acceptance
by each of Fleet Bank, N.A., as an Assignor Lender, FUNB, as an Assignee Lender,
Borrowers and Agent, pursuant to which Fleet Bank, N.A. shall have assigned to
FUNB all of its Commitments under the Credit Agreement, which assignment shall
have been effected.
(d) Satisfaction, to the approval of Lenders and Agent, of all
conditions precedent to the effectiveness of Amendment No. 3 to Second Amended
and Restated Warehousing Credit Agreement dated as of the date hereof by and
among the Growth Funds, FSI, Lenders and Agent.
(e) Satisfaction, to the approval of Lenders and Agent, of all
conditions precedent to the effectiveness of Amendment No. 3 to Warehousing
Credit Agreement dated as of the date hereof by and among AFG, Lenders and
Agent.
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. 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. 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.
<PAGE>
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:
AGENT FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Agent
By:
Printed Name:
Title:
<PAGE>
156218 v1/SF
3cj#01!.DOC
ATTACHMENT I
[Revised Schedule A]
<PAGE>
SCHEDULE A
COMMITMENTS
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $35,000,000 35/35 x 100%
of North Carolina
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(PLMI/Tec AcquiSub)
SECTION 1. PLM International, Inc. ("PLMI") hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amendment No. 4 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
AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
AMONG
AMERICAN FINANCE GROUP, INC.
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
BANK OF MONTREAL
and Such Other Financial Institutions
as Shall Become LENDERS Hereunder
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent
December 2, 1997
<PAGE>
AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
THIS AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT is entered into
as of December 2, 1997, by and among AMERICAN FINANCE GROUP, INC., a Delaware
corporation ("Borrower"), FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("FUNB")
and BANK OF MONTREAL ("BMO") and each other financial institution which may
hereafter execute and deliver an instrument of assignment with respect to this
Agreement pursuant to Section 11.10 (any one individually, a "Lender," and
collectively, "Lenders"), and FUNB, as agent on behalf of Lenders (not in its
individual capacity, but solely as agent, "Agent"). This Agreement amends,
restates and supersedes the AFG Credit Agreement (as defined below).
RECITALS
A. Borrower, FUNB and Fleet Bank, N.A. (the "Prior Lenders") and Agent,
as agent for the Prior Lenders, entered into that Warehousing Credit Agreement
dated as of May 31, 1996, by and among Borrower, FUNB (as the sole Lender party
thereto) and Agent, as amended by that Amendment No. 1 to Warehousing Credit
Agreement dated as of November 5, 1996, that Amendment No. 2 to Warehousing
Credit Agreement dated as of October 3, 1997 and that Amendment No. 3 to
Warehousing Credit Agreement dated as of November 3, 1997 (as so amended, the
"AFG Credit Agreement"), pursuant to which the Prior Lenders have agreed to
extend and make available to Borrower certain advances of credit.
B. Borrower and FUNB, as the sole remaining Prior Lender having a
Commitment under the AFG Credit Agreement, desire to amend and restate the AFG
Credit Agreement to, among other things, increase the aggregate Commitments set
forth on Schedule A of the AFG Credit Agreement, extend the Commitment
Termination Date, reduce the Applicable Margin and amend the calculation of the
Borrowing Base, as more fully set forth herein.
C. On the terms and conditions set forth below, BMO desires, as of and
from the Closing Date, to become a Lender under the Credit Agreement.
D. Lenders have agreed to make such credit available to Borrower, but
only upon the terms and subject to the conditions hereinafter set forth and in
reliance on the representations and warranties set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants hereinafter set forth, and intending to be legally bound, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. As used herein, the following terms have the
following meanings:
"Acquisition" means any transaction, or any series of related
transactions, by which Borrower directly or indirectly (a) acquires any ongoing
business or all or substantially all of the assets of any Person or any division
thereof, whether through a purchase of assets, merger or otherwise, or (b)
acquires (in one transaction or as the most recent transaction in a series of
transactions) control of at least a majority of the stock of a corporation
having ordinary voting power for the election of directors, or (c) acquires
control of at least a majority of the ownership interests in any partnership,
limited liability company or joint venture.
[OBJECT OMITTED]
0 "Adjustable LIBOR" means, for each Interest Period in respect of LIBOR Loans,
an interest rate per annum (rounded upward to the nearest 1/16th of one percent
(0.0625%)) determined pursuant to the following formula:
The Adjusted LIBOR shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Administrative Lease" means any Investment Grade Lease which would
otherwise constitute an Eligible Lease but for the fact that payments thereunder
are more than ninety (90) days delinquent, but no more than one hundred eighty
(180) days delinquent, for reasons determined by Borrower to be unrelated to the
lessee's financial ability to make scheduled lease payments. For purposes of
this Agreement, Administrative Leases shall be considered Eligible Leases,
except as specifically provided under the definition of Borrowing Base.
"Advance" means any Advance made or to be made by any Lender to
Borrower as set forth in Section 2.1.1.
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, through one or more intermediaries, owns or controls,
whether beneficially or as a trustee, guardian or other fiduciary, five percent
(5.0%) or more of the stock having ordinary voting power in the election of
directors of such Person or of the ownership interests in any partnership or
joint venture, (b) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person, or (c) each of
such Person's officers, directors, joint venturers and partners; provided,
however, that in no case shall any Lender or Agent be deemed to be an Affiliate
of Borrower for purposes of this Agreement. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"AFG Allocated Residual Amount" means, as at and for any date of
determination, as to those items of Eligible Equipment then owned of record by
Borrower and subject to an Eligible Lease, an amount equal to the present value
of the aggregate of Insured Residual Values of such items of Eligible Equipment,
computed for a period equal to the sum of the original lease term of the
applicable Eligible Lease plus thirty (30) days and discounted at the Discount
Rate, not to exceed, in any event, an amount equal to the difference between (a)
an amount equal to ninety percent (90.0%) of the aggregate Invoice Price of such
items of Eligible Equipment and (b) an amount equal to one hundred percent
(100.0%) of the Discounted Present Value of the subject Eligible Lease (provided
that for purposes of this clause (b), the Discounted Present Value of such
Eligible Lease shall be calculated for the entire original lease term rather
than the remaining lease term).
"AFG Insured Residual Value" means, as at and for any date of
determination, as to any item of Eligible Equipment then owned of record by
Borrower and subject to an Eligible Lease, an amount equal to one hundred
percent (100.0%) of the insured residual value of such item of Equipment that is
covered under a residual value insurance policy in form and substance
satisfactory to Agent, as such insured residual value is confirmed in writing by
a residual value insurance company satisfactory to Agent.
"AFG Master Trust" means the trust established by and under the AFG
Master Trust Agreement.
"AFG Master Trust Agreement" means the Pooling and Servicing Agreement
and Indenture of Trust dated as of July 1, 1995, as amended from time to time,
by and among AFG Credit Corporation, as transferor, Borrower, as servicer, and
Bankers Trust Company, as trustee and collateral trustee.
"AFG Master Trust Program" means the program for the sale of Leases
under the AFG Master Trust Agreement.
"Agent" means FUNB solely when acting in its capacity as the Agent
under this Agreement or any of the other Loan Documents, and any successor
Agent.
"Agent's Side Letter" means the side letter agreement dated November
31, 1997, by and among Borrower, TEC AcquiSub, each of the Growth Funds and
Agent.
"Agreement" means this Amended and Restated Warehousing Credit
Agreement dated as of November 3, 1997, including all amendments, modifications
and supplements hereto, renewals, extensions or restatements hereof, and all
appendices, exhibits and schedules to any of the foregoing, and shall refer to
the Agreement as the same may be in effect from time to time.
"Applicable Margin" means:
(a) with respect to Prime Rate Loans, zero percent (0.00%);
and
(b) with respect to LIBOR Loans, one and five-eighths percent
(1.625%).
"Assignment and Acceptance" has the meaning set forth in Section
11.10.2.
"Bank Affiliate" means a Person engaged primarily in the business of
commercial banking and that is an Affiliate of a Lender or of a Person of which
a Lender is an Affiliate.
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended, as
codified under Title 11 of the United States Code, and the Bankruptcy Rules
promulgated thereunder, as the same may be in effect from time to time.
"Borrowing Base" means, as at and for any date of determination, an
amount not to exceed the sum of:
(a) an amount equal to the sum of:
(i) an amount equal to one hundred percent (100.0%)
of the aggregate Discounted Present Value of all Eligible Leases then owned of
record by Borrower, computed (1) with respect to any requested Loan, as of the
requested Funding Date (and shall include the aggregate Discounted Present Value
of all Eligible Leases to be acquired with the proceeds of the requested Loan),
and (2) with respect to the delivery of any monthly Borrowing Base Certificate
to be furnished pursuant to Section 5.1.3, as of the last day of the calendar
month for which such Borrowing Base Certificate is furnished; provided, however,
that there shall be excluded from the calculation under this clause (i), (x) as
to any lessee under Leases which are not Investment Grade Leases but which are
otherwise Eligible Leases, the amount by which the aggregate Discounted Present
Value of such Leases exceeds $2,000,000, (y) Leases which are not Investment
Grade Leases but which are otherwise Eligible Leases to the extent such Leases
have otherwise been eligible for inclusion within the Borrowing Base beyond a
period of 120 days, and (z) the aggregate Discounted Present Value in excess of
$1,000,000 of Administrative Leases (the Eligible Leases, or the ratable portion
thereof, the Discounted Present Value of which are excluded from the Borrowing
Base under the foregoing clauses (x), (y) and (z) shall similarly be excluded
from the Borrowing Base for purposes of the calculations of AFG Insured Residual
Value and AFG Allocated Residual Amount); plus
(ii) an amount equal to one hundred percent (100.0%)
of the aggregate AFG Allocated Residual Amount of all Eligible Equipment,
computed as of the last day of each quarterly accounting period of Borrower;
plus
(b) an amount equal to one hundred percent (100.0%) of the
aggregate Master Trust Allocated Residual Amount of all Master Trust Pooled
Equipment, computed as of the last day of each quarterly accounting period of
the AFG Master Trust.
"Borrowing Base Certificate" means a certificate with appropriate
insertions setting forth the components of the Borrowing Base as of the last day
of the month for which such certificate is submitted or as of a requested
Funding Date, as the case may be, which certificate shall be substantially in
the form set forth in Exhibit B and certified by a Responsible Officer of
Borrower.
"Business Day" means any day which is not a Saturday, Sunday or a legal
holiday under the laws of the States of California or North Carolina or is not a
day on which banking institutions located in the States of California or North
Carolina are authorized or permitted by law or other governmental action to
close and, with respect to LIBOR Loans, means any day on which dealings in
foreign currencies and exchanges may be carried on by Agent and Lenders in the
London interbank market.
"Cash Equivalents" means:
(a) securities issued or unconditionally guaranteed or insured
by the United States Government or any agency or any State thereof and backed by
the full faith and credit of the United States or such State having maturities
of not more than six (6) months from the date of acquisition;
(b) certificates of deposit, time deposits, Eurodollar time
deposits, repurchase agreements, reverse repurchase agreements, or bankers'
acceptances, having in each case a tenor of not more than six (6) months, issued
by any Lender, or by any nationally or state chartered commercial bank or any
branch or agency of a foreign bank licensed to conduct business in the United
States having combined capital and surplus of not less than $100,000,000 whose
short-term securities are rated at least A-1 by Standard & Poor's Corporation
and P-1 by Moody's Investors Service, Inc.; and
(c) commercial paper of an issuer rated at least A-1 by
Standard & Poor's Corporation or P-1 by Moody's Investor Service, Inc., and in
either case having a tenor of not more than six (6) months.
"Casualty Loss" means any of the following events with respect to any
item of Equipment: (a) the actual total loss or compromised total loss of such
item of Equipment; (b) such item of Equipment shall become lost, stolen,
destroyed, damaged beyond repair or permanently rendered unfit for use for any
reason whatsoever; (c) the seizure of such item of Equipment for a period
exceeding sixty (60) days or the condemnation or confiscation of such item of
Equipment; or (d) such item of Equipment shall be deemed under its Lease to have
suffered a casualty loss as to the entire item of Equipment.
"Charges" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes, levies, assessments, charges or claims, in
each case then due and payable, upon or relating to (a) the Loans hereunder, (b)
Borrower's employees, payroll, income or gross receipts, (c) Borrower's
ownership or use of any of its Properties or assets, or (d) any other aspect of
Borrower's business.
"Closing" means the time at which each of the conditions precedent set
forth in Section 3 to the making of the first Loan hereunder shall have been
duly fulfilled or satisfied by Borrower.
"Closing Date" means the date on which Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, the
Treasury Regulations adopted thereunder and the Treasury Regulations proposed
thereunder (to the extent Requisite Lenders, in their sole discretion,
reasonably determine that such proposed regulations set forth the regulations
that apply in the circumstances), as the same may be in effect from time to
time.
"Collateral" means the Collateral described in the Security Agreement.
"Commitment" means with respect to each Lender the amounts set forth on
Schedule A and "Commitments" means all such amounts collectively, as each may be
amended from time to time upon the execution and delivery of an instrument of
assignment pursuant to Section 11.10, which amendments shall be evidenced on
Schedule 1.1.
"Commitment Termination Date" means November 2, 1998.
"Compliance Certificate" means a certificate signed by a Responsible
Officer of Borrower, substantially in the form set forth in Exhibit C, with such
changes therein as the Requisite Lenders may from time to time reasonably
request for the purpose of having such certificate disclose the matters
certified therein and the method of computation thereof.
"Consolidated Intangible Assets" means, for any Person, as measured at
any date of determination on a consolidated basis, all intangible assets of such
Person.
"Consolidated Net Worth" means, for any Person, as measured at any date
of determination, the difference between Consolidated Total Assets and
Consolidated Total Liabilities.
"Consolidated Tangible Net Worth" means, for any Person, as measured at
any date of determination, the difference between Consolidated Net Worth and
Consolidated Intangible Assets.
"Consolidated Total Assets" means, for any Person, as measured at any
date of determination on a consolidated basis, all assets of such Person.
"Consolidated Total Liabilities" means, for any Person, as measured at
any date of determination on a consolidated basis, all liabilities of such
Person.
"Contingent Obligation" means, as to any Person, (a) any Guaranty
Obligation of that Person and (b) any direct or indirect obligation or
liability, contingent or otherwise, of that Person, (i) in respect of any letter
of credit or similar instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings, (ii) with
respect to the Indebtedness of any partnership or joint venture of which such
Person is a partner or a joint venturer, (iii) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered, or (iv) in respect of any interest rate protection contract that is
not entered into in connection with a bona fide hedging operation that provides
offsetting benefits to such Person. The amount of any Contingent Obligation
shall (subject, in the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty Obligation") be deemed equal to the maximum reasonably
anticipated liability in respect thereof, and shall, with respect to clause
(b)(iv) of this definition, be marked to market on a current basis.
"Default Rate" has the meaning set forth in Section 2.3.
"Designated Deposit Account" means a demand deposit account maintained
by Borrower with FUNB designated by written notice from Borrower to Agent.
"Discount Rate" means, as at and for any date of determination, the
then effective two-year U.S. Treasury Bill rate plus two percent (2.00%),
calculated on the basis of a 360 day year and actual number of days elapsed.
"Discounted Present Value" means, with respect to any Lease or any
Master Trust Pooled Lease, the present value of the unpaid balance of the total
rent to be paid under such Lease or Master Trust Pooled Lease calculated for the
period from the applicable date of determination through the remaining lease
term (provided that for Leases having original lease terms exceeding eighty-four
(84) months, such period of calculation shall only extend through the end of the
eighty-fourth (84th) month of such original lease term), in each case discounted
at the Discount Rate.
"Dollars" and the sign "$" means lawful money of the United States of
America.
"EGF" means PLM Equipment Growth Fund, a California limited
partnership.
"EGF II" means PLM Equipment Growth Fund II, a California limited
partnership.
"EGF III" means PLM Equipment Growth Fund III, a California limited
partnership.
"EGF IV" means PLM Equipment Growth Fund IV, a California limited
partnership.
"EGF V" means PLM Equipment Growth Fund V, a California limited
partnership.
"EGF VI" means PLM Equipment Growth Fund VI, a California limited
partnership.
"EGF VII" means PLM Equipment Growth & Income Fund VII, a California
limited partnership.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000, (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United States, and
(c) any Bank Affiliate.
"Eligible Equipment" means any item of Equipment other than commercial
jet aircraft designed to carry more than fifty (50) passengers or self-powered
ocean-going vessels.
"Eligible Lease" means any Lease in respect of which the lessee and
Lease terms (including, without limitation, as to credit quality, rental rate,
maturity and insurance coverage) are acceptable to Agent, in its sole
discretion, and otherwise comply with the following requirements:
(a) the original term shall be at least six (6) months;
(b) the lessee shall not be a Governmental Authority;
(c) Lease payments shall be due in United States Dollars;
(d) the lessee shall not be in default under the Lease (except
as permitted by clause (f), below) or subject to bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy or similar insolvency law;
(e) neither the Lease nor the Equipment leased thereunder
shall be subject to any Lien of any nature other than the Lien granted in favor
of Agent on behalf of Lenders under the Security Agreement and the other
Security Documents;
(f) amounts due under the Lease shall be less than thirty (30)
days delinquent at the time of the Funding Date related to the Lease and remain
at all times less than four (4) scheduled payments past due, unless such Lease
is an Administrative Lease;
(g) the Lease shall contain a "hell or highwater" provision
which unconditionally obligates the lessee to maintain the Equipment in good
working order, bear all costs of operating such Equipment and make periodic
Lease payments, including, without limitation, taxes, notwithstanding damage to
or destruction of the Equipment leased thereunder or any other event;
(h) the Lease shall not be subject to cancellation by the
lessee and shall not permit early termination unless the lessee pays an amount
not less than the Discounted Present Value of the Lease;
(i) payments under the Lease shall be absolute, unconditional
obligations of the lessee without the right to offset for any reason;
(j) the Lease shall require the lessee to maintain the
Equipment in good working order and to bear the costs of operating and
maintaining the Equipment, including, without limitation, taxes and insurance;
(k) the Lease shall permit the lessor to accelerate all Lease
payments in the event of the lessee's default;
(l) payments under the Lease shall be made no less frequently
than quarterly;
(m) the Lease shall provide that in the event of a Casualty
Loss, the lessor shall have the option, at the lessee's sole cost and expense,
to
(i) repair the Equipment to good condition and
working order,
(ii) replace the Equipment with like Equipment of the
same or later model in good repair, condition and working order, or
(iii) require the lessee to pay to the lessor the
Stipulated Loss Value of the
Equipment;
(n) the Equipment subject to the Lease shall be Eligible
Equipment; and
(o) the lessee shall have a minimum rating by Moody's
Investors Service, Inc. of B3, Standard & Poor's Corporation of B- or the
equivalent under the Alcar Debt Rater System.
Any Lease which is an Eligible Lease will cease to be an Eligible Lease at any
time it no longer meets all of the foregoing requirements.
"Employee Benefit Plan" means any Pension Plan and any employee welfare
benefit plan, as defined in Section 3(1) of ERISA, that is maintained for the
employees of Borrower or any ERISA Affiliate of Borrower.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from Property,
whether or not owned by Borrower, or (b) any other circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all foreign, federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act and the Emergency Planning and
Community Right-to-Know Act.
"Environmental Permit" has the meaning set forth in Section 4.15.2.
"Equipment" means the assets (including office or other equipment)
leased to a lessee pursuant to a Lease.
"Equipment Growth Funds" means any and all of EGF, EGF II, EGF III, EGF
IV, EGF V, EGF VI, EGF VII and Income Fund I.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, as the same may be in effect from time to time, and any successor
statute.
"ERISA Affiliate" means, as applied to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Code.
"Eurodollar Reserve Percentage" means the maximum reserve percentage
(expressed as a decimal, rounded upward to the nearest 1/100th of one percent
(0.01%)) in effect from time to time (whether or not applicable to any Lender)
under regulations issued by the Federal Reserve Board for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency liabilities having a
term comparable to such Interest Period.
"Event of Default" means any of the events set forth in Section 8.1.
"Facility" means the total Commitments described in Schedule A, as such
Schedule A may be amended from time to time as set forth on Schedule 1.1, for
the revolving credit facility described in Section 2.1.1 to be provided by
Lenders to Borrower according to each Lender's Pro Rata Share.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective Rate". If on
any relevant day the appropriate rate for such previous day is not yet published
in either H.15(519) or the Composite 3:30 p.m. Quotation, the rate for such day
will be the arithmetic mean of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System and any successor thereto.
"Form 1001" has the meaning set forth in Section 2.14.6.
"Form 4224" has the meaning set forth in Section 2.14.6.
"FSI" means PLM Financial Services, Inc., a Delaware corporation.
"Funding Date" means with respect to any proposed borrowing hereunder,
the date funds are advanced to Borrower for any Loan.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar function of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means (a) any federal, state, county,
municipal or foreign government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.
"Growth Funds" means any and all of EGF V, EGF VI, EGF VII and Income
Fund I.
"Growth Fund Agreement" means the Third Amended and Restated
Warehousing Credit Agreement dated as of November 3, 1997, by and among each of
the Growth Funds, Lenders and Agent, as the same may from time to time be
amended, modified, supplemented, renewed, extended or restated.
"Guarantor" means any Person who executes a written guaranty of the
Obligations, including, without limitation, PLMI under the Guaranty.
"Guaranty" means that certain Guaranty dated as of November 5, 1996,
executed by PLMI in favor of Lenders and Agent.
"Guaranty Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease for
capital equipment other than Equipment under an Eligible Lease, dividend, letter
of credit or other obligation (the "primary obligations") of another Person (the
"primary obligor"), including any obligation of that Person, whether or not
contingent, (a) to purchase, repurchase or otherwise acquire such primary
obligations or any property constituting direct or indirect security therefor,
or (b) to advance or provide funds (i) for the payment or discharge of any such
primary obligation, or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, or (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation, or (d) otherwise
to assure or hold harmless the holder of any such primary obligation against
loss in respect thereof. The amount of any Guaranty Obligation shall be deemed
equal to the stated or determinable amount of the primary obligation in respect
of which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in respect thereof.
"Hazardous Materials" means all those substances which are regulated
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"Income Fund I" means Professional Lease Management Income Fund I,
L.L.C., a Delaware limited liability company.
"Indebtedness" means, as to any Person, (a) all indebtedness of such
Person for borrowed money, (b) all leases of equipment of such Person as lessee,
(c) to the extent not included in clause (b), above, all capital leases of such
Person as lessee, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than trade or other accounts payable in the
ordinary course of business and not more than ninety (90) days past due), (e)
any obligation of such Person that is secured by a Lien on assets of such
Person, whether or not that Person has assumed such obligation or whether or not
such obligation is non-recourse to the credit of such Person, (f) obligations of
such Person arising under acceptance facilities or under facilities for the
discount of accounts receivable of such Person and (g) any obligation of such
Person to reimburse the issuer of any letter of credit issued for the account of
such Person upon which a draw has been made.
"Indemnified Liability" has the meaning set forth in Section 10.2.1.
"Indemnified Person" has the meaning set forth in Section 10.2.1.
"Interest Differential" means, with respect to any prepayment of a
LIBOR Loan on a day other than an Interest Payment Date on which such LIBOR Loan
matures, the difference between (a) the per annum interest rate payable with
respect to such LIBOR Loan as of the date of the prepayment and (b) the Adjusted
LIBOR on, or as near as practicable to, the date of the prepayment for a LIBOR
Loan commencing on such date and ending on the last day of the applicable
Interest Period. The determination of the Interest Differential by Agent shall
be conclusive in the absence of manifest error.
"Interest Payment Date" means, with respect to any LIBOR Loan, the last
day of each Interest Period applicable to such Loan and, with respect to Prime
Rate Loans, the first Business Day of each calendar month following the Funding
Date of such Prime Rate Loan.
"Interest Period" means, with respect to any LIBOR Loan, the one-month,
two-month or three-month period selected by the Borrower pursuant to Section 2,
in each instance commencing on the applicable Funding Date of the Loan;
provided, however, that any Interest Period which would otherwise end on a day
that is not a Business Day shall end on the next succeeding Business Day except
that in the instance of any LIBOR Loan, if such next succeeding Business Day
falls in the next calendar month, the Interest Period shall end on the next
preceding Business Day.
"Investment" means, when used in connection with any Person, any
investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities of any other Person or by means of loan
or advance (other than advances to employees for moving or travel expenses,
drawing accounts and similar expenditures in the ordinary course of business),
capital contribution, guaranty or other debt or equity participation or
interest, or otherwise, in any other Person, including any partnership and joint
venture interests of such Person in any other Person or in any item of
transportation-related equipment, owned by a Person unaffiliated with Borrower
and on lease to another third party, in which Borrower acquires a right to
share, directly or indirectly.
"Investment Company Act" means the Investment Company Act of 1940, as
amended (15 U.S.C. ss. 80a-1 et seq.), as the same may be in effect from time to
time, or any successor statute thereto.
"Investment Grade Lease" means an Eligible Lease under which the lessee
has a minimum investment grade rating by Moody's Investors Service, Inc. of
Baa3, Standard & Poor's Corporation of BBB- or the equivalent under the Alcar
Debt Rater System.
"Invoice Price" means the sum of the purchase price (including
modifications, as applicable), delivery charges, third party brokerage fees and
other reasonable closing costs, if any (provided that delivery charges, third
party brokerage fees and closing costs shall be included in the computation of
the "Invoice Price" only to the extent that they do not, in the aggregate,
exceed five percent (5.0%) of the total purchase price), and all applicable
taxes, paid by Borrower for or with respect to any item of Equipment.
"IRS" means the Internal Revenue Service and any successor thereto.
"Lease" means each and every item of chattel paper, installment sales
agreement, equipment lease or rental agreement (including progress payment
authorizations) relating to an item of Equipment of which Borrower is the
lessor. The term "Lease" includes (a) all payments to be made thereunder, (b)
all rights of Borrower therein, and (c) any and all amendments, renewals,
extensions or guaranties thereof.
"Lease Sale Program" means any lease sale program established by a
Subsidiary of Borrower, so long as any debt incurred by such Subsidiary is
non-recourse to Borrower, including, without limitation, the AFG Master Trust
Program and the United Bank of Kuwait Program.
"Lender's Side Letter" means the side letter agreement dated November
3, 1997, by and among Borrower, TEC AcquiSub, each of the Growth Funds and BMO.
"Lending Office" means, with respect to any Lender, the office or
offices of the Lender specified as its lending office opposite its name on the
applicable signature page hereto, or such other office or offices of the Lender
as it may from time to time notify Borrower and Agent.
"LIBOR" means, with respect to any Loan to be made, continued as or
converted into a LIBOR Loan, the London Inter-Bank Offered Rate (determined
solely by Agent), rounded upward to the nearest 1/16th of one percent (0.0625%),
at which Dollar deposits are offered to Agent by major banks in the London
interbank market at or about 11:00 a.m., London time, on the second Business Day
prior to the first day of the related Interest Period with respect to such Loan
in an aggregate amount approximately equal to the amount of such Loan and for a
period of time comparable to the number of days in the applicable Interest
Period. The determination of LIBOR by Agent shall be conclusive in the absence
of manifest error.
"LIBOR Loan" means a Loan that bears interest based on Adjusted LIBOR.
"Lien" means any mortgage, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any Property, including any agreement to grant any of the foregoing,
any conditional sale or other title retention agreement, any lease in the nature
of a security interest, and the filing of or agreement to file or deliver any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
"Loan" has the meaning set forth in Section 2.1.1(a)(i).
"Loan Document" when used in the singular and "Loan Documents" when
used in the plural means any and all of this Agreement, the Note, the Security
Agreement, the Lockbox Agreement and the Guaranty and any and all other
agreements, documents and instruments executed and delivered by or on behalf or
support of Borrower to Agent or any Lender or any of their respective authorized
designees evidencing or otherwise relating to the Advances and the Liens granted
to Agent, on behalf of Lenders, with respect to the Advances, as the same may
from time to time be amended, modified, supplemented or renewed.
"Lockbox" has the meaning set forth in Section 5.9.
"Lockbox Agreement" means the Lockbox Agreement dated May 31, 1996,
among Borrower, FUNB and Agent on behalf of Lenders, relating to the Lockbox.
"Master Trust Allocated Residual Amount" means, as at and for any date
of determination, as to those items of Master Trust Equipment then owned of
record by Borrower and subject to an Master Trust Pooled Lease, an amount equal
to the present value of the aggregate of Master Trust Insured Residual Values of
such items of Master Trust Equipment, computed for a period equal to the sum of
the original lease term and thirty (30) days and discounted at the Discount
Rate, not to exceed, in any event, an amount equal to the difference between (a)
an amount equal to ninety percent (90.0%) of the aggregate Invoice Price of such
items of Master Trust Equipment and (b) an amount equal to one hundred percent
(100.0%) of the Discounted Present Value of the subject Master Trust Pooled
Lease (provided that for purposes of this clause (b), the Discounted Present
Value of such Master Trust Pooled Lease shall be calculated for the entire
original lease term rather than the remaining lease term).
"Master Trust Equipment" means the assets (including office or other
equipment) leased to a lessee pursuant to a Master Trust Pooled Lease.
"Master Trust Insured Residual Value" means, as at and for any date of
determination, as to any item of Master Trust Equipment then owned of record by
the AFG Master Trust and subject to a Master Trust Pooled Lease, an amount equal
to one hundred percent (100.0%) of the insured residual value of such item of
Master Trust Equipment that is covered under a residual value insurance policy
in form and substance satisfactory to Agent, as such insured residual value is
confirmed in writing by a residual value insurance company satisfactory to
Agent.
"Master Trust Pooled Lease" means each and every item of chattel paper,
installment sales agreement, equipment lease or rental agreement (including
progress payment authorizations) included within the "Aggregate Net Pool
Balance", as such term is defined as of the Closing Date in the AFG Master Trust
Agreement.
"Material Adverse Effect" means any set of circumstances or events
which (a) has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of any Loan Document, (b)
is or could reasonably be expected to be material and adverse to the condition
(financial or otherwise) or business operations of Borrower or Guarantor, (c)
materially impairs or could reasonably be expected to materially impair the
ability of Borrower or Guarantor to perform its Obligations, or (d) materially
impairs or could reasonably be expected to materially impair the ability of
Agent or any Lender to enforce any of its or their legal remedies pursuant to
the Loan Documents.
"Maximum Availability" has the meaning set forth in Section 2.1.1.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, and to which Borrower or any ERISA Affiliate of Borrower is
making, or is obligated to make, contributions or has made, or been obligated to
make, contributions within the preceding five (5) years.
"Note" has the meaning set forth in Section 2.1.1(a)(i), and any and
all replacements, extensions, substitutions and renewals thereof.
"Notice of Borrowing" means a notice given by Borrower to Agent in
accordance with Section 2.7, substantially in the form of Exhibit E, with
appropriate insertions.
"Notice of Conversion/Continuation" means a notice given by Borrower to
Agent in accordance with Section 2.8, substantially in the form of Exhibit F,
with appropriate insertions.
"Obligations" means all loans, advances, liabilities and obligations
for monetary amounts owing by Borrower to any Lender or Agent, whether due or to
become due, matured or unmatured, liquidated or unliquidated, contingent or
non-contingent, and all covenants and duties regarding such amounts, of any kind
or nature, arising under any of the Loan Documents. This term includes, without
limitation, all principal, interest (including interest that accrues after the
commencement of a case or proceeding against Borrower under the Bankruptcy
Code), fees, including, without limitation, any and all prepayment fees,
facility fees, commitment fees, arrangement fees, agent fees and attorneys' fees
and any and all other fees, expenses, costs or other sums chargeable to Borrower
under any of the Loan Documents.
"Opinion of Counsel" means the favorable written legal opinion of Susan
Santo, general counsel of Borrower and Guarantor, substantially in the form of
Exhibit D.
"Other Taxes" has the meaning set forth in Section 2.14.2.
"Overadvance" has the meaning set forth in Section 2.1.1(a)(iii).
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Pension Plan" means any employee pension benefit plan, as defined in
Section 3(2) of ERISA, that is maintained for the employees of Borrower or any
ERISA Affiliate of Borrower, other than a Multiemployer Plan.
"Permitted Liens" has the meaning set forth in Section 6.1.
"Permitted Rights of Others" means, as to any Property in which a
Person has an interest, (a) an option or right to acquire a Lien that would be a
Permitted Lien, (b) the reversionary interest of a lessor under a lease of such
Property, and (c) an option or right of the lessee under a lease of such
Property to purchase such Property at fair market value.
"Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or Governmental Authority.
"PLMI" means PLM International, Inc., a Delaware corporation, of which
Borrower is a wholly owned subsidiary.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, will constitute an Event of Default.
"Prepayment Date" has the meaning set forth in Section 2.2.2.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by FUNB as its prime rate. Each change in
the Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by FUNB as its Prime Rate is an index or base rate and shall
not necessarily be its lowest rate charged to FUNB's customers or other banks.
"Prime Rate Loan" means any borrowing which bears interest at a rate
determined with reference to the Prime Rate.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"Pro Rata Share" means, for any Lender, the proportion such Lender's
Commitment with respect to the Facility has to the aggregate of all Commitments
with respect to the Facility.
"Public Utility Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended (15 U.S.C. ss. 79 et seq.) as the same shall be
in effect from time to time, and any successor statute thereto.
"Reaffirmation of Guaranty" means the Acknowledgment and Reaffirmation
of Guaranty, dated as of November 3, 1997, executed by PLMI in favor of Lenders
reaffirming its obligations under the Guaranty.
"Regulations G, T, U and X" means, collectively, Regulations G, T, U
and X adopted by the Federal Reserve Board (12 C.F.R. Parts 207, 220, 221 and
224, respectively) and any other regulation in substance substituted therefor.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule, regulation, guideline or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property is
subject.
"Requisite Lenders" means any combination of Lenders whose combined Pro
Rata Share (and voting interest with respect thereto) of all amounts outstanding
under this Agreement, or, in the event there are no amounts outstanding, the
Commitments, is greater than sixty-six and two-thirds percent (66 2/3%) of all
such amounts outstanding or the total Commitments, as the case may be; provided,
however, that in the event there are only two (2) Lenders, Requisite Lenders
means both Lenders.
"Responsible Officer" means any of the President, Executive Vice
President, Chief Financial Officer, Secretary or Corporate Controller of
Borrower having authority to request Loans or perform other duties required
hereunder.
"SEC" means the Securities and Exchange Commission and any successor
thereto.
"Security Agreement" means that certain Security Agreement dated as of
May 31, 1996, between Borrower and Agent, on behalf of Lenders, including all
amendments, modifications and supplements thereto and all appendices, exhibits
and schedules to any of the foregoing, and shall refer to the Security Agreement
as the same may be in effect from time to time.
"Security Documents" means the Security Agreement, each chattel
mortgage, ship mortgage or similar security agreement, mortgage or other
agreement or document entered into with respect to this Agreement, each UCC-1
financing statement delivered pursuant hereto and any and all other related
documents.
"Solvent" means, as to any Person at any time, that (a) the fair value
of the Property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code; (b) the present fair saleable value of the
Property in an orderly liquidation of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
Property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute unreasonably small capital.
"Stipulated Loss Value" means, with respect to any Lease, the amount
payable by the lessee after a Casualty Loss with respect to the Equipment
subject thereto.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company (other than Equipment Growth
Funds) or other business entity of which an aggregate of fifty percent (50.0%)
or more of the beneficial interest (in the case of a partnership) or fifty
percent (50.0%) or more of the outstanding stock, units, or other voting
interest having ordinary voting power to elect a majority of the directors,
managers or trustees of such Person (irrespective of whether, at the time, the
stock, units or other voting interest of any other class or classes of such
Person shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person.
"Taxes" has the meaning set forth in Section 2.14.1.
"TEC" means PLM Transportation Equipment Corporation, a California
corporation and a wholly-owned Subsidiary of FSI and of which TEC AcquiSub is a
special purpose Subsidiary.
"TEC AcquiSub" means TEC AcquiSub, Inc., a California special purpose
corporation and a wholly-owned Subsidiary of TEC.
"TEC AcquiSub Agreement" means the Second Amended and Restated
Warehousing Credit Agreement dated as of November 3, 1997, by and among TEC
AcquiSub, Lenders and Agent, and as the same from time to time may be further
amended, modified, supplemented, renewed, extended or restated.
"Termination Event" means (a) a "reportable event" described in Section
4043 of ERISA and the regulations issued thereunder (other than a reportable
event not subject to the provision for 30-day notice to the PBGC under such
regulations), or (b) the withdrawal of Borrower, FSI or any of FSI's other
Subsidiaries or any of their ERISA Affiliates from a Pension Plan during a plan
year in which any of them was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate a
Pension Plan or the treatment of a Pension Plan amendment as a termination under
Section 4041 of ERISA, or (d) the institution of proceedings to terminate a
Pension Plan by the PBGC, or (e) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of North Carolina; provided, however, in the
event that, by reason of mandatory provisions of law, any and all of the
attachment, perfection or priority of the Lien of Agent, on behalf of Lenders,
in and to the Collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than the State of North Carolina, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
"United Bank of Kuwait Program" means, collectively, the programs for
the sale of Leases under (a) the Master Purchase Agreement dated as of January
30, 1996, by and between Borrower and AFG/Eireann Limited Partnership II, a
limited partnership organized under the laws of the Commonwealth of
Massachusetts, and (b) the Master Purchase Agreement dated as of November [___],
19997, by and between Borrower and AFG/Eireann Limited Partnership III, a
limited partnership organized under the laws of the Commonwealth of
Massachusetts.
1.2 Accounting Terms1.2 Accounting Terms. Any accounting term used in
this Agreement shall have, unless otherwise specifically provided herein, the
meaning customarily given such term in accordance with GAAP, and all financial
data required to be submitted by this Agreement shall be prepared and computed,
unless otherwise specifically provided herein, in accordance with GAAP. That
certain terms or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing.
1.3 Other Terms1.3 Other Terms. All other undefined terms contained in
this Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are used or defined therein. The
words "herein," "hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole, including the Exhibits and Schedules hereto, all
of which are by this reference incorporated into this Agreement, as the same may
from time to time be amended, modified or supplemented, and not to any
particular section, subsection or clause contained in this Agreement. The term
"including" shall not be limiting or exclusive, unless specifically indicated to
the contrary. The term "or" is disjunctive; the term "and" is conjunctive. The
term "shall" is mandatory; the term "may" is permissive. Wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, feminine and
the neuter.
1.4 Schedules and Exhibits1.4 Schedules and Exhibits. Any reference to
a "Sections," "Subsection," "Exhibit," or "Schedule" shall refer to the relevant
Section or Subsection of or Exhibit or Schedule to this Agreement, unless
specifically indicated to the contrary.
SECTION 2. AMOUNT AND TERMS OF CREDIT.
2.1 Commitment to Lend.
2.1.1 Revolving Facility. Subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties of
Borrower set forth herein, Lenders hereby agree to make Advances (as defined
below) of immediately available funds to Borrower, on a revolving basis, from
the Closing Date until the Business Day immediately preceding the Commitment
Termination Date, in the aggregate principal amount outstanding at any time not
to exceed the lesser of (a) the total Commitments for the Facility less the
aggregate principal amount then outstanding under the Growth Fund Agreement and
the TEC AcquiSub Agreement or (b) the Borrowing Base (such lesser amount being
the "Maximum Availability"), as more fully set forth in this Section 2.1.1.
(a) Facility Commitments.
(i) On the Funding Date requested by Borrower, after
Borrower shall have satisfied all applicable conditions precedent set forth in
Section 3, each Lender shall advance immediately available funds to Agent (each
such advance being an "Advance") evidencing such Lender's Pro Rata Share of a
loan ("Loan"). Agent shall immediately advance such immediately available funds
to Borrower at the Designated Deposit Account (or such other deposit account at
FUNB or such other financial institution as to which Borrower and Agent shall
agree at least three (3) Business Days prior to the requested Funding Date) on
the Funding Date with respect to such Loan. Borrower shall pay interest accrued
on the Loan at the rates and in the manner set forth in Section 2.1.1(b).
Subject to the terms and conditions of this Agreement, the unpaid principal
amount of each Loan and all unpaid interest accrued thereon, together with all
other fees, expenses, costs and other sums chargeable to Borrower incurred in
connection therewith shall be due and payable no later than the Commitment
Termination Date. Each Loan advanced hereunder by each Lender shall be evidenced
by Borrower's revolving promissory note, substantially in the form of Exhibit A
(each, a "Note").
(ii) The obligation of Lenders to make any Loan from
time to time hereunder shall be limited to the then applicable Maximum
Availability. For the purpose of determining the amount of the Borrowing Base
available at any one time, the amount available shall be the total amount of the
Borrowing Base as set forth in the Borrowing Base Certificate delivered to Agent
pursuant to Section 3.2.1 with respect to each requested Loan. Nothing contained
in this Agreement shall under any circumstance be deemed to require any Lender
to make any Advance under the Facility which, in the aggregate principal amount,
either (1), taking into account such Lender's Pro Rata Share of the principal
amounts outstanding under this Agreement and the making of such Advance, exceeds
the lesser of (A) such Lender's Commitment for the Facility and (B) such
Lender's Pro Rata Share of the Borrowing Base, or (2), taking into account such
Lender's Pro Rata Share of the principal amounts outstanding under this
Agreement, under the Growth Fund Agreement and under the TEC AcquiSub Agreement
and the making of such Advance, exceeds such Lender's Commitment for the
Facility.
(iii) If at any time and for any reason the aggregate
principal amount of the Loan(s) then outstanding shall exceed the Maximum
Availability (the amount of such excess, if any, being an "Overadvance"),
Borrower shall immediately, and in no event more than two (2) Business Days
thereafter, repay the full amount of such Overadvance, together with all
interest accrued thereon.
(iv) Amounts borrowed by Borrower under this Facility
may be repaid and, prior to the Commitment Termination Date and subject to the
applicable terms and conditions precedent to borrowings hereunder, reborrowed;
provided, however, that no Loan shall mature later than the Commitment
Termination Date.
(v) Each request for a Loan hereunder shall
constitute a reaffirmation by Borrower and the Responsible Officer requesting
the same that the representations and warranties contained in this Agreement are
true, correct and complete in all material respects to the same extent as though
made on and as of the date of the request, except to the extent such
representations and warranties specifically relate to an earlier date, in which
event they shall be true, correct and complete in all material respects as of
such earlier date.
(b) Each Loan. Each Loan made by Lenders hereunder
shall, at Borrower's option in accordance with the terms of this Agreement, be
either in the form of a Prime Rate Loan or a LIBOR Loan. Subject to the terms
and conditions of this Agreement, each Loan shall bear interest on the sum of
the unpaid principal balance thereof outstanding on each day from the date when
made, continued or converted until such Loan shall have been fully repaid at a
rate per annum equal to the Prime Rate, as the same may fluctuate on a daily
basis, or the Adjusted LIBOR, plus, in each case, the Applicable Margin.
Interest on each Loan funded hereunder shall be due and payable in arrears on
each Interest Payment Date, with all accrued but unpaid interest on such Loan
being due and payable on the date such Loan is repaid, whether by prepayment or
at maturity, and with all accrued but unpaid interest being due and payable on
the Commitment Termination Date.
Each Advance made by a Lender as part of a Loan hereunder and all
repayments of principal with respect to such Advance shall be evidenced by
notations made by such Lender on the books and records of such Lender; provided,
however, that the failure by such Lender to make such notations shall not limit
or otherwise affect the obligations of Borrower with respect to the repayments
of principal or payments of interest on any Advance or Loan. The aggregate
unpaid amount of each Advance set forth on the books and records of a Lender
shall be presumptive evidence of such Lender's portion of the principal amount
owing and unpaid under the Note.
2.1.2 Funding. Promptly following the receipt of such
documents required pursuant to Section 3.2.1 and approval of a Loan by the
Agent, Agent shall notify by telephone, telecopier, facsimile or telex each
Lender of the principal amount (including Lender's Pro Rata Share thereof) and
Funding Date of the Loan requested by Borrower. Not later than 1:00 p.m., North
Carolina time, on the Funding Date for any Loan, each Lender shall make an
Advance to Agent for the account of Borrower in the amount of its Pro Rata Share
of the Loan being requested by Borrower. Upon satisfaction of the applicable
conditions precedent set forth in Section 3, all Advances shall be credited in
immediately available funds to the Designated Deposit Account.
2.1.3 Utilization of the Loans. The Loans made under the
Facility may be used solely for the purpose of acquiring the specific Eligible
Leases pending the sale of such Leases under a Lease Sale Program.
2.2 Repayment and Prepayment.
2.2.1 Repayment. Unless prepaid pursuant to Section
2.1.1.(a)(iii) or Section 2.2.2, the principal amount of each Loan hereunder
shall be repaid by Borrower to Lenders not later than the Commitment Termination
Date.
2.2.2 Voluntary Prepayment. Subject to Section 2.18, Borrower
may in the ordinary course of Borrower's business, upon at least three (3)
Business Days' written notice, or telephonic notice promptly confirmed in
writing to Agent, which notice shall be irrevocable, prepay any Loan in whole or
in part. Such notice of prepayment shall specify the date and amount of such
prepayment and whether such prepayment is of Prime Rate Loans or LIBOR Loans, or
any combination thereof. Such prepayment of Loans, together with any amounts
required pursuant to Section 2.18, shall be in immediately available funds and
delivered to Agent not later than 1:00 p.m., North Carolina time, on the date
for prepayment stated in such notice (the "Prepayment Date"). With respect to
any prepayment under this Section 2.2.2, all interest on the amount prepaid
accrued up to but excluding the date of such prepayment shall be due and payable
on the Prepayment Date.
2.3 Calculation of Interest; Post-Maturity Interest2.3 Calculation of
Interest; Post-Maturity Interest. Interest on the Loans shall be computed on the
basis of a 365/366-day year for all Prime Rate Loans and a 360-day year for all
LIBOR Loans and the actual number of days elapsed in the period during which
such interest accrues. In computing interest on any Loan, the date of the making
of such Loan shall be included and the date of payment shall be excluded. Each
change in the interest rate of the Prime Rate Loans based on changes in the
Prime Rate and each change in the Adjusted LIBOR based on changes in the
Eurodollar Reserve Percentage shall be effective on the effective date of such
change and to the extent of such change. Agent shall give Borrower notice of any
such change in the Prime Rate; provided, however, that any failure by Agent to
provide Borrower with notice hereunder shall not affect Agent's right to make
changes in the interest rate of any Loan based on changes in the Prime Rate.
Upon the occurrence and during the continuation of any Event of Default under
this Agreement, Advances under this Agreement will at the option of Requisite
Lenders bear interest at a rate per annum which is determined by adding two
percent (2.0%) to the Applicable Margin for such Loan (the "Default Rate"). This
may result in the compounding of interest. The imposition of a Default Rate will
not constitute a waiver of any Event of Default.
2.4 Manner of Payments. All repayments or prepayments of principal and
all payments of interest, fees, costs, expenses and other sums chargeable to
Borrower under this Agreement, the Note or any of the other Loan Documents shall
be in lawful money of the United States of America in immediately available
funds and delivered to Agent, for the account of Lenders, not later than 1:00
p.m., North Carolina time, on the date due at First Union National Bank of North
Carolina, One First Union Center, 301 South College Street, Charlotte, North
Carolina 28288, Attention: Elisha Sabido or such other place as shall have been
designated in writing by Agent.
2.5 Payment on Non-Business Days. Whenever any payment to be made under
this Agreement, the Note or any of the other Loan Documents shall be stated to
be due on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall in such case be
included in the computation of the payment of interest thereon; provided,
however, that no Loan shall have remained outstanding after the Commitment
Termination Date.
2.6Application of Payments. All payments to or for the benefit of
Lenders hereunder shall be applied in the following order: (a) at the direction
of Borrower or upon prior notice given to Borrower by Agent, then due and
payable fees, expenses and costs; (b) then due and payable interest payments and
mandatory prepayments; and (c) then due and payable principal payments and
optional prepayments; provided that if an Event of Default shall have occurred
and be continuing, Lenders shall have the exclusive right to apply any and all
such payments against the then due and owing Obligations of Borrower as Lenders
may deem advisable. To the extent Borrower fails to make payment required
hereunder or under any of the other Loan Documents, each Lender is authorized
to, and at its sole option may, make such payments on behalf of Borrower. To the
extent permitted by law, all amounts advanced by any Lender hereunder or under
other provisions of the Loan Documents shall accrue interest at the same rate as
Loans hereunder.
2.7 Procedure for the Borrowing of Loans.
2.7.1 Notice of Borrowing. Each borrowing of Loans shall be
made upon Borrower's irrevocable written notice delivered to Agent in the form
of a Notice of Borrowing, executed by a Responsible Person of Borrower, with
appropriate insertions (which Notice of Borrowing must be received by Lender
prior to 12:00 noon, Charlotte, North Carolina time, three (3) Business Days
prior to the requested Funding Date) specifying:
(a) the amount of the requested borrowing, which, if
a LIBOR Loan is requested, shall be not less than One Million Dollars
($1,000,000);
(b) the requested Funding Date, which shall be a
Business Day;
(c) whether the borrowing is to be comprised of one
or more LIBOR Loans or Prime Rate Loans; and
(d) the duration of the Interest Period applicable to
any such LIBOR Loans included in such Notice of Borrowing. If the Notice of
Borrowing shall fail to specify the duration of the Interest Period for any
borrowing comprised of LIBOR Loans, such Interest Period shall be one (1) month.
2.7.2 Unavailability of LIBOR Loans2.7.2 Unavailability of
LIBOR Loans. Unless Agent shall otherwise consent, during the existence of an
Event of Default or Potential Event of Default, Borrower may not elect to have a
Loan made as a LIBOR Loan.
2.8 Conversion and Continuation Elections.
2.8.1 Election. Borrower may, upon irrevocable written notice
to Agent:
(a) elect to convert on any Business Day, any Prime
Rate Loan (or any portion thereof in an amount equal to at least One Million
Dollars ($1,000,000) into a LIBOR Loan; or
(b) elect to convert on any Interest Payment Date any
LIBOR Loan maturing on such Interest Payment Date (or any portion thereof) into
a Prime Rate Loan; or
(c) elect to continue on any Interest Payment Date
any LIBOR Loan maturing on such Interest Payment Date (or any portion thereof in
an amount equal to at least One Million Dollars ($1,000,000); provided, that if
the aggregate amount of LIBOR Loans outstanding to Borrower shall have been
reduced, by payment, prepayment, or conversion of portion thereof, to be less
than $1,000,000, such LIBOR Loans shall automatically convert into Prime Rate
Loans, and on and after such date the right of Borrower to continue such Loans
as, and convert such Loans into, LIBOR Loans shall terminate.
2.8.2 Notice of Conversion. Each conversion or continuation of
Loans shall be made upon Borrower's irrevocable written notice delivered to
Agent in the form of a Notice of Conversion/Continuation, executed by a
Responsible Person of Borrower, with appropriate insertions (which Notice of
Conversion/Continuation must be received by Lender prior to 12:00 noon,
Charlotte, North Carolina time, at least three (3) Business Days in advance of
the proposed conversion date or continuation date specifying:
(a) the proposed conversion date or continuation
date;
(b) the aggregate amount of Loans to be converted or
continued;
(c) the nature of the proposed conversion or
continuation; and
(d) the duration of the requested Interest Period.
2.8.3 Interest Period. If upon the expiration of any Interest
Period applicable to any LIBOR Loan, Borrower has failed to select a new
Interest Period to be applicable to such LIBOR Loan, Borrower shall be deemed to
have elected to convert such LIBOR Loan into a Prime Rate Loan effective as of
the last day of such current Interest Period. 2.8.4 Unavailability of LIBOR
Loans2.8.4 Unavailability of LIBOR Loans. Unless Agent shall otherwise consent,
during the existence of an Event of Default or Potential Event of Default,
Borrower may not elect to have a Loan converted into or continued as a LIBOR
Loan.
2.9 Discretion of Lenders as to Manner of Funding2.9 Discretion of
Lenders as to Manner of Funding. Notwithstanding any provision of this Agreement
to the contrary, each Lender shall be entitled to fund and maintain its funding
of all or any part of its LIBOR Loans in any manner it elects, it being
understood, however, that for the purposes of this Agreement all determinations
hereunder shall be made as if such Lender actually funded and maintained each
LIBOR Loan through the purchase of deposits having a maturity corresponding to
the maturity of the LIBOR Loan and bearing an interest rate equal to the LIBOR
rate (whether or not, in any instance, Lender shall have granted any
participations in such Loan). Each Lender may, if it so elects, fulfill any
commitment to make LIBOR Loans by causing a foreign branch or affiliate to make
or continue such LIBOR Loans; provided, however, that in such event such Loans
shall be deemed for the purposes of this Agreement to have been made by such
Lender, and the obligation of Borrower to repay such Loans shall nevertheless be
to such Lender and shall be deemed held by such Lender, to the extent of such
Loans, for the account of such branch or affiliate.
2.10 Distribution of Payments. Agent shall immediately distribute to
each Lender, at such address as each Lender shall designate, its respective
interest in all repayments and prepayments of principal and all payments of
interest and all fees, expenses and costs received by Agent on the same day and
in the same type of funds as payment was received. In the event Agent does not
distribute such payments on the same day received, if such payments are received
by Agent by 1:00 p.m., North Carolina time, or if received after such time, on
the next succeeding Business Day, such payment shall accrue interest at the
Federal Funds Rate.
2.11 Agent's Right to Assume Funds Available for Advances. Unless Agent
shall have been notified by any Lender no later than the Business Day prior to
the respective Funding Date of a Loan that such Lender does not intend to make
available to Agent an Advance in immediately available funds equal to such
Lender's Pro Rata Share of the total principal amount of such Loan, Agent may
assume that such Lender has made such Advance to Agent on the date of the Loan
and Agent may, in reliance upon such assumption, make available to Borrower a
corresponding Advance. If Agent has made funds available to Borrower based on
such assumption and such Advance is not in fact made to Agent by such Lender,
Agent shall be entitled to recover the corresponding amount of such Advance on
demand from such Lender. If such Lender does not promptly pay such corresponding
amount upon Agent's demand, Agent shall notify Borrower and Borrower shall repay
such Advance to Agent. Agent also shall be entitled to recover from such Lender
interest on such Advance in respect of each day from the date such Advance was
made by Agent to Borrower to the date such corresponding amount is recovered by
Agent at the Federal Funds Rate. Nothing in this Section 2.11 shall be deemed to
relieve any Lender from its obligation to fulfill its Commitment or to prejudice
any rights which Agent or Borrower may have against such Lender as a result of
any default by such Lender under this Agreement.
2.12 Agent's Right to Assume Payments Will be Made by Borrower. Unless
Agent shall have been notified by Borrower prior to the date on which any
payment to be made by Borrower hereunder is due that Borrower does not intend to
remit such payment, Agent may, in its sole discretion, assume that Borrower has
remitted such payment when so due and Agent may, in its sole discretion and in
reliance upon such assumption, make available to each Lender on such payment
date an amount equal to such Lender's Pro Rata Share of such assumed payment. If
Borrower has not in fact remitted such payment to Agent, each Lender shall
forthwith on demand repay to Agent the amount of such assumed payment made
available to such Lender, together with interest thereon in respect of each date
from and including the date such amount was made available by Agent to such
Lender to the date such amount is repaid to Agent at the Federal Funds Rate.
2.13 Capital Requirements. If any Lender determines that compliance
with any law or regulation or with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law)
has or would have the effect of reducing the rate of return on the capital of
such Lender or any corporation controlling such Lender as a consequence of, or
with reference to, such Lender's Commitment or its making or maintaining its Pro
Rata Share of the Loans below the rate which such Lender or such other
corporation could have achieved but for such compliance (taking into account the
policies of such Lender or corporation with regard to capital), then Borrower
shall from time to time, upon written demand by such Lender (with a copy of such
demand to Agent), immediately pay to such Lender such additional amounts as
shall be sufficient to compensate such Lender or other corporation for such
reduction. A certificate submitted by such Lender to Borrower, stating that the
amounts set forth as payable to such Lender are true and correct, shall be
conclusive and binding for all purposes, absent manifest error. Each Lender
agrees promptly to notify Borrower and Agent of any circumstances that would
cause Borrower to pay additional amounts pursuant to this section, provided that
the failure to give such notice shall not affect Borrower's obligation to pay
any such additional amounts.
2.14 Taxes.
2.14.1 No Deductions. Subject to Subsection 2.14.7, any and
all payments by Borrower to each Lender or Agent under this Agreement shall be
made free and clear of, and without deduction or withholding for, any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding, in the case of each Lender
and Agent, such taxes (including income taxes or franchise taxes) as are imposed
on or measured by each Lender's net income (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes").
2.14.2 Miscellaneous Taxes. In addition, Borrower shall pay
any present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or any other Loan Documents (hereinafter referred to as "Other
Taxes").
2.14.3 Indemnity. Subject to Subsection 2.14.7, Borrower shall
indemnify and hold harmless each Lender and Agent for the full amount of Taxes
or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this Section 2.14) paid by such Lender or Agent and any
liability (including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. Payment under this indemnification shall be made
within thirty (30) days from the date any Lender or Agent makes written demand
therefor.
2.14.4 Required Deductions. If Borrower shall be required by
law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum
payable hereunder to any Lender or Agent, then, subject to Subsection 2.14.7:
(a) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.14) such Lender or Agent, as the
case may be, receives an amount equal to the sum it would have received had no
such deductions been made;
(b) Borrower shall make such deductions, and
(c) Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law.
2.14.5 Evidence of Payment. Within thirty (30) days after the
date of any payment by Borrower of Taxes or Other Taxes, Borrower shall furnish
to Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to Agent.
2.14.6 Foreign Persons. Each Lender which is a foreign person
(i.e., a person other than a United States person for United States Federal
income tax purposes) shall:
(a) No later than the date upon which such Lender
becomes a party hereto deliver to Borrower through Agent two (2) accurate and
complete signed originals of IRS Form 4224 or any successor thereto ("Form
4224"), or two accurate and complete signed originals of IRS Form 1001 or any
successor thereto ("Form 1001"), as appropriate, in each case indicating that
such Lender is on the date of delivery thereof entitled to receive payments of
principal, interest and fees under this Agreement free from withholding of
United States Federal income tax;
(b) If at any time such Lender makes any changes
necessitating a new Form 4224 or Form 1001, with reasonable promptness deliver
to Borrower through Agent in replacement for, or in addition to, the forms
previously delivered by it hereunder, two accurate and complete signed originals
of Form 4224; or two accurate and complete signed originals of Form 1001, as
appropriate, in each case indicating that the Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees under this
Agreement free from withholding of United States Federal income tax;
(c) Before or promptly after the occurrence of any
event (including the passing of time but excluding any event mentioned in (ii)
above) requiring a change in or renewal of the most recent Form 4224 or Form
1001 previously delivered by such Lender, deliver to Borrower through Agent two
accurate and complete original signed copies of Form 4224 or Form 1001 in
replacement for the forms previously delivered by the Lender; and
(d) Promptly upon Borrower's or Agent's reasonable
request to that effect, deliver to Borrower or Agent (as the case may be) such
other forms or similar documentation as may be required from time to time by any
applicable law, treaty, rule or regulation in order to establish such Lender's
tax status for withholding purposes.
2.14.7 Income Taxes. Borrower will not be required to pay any
additional amounts in respect of United States Federal income tax pursuant to
Subsection 2.14.4 to Lender for the account of any Lending Office of such
Lender:
(a) If the obligation to pay such additional amounts
would not have arisen but for a failure by such Lender to comply with its
obligations under Subsection 2.14.6 in respect of such Lending Office;
(b) If such Lender shall have delivered to Borrower a
Form 4224 in respect of such Lending Office pursuant to Subsection 2.14.6 and
such Lender shall not at any time be entitled to exemption from deduction or
withholding of United States Federal income tax in respect of payments by
Borrower hereunder for the account of such Lending Office for any reason other
than a change in United States law or regulations or in the official
interpretation of such law or regulations by any Governmental Authority charged
with the interpretation or administration thereof (whether or not having the
force of law) after the date of delivery of such Form 4224; or
(c) If such Lender shall have delivered to Borrower a
Form 1001 in respect of such Lending Office pursuant to Subsection 2.14.6, and
such Lender shall not at any time be entitled to exemption from deduction or
withholding of United States Federal income tax in respect of payments by
Borrower hereunder for the account of such Lending Office for any reason other
than a change in United States law or regulations or any applicable tax treaty
or regulations or in the official interpretation of any such law, treaty or
regulations by any Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law) after the date
of delivery of such Form 1001.
2.14.8 Reimbursement of Costs. If, at any time, Borrower
requests any Lender to deliver any forms or other documentation pursuant to
Subsection 2.14.6(d), then Borrower shall, on demand of such Lender through
Agent, reimburse such Lender for any costs and expenses (including reasonable
attorney fees) reasonably incurred by such Lender in the preparation or delivery
of such forms or other documentation.
2.14.9 Jurisdiction. If Borrower is required to pay additional
amounts to any Lender or Agent pursuant to Subsection 2.14.4, then such Lender
shall use its reasonable good faith efforts (consistent with legal and
regulatory restrictions) to change the jurisdiction of its Lending Office so as
to eliminate any such additional payment by Borrower which may thereafter accrue
if such change in the judgment of such Lender is not otherwise disadvantageous
to such Lender.
2.15 Illegality.
2.15.1LIBOR Loans. If any Lender shall determine that the
introduction of any Requirement of Law, or any change in any Requirement of Law
or in the interpretation or administration thereof, has made it unlawful, or
that any central bank or other Governmental Authority has asserted that it is
unlawful, for such Lender or its Lending Office to make LIBOR Loans, then, on
notice thereof by Lender to Borrower, the obligation of such Lender to make
LIBOR Loans shall be suspended until such Lender shall have notified Borrower
that the circumstances giving rise to such determination no longer exists.
2.15.2 Prepayment. If a Lender shall determine that it is
unlawful to maintain any LIBOR Loan, Borrower shall prepay in full all LIBOR
Loans of such Lender then outstanding, together with interest accrued thereon,
either on the last day of the Interest Period thereof if such Lender may
lawfully continue to maintain such LIBOR Loans to such day, or immediately, if
such Lender may not lawfully continue to maintain such LIBOR Loans, together
with any amounts required to be paid in connection therewith pursuant to Section
2.18.
2.15.3Prime Rate Borrowing. If Borrower is required to prepay
any LIBOR Loan immediately as provided in Section 2.2.3, then concurrently with
such prepayment, Borrower shall borrow, in the amount of such prepayment, a
Prime Rate Loan.
2.16 Increased Costs. If any Lender shall determine that, due to either
(a) the introduction of or any change (other than any change by way of
imposition of or increase in reserve requirements included in the calculation of
the LIBOR) in or in the interpretation of any Requirement of Law or (b) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to such Lender of agreeing to make or making, funding
or maintaining any LIBOR Loans, then Borrower shall be liable, and shall from
time to time, upon demand therefor by such Lender, pay to such Lender such
additional amounts as are sufficient to compensate such Lender for such
increased costs.
2.17 Inability to Determine Rates. If Agent shall have determined that
for any reason adequate and reasonable means do not exist for ascertaining the
LIBOR for any requested Interest Period with respect to a proposed LIBOR Loan or
that the LIBOR applicable for any requested Interest Period with respect to a
proposed LIBOR Loan does not adequately and fairly reflect the cost to Lenders
of funding such Loan, Agent will forthwith give notice of such determination to
Borrower and each Lender. Thereafter, the obligation of Lenders to make or
maintain LIBOR Loans, as the case may be, hereunder shall be suspended until
Agent, upon instruction from the Requisite Lenders, revokes such notice in
writing. Upon receipt of such notice, Borrower may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted. If Borrower does
not revoke such notice, Lenders shall make, convert or continue the Loans, as
proposed by Borrower, in the amount specified in the applicable notice submitted
by Borrower, but such Loans shall be made, converted or continued as Prime Rate
Loans instead of LIBOR Loans, as the case may be.
2.18 Prepayment of LIBOR Loans. Borrower agrees that in the event that
Borrower prepays or is required to prepay any LIBOR Loan by acceleration or
otherwise or fails to draw down or convert to a LIBOR Loan after giving notice
thereof, it shall reimburse each Lender for its funding losses due to such
prepayment or failure to draw. Borrower and Lenders hereby agree that such
funding losses shall consist of the sum of the discounted monthly differences
for each month during the applicable or requested Interest Period, calculated as
follows for each such month:
2.18.1 Principal amount of such LIBOR Loan times (number of
days between the date of prepayment and the last day in the applicable Interest
Period divided by 360), times the applicable Interest Differential, plus
2.18.2 all actual out-of-pocket expenses (other than those
taken into account in the calculation of the Interest Differential) incurred by
Lenders and Agent (excluding allocation of any expense internal to Lenders and
Agent) and reasonably attributable to such payment, prepayment or failure to
draw down or convert as described above; provided that no prepayment fee shall
be payable (and no credit or rebate shall be required) if the product of the
foregoing formula is not a positive number.
SECTION 3. CONDITIONS PRECEDENT.
3.1 Effectiveness of this Agreement. The effectiveness of this amended
and restated Agreement is subject to the satisfaction of the following
conditions precedent:
3.1.1 Corporate Documents. Agent shall have received, in form
and substance satisfactory to Lenders and their respective counsel, the
following:
(a) A certified copy of the records of all actions
taken by each of Borrower and Guarantor, including all corporate resolutions of
each of Borrower and Guarantor authorizing or relating to the execution,
delivery and performance of the Loan Documents and the consummation of the
transactions contemplated hereby and thereby;
(b) A certificate of a Responsible Officer each of
Borrower and Guarantor, respectively, certifying that (i) the certified copies
of the Certificate of Incorporation and Bylaws of Borrower or Guarantor, as the
case may be, attached as Exhibits A and B to the Certificate of Assistant
Secretary of American Finance Group, Inc. dated as of May 30, 1996, and the
Certificate of Assistant Secretary of PLM International, Inc. dated as of
November 5, 1996, as the case may be, are true and accurate, remain in full
force and effect and have not been amended since the respective date thereof,
and (ii) each of Borrower and Guarantor are in good standing under the laws of
the state of its formation and each other jurisdiction where its ownership of
Property and assets or conduct of its business requires such qualification;
(c) A certificate of the secretary or assistant
secretary of AFG Credit Corporation, certifying that (i) the certified copies of
the Certificate of Incorporation and Bylaws of AFG Credit Corporation, attached
as Exhibits A and B thereto, are true and accurate, remain in full force and
effect and have not been amended since the respective date thereof, and (ii) AFG
Credit Corporation is in good standing under the laws of the state of its
formation and each other jurisdiction where its ownership of Property and assets
or conduct of its business requires such qualification;
(d) A certificate of Borrower (executed by a
Responsible Officer thereof), as the servicer for and behalf of the AFG Master
Trust, and by AFG Credit Corporation (executed by the secretary or assistant
secretary thereof) as the transferor for and on behalf of the AFG Master Trust,
certifying that attached to such certificate is a true and accurate copy of the
AFG Master Trust Agreement, as amended through the Closing Date, which remains
in full force and effect; and
(e) Such other documents relating to Borrower or
Guarantor as Lenders reasonably may request.
3.1.2 Notes. Agent shall have received the Notes, in form and
substance satisfactory to Lenders, duly executed and delivered by Borrower,
which Notes shall replace and supersede the existing Notes dated as of November
5, 1996, issued by Borrower to FUNB and Fleet.
3.1.3 Security Documents. Agent shall have received the
Security Documents in form and substance satisfactory to Lenders, duly executed
and delivered by Borrower.
3.1.4 Opinion of Counsel. Agent shall have received an
originally executed Opinion of Counsel on behalf of Borrower and Guarantor, in
form and substance satisfactory to Lenders, dated as of the Closing Date and
addressed to Lenders, together with copies of any officer's certificate or legal
opinion of other counsel or law firm specifically identified and expressly
relied upon by such counsel.
3.1.5 Reaffirmation of Guaranty. Agent shall have received the
Reaffirmation of Guaranty, in form and substance satisfactory to Lenders, duly
executed and delivered by Guarantor.
3.1.6Growth Fund Agreement. Agent shall have received the
Growth Fund Agreement, duly executed and delivered by each of the Growth Funds
and all conditions precedent to the effectiveness of the Growth Fund Agreement
shall have been satisfied.
3.1.7 TEC AcquiSub Agreement. Agent shall have received the
TEC AcquiSub Agreement, executed and delivered by TEC AcquiSub and all
conditions precedent to the effectiveness of the TEC AcquiSub Agreement shall
have been satisfied.
3.1.8Bringdown Certificate. A certificate or certificates,
dated as of the Closing Date, of the Chief Financial Officer or Corporate
Controller of Borrower to the effect that (i) the representations and warranties
of Borrower contained in Section 4 are true, accurate and complete in all
material respects as of the Closing Date as though made on such date and (ii) no
Event of Default or Potential Event of Default under this Agreement has
occurred.
3.1.9 Fees. Agent shall have received the Agent's Side Letter
and BMO shall have received the Lender's Side Letter, each duly executed by
Borrower, Guarantor, each of the Growth Funds and TEC AcquiSub, and Agent and
BMO shall have received the fees described in the Agent's Side Letter and the
Lender's Side Letter, respectively.
3.1.10 Other Documents. Agent shall have received such other
documents, information and items from Borrower and Guarantor as reasonably
requested by Agent.
3.2 All Loans. Unless waived in writing by Requisite Lenders, the
obligation of any Lender to make any Advance is subject to the satisfaction of
the following further conditions precedent:
3.2.1 Notice of Borrowing. At least three (3) Business Days
before each Loan hereunder with respect to any acquisition of Leases by
Borrower, Agent shall have received (a) a Notice of Borrowing; (b) a Borrowing
Base Certificate; and (c) other information as may be requested by the Agent to
confirm that such Lease satisfies the criteria for Eligible Leases.
3.2.2 No Event of Default. No event shall have occurred and be
continuing or would result from the making of any Loan on such Funding Date
which constitutes an Event of Default or Potential Event of Default under this
Agreement or under (and as separately defined in) the Growth Fund Agreement or
under (and as separately defined in) the TEC AcquiSub Agreement, or which with
notice or lapse of time or both would constitute an Event of Default or
Potential Event of Default under this Agreement or under the Growth Fund
Agreement or under the TEC AcquiSub Agreement.
3.2.3Officer's Certificate. Agent shall have received a
certificate, dated as of the Funding Date, of the Chief Financial Officer or
Corporate Controller of Borrower to the effect that all representations and
warranties contained in the Loan Documents are true, accurate and complete in
all material respects with the same effect as though such representations and
warranties had been made on and as of such Funding Date (except to the extent
such representations and warranties specifically relate to an earlier date, in
which case they shall be true, accurate and complete in all material respects as
of such earlier date).
3.2.4Officer's Certificate - Leases. Agent shall have received
a certificate, dated as of the Funding Date of the Chief Financial Officer or
Corporate Controller of Borrower with respect to each Eligible Lease being
financed with such Loan to the effect that:
(a) Borrower has in its possession each of the
following: (i) valid lease documentation, including, without limitation, the
original master lease agreement, or a copy thereof and original lease schedules,
including all amendments, modifications, supplements or addenda made thereto;
(ii) the purchase agreement and assignment of lease, or bill of sale, as
applicable; (iii) invoices with respect to the Equipment subject to the Lease
against which the Loan is to be made, together with evidence of payment to the
vendor or supplier of the Equipment; (iv) the original equipment acceptance
executed by the obligor under the Lease; and (v) certificates of title for the
Equipment subject to the Lease, if applicable;
(b) The Lease constitutes the entire agreement of the
parties thereto and no party thereto shall be bound except in accordance
therewith, and no amendments, modifications, supplements or addenda have been
made to, or schedules attached to, the Lease except as disclosed in such
certificate;
(c) No material default exists under the Lease as of
the date of the Loan; provided that a payment delinquency under the Lease of
less than sixty (60) days shall not constitute a material default;
(d) The Lease constitutes the valid contract of
Borrower and each lessee that is a party to the Lease, and shall at all times be
enforceable against each such lessee in accordance with its terms, subject to
the limitations on enforceability imposed by bankruptcy and creditors' rights
laws and the general principles of equity, and each party thereto has executed
the Lease with full power, authority and capacity to contract;
(e) Upon delivery of the purchase price and the
executed bill of sale or similar instrument of title, a true and correct copy of
which is to be attached, Borrower shall acquire good title to the Equipment
subject to the Eligible Lease against which the Loan is to be made, free and
clear of all Liens and other encumbrances on title (other than Permitted Liens);
(f) The lessee is responsible for the payment of all
taxes, insurance and similar charges so that all Lease payments will be net to
Borrower; and
(g) No rentals, fees, costs, expenses or charges paid
or payable by any lessee under the Lease violate any known statute, rule,
regulation, court ruling or other regulation or limitation relating to the
maximum fees, costs, expenses or charges permitted in any state in which the
Equipment is located or in which the lessee is located, resides or is domiciled,
or in which the transaction was consummated, or in any other state which has
jurisdiction of the Equipment, Lease or lessee.
3.2.5 Insurance. The insurance required to be maintained by
Borrower pursuant to the Loan Documents shall be in full force and effect.
3.2.6 Other Instruments. Agent shall have received such other
instruments and documents as it may have reasonably requested from Borrower in
connection with the Loans to be made on such date.
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower hereby warrants and represents to Agent and each Lender as
follows, and agrees that each of said warranties and representations shall be
deemed to continue until full, complete and indefeasible payment and performance
of the Obligations and shall apply anew to each borrowing hereunder:
4.1 Existence and Power. Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified and licensed as a foreign corporation and authorized to do
business in each jurisdiction within the United States where its ownership of
Property and assets or conduct of business requires such qualification. Borrower
has the corporate power and authority, rights and franchises to own its Property
and assets and to carry on its business as now conducted. Borrower has the
corporate power and authority to execute, deliver and perform the terms of the
Loan Documents (to the extent either is a party thereto) and all other
instruments and documents contemplated hereby or thereby.
4.2 Loan Documents and Note Authorized; Binding Obligations. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents to which Borrower is a party and payment of the Note have been duly
authorized by all necessary and proper corporate action on the part of Borrower.
The Loan Documents constitute legally valid and binding obligations of Borrower,
enforceable against Borrower, to the extent Borrower is a party thereto, in
accordance with their respective terms, except as enforcement thereof may be
limited by bankruptcy, insolvency or other laws affecting the enforcement of
creditors' rights generally.
4.3 No Conflict; Legal Compliance. The execution, delivery and
performance of this Agreement, and each of the other Loan Documents and the
execution, delivery and payment of the Note will not: (a) contravene any
provision of Borrower's certificate of incorporation or bylaws; (b) contravene,
conflict with or violate any applicable law or regulation, or any order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority, which contravention, conflict or violation, in the aggregate, may
have a Material Adverse Effect; or (c) violate or result in the breach of, or
constitute a default under any indenture or other loan or credit agreement, or
other agreement or instrument to which Borrower is a party or by which Borrower,
or its Property and assets may be bound or affected. Borrower is not in
violation or breach of or default under any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any contract, agreement,
lease, license, indenture or other instrument to which it is a party, the
non-compliance with, the violation or breach of or the default under which
would, with reasonable likelihood, have a Material Adverse Effect.
4.4 Financial Condition. Borrower's and Guarantor's audited
consolidated financial statements as of December 31, 1996, and Borrower's and
Guarantor's unaudited consolidated financial statements as of June 30, 1997,
copies of which heretofore have been delivered to Agent by Borrower, and all
other financial statements and other data submitted in writing by Borrower to
Agent or any Lender in connection with the request for credit granted by this
Agreement, are true, accurate and complete in all material respects, and said
financial statements and other data fairly present the consolidated financial
condition of Guarantor, as of the date thereof, and have been prepared in
accordance with GAAP, subject to fiscal year-end audit adjustments. There has
been no material adverse change in the business, properties or assets,
operations, prospects, profitability or financial or other condition of Borrower
or Guarantor since December 31, 1996.
4.5 Executive Offices. The current location of Borrower's chief
executive offices and principal places of business is set forth on Schedule 4.5.
4.6 Litigation. Except as set forth in Schedule 4.6, there are no
claims, actions, suits, proceedings or other litigation pending or, to the best
of Borrower's knowledge, after due inquiry, threatened against Borrower, at law
or in equity before any Governmental Authority or, to the best of Borrower's
knowledge, after due inquiry, any investigation by any Governmental Authority of
Borrower's Properties or assets. Borrower has no Contingent Obligations.
4.7 Consents and Approvals. No approval, authorization or consent of
any trustee or holder of any indebtedness or obligation of Borrower or of any
other Person under any such material agreement, contract, lease or license or
similar document or instrument to which Borrower is a party or by which Borrower
is bound, is required to be obtained by Borrower in order to make or consummate
the transactions contemplated under the Loan Documents. Except as set forth in
Schedule 4.7, all consents and approvals of, filings and registrations with, and
other actions in respect of, all Governmental Authorities required to be
obtained by Borrower in order to make or consummate the transactions
contemplated under the Loan Documents have been, or prior to the time when
required will have been, obtained, given, filed or taken and are or will be in
full force and effect.
4.8 Other Agreements. Borrower is not a party to and is not bound by
any agreement, contract, lease, license or instrument, and is not subject to any
restriction under its respective charter or formation documents, which has, or
is likely in the foreseeable future to have, a Material Adverse Effect. Borrower
has not entered into and, as of the Closing Date does not contemplate entering
into, any material agreement or contract with any Affiliate of Borrower on terms
that are less favorable to Borrower than those that might be obtained at the
time from Persons who are not such Affiliates.
4.9 ERISA. All Employee Benefit Plans of Borrower are listed on
Schedule 4.9. All Pension Plans of Borrower, including terminated Pension Plans,
that are intended to be qualified under Section 401(a) of the Code have been
determined by the IRS to be qualified. All Pension Plans existing as of the date
hereof continue to be so qualified. No "reportable event" (as defined in Section
4043 of ERISA) has occurred and is continuing with respect to any Pension Plan
for which the thirty-day notice requirement may not be waived other than those
of which the appropriate Governmental Authority has been notified. All Employee
Benefit Plans of the Borrower have been operated in all material respects in
accordance with their terms and applicable law, including ERISA, and no
"prohibited transaction" (as defined in ERISA and the Code) that would result in
any material liability to the Borrower has occurred with respect to any such
Employee Benefit Plan.
4.10 Labor Matters. There are no strikes or other labor disputes
against or threatened against Borrower. All payments due from Borrower on
account of employee health and welfare insurance which would, with reasonable
likelihood, have a Material Adverse Effect if not paid have been paid or, if not
due, accrued as a liability on the books of Borrower.
4.11 Margin Regulations. Borrower does not own any "margin security",
as that term is defined in Regulations G and U of the Federal Reserve Board, and
the proceeds of the Loans under this Agreement will be used only for the
purposes contemplated hereunder. None of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans under this Agreement to be considered a "purpose
credit" within the meaning of Regulations G, T, U and X. Borrower will not take
or permit any agent acting on its behalf to take any action which might cause
this Agreement or any document or instrument delivered pursuant hereto to
violate any regulation of the Federal Reserve Board.
4.12 Taxes. All federal, state, local and foreign tax returns, reports
and statements required to be filed by Borrower have been filed with the
appropriate Governmental Authorities where failure to file would, with
reasonable likelihood, have a Material Adverse Effect, and all material Charges
and other impositions shown thereon to be due and payable by Borrower have been
paid prior to the date on which any fine, penalty, interest or late charge may
be added thereto for nonpayment thereof, or any such fine, penalty, interest,
late charge or loss has been paid, or Borrower is contesting its liability
therefore in good faith and has fully reserved all such amounts according to
GAAP in the financial statements provided to Agent pursuant to Section 5.1.
Borrower has paid when due and payable all material Charges upon the books of
Borrower and no Government Authority has asserted any Lien against Borrower with
respect to unpaid Charges. Proper and accurate amounts have been withheld by
Borrower from its employees for all periods in full and complete compliance with
the tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective Governmental Authorities.
4.13 Environmental Quality.
4.13.1 Except as specifically disclosed in Schedule 4.13, the
on-going operations of Borrower comply in all material respects with all
Environmental Laws.
4.13.2 Except as specifically disclosed in Schedule 4.13,
Borrower has obtained all licenses, permits, authorizations and registrations
required under any Environmental Law ("Environmental Permits") and necessary for
its ordinary course operations, all such Environmental Permits are in good
standing, and Borrower is in compliance with all material terms and conditions
of such Environmental Permits.
4.13.3 Except as specifically disclosed in Schedule 4.13,
neither Borrower nor any of its present Property or operations is subject to any
outstanding written order from or agreement with any Governmental Authority nor
subject to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material.
4.13.4 There are no Hazardous Materials or other conditions or
circumstances existing with respect to any Property, or arising from operations
prior to the Closing Date, of Borrower that would reasonably be expected to give
rise to any Environmental Claim with a potential liability of Borrower in excess
of $100,000 in the aggregate from any such condition, circumstance or Property.
4.14 Trademarks, Patents, Copyrights, Franchises and Licenses. Borrower
possesses and owns all necessary trademarks, trade names, copyrights, patents,
patent rights, franchises and licenses which are material to the conduct of its
business as now operated.
4.15 Full Disclosure. As of the Closing Date, no information contained
in this Agreement, the other Loan Documents or any other documents or written
materials furnished by or on behalf of Borrower to Agent or any Lender pursuant
to the terms of this Agreement or any of the other Loan Documents contains any
untrue or inaccurate statement of a material fact or omits to state a material
fact necessary to make the statement contained herein or therein not misleading
in light of the circumstances under which made.
4.16 Other Regulations. Borrower is not: (a) a "public utility company"
or a "holding company," or an "affiliate" or a "subsidiary company" of a
"holding company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act or (b) an
"investment company," or an "affiliated person" of, or a "promoter" or
"principal underwriter" for, an "investment company," as such terms are defined
in the Investment Company Act. The making of the Loans hereunder and the
application of the proceeds and repayment thereof by Borrower and the
performance of the transactions contemplated by this Agreement and the other
Loan Documents will not violate any provision of the Investment Company Act or
the Public Utility Holding Company Act, or any rule, regulation or order issued
by the SEC thereunder.
4.17 Solvency. Borrower is Solvent.
4.18 Survival of Representations and Warranties. So long as any of the
Commitments shall be available and until payment and performance in full of the
Obligations, the representations and warranties contained herein shall have a
continuing effect as having been true when made.
4.19 Eligible Leases. With respect to each Eligible Lease financed by a
Loan:
4.19.1 Borrower maintains in its possession each of the
following: (a) valid lease documentation, including, without limitation, the
original master lease agreement, or a copy thereof and original lease schedules,
together with all amendments, modifications, supplements or addenda made, or
schedules attached, thereto; (b) the purchase agreement and assignment of lease,
or bill of sale, as applicable; (c) invoices with respect to Equipment subject
to the Lease, together with evidence of payment to the vendor or supplier of the
Equipment; (d) the original equipment acceptance executed by the obligor under
the Lease; and (e) certificates of title for the Equipment subject to the Lease,
if applicable;
4.19.2 No material default exists under the Lease; provided
that a payment delinquency under the Lease of less than sixty (60) days shall
not constitute a material default;
4.19.3 The Lease constitutes the valid contract of Borrower
and each lessee that is a party to the Lease, and shall at all times be
enforceable against each such lessee in accordance with its terms, subject to
the limitations on enforceability imposed by bankruptcy and creditors' rights
laws and the general principles of equity, and each party thereto has executed
the Lease with full power, authority and capacity to contract;
4.19.4 Borrower has good title to the Equipment subject to the
Eligible Lease, free and clear of all Liens and other encumbrances on title
(other than Permitted Liens);
4.19.5 The lessee is responsible for the payment of all taxes,
insurance and similar charges so that all Lease payments will be net to
Borrower; and
4.19.6 No rentals, fees, costs, expenses or charges paid or
payable by any lessee under the Lease violate any known statute, rule,
regulation, court ruling or other regulation or limitation relating to the
maximum fees, costs, expenses or charges permitted in any state in which the
Equipment is located or in which the lessee is located, resides or is domiciled,
or in which the transaction was consummated, or in any other state which has
jurisdiction of the Equipment, Lease or lessee.
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any of the Commitments
shall be available and until full, complete and indefeasible payment and
performance of the Obligations, unless Requisite Lenders shall otherwise consent
in writing, Borrower shall do or cause to have done all of the following:
5.1 Records and Reports. Maintain a system of accounting administered
in accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP, and deliver to Agent or caused to be
delivered to Agent:
5.1.1 Quarterly Statements. As soon as practicable and in any
event within sixty (60) days after the end of each quarterly accounting period
of Borrower, Guarantor and PLMI, except with respect to the final fiscal quarter
of each fiscal year, in which case as soon as practicable and in any event
within one hundred twenty (120) days after the end of such fiscal quarter,
consolidating balance sheets of Guarantor and Borrower as at the end of such
period and the related consolidated statements of income, stockholders' equity
and cash flows of PLMI (and, as to statements of income only, consolidating) for
such quarterly accounting period, setting forth in each case in comparative form
the consolidated figures for the corresponding periods of the previous year, all
in reasonable detail and certified by the Chief Financial Officer or Corporate
Controller of Borrower, Guarantor and PLMI that they (i) are complete and fairly
present the financial condition of Borrower, Guarantor and PLMI as at the dates
indicated and the results of their operations and changes in their cash flow for
the periods indicated, (ii) disclose all liabilities of Borrower, Guarantor and
PLMI that are required to be reflected or reserved against under GAAP, whether
liquidated or unliquidated, fixed or contingent, and (iii) have been prepared in
accordance with GAAP, subject to changes resulting from audit and normal
year-end adjustment;
5.1.2 Annual Statements. As soon as practicable and in any
event within one hundred twenty (120) days after the end of each fiscal year of
Guarantor and PLMI, consolidated and consolidating balance sheets of Guarantor
and PLMI and the related consolidated (and, as to statements of income only for
Guarantor and PLMI, consolidating) statements of income, stockholders' equity
and cash flows of Guarantor and PLMI for such fiscal year, setting forth in each
case, in comparative form the consolidated figures for the previous year, all in
reasonable detail and (i) in the case of such consolidated financial statements,
accompanied by a report thereon of an independent public accountant of
recognized national standing selected by Guarantor and PLMI and satisfactory to
Agent, which report shall contain an opinion which is not qualified in any
manner or which otherwise is satisfactory to Requisite Lenders, in their sole
discretion, and (ii) in the case of such consolidating financial statements,
certified by the Chief Financial Officer or Corporate Controller of Guarantor
and PLMI;
5.1.3 Borrowing Base Certificate. As soon as practicable, and
in any event not later than fifteen (15) days after the end of each calendar
month in which a Loan has been, or is outstanding, a Borrowing Base Certificate
dated as of the last day of such month, duly executed by a Chief Financial
Officer or Corporate Controller of Borrower, with appropriate insertions;
5.1.4 Compliance Certificate. As soon as practicable, and in
any event not later than sixty (60) days after the end of each fiscal quarter of
Borrower, a Compliance Certificate dated as of the last day of such fiscal
quarter, duly executed by the Chief Financial Officer or Corporate Controller of
Borrower, with appropriate insertions;
5.1.5 Reports. At Agent's request, promptly upon receipt
thereof, copies of all reports submitted to Borrower, Guarantor or PLMI by
independent public accountants in connection with each annual, interim or
special audit of the financial statements of Borrower, Guarantor or PLMI made by
such accountants;
5.1.6 Lease Receivables Aging Reports. As soon as practicable
and in any event within sixty (60) days after the end of each quarterly
accounting period of Borrower, a Lease receivables aging report as at the end of
such period, all in reasonable detail and certified by the Chief Financial
Officer or Corporate Controller of Borrower that they are complete and fairly
present the Lease receivables aging of Borrower as at the dates indicated.
5.1.7 . As soon as practicable, and in any event within sixty
(60) days after the end of each quarterly accounting period of Borrower, an
equipment residual value report as of the end of such period for each item of
Eligible Equipment and Master Trust Pooled Equipment for which the AFG Allocated
Residual Amount or Master Trust Allocated Residual Amount, as applicable, is
included within the Borrowing Base, as calculated as of the end of such period,
setting forth for each such item of equipment (i) the Invoice Price, (ii) the
GAAP book residual value, (iii) the insured residual value and (iv) on a
trailing basis, the total residual proceeds, including re-leasing and sales
proceeds, all in reasonable detail and certified by the Chief Financial Officer
or Corporate Controller of Borrower.
5.1.8 [Intentionally Omitted.]
5.1.9 Insurance Reports. (i) On the date six (6) months after
the Closing Date and thereafter upon Agent's reasonable request, which request
shall not be made more than once during any calendar year (unless an Event of
Default shall have occurred and be continuing, in which event such limitation
shall not apply), a report from Borrower's insurance broker, in such detail as
Agent may reasonably request, as to the insurance maintained or caused to be
maintained by Borrower pursuant to this Agreement, demonstrating compliance with
the requirements hereof and thereof, and (ii) as soon as possible and in no
event later than fifteen (15) days prior to the expiration date of any insurance
policy of Borrower, a written confirmation that such policy is in process of
renewal and is not terminated or subject to a notice of non-renewal from such
Borrower's insurance broker; provided, however, that Borrower shall give Agent
prompt written notice if changes affecting risk coverage will be made to such
policy or if the policy will be canceled;
5.1.10 Certificate of Responsible Officer. Promptly upon any
officer of Borrower obtaining knowledge (i) of any condition or event which
constitutes an Event of Default or Potential Event of Default under this
Agreement, (ii) that any Person has given any notice to Borrower, Guarantor or
PLMI or taken any other action with respect to a claimed default or event or
condition of the type referred to in Section 8.1.2, (iii) of the institution of
any litigation or of the receipt of written notice from any Governmental
Authority as to the commencement of any formal investigation involving an
alleged or asserted liability of Borrower of any amount and of Guarantor or PLMI
equal to or greater than $500,000 or any adverse judgment in any litigation
involving a potential liability of Borrower of any amount and of Guarantor or
PLMI equal to or greater than $500,000, or (iv) of a material adverse change in
the business, operations, properties, assets or condition (financial or
otherwise) of Borrower, Guarantor or PLMI, a certificate of a Responsible
Officer of Borrower, specifying the notice given or action taken by such Person
and the nature of such claimed default, Event of Default, Potential Event of
Default, event or condition and what action Borrower, Guarantor or PLMI has
taken, is taking and proposes to take with respect thereto;
5.1.11 Employee Benefit Plans5.1.11 Employee Benefit Plans.
Promptly upon becoming aware of the occurrence of any (i) Termination Event in
connection with any Pension Plan or (ii) "prohibited transaction" (as such term
is defined in ERISA and the Code) in connection with any Employee Benefit Plan
or any trust created thereunder, a written notice specifying the nature thereof,
what action Borrower or any of its ERISA Affiliates has taken, is taking or
proposes to take with respect thereto, and, when known, any action taken or
threatened by the IRS or the PBGC with respect thereto;
5.1.12 ERISA Notices. With reasonable promptness, copies of
(i) all notices received by Borrower or any of its ERISA Affiliates of the
PBGC's intent to terminate any Pension Plan or to have a trustee appointed to
administer any Pension Plan, (ii) each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) filed by Borrower or any of its ERISA
Affiliates with the IRS with respect to each Pension Plan covering employees of
Borrower, and (iii) all notices received by Borrower or any of its ERISA
Affiliates from a Multiemployer Plan sponsor concerning the imposition or amount
of withdrawal liability pursuant to Section 4202 of ERISA;
5.1.13 Pension Plans. Promptly upon receipt by Borrower any
challenge by the IRS to the qualification under Section 401 or 501 of the Code
of any Pension Plan;
5.1.14SEC Reports. As soon as available and in no event later
than five (5) days after the same shall have been filed with the SEC, a copy of
each Form 8-K Current Report, Form 10-K Annual Report, Form 10-Q Quarterly
Report, Annual Report to Shareholders, Proxy Statement and Registration
Statement of PLMI;
5.1.15Tax Returns. Upon the request of Agent, copies of all
federal, state, local and foreign tax returns and reports in respect of income,
franchise or other taxes on or measured by income (excluding sales, use or like
taxes) filed by or on behalf of Borrower, Guarantor and PLMI; and
5.1.16 Additional Information. Such other information
respecting the condition or operations, financial or otherwise, of Borrower and
PLMI and its Subsidiaries as Agent or any Lender may from time to time
reasonably request, and such information regarding the lessees under Leases as
Borrower from time to time receives or Agent or any Lender reasonably requests.
All financial statements of Borrower, Guarantor and PLMI to be
delivered by Borrower, Guarantor and PLMI to Agent pursuant to this Section 5.1
will be complete and correct and present fairly the financial condition of
Borrower, Guarantor and PLMI as of the date thereof; will disclose all
liabilities of Borrower, Guarantor and PLMI that are required to be reflected or
reserved against under GAAP, whether liquidated or unliquidated, fixed or
contingent; and will have been prepared in accordance with GAAP. All tax returns
submitted to Agent by Borrower, Guarantor and PLMI will, to the best of
Borrower's, Guarantor's and PLMI's knowledge, after due inquiry, be true and
correct. Borrower, Guarantor and PLMI hereby agree that each time either submits
a financial statement or tax return to Agent, Borrower, Guarantor and PLMI shall
be deemed to represent and warrant to Lenders that such financial statement or
tax return complies with all of the preceding requirements set forth in this
paragraph.
5.2 Existence; Compliance with Law. Borrower shall preserve and
maintain its existence and all of its licenses, permits, governmental approvals,
rights, privileges and franchises necessary or desirable in the normal conduct
of its business as now conducted or presently proposed to be conducted
(including, without limitation, its qualification to do business in each
jurisdiction in which such qualification is necessary or desirable in view of
its business); to conduct its business in an orderly and regular manner; and
comply with (a) the provisions of its articles of incorporation and bylaws and
(b) the requirements of all applicable laws, rules, regulations or orders of any
Governmental Authority and requirements for the maintenance of Borrower's
insurance, licenses, permits, governmental approvals, rights, privileges and
franchises, except, in either case, to the extent that the failure to comply
therewith would not, in the aggregate, with reasonable likelihood, have a
Material Adverse Effect.
5.3 Insurance. Borrower shall maintain and keep in force insurance of
the types and in amounts then customarily carried in lines of business similar
to that of Borrower including, but not limited to, property insurance coverage
for Borrower under the existing blanket policies of insurance for PLMI and its
Subsidiaries, and all such policies of property insurance shall carry
endorsements naming Agent as principal loss payee as to any property owned by
Borrower; and public liability insurance, which shall carry endorsements naming
Agent and each Lender as an additional insured, and in each case indicating that
(i) any loss thereunder shall be payable to Agent or Lenders, as the case may
be, notwithstanding any action, inaction or breach of representation or warranty
by Borrower; (ii) there shall be no recourse against any Lender for payment of
premiums or other amounts with respect thereto, and (iii) at least fifteen (15)
days' prior written notice of cancellation, lapse or material change in coverage
shall be given to Agent by the insurer. In addition, Borrower shall require each
lessee under each Eligible Lease that is not an Investment Grade Lease to
maintain and keep in force property insurance covering the Equipment subject to
such Eligible Lease.
5.4 Taxes and Other Liabilities. Promptly pay and discharge all
material Charges when due and payable, except (a) such as may be paid thereafter
without penalty or (b) such as may be contested in good faith by appropriate
proceedings and for which an adequate reserve has been established and is
maintained in accordance with GAAP. Borrower shall promptly notify Agent of any
material challenge, contest or proceeding pending by or against Borrower or
against PLMI or any of its other Subsidiaries before any taxing authority.
5.5 Inspection Rights; Assistance. At any reasonable time and from time
to time during normal business hours, permit Agent or any Lender or any agent,
representative or employee thereof, to examine and make copies of and abstracts
from the financial records and books of account of Borrower and other documents
in the possession or under the control of Borrower relating to any obligation of
Borrower arising under or contemplated by this Agreement, and to visit the
offices of Borrower to discuss the affairs, finances and accounts of Borrower
with any of the officers of Borrower, and, upon reasonable notice and during
normal business hours (unless an Event of Default or Potential Event of Default
shall have occurred and be continuing, in which event no notice is required) to
conduct audits of and appraise the Equipment. Such audits and appraisals shall
be subject to the lessee's right to quiet enjoyment as set forth in the
respective Lease.
5.6 Maintenance of Facilities; Modifications; Performance of Leases.
5.6.1 Maintenance of Facilities. Borrower shall keep its
Properties which are useful or necessary to Borrower in good repair and
condition, normal wear and tear excepted, and from time to time make necessary
repairs thereto, and renewals and replacements thereof so that Borrower's
Properties shall be fully and efficiently preserved and maintained.
5.6.2Performance of Leases. Borrower shall timely perform in
all material respects each of its covenants and obligations under the Eligible
Leases to which it is a party.
5.7Supplemental Disclosure. From time to time as may be necessary (in
the event that such information is not otherwise delivered by Borrower to Agent
or Lenders pursuant to this Agreement), so long as there are Obligations
outstanding hereunder, disclose to Agent in writing any material matter
hereafter arising which, if existing or occurring at the date of this Agreement,
would have been required to be set forth or described by Borrower in this
Agreement or any of the other Loan Documents (including all Schedules and
Exhibits hereto or thereto) or which is necessary to correct any information set
forth or described by Borrower hereunder or thereunder or in connection herewith
which has been rendered inaccurate thereby.
5.8 Further Assurances. In addition to the obligations and documents
which this Agreement expressly requires Borrower to execute, deliver and
perform, Borrower shall execute, deliver and perform any and all further acts or
documents which Agent or Lenders may reasonably require to effectuate the
purposes of this Agreement or any of the other Loan Documents.
5.9 Lockbox. Borrower shall unless otherwise directed in writing by
Agent, cause all remittances made by the obligor under any Lease to be made to a
lock box (the "Lockbox") maintained with FUNB pursuant to the Lockbox Agreement.
Unless otherwise directed by Agent in writing, all invoices and other
instructions submitted by Borrower to the obligor relating to Lease payments
shall designate the Lockbox as the place to which such payments shall be made.
5.10 Environmental Laws5.10 Environmental Laws. Borrower shall conduct
its operations and keep and maintain its Property in material compliance with
all Environmental Laws.
SECTION 6. BORROWER'S NEGATIVE COVENANTS.
So long as any of the Commitments shall be available and until full,
complete and indefeasible payment and performance of the Obligations, unless
Requisite Lenders shall otherwise consent in writing, Borrower covenants and
agrees as follows:
6.1 Liens; Negative Pledges; and Encumbrances. Borrower shall not
create, incur, assume or suffer to exist any Lien of any nature upon or with
respect to any of their respective Property, whether now or hereafter owned,
leased or acquired, except (collectively, the "Permitted Liens"):
6.1.1 Liens granted in favor of Agent on behalf of Lenders
under the Security Agreement and the other Security Documents;
6.1.2 Liens for Charges if payment shall not at the time be
required to be made in accordance with Section 5.4;
6.1.3 Liens in respect of pledges, obligations or deposits (i)
under workers' compensation laws, unemployment insurance and other types of
social security or similar legislation, (ii) in connection with surety, appeal
and similar bonds incidental to the conduct of litigation, (iii) in connection
with bid, performance or similar bonds and mechanics', laborers' and
materialmen's and similar statutory Liens not then delinquent, or (iv)
incidental to the conduct of the business of Borrower and which were not
incurred in connection with the borrowing of money or the obtaining of advances
or credit; provided that the Liens permitted by this Section 6.1.3 do not in the
aggregate materially detract from the value of any assets or property of or
materially impair the use thereof in the operation of the business of Borrower;
and provided further that the adverse determination of any claim or liability,
contingent or otherwise, secured by any of such Liens would not either
individually or in the aggregate, with reasonable likelihood, have a Material
Adverse Effect; and
6.1.4 Permitted Rights of Others.
6.2 Limitations on Indebtedness. Borrower shall not create, incur,
assume or suffer to exist, any Indebtedness or Contingent Obligation; provided,
however, that this Section 6.2 shall not be deemed to prohibit the Obligations
to Lenders and Agent arising under this Agreement and the other Loan Documents.
6.3 Disposition of Assets. Borrower shall not sell, assign or otherwise
dispose of any of its assets, except for full, fair and reasonable
consideration, or enter into any sale and leaseback agreement covering any of
its fixed or capital assets.
6.4 Restricted Payments. Borrower shall not make any dividend payment
or other distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of its capital stock, or
purchase, redeem or otherwise acquire for value any shares of its capital stock
or any warrants, rights or options to acquire such shares, now or hereafter
outstanding, if such payment would cause an Event of Default or a prospective
Event of Default to occur.
6.5 Restriction on Fundamental Changes. Borrower shall not enter into
any transaction of Acquisition, merger, consolidation or recapitalization,
directly or indirectly, whether by operation of law or otherwise, or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution), or
convey, sell, lease, assign, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or any part of its business,
Property or assets, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or substantially all the business, Property or assets
of, or stock or other evidence of beneficial ownership of, any Person, except
for the acquisition or resale of Leases and Equipment in the ordinary course of
business and as contemplated by this Agreement.
6.6 Transactions with Affiliates. Borrower shall not directly or
indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any of its Affiliates on terms that are less
favorable to Borrower than those that might be obtained at the time from Persons
who are not such Affiliates.
6.7 No Loans to Affiliates. Borrower shall not make any loans to any of
its Affiliates.
6.8 No Investment. Borrower shall not make or suffer to exist any
Investments, except for:
(a) Investments in Cash Equivalents;
(b) subject to Section 6.10, Investments in new
Subsidiaries for the purpose of capitalizing Lease Sale Programs; and
(c) extensions of credit in the nature of accounts
receivable or notes receivable arising form the sale or lease of goods or
services in the ordinary course of Borrower's business.
6.9Maintenance of Business. Borrower shall not engage in any business
other than the originating and purchase of leases of equipment and the
operation, remarketing and resale of such leases and equipment.
6.10 No Subsidiaries. Except for such existing Subsidiaries listed in
Schedule 6.10, and such future Subsidiaries as Borrower may create after
providing the Agent with prior written notice of its intention to do so and so
long as any Indebtedness or other obligations or liabilities of any Subsidiary
shall be non-recourse to Borrower, Borrower shall not create any Subsidiaries.
6.11 Events of Default. Borrower shall not take or omit to take any
action, which act or omission would, with the lapse of time, or otherwise
constitute (a) a default, event of default or Event of Default under any of the
Loan Documents or (b) a default or an event of default under any other material
agreement, contract, lease, license, mortgage, deed of trust or instrument to
which it is a party or by which it or any of its Properties or assets is bound,
which default or event of default would, with reasonable likelihood, have a
Material Adverse Effect.
6.12 ERISA.
6.12.1 Borrower shall not incur any obligation to contribute
to a Pension Plan required by a collective bargaining agreement or as a
consequence of the acquisition of an ERISA Affiliate, unless (i) Borrower shall
notify Agent in writing that it intends to incur such obligation and (ii) after
Agent's receipt of such notice, Requisite Lenders consent to the establishment
or maintenance of, or Borrower's incurring an obligation to contribute to, the
Pension Plan, which consent may not unreasonably be withheld but may be subject
to such reasonable conditions as Requisite Lenders may require.
6.12.2 If Borrower or any ERISA Affiliate of Borrower incurs
any obligation to contribute to any Pension Plan, then Borrower shall not (i)
terminate, or permit such ERISA Affiliate to terminate, any Pension Plan so as
to result in any liability that would, with reasonable likelihood, have a
Material Adverse Effect or (ii) make or permit such ERISA Affiliate to make a
complete or partial withdrawal (within the meaning of Section 4201 of ERISA)
from any Multiemployer Plan so as to result in any liability that would, with
reasonable likelihood, have a Material Adverse Effect.
6.13 No Use of Any Lender's Name. Borrower shall not use or authorize
others to use any Lender's name or marks in any publication or medium,
including, without limitation, any prospectus, without such Lender's advance
written authorization.
6.14 Certain Accounting Changes. Borrower shall not change its fiscal
year end from December 31, nor make any change in its accounting treatment and
reporting practices except as permitted by GAAP.
SECTION 7. FINANCIAL COVENANT OF BORROWER.
Borrower covenants and agrees that, so long as the Commitment hereunder
shall be available, and until full, complete and indefeasible payment and
performance of the Obligations, including, without limitation, all Loans
evidenced by the Note, unless Requisite Lenders shall otherwise consent in
writing, Borrower shall perform the following financial covenant. Borrower
agrees and understands that (except as expressly provided herein) the covenant
under this Section 7 shall be subject to quarterly compliance or compliance as
of the date of any request for a Loan pursuant to Section 3.2.1 (as measured on
the last day of each fiscal quarter of Borrower or as of the date of any request
for a Loan pursuant to Section 3.2.1), and in each case review by Lenders of the
respective fiscal quarter's consolidated financial statements delivered to Agent
by Borrower pursuant to Section 5.1.
7.1 Minimum Consolidated Tangible Net Worth. Borrower shall maintain a
Consolidated Tangible Net Worth of not less than $6,000,000.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
8.1 Events of Default. The occurrence of any one or more of the
following shall constitute an Event of Default:
8.1.1 Failure to Make Payments. Borrower or Guarantor fails to
pay any sum due to Lenders or Agent arising under this Agreement, the Note or
any of the other Loan Documents when and as the same shall become due and
payable, whether by acceleration or otherwise and such failure shall not have
been cured to Lenders' satisfaction within five (5) calendar days; or
8.1.2 Other Agreements. (a) Borrower defaults in the repayment
of any principal of or the payment of any interest on any Indebtedness of
Borrower, or breaches any term of any evidence of such Indebtedness or defaults
in any payment in respect of any Contingent Obligation, (b) Guarantor defaults
in the repayment of any principal of or the payment of any interest on any
Indebtedness of Guarantor, or breaches any term of any evidence of such
Indebtedness or defaults in any payment in respect of any Contingent Obligations
(excluding, as to Guarantor, any Contingent Obligations of Guarantor arising
solely as a result of Guarantor's status as a general partner of any Person), in
each case exceeding, in the aggregate outstanding principal amount, $2,000,000,
(c) Borrower or Guarantor breaches or violates any term or provision of any
evidence of such Indebtedness or Contingent Obligation or of any such loan
agreement, mortgage, indenture, guaranty or other agreement relating thereto if
the effect of such breach is to permit acceleration under the applicable
instrument, loan agreement, mortgage, indenture, guaranty or other agreement and
such failure shall not have been cured within the applicable cure period, or
there is an acceleration under the applicable instrument, loan agreement,
mortgage, indenture, guaranty or other agreement, or (d) PLMI defaults in the
repayment of any principal of or the payment of any interest on any Indebtedness
or defaults in any payment in respect of any Contingent Obligation, in each case
exceeding, in the aggregate outstanding principal amount, $2,000,000, or PLMI
breaches or violates any term or provision of any evidence of such Indebtedness
or Contingent Obligation or of any such loan agreement, mortgage, indenture,
guaranty or other agreement relating thereto with the result that such
Indebtedness or Contingent Obligation becomes or is caused to become then due
and payable in its entirety, whether by acceleration of otherwise; or
8.1.3 Breach of Covenants. Borrower fails or neglects to
perform, keep or observe any of the covenants contained in Sections 2.1.3, 5.2,
5.3, 5.9, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10 and 7.1 of this
Agreement; or
8.1.4 Breach of Representations or Warranties. Any
representation or warranty made by or on behalf of Borrower or Guarantor in this
Agreement or any statement or certificate at any time given in writing pursuant
hereto or in connection herewith shall be false, misleading or incomplete in any
material respect when made; or
8.1.5 Failure to Cure. Except as provided in Sections 8.1.1
and 8.1.3, Borrower or Guarantor fails or neglects to perform, keep or observe
any covenant or provision of this Agreement or of any of the other Loan
Documents or any other document or agreement executed by Borrower or Guarantor
in connection therewith and the same has not been cured to Requisite Lenders'
satisfaction within thirty (30) calendar days after Borrower or Guarantor shall
become aware thereof, whether by written notice from Agent or any Lender or
otherwise; or
8.1.6 Insolvency. Borrower, Guarantor, PLMI or any other
guarantor of any of Borrower's or Guarantor's obligations to Lenders shall (i)
cease to be Solvent, (ii) admit in writing its inability to pay its debts as
they mature, (iii) make an assignment for the benefit of creditors, or (iv)
apply for or consent to the appointment of a receiver, liquidator, custodian or
trustee for it or for a substantial part of its Properties or business, or such
a receiver, liquidator, custodian or trustee otherwise shall be appointed and
shall not be discharged within sixty (60) days after such appointment; or
8.1.7 Bankruptcy Proceedings. Bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by
or against Borrower, Guarantor, PLMI or any other guarantor of any of Borrower's
or Guarantor's obligations to Lenders or any order, judgment or decree shall be
entered against Borrower, Guarantor, PLMI or any other guarantor of any of
Borrower's or Guarantor's obligations to Lenders decreeing its dissolution or
division; provided, however, with respect to an involuntary petition in
bankruptcy, such petition shall not have been dismissed within sixty (60) days
after the filing of such petition; or
8.1.8 Material Adverse Effect. There shall have been a change
in the assets, liabilities, financial condition, operations, affairs or
prospects of Borrower, Guarantor, PLMI or any other guarantor of any of
Borrower's or Guarantor's obligations to Lenders which, in the reasonable
determination of Requisite Lenders has, either individually or in the aggregate,
had a Material Adverse Effect; or
8.1.9 Judgments, Writs and Attachments. There shall be a money
judgment, writ or warrant of attachment or similar process entered or filed
against Borrower or Guarantor which (net of insurance coverage) remains
unvacated, unbonded, unstayed or unpaid or undischarged for more than sixty (60)
days (whether or not consecutive) or in any event later than five (5) calendar
days prior to the date of any proposed sale thereunder, which, together with all
such other unvacated, unbonded, unstayed, unpaid and undischarged judgments or
attachments against Borrower in any amount; against Guarantor exceeds in the
aggregate $500,000; or against any combination of the foregoing Persons exceeds
in the aggregate $1,000,000; or
8.1.10 Legal Obligations. Any of the Loan Documents shall for
any reason other than the full, complete and indefeasible satisfaction of the
Obligations thereunder cease to be, or be asserted by Borrower or Guarantor, not
to be, a legal, valid and binding obligation of Borrower or Guarantor,
respectively, enforceable against such Person in accordance with its terms; or
8.1.11 Growth Fund Agreement. Without limiting the generality
of, and in addition to the events described in this Section 8.1, the occurrence
of any "Event of Default" as defined under the Growth Fund Agreement or any
other loan or security document related to the Growth Fund Agreement; or
8.1.12 TEC AcquiSub Agreement. Without limiting the generality
of, and in addition to the events described in this Section 8.1, the occurrence
of any "Event of Default" as defined in the TEC AcquiSub Agreement or any other
loan or security document related to the TEC AcquiSub Agreement; or
8.1.13 Criminal Proceedings. A criminal proceeding shall have
been filed in any court naming Borrower as a defendant for which forfeiture is a
potential penalty under applicable federal or state law which, in the reasonable
determination of Requisite Lenders, may have a Material Adverse Effect; or
8.1.14 Action by Governmental Authority. Any Governmental
Authority enters a decree, order or ruling ("Government Action") which will
materially and adversely affect Borrower's, Guarantor's or PLMI's financial
condition, operations or ability to perform or pay such party's obligations
arising under this Agreement or any instrument or agreement executed pursuant to
the terms of this Agreement. Borrower or Guarantor shall have thirty (30) days
from the earlier of the date (a) Borrower or Guarantor, as applicable, first
discovers it is the subject of Government Action or (b) a Lender or any agency
gives notice of Government Action to take such steps as are necessary to obtain
relief from the Government Action. For the purpose of this paragraph, "relief
from Government Action" means to discharge or to obtain a dismissal of or
release or relief from (i) any Government Action so that the affected party or
parties do not incur (v) any monetary liability in the case of Borrower, (x)
monetary liability of more than $500,000 in the case of Guarantor, (y) monetary
liability of more than $250,000 in the case of TEC AcquiSub, (y) monetary
liability of more than $1,000,000 in the case of PLMI, or (z) monetary liability
of more than $1,000,000, in the aggregate, in the case of any combination of the
foregoing Persons, or (ii) any disqualification of or other limitation on the
operation of Borrower, Guarantor and PLMI, or any of them, which in the
reasonable determination of the Requisite Lenders may have a Material Adverse
Effect; or
8.1.15 Governmental Decrees. Any Governmental Authority,
including, without limitation, the SEC, shall enter a decree, order or ruling
prohibiting the Equipment Growth Funds from releasing or paying to Guarantor any
funds in the form of management fees, profits or otherwise which, in the
reasonable determination of Requisite Lenders, may have a Material Adverse
Effect.
8.2 Waiver of Default. An Event of Default may be waived only with the
written consent of Requisite Lenders, or if expressly provided, of all Lenders.
Any Event of Default so waived shall be deemed to have been cured and not to be
continuing; but no such waiver shall be deemed a continuing waiver or shall
extend to or affect any subsequent like default or impair any rights arising
therefrom.
8.3 Remedies. Upon the occurrence and continuance of any Event of
Default or Potential Event of Default, Lenders shall have no further obligation
to advance money or extend credit to or for the benefit of Borrower.
In addition, upon the occurrence and during the continuance of an Event
of Default, Lenders or Agent, on behalf of Lenders, may, at the option of
Requisite Lenders, do any one or more of the following, all of which are hereby
authorized by Borrower:
8.3.1 Declare all or any of the Obligations of Borrower under
this Agreement, the Note, the other Loan Documents and any other instrument
executed by Borrower pursuant to the Loan Documents to be immediately due and
payable, and upon such declaration such obligations so declared due and payable
shall immediately become due and payable; provided that if such Event of Default
is under Section 8.1.6 or 8.1.7, then all of the Obligations shall become
immediately due and payable forthwith without the requirement of any notice or
other action by Lenders or Agent;
8.3.2 Terminate this Agreement as to any future liability or
obligation of Agent or Lenders; and
8.3.3 Exercise in addition to all other rights and remedies
granted hereunder, any and all rights and remedies granted under the Loan
Documents or otherwise available at law or in equity.
8.4 Set-Off.
8.4.1 During the continuance of an Event of Default, any
deposits or other sums credited by or due from any Lender to Borrower or
Guarantor (exclusive of deposits in accounts expressly held in the name of third
parties or held in trust for benefit of third parties) may be set-off against
the Obligations and any and all other liabilities, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter arising, of
Borrower or Guarantor to Lenders. Each Lender agrees to notify promptly Borrower
or Guarantor and Agent of any such set-off; provided, that the failure to give
such notice shall not affect the validity of any such set-off.
8.4.2 Each Lender agrees that if it shall, whether by right of
set-off, banker's lien or similar remedy pursuant to Section 8.4.1, obtain any
payment as a result of which the outstanding and unpaid principal portion of the
Commitments of such Lender shall be less than such Lender's Pro Rata Share of
the outstanding and unpaid principal portion of the aggregate of all
Commitments, such Lender receiving such payment shall simultaneously purchase
from each other Lender a participation in the Commitments held by such Lenders
so that the outstanding and unpaid principal amount of the Commitments and
participations in Commitments of such Lender shall be in the same proportion to
the unpaid principal amount of the aggregate of all Commitments then outstanding
as the unpaid principal amount under the Commitments of such Lender outstanding
immediately prior to receipt of such payment was to the unpaid principal amount
of the aggregate of all Commitments outstanding immediately prior to such
Lender's receipt of such payment; provided, however, that if any such purchase
shall be made pursuant to this Section 8.4.2 and the payment giving rise thereto
shall thereafter be recovered, such purchase shall be rescinded to the extent of
such recovery and the purchase price restored without interest. Borrower
expressly consents to the foregoing arrangements and agrees that any Lender
holding a participation in a Commitment deemed to have been so purchased may
exercise any and all rights of set-off, banker's lien or similar remedy with
respect to any and all moneys owing by Borrower to such Lender as fully as if
such Lender held a Commitment in the amount of such participation.
8.5 Rights and Remedies Cumulative. The enumeration of the rights and
remedies of Agent and Lenders set forth in this Agreement is not intended to be
exhaustive and the exercise by Agent and Lenders of any right or remedy shall
not preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of Agent and Lenders in exercising any right, power or privilege shall
operate as a waiver hereof, nor shall any single or partial exercise of any such
right, power or privilege preclude other or further exercise thereof or the
exercise of any other right, power or privilege or shall be construed to be a
waiver of any Event of Default or Potential Event of Default. No course of
dealing between Borrower, Agent or any Lender or their respective agents or
employees shall be effective to change, modify or discharge any provision of
this Agreement or any of the Loan Documents or to constitute a waiver of any
Event of Default or Potential Event of Default.
SECTION 9. AGENT.
9.1 Appointment. Each of the Lenders hereby irrevocably designates and
appoints First Union National Bank of North Carolina as the Agent of such Lender
under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes First Union National Bank of North Carolina as the Agent
for such Lender to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and such other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or such other Loan Documents, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against Agent. To the extent any provision of this Agreement permits action by
Agent, Agent shall, subject to the provisions of this Section 9, take such
action if directed in writing to do so by the Requisite Lenders.
9.2 Delegation of Duties. Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
9.3 Exculpatory Provisions. Neither Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (a)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or the other Loan Documents (except
for its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any Lender for any recitals, statements,
representations or warranties made by Borrower or any officer thereof contained
in this Agreement or the other Loan Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or the other Loan Documents or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or the other Loan Documents or for any failure of Borrower to
perform its obligations hereunder or thereunder. Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the Properties, books or records of Borrower.
9.4 Reliance by Agent. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to Borrower), independent accountants and other experts
selected by Agent. Agent may deem and treat the payee of any promissory note
issued pursuant to this Agreement as the owner thereof for all purposes unless
such promissory note shall have been transferred in accordance with Section
11.10 hereof. Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Requisite Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action except for its own gross
negligence or willful misconduct. Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement in accordance with a
request of the Requisite Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all Lenders.
9.5 Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default or Potential Event of Default
hereunder unless Agent has received notice from a Lender or Borrower referring
to this Agreement, describing such Event of Default or Potential Event of
Default and stating that such notice is a "notice of default". In the event that
Agent receives such a notice, Agent shall promptly give notice thereof to
Lenders. The Agent shall take such action with respect to such Event of Default
or Potential Event of Default as shall be reasonably directed by the Requisite
Lenders; provided that unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Event of Default or
Potential Event of Default as it shall deem advisable in the best interests of
Lenders.
9.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by Agent hereinafter taken, including any
review of the affairs of Borrower, shall be deemed to constitute any
representation or warranty by Agent to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of
Borrower and Guarantor and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of
Borrower and Guarantor. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by Agent hereunder or by the
other Loan Documents, Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of
Borrower and Guarantor which may come into the possession of Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
9.7 Indemnification. Each Lender agrees to indemnify Agent in its
capacity as such (to the extent not reimbursed by Borrower and without limiting
the obligation of Borrower to do so), ratably according to the respective
amounts of their Pro Rata Share of the Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against Agent in any way relating to or
arising out of this Agreement or the other Loan Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by Agent under or
in connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's bad faith, gross negligence or willful misconduct.
The agreements in this Section 9.7 shall survive the repayment of the Loans and
all other amounts payable hereunder.
9.8Agent in Its Individual Capacity. Agent and its Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
Borrower or Guarantor as though Agent were not Agent hereunder. With respect to
Advances made or renewed by it, Agent shall have the same rights and powers
under this Agreement and the other Loan Documents as any Lender and may exercise
the same as though it were not Agent, and the terms "Lender" and "Lenders" shall
include Agent in its individual capacity.
9.9 Resignation and Appointment of Successor Agent. Agent may resign at
any time by giving thirty (30) days' prior written notice thereof to Lenders and
Borrower; provided, however, that the retiring Agent shall continue to serve
until a successor Agent shall have been selected and approved pursuant to this
Section 9.9. Upon any such notice, Agent shall have the right to appoint a
successor Agent; provided, however, that if such successor shall not be a
signatory to this Agreement, such appointment shall be subject to the consent of
Requisite Lenders. Agent may be replaced by the Requisite Lenders, with or
without cause; provided, however, that any successor agent shall be subject to
Borrower's consent, which consent shall not be unreasonably withheld. Upon the
acceptance of any appointment as an Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
SECTION 10.EXPENSES AND INDEMNITIES.
10.1 Expenses. Borrower agrees to pay promptly on demand, and, in any
event, within thirty (30) days of the invoice date therefor, (a) all costs,
expenses, charges and other disbursements (including, without limitation, all
reasonable attorneys' fees and allocated expenses of outside counsel and
in-house legal staff) incurred by or on behalf of Agent or any Lender in
connection with the preparation of the Loan Documents and all amendments and
modifications thereof, extensions thereto or substitutions therefor, and all
costs, expenses, charges or other disbursements incurred by or on behalf of
Agent or any Lender (including, without limitation all reasonable attorney's
fees and allocated expenses of outside counsel and in-house legal staff) in
connection with the furnishing of opinions of counsel (including, without
limitation, any opinions requested by Lenders as to any legal matters arising
hereunder) and of Borrower's performance of and compliance with all agreements
and conditions contained herein or in any of the other Loan Documents on its
part to be performed or complied with; (b) all other costs, expenses, charges
and other disbursements incurred by or on behalf of Agent or any Lender in
connection with the negotiation, preparation, execution, administration,
continuation and enforcement of the Loan Documents, and the making of the Loans
hereunder; (c) all costs, expenses, charges and other disbursements (including,
without limitation, all reasonable attorney's fees and allocated expenses of
outside counsel and in-house legal staff) incurred by or on behalf of Agent or
FUNB in connection with the assignment or attempted assignment to any other
Person of all or any portion of any Lender's interest under this Agreement
pursuant to Section 11.10; and (d) regardless of the existence of an Event of
Default or Potential Event of Default, all legal, appraisal, audit, accounting,
consulting or other fees, costs, expenses, charges or other disbursements
incurred by or on behalf of Agent or any Lender in connection with any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Lenders, Agent, Borrower or any other Person) seeking to enforce any Obligations
of, or collecting any payments due from, Borrower under this Agreement and the
Note, all of which amounts shall be deemed to be part of the Obligations.
Notwithstanding anything to the contrary contained in this Section 10.1, so long
as no Event of Default or Potential Event of Default shall have occurred and be
continuing, all appraisals of the Eligible Leases shall be at the expense of
Lenders. If an Event of Default or Potential Event of Default shall have
occurred and be continuing, such appraisals shall be at the expense of Borrower.
10.2 Indemnification. Whether or not the transactions contemplated
hereby shall be consummated:
10.2.1 General Indemnity. Borrower shall pay, indemnify, and
hold each Lender, Agent and each of their respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including reasonable attorney's fees and the allocated cost of in-house
counsel) of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement and any
other Loan Documents, or the transactions contemplated hereby and thereby, and
with respect to any investigation, litigation or proceeding (including any case,
action or proceeding before any court or other Governmental Authority relating
to bankruptcy, reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate proceeding) related to this Agreement or the Loans or
the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that Borrower shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities arising from the gross negligence
or willful misconduct of such Indemnified Person.
10.2.2 Environmental Indemnity.
(a) Borrower hereby agrees to indemnify, defend and
hold harmless each Indemnified Person, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses or disbursements (including reasonable attorneys' fees and the
allocated cost of in-house counsel and internal environmental audit or review
services), which may be incurred by or asserted against such Indemnified Person
in connection with or arising out of any pending or threatened investigation,
litigation or proceeding, or any action taken by any Person, with respect to any
Environmental Claim arising out of or related to any Property owned, leased or
operated by Borrower. No action taken by legal counsel chosen by Agent or any
Lender in defending against any such investigation, litigation or proceeding or
requested remedial, removal or response action (except for actions which
constitute fraud, willful misconduct, gross negligence or material violations of
law) shall vitiate or in any way impair Borrower's obligation and duty hereunder
to indemnify and hold harmless Agent and each Lender. Agent and Lenders agree to
use reasonable efforts to cooperate with Borrower respecting the defense of any
matter indemnified hereunder, except insofar as and to the extent that their
respective interests may be adverse to Borrower's, in Agent's and each Lenders'
sole discretion.
(b) In no event shall any site visit, observation, or
testing by Agent or any Lender be deemed a representation or warranty that
Hazardous Materials are or are not present in, on, or under the site, or that
there has been or shall be compliance with any Environmental Law. Neither
Borrower nor any other Person is entitled to rely on any site visit,
observation, or testing by Agent or any Lender. Except as otherwise provided by
law, neither Agent nor any Lender owes any duty of care to protect Borrower or
any other Person against, or to inform Borrower or any other party of, any
Hazardous Materials or any other adverse condition affecting any site or
Property. Neither Agent nor any Lender shall be obligated to disclose to
Borrower or any other Person any report or findings made as a result of, or in
connection with, any site visit, observation, or testing by Agent or any Lender.
10.2.3 Survival; Defense. The obligations in this Section 10.2
shall survive payment of all other Obligations. At the election of any
Indemnified Person, Borrower shall defend such Indemnified Person using legal
counsel satisfactory to such Indemnified Person in such Person's sole
discretion, at the sole cost and expense of Borrower. All amounts owing under
this Section 10.2 shall be paid within thirty (30) days after written demand.
SECTION 11. MISCELLANEOUS.
11.1 Survival. All covenants, agreements, representations and
warranties made herein shall survive the execution and delivery of the Loan
Documents and the making of the Loans hereunder.
11.2 No Waiver by Agent or Lenders. No failure or delay on the part of
Agent or any Lender in the exercise of any power, right or privilege under this
Agreement, the Note or any of the other Loan Documents shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
11.3 Notices. Except as otherwise provided in this Agreement, any
notice or other communication herein required or permitted to be given shall be
in writing and may be delivered in person, with receipt acknowledged, or sent by
telex, facsimile, telecopy, computer transmission or by United States mail,
registered or certified, return receipt requested, or by Federal Express or
other nationally recognized overnight courier service, postage prepaid and
confirmation of receipt requested, and addressed as set forth on the signature
pages to this Agreement or at such other address as may be substituted by notice
given as herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly given or served on the date on which the same
shall have been personally delivered, with receipt acknowledged, or sent by
telex, facsimile, telecopy or computer transmission (with appropriate
answerback), three (3) Business Days after the same shall have been deposited in
the United States mail or on the next succeeding Business Day if the same has
been sent by Federal Express or other nationally recognized overnight courier
service. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication.
11.4 Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
11.5 Severability. Whenever possible, each provision of this Agreement,
the Note and each of the other Loan Documents shall be interpreted in such a
manner as to be valid, legal and enforceable under the applicable law of any
jurisdiction. Without limiting the generality of the foregoing sentence, in case
any provision of this Agreement, the Note or any of the other Loan Documents
shall be invalid, illegal or unenforceable under the applicable law of any
jurisdiction, the validity, legality and enforceability of the remaining
provisions, or of such provision in any other jurisdiction, shall not in any way
be affected or impaired thereby.
11.6 Entire Agreement; Construction; Amendments and Waivers.
11.6.1 This Agreement, the Note and each of the other Loan
Documents dated as of the date hereof, taken together, constitute and contain
the entire agreement among Borrower, Lenders and Agent and supersede any and all
prior agreements, negotiations, correspondence, understandings and
communications between the parties, whether written or oral, respecting the
subject matter hereof.
11.6.2 This Agreement is the result of negotiations between
and has been reviewed by each of Borrower, the Lenders executing this Agreement
as of the Closing Date and Agent and their respective counsel; accordingly, this
Agreement shall be deemed to be the product of the parties hereto, and no
ambiguity shall be construed in favor of or against Borrower, Lenders or Agent.
Borrower, Lenders and Agent agree that they intend the literal words of this
Agreement and the other Loan Documents and that no parol evidence shall be
necessary or appropriate to establish Borrower's, any Lender's or Agent's actual
intentions.
11.6.3 No amendment, modification, discharge or waiver of or
consent to any departure by Borrower or Guarantor from, any provision in this
Agreement or any of the other Loan Documents relating to (i) the definition of
"Borrowing Base" or "Requisite Lenders," (ii) any increase of the amount of any
Commitment, (iii) any reduction of principal, interest or fees payable
hereunder, (iv) any postponement of any date fixed for any payment or prepayment
of principal or interest hereunder or (v) this Section 11.6.3 shall be effective
without the written consent of all Lenders. Any and all other amendments,
modifications, discharges or waivers of, or consents to any departures from any
provision of this Agreement or of any of the other Loan Documents shall not be
effective without the written consent of the Requisite Lenders. Any waiver or
consent with respect to any provision of the Loan Documents shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, waiver or consent effected in accordance with this
Section 11.6 shall be binding upon each Lender then party hereto and each
subsequent Lender, and on Borrower.
11.7 Reliance by Lenders. All covenants, agreements, representations
and warranties made herein by Borrower shall, notwithstanding any investigation
by Lenders or Agent be deemed to be material to and to have been relied upon by
Lenders.
11.8Marshalling; Payments Set Aside. Lenders shall be under no
obligation to marshall any assets in favor of Borrower or any other person or
against or in payment of any or all of the Obligations. To the extent that
Borrower makes a payment or payments to Lenders or Agent, or Lenders or Agent,
on behalf of Lenders, enforce their or its Liens or exercises their or its
rights of set-off, and such payment or payments or the proceeds of such
enforcement or set-off or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party under Title 11 of the United States Code
or under any other similar federal or state law, common law or equitable cause,
then to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or set-off had not
occurred.
11.9 No Set-Offs by Borrower. All sums payable by Borrower pursuant to
this Agreement, the Note or any of the other Loan Documents shall be payable
without notice or demand and shall be payable in United States Dollars without
set-off or reduction of any manner whatsoever.
11.10 Binding Effect, Assignment.
11.10.1 This Agreement, the Note and the other Loan Documents
shall be binding upon and shall inure to the benefit of the parties hereto and
thereto and their respective successors and assigns, except that neither
Borrower nor Guarantor may assign its rights hereunder or thereunder or any
interest herein or therein without the prior written consent of each Lender.
Each Lender shall (i) have the right in accordance with this Section 11.10 to
sell and assign to any Eligible Assignee all or any portion of its interest
(provided that any such partial assignment shall not be for a principal amount
of less than Five Million Dollars ($5,000,000)) under this Agreement, the Note
and the other Loan Documents (as separately described and defined in those
agreements), subject to the prior written consent of Borrower, which consent
shall not be unreasonably withheld, and (ii) to grant any participation or other
interest herein or therein, except that each potential participant to which a
Lender intends to grant any rights under Sections 2.9, 2.10, 5.1 or 10.2 shall
be subject to the prior written consent of Borrower, which consent shall not be
unreasonably withheld; provided, however, that no such sale, assignment or
participation grant shall result in requiring registration under the Securities
Act of 1933, as amended, or qualification under any state securities law.
11.10.2 Subject to the limitations of this Section 11.10.2,
each Lender may sell and assign, from time to time, all or any portion of its
Pro Rata Share of the Commitments to any of its Affiliates or, with the approval
of Borrower (which approval shall not be unreasonably withheld), to any other
financial institution acceptable to Agent, subject to the assumption by such
assignee of the share of the Commitments so assigned. The assignment to such
Affiliate or other financial institution shall be evidenced by an instrument of
Assignment and Assumption in the form of Exhibit G (the "Assignment and
Acceptance") executed by the assignor Lender (hereinafter from time to time
referred to as the "Assignor Lender") and such Affiliate or other financial
institution (which, upon such assignment shall become a Lender hereunder
(hereinafter from time to time referred to as the "Assignee Lender")). The
Assignment and Assumption need not include any of the economic or financial
terms upon which such Assignee Lender receives the assignment from the Assignor
Lender, and such terms need not be disclosed to or approved by Borrower;
provided only that such terms do not diminish the obligations undertaken by such
Assignee Lender in the Assignment and Assumption or increase the obligations of
Borrower under this Agreement. Upon execution of an Assignment and Assumption,
(i) the definition of "Commitments" in Section 1 hereof and the Pro Rata Shares
set forth therein shall be deemed to be amended to reflect each Lender's share
of the Commitments, giving effect to the assignment and (ii) the Assignee Lender
shall, from the effective date of the Assignment and Assumption, be subject to
all of the obligations, and entitled to all of the rights, of a Lender
hereunder, except as may be expressly provided to the contrary in the Assignment
and Assumption. To the extent the obligations hereunder of the Assignor Lender
are assumed by the Assignee Lender, the Assignor Lender shall be relieved of
such obligations. Upon the assignment of any interest by any Assignor Lender
pursuant to this Section 11.10.2, such Assignor Lender agrees to supplement
Schedule 1.1 to show the date of such assignment, the Assignor Lender, the
Assignee Lender, the Assignee Lender's address for notice purposes and the
amount of the Commitments so assigned.
11.10.3 Subject to the limitations of this Section 11.10.3,
any Lender may also grant, from time to time, participation interests in the
interests of such Lender under this Agreement, the Note and the other Loan
Documents to any other financial institution without notice to, or approval of,
Borrower. The grant of such a participation interest shall be on such terms as
the granting Lender determines are appropriate, provided only that (i) the
holder of such participation interest shall not have any of the rights of a
Lender under this Agreement except, if the participation agreement expressly
provides, rights under Sections 2.9, 2.10, 5.1 and 10.2, and (ii) the consent of
the holder of such a participation interest shall not be required for amendments
or waivers of provisions of the Loan Documents other than, if the participation
agreement expressly provides, those which (A) increase the monetary amount of
any Commitment, (B) decrease any fee or any other monetary amount payable to
Lenders, or (C) extend the date upon which any monetary amount is payable to
Lenders.
11.11 Counterparts. This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. Each such agreement
shall become effective upon the execution of a counterpart hereof or thereof by
each of the parties hereto or thereto, delivery of each such counterpart to
Agent.
11.12 Equitable Relief. Borrower recognize that, in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, the Note or any of the other Loan Agreements, any remedy
at law may prove to be inadequate relief to Lenders or Agent; therefore,
Borrower agrees that Lenders or Agent, if Lenders or Agents so request, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
11.13 Written Notice of Claims; Claims Bar. BORROWER HEREBY AGREES THAT
IT SHALL GIVE PROMPT WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES
IT HAS, OR MAY SEEK TO ASSERT OR ALLEGE AGAINST ANY LENDER OR AGENT, WHETHER
SUCH CLAIM IS BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO THIS
AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS OR TO THE LOANS
CONTEMPLATED HEREBY OR THEREBY OR ANY ACT OR OMISSION TO ACT BY ANY LENDER OR
AGENT WITH RESPECT HERETO OR THERETO, AND THAT IF IT SHALL FAIL TO GIVE SUCH
PROMPT NOTICE TO AGENT WITH REGARD TO ANY SUCH CLAIM OR CAUSE OF ACTION, IT
SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED FROM BRINGING OR
ASSERTING SUCH CLAIM OR CAUSE OF ACTION IN ANY SUIT, ACTION OR PROCEEDING IN ANY
COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY.
11.14 Waiver of Punitive Damages. NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN THIS AGREEMENT, BORROWER HEREBY AGREES THAT IT SHALL NOT
SEEK FROM LENDERS OR AGENT, UNDER ANY THEORY OF LIABILITY, INCLUDING, WITHOUT
LIMITATION, ANY THEORY IN TORTS, ANY PUNITIVE DAMAGES.
11.15 Governing Law. Except as otherwise expressly provided in any of
the Loan Documents, in all respects, including all matters of construction,
validity and performance, this Agreement and the Obligations arising hereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of North Carolina applicable to contracts made and performed in such
state, without regard to the principles thereof regarding conflict of laws, and
any applicable laws of the United States of America.
11.16 Consent to Jurisdiction. Borrower hereby irrevocably consents to
the personal jurisdiction of the state and federal courts located in Mecklenburg
County, North Carolina, in any action, claim or other proceeding arising out of
any dispute in connection with this Agreement, the Note and the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations. Borrower hereby irrevocably consents to the
service of a summons and complaint and other process in any action, claim or
proceeding brought by Agent or any Lender in connection with this Agreement or
the other Loan Documents, any rights or obligations hereunder or thereunder, or
the performance of such rights and obligations, on behalf of itself or its
Property, in the manner specified in Section 11.3. Nothing in this Section 11.16
shall affect the right of the Agent or any Lender to serve legal process in any
other manner permitted by applicable law or affect the right of Agent or any
Lender to bring any action or proceeding against Borrower or its properties in
the courts of any other jurisdictions.
11.17 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER AND GUARANTOR, BY EXECUTION HEREOF, AND THE AGENT AND EACH LENDER, BY
ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS
AGREEMENT, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL
INDUCEMENT TO THE AGENT AND EACH LENDER TO ACCEPT THIS AGREEMENT AND THE NOTES
EXECUTED AND DELIVERED BY BORROWER PURSUANT TO THIS AGREEMENT.
11.18 BMO as Lender. Upon the Closing, BMO shall be a Lender for all
purposes of this Agreement and the other Loan Documents, and shall be entitled
to the rights and benefits and be subject to the obligations of a Lender under
and in accordance with and subject to the terms of this Agreement and the other
Loan Documents.
<PAGE>
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORROWER AMERICAN FINANCE GROUP, INC.
By:
J. Michael Allgood
Chief Financial Officer
Notice to be sent to:
AMERICAN FINANCE GROUP, INC.
One Market
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: J. Michael Allgood,
Chief Financial Officer
Telephone: (415) 905-7228
Facsimile: (415) 905-7256
AGENT FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:
Printed Name:
Title:
Notice to be sent to:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: (704) 383-5164
Facsimile: (704) 374-4092
LENDERS FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:
Printed Name:
Title:
Notice to be sent to:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: (704) 383-5164
Facsimile: (704) 374-4092
BANK OF MONTREAL
By:
Printed Name:
Title:
Notice to be sent to:
BANK OF MONTREAL
Attention:
Telephone:
Facsimile:
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT AND
REAFFIRMATION OF GUARANTY
(AFG Finance Group)
SECTION 1. PLM International, Inc. ("PLMI") hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amended and Restated Warehousing Credit Agreement ("Agreement").
SECTION 2. PLMI hereby consents to this Agreement and agrees that its
Guaranty of the Obligations of Borrower under the AFG Credit Agreement shall
continue in full force and effect under this Agreement, shall be valid and
enforceable and shall not be impaired or otherwise affected by the execution of
this Agreement or any other document or instrument delivered in connection
herewith.
SECTION 3. PLMI represents and warrants that, after giving effect to
this Agreement, that 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
<PAGE>
SCHEDULE A
(COMMITMENTS)
Pro
Rata
Lender Commitment Share
First Union National Bank $35,000,000 70%
of North Carolina
Bank of Montreal $15,000,000 30%
<PAGE>
WAREHOUSING CREDIT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS...........................................2
1.1 Defined Terms.........................................2
1.2 Accounting Terms......................................20
1.3 Other Terms...........................................20
1.4 Schedules and Exhibits................................20
SECTION 2. AMOUNT AND TERMS OF CREDIT............................20
2.1 Commitment to Lend....................................20
2.1.1 Revolving Facility..........................20
(a) Facility Commitments................21
(b) Each Loan...........................22
2.1.2 Funding.....................................22
2.1.3 Utilization of the Loans....................22
2.2 Repayment and Prepayment..............................22
2.2.1 Repayment...................................22
2.2.2 Voluntary Prepayment........................23
2.3 Calculation of Interest; Post-Maturity Interest.......23
2.4 Manner of Payments....................................23
2.5 Payment on Non-Business Days..........................23
2.6 Application of Payments...............................24
2.7 Procedure for the Borrowing of Loans..................24
2.7.1 Notice of Borrowing.........................24
2.7.2 Unavailability of LIBOR Loans...............24
2.8 Conversion and Continuation Elections.................24
2.8.1 Election....................................24
2.8.2 Notice of Conversion........................25
2.8.3 Interest Period.............................25
2.8.4 Unavailability of LIBOR Loans...............25
2.9 Discretion of Lenders as to Manner of Funding.........25
2.10 Distribution of Payments..............................26
2.11 Agent's Right to Assume Funds Available for Advances..26
2.12 Agent's Right to Assume Payments Will be Made by Borrower..26
2.13 Capital Requirements..................................27
2.14 Taxes.................................................27
2.14.1 No Deductions...............................27
2.14.2 Miscellaneous Taxes.........................27
2.14.3 Indemnity...................................27
2.14.4 Required Deductions.........................28
2.14.5 Evidence of Payment.........................28
2.14.6 Foreign Persons.............................28
2.14.7 Income Taxes................................29
2.14.8 Reimbursement of Costs......................29
2.14.9 Jurisdiction................................29
2.15 Illegality............................................30
2.15.1 LIBOR Loans.................................30
2.15.2 Prepayment..................................30
2.15.3 Prime Rate Borrowing........................30
2.16 Increased Costs.......................................30
2.17 Inability to Determine Rates..........................30
2.18 Prepayment of LIBOR Loans.............................31
SECTION 3. CONDITIONS PRECEDENT..................................31
3.1 Effectiveness of this Agreement.......................31
3.1.1 Corporate Documents.........................31
3.1.2 Notes.......................................32
3.1.3 Security Documents..........................32
3.1.4 Opinion of Counsel..........................32
3.1.5 Reaffirmation of Guaranty...................32
3.1.6 Growth Fund Agreement.......................32
3.1.7 TEC AcquiSub Agreement......................32
3.1.8 Bringdown Certificate.......................32
3.1.9 Fees........................................33
3.1.10 Other Documents.............................33
3.2 All Loans.............................................33
3.2.1 Notice of Borrowing.........................33
3.2.2 No Event of Default.........................33
3.2.3 Officer's Certificate.......................33
3.2.4 Officer's Certificate - Leases..............33
3.2.5 Insurance...................................34
3.2.6 Other Instruments...........................34
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES.............35
4.1 Existence and Power...................................35
4.2 Loan Documents and Note Authorized; Binding Obligations..35
4.3 No Conflict; Legal Compliance............................35
4.4 Financial Condition......................................35
4.5 Executive Offices........................................36
4.6 Litigation...............................................36
4.7 Consents and Approvals...................................36
4.8 Other Agreements.........................................36
4.9 ERISA....................................................36
4.10 Labor Matters............................................37
4.11 Margin Regulations.......................................37
4.12 Taxes....................................................37
4.13 Environmental Quality....................................37
4.14 Trademarks, Patents, Copyrights, Franchises and Licenses.38
4.15 Full Disclosure..........................................38
4.16 Other Regulations........................................38
4.17 Solvency.................................................38
4.18 Survival of Representations and Warranties...............38
4.19 Eligible Leases..........................................38
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS.........................39
5.1 Records and Reports......................................39
5.1.1 Quarterly Statements...........................39
5.1.2 Annual Statements..............................40
5.1.3 Borrowing Base Certificate.....................40
5.1.4 Compliance Certificate.........................40
5.1.5 Reports........................................40
5.1.6 Lease Receivables Aging Reports................40
5.1.7 AFG Equipment Residual Value Reports...........41
5.1.8 Master Trust Equipment Residual Value Reports..41
5.1.9 Insurance Reports..............................41
5.1.10 Certificate of Responsible Officer.............41
5.1.11 Employee Benefit Plans.........................41
5.1.12 ERISA Notices..................................42
5.1.13 Pension Plans..................................42
5.1.14 SEC Reports....................................42
5.1.15 Tax Returns....................................42
5.1.16 Additional Information.........................42
5.2 Existence; Compliance with Law...........................42
5.3 Insurance................................................43
5.4 Taxes and Other Liabilities..............................43
5.5 Inspection Rights; Assistance............................43
5.6 Maintenance of Facilities; Modifications;
Performance of Leases................................... 44
5.6.1 Maintenance of Facilities......................44
5.6.2 Performance of Leases..........................44
5.7 Supplemental Disclosure..................................44
5.8 Further Assurances.......................................44
5.9 Lockbox..................................................44
5.10 Environmental Laws.......................................44
SECTION 6. BORROWER'S NEGATIVE COVENANTS............................44
6.1 Liens; Negative Pledges; and Encumbrances................44
6.2 Limitations on Indebtedness..............................45
6.3 Disposition of Assets....................................45
6.4 Restricted Payments......................................45
6.5 Restriction on Fundamental Changes.......................45
6.6 Transactions with Affiliates.............................46
6.7 No Loans to Affiliates...................................46
6.8 No Investment............................................46
6.9 Maintenance of Business..................................46
6.10 No Subsidiaries..........................................46
6.11 Events of Default........................................46
6.12 ERISA....................................................46
6.13 No Use of Any Lender's Name..............................47
6.14 Certain Accounting Changes...............................47
SECTION 7. FINANCIAL COVENANT OF BORROWER...........................47
7.1 Minimum Consolidated Tangible Net Worth..................47
SECTION 8. EVENTS OF DEFAULT AND REMEDIES...........................47
8.1 Events of Default........................................47
8.1.1 Failure to Make Payments.......................47
8.1.2 Other Agreements...............................48
8.1.3 Breach of Covenants............................48
8.1.4 Breach of Representations or Warranties........48
8.1.5 Failure to Cure................................48
8.1.6 Insolvency.....................................48
8.1.7 Bankruptcy Proceedings.........................49
8.1.8 Material Adverse Effect........................49
8.1.9 Judgments, Writs and Attachments...............49
8.1.10 Legal Obligations................................49
8.1.11 Growth Fund Agreement............................49
8.1.12 TEC AcquiSub Agreement.........................49
8.1.13 Criminal Proceedings.............................50
8.1.14 Action by Governmental Authority.................50
8.1.15 Governmental Decrees.............................50
8.2 Waiver of Default........................................50
8.3 Remedies.................................................50
8.4 Set-Off..................................................51
8.5 Rights and Remedies Cumulative...........................52
SECTION 9. AGENT....................................................52
9.1 Appointment..............................................52
9.2 Delegation of Duties.....................................52
9.3 Exculpatory Provisions...................................52
9.4 Reliance by Agent........................................53
9.5 Notice of Default........................................53
9.6 Non-Reliance on Agent and Other Lenders..................53
9.7 Indemnification..........................................54
9.8 Agent in Its Individual Capacity.........................54
9.9 Resignation and Appointment of Successor Agent...........54
SECTION 10. EXPENSES AND INDEMNITIES.......................................55
10.1 Expenses.................................................55
10.2 Indemnification..........................................55
10.2.1 General Indemnity..............................55
10.2.2 Environmental Indemnity........................56
10.2.3 Survival; Defense..............................57
SECTION 11. MISCELLANEOUS..................................................57
11.1 Survival.................................................57
11.2 No Waiver by Agent or Lenders............................57
11.3 Notices..................................................57
11.4 Headings.................................................57
11.5 Severability.............................................57
11.6 Entire Agreement; Construction; Amendments and Waivers...58
11.7 Reliance by Lenders......................................58
11.8 Marshalling; Payments Set Aside..........................58
11.9 No Set-Offs by Borrower..................................59
11.10 Binding Effect, Assignment...............................59
11.11 Counterparts.............................................60
11.12 Equitable Relief.........................................60
11.13 Written Notice of Claims; Claims Bar.....................60
11.14 Waiver of Punitive Damages...............................61
11.15 Governing Law............................................61
11.16 Consent to Jurisdiction..................................61
11.17 Waiver of Jury Trial.....................................61
11.18 BMO as Lender............................................62
<PAGE>
INDEX OF EXHIBITS
Exhibit A Form of Revolving Promissory Note
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Compliance Certificate
Exhibit D Form of Opinion of Counsel
Exhibit E Form of Notice of Borrowing
Exhibit F Form of Notice of Conversion/Continuation
Exhibit G Form of Assignment and Acceptance
<PAGE>
INDEX OF SCHEDULES
Schedule A Commitments
Schedule 1.1 Amendments to Schedule A
Schedule 4.5 Executive Offices and Principal Places of Business
Schedule 4.6 Litigation
Schedule 4.7 Material Contracts
Schedule 4.8 Consent and Approvals
Schedule 4.10 Employment and Labor Agreements
Schedule 4.11 Employee Benefit Plans
Schedule 4.15 Environmental Disclosures
Schedule 6.1 Existing Liens
Schedule 6.11 Subsidiaries
The Board of Directors
PLM International, Inc.
We consent to incorporation by reference in the registration statements on Form
S-2 (No. 033-55183), on Form S-3 (No. 033-54869), and on Form S-8 (No.
033-56877), of PLM International, Inc. of our report dated February 23, 1998,
relating to the consolidated balance sheets of PLM International, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1997, which report appears in
the December 31, 1997 annual report on Form 10-K of PLM International, Inc.
/S/ KPMG PEAT MARWICK LLP
- -----------------------------
KPMG PEAT MARWICK LLP
San Francisco, California
February 23, 1998
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, J. Michael Allgood and Richard Brock, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1998 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1997.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1998.
/s/ Douglas P. Goodrich
- ---------------------------
Douglas P. Goodrich
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, J. Michael Allgood and Richard Brock, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1998 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1997.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1998.
/s/ Robert N. Tidball
- ---------------------------
Robert N. Tidball
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, J. Michael Allgood and Richard Brock, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1998 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1997.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1998.
/s/ Robert L. Witt
- ----------------------------
Robert L. Witt
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, J. Michael Allgood and Richard Brock, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1998 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1997.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1998.
/s/ Randall L.-W. Caudill
- --------------------------------
Randall L.-W. Caudill
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Susan Santo, J. Michael Allgood and Richard Brock, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM International, Inc. to
comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any
rules and regulations thereunder, in connection with the preparation and filing
with the Securities and Exchange Commission of annual reports on Form 10-K on
behalf of PLM International, Inc., including specifically, but without limiting
the generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1998 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1997.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1998.
/s/ Harold R. Somerset
- -------------------------------
Harold R. Somerset
<PAGE>
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