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, 1998
[] 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
organization) Identification No.)
One Market, Steuart Street Tower,
Suite 800, San Francisco, CA 94105-1301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 974-1399
--------------------
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 March 9, 1999 was $45,908,460.
The number of shares outstanding of the issuer's classes of common
stock as of March 9, 1999: Common Stock, $0.01 Par Value -- 8,161,504 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1999 Annual Meeting of
Stockholders are incorporated by reference in Part III.
<PAGE>
PLM INTERNATIONAL, INC.
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
Part I
Item 1 Business 2
Item 2 Properties 10
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of Security Holders 13
Part II
Item 5 Market for the Company's Common Equity and Related
Stockholder Matters 13
Item 6 Selected Financial Data 14
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 7A Quantitative and Qualitative Disclosures about
Market Risk 27
Item 8 Financial Statements and Supplemental Data 28
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 28
Part III
Item 10 Directors and Executive Officers of the Company 28
Item 11 Executive Compensation 28
Item 12 Security Ownership of Certain Beneficial Owners
and Management 28
Item 13 Certain Relationships and Related Transactions 28
Part IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 28
<PAGE>
PART I
ITEM 1. BUSINESS
(A) Background
PLM International, Inc. (PLM International, the Company, or PLMI), a Delaware
corporation, is a diversified equipment leasing company that owns and manages
transportation, industrial, and commercial equipment, both domestically and
internationally. Through May 1996, the Company also syndicated investment
programs organized to invest primarily in transportation and related equipment.
The Company continues to manage these syndicated investment programs. The
Company operates and manages transportation, industrial, and commercial
equipment and related assets for its own account and for various investment
programs and third-party investors with an approximate cost of $1.2 billion. An
organizational chart for PLM International indicating the relationships of
significant active legal entities as of December 31, 1998 is shown in Table 1:
TABLE 1
ORGANIZATIONAL CHART
PLM International, Inc. (Delaware)
Subsidiaires of PLM International, Inc.
PLM Rental, Inc. (Delaware)
PLM Financial Services, Inc. (Delaware)
PLM Railcar Management Services, Inc. (Delaware)
PLM Worldwide Management Services Limited (Bermuda)
American Finance Group, Inc. (Delaware)
Subsidiaries of PLM Financial Services, Inc.
PLM Investment Management, Inc. (California)
PLM Transportation Equipment Corporation (California)
(Subsidiary of PLM Transportation Equipment Corporation:
TEC Acquisub, Inc. (California))
Subsidiaries of PLM Worldwide Management Services Limited:
Transportation Equipment Indemnity Company, Ltd. (Bermuda)
PLM Railcar Management Services Canada, Limited (Alberta, Canada)
Subsidiary of American Finance Group, Inc.
AFG Credit Corporation (Delaware)
<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 operates in three operating
segments: refrigerated and dry van (nonrefrigerated) over-the-road trailer
leasing, commercial and industrial equipment leasing and financing, and the
management of investment programs and other transportation equipment leasing.
TABLE 2
EQUIPMENT AND RELATED ASSETS
December 31, 1998
(original cost in millions of dollars)
<TABLE>
<CAPTION>
Professional
Lease Management Equipment Other
Income Fund I Growth Funds Investor
PLMI Programs Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial and industrial equipment $ 213 $ -- $ -- $ -- $ 213
Refrigerated and dry van over-the-road trailers 63 8 40 2 113
Intermodal trailers -- 7 24 -- 31
Aircraft, aircraft engines, and rotables -- 45 278 -- 323
Marine vessels -- 51 174 -- 225
Railcars -- 20 128 51 199
Marine containers -- -- 59 -- 59
Mobile offshore drilling units and drilling ship -- 12 8 -- 20
Other 8 4 20 3 35
----------------------------------------------------------------------
Total $ 284 $ 147 $ 731 $ 56 $ 1,218
======================================================================
</TABLE>
(C) Owned Equipment
(1) Refrigerated and Dry Van Over-the-Road Trailers
PLM Rental, Inc. doing business as PLM Trailer Leasing, a wholly-owned
subsidiary of PLMI, markets refrigerated trailers used to transport
temperature-sensitive food products and dry van (nonrefrigerated) over-the-road
trailers on short-term and mid-term operating leases through a network of rental
facilities. These trailers are owned by the Company or managed for the Company's
syndicated investment programs. Presently, facilities are located in or near
Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; Detroit, Michigan;
Indianapolis, Indiana; Kansas City, Kansas; Miami, Florida; Orlando, Florida;
Tampa, Florida; Baltimore, Maryland; Boston, Massachusetts; Denver, Colorado;
Philadelphia, Pennsylvania; San Francisco, California; Los Angeles, California;
and Newark, New Jersey. As of December 31, 1998, the Company owned 2,780
refrigerated and dry van over-the-road trailers and managed 2,276 trailers for
its syndicated investment programs.
The Company's strategy is to specialize in refrigerated trailers and become the
predominant supplier of refrigerated trailer rentals in the cities in which it
has facilities. During 1998, the Company purchased $34.1 million of primarily
refrigerated trailers and opened six new rental yard facilities. The Company
intends to continue to expand its refrigerated trailer leasing and management
operations by opening additional rental yard facilities and by continuing to
purchase refrigerated trailers in the future.
<PAGE>
Leasing Markets: In general, the trailer leasing industry provides an
alternative to direct trailer ownership. It is a highly competitive industry
offering lease terms ranging from one day to a term equal to the economic life
of the equipment.
Within the trailer leasing industry, there are 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 it, 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. Full payout leases are generally "net"
leases where the lessee pays for operating expenses such as maintenance,
insurance, licenses, and taxes.
Short-term trailer rentals and mid-term operating leases are generally
"full-service" leases where the owner/lessor provides and/or pays for operating
expenses such as maintenance, insurance, licenses, and taxes. The addition of
these value-added services enables the lessor to charge higher rentals. The
provision of maintenance services results in increased expenses, particularly
for maintenance, but under a full-service contract, the lessor generally levies
usage charges for each mile the trailer travels and each hour the refrigeration
unit runs. The provision of maintenance services also ensures the full-services
lessor that the equipment is being properly maintained.
Short-term rental lessors direct their services to users' short-term trailer
needs. This business requires a more extensive overhead commitment in the form
of marketing, maintenance, 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. Generally, lessees use
short-term trailer rentals to augment their own fleet when seasonal needs or an
unexpected surge in business occurs.
Mid-term operating leases for trailers generally run for a period of one to five
years. Mid-term 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, the fact that the rental obligation
under the lease need not be capitalized on the lessee's balance sheet, greater
control over future costs, protection against technological obsolescence, 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 increases in lease rates in
future leasing periods or may be required to be returned to the lessor at the
expiration of the initial lease. From the lessor's perspective, the advantages
of a mid-term operating lease (as well as a short-term rental), compared to a
full payout lease, are that rental rates are generally higher, and in periods of
price inflation, there is the potential for increasing rentals during the
equipment's economic life. 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 the equipment must generally be re-leased at the
expiration of the initial lease term in order for the lessor to recover its
investment and that re-lease rates are subject to changes in market conditions
and changes in trailer or refrigeration unit design.
The Company markets short-term trailer rentals and mid-term trailer operating
leases and avoids full payout leases because it believes there is very little
value added beyond the financing provided by the full payout leases. The
Company's emphasis on short-term trailer rentals and mid-term trailer operating
leases requires highly experienced management and support staff, as the
equipment must be properly maintained and periodically re-leased to continue
generating rental income and thus maximize the long-term return on the trailers.
Lessees: Lessees of trailer equipment range from Fortune 1,000 companies to
small, privately held corporations and entities. The Company's refrigerated
trailer lessees are primarily engaged in the production, processing, or
distribution of temperature-sensitive food products. The Company believes that
the demand for food products is less cyclical than in the general economy.
In recent years, the Company has invested in specialized refrigerated trailers
used by the foodservice distribution industry in the local delivery of food
products to restaurants, schools, hospitals and other institutional customers.
These trailers have refrigeration and delivery features designed to facilitate
multiple stops with multiple products, requiring multiple temperature settings
and compartments. These features are not found on traditional "over-the-road"
trailers used to carry one product between cities. As a result, foodservice
distributors have become an important customer base for the Company.
Competition: The Company encounters considerable competition from lessors and
financial institutions offering full payout leases on new trailers. Full payout
leases provide longer lease periods and lower monthly rent than the Company
offers. The shorter-length full service operating leases that the Company
provides offer lessees flexibility and value-added services such as the repair
and maintenance of the trailers.
The Company competes with many trailer lessors, including TIP Corporation and
XTRA Corporation, on a national basis, and numerous smaller trailer lessors in
local markets. In addition, truck leasing companies such as Ryder Transportation
Services and Penske Corporation provide trailer rental and leasing to their
customers.
Demand: Demand conditions for the Company's major trailer types are discussed
below.
Foodservice Distribution Trailers: Food and drink sales to the restaurant
industry, institutions providing meal service, and specialty and prepared foods
for the grocery industry showed healthy gains in the 2% to 5% range in 1998.
Consumer demand is fueling double-digit growth in some of the foodservice
industry segments, reflecting the consumer trend toward eating fresher, more
convenient foods. Heightened fears about food safety and increased service
demands from customers have accelerated the development of new technology for
refrigerated trailers and caused foodservice distributors to upgrade their
fleets. Leasing has allowed these companies access to improved equipment. This
has helped PLM Rental expand and grow its specialized refrigerated fleet that
caters to the foodservice distribution industry. Overall, the Company's
utilization and fleet size increased dramatically in 1998 and both are expected
to continue in 1999. The Company will continue to expand its marketing to the
foodservice industry, based on the growth potential of this market and the
initial strong utilization of its specialized refrigerated trailer fleet.
Over-the-Road Refrigerated Trailers: The temperature-controlled over-the-road
trailer market remained strong in 1998 as usage levels improved and equipment
oversupply was reduced. Refrigerated equipment users have been actively retiring
their older trailers and consolidating their fleets in response to improved
refrigerated trailer technology. There is currently a backlog in orders for new
equipment. As a result of these changes in the refrigerated trailer market, it
is anticipated that trucking companies and shippers will utilize short-term
trailer leases more frequently to supplement their fleets. Such a trend should
benefit the Company, which usually leases its equipment on a short-term basis.
The Company's utilization of refrigerated trailers showed improvement in 1998, a
trend that should continue in 1999.
Over-the-Road Dry Trailers: The U.S. over-the-road dry trailer market continued
to recover in 1998 as the strong domestic economy resulted in heavy freight
volumes. With unemployment low, consumer confidence high, and industrial
production sound, the outlook continues to look good for leasing of this type of
trailer, particularly since the equipment surpluses of recent years are being
absorbed by a buoyant market. In addition to high freight volumes, declining
fuel prices have led to a stronger trucking industry and stronger equipment
demands. The Company's dry van fleet experienced strong utilization throughout
1998.
Government Regulations: The trailer industry in which the Company operates is
subject to substantial regulation by various federal, state, and local
government authorities. For example, federal regulations by the National Highway
Transportation Safety Association, implemented in March 1998, require all new
trailers to have antilock brake systems installed, adding 2% to 3% to the price
of new trailers but increasing safety while also reducing tire and brake wear.
An enactment such as this affects the performance of trailers owned by the
Company. It is not possible to predict the positive or negative effects of
future regulatory changes in the trailer industry.
(2) Commercial and Industrial Equipment
American Finance Group, Inc. (AFG), a wholly-owned subsidiary of PLMI, is a
Boston-based company that originates and manages lease and loan transactions for
commercial and industrial equipment for the Company's own account or for
institutional programs or other third-party investors. AFG serves the capital
equipment financing needs of predominantly investment-grade, Fortune 1,000
companies and creditworthy middle-market companies. AFG originates and manages
leases and loans for commercial and industrial equipment, utilizing its
transaction-structuring capabilities to tailor financing solutions that meet the
needs of its customers. AFG takes a security interest in the assets on which it
provides loans. Assets purchased and loans provided by AFG may be financed by
nonrecourse securitized debt. AFG uses its warehouse credit facility to finance
the acquisition of assets prior to their sale or the receipt of permanent
financing by nonrecourse securitized debt. The leases are accounted for as
operating or direct finance leases.
Leasing Markets: AFG leases commercial and industrial equipment primarily on
full payout and mid-term triple net leases to Fortune 1,000 and creditworthy
middle-market companies. Expenses such as insurance, taxes, and maintenance are
generally 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, cost of capital,
financial reporting considerations, and capital budgeting constraints. AFG
leases have an average term of 53 months. These longer-term leases and loans
provide a predictable cash stream with lower risk. Although AFG leases a wide
range of commercial and industrial equipment, as of December 31, 1998, the lease
portfolio was concentrated primarily in point-of-sale, materials handling,
computer and peripheral, manufacturing, general purpose plant and warehouse,
communications, medical, and construction and mining equipment.
Lessees: Lessees of commercial and industrial equipment range from Fortune 1,000
to creditworthy middle-market companies. The Company has developed credit
underwriting policies and procedures that management believes have been
effective in selecting creditworthy lessees and in minimizing the risks of
delinquencies and credit losses. AFG's nonrecourse lenders, as well as the lease
portfolios owned by institutional programs and serviced by AFG, require a
dollar-weighted investment grade rating equivalent of Baa2. The lenders also
require that lessees accounting for at least 60% of the receivables in the
facility have a debt rating published by a credit rating agency.
In order to establish the creditworthiness of a prospective customer, the
Company first reviews the current ratings, if any, published by the credit
rating agencies. The Company subscribes to services from two major credit rating
agencies to ensure the availability of the most current data. The Company also
subscribes to additional sources of financial information for purposes of
reviewing the credit of existing and prospective customers. In the event a
prospective customer does not have a published credit rating, the Company
undertakes an analysis of the customer's credit, relying on a credit-rating
software package, financial statement ratios, and industry analyses. The
Company's credit-rating software package compares certain financial information
concerning the prospective customer with similar information about other
companies with the same industrial classification code to account for
industry-specific debt risk characteristics. The software package's database
maintains current information on over 2,000 companies and is updated quarterly.
All commercial and industrial equipment acquisitions and sales relating to
equipment having an original cost basis in excess of $0.1 million must be
approved by a credit committee. The credit committee consists of members of
senior management of PLMI and AFG. The credit committee performs an in-depth
review of each transaction, and considers many factors, including anticipated
residual values from the eventual sale of the equipment. These residuals may be
affected by several factors during the time the equipment is held, including
changes in regulatory environments in which the equipment is operated, the onset
of technological obsolescence, changes in equipment markets, and perceived
values for equipment at the time of sale. Because the impact of any of these
factors is difficult to forecast with accuracy over extended time horizons, the
Company cannot predict with certainty that the anticipated residual values for
equipment selected for acquisition will actually be realized when the equipment
is sold.
Competition: AFG competes for customers with a number of international,
national, and regional finance and leasing companies, as well as banks and
equipment manufacturers that finance the sale or lease of their products
themselves. Some of AFG's competitors include General Electric Capital,
Caterpillar Financial, IBM Credit, AT&T Capital, Fleet Credit Corp., Pitney
Bowes, Comdisco, Charter One Bank, Bank of Boston, ATEL, and Capital Associates.
Many of AFG's competitors and potential competitors have greater financial,
marketing, and operational resources than the Company. 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. AFG's
competitors, some of which are larger and more established than AFG, may have a
lower cost of funds than the Company and access to capital markets and other
funding sources that may not be available to AFG. AFG believes that the
principal competitive factors in the equipment leasing and secured financing
business, and the bases on which it competes, are (a) access to sufficient
capital with an efficient cost of funds, (b) the ability to provide flexible
lease and financing structures, (c) the ability to develop and maintain
"relationship" accounts, (d) repeat business generated on relationship accounts,
(e) customer service, including customized value-added services, (f) the skill
and expertise of a company's employees, (g) the image a company enjoys among
lessees in the marketplace, and (h) the ability to utilize tax benefits
generated by leasing equipment.
Demand: The Equipment Leasing Association (ELA) estimated that $593.0 billion in
business was invested in equipment for 1998. This represents a 1.9% growth over
the prior year. The market penetration rate of leasing has remained static over
the last two years at 30.9% or $183.4 billion in 1998. The ELA recently released
the results of its Performance Indicators Report, which tracks the performance
of prominent leasing organizations in several key areas. The results showed that
the average portfolio has grown approximately 4% each quarter since the first
quarter 1998. The new business volume has risen approximately 32% since the
first quarter of 1998. Average losses and the number of employees seemed to have
flattened out. Generally the domestic leasing market continues to be strong.
Government Regulations: The commercial and industrial equipment leasing industry
in which the Company operates is subject to substantial regulation by various
federal, state, and local government authorities. For tax purposes, the majority
of the Company's leases are treated as true leases, which generate considerable
depreciation allowances that provide the Company with substantial and ongoing
tax benefits. In recent years, there have been proposals and related activity to
revise the United States tax regulations applicable to international leasing
transactions and to conform accounting principles relating to leasing
transactions to an international standard. Any changes in government regulations
such as changes in tax laws could affect the performance of the Company. It is
not possible to predict the positive or negative effects of future regulatory
changes in the commercial and industrial equipment leasing industry.
(D) Management of Investment Programs and Other Transportation Equipment Leasing
Management of Investment Programs
PLM Financial Services, Inc. (FSI), a wholly-owned subsidiary of PLMI, 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 Company has entered into management
agreements with these programs.
FSI 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 and
related equipment for lease in order to generate current operating cash flow for
distribution to investors and for reinvestment into additional used
transportation and related 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.
TEC is responsible for the selection, negotiation and purchase, initial lease
and re-lease, and sale of transportation and related equipment. This process
includes identifying prospective lessees; analyzing lessees' creditworthiness;
negotiating lease terms; and negotiating with equipment owners, manufacturers,
or dealers for the purchase, delivery, and inspection of equipment. TEC or its
wholly-owned subsidiary, TEC AcquiSub, Inc., also purchases transportation
equipment for PLM International's own portfolio and on an interim basis prior to
resale to third parties or various affiliated programs at the lower of fair
market value or cost.
IMI manages equipment owned 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), mobile
offshore drilling units, and a drilling ship. 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 various investment program agreements.
PLM Railcar Management Services, Inc. (RMSI) markets and manages the investment
programs' railcar fleets. RMSI is also involved in negotiating the purchase and
sale of railcars on behalf of IMI and TEC.
PLM Worldwide Management Services Limited (WMS), a wholly-owned subsidiary of
PLMI, is a Bermuda-based company that serves as the parent of several PLMI-owned
foreign-operating entities and generates revenue from certain equipment leasing
and brokerage activities.
<PAGE>
PLM Railcar Management Services Canada, Limited, a wholly-owned subsidiary of
WMS headquartered in Calgary, Alberta, Canada, provides fleet management
services on behalf of IMI to the managed railcars operating in Canada.
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 managed equipment. A substantial portion of the
risks underwritten by TEI is reinsured with unaffiliated underwriters. In 1998,
TEI provided limited insurance coverage to the investment programs. Insurance
previously provided by TEI was provided by unaffiliated third parties. The
Company intends to liquidate TEI in 1999.
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. Equipment acquisition,
lease negotiation, and debt placement fees are generally earned through the
purchase, initial lease, and financing of equipment. These fees are recognized
as revenue when FSI has completed substantially all of the services required to
earn them, 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. FSI is also entitled to
reimbursement for providing certain administrative services.
With the termination of syndication activities in 1996, management fees,
acquisition fees, lease negotiation fees, and debt placement fees from the older
programs have decreased and are expected to continue to decrease as the programs
liquidate their equipment portfolios.
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 a partnership interest
its equity interest in the earnings of a program, 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.
FSI also recognizes as income its interest in the estimated net residual value
of the assets of a partnership as the assets are purchased. The amounts recorded
are based on management's estimate of the net proceeds to be distributed upon
disposition of a partnership's equipment at the end of a partnership's life. As
assets are purchased by a partnership, their residual value is recorded as
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 quarterly in
relation to expected future market values for the 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.
In the event organizational and offering costs incurred by FSI, as defined by
the program agreement, exceeded the amounts allowed, the excess costs were
capitalized as an additional investment in the related program and are being
amortized until the projected start of the liquidation phase of the program.
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, which is reflected as equity interest
in affiliates in the accompanying consolidated balance sheets. 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. Management fees are earned for managing the
equipment portfolios in Fund I, and are recognized as revenue as they are
earned. FSI is also entitled to reimbursement for providing certain
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. 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 quarterly in relation to expected
future market values for the equipment in which it holds residual interests for
the purpose of assessing recoverability of recorded amounts. 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.
Leasing Markets: FSI, on behalf of its affiliated investment programs, leases
its transportation equipment primarily on mid-term operating leases and
short-term rentals. Leases of aircraft and mobile offshore drilling units are
generally 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. Per diem rental
agreements are used on equipment in the Company's refrigerated and over-the-road
trailer and container rental operations, in addition to mid-term operating
leases. Railcar leases are generally full-services leases. Marine vessel leases
may be either net operating leases or full-service leases. In a full-service
lease and a per diem rental, the lessee absorbs the maintenance costs.
This allows the Company to insure proper maintenance of the equipment.
Lessees: Lessees of the investment programs' equipment range from Fortune 1,000
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. The credit committee performs an in-depth review of each transaction
and considers many factors, including anticipated residual values from the
eventual sale of the equipment. These residuals may be affected by several
factors during the time the equipment is held, including changes in regulatory
environments in which the equipment is operated, the onset of technological
obsolescence, changes in equipment markets, and perceived values for equipment
at the time of sale. Because the impact of any of these factors is difficult to
forecast with accuracy over extended time horizons, the Company cannot predict
with certainty that the anticipated residual values for equipment selected for
acquisition will actually be realized when the equipment is sold. Deposits,
prepaid rents, corporate and personal guarantees, and letters of credit are
utilized, when necessary, to provide credit support for lessees who do not
satisfy the credit committee's financial requirements.
Competition: When marketing operating leases for transportation assets owned by
the managed investment programs, 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 rents 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
Penske Corporation, TIP Corporation, GE Capital Railcar Services, Inc., GATX,
Associates Commercial Corporation, Ryder Transportation Services, Inc., XTRA
Corporation, GE Capital Aviation Services, Inc., International Lease Finance
Corporation, Newcourt Capital U.S.A., Inc., Union Tank Car Company,
international banks, and certain limited partnerships, some of which lease the
same type of equipment.
<PAGE>
Government Regulations: The transportation industry, in which the majority of
the equipment managed by the Company operates, is subject to substantial
regulation by various federal, state, local, and foreign government authorities.
For example, federal regulations issued by the U.S. Department of
Transportation, through the Federal Railroad Administration, implemented in
September 1998, requires the inspection and repair of tanks in Richmond-built
tank cars that were originally equipped with "foam-in-place" insulation,
resulting in additional inspection and repair costs while increasing safety. 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 managed by the Company. It is not possible
to predict the positive or negative effects of future regulatory changes in the
transportation industry.
Transportation Equipment Leasing and Other
The Company owns portable on-site storage units. 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.
The Company had an 80% interest in a company owning 100% of a company located in
Australia that was involved in aircraft brokerage and aircraft spare parts
sales. This company was sold during August 1998.
During the last few years, the Company has exited certain equipment markets by
selling or disposing of underperforming assets including vessels, containers,
railcars, aircraft, and intermodal trailers. During 1998, the Company marketed
intermodal trailers to railroads and shippers on short-term arrangements through
a licensing agreement with a short-line railroad. These intermodal trailers were
sold in the third quarter of 1998. 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. The Company no longer owns equipment leased in utilization-type pools
that include equipment owned by unaffiliated parties.
(E) Employees
As of March 9, 1999, the Company and its subsidiaries had 156 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, 1998, the Company owned trailer equipment and related assets
and commercial and industrial equipment with an original cost of approximately
$284.0 million.
The Company's principal offices are located in leased office space at One
Market, Steuart Street Tower, Suite 800, 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; Orlando, Florida; Tampa, Florida;
Baltimore, Maryland; Mansfield, Massachusetts; Denver, Colorado; Bensalem,
Philadelphia; San Leandro, California; Fontana, California; and Newark, New
Jersey.
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, the Company 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 in May 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 in October 1997, the Ninth Circuit
reversed the decision of the district court and remanded the case to the
district court for further proceedings. The Company filed a petition for
rehearing, which was denied in November 1997. The Ninth Circuit mandate was
filed in the district court in December 1997.
In February 1998, plaintiff was permitted by the district court 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 the Company 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. Also in February 1998, the defendants filed a motion to
dismiss the fourth, fifth, and sixth claims relating to the termination of the
ESOP, and the seventh claim relating to defendants' alleged interference with
plaintiff's rights under ERISA, all for failure to state claims for relief. The
district court, in an order dated July 14, 1998, granted this motion and
dismissed the fourth through seventh claims for relief.
In June 1998, the defendants filed a motion for summary judgment seeking a
ruling that the first two claims for relief, which allege breaches arising out
of the purchase and sale of stock at the inception of the ESOP, are barred by
the applicable statute of limitations. In an order dated July 14, 1998, the
district court granted in part and denied in part this motion and ruled that
these claims for relief are barred by the statute of limitations to the extent
that they rely on a theory that the automatic conversion feature and other terms
and conditions of the purchase and sale of the preferred stock violated ERISA,
but are not so barred to the extent that they rely on a theory that the purchase
and sale of the preferred stock at the inception of the ESOP was for more than
adequate consideration.
On September 30, 1998, plaintiff filed a motion to certify as final, and enter
judgment on, the two July 14, 1998 orders. This motion was denied. Defendants
filed their answer to the second amended complaint on September 18, 1998,
denying the allegations contained in the first, second, and third claims for
relief. The trial regarding these remaining claims is set for September 27,
1999. The Company believes it has meritorious defenses to these claims 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 purported class action on January 22, 1997 in the Circuit Court of
Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch action).
Plaintiffs, who filed the complaint on their own and on behalf of all class
members similarly situated, are six individuals who invested in certain
California limited partnerships (the Partnerships) for which the Company's
wholly-owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the general
partner, including PLM Equipment Growth Funds IV, V, and VI, and PLM Equipment
Growth & Income Fund VII (Fund VII). The state court ex parte certified the
action as a class action (i.e., solely upon plaintiffs' request and without the
Company being given the opportunity to file an opposition). 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 Corp. for breach of third party beneficiary contracts in
violation of the National Association of Securities Dealers 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,
and control persons. Based on these duties, plaintiffs assert liability against
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.
In March 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. Removal of the action to federal court automatically nullified
the state court's ex parte certification of the class. In September 1997, the
district court denied plaintiffs' motion to remand the action to state court and
dismissed without prejudice the individual claims of the California plaintiff,
reasoning that he had been fraudulently joined as a plaintiff. In October 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
defendants' motion in December 1997.
Following various unsuccessful requests that the district court reverse, or
otherwise certify for appeal, its order denying plaintiffs' motion to remand the
case to state court and dismissing the California plaintiff's claims, plaintiffs
filed with the U.S. Court of Appeals for the Eleventh Circuit a petition for a
writ of mandamus seeking to reverse the district court's order. The Eleventh
Circuit denied plaintiffs' petition in November 1997, and further denied
plaintiffs subsequent motion in the Eleventh Circuit for a rehearing on this
issue. Plaintiffs also appealed the district court's order granting defendants'
motion to compel arbitration, but in June 1998 voluntarily dismissed their
appeal pending settlement of the Koch action, as discussed below.
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, defendants filed with the district court for the Northern
District of California (Case No. C-97-2847 WHO) a petition (the 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. In October 1997, the district court denied the Company's
petition to compel arbitration, but in November 1997, agreed to hear the
Company's motion for reconsideration of this order. The hearing on this motion
has been taken off calendar and the district court has dismissed the petition
pending settlement of the Romei action, as discussed below. The state court
action continues to be stayed pending such resolution. In connection with her
opposition to the petition to compel arbitration, plaintiff filed an amended
complaint with the state court in August 1997, 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 also served certain discovery requests on
defendants. Because of the stay, no response to the amended complaint or to the
discovery is currently required.
In May 1998, all parties to the Koch and Romei actions entered into a memorandum
of understanding (MOU) related to the settlement of those actions (the monetary
settlement). The monetary settlement contemplated by the MOU provides for
stipulating to a class for settlement purposes, and a settlement and release of
all claims against defendants and third party brokers in exchange for payment
for the benefit of the class of up to $6.0 million. The final settlement amount
will depend on the number of claims filed by authorized claimants who are
members of the class, the amount of the administrative costs incurred in
connection with the settlement, and the amount of attorneys' fees awarded by the
Alabama district court. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy.
The parties to the monetary settlement have also agreed in principal to an
equitable settlement (the equitable settlement), which provides, among other
things: (a) for the extension of the operating lives of Funds V, VI, and VII by
judicial amendment to each of their partnership agreements, such that FSI, the
general partner of each such partnership, will be permitted to reinvest cash
flow, surplus partnership funds, or retained proceeds in additional equipment
into the year 2004, and will liquidate the partnerships' equipment in 2006; (b)
that FSI is entitled to earn front-end fees (including acquisition and lease
negotiation fees) in excess of the compensatory limitations set forth in the
NASAA Statement of Policy by judicial amendment to the partnership agreements
for Funds V, VI, and VII; (c) for a one-time redemption of up to 10% of the
outstanding units of Funds V, VI, and VII at 80% of such partnership's net asset
value; and (d) for the deferral of a portion of FSI's management fees. The
equitable settlement also provides for payment of the equitable class attorneys'
fees from partnership funds in the event that distributions paid to investors in
Funds V, VI, and VII during the extension period reach a certain internal rate
of return.
Defendants will continue to deny each of the claims and contentions and admit no
liability in connection with the proposed settlements. The monetary settlement
remains subject to numerous conditions, including but not limited to: (a)
agreement and execution by the parties of a settlement agreement (the settlement
agreement), (b) notice to and certification of the monetary class for purposes
of the monetary settlement, and (c) preliminary and final approval of the
monetary settlement by the Alabama district court. The equitable settlement
remains subject to numerous conditions, including but not limited to: (a)
agreement and execution by the parties of the settlement agreement, (b) notice
to the current unitholders in Funds V, VI, and VII (the equitable class) and
certification of the equitable class for purposes of the equitable settlement,
(c) preparation, review by the Securities and Exchange Commission (SEC), and
dissemination to the members of the equitable class of solicitation statements
regarding the proposed extensions, (d) disapproval by less than 50% of the
limited partners in Funds V, VI, and VII of the proposed amendments to the
limited partnership agreements, (e) judicial approval of the proposed amendments
to the limited partnership agreements, and (f) preliminary and final approval of
the equitable settlement by the Alabama district court. The parties submitted
the settlement agreement to the Alabama district court on February 12, 1999, and
the preliminary class certification hearing is scheduled for March 24, 1999. If
the district court grants preliminary approval, notices to the monetary class
and equitable class will be sent following review by the SEC of the solicitation
statements to be prepared in connection with the equitable settlement. The
monetary settlement, if approved, will go forward regardless of whether the
equitable settlement is approved or not. The Company continues to believe that
the allegations of the Koch and Romei actions are completely without merit and
intends to continue to defend this matter vigorously if the monetary settlement
is not consummated.
The Company is involved as plaintiff or defendant in various other legal actions
incident to its business. Management does not believe that any of these actions
will be material to the financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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 PLMI on the American
Stock Exchange (AMEX). As of the date of this annual report, the Company has
8,161,504 common shares outstanding and approximately 3,285 shareholders of
record.
Table 3, below, sets forth the quarterly high and low prices of the Company's
common stock for 1998 and 1997, as reported by the AMEX: TABLE 3
Calendar Period High Low
------------------- --------- ---------
1998
1st Quarter $ 6.250 $ 5.063
2nd Quarter 9.250 5.813
3rd Quarter 7.750 5.438
4th Quarter 7.000 5.063
1997
1st Quarter $ 3.813 $ 3.000
2nd Quarter 6.375 3.500
3rd Quarter 6.000 5.500
4th Quarter 5.875 5.250
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 for a total of $4.4 million.
During 1998, the Company repurchased 106,200 shares for $0.6 million, completing
the $5.0 million common stock repurchase program announced in March 1997.
In 1998, the Company announced that its Board of Directors had authorized the
repurchase of up to $1.1 million of the Company's common stock. During 1998,
170,300 shares were repurchased under this plan for a total of $1.1 million.
In December 1998, the Company announced that its Board of Directors had
authorized the repurchase of up to $5.0 million of the Company's common stock.
During 1998, 63,300 shares had been repurchased under this plan for a total of
$0.4 million.
Additional future repurchases may be made in the open market or through private
transactions.
ITEM 6. SELECTED FINANCIAL DATA
Years ended December 31,
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of operations:
Revenue $ 57,078 $ 49,665 $ 51,545 $ 60,073 $ 53,715
Income (loss) before income taxes 7,899 6,515 3,893 7,868 (5,579 )
Net income (loss) before cumulative
effect of accounting change 4,857 4,667 4,095 6,048 (1,511 )
Cumulative effect of accounting change -- -- -- -- (5,130 )
Net income (loss) to common shares 4,857 4,667 4,095 6,048 (9,071 )
Basic earnings (loss) per weighted-
average common share 0.58 0.51 0.41 0.52 (0.74 )
Financial position:
Total assets 292,069 236,283 198,749 126,213 140,372
Short-term secured debt 34,420 23,040 30,966 -- 6,404
Long-term recourse debt 56,047 44,844 43,618 47,853 60,119
Long-term nonrecourse debt 111,222 81,302 45,392 -- --
Shareholders' equity 50,197 46,548 46,320 48,620 45,695
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Trailer Leasing
The Company operates 16 trailer rental facilities that engage in short-term and
mid-term operating leases. Equipment operated in these facilities consists of
refrigerated trailers used to transport temperature-sensitive food products and
dry van (nonrefrigerated) trailers leased to a variety of customers. The Company
opened six of these rental yards in 1998 and intends to open additional rental
yard facilities in the future. The Company is selling certain of its older
trailers and is replacing them with new or late-model refrigerated trailers. The
new trailers will be placed in existing rental facilities or in new yards.
Commercial and Industrial Equipment Leasing and Financing
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 point-of-sale, materials handling, computer and
peripheral, manufacturing, general purpose plant and warehouse, communications,
medical, and construction and mining equipment. Through AFG, the Company is also
engaged in the management of institutional programs for which it originates
leases and receives acquisition and management fees. The Company also earns
syndication fees for arranging purchases and sales of equipment to other
unaffiliated third parties.
In March 1998, the Company announced that its Board of Directors had authorized
management to engage investment bankers for the purpose of undertaking an
initial public offering of common stock for AFG. On May 7, 1998, AFG filed a
registration statement with the U.S. Securities and Exchange Commission (SEC)
for the initial public offering. On October 15, 1998, AFG filed an amended
registration statement with the SEC for the initial public offering.
On January 11, 1999, the Company announced that its Board of Directors had
engaged an investment banking firm to explore strategic alternatives for AFG.
The Company does not intend to withdraw the current registration statement on
file with the SEC at the present time, pending the results of the review.
Management of Investment Programs
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 invested the equity raised through syndication for these programs 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.
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. The Company's interest in the earnings of Fund I
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 for these programs becomes permanently reduced.
<PAGE>
Comparison of the Company's Operating Results for the Years Ended December 31,
1998 and 1997
The following analysis reviews the operating results of the Company:
Revenues
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operating lease income $ 19,947 $ 15,777
Finance lease income 12,529 8,685
Management fees 10,203 11,275
Partnership interests and other fees 917 1,306
Acquisition and lease negotiation fees 3,974 3,184
Aircraft brokerage and services 1,090 2,466
Gain on the sale or disposition of assets, net 4,693 3,720
Other 3,725 3,252
--------------------------------------
Total revenues $ 57,078 $ 49,665
</TABLE>
The fluctuations in revenues between 1998 and 1997 are summarized and explained
below.
Operating lease income by equipment type:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Refrigerated and dry van over-the-road trailers $ 9,743 $ 5,539
Commercial and industrial equipment 7,935 5,175
Intermodal trailers 1,706 3,083
Marine vessel 412 501
Aircraft and aircraft engine 74 655
Mobile offshore drilling units -- 603
Marine containers -- 188
Other 77 33
--------------------------------------
Total operating lease income $ 19,947 $ 15,777
</TABLE>
Operating lease income includes revenues generated from assets held for
operating leases and assets held for sale that are on lease. Operating lease
income increased $4.2 million during 1998, compared to 1997, due to the
following:
(a) A $4.2 million increase in operating lease income was generated from
refrigerated and dry van trailer equipment, due to an increase in the amount of
these types of equipment owned and on operating lease.
(b) A $2.8 million increase in operating lease income was generated from
commercial and industrial equipment, due to an increase in the amount of
these types of equipment owned and on operating lease.
These increases in operating lease income were partially offset by the
following:
(a) A $0.1 million decrease in operating lease income from marine vessels.
During 1998, the Company purchased an entity owning a marine vessel that
generated $0.4 million in operating lease income. The Company sold the
entity that owned the marine vessel, at the Company's cost, to an
affiliated program in 1998. During 1997, the Company owned a 47.5% interest
in an entity that owned a marine vessel, which generated $0.5 million in
operating lease income during that year. The Company sold the 47.5%
interest in the entity that owned the marine vessel, at the Company's cost,
to an affiliated program in 1997.
(b) A $0.6 million decrease in operating lease income from mobile offshore
drilling units. During 1997, the Company owned one mobile offshore drilling
unit, as well as a 25.5% interest in an entity that owned another mobile
offshore drilling unit, which generated $0.6 million in operating lease
income. Both of these drilling units were sold at the Company's cost to an
affiliated program during the first quarter of 1997. No similar asset was
owned by the Company during 1998.
<PAGE>
(c) A $2.1 million decrease in marine container, aircraft, and intermodal
trailer operating lease income was due to the Company's strategic decision
to dispose of certain transportation assets and exit certain equipment
markets. Intermodal trailer lease revenues also decreased due to lower
utilization, compared to the prior year.
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. Finance lease income increased $3.8 million during 1998, compared to
1997, due to an increase in commercial and industrial assets that were on
finance lease.
Management fees:
Management fees are, for the most part, based on the gross revenues
generated by equipment under management. Management fees decreased $1.1 million
during 1998, compared to 1997. The decrease in management fees resulted from a
net decrease in managed equipment from the PLM Equipment Growth Fund (EGF)
programs and other managed programs. With the termination of syndication
activities in 1996, management fees from the older programs are decreasing and
are expected to continue to decrease as the programs liquidate their equipment
portfolios. The Company also earns management fees from the institutional
programs managed by the Company's AFG subsidiary.
Partnership interests and other fees:
The Company records as revenues its equity interest in the earnings of the
Company's affiliated programs. The net earnings and distribution levels from the
affiliated programs were $1.7 million and $2.3 million for 1998 and 1997,
respectively. In addition, a decrease of $0.8 million and $1.0 million in the
Company's residual interests in the programs was recorded during 1998 and 1997,
respectively. The decrease in net earnings and distribution levels and residual
interests in 1998, compared to 1997, resulted mainly from the disposition of
equipment in certain of the EGF programs. Residual income is based on the
general partner's share of the present value of the estimated disposition
proceeds of the equipment portfolios of the affiliated partnerships when the
equipment is purchased. Net decreases in the recorded residual values result
when partnership assets are sold and the proceeds are less than the original
investment in the sold equipment.
Acquisition and lease negotiation fees:
During 1998, the Company, on behalf of the EGF programs, purchased
transportation and other equipment, along with beneficial interests in entities
that own marine containers and a commercial aircraft, for $60.4 million,
compared to $42.8 million in transportation equipment and a beneficial interest
in a marine vessel and aircraft purchased on behalf of the EGFs during 1997,
resulting in a $0.9 million increase in acquisition and lease negotiation fees.
Also during 1998, equipment purchased by AFG for the institutional programs was
$26.0 million, compared to $29.6 million for 1997, resulting in a $0.1 million
decrease in acquisition and lease negotiation fees for 1998, compared to 1997.
The Company does not expect to sell assets in the future to the institutional
programs. It will, however, continue to manage the existing portfolios for these
programs. Because of the Company's decision to halt syndication of equipment
leasing programs with the close of Fund I in 1996, because Fund I has a no
front-end fee structure, and because the Company does not expect to sell assets
in the future to the institutional programs, 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 spare part sales and
brokerage subsidiary, decreased $1.4 million during 1998, compared to 1997, due
to a decrease in spare parts sales and due to the sale of the Company's aircraft
leasing and spare parts brokerage subsidiary, located in Australia, in August
1998.
Gain on the sale or disposition of assets, net:
During 1998, the Company recorded $4.7 million in net gains on the sale
or disposition of assets. Of this gain, $1.0 million resulted from the sale or
disposition of an aircraft engine, a 20% interest in a commuter aircraft, and
trailers, and $3.2 million related to the sale of commercial and industrial
equipment. Also during 1998, the Company purchased and subsequently sold
railcars to an unaffiliated third party for a net gain of $0.5 million. 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.
Other:
Other revenues increased $0.5 million during 1998, compared to 1997,
due mainly to increased revenue earned from financing income earned on loans
made by AFG.
Costs and Expenses
<TABLE>
<CAPTION>
1998 1997
-------------------------------------
(in thousands of dollars)
<S> <C> <C>
Operations support $ 17,571 $ 16,633
Depreciation and amortization 11,833 8,447
General and administrative 7,086 9,472
-------------------------------------
Total costs and expenses $ 36,490 $ 34,552
Operations support:
</TABLE>
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, increased $0.9 million (6%) for 1998, compared to 1997. The increase
resulted from $1.6 million in additional costs due to the expansion of PLM
Rental, with the addition of six rental yards and new trailers to existing
yards; a $0.2 million loss related to the sale of the Company's aircraft leasing
and spare parts brokerage subsidiary, located in Australia, in August 1998; and
a $0.5 million write-down of its aircraft spare parts inventory. These increases
were partially offset by a $0.8 million decrease in the costs of goods sold,
which was associated with the decrease in the cost of sales of aircraft spare
parts because of reduced spare parts sales and the sale of the Company's spare
parts brokerage subsidiary, and a $0.6 million decrease in bad debt expense.
Depreciation and amortization:
Depreciation and amortization expenses increased $3.4 million (40%) for
1998, compared to 1997. An increase of $3.0 million was due to an increase in
commercial and industrial equipment owned and on operating lease, and an
increase of $1.7 million was due to an increase in refrigerated trailer
equipment owned and on operating lease. These increases were partially offset by
the reduction in aircraft, marine container, and intermodal trailer portfolios
(discussed in the operating lease income section).
General and administrative:
General and administrative expenses decreased $2.4 million (25%) during 1998,
compared to 1997, primarily due to a $0.6 million decrease in compensation and
benefits expense as a result of a decrease in staffing requirements, a $0.5
million decrease in expenses related to the Company's response to
shareholder-sponsored initiatives in 1997, a $0.5 million decrease in legal fees
related to the Koch and Romei actions, a $0.4 million decrease in rent expense,
a $0.3 million decrease in expenses related to the redemption of stock options,
and a $0.1 million decrease in professional service expenses.
Other Income and Expenses
<TABLE>
<CAPTION>
1998 1997
----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Interest expense $ (14,608 ) $ (9,891 )
Interest income 1,446 1,635
Other income (expenses), net 473 (342 )
</TABLE>
Interest expense:
Interest expense increased $4.7 million (48%) during 1998, compared to 1997, due
to an increase in borrowings of nonrecourse securitized debt, an increase in
borrowings on the warehouse credit facilities, and an increase in borrowings on
the senior secured notes. Interest expense on borrowings for AFG increased $5.5
million. The
<PAGE>
additional interest expense caused by these increased borrowings was partially
offset by lower interest expense resulting from reductions in the amounts
outstanding on the senior secured loan.
Interest income:
Interest income decreased $0.5 million during 1998, compared to 1997,
due to a decrease in average cash balances. This decrease was partially offset
by $0.3 million of interest income for a tax refund receivable that had not
previously been recognized, which was recorded in 1998.
Other income (expenses), net:
For 1998, other income was $0.5 million, compared to $0.3 million of
expense for 1997. During 1998, the Company recorded income of $0.7 million
related to the settlement of a lawsuit against Tera Power Corporation and
others, and recorded expense of $0.3 million related to a legal settlement for
the Koch and Romei actions (refer to Note 13 to the consolidated financial
statements). During 1997, other expenses of $0.3 million represented an accrual
for a litigation settlement that was paid in 1998.
Provision for Income Taxes
For 1998, the provision for income taxes was $3.0 million, representing an
effective rate of 39%. For 1997, the provision for income taxes was $1.8
million, representing an effective rate of 28%. In 1997, 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. The Company did
not earn any income of this type during 1998 (refer to Note 12 to the
consolidated financial statements).
Net Income
As a result of the foregoing, 1998 net income was $4.9 million,
resulting in basic and diluted earnings per weighted-average common share
outstanding of $0.58 and $0.57, respectively. For 1997, net income was $4.7
million, resulting in basic and diluted earnings per weighted-average common
share outstanding of $0.51 and $0.50, respectively.
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 lease income $ 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>
<PAGE>
The fluctuations in revenues between 1997 and 1996 are summarized and explained
below.
Operating lease income by equipment type:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------
(in thousands of dollars)
<S> <C> <C>
Refrigerated and dry van over-the-road trailers $ 5,539 $ 5,584
Commercial and industrial equipment 5,175 4,042
Intermodal trailers 3,083 2,420
Aircraft and aircraft engine 655 4,444
Mobile offshore drilling units 603 123
Marine vessel 501 --
Marine containers 188 392
Railcars 29 99
Storage equipment 4 1,076
--------------------------------------
Total operating lease income $ 15,777 $ 18,180
</TABLE>
Operating lease income includes 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 lease 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 lease or
held for sale as of December 31, 1996. 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, which 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 operating lease income was reduced,
compared to the prior year. The $1.1 million decrease in storage equipment
operating lease income 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 income 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 income. Commercial and industrial
operating lease income increased as a result of an increase in commercial and
industrial equipment owned and on operating lease. Intermodal trailer operating
lease income increased $0.6 million as a result of higher utilization in the
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.
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. 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 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 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 $2.3 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. Because 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 an 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
transportation equipment and a beneficial interest in a marine vessel and
aircraft for $42.8 million, compared to $105.7 million of transportation
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 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 parts 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>
<PAGE>
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 13 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>
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 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 represent 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, incurring 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.
<PAGE>
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
differences between the amount recognized in the 1995 financial statements and
the 1995 tax return as filed and 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 12 to the
consolidated financial statements).
Net Income
As a result of the foregoing, 1997 net income was $4.7 million,
resulting in basic and 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 diluted earnings per weighted-average common
share outstanding of $0.41 and $0.40, respectively.
Liquidity and Capital Resources
Cash requirements have historically been satisfied through cash flow from
operations, borrowings, and the sale of equipment.
Liquidity in 1999 and beyond will depend, in part, on the continued remarketing
of the equipment portfolio at similar lease rates, the management of existing
sponsored programs, the effectiveness of cost control programs, the purchase and
sale of equipment, the volume of commercial and industrial and trailer equipment
leasing transactions, additional borrowings, and the potential proceeds from the
initial public offering or sale of AFG. 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:
Nonrecourse Securitized Debt: The Company has available a nonrecourse debt
facility for up to $150.0 million, secured by direct finance leases, operating
leases, and loans on commercial and industrial equipment at AFG that generally
have terms of one to seven years. The facility is available for a one-year
period expiring October 12, 1999. Repayment of the facility matches the terms of
the underlying leases. The Company believes that it will be able to renew this
facility on substantially the same terms upon its expiration and increase its
borrowing capacity as needed. The securitized debt bears interest equivalent to
the lender's cost of funds, based on commercial paper market rates for the
determined period of borrowing, plus an interest rate spread and fees (6.46% and
7.16% as of December 31, 1998 and 1997, respectively). As of December 31, 1998,
$103.6 million in borrowings was outstanding under this facility. As of March 9,
1999, $108.1 million in borrowings was outstanding under this facility.
In addition to the $150.0 million nonrecourse debt facility discussed above,
the Company also has $7.6 million in nonrecourse notes payable secured by direct
finance leases on commercial and industrial equipment at AFG that have terms
corresponding to the note repayment schedule that began November 1997 and ends
March 2001. The notes bear interest from 8.32% to 9.5% per annum.
FSI Warehouse Credit Facility: Assets acquired and held on an interim
basis by FSI for placement with affiliated programs or sale to third parties
have, from time to time, been partially funded by a warehouse credit facility.
This facility is also used to temporarily finance the purchase of trailers prior
to permanent financing. This facility was amended on December 15, 1998 to amend
FSI's borrowing capacity to $24.5 million until December 14, 1999. 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 VI and VII, and Fund I, allows the
Company to purchase equipment prior to its designation to a specific program.
Borrowings under this facility by the other eligible borrowers reduce the amount
available to be borrowed by the Company. All borrowings under this facility are
guaranteed by the Company. This facility provides 80% financing for
transportation assets. The Company can hold transportation assets under this
facility for up to 150 days. Interest accrues at prime or LIBOR plus 162.5 basis
points, at the option of the Company. 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, 1998, the Company had
no outstanding borrowings under this facility and no other borrowings were
outstanding under this facility by any other eligible borrower. As of March 9,
1999, the Company and EGF VI had $8.3 million and $3.7 million in borrowings
outstanding under this facility, respectively.
AFG Warehouse Credit Facility: Assets acquired and held on an interim basis by
AFG for placement in the Company's securitization facility or for sale to
institutional programs or other unaffiliated third parties have, from time to
time, been partially funded by a $60.0 million warehouse credit facility. The
facility expires December 14, 1999; however, the Company believes it will be
able to renew this facility on substantially the same terms upon its expiration.
This facility provides for 100% of the present value of the lease
stream of commercial and industrial equipment for up to 90% of original
equipment cost of the assets held on this facility.
Borrowings secured by investment-grade lessees can be held under this facility
until the facility's expiration. Borrowings secured by noninvestment-grade
lessees may by outstanding for 120 days. Interest accrues at prime or LIBOR plus
137.5 basis points, at the option of the Company. 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,
1998, the Company had $34.4 million outstanding under this facility. As of March
9, 1999, the Company had $29.8 million in borrowings outstanding under this
facility.
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. On September 22, 1998, the Company amended the
note agreement to allow the Company to borrow an additional $10.0 million under
the facility during the period from September 22, 1998 through October 15, 1998.
During this period, the Company borrowed $10.0 million. During 1998, the Company
repaid $5.6 million on this facility. The facility bears interest at LIBOR plus
240 basis points. As of December 31, 1998, the Company had $28.2 million
outstanding under this agreement. As of March 9, 1999, the Company had $26.3
million outstanding under this agreement. The Company has pledged substantially
all of its future management fees, acquisition and lease negotiation fees, data
processing fees, and 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 of $1.9 million are payable quarterly through termination of the loan
on August 15, 2002.
Senior Secured Loan: The Company's senior loan with a syndicate of insurance
companies, which had an outstanding balance of $14.7 million as of December 31,
1998 and March 9, 1999, provides that equipment sale proceeds from pledged
equipment or cash deposits be placed into a collateral account or used to
purchase additional equipment to the extent required to meet certain debt
covenants. Pledged equipment for this loan consists of the storage equipment and
virtually all trailer equipment purchased prior to August 1998. As of December
31, 1998, the cash collateral balance for this loan was $0.1 million and is
included in restricted cash and cash equivalents on the Company's balance sheet.
During 1998, the Company repaid $5.9 million on this facility. The facility
bears interest at 9.78% and required quarterly interest payments through June
30, 1997, with quarterly principal payments of $1.5 million plus interest
charges beginning June 30, 1997 and continuing until termination of the loan in
June 2001.
Other Secured Debt: As of December 31, 1998, the Company had $13.1 million in
other secured debt, bearing interest from 5.35% to 5.55%, with payments due
monthly in advance, beginning December 31, 1998 and ending November 30, 2005.
The debt is secured by certain trailer equipment and allows the Company to buy
the equipment at a fixed price at the end of the loan. The Company intends to
use this type of debt for the purchase of new trailers in the future.
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 securitized debt. As of December 31, 1998, the swap agreements had a
weighted-average duration of 1.28 years, corresponding to the terms of the
related debt. As of December 31, 1998, a notional amount of $99.0 million of
interest-rate swap agreements effectively fixed interest rates at an average of
6.59% on such obligations. For 1998, interest expense increased by $0.4 million
due to these arrangements.
<PAGE>
Trailer leasing:
The Company operates 16 trailer rental facilities that engage in short-term and
mid-term operating leases. Equipment operated in these facilities consists of
refrigerated trailers used to transport temperature-sensitive food products and
dry van trailers leased to a variety of customers. The Company opened six of
these rental yards in 1998 and intends to open additional rental yard facilities
in the future. The Company is selling certain of its older trailers and is
replacing them with new or late-model refrigerated trailers. The new trailers
will be placed in existing rental facilities or in new yards. During 1998, the
Company purchased $34.1 million of primarily refrigerated trailers and sold
refrigerated and dry van trailers with a net book value of $2.1 million for
proceeds of $2.2 million.
Commercial and industrial equipment leasing and financing:
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
securitization facility. AFG also originates loans in which it takes a security
interest in the assets financed. During 1998, the Company funded lease and loan
transactions for commercial and industrial equipment with an original equipment
cost of $176.0 million. During 1998, the Company sold commercial and industrial
equipment with a net book value of $89.3 million for proceeds of $92.5 million.
The majority of these transactions was financed, on an interim basis, through
the Company's warehouse credit facility.
Some equipment subject to leases is sold to institutional programs for which the
Company is the servicer. Acquisition and management fees are received for the
sale and subsequent servicing of these leases. The Company does not believe it
will be selling assets in the future to the institutional programs. It will,
however, continue to manage the existing portfolios for these programs.
As of December 31, 1998, the Company had committed to purchase $40.5 million of
equipment for its commercial and industrial lease and finance receivables
portfolio, to be held by the Company or sold to the institutional programs or to
other third parties, of which $8.7 million had been received by lessees and
accrued for as of December 31, 1998.
From January 1, 1999 through March 9, 1999, the Company funded $8.1 million of
commitments outstanding as of December 31, 1998 for its commercial and
industrial lease and finance receivables portfolio.
As of March 9, 1999, the Company had committed to purchase $51.7 million of
equipment for its commercial and industrial lease and finance receivables
portfolio.
In March 1998, the Company announced that its Board of Directors had authorized
management to engage investment bankers for the purpose of undertaking an
initial public offering of common stock for AFG. On May 7, 1998, AFG filed a
registration statement with the SEC for the initial public offering. On October
15, 1998, AFG filed an amended registration statement with the SEC for the
initial public offering.
On January 11, 1999, the Company announced that its Board of Directors had
engaged an investment banking firm to explore strategic alternatives for AFG.
The Company does not intend to withdraw the current registration statement on
file with the SEC at the present time, pending the results of the review.
Other transportation equipment leasing and other:
During 1998, the Company generated proceeds of $6.4 million from the sale of an
aircraft engine, a 20% interest in a commuter aircraft, intermodal trailers, and
railcars sold to unaffiliated third parties. 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 1998, the Company generated proceeds of $23.0 million from the sale of
assets sold to affiliated programs at cost, which approximated their fair market
value.
Management believes that, through debt and equity financing, possible sales of
equipment, proceeds from the initial public offering or sale of AFG, and cash
flows from operations, the Company will have sufficient liquidity and capital
resources to meet its projected future operating needs.
<PAGE>
Stock repurchase program:
In December 1998, the Company announced that its Board of Directors had
authorized the repurchase of up to $5.0 million of the Company's common stock.
As of March 9, 1999, 103,300 shares had been repurchased under this plan for a
total of $0.6 million.
Effects of the Year 2000
It is possible that the Company's currently installed computer systems, software
products, and other business systems, or those of the Company's vendors, service
providers, and customers, working either alone or in conjunction with other
software or systems, may not accept input of, store, manipulate, and output
dates on or after January 1, 2000 without error or interruption, a possibility
commonly known as the "Year 2000" or "Y2K" problem.
The Company has established a special Year 2000 oversight committee to review
the impact of Year 2000 issues on its software products and other business
systems in order to determine whether such systems will retain functionality
after December 31, 1999. The Company (a) is currently integrating Year
2000-compliant programming code into its existing internally customized and
internally developed transaction processing software systems and (b) the
Company's accounting and asset management software systems have either already
been made Year 2000 compliant or Year 2000-compliant upgrades of such systems
are planned to be implemented by PLMI before the end of fiscal 1999. The Company
believes that its Year 2000 compliance program can be completed by the end of
1999. As of December 31, 1998, the Company has spent approximately $0.1 million
to become Year 2000 compliant. The Company expects to spend an additional $0.1
million in order to become Year 2000-compliant.
It is possible that certain of the Company's equipment lease portfolio may not
be Year 2000 compliant. The Company is currently contacting equipment
manufacturers of the Company's leased equipment portfolio to assure Year 2000
compliance or to develop remediation strategies. The Company does not expect
that non-Year 2000 compliance of its leased equipment portfolio will have an
adverse material impact on its financial statements.
Some risks associated with the Year 2000 problem are beyond the ability of the
Company to control, including the extent to which third parties can address the
Year 2000 problem. The Company is communicating with vendors, services
providers, and customers in order to assess the Year 2000 compliance readiness
of such parties and the extent to which the Company is vulnerable to any
third-party Year 2000 issues. There can be no assurance that the software
systems of such parties will be converted or made Year 2000 compliant in a
timely manner. Any failure by such other parties to make their respective
systems Year 2000 compliant could have a material adverse effect on the
business, financial position, and results of operations of the Company. The
Company will make an ongoing effort to recognize and evaluate potential exposure
relating to third-party Year 2000 noncompliance, and will develop a contingency
plan if the Company determines that third-party noncompliance would have a
material adverse effect on the Company's business, financial position or results
of operation.
The Company is currently developing a contingency plan to address the possible
failure of any systems due to the Year 2000 problems. The Company anticipates
these plans will be completed by September 30, 1999.
Inflation
There was no material impact on the Company's operations as a result of
inflation during 1998, 1997, or 1996.
Geographic Information
For geographic information, refer to Note 19 to the consolidated financial
statements.
Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which standardizes the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, by requiring that an entity recognize those items as assets or
liabilities in the statement of financial position and measure them at fair
value. This statement is effective for all quarters of fiscal years beginning
after June 15, 1999. As of December 31, 1998, the Company is reviewing the
effect this standard will have on the Company's consolidated financial
statements.
<PAGE>
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
which requires costs related to start-up activities to be expensed as incurred.
The statement requires that initial application be reported as a cumulative
effect of a change in accounting principle. Upon adoption of this statement in
1999, the Company will take a pretax charge related to start-up costs of one of
its subsidiaries of $0.4 million. The Company is continuing to review this
statement for any other impact it may have on the Company's consolidated
financial statements.
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. Over the past few years, the Company has exited certain equipment
markets by selling or disposing of underperforming assets from its owned
transportation equipment portfolio. The Company's transportation equipment
currently consists mainly of refrigerated and dry van trailers. The Company does
not anticipate continued substantial reductions in its owned equipment portfolio
in 1999 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 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.
On January 11, 1999, the Company announced that its Board of Directors had
engaged an investment banking firm to explore strategic alternatives for AFG.
The Company does not intend to withdraw the current registration statement on
file with the SEC at the present time, pending the results of the review.
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 continues to monitor costs and expenses for potential reductions in
all areas.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is that of interest rate risk. A
change in the U.S. prime interest rate, LIBOR rate, or lender's cost of funds
based on commercial paper market rates, would affect the rate at which the
Company could borrow funds under its various borrowing facilities. Increases in
interest rates to the Company, which may cause the Company to raise the implicit
rates charged to its customers, could in turn, result in a reduction in demand
for the Company's lease financing. The Company's warehouse credit facilities and
senior secured notes are variable rate debt. The Company estimates a one percent
increase or decrease in the Company's variable rate debt would result in an
increase or decrease, respectively, in interest expense of $0.4 million in 1999,
$0.2 million in 2000, $0.1 million in 2001, and $18,000 in 2002. The Company
estimates a two percent increase or decrease in the Company's variable rate debt
would result in an increase or decrease, respectively, in interest expense of
$0.8 million in 1999, $0.3 million in 2000, $0.2 million in 2001, and $35,000 in
2002.
The Company hedges borrowings under the nonrecourse securitization facility,
effectively fixing the rate of these borrowings. The Company is currently
required to hedge against the risk of interest rate increases for those leases
used as collateral for its nonrecourse securitization facility, but the Company
generally does not enter into hedges for leases designated for sale to
institutional programs, or for syndication, or for leases of transportation
equipment. Such hedging activities may limit the Company's ability to
participate in the benefits of any decrease in interest rates with respect to
the hedged portfolio of leases, but may also protect the Company from increases
in interest rates for the hedged portfolio. All of the Company's other financial
assets and liabilities are at fixed rates.
<PAGE>
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.
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 the Last Quarter of 1998
December 14, 1998 - Announcement regarding the election of Warren G.
Lichtenstein as a Class III director of the Board of Directors of the Company.
(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.
<PAGE>
10.3 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.
10.4 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.
10.5 Directors' 1995 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
15, 1995.
10.6 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.
10.7 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.
10.8 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.
10.9 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.
10.10 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.
10.11 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.
10.12 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.
10.13 First Amendment to Restated Warehousing Credit Agreement
among American Finance Group, Inc., First Union National Bank
of North Carolina, and Bank of Montreal, dated as of June 1,
1998, incorporated by reference to the Company's Form 10-Q
filed with the Securities and Exchange Commission on July 22,
1998.
10.14 Second Amendment to Restated Warehousing Credit Agreement
among American Finance Group, Inc., First Union National
Bank, and Bank of Montreal, dated as of June 8, 1998,
incorporated by reference to the Company's Form 10-Q filed
with the Securities and Exchange Commission on July 22, 1998.
10.15 1998 Management Stock Compensation Plan, dated May 12, 1998,
incorporated by reference to the Company's Form 10-Q filed
with the Securities and Exchange Commission on July 22, 1998.
10.16 $5.0 million Promissory Note, dated July 15, 1998, executed
by PLM International, Inc. in favor of First Union National
Bank, incorporated by reference to the Company's Form 10-Q
filed with the Securities and Exchange Commission on July 22,
1998.
<PAGE>
10.17 Amendment No. 4 to Pooling and Servicing Agreement and
Indenture of Trust, dated April 14, 1998, incorporated by
reference to the Company's Form 10-Q filed with the
Securities and Exchange Commission on October 27, 1998.
10.18 Master Amendment to Floating Rate Senior Secured Notes
Agreement, dated September 22, 1998, incorporated by
reference to the Company's Form 10-Q filed with the
Securities and Exchange Commission on October 27, 1998.
10.19 Commitment Letter from First Union National Bank extending
the $125.0 million nonrecourse securitization facility
through October 12, 1999, dated October 13, 1998,
incorporated by reference to the Company's Form 10-Q filed
with the Securities and Exchange Commission on October 27,
1998.
10.20 Third Amended and Restated Warehousing Credit Agreement among
TEC Acquisub, Inc., the Lenders, and First Union National
Bank, dated December 15, 1998.
10.21 Fourth Amended and Restated Warehousing Credit Agreement
among PLM Equipment Growth Fund VI, PLM Equipment Growth &
Income Fund VII, Professional Lease Management Income Fund I,
LLC, PLM Financial Services, Inc., the Lenders, and First
Union National Bank, dated December 15, 1998.
10.22 Master Lease Agreement among PLM International, Inc. and
Norwest Equipment Finance, Inc., dated December 28, 1998.
10.23 Master Lease Agreement among PLM International, Inc. and U.S.
Bancorp Leasing & Financial, dated December 11, 1998.
10.24 Warehousing Credit Agreement among American Finance Group,
Inc., the Lenders, and First Union National Bank, dated
December 15, 1998.
10.25 Amendment No. 1 to Series 1997-1 Supplemental Indenture among
AFG Credit Corporation, American Finance Group, Inc., and
First Union Capital Markets, dated December 9, 1998.
10.26 Amendment No. 2 to Note Purchase Agreement among Variable
Funding Capital Corporation, First Union Capital Markets, and
AFG Credit Corporation, dated December 9, 1998.
10.27 $1,813,449 Note Payable and Security Agreement among American
Finance Group, Inc. and Transamerica Business Credit
Corporation, dated July 28, 1998.
10.28 $1,118,010 Promissory Note, Pledge, and Security Agreement
among American Finance Group, Inc. and General Electric
Capital Corporation, dated June 30, 1998.
10.29 $6,579,350 Term Notes and Loan and Security Agreements among
American Finance Group, Inc. and Varilease Corporation, dated
March 27, 1998.
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: March 9, 1999 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.
* Director, Senior March 9, 1999
--------------------------------------------- Vice President
Douglas P. Goodrich
* Director March 9, 1999
---------------------------------------------
Robert L. Witt
* Director March 9, 1999
---------------------------------------------
Randall L.-W. Caudill
* Director March 9, 1999
---------------------------------------------
Harold R. Somerset
* Director March 9, 1999
---------------------------------------------
Howard M. Lorber
* Director March 9, 1999
---------------------------------------------
Warren G. Lichtenstein
* 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 33
Consolidated Statements of Income for Years Ended
December 31, 1998, 1997, and 1996 34
Consolidated Balance Sheets as of December 31, 1998 and 1997 35
Consolidated Statements of Changes in Shareholders' Equity
and Comprehensive Income for Years Ended December 31,
1998, 1997, and 1996 36
Consolidated Statements of Cash Flows for Years
Ended December 31, 1998, 1997, and 1996 37-38
Notes to Consolidated Financial Statements 39-62
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 (the Company), 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
/S/ KPMG LLP
- -----------------------
SAN FRANCISCO, CALIFORNIA
MARCH 9, 1999
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------
<S> <C> <C> <C>
Revenues
Operating lease income (Note 6) $ 19,947 $ 15,777 $ 18,180
Finance lease income (Note 2) 12,529 8,685 4,186
Management fees (Note 1) 10,203 11,275 10,971
Partnership interests and other fees (Note 1) 917 1,306 3,811
Acquisition and lease negotiation fees (Note 1) 3,974 3,184 6,610
Aircraft brokerage and services 1,090 2,466 2,903
Gain on the sale or disposition of assets, net 4,693 3,720 2,282
Other 3,725 3,252 2,602
----------------------------------------------
Total revenues 57,078 49,665 51,545
----------------------------------------------
Costs and expenses
Operations support (Notes 13 and 16) 17,571 16,633 21,595
Depreciation and amortization (Note 1) 11,833 8,447 11,318
General and administrative (Notes 13 and 16) 7,086 9,472 7,956
----------------------------------------------
Total costs and expenses 36,490 34,552 40,869
----------------------------------------------
Operating income 20,588 15,113 10,676
Interest expense (Notes 9, 10 and 11) (14,608 ) (9,891 ) (7,341 )
Interest income 1,446 1,635 1,228
Other income (expenses), net 473 (342 ) (670 )
----------------------------------------------
Income before income taxes 7,899 6,515 3,893
Provision for (benefit from) income taxes (Note 12) 3,042 1,848 (202 )
----------------------------------------------
Net income to common shares $ 4,857 $ 4,667 $ 4,095
==============================================
Basic earnings per weighted-average common share
outstanding $ 0.58 $ 0.51 $ 0.41
==============================================
Diluted earnings per weighted-average common
share outstanding $ 0.57 $ 0.50 $ 0.40
==============================================
</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>
1998 1997
-------------------------------
<S> <C> <C>
Cash and cash equivalents $ 8,786 $ 5,224
Receivables (net of allowance for doubtful accounts of $0.4 million and
$0.6 million as of December 31, 1998 and 1997, respectively) 7,282 4,969
Receivables from affiliates (Note 4) 2,944 5,007
Investment in direct finance leases, net (Note 2) 145,088 119,613
Loans receivable (Note 3) 23,493 5,861
Equity interest in affiliates (Note 4) 22,588 26,442
Transportation equipment held for operating leases (Note 6) 63,044 50,252
Less accumulated depreciation (15,516 ) (26,981 )
------------------------------
47,528 23,271
Commercial and industrial equipment held for operating leases (Note 6) 24,520 23,268
Less accumulated depreciation (7,831 ) (4,816 )
------------------------------
16,689 18,452
Restricted cash and cash equivalents (Note 7) 10,349 18,278
Other, net (Note 8) 7,322 9,166
==============================
Total assets $ 292,069 $ 236,283
==============================
LIABILITIES, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Liabilities
Warehouse credit facilities (Note 9) $ 34,420 $ 23,040
Senior secured notes (Note 10) 28,199 23,843
Senior secured loan (Note 10) 14,706 20,588
Other secured debt (Note 10) 13,142 413
Nonrecourse securitized debt (Note 11) 111,222 81,302
Payables and other liabilities 21,768 25,366
Deferred income taxes (Note 18,415 14,860
12)
------------------------------
Total liabilities 241,872 189,412
Commitments and contingencies (Note 13)
Minority interest -- 323
Shareholders' equity (Note 14)
Common stock ($0.01 par value, 50.0 million shares
authorized, and 8,159,919 and 8,393,362 shares
issued and outstanding as of December 31, 1998
and 1997, respectively) 112 112
Paid-in capital, in excess of par 74,947 74,650
Treasury stock (3,875,836 and 3,641,485 shares at
respective dates) (15,072 ) (13,435 )
Accumulated deficit (9,790 ) (14,647 )
Accumulated other comprehensive loss -- (132 )
------------------------------
Total shareholders' equity 50,197 46,548
==============================
Total liabilities, minority interest, and shareholders' equity $ 292,069 $ 236,283
==============================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
PLM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Years Ended December 31, 1998, 1997, and 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
Common Stock Accumulated
------------------------------------------ Deficit &
Paid-in Accumulated
Capital in Other Total
At Excess Treasury Comprehensive Comprehensive Shareholders'
Par of Par Stock Income Income Equity
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995 $ 117 $ 77,743 $ (5,931 ) $ (23,309 ) $ 48,620
Comprehensive income:
Net income 4,095 $ 4,095 4,095
Other comprehensive income:
Foreign currency translation
income 21 21 21
-------------
Total comprehensive income 4,116
=============
Common stock repurchases (6,451 ) (6,451 )
Exercise of stock options 35 35
- ---------------------------------------------------------------------------------------------------- ----------------
Balances, December 31, 1996 117 77,778 (12,382 ) (19,193 ) 46,320
Comprehensive income:
Net income 4,667 4,667 4,667
Other comprehensive loss:
Foreign currency translation loss (123 ) (123 ) (123 )
=============
Total comprehensive income 4,544
=============
Common stock repurchases (5 ) (3,128 ) (1,268 ) (4,401 )
Reissuance of treasury stock, net 215 (38 ) 177
Redemption of shareholder rights (92 ) (92 )
- ---------------------------------------------------------------------------------------------------- ----------------
Balances, December 31, 1997 112 74,650 (13,435 ) (14,779 ) 46,548
Comprehensive income:
Net income 4,857 4,857 4,857
Other comprehensive income:
Foreign currency translation
income 132 132 132
-------------
Total comprehensive income $ 4,989
=============
Exercise of stock options 218 211 429
Common stock repurchases (2,059 ) (2,059 )
Reissuance of treasury stock, net 79 211 290
=========================================================== ================
Balances, December 31, 1998 $ 112 $ 74,947 $ (15,072 ) $ (9,790 ) $ 50,197
=========================================================== ================
</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>
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 4,857 $ 4,667 $ 4,095
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,833 8,447 11,318
Foreign currency translation (80) (123) 21
Deferred income tax expense (benefit) 3,464 (474) (141)
Gain on the sale or disposition of assets, net (4,693) (3,720) (2,282)
Loss on sale of investment in subsidiary 245 -- --
Undistributed residual value interests 1,057 1,052 (846)
Minority interest in net loss of subsidiaries (100) (39) (1)
(Decrease) increase in payables and other liabilities (1,435) 3,459 2,881
(Increase) decrease in receivables and receivables from
affiliates (32) 1,516 4,001
Amortization of organization and offering costs 2,839 2,913 2,977
(Increase) decrease in other assets (85) 474 151
------------------------------------------------
Net cash provided by operating activities 17,870 18,172 22,174
------------------------------------------------
Investing activities
Additional investments in affiliates -- -- (4,972)
Principal payments received on finance leases 32,202 17,705 5,746
Principal payments received on loans 5,272 2,020 --
Investment in direct finance leases (129,140) (103,592) (99,113)
Investment in loans receivable (22,904) (2,163) (5,718)
Purchase of property, plant, and equipment (339) (839) (573)
Purchase of transportation equipment and capital improvements (58,916) (33,725) (7,464)
Purchase of commercial and industrial equipment held
for operating lease (23,989) (18,915) (46,660)
Proceeds from the sale of transportation equipment held for lease 6,230 12,318 17,409
Proceeds from the sale of assets held for sale 25,328 25,857 2,052
Proceeds from the sale of commercial and industrial equipment 92,498 56,481 51,891
Sale of investment in subsidiary 176 -- 372
Decrease (increase) in restricted cash and cash equivalents 7,929 (450) (7,207)
------------------------------------------------
Net cash used in investing activities (65,653) (45,303) (94,237)
------------------------------------------------
</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>
1998 1997 1996
------------------------------------------------
<S> <C> <C> <C>
Financing activities
Borrowings of warehouse credit facilities $ 151,726 $ 106,547 $ 109,254
Repayment of warehouse credit facilities (140,346 ) (114,473 ) (78,288 )
Borrowings of senior secured notes 10,000 9,000 18,000
Repayment of senior secured notes (5,644 ) (3,157 ) (10,000 )
Repayment of senior secured loan (5,882 ) (4,412 ) --
Borrowings of other secured debt 13,471 -- 90
Repayment of other secured debt (270 ) (205 ) (595 )
Borrowings of nonrecourse securitized debt 74,487 121,716 56,024
Repayment of nonrecourse securitized debt (44,567 ) (85,806 ) (10,632 )
Repayment of subordinated debt -- -- (11,500 )
Purchase of stock (2,059 ) (4,401 ) (6,451 )
Redemption of shareholder rights -- (92 ) --
Proceeds from exercise of stock options 429 -- 35
-------------------------------------------------
Net cash provided by financing activities 51,345 24,717 65,937
-------------------------------------------------
Net increase (decrease) in cash and cash equivalents 3,562 (2,414 ) (6,126 )
Cash and cash equivalents at beginning of year 5,224 7,638 13,764
=================================================
Cash and cash equivalents at end of year $ 8,786 $ 5,224 $ 7,638
=================================================
Supplemental information
Net cash paid for interest $ 14,054 $ 9,395 $ 6,516
=================================================
Net cash paid for income taxes $ 1,656 $ 1,119 $ 1,292
=================================================
</TABLE>
See accompanying notes to these consolidated
financial statements.
<PAGE>
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, 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
specializing in the leasing of transportation and commercial and industrial
equipment. The Company specializes in creating equipment leasing solutions for
domestic and international customers.
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, including trailers,
point-of-sale, computer, communications, manufacturing, and materials-handling
equipment. Equipment held for operating lease includes transportation equipment
and commercial and industrial equipment, which are depreciated over their
estimated useful life. Rental payments are recorded as revenue over the lease
term as earned.
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, including third-party guaranteed residuals, plus
the unguaranteed residual value of the equipment, less unearned income. Rental
payments, including principal and interest on the lease, reduce the investment
in the finance lease, and the interest is recorded as revenue over the lease
term.
Prior to 1998, the Company expensed initial direct lease origination costs as
incurred since they were not material. Under generally accepted accounting
principles, initial direct costs, if material, should be capitalized. Because
the Company's portfolio of equipment on lease continues to grow, the resulting
initial direct lease origination costs have become material. Effective January
1, 1998, the Company now capitalizes these costs. During 1998, the Company
capitalized $0.6 million of these costs, of which $0.2 million had been
amortized as of December 31, 1998. Amounts capitalized related to direct finance
leases are included in the net investment in finance leases and are amortized
using the effective interest method. Amounts capitalized related to operating
leases are included in other assets and are amortized straight line over the
lease term.
Equipment
Transportation equipment held for operating lease 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 the equipment's estimated salvage
value, utilizing the following estimated useful lives in years: trailers,
primarily 10 to 12; commercial and industrial equipment, 1 to 7; aircraft, 8 to
20; marine containers, 10 to 15; and storage equipment, 15. Salvage values for
transportation equipment are generally 20% 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 of
Financial Accounts Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company
reviews the carrying value of its equipment quarterly in relation to expected
future market conditions for the purpose of assessing recoverability of the
recorded amounts. In addition, from time-to-time the Company utilizes
third-party appraisals to estimate the fair value of its residual values,
comparing the aggregate carrying value for each equipment type to the aggregate
appraisal value in order to assess potential impairment. If projected
undiscounted future
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equipment (continued)
lease revenues plus residual values are lower than the carrying value of the
equipment, the loss on revaluation is recorded as either a net reduction in the
gain on the sale or disposition of assets or as a reduction to finance lease
income (if the assets were on finance lease). Total reductions were $0.2 million
in 1998, $0.2 million in 1997, and $0.7 million in 1996.
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. Repair and
maintenance expenses were $2.7 million, $2.7 million, and $3.0 million for 1998,
1997, and 1996, respectively.
Investment in and Management of Equipment Growth Funds, Other Limited
Partnerships, and Private Placement Programs
The Company earns revenues in connection with the management of limited
partnerships and private placement programs. Equipment acquisition and lease
negotiation fees are generally earned through the purchase and initial lease 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, in 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 programs' 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 partnerships' 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. Special distributions
received by the Company resulting from the sale of equipment 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.
The Company is entitled to reimbursement for providing certain administrative
services.
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. 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.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 negotiation of leases for
equipment, or the placement of debt. 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 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. Special distributions resulting from the sale of equipment 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.
Institutional Programs
The Company earns revenues in connection with lease originations and servicing
equipment leases for institutional programs. Acquisition fees are generally
earned through the purchase and initial lease 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 servicing the equipment portfolios
and leases as provided for in various agreements, and are recognized as revenue
over time as they are earned.
Residual Interests
The Company has residual interests in equipment owned by the managed programs,
which are recorded as equity interest in affiliates. As required by FASB
Technical Bulletin 1986-2, the discount on the Company's residual value
interests in the equipment owned by the managed programs is not accreted over
the holding period. Residual interests in equipment on finance leases are
included in investment in direct finance leases, net. The Company reviews the
carrying value of its residual interests quarterly in relation to expected
future market values for the equipment in which it holds residual interests for
the purpose of assessing recoverability of recorded amounts.
Transfer of Direct Finance Leases, Loans, and Operating Leases
On January 1, 1997, the Company adopted FASB SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities."
SFAS No. 125 provides guidelines for distinguishing between transfers of
financial assets that are sales and transfers that are secured borrowings. The
Company's transfers of direct finance leases and loans to the securitization
facility are accounted for as financings under SFAS No. 125.
Transfers of equipment to a securitization facility, subject to operating leases
in which the Company retains substantial risk of ownership, are not treated as
sales, in accordance with the provisions of FASB SFAS No. 13, "Accounting for
Leases," and are also accounted for as financings. Transfer of equipment to
institutional programs and third parties, subject to operating leases in which
the Company retains no risk of ownership, are treated as sales, with gain or
loss on sale recognized in the period title passes.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings Per Weighted-Average Common Share
Basic earnings per common share are computed by dividing net income to common
shares by the weighted-average number of shares outstanding during the period.
The computation of diluted earnings per share is similar to the computation of
basic earnings per share, except for the inclusion of all potentially dilutive
common shares. Basic and diluted earnings per share are presented below for the
years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------
(in thousands of dollars, except per share data)
<S> <C> <C> <C>
Basic:
Net income $ 4,857 $ 4,667 $ 4,095
Shares:
Weighted-average number of common shares outstanding 8,325 9,081 10,032
Basic earnings per common share $ 0.58 $ 0.51 $ 0.41
===============================================
Diluted:
Net income $ 4,857 $ 4,667 $ 4,095
Shares:
Weighted-average number of common shares outstanding 8,325 9,081 10,032
Potentially dilutive common shares 155 196 168
-----------------------------------------------
Total shares 8,480 9,277 10,200
Diluted earnings per weighted-average common share $ 0.57 $ 0.50 $ 0.40
===============================================
</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 accruals for
financial statement and income tax reporting purposes.
Intangibles
Intangibles consist primarily of goodwill related to acquisitions, loan fees,
software, and lease origination costs. They are shown as the lower of net
amortized cost or fair value and are included on the balance sheet in other
assets, net. Goodwill is amortized over eight years from the acquisition date.
The Company annually reviews the valuation of goodwill based on projected
undiscounted future cash flows. Loan fees are amortized over the life of the
related loan. Software is amortized over three years from the acquisition date.
Lease origination costs are amortized over the life of the related lease.
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.
Comprehensive Income
As of the first quarter of 1998, the Company adopted Financial Accounting
Standards Board SFAS No. 130, "Reporting Comprehensive Income," which requires
enterprises to report, by major component and in total, all changes in equity
from nonowner sources. The Company discloses the foreign currency translation
gain (loss) as a component of comprehensive income on a gross basis, because it
relates to a foreign investment permanently reinvested outside of the United
States.
Reclassifications
Certain prior-year amounts have been reclassified in order to conform to the
current year's presentation.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Interest-Rate Swap Agreements
The Company has entered into interest-rate swap agreements to hedge its
interest-rate exposure on its nonrecourse securitization facility. The terms of
the swap agreements correspond to the hedged debt. The differential to be paid
or received under a swap agreement is charged or credited to interest expense.
2. FINANCING TRANSACTION ACTIVITIES
American Finance Group, Inc. (AFG), a wholly-owned subsidiary of the Company,
originates and manages lease and loan transactions on primarily new commercial
and industrial equipment that is financed by nonrecourse securitized debt for
the Company's own account, or for sale to institutional programs or other
unaffiliated investors. The Company uses one of its warehouse credit facilities
to finance the acquisition of the assets, subject to leases, prior to sale or
permanent financing by nonrecourse securitized debt. The majority of these
transactions are accounted for as direct finance leases, while some transactions
qualify as operating leases or loans.
During 1998, the Company funded $129.1 million in equipment that was placed on
finance lease. Also during 1998, the Company sold equipment on finance lease
with an original cost of $56.0 million, resulting in net gains of $1.5 million.
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.
The table below shows the types of owned commercial and industrial equipment
subject to finance leases, the original cost, and the percentage each type
represents in the equipment portfolio, as of December 31 (in thousands of
dollars):
<TABLE>
<CAPTION>
1998 1997
------------------------------------------------
<S> <C> <C> <C> <C>
Computers and peripherals $ 61,954 33% $ 59,934 44%
Materials handling 45,282 24 29,410 21
Manufacturing 31,252 17 7,160 5
Point of sale 22,262 12 23,111 17
General purpose plant and warehouse 9,187 5 3,221 2
Communications 4,488 2 6,495 5
Construction and mining 4,491 2 3,329 2
Other 9,997 5 4,814 4
===============================================
Total $ 188,913 100% $ 137,474 100%
===============================================
</TABLE>
The following table lists the components of the investment in direct finance
leases, net, as of December 31 (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Minimum lease payments receivable $ 147,246 $ 122,508
Estimated unguaranteed residual values
of leased properties 24,782 20,328
Initial direct lease origination costs, net 435 --
------------- -------------
172,463 142,836
Less unearned income (27,375 ) (23,223 )
------------- =============
Investment in direct finance leases, net $ 145,088 $ 119,613
============= =============
</TABLE>
2. FINANCING TRANSACTION ACTIVITIES (continued)
The schedule of the minimum future lease revenues is projected as follows (in
thousands of dollars):
$ 46,516
1999
39,536
2000
27,151
2001
16,943
2002
12,697
2003
Thereafter 4,403
================
Total minimum lease payments receivable $ 147,246
================
3. LOANS RECEIVABLE
As of December 31, 1998, the Company had loans receivable outstanding with 12
customers, totaling $23.5 million and with interest rates ranging from 6.23% to
10.81%, all secured by commercial and industrial equipment. As of December 31,
1997, the Company had loans receivable outstanding with three customers,
totaling $5.9 million and with interest rates ranging from 8.7% to 10.81%, all
secured by commercial and industrial equipment. Future payments receivable on
the notes as of December 31, 1998 are as follows (in thousands of dollars):
1999 $ 7,179
2000 4,786
2001 4,123
2002 6,490
2003 848
Thereafter 67
=============
Total loans receivable $ 23,493
=============
4. EQUITY INTEREST IN AFFILIATES
FSI, a wholly-owned subsidiary of the Company, is the general partner in 10
limited partnerships. Net earnings and distributions of the partnerships are
generally allocated as follows: 99% to the limited partners and 1% to the
general partner in PLM Equipment Growth Fund (EGF I); 95% to the limited
partners and 5% to the general partner in EGFs II, III, IV, V, VI, and PLM
Equipment Growth & Income Fund VII (EGF VII); and 85% to the limited partners
and 15% to the general partner in Professional Lease Management Income Fund I
(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 summarized combined financial data for FSI's affiliates as of and for the
years ended December 31, reflecting straight-line depreciation, are as follows
(in thousands of dollars, unaudited):
<TABLE>
<CAPTION>
1998 1997
-----------------------------
<S> <C> <C>
Financial position:
Cash and other assets $ 31,927 $ 87,205
Transportation equipment and other assets,
net of accumulated depreciation of $177,859
in 1998 and $186,295 in 1997 569,495 585,762
-----------------------------
Total assets 601,422 672,967
Less liabilities, primarily long-term financings 154,603 196,464
=============================
Partners' equity $ 446,819 $ 476,503
=============================
PLM International's share thereof, recorded as equity interest in affiliates:
Equity interest $ 11,781 $ 14,578
Estimated residual value interests in equipment 10,807 11,864
=============================
Equity interest in affiliates $ 22,588 $ 26,442
=============================
</TABLE>
<PAGE>
4. EQUITY INTEREST IN AFFILIATES (continued)
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Operating results:
Revenue from equipment leases and other $ 142,705 $ 184,940 $ 198,226
Equipment depreciation (64,033 ) (54,634 ) (52,653 )
Other costs and expenses (47,513 ) (69,795 ) (60,768 )
Reduction in carrying value of certain assets (4,276 ) -- --
================================================
Net income before provision for income taxes $ 26,883 $ 60,511 $ 84,805
================================================
PLM International's share of partnership interests
and other fees (net of related expenses) $ 917 $ 1,306 $ 3,811
================================================
Distributions received $ 4,883 $ 5,818 $ 5,565
================================================
</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, 1998 and 1997, the Company had no assets held for sale.
During 1998, the Company purchased railcars for $4.8 million, portable heaters
for $3.0 million, and an entity that owns a marine vessel for $17.0 million.
Railcars with a cost of $1.8 million were sold to an unaffiliated third party
for a net gain of $0.5 million. Railcars with a cost of $3.0 million were sold
to affiliated programs at cost, which approximated fair market value. The
portable heaters and the entity that owns a marine vessel were sold to
affiliated programs at cost, which approximated fair market value. During 1997,
the Company purchased two commercial aircraft for $5.0 million, 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. The two commercial aircraft were sold in
1997 to an unaffiliated third party for a net gain of $0.8 million. The mobile
offshore drilling unit and the 47.5% interest in an entity that owns a marine
vessel were sold to affiliated programs at cost, which approximated fair market
value.
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 1998, the Company realized $0.5 million of gains from
the sale of 27 railcars to an unaffiliated third party. These railcars were
purchased in 1998 as part of a group of assets that had been allocated between
the Company and Fund I. 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.
6. EQUIPMENT HELD FOR OPERATING LEASES
As of December 31, 1998, transportation equipment held for operating leases
consisted of refrigerated and dry van trailers.
During 1998, the Company purchased trailers for $34.1 million and sold trailers
with a net book value of $4.8 million for $5.1 million. During 1997, the Company
purchased trailers for $9.1 million and sold trailers with a net book value of
$1.5 million for $1.5 million. As of December 31, 1998, the Company had
committed all of its trailer equipment to rental yard operations.
<PAGE>
6. EQUIPMENT HELD FOR OPERATING LEASES (continued)
The table below shows the types of owned commercial and industrial equipment
held for operating leases at original cost, and the percentages that each type
represents in the equipment portfolio as of December 31 (in thousands of
dollars):
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------
<S> <C> <C> <C> <C>
Materials handling $ 9,246 38% $ 6,350 27%
Point of sale 5,166 21 2,832 12
Communications 2,721 11 2,314 10
Construction and mining 2,365 10 701 3
Computers and peripherals 1,665 7 2,219 10
Medical 1,033 4 1,010 4
Manufacturing 254 1 6,735 29
Other 2,070 8 1,107 5
------------------------------------------------
24,520 100% 23,268 100%
Less accumulated depreciation (7,831) (4,816)
------------------------------------------------
Net commercial and industrial equipment
held for operating leases $ 16,689 $ 18,452
================================================
</TABLE>
During 1998, the Company funded $24.0 million in commercial and industrial
equipment, which was placed on operating lease. During 1998, the Company sold
commercial and industrial equipment that was on operating lease, for a net gain
of $1.7 million. 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. Future
minimum rentals receivable for commercial and industrial equipment under
noncancelable leases as of December 31, 1998 are approximately $5.1 million in
1999, $3.7 million in 2000, $2.0 million in 2001, $0.8 million in 2002, $0.3
million in 2003, and $2,000 thereafter.
In 1998, the Company sold an aircraft engine and its 20% interest in a commuter
aircraft, with a combined net book value of $0.4 million, for $1.1 million.
Other transportation equipment was sold for net gains of $1.1 million during
1997.
Per diem and short-term rentals consisting of utilization rate lease payments
included in revenue amounted to approximately $10.1 million in 1998, $8.5
million in 1997, and $9.3 million in 1996.
7. RESTRICTED CASH
Restricted cash consists of bank accounts and short-term investments that are
primarily subject to withdrawal restrictions as per 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 10). The
Company's senior notes require virtually all management fees, acquisition and
lease negotiation fees, data processing fees, and 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 10). 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 11).
<PAGE>
8. OTHER ASSETS, NET
Other assets, net consists of the following as of December 31 (in thousands of
dollars):
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Intangibles, net of accumulated amortization of $1,028 and $685
in 1998 and 1997, respectively $ 1,713 $ 2,055
Prepaid expenses, deposits, and other 1,372 742
Cash surrender value of officers' life insurance policies 1,369 1,075
Furniture, fixtures, and equipment, net of accumulated
depreciation of $2,819 and $4,316 in 1998 and 1997, respectively 1,038 1,992
Loan fees, net of accumulated amortization of $1,575 and $1,225
in 1998 and 1997, respectively 958 1,186
Software, net of accumulated amortization of $415 and $550 as of
1998 and 1997, respectively 533 650
Investments 339 371
Spare parts inventory -- 1,095
---------------------------
Total other assets, net $ 7,322 $ 9,166
===========================
</TABLE>
Prepaid expenses, deposits, and other as of December 31, 1998 included $0.7
million related to the proposed initial public offering (IPO) of the Company's
AFG subsidiary. If the Company does not proceed with the IPO, it will have to
expense all costs related to the IPO in the first quarter of 1999.
9. WAREHOUSE CREDIT FACILITIES
The Company had a warehouse credit facility that allowed the Company to borrow
up to $50.0 million to be used to acquire assets on an interim basis prior to
placement with affiliated programs, placement in the Company's nonrecourse
securitization facility, or sale to unaffiliated third parties. This facility
was shared with various investment programs managed by the Company. Interest
accrued at prime or LIBOR plus 162.5 basis points, at the option of the Company.
This facility expired on December 14, 1998.
On December 14, 1998, the Company entered into new warehouse credit facilities
for FSI and AFG. FSI now has a $24.5 million warehouse credit facility to be
used to acquire assets on an interim basis prior to placement with affiliated
programs or sale to unaffiliated third parties and to purchase trailers prior to
obtaining permanent financing. AFG now has a $60.0 million warehouse credit
facility to be used to acquire assets on an interim basis prior to placement in
the Company's nonrecourse securitization facility or sale to institutional
programs or other unaffiliated third parties.
FSI Warehouse Credit Facility: This facility allows FSI to borrow up to
$24.5 million until December 14, 1999. This facility, which is shared with EGFs
VI and VII and Fund I, allows the Company to purchase equipment prior to its
designation to a specific program. Borrowings under this facility by the other
eligible borrowers reduce the amount available to be borrowed by the Company.
All borrowings under this facility are guaranteed by the Company. This facility
provides 80% financing for transportation assets. The Company can hold
transportation assets under this facility for up to 150 days. Interest accrues
at prime or LIBOR plus 162.5 basis points, at the option of the Company. The
weighted-average interest rates on the Company's warehouse credit facility were
7.25% and 7.61% for 1998 and 1997, 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. The Company believes
it will be able to renew this facility on substantially the same terms upon its
expiration. As of December 31, 1998, the Company had no borrowings outstanding
under this facility and there were no other borrowings outstanding under this
facility by any other eligible borrower. As of March 9, 1999, the Company and
EGF VI had $8.3 million and $3.7 million in borrowings outstanding under this
facility, respectively.
AFG Warehouse Credit Facility: This facility allows AFG to borrow up to $60.0
million until December 14, 1999. This facility provides for 100% of the present
value of the lease stream of commercial and industrial equipment for up to 90%
of the original equipment cost of the assets held on this facility.
<PAGE>
9. WAREHOUSE CREDIT FACILITIES (continued)
Borrowings secured by investment-grade lessees can be held under this facility
until the facility's expiration. Borrowings secured by noninvestment-grade
lessees may be outstanding for 120 days. Interest accrues at prime or LIBOR plus
137.5 basis points, at the option of the Company. 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. The weighted-average
interest rates on the Company's warehouse credit facility were 7.22% and 7.61%
for 1998 and 1997, respectively. Repayment of the borrowings for commercial and
industrial equipment matches the terms of the underlying leases. The Company
believes it will be able to renew this facility on substantially the same terms
upon its expiration. As of December 31, 1998, the Company had $34.4 million
outstanding under this facility. As of March 9, 1999, the Company had $29.8
million in borrowings outstanding under this facility.
10. LONG-TERM SECURED DEBT
Long-term secured debt consisted of the following as of December 31 (in
thousands of dollars):
<TABLE>
<CAPTION>
1998 1997
-------------------------------
<S> <C> <C>
Senior secured notes:
Institutional notes, bearing interest at LIBOR plus 2.40% per annum (7.80%
and 8.34% as of December 31, 1998 and 1997, 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, partnership distributions,
and cash in a cash collateral account $ 28,199 $ 23,843
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 certain of the Company's transportation-related equipment
assets and associated leases, and cash
in a cash collateral account 14,706 20,588
Other secured debt:
Debt agreements, bearing interest from 5.35% to 5.55%, payments due monthly
beginning December 31, 1998 through November 30, 2005, secured by certain
trailer equipment. In return for favorable financing terms, these
agreements give beneficial tax treatment in these secured trailers to the
lenders 13,142 --
Notes payable, with interest from 10.75% to 12.37%, due in varying monthly
principal and interest installments, secured by equipment with a net book
value
of approximately $438,000 as of December 31, 1997 -- 413
-------------------------------
Total secured debt $ 56,047 $ 44,844
===============================
</TABLE>
On September 22, 1998, the Company's senior secured notes agreement was amended,
allowing the Company to borrow an additional $10.0 million under the facility
during the period from September 22, 1998 through October 15, 1998. During 1998,
the Company borrowed $10.0 million and repaid $5.6 million on the senior secured
notes, in accordance with the debt repayment schedule. 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, 1998. In addition, there are restrictions on the payment
of dividends, purchase of stock, and certain investments based on computations
of tangible net worth, financial ratios, and cash flows.
10. LONG-TERM SECURED DEBT (continued)
During 1998, the Company repaid $5.9 million of the senior secured loan, in
accordance with the debt repayment schedule. 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. The senior
secured loan agreement contains financial covenants related to net worth, ratios
for leverage, interest coverage ratios, and collateral coverage, all of which
were met as of December 31, 1998. As of December 31, 1998, the cash collateral
balance was $0.1 million.
In August 1998, the Company sold its aircraft leasing and spare parts brokerage
subsidiary located in Australia, and all associated other secured debt was
eliminated from the Company's books as a result of the transaction.
Scheduled principal payments on long-term secured debt are (in thousands of
dollars):
1999 $ 14,608
2000 14,674
2001 11,803
2002 7,056
2003 1,495
Thereafter 6,411
-----------
Total $ 56,047
===========
11. NONRECOURSE SECURITIZED DEBT
The Company has available a nonrecourse securitization facility to be used to
acquire assets by AFG secured by direct finance leases, operating leases, and
loans on commercial and industrial equipment that generally have terms from one
to seven years. The facility allows the Company to borrow up to $150.0 million
through October 12, 1999. Repayment of the facility matches the terms of the
underlying leases. The securitized debt bears interest equivalent to the
lender's cost of funds based on commercial paper market rates for the determined
period of borrowing, plus an interest rate spread and fees (6.46% and 7.16% as
of December 31, 1998 and 1997, respectively). As of December 31, 1998 and 1997,
there were $103.6 million and $71.3 million in borrowings under this facility,
respectively. The Company is required to hedge at least 90% of the aggregate
discounted lease balance (ADLB) of those leases used as collateral in its
nonrecourse securitization facility. As of December 31, 1998, 94.8% of the ADLB
had been hedged.
During 1998, the Company assumed $12.4 million in additional nonrecourse notes
payable, and received principal payments of $4.6 million. Also during 1998, the
Company prepaid $10.2 million of the nonrecourse notes, based on the sale of
related assets, resulting in total nonrecourse notes payable of $7.6 million as
of December 31, 1998. Principal and interest on the notes are due monthly
beginning November 1997 through March 2001. The notes bear interest ranging from
8.32% to 9.5% per annum and 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):
1999 $ 42,901
2000 32,887
2001 19,411
2002 8,836
2003 3,950
Thereafter 3,237
===========
Total $ 111,222
===========
<PAGE>
12. INCOME TAXES
The provision for (benefit from) income taxes attributable to income from
operations consists of the following (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997
------------------------------------------- -----------------------------------------------------------
Federal State Total Federal State Foreign Total
------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current $ (575) $ 62 $ (513) $ 2,255 $ 64 $ 3 $ 2,322
Deferred 3,296 259 3,555 (349) (125) -- (474)
=========================================== ===========================================================
$ 2,721 $ 321 $ 3,042 $ 1,906 $ (61) $ 3 $ 1,848
=========================================== ===========================================================
</TABLE>
1996
----------------------------------------------------------
Federal State Foreign Total
----------------------------------------------------------
Current $ (262) $ 64 $ 155 $ (43)
Deferred 470 (629) -- (159)
==========================================================
$ 208 $ (565) $ 155 $ (202)
==========================================================
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.
The difference between the effective rate and the expected federal statutory
rate is reconciled below:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------
<S> <C> <C> <C>
Federal statutory tax expense rate 34 % 34 % 34 %
State income tax rate 3 -- 1
Effect of foreign operations at lower rate -- (2 ) (20 )
Reversal of excess accrual 1 -- (19 )
Tax adjustment related to termination of employee stock -- -- (6 )
ownership plan
Abandonment of identifiable intangibles -- (5 ) --
Other 1 1 5
------------------------------------------
Effective tax expense (benefit) rate 39 % 28 % (5 )%
==========================================
</TABLE>
Net operating loss carryforwards for federal income tax purposes amounted to
$4.0 million and $1.0 million as of December 31, 1998 and 1997, respectively.
Alternative minimum tax credit carryforwards are $5.2 million and $9.2 million
as of December 31, 1998 and 1997, respectively.
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>
1998 1997
------------------------------
<S> <C> <C>
Deferred tax assets:
Tax credit carryforwards $ 5,228 $ 9,224
State net operating loss carryforwards 620 949
Federal net operating loss carryforwards 1,375 --
Federal benefit of state taxes 588 1,087
Other 744 --
----------------------------------
Total deferred tax assets 8,555 11,260
----------------------------------
Deferred tax liabilities:
Equipment, principally differences in depreciation 19,604 17,433
Partnership interests 4,195 5,343
Other 3,171 3,344
----------------------------------
Total deferred tax liabilities 26,970 26,120
----------------------------------
Net deferred tax liabilities $ 18,415 $ 14,860
==================================
</TABLE>
<PAGE>
12. INCOME TAXES (continued)
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,
1998, the deferred taxes not provided on cumulative earnings of consolidated
foreign subsidiaries that are designated as permanently invested were
approximately $2.1 million.
13. 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, the Company 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 in May 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 in October 1997, the Ninth Circuit
reversed the decision of the district court and remanded the case to the
district court for further proceedings. The Company filed a petition for
rehearing, which was denied in November 1997. The Ninth Circuit mandate was
filed in the district court in December 1997.
In February 1998, plaintiff was permitted by the district court 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 the Company 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. Also in February 1998, the defendants filed a motion to
dismiss the fourth, fifth, and sixth claims relating to the termination of the
ESOP, and the seventh claim relating to defendants' alleged interference with
plaintiff's rights under ERISA, all for failure to state claims for relief. The
district court, in an order dated July 14, 1998, granted this motion and
dismissed the fourth through seventh claims for relief.
In June 1998, the defendants filed a motion for summary judgment seeking a
ruling that the first two claims for relief, which allege breaches arising out
of the purchase and sale of stock at the inception of the ESOP, are barred by
the applicable statute of limitations. In an order dated July 14, 1998, the
district court granted in part and denied in part this motion and ruled that
these claims for relief are barred by the statute of limitations to the extent
that they rely on a theory that the automatic conversion feature and other terms
and conditions of the purchase and sale of the preferred stock violated ERISA,
but are not so barred to the extent that they rely on a theory that the purchase
and sale of the preferred stock at the inception of the ESOP was for more than
adequate consideration.
On September 30, 1998, plaintiff filed a motion to certify as final, and enter
judgment on, the two July 14, 1998 orders. This motion was denied. Defendants
filed their answer to the second amended complaint on September 18, 1998,
denying the allegations contained in the first, second, and third claims for
relief. The trial regarding these remaining claims is set for September 27,
1999. The Company believes it has meritorious defenses to these claims 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 purported class action on January 22, 1997 in the Circuit Court of
Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch action).
Plaintiffs, who filed the complaint on their own and on behalf of all class
members similarly situated, are six individuals who invested in certain
California limited partnerships (the Partnerships) for which the Company's
wholly-owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the general
partner, including PLM Equipment Growth Funds IV, V, and VI, and PLM Equipment
Growth & Income Fund VII (Fund VII). The state court ex parte certified the
action as a class action (i.e., solely upon plaintiffs' request and without the
Company being given the opportunity to file an opposition). The complaint
asserts eight causes of action against all defendants, as follows: fraud and
deceit, suppression, negligent
<PAGE>
13. COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
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 Corp. for breach of third party beneficiary contracts in violation of
the National Association of Securities Dealers 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, and
control persons. Based on these duties, plaintiffs assert liability against
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.
In March 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. Removal of the action to federal court automatically nullified
the state court's ex parte certification of the class. In September 1997, the
district court denied plaintiffs' motion to remand the action to state court and
dismissed without prejudice the individual claims of the California plaintiff,
reasoning that he had been fraudulently joined as a plaintiff. In October 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
defendants' motion in December 1997.
Following various unsuccessful requests that the district court reverse, or
otherwise certify for appeal, its order denying plaintiffs' motion to remand the
case to state court and dismissing the California plaintiff's claims, plaintiffs
filed with the U.S. Court of Appeals for the Eleventh Circuit a petition for a
writ of mandamus seeking to reverse the district court's order. The Eleventh
Circuit denied plaintiffs' petition in November 1997, and further denied
plaintiffs subsequent motion in the Eleventh Circuit for a rehearing on this
issue. Plaintiffs also appealed the district court's order granting defendants'
motion to compel arbitration, but in June 1998 voluntarily dismissed their
appeal pending settlement of the Koch action, as discussed below.
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, defendants filed with the district court for the Northern
District of California (Case No. C-97-2847 WHO) a petition (the 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. In October 1997, the district court denied the Company's
petition to compel arbitration, but in November 1997, agreed to hear the
Company's motion for reconsideration of this order. The hearing on this motion
has been taken off calendar and the district court has dismissed the petition
pending settlement of the Romei action, as discussed below. The state court
action continues to be stayed pending such resolution. In connection with her
opposition to the petition to compel arbitration, plaintiff filed an amended
complaint with the state court in August 1997, 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 also served certain discovery requests on
defendants. Because of the stay, no response to the amended complaint or to the
discovery is currently required.
In May 1998, all parties to the Koch and Romei actions entered into a memorandum
of understanding (MOU) related to the settlement of those actions (the monetary
settlement). The monetary settlement contemplated by the MOU provides for
stipulating to a class for settlement purposes, and a settlement and release of
all claims against defendants and third party brokers in exchange for payment
for the benefit of the class of up to $6.0 million. The final settlement amount
will
<PAGE>
13. COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
depend on the number of claims filed by authorized claimants who are members of
the class, the amount of the administrative costs incurred in connection with
the settlement, and the amount of attorneys' fees awarded by the Alabama
district court. The Company will pay up to $0.3 million of the monetary
settlement, with the remainder being funded by an insurance policy.
The parties to the monetary settlement have also agreed in principal to an
equitable settlement (the equitable settlement) which provides, among other
things: (a) for the extension of the operating lives of Funds V, VI, and VII by
judicial amendment to each of their partnership agreements, such that FSI, the
general partner of each such partnership, will be permitted to reinvest cash
flow, surplus partnership funds or retained proceeds in additional equipment
into the year 2004, and will liquidate the partnerships' equipment in 2006; (b)
that FSI is entitled to earn front-end fees (including acquisition and lease
negotiation fees) in excess of the compensatory limitations set forth in the
NASAA Statement of Policy by judicial amendment to the partnership agreements
for Funds V, VI, and VII; (c) for a one-time redemption of up to 10% of the
outstanding units of Funds V, VI, and VII at 80% of such partnership's net asset
value; and (d) for the deferral of a portion of FSI's management fees. The
equitable settlement also provides for payment of the equitable class attorneys'
fees from partnership funds in the event that distributions paid to investors in
Funds V, VI, and VII during the extension period reach a certain internal rate
of return.
Defendants will continue to deny each of the claims and contentions and admit no
liability in connection with the proposed settlements. The monetary settlement
remains subject to numerous conditions, including but not limited to: (a)
agreement and execution by the parties of a settlement agreement (the settlement
agreement), (b) notice to and certification of the monetary class for purposes
of the monetary settlement, and (c) preliminary and final approval of the
monetary settlement by the Alabama district court. The equitable settlement
remains subject to numerous conditions, including but not limited to: (a)
agreement and execution by the parties of the settlement agreement, (b) notice
to the current unitholders in Funds V, VI, and VII (the equitable class) and
certification of the equitable class for purposes of the equitable settlement,
(c) preparation, review by the Securities and Exchange Commission (SEC), and
dissemination to the members of the equitable class of solicitation statements
regarding the proposed extensions, (d) disapproval by less than 50% of the
limited partners in Funds V, VI, and VII of the proposed amendments to the
limited partnership agreements, (e) judicial approval of the proposed amendments
to the limited partnership agreements, and (f) preliminary and final approval of
the equitable settlement by the Alabama district court. The parties submitted
the settlement agreement to the Alabama district court on February 12, 1999, and
the preliminary class certification hearing is scheduled for March 24, 1999. If
the district court grants preliminary approval, notices to the monetary class
and equitable class will be sent following review by the SEC of the solicitation
statements to be prepared in connection with the equitable settlement. The
monetary settlement, if approved, will go forward regardless of whether the
equitable settlement is approved or not. The Company continues to believe that
the allegations of the Koch and Romei actions are completely without merit and
intends to continue to defend this matter vigorously if the monetary settlement
is not consummated.
The Company is involved as plaintiff or defendant in various other legal actions
incident to its business. Management does not believe that any of these actions
will be material to the financial condition of the Company.
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 $1.7
million, $2.1 million, and $2.4 million in 1998, 1997, and 1996, respectively.
The portion of rent expense related to its principal office, net of sublease
income of $0.8 million, $0.4 million, and $38,000 in 1998, 1997, and 1996,
respectively, was $0.5 million, $0.9 million, and $1.3 million in 1998, 1997,
and 1996, 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 $2.8 million
in 1999, $2.5 million in 2000, $1.1 million in 2001, $0.3 million in 2002, and
$0.1 million in 2003.
13. COMMITMENTS AND CONTINGENCIES (continued)
Purchase Commitments
As of December 31, 1998, the Company had committed to purchase $40.5 million of
equipment for its commercial and industrial equipment lease and finance
receivable portfolio, of which $8.7 million had been received by lessees and
accrued for as of December 31, 1998. This includes equipment that will be held
by the Company and equipment that will be sold to third parties.
From January 1, 1999 through March 9, 1999, the Company funded $8.1 million of
commitments outstanding for its commercial and industrial equipment lease and
finance receivables portfolio as of December 31, 1998.
As of March 9, 1999, the Company had committed to purchase $51.7 million of
equipment for its commercial and industrial lease and finance receivables
portfolio.
Letter of Credit
As of December 31, 1998, the Company had a $0.3 million 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% ownership interest. The Company
intends to renew this letter of credit in the first quarter of 1999.
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 an agreement with one officer at AFG that requires
the Company to pay, under certain circumstances, an amount equal to two years'
salary plus insurance coverage if the Company terminates this employee's
employment. The Company may enter into similar agreements with other AFG
employees in the future.
The Company has agreed to provide supplemental retirement benefits to 11 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 in the program. Expenses for these arrangements were $0.3 million
for 1998, $0.4 million for 1997, and $0.2 million for 1996. As of December 1998,
the total estimated future obligation relating to the current participants is
$3.4 million, including vested benefits of $1.8 million. In connection with
these arrangements, whole-life insurance contracts were purchased on certain of
the participants. Insurance premiums of $0.3 million were paid during 1998,
1997, and 1996. The Company has recorded $1.4 million in cash surrender values
relating to these contracts as of December 31, 1998, which are included in other
assets.
14. SHAREHOLDERS' EQUITY
Common Stock
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.
During 1998, the Company repurchased an additional 106,200 shares for $0.6
million, which completed the $5.0 million common stock repurchase program
announced in March 1997.
During the third quarter of 1998, the Company announced that its Board of
Directors had authorized the repurchase of up to $1.1 million of the Company's
common stock. During 1998, 170,300 shares, for a total of $1.1 million, had been
repurchased under this plan.
<PAGE>
14. SHAREHOLDERS' EQUITY (continued)
Common Stock (continued)
In December 1998, the Company announced that its Board of Directors had
authorized the repurchase of up to $5.0 million of the Company's common stock.
During 1998, 63,300 shares had been repurchased under this plan, for a total of
$0.4 million.
The following table summarizes changes in common stock during 1997 and 1998:
<TABLE>
<CAPTION>
Issued Outstanding
Common Treasury Common
Shares Shares Shares
--------------------------------------------------------
<S> <C> <C> <C>
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 ) 247,858 (809,402 )
------------------------------------------------------
Shares as of December 31, 1997 12,034,847 3,641,485 8,393,362
Reissuance of treasury stock, net 908 (113,088 ) 113,996
Stock repurchased -- 347,439 (347,439 )
======================================================
Shares as of December 31, 1998 12,035,755 3,875,836 8,159,919
======================================================
</TABLE>
Preferred Stock
PLM International has authorized 10.0 million shares of preferred stock at $0.01
par value, none of which were outstanding as of December 31, 1998 or December
31, 1997.
Stock Option Plans
Prior to 1998, the Company had two nonqualified stock options plans that
reserved up to 780,000 shares of the Company's common stock for key employees
and directors. Under these plans, 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 under these plans 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. As of December 31, 1998, grants
could no longer be made under the employee option plan and 60,000 shares were
available for grant under the directors' plan.
In May 1998, the Company's Board of Directors adopted the 1998 Management Stock
Compensation Plan, which reserved 800,000 shares (in addition to the 780,000
shares above) of the Company's common stock for issuance to certain management
and key employees of the Company upon the exercise of stock options. During
1998, 500,000 nonqualified options were granted under this plan at $6.81 per
share, which equaled 110% of the average daily closing price of such shares on
the American Stock Exchange for the 10 trading days immediately preceding the
grant (as required by the plan). Vesting of options granted generally occurs in
three equal installments of 33.3% per year, initiating from the date of the
grant.
<PAGE>
14. SHAREHOLDERS' EQUITY (continued)
Stock Option Plans (continued)
Stock option transactions during 1996, 1997, and 1998 are summarized as follows:
<TABLE>
<CAPTION>
Number of Average
Options/ Option Price
Shares Per Share
------------------------------------
<S> <C> <C>
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 (251,244 ) 2.72
------------------------------------
Balance, December 31, 1997 475,556 $ 2.62
Granted 530,000 6.72
Canceled (19,556 ) 3.25
Exercised (56,500 ) 3.06
------------------------------------
Balance, December 31, 1998 929,500 $ 4.92
====================================
</TABLE>
As of December 31, 1998, 1997, and 1996, respectively, 337,500, 343,037, and
381,633 of these options were exercisable.
The following table summarizes information about fixed stock options outstanding
as of December 31, 1998:
Options outstanding:
Range of exercise prices $2.00-6.81
Number outstanding, December 31, 1998 929,500
Weighted-average exercise price $4.92
Options exercisable:
Number exercisable, December 31, 1998 337,500
Weighted-average exercise price $2.47
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its plans. The fair value of each option grant is estimated on the date of
the grant using an option-pricing model that computes the value of employee
stock options consistent with FASB SFAS No.123. The following weighted-average
assumptions were used for grants in 1998, 1997, and 1996, respectively: no
dividend yield; expected lives of three years for the management plan and eight
years for the director plan options; shorter-term adjustment of six years;
expected volatility of 30% for all years; and risk-free interest rates of 5.16%,
5.58%, and 5.53%. The weighted-average fair market value per share of options
granted during 1998, 1997, and 1996 was $1.86, $1.38, and $1.10, respectively.
<PAGE>
14. SHAREHOLDERS' EQUITY (continued)
Stock Option Plans (continued)
Had compensation expense for the Company's stock-based compensation plans been
recorded consistent with FASB SFAS 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>
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Net income As reported $ 4,857 $ 4,667 $ 4,095
Pro forma 4,578 4,562 3,997
Basic earnings per share As reported 0.58 0.51 0.41
Pro forma 0.55 0.50 0.40
Diluted earnings per share As reported 0.57 0.50 0.40
Pro forma 0.54 0.49 0.39
</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.
15. 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
Plan is a contributory plan available to essentially all full-time employees of
the Company in the United States. In 1998, employees who participated in the
Plan could elect to defer and contribute to the trust established under the Plan
up to 9% of pretax salary or wages up to $10,000. The Company matched up to a
maximum of $4,000 of employees' 401(k) contributions in 1998, 1997, and 1996 to
vest in four equal installments over a four-year period. The Company's total
401(k) contributions were $0.3 million for 1998, 1997, and 1996, respectively.
During 1998, 1997, and 1996, the Company accrued discretionary profit-sharing
contributions. Profit-sharing contributions are allocated equally among the
number of eligible Plan participants. The Company's total profit-sharing
contributions were $0.1 million, $0.2 million, and $0.2 million for 1998, 1997,
and 1996, respectively.
16. 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 $6.1 million,
$6.4 million, and $6.2 million in 1998, 1997, and 1996, respectively, have been
recorded as reductions of operations support or general and administrative
expenses. Outstanding amounts are paid under normal business terms.
17. 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
<PAGE>
17. RISK MANAGEMENT (continued)
Concentrations of Credit Risk (continued)
different businesses and geographic areas. Currently, none of the Company's
equipment is leased internationally. 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, 1998, the Company's five largest customers accounted for
approximately 37% of its commercial and industrial equipment lease and finance
receivables. No single lessee of the Company's equipment accounted for more than
10% of revenues for the years ended December 31, 1998, 1997, or 1996. As of
December 31, 1998 and 1997, management believes the Company had no significant
concentrations of credit risk that could have a material adverse effect on the
Company's business, financial condition, or results of operations.
Interest-Rate Risk Management
The Company is required to hedge at least 90% of the ADLB of those leases
designated for its nonrecourse securitization facility. As of December 31, 1998,
94.8% of the ADLB had been hedged. The Company has entered into interest-rate
swap agreements in order to meet the hedge requirements and to manage the
interest-rate exposure associated with its nonrecourse debt. As of December 31,
1998, the swap agreements had a weighted-average duration of 1.28 years,
corresponding to the terms of the remaining debt. As of December 31, 1998, a
notional amount of $99.0 million of interest-rate swap agreements effectively
fixed interest rates at an average of 6.59% on such obligations. Interest
expense was increased by $0.4 million, $0.3 million, and $0.1 million due to
these arrangements in 1998, 1997, and 1996, respectively.
18. OPERATING SEGMENTS
The Company operates in three operating segments: trailer leasing, commercial
and industrial equipment leasing and financing, and the management of investment
programs and other transportation equipment leasing. The trailer equipment
leasing segment includes 16 trailer rental facilities that engage in short-term
to mid-term operating leases of refrigerated and dry van trailers to a variety
of customers, and management of trailers for the investment programs. The
commercial and industrial equipment leasing and financing segment originates
finance and operating leases and loans on commercial and industrial equipment
that is financed through a securitization facility, brokers equipment, and
manages institutional programs. The management of investment programs and other
transportation equipment leasing segment manages its syndicated investment
programs, from which it earns fees and equity interests, and arranges short-term
to mid-term operating leases of other transportation equipment.
The Company evaluates the performance of each segment based on profit or loss
from operations before allocating general and administrative expenses and before
allocating income taxes. The segments are managed separately because each
operation requires different business strategies.
<PAGE>
18. OPERATING SEGMENTS (continued)
The following tables present a summary of the operating segments (in thousands
of dollars):
<TABLE>
<CAPTION>
Commercial Management
and of Investment
Industrial Programs
Equipment and Other
Leasing Transportation
Trailer and Equipment
For the year ended December 31, 1998 Leasing Financing Leasing Other<F1> Total
- ------------------------------------
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Lease revenue $9,743 $20,254 $2,479 $ -- $32,476
Fees earned 1,022 2,132 11,940 -- 15,094
Gain on sale or disposition of assets, net 94 3,204 1,395 -- 4,693
Other 4 1,217 3,594 -- 4,815
-------------------------------------------------------------------------
Total revenues 10,863 26,807 19,408 -- 57,078
-------------------------------------------------------------------------
Costs and expenses
Operations support 5,127 4,449 5,909 2,086 17,571
Depreciation and amortization 3,802 6,808 1,223 -- 11,833
General and administrative expenses -- -- -- 7,086 7,086
-------------------------------------------------------------------------
Total costs and expenses 8,929 11,257 7,132 9,172 36,490
-------------------------------------------------------------------------
Operating income (loss) 1,934 15,550 12,276 (9,172) 20,588
Interest expense, net (1,754) (10,277) (1,343) 212 (13,162)
Other income (expenses), net -- (1) 474 -- 473
-------------------------------------------------------------------------
Income (loss) before income taxes $ 180 $ 5,272 $11,407 $(8,960) $ 7,899
=========================================================================
Total assets as of December 31, 1998 $50,819 $197,454 $31,499 $ 12,297 $292,069
=========================================================================
<FN>
<F1> Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Commercial Management
and of Investment
Industrial Programs
Equipment and Other
Leasing Transportation
Trailer and Equipment
For the year ended December 31, 1997 Leasing Financing Leasing Other<F1> Total
- ------------------------------------
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Lease revenue $5,544 $ 13,832 $5,086 $ -- $24,462
Fees earned 1,283 1,971 12,511 -- 15,765
Gain on sale or disposition of assets, net 313 1,975 1,432 -- 3,720
Other 2 718 4,998 -- 5,718
-------------------------------------------------------------------------
Total revenues 7,142 18,496 24,027 -- 49,665
-------------------------------------------------------------------------
Costs and expenses
Operations support 3,282 4,466 6,878 2,007 16,633
Depreciation and amortization 1,672 3,958 2,817 -- 8,447
General and administrative expenses -- -- -- 9,472 9,472
-------------------------------------------------------------------------
Total costs and expenses 4,954 8,424 9,695 11,479 34,552
-------------------------------------------------------------------------
Operating income (loss) 2,188 10,072 14,332 (11,479) 15,113
Interest expense, net (1,201) (5,476) (2,060) 481 (8,256)
Other expenses, net (2) -- (340) -- (342)
=========================================================================
Income (loss) before income taxes $ 985 $ 4,596 $11,932 $(10,998) $ 6,515
=========================================================================
Total assets as of December 31, 1997 $37,146 $150,681 $41,817 $ 6,639 $236,283
=========================================================================
<FN>
<F1> Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
</FN>
</TABLE>
18. OPERATING SEGMENTS (continued)
<TABLE>
<CAPTION>
Commercial Management
and of Investment
Industrial Programs
Equipment and Other
Leasing Transportation
Trailer and Equipment
For the year ended December 31, 1996 Leasing Financing Leasing Other<F2> Total
- ------------------------------------
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Lease revenue $5,671 $8,080 $8,615 $ -- $22,366
Fees earned 1,292 1,620 18,480 -- 21,392
Gain on sale or disposition of assets, net 207 894 1,181 -- 2,282
Other 3 93 5,409 -- 5,505
------------------------------------------------------------------------
Total revenues 7,173 10,687 33,685 -- 51,545
------------------------------------------------------------------------
Costs and expenses
Operations support 4,299 4,003 11,342 1,951 21,595
Depreciation and amortization 1,445 3,599 6,274 -- 11,318
General and administrative expenses -- -- -- 7,956 7,956
------------------------------------------------------------------------
Total costs and expenses 5,744 7,602 17,616 9,907 40,869
------------------------------------------------------------------------
Operating income (loss) 1,429 3,085 16,069 (9,907) 10,676
Interest expense, net (1,225) (2,448) (2,440) -- (6,113)
Other expenses, net (6) (19) (645) -- (670)
========================================================================
Income (loss) before income taxes $ 198 $ 618 $12,984 $ (9,907) $ 3,893
========================================================================
Total assets as of December 31, 1996 $32,197 $98,653 $58,541 $9,358 $198,749
========================================================================
<FN>
<F1> Includes costs not identifiable to a particular segment such as general and
administrative and certain operations support expenses.
</FN>
</TABLE>
19. GEOGRAPHIC INFORMATION
Financial information about the Company's foreign and domestic operations
follow:
Revenues for the years ended December 31, 1998, 1997, and 1996 are as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Domestic (including corporate) $ 55,125 $ 45,802 $ 42,493
International 1,953 3,863 9,052
==============================================
Total revenues $ 57,078 $ 49,665 $ 51,545
==============================================
</TABLE>
Long-lived assets as of December 31, 1998, 1997, and 1996 are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Domestic (including corporate) $ 261,036 $ 198,993 $ 151,251
International 633 1,938 3,085
==============================================
Total long-lived assets $ 261,669 $ 200,931 $ 154,336
==============================================
</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>
20. ESTIMATED FAIR VALUE OF THE COMPANY'S FINANCIAL INSTRUMENTS
The Company estimates the fair value of it's financial instruments based on
recent similar transactions the Company has entered into. The estimated fair
values of the Company's financial instruments are as follows as of December 31
(in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997
------------------------------ -------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Financial assets:
Restricted cash (Note 7) $10,349 $10,349 $18,278 $18,278
Loans receivable (Note 3) 23,493 23,548 5,861 5,921
Financial liabilities:
Warehouse credit facility (Note 9) 34,420 34,420 23,040 23,040
Senior secured notes (Note 10) 28,199 28,199 23,843 23,843
Senior loan (Note 10) 14,706 15,137 20,588 20,946
Other secured debt (Note 10) 13,142 13,142 -- --
Nonrecourse securitized debt (Note 11) 103,637 103,637 71,302 71,302
Nonrecourse notes (Note 11) 7,585 7,673 10,000 10,407
Unrecognized financial instruments -- 683 -- 113
</TABLE>
21. QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1998 and 1997 (in thousands of dollars, except per share
amounts):
<TABLE>
<CAPTION>
Basic Earnings Diluted Earnings
Per Per
Weighted-Average Weighted-Average
Common Common
Income Share Share
Revenue Before Taxes Net Income Outstanding Outstanding
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 quarters:
First $ 12,544 $ 1,590 $ 983 $ 0.12 $ 0.11
Second 15,308 2,061 1,201 0.14 0.14
Third 14,923 2,169 1,362 0.16 0.16
Fourth 14,303 2,079 1,311 0.16 0.16
==============================================================================================
Total $ 57,078 $ 7,899 $ 4,857 $ 0.58 $ 0.57
==============================================================================================
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
=============================================================================================
</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 13).
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 13) and a $0.5 million increase in
costs related to the Company's response to shareholder-sponsored initiatives.
<PAGE>
21. QUARTERLY RESULTS OF OPERATIONS (unaudited) (continued)
In the third quarter of 1997, the Company recorded $0.3 million in legal fees
related to the Koch action (refer to Note 13).
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 first quarter of 1998, the Company purchased and subsequently sold
railcars to an unaffiliated third party for a net gain of $0.5 million.
In the second quarter of 1998, the Company recorded a $0.5 million write-down of
its spare parts aircraft inventory located in Australia. In addition, the
Company recorded income of $0.7 million related to the settlement of a lawsuit
against Tera Power Corporation and others, and recorded expense of $0.3 million
related to a legal settlement for the Koch and Romei actions (refer to Note 13).
In the third quarter of 1998, the Company recorded a $0.2 million loss related
to the August sale of the Company's aircraft leasing and spare parts brokerage
subsidiary located in Australia, and recorded interest income of $0.3 million
for a tax refund receivable that had not previously been recognized.
THIRD AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
AMONG
TEC ACQUISUB, INC.
And
THE LENDERS LISTED HEREIN,
and
FIRST UNION NATIONAL BANK,
as Agent
December 15, 1998
<PAGE>
SECTION 1. DEFINITIONS.................................1
1.1 .......................................Defined Terms 1
1.2 ...................................Accounting Terms 17
1.3 .................................... Other Terms 17
1.4 .............................Schedules and Exhibits 18
SECTION 2. AMOUNT AND TERMS OF CREDIT.................18
2.1 .................................Commitment to Lend 18
2.1.1 ...................... Revolving Facility 18
(a) .............Facility Commitments 18
2.1.2 ...................................Funding 20
2.1.3 ..................Utilization of the Loans 20
2.2 ...........................Repayment and Prepayment 20
2.2.1 .................................Repayment 20
2.2.2 ......................Voluntary Prepayment 20
2.2.3 .....................Mandatory Prepayments 20
2.3 ....Calculation of Interest; Post-Maturity Interest 21
2.4 .................................Manner of Payments 22
2.5 .......................Payment on Non-Business Days 22
2.6 ............................Application of Payments 22
2.7 ...............Procedure for the Borrowing of Loans 22
2.7.1 .......................Notice of Borrowing 22
2.7.2 ............ Unavailability of LIBOR Loans 23
2.8 ..............Conversion and Continuation Elections 23
2.8.1 ..................................Election 23
2.8.2 ......................Notice of Conversion 23
2.8.3 ...........................Interest Period 23
2.8.4 .............Unavailability of LIBOR Loans 24
2.9 ......Discretion of Lenders as to Manner of Funding 24
2.10 ...........................Distribution of Payments 24
2.11 Agent's Right to Assume Funds Available for Advances 24
2.12 Agent's Right to Assume Payments Will be Made by Borrower 24
2.13 ...............................Capital Requirements 25
2.14 ...................................Taxes 25
2.14.1 ..........................No Deductions 25
2.14.2 ..........................Miscellaneous Taxes 25
2.14.3 ..........................Indemnity 25
2.14.4 ..........................Required Deductions 26
2.14.5 ..........................Evidence of Payment 26
2.14.6 ..........................Foreign Persons 26
2.14.7 ..........................Income Taxes 27
2.14.8 ..........................Reimbursement of Costs 27
2.14.9 ..........................Jurisdiction 27
2.15 ...................................Illegality 27
2.15.1 ..........................LIBOR Loans 27
2.15.2 ..........................Prepayment 28
2.15.3 ..........................Prime Rate Borrowing 28
2.16 ...................................Increased Costs 28
2.17 ............................Inability to Determine Rates 28
2.18 ...............................Prepayment of LIBOR Loans 28
SECTION 3. CONDITIONS PRECEDENT......29
3.1 ...................... Effectiveness of this Agreement 29
3.1.1 ................Corporate Documents 29
3.1.2 ................Notes 29
3.1.3 ................Security Documents 29
3.1.4 ................Opinion of Counsel 29
3.1.5 ................Reaffirmation of Guaranty 30
3.1.6 ................Growth Fund Agreement 30
3.1.7 ................Bringdown Certificate 30
3.1.8 ................Fees 30
3.1.9 ................Other Documents 30
3.2 .........................All Loans 30
3.2.1 ................Notice of Borrowing 30
3.2.2 ................Invoices 30
3.2.3 ................Title to Equipment 30
3.2.4 ................Approval of Loan 31
3.2.5 ................Leases 31
3.2.6 ................No Event of Default 31
3.2.7 ................Officer's Certificate 31
3.2.8 ................Officer's Certificate - Leases 31
3.2.9 ................Insurance 32
3.2.10 ................Warranty of TEC AcquiSub 32
3.2.11 ................Other Instruments 32
3.3 .........................Further Conditions to All Loans 33
3.3.1 ................General Partner or Manager 33
3.3.2 ............Removal of General Partner or Manager 33
3.3.3 ................Cash Balances 33
3.3.4 ................Purchaser 33
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES..........33
4.1 .........................Existence and Power 33
4.2 ...Loan Documents and Note Authorized; Binding Obligations 33
4.3 .........................No Conflict; Legal Compliance 34
4.4 .........................Financial Condition 34
4.5 .........................Executive Offices 34
4.6 .........................Litigation 34
4.7 .........................Material Contracts 34
4.8 .........................Consents and Approvals 34
4.9 .........................Other Agreements 35
4.10 .........................Employment and Labor Agreements 35
4.11 .........................ERISA 35
4.12 .........................Labor Matters 35
4.13 .........................Margin Regulations 35
4.14 .........................Taxes 35
4.15 .........................Environmental Quality 36
4.16 Trademarks, Patents, Copyrights, Franchises and Licenses 36
4.17 .........................Full Disclosure 36
4.18 .........................Other Regulations 36
4.19 .........................Solvency. 37
4.20 .........................Year 2000 37
4.21 ..........Survival of Representations and Warranties 37
SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS......37
5.1 .........................Records and Reports 37
5.1.1 ................Quarterly Statements 37
5.1.2 ................Annual Statements 37
5.1.3 ................Borrowing Base Certificate 38
5.1.4 ................Compliance Certificate 38
5.1.5 ................Reports 38
5.1.6 ................Insurance Reports 38
5.1.7 ................Certificate of Responsible Officer 38
5.1.8 ................Employee Benefit Plans 39
5.1.9 ................ERISA Notices 39
5.1.10 ................Pension Plans 39
5.1.11 ................SEC Reports 39
5.1.12 ................Tax Returns 39
5.1.13 ................Additional Information 39
5.2 .........................Existence; Compliance with Law 40
5.3 .........................Insurance 40
5.4 .........................Taxes and Other Liabilities 40
5.5 .........................Inspection Rights; Assistance 41
5.6 Maintenance of Facilities; Modifications;
Performance of Leases 41
5.6.1 ................Maintenance of Facilities 41
5.6.2 ...........Certain Modifications to the Equipment 41
5.6.3 ................Performance of Leases 41
5.7 .........................Supplemental Disclosure 41
5.8 .........................Further Assurances 41
5.9 .........................Lockbox 42
5.10 .........................Environmental Laws 42
5.11 .........................Equipment Purchase Agreement 42
SECTION 6. BORROWER'S NEGATIVE COVENANTS.........42
6.1 ................Liens; Negative Pledges; and Encumbrances 42
6.2 .........................Acquisitions 43
6.3 .........................Limitations on Indebtedness 43
6.4 .........................Use of Proceeds 43
6.5 .........................Disposition of Assets 43
6.6 .........................Restricted Payments 43
6.7 .........................Restriction on Fundamental Changes 44
6.8 .........................Transactions with Affiliates 44
6.9 .........................No Loans to Affiliates 44
6.10 .........................No Investment 44
6.11 .........................Maintenance of Business 44
6.12 .........................No Modification to Leases 44
6.13 .........................No Subsidiaries 44
6.14 .........................Amendments of Charter Documents 44
6.15 .........................Events of Default 44
6.16 .........................ERISA 45
6.17 .........................No Use of Any Lender's Name 45
6.18 .........................Certain Accounting Changes 45
SECTION 7. FINANCIAL COVENANTS OF BORROWER.......45
7.1 ..................Minimum Consolidated Tangible Net Worth 46
SECTION 8. EVENTS OF DEFAULT AND REMEDIES........46
8.1 .........................Events of Default 46
8.1.1 ................Failure to Make Payments 46
8.1.2 ................Other Agreements 46
8.1.3 ................Breach of Covenants 46
8.1.4 ..........Breach of Representations or Warranties 46
8.1.5 ................Failure to Cure 47
8.1.6 ................Insolvency 47
8.1.7 ................Bankruptcy Proceedings 47
8.1.8 ................Material Adverse Effect 47
8.1.9 ................Judgments, Writs and Attachments 47
8.1.10 ................Legal Obligations 48
8.1.11 ................Growth Fund Agreement 48
8.1.12 ................Board of Directors 48
8.1.13 ................Criminal Proceedings 48
8.1.14 ................Action by Governmental Authority 48
8.1.15 ................Governmental Decrees 48
8.2 .........................Waiver of Default 49
8.3 .........................Remedies 49
8.4 .........................Set-Off 49
8.5 .........................Rights and Remedies Cumulative 50
SECTION 9. AGENT...........50
9.1 .........................Appointment 50
9.2 .........................Delegation of Duties 51
9.3 .........................Exculpatory Provisions 51
9.4 .........................Reliance by Agent 51
9.5 .........................Notice of Default 51
9.6 .................Non-Reliance on Agent and Other Lenders 52
9.7 .........................Indemnification 52
9.8 .........................Agent in Its Individual Capacity 52
9.9 ...........Resignation and Appointment of Successor Agent 53
SECTION 10. EXPENSES AND INDEMNITIES..........53
10.1 .........................Expenses 53
10.2 .........................Indemnification 54
10.2.1 ................General Indemnity 54
10.2.2 ................Environmental Indemnity 54
10.2.3 ................Survival; Defense 55
SECTION 11. MISCELLANEOUS...55
11.1 .........................Survival 55
11.2 .........................No Waiver by Agent or Lenders 55
11.3 .........................Notices 55
11.4 .........................Headings 55
11.5 .........................Severability 55
11.6 .....Entire Agreement; Construction;
Amendments and Waivers 56
11.7 .........................Reliance by Lenders 56
11.8 .........................Marshaling; Payments Set Aside 56
11.9 .........................No Set-Offs by Borrower 57
11.10 .........................Binding Effect, Assignment 57
11.11 .........................Counterparts 58
11.12 .........................Equitable Relief 58
11.13 .....Written Notice of Claims; Claims Bar 58
11.14 .........................Waiver of Punitive Damages 59
11.15 .........................Governing Law 59
11.16 .........................Waiver of Jury Trial 59
<PAGE>
THIRD AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT is entered
into as of December 15, 1998, by and between TEC ACQUISUB, INC., a California
special purpose corporation ("Borrower"), the banks, financial institutions,
institutional lenders from time to time party hereto and defined as Lenders
herein and FIRST UNION NATIONAL BANK ("FUNB"), not in its individual capacity,
but solely as Agent. This Agreement amends, restates and supersedes the TEC
AcquiSub Agreement (as defined below).
RECITALS
A. Borrower, Lenders and Agent, entered into that Second Amended and
Restated Warehousing Credit Agreement dated as of December 2, 1997, as amended
(as so amended, the "TEC AcquiSub Agreement"), pursuant to which Lenders have
agreed to extend and make available to Borrower certain advances of credit.
B. Borrower and the Lenders desire to amend and restate the TEC
AcquiSub Agreement as set forth herein.
C. 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 or
joint venture.
"Adjusted 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:
[GRAPHIC OMITTED]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.
"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 December
15, 1998, by and among Borrower, AFG, each of the Growth Funds and Agent.
"Agreement" means this Third Amended and Restated Warehousing Credit
Agreement dated as of December 15, 1998, 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.
"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.
"Borrower" has the meaning set forth in the Preamble.
"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 December 14, 1999.
"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.
<PAGE>
"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.
"Effective Amount" means with respect to any Loans on any date, the
aggregate outstanding principal amount thereof after giving effect to any
borrowing and prepayments or repayments thereof occurring on such date.
"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, (b) a commercial bank organized
under the laws of any other country which is a member of the Organization for
Economic Cooperation and Development ("OECD"), or a political subdivision of any
such country; provided, however, that such bank is acting through a branch or
agency located in the country in which it is organized or another country which
is also a member of the OECD or the Cayman Islands; (c) the central bank of any
country which is a member of the OECD; (d) an insurance company organized under
the laws of the United States; (e) a commercial finance company, mutual or other
investment fund, lease financing company or other institutional investor
(whether a corporation, partnership, trust or other entity) that is engaged in
making, purchasing or otherwise investing in commercial loans in the ordinary
course of its business, provided that such Person is an "accredited investo
(as defined in Regulation D under the Securities Act of 1933, as amended); (f)
any Lender party to this Agreement; (g) any Lender Affiliate and (h) any other
Person approved be Agent and Borrower, such approval not to be unreasonably
withheld; provided, however, that (i) Borrower's approval shall not be required
so long as an Event of Default has occurred and is continuing and (ii) an
Affiliate of Borrower shall not qualify as an Eligible Assignee.
"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.
"FUNB" has the meaning set forth in the Preamble.
"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 VI, EGF VII and Income Fund I.
"Growth Fund Agreement" means the Fourth Amended and Restated
Warehousing Credit Agreement dated as of December 15, 1998, 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 Affiliate" means a Person engaged primarily in the business of
commercial banking and that is an Affiliate or Lender or of a Person of which a
Lender is an Affiliate.
"Lenders" means the banks, financial institutions or other financial
institutional lenders which have executed signature pages to this Agreement and
such other Assignees, banks, financial institutions or other institutional
lenders as shall hereafter execute and deliver an Assignment and Acceptance with
respect to all or any portion of the Commitments and the Loans advanced and
maintained pursuant to the Commitments, in each case pursuant to and in
accordance with Section 11.10.
"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 Notes, 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 December 15,
1998, among Borrower, FUNB and Agent on behalf and for the benefit 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, as to any Lender at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of the Effective Amount of such Lender's Loans divided by the Effective
Amount of all Loans, or if no Loans are outstanding, the percentage equivalent
(expressed as a decimal, rounded to the ninth decimal place) at such time of
such Lender's aggregate Commitments divided by the aggregate Commitments, or, if
the Commitments have expired or been terminated and all Loans repaid in full,
the percentage equivalent (expressed as a decimal, rounded to the ninth decimal
place) of the Effective Amount of such Lender's Loans divided by the aggregate
Effective Amount of all Loans immediately before such repayment in full.
"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 December 15, 1998, executed by PLMI in favor of Lenders
reaffirming its obligations under the Guaranty.
"Regulations T, U and X" means, collectively, Regulations T, U and X
adopted by the Federal Reserve Board (12 C.F.R. Parts 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 Amended and Restated Security Agreement
entered into as of December 15, 1998, between Borrower and Agent, on behalf and
for the benefit 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 California; 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 California, 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 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 Sections 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 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, Section 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 Exhibits. Any reference to a "Sections", "Section",
"Exhibit", or "Schedule" shall refer to the relevant Section or Section 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 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 in favor of such Lender, 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, 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. 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 respective 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 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 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 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 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 shall be
terminated for any reason as to any one or more of the Growth Funds, 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 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 Notes 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, One First Union Center, 301 South College Street, Charlotte, North
Carolina 28288, Attention: Maria Ostrowski, 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, any 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.
2.6 Application 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 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 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 Lende 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 Section 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 Section 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 Section 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
Section 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 Section 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 Section 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 Section 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 Section
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 Section 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.
<PAGE>
2.15 Illegality.
2.15.1 LIBOR 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 Borrowing. If Borrower is required to prepay any
LIBOR Loan immediately as provided in Section 2.15.2, 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
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 Note, in form and substance
satisfactory to Lenders, duly executed and delivered by Borrower, which Note
shall replace and supersede the existing Note dated as of November 3, 1997,
issued by Borrower to FUNB.
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 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.
3.1.5 Reaffirmation of Guaranty. Agent shall have received the
Reaffirmation of Guaranty duly executed and delivered by PLMI.
3.1.6 Growth 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 Bringdown 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 duly
executed by Borrower and each of the Growth Funds, and Agent shall have received
the fees described in the Agent's Side Letter.
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 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 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 - 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 totaling, 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.
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 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 Notes 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 Notes 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, 1997, and Borrower's and FSI's unaudited consolidated financial
statements as of September 30, 1998, 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, 1997.
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.
4.10 Employment 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 Regulation 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 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 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 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 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 Year 2000. Borrower has reviewed the areas within its business and
operations which could be adversely affected by, and has developed or is
developing a program to address on a timely basis, the "Year 2000 Problem" (that
is, the risk that computer applications used by Borrower may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date on or after December 31, 1999), and have made related
appropriate inquiry of material suppliers, vendors and customers. Based on such
review and program, Borrower believes that the "Year 2000 Problem" would not
with reasonable likelihood have or result in a Material Adverse Effect.
4.21 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.
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, 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;
5.1.11 SEC 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;
5.1.12 Tax 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.
Statements of financial performance required to be provided by Borrower
to Agent pursuant to this Section 5.1 shall (i) include a statement that the
Year 2000 remediation efforts of Borrower are proceeding as scheduled and no
Material Adverse Effect is expected to result from the "Year 2000 Problem"
(within the meaning of such term set forth in Section 4.20) or such remediation
efforts and (ii) indicate whether an auditor, regulator or third party
consultant has issued a management letter or other communication regarding the
Year 2000 exposure, program or progress of Borrower.
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.
5.6.3 Performance 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.
5.7 Supplemental 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.
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, 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 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 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 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 Section 2.1.3, 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 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 to Borrower or such Marine Subsidiary or Owner
Trustee 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 is received by Borrower or such Marine Subsidiary or Owner
Trustee will be subject to mandatory prepayment pursuant to Section 2.2.3(c).
6.6 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 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 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 Affiliates. Borrower shall not make any loans to any of its
Affiliates other than to its Marine Subsidiaries.
6.10 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 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 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.
6.14 Amendments 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.
SECTION 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 any 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.
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, 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 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
8.1.13 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
8.1.14 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
8.1.15 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 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 Notes, 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 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 FUNB as the Agent of such Lender under this Agreement and the other
Loan Documents, and each such Lender irrevocably authorizes FUNB 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 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 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 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 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
Notes, 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, any 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 Section 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,
each 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, any 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 Notes 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.
11.8 Marshaling; Payments Set Aside. Lenders shall be under no obligation
to marshal 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, any 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 Notes 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 Borrower shall not
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, its respective Notes and the other Loan
Documents, together with a ratable interest in 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 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 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 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
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. In connection and as a condition to each assignment hereunder, the
Assignor Lendor agrees to pay or to cause the Assignee Lender to pay to Agent a
processing fee f $3,500; provided that no processing fee shall be charged for
any assignment to a Lender or a Lender Affiliate.
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, any 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, ANY
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 California 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 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.
<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 /s/ Robert N. Tidball
------------------------------
Robert N. Tidball
President
Notice to be sent to:
TEC AcquiSub, Inc.
One Market
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: Robert N. Tidball
President
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
By /s/ Bill A. Shirley
----------------------------
Printed Name: Bill A. Shirley
Title: Senior Vice President
Notice to be sent to:
First Union National Bank
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Russ Morrison
Telephone: 704/383-9687
Facsimile: 704/374-4092
LENDERS FIRST UNION NATIONAL BANK
By /s/ Bill A. Shirley
------------------------------
Printed Name: Bill A. Shirley
Title: Senior Vice President
Notice to be sent to:
First Union National Bank
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Russ Morrison
Telephone: 704/383-9687
Facsimile: 704/374-4092
<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 /s/ Robert N. Tidball
------------------------------
Robert N. Tidball
President
<PAGE>
SCHEDULE A
(COMMITMENTS)
Pro
Rata
Lender Commitment Share
First Union National Bank $24,500,000 100%
<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
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
[LENDER]
$____________________ San Francisco, California
Date: December __, 1998
TEC ACQUISUB, Inc., a California corporation (the "Borrower"), FOR
VALUE RECEIVED, hereby unconditionally promises to pay to the order of [LENDER]
("[__________________]"), in lawful money of the United States of America, the
aggregate principal amount of [__________________]'s Pro Rata Share of all Loans
outstanding under the Credit Agreement referred to below, payable in the
amounts, on the dates and in the manner set forth below.
This revolving promissory note (the "Note") is one of the Notes referred to in
that certain Third Amended and Restated Warehousing Credit Agreement dated as
of December 15, 1998 (as the same may from time to time be further amended,
modified, supplemented, renewed, extended or restated, the "Credit
Agreement"), by and among the Borrower, the banks, financial institutions and
other institutional lenders from time to time party thereto and defined
therein as Lenders (such entities, together with their respective successors
and assigns being collectively referred to herein as "Lenders"), and FUNB in
its capacity as Agent on behalf and for the benefit of Lenders ("Agent"). All
capitalized terms used but not defined herein shall have the same meaning as
given to them in the Credit Agreement.
1. Principal Payments. Subject to the terms and conditions of the
Credit Agreement, including, without limitation, terms relating to mandatory
prepayments of principal (Section 2.2.3), the entire principal amount
outstanding under each Loan shall be due and payable on the Maturity Date with
respect to such Loan, with any and all unpaid and not previously due and payable
principal amounts under the Loans being due and payable on the Commitment
Termination Date.
2. Interest Rate. The Borrower further promises to pay interest on the
sum of the daily unpaid principal balance of all Loans outstanding on each day
in lawful money of the United States of America, from the Closing Date until all
such principal amounts shall have been repaid in full, which interest shall be
payable at the rates per annum and on the dates determined pursuant to the
Credit Agreement.
3. Place of Payment. All amounts payable hereunder shall be payable to
the Agent, on behalf of [__________________], at the office of First Union
National Bank of North Carolina, One First Union Center, 301 South College
Street, Charlotte, North Carolina 28288, Attention: Maria Ostrowski, or such
other place of payment as may be specified by the Agent in writing.
4. Application of Payments; Acceleration. Payments on this Note shall
be applied in the manner set forth in the Credit Agreement. The Credit Agreement
contains provisions for acceleration of the maturity of the Loans upon the
occurrence of certain stated events and also provides for mandatory and optional
prepayments of principal prior to the stated maturity on the terms and
conditions therein specified.
Each Advance made by [__________________] to the Borrower constituting
[__________________]'s Pro Rata Share of a Loan pursuant to the Credit Agreement
shall be recorded by [__________________] on its books and records. The failure
of [__________________] to record any Advance or any repayment or prepayment
made on account of the principal balance thereof shall not limit or otherwise
affect the obligations of the Borrower under this Note and under the Credit
Agreement to pay the principal, interest and other amounts due and payable
hereunder and thereunder.
5. Default. The Borrower's failure to pay timely any of the principal
amount due under this Note or any accrued interest or other amounts due under
this Note on or within five (5) calendar days after the date the same becomes
due and payable shall constitute a default under this Note. Upon the occurrence
of a default hereunder or an Event of Default under the Credit Agreement, all
unpaid principal, accrued interest and other amounts owing hereunder shall, at
the option of Required Lenders, be immediately collectible by the Lenders and
the Agent pursuant to the Credit Agreement and applicable law.
6. Waivers. The Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and shall pay
all costs of collection when incurred by or on behalf of the Lenders, including,
without limitation, reasonable attorneys' fees, costs and other expenses as
provided in the Credit Agreement.
7. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
8. Successors and Assigns. The provisions of this Note shall inure to
the benefit of and be binding on any successor to the Borrower and shall extend
to any holder hereof.
BORROWER TEC ACQUISUB, INC.,
a California corporation
By
J. Michael Allgood
Chief Financial Officer
FOURTH AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
AMONG
PLM EQUIPMENT GROWTH FUND VI
PLM EQUIPMENT GROWTH & INCOME FUND VII
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
PLM FINANCIAL SERVICES, INC.
AND
THE LENDERS LISTED HEREIN,
AND
FIRST UNION NATIONAL BANK,
as Agent
December 15, 1998
<PAGE>
WAREHOUSING CREDIT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.............................................1
1.1 Defined Terms...........................................1
1.2 Accounting Terms........................................17
1.3 Other Terms.............................................17
1.4 Schedules And Exhibits..................................18
SECTION 2. AMOUNT AND TERMS OF CREDIT..............................18
2.1 Commitment To Lend......................................18
2.1.1 Revolving Facility.............................18
(a) Facility Commitments..................18
(b) Each Loan.............................19
2.1.2 Funding........................................20
2.1.3 Utilization Of The Loans.......................20
2.2 Repayment And Prepayment................................20
2.2.1 Repayment......................................20
2.2.2 Voluntary Prepayment...........................20
2.2.3 Mandatory Prepayments..........................20
2.3 Calculation Of Interest; Post-Maturity Interest.........21
2.4 Manner Of Payments......................................21
2.5 Payment On Non-Business Days............................21
2.6 Application Of Payments.................................21
2.7 Procedure For The Borrowing Of Loans....................22
2.7.1 Notice Of Borrowing............................22
2.7.2 Unavailability Of LIBOR Loans..................22
2.8 Conversion And Continuation Elections...................22
2.8.1 Election.......................................22
2.8.2 Notice Of Conversion...........................23
2.8.3 Interest Period................................23
2.8.4 Unavailability Of LIBOR Loans..................23
2.9 Discretion Of Lenders As To Manner Of Funding...........23
2.10 Distribution Of Payments................................24
2.11 Agent's Right To Assume Funds Available For Advances....24
2.12 Agent's Right To Assume Payments Will Be Made By Borrower..24
2.13 Capital Requirements....................................24
2.14 Taxes...................................................25
2.14.1 No Deductions..................................25
2.14.2 Miscellaneous Taxes............................25
2.14.3 Indemnity......................................25
2.14.4 Required Deductions............................25
2.14.5 Evidence of Payment............................26
2.14.6 Foreign Persons................................26
2.14.7 Income Taxes...................................26
2.14.8 Reimbursement Of Costs.........................27
2.14.9 Jurisdiction...................................27
2.15 Illegality..............................................27
2.15.1 LIBOR Loans....................................27
2.15.2 Prepayment.....................................27
2.15.3 Prime Rate Borrowing...........................28
2.16 Increased Costs.........................................28
2.17 Inability To Determine Rates............................28
2.18 Prepayment Of LIBOR Loans...............................28
SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND THE
MAKING OF LOANS...........................................................29
3.1 Effectiveness of This Agreement.........................29
3.1.1 Partnership, Company And Corporate Documents...29
3.1.2 Notes..........................................29
3.1.3 Security Documents.............................29
3.1.4 Opinion Of Counsel.............................29
3.1.5 Reaffirmation of Guaranty......................29
3.1.6 TEC AcquiSub Amendment.........................29
3.1.7 Bringdown Certificate..........................29
3.1.8 Fees...........................................29
3.1.9 Other Documents................................29
3.2 All Loans...............................................30
3.2.1 Notice Of Borrowing............................30
3.2.2 No Event Of Default............................30
3.2.3 Representations And Warranties.................30
3.2.4 Insurance......................................30
3.2.5 Other Instruments..............................30
3.3 Further Conditions To All Loans.........................30
3.3.1 General Partner Or Manager.....................30
3.3.2 Removal Of General Partner Or Manager..........30
3.3.3 Purchaser......................................31
SECTION 4. BORROWERS' AND FSI'S REPRESENTATIONS AND WARRANTIES.....31
4.1 General Representations And Warranties..................31
4.1.1 Existence And Power............................31
4.1.2 Loan Documents And Notes Authorized; Binding
Obligations....................................31
4.1.3 No Conflict; Legal Compliance..................31
4.1.4 Financial Condition............................32
4.1.5 Executive Offices..............................32
4.1.6 Litigation.....................................32
4.1.7 Material Contracts.............................32
4.1.8 Consents And Approvals.........................32
4.1.9 Other Agreements...............................33
4.1.10 Employment And Labor Agreements................33
4.1.11 ERISA..........................................33
4.1.12 Labor Matters..................................33
4.1.13 Margin Regulations.............................33
4.1.14 Taxes..........................................34
4.1.15 Environmental Quality..........................34
4.1.16 Trademarks, Patents, Copyrights, Franchises
And Licenses...................................35
4.1.17 Full Disclosure................................35
4.1.18 Other Regulations..............................35
4.1.19 Solvency.......................................35
4.1.20 Year 2000......................................35
4.2 Representations And Warranties At Time Of First Advance.35
4.2.1 Power And Authority............................35
4.2.2 No Conflict....................................36
4.2.3 Consents And Approvals.........................36
4.3 Survival Of Representations And Warranties..............36
SECTION 5. BORROWERS' AND FSI'S AFFIRMATIVE COVENANTS..............36
5.1 Records And Reports.....................................36
5.1.1 Quarterly Statements...........................36
5.1.2 Annual Statements..............................37
5.1.3 Borrowing Base Certificate.....................37
5.1.4 Compliance Certificate.........................37
5.1.5 Reports........................................37
5.1.6 Insurance Reports..............................37
5.1.7 Certificate Of Responsible Officer.............38
5.1.8 Employee Benefit Plans.........................38
5.1.9 ERISA Notices..................................38
5.1.10 Pension Plans..................................38
5.1.11 SEC Reports....................................38
5.1.12 Tax Returns....................................38
5.1.13 Additional Information.........................39
5.2 Existence; Compliance With Law..........................39
5.3 Insurance...............................................40
5.4 Taxes And Other Liabilities.............................40
5.5 Inspection Rights; Assistance...........................40
5.6 Maintenance Of Facilities; Modifications................40
5.6.1 Maintenance Of Facilities......................40
5.6.2 Certain Modifications To The Equipment.........41
5.7 Supplemental Disclosure.................................41
5.8 Further Assurances......................................41
5.9 Lockbox.................................................41
5.10 Environmental Laws......................................41
SECTION 6. BORROWER'S AND FSI'S NEGATIVE COVENANTS.................41
6.1 Liens; Negative Pledges; And Encumbrances...............41
6.2 Acquisitions............................................42
6.3 Limitations On Indebtedness.............................42
6.4 Use Of Proceeds.........................................43
6.5 Disposition Of Assets...................................43
6.6 Restriction On Fundamental Changes......................43
6.7 Transactions With Affiliates............................44
6.8 Maintenance Of Business.................................44
6.9 No Distributions........................................44
6.10 Events Of Default.......................................44
6.11 ERISA...................................................44
6.12 No Use Of Any Lender's Name.............................44
6.13 Certain Accounting Changes..............................44
6.14 Amendments Of Limited Partnership Or Operating Agreements..45
SECTION 7. FINANCIAL COVENANTS OF BORROWER AND FSI.................45
7.1 Maximum Funded Debt Ratio...............................45
7.2 Minimum Debt Service Ratio..............................45
7.3 Cash Balances...........................................45
SECTION 8. EVENTS OF DEFAULT AND REMEDIES..........................45
8.1 Events Of Default.......................................45
8.1.1 Failure To Make Payments.......................45
8.1.2 Other Agreements...............................46
8.1.3 Breach Of Covenants............................46
8.1.4 Breach Of Representations Or Warranties........46
8.1.5 Failure To Cure................................46
8.1.6 Insolvency.....................................47
8.1.7 Bankruptcy Proceedings.........................47
8.1.8 Material Adverse Effect........................47
8.1.9 Judgments, Writs And Attachments...............47
8.1.10 Legal Obligations..............................48
8.1.11 TEC AcquiSub Agreement.........................48
8.1.12 Change Of General Partner Or Manager...........48
8.1.13 Change Of Purchaser............................48
8.1.14 Criminal Proceedings...........................48
8.1.15 Action By Governmental Authority...............48
8.1.16 Governmental Decrees...........................49
8.2 Waiver Of Default.......................................49
8.3 Remedies................................................49
8.4 Set-Off.................................................50
8.5 Rights And Remedies Cumulative..........................50
SECTION 9. AGENT...................................................50
9.1 Appointment.............................................50
9.2 Delegation Of Duties....................................51
9.3 Exculpatory Provisions..................................51
9.4 Reliance By Agent.......................................51
9.5 Notice Of Default.......................................52
9.6 Non-Reliance On Agent And Other Lenders.................52
9.7 Indemnification.........................................52
9.8 Agent In Its Individual Capacity........................53
9.9 Resignation And Appointment Of Successor Agent..........53
SECTION 10. EXPENSES AND INDEMNITIES................................53
10.1 Expenses................................................53
10.2 Indemnification.........................................54
10.2.1 General Indemnity..............................54
10.2.2 Environmental Indemnity........................54
10.2.3 Survival; Defense..............................55
SECTION 11. MISCELLANEOUS...........................................55
11.1 Survival................................................55
11.2 No Waiver By Agent Or Lenders...........................55
11.3 Notices.................................................55
11.4 Headings................................................56
11.5 Severability............................................56
11.6 Entire Agreement; Construction; Amendments And Waivers..56
11.7 Reliance By Lenders.....................................57
11.8 Marshaling; Payments Set Aside..........................57
11.9 No Set-Offs By Borrowers................................57
11.10 Binding Effect, Assignment..............................57
11.11 Counterparts............................................59
11.12 Equitable Relief........................................59
11.13 Written Notice Of Claims; Claims Bar....................59
11.14 Waiver Of Punitive Damages..............................59
11.15 Relationship Of Parties.................................59
11.16 Obligations Of Each Borrower............................60
11.17 Co-Borrower Waivers.....................................61
11.18 Governing Law...........................................61
11.19 Waiver Of Jury Trial....................................62
<PAGE>
FOURTH AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
THIS FOURTH AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT is
entered into as of December 15, 1998, by and among PLM EQUIPMENT GROWTH FUND VI,
a California limited partnership ("EGF VI"), PLM EQUIPMENT GROWTH & INCOME FUND
VII, a California limited partnership ("EGF VII"), and PROFESSIONAL LEASE
MANAGEMENT INCOME FUND I, L.L.C., a Delaware limited liability company ("Income
Fund I") (EGF V, EGF VI, EGF VII and Income Fund I each individually being a
"Borrower" and, collectively, the "Borrowers"), and PLM FINANCIAL SERVICES,
INC., a Delaware corporation and the sole general partner, in the case of EGF V,
EGF VI and EGF VII, and the sole manager, in the case of Income Fund I ("FSI"),
the banks, financial institutions and institutional lenders from time to time
party hereto and defined as Lenders herein and FIRST UNION NATIONAL BANK
("FUNB") not in its individual capacity, but solely as Agent.
This Agreement amends, restates and supersedes the Growth Fund Agreement (as
defined below).
RECITALS
A. Borrowers, Lenders and Agent entered into that Third Amended and
Restated Warehousing Credit Agreement dated as of December 2, 1997, as amended
to the date hereof (as so amended, the "Growth Fund Agreement"), pursuant to
which Lenders have agreed to extend and make available to Borrowers certain
advances of credit.
B. Borrowers and Lenders desire to amend and restate the Growth Fund
Agreement as set forth herein.
C. Lenders have agreed to make such credit available to Borrowers, 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, with respect to any Borrower, any transaction, or
any series of related transactions, by which such Borrower, FSI or any of FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, directly or
indirectly (a) acquires any ongoing business or all or substantially all of the
assets of any Person or 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.
"Adjusted LIBOR" means, for each Interest Period in respect of LIBOR
Loans, an interest rate per annum (rounded upward to the nearest 1/16th of one
percent (0.0625%)) determined pursuant to the following formula:
Adjusted LIBOR = LIBOR
-------------------------------------
1.00 - Eurodollar Reserve Percentage
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 any
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 any Borrower or FSI 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.
"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 December
15, 1998, by and between Borrowers, TEC AcquiSub, AFG and Agent.
"Agreement" means this Fourth Amended and Restated Warehousing Credit
Agreement dated as of December 15, 1998, 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
or propellers, and any engines, rotables and propellers used on a stand-lone
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.
"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.
"Borrower" has the meaning set forth in the Preamble.
"Borrowing Base" means, as calculated separately for each Borrower
individually as at any date of determination, an amount not to exceed the sum
of:
(a) fifty percent (50.0%) of the unrestricted cash available
for the purchase of Eligible Inventory by such Borrower,
plus
(b) an amount equal to the lesser of (i) seventy percent
(70.0%) of the aggregate net book value or (ii) fifty percent (50.0%) of the
aggregate net fair market value of all Eligible Inventory then owned by such
Borrower or a Marine Subsidiary or owned of record by an Owner Trustee for the
beneficial interest of such Borrower or any Marine Subsidiary of such Borrower
(provided, however, that there shall be excluded from this clause (b) the
aggregate net book value or aggregate net fair market value, as the case may be,
of all items of Eligible Inventory which are either (i) off-lease or (ii)
subject to a Lease under which any applicable lease or rental payment is more
than ninety (90) days past due, but only to the extent and in the amount that
the aggregate net book value or net fair market value, as the case may be, of
such otherwise excluded Eligible Inventory exceeds fifteen percent (15.0%) of
the respective net book value or net fair market value of all Eligible Inventory
included in this clause (b) notwithstanding this proviso),
less
(c) the aggregate Consolidated Funded Debt of such Borrower
then outstanding, excluding the aggregate principal amounts of the Loans
outstanding for such Borrower under the Facility,
in each case 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 for the purpose of
computing the Borrowing Base, in the event that any Borrower or a Marine
Subsidiary of such Borrower shall own less than one hundred percent (100.0%) of
the record or beneficial interests in any item of Eligible Inventory, with one
or more of the other Equipment Growth Funds owning of record or beneficially the
remaining interests, there shall be included only such Borrower's or such Marine
Subsidiary's, as the case may be, ratable interest in such item of Eligible
Inventory).
"Borrowing Base Certificate" means, with respect to any Borrower, a
certificate with appropriate insertions setting forth the components of the
Borrowing Base of such Borrower 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 such 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, with respect to any Borrower, 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 made to such Borrower hereunder, (b) such Borrower's
employees, payroll, income or gross receipts, (c) such Borrower's ownership or
use of any of its Properties or assets or (d) any other aspect of such
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 each 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.
"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 December 14, 1999.
"Compliance Certificate" means, with respect to any Borrower, a
certificate signed by a Responsible Officer of such Borrower, substantially in
the form of Exhibit E, with such changes as Agent may from time to time
reasonably request for the purpose of having such certificate disclose the
matters certified therein and the method of computation thereof.
"Consolidated EBITDA" means, for any Borrower, as measured as at any
date of determination for any period on a consolidated basis, the sum of (a) the
Consolidated Net Income of such Borrower, plus (b) all amounts treated as
expenses for depreciation and the amortization of intangibles of any kind, plus
(c) all accrued taxes on or measured by income, plus (d) Consolidated Interest
Expense, and in the cases of clauses (b), (c) and (d), above, each to the extent
included in the determination of Consolidated Net Income.
"Consolidated Funded Debt" means, for any Borrower, as measured at any
date of determination on a consolidated basis, the total amount of all interest
bearing obligations (including Indebtedness for borrowed money) of such
Borrower, capital lease obligations of such Borrower as a lessee and the stated
amount of all outstanding undrawn letters of credit issued on behalf of such
Borrower or for which such Borrower is liable.
"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 Interest Expense" means, for any Borrower, as measured at
any date of determination for any period on a consolidated basis, the gross
interest expense of such Borrower for the period (including all commissions,
discounts, fees and other charges in connection with standby letters of credit
and similar instruments), less interest income for that period.
"Consolidated Net Income" means, for any Borrower, as measured at any
date of determination for any period on a consolidated basis, the net income (or
loss) of such Borrower for such period taken as a single accounting period.
"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.
"Debt Service Ratio" means, as measured separately for each Borrower as
at any date of determination, the ratio of (a) Consolidated EBITDA to (b) the
sum of (i) Consolidated Interest Expense plus (ii) an amount equal to three and
one-eighths percent (3.125%) of Consolidated Funded Debt (Consolidated EBITDA
and Consolidated Interest Expense to be measured on a quarterly basis for the
current fiscal quarter).
"Default Rate" has the meaning set forth in Section 2.3.
"Designated Deposit Account" means a demand deposit account maintained
by Borrowers with FUNB designated by written notice from Borrowers to Agent.
"Dollars" and the sign "$" means lawful money of the United States of
America.
"Effective Amount" means with respect to any Loans on any date, the
aggregate outstanding principal amount thereof after giving effect to any
borrowing and prepayments or repayments thereof occurring on such date.
"EGF" means PLM Equipment Growth Fund, a California limited
partnership.
"EGF II" means PLM Equipment Growth Fund, 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" has the meaning set forth in the Preamble to this Agreement
"EGF VII" has the meaning set forth in the Preamble to this Agreement.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any State thereof; (b) a commercial bank organized
under the laws of any other country which is a member of the Organization for
Economic Cooperation and Development ("OECD"), or a political subdivision of any
such country, provided, however, that such bank is acting through a branch or
agency located in the country in which it is organized or another country which
is also a member of the OECD; (d) an insurance company organized under the laws
of the United States; (e) a commercial finance company, mutual or other
investment fund, lease financing company or other institutional investor
(whether a corporation, partnership, trust or other entity) that is engaged in
making, purchasing or otherwise investing in commercial loans in the ordinary
course of its business, provided that such Person is an "accredited investor"
(as defined in Regulation D under the Securities Act of 1933, as amended); (f)
any Lender party to this Agreement; (g) any Lender Affiliate and (h) any other
Person approved by Agent and Borrower, such approval not to be unreasonably
withheld; provided, however, that (i) Borrower's approval shall not be required
so long as an Event of Default has occurred and is continuing and (ii) an
Affiliate of Borrower shall not qualify as an Eligible Assignee.
"Eligible Inventory" means, with respect to any Borrower, all Trailers,
Aircraft and Aircraft engines, Railcars, cargo-containers, marine vessels and,
if approved by Requisite Lenders, other related Equipment, in each case owned by
such Borrower or a Marine Subsidiary of such Borrower (or jointly by such
Borrower and one or more of the other Equipment Growth Funds) or, subject to the
approval of Agent, any owner trust of which such Borrower is the sole
beneficiary or owner (or is the beneficiary or owner jointly with one or more of
the other Equipment Growth Funds), 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
such Borrower or a Marine Subsidiary of such Borrower is the sole beneficiary or
direct or indirect owner (or as the beneficiary or direct or indirect owner
jointly with one or more of the other Equipment Growth Funds).
"Employee Benefit Plan" means, with respect to any Borrower, any
Pension Plan and any employee welfare benefit plan, as defined in Section 3(1)
of ERISA, that is maintained for the employees of such Borrower, FSI or any of
FSI's Subsidiaries or any ERISA Affiliate of such Borrower.
"Environmental Claims" means, with respect to any Borrower, 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 such Borrower, FSI or any
Subsidiary of FSI, 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 4.1.15.
"Equipment" means, with respect to any Borrower, all items of
transportation related equipment owned directly or beneficially by such Borrower
or by any Marine Subsidiary of such Borrower 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 such Borrower or any Marine Subsidiary of
such Borrower 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.
"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 Borrowers, on a several but not joint basis, 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" has the meaning set forth in the Preamble.
"FUNB" has the meaning set forth in the Preamble.
"Funded Debt Ratio" means, as measured separately for each Borrower as
at any date of determination, the ratio of (a) the Consolidated Funded Debt of
such Borrower to (b) the sum of (i) the aggregate net fair market value of the
Equipment owned of record and beneficially by such Borrower or any Marine
Subsidiary of such Borrower or owned of record by an Owner Trustee for the
beneficial interest of such Borrower or any Marine Subsidiary of such Borrower
plus (ii) the unrestricted cash available for the purchase of Eligible Inventory
for such Borrower (provided, that for the purpose of computing the Funded Debt
Ratio, in the event that any Borrower or a Marine Subsidiary of such Borrower
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 any such Borrower's or such Marine Subsidiary's, as the case
may be, ratable interest in such item of Equipment).
"Funding Date" means with respect to any proposed borrowing hereunder,
the date funds are advanced to any Borrower for any Loan requested by such
Borrower.
"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.
"Guaranty" means that 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, 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.
"IMI" means PLM Investment Management, Inc., a California corporation
and a wholly-owned Subsidiary of FSI.
"Income Fund I" has the meaning set forth in the Preamble to this
Agreement.
"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.
"Indemnified Person" has the meaning set forth in Section 10.2.
"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; provided, however, that if any Interest Period for
a LIBOR Loan exceeds three (3) months, interest shall also be paid on the date
which falls three (3) months after the beginning of such Interest Period.
"Interest Period" means, with respect to any LIBOR Loan, the one-month,
two-month or three-month period selected by the Requesting 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 Company Act" means the Investment Company Act of 1940, as
amended (15 U.S.C.ss. 80a-1 et seq.), as the same may be in effect from time to
time, or any successor statute thereto.
"IRS" means the Internal Revenue Service and any successor thereto.
"Lease" means, for any Borrower, 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 such
Borrower is the record or beneficial 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
such Borrower therein, and (c) any and all amendments, renewals, extensions or
guaranties thereof.
"Lender 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.
"Lenders" means the banks, financial institutions or other
institutional lenders which have executed signature pages to this Agreement and
such other Assignees, banks, financial institutions or other institutional
lenders as shall hereafter execute and deliver an Assignment and Acceptance with
respect to all or any portion of the Commitments and the Loans advanced and
maintained pursuant to the Commitments, in each case pursuant to and in
accordance with Section 11.10.
"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 Borrowers 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.
"Limited Partnership Agreement" means (a) for EGF VI, the Amended and
Restated Limited Partnership Agreement dated as of December 20, 1991 and (b) for
EGF VII, the Third Amended and Restated Limited Partnership Agreement of EGF VII
dated as of May 10, 1993, as amended by the First Amendment to the Third Amended
and Restated Limited Partnership Agreement dated May 28, 1993 and by the Second
Amendment to Third Amended and Restated Limited Partnership Agreement dated as
of January 21, 1994.
"Loan" has the meaning set forth in Section 2.1.1.
"Loan Document" when used in the singular and "Loan Documents" when
used in the plural means any and all of this Agreement, the Notes, 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 any 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 December 15,
1998, among Borrowers, FUNB and Agent on behalf and for the benefit of Lenders,
relating to the Lockbox.
"Marine Subsidiary" means, for any Borrower, a Subsidiary of such
Borrower (in which the remaining record or beneficial ownership interests may be
held by TEC AcquiSub or any Equipment Growth Fund) organized for the purpose of
holding legal record title to one or more marine vessels or to aircraft rotables
and spare parts.
"Material Adverse Effect" means, with respect to any Borrower, 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 such
Borrower or FSI, (c) materially impairs or could reasonably be expected to
materially impair the ability of such Borrower or FSI 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 seventy-nine (179) days after the
Funding Date of such Loan or such earlier or later date as requested by the
Requesting Borrower and approved by 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, with respect to any Borrower, a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA, and to which
such Borrower, FSI or any of FSI's Subsidiaries or any ERISA Affiliate of such
Borrower, FSI or any of FSI's Subsidiaries 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, substitutions and renewals thereof.
"Notice of Borrowing" means a notice given by any Borrower to Agent in
accordance with Section 2.7, substantially in the form of Exhibit F, with
appropriate insertions.
"Notice of Conversion/Continuation" means a notice given by any
Borrower to Agent in accordance with Section 2.8, substantially in the form of
Exhibit G, with appropriate insertions.
"Obligations" means, with respect to any Borrower, all loans, advances,
liabilities and obligations for monetary amounts owing by such 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 such 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 such 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 FSI, on behalf of FSI for itself and as the sole
general partner or managing member, as applicable, of each Borrower,
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 Sections 2.1.1(a)(iii) and
(iv).
"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 any
Borrower or FSI.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Pension Plan" means, with respect to any Borrower, any employee
pension benefit plan, as defined in Section 3(2) of ERISA, that is maintained
for the employees of such Borrower, FSI or any of FSI's Subsidiaries or any
ERISA Affiliate of such Borrower, FSI or any of FSI's Subsidiaries, 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, as to any Lender at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of the Effective Amount of such Lender's Loans divided by the Effective
Amount of all Loans, or if no Loans are outstanding, the percentage equivalent
(expressed as a decimal, rounded to the ninth decimal place) at such time of
such Lender's aggregate Commitments divided by the aggregate Commitments or, if
the Commitments have expired or been terminated and all Loans repaid in full,
the percentage equivalent (expressed as a decimal, rounded to the ninth decimal
place) of the Effective Amount of such Lender's Loans divided by the aggregate
Effective Amount of all Loans immediately before such repayment in full.
"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 December 15, 1998, executed by PLMI in favor of Lenders
reaffirming its obligations under the Guaranty.
"Regulations T, U and X" means, collectively, Regulations G, T, U and X
adopted by the Federal Reserve Board (12 C.F.R. Parts 220, 221 and 224,
respectively) and any other regulation in substance substituted therefor.
"Requesting Borrower" means any Borrower requesting a Loan pursuant to
Section 2.1.1.
"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 for (i) FSI, any of the President,
Executive Vice President, Chief Financial Officer, Secretary or Corporate
Controller of FSI having authority to request Advances or perform other duties
required hereunder, and (ii) Borrowers, any of the President, Executive Vice
President, Chief Financial Officer, Secretary or Corporate Controller of FSI as
the sole general partner of EGF V, EGF VI or EGF VII, as the case may be, or
sole manager of Income Fund I, in each case having authority to request Advances
or perform other duties required hereunder
"SEC" means the Securities and Exchange Commission and any successor
thereto.
"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 or other business entity
(other than Equipment Growth Funds) 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%) 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.
"TEC AcquiSub" means TEC AcquiSub, Inc., a California special purpose
corporation and a wholly-owned Subsidiary of TEC.
"TEC AcquiSub Agreement" means the Third Amended and Restated
Warehousing Credit Agreement dated as of December 15, 1998, by and among TEC
AcquiSub, Lenders and Agent, and as the same may from time to time be further
amended, modified, supplemented, renewed, extended or restated.
"Termination Event" means, with respect to any Borrower, (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 such
Borrower, FSI or any of FSI's 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 California; 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 any
collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of California, 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 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
each Borrower's financial condition to substantially the same criteria as were
effective prior to such change in GAAP and (b) each 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 each Borrower would have been in compliance therewith under GAAP as
in effect immediately prior to such change.
1.3 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 Exhibits. Any reference to a "Section," "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 Borrowers set forth
herein, Lenders hereby agree to make Advances (as defined below) of immediately
available funds to Borrowers, 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 TEC AcquiSub Agreement or (b) for any one Borrower,
its respective Borrowing Base (such lesser amount being the "Maximum
Availability"), as more fully set forth in this Section 2.1.1. The obligation of
Borrowers to repay the Advances made to any Borrower shall be several but not
joint.
(a) Facility Commitments.
(i) On the Funding Date requested by any Borrower (the "Requesting Borrower"),
after such 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 such Borrower at the Designated Deposit Account (or such
other deposit account at FUNB or such other financial institution as to which
such 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. The
Requesting 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 the Requesting Borrower incurred in connection therewith shall be
due and payable no later than the Maturity Date of such Loan. Each Loan advanced
hereunder by each Lender shall be evidenced by the Requesting Borrower's
revolving promissory note in favor of such Lender 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 such 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
Requesting Borrower's Borrowing Base, or (2) taking into account such Lender's
portion of the aggregate principal amounts outstanding under this Agreement,
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 to any Borrower shall exceed the Maximum Availability
for such Borrower (the amount of such excess, if any, being an "Overadvance"),
such 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), as set forth on a Borrowing Base Certificate delivered to
Agent pursuant to Section 5.1.3, then, to the extent of such decrease, such
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
hereunder so long as such Overadvance condition shall remain in effect.
(iv) Amounts borrowed by Borrowers 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 and no LIBOR Loan shall have an Interest Period ending after
the Maturity Date.
(v) Each request for a Loan hereunder shall constitute a reaffirmation by the
Requesting 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 the Requesting
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 by the
Requesting Borrower 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 by the Requesting Borrower 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 any 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 by any Borrower under its 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 Agent, Agent shall notify by
telephone, telecopier, facsimile or telex each Lender of the (a) Requesting
Borrower, (b) the principal amount (including Lender's Pro Rata Share thereof)
and (c) Funding Date of the Loan requested by such Requesting 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 Requesting
Borrower in the amount of its Pro Rata Share of the Loan being requested. 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 items of Equipment.
2.2 Repayment And Prepayment.
2.2.1 Repayment. Unless prepaid pursuant to Section 2.2.2, the principal amount
of each Loan hereunder made to a Requesting Borrower shall be repaid by the
Requesting Borrower to Lenders not later than the Maturity Date of such Loan.
2.2.2 Voluntary Prepayment. Subject to Section 2.18, any Borrower may in the
ordinary course of such 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 any Borrower or any Marine Subsidiary of such Borrower, or the ownership
interests (whether Stock or otherwise) of any Borrower in any Marine Subsidiary
of such Borrower owning record or beneficial title to any item of Eligible
Inventory shall be sold or transferred, then such 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 any 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 any 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 such 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, the applicable 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 such 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 such
Borrower as provided in Section 2.2.1.
2.3 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 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 Borrowers notice
of any such change in the Prime Rate; provided, however, that any failure by
Agent to provide Borrowers 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 (2.00%) 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
Borrowers under this Agreement, the Notes 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, One First Union Center, 301 South College Street, Charlotte, North
Carolina 28288, Attention: Maria Ostrowski, 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 Maturity Date of
such Loan.
2.6 Application Of Payments. All payments to or for the benefit of Lenders
hereunder shall be applied to the Obligations of any Borrower making payment in
the following order: (a) then due and payable fees as set forth in Section
2.1.1(a)(i) and, at the direction of such Borrower or upon prior notice given to
such Borrower by Agent, other 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 such Borrower as Lenders may deem advisable. To the extent
any 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 such 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 any
Requesting Borrower's irrevocable written notice delivered to Agent in the form
of a Notice of Borrowing, executed by a Responsible Person of such Requesting
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,
Borrowers may not elect to have a Loan made as a LIBOR Loan.
2.8 Conversion And Continuation Elections.
2.8.1 Election. Each 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 such
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 such 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 any Borrower's irrevocable written notice delivered to Agent in the
form of a Notice of Conversion/Continuation, executed by a Responsible Person of
such 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, the Requesting Borrower has failed to select a new Interest
Period to be applicable to such LIBOR Loan, such 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,
Borrowers may not elect to have a Loan converted into or continued as a LIBOR
Loan.
2.9 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 Borrowers 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 the
Requesting Borrower a corresponding Advance. If Agent has made funds available
to such 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
such Requesting Borrower and such Requesting 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 such Requesting 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 such Requesting 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 any Borrower prior to the date on which any payment
to be made by such Borrower hereunder is due that such Borrower does not intend
to remit such payment, Agent may, in its sole discretion, assume that such
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 such 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 each 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 (a) such additional amounts as shall be
sufficient to compensate such Lender or other corporation for such reduction
resulting from such Borrower's Loans or (b) in the case where such reduction
results from compliance with any such law, regulation, guideline or request
affecting only the Commitments and not the Loans, such additional amounts as
shall be sufficient to compensate such Lender or other corporation for such
reduction based on each Borrower's percentage of average usage of the
Commitments versus the total average usage by all Borrowers. A certificate
submitted by such Lender to any 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
effected Borrowers and Agent of any circumstances that would cause any Borrower
to pay additional amounts pursuant to this section, provided that the failure to
give such notice shall not affect Borrowers' obligation to pay any such
additional amounts.
2.14 Taxes.
2.14.1 No Deductions. Subject to Section 2.14.7, any and all payments by each
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, Borrowers 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 Section 2.14.7, each 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 in relation to any
payments made by or Obligations of such Borrower 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 any 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 Section 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) such Borrower shall make such deductions, and
(c) such 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 any Borrower of Taxes or Other Taxes, such 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 Borrowers 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 Borrowers 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 Borrowers 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 any Borrower's or Agent's reasonable request to that effect,
deliver to such 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. Borrowers will not be required to pay any additional
amounts in respect of United States Federal income tax pursuant to Section
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 Section 2.14.6
in respect of such Lending Office;
(b) If such Lender shall have delivered to Borrowers a Form 4224 in respect of
such Lending Office pursuant to Section 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 Borrowers 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 Borrowers a Form 1001 in respect of
such Lending Office pursuant to Section 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 Borrowers 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, any Borrower requests any Lender
to deliver any forms or other documentation pursuant to Section 2.14.6(a), then
such 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 any Borrower is required to pay additional amounts to
any Lender or Agent pursuant to Section 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 such Borrower which may thereafter
accrue if such change, in the judgment of such Lender, is not otherwise
disadvantageous to such Lender.
2.15 Illegality.
2.15.1 LIBOR 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 the Requesting Borrower, the obligation of such Lender to
make LIBOR Loans shall be suspended until such Lender shall have notified the
Requesting 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, Borrowers 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 Borrowing. If any Borrower is required to prepay any LIBOR
Loan immediately as provided in Section 2.15.2, then concurrently with such
prepayment, such 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 Borrowers shall be liable on a joint and several basis for,
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 Borrowers
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 Requisite Lenders, revokes such notice in writing. Upon receipt
of such notice, Borrowers may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted. If a Borrower does not revoke such
notice, Lenders shall make, convert or continue the Loans, as proposed by such
Borrower, in the amount specified in the applicable notice submitted by such
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. Each Borrower agrees, severally but not jointly,
that in the event that such 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. Borrowers 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:
(a) 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
(b) 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 TO EFFECTIVENESS OF THIS AGREEMENT AND THE
MAKING OF LOANS.
3.1 Effectiveness of This Agreement. The effectiveness of this Agreement is
subject to the satisfaction of the following conditions precedent:
3.1.1 Partnership, Company And Corporate Documents. Agent shall have received,
in form and substance satisfactory to Lenders and their respective counsel a
certified copy of the records of all actions taken by each Borrower, FSI and
PLMI, including all resolutions of each Borrower and corporate resolutions of
FSI 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.
3.1.2 Notes. Agent shall have received new Notes, in form and substance
satisfactory to Lenders, and duly executed and delivered by each Borrower, which
Notes shall replace and supersede the Notes issued by Borrowers to Agent
pursuant to the Growth Fund Agreement.
3.1.3 Opinion Of Counsel. Agent shall have received an originally executed
Opinion of Counsel, 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 Guaranty. Agent shall have received the Reaffirmation of
Guaranty, in form and substance satisfactory to Lenders, duly executed and
delivered by PLMI.
3.1.5 TEC AcquiSub Amendment. Agent shall have received the TEC AcquiSub
Agreement, duly executed and delivered by TEC AcquiSub, and all conditions
precedent to the effectiveness of the TEC AcquiSub Agreement shall have been
satisfied.
3.1.6 Bringdown Certificate. Separate certificates, dated as of the Closing
Date, of the Chief Financial Officer or Corporate Controller of FSI, in its
capacity as the sole general partner of EGF VI and EGF VII and as the sole
manager of Income Fund I, to the effect that (i) the representations and
warranties of each 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.
3.1.7 Fees. Agent shall have received the Agent's Side Letter, duly executed by
Borrowers and TEC AcquiSub, and Agent shall have received the fees described in
the Agent's Side Letter.
3.1.8 Other Documents. Agent shall have received such other documents,
information and items from Borrowers and FSI 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 any Borrower, Agent
shall have received (i) Notice of Borrowing and (ii) a Borrowing Base
Certificate, with appropriate insertions, executed by the Chief Financial
Officer or Corporate Controller of such Borrower.
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 TEC AcquiSub Agreement or under (and as
separately defined in) the AFG 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 TEC AcquiSub Agreement or the AFG Agreement.
3.2.3 Representations And Warranties. All representations and warranties
contained in the Loan Documents shall be 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).
3.2.4 Insurance. The insurance required to be maintained by such Borrower
pursuant to the Loan Documents shall be in full force and effect.
3.2.5 Other Instruments. Agent shall have received such other instruments and
documents as it may have reasonably requested from Borrowers 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 of EGF V, EGF VI or EGF VII 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 or capital contribution in such Borrower.
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
shall at any time vote to remove FSI as manager of Income Fund I, in each case,
regardless of whether FSI is actually removed.
3.3.3 Purchaser. Requesting Borrower, TEC AcquiSub, FSI or their Subsidiaries
shall have ceased to be the purchaser of Eligible Inventory for such Requesting
Borrower.
Section 4. BORROWERS' AND FSI'S REPRESENTATIONS AND WARRANTIES.
4.1 General Representations And Warranties. Each Borrower, severally, as to
itself, but not jointly as to the other Borrowers and FSI, and FSI, jointly and
severally with each Borrower as to each such Borrower and as to itself, hereby
warrant and represent to Agent and each Lender as follows, and agree 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:
4.1.1 Existence And Power. Each Borrower is a limited partnership or, in the
case of Income Fund I, a limited liability company, and FSI is a corporation,
each duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified and licensed as a foreign
corporation, partnership or limited liability company, as applicable, 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. Each Borrower and FSI has the power and authority, rights and
franchises to own their Property and assets and to carry on their businesses as
now conducted. Each Borrower and FSI has the power and authority to execute and
deliver the Loan Documents (to the extent each is a party thereto) and all other
instruments and documents contemplated hereby or thereby.
4.1.2 Loan Documents And Notes Authorized; Binding Obligations. The execution,
delivery and performance of this Agreement and each of the other Loan Documents
to which any Borrower is a party and delivery and payment of such Borrower's
respective Notes have been duly authorized by all necessary and proper action on
the part of such Borrower. The execution, delivery and performance of this
Agreement and each of the other Loan Documents to which FSI is a party have been
duly authorized by all necessary and proper corporate action on the part of FSI.
The Loan Documents constitute legally valid and binding obligations of each
Borrower and FSI, as the case may be, enforceable against each Borrower and FSI,
to the extent any one of them 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.
4.1.3 No Conflict; Legal Compliance. (a) The execution, delivery and performance
of this Agreement, and each of the other Loan Documents and the execution,
delivery and payment of the Notes will not: (i) contravene any provision of
FSI's certificate of incorporation or bylaws; (ii) contravene any provision of
any Borrowers' Limited Partnership Agreements or, in the case of Income Fund I,
Operating Agreement or other formation or organization document; or (iii)
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 Material Adverse Effect; and (b) the execution and delivery
of this Agreement, and each of the other Loan Documents and the execution and
delivery of the Notes will not 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 which are, in the aggregate, material and to which any
Borrower or FSI is a party or by which any Borrower, FSI or their Property and
assets may be bound or affected. Neither any Borrower nor FSI is 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 any one of them 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.
4.1.4 Financial Condition. Each Borrower's and FSI's audited consolidated
financial statements as of December 31, 1997 and Borrowers' and FSI's unaudited
consolidated financial statements as of September 30, 1998, copies of which
heretofore have been delivered to Agent by such Borrower and FSI, respectively,
and all other financial statements and other data submitted in writing by any
Borrower and FSI 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 such Borrower and 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 any Borrower or FSI since December 31, 1997.
4.1.5 Executive Offices. The current location of each Borrower's and FSI's chief
executive offices and principal places of business is set forth on Schedule
4.1.5.
4.1.6 Litigation. Except as disclosed on Schedule 4.1.6, there are no claims,
actions, suits, proceedings or other litigation pending or, to the best of each
Borrower's and FSI's knowledge, after due inquiry, threatened against any
Borrower, FSI or any of FSI's Subsidiaries, including, without limitation, TEC
AcquiSub, at law or in equity before any Governmental Authority or, to the best
of each Borrower's and FSI's knowledge, after due inquiry, any investigation by
any Governmental Authority of any Borrower's or FSI's or any of FSI's
Subsidiaries', including, without limitation, TEC AcquiSub's, affairs,
Properties or assets which would, with reasonable likelihood, if adversely
determined, have a Material Adverse Effect. Other than any liability incident to
the litigation or proceedings disclosed on Schedule 4.1.6, neither any Borrower,
nor FSI nor any of FSI's Subsidiaries, including, without limitation, TEC
AcquiSub, has any Contingent Obligations which are not provided for or disclosed
in the financial statements delivered to Agent pursuant to Sections 4.1.4 and
5.1.
4.1.7 Material Contracts. Schedule 4.1.7 lists all currently effective contracts
and agreements (whether written or oral) to which each Borrower is a party and
which (i) could involve the payment or receipt by such Borrower after the date
of this Agreement of more than $250,000 or (ii) otherwise materially affect the
business, operations or financial condition of any Borrower (the "Material
Contracts"). Except as disclosed on Schedule 4.1.7, there are no material
defaults under any such Material Contract by any Borrower, to the best of each
Borrower's knowledge, by any other party to any such Material Contract. Each
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).
4.1.8 Consents And Approvals. Except as set forth in Schedule 4.1.8, all
consents and approvals of, filings and registrations with, and other actions in
respect of, all Governmental Authorities required to be obtained by any
Borrower, FSI or any of FSI's Subsidiaries 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.
4.1.9 Other Agreements. Neither any Borrower, FSI nor any of FSI's Subsidiaries,
including, without limitation, TEC AcquiSub, is a party to or is bound by any
agreement, contract, lease, license or instrument, or is 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. Neither
any Borrower nor FSI has entered into and, as of the Closing Date does not
contemplate entering into, any material agreement or contract with any Affiliate
of any Borrower or FSI on terms that are less favorable to such Borrower or FSI
than those that might be obtained at the time from Persons who are not such
Affiliates.
4.1.10 Employment And Labor Agreements. There are no collective bargaining
agreements or other labor agreements covering any employees of any Borrower, FSI
or any of FSI's Subsidiaries.
4.1.11 ERISA. No Borrower has an Employee Benefit Plan subject to ERISA. All
Pension Plans of FSI and any of FSI's Subsidiaries, that are intended to be
qualified under Section 401(a) of the Code have been determined by the IRS to be
qualified or FSI or any of FSI's Subsidiaries will obtain such determination
prior to instituting such a Pension Plan. 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 FSI or any of FSI's Subsidiaries 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 FSI or any of FSI's
Subsidiaries has occurred with respect to any such Employee Benefit Plan.
4.1.12 Labor Matters. There are no strikes or other labor disputes against any
Borrower, FSI or any of FSI's Subsidiaries or, to the best of each Borrower's
and FSI's knowledge, after due inquiry, threatened against any Borrower, FSI or
any of FSI's Subsidiaries, which would, with reasonable likelihood, have a
Material Adverse Effect. All payments due from any Borrower or FSI 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 such Borrower or FSI.
4.1.13 Margin Regulations. Neither any Borrower nor FSI own any "margin
security", as that term is defined in Regulation 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 T, U and X. Neither any Borrower nor
FSI will 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.
4.1.14 Taxes. All federal, state, local and foreign tax returns, reports and
statements required to be filed by any Borrower, FSI and, to the best of each
Borrower's and FSI's knowledge, after due inquiry, by any of FSI's Subsidiaries
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
any Borrower, FSI or such Subsidiary 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 such Borrower, FSI or such Subsidiary 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. Each Borrower,
FSI and, to the best of each Borrower's and FSI's knowledge, after due inquiry,
each of FSI's Subsidiaries has paid when due and payable all material Charges
upon the books of any Borrower, FSI or such Subsidiary and no Government
Authority has asserted any Lien against any Borrower, FSI or any of FSI's
Subsidiaries with respect to unpaid Charges. Proper and accurate amounts have
been withheld by each Borrower, FSI and, to the best of each Borrower's and
FSI's knowledge, after due inquiry, each of FSI's Subsidiaries 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.
4.1.15 Environmental Quality.
(a) Except as specifically disclosed in Schedule 4.1.15, the on-going operations
of each Borrower, FSI and each of FSI's Subsidiaries comply in all material
respects with all Environmental Laws, except such non-compliance which would not
(if enforced in accordance with applicable law) result in liability in excess of
$250,000 in the aggregate.
(b) Except as specifically disclosed in Schedule 4.1.15, each Borrower, FSI and
each of FSI's Subsidiaries 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 each Borrower, FSI and each of FSI's Subsidiaries is
in compliance with all material terms and conditions of such Environmental
Permits.
(c) Except as specifically disclosed in Schedule 4.1.15, neither any Borrower,
FSI or any of FSI's Subsidiaries nor any of their respective 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.
(d) Except as specifically disclosed in Schedule 4.1.15, 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 any Borrower,
FSI or any of FSI's Subsidiaries that would reasonably be expected to give rise
to Environmental Claims with a potential liability of any Borrower, FSI or any
of FSI's Subsidiaries in excess of $250,000 in the aggregate for any such
condition, circumstance or Property.
4.1.16 Trademarks, Patents, Copyrights, Franchises And Licenses. Each Borrower
and FSI and, to the best of their knowledge, after due inquiry, each of FSI's
Subsidiaries possess and owns all necessary trademarks, trade names, copyrights,
patents, patent rights, franchises and licenses which are material to the
conduct of their business as now operated.
4.1.17 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 any Borrower or FSI 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.
4.1.18 Other Regulations. Neither any Borrower nor FSI is: (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 each 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.
4.1.19 Solvency. Each Borrower and FSI are Solvent.
4.1.20 Year 2000. Each Borrower has reviewed the areas within its business and
operations which could be adversely affected by, and has developed or is
developing a program to address on a timely basis, the "Year 2000 Problem" (that
is, the risk that computer applications used by Borrower may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date on or after December 31, 1999), and have made related
appropriate inquiry of material suppliers, vendors and customers. Based on such
review and program, each Borrower believes that the "Year 2000 Problem" would
not with reasonable likelihood have or result in a Material Adverse Effect.
4.2 Representations And Warranties At Time Of First Advance. At the time any
Borrower makes a request for an initial borrowing hereunder, each such Borrower,
severally, as to itself, but not jointly as to the other Borrowers and FSI, and
FSI, jointly and severally with each Borrower as to each such Borrower and as to
itself, hereby warrant and represent to Agent and each Lender as follows, and
agree 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 additional borrowing hereunder:
4.2.1 Power And Authority. Each Borrower and FSI has the power and authority to
perform the terms of the Loan Documents (to the extent each is a party thereto)
and all other instruments and documents contemplated hereby or thereby.
4.2.2 No Conflict. The performance of this Agreement, and each of the other Loan
Documents and the payment of the Notes will not 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 which are, in the aggregate,
material and to which any Borrower or FSI is a party or by which any Borrower,
FSI or their Property and assets may be bound or affected.
4.2.3 Consents And Approvals. No approval, authorization or consent of any
trustee or holder of any indebtedness or obligation of any Borrower or FSI or of
any other Person under any such material agreement, contract, lease or license
or similar document or instrument to which such Borrower, FSI or any of FSI's
Subsidiaries is a party or by which such Borrower, FSI or any such Subsidiary is
bound, is required to be obtained by any such Borrower, FSI or any such
Subsidiary in order to make or consummate the transactions contemplated under
the Loan Documents.
4.3 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.
Section 5. BORROWERS' AND FSI'S AFFIRMATIVE COVENANTS.
Each Borrower, severally, as to itself, but not jointly as to the other
Borrowers and FSI, and FSI, jointly and severally with each Borrower as to each
Borrower and as to itself (and, where applicable, PLMI) covenant and agree 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, each Borrower and FSI shall do or
cause to have done all of the following:
5.1 Records And Reports. Maintain, and cause each of FSI's Subsidiaries to
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 each 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 each
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' or members' equity of each Borrower and FSI and the related
consolidated statements of income, stockholders' or members' 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 the general partner or manager of each Borrower, as applicable,
FSI and PLMI that they (i) are complete and fairly present the financial
condition of such 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 each 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 each Borrower and
PLMI, consolidated and consolidating balance sheets of PLMI and a balance sheet
of each Borrower as at the end of such year and the related consolidated (and,
as to statements of income only for PLMI, consolidating) statements of income,
stockholders' or members' equity and cash flows of each Borrower, if applicable,
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 each Borrower 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 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 the general partner or manager of each 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 each Borrower,
a Compliance Certificate dated as of the last day of such fiscal quarter, and
executed by the Chief Financial Officer or Corporate Controller of the general
partner or manager of such Borrower, with appropriate insertions.
5.1.5 Reports. At Agent's request, promptly upon receipt thereof, copies of all
reports submitted to each Borrower, FSI or PLMI by independent public
accountants in connection with each annual, interim or special audit of the
financial statements of such Borrower, FSI or PLMI made by such accountants;
5.1.6 Insurance Reports. (i) On the date six months after the Closing Date and
thereafter upon Agent's reasonable request, which request will not be made more
than once during any calendar year (unless an Event of Default shall have
occurred and be continuing), a report from each Borrower's insurance broker, in
such detail as Agent may reasonably request, as to the insurance maintained or
caused to be maintained by each 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 any 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 such Borrower shall give Agent prompt written notice if changes affecting
risk coverage will be made to such policy or if the policy will be terminated;
5.1.7 Certificate Of Responsible Officer. Promptly upon any officer of any
Borrower or FSI obtaining knowledge (a) of any condition or event which
constitutes an Event of Default or Potential Event of Default under this
Agreement, (b) that any Person has given any notice to any Borrower, FSI, TEC,
TEC AcquiSub 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, (c) 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 any Borrower, FSI, TEC, TEC
AcquiSub or PLMI equal to or greater than $500,000 or any adverse judgment in
any litigation involving a potential liability of any Borrower, FSI, TEC, TEC
AcquiSub or PLMI equal to or greater than $500,000, or (d) of a material adverse
change in the business, operations, properties, assets or condition (financial
or otherwise) of any Borrower, FSI, TEC, TEC AcquiSub or PLMI, a certificate of
a Responsible Officer of any Borrower or FSI, as applicable, 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 such Borrower, FSI, TEC, TEC AcquiSub 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 (a) Termination Event in connection with any Pension Plan or (b) "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 any 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 (a) all notices
received by any Borrower, FSI, any of FSI's Subsidiaries or any of their ERISA
Affiliates of the PBGC's intent to terminate any Pension Plan or to have a
trustee appointed to administer any Pension Plan, (b) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by any Borrower, FSI,
any of FSI's Subsidiaries or any of their ERISA Affiliates with the IRS with
respect to each Pension Plan covering employees of any Borrower, FSI or any of
FSI's Subsidiaries, and (c) all notices received by any Borrower, FSI, any of
FSI's Subsidiaries or any of their 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 any Borrower, FSI or any of FSI's
Subsidiaries, any challenge by the IRS to the qualification under Section 401 or
501 of the Code of any Pension Plan;
5.1.11 SEC 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 any
Borrower and PLMI;
5.1.12 Tax 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 any Borrower and FSI; and
5.1.13 Additional Information. Such other information respecting the condition
or operations, financial or otherwise, of any 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 any Borrower from
time to time receives or Agent or any Lender reasonably requests.
All financial statements of Borrowers, FSI and PLMI to be delivered by
any Borrower and FSI to Agent pursuant to this Section 5.1 will be complete and
correct and present fairly the financial condition of each Borrower, FSI and
PLMI as of the date thereof; will disclose all liabilities of each 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
Borrowers and FSI will, to the best of each Borrower's and FSI's knowledge,
after due inquiry, be true and correct. Each Borrower and FSI hereby agree that
each time any one of them submits a financial statement or tax return to Agent,
such Borrower and FSI 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.
Statements of financial performance required to be provided by Borrower
to Agent pursuant to this Section 5.1 shall (a) include a statement that the
Year 2000 remediation efforts of Borrower are proceeding as scheduled and no
Material Adverse Effect is expected to result from the "Year 2000 Problem"
(within the meaning of such term set forth in Section 4.20) or such remediation
efforts and (b) indicate whether an auditor, regulator or third party consultant
has issued a management letter or other communication regarding the Year 2000
exposure, program or progress of Borrower.
5.2 Existence; Compliance With Law. Each Borrower and FSI shall preserve and
maintain, and FSI shall cause each of FSI's Subsidiaries, including, without
limitation, TEC AcquiSub, to preserve and maintain, their existence and all of
their licenses, permits, governmental approvals, rights, privileges and
franchises necessary or desirable in the normal conduct of their businesses as
now conducted or presently proposed to be conducted (including, without
limitation, their qualification to do business in each jurisdiction in which
such qualification is necessary or desirable in view of its business); conduct,
and cause each of FSI's Subsidiaries, including, without limitation, TEC
AcquiSub, and any Owner Trustee to conduct, its business in an orderly and
regular manner; and comply, and cause each of FSI's Subsidiaries, including,
without limitation, TEC AcquiSub, and any Owner Trustee, to comply, with (a) as
to any Borrower, its Limited Partnership Agreement, Operating Agreement and
other organizational documents, as applicable, and as to FSI and each of its
Subsidiaries, including, without limitation, TEC AcquiSub, the provisions of its
respective certificate or articles of incorporation, as applicable, and bylaws
and (b) the requirements of all applicable laws, rules, regulations or orders of
any Governmental Authority and requirements for the maintenance of any
Borrower's, FSI's or such Subsidiary'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. Each Borrower and FSI shall maintain and keep in force, and cause
each of FSI's Subsidiaries, including, without limitation, TEC AcquiSub, to
maintain and keep in force insurance of the types and in amounts then
customarily carried in lines of business similar to that of Borrowers, FSI or
any of FSI's Subsidiaries as the case may be, 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 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 any Borrower
than provided as of the Closing Date by the existing blanket policies of
insurance for PLMI and its Subsidiaries. All such policies as to liability
insurance shall carry endorsements naming Agent and each Lender as an additional
insured and, upon the reasonable request of Agent, all such policies of property
insurance shall carry endorsements naming Agent as principal loss payee as to
any property owned by Borrowers and financed by Lenders, and in each case
indicating that (a) 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 any Borrower or FSI; (b) there shall be no
recourse against any Lender for payment of premiums or other amounts with
respect thereto, and (c) 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 and cause each of
FSI's Subsidiaries, including, without limitation, TEC AcquiSub, promptly to 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. Each Borrower and FSI
shall promptly notify Agent of any material challenge, contest or proceeding
pending by or against any Borrower, FSI and PLMI or any of FSI's 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 each Borrower, FSI or any of
FSI's Subsidiaries, including, without limitation, TEC AcquiSub, and other
documents in the possession or under the control of any Borrower, FSI or any of
FSI's Subsidiaries, including, without limitation, TEC AcquiSub, relating to any
obligation of any Borrower or FSI arising under or contemplated by this
Agreement and to visit the offices of any Borrower or FSI to discuss the
affairs, finances and accounts of any Borrower or FSI with any of the officers
of any Borrower or FSI, 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 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.
5.6.1 Maintenance Of Facilities. Each Borrower and FSI shall keep and cause each
of FSI's Subsidiaries, including, without limitation, TEC AcquiSub, to keep, all
of their respective Properties which are useful or necessary to such Borrower's,
FSI's or such Subsidiary's business, in good repair and condition, normal wear
and tear excepted, and from time to time make, and cause each such Subsidiary to
make necessary repairs thereto, and renewals and replacements thereof so that
each Borrower's, FSI's or such Subsidiary's Properties shall be fully and
efficiently preserved and maintained.
5.6.2 Certain Modifications To The Equipment. Subject to Section 5.6.1, each
Borrower and FSI 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.
5.7 Supplemental Disclosure. From time to time as may be necessary (in the event
that such information is not otherwise delivered by Borrowers or FSI 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 any Borrower or FSI 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 Borrowers or FSI 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 Borrowers or FSI to execute, deliver and perform,
each Borrower or FSI shall execute, deliver and perform, and shall cause FSI's
Subsidiaries to 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. Each 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 any 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. Each Borrower and FSI shall, and FSI shall cause each
of its Subsidiaries to, conduct its operations and keep and maintain its
Property in material compliance with all Environmental Laws.
Section 6. BORROWER'S AND FSI'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, each Borrower, severally,
as to itself, but not jointly as to the other Borrowers and FSI, and FSI,
jointly and severally with each Borrower as to such Borrower and to itself,
covenants and agrees as follows:
6.1 Liens; Negative Pledges; And Encumbrances. Each Borrower shall not create,
incur, assume or suffer to exist, and shall not permit any Marine Subsidiary of
such Borrower or Owner Trustee holding record title to any Eligible Inventory
for the beneficial interest of such Borrower to create, incur, assume or suffer
to exist, and FSI shall not permit any of its Subsidiaries (including, without
limitation, TEC and TEC AcquiSub) 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 Existing Liens disclosed on Schedule 6.1, provided that the obligations
secured thereby are not increased;
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 (a) under workers'
compensation laws, unemployment insurance and other types of social security or
similar legislation, (b) in connection with surety, appeal and similar bonds
incidental to the conduct of litigation, (c) in connection with bid, performance
or similar bonds and mechanics', laborers' and materialmen's and similar
statutory Liens not then delinquent, or (d) incidental to the conduct of the
business of such Borrower, any Marine Subsidiary of such Borrower, or any Owner
Trustee or any of FSI's Subsidiaries 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 such Borrower, any
Owner Trustee or any of FSI's Subsidiaries; 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;
6.1.4 Permitted Rights of Others; and
6.1.5 Liens granted in favor of Agent on behalf of Lenders under the TEC
AcquiSub Agreement and the security agreement and other loan documents delivered
by TEC AcquiSub pursuant thereto.
6.2 Acquisitions. Each Borrower shall not, and shall not permit any Marine
Subsidiary of such Borrower to, and FSI shall not permit TEC and TEC AcquiSub
to, make any Acquisition or enter into any agreement to make any Acquisition,
other than with respect to the purchase of Equipment in the ordinary course of
business or the formation or acquisition of a Marine Subsidiary.
6.3 Limitations On Indebtedness. Each Borrower shall not create, incur, assume
or suffer to exist, nor permit any Marine Subsidiary of such Borrower or Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower to create, incur, assume or suffer to exist, and FSI
shall not permit any of its Subsidiaries (including, without limitation, TEC and
TEC AcquiSub) 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 hereunder and under the other
Loan Documents;
6.3.2 Existing Indebtedness disclosed on Schedule 6.3(a) and anticipated
Indebtedness disclosed on Schedule 6.3(b);
6.3.3 Indebtedness of any Subsidiary of FSI, provided that such Indebtedness is
non-recourse as to FSI, TEC and TEC AcquiSub;
6.3.4 The acquisition of goods, supplies or merchandise on normal trade credit;
6.3.5 The endorsement of negotiable instruments received in the ordinary course
of any Borrower's business as presently conducted;
6.3.6 Indebtedness incurred in respect of the deferred purchase price for an
item of Equipment, 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 Section 6.3.6 if, taking into account the incurrence of such Indebtedness,
the Borrower incurring such Indebtedness 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); and
6.3.7 Any Guaranty Obligations of any Borrower in the form of performance
guaranties undertaken on behalf of a Marine Subsidiary of such Borrower in favor
of the charter party in connection with the leasing of a marine vessel on a time
charter;
6.4 Use Of Proceeds. Each Borrower and FSI shall not, and shall not permit any
Marine Subsidiary of such Borrower or Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI to, use
the proceeds of any Loan except for the purpose set forth in Section 2.1.3, 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 Assets. Each Borrower and FSI shall not, and shall not permit
any Marine Subsidiary of such Borrower or any Owner Trustee holding record title
to any Eligible Inventory for the beneficial interest of such Borrower or FSI
to, sell, assign or otherwise dispose of, any of its or their respective assets,
except for full, fair and reasonable consideration, or enter into any sale and
leaseback agreement covering any of its or their respective fixed or capital
assets.
6.6 Restriction On Fundamental Changes. Each Borrower and FSI shall not, and
shall not permit any Marine Subsidiary of such Borrower 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 sales (a) of Equipment
in the ordinary course of business (for the purposes of this Section 6.6, with
respect to any Borrower and any Marine Subsidiary of such Borrower, ordinary
course of business shall refer to the business of the Equipment Growth Funds and
all Marine Subsidiaries, collectively) and (b) any Subsidiary of FSI (other than
TEC AcquiSub) may be merged or consolidated with or into FSI or any wholly-owned
Subsidiary of FSI, or be liquidated, wound up or dissolved, or all or
substantially all of its business, property or assets may be conveyed, sold,
leased, transferred or otherwise disposed of, in one transaction or a series of
transactions, to, FSI or any wholly-owned Subsidiary of FSI; provided that, in
the case of such a merger or consolidation, FSI or such wholly-owned Subsidiary
shall be the continuing or surviving corporation. 6.7 Transactions With
Affiliates. Each Borrower shall not, and shall not permit any Marine Subsidiary
of such Borrower 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 such Borrower or such Marine
Subsidiary than those that might be obtained at the time from Persons who are
not such Affiliates.
6.8 Maintenance Of Business. Each Borrower shall not, and FSI shall not permit
any of its existing Subsidiaries to, engage in any business materially different
than the business currently engaged in by such Person.
6.9 No Distributions. Each Borrower shall not make, pay or set apart any funds
for the payment of distribution to its partners or members if such distribution
would cause or result in an Event of Default or Potential Event of Default.
6.10 Events Of Default. Each Borrower and FSI 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 either is a party or by which either or any of their Properties or assets
is bound, which default or event of default would, with reasonable likelihood,
have a Material Adverse Effect.
6.11 ERISA. If any Borrower or FSI or any of their ERISA Affiliates incurs any
obligation to contribute to any Pension Plan, then such Borrower or FSI, as the
case may be, shall not (a) 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 (b) 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.
6.12 No Use Of Any Lender's Name. Each Borrower and FSI 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.
6.13 Certain Accounting Changes. Each 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
any 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 such 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.
6.14 Amendments Of Limited Partnership Or Operating Agreements. Each Borrower
shall not, shall not cause to occur and shall not permit any amendment,
modification or supplement of or to any of the terms or provisions of such
Borrower's Limited Partnership Agreement or, in the case of Income Fund I, its
Operating Agreement, which amendment, modification or supplement would affect,
limit or otherwise impair such Borrower's ability to pay the Obligations or
perform its obligations under this Agreement or any of the other Loan Documents.
Section 7. FINANCIAL COVENANTS OF BORROWER AND FSI.
Each Borrower, severally, as to itself, but not jointly as to the other
Borrowers and FSI, and FSI, jointly and severally with each Borrower as to each
Borrower and as to itself, covenant and agree 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 Notes, unless Requisite Lenders shall otherwise consent in
writing, Borrowers and FSI shall perform the following financial covenants. Each
Borrower and FSI agree and understand that (except as expressly provided herein)
all covenants 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 such Borrower, or FSI, as
the case may be, 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 each Borrower and FSI
pursuant to Section 5.1; provided, however, that the following financial
covenants shall apply only as to those Borrowers requesting a Loan or as to
which a Loan remains outstanding.
7.1 Maximum Funded Debt Ratio. Each Borrower shall maintain a Funded Debt Ratio
of not greater than 0.5:1.0.
7.2 Minimum Debt Service Ratio. Each Borrower shall maintain a Debt Service
Ratio of not less than 1.75:1.0.
7.3 Cash Balances. The Equipment Growth Funds of which FSI is the sole general
partner shall maintain aggregate unrestricted cash balances of $10,000,000.
section 8. EVENTS OF DEFAULT AND REMEDIES.
8.1 Events Of Default. As to any Borrower, the occurrence of any one or more of
the following shall constitute an Event of Default for each such Borrower
individually:
8.1.1 Failure To Make Payments. Such Borrower, any Marine Subsidiary of such
Borrower or any Owner Trustee holding record title to any Eligible Inventory for
the beneficial interest of such Borrower or FSI fails to pay any sum due to
Lenders or Agent arising under this Agreement, the Note of such Borrower 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) Such Borrower, any Marine Subsidiary of such
Borrower, FSI, TEC, TEC AcquiSub or any Owner Trustee holding record title to
any Eligible Inventory for the beneficial interest of such Borrower defaults in
the repayment of any principal of or the payment of any interest on any
Indebtedness of such Borrower, any such Marine Subsidiary, FSI, TEC, TEC
AcquiSub or any such Owner Trustee, respectively, or breaches any term of any
evidence of such Indebtedness or defaults in any payment in respect of any
Contingent Obligation (excluding, as to FSI, any Contingent Obligation of FSI
arising solely as a result of FSI's status as a general partner of any Person
other than such Borrower), in each case exceeding, in the aggregate outstanding
principal amount, $2,000,000, or such Borrower, any Marine Subsidiary, FSI, TEC,
TEC AcquiSub 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 (b) 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. Such Borrower or FSI fails or neglects to perform,
keep or observe any of the covenants contained in Sections 2.1.3, 5.2, 5.3, 5.9,
6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9 or 6.13, 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 such 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, such
Borrower, FSI or any Marine Subsidiary of such Borrower or Owner Trustee holding
record title to any Eligible Inventory for the beneficial interest of such
Borrower or FSI 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 such Borrower, FSI or any Marine Subsidiary of
such Borrower or Owner Trustee holding record title to any Eligible Inventory
for the beneficial interest of such Borrower or FSI in connection therewith and
the same has not been cured to Requisite Lenders' satisfaction within thirty
(30) calendar days after such Borrower, FSI or any Marine Subsidiary of such
Borrower or Owner Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI shall become aware thereof, whether
by written notice from Agent or any Lender or otherwise; or
8.1.6 Insolvency. Such Borrower, any Marine Subsidiary of such Borrower, TEC
AcquiSub, any other Borrower (but only for so long as Obligations of such other
Borrower remain or Commitments to such other Borrower are available under this
Agreement), FSI, TEC, PLMI or any Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI or any
other guarantor of any of such Borrower's or FSI's obligations to Lenders shall
(a) cease to be Solvent, (b) admit in writing its inability to pay its debts as
they mature, (c) make an assignment for the benefit of creditors, (d) 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 such
Borrower, any Marine Subsidiary of such Borrower, TEC AcquiSub, any other
Borrower (but only for so long as Obligations of such other Borrower remain or
Commitments to such other Borrower are available under this Agreement), FSI,
TEC, PLMI or any Owner Trustee holding record title to any Eligible Inventory
for the beneficial interest of such Borrower or FSI or any other guarantor of
any of such Borrower's or FSI's obligations to Lenders or any order, judgment or
decree shall be entered against such Borrower, any Marine Subsidiary of such
Borrower, TEC AcquiSub, any other Borrower (but only for so long as Obligations
of such other Borrower remain or Commitments to such other Borrower are
available under this Agreement), FSI, TEC, PLMI or any Owner Trustee holding
record title to any Eligible Inventory for the beneficial interest of such
Borrower or FSI or any other guarantor of any of such 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 such
Borrower, any Marine Subsidiary of such Borrower, TEC AcquiSub, FSI, TEC, PLMI
or any Owner Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI or any other guarantor of any of
such 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 such Borrower,
any Marine Subsidiary of such Borrower, TEC AcquiSub, FSI, TEC or any Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI 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 such Borrower or any Marine Subsidiary of such Borrower
exceeds in the aggregate $1,000,000; against FSI exceeds in the aggregate
$500,000; against TEC or TEC AcquiSub exceeds in the aggregate $500,000; or
against any Owner Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI 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 such Borrower, FSI or any Marine
Subsidiary of such Borrower or Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI not to
be, a legal, valid and binding obligation of such Borrower, FSI or any Marine
Subsidiary of such Borrower or Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI,
respectively enforceable against such Person in accordance with its terms; or
8.1.11 TEC AcquiSub Agreement. The occurrence of any "Event of Default" as
defined under the TEC AcquiSub Agreement or any other loan or security document
related to the TEC AcquiSub Agreement; or
8.1.12 Change Of General Partner Or Manager. FSI shall cease to be the sole
general partner or the sole manager, as applicable, of such Borrower, 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 or capital contribution in such Borrower; or
8.1.13 Change Of Purchaser. Requesting Borrower, TEC AcquiSub, FSI or their
Subsidiaries shall cease to be the purchaser of Eligible Inventory for such
Requesting Borrower.
8.1.14 Criminal Proceedings. A criminal proceeding shall have been filed in any
court naming any Borrower, FSI or any Marine Subsidiary of such Borrower or
Owner Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI 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 any Borrower's, any Marine Subsidiary of such Borrower's,
FSI's, TEC's, TEC AcquiSub'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 holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI. Such
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 monetary liability (A) of more
than $1,000,000 in the case of any Borrower or any Marine Subsidiary of such
Borrower, (B) of more than $500,000 in the case of FSI, (C) of more than
$500,000 in the case of TEC, (D) of more than $250,000 in the case of TEC
AcquiSub, (E) of more than $1,000,000 in the case of PLMI, or (F) 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
any Borrower, any Marine Subsidiary of such Borrower, FSI, TEC, TEC AcquiSub and
PLMI, or any of them, which in the reasonable determination of 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 the defaulting Borrower or any
other Borrower, regardless of whether such Event of Default or Potential Event
of Default has occurred with respect to such Borrower or another Borrower.
In addition, upon the occurrence and during the continuance of an Event
of Default, except an Event of Default arising under Section 8.1.11 hereof (the
remedies for which shall be limited to those set forth in the preceding
paragraph), Lenders or Agent, on behalf of Lenders, may, as to such defaulting
Borrower, or as to all Borrowers should such Event of Default result from the
actions or inactions of FSI, at the option of Requisite Lenders, do any one or
more of the following, all of which are hereby authorized by each Borrower and
FSI:
8.3.1 Declare all or any of the Obligations of such Borrower under this
Agreement, the Notes of such Borrower, the other Loan Documents and any other
instrument executed by such 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 part 8.1.6 or 8.1.7 of Section 8.1, then all
of the Obligations of each Borrower 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 as to such Borrower or as to each Borrower if such Event of Default
results from the actions, inactions or violation of any covenant of or by FSI
(excluding, as to FSI, Events of Default under Section 8.1.2 arising in relation
to Contingent Obligation of FSI arising solely as a result of FSI's status as a
general partner of any Person other than such Borrower); 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 any Borrower 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 of such
Borrower and any and all other liabilities, due or existing or hereafter arising
and owing by such Borrower or FSI to Lenders. Each Lender agrees to notify
promptly Borrowers and 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. Each 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 any Borrower, FSI, 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
FUNB as the Agent of such Lender under this Agreement and the other Loan
Documents, and each such Lender irrevocably authorizes FUNB 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 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 any 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 any 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 any 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 Borrowers), 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 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
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 any 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 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 each 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 each 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 each 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 Indemnification. Each Lender agrees to indemnify Agent in its capacity as
such (to the extent not reimbursed by Borrowers and without limiting the
obligation of Borrowers 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 Capacity. Agent and its Affiliates may make loans
to, accept deposits from and generally engage in any kind of business with any
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 Agent. Agent may resign at any time
by giving thirty (30) days' prior written notice thereof to Lenders and
Borrowers; 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 Requisite Lenders, with or without
cause; provided, however, that any successor agent shall be subject to
Borrowers' 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. Borrowers and Lenders agree that, as the following costs,
expenses, charges and other disbursements benefit each Borrower and as such
costs, expenses, charges and other disbursements cannot easily be ratably
allocated to the account of any Borrower or Borrowers, each Borrower, unless
otherwise specified in this Section 10.1, shall pay, as its Obligation, 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 Borrowers' 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
any Lender 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, any Borrower or any other Person) seeking to enforce any
Obligations of, or collecting any payments due from, any Borrower under this
Agreement and the Notes, all of which amounts shall be deemed to be part of the
Obligations; provided, however, that Lenders shall be entitled to collect the
full amount of such costs, expenses, charges and other disbursements only once.
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 the
Requesting Borrower.
10.2 Indemnification. Whether or not the transactions contemplated hereby shall
be consummated:
10.2.1 General Indemnity. Each Borrower, as to itself, and FSI, jointly and
severally as to itself and each 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 Borrowers and FSI 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) Each Borrower, to the extent of its pro rata share of ownership of Property
involved in any investigation, litigation or proceeding, as set forth below, and
FSI hereby jointly and severally agree 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 of 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
such 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 shall (except for actions which constitute
fraud, willful misconduct, gross negligence or material violations of law)
vitiate or in any way impair Borrowers' or FSI's obligation and duty hereunder
to indemnify and hold harmless Agent and each Lender. Agent and all Lenders
agree to use reasonable efforts to cooperate with Borrowers respecting the
defense of any matter indemnified hereunder, except insofar as and to the extent
that their respective interests may be adverse to Borrowers' or FSI's in Agent's
or such Lender's 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 Borrowers, FSI 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 Borrowers, or any one of them, or any other
Person against, or to inform Borrowers 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 Borrowers, FSI 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,
Borrowers shall defend such Indemnified Person using legal counsel satisfactory
to such Indemnified Person in such Person's reasonable discretion, at the sole
cost and expense of Borrowers, which cost and expense shall be allocated to
Borrowers according to such Borrower's pro rata share of ownership of any
Property in relation to which such obligations arise. 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 Notes 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, each
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, any 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 Notes and each of the other Loan Documents dated as
of the date hereof, taken together, constitute and contain the entire agreement
among Borrowers, 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 Borrower, FSI, and each Lender 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 Borrowers, FSI, Lenders or
Agent. Borrowers, FSI, 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 Borrowers', FSI'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 any Borrower or FSI from, any provision in this Agreement or any of
the other Loan Documents relating to (a) the definition of "Borrowing Base" or
"Requisite Lenders," (b) any increase of the amount of any Commitment, (c) any
reduction of principal, interest or fees payable hereunder, (d) any postponement
of any date fixed for any payment or prepayment of principal or interest
hereunder or (e) 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 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 any Borrower or FSI in any case shall entitle any Borrower or FSI 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, on Borrower, and on FSI.
11.7 Reliance By Lenders. All covenants, agreements, representations and
warranties made herein by each Borrower or FSI shall, notwithstanding any
investigation by Lenders or Agent be deemed to be material to and to have been
relied upon by Lenders.
11.8 Marshaling; Payments Set Aside. Lenders shall be under no obligation to
marshal any assets in favor of any Borrower or any other person or against or in
payment of any or all of the Obligations. To the extent that any 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 Borrowers. All sums payable by Borrowers or FSI pursuant to
this Agreement, any 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 Notes 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 shall 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, its respective Notes and the other Loan
Documents, together with a ratable interest in the TEC AcquiSub 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 H ("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, (a) 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 (b) 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. In connection and as a condition
to each assignment hereunder, the Assignor Lender agrees to pay or to cause the
Assignee Lender to pay to Agent a processing fee of $3,500; provided that no
processing fee shall be charged for any assignment to a Lender or a Lender
Affiliate.
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 Notes and the other Loan Documents to any other
financial institution without notice to, or approval of, any Borrower or FSI.
The grant of such a participation interest shall be on such terms as the
granting Lender determines are appropriate, provided only that (a) 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 (b) 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 (i) increase the monetary amount of any
Commitment, (ii) decrease any fee or any other monetary amount payable to
Lenders, or (iii) 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. Borrowers and FSI recognize that, in the event any
Borrower or FSI fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any Note or any of the other Loan Agreements,
any remedy at law may prove to be inadequate relief to Lenders or Agent;
therefore, Borrowers and FSI agree 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. EACH BORROWER AND FSI HEREBY AGREE
THAT EACH 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, ANY 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, EACH BORROWER AND FSI HEREBY AGREE THAT EACH SHALL
NOT SEEK FROM LENDERS OR AGENT, UNDER ANY THEORY OF LIABILITY, INCLUDING,
WITHOUT LIMITATION, ANY THEORY IN TORTS, ANY PUNITIVE DAMAGES.
11.15 Relationship Of Parties. The relationship between Borrowers and FSI, on
the one hand, and Lenders and Agent, on the other, is, and at all time shall
remain solely that of a borrower and lenders. Neither Lenders nor Agent shall
under any circumstances be construed to be partners or joint venturers of
Borrowers or FSI or any of their Affiliates; nor shall Lenders nor Agent under
any circumstances be deemed to be in a relationship of confidence or trust or a
fiduciary relationship with Borrowers or FSI or any of their Affiliates, or to
owe any fiduciary duty to any Borrower or any of its Affiliates. Lenders and
Agent do not undertake or assume any responsibility or duty to Borrowers or FSI
or any of their Affiliates to select, review, inspect, supervise, pass judgment
upon or otherwise inform Borrowers or any of their Affiliates of any matter in
connection with its or their Property, any collateral held by Agent or any
Lender or the operations of Borrowers or FSI or any of their Affiliates.
Borrowers and each of their Affiliates shall rely entirely on their own judgment
with respect to such matters, and any review, inspection, supervision, exercise
of judgment or supply of information undertaken or assumed by any Lender or
Agent in connection with such matters is solely for the protection of Lenders
and Agent and neither Borrowers nor any Affiliate is entitled to rely thereon.
11.16 Obligations Of Each Borrower. Each Borrower and FSI agrees that its
liability hereunder shall be the immediate, direct, and primary obligation of
such Borrower or FSI, as the case may be, and shall not be contingent upon the
Agent's or any Lender's exercise or enforcement of any remedy it may have
against any other Borrower, FSI or any other person, or against any collateral
or any security for the Obligations. Without limiting the generality of the
foregoing, the Obligations shall remain in full force and effect without regard
to and shall not be impaired or affected by, nor shall such Borrower or FSI be
exonerated or discharged by, any of the following events:
11.16.1 Insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition, assignment for the benefit of creditors, death, liquidation,
winding up or dissolution of any Borrower or any guarantor of the Obligations of
any Borrower;
11.16.2 Any limitation, discharge, or cessation of the liability of any other
Borrower or any guarantor for the Obligations of such other Borrower due to any
statute, regulation or rule of law, or any invalidity or unenforceability in
whole or in part of the documents evidencing the Obligations of such other
Borrower or any guaranty of the Obligations of such other Borrower;
11.16.3 Any merger, acquisition, consolidation or change in structure of any
Borrower or any guarantor of the Obligations of any Borrower or any sale, lease,
transfer or other disposition of any or all of the assets, shares or interests
in or of any Borrower or any guarantor of the Obligations of any Borrower;
11.16.4 Any assignment or other transfer, in whole or in part, of any Lender's
interests in and rights under this Agreement or any of the other Loan Documents,
including, without limitation, any assignment or other transfer, in whole or in
part, of Banks' interests in and to any collateral;
11.16.5 Any claim, defense, counterclaim or setoff, other than that of prior
performance, that any Borrower or any guarantor of the Obligations of any
Borrower may have or assert, including, but not limited to, any defense of
incapacity or lack of corporate or other authority to execute any documents
relating to the Obligations of any Borrower or any collateral;
11.16.6 Agent's or any Lender's amendment, modification, renewal, extension,
cancellation or surrender of any agreement, document or instrument relating to
this Agreement, the Obligations of any Borrower or any collateral, or any
exchange, release, or waiver of any collateral;
11.16.7 Agent's or any Lender's exercise or nonexercise of any power, right or
remedy with respect to the Obligations of any Borrower or any collateral,
including, but not limited to, the compromise, release, settlement or waiver
with or of any Borrower or any other person;
11.16.8 Agent's or any Lender's vote, claim, distribution, election, acceptance,
action or inaction in any bankruptcy case related to the Obligations of any
Borrower or any collateral; and
11.16.9 Any impairment or invalidity of any collateral or any failure to perfect
any of Agent's liens thereon.
11.17 Co-Borrower Waivers. Each Borrower and FSI hereby expressly waives (a)
diligence, presentment, demand for payment and protest affecting any other
Borrower's or FSI's liability under the Loan Documents; (b) discharge due to any
disability of any Borrower or FSI; (c) any defenses of any other Borrower or FSI
to obligations under the Loan Documents not arising under the express terms of
the Loan Documents or from a material breach thereof by Agent or any Lender
which under applicable law has the effect of discharging any other Borrower from
the Obligations of any Borrower as to which this Agreement is sought to be
enforced; (d) the benefit of any act or omission by Agent or any Lender which
directly or indirectly results in or aids the discharge of any other Borrower
from any of the Obligations of any such Borrower by operation of law or
otherwise; (e) all notices whatsoever, including, without limitation, notice of
acceptance of the incurring of the Obligations of any Borrower; (f) any right it
may have to require Agent or any Lender to disclose to it any information that
Agent or Lenders may now or hereafter acquire concerning the financial condition
or any circumstances that bear on the risk of nonpayment by any other Borrower,
including the release of such other Borrower from its Obligations hereunder; and
(g) any requirement that Agent and Lenders exhaust any right, power or remedy or
proceed against any other Borrower or any other security for, or any guarantor
of, or any other party liable for, any of the Obligations of any Borrower, or
any portion thereof (including without limitation any requirements set forth in
Section 26-7 of the North Carolina General Statutes). Each Borrower specifically
agrees that it shall not be necessary or required, and Borrowers shall not be
entitled to require, that Agent or any Lender (i) file suit or proceed to assert
or obtain a claim for personal judgment against any other Borrower for all or
any part of the Obligations of any Borrower; (ii) make any effort at collection
or enforcement of all or any part of the Obligations of any Borrower from any
Borrower; (iii) foreclose against or seek to realize upon any collateral or any
other security now or hereafter existing for all or any part of the Obligations
of any Borrower; (iv) file suit or proceed to obtain or assert a claim for
personal judgment against any Borrower or any guarantor or other party liable
for all or any part of the Obligations of any Borrower; (v) exercise or assert
any other right or remedy to which Agent or any Lender is or may be entitled in
connection with the Obligations of any Borrower or any security or guaranty
relating thereto to assert; or (vi) file any claim against assets of one
Borrower before or as a condition of enforcing the liability of any other
Borrower under this Agreement or the Notes.
11.18 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 California 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.
11.19 Waiver Of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
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 EACH BORROWER PURSUANT TO THIS AGREEMENT.
<PAGE>
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORROWER PLM EQUIPMENT GROWTH FUND VI
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ Richard Brock
---------------------------------
Richard Brock
Vice President
PLM EQUIPMENT GROWTH & INCOME FUND VII
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ Richard Brock
----------------------------------
Richard Brock
Vice President
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
BY PLM FINANCIAL SERVICES, INC.,
ITS MANAGER
By /s/ Richard Brock
-------------------------------------
Richard Brock
Vice President
Notice to any Borrower to be sent to:
[Insert name of Borrower]
c/o PLM Financial Services, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: Richard Brock
Vice President
Telephone: 415/974-1399
Telecopy: 415/882-0860
With a copy to:
TEC AcquiSub, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: General Counsel
Telephone: 415/896-1138
Facsimile: 415/882-0860
FSI PLM FINANCIAL SERVICES, INC.
By /s/ Richard Brock
----------------------------------
Richard Brock
Vice President
Notice to be sent to:
PLM Financial Services, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: Richard Brock
Vice President
Telephone: 415/974-1399
Telecopy: 415/882-0860
AGENT FIRST UNION NATIONAL BANK
By /s/ Bill A. Shirley
----------------------------------
Printed Name: Bill A. Shirley
Title: Senior Vice President
Notice to be sent to:
First Union National Bank
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Russ Morrison
Telephone: 704/383-9687
Facsimile: 704/374-4092
LENDERS FIRST UNION NATIONAL BANK
By /s/ Bill A. Shirley
-----------------------------------
Printed Name: Bill A. Shirley
Title: Senior Vice President
Notice to be sent to:
First Union National Bank
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Russ Morrison
Telephone: 704/383-9687
Facsimile: 704/374-4092
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(Growth Funds)
SECTION 1. PLM International, Inc. ("PLMI") hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Fourth Amended and Restated Warehousing Credit Agreement ("Agreement").
SECTION 2. PLMI hereby consents to this Agreement and agrees that its
Guaranty of the Obligations of Borrowers under the Growth Fund Agreement shall
continue in full force and effect under the 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, all representations and warranties contained in its Guaranty are
true, accurate and complete as if made the date hereof.
GUARANTOR PLM INTERNATIONAL, INC.
By Robert N. Tidball
-----------------------------
Robert N. Tidball
President
<PAGE>
SCHEDULE A
(COMMITMENTS)
Pro Rata
Lender Commitment Share
First Union National Bank $24,500,000 100%
<PAGE>
INDEX OF EXHIBITS
Exhibit A.........Form of Revolving Promissory Note
Exhibit B.........Form of Borrowing Base Certificate
Exhibit C.........Form of Opinion of Counsel
Exhibit D.........Form of Compliance Certificate
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 4.1.5 Executive Offices and Principal Places of Business
Schedule 4.1.6 Litigation
Schedule 4.1.7 Material Contracts
Schedule 4.1.8 Consent and Approvals
Schedule 4.1.15 Environmental Disclosures
Schedule 6.1 Existing Liens
Schedule 6.3(a) Existing Indebtedness
Schedule 6.3(b) Anticipated Indebtedness
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
[LENDER]
$____________ San Francisco, California
Date: December __, 1998
[BORROWER], a _____________________ (the "Borrower"), FOR VALUE
RECEIVED, hereby unconditionally promises to pay to the order of [LENDER]
("[_________________]"), in lawful money of the United States of America, the
aggregate outstanding principal amount of [_________________]'s Pro Rata Share
of all Loans made to the Borrower under the Credit Agreement referred to below,
payable in the amounts, on the dates and in the manner set forth below.
This revolving promissory note (this "Note") is one of the Notes
referred to and defined in that certain Fourth Amended and Restated Warehousing
Credit Agreement dated as of December 15, 1998 (as the same may from time to
time be further amended, modified, supplemented, renewed, extended or restated,
the "Credit Agreement") by and among PLM Equipment Growth Fund VI, PLM Equipment
Growth & Income Fund VII and Professional Lease Management Income Fund I,
L.L.C., as co-borrowers, PLM Financial Services, Inc., the banks, financial
institutions and other institutional lenders from time to time party thereto and
defined therein as Lenders (such entities, together with their respective
successors and assigns being collectively referred to herein as "Lenders"), and
FUNB in its capacity as Agent on behalf and for the benefit of Lenders
("Agent"). All capitalized terms used but not defined herein shall have the same
meaning as given to them in the Credit Agreement.
1. Principal Payments. Subject to the terms and conditions of the
Credit Agreement, including, without limitation, terms relating to mandatory
prepayments of principal (Section 2.2.3), the entire principal amount
outstanding under each Loan evidenced by this Note shall be due and payable on
the Maturity Date with respect to such Loan, with any and all unpaid and not
previously due and payable principal amounts under each such Loan being due and
payable on the Commitment Termination Date.
2. Interest Rate. The Borrower further promises to pay interest on the
sum of the daily unpaid principal balance of all Loans evidenced by this Note
outstanding on each day in lawful money of the United States of America, from
the Closing Date until all such principal amounts shall have been repaid in
full, which interest shall be payable at the rates per annum and on the dates
determined pursuant to the Credit Agreement.
3. Place Of Payment. All amounts payable hereunder shall be payable to
the Agent, on behalf of [_________________], at the office of First Union
National Bank, One First Union Center, 301 South College Street, Charlotte,
North Carolina 28288, Attention: Maria Ostrowski, or such other place of payment
as may be specified by the Agent in writing.
4. Application Of Payments; Acceleration. Payments on this Note shall
be applied in the manner set forth in the Credit Agreement. The Credit Agreement
contains provisions for acceleration of the maturity of the Loans upon the
occurrence of certain stated events and also provides for mandatory and optional
prepayments of principal prior to the stated maturity on the terms and
conditions therein specified.
Each Advance made by [_________________] to the Borrower constituting
[_________________]'s Pro Rata Share of a Loan made to the Borrower pursuant to
the Credit Agreement shall be recorded by [_________________] on its books and
records. The failure of [_________________] to record any such Advance or any
repayment or prepayment made on account of the principal balance thereof shall
not limit or otherwise affect the obligation of the Borrower under this Note and
under the Credit Agreement to pay the principal, interest and other amounts due
and payable thereunder.
5. Default. The Borrower's failure to pay timely any of the principal
amount due under this Note or any accrued interest or other amounts due under
this Note on or within five (5) calendar days after the date the same becomes
due and payable shall constitute a default under this Note. Upon the occurrence
of a default hereunder or an Event of Default under the Credit Agreement with
respect to the Borrower, all unpaid principal, accrued interest and other
amounts owing hereunder shall, at the option of the Required Lenders, be
immediately collectible by the Lenders and the Agent pursuant to the Credit
Agreement and applicable law.
6. Waivers. The Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and shall pay
all costs of collection when incurred by or on behalf of the Lenders, including,
without limitation, reasonable attorneys' fees, costs and other expenses as
provided in the Credit Agreement.
7. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
8. Successors And Assigns. The provisions of this Note shall inure to
the benefit of and be binding on any successor to the Borrower and shall extend
to any holder hereof.
BORROWER [BORROWER]
By: PLM FINANCIAL SERVICES, INC.,
a Delaware corporation
Its [General Partner][Manager]
By
J. Michael Allgood
Chief Financial Officer
[Norwest Equipment Finance Logo] MASTER LEASE
Norwest Equipment Finance, Inc.
Investors Building, Suite 300
733 Marquette Avenue
Minneapolis, MN 55479-2048
Master Lease Number 7313 dated as of December 28, 1998
Name and Address of Lessee:
PLM International, Inc.
One Market Plaza
Steuart Tower, Suite #800
San Francisco, CA 94105-1301
Master Lease Provisions
1. LEASE. Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to
lease from Lessor, the personal property described in a Supplement or
Supplements to this Master Lease from time to time signed by Lessor and Lessee
upon the terms and conditions set forth herein and in the related Supplement
(such property together with all replacements, repairs, and additions
incorporated therein or affixed thereto being referred to herein as the
"Equipment"). The lease of the items described in a particular Supplement shall
be considered a separate lease pursuant to the terms of the Master Lease and the
Supplement the same as if a single lease agreement containing such terms had
been executed covering such items.
2. TERM. The term of this lease with respect to each item of Equipment shall
begin on the date it is accepted by Lessee and shall continue for the number of
consecutive months from the rent commencement date shown in the related
Supplement (the "initial term") unless earlier terminated as provided herein or
unless extended automatically as provided below in this paragraph. The rent
commencement date is the 15th day of the month in which all of the items of
Equipment described in the related Supplement have been delivered and accepted
by Lessee if such delivery and acceptance is completed on or before the 15th of
such month, and the rent commencement date is the last day of such month if such
delivery and acceptance is completed during the balance of such month. In the
event Lessee executes the related Supplement prior to delivery and acceptance of
all items of Equipment described therein, Lessee agrees that the rent
commencement date may be left blank when Lessee executes the related Supplement
and hereby authorizes Lessor to insert the rent commencement date based upon the
date appearing on the delivery and acceptance certificate signed by Lessee with
respect to the last item of Equipment to be delivered. AUTOMATIC EXTENSION.
Lessee or Lessor may terminate this lease at the expiration of the initial term
by giving the other at least 90 days prior written notice of termination. If
neither Lessee nor Lessor gives such notice, then the term of this lease shall
be extended automatically on the same rental and other terms set forth herein
(except that in any event rent during any extended term shall be payable in the
amounts and at the times provided in paragraph 3) for successive periods of one
month until terminated by either Lessee or Lessor giving the other at least 90
days prior written notice of termination.
3. RENT. Lessee shall pay as basic rent for the initial term of this lease the
amount shown in the related Supplement as Total Basic Rent. The Total Basic Rent
shall be payable in installments each in the amount of the basic rental payment
set forth in the related Supplement plus sales and use tax thereon. Lessee shall
pay advance installments and any security deposit, each as shown in the related
Supplement, on the date it is executed by Lessee. Subsequent installments shall
be payable on the first day of each rental payment period shown in the related
Supplement beginning after the first rental payment period; provided, however,
that Lessor and Lessee may agree to any other payment schedule, including
irregular payments or balloon payments, in which event they shall be set forth
in the space provided in the Supplement for additional provisions. If the actual
cost of the Equipment is more or less than the Total Cost as shown in the
Supplement, the amount of each installment of rent will be adjusted up or down
to provide the same yield to Lessor as would have been obtained if the actual
cost had been the same as the Total Cost. Adjustments of 10% or less may be made
by written notice from Lessor to Lessee. Adjustments of more than 10% shall be
made by execution of an amendment to the Supplement reflecting the change in
Total Cost and rent. During any extended term of this lease, basic rent shall be
payable monthly in advance on the first day of each month during such extended
term in the amount equal to the basic rental payment set forth in the related
Supplement if rent is payable monthly during the initial term or in an amount
equal to the monthly equivalent of the basic rental payment set forth in the
related Supplement if rent is payable other than monthly during the initial
term. In addition, Lessee shall pay any applicable sales and use tax on rent
payable during any extended term. In addition to basic rent, which is payable
only from the rent commencement date as provided above, Lessee agrees to pay
interim rent with respect to each separate item of Equipment covered by a
particular Supplement from the date it is delivered and accepted to the rent
commencement date at a daily rate equal to the percentage of Lessor's cost of
such item specified in such Supplement. Interim rent accruing each calendar
month shall be payable by the 10th day of the following month and in any event
on the rent commencement date. Lessee agrees that if all of the items of
Equipment covered by such Supplement have not been delivered and accepted
thereunder before the date specified as the Cutoff Date in such Supplement,
Lessee shall purchase from Lessor the items of Equipment then subject to the
lease within five days after Lessor's request to do so for a price equal to
Lessor's cost of such items plus all accrued but unpaid interim rent thereon.
Lessee shall also pay any applicable sales and use tax on such sale.
4. SECURITY DEPOSIT. Lessor may apply any security deposit toward any obligation
of Lessee under this lease, and shall return any unapplied balance to Lessee
without interest upon satisfaction of Lessee's obligations hereunder.
5. WARRANTIES. Lessee agrees that it has selected each item of Equipment based
upon its own judgment and disclaims any reliance upon any statements or
representations made by Lessor. LESSOR MAKES NO WARRANTY WITH RESPECT TO THE
EQUIPMENT, EXPRESS OR IMPLIED, AND LESSOR SPECIFICALLY DISCLAIMS ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE AND ANY LIABILITY FOR
CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OF OR THE INABILITY TO USE THE
EQUIPMENT. Lessee agrees to make the rental and other payments required
hereunder without regard to the condition of the Equipment and to look only to
persons other than Lessor such as the manufacturer, vendor or carrier thereof
should any item of Equipment for any reason be defective. So long as no Event of
Default has occurred and is continuing, Lessor agrees, to the extent they are
assignable, to assign to Lessee, without any recourse to Lessor, any warranty
received by Lessor.
6. TITLE. Title to the Equipment shall at all times remain in Lessor, and Lessee
at its expense shall protect and defend the title of Lessor and keep it free of
all claims and liens other than the rights of Lessee hereunder and claims and
liens created by or arising through Lessor. The Equipment shall remain personal
property regardless of its attachment to realty, and Lessee agrees to take such
action at its expense as may be necessary to prevent any third party from
acquiring any interest in the Equipment as a result of its attachment to realty.
7. LAWS AND TAXES. Lessee shall comply with all laws and regulations relating to
the Equipment and its use and shall promptly pay when due all sales, use,
property, excise and other taxes and all license and registration fees now or
hereafter imposed by any governmental body or agency upon the Equipment or its
use or the rentals hereunder. Upon request by Lessor, Lessee shall prepare and
file all tax returns relating to taxes for which Lessee is responsible hereunder
which Lessee is permitted to file under the laws of the applicable taxing
jurisdiction.
8. INDEMNITY. Lessee hereby indemnifies Lessor against and agrees to save Lessor
harmless from any and all liability and expense arising out of the ordering,
ownership, use, condition, or operation of each item of Equipment during the
term of this lease, including liability for death or injury to persons, damage
to property, strict liability under the laws or judicial decisions of any state
or the United States, and legal expenses in defending any claim brought to
enforce any such liability or expense.
9. ASSIGNMENT. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, LESSEE WILL NOT SELL,
ASSIGN, SUBLET, PLEDGE, OR OTHERWISE ENCUMBER OR PERMIT A LIEN ARISING THROUGH
LESSEE TO EXIST ON OR AGAINST ANY INTEREST IN THIS LEASE OR THE EQUIPMENT, or
remove the Equipment from its location referred to above. Lessor may assign its
interest in this lease and sell or grant a security interest in all or any part
of the Equipment without notice to or the consent of Lessee. Lessee agrees not
to assert against any assignee of Lessor any claim or defense Lessee may have
against Lessor.
10. INSPECTION. Lessor may inspect the Equipment at any time and from time to
time during regular business hours.
11. REPAIRS. Lessee will use the Equipment with due care and for the purpose for
which it is intended. Lessee will maintain the Equipment in good repair,
condition and working order and will furnish all parts and services required
therefor, all at its expense, ordinary wear and tear excepted. Lessee shall, at
its expense, make all modifications and improvements to the Equipment required
by law, and shall not make other modifications or improvements to the Equipment
without the prior written consent of Lessor. All parts, modifications and
improvements to the Equipment shall, when installed or made, immediately become
the property of Lessor and part of the Equipment for all purposes.
12. LOSS OR DAMAGE. In the event any item of Equipment shall become lost,
stolen, destroyed, damaged beyond repair or rendered permanently unfit for use
for any reason, or in the event of condemnation or seizure of any item of
Equipment, Lessee shall promptly pay Lessor the sum of (a) the amount of all
rent and other amounts payable by Lessee hereunder with respect to such item due
but unpaid at the date of such payment plus (b) the amount of all unpaid rent
with respect to such item for the balance of the term of this lease not yet due
at the time of such payment discounted from the respective dates installment
payments would be due at the rate implicit in the schedule of rental payments
when applied to the cost of such item plus (c) 10% of the cost of such item as
shown in the related Supplement. Upon payment of such amount to Lessor, such
item shall become the property of Lessee, Lessor will transfer to Lessee,
without recourse or warranty, all of Lessor's right, title and interest therein,
the rent with respect to such item shall terminate, and the basic rental
payments on the remaining items shall be reduced accordingly. Lessee shall pay
any sales and use taxes due on such transfer. Any insurance or condemnation
proceeds received shall be credited to Lessee's obligation under this paragraph
and Lessor shall be entitled to any surplus.
13. INSURANCE. Lessee shall obtain and maintain on or with respect to the
Equipment at its own expense (a) liability insurance insuring against liability
for bodily injury and property damage with a minimum limit of $500,000 combined
single limit and (b) physical damage insurance insuring against loss or damage
to the Equipment in an amount not less than the full replacement value of the
Equipment. Lessee shall furnish Lessor with a certificate of insurance
evidencing the issuance of a policy or policies to Lessee in at least the
minimum amounts required herein naming Lessor as an additional insured
thereunder for the liability coverage and as loss payee for the property damage
coverage. Each such policy shall be in such form and with such insurers as may
be satisfactory to Lessor, and shall contain a clause requiring the insurer to
give to Lessor at least 10 days prior written notice of any alteration in the
terms of such policy or the cancellation thereof, and a clause specifying that
no action or misrepresentation by Lessee shall invalidate such policy. Lessor
shall be under no duty to ascertain the existence of or to examine any such
policy or to advise Lessee in the event any such policy shall not comply with
the requirements hereof.
14. RETURN OF THE EQUIPMENT. Upon the expiration or earlier termination of this
lease, Lessee will immediately deliver the Equipment to Lessor in the same
condition as when delivered to Lessee, ordinary wear and tear excepted, at such
location within the continental United States as Lessor shall designate. Lessee
shall pay all transportation and other expenses relating to such delivery.
15. ADDITIONAL ACTION. Lessee will promptly execute and deliver to Lessor such
further documents and take such further action as Lessor may request in order to
carry out more effectively the intent and purpose of this lease, including the
execution and delivery of appropriate financing statements to protect fully
Lessor's interest hereunder in accordance with the Uniform Commercial Code or
other applicable law. Lessee will furnish, from time to time on request, a copy
of Lessee's latest annual balance sheet and income statement.
16. LATE CHARGES. If any installment of interim rent or basic rent is not paid
when due, Lessor may impose a late charge of up to 5% of the amount of the
installment but in any event not more than permitted by applicable law. Payments
thereafter received shall be applied first to delinquent installments and then
to current installments.
17. DEFAULT. Each of the following events shall constitute an "Event of Default"
hereunder: (a) Lessee shall fail to pay when due any installment of interim rent
or basic rent; (b) Lessee shall fail to observe or perform any other agreement
to be observed or performed by Lessee hereunder and the continuance thereof for
10 calendar days following written notice thereof by Lessor to Lessee; (c)
Lessee or any guarantor of this lease or any partner of Lessee if Lessee is a
partnership shall cease doing business as a going concern or make an assignment
for the benefit of creditors; (d) Lessee or any guarantor of this lease or any
partner of Lessee if Lessee is a partnership shall voluntarily file, or have
filed against it involuntarily, a petition for liquidation, reorganization,
adjustment of debt, or similar relief under the federal Bankruptcy Code or any
other present or future federal or state bankruptcy or insolvency law, or a
trustee, receiver, or liquidator shall be appointed of it or of all or a
substantial part of its assets; (e) any individual Lessee, guarantor of this
lease, or partner of Lessee if Lessee is a partnership shall die; (f) any
financial or credit information submitted by or on behalf of Lessee shall prove
to have been false or materially misleading when made; (g) an event of default
shall occur under any other obligation Lessee owes to Lessor; (h) any
indebtedness Lessee may now or hereafter owe to Any affiliate of Lessor shall be
accelerated following a default thereunder or, if any such indebtedness is
payable on demand, payment thereof shall be demanded; (i) if Lessee is a
corporation, more than 50% of the shares of voting stock of Lessee shall become
owned by a shareholder or shareholders who were not owners of voting stock of
Lessee on the date this lease begins or, if Lessee is a partnership, more than
50% of the partnership interests in the Lessee shall become owned by a partner
or partners who were not partners of Lessee on the date this lease begins; and
(j) Lessee shall consolidate with or merge into, or sell or lease all or
substantially all of its assets to, any individual, corporation, or other
entity.
18. REMEDIES. Lessor and Lessee agree that Lessor's damages suffered by reason
of an Event of Default are uncertain and not capable of exact measurement at the
time this lease is executed because the value of the Equipment at the expiration
of this lease is uncertain, and therefore they agree that for purposes of this
paragraph 18 "Lessor's Loss" as of any date shall be the sum of the following:
(1) the amount of all rent and other amounts payable by Lessee hereunder due but
unpaid as of such date plus (2) the amount of all unpaid rent for the balance of
the term of this lease not yet due as of such date discounted from the
respective dates installment payments would be due at the rate of 5% per annum
plus (3) 10% of the cost of the Equipment subject to this lease as of such date.
Upon the occurrence of an Event of Default and at any time thereafter, Lessor
may exercise any one or more of the remedies listed below as Lessor in its sole
discretion may lawfully elect; provided, however, that upon the occurrence of an
Event of Default specified in paragraph 17(d), an amount equal to Lessor's Loss
as of the date of such occurrence shall automatically become and be immediately
due and payable without notice or demand of any kind. a) Lessor may, by written
notice to Lessee, terminate this lease and declare an amount equal to Lessor's
Loss as of the date of such notice to be immediately due and payable, and the
same shall thereupon be and become immediately due and payable without further
notice or demand, and all rights of Lessee to use the Equipment shall terminate
but Lessee shall be and remain liable as provided in this paragraph 18. Lessee
shall at its expense promptly deliver the Equipment to Lessor at a location or
locations within the continental United States designated by Lessor. Lessor may
also enter upon the premises where the Equipment is located and take immediate
possession of and remove the same with or without instituting legal proceedings.
b) Lessor may proceed by appropriate court action to enforce performance by
Lessee of the applicable covenants of this lease or to recover, for breach of
this lease, Lessor's Loss as of the date Lessor's Loss is declared due and
payable hereunder; provided, however, that upon recovery of Lessor's Loss from
Lessee in any such action without having to repossess and dispose of the
Equipment, Lessor shall transfer the Equipment to Lessee at its then location
upon payment of any additional amount due under clauses (d) and (e) below. c) In
the event Lessor repossesses the Equipment, Lessor shall either retain the
Equipment in full satisfaction of Lessee's obligation hereunder or sell or lease
each item of Equipment in such manner and upon such terms as Lessor may in its
sole discretion determine. The proceeds of such sale or lease shall be applied
to reimburse Lessor for Lessor's Loss and any additional amount due under
clauses (d) and (e) below. Lessor shall be entitled to any surplus and Lessee
shall remain liable for any deficiency. For purposes of this subparagraph, the
proceeds of any lease of all or any part of the Equipment by Lessor shall be the
amount reasonably assigned by Lessor as the cost of such Equipment in
determining the rent under such lease. d) Lessor may recover interest on the
unpaid balance of Lessor's Loss from the date it becomes payable until fully
paid at the rate of the lesser of 8% per annum or the highest rate permitted by
law. e) Lessor may exercise any other right or remedy available to it by law or
by agreement, and may in any event recover legal fees and other expenses
incurred by reason of an Event of Default or the exercise of any remedy
hereunder, including expenses of repossession, repair, storage, transportation,
and disposition of the Equipment. If any Supplement is deemed at any time to be
a lease intended as security, Lessee grants Lessor a security interest in the
Equipment to secure its obligations under this lease and all other indebtedness
at any time owing by Lessee to Lessor and agrees that upon the occurrence of an
Event of Default, in addition to all of the other rights and remedies available
to Lessor hereunder, Lessor shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code.. No remedy given in this
paragraph is intended to be exclusive, and each shall be cumulative but only to
the extent necessary to permit Lessor to recover amounts for which Lessee is
liable hereunder. No express or implied waiver by Lessor of any breach of
Lessee's obligations hereunder shall constitute a waiver of any other breach of
Lessee's obligations hereunder.
19. NOTICES. Any written notice hereunder to Lessee or Lessor shall be deemed to
have been given when delivered personally or deposited in the United States
mails, postage prepaid, addressed to recipient at its address set forth above or
at such other address as may be last known to the sender.
20. NET LEASE AND UNCONDITIONAL OBLIGATION. This lease is a completely net lease
and Lessee's obligation to pay rent and amounts payable by Lessee under
paragraphs 12 and 18 is unconditional and not subject to any abatement,
reduction, setoff or defense of any kind.
21. NON-CANCELABLE LEASE. This lease cannot be canceled or terminated except as
expressly provided herein.
22. SURVIVAL OF INDEMNITIES. Lessee's obligations under paragraphs 7, 8, and 18
shall survive termination or expiration of this lease.
23. COUNTERPARTS. There shall be but one counterpart of the Master Lease and of
each Supplement and such counterpart will be marked "Original." To the extent
that any Supplement constitutes chattel paper (as that term is defined by the
Uniform Commercial Code), a security interest may only be created in the
Supplement marked "Original."
24. MISCELLANEOUS. This Master Lease and related Supplement(s) constitute the
entire agreement between Lessor and Lessee and may be modified only by a written
instrument signed by Lessor and Lessee. Any provision of this lease which is
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such unenforceability without invalidating the remaining
provisions of this lease, and any such unenforceability in any jurisdiction
shall not render unenforceable such provision in any other jurisdiction. If this
lease shall in all respects be governed by, and construed in accordance with,
the substantive laws of the State of Minnesota. In the event there is more than
one Lessee named herein or in any Supplement, the obligations of each shall be
joint and several.
Lessor: Norwest Equipment Finance, Inc. PLM International, Inc., Lessee
By: /s/ Lisa K. Lenton /s/ J. Michael Allgood
------------------------------- ----------------------------------
Lisa K. Fenton J. Michael Allgood
Assistant Vice President Vice President & CFO
<PAGE>
[Norwest Equipment Finance Logo] SUPPLEMENT TO MASTER LEASE
Norwest Equipment Finance, Inc.
Investors Building, Suite 300
733 Marquette Avenue
Minneapolis, MN 55479-2048
Supplement Number 7313-100 dated as of December 28, 1998 to
Master Lease Number 7313 dated as of December 28, 1998
Name and Address of Lessee:
PLM International, Inc.
One Market Plaza
Steuart Tower, Suite #800
San Francisco, CA 94105-1301
- --------------------------------------------------------------------------------
This is a Supplement to the Master Lease identified above between Lessor and
Lessee (the "Master Lease"). Upon the execution and delivery by Lessor and
Lessee of this Supplement, Lessor hereby agrees to lease to Lessee, and Lessee
hereby agrees to lease from Lessor, the equipment described below upon the terms
and conditions of this Supplement and the Master Lease. All terms and conditions
of the Master Lease shall remain in full force and effect except to the extent
modified by this Supplement. This Supplement and the Master Lease as it relates
to this Supplement are hereinafter referred to as the "Lease".
Equipment Description:
14-1999 Great Dane 36-Ft. Reefer Trailers
25-1999 Utility 53-Ft. Reefer Trailers
5-1999 Kidron 28-Ft. Reefer Trailers
6-1999 Trailmobile 48-Ft. Reefer Trailers
16-1999 Utility 48-Ft. Reefer Trailers
2-1999 Great Dane 48-Ft. Reefer Trailers
Equipment Location: One Market Plaza, San Francisco, CA 94105-1301
SUMMARY OF PAYMENT TERMS
Initial Term in Months: 84 Total Cost: $2,862,840.00
Payment Frequency: Monthly Total Basic Rent: $2,860,869.48
Basic Rental Payment: $34,057.97 Interim Rent Daily Rate: N/A
plus applicable sales and use tax
Number of Installments: 84 Interim Rent Cutoff Date: N/A
Advance Payments: First Security Deposit: N/A
due on signing this Lease
Terminal Rental Adjustment Clause (TRAC): In accordance with Section 7701(h) of
the Internal Revenue Code of 1986, under penalty of perjury, Lessee hereby
certifies that it intends that more than 50% of the use of the Equipment is to
be in a trade or business of Lessee. Lessor and Lessee hereby agree that at the
expiration of the initial term of the Lease according to its original terms (and
not early on account of default or otherwise) the Equipment will be sold by the
Lessor (or by an agent of Lessor). The proceeds of sale (the "Proceeds") shall
be distributed as follows:
1. First, to reimburse Lessor or its agent for the cost of putting the
Equipment in a condition to be sold, sales commissions, legal fees, expenses
or repossession and all other expenses of sale.
2. Second, the balance to Lessor up to an amount equal to 25.00% of the
original cost of the Equipment.
3. Third, the balance, if any, to Lessee as an adjustment to rent previously
paid by Lessee to Lessor pursuant to the Lease.
In the event the Proceeds are less than the sum of item 1 plus item 2 above, the
Lessee shall pay to the Lessor the deficiency as additional rent pursuant to the
Lease but in any event not more than 25.00% of the original cost of the
Equipment.
Any amount paid to or by the Lessee pursuant to this Addendum shall be the
"Terminal Rental Adjustment".
To be consistent with the Terminal Rental Adjustment, Lessor and Lessee hereby
amend paragraphs 12 and 18 of the Lease (relating to casualty and default) by
amending the figure "10%" where it appears therein to "25.00%".
In addition, the second paragraph of paragraph 2 of the Lease relating to
automatic extension is hereby deleted. Lessee acknowledges that it has been
advised that it will not be treated as the owner of the Equipment for federal
income tax purposes.
Lessor: Norwest Equipment Finance, Inc. PLM International, Inc., Lessee
By: /s/ Lisa K. Lenton /s/ J. Michael Allgood
------------------------------- ---------------------------------
Lisa K. Fenton J. Michael Allgood
Assistant Vice President Vice President & CFO
December 31, 1998
- ----------------------------------------
Rent Commencement Date
<PAGE>
Amendment No. 1 to
Master Lease dated December 28, 1998 ("Lease")
Between
PLM International, Inc. ("Lessee")
And
Norwest Equipment Finance, Inc. ("Lessor")
Lessor and Lessee hereby agree to amend the Lease as follows:
1. Paragraph 6 is amended by adding the following to the end thereof: For
administrative convenience and as an accommodation to Lessee, Lessor agrees
that Lessee may be named as owner on certificate of titles for the
Equipment.
2. Paragraph 9 is amended by adding the following to the end thereof:
Notwithstanding anything to the contrary in this paragraph 9, Lessee may,
from time to time sublet, the Equipment without the prior consent of
Lessor, provided however that Lessee shall remain fully obligated to Lessor
under this Lease and the term of the sublease shall not extend beyond the
term of the Lease.
3. The last sentence of paragraph 12 is amended to read: Any insurance or
condemnation proceeds received shall be credited to Lessee's obligation
under this paragraph and Lessee shall be entitled to any surplus.
4. Except as modified herein, the terms and conditions of the Lease remain the
same.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment this 30th day
of December, 1998.
Norwest Equipment Finance, Inc. PLM International, Inc.
By:/s/ Lisa K. Lenton By: /s/ J. Michael Allgood
------------------------------ ----------------------------------
Lisa K. Lenton J. Michael Allgood
Its: Assistant Vice President Its:Vice President and CFO
<PAGE>
ADDENDUM NO. 2 TO MASTER LEASE AGREEMENT NO. 7313
This Addendum is made and entered into as of the 28th day of December, 1998 with
reference to that certain Master Lease No. 7313, dated as of December 28, 1998,
(herein referred to as the "Lease") between Norwest Equipment Finance, Inc.
("Norwest") and PLM International, Inc. ("Lessee").
WHEREAS, Lessee desires to lease from Norwest the Equipment specified in the
Lease, and,
WHEREAS, Norwest, as a condition precedent to entering into the Lease and
delivering the Equipment, requires Lessee's affiliate TEC Acquisub, Inc. to
execute the Lease and related documents as a co-lessee with joint and several
liability for all of the obligations of the Lessee under the Lease.
NOW THEREFORE, in consideration for Norwest's agreement to enter into the Lease,
deliver the Equipment provided for therein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Norwest, PLM International, Inc.
and TEC Acquisub, Inc. agree as follows:
1. Effective as of the date of this Addendum, TEC Acquisub, Inc. shall be
deemed a co-lessee with PLM International, Inc. for all of the duties and
obligations of the "Lessee" under the Lease with the same force and effect
as if TEC Acquisub, Inc. had executed the Lease as "Lessee."
2. From and after the date of this Addendum, all references in the Lease to
"Lessee" shall be deemed to refer to PLM International, Inc. and TEC
Acquisub, Inc., jointly and severally. Except as otherwise provided herein,
any capitalized terms used in this Addendum and not otherwise defined shall
have the meanings set forth in the Lease. The Lease shall continue in full
force and effect as supplemented and amended hereby.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the date first
indicated above.
LESSOR: Norwest Equipment LESSEE: PLM International, Inc.
Finance, Inc.
By: /s/ Lisa K. Lenton By: /s/ J. Michael Allgood
--------------------------------- ------------------------------
Lisa K. Lenton J. Michael Allgood
Its: Assistant Vice President Its : Vice President and CFO
LESSEE: TEC Acquisub, Inc.
By: /s/ J. Michael Allgood
--------------------------------
J. Michael Allgood
Its: Vice President and CFO
[U.S. BANCORP LOGO]
MASTER LEASE AGREEMENT
THIS LEASE, dated as of December 11, 1998, is made by and between U.S.
Bancorp Leasing & Financial, hereafter referred to as "Lessor," and PLM
International, Inc., hereafter referred to as "Lessee."
LESSOR AND LESSEE COVENANT AND AGREE AS FOLLOWS:
1. PROPERTY LEASED. Lessor agrees to lease to Lessee and Lessee agrees
to lease from Lessor the personal property ("Property") together with any
replacements, additions, repairs, now or hereafter incorporated therein as
described in any Schedule to Master Lease Agreement ("Schedule") now or
hereafter executed by the parties hereto, the terms of which are incorporated
herein.
2. TERM. This Lease shall become effective on the execution hereof by
Lessor. The Term of this Lease may consist of an "Interim Term" and a "Base
Term" in regard to each Schedule. The Interim Term for each Schedule shall begin
on the date that Lessee executes a Delivery and Acceptance Certificate in
connection with any item of Property or provides to Lessor written approval for
payment for such item of Property. Each Interim Term shall continue until the
Base Term Commencement Date set forth in each Schedule. The Base Term for each
Schedule shall begin on the Base Term Commencement Date and shall continue for
the period specified in each Schedule. During each Interim Term, if any, Lessee
shall pay rental ("Interim Rental") in the amount set forth in each Schedule
plus applicable tax thereon.
3. RENT, PAYMENT AND TAXES. Rental payments are specified in each
Schedule. All rents shall be payable by Lessee each month on or before the
payment date shown in each Schedule at Lessor's address herein, or as otherwise
directed by Lessor, without notice or demand and without abatement, set-off or
deduction of any amount whatsoever. Lessee shall pay when due all taxes, fees,
assessments, or other charges, however designated, now or hereafter levied or
based upon the rentals, ownership, use, possession, leasing, operation, control,
or maintenance of the Property, whether or not paid or payable by Lessor,
excluding Lessor's income, franchise and business and occupation taxes, and
shall supply Lessor with proof of payment satisfactory to Lessor at least seven
(7) days before delinquency. At its option, Lessor may pay any tax, assessment,
insurance premium, expense, repair, release, confiscation expense, lien,
encumbrance, or other charge or fee payable hereunder by Lessee, and any amount
so paid shall be repayable by Lessee on demand.
For any payment due hereunder which is not paid within ten (10) days
after the date such payment is due, Lessee agrees to pay a late charge
calculated thereon at a rate of five percent (5.0%) of such overdue amount. The
parties hereto agree that: a) the amount of such late charge represents a
reasonable estimate of the cost that Lessor would incur in processing each
delinquent payment by Lessee and that such late charge shall be paid as
liquidated damages for each delinquent payment; and, b) the payment of late
charges and the payment of Default Interest are distinct and separate from one
another. Acceptance of any late charge or interest shall not constitute a waiver
of default with respect to the overdue amount or prevent Lessor from exercising
any other available rights and remedies. Payments received shall be applied
first to delinquent amounts due, including late charges, then to current
installments. If any such rental payment is made by check and such check is
returned to Lessor for any reason, including without limitation, insufficient
funds in Lessee's account, then Lessee shall be assessed a fee of $25.00 in
addition to any other late charge or any other fee which may be applicable.
If the Property is located in a jurisdiction which imposes any "Sales,"
"Use," or "Rental" tax, Lessor shall collect such tax from Lessee and remit such
tax to the appropriate taxing authority or Lessee shall remit such tax directly
to the appropriate taxing authority. Such requirement may only be waived if
Lessee is exempt from such tax under applicable laws or regulations. Lessee is
responsible for ensuring that such exemption is properly documented in
accordance with such laws and regulations and that such documentation is
provided to Lessor at the inception of each Schedule.
If the Property is subject to Personal Property Taxes, both Lessee and
Lessor are required to advise the proper taxing authorities of all leased
property. Lessee agrees that it will report the Property as having an original
cost as set forth on each Schedule and as Property leased from U.S. BANCORP
LEASING & FINANCIAL. If Lessor receives an invoice from the taxing authorities
for applicable Personal Property Taxes, Lessor shall pay any such taxes directly
and Lessee agrees to reimburse Lessor for all such taxes paid by Lessor. If
Lessee receives such invoice, Lessee agrees to promptly remit such tax directly
to the taxing authority and maintain proof of payment. Upon termination of each
Schedule, Lessor will, if applicable, estimate Personal Property Taxes on the
Property based upon the most recent tax assessment of the Property or on the tax
rates and taxable value calculations as available from the appropriate taxing
jurisdiction. In the event that the actual personal property tax bill is within
$500.00 of such estimate, then Lessor shall not seek reimbursement from Lessee
for any underpayment, and Lessor may retain any overpayment. If the difference
between such estimate and the actual tax bill exceeds $500.00, Lessor shall
refund or Lessee shall remit the entire difference.
4. LOSS OR DAMAGE. No loss or damage to the Property, or any part of
it, shall impair any obligation of Lessee hereunder. Lessee assumes all risk of
damage to or loss of the Property, however caused, while in transit and during
the term hereof. If any Property is totally destroyed, Lessee may substitute
property of like kind and value (subject to approval by Lessor in its sole
discretion) or may pay to Lessor the proportionate value of that item of
Property relative to the total cost of the Property plus recovery of applicable
tax benefits, less the amount of any recovery received by Lessor from any
insurance or other source.
5. OWNERSHIP, LOCATION, MAINTENANCE AND USE. Lessee transfers to Lessor
all right, title and interest, including any and all ownership interest, which
Lessee may have in or to the Property. Lessee represents and warrants that it
has the legal right to make such transfer and that such transfer does not
constitute a transfer of all or substantially all of the assets of Lessee, and
that such transfer does not constitute all or a portion of a "bulk transfer"
under the Uniform Commercial Code. It is agreed between the parties hereto that
Lessor shall be the owner of, and hold title to, the Property for all purposes
throughout each Schedule. At its own risk, Lessee shall use or permit the use of
the Property primarily at the location specified in the Schedule and, without
Lessor's prior written consent, shall not loan, sublet, remove from such
location, part with possession or otherwise dispose of the Property. Lessee
shall at its sole expense maintain the Property in good repair, appearance and
functional order and in compliance with any manufacturer's and regulatory
maintenance and performance standards, shall keep complete records and documents
regarding its use, maintenance and repair, shall not use or permit the use of
the Property in any unintended, injurious or unlawful manner, shall not permit
use or operation of the Property by any one other than Lessee's qualified
employees and shall not change or alter the Property without Lessor's written
consent. Lessee shall not create, cause, or permit any kind of claim, levy, lien
or legal process on the Property, and shall forthwith satisfy, remove and
procure the release thereof. The Property is and always shall remain personal
property. Lessee shall not cause or permit the Property to be used or located in
such a manner that it might be deemed a fixture. Lessee shall secure from each
person not a party hereto who might secure an interest, lien or other claim in
the Property, a waiver thereof. Lessee shall affix and maintain, at its expense,
in a prominent and visible location, all ownership notices supplied by Lessor.
Lessee shall permit Lessor to mark the Property in a manner sufficient to
identify the Property as Lessor's Property.
6. LEASE. This is a non-cancelable contract of lease only and nothing
herein or in any other document executed in conjunction herewith shall be
construed as conveying or granting to Lessee any option to acquire any right,
title or interest, legal or equitable, in or to the Property, other than use,
possession and quiet enjoyment of the Property, subject to and upon full
compliance with the provisions hereof. Lessee and Lessor agree that this Lease
is a "Finance Lease" as defined by the Uniform Commercial Code Article 2A, the
Uniform Personal Property Leasing Act. Notwithstanding the foregoing, Lessee
hereby grants to Lessor a security interest in and to the Property as security
for all Lessee's obligations to Lessor of every kind and nature.
Lessee hereby acknowledges that all of the leased Property was selected
by Lessee from Supplier(s) chosen by Lessee. Lessee is familiar with all Supply
Contract rights provided by the Supplier(s) and is aware that the Supplier(s)
may be contacted for a full description of any rights Lessee may have under any
Supply Contract. Providing Lessee is not in Default under this Lease, Lessor
hereby assigns to Lessee without recourse, all rights arising under any
warranties applicable to the Property provided by the manufacturer or any other
person. All proceeds of any warranty claim from the manufacturer or any other
person shall first be used to repair the affected Property.
7. GENERAL INDEMNIFICATION AND INSURANCE. Lessee assumes liability for,
and agrees to defend, indemnify and hold Lessor harmless from any claim,
liability, loss, cost, expense, or damage of every nature (including, without
limitation, fines, forfeitures, penalties, settlements, and attorneys' fees) by
or to any person whomsoever, regardless of the basis, including wrongful,
negligent or improper act or misuse by Lessor, which directly or indirectly
results from or pertains to the leasing, manufacture, delivery, ownership, use,
possession, selection, performance, operation, inspection, condition (including
without limitation, latent or other defects, and whether or not discoverable),
improvements, removal, return or storage of the Property, except arising while
the Property is in the possession of Lessor.
Upon request of Lessor, Lessee shall assume the defense of all demands,
claims, or actions, suits and all proceedings against Lessor for which indemnity
is provided and shall allow Lessor to participate in the defense thereof. Lessor
shall be subrogated to all rights of Lessee for any matter which Lessor has
assumed obligation hereunder, and may settle any such demand, claim, or action
with Lessee's prior consent (which shall not be unreasonably withheld), and
without prejudice to Lessor's right to indemnification hereunder.
At its expense, Lessee shall maintain in force, at all times from
shipment of the Property to Lessee until surrender thereof, property damage
insurance and liability insurance with such deductibles and from such insurance
carriers as shall be satisfactory to Lessor. The Property must be insured
against all risks which are customarily insured against on the type of property
leased hereunder. The amount of Lessee's liability insurance shall not be less
than $1,000,000.00. Such insurance policies must name Lessor as an additional
insured and loss payee, and provide for ten (10) days advance written notice to
Lessor of modification or cancellation. Lessee shall, upon request, deliver to
Lessor satisfactory evidence of the insurance coverage. In the event Lessee
fails to do so, Lessor may, at Lessor's option, in addition to any other rights
available to Lessor, obtain coverage, and any sum paid therefor by Lessor
(including any charges assessed by Lessor for such service) shall be immediately
due and payable to Lessor by Lessee.
8. INCOME TAX INDEMNITY. Lessee and Lessor hereby agree and assume as
follows:
(a) This Lease will be a lease for Federal and Oregon state income tax
purposes; Lessor will be treated as the purchaser, owner, lessor, and original
user of the Property and Lessee will be treated as the lessee of the Property
for such purposes.
(b) Lessor shall be entitled to depreciation deductions with respect to
each item of Property as provided by Section 167(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), determined under Section 168 of the Code by
using the applicable depreciation method, the applicable recovery period, and
the applicable convention, all as may be specified on the applicable Schedule
for the Property, and Lessor shall also be entitled to corresponding Oregon
depreciation deductions.
(c) For purposes of determining depreciation deductions, the Property
shall have an income tax basis equal to Lessor's cost for the Property specified
on the applicable Schedule, plus such expenses of the transaction incurred by
Lessor as may be included in basis under Section 1012 of the Code.
(d) The maximum federal and Oregon income tax rates applicable to
Lessor in effect on the date of execution and delivery of a Schedule with
respect to an item or items of Property will not change during the lease term
applicable to such Property.
If, as the result of the acts or omissions of the Lessee, the
assumptions, representations, warranties, or covenants of Lessee contained in
this Lease or in any other agreement relating to the Property shall prove to be
incorrect and (i) Lessor shall determine that it is not entitled to claim all or
any portion of the depreciation deductions in the amounts and in the taxable
years determined as specified in (b) and (c), above, or (ii) such depreciation
deductions are disallowed, adjusted, recomputed, reduced, or recaptured, in
whole or in part, by the Internal Revenue Service or Oregon Department of
Revenue (such determination, disallowance, adjustment, recomputation, reduction,
or recapture being herein called a "Loss"), then Lessee shall pay to Lessor as
an indemnity and as additional rent such amount as shall, in the reasonable
opinion of Lessor, cause Lessor's after-tax economic yield (the "Net Economic
Return") to equal the Net Economic Return that would have been realized by
Lessor if such Loss had not occurred. The amount payable to Lessor pursuant to
this section shall be payable on the next succeeding rental payment date after
written demand therefor from Lessor accompanied by a written statement
describing in reasonable detail such Loss and the computation of the amount so
payable.
9. INSPECTION AND REPORTS. Lessor shall have the right, at any
reasonable time, to enter on Lessee's premises or elsewhere and inspect the
Property and any records and documents regarding its use, maintenance and
repair. Upon Lessor's request, but in no event later than thirty (30) days after
such request, Lessee will deliver all information requested by Lessor which
Lessor deems necessary to determine Lessee's current financial condition or
faithful performance of the terms hereof. Lessee shall give Lessor immediate
notice and copy of all tax notices, reports, or inquiries, and of all seizure,
attachment, or judicial process affecting or relating to the use, maintenance,
operation, possession, or ownership of the Property.
10. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee represents and
warrants to Lessor that as of the date of this Lease and of each Schedule:
(a) Lessee has adequate power and capacity to enter into this Lease,
any Schedule, and any other documents required to be delivered in connection
with this Lease (collectively, the "Documents"); the Documents have been duly
authorized, executed and delivered by Lessee and constitute valid, legal and
binding agreements, enforceable in accordance with their terms; there are no
proceedings presently pending or threatened against Lessee which will impair its
ability to perform under the Lease; and all information supplied to Lessor is
accurate and complete.
(b) Lessee's entering into the Lease and leasing the Property does not
and will not; (i) violate any judgment, order, or law applicable to the Lease,
Lessee or Lessee's organizational documents; or (ii) result in the creation of
any lien, security interest or other encumbrance upon the Property, other than
as granted hereunder.
(c) All information and representations furnished by Lessee to Lessor
concerning the Property are accurate and correct.
(d) All financial data of Lessee or of any consolidated group of
companies of which Lessee is a member ("Lessee Group"), delivered to Lessor have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis with prior periods and fairly present the
financial position and results from operations of Lessee, or of the Lessee
Group, as of the stated date and period(s). Since the date of the most recently
delivered financial data, there has been no material adverse change in the
financial or operating condition of Lessee or of the Lessee Group.
(e) If Lessee is a business entity, it is and will be validly existing
and in good standing under laws of the state of its organization; the persons
signing the Documents are acting with all necessary authority and hold the
offices indicated below their signatures, which are genuine.
11. ASSIGNMENT. LESSEE SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR
ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS LEASE OR ENTER INTO ANY SUBLEASE OF
ALL OR ANY PART OF THE LEASED PROPERTY WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR WHICH SHALL NOT BE UNREASONABLY WITHHELD. IN CONNECTION WITH THE GRANTING
OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION, A FEE SHALL BE
ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING BALANCE THEN DUE
HEREUNDER.
LESSEE AGREES THAT LESSOR MAY ASSIGN OR TRANSFER THIS LEASE OR LESSOR'S
INTEREST IN THE LEASED PROPERTY WITHOUT NOTICE TO LESSEE. Any assignee of Lessor
shall have all of the rights, but none of the obligations, of Lessor under this
Lease and Lessee will not assert against any assignee of Lessor any defense,
counter claim or offset that Lessee may have against Lessor. Lessee acknowledges
that any assignment or transfer by Lessor will not materially change Lessee's
duties or obligations under this Lease nor materially increase the burdens or
risks imposed on Lessee. Lessee shall cooperate with Lessor in executing any
documentation reasonably required by Lessor or any assignee of Lessor to
effectuate any such assignment.
12. SURRENDER. On the expiration or termination of the term specified
in each Schedule, unless Lessee shall exercise any purchase option granted in
connection with such Schedule, Lessee shall, at its risk and expense and
according to manufacturer's recommendations, assemble, prepare for delivery, and
deliver the applicable Property and all manuals, records, certificates and
documents regarding its use, maintenance and repair to any location specified by
Lessor within the continental United States. To the extent that any such
purchase option specifies that the purchase price shall be the "fair market
value" of the Property, the term "fair market value" shall be defined as the
value of the Property in continued use. Upon return of the Property any upgrades
and improvements shall become the property of Lessor. Any upgrades, parts or
improvements may only be removed from the Property if their removal shall not
impair the Property's ability to operate according to any manufacturer's and
regulatory performance standards and specifications. The Property shall be
delivered unencumbered and free of any liens, charges, or other obligations
(including delivery expense and sales or use taxes, if any, arising from such
delivery) and shall be in good working order, in the same condition, appearance,
and functional order as when first leased hereunder, reasonable wear excepted,
and in the condition specified or described in the applicable Schedule. At
Lessor's request, Lessee shall at Lessee's expense provide Lessor with a written
certification by an independent engineer or other recognized expert acceptable
to Lessor to the effect that the Property is in the condition required
hereunder. In lieu of delivery, Lessor may, at its option, direct Lessee to
dispose of all or a portion of the Property in a proper and lawful manner at a
recognized disposal site at Lessee's sole cost and responsibility.
13. DEFAULT. Time is of the essence under this Lease, and Lessee shall
be in default in the event of any of the following ("Event of Default"): (a) any
failure to pay when due the full amount of any payment required hereunder,
including, without limitation, rent, taxes, liens, insurance, indemnification,
repair or other charge; (b) any misstatement or false statement in connection
with, or non-performance of any of Lessee's obligations, agreements, or
affirmations under or emanating from, this Lease which continues for more than
ten (10) days after writtne notice; (c) Lessee's death, dissolution, termination
of existence; (d) if any of the following actions or proceedings are not
dismissed within sixty (60) days after commencement: Lessee's insolvency,
becoming the subject of a petition in bankruptcy, either voluntary or
involuntary, or in any other proceeding under federal bankruptcy laws; making an
assignment for benefit of creditors; or being named in, or the Property being
subjected to a suit for the appointment of a receiver; (e) any failure to pay,
as and when due, any obligation of Lessee in excess of $250,000 (which is not
disputed by Lessee in good faith), whether or not to Lessor, arising
independently of this Lease; (f) any removal, sale, transfer, sublease,
encumbrance, seizure or levy of or upon the Property; or (g) bankruptcy,
insolvency, termination, death, dissolution, or default of any guarantor for
Lessee.
<PAGE>
14. REMEDIES. Upon the occurrence of any Event of Default purusant to
Section 13(a) which continues for more than ten (10) days and at any time
thereafter and upon the occurrence of any Event of Default purusant to Sections
13(b) through (g) which continues for more than ten (10) days after written
notice and at any time thereafter, Lessor shall have all remedies provided by
law; and, without limiting the generality of the foregoing and without
terminating this Lease, Lessor, at its sole option, shall have the right at any
time to exercise concurrently, or separately, without notice to Lessee (unless
specifically stated), any one or all of the following remedies:
(a) Request Lessee to assemble the Property and make it available to
Lessor at a reasonable place designated by Lessor and put Lessor in possession
thereof on demand;
(b) Immediately and without legal proceedings or notice to Lessee,
enter the premises, take possession of, remove and retain the Property or render
it unusable (any such taking shall not terminate this Lease);
(c) Declare the entire amount of rent and other sums payable hereunder
immediately due and payable; however, in no event shall Lessor be entitled to
recover any amount in excess of the maximum permitted by applicable law;
(d) Terminate the leasing of any or all items of Property. Such
termination shall occur only upon notice by Lessor and only as to such items of
Property as Lessor specifically elects to terminate. This Lease shall continue
in full force and effect as to any remaining items;
(e) Recover the sum of: (i) any accrued and unpaid rent, plus (ii) the
present value of all future rentals reserved in the Lease and contracted to be
paid over the unexpired term of the Lease, discounted at the rate of six percent
(6%); plus, (iii) the anticipated residual value of the Property as of the
expiration of this Lease or any renewal thereof; (iv) any indemnity payment, if
then determinable; (v) all commercially reasonable costs and expenses incurred
by Lessor in any repossession, recovery, storage, repair, sale, re-lease or
other disposition of the Property, including reasonable attorneys' fees and
costs incurred in connection therewith or otherwise resulting from Lessee's
default (including any incurred at trial, on appeal or in any other proceeding);
and, (vi) the value of all tax benefits lost to Lessor as a result of Lessee's
default or the enforcement by Lessor of any remedy; plus interest on each of the
foregoing at a rate of fifteen percent (15.0%) per annum ("Default Interest");
and,
(f) In an effort to mitigate its damages, Lessor shall re-lease or sell
any or all of the Property at a public or private sale on such terms and notice
as Lessor shall deem reasonable. The proceeds of any sale or lease shall be
applied in the following order of priorities: (i) to pay all of Lessor's
expenses in taking, removing, holding, repairing and disposing of Property; then
(ii) to pay any late charges and interest accrued; then (iii) to pay accrued but
unpaid rent together with the anticipated residual value, future rent, interest
and all other due but unpaid sums (including any indemnification and sums due
under other Leases or agreements in default). Any remaining proceeds will
reimburse Lessee for payments which it made to reduce the amounts owed to Lessor
in the preceding sentence. Lessor shall keep any excess. If the proceeds of any
sale or lease are not enough to pay the amounts owed to Lessor under this
Section, Lessee shall pay the deficiency.
No remedy referred to in this paragraph is intended to be exclusive,
but shall be cumulative and in addition to any other remedy referred to above or
otherwise available to Lessor at law or in equity.
15. LESSEE'S WAIVER. Upon the execution by Lessee of a Delivery and
Acceptance Certificate in connection with each Schedule hereto, to the extent
permitted by applicable law, Lessee hereby waives Lessee's rights to: (i) cancel
or repudiate this Lease; (ii) reject or revoke acceptance of the Property; (iii)
recover damages from Lessor for any breaches of warranty; (iv) claim, grant or
permit a security interest in the Property in Lessee's possession or control for
any reason; (v) deduct all or part of any claimed damages resulting from
Lessor's default, if any, under this Lease; (vi) accept any partial delivery of
the property; (vii) "cover" by making any purchase or lease of or contract to
purchase or lease property in substitution for the Property; (viii) commence
legal action against Lessor for specific performance, replevin, sequestration,
claim and delivery or the like for the Property.
16. NOTICES, PAYMENTS AND GOVERNING LAW. All notices and payments shall
be mailed or delivered to the respective parties at the below address, or such
other address as a party may provide in writing from time to time. This Lease
shall be considered to have been made in the State of Oregon and shall be
interpreted, and the rights and liabilities of the parties determined, in
accordance with applicable federal law and the laws of the State of Oregon. In
the event of suit enforcing this Lease, Lessee agrees that venue may, at
Lessor's option, be laid in the county of Lessor's address below.
17. SEVERABILITY. If any of the provisions of this Lease are contrary
to, prohibited by, or held invalid under applicable laws, regulations or public
policy of any jurisdiction in which it is sought to be enforced, then that
provision shall be considered inapplicable and omitted but shall not invalidate
the remaining provisions. In no event shall this Lease be enforced in any way
which permits Lessor to charge or collect interest in excess of the maximum
lawful rate. Should interest collected exceed such rate, Lessor shall refund
such excess interest to Lessee. In such event, Lessee agrees that Lessor shall
not be subject to any penalties provided by law for contracting for or
collecting interest in excess of the maximum lawful rate.
18. SURVIVAL. All of Lessor's rights, privileges and indemnities
contained herein shall survive the expiration or other termination of the Lease
and any Schedules, and the rights, privileges and indemnities contained herein
are expressly made for the benefit of, and shall be enforceable by, Lessor, its
successors and assigns.
19. LESSOR'S DISCLAIMERS. Lessor has obtained the Property based on
specifications furnished by the Lessee. Lessor does not deal in property of this
kind or otherwise hold itself or its agents out as having knowledge or skill
peculiar to the Property. Lessee acknowledges that it has relied on its own
skill and experience in selecting property suitable to the Lessee's particular
needs or purposes and has neither relied upon the skill or judgment of Lessor
nor believes that Lessor or its agents possess any special skill or judgment in
the selection of Property for Lessee's particular purposes. Further, Lessee has
not notified Lessor of Lessee's particular needs in using the Property.
Lessee understands and agrees that neither the Supplier(s) nor any
salesman or any agent of the Supplier(s) is an agent of Lessor. No salesman or
agent of supplier is authorized to waive or alter any term or condition of this
Lease, and no representation as to the Property or any other matter by the
Supplier shall in any way affect Lessee's duty to pay the rent and perform its
obligations as set forth in this Lease. Lessor shall not be liable to Lessee for
any incidental, consequential, or indirect damages or for any act, neglect,
omission, breach or default by any third party.
LESSOR ASSUMES NO RESPONSIBILITY FOR AND MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE TITLE, DESIGN, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, QUALITY, WORKMANSHIP, OR THE SUITABILITY, SAFETY,
ADEQUACY, OPERATION, USE OR PERFORMANCE OF THE PROPERTY OR AS TO ITS
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR AS TO PATENT, TRADEMARK
OR COPYRIGHT INFRINGEMENT. ANY DELAY IN DELIVERY SHALL NOT AFFECT THE VALIDITY
OF THIS LEASE.
LESSOR SHALL NOT BE LIABLE TO LESSEE FOR ANY REPRESENTATION, CLAIM,
BREACH OF WARRANTY, EXPENSE OR LOSS DIRECTLY OR INDIRECTLY CAUSED BY ANY PERSON,
INCLUDING LESSOR, IN ANY WAY RELATED TO THE PROPERTY.
20. ENTIRE AGREEMENT, WAIVERS, SUCCESSORS, NOTICE. This Lease and any
Schedule expressly referring hereto (each, a "Transaction") contain the entire
agreement of the parties and shall not be qualified or supplemented by course of
dealing. However, in any case where the Lessor takes an assignment from a vendor
of its security interest in the same Property, the terms of the Transaction
shall be incorporated into the assigned agreement and shall prevail over any
inconsistent terms therein but shall not be construed to create a new contract.
No waiver or modification by Lessor of any of the terms or conditions hereof
shall be effective unless in writing signed by an officer of Lessor. No waiver
or indulgence by Lessor of any default or deviation by Lessee of any required
performance shall be a waiver of Lessor's right to subsequent or other full and
timely performance. This Lease shall be binding on the parties hereto and their
respective successors and assigns and shall inure to the benefit of such
successors and assigns. Paragraph headings shall not be considered a part of
this Lease.
Under Oregon law, most agreements, promises and commitments made by
Lessor after October 3, 1989, concerning loans and other credit extensions which
are not for personal, family or household purposes or secured solely by the
Lessee's residence must be in writing, express consideration and be signed by
Lessor to be enforceable.
BY INITIALING THIS SECTION, LESSEE ACKNOWLEDGES THAT LESSEE HAS READ THE ABOVE
PARAGRAPHS UNDER SECTION 19, LESSOR'S DISCLAIMERS, AND SECTION 20, ENTIRE
AGREEMENT, AND FULLY UNDERSTANDS THEIR CONTENT.
INITIALED: /S/ JMA
---------
21. POWER OF ATTORNEY. LESSEE HEREBY AUTHORIZES AND APPOINTS LESSOR AS
ITS ATTORNEY-IN-FACT TO COMPLETE, AMEND AND EXECUTE ON LESSEE'S BEHALF FINANCING
STATEMENTS IN CONNECTION WITH THIS LEASE AND TO CONFORM THE DESCRIPTION OF THE
PROPERTY (INCLUDING SERIAL NUMBERS) IN ANY SUCH FINANCING STATEMENTS OR OTHER
DOCUMENTATION. LESSEE WILL ALSO PROMPTLY EXECUTE AND DELIVER TO LESSOR SUCH
FURTHER DOCUMENTS AND TAKE FURTHER ACTION AS LESSOR MAY REQUEST TO MORE
EFFECTIVELY CARRY OUT THE INTENT AND PURPOSE OF THIS LEASE.
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Master
Lease Agreement to be duly executed as of the day and year first above written.
PLM International, Inc. (LESSEE)
By:/s/ J. Michael Allgood
------------------------------------
J. Michael Allgood
Vice President
U.S. BANCORP LEASING & FINANCIAL (LESSOR)
By:/s/ James M. Gilroy
-------------------------------------
An Authorized Officer Thereof
Address for All Notices:
U. S. BANCORP LEASING & FINANCIAL
P.O. Box 2177, 7659 S.W. Mohawk Street
Tualatin, Oregon 97062-2177
<PAGE>
[U.S. BANCORP LOGO]
SCHEDULE TO MASTER LEASE AGREEMENT
Schedule Number 12209.001
THIS SCHEDULE made as of December 11, 1998, by and between U.S. BANCORP
LEASING & FINANCIAL ("Lessor"), having its principal place of business at P.O.
Box 2177, 7659 S.W. Mohawk Street, Tualatin, Oregon 97062-2177, and PLM
International, Inc. ("Lessee"), having its principal place of business located
at One Market Street, Steuart Street Tower, Suite 800, San Francisco, California
94105-1301, to the Master Lease Agreement dated as of December 11, 1998 between
the Lessee and the Lessor (the "Lease"). Capitalized terms used but not defined
herein are used with the respective meanings specified in the Lease.
LESSOR AND LESSEE HEREBY COVENANT AND AGREE AS FOLLOWS:
(a) The following specified equipment (the "Property") is hereby made and
constituted Property for all purposes pursuant to the Lease:
See Exhibit "A" attached hereto and made a part hereof.
(b) The cost of the Property is $10,435,856.00;
Please Initial Here:/s/ JMA
---------------
(c) This Schedule shall commence on December 31, 1998 and shall continue
for eighty-four (84) months thereafter.
(d) Lessee shall owe eighty-four (84) basic monthly rental payments in
advance each in the amount of $121,897.77 (plus applicable sales/use
taxes). The first such payment shall be due on December 31, 1998 and
shall continue on the same day of each month thereafter until the end
of the term of this Schedule. In addition, Lessee shall pay daily pro
rata rental in the amount of $4,063.26 per day (plus applicable
sales/use taxes) from the date on which Lessee executes a Delivery and
Acceptance Certificate for the Property through December 30, 1998. Such
daily pro rata rental shall be due and payable on the date on which
Lessee executes a Delivery and Acceptance Certificate.
(e) The record owner of the premises at which the Property will be
installed or stored is: ;
1. LATE CHARGE. If any installment of Rent shall not be received by Lessor or
Lessor's Assignee within ten (10) days after such amount is due, Lessee shall
pay to Lessor a late charge equal to five percent (5.0%) of such overdue amount.
2. TRAC OBLIGATION. a. In addition to the rental payments specified above,
Lessor is also entitled to recover a residual value equal to twenty-five percent
(25.00%) of the cost of the Property as set forth herein (the "Residual Value")
plus a Lease Termination Fee of $500.00.
b. At the end of the Term hereof, Lessee may purchase the Property for
the Residual Value. Lessee shall give written notice ninety (90) days prior to
Lease expiration of Lessee's intent to purchase the Property. Should Lessee
elect not to purchase the Property, Lessor shall dispose of any or all of the
Property by selling such Property for the highest cash offer then reasonably
available, or by re-leasing such Property on terms and conditions acceptable to
Lessor. The proceeds of any sale of the Property shall be deemed to be the
"Market Value" of the Property. If the disposition is by re-lease, the Market
Value of the Property shall be the present value of the rental stream of the
re-lease discounted at a rate acceptable to Lessee and Lessor. The Market Value
shall then be reduced by a Lease Termination Fee of $500.00 plus all expenses
incurred by Lessor in connection with the recovery and disposition of the
Property. The remaining balance shall be referred to as the "Residual Credit."
If the Residual Credit exceeds the Residual Value, Lessor shall promptly pay the
amount of such excess to Lessee as adjusted rent. If the Residual Credit is less
than the Residual Value, Lessee shall promptly pay the amount of such deficiency
to Lessor as adjusted rent.
c. Upon receipt of payment from Lessee of the Residual Value together
with any and all applicable sales or other taxes due in connection therewith,
and any and all remaining sums or other amounts payable under this Schedule,
Lessor shall transfer all its right, title and interest in and to the Property
to Lessee. The Property shall be transferred "As Is" and "Where Is" without any
express or implied representations or warranties.
d. Should Lessee fail to comply with the foregoing, then Lessor, at its
sole option, shall have the right to: a) demand immediate return of the
Property; or, b) extend the Term for an additional six (6) months (the "Extended
Term"). Should Lessor elect to extend the Term, Lessee shall be irrevocably
obligated to remit basic monthly rent for the period beginning on the day
immediately succeeding the last day of the original Term (the "Holdover Date")
and ending at the end of the sixth (6) month thereafter, a payment of such rent
being due on the Holdover Date and on the same day of each consecutive month
thereafter. Each payment of such rent shall be in the amount of the basic
monthly rent for the last month of the Term in accordance with the provisions of
this Schedule. All Lessee's other obligations under the Lease shall remain in
full force and effect for so long as Lessee shall continue to possess the
Property. Any and all rental payments pursuant to this Paragraph shall be deemed
for all intents and purposes to be payments for possession and use of the
Property after the expiration of the Term, and shall not be credited to any
other obligation of Lessee to Lessor. Lessor's invoicing and/or accepting any
such payment shall not give rise to any right, title or interest of Lessee other
than to possession and use of the Property during the period to which such rent
applies in accordance with this Paragraph. The aforesaid right to charge Lessee
rent for possession and use of the Property is not in limitation or derogation
of any of Lessor's rights pursuant to the Lease.
3. DEPRECIATION. Lessor will be entitled to modified accelerated cost recovery
depreciation based on 100% of Property Cost using the 200% declining balance
method, switching to straight line, for five (5) year Property, and zero salvage
value.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Schedule to be duly executed as of the day and year first above written.
PLM International, Inc.
By: /s/ J. Michael Allgood
-------------------------------------
J. Michael Allgood
Vice President
U.S. BANCORP LEASING & FINANCIAL
By: /s/ James M. Gilroy
-------------------------------------
An Authorized Officer Thereof
Address for All Notices:
U. S. BANCORP LEASING & FINANCIAL
P.O. Box 2177, 7659 S.W. Mohawk Street
Tualatin, Oregon 97062-2177
WAREHOUSING CREDIT AGREEMENT
AMONG
AMERICAN FINANCE GROUP, INC.
AND
THE LENDERS LISTED HEREIN,
as Lenders
AND
FIRST UNION NATIONAL BANK,
as Agent
DECEMBER 15, 1998
<PAGE>
SECTION 1. .....................................DEFINITIONS 1
1.1 Defined Terms....................................1
1.2 Accounting Terms.................................17
1.3 Other Terms......................................18
1.4 Schedules And Exhibits...........................18
SECTION 2. ......................AMOUNT AND TERMS OF CREDIT 18
2.1 Commitment To Lend...............................18
2.1.1 Revolving Facility.............18
(a) Facility Commitments...........18
(b) Each Loan......................19
2.1.2 Funding........................20
2.1.3 Utilization Of The Loans.......20
2.2 Repayment And Prepayment.........................20
2.2.1 Repayment......................20
2.2.2 Voluntary Prepayment...........20
2.3 Calculation Of Interest; Post-Maturity Interest..20
2.4 Manner Of Payments...............................21
2.5 Payment On Non-Business Days.....................21
2.6 Application Of Payments..........................21
2.7 Procedure For The Borrowing Of Loans.............21
2.7.1 Notice Of Borrowing............21
2.7.2 Unavailability Of LIBOR Loans..22
2.8 Conversion And Continuation Elections............22
2.8.1 Election.......................22
2.8.2 Notice Of Conversion...........22
2.8.3 Interest Period................23
2.8.4 Unavailability Of LIBOR Loans..23
2.9 Discretion Of Lenders As To Manner Of Funding....23
2.10 Distribution Of Payments.........................23
2.11 Agent's Right To Assume Funds Available For Advances...23
2.12 Agent's Right To Assume Payments Will Be Made By Borrower.24
2.13 Capital Requirements.............................24
2.14 Taxes............................................24
2.14.1 No Deductions..................24
2.14.2 Miscellaneous Taxes............24
2.14.3 Indemnity......................25
2.14.4 Required Deductions............25
2.14.5 Evidence Of Payment............25
2.14.6 Foreign Persons................25
2.14.7 Income Taxes...................26
2.14.8 Reimbursement Of Costs.........26
2.14.9 Jurisdiction...................27
2.15 Illegality.......................................27
2.15.1 LIBOR Loans....................27
2.15.2 Prepayment.....................27
2.15.3 Prime Rate Borrowing...........27
2.16 Increased Costs..................................27
2.17 Inability To Determine Rates.....................27
2.18 Prepayment Of LIBOR Loans........................28
SECTION 3. ............................CONDITIONS PRECEDENT 28
3.1 Effectiveness Of This Agreement..................28
3.1.1 Corporate Documents............28
3.1.2 Notes..........................29
3.1.3 Security Documents.............29
3.1.4 Opinion Of Counsel.............29
3.1.5 Guaranty.......................29
3.1.6 Bringdown Certificate..........29
3.1.7 Fees...........................29
3.1.8 Other Documents................29
3.2 All Loans........................................29
3.2.1 Notice Of Borrowing............30
3.2.2 No Event Of Default............30
3.2.3 Officer's Certificate..........30
3.2.4 Officer's Certificate - Leases.30
3.2.5 Insurance......................31
3.2.6 Other Instruments..............31
SECTION 4. .......BORROWER'S REPRESENTATIONS AND WARRANTIES 31
4.1 Existence And Power..............................31
4.2 Loan Documents And Note Authorized; Binding Obligations..31
4.3 No Conflict; Legal Compliance....................32
4.4 Financial Condition..............................32
4.5 Executive Offices................................32
4.6 Litigation.......................................32
4.7 Consents And Approvals...........................32
4.8 Other Agreements.................................33
4.9 ERISA............................................33
4.10 Labor Matters....................................33
4.11 Margin Regulations...............................33
4.12 Taxes............................................33
4.13 Environmental Quality............................34
4.14 Trademarks, Patents, Copyrights, Franchises And Licenses..34
4.15 Full Disclosure..................................34
4.16 Other Regulations................................34
4.17 Solvency.........................................35
4.18 Survival Of Representations And Warranties.......35
4.19 Eligible Leases..................................35
4.20 Year 2000........................................35
SECTION 5. ................BORROWER'S AFFIRMATIVE COVENANTS 36
5.1 Records And Reports..............................36
5.1.1 Quarterly Statements...........36
5.1.2 Annual Statements..............36
5.1.3 Borrowing Base Certificate.....36
5.1.4 Compliance Certificate.........37
5.1.5 Reports........................37
5.1.6 Lease Receivables Aging Reports...37
5.1.7 Insurance Reports..............37
5.1.8 Certificate Of Responsible Officer..37
5.1.9 Employee Benefit Plans.........38
5.1.10 ERISA Notices..................38
5.1.11 Pension Plans..................38
5.1.12 SEC Reports....................38
5.1.13 Tax Returns....................38
5.1.14 Additional Information.........38
5.2 Existence; Compliance With Law...................39
5.3 Insurance........................................39
5.4 Taxes And Other Liabilities......................39
5.5 Inspection Rights; Assistance....................39
5.6 Maintenance Of Facilities; Modifications; Performance
Of Leases........................................40
5.6.1 Maintenance Of Facilities......40
5.6.2 Performance Of Leases..........40
5.7 Supplemental Disclosure..........................40
5.8 Further Assurances...............................40
5.9 Lockbox..........................................40
5.10 Environmental Laws...............................40
SECTION 6. ...................BORROWER'S NEGATIVE COVENANTS 40
6.1 Liens; Negative Pledges; And Encumbrances........41
6.2 Limitations On Indebtedness......................41
6.3 Disposition Of Assets............................41
6.4 Restricted Payments..............................41
6.5 Restriction On Fundamental Changes...............41
6.6 Transactions With Affiliates.....................42
6.7 No Loans To Affiliates...........................42
6.8 No Investment....................................42
6.9 Maintenance Of Business..........................42
6.10 No Subsidiaries..................................42
6.11 Events Of Default................................42
6.12 ERISA............................................42
6.13 No Use Of Any Lender's Name......................43
6.14 Certain Accounting Changes.......................43
SECTION 7. .................FINANCIAL COVENANTS OF BORROWER 43
7.1 Minimum Consolidated Tangible Net Worth..........43
7.2 Minimum Interest Coverage Ratio..................43
SECTION 8. ..................EVENTS OF DEFAULT AND REMEDIES 43
8.1 Events Of Default................................43
8.1.1 Failure To Make Payments.......44
8.1.2 Other Agreements...............44
8.1.3 Breach Of Covenants............44
8.1.4 Breach Of Representations Or Warranties..44
8.1.5 Failure To Cure................44
8.1.6 Insolvency.....................44
8.1.7 Bankruptcy Proceedings.........45
8.1.8 Material Adverse Effect........45
8.1.9 Judgments, Writs And Attachments..45
8.1.10 Legal Obligations..............45
8.1.11 Criminal Proceedings...........45
8.1.12 Action By Governmental Authority..45
8.2 Waiver Of Default................................46
8.3 Remedies.........................................46
8.4 Set-Off..........................................46
8.5 Rights And Remedies Cumulative...................47
SECTION 9. ...........................................AGENT 47
9.1 Appointment......................................47
9.2 Delegation Of Duties.............................48
9.3 Exculpatory Provisions...........................48
9.4 Reliance By Agent................................48
9.5 Notice Of Default................................48
9.6 Non-Reliance On Agent And Other Lenders..........49
9.7 Indemnification..................................49
9.8 Agent In Its Individual Capacity.................49
9.9 Resignation And Appointment Of Successor Agent...50
SECTION 10. ........................EXPENSES AND INDEMNITIES 50
10.1 Expenses.........................................50
10.2 Indemnification..................................51
10.2.1 General Indemnity..............51
10.2.2 Environmental Indemnity........51
10.2.3 Survival; Defense..............52
SECTION 11. ...................................MISCELLANEOUS 52
11.1 Survival.........................................52
11.2 No Waiver By Agent Or Lenders....................52
11.3 Notices..........................................52
11.4 Headings.........................................52
11.5 Severability.....................................53
11.6 Entire Agreement; Construction; Amendments And Waivers..53
11.7 Reliance By Lenders..............................53
11.8 Marshalling; Payments Set Aside..................53
11.9 No Set-Offs By Borrower..........................54
11.10 Binding Effect, Assignment..............54
11.11 Counterparts............................55
11.12 Equitable Relief........................55
11.13 Written Notice Of Claims; Claims Bar....55
11.14 Waiver Of Punitive Damages..............56
11.15 Governing Law...........................56
11.16 Waiver Of Jury Trial....................56
<PAGE>
NEW AFG Warehousing
Credit Agreement
($60MM)
WAREHOUSING CREDIT AGREEMENT
THIS WAREHOUSING CREDIT AGREEMENT is entered into as of December 15,
1998, by and among AMERICAN FINANCE GROUP, INC., a Delaware corporation
("Borrower"), the banks, financial institutions and institutional lenders party
hereto and defined as Lenders herein, and FIRST UNION NATIONAL BANK ("FUNB"),
not in its individual capacity, but solely as Agent.
RECITALS
A. Borrower desires to obtain from Lenders a revolving credit facility with
an aggregate principal availability of up to $60,000,000 for the purpose of
financing the purchase of finance leases, all as more particularly described
below; and
B. Lenders have agreed to make such credit available to Borrower, but only
upon the terms and subject to the conditions hereinafter set forth and in
reliance on the representations and warranties set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants hereinafter set forth, and intending to be legally bound, the
parties hereto agree as follows:
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.
"Adjusted LIBOR" means, for each Interest Period in respect of LIBOR
Loans, an interest rate per annum (rounded upward to the nearest 1/16th of one
percent (0.0625%)) determined pursuant to the following formula:
Adjusted LIBOR = LIBOR
-----------------------------------------
1.00 - Eurodollar Reserve Percentage
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 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 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 December
15, 1998, by and between Borrower and FUNB as Agent.
"Agreement" means this Warehousing Credit Agreement dated as of
December 15, 1998, 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 three-eighths percent
(1.375%).
"Assignment and Acceptance" has the meaning set forth in Section
11.10.2.
"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.
"Borrower" has the meaning set forth in the Preamble.
"Borrowing Base" means, as at and for any date of determination, an
amount not to exceed the lesser of:
(a) an amount equal to one hundred percent (100.0%) of the
aggregate Discounted Present Value of all Eligible Leases then owned of record
by Borrower, computed (i) with respect to any requested Loan, as of the
requested Funding Date (and shall include the aggregate Discounted Present Value
of all Eligible Leases to be acquired with the proceeds of the requested Loan),
and (ii) with respect to the delivery of any monthly Borrowing Base Certificate
to be furnished pursuant to Section 5.1.3, as of the last day of the calendar
month for which such Borrowing Base Certificate is furnished; provided, however,
that there shall be excluded from the calculation under this clause (i), (1) as
to any single lessee under one or more 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, (2) as to
all Lessees 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 $10,000,000, (3) 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 (4) the aggregate Discounted Present Value in excess of
$1,000,000 of Administrative Leases; and
(b) an amount equal to ninety percent (90.0%) of the aggregate
Invoice Price of Eligible 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.
"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 Fee Percentage" has the meaning set forth in Section 2.3.
"Commitment Percentage" means, as to any Lender, the percentage
equivalent of such Lender's Commitment divided by aggregate of all Commitments.
"Commitment Termination Date" means December 14, 1999.
"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 2.4.
"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.
"EBIT" means, as calculated for Borrower on a consolidated basis for
any period as of any date of determination, the sum of (a) Net Income, plus (b)
Interest Expense to the extent included in the determination of Net Income, plus
(c) net taxes on income attributable to the business of Borrower and actually
payable by Borrower.
"Effective Amount" means with respect to any Loans on any date, the
aggregate outstanding principal amount thereof after giving effect to any
borrowing and prepayments or repayments thereof occurring on such date.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any State thereof; (b) a commercial bank organized
under the laws of any other country which is a member of the Organization for
Economic Cooperation and Development ("OECD"), or a political subdivision of any
such country; provided, however, that such bank is acting through a branch or
agency located in the country in which it is organized or another country which
is also a member of the OECD or the Cayman Islands; (c) the central bank of any
country which is a member of the OECD; (d) an insurance company organized under
the laws of the United States; (e) a commercial finance company, mutual or other
investment fund, lease financing company or other institutional investor
(whether a corporation, partnership, trust or other entity) that is engaged in
making, purchasing or otherwise investing in commercial loans in the ordinary
course of its business, provided that such Person is an "accredited investo
(as defined in Regulation D under the Securities Act of 1933, as amended); (f)
any Lender party to this Agreement; (g) any Lender Affiliate and (h) any other
Person approved by the Administrative Agent and Borrower, such approval not to
be unreasonably withheld; provided, however, that (i) Borrower's approval shall
not be required so long as an Event of Default has occurred and is continuing
and (ii) an Affiliate of Borrower shall not qualify as an Eligible Assignee.
"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 semi-annually;
(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 rating by Moody's
Investors Service, Inc. equal to B3 or higher, by Standard & Poor's Corporation
equal to B- or higher or the equivalent under the Alcar Debt Rater System;
provided, however, if lessee is domiciled outside the United States, the Lease
must be an Investment Grade Lease.
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 4.13.2.
"Equipment" means the assets (including office or other equipment)
leased to a lessee pursuant to a Lease.
"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 2.15.6.
"Form 4224" has the meaning set forth in Section 2.15.6.
"FUNB" has the meaning set forth in the Preamble.
"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.
"Guarantor" means PLMI.
"Guaranty" means that certain Guaranty dated as of the date of this
Agreement, executed by Guarantor 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.
"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 Coverage Ratio" means, as calculated quarterly on the last
day of each fiscal quarter of Borrower on a rolling four (4) fiscal quarter
basis, the ratio of (a) EBIT to (b) Interest Expense.
"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 Expense" means, as calculated for Borrower on a consolidated
basis for any period as at any date of determination, interest expense for such
period (whether cash or non-cash) determined in accordance with GAAP.
"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 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 an investment grade rating by Moody's Investors Service, Inc. of Baa3 or
higher, by Standard & Poor's Corporation of BBB- or higher 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 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.
"Lenders" means the banks, financial institutions or other
institutional lenders which have executed signature pages to this Agreement and
such other Assignees, banks, financial institutions or other institutional
lenders as shall hereafter execute and deliver an Assignment and Acceptance with
respect to all or any portion of the Commitments and the Loans advanced and
maintained pursuant to the Commitments, in each case pursuant to and in
accordance with Section 11.10.
"Lenders' Side Letter" means the side letter relating to fees dated
December 15, 1998 among Borrower and the Lenders party to this Agreement as of
the Closing Date, other than FUNB.
"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 Notes, 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 December 15,
1998, among Borrower, FUNB and Agent on behalf of Lenders, relating to the
Lockbox.
"Majority 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 fifty percent (50.00%) of all such amounts
outstanding or the total Commitments, as the case may be; provided, however,
that in the event there are two (2) or more Lenders, Majority Lenders must
include at least two (2) Lenders.
"Master Trust Equipment" means the assets (including office or other
equipment) leased to a lessee pursuant to a Master Trust Pooled Lease.
"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.
"Net Income" means, as calculated for Borrower on a consolidated basis
for any period as of any of determination, the net income (or loss) of Borrower
for such period taken as a single accounting period.
"Note" or "Notes" 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 2.15.2.
"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, as to any Lender at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of the Effective Amount of such Lender's Loans divided by the Effective
Amount of all Loans, or if no Loans are outstanding, the percentage equivalent
(expressed as a decimal, rounded to the ninth decimal place) at such time of
such Lender's aggregate Commitments divided by the aggregate Commitments or, if
the Commitments have expired or been terminated and all Loans repaid in full,
the percentage equivalent (expressed as a decimal, rounded to the ninth decimal
place) of the Effective Amount of such Lender's Loans divided by the aggregate
Effective Amount of all Loans immediately before such repayment in full.
"Public Utility Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended (15 U.S.C. ss. 79 et seq.) as the same shall be
in effect from time to time, and any successor statute thereto.
"Regulations T, U and X" means, collectively, Regulations T, U and X
adopted by the Federal Reserve Board (12 C.F.R. Parts 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 (66.67%) of all
such amounts outstanding or the total Commitments, as the case may be; provided,
however, that in the event there are two (2) or more Lenders, Requisite Lenders
must include at least two (2) 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
the date of this Agreement, 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 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 2.15.1.
"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 or any of its 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 California; 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 California, 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 25,
1997, 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 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 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 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 this Agreement and (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 in favor of such Lender, substantially
in the form of Exhibit A (each, a "Note" and collectively, the "Notes").
(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, 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.
(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 respective 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 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 3:00 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' prior written notice with respect to the prepayment of LIBOR Loans and at
least one (1) Business Day's prior written notice with respect to the prepayment
of Prime Rate Loans, or three (3) Business Days' or one (1) Business Day's, as
applicable, prior 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 Commitment Fee for Providing Commitments. In consideration of Lenders'
agreement to commit to make the Loans available to Borrower as contemplated by
this Agreement, Borrowers agree to pay to Agent, on behalf of and for the
ratable benefit of Lenders according to their respective Commitment Percentage
of the aggregate Commitments, a commitment fee in an amount equal to fifteen-one
hundredths of one per cent (0.15%) (the "Commitment Fee Percentage") multiplied
by the average daily difference between the aggregate Commitments and the sum of
the aggregate outstanding principal amount of Loans, due and payable quarterly
in arrears on the last day of each Fiscal Quarter, with the final such payment
due and payable on the Commitment Termination Date.
2.4 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.
2.5 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, any 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, One
First Union Center, 301 South College Street, Charlotte, North Carolina 28288,
Attention: Maria Ostrowski or such other place as shall have been designated in
writing by Agent.
2.6 Payment On Non-Business Days. Whenever any payment to be made under
this Agreement, any 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.
2.7 Application 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.
2.8 Procedure For The Borrowing Of Loans.
2.8.1 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 Officer 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 for LIBOR Loans and one (1) Business Day prior to the
Funding Date for Prime Rate Loans) 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) and if greater, in additional increments of $100,00, and if a Prime
Rate Loan is requested, shall be not less than Two Hundred Fifty Thousand
Dollars ($250,000) and if greater, in additional increments of $10,000;
(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.
2.8.2 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.
2.9 Conversion And Continuation Elections.
2.9.1 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) and if greater, in additional increments of $100,000) 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) and if greater, in
additional increments of $100,000);
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.
2.9.2 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.
2.9.3 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.
2.9.4 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.
2.10 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.
2.11 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.
2.12 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 2.12 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.
2.13 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 Lende 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.
Nothing in this Section 2.13 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.
2.14 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.
2.15 Taxes.
2.15.1 No Deductions. Subject to Section 2.15.7, 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").
2.15.2 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").
2.15.3 Indemnity. Subject to Section 2.15.7, 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 2.15) 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.
2.15.4 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 Section 2.15.7:
(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 2.15) 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.
2.15.5 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.
2.15.6 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 (b)
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.
2.15.7 Income Taxes. Borrower will not be required to pay any
additional amounts in respect of United States Federal income tax pursuant to
Section 2.15.4 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 Section 2.15.6 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 Section 2.15.6 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 Section 2.15.6, 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.
2.15.8 Reimbursement Of Costs. If, at any time, Borrower requests any
Lender to deliver any forms or other documentation pursuant to Section
2.15.6(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.
2.15.9 Jurisdiction. If Borrower is required to pay additional amounts
to any Lender or Agent pursuant to Section 2.15.4, 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.
2.16 Illegality.
2.16.1 LIBOR 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.
2.16.2 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.
2.16.3 Prime Rate Borrowing. If Borrower is required to prepay any
LIBOR Loan immediately as provided in Section 2.16.2, then concurrently with
such prepayment, Borrower shall borrow, in the amount of such prepayment, a
Prime Rate Loan.
2.17 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.
2.18 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.
2.19 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:
2.19.1 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
2.19.2 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 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 of
Borrower and Guarantor, respectively, certifying that (i) attached are copies of
the Certificate of Incorporation and Bylaws of Borrower or Guarantor, as the
case may be, which remain in full force and effect and have not been amended
since the respective date thereof, and (ii) such Person 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;
(c) A certificate of the secretary or assistant
secretary of AFG Credit Corporation, certifying that (i) the attached are copies
of the Certificate of Incorporation and Bylaws of AFG Credit Corporation, which
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.
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 Guaranty. Agent shall have received the Guaranty, in form and
substance satisfactory to Lenders, duly executed and delivered by Guarantor.
3.1.6 Bringdown 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.
3.1.7 Fees. Agent, on behalf of itself and on behalf of those Lenders
party to the Lenders' Side Letter, shall have received Agent's Side Letter and
the Lenders' Side Letter, respectively, each duly executed by Borrower and shall
have received the fees described therein.
3.1.8 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 (or, in the
case of Section 3.2.2, unless waived in writing by all 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 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 which with notice or lapse of time or both would constitute an
Event of Default or Potential Event of Default under this Agreement.
3.2.3 Officer'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).
3.2.4 Officer'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 Notes 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 Notes 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. Guarantor's audited consolidated financial
statements as of December 31, 1997, and Borrower's and Guarantor's unaudited
consolidated financial statements as of September 30, 1998, 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
Borrower and Guarantor, respectively, 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, 1997.
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 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 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 Regulation 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 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
4.20 Year 2000. Borrower has reviewed the areas within its business and
operations which could be adversely affected by, and have developed or are
developing a program to address on a timely basis, the "Year 2000 Problem" (that
is, the risk that computer applications used by Borrower and its Subsidiaries
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date on or after December 31, 1999),
and have made related appropriate inquiry of material suppliers, vendors and
customers. Based on such review and program, Borrower warrants that the "Year
2000 Problem" would not with reasonable likelihood have or result in a Material
Adverse Effect.
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 and Guarantor, 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 Borrower and Guarantor as at the end of such
period and the related consolidated statements of income, stockholders' equity
and cash flows of Guarantor (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 and Guarantor that they (i) are
complete and fairly present the financial condition of Borrower and Guarantor 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
and Guarantor 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, consolidated and consolidating balance sheets of Guarantor and the
related consolidated (and, as to statements of income only for Guarantor,
consolidating) statements of income, stockholders' equity and cash flows of
Guarantor 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 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;
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 or Guarantor by independent public
accountants in connection with each annual, interim or special audit of the
financial statements of Borrower or Guarantor 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 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;
5.1.8 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 or Guarantor 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 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 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 or
Guarantor, 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 or Guarantor has taken, is taking and proposes to take with
respect thereto;
5.1.9 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;
5.1.10 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;
5.1.11 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;
5.1.12 SEC 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
Guarantor;
5.1.13 Tax 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 and Guarantor; and
5.1.14 Additional Information. Such other information respecting the
condition or operations, financial or otherwise, of Borrower and Guarantor 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.
Statements of financial performance required to be provided by Borrower
to Agent pursuant to this Section 5.1 shall (i) include a statement that the
Year 2000 remediation efforts of Borrower are proceeding as scheduled and no
Material Adverse Effect is expected to result from the "Year 2000 Problem"
(within the meaning of such term set forth in Section 4.20) or such remediation
efforts and (ii) indicate whether an auditor, regulator or third party
consultant has issued a management letter or other communication regarding the
Year 2000 exposure, program or progress of Borrower.
All financial statements of Borrower and Guarantor to be delivered by
Borrower and Guarantor to Agent pursuant to this Section 5.1 will be complete
and correct and present fairly the financial condition of Borrower and Guarantor
as of the date thereof; will disclose all liabilities of Borrower and Guarantor
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 and
Guarantor will, to the best of Borrower's and Guarantor's knowledge, after due
inquiry, be true and correct. Borrower and Guarantor hereby agree that each time
either submits a financial statement or tax return to Agent, Borrower and
Guarantor 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 Guarantor 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
Guarantor 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. Without limitation of the other inspection and audits rights
provided by this Section 5.5, Borrower agrees to bear the costs, up to an annual
maximum of $7,500, of field audits of the Equipment and Leases conducted by an
independent auditing or appraisal firm retained by Agent, on behalf and for the
benefit of Lenders (provided that such cap on costs borne by Borrower shall not
apply to the extent Section 10.1(d) applies).
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 Performance 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.
5.7 Supplemental 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.
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 its 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 Potential
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.
6.9 Maintenance 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 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 COVENANTS 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 Notes, 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 (exclusive of intercompany payables and
receivables between Borrower and Guarantor) of not less than the sum of (i)
$15,750,000, plus (ii) an amount equal to fifty percent (50.0%) of Borrower's
cumulative Net Income, as calculated on an annual basis for each fiscal year of
Borrower commencing with Borrower's fiscal year ending December 31, 1998.
7.2 Minimum Interest Coverage Ratio. Borrower shall maintain an Interest
Coverage Ratio of not less than 1.15:1.00.
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, any 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 by
payment in full of the amount thereof 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, or (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
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, 7.1 and 7.2 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
other Loan Document or any statement or certificate at any time given in writing
pursuant hereto or thereto or in connection herewith or therewith 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 or Guarantor 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 or Guarantor or any order, judgment or decree shall be entered against
Borrower or Guarantor 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 or Guarantor 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 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
8.1.12 Action By Governmental Authority. Any Governmental Authority
enters a decree, order or ruling ("Government Action") which will materially and
adversely affect Borrower's or Guarantor'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 (x) any
monetary liability in the case of Borrower, or (y) monetar liability of more
than $1,000,000 in the case of Guarantor, or (ii) any disqualification of or
other limitation on the operation of Borrower or Guarantor, or either of them,
which in the reasonable determination of the Requisite Lenders may have a
Material Adverse Effect; or
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, at the option of Required Lenders, Lenders or Agent, on behalf and for
the benefit of Lenders, may 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 Notes, 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 FUNB as Agent of such Lender under this Agreement and the other Loan
Documents, and each such Lender irrevocably authorizes FUNB as 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 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, 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. 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.
9.8 Agent 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
Majority 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
Notes, all of which amounts shall be deemed to be part of the Obligations.
Notwithstanding anything to the contrary contained in this Section 10.1, but
subject to Section 5.5, 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, any 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,
each 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, any 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 Notes 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.
11.8 Marshalling; Payments Set Aside. Lenders shall be under no obligation
to marshal 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, any 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 Notes 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, its respective 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. In connection and as a condition to each
assignment hereunder, the Assignor Lender agrees to pay or to cause the Assignee
Lender to pay to Agent a processing fee of $3,500; provided that no processing
fee shall be charged for any assignment to a Lender or a Lender Affiliate.
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, its 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, any 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, ANY
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 California 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 Waiver Of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER AND GUARANTOR, BY EXECUTION HEREOF, AND 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 AGENT AND EACH LENDER TO ACCEPT THIS AGREEMENT AND THE NOTES
EXECUTED AND DELIVERED BY BORROWER PURSUANT TO THIS AGREEMENT.
<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: /s/ Donald R. Dugan
----------------------------
Printed Name: Donald R. Dugan
Title: President
Notice to be sent to:
AMERICAN FINANCE GROUP, INC.
24 School Street
Boston, MA 02108
Attention: D.R. Dugan, President
Telephone: (617) 557-9329
Facsimile: (617) 557-9348
with a copy to:
PLM INTERNATIONAL, 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
By: /s/ Russell D. Morrison
------------------------------------
Printed Name: Russell D. Morrison
Title: Vice President
Notice to be sent to:
FIRST UNION NATIONAL BANK
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Russ Morrison
Telephone: (704) 383-9687
Facsimile: (704) 374-3254
LENDERS FIRST UNION NATIONAL BANK
By: /s/ Russell D. Morrison
-------------------------------
Printed Name: Russell D. Morrison
Title: Vice President
Notice to be sent to:
FIRST UNION NATIONAL BANK
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Russ Morrison
Telephone: (704) 383-9687
Facsimile: (704) 374-3254
EUROPEAN AMERICAN BANK
By: /s/ Robert W. Peck
-----------------------------
Printed Name: Robert W. Peck
Title: Vice President
Notice to be sent to:
EUROPEAN AMERICAN BANK
400 Oak Street
Garden City, NY 11530
Attention: Robert Peck
Telephone: (516) 357-1189
Facsimile: (516) 357-1784
IMPERIAL BANK
By: /s/ Russell A. Colombo
----------------------------------
Printed Name: Russell A. Colombo
Title: Regional Vice President
Notice to be sent to:
IMPERIAL BANK
Embarcadero Center West
275 Battery Street, Suite 1100
San Francisco, CA 94115
Attention: Russell Colombo,
Regional Vice President
Telephone: (415) 954-5059
Facsimile: (415) 954-5020
MEES PIERSON, N.V.
By: /s/ In D. van der Klaauw
------------------------------------
Printed Name: In D. van der Klaauw
Title: J.G.H.M. Hanegraaf
Notice to be sent to:
MEES PIERSON, N.V.
Coolsingel 93
3012 AE Rotterdam (courier address)
P.O. Box 749
3000 AS Rotterdam (mailing address)
The Netherlands
Attention: Hans Hanegraaf
Telephone: (011) 3110-401-61-60
Facsimile: (011) 3110-401-63-43
<PAGE>
SCHEDULE A
COMMITMENTS
Lender COMMITMENT PRO RATA SHARE
First Union National Bank $25,000,000 41.666666667%
European American Bank $10,000,000 16.666666667%
Imperial Bank $10,000,000 16.666666667%
Mees Pierson, N.V. $15,000,000 25.000000000%
C
<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
C:\#351852 v3 - NEW AFG Warehousing Credit Agreement ($60MM).doc
ii
<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 Consent and Approvals
Schedule 4.9 Employee Benefit Plans
Schedule 4.13 Environmental Disclosures
Schedule 6.10 Subsidiaries
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
[LENDER]
$______________ San Francisco, California
Date: December [___], 1998
AMERICAN FINANCE GROUP, INC., a Delaware corporation (the "Borrower"),
FOR VALUE RECEIVED, hereby unconditionally promises to pay to the order of
[LENDER] ("[_________________]"), in lawful money of the United States of
America, the aggregate principal amount of [_________________]'s Pro Rata Share
of all Loans outstanding under the Credit Agreement referred to below, payable
in the amounts, on the dates and in the manner set forth below.
This revolving promissory note (the "Note") is one of the Notes
referred to in that Warehousing Credit Agreement dated as of December 15, 1998
(as the same may from time to time be amended, modified, supplemented, renewed,
extended or restated, the "Credit Agreement") by and among Borrower, the banks,
financial institutions and other institutional lenders from time to time party
thereto and defined therein as Lenders (such entities, together with their
respective successors and assigns being collectively referred to herein as
"Lenders"), and First Union National Bank in its capacity as Agent on behalf and
for the benefit of Lenders ("Agent"). All capitalized terms used but not defined
herein shall have the same meaning as given to them in the Credit Agreement.
1. Principal Payments. Subject to the terms and conditions of the
Credit Agreement, the entire principal amount outstanding under each Loan shall
be due and payable on the Commitment Termination Date.
2. Interest Rate. Borrower further promises to pay interest on the sum
of the daily unpaid principal balance of all Loans outstanding on each day in
lawful money of the United States of America, from the Closing Date until all
such principal amounts shall have been repaid in full, which interest shall be
payable at the rates per annum and on the dates determined pursuant to the
Credit Agreement.
3. Place of Payment. All amounts payable hereunder shall be payable to
Agent, on behalf of [_________________], at the office of First Union National
Bank, One First Union Center, 301 South College Street, Charlotte, North
Carolina 28288, Attention: Elisha Sabido, or such other place of payment as may
be specified by Agent in writing.
4. Application of Payments; Acceleration. Payments on this Note shall
be applied in the manner set forth in the Credit Agreement. The Credit Agreement
contains provisions for acceleration of the maturity of the Loans upon the
occurrence of certain stated events and also provides for mandatory and optional
prepayments of principal prior to the stated maturity on the terms and
conditions therein specified.
Each Advance made by [_________________] to Borrower constituting
[_________________]'s Pro Rata Share of a Loan pursuant to the Credit Agreement
shall be recorded by [_________________] on its books and records. The failure
of [_________________] to record any Advance or any repayment or prepayment made
on account of the principal balance thereof shall not limit or otherwise affect
the obligations of Borrower under this Note and under the Credit Agreement to
pay the principal, interest and other amounts due and payable hereunder and
thereunder.
5. Default. Borrower's failure to pay timely any of the principal
amount due under this Note or any accrued interest or other amounts due under
this Note on or within five (5) calendar days after the date the same becomes
due and payable shall constitute a default under this Note. Upon the occurrence
of a default hereunder or an Event of Default under the Credit Agreement, all
unpaid principal, accrued interest and other amounts owing hereunder shall, at
the option of Requisite Lenders, be immediately collectible by the Lenders and
Agent pursuant to the Credit Agreement and applicable law.
6. Waivers. Borrower waives presentment and demand for payment, notice
of dishonor, protest and notice of protest of this Note, and shall pay all costs
of collection when incurred by or on behalf of the Lenders, including, without
limitation, reasonable attorneys' fees, costs and other expenses as provided in
the Credit Agreement.
7. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
8. Successors and Assigns. The provisions of this Note shall inure to
the benefit of and be binding on any successor to Borrower and shall extend to
any holder hereof.
BORROWER AMERICAN FINANCE GROUP, INC.,
a Delaware corporation
By
Printed Name
Title
<PAGE>
[EXECUTION COPY]
AMENDMENT NO. 1 TO
SERIES 1997-1 SUPPLEMENTAL INDENTURE
THIS AMENDMENT NO. 1 TO SERIES 1997-1 SUPPLEMENTAL INDENTURE, dated as
of December 9, 1998 (this "Amendment"), among AFG CREDIT CORPORATION, a Delaware
corporation, as Transferor, AMERICAN FINANCE GROUP, INC., a Delaware
corporation, as Servicer, FIRST UNION CAPITAL MARKETS, a division of WHEAT FIRST
SECURITIES, INC., a Virginia corporation, as Deal Agent (the "Deal Agent") and
BANKERS TRUST COMPANY, a banking corporation organized and existing under the
laws of the State of New York, as Trustee (in such capacity, the "Trustee") and
as Collateral Trustee (in such capacity, the "Collateral Trustee"). Capitalized
terms used but not otherwise defined herein are used as defined in the Series
1997-1 Supplemental Indenture, dated as of October 14, 1997, among AFG, the Deal
Agent, the Trustee and the Collateral Trustee (as amended, modified or
supplemented, the "Agreement").
WHEREAS, the Transferor, the Servicer, the Deal Agent, the Trustee and
the Collateral Trustee wish to amend the Agreement in the manner provided for in
this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The definition of "Facility Amount" set forth in Section 2 of the
Agreement is amended and restated in its entirety to read as follows:
Facility Amount: $150,000,000.
2. Except as expressly amended, modified and supplemented hereby, the
provisions of the Agreement are and shall remain in full force and effect.
3. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, PROVIDED, HOWEVER,
THAT THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE TRUSTEE AND THE COLLATERAL
TRUSTEE SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
4. This Amendment may be executed in two or more counterparts (and by
different parties on separate counterparts), each of which shall be an original,
but all of which together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective officers as of the day and year first above
written.
AFG CREDIT CORPORATION,
as Transferor
By: /s/ J. Michael Allgood
----------------------------------------
Name: J. Michael Allgood
Title: Vice President & Treasurer
AMERICAN FINANCE GROUP, INC.
as Servicer
By: /s/ J. Michael Allgood
--------------------------------------------
Name: J. Michael Allgood
Title: Director
FIRST UNION CAPITAL MARKERS, a division
of WHEAT FIRST SECURITIES, INC.,
as Deal Agent
By: /s/ Darrell R. Baber
---------------------------------------------
Name: Darrell R. Baber
Title: Director
BANKERS TRUST COMPANY,
as Trustee
By: /s/ Marc Parilla
----------------------------------------
Name: Marc Parilla
Title: Assistant Treasurer
BANKERS TRUST COMPANY,
as Collateral Trustee
By: /s/ Marc Parilla
------------------------------------------
Name: Marc Parilla
Title: Assistant Treasurer
[EXECUTION COPY]
AMENDMENT NO. 2 TO
NOTE PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO NOTE PURCHASE AGREEMENT, dated as of December
9, 1998 (the "Amendment"), is entered into by and among VARIABLE FUNDING CAPITAL
CORPORATION ("VFCC"), FIRST UNION CAPITAL MARKETS, a division of WHEAT FIRST
SECURITIES, INC., as Deal Agent and AFG CREDIT CORPORATION, as Transferor.
Capitalized terms used and not otherwise defined herein are used as defined in
the Note Purchase Agreement, dated as of October 14, 1997, as amended by
Amendment No. 1, dated as of October 9, 1998 (as amended, modified or
supplemented, the "Agreement"), among VFCC, the Deal Agent and the Transferor.
WHEREAS, the parties hereto desire to amend the Agreement in certain
respects as provided herein;
NOW THEREFORE, in consideration of the premises and the other mutual
covenants contained herein, the parties hereto agree as follows:
SECTION 1. Amendments.
(a) The following definition set forth in Section 1.1 of the Agreement
is hereby amended and restated in its entirety to read as follows:
Purchase Limit: $150,000,000; provided, however, that at all times on
or after the Termination Date the Purchase Limit shall mean the Principal
Amount.
SECTION 2. Agreement in Full Force and Effect as Amended. Except as
specifically amended hereby, the Agreement shall remain in full force and
effect. All references to the Agreement shall be deemed to mean the Agreement as
modified hereby. This Amendment shall not constitute a novation of the
Agreement, but shall constitute an amendment thereof. The parties hereto agree
to be bound by the terms and conditions of the Agreement, as amended by this
Amendment, as though such terms and conditions were set forth herein.
SECTION 3. Miscellaneous.
(a) This Amendment may be executed in any number of
counterparts, and by the different parties hereto on the same or separate
counterparts, each of which shall be deemed to be an original instrument but all
of which together shall constitute one and the same agreement.
(b) The descriptive headings of the various sections of this
Amendment are inserted for convenience of reference only and shall not be deemed
to affect the meaning or construction of any of the provisions hereof.
(c) This Amendment may not be amended or otherwise modified
except as provided in the Agreement.
(d) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT REFERENCE TO
ITS CONFLICT OF LAWS PROVISIONS.
[Remainder of Page Intentionally Left Blank.]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE TRANSFEROR: AFG CREDIT CORPORATION
By /s/ J. Michael Allgood
-----------------------------------------------
Title: Vice President & Treasurer
24 School Street
Boston, MA 02108
Facsimile No.:
Confirmation No.:
<PAGE>
VFCC: VARIABLE FUNDING CAPITAL CORPORATION
By First Union Capital Markets, a division
of Wheat First Securities, Inc.
as attorney-in-fact
By /s/ Darrell R. Baber
------------------------------
Title: Director
Variable Funding Capital Corporation
c/o First Union Capital Markets,
a division of Wheat First Securities, Inc.
One First Union Center, TW-9
Charlotte, North Carolina 28288-0610
Attention: Conduit Administration
Facsimile No.: (704) 383-6036
Confirmation No.: (704) 383-9343
THE DEAL AGENT: FIRST UNION CAPITAL MARKETS, a division
of Wheat First Securities, Inc.
By /s/ Darrell R. Baber
-------------------------------
Title: Director
First Union Capital Markets, a division of
WHEAT FIRST SECURITIES, INC.
One First Union Center, TW-9
Charlotte, North Carolina 28288
Attn: Conduit Administration
Facsimile No.: (704) 383-6036
Confirmation No.: (704) 383-9343
EXECUTION COPY
NOTE AND SECURITY AGREEMENT
$1,813,449.08 Date: July 28, 1998
FOR VALUE RECEIVED, the undersigned debtor, American Finance Group, Inc.
(hereinafter called the "Debtor"), hereby promises to pay to the order of
Transamerica Business Credit Corporation (hereinafter called the "Lender") the
principal amount of ONE MILLION EIGHT HUNDRED THIRTEEN THOUSAND FOUR HUNDRED
FORTY-NINE AND 08/100 DOLLARS ($1,813,449.08), together with interest thereon at
the rate of 9.22% per annum, in thirty-two (32) equal installments of $63,714.65
each commencing on August 1, 1998 and continuing monthly on the I' day of each
month through and including March 1, 2001.
Section 1. Grant of Security Interest.
As security for the payment and performance of the obligations of the Debtor
under this Note and Security Agreement ("Note and Security Agreement'), the
Debtor hereby gives, grants and assigns to the Lender a security interest in and
lien on all of the Debtor's rights in the following described property now owned
by the Debtor or to be purchased by the Debtor with the proceeds of this Note
and Security Agreement (hereinafter called the "Collateral").
1. Schedule No. 12 dated February 12, 1998 (the "Rental Schedule") to the
Master Lease Agreement dated February 10, 1998, between American Finance
Group, Inc., as lessor, by assignment from Varilease Corporation, as
original lessor, and Oxford Health Plans, Inc. as lessee (the "Master
Lease") (the Rental Schedule and the Master Lease to the extent but only to
the extent it relates to the equipment covered by the Rental Schedule and
as incorporated in the Rental Schedule, collectively, hereinafter called
the "Lease") and those items of equipment described in the Rental Schedule
(the "Equipment").
2. All Base Monthly Rentals, Stipulated Loss Values, Fair Market Values and
other monies due or to become due to the Debtor under the Lease.
3. All the Debtor's rights, but none of its obligations, as lessor under the
lease.
4. All the Debtor's right, title and interest in and to the Equipment.
5. All the Debtor's right, title and interest in and to all additions,
replacements, accessions, substitutions and improvements to the Equipment
other than those additions, replacements, accessions, substitutions or
improvements that are leased by the Debtor to the Lessee pursuant to a
lease agreement other than the Lease (in each case to the extent permitted
under the Lease).
6. All proceeds of each of the foregoing.
Section 2. Representations and Warranties of the Debtor.
The Debtor hereby represents and warrants as follows:
1. This Note and Security Agreement and the Lease have each been duly
authorized, executed and delivered by the Debtor and each constitutes a
legal, valid and binding agreement and obligation of the Debtor,
enforceable according to its terms, except as such enforcement may be
limited by bankruptcy, reorganization, moratorium, insolvency or similar
laws affecting creditors' rights generally or by equitable remedies in the
discretion of the courts, and the Lease, and, if and when delivered, the
Lessee's Notice, Acknowledgment and Lessee Indemnification referred to in
Section 9(ii) hereof constitute the entire agreement between the Debtor an
the Lessee pertaining to the leasing of the Equipment by the Debtor to the
Lessee except that Section 3(a)(ii) of the Lease is no longer in effect.
2. The execution and delivery of this Note and Security Agreement and the
Lease and consummation of the transactions contemplated herein or in the
Lease and the fulfillment of and compliance with the terms and provisions
hereof or of the Lease (i) do not result in a breach of any of the terms,
conditions or provisions of its Amended and Restated Declaration of Trust
or any bond, debenture, note, mortgage, indenture, credit agreement or
other instrument to which the Debtor is a party or by which it or its
property may be bound, and will not constitute (with the giving of notice
or tie passage o time or both) a default thereunder, or result in the
creation or imposition of any lien, charge, security interest or other
encumbrance of any nature whatsoever upon the Collateral pursuant to the
terms of any such agreement or instrument or otherwise or (ii) will not, in
any material respect, contravene any law, rule, regulation or order of the
United States or any state thereof or any other governmental authority
which is in existence on the date hereof and which is applicable to the
Debtor.
3. Neither the execution and delivery by the Debtor of this Note and Security
Agreement or the Lease, nor the performance thereof by the Debtor requires
the authorization, consent or approval of, or the giving of notice to, or
the registration with, any governmental authority.
4. The Debtor is a corporation duly organized and validly existing under the
laws of the State of Delaware and has the power and authority to execute,
deliver and to perform its obligations under this Note and Security
Agreement, the Lease and the Assignment and is duly qualified to do
business in each jurisdiction where its failure to so qualify would
adversely affect the enforceability against the Debtor of this Note and
Security Agreement, the Lease, or the Assignment or its ability to perform
its obligations hereunder or thereunder.
-2-
<PAGE>
5. The Debtor has good title to and ownership of the Equipment free and
clear of all security interests, liens and other encumbrances, except
for the respective interests of the Lender hereunder and the Lessee
under the Lease (including such as are required to be discharged by the
Lessee pursuant to the Lease) and no other assignment or security
interest has been granted generally or specifically with respect to the
Collateral except for a lien in favor of First Union National Bank of
North Carolina, such lien to be discharged with the proceeds hereof and
such liens have previously been terminated.
6. There are no pending or, to the actual knowledge of the Debtor,
threatened actions or proceedings against or affecting the Debtor
before any court or administrative agency which, if determined
adversely to the Debtor, would have an adverse effect on the ability of
the Debtor to perform its obligations hereunder or under the Lease or
the Assignment.
7. The aggregate unpaid Base Monthly Rentals under the Lease as of July 8,
1998 total $2,038,868.80, consisting of $63,714.65 per month for the
following thirty-two (32) months, and such Base Monthly Rentals and
other sums due and payable under the Lease are not subject to any
defenses, set-off or counterclaims, nor, to the Debtor's actual
knowledge, has Lessee asserted any such defense, set-off or
counterclaim, and there is no Base Monthly Rentals now due and unpaid
pursuant to the terms of the Lease nor have there been any payments
made in advance on account of the Base Monthly Rentals to become due
under the Lease. The Base Monthly Rentals payable under the Lease is
sufficient to pay principal and interest due under this Note and
Security Agreement in accordance with the terms hereof.
8. No Event of Default or event which with the passing of time or the
giving of notice, or both, would constitute an Event of Default
hereunder or under the Lease has occurred and is continuing.
9. The Debtor has made its investment in the Equipment and has acquired
its interest in the Lease with its general assets and not directly or
indirectly with the assets of or in connection with any arrangement or
understanding by it in any way involving any employee benefit plan (or
its related trust) all within the meaning of the Employee Retirement
Income Security Act of 1974.
10. The Debtor has not offered this Note and Security Agreement for sale
directly or in erectly, or solicited any offer to buy the same or
otherwise negotiated with respect thereto, with any person or persons so
as to bring the sale of this Note and Security Agreement under the
provisions of Section 5 of the Securities Act of 1933, as amended.
II. There is no outstanding order, writ, injunction or decree of any court,
government or governmental agency against or affecting the Debtor with
respect to the Equipment, the Lease or this Note and Security Agreement.
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<PAGE>
12. The Master Lease and the Rental Schedule (the "Lease Documents"), the
original (in the case of the Rental Schedule) and a copy (in the case of
the Master Lease) of which have been delivered to the Assignee, are true,
correct and complete and include all amendments thereto, are the only
documents executed by the Borrower and the Lessee with respect to the
Equipment, are enforceable against the parties thereto, and represent
legal, valid and binding obligations of the parties thereto in accordance
with their terms, and all signatures, names, addresses, amounts and other
statements and facts contained therein are true and correct.
13. The Lease Documents (including their form and substance and the computation
of all charges therein) and the transactions contemplated thereby conform
in all material respects to all applicable laws, rules, regulations,
ordinances and orders.
14. The Equipment was delivered to the Lessee in satisfactory condition and was
accepted by the Lessee.
15. The Lease Documents are not and will not at any time be subject to any
defense, claim, counterclaim or setoff by Lessee.
16. The Lease constitutes a valid reservation of unencumbered title to or a
perfected first priority security interest in the property covered thereby,
effective against all persons, and any filing, recordation or any other
action or procedure permitted or required by law to perfect such security
interest has been accomplished.
Section 3. Covenants of the Debtor.
The Debtor hereby covenants and agrees for the benefit of the Lender as
follows:
1. All payments to be made by the Lessee under the Lease and by the Debtor
hereunder shall be made on the payment date by check in immediately
available funds, to Transamerica Business Credit Corporation, c/o First
National Bank of Chicago, P.O. Box 70656, Chicago, Illinois 60673-0656 or
by wire transfer to the account of the Lender at Transamerica Finance and
Leasing, First National Bank of Chicago, One First National Plaza, Chicago,
Illinois, Account No. 55-41948, ABA No. 071000013, Reference: American
Finance Group/Oxford, or to such other address as the Lender d designates
in writing.
2. All right, title and interest of the Debtor in and to the Collateral and
any payments with respect thereto shall be expressly subject and
subordinate to all of the right, title and interest of the Lender therein.
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<PAGE>
3. The Debtor shall not modify, rescind, cancel or accept surrender of the
Lease or waive or enforce any of the provisions thereof, accept and retain
payments of Base Monthly Rentals from the Lessee (except as specified in
Section 4(3) hereof), give any consent with respect to the Lease, or extend
the time of payment for payments due thereunder, and shall not sell,
assign, or transfer its interest in the Lease or the Equipment or take any
other action with respect thereto without the prior written consent of the
Lender and will include in any documentation submitted to the Lender
soliciting its consent to such sale or transfer a prohibition against any
future transfer to any natural person or persons or entity which is not a
permitted assignee under the Lease; provided, however, that the consent of
the Lender is not required to the sublease of the Equipment by the Lessee
as long as such sublease is expressly made subject and subordinate to the
rights of the Debtor and the Lender under the Lease, is protected by a
precautionary filing of a financing statement under the Uniform Commercial
Code of which the Lender is assignee, does not relieve the Lessee of any of
its obligations under the Lease and does not create any obligations on the
part of the Debtor or the Lender in favor of the sublessee of Lessee.
4. The Debtor shall keep the Collateral free and clear of all mortgages,
pledges, liens, charges, security interests and other encumbrances
whatsoever, except those created by this Note and Security Agreement, the
rights of Lessee under the Lease and those caused by any act or omission on
the part of the Lessee or required to be discharged by the Lessee under the
terms of the Lease. The Debtor shall pay all charges, including without
limitation, all taxes and assessments levied or assessed against the
Debtor, which if unpaid would constitute a lien on the Collateral or any
portion thereof, provided, however, that the Debtor shall pay charges
required to be paid or discharged by the Lessee under the terms of the
Lease only to the extent that the Debtor shall have received funds or such
funds are due from the Lessee allocable to such charges. The Debtor shall
not be required to pay or discharge any such charges, taxes or assessments
so long as it shall in good faith and by appropriate legal proceedings
being diligently prosecuted, contest the validity thereof in any reasonable
manner which will not endanger the Lessee's right of quiet enjoyment and
use of the Equipment under the Lease or the Lender's security interest in
the Collateral pursuant to this Note and Security Agreement.
5. Only the duplicate original of the Rental Schedule with the legend "This is
Counterpart No. I of 3 Counterparts" which has been delivered to the Lender
constitutes chattel paper for purposes of perfecting an interest therein.
The Debtor will not relinquish possession and control of any duplicate
originals held by it (notated "Counterpart No. 2 of 3 Counterparts" and
"Counterpart No. 3 of 3 Counterparts") to any person without the prior
written consent of the Lender. The Debtor represents that there exists only
one duplicate original of the Rental Schedule notated "Counterpart No. I of
3 Counterparts' and covenants not to execute any additional duplicate
original of the Rental Schedule notated "Counterpart No. I of 3
Counterparts".
<PAGE>
6. The Debtor shall execute and deliver any and all papers or documents which
the Lender may reasonably request from time to time in order to carry out
the purposes hereof and of the Lease, or to facilitate the collection of
monies due or to become due from the Lessee under the Lease.
7. The Debtor shall duly fulfill or cause to be fulfilled all of the
obligations to be performed by the Debtor under the Lease.
8. The Debtor shall not permit the Equipment to be relocated to a jurisdiction
outside the contiguous United States and Debtor shall promptly notify the
Lender if any item of Equipment is removed from its current jurisdiction to
another within the United States.
9. The Debtor shall promptly notify the Lender upon obtaining knowledge of any
Event of Default or event, which with the giving of notice or passage of
time or both would constitute an Event of Default, hereunder or under the
Lease.
10. The Debtor shall allow the Lender and its representatives free access and
right of inspection, as provided for in the Lease, of the Equipment at its
location, and in the event of loss or damage to the Equipment shall send
prompt written notice thereof to the Lender, all to the extent provided for
in the Lease.
II. The Debtor shall provide the Lessee any and all consents, assistance and
cooperation necessary for the Lessee to maintain property insurance and
public liability insurance, showing the Lender as additional insured and
loss payee, in amounts and with insurance companies satisfactory to the
Lender, all to the extent required by and in accordance with the terms of
the Lease.
12. The Debtor shall provide the Lessee any and all consents, assistance and
cooperation necessary for the Lessee to keep the Equipment in good repair
and operating condition without any costs or liability to the Lender, all
to the extent required by and in accordance with the terms of the Lease.
13. The Debtor shall maintain its records concerning the Lease at its principal
place of business at 24 School St, 7' Floor, Boston, MA 02108, and will not
remove such records, except to a jurisdiction where the Uniform Commercial
Code shall be in effect, and upon thirty (30) days prior written notice to
the Lender.
14. The Debtor shall file or cause to be filed in each office where filing is
necessary to perfect the Lender's security interest in the Collateral under
the respective UCC statutes, all UCC financing statements, agreements,
instruments or applications which the Lender deems necessary or desirable
for such purpose.
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<PAGE>
Section 4. Covenants of the Lender.
The Lender hereby covenants and agrees for the benefit of the Debtor as
follows:
1. So long as Lessee is not in default of any of its obligations under the
Lease, the interest of the Lender in the Lease and the Equipment shall be
subject and subordinate to Lessee's leasehold estate in the Equipment and
the Lender will not disturb Lessee's quiet use and possession of the
Equipment.
2. The Lender shall, upon receipt of payments of Base Monthly Rentals from
Lessee, immediately apply such payments towards the satisfaction of
principal and interest then due hereunder.
3. So long as Lessee is not then in default under the Lease and provided the
Debtor is not in default under this Note and Security Agreement, the Lender
shall pay over to the Debtor within twenty (20) days of receipt, and the
Debtor may receive and retain notwithstanding any subsequent default
hereunder, (a) all sums received from the Lessee in payment of Base Monthly
Rentals due under the Lease to the extent such sums exceed the installment
of principal and interest then due hereunder and (b) any payments made by
the Lessee pursuant to its indemnification obligations under the Lease as
compensation to the Debtor for costs, charges or losses incurred by the
Debtor. Such sums shall be forwarded to the Debtor at American Finance
Group, Inc./FUNC, P.O. Box 60581, Charlotte, NC 28260 ATTN: Lease
Operations or deposited to such account as debtor may direct.
4. The Debtor shall have the right to pay and perform for the account of the
Lessee any obligation of the Lessee under the Lease (other than the payment
of Base Monthly Rentals or sums due upon the occurrence of a casualty or
other loss to any of the Equipment), in which case the Lender agrees that
for purposes of the default provision of this Note and Security Agreement
an Event of Default shall be deemed not to have occurred on account of
Lessee's nonperformance of the obligation if the Debtor so pays or performs
such obligation within the period required under the Lease. In the event
the Debtor makes payments to the Lender on the account of Lessee, the
Debtor shall be subrogated to the rights of the Lender with respect to such
sums and, if any default has occurred and is continuing under the Lease,
shall not collect such sums from the Debtor until each such default has
been cured.
Section 5. Rights of the Lender.
The Debtor hereby irrevocably constitutes and appoints the Lender, and any
officer thereof responsible for enforcing the terms of this Note and Security
Agreement, the Debtor's agent and attorney-in-fact to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purpose of this Note and
Security Agreement. This power of attorney is a power coupled with an interest,
shall be irrevocable and shall terminate only upon payment in full of the
obligations set forth herein and the termination of this Note and Security
Agreement. The powers conferred on the Lender hereunder are solely to protect
the Lender's interests in the Collateral and shall not impose any duty upon it
to exercise any such powers. Without limiting the generality of the foregoing,
the Debtor hereby gives the Lender the power and right, on behalf of the Debtor
and without notice to or assent by the Debtor, to do the following:
1. Receive directly from the Lessee all payments of Base Monthly Rentals or
other sums due and payable under the Lease, Stipulated Loss Value, Fair
Market Value and other sums due and to become due under the Lease (other
than the sums not payable to the Lessor under the Lease) and endorse all
remittances received thereunder and to exercise all rights, privileges and
remedies of Lessor under the Lease, including without limitation, the right
to grant waivers or consents of any character.
2. Endorse any loss payment or returned premium check and to make, settle and
release any claim under any insurance policy with respect to the Equipment.
3. File any claim or take any other action or proceeding in any court of law
or equity for the purpose of collecting any and all monies due under the
Lease.
4. File financing statements signed only by the Lender with respect to this
Note and Security Agreement in accordance with the Uniform Commercial Code
or signed by the Lender as attorney-in-fact for the Debtor.
5. File this Note and Security Agreement, or any reproduction hereof, as a
financing statement. The Debtor hereby ratifies all that the Lender may do
pursuant to such power.
The Lender shall be accountable only for the amounts that it actually
receives as a result of the exercise of such powers, and neither it nor any of
its officers, directors, employees or agents shall be responsible to the Debtor
for any action taken or omitted to be taken in good faith or in reliance on the
advice of counsel except for its own gross negligence or willful misconduct.
Section 6. Casualty.
Upon the occurrence of a casualty or other loss to any of the Equipment,
all or a portion of the unpaid principal under this Note and Security Agreement
shall become immediately due and payable, together with accrued interest
thereon, on the date on which the Stipulated Loss Value due under the Lease is
paid in full. The amount of principal to be prepaid shall be calculated by
multiplying the outstanding principal balance by a fraction (the "Prepayment
Factor") determined by dividing the original cost for the item or items of
Equipment suffering the casualty or loss by the original cost for all items of
Equipment subject to the Rental Schedule immediately prior to the casualty or
loss. Each remaining installment of principal and interest due hereunder shall
be reduced by an amount equal to the amount obtained by multiplying the debt
service payment due before the prepayment by the Prepayment Factor. Otherwise,
there shall be no prepayment of this Note and Security Agreement without the
prior written consent of the Lender.
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<PAGE>
Section 7. Late Payment Rate.
Any payment past due hereunder for more than ten (10) days shall be payable
on demand with interest computed from the day payment was due at the rate of two
percent (2%) per month, or if such rate shall exceed the maximum rate of
interest allowed by law, then at such maximum rate.
Section 8. Right of Lender to Perform for Debtor.
If the Debtor defaults in its obligations hereunder, the Lender may, at its
option, effect insurance and pay all taxes, assessments and charges levied on
the Equipment or for the storage, maintenance or repair thereof. Any insurance
premiums, taxes, assessments and charges so paid shall be secured by this Note
and Security Agreement and shall be added to the principal due hereunder, shall
be payable on demand and shall be secured by the Collateral.
Section 9. Limitations of Liability.
Principal and interest due hereunder is repayable from the Collateral only,
and the Lender shall have no further recourse against the Debtor personally;
provided, however, that the Lender shall have recourse against the Debtor
personally for (i) any claims arising out of or in connection with the breach by
the Debtor of any of its representations, warranties, covenants and undertakings
(other than the payment of principal and interest due under this Note and
Security Agreement) set forth herein and (ii) the full unpaid principal amount
of this Note and Security Agreement, all accrued and unpaid interest, late
charges and other amounts payable hereunder or in connection herewith, which
amounts shall become immediately due and payable on July 31, 1998 or thereafter
on demand by the Lender, if on or before July 31, 1998, there shall exist any
security interest, lien or other encumbrance (except for the respective
interests of the Lender hereunder and the Lessee under the Lease) in or on the
Lease or any of the Equipment.
Section 10. Events of Default.
Any of the following events shall constitute an Event of Default hereunder.
1. The Debtor shall fail to make any payment due hereunder within ten (10)
days after the Debtor's receipt of written notice of the nonpayment
thereof.
2. An Event of Default under and as defined in the Lease shall have occurred
and be continuing.
3. There shall be imposed upon the Collateral or any part thereof any claim,
lien, security interest, encumbrance or charge, other than the Lease and
liens expressly permitted by the Lease.
4. The Debtor shall fail to perform or observe any other covenant, condition
or agreement to be performed or observed by the Debtor hereunder or in any
agreement or certificate furnished to the Lender in connection herewith and
such failure shall continue unremedied for a period of thirty (30) days
after the earlier of (i) the date on which the Debtor has knowledge of such
failure
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<PAGE>
and (ii) the date on which the Lender gives written notice thereof to the
Debtor.
5. Any representation or warranty made by the Debtor herein or in any document
or certificate furnished to the Lender in connection herewith shall have
been incorrect in any material respect when made.
6. The Debtor shall (a) be generally not paying its debts as they become due
as such phrase has been construed under Section 303(h)(1) of Title 11 of
the United States Code, (b) file, or consent by answer or otherwise to the
filing against it of, a petition of relief or reorganization or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (c) make an assignment
for the benefit of its creditors, (d) consent to the appointment of a
custodian, receiver, trustee or other officer with similar powers of itself
or of any substantial part of its property, or (e) take corporate or
comparable action for the purpose of any of the foregoing.
7. Any petition for any relief under any bankruptcy or insolvency law of any
jurisdiction shall be filed against the Debtor and such petition shall not
be stayed or dismissed within sixty (60) days of the date of filing.
8. A court or governmental authority of competent jurisdiction shall enter an
order (a) appointing, without consent by the Debtor, a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, or (b) approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or (c) ordering the dissolution, winding-up or
liquidation of the Debtor.
Section I 1. Remedies.
If an Event of Default hereunder shall have occurred, then, or at any time
thereafter while such Event of Default is continuing, the Lender may declare the
principal balance hereof and all accrued interest due and payable, whereupon it
shall become immediately due and payable without notice or demand. It shall then
be lawful for the Lender (and the Debtor hereby authorizes and empowers the
Lender with the aid and assistance of any persons) to exercise any one or more
of the following remedies.
1. Subject and subordinate to the rights of the Lessee under the Lease, to
enter upon such place as the Equipment may be found and take possession of
and carry away the Equipment with process of law at any time or times, and
to dispose of the Equipment and apply the proceeds thereof to the balance
hereof or any other obligation arising hereunder, all to the extent
permitted by and in accordance with law and with the Lease.
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<PAGE>
2. If any Event of Default has occurred and is continuing under the Lease, as
assignee of the Lessor s interest in the Lease, to exercise any or all of
the rights and powers and pursue any or all of the remedies provided for in
the Lease.
3. To exercise any or all of the rights and powers and pursue any or all of
the remedies that are available to a secured party under the Uniform
Commercial Code or any other applicable law or in equity in respect to the
Collateral.
The Debtor will reimburse the Lender for all fees of attorneys or
collection agencies and all expenses, costs and charges paid or payable to third
persons or suffered or incurred by the Lender in attempting or effecting
protection or preservation of its security interest in the Collateral or the
enforcement of any provision of this Note and Security Agreement. Costs of
collecting the amounts secured hereby shall be added to the principal amount due
hereunder, shall be payable on demand and shall be secured by the Collateral.
The proceeds of any sale of the Collateral or any part thereof or any
interest therein and the proceeds of the exercise of any other remedy with
respect to the Collateral, shall be applied by the Lender, first, to the payment
of accrued but unpaid interest hereon, second, to the payment of any amount due
hereunder other than principal and interest, third, to the repayment of the
outstanding principal balance hereof, including costs and expenses incurred by
the Lender or any person or party acting on behalf of the Lender in connection
with the exercise of remedies hereunder and addled to principal as herein above
provided, and fourth, to whomever shall be lawfully entitled thereto.
All rights, remedies and options conferred upon the Lender hereunder or by
law shall be cumulative and may be exercised successively or concurrently and
are not alternative or exclusive of any other such rights, remedies or options.
No express or implied waiver by the Lender of any default or event of default
hereunder shall in any way be, or be construed to be, a waiver of any future or
subsequent default or event of default. The failure or delay of the Lender in
exercising any rights granted hereunder shall not constitute a waiver of any
such right in the future and any single or partial exercise of any particular
right by the Lender shall not be deemed to exhaust such rights or constitute a
waiver of any other right provided herein.
Section 12. Stitus of Equipment.
The Equipment is currently located at the addresses set forth in the Rental
Schedule. The Debtor will not cause the Equipment to be relocated to any other
jurisdiction without notifying the Lender within sixty (60) days of such act.
Section 13. Miscellaneous.
This Note and Security Agreement may not be amended, waived, or discharged,
except by an agreement in writing by the party against which or whom enforcement
of the amendment, waiver or discharge is sought. In case any one or more of the
provisions contained in this Note and Security Agreement shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby in such jurisdiction, nor shall such provision
be invalid, illegal or unenforceable in another jurisdiction to which the
holding thereof shall not apply. Time and exactitude are of the essence hereof.
All notices to be made hereunder shall be in writing and delivered by hand,
overnight courier or first-class mail and (a) if to the Lender, addressed to it
at 144 Merchant Street, Suite 150, Cincinnati, Ohio 45246, ATTN: Credit Manager,
with a copy to Transamerica Finance & Lease Division, 5080 Spectrum, Suite I 100
West, Dallas, Texas 75248, ATTN: Counsel, and (b) if to the Debtor, addressed to
it at 24 School Street, 7th Floor, Boston, Massachusetts, 02108, ATTN. Lease
Operations. Either party hereto may change the address to which notice to such
party shall be sent by giving written notice of such change to the other party
to this Note and Security Agreement in the manner provided herein.
It is the intention of the parties that the provisions of this Note and
Security Agreement shall be governed by the laws of the State of Illinois
without giving effect to principles of conflicts of law.
All interest due hereunder shall be computed on the basis of a 360 day
year.
Section headings and captions are inserted for convenience only and shall
not affect any construction or interpretation of this Note and Security
Agreement. The words "herein', "hereof', "hereby", "hereto", "hereunder", and
words of similar import refer to this Note and Security Agreement as a whole and
not to any particular section, subsection, paragraph, clause or subdivision
hereof. Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed to them in the Lease.
The Debtor and the Lender agree that this Note and Security
Agreement, the Exhibit hereto and the letter agreement of even date herewith
among the Debtor, the Lender, the Lessee and Varilease Corporation are the
complete and exclusive statement and agreement between the parties with respect
to the subject matter hereof, superseding all proposals and prior agreements,
oral or written, and all other communications between the parties with respect
to the subject matter hereof.
THE DEBTOR AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT THEY MAY
HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS NOTE
AND SECURITY AGREEMENT AND EACH AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED
BEFORE A JUDGE SITTING WITHOUT A JURY.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE AND SECURITY
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK
COUNTY, OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF
ILLINOIS, AND, BY EXECUTION AND DELIVERY OF THIS NOTE AND SECURITY AGREEMENT,
THE DEBTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE DEBTOR HEREBY
IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING, (A) ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR
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<PAGE>
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (B) THE RIGHT TO INTERPOSE ANY
NONCOMPULSORY SETOFF. THE DEBTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
THE DEBTOR AT THE ADDRESS FOR IT SPECIFIED IN THIS SECTION 13. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE DEBTOR IN ANY OTHER JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS
HEREOF WITH RESPECT TO RIGHTS AND REMEDIES.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Note and Security
Agreement to be duly executed this 28th day of July, 1998.
AMERICAN FINANCE GROUP, INC. TRANSAMERICA BUSINESS CREDIT
DEBTOR CORPORATION
LENDER
By: /s/ Donald R. Dugan By: /s/ Sean D. McAlister
--------------------- -------------------------
Donald R. Dugan Sean D. McAlister
Title: President Title: V.P. Reqion Credit Manager
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PLEDGE AND SECURITY AGREEMENT
THIS SECURITY AGREEMENT, made as of the 30th day of June 1998, is by and
between GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation with an
address at 44 Old Ridgebury Road, Danbury, CT 06811 (the "Secured Party"), and
American Finance Group, Inc., a corporation organized and existing under the
laws of the State of Delaware with its chief executive offices located at 24
School Street, Boston, MA 02108 (the "Debtor").
In consideration of the promises herein contained and of certain other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor and Secured Party hereby agree as follows:
I. CREATION OF SECURITY INTEREST.
As security for the payment of any and all obligations and liabilities
of any nature whatsoever, whether primary, secondary, direct, contingent, sole,
joint or several, due or to become due, now existing or hereafter contracted or
acquired, of Debtor to Secured Party, including without limitation the payment
of all sums due or to become due and the performance of all obligations pursuant
to certain Promissory Notes (each, a "Note", together the "Notes") made by
Debtor to the order of Secured Party, identified on any collateral schedule
which, from time to time, may be annexed hereto and incorporated herein by
reference ("Collateral Schedule"), and modifications thereof (any and all of
which are sometimes referred to hereafter as the "Indebtedness"), Debtor hereby
gives, grants and assigns to Secured Party, its successors and assigns, a
security interest in and against the Lease Agreement between Debtor and Oxford
Health Plans, Inc., dated February 10, 1998 and Equipment Schedule Nos. 10
attached hereto (the Lease Agreement and all such equipment schedules shall be
hereinafter collectively and individually referred to as the "Lease"), all of
the equipment leased thereunder (the "Equipment") and any and all additional
property pledged to Debtor pursuant to any such Lease now and hereafter listed
on any such Collateral Schedule and in and against any and all additions,
attachments, accessories and accessions thereto, any and all substitutions,
replacements or exchanges therefore, and any and all insurance and/or other
proceeds of the Lease, Equipment and other property in and against which a
security interest is granted hereunder, all of which Lease, Equipment and other
property and proceeds are hereinafter individually and collectively referred to
as the ("Collateral").
2. RIGHTS OF SECURED PARTY.
(a) If requested by Debtor, Secured Party may, but shall in no event be
obligated to, accept and/or designate substitutions and exchanges of the
Lease, Equipment or other property already pledged hereunder for leases,
equipment or other property not already pledged hereunder, and additions to
the Lease, Equipment and other property, constituting all or any part of
the Collateral. Such substitutions, exchanges and additions shall be
accomplished at any time and from time to time, by the substitution of a
revised Collateral Schedule for the Collateral Schedule now or hereafter
annexed. Any lease, equipment or other property which may be substituted,
exchanged or added as aforesaid shall constitute a portion of the
Collateral and shall be subject to the security interest granted herein.
Any substitution, exchange or addition of a lease or leases under this
Security Agreement shall be conditioned on the receipt by Secured Party of
Debtor's representations and warranties, in writing, as to each such
substituted, exchanged or added lease (each, a "Replacement Lease")
substantially in the form of Section 3(k) hereof. Replacement Leases to be
pledged pursuant to the terms of Section 50) hereof shall be have a value,
as determined by Secured Party in its sole discretion, at least equal to
the value of the Lease or Leases to be replaced pursuant to said Section
50).
(b) Additions to, reductions or exchanges of, or substitutions for, the
Collateral, payments on account of any obligation or liability secured
hereby, or increases in the obligations and liabilities secured hereby, or
the creation of additional obligations and liabilities secured hereby, may
from time to time be made or occur without affecting the provisions of this
Security Agreement or the provisions of any obligation or liability which
this Security Agreement secures.
(c) The surrender of a Note or other document evidencing an obligation or
liability secured hereby upon payment or otherwise, shall not affect the
rights of Secured Party to retain the Collateral for such other obligations
and liabilities as may then exist or as it may be reasonably contemplated
will exist in the future.
(d) Any third person at any time and from time to time holding all or any
portion of the Collateral shall be deemed to, and shall, hold the
Collateral as the agent of, and as pledge holder for, Secured Party. At any
time and from time to time, Secured Party may give notice to any third
person holding all or any portion of the Collateral that such third person
is holding the Collateral as the agent of, and as pledge holder for, the
Secured Party.
3. REPRESENTATIONS AND WARRANTIES OF DEBTOR.
Debtor hereby represents and warrants as of the date hereof and as of
the date of execution of each Collateral Schedule hereto that:
(a) Debtor is duly organized, existing and in good standing under the
laws of the State set forth in the first paragraph of this Security Agreement,
has its chief executive offices at the location set forth in such paragraph,
and, to the best of Debtor's knowledge, is duly qualified and licensed in every
jurisdiction wherever necessary to carry on its present business and operations;
(b) Debtor has adequate power and capacity to enter into, and to perform
its obligations, under this Security Agreement, each Note and any other
documents evidencing, or given in connection with, any of the Indebtedness (all
of the foregoing being hereinafter collectively referred to as the "Loan
Documents");
(c) The Loan Documents have been duly authorized, executed and delivered
by Debtor and constitute legal, valid and binding agreements enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies may be limited under applicable bankruptcy and insolvency laws;
(d) No approval, consent or withholding of objections is required from
any governmental authority or instrumentality with respect to the entry into, or
performance by, Debtor of any of the Loan Documents, except such as may have
already been obtained;
(e) The entry into, and performance by, Debtor of the Loan Documents
will not (i) violate any of the organizational documents of Debtor or any
judgment, order, law or regulation applicable to Debtor, or (ii) result in any
breach of, constitute a default under, or result in the creation of any lien,
claim or encumbrance (except for the lien created by Secured Party under this
Security Agreement) pursuant to, any indenture mortgage, deed of trust, bank
loan, credit agreement, or other agreement or instrument to which Debtor is a
party;
(f) There are no suits, or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Debtor which could, in the aggregate, have a material adverse effect on Debtor,
its business or operations, or its ability to perform its obligations under the
Loan Documents;
(g) All financial statements of Debtor and any of its affiliates
delivered to Secured Party have been prepared in accordance with generally
accepted accounting principles, and since the date of the most recent financial
statement, there has been no material adverse change;
(h) The Equipment pledged hereunder is and will remain in good condition
in accordance with theLease.
(i) Debtor is the sole and lawful owner of the Lease and Equipment, has
good and marketable title to the Lease and Equipment, free and clear of any
security interests, liens, and other encumbrances and rights, except as provided
for in this Security Agreement, and has the sole right and lawful authority to
grant to Secured Party the security interest described in this Security
Agreement; and
(j) The Collateral is and will remain free and clear of all liens,
claims and encumbrances of every kind, nature and description except for the
lien of this Security Agreement.
(k) With respect to each Lease pledged hereunder: (i) the Lease is
genuine and represents a valid obligation of the lessee and any other party
(including, but not limited to, any Guarantors) named in any of the Lease
documentation (each, a "Lease Party"); (ii) each Lease Party is bona fide and in
good standing; (iii) the Lease documentation delivered by Debtor to Secured
Party correctly reflects the entire agreement between Debtor and each Lease
Party with respect to the Lease; (iv) Debtor has delivered to Secured Party all
originals of the Lease documentation, except for those in the possession or
control of a Lease Party; (v) all names, addresses, amounts, dates, signatures
and other statements and facts contained in the Lease documentation are genuine,
true and correct; (vi) all Lease documentation has been duly authorized,
executed and delivered by each Lease Party thereto and represents the legal,
valid and binding obligation of such Lease Party, enforceable under all
applicable laws against such Lease Party in accordance with its terms, except to
the extent that enforcement of remedies may be limited by applicable bankruptcy,
insolvency or similar laws; (vii) the Lease is not in default and is and will be
free from any liens, setoffs, counterclaims and any and all other defenses;
(viii) there are no claims pending or threatened by any Lease Party against
Debtor in connection with the Lease or otherwise; (ix) the Lease documentation
evidences a valid reservation of title to, or first lien on, the Equipment and
all other property that is the subject of the Lease that is effective against
all persons; (x) Debtor has properly and timely filed or recorded any Lease
documentation or other instruments as may be required under all applicable
filing and recording statutes, and has obtained all necessary subordinations,
releases and/or waivers, to ensure that Debtor's lien or other interest in the
Equipment and all other property that is the subject of the Lease is and will be
superior to that of all other persons; (xi) Debtor has the right to assign the
Lease to Secured Party and the assignment conveys to Secured Party good and
valid title, at law and in equity, to the Lease, free and clear of any and all
liens, claims and encumbrances of any kind or nature whatsoever and (xii) as of
the date a Lease is assigned to Secured Party hereunder, (1) except April 1998
payment, no payment due under the Lease was more than ten (IO) days past due,
(2) no nonpayment default was in existence thereunder, (3) Debtor has no
knowledge that any Lease Party is asserting or has any basis to assert any
defense, setoff, or counterclaim to its obligations under any Lease Document,
(4) Debtor has not granted any extensions or waivers under the Lease during the
period since the commencement date of the Lease, (5) the Lease complies with all
applicable usury laws, retail installment sales acts, truth-in-lending and
truth-in-leasing laws and regulations and all other applicable laws and
regulations and (6) no consent of any Lease Party is required for Lessor to
assign or grant a security interest in, as applicable, the Lease or the
Equipment.
4. CERTAIN COVENANTS OF DEBTOR.
Debtor hereby covenants as follows:
(a) Debtor shall cooperate and do all acts deemed necessary or
advisable by Secured Party to continue in Secured Party a perfected first
security interest in the Collateral, including without limitation the removal of
any liens, claims or encumbrances upon any of the Collateral, the subordination
and waiver of any landlord or lessor rights to Secured Party's first security
interest in the collateral and subordination of any rights of any mortgagee of
any real property where Collateral is located to Secured Party's first security
interest therein. Debtor agrees to make a good faith effort to obtain and
furnish to Secured Party landlord, lessor, and/or mortgagee waivers upon request
of and in form satisfactory to Secured Party.
(c) Debtor shall, upon request of Secured Party, furnish to
Secured Party such further information, execute and deliver to Secured Party
such documents, including without limitation Uniform Commercial Code financing
statements, and do such other acts and things, as Secured Party may at any time
reasonably request relating to the perfection or protection of the security
interest created by this Security Agreement or for the purpose of carrying out
the intent of this Security Agreement.
(d) All Leases and other Lease Documentation delivered to Secured Party
hereunder and constituting any or all of the Collateral shall be originals
thereof identified by the stamp or mark "Original" and all other counterparts,
if any, shall be marked "Duplicate" or "Copy".
<PAGE>
(e) Debtor shall promptly notify Secured Party in writing in the event
of any change in the name of Debtor or any relocation of its chief executive
offices. In addition, Debtor shall promptly notify Secured Party in writing in
the event of any relocation of any of the Collateral; provided, however, in no
event shall any of the Collateral be removed from the continental United States.
5. EVENTS OF DEFAULT.
Debtor shall be in default under this Security Agreement and under each
obligation and liability identified on any Collateral Schedule hereto upon the
occurrence of any of the following "Event(s) of Default":
(a) Debtor fails to pay any installment or other amount due or coming
due under any of the Loan Documents within ten days after its due date;
(b) Any attempt by Debtor, without the prior written consent of Secured
Party, to sell, rent, lease, mortgage, grant a security interest in (other than
the security interest granted in favor of Secured Party pursuant to this
Security Agreement), or otherwise encumber or transfer any of the Collateral;
(c) Debtor fails to procure, or maintain in effect at all times, any of
the insurance on the Collateral in accordance with Section 7(b) of the this
Security Agreement;
(d) Debtor breaches any of its other obligations under any of the Loan
Documents and fails to cure the same within thirty days after written notice
thereof;
(e) Any warranty, representation or statement made by Debtor in any of
the Loan Documents or otherwise in connection with any of the Indebtedness shall
be false or misleading in any material respect;
(f) Any dissolution, termination of existence, insolvency, or business
failure of Debtor, or if Debtor is a natural person, any death or incompetency
of Debtor;
(g) Any of the Collateral being subjected to, or being threatened with,
attachment, execution, levy, seizure or confiscation in any legal proceeding, or
the entry of any judgment against, or the assessment and/or filing of any tax
lien against, or the issuance of any writ of garnishment or attachment against
any property of Debtor;
(h) The appointment of a receiver for all or of any part of the
property of Debtor, the assignment for the benefit of creditors by or the
commencement of any proceeding under any bankruptcy or insolvency law by Debtor
or against Debtor or any guarantor of Debtor's obligation hereunder or in
connection with the Indebtedness (and such involuntary proceeding is not
dismissed within thirty days of the filing thereof); or
(j) Debtor fails to provide Secured Party with a Replacement, Lease or
Leases, as the case may be, in compliance with Section 2(a) hereof within thirty
(30) days of the occurrence of any of the following events (i) any Lease pledged
hereunder is declared in default or is otherwise terminated or (ii) any Lease
pledged hereunder is, in the judgment of Secured Party, likely to be declared in
default.
6. REMEDIES ON DEFAULT.
Upon the occurrence of an Event of Default under this Security
Agreement, the Secured Party, at its option, may declare any or all of the
Indebtedness, including without limitation the Notes, to be immediately due and
payable, without demand or notice to Debtor or any guarantor of any obligations
of Debtor. The obligations and liabilities accelerated thereby shall bear
interest at the lower of thirteen percent (13%) per annum or the maximum rate
allowed by applicable law. Upon such declaration of default, Secured Party shall
have all of the rights and remedies of a Secured Party under the Uniform
Commercial Code, or under any other applicable law, including without limitation
the right to (i) notify any account debtor of Debtor or any obligor on any
instrument which constitutes part of the Collateral to make payment to the
Secured Party, (ii) with or without legal process, enter any premises where the
Collateral may be and take possession and/or remove said Collateral from said
premises, (iii) sell the Collateral at public or private sale, in whole or in
part, and have the right to bid and purchase at said sale, and/or (iv) lease or
otherwise dispose of all or part of the Collateral, applying proceeds therefrom
to the obligations
<PAGE>
then in default. If requested by Secured Party, Debtor shall promptly assemble
the Collateral and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to both parties.
Secured Party may also render any or all of the Collateral unusable at the
Debtor's premises and may dispose of such Collateral on such premises without
liability for rent or costs. Proceeds from any sale or lease or other
disposition shall be applied: first, to all costs of repossession, storage, and
disposition including without limitation reasonable attorneys', appraisers', and
auctioneers' fees; second, to discharge the obligations then in default; third,
to discharge any other indebtedness of Debtor to Secured Party, whether as
obligor, endorser, guarantor, surety or indemnitor; fourth, to expenses incurred
in paying or settling liens and claims against the Collateral; and lastly, to
Debtor, if there exists any surplus. Any notice which Secured Party is required
to give to Debtor under the Uniform Commercial Code of the time and place of any
public sale or the time after which any private sale or other intended
disposition of the Collateral is to be made shall be deemed to constitute
reasonable notice if such notice is mailed by registered or certified mail to
the last known address of Debtor at least five (5) days prior to such action.
In the event of the breach of any representations or warranties of
Debtor hereunder in connection with any Lease, or in the event Debtor fails to
observe or perform any covenants or agreements to be observed and performed by
Debtor hereunder in connection with any Lease, and the continuance thereof for
fifteen (I 5) calendar days following written notice thereof from Secured Party
to Debtor, Secured Party may demand that Debtor prepay the Note secured by
applicable Lease and Equipment, and Debtor agrees to make such prepayment upon
such demand and that Debtor will be liable for such payment upon demand. Secured
Party agrees to reassign such Lease and related Equipment to Debtor AS-IS,
WHERE-IS, without recourse and to release Secured Party's security interest in
the related Equipment upon receipt of such payment by Debtor.
7. COLLATERAL.
(a) Debtor shall not, without the prior written consent of Secured Party
sell, rent, lease, mortgage, grant a security interest in (other than the
security interest granted to Secured Party hereunder) or otherwise encumber or
transfer any of the Collateral. Debtor shall pay promptly when due all taxes,
license fees, assessments and public and private charges levied or assessed on
any of the Collateral, on the use thereof, or on this Security Agreement or any
of the other Loan Documents. At its option, Secured Party may discharge taxes,
liens, security interests or other encumbrances at any time levied or placed on
the Collateral and may pay for the maintenance, insurance and preservation of
the Collateral or to effect compliance with the terms of this Security Agreement
or any of the other Loan Documents, and Debtor agrees to reimburse Secured
Party, on demand, therefor.
(b) Until the declaration of any default hereunder, Debtor shall remain
in possession of the Collateral subject to any lessee's rights under the Lease
or any Replacement Lease. The Collateral shall at all times be held at Debtor's
risk, and Debtor shall keep it insured against loss or damage by fire and
extended coverage perils, theft, burglary and for any or all Collateral which
are vehicles, for risk of loss by collision, and where requested by Secured
Party, against other risks as required thereby, for the full replacement value
thereof, with companies, in amounts and under policies acceptable to Secured
Party, with losses payable to Secured Party and Debtor as their interests may
appear. Debtor shall, if Secured Party so requires, deliver to Secured Party
policies or certificates of insurance evidencing such coverage. Each policy
shall provide for coverage to Secured Party regardless of the breach by Debtor
of any warranty or representation made therein and shall provide for thirty (30)
days written notice to Secured Party of the cancellation or material
modification thereof.
(c) Debtor will, at all times, keep accurate and complete records of
the Collateral to the extent permitted by the Lease, and Secured Party or its
agents, successors and assigns will have the right to examine, inspect, and make
extracts from all of Debtor's books and records relating to the Collateral at
any time.
8. MISCELLANEOUS.
(a) Secured Party's rights and remedies hereunder or otherwise arising
are cumulative and may be exercised singularly or concurrently.
Neither the failure nor any delay on the part of the Secured Party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
(b) Secured Party shall not be deemed to have waived any of its rights
hereunder, or under any other agreement, instrument or paper signed by Debtor
unless such waiver be in waiting and signed by Secured Party. No delay or
omission on the part of Secured Party in exercising any right shall operate as a
waiver of such right or any other right. A waiver on any one occasion shall not
be construed as a bar to or waiver of any right or remedy on any future
occasion. Secured Party may correct patent errors herein. All notices to be
given in connection with this Security Agreement shall be in writing and shall
be sufficiently given if sent by first-class mail, postage prepaid, or delivered
in hand, to the appropriate party at its address set forth hereinabove (unless
and until a different address may be specified in a written notice to the other
party).
(c) Time is of the essence hereof. This Security Agreement shall be
binding, jointly and severally, upon all parties described as the "Debtor" and
their respective heirs, executors, representatives, successors and assigns, and
shall inure to the benefit of Secured Party, its successors and assigns. If any
provision of this Security Agreement is in conflict with any statute, rule of
law applicable hereto, then such provision shall be deemed null and void to the
extent that it may conflict therewith, but without invalidating any other
provision(s) hereof. This Security Agreement shall not be changed or terminated
orally, but only by a writing signed by both parties hereto. This Security
Agreement, any Note and/or any of the other Loan Documents may be assigned by
Secured Party without notice to Debtor, and Debtor hereby waives any defense,
counterclaim or cross-complaint by Debtor against any assignee, agreeing that
Secured Party shall be solely responsible therefor.
(d) Debtor hereby grants to Secured Party the power to sign Debtor's
name and generally to act on behalf of Debtor to execute and file applications
for title, transfers of title, financing statements, notices of lien and other
documents pertaining to any or all of the Collateral. Debtor shall, if any
certificate of title be required or permitted by law for any of the Collateral,
obtain such certificate showing the lien hereof with respect to the Collateral
and promptly deliver same to Secured Party. Debtor shall do everything necessary
or expedient to preserve or perfect the lien and perfected security interest of
Secured Party granted hereunder. Debtor waives, to the greatest extent permitted
by law, the benefit of all homestead and other property exemption laws. In the
event this Security Agreement, any Note or any other Loan Documents are placed
in the hands of an attorney for collection of money due or to become due or to
obtain performance of any provision hereof, Debtor agrees to pay all reasonable
attorneys' fees incurred by Secured Party, and further agrees that payment of
such fees is secured hereunder.
(e) Upon request, if so available, Debtor agrees to furnish its annual
financial statements in form Satisfactory to Secured Party. Any and all
financial statements submitted and to be submitted to Secured Party have and
will have been prepared on a basis of generally accepted accounting principles,
and are and will be complete and correct and fairly present Debtor's financial
condition as at the date thereof. Secured Party may at any reasonable time
examine the books and records of Debtor and make copies thereof.
(f) This Security Agreement shall be governed by and construed under
the substantive laws of the State of New York, without regard to choice of law
principles thereof, and any provision of this Security Agreement or of the
obligations and liabilities secured by this Security Agreement which may prove
to be unenforceable shall not affect the validity of any other provision of the
Security Agreement.
(g) This Security Agreement shall continue in full force and effect for
so long as there shall remain in existence obligations or liabilities from
Debtor to Secured Party and for so long after the payment of all outstanding
obligations and liabilities as it is reasonably contemplated that there may be
future obligations and liabilities between Debtor and Secured Party, which
future obligations and liabilities shall be secured by the security interest
granted in this Security Agreement.
(h) Secured Party hereby acknowledges that the Leases pledged hereunder
grant certain rights of quiet enjoyment to the lessees under such Leases.
Secured Party hereby agrees that, so long as no Event of Default has occurred
under the Lease, it will not disturb any such lessee's quiet, peaceful and
uninterrupted possession of the Collateral that is the subject of any such
Lease.
(i) THE PARTIES TO THIS SECURITY AGREEMENT HEREBY UNCONDITIONALLY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
<PAGE>
UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS SECURITY AGREEMENT, ANY OF
THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS
BEING ESTABLISHED BETWEEN THEM. The scope of this waiver is intended to be all
encompassing of any and all disputes that may be filed in any court (including,
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims). THIS WAIVER IS IRREVOCABLE MEANING THAT
IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
SECURITY AGREEMENT ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally
bound hereby, have duly executed this Security Agreement in one or more
counterparts, each of which shall be deemed to be an original, as of the day and
year first aforesaid.
SECURED PARTY: DEBTOR:
GENERAL ELECTRIC CAPITAL CORPORATION AMERICAN FINANCE GROUP, INC.
By: /s/ James Trinacria By: /s/ Donald R. Dugan
------------------------ --------------------------
James Trinacria Donald R. Dugan
Title: Senior Risk Analyst Title: President
<PAGE>
COLLATERAL SCHEDULE NO. I
THIS COLLATERAL SCHEDULE NO. 1 is annexed to and made a part of that
certain Pledge and Security Agreement dated as of June 30, 1998 (the "Security
Agreement") between General Electric Capital Corporation as secured party
("Secured Party") and American Finance Group, Inc., as debtor ("Debtor") and
describes the collateral in which Debtor has granted Secured Party a security
interest in connection with the Indebtedness (as defined in the Security
Agreement) including without limitation that certain Promissory Note dated June
30, 1998 in the original principal amount of $1,118,010.14.
The inventory of Debtor consisting of the equipment listed on Equipment
Schedule nos. 10 (all attachments, replacements and substitutions thereof) to
the Lease Agreement dated February 19,1998 by and between Debtor, as Lessor, and
Oxford Health Plans, Inc., as Lessee ("Lessee"), copies of which are attached
hereto and made a part hereof. In addition, Debtor hereby assigns and grants to
Secured Party a security interest in the above described Lease Agreement and
Equipment Schedule Nos. 10 thereto.
SECURED PARTY: DEBTOR:
GENERAL ELECTRIC CAPITAL CORPORATION AMERICAN FINANCE GROUP, INC.
By: /s/ James Trinacria By: /s/ Donald R. Dugan
-------------------------- -------------------------
James Trinacria Donald R. Dugan
Title: Senior Risk Analyst Title: President
Date: 6/30/98 Date: 26 June 1998
<PAGE>
PROMISSORY NOTE
June 30, 1998
(Date)
24 SCHOOL STREET, BOSTON, MA 02108
(Address of Maker)
FOR VALUE RECEIVED, AMERICAN FINANCE GROUP, INC., ("Maker") promises, jointly
and severally if more than one, to pay to the order of General Electric Capital
Corporation or any subsequent holderhereof (each, a "Payee") at its office
located at 44 0ld Ridgebury Road, Danbury, CT 06811orat such other place as
Payee or the holder hereof may designate, the principal sum of one million one
hundred eighteen thousand ten and 14/100 dollars ($1,118,010.14), with interest
thereon, from the date hereof through and including the dates of payment, at a
fixed interest rate of nine and 26/100 percent (9.26%) per annum, to be paid in
lawful money of the United States, in thirty two (32) consecutive monthly
installments of principal and interest of thirty nine thousand five hundred
seventy two and 81/100 ($39,572.81) each ("Periodic Installment") and a final
installment which shall be in the amount of the total outstanding principal and
interest. The first Periodic Installment shall be due and payable on August 1,
1998 and the following Periodic Installments and the final installment shall be
due and payable on the same day of each succeeding month (each, a "Payment
Date"). Such installments have been calculated on the basis of a 360 day year of
twelve 30-day months. Each payment may, at the option of the Payee, be
calculated and applied on an assumption that such payment would be made on its
due date.
The acceptance by Payee of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute a waiver of Payee's
right to receive payment in full at such time or at any prior or subsequent
time.
Maker hereby expressly authorizes the Payee to insert the date value is actually
given in the blank space on the face hereof and on all related documents
pertaining hereto.
This Note may be secured by a security agreement, chattel mortgage, pledge
agreement or like instrument (each of which is hereinafter called a "Security
Agreement")
Maker shall be liable to repay this Note in the event of any breach of any
representation or warranty given by Maker to Payee under any Security Agreement,
however to the extent that any payments to be made by Maker under this Note or
any Security Agreement not related to a breach of any representation or warranty
given by Maker to Payee under any Security Agreement, Payee shall look solely to
the income and proceeds available under the Collateral (as that term is defined
in the Security Agreement) for the performance of Maker's duties and obligations
hereunder or under any Security Agreement and except as specifically provided
for in the paragraph, Maker shall not be otherwise personally liable to Payee
hereunder.
Time is of the essence hereof. If any installment or any other sum due under
this Note or any Security Agreement is not received within ten (10) days after
its due date. If (i) Maker fails to make payment of any amount due hereunder
within ten (10) days after the same becomes due and payable; or (ii) Maker is in
default under, or fails to perform under any term or condition contained in any
Security Agreement, then the entire principal sum remaining unpaid, together
with all accrued interest thereon and any other sum payable under this Note or
any Security Agreement, at the election of Payee, shall immediately become due
and payable, with interest thereon at the lesser of thirteen percent (I 3%) per
annum or the highest rate not prohibited by applicable law from the date of such
accelerated maturity until paid (both before and after any judgment).
Maker may prepay in full, but not in part, its entire indebtedness hereunder
upon payment of an additional sum as a premium equal to the following
percentages of the original principal balance for the indicated period:
<PAGE>
Prior to the first annual anniversary date of this Note: three percent (3%)
Prior to the second annual anniversary date of this Note: two percent (2%)
Prior to the third annual anniversary date of this Note: one percent (I%) and
zero percent (O%) thereafter, plus all other sums due hereunder or under any
Security Agreement.
It is the intention of the parties hereto to comply with the applicable usury
laws; accordingly, it is agreed that, notwithstanding any provision to the
contrary in this Note or any Security Agreement, in no event shall this Note or
any Security Agreement require the payment or permit the collection of interest
in excess of the maximum amount permitted by applicable law. If any such excess
interest is contracted for, charged or received under this Note or any Security
Agreement, or if all of the principal balance shall be prepaid, so that under
any of such circumstances the amount of interest contracted for, charged or
received under this Note or any Security Agreement on the principal balance
shall exceed the maximum amount of interest permitted by applicable law, then in
such event (a) the provisions of this paragraph shall govern and control, (b)
neither Maker nor any other person or entity now or hereafter liable for the
payment hereof shall be obligated to pay the amount of such interest to the
extent that it is in excess of the maximum amount of interest permitted by
applicable law, (c) any such excess which may have been collected shall be
either applied as a credit against the then unpaid principal balance or refunded
to Maker, at the option of the Payee, and (d) the effective rate of interest
shall be automatically reduced to the maximum lawful contract rate allowed under
applicable law as now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged or received under
this Note or any Security Agreement which are made for the purpose of
determining whether such rate exceeds the maximum lawful contract rate, shall be
made, to the extent permitted by applicable law, by amortizing, prorating,
allocating and spreading in equal parts during the period of the full stated
term of the indebtedness evidenced hereby, all interest at any time contracted
for, charged or received from Maker or otherwise by Payee in connection with
such indebtedness; provided, however, that if any applicable state law is
amended or the law of the United States of America preempts any applicable state
law, so that it becomes lawful for the Payee to receive a greater interest per
annum rate than is presently allowed, Maker agrees that, on the effective date
of such amendment or preemption, as the case may be, the lawful maximum
hereunder shall be increased to the maximum interest per annum rate allowed by
the amended state law or the law of the United States of America.
Maker and all sureties, endorsers, guarantors or any others (each such person,
other than Maker, an "Obligor") who may at any time become liable for the
payment hereof jointly and severally consent hereby to any and all extensions of
time, renewals, waivers or modifications of, and all substitutions or releases
of, security or of any party primarily or secondarily liable on this Note or any
Security Agreement or any term and provision of either, which may be made,
granted or consented to by Payee, and agree that suit may be brought and
maintained against any one or more of them, at the election of Payee without
joinder of any other as a party thereto, and that Payee shall not be required
first to foreclose, proceed against, or exhaust any security hereof in order to
enforce payment of this Note. Maker and each Obligor hereby waives presentment,
demand for payment, notice of nonpayment, protest, notice of protest, notice of
dishonor, and all other notices in connection herewith, as well as filing of
suit (if permitted by law) and diligence in collecting this Note or enforcing
any of the security hereof, and agrees to pay (if permitted by law) all expenses
incurred in collection, including Payee's actual attorneys' fees. Maker and each
Obligor agrees that fees not in excess of twenty percent (20%) of the amount
then due shall be deemed reasonable.
THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
<PAGE>
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED
TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
This Note and any Security Agreement constitute the entire agreement of Maker
and Payee with respect to the subject matter hereof and supercedes all prior
understandings, agreements and representations, express or implied.
No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an
authorized representative of Maker and Payee. Any such waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given.
Any provision in this Note or any Security Agreement which is in conflict with
any statute, law or applicable rule shall be deemed omitted, modified or altered
to conform thereto.
AMERICAN FINANCE GROUP, INC.
BY: /s/ Donald R. Dugan (L.S.)
-------------------------------
/s/ Jason M. Howard (Signature)
- ---------------------------------
(Witness)
Jason M. Howard Donald R. Dugan, President
(Print name) Print name (and title, if applicable)
Account Manager, AFG 94-3226128
(Address) (Federal tax identification number)
NON-RECOURSE PROMISSORY NOTE
$2,151,145.48 Chicago, Illinois
March 4, 1998
FOR VALUE RECEIVED, the undersigned Maker, promises to pay to the order of
Heller Financial, Inc. at its office at 500 West Monroe Street, Chicago,
Illinois 60661 or at such other place as the holder may appoint, the principal
sum of Two Million One Hundred Fifty One Thousand, One Hundred Forty Five and
48/10 Dollars ($2,151,145.48) together with interest on the principal balance
remaining from time to time unpaid payable in Thirty-six (36) consecutive
monthly installments, each in the amount of Sixty-seven thousand six hundred
ninety-six Dollars ($67,696.00), with the first such installment due on April 1,
1998, continuing on the same date of each month thereafter until paid in full.
Interest, prior to maturity, at the rate of Eight and Thirty-two One Hundredths
percent (8.32%) per annum on the basis of a year consisting of 360 days, is
included in the foregoing installments. If any installment due hereunder shall
not be paid within ten (10) days after such installment is due, Maker shall pay
to holder hereof (i) a "late charge" of five percent (5%) of such delinquent
amount to defray the cost of collection, plus (ii) interest after maturity
whether by acceleration or otherwise, at the rate of one and one-half percent
(1.5%) per month (or the maximum amount permitted by law, whichever is less)
plus reasonable attorneys' fees if placed with an attorney for collection.
Demand, presentment for payment, protest, notice of non-payment or protest, is
hereby waived by Maker.
If this Note is not dated when executed by the Maker, the holder is hereby
authorized, without notice to the Maker, to date this Note as of the date when
the loan evidenced hereby is made. Maker furthermore hereby authorizes holder to
insert the date of the first installment due hereunder. Holder's books and
records shall be dispositive of the date disbursement is made hereunder.
This Note is secured by and entitled to the benefits of both (i) for collateral
identification purposes the original copy of the Lease (including, without
limitation, the Equipment described thereon and the Proceeds thereof) and (ii)
the Security Agreement (Chattel Mortgage and Assignment of Lease) dated as of
the 4th day of March, 1998, and to which reference is made for a statement of
the nature and extent of the protection and security afforded, the rights of the
payee or holder hereof, and the rights and obligations of the undersigned,
including payment. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Security Agreement.
If a default shall occur under the Security Agreement or any Lease, this Note
may become or be declared due in the manner and with the effect provided for
herein and in the Security Agreement. Furthermore, except for any breach of the
warranties, representations and covenants contained in that certain Security
Agreement executed by the undersigned Maker to Heller Financial, Inc., the
undersigned Maker shall have no liability for the payment of the principal of,
or interest on, this Note, and any judgment obtained against the undersigned
Maker (except for a breach of warranty, representation or covenant or a breach
of any other obligation by the undersigned Maker under the Security Agreement)
may be enforced only against the Lessee, the related Lease(s), and the Equipment
described therein, that are the subject of the aforesaid Security Agreement.
Nothing herein shall be deemed to constitute, intended to be, or construed as, a
release or impairment of the indebtedness evidenced by this Note or of the
assignment(s) and security interest(s) created by the Security Agreement.
Maker may prepay the indebtedness evidenced hereby only as provided in said
Security Agreement.
All remedies conferred upon the holder of this Note or the Security Agreement
shall be cumulative and not exclusive, and such remedies may be exercised
concurrently or consecutively at the holder's option. The validity,
interpretation, enforcement and effect of this Note shall be governed by the
laws of the State of Illinois.
THIS NOTE SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE
OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE
OF ILLINOIS. MAKER DOES HEEREBY SUBMIT, AT HOLDER'S ELECTION, TO THE EXCLUSIVE
JURISDICTION AND VENUE OF ANY COURTS (FEDERAL, STATE OR LOCAL) HAVING A SITUS
WITHIN THE COUNTY OF COOK AND THE STATE OF ILLINOIS WITH RESPECT TO ANY DISPUTE,
CLAIM, OR SUIT WHETHER DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
NOTE, OR ANY OF MAKER'S OBLIGATIONS OR INDEBTEDNESS HEREUNDER. MAKER EXPRESSLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE BY CERTIFIED MAIL,
POSTAGE PREPAID, DIRECTED TO THE LAST KNOWN ADDRESS OF MAKER, WHICH SERVICE
SHALL BE DEEMED COMPLETED WITHIN TEN (10) DAYS AFTER THE DATE OF MAILING
THEREOF. MAKER HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT THE COUNTY OF COOK,
STATE OF ILLINOIS IS AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF
VENUE AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO REMOVE ANY SUCH
ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM
NON CONVENIENS OR OTHERWISE. THE EXCLUSIVE CHOICE OF FORUM SET FORTH HEREIN
SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT BY HOLDER OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION BY HOLDER TO ENFORCE THE SAME
IN ANY OTHER APPROPRIATE JURISDICTION.
WAIVER OF JURY TRIAL. MAKER AND HOLDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
NOTE. MAKER AND HOLDER ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND
WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF HOLDER. THIS WAIVER IS INTENDED
TO BE EFFECTIVE WITH RESPECT TO ALL DISPUTES WHICH ARISE OUT OF THIS NOTE OR
PERTAIN TO THE TRANSACTIONS CONTEMPLATED HEREBY. MAKER AND HOLDER EACH
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH ALREADY HAS RELIED ON SUCH WAIVER IN ENTERING INTO THIS
NOTE AND THAT EACH WILL CONTINUE TO RELY ON SUCH WAIVER IN THEIR RELATED FUTURE
DEALINGS. MAKER AND HOLDER FURTHER WARRANT AND REPRESENT THAT EACH KNOWINGLY AND
VOLUNTARILY HAS WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, AND MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND SUCH WAIVER SET FORTH HEREIN SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE. IN THE EVENT OF
LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
IN WITNESS WHEREOF, the undersigned Maker has caused this Note to be duly
executed on the date first above written.
ATTEST: VARILEASE CORPORATION, Maker
/s/ Marjorie A. Biglin /s/ Gary F. Miller
- ----------------------------- ----------------------------
Marjorie A. Biglin Gary F. Miller
Assistant Secretary Senior Vice President
<PAGE>
EXHIBIT A TO THE TRASNFEREE AGREEMENT
SECURITY AGREEMENT
(CHATTEL MORTGAGE AND ASSIGNMENT OF LEASE)
Security Agreement dated March 4, 1998, between VARILEASE CORPORATION, a
Michigan corporation ("Debtor"), having its principal place of business at 28525
Orchard Lake Road, Farmington Hills, MI 48334 and HELLER FINANCIAL, INC., a
Delaware corporation ("Secured Party"), having its principal place of business
at 500 West Monroe Street, Chicago, Illinois 60661.
WITNESSETH:
WHEREAS, Debtor is indebted to Secured Party pursuant to a promissory note dated
March 4, 1998, and any other promissory note made by Debtor ("Note"), and in
order to secure the payment of principal and interest on the Note, Debtor has
agreed to grant Secured Party a security interest in certain equipment and
assign its interest as lessor in Rental Schedule(s) No. 01 incorporating that
certain Master Lease dated February 10, 1998, ("Lease") by and between Debtor
and Oxford Health Plans, Inc. ("Lessee");
Now, Therefore, for valuable consideration, the parties hereto agree as follows:
1. SECURITY INTEREST IN EQUIPMENT. In order to induce Secured Party to make
loans to Debtor pursuant to the Note and in order to secure the payment of
principal and interest on the Note and rent and other sums due and to become due
under the Lease and any other indebtedness of every kind now or hereafter owing
from Debtor to Secured Party, created, incurred or arising directly or
indirectly out of the Note, the Lease, the Assignment and Security Agreement or
hereunder, whether direct or indirect, primary or secondary, fixed or
contingent, liquidated or unliquidated (hereafter referred to as the
"Indebtedness") and the performance and observance of all other obligations of
the Debtor contained herein and in the Lease, Debtor hereby grants to Secured
Party a security interest in all machinery, equipment and other personal
property and fixtures, together with all attachments, accessories and
replacements thereto and therefor (hereafter referred to as the "Equipment") and
all proceeds of the Equipment now or hereafter acquired by Debtor for lease to
Lessee under the Lease (to which Lease reference is hereby made for a more
specific description of the Equipment), subject, however, to the rights of the
Lessee under the Lease.
2. ASSIGNMENT OF LEASE. In order to further induce Secured party to make loans
to Debtor pursuant to the Note, and in order to further secure the payment of
the Indebtedness and the performance and observation of all other obligations of
the Debtor contained herein and in the Lease, Debtor hereby assigns, conveys,
transfers and sets over to Secured Party all right, title and interest now held
or hereafter acquired by the Debtor in and to the Equipment, the Lease and all
instruments and documents related thereto (all such instruments and documents,
whenever arising being hereafter called "Related Documents") and all proceeds of
the Lease, the Equipment and the Related Documents. The assignment of the Lease
to Secured Party by Debtor pursuant to this Security Agreement is being made for
collateral purposes only and Debtor shall be deemed the owner of the Equipment
for all purposes. The Equipment, the Lease and Related Documents; Debtor's
right, title and interest thereto; all books and records relating to the
foregoing, and all proceeds (including insurance proceeds) pertaining thereto
shall hereinafter collectively be referred to as the "Collateral."
3. REPRESENTATIONS AND WARRANTIES OF DEBTOR. Debtor hereby represents and
warrants to Secured Party, as of the date any Indebtedness is incurred, and
covenants thereafter, that:
(a) except for the security interest granted hereby (and the Lease to
which each item of Equipment is subject), Debtor is and will remain the
owner of, and has good title to, the Collateral, free and clear of all
liens, encumbrances, security interests and adverse claims, and Debtor
will defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein;
(b) (i) Debtor is legally organized and validly existing, in good
standing under the laws of its state of organization and is duly
qualified to do business and in good standing under the laws of each
jurisdiction where the nature of its business or the character of its
properties makes it necessary for it to so qualify to do business; (ii)
Debtor has full power and authority to execute and deliver this
Agreement, together with all Notes, Lease(s), agreements and
instruments evidencing Indebtedness, and to perform its obligations
thereunder; (iii) Debtor has full power and authority to own its
properties and carry on its business as now being conducted; and (iv)
this Agreement, each Note, and all other documents evidencing any of
the Indebtedness have been duly authorized, executed and delivered by
Debtor and constitute the valid, legal and binding Indebtedness of
Debtor, enforceable in accordance with their terms, and performance of
same by Debtor will not violate the terms of its Articles of
Incorporation, by-laws or any agreement, indenture, order or decree by
which Debtor is bound, nor cause default under any thereof;
(c) Secured Party has and will retain, so long as any Indebtedness are
outstanding, a first, prior and perfected security interest in the
Collateral; and
Debtor hereby further represents and warrants with respect to the Equipment, as
of the date any Indebtedness is incurred and covenants thereafter, so long as
any Indebtedness are outstanding, that;
(d) except for such financing statements as may have been heretofore
filed by Debtor as Secured Party and lessor under the Lease, no
financing statement covering the Leases and any Equipment or any
Proceeds thereof is on file in any public office and Debtor will
execute such Uniform Commercial Code financing statements (including
fixture filings, and filings made by Debtor against the Lessee,
describing the Lease and the Equipment, which filings shall have been
assigned to Secured Party by Debtor), in any case covering the
Collateral or a portion thereof as Secured Party may desire;
(e) Debtor will not sell the Equipment or otherwise transfer any
interest therein (except pursuant to the Lease) without written consent
of Secured Party, which consent shall not be unreasonably withheld; and
Debtor hereby further expressly represents and warrants with respect to the
Lease as of the date any Indebtedness is incurred and covenants thereafter, so
long as any Indebtedness are outstanding, that:
(f) all of the documents comprising the Lease are as respectively
described in Exhibit "A" herein, and the Lease and all documents or
instruments related thereto arise out of a bona fide lease of the
Equipment described, to the Lessee;
(g) prior to the execution of the Lease, the Lessee had no interest,
directly or indirectly, in the Equipment, or the Lessee has conveyed
any such interest or good title to the Equipment to Debtor;
(h) all rental and other payments under the Lease are to be made by the
Lessee in cash or cash equivalent in accordance with the terms of the
Lease;
(i) Except in accordance with the cure provisions of Section 6 hereof,
Debtor has not and will not give or loan to any Lessee, directly or
indirectly, any unpaid rent;
(j) the Lessee has not received, nor will the Lessee receive, from or
through Debtor, directly or indirectly, any part of the consideration
received by Debtor hereunder from Secured Party;
(k) Debtor shall have delivered the Original counterpart of the Lease
to Secured Party, and the counterparts in Debtor's and Lessee's
possession are marked to indicate that they are duplicate counterparts
and that the rental payments thereunder have been assigned to Secured
Party. Debtor will retain physical possession and control of the
original Master Lease in trust for the benefit of Secured Party,
subject to the following:
(i) Debtor will not sell, assign, pledge, encumber or
hypothecate the original Master Lease, or any interest
therein, without the prior written consent of Secured Party;
(ii) Debtor will not surrender, deliver, or part with
possession of the original Master Leases to any other party
without the prior written consent of Secured Party;
(iii) Debtor will store and safeguard the original Master
Lease and will use its best efforts, at all times, to protect
the original Master Lease from fire, theft, water, and smoke
damage, mutilation, alteration, and destruction;
(iv) Debtor may from time to time enter into additional
schedules to the Master Lease with Lessee without the prior
consent of Secured Party;
(v) Debtor may sell, assign, pledge or hypothecate Rental
Schedules other than the Schedule(s) assigned hereunder, or
the stream of rental payments therefrom, to parties other than
Secured Party. The interest, if any, that such other parties
may have in the Master Lease will be in pari passu with the
interests of Secured Party in the Master Lease, and Debtor
will advise all such other parties of the interest of Secured
Party in the Master Lease. Secured Party's interest in each
Rental Schedule assigned hereunder shall be and remain
superior in right to that of Debtor and to all other parties
interested in the original Master Lease;
(vi) Debtor will represent and surrender and deliver to
Secured Party, upon demand by Secured Party, the original
Master Lease in the event of default by Lessee under the Lease
and, furthermore, will advise Secured Party prior to the
surrender and delivery of the original Master Lease to any
other party in the event of a default by a Lessee on any
rental schedule held by any other party;
(l) upon due inquiry, Debtor knows of no default under the Lease, nor
of anything which would impair the value of the Lease, and Debtor will
not by any act or omission on its part cause any impairment of the
value or validity of the Lease, and will, promptly upon learning
thereof, give notice to Secured Party of the occurrence of any default
under the Lease;
(m) Debtor will not make any modifications to the Lease without the
prior written consent of Secured Party, which consent shall not be
unreasonably withheld; provided, that, as to any such modification
which results in a reduction of rental payments under the Lease, or a
prepayment of rental payments under the Lease, or in any other way
causes the present value of the Lease to Secured Party to be lessened,
it shall be a condition to the effectiveness of any such consent given
by Secured Party that Debtor shall promptly pay to Secured Party the
amount which Secured Party reasonably determines to be the amount of
said decreased value to Secured Party, as a partial prepayment of the
outstanding principal portion of the Indebtedness under the relevant
Note, together with any accrued late charges and interest thereon;
(n) the Lease constitutes the entire agreement of the parties thereto
and neither party shall be bound except in accordance therewith;
(o) the Lease constitutes the valid contract of Debtor and Lessee,
enforceable against the Lessee in accordance with its terms, and each
party thereto has executed the Lease with full power, authority and
capacity to contract;
(p) Debtor has performed, and so long as any Indebtedness remain
unperformed, Debtor will at all times continue to perform, its duties
and Indebtedness as lessor under the Lease;
(q) the obligation of Lessee to pay rent under the Lease is not, nor is
claimed to be, and will not be, nor will be claimed to be, subject to
any claims, defenses or rights of counterclaim or setoff against Debtor
or its assignee; and
(r) To the extent that the manufacturer of the Equipment has not been
paid for the Equipment, Debtor shall use the proceeds of the Note to
pay the manufacturer the applicable purchase price. If manufacturer has
been so paid, then the proceeds of the Note shall be used by Debtor to
reimburse it for payment of the applicable purchase price.
4. BREACH OF WARRANTIES. Notwithstanding anything contained herein to the
contrary, Secured Party shall have full recourse against Debtor for any material
breach of Debtor's representations and warranties contained in Section 3 hereof,
for any material breach of Debtor's covenants, as applicable, as more fully set
forth in Section 4 hereof, or for any damages suffered by Secured Party as a
result of any fraudulent conduct by Debtor not otherwise covered herein. Upon
such breach, Secured Party may, without notice or demand, declare the entire
unpaid balance of the Indebtedness to be immediately due and payable and
exercise its rights and remedies, to wit: (a) demand and receive from Debtor all
sums due and payable under the Note or hereunder, including all out-of-pocket
attorney's fees actually incurred by Secured Party; and (b) exercise any other
rights and remedies available to Secured Party under the Lease, or this Security
Agreement.
5. COVENANTS OF DEBTOR. Debtor further covenants and agrees with Secured Party
as follows:
(a) to keep the Equipment insured against all risks of the kinds
customarily insured against by companies similarly situated for the
full insurable value thereof, including, but not limited to, fire,
theft, vandalism, windstorm, explosion and extended coverage on the
Equipment, comprehensive general liability insurance in amounts
reasonably acceptable to Secured Party for property damage, personal
liability, bodily injury and medical, and to deliver evidence of such
coverage or all such policies to the Secured Party, with such companies
and in such amounts and by policies in such form as shall be
satisfactory to the Secured Party, which insurance policies shall, by
endorsement:
(i) name Secured Party as the sole loss payee;
(ii) provide that the policies will not be invalidated as
against Secured party because of any violation of a condition
or warranty of the policy or application therefor by Debtor;
and
(iii) provide that the policies may only be materially altered
or cancelled by the insurer after thirty (30) days' prior
written notice to Secured Party;
Debtor hereby appoints Secured Party attorney for Debtor to
prove and adjust any losses and to endorse any loss drafts, and Debtor
hereby assigns to Secured Party all sums which may become payable under
such insurance, including returned premiums and dividends as additional
security hereunder; and Debtor shall give immediate written notice to
Secured Party and to the insurers of any loss or damage to the
Equipment and shall promptly file proofs of loss with such insurers;
(b) to pay, as and when the same becomes due, all taxes, assessments,
license fees, registration fees, and governmental charges, local, state
or federal (including any interest and/or penalties thereon) of any and
every nature, special or otherwise, levied or assessed upon the
Equipment or any portion thereof, or upon the use or operation thereof,
or upon or in respect of Indebtedness or this Security Agreement, and
to file or cause to be filed with the appropriate authorities all
returns and/or reports incident thereto;
(c) not to sell, lease, transfer, encumber, grant security interests in
or otherwise dispose of the Equipment or any part hereof or any
interest therein, or attempt so to do, or suffer or permit any lien of
any kind to attach to any of the Equipment except in favor of the
Secured Party;
(d) not to remove or suffer or permit to be removed, any of the
Equipment from the locations specified in the Lease, or make any
modifications thereto without the prior written consent of the Secured
Party;
(e) at its sole expense, to (i) keep the Equipment in good and safe
operating order, repair and condition, and maintain and use same in a
safe and proper manner, in accordance with the requirements of any
federal, state, county, municipal, regulatory or other authority,
having jurisdiction thereof, (ii) pay for all fuel, service,
inspections, overhauls, replacements, substitutions, materials and
labor necessary or desirable for the proper use, repair, operation and
maintenance of the Equipment, and (iii) maintain in force and effect
all licenses and other approvals required in connection with the
conduct of its existing business;
(f) in case of any failure of the Debtor to keep the Equipment insured
and in good repair and operating condition, or to keep the same free
from liens, security interests, encumbrances or adverse claims, or to
pay taxes on or in respect thereof, as herein covenanted, or to fully
and punctually keep and perform any other covenant hereof, then in any
such case, Secured Party may (but shall not be required so to do) pay
or perform such obligation for Debtor; Debtor covenants to reimburse
Secured Party promptly for all sums paid or advanced for any such
purpose, and any other sums disbursed by Secured Party to protect the
Equipment or the lien and security interest of this Security Agreement,
together with all costs, expenses and attorneys' fees paid or incurred
by Secured Party, all with interest from the date of advancement until
repaid to Secured Party at the rate of one and one-half percent (1.5%)
per month (or the maximum per annum rate of interest permitted by law,
whichever is less);
(g) to pay all filing, recording, search and other expenses incurred by
the Secured Party with respect to the perfection of its security
interest in the Equipment and confirming the priority thereof;
(h) to execute and deliver such further documents (including Uniform
Commercial Code financing statements) and do such further acts and
things as Secured Party may reasonably request in order to fully effect
the purposes of this Security Agreement and Secured Party's rights in
the Equipment; and
(i) to preserve and protect the Equipment as personal property,
regardless of the manner or degree of its attachment to realty.
It is expressly understood that some of the undertakings contained in the
foregoing paragraph may have been assumed by the Lessee under the Lease, and
therefore performance by the Lessee of such undertakings shall be deemed to be
performance by Debtor. It is further expressly understood that, with respect to
the undertakings assumed by Lessee under the Lease, Secured Party shall have no
recourse to Debtor for the failure of either Debtor or Lessee to perform such
undertakings except as otherwise provided herein.
6. TAX ADMINISTRATION. Any and all sales, use, property or other taxes
applicable to or arising out of each Lease, the Equipment or the proceeds
thereof (sometimes collectively referred to as "Taxes"), are current and have
been paid by Debtor or the party obligated to make such payment as of the date
of this Agreement. Pursuant to the Leases, Debtor or Lessees will file all
property tax returns and pay the property taxes levied or assessed on the
Equipment. Debtor will bill the Lessees for all sales and use tax that is due
and payable during the terms of the Leases, and direct the Lessees to remit such
taxes to Secured Party. Secured Party agrees to remit any sales and use taxes it
receives from the Lessees to the appropriate taxing jurisdiction.
Notwithstanding the above, in the event Debtor or a Lessee shall fail to remit
the necessary property taxes to the taxing jurisdiction within the time
prescribed, or Debtor shall fail to timely bill the Lessees for the correct
amount of the sales and use tax due during the term of the Lease, Debtor shall
remit the amount of such overdue Taxes to Secured Party in Lessee's name, within
five (5) business days of written notification by Secured Party, and shall
indemnify and hold harmless Secured Party for all such overdue and/or unpaid
Taxes, and any fines, penalties and late charges related thereto.
7. DEFAULT. Subject to Debtor's right to cure as set forth in Section 7 of this
Security Agreement, the occurrence of any of the following events shall be an
event of default hereunder: (a) Debtor shall default in the payment of any
principal or interest or any other payment obligation under the Note for more
than ten (10) days after the due date, (b) Debtor shall default in the payment
or performance of any other term or condition hereunder, or under the Note or
Lease, and such default continues for more than ten (10) days after written
notice is given to Debtor, (c) any representation or warranty made herein by the
Debtor is false or misleading in any material respect at the time made, (d)
dissolution, termination of existence, insolvency, appointment of a receiver of
any part of the Property of, assignment for the benefit of creditors by, or the
commencement of any proceeding under any bankruptcy or insolvency laws by or
against Debtor, (e) loss, theft, or substantial damage to any of the Equipment,
or (f) a default by Lessee under the Lease.
8. RIGHT TO CURE. In the event of any default on the part of Lessee under the
Lease, Secured Party shall notify Debtor in writing of such default, and Debtor
may, within ten (10) days after receiving notice of such default, at Debtor's
option: (a) cure the default on behalf of the Lessee; or (b) assume and
immediately perform the obligations of the Lessee under the Lease to Secured
Party. In the event Debtor does not exercise either such option, Debtor will, at
the request of Secured Party, (i) cooperate with Secured Party in exercising
Secured Party's rights under the Lease, (ii) if Secured Party takes possession
of any Equipment, properly store such Equipment on Secured Party's behalf, and
(iii) assist in Secured Party's search for a satisfactory purchaser or lessee of
such Equipment.
9. REMEDIES OF SECURED PARTY. Upon the breach of any warranty made by Debtor
hereunder or upon the occurrence of an event of default hereunder which has not
been timely cured as provided in Section 7 of this Security Agreement, Secured
Party may, without notice or demand declare all liabilities secured hereby
immediately due and payable, and Secured Party shall have the rights and
remedies of a Secured Party under the Uniform Commercial Code and all other
remedies to which Secured Party is entitled by law or equity. Subject to the
then existing rights of Lessee, if any, under the Lease, Secured Party or its
representative may enter upon the premises where the Equipment may be and remove
same or maintain possession on such premises pending disposition thereof, all
without charge to or liability on the part of Secured Party, or, upon request of
Secured Party, Debtor agrees, at its expense to assemble the Equipment and to
deliver same to Secured Party at a place designated by Secured Party. Debtor's
obligation to assemble and deliver the Equipment is of the essence of this
Security Agreement and accordingly, upon application to a court of equity having
jurisdiction, Secured Party shall be entitled to a decree requiring specific
performance by Debtor of said obligation. DEBTOR HEREBY EXPRESSLY WAIVES ITS
RIGHTS, IF ANY, TO PRIOR NOTICE OF REPOSSESSION AND TO A JUDICIAL OR
ADMINISTRATIVE HEARING PRIOR TO REPOSSESSION. The proceeds of any sale or other
disposition of Equipment, less the expenses of retaking, holding, preparing for
disposition, disposing of Equipment and the like (including reasonable
attorneys' fees, collection agency fees and other legal expenses incurred by
Secured Party), shall be credited to the Indebtedness secured hereby, in such
order of preference as Secured Party may determine. Except as provided in
Section 9 below, the deficiency, if any, shall be paid by Debtor to Secured
Party forthwith, upon demand, with interest thereon at the rate of one and
one-half percent (1.5%) per month, but not exceeding the lawful maximum, if any.
Secured Party agrees to pay forthwith to Debtor any surplus remaining from the
Equipment after payment of all Indebtedness. Secured Party will give Debtor
reasonable notice of the time and place of any public sale thereof or of the
time after which any private sale or other intended disposition thereof is to be
made. The requirements of reasonable notice shall be met if such notice is
mailed, postage prepaid, to the address of Debtor shown at the beginning of this
Security Agreement at least five (5) days before the time of the sale or other
disposition.
10. RECOURSE TO DEBTOR. Notwithstanding any of the foregoing, Secured Party
acknowledges that except as provided in this Section, the Indebtedness is to be
repaid solely from the payments to be made by the Lessee under the Lease.
Provided that no breach of Debtor's representations, warranties and/or covenants
shall have occurred under Sections 3, 4 and 5 hereof, Secured Party shall have
no recourse against Debtor for any default in the payment of the Indebtedness or
any default by the Lessee under the Lease, and Secured Party's sole remedy in
the event of any such default shall be to exercise its rights and remedies under
the Lease and this Security Agreement.
11. PREPAYMENT. The Indebtedness may be prepaid upon the occurrence of: (a) a
casualty loss, in which event the voluntary prepayment shall be limited to that
portion of the Note proportionately equal to the portion of the Lease which is
terminated due to the casualty loss; or (b) a permitted early termination of the
Lease as negotiated between Debtor and the Lessee, in which event the voluntary
prepayment shall be limited to that portion of the Note proportionately equal to
the portion of the Lease which is terminated early. In addition, the Debtor may
voluntarily prepay the Note in full upon ten (10) days prior written notice to
Secured Party and upon payment to Secured Party of the sum of the unpaid
principal on the date of prepayment and all accrued but unpaid interest on the
Note to such date, together with a prepayment fee equal to the following
percentages of unpaid principal and accrued but unpaid interest on the Note:
Time of Prepayment Request Payment Fee (%)
- ---------------------------- --------------------------
Year 1 3%
Year 2 2%
Year 3 1%
After Year 3 1%
12. COLLECTION. Upon notice sent to Lessee by Debtor at Secured Party's
direction, Secured Party shall collect all Rental Payments to be made under the
Lease and shall apply such payments to the amount due and payable on the
Indebtedness. Provided that no default exists by Lessee or Debtor, Secured Party
agrees to pay to Debtor the portion of any Lease payment received by Secured
Party in excess of the rental payments set forth in the Lease. At such time as
the Indebtedness is paid in full, Debtor shall collect all further rental
payments made under the Lease.
13. REMITTANCES. If Debtor shall obtain possession of any item of Equipment (as
a result of its return, rejection or repossession), Debtor agrees to hold the
same subject to the security interest of Secured Party hereunder and to dispose
of such Equipment, at Debtor's expense, but for the account of Secured Party, in
such manner as Secured Party may direct.
14. NOTICES. All notices and demands required or permitted to be given or made
hereunder on any party shall be deemed duly given or made and received for
purposes of this Agreement when personally delivered or mailed, by registered
mail, return receipt requested, postage prepaid, to the party intended as the
recipient thereof at the address of such party set forth on the first page
hereof or at such other address as the intended recipient shall have provided
for such purpose in a notice given in accordance with the provisions of this
paragraph. If mailed, such notice shall be deemed delivered on the fifth
business day after mailing.
15. TERMINATION; NO WAIVER. This Agreement and the security interest of Secured
Party hereunder shall terminate when the Indebtedness has been paid in full, at
which time Secured Party shall reassign and deliver to Debtor, Secured Party's
interest in the Lease, the excess proceeds, if any, the Equipment and Related
Documents in which the Secured Party shall have any interest hereunder or which
shall then be held by Secured Party or in its possession and, if requested by
Debtor, Secured Party shall execute and file in each office in which any
financing statement relative to the Collateral, or any part thereof, shall have
been filed, a termination statement under the Uniform Commercial Code releasing
Secured Party's interest therein, all without recourse to or warranty by Secured
Party and at the cost and expense of Debtor.
16. NO WAIVER. Failure of the Secured Party to exercise any right or privilege
or the granting of any indulgence to Debtor or Lessee shall not be deemed to be
a waiver of such right or privilege. No waiver by Secured Party of any default
shall operate as a waiver of any other default or of the same default on a
future occasion. Debtor hereby irrevocably appoints Secured Party its true and
lawful attorney, with power of substitution, to endorse Debtor's name upon any
checks or other items of payment relating to the Lease or upon any documents
relating to the sale or other disposition of the Lease or Equipment and to do
all other things necessary in Secured Party's judgment to carry out the purposes
of this Security Agreement.
17. LATE CHARGE; BINDING CHARACTER; GOVERNING LAW. If any payment due from
Debtor to Secured Party is in default for more than ten (10) days, Debtor shall
pay to Secured Party a "late charge" of five percent (5.0%) per month (or the
maximum amount permitted by law, whichever is less) on the amount of said
payment in default. This Agreement shall be binding on and inure to the benefit
of Debtor and Secured Party, and their respective successors and assigns. None
of the terms or provisions hereof may be waived, altered, modified or amended,
except by an agreement in writing executed by Debtor and Secured Party. The
validity, interpretation, enforcement and effect of this Security Agreement
shall be governed by the laws of the State of Illinois.
18. HEADINGS. Section headings and titles used herein are for convenience only
and shall in no way be held to explain, modify, amplify or aid in the
interpretation of this Agreement.
19. JURISDICTION AND VENUE. DEBTOR DOES HEREBY SUBMIT, AT SECURED PARTY'S
ELECTION, TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY COURTS (FEDERAL, STATE
OR LOCAL) HAVING A SITUS WITHIN THE COUNTY OF COOK AND THE STATE OF ILLINOIS
WITH RESPECT TO ANY DISPUTE, CLAIM, OR SUIT WHETHER DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY RELATED NOTE OR ANY
OF DEBTOR'S OBLIGATIONS OR INDEBTEDNESS HEREUNDER. DEBTOR EXPRESSLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE BY CERTIFIED MAIL, POSTAGE
PREPAID, DIRECTED TO THE LAST KNOWN ADDRESS OF DEBTOR, WHICH SERVICE SHALL BE
DEEMED COMPLETED WITHIN TEN (10) DAYS AFTER THE DATE OF MAILING THEREOF. DEBTOR
HEREBY WAIVES ANY OBJECTION TO IMPROVER VENUE AND FORUM NON CONVENIENS.
20. WAIVER OF TRIAL BY JURY. DEBTOR AND SECURED PARTY HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS SECURITY AGREEMENT, THE RELATED NOTE OR ANY OF THE RELATED
DOCUMENTS. DEBTOR AND SECURED PARTY ALSO WAIVE ANY BOND OR SURETY OR SECURITY
UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SECURED PARTY.
THIS WAIVER IS INTENDED TO BE EFFECTIVE WITH RESPECT TO ALL DISPUTES WHICH ARISE
OUT OF ANY OF THE LOAN DOCUMENTS OR PERTAIN TO THE TRANSACTIONS CONTEMPLATED
THEREBY. DEBTOR AND SECURED PARTY EACH ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH ALREADY HAS
RELIED ON SUCH WAIVER IN ENTERING INTO THIS NOTE AND THE OTHER LOAN DOCUMENTS
AND THAT EACH WILL CONTINUE TO RELY ON SUCH WAIVER IN THEIR RELATED FUTURE
DEALINGS. DEBTOR AND SECURED PARTY FURTHER WARRANT AND REPRESENT THAT EACH
KNOWINGLY AND VOLUNTARILY HAS WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, AND MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND SUCH WAIVER SET FORTH HEREIN SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS SECURITY AGREEMENT, THE NOTE, OR THE OTHER LOAN DOCUMENTS. IN THE EVENT OF
LITIGATION, THIS SECURITY AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
21. COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original and all of which, taken together,
shall constitute but one and the same instrument.
In Witness Whereof, the parties hereto have caused this Agreement to be duly
executed and its corporate seal to be affixed hereto by its duly authorized
officers this _____ day of _________________, 19___.
VARILEASE CORPORATION
Debtor
Attest:
/s/ Gary F. Mller
/s/ Marjorie A. Biglin --------------------------------
- ------------------------------- Gary F. Miller
Marjorie A. Biglin Senior Vice President
Assistant Secretary
HELLER FINANCIAL, INC.
/s/ Robert Kelderhouse
--------------------------------
Vice President
<PAGE>
TERM NOTE (LIMITED RECOURSE)
$1,581,452.26 Princeton, NJ
March 27, 1998
FOR VALUE RECEIVED and intending to be legally bound, the undersigned,
Varilease Corporation ("Borrower"), a Michigan corporation, with a place of
business at 28525 Orchard Lake Road, Farmington Hills, MI 48334, promises to
pay, in lawful money of the United States, to the order of Interpool, Inc. and
its assigns ("Lender"), at Lender's offices at 211 College Road East, Princeton,
NJ 08540, the sum of One Million Five Hundred Eighty-One Thousand Four Hundred
Fifty-Two and 26/100 ($1,581,452.26) Dollars in thirty-six (36) equal
consecutive monthly installments of principal and interest of $50,327.00 each
commencing on April 1, 1998 and on the first day of each month thereafter with a
final payment of the entire outstanding principal balance of the Loan and all
accrued but unpaid interest, fees, costs and expenses due on March 1, 2001. The
actual amount due and owing from time to time hereunder shall be evidenced by
Lender's records of disbursements and receipts with respect to the Loan which
shall be presumptive conclusive evidence of such amount.
Interest shall accrue on the unpaid principal amount outstanding
hereunder from time to time at the per annum rate equal to nine and one-half
percent (9.50%) ("Contract Rate"). Interest shall be calculated on a basis of a
year of 360 days but computed for the actual number of days elapsed. After the
occurrence of an Event of Default (as defined in the Loan Agreement) such rate
shall be increased to a per annum rate equal to three percent (3%) in excess of
the Contract Rate. In no event shall the amount of interest paid or agreed to be
paid to Lender hereunder exceed the highest lawful rate permissible under any
law which a court of competent jurisdiction may deem applicable hereto. In such
event, the interest rate shall automatically be reduced to the maximum rate
permitted by such law and Lender shall apply any such excess to principal, in
the inverse order of maturity.
This Term Note is the Note referred to in the Limited Recourse Loan and
Security Agreement between Borrower and Lender dated of even date herewith
("Loan Agreement"). This Term Note ("Note") shall evidence Borrower's obligation
to repay all sums advanced by Lender pursuant to this Note, provided however
that Borrower's obligations under this Note are with limited recourse as more
fully set forth below and in the Loan Agreement. If Borrower fails to make any
payment required hereunder or if an Event of Default occurs under the Loan
Agreement, Lender may declare Borrower in default hereunder and declare the
unpaid principal balance of this Note to be immediately due and payable. Lender
shall thereupon have the option at any time and from time to time to exercise
all rights and remedies set forth herein, and in the Loan Agreement, as well as
all rights and remedies otherwise available to Lender at law or in equity, to
collect the unpaid indebtedness hereunder and thereunder. This Note is secured
by the Collateral described in the Loan Agreement. This Note may be prepaid only
in accordance with the terms and conditions of the Loan Agreement.
Borrower hereby waives protest, demand, notice of nonpayment and all
other notices in connection with the delivery, acceptance, performance or
enforcement of this Note. Any failure or delay of Lender to exercise any right
hereunder shall not be construed as a waiver of the right to exercise the same
or any other right at any other time or times. The waiver by Lender of a breach
or default of any provision of this Note shall not operate or be construed as a
waiver of any subsequent breach or default thereof. Subject to the terms of the
Loan Agreement, Borrower agrees to reimburse Lender for all expenses, including,
without limitation, attorneys' fees, incurred by Lender to enforce the
provisions of this Note, to protect, preserve and defend Lender's rights under
the Loan Agreement, and collect Borrower's obligations hereunder as described in
the Loan Agreement.
Notwithstanding the entry of any judgment under this Note, the unpaid
principal balance under this Note shall continue to bear interest at the
applicable rate set forth above.
This Note shall be construed and governed by the laws of the State of
New Jersey, without regard to its otherwise applicable principles of conflict of
laws. The provisions of this Note are severable and the invalidity or
unenforceability of any provision shall not alter or impair the remaining
provisions of this Note. All capitalized terms not otherwise defined herein
shall have the respective meanings as set forth in the Loan Agreement.
BORROWER AND LENDER AS INDEPENDENT COVENANTS IRREVOCABLY WAIVE JURY
TRIAL AND THE RIGHT THERETO IN ANY AND ALL DISPUTES BETWEEN BORROWER AND LENDER
WHETHER HEREUNDER OR UNDER ANY OTHER AGREEMENTS, NOTES, PAPERS, INSTRUMENTS OR
DOCUMENTS HERETOFORE, NOW OR HEREAFTER EXECUTED.
Lender, and any subsequent holder of this Note, by acceptance of the
Note agrees that except as provided in the Loan Agreement, Borrower shall have
no personal liability or obligation with respect to payment of principal,
interest and other amounts payable under this Note and such amounts are payable
from the proceeds received by Lender (or the Lender's successors or assigns)
from Lender's right, title and interest in and to the Collateral.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower
has executed these presents the day and year first above written.
VARILEASE CORPORATION
By: /s/ Marjorie Biglin Attest: /s/ Jennifer Charles-Rentz
--------------------- ----------------------------
Name: Assistant Secretary
Title:Assistant Secretary
<PAGE>
LIMITED RECOURSE
LOAN AND SECURITY AGREEMENT
AGREEMENT made this 27th day of March, 1998, by and among Varilease
Corporation ("Borrower"), a Michigan corporation and Interpool, Inc. ("Lender"),
a Delaware corporation.
B A C K G R O U N D
A. Borrower is in the business of leasing personal property to third
party lessees. Borrower desires to borrow funds on a limited recourse basis from
Lender and Lender is willing to lend such funds to Borrower under the terms and
provisions set forth below.
B. The parties desire to define the terms and conditions of the Loan as
defined in Section 2.2 and to reduce their agreements to writing.
NOW, THEREFORE, with the foregoing Background incorporated herein by
reference and intending to be legally bound, the parties hereto agree as
follows:
SECTION 1. Definitions
1.1 "Books and Records" means all of Borrower's original ledger cards,
payment schedules, credit applications, contract rights, liens, security
instruments, guarantees and other General Intangibles relating in any way to the
Lease(s) or Leased Property.
1.2 "Collateral" means the Lease(s), Leased Property and all now or
hereafter existing Books and Records and all cash and noncash proceeds, thereof,
including insurance proceeds.
1.3 "Contract Rate" shall have the meaning set forth in Section 2.3.
1.4 "Defaulted Lease" means any Lease where (i) the Lessee is in
default under the terms of such Lease, (ii) the Lease or Leased Property is
subject to any tax lien or security interest, lien or encumbrance other than
Lender's, except as otherwise consented to by Lender in writing, or (iii) the
Lessee has prepaid any amounts and such prepayment has not been delivered to
Lender within ten days of receipt by Borrower, or (iv) the Leased Property is
destroyed.
1.5 "Equipment" shall have the meaning ascribed thereto in the New
Jersey Uniform Commercial Code.
1.6 "GAAP" means generally accepted accounting principles and practices
at the time for companies engaged in similar businesses, consistently applied.
1.7 "General Intangibles" shall have the meaning ascribed thereto in
the New Jersey Uniform Commercial Code and shall include, but not be limited to,
all contract rights (including without limitation rights under remarketing
agreements), chattel paper, documents, instruments, books, records, ledgers,
journals, check books, print outs, designs, computer programs, computer tapes,
customer lists, causes of action, claims, goodwill, designs and plans, licenses,
license agreements, tax and all other types of refunds, returned and unearned
insurance premiums, rights and claims under insurance policies, patents, patent
application, trademarks, trade names, trade styles, trademark applications and
copyrights.
1.8 "Inventory" shall have the meaning ascribed thereto in the New
Jersey Uniform Commercial Code.
1.9 "Lease" means all of Borrower's Accounts, Documents, General
Intangibles, Instruments and Chattel Paper arising in connection with each and
every equipment lease and/or schedule to a master lease agreement identified on
Schedule "A" attached hereto and made a part hereof. The term "Lease" includes
(i) all payments to be made thereunder, (ii) all rights of Borrower therein, and
(iii) any and all amendments, renewals, extensions or guarantees thereof.
1.10 "Leased Property" means any property leased or to be leased by
Borrower to a Lessee pursuant to a Lease; the term "Leased Property" includes
all of Borrower's Inventory or Equipment so leased and any and all additions,
improvements, accessions, attachments, upgrades (except to the extent such
upgrades are severable without diminishing the value of the underlying Leased
Property), replacements and substitutions thereto and therefor.
1.11 "Lessee" means the lessee(s) or obligor(s) responsible for payment
and/or performance under a Lease.
1.12 "Liability" or "Liabilities" means all existing and future
recourse liabilities of Borrower to Lender, including without limitation, the
obligations of Borrower under Sections 2.5, and 12.4 of this Agreement and all
other recourse liabilities and obligations of every kind or nature whatsoever of
Borrower to Lender, whether now existing or hereafter incurred, joint or
several, matured or unmatured, direct or indirect, primary or secondary, related
or unrelated or due or to become due, including but not limited to, any
extensions, modifications, substitutions, increases and renewals thereof, and
substitutions therefor.
1.13 "New Jersey Uniform Commercial Code" shall mean the Uniform
Commercial Code as enacted in New Jersey as the same shall be amended from time
to time.
1.14 "Note" means all notes evidencing the Loan made by Lender to
Borrower hereunder, as may be amended, modified, replaced or restated from time
to time.
1.15 All other capitalized terms used but not defined herein shall have
the meanings ascribed thereto in the New Jersey Uniform Commercial Code unless
the text clearly indicates otherwise.
SECTION 2. The Loans
2.1 Preconditions to Loan. All of the following events must occur prior
to Lender making the Loan hereunder:
(a) The Board of Directors and, if stockholder
approval is deemed necessary, the stockholders of Borrower shall have adopted
appropriate general or specific resolutions authorizing the execution and
delivery of this Agreement and the taking of all action called for herein;
(b) Counsel for Borrower shall have furnished general
or specific opinions satisfactory to Lender that
include without limitation that the corporate action of Borrower referred to in
Section 2.1(a) is satisfactory to such counsel and that this Agreement has been
duly authorized, executed and delivered by the Borrower, and it constitutes, and
the Loan to Borrower hereunder will constitute, legal, valid and binding
obligations of Borrower in accordance with the terms of this Agreement;
(c) There must not exist an Event of Default or event
which with the lapse of time or notice or both would become an Event of Default
under Section 7;
(d) There has been no material adverse change in the
business, operations or condition (financial or otherwise) of Borrower since the
date of the most recent financial statement of Borrower delivered to the Lender;
(e) Borrower has delivered or caused to be delivered
such other documents, instruments and agreements reasonably required by Lender
or required by the terms of this Agreement; and
(f) Borrower shall have delivered the following to
Lender:
(i) A written statement setting forth the
Lessee and a description of the Lease and the Leased Property;
(ii) A fully executed counterpart of this
Agreement;
(iii) A Note executed by Borrower in form
and substance satisfactory to Lender;
(iv) Invoices showing the true cost of the
Leased Property net of any servicing or maintenance charges, brokers' fees or
similar type of "soft costs";
(v) Uniform Commercial Code financing
statements listing Lender as secured party and Borrower
as debtor, to be filed in all locations satisfactory to Lender;
(vi) Each original counterpart of each
Lease, together with, if Borrower is not the original lessor, an original
counterpart of an assignment of the Lease to Borrower by the original and
intermediary lessors thereof;
(vii) The original Certificate of Acceptance
evidencing that the Lessee has received and accepted the Leased Property;
(viii) The Notice and Acknowledgement of
Assignment of Lease executed and delivered by Lessee agreeing to pay Lender
directly;
(ix) All guaranties, agreements, sureties,
insurance policies, subordination agreements and opinions of counsel arising
pursuant to or in connection with, the Collateral;
(x) Such additional UCC financing statements
as Lender may request in number, form and substance satisfactory to Lender
necessary to perfect Lender's security interest in the Lease and Leased Property
including without limitation UCC-1 financing statements filed by Borrower, as
secured party, against Lessee, as Debtor, and assigned to Lender;
(xi) Such UCCs, federal tax lien, and
judgment searches as Lender requests showing that the Collateral is free and
clear of all liens, claims and encumbrances other than those granted to Lender
hereunder;
(xii) Such other agreements, instruments and
documents and information (financial or otherwise) concerning Borrower or Lessee
as Lender may reasonably request; and
(xiii) Evidence that Leased Property is
insured against all risks in form and amount, with an insurer satisfactory to
Lender, against fire (with extended coverage), liability and such other hazards
as are customary with companies in the same or similar business as the Lessee
and cause Lender's security interest as indicated in Section 3.1, to be endorsed
on all policies of insurance as lender loss payee, so that: (i) all payments for
losses will be paid solely to Lender; (ii) the policy shall cover and insure
Lender's interest in the Collateral notwithstanding any act or neglect of
Borrower or Lessee, and (iii) the Borrower shall furnish Lender upon request
with evidence of such insurance together with a certificate thereof requiring
not less than thirty (30) days written notice to Lender prior to cancellation or
termination.
2.2 Limited Recourse Loan. Upon the occurrence of all events set forth
in Section 2.1 above, and simultaneously with the execution hereof (the
"Closing") and of all instruments or documents necessary or in the opinion of
Lender proper to effectuate the intention of the parties hereto, the Lender
shall lend to Borrower the sum of $1,581,452.26 for the purpose of financing
Leases or Leased Property on a limited recourse basis ("Loan").
2.3 Interest. Interest on the outstanding principal balance of the Loan
will be paid monthly (with such payments coinciding with the lease payments on
the Collateral) at the per annum rate equal to nine and 50/100 percent (9.50%)
("Contract Rate"). Upon the occurrence of an Event of Default hereunder,
interest shall accrue on the outstanding principal balance of the Loan at a per
annum rate of three percent (3%) in excess of the Contract Rate except, however,
where any amount due by Lessee under the Lease is more than five (5) days past
due, interest on such amount shall accrue at the interest rate set forth in the
Lease. Interest shall be charged on a 360 day year counting the actual days
elapsed. Interest at the applicable rate shall be paid and continue to be paid
even after default, maturity, acceleration, recovery of judgment, Bankruptcy,
insolvency proceedings of any kind or the happening of any event or occurrence
similar or dissimilar. In no event shall any interest accrued pursuant to the
second sentence of this paragraph be a recourse liability of Borrower unless the
same accrued as a result of an Event of Default which gives rise to a Liability.
2.4 Invoices. Each month, Lessor under the Lease shall render to
Lessee, an invoice for the Lease payments due and owing. Lessee shall be
instructed to, and shall agree to, make all payments under the Lease directly to
Lender to be applied against the Loan balance.
2.5 Reimbursement of Expenses. It is anticipated that Borrower and
Lender will enter into a series of loan transactions on the date hereof
("Transactions") and in conjunction therewith Borrower shall pay Lender the
aggregate sum of $7,500 for all out of pocket expenses of any kind incurred by
Lender in connection with the Transactions, including reasonable attorneys fees,
UCC searches, the cost of filing financing statements, continuation, amendment
and termination statements, search fees and any other fees incurred solely in
connection with the negotiation, drafting and closing of the Transactions and
perfection of its security interest in the Collateral.
2.6 Use of Proceeds. The proceeds of the Loan shall be used solely to
finance or refinance Borrower's purchase of the Lease(s) or Leased Property.
2.7 Limited Recourse. Subject to the Lender's rights and Borrower's
recourse liability under Sections 2.5 and 12.4 or as otherwise agreed to between
Borrower and Lender from time to time, Lender's recourse against Borrower under
the Note shall be limited to the Collateral.
SECTION 3. Collateral
3.1 Security Interest. As security for repayment of the Loan and all
Liabilities of Borrower to Lender arising hereunder or under the Note, Borrower
grants to Lender a first priority security interest in, and assigns to Lender
the Collateral.
3.2 Financing Statements. Borrower will, from time to time, join with
Lender in executing financing statements, assignments and continuation
statements, under the Uniform Commercial Code covering the Collateral and any
portion thereof and such other instruments and documents as may be necessary to
perfect Lender's security interest in the Collateral or otherwise effectuate the
purposes of this Agreement. Borrower irrevocably grants to Lender a power of
attorney to execute for Borrower all such financing statements, and any
amendments thereto. Further, Borrower irrevocably authorizes the filing of a
carbon, photographic or other reproduction of this Agreement or of a financing
statement as a financing statement and agrees that such filing is sufficient as
a financing statement.
3.3 Sole Original Leases. Borrower shall deliver the sole original of
Counterpart 1 of each Lease Schedule to the Lender and all other existing copies
of such Leases shall be marked "copy" or "this lease has been assigned to
Interpool, Inc. as security for the obligations pursuant to that Limited
Recourse Loan and Security Agreement dated March 27, 1998." For purposes of this
paragraph the term "sole original of Counterpart 1 of each Lease Schedule" shall
not include a master lease agreement where a schedule to a master lease
agreement is assigned to the Lender and such schedule incorporates the terms of
such master lease agreement by reference and the schedule is a separate lease
for "chattel paper" purposes under the Uniform Commercial Code and possession of
such schedule constitutes possession of "chattel paper" under the Uniform
Commercial Code.
SECTION 4. Representations and Warranties
The Borrower represents and warrants to the Lender, which
representations and warranties shall survive the execution hereof and all action
hereunder as follows:
4.1 Borrower is a corporation duly organized, validly existing, and in
good standing under the laws of the State of its incorporation and has the power
to carry on its business as now constituted, is qualified as a foreign
corporation and is in good standing in other jurisdictions where the nature of
its business makes such qualification necessary.
4.2 The execution and delivery by Borrower of this Agreement and the
performance by it of the transactions herein contemplated are and will be within
its corporate powers, have been and will be duly authorized, and are not and
will not be in contravention of any order of court or other agency of
government, of law or the terms of its Articles of Incorporation, By-Laws, or of
any indenture, agreement or undertaking to which it is a party or by which it or
its property is bound, or be in conflict with, result in a breach of or
constitute (with due notice and/or lapse of time) a default under any such
indenture, agreement or undertaking, or result in the imposition of any lien,
charge or encumbrance of any nature on any of Borrower's properties.
4.3 This Agreement, the Note, all Leases and any assignment or other
document when delivered, will be the valid, legal and binding obligations of
Borrower, enforceable in accordance with their respective terms.
4.4 There are no suits in law or equity or proceedings before any
governmental instrumentality or agency against Borrower, now pending or to the
knowledge of Borrower's officers is there threatened or likely any litigation or
any proceedings against or affecting Borrower, the outcome of which might
materially and adversely affect the Collateral.
4.5 All Collateral is free and clear of all liens, claims, encumbrances
and security interests, except those granted to Lender hereunder.
4.6 All taxes, federal, state and local, due by Borrower have been paid
or accrued to date.
4.7 Borrower's tax identification number is as follows: 38-237-9524.
4.8 All operations of the Borrower have been carried on in accordance
with all applicable laws, statutes, ordinances, rules and regulations. No
investigation by any governmental authority, federal, state or local, is pending
or threatened against Borrower.
4.9 All places of business of Borrower are listed on Exhibit "4.9"
attached hereto and made a part hereof.
4.10 Within five (5) years prior to the Closing, Borrower has not
conducted business under or used any other name (whether corporate or assumed).
4.11 The following representations and warranties are made with respect
to each Lease and/or items of Leased Property and shall be true and correct at
the time each such Lease is assigned to Lender:
(a) Each Lease is genuine, based on contracts that
are enforceable in accordance with its terms against the Lessee and the Leased
Property named and referenced therein, constitutes the entire agreement for the
leasing of the Leased Property thereby covered, has not been altered or amended,
except as set forth in the related schedules, and Borrower's Books and Records
relating thereto are accurate, complete and genuine;
(b) The sole original of each Lease has been
delivered to Lender and any counterpart of any lease which has not been
delivered to the Lender bears the legend "Copy" or "This Lease has been assigned
to Interpool, Inc. as security for the obligations pursuant to that certain
Limited Recourse Loan and Security Agreement dated March 27 1998," or similar
language on the face thereof;
(c) Where the Lease consists of a Master Lease
Agreement and specific schedules which describe the terms of any specific items
to be leased pursuant to such schedule, delivery of the original schedule shall
constitute delivery of the original Lease, provided that the terms of the Master
Lease Agreement and the schedule make it clear that for purposes of "Chattel
Paper" under the Uniform Commercial Code, the sole original schedule delivered
to Lender is a separate lease and that possession of such schedule constitutes
possession of "Chattel Paper" under the Uniform Commercial Code;
(d) With respect to each Lease, unless Lender agrees
otherwise in writing, Borrower will file within ten (10) days of receipt by
Lessee of possession of Leased Property, such UCC financing statements (listing
Borrower as Secured Party, the Lessee as Debtor, Lender as Assignee and such
Leased Property as Collateral) in such locations as would be required by
applicable law (if Borrower were a Secured Party and Lessee were a Debtor) in
order to perfect a security interest in such Leased Property under the UCC in
favor of Lender as Borrower's Assignee;
(e) The original amount and unpaid balance of each
Lease shown on Borrower's Books and Records and on any statement or schedule
delivered to Lender in connection therewith is the true and correct amount
actually owed to Lender, no portion of which, except as specifically provided
for in the Lease, has been prepaid;
(f) The amounts due under the Leases are not and will
not be subject to any claim or reduction, counterclaim, setoff, recoupment, or
any other claim, allowance or adjustment and no Lease has been re-negotiated,
restructured or compromised except as renewed in the ordinary course of
business;
(g) All security agreements, title retention
instruments and other documents and instruments which are security for any
Lease, and/or each Lease, contained a correct and sufficient description of the
Leased Property covered thereby and all security interests granted therein to
Borrower (either directly or as assignee) have been properly perfected and
assigned to Lender;
(h) Borrower has not and will not enter into any
agreement with a Lessee of any Leased Property which
provides, directly or indirectly, for the crediting of any obligation or
liability of Borrower to such Lessee against future rentals accruing under the
Lease;
(i) Each item of Leased Property is in good
condition, ordinary wear and tear excepted, has not been lost, stolen, destroyed
or damaged;
(j) Each item of Leased Property has been delivered
to and, in all instances, unconditionally accepted by the Lessee and has not
been removed from service or the place of installation indicated in the Lease;
(k) Each Lease has been duly executed by the lessor
named therein and each Lessee, and is a valid, legal and binding obligation of
Borrower, and such Lessee, and is enforceable against Borrower and such Lessee
in accordance with its terms. Following the making of the Loan in accordance
with Borrower's instructions to Lender, Borrower, subject to the security
interest of Lender, will be the sole owner of the Collateral and has the
authority to assign all of its right, title and interest therein upon the terms
herein set forth;
(l) All costs, fees, and expenses incurred in making
and closing each of the Leases has been paid and each Lease is or will be
current at the time of the assignment thereof to Lender. No event exists which
with the giving of notice or the passage of time or both, will result in the
occurrence of a default of any obligation as expressed in any Lease;
(m) All rentals, fees, costs, expenses and charges
paid or payable by the Lessee under any Lease, including without limitation, any
brokerage and other fees paid to Borrower do not violate any laws relating to
the maximum fees, costs, expenses or charges that can be charged in any state in
which any Leased Property is located or in which the corresponding Lessee is
located, or in which a transaction was consummated, or in any other state which
may have jurisdiction with respect to any such Leased Property, Lease or Lessee;
(n) Lender has a first lien security interest in the
Collateral subject to no other security interest or other interest. Borrower has
taken all steps necessary to maintain Lender's first lien security interest in
the Collateral, including, if required, perfecting the Borrower's security
interest through filing financing statements, amendments thereto, or
assignments;
(o) Each item of Leased Property has been insured in
the ordinary course of Borrower's or the corresponding Lessee's business;
(p) Neither Borrower nor to the best of Borrower's
knowledge has any lessor or prior lender holding a security interest in any of
the Collateral received notice of a Bankruptcy, receivership, reorganization,
insolvency or financial embarrassment of any Lessee;
(q) No Lessee is a subsidiary, or affiliate of
Borrower, or under common control with Borrower or is an officer or employee of
Borrower;
(r) No Lease is a Defaulted Lease;
(s) No Lease constitutes a sublease of the
corresponding Leased Property.
SECTION 5. Affirmative Covenants
Borrower covenants with Lender as follows:
5.1 Borrower will take the necessary steps to preserve its rights to
conduct business in all jurisdictions in which the nature of its business shall
require qualifications to do business or where the failure to so qualify may
have a material adverse effect on the ability of Borrower or Lender to enforce
any Lease or realize on any Leased Property.
5.2 Borrower will notify Lender, in writing, not less than thirty (30)
days prior to any change in the location of the Chief Executive Office or if the
Collateral is moved to a location other than that specified in the corresponding
Lease.
5.3 Borrower will comply with and observe all laws, statutes,
ordinances, rules and regulations material to the operation of its business and
maintain all licenses and permits necessary for the operation of its business,
and Borrower will pay all taxes, assessments and governmental charges required
by law.
5.4 Borrower shall permit Lender, and any representative designated by
Lender, to visit and inspect any of Borrower's property, assets, Books and
Records, and finance and other records, including, without limitation, financial
statements and Leases, and to discuss Borrower's affairs, finances and accounts
as they relate to the Collateral with Borrower's agents, officers and employees
(including Borrower's independent accountants) at such reasonable times and as
often as Lender may reasonably request.
5.5 Unless Lender consents otherwise in writing, Borrower shall at all
times keep all Collateral free and clear of all liens, encumbrances and security
interests of every kind without limitation.
5.6 Borrower shall mark its Books and Records to indicate the Lender's
security interest in the Collateral, including the Lease(s) and, unless Lender
consents otherwise in writing, Borrower shall retain title at all times to the
Leased Property. However, where Lender consents in writing to an assignment of
any of Borrower's right, title and interest in the Lease and/or the Collateral,
(which consent shall not be unreasonably withheld) and provided Borrower
complies with the requirements of a Transferee Agreement (which Transferee
Agreement shall be the same in form and substance as that attached hereto as
Exhibit 5.6), Borrower may sell, assign or transfer its right, title and
interest, subject always to the prior rights of Lender, in the Lease and/or
Collateral.
5.7 Borrower shall join with Lender to notify all Lessee(s) of the
Lender's security interest in the Collateral and direct payment under the
Lease(s) to be made directly to Lender and Lender may, in its own name or in the
name of the Borrower collect, sue for and receive payment of any or all
Lease(s), and settle, compromise and adjust the same on any terms as may be
satisfactory to Lender, in its sole and absolute discretion for any reason or
without reason.
5.8 Borrower will immediately notify Lender of the institution or
threat of any litigation, administrative proceeding or investigation or any
other event or happening which might have a material adverse affect on the
Collateral or Borrower's or Lender's ability to enforce their respective rights
under the Lease(s).
5.9 Borrower shall, at Lender's request, within ninety (90) days after
the close of the fiscal year, furnish Lender with a complete financial audit
prepared by Borrower's independent certified public accounting firm acceptable
to Lender, including a balance sheet, income statement and statement of cash
flows prepared in accordance with GAAP.
SECTION 6. Negative Covenants
Borrower covenants with Lender that it will not:
6.1 Without the prior written consent of Lender, sell, assign or
transfer any portion of the Collateral. However, where Lender consents in
writing to an assignment of any of Borrower's right, title and interest in the
Lease and/or the Collateral, (which consent shall not be unreasonably withheld)
and provided Borrower complies with the requirements of a Transferee Agreement
(which Transferee Agreement shall be the same in form and substance as that
attached hereto as Exhibit 5.6), Borrower may sell, assign or transfer its
right, title and interest, subject always to the prior rights of Lender, in the
Lease and/or Collateral.
6.2 Without the prior written consent of Lender, liquidate, dissolve or
discontinue normal operations with the intention to liquidate, dissolve, sell,
lease, transfer or otherwise dispose of any substantial part of its assets.
Lender acknowledges that the Borrower anticipates a merger with other entities
that may occur during the term hereof, however, according to the terms thereof,
Varilease Corporation will be a wholly owned subsidiary and will continue to
operate in the same or like manner as prior to said merger.
6.3 Without the prior written consent of Lender, permit the removal,
other than in the ordinary course of business, of any Books and Records or
Leased Property from the place of business where presently located.
6.4 Without providing to Lender thirty (30) days prior written notice,
change its name or any trade style it uses, or adopt any new name or trade
style.
SECTION 7. Events of Default
The occurrence of any one or more of the following events with
respect to Borrower shall constitute an event of default ("Event of Default")
hereunder:
7.1 Termination of existence, business failure or the making of an
assignment for the benefit of creditors;
7.2 Non-payment of any sum or sums due to Lender or others hereunder or
otherwise when due or non-performance of any contractual obligation to Lender
including without limitation a breach of a Lease by the Lessee or Borrower that
results in a Lease becoming a Defaulted Lease;
7.3 Institution of Bankruptcy, arrangement, composition,
reorganization, liquidation or receivership proceedings, voluntary or
involuntary, or the appointment of a receiver, trustee, conservator,
sequestrator or other judicial representative, similar or dissimilar;
7.4 Any financial statements of Borrower, warranties or representations
herein, or in any other document or certificate heretofore or hereafter made by
Borrower are false, misleading, incomplete or incorrect in any material manner;
7.5 If Borrower has engaged in any activity which may reasonably result
in the forfeiture of any Collateral to any governmental entity, federal, state
or local; then, in any such event which is not cured within seven (7) days of
the earlier of receipt of notice from Lender of the Event of Default or Borrower
obtaining knowledge of the Event of Default, Lender, at its option may declare
the unpaid principal balance, accrued interest, and all other sums due to Lender
hereunder or otherwise immediately due and payable (except with respect to an
Event of Default arising under paragraph 7.1 or 7.3 above, in which case all of
Borrower's obligations and liabilities to Lender shall be automatically deemed
to be immediately due and payable).
SECTION 8. Remedies on Default
8.1 (a) Upon the occurrence of an Event of Default hereunder, Borrower
grants to Lender in addition to any rights, powers or remedies Lender may have
under any applicable law, all of which shall be cumulative, the right, subject
always to the rights of Lessees under the Leases, to do any or all of the
following (which list is given by way of example and is not intended to be an
exhaustive list of all rights and remedies):
(i) By its own means, with or without judicial
assistance, enter any of Borrower's premises or other locations where Collateral
is kept, and take possession of the Collateral, or render it unusable, or
dispose of the Collateral on such premises without any liability for rent,
storage, utilities or other sums, and Borrower shall not resist or interfere
with such action; and
(ii) Lender shall have all rights, remedies and
powers of Borrower under the Leases as lessor, including without limitation, the
right to collect and receive all rental, insurance proceeds and other payments,
payable pursuant to the Leases; amend or terminate any Lease; and take such
action upon default under any Lease, as any lessor may do, in Lender's or
Borrower's name, including without limitation repossession of any Leased
Property and commencement of suit, and to exercise any rights and remedies as
lessor under the Lease(s).
(b) Anything herein to the contrary notwithstanding,
the execution of this Agreement and the exercise by Lender of any of its rights
hereunder shall not (i) release Borrower from any of its duties or obligations
under the Leases, and (ii) shall not obligate Lender (x) to perform any of
Borrower's obligations or duties under the Leases, or (y) to take any action to
collect or enforce any claim for payment.
(c) Borrower hereby agrees that a notice received by
it at least ten (10) days before the time of any intended public sale or at the
time after which any private sale or other disposition of the Collateral is to
be made, shall be deemed to be commercially reasonable notice of such sale or
other disposition. If permitted by law, any Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrower.
8.2 Lender shall have the right to proceed against all or any portion
of the Collateral in any order and may apply such Collateral to the Liabilities
of Borrower to Lender in any order. All rights and remedies granted Lender
hereunder and under any agreement referred to herein, or otherwise available at
law or in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Lender may proceed with any number of remedies at the same time
until all existing and future Liabilities of Borrower to Lender, are satisfied
in full. The exercise of any one right or remedy shall not be deemed a waiver or
release of any other right or remedy, and upon the occurrence of an Event of
Default, Lender may proceed against Borrower and/or the Collateral, at any time,
under any agreement, with any available remedy and in any order.
8.3 Notwithstanding anything to the contrary contained in this Section
8 or Section 7 above, the occurrence of an Event of Default due solely to the
non-payment of sums owed to Lender resulting from a Lease becoming a Defaulted
Lease shall constitute an Event of Default hereunder only with respect to the
Loan and Lender's recourse to Borrower with respect to amounts due under such
Loan shall be limited to the Collateral.
SECTION 9. Termination
9.1 Lender shall have the right to retain, until final payment in full
of all Liabilities of the Borrower all of the Collateral and all of its rights
with respect thereto; provided, however, that so long as no Event of Default has
occurred, Lender shall release its lien on Collateral at the time the Loan is
repaid in full. All terms, conditions and provisions of this Agreement shall
remain in full force and effect until such time as all sums owed Lender
hereunder are paid in full.
SECTION 10. Waivers
Borrower waives presentment, demand, protest, notice of default,
non-payment, partial payments and all other notices and formalities relating to
this Agreement other than notices specifically required hereunder. Borrower
consents to and waives notice of the granting of indulgences or extensions of
time or payment, the taking or releasing of security, the addition or release of
persons primarily or secondarily liable on or with respect to the Liabilities.
No delay by the Lender in exercising any right, power or remedy hereunder and no
indulgence given to Borrower in case of any default shall impair any such right
or power or be construed as a waiver of any default by Lender or any
acquiescence therein or as a violation or waiver of any of the terms or
provisions of this Agreement.
SECTION 11. Notices
All notices and other communications hereunder shall be in writing or
confirmed in writing, and they shall be deemed to have been duly delivered or
given, if hand delivered, if telecopied, if sent by nationally recognized
overnight courier, or if mailed via certified mail, return receipt requested
when delivered, as follows:
(a) If to Borrower:
Varilease Corporation
28525 Orchard Lake Road
Farmington Hills, MI 48334
Attention: Gary F. Miller, Senior Vice President
Telecopy:(248) 488-0162
(b) If to Lender:
Interpool, Inc.
211 College Road East
Princeton, NJ 08540
Attention:Raoul J. Witteveen, President
Telecopy: (609)951-0362
and
Interpool, Inc.
211 College Road East
Princeton, NJ 08540
Attention: Richard W. Gross, Senior Vice
President
Telecopy: (609)951-0362
and
MicroTech Leasing Corporation
211 College Road East
Princeton, NJ 08540
Attention: Allen M. Olinger, President
Telecopy: (609) 987-1011
SECTION 12. Miscellaneous
12.1 Borrower agrees that Lender may sell or assign this Loan or grant
participation(s) in this Loan and may without liability furnish information with
respect to this Loan to any prospective purchaser, assignee or participant(s).
12.2 Borrower hereby irrevocably appoints Lender as Borrower's attorney
in fact with full authority in the place and stead of Borrower and in the name
of Borrower, Lender or otherwise in Lender's discretion, to take any action and
to execute any instrument, agreement or document which Lender may reasonably
deem necessary or advisable to accomplish the purposes of this Agreement.
Without limiting the generality of the foregoing, Lender may:
(a) obtain and adjust insurance that Borrower or
Lessee is required to maintain;
(b) ask, demand, collect, sue for, recover, compound,
receive or give acquittance and receipts for money due and to become due under
or in respect of any of the Collateral;
(c) receive, endorse and collect any drafts or other
instruments, documents or chattel paper, in connection with (a) or (b) above;
(d) after the occurrence of an Event of Default, file
any claim or take any action or institute any proceedings which Lender may deem
necessary or desirable for the collection of any of the Collateral or otherwise
to enforce the rights of Lender with respect to any of the Collateral; and
(e) after the occurrence of an Event of Default, with
respect to a Defaulted Lease, execute in Borrower's name, a bill of sale
relating to any Collateral, transferring title to such Collateral to a third
party purchaser.
12.3 If Borrower fails to perform any agreement contained herein,
Lender may (but is not obligated to) perform or cause performance of, such
agreement, at Borrower's expense payable on demand.
12.4 (a) Borrower shall pay, on demand, all of Lender's costs and
expenses (including but not limited to all legal fees and costs) (i) in
connection with the negotiation or preparation of any extensions, modifications,
amendments, waivers or consents to this Agreement, any note, or any other
instrument, agreement or document in connection herewith (but not including the
Lease(s) or corresponding equipment schedules and agreements), and (ii) in
connection with the enforcement of any right, remedy or power pursuant to this
Agreement, any note or any other instrument, agreement, or document in
connection herewith as such rights pertain to the Liabilities. In no event shall
Borrower be personally liable for any of said costs or fees relating to a
default by the Lessee under the Lease which does not also constitute or result
in a breach of any representation, warranty or covenant made by Borrower to or
in favor of Lender; and
(b) Borrower shall indemnify, defend (with counsel
satisfactory to Lender) and hold harmless Lender against and in respect of (i)
any loss, damage or deficiency related to any breach of warranty or
representation or non-fulfillment of any agreement by Borrower under this
Agreement or any related instrument, agreement, document, schedule, exhibit or
other legal obligations in connection herewith, and (ii) all actions, suits,
proceedings, demands, assessments, judgments, costs, legal fees and expenses
incident to any of the foregoing. Any amount reasonably required to be paid
pursuant to the foregoing shall be paid by Borrower to Lender on demand and may
at Lender's option be deducted from or set off against any existing or future
debt, liability or obligation of Lender to Borrower relating to this
transaction. In no event shall Borrower be personally liable for any of said
costs or fees relating to a default by the Lessee under the Lease which does not
also constitute or result in a breach of any representation, warranty or
covenant made by Borrower to or in favor of Lender.
12.5 This Agreement and all rights hereunder shall be governed by the
substantive law of the State of New Jersey. This Agreement shall bind Lender and
Borrower and shall inure to the benefit of Lender and the terms "Lender" and
"Borrower" as used in this Agreement shall include the respective parties and
their respective successors and assigns.
12.6 The terms of this Agreement shall be in addition to those of any
other evidence of liability held by the Lender, all of which shall be construed
as complementary to each other, except as herein otherwise expressly provided
and such other agreements, instruments and documents not modified or superseded
pursuant to the terms hereof remain in full force and effect.
12.7 This Agreement contains the entire agreement between the parties
hereto and may not be modified or changed in any way except in writing signed by
all parties.
12.8 Any express waiver by Lender of any power, right, remedy,
obligation or duty shall not under any circumstances be deemed to constitute a
waiver of Lender's powers, rights or remedies upon the later occurrence or
reoccurrence of any event, transaction or matter. No course of dealing between
Lender and Borrower shall operate as or be deemed to constitute a waiver of
Lender's rights hereunder or affect the duties or obligations of Borrower.
12.9 All powers, rights and remedies of Lender hereunder shall be
cumulative and not exclusive of other powers, rights or remedies granted or
available to Lender under any applicable law unless specifically stated
otherwise.
12.10 All warranties, covenants and representations, whether
affirmative or negative, shall survive the making of this Agreement and the loan
of monies hereunder and each shall be deemed to be continuing in force and
effect and substantial and material in nature.
12.11 Borrower irrevocably consents to the exclusive jurisdiction of
the State Courts of New Jersey or the United States District Court for the
District of New Jersey in any and all actions and proceedings whether arising
hereunder or under any other agreement or undertaking and irrevocably agrees to
service of process by certified mail, return receipt requested to the address of
Borrower set forth herein.
12.12 Borrower waives and shall not interpose any objection of forum
non conveniens or to venue and waives any right to remove any proceeding
commenced in a state court to a federal court.
12.13 BORROWER AND LENDER AS INDEPENDENT COVENANTS IRREVOCABLY WAIVE
JURY TRIAL AND THE RIGHT THERETO IN ANY AND ALL DISPUTES BETWEEN BORROWER AND
LENDER WHETHER HEREUNDER OR UNDER ANY OTHER AGREEMENTS, NOTES, PAPERS,
INSTRUMENTS OR DOCUMENTS HERETOFORE, NOW OR HEREAFTER EXECUTED.
12.14 Headings preceding the text of the several Sections hereof are
for the convenience of reference only and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
12.15 This Agreement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, and such
counterparts shall together constitute one and the same instrument.
12.16 All instruments, agreements and documents to be executed or
delivered by Borrower shall be in form and substance satisfactory to Lender in
its sole discretion.
12.17 Time is of the essence.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
LENDER: Interpool, Inc.
ATTEST:/s/ Kathleen Francis BY:/s/ Richard W. Gross
---------------------------- ----------------------------
Kathleen Francis Name:Richard W. Gross
Title:Senior Vice President
BORROWER: VARILEASE CORPORATION
ATTEST: /s/ Jennifer Charles-Rentz BY: /s/ Marjorie Biglin
-------------------------- ------------------------------
Name: Marjorie Biglin
Title: Assistant Secretary
<PAGE>
SCHEDULE "A"
LEASES
<PAGE>
TERM NOTE (LIMITED RECOURSE)
$1,581,452.26 Princeton, NJ
March 27, 1998
FOR VALUE RECEIVED and intending to be legally bound, the undersigned,
Varilease Corporation ("Borrower"), a Michigan corporation, with a place of
business at 28525 Orchard Lake Road, Farmington Hills, MI 48334, promises to
pay, in lawful money of the United States, to the order of Interpool, Inc. and
its assigns ("Lender"), at Lender's offices at 211 College Road East, Princeton,
NJ 08540, the sum of One Million Five Hundred Eighty-One Thousand Four Hundred
Fifty-Two and 26/100 ($1,581,452.26) Dollars in thirty-six (36) equal
consecutive monthly installments of principal and interest of $50,327.00 each
commencing on April 1, 1998 and on the first day of each month thereafter with a
final payment of the entire outstanding principal balance of the Loan and all
accrued but unpaid interest, fees, costs and expenses due on March 1, 2001. The
actual amount due and owing from time to time hereunder shall be evidenced by
Lender's records of disbursements and receipts with respect to the Loan which
shall be presumptive conclusive evidence of such amount.
Interest shall accrue on the unpaid principal amount outstanding
hereunder from time to time at the per annum rate equal to nine and one-half
percent (9.50%) ("Contract Rate"). Interest shall be calculated on a basis of a
year of 360 days but computed for the actual number of days elapsed. After the
occurrence of an Event of Default (as defined in the Loan Agreement) such rate
shall be increased to a per annum rate equal to three percent (3%) in excess of
the Contract Rate. In no event shall the amount of interest paid or agreed to be
paid to Lender hereunder exceed the highest lawful rate permissible under any
law which a court of competent jurisdiction may deem applicable hereto. In such
event, the interest rate shall automatically be reduced to the maximum rate
permitted by such law and Lender shall apply any such excess to principal, in
the inverse order of maturity.
This Term Note is the Note referred to in the Limited Recourse Loan and
Security Agreement between Borrower and Lender dated of even date herewith
("Loan Agreement"). This Term Note ("Note") shall evidence Borrower's obligation
to repay all sums advanced by Lender pursuant to this Note, provided however
that Borrower's obligations under this Note are with limited recourse as more
fully set forth below and in the Loan Agreement. If Borrower fails to make any
payment required hereunder or if an Event of Default occurs under the Loan
Agreement, Lender may declare Borrower in default hereunder and declare the
unpaid principal balance of this Note to be immediately due and payable. Lender
shall thereupon have the option at any time and from time to time to exercise
all rights and remedies set forth herein, and in the Loan Agreement, as well as
all rights and remedies otherwise available to Lender at law or in equity, to
collect the unpaid indebtedness hereunder and thereunder. This Note is secured
by the Collateral described in the Loan Agreement. This Note may be prepaid only
in accordance with the terms and conditions of the Loan Agreement.
Borrower hereby waives protest, demand, notice of nonpayment and all
other notices in connection with the delivery, acceptance, performance or
enforcement of this Note. Any failure or delay of Lender to exercise any right
hereunder shall not be construed as a waiver of the right to exercise the same
or any other right at any other time or times. The waiver by Lender of a breach
or default of any provision of this Note shall not operate or be construed as a
waiver of any subsequent breach or default thereof. Subject to the terms of the
Loan Agreement, Borrower agrees to reimburse Lender for all expenses, including,
without limitation, attorneys' fees, incurred by Lender to enforce the
provisions of this Note, to protect, preserve and defend Lender's rights under
the Loan Agreement, and collect Borrower's obligations hereunder as described in
the Loan Agreement.
Notwithstanding the entry of any judgment under this Note, the unpaid
principal balance under this Note shall continue to bear interest at the
applicable rate set forth above.
This Note shall be construed and governed by the laws of the State of
New Jersey, without regard to its otherwise applicable principles of conflict of
laws. The provisions of this Note are severable and the invalidity or
unenforceability of any provision shall not alter or impair the remaining
provisions of this Note. All capitalized terms not otherwise defined herein
shall have the respective meanings as set forth in the Loan Agreement.
BORROWER AND LENDER AS INDEPENDENT COVENANTS IRREVOCABLY WAIVE JURY
TRIAL AND THE RIGHT THERETO IN ANY AND ALL DISPUTES BETWEEN BORROWER AND LENDER
WHETHER HEREUNDER OR UNDER ANY OTHER AGREEMENTS, NOTES, PAPERS, INSTRUMENTS OR
DOCUMENTS HERETOFORE, NOW OR HEREAFTER EXECUTED.
Lender, and any subsequent holder of this Note, by acceptance of the
Note agrees that except as provided in the Loan Agreement, Borrower shall have
no personal liability or obligation with respect to payment of principal,
interest and other amounts payable under this Note and such amounts are payable
from the proceeds received by Lender (or the Lender's successors or assigns)
from Lender's right, title and interest in and to the Collateral.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower
has executed these presents the day and year first above written.
VARILEASE CORPORATION
By: /s/ Marjorie Biglin Attest: /s/ Jennifer Charles-Rentz
--------------------------- ------------------------------
Name: Marjorie Biglin
Title: Assistant Secretary
<PAGE>
LIMITED RECOURSE
LOAN AND SECURITY AGREEMENT
AGREEMENT made this 27th day of March, 1998, by and among Varilease
Corporation ("Borrower"), a Michigan corporation and Interpool, Inc. ("Lender"),
a Delaware corporation.
B A C K G R O U N D
A. Borrower is in the business of leasing personal property to third
party lessees. Borrower desires to borrow funds on a limited recourse basis from
Lender and Lender is willing to lend such funds to Borrower under the terms and
provisions set forth below.
B. The parties desire to define the terms and conditions of the Loan as
defined in Section 2.2 and to reduce their agreements to writing.
NOW, THEREFORE, with the foregoing Background incorporated herein by
reference and intending to be legally bound, the parties hereto agree as
follows:
SECTION 1. Definitions
1.1 "Books and Records" means all of Borrower's original ledger cards,
payment schedules, credit applications, contract rights, liens, security
instruments, guarantees and other General Intangibles relating in any way to the
Lease(s) or Leased Property.
1.2 "Collateral" means the Lease(s), Leased Property and all now or
hereafter existing Books and Records and all cash and noncash proceeds, thereof,
including insurance proceeds.
1.3 "Contract Rate" shall have the meaning set forth in Section 2.3.
1.4 "Defaulted Lease" means any Lease where (i) the Lessee is in
default under the terms of such Lease, (ii) the Lease or Leased Property is
subject to any tax lien or security interest, lien or encumbrance other than
Lender's, except as otherwise consented to by Lender in writing, or (iii) the
Lessee has prepaid any amounts and such prepayment has not been delivered to
Lender within ten days of receipt by Borrower, or (iv) the Leased Property is
destroyed.
1.5 "Equipment" shall have the meaning ascribed thereto in the New
Jersey Uniform Commercial Code.
1.6 "GAAP" means generally accepted accounting principles and practices
at the time for companies engaged in similar businesses, consistently applied.
1.7 "General Intangibles" shall have the meaning ascribed thereto in
the New Jersey Uniform Commercial Code and shall include, but not be limited to,
all contract rights (including without limitation rights under remarketing
agreements), chattel paper, documents, instruments, books, records, ledgers,
journals, check books, print outs, designs, computer programs, computer tapes,
customer lists, causes of action, claims, goodwill, designs and plans, licenses,
license agreements, tax and all other types of refunds, returned and unearned
insurance premiums, rights and claims under insurance policies, patents, patent
application, trademarks, trade names, trade styles, trademark applications and
copyrights.
1.8 "Inventory" shall have the meaning ascribed thereto in the New
Jersey Uniform Commercial Code.
1.9 "Lease" means all of Borrower's Accounts, Documents, General
Intangibles, Instruments and Chattel Paper arising in connection with each and
every equipment lease and/or schedule to a master lease agreement identified on
Schedule "A" attached hereto and made a part hereof. The term "Lease" includes
(i) all payments to be made thereunder, (ii) all rights of Borrower therein, and
(iii) any and all amendments, renewals, extensions or guarantees thereof.
1.10 "Leased Property" means any property leased or to be leased by
Borrower to a Lessee pursuant to a Lease; the term "Leased Property" includes
all of Borrower's Inventory or Equipment so leased and any and all additions,
improvements, accessions, attachments, upgrades (except to the extent such
upgrades are severable without diminishing the value of the underlying Leased
Property), replacements and substitutions thereto and therefor.
1.11 "Lessee" means the lessee(s) or obligor(s) responsible for payment
and/or performance under a Lease.
1.12 "Liability" or "Liabilities" means all existing and future
recourse liabilities of Borrower to Lender, including without limitation, the
obligations of Borrower under Sections 2.5, and 12.4 of this Agreement and all
other recourse liabilities and obligations of every kind or nature whatsoever of
Borrower to Lender, whether now existing or hereafter incurred, joint or
several, matured or unmatured, direct or indirect, primary or secondary, related
or unrelated or due or to become due, including but not limited to, any
extensions, modifications, substitutions, increases and renewals thereof, and
substitutions therefor.
1.13 "New Jersey Uniform Commercial Code" shall mean the Uniform
Commercial Code as enacted in New Jersey as the same shall be amended from time
to time.
1.14 "Note" means all notes evidencing the Loan made by Lender to
Borrower hereunder, as may be amended, modified, replaced or restated from time
to time.
1.15 All other capitalized terms used but not defined herein shall have
the meanings ascribed thereto in the New Jersey Uniform Commercial Code unless
the text clearly indicates otherwise.
SECTION 2. The Loans
2.1 Preconditions to Loan. All of the following events must occur prior
to Lender making the Loan hereunder:
(a) The Board of Directors and, if stockholder
approval is deemed necessary, the stockholders of Borrower shall have adopted
appropriate general or specific resolutions authorizing the execution and
delivery of this Agreement and the taking of all action called for herein;
(b) Counsel for Borrower shall have furnished general
or specific opinions satisfactory to Lender that include without limitation that
the corporate action of Borrower referred to in Section 2.1(a) is satisfactory
to such counsel and that this Agreement has been duly authorized, executed and
delivered by the Borrower, and it constitutes, and the Loan to Borrower
hereunder will constitute, legal, valid and binding obligations of Borrower in
accordance with the terms of this Agreement;
(c) There must not exist an Event of Default or event
which with the lapse of time or notice or both would become an Event of Default
under Section 7;
(d) There has been no material adverse change in the
business, operations or condition (financial or otherwise) of Borrower since the
date of the most recent financial statement of Borrower delivered to the Lender;
(e) Borrower has delivered or caused to be delivered
such other documents, instruments and agreements reasonably required by Lender
or required by the terms of this Agreement; and
(f) Borrower shall have delivered the following to
Lender:
(i) A written statement setting forth the
Lessee and a description of the Lease and the Leased Property;
(ii) A fully executed counterpart of this
Agreement;
(iii) A Note executed by Borrower in form
and substance satisfactory to Lender;
(iv) Invoices showing the true cost of the
Leased Property net of any servicing or maintenance charges, brokers' fees or
similar type of "soft costs";
(v) Uniform Commercial Code financing
statements listing Lender as secured party and Borrower as debtor, to be filed
in all locations satisfactory to Lender;
(vi) Each original counterpart of each
Lease, together with, if Borrower is not the original lessor, an original
counterpart of an assignment of the Lease to Borrower by the original and
intermediary lessors thereof;
(vii) The original Certificate of Acceptance
evidencing that the Lessee has received and accepted the Leased Property;
(viii) The Notice and Acknowledgement of
Assignment of Lease executed and delivered by Lessee agreeing to pay Lender
directly;
(ix) All guaranties, agreements, sureties,
insurance policies, subordination agreements and opinions of counsel arising
pursuant to or in connection with, the Collateral;
(x) Such additional UCC financing statements
as Lender may request in number, form and substance satisfactory to Lender
necessary to perfect Lender's security interest in the Lease and Leased Property
including without limitation UCC-1 financing statements filed by Borrower, as
secured party, against Lessee, as Debtor, and assigned to Lender;
(xi) Such UCCs, federal tax lien, and
judgment searches as Lender requests showing that the Collateral is free and
clear of all liens, claims and encumbrances other than those granted to Lender
hereunder;
(xii) Such other agreements, instruments and
documents and information (financial or otherwise) concerning Borrower or Lessee
as Lender may reasonably request; and
(xiii) Evidence that Leased Property is
insured against all risks in form and amount, with an insurer satisfactory to
Lender, against fire (with extended coverage), liability and such other hazards
as are customary with companies in the same or similar business as the Lessee
and cause Lender's security interest as indicated in Section 3.1, to be endorsed
on all policies of insurance as lender loss payee, so that: (i) all payments for
losses will be paid solely to Lender; (ii) the policy shall cover and insure
Lender's interest in the Collateral notwithstanding any act or neglect of
Borrower or Lessee, and (iii) the Borrower shall furnish Lender upon request
with evidence of such insurance together with a certificate thereof requiring
not less than thirty (30) days written notice to Lender prior to cancellation or
termination.
2.2 Limited Recourse Loan. Upon the occurrence of all events set forth
in Section 2.1 above, and simultaneously with the execution hereof (the
"Closing") and of all instruments or documents necessary or in the opinion of
Lender proper to effectuate the intention of the parties hereto, the Lender
shall lend to Borrower the sum of $1,581,452.26 for the purpose of financing
Leases or Leased Property on a limited recourse basis ("Loan").
2.3 Interest. Interest on the outstanding principal balance of the Loan
will be paid monthly (with such payments coinciding with the lease payments on
the Collateral) at the per annum rate equal to nine and 50/100 percent (9.50%)
("Contract Rate"). Upon the occurrence of an Event of Default hereunder,
interest shall accrue on the outstanding principal balance of the Loan at a per
annum rate of three percent (3%) in excess of the Contract Rate except, however,
where any amount due by Lessee under the Lease is more than five (5) days past
due, interest on such amount shall accrue at the interest rate set forth in the
Lease. Interest shall be charged on a 360 day year counting the actual days
elapsed. Interest at the applicable rate shall be paid and continue to be paid
even after default, maturity, acceleration, recovery of judgment, Bankruptcy,
insolvency proceedings of any kind or the happening of any event or occurrence
similar or dissimilar. In no event shall any interest accrued pursuant to the
second sentence of this paragraph be a recourse liability of Borrower unless the
same accrued as a result of an Event of Default which gives rise to a Liability.
2.4 Invoices. Each month, Lessor under the Lease shall render to
Lessee, an invoice for the Lease payments due and owing. Lessee shall be
instructed to, and shall agree to, make all payments under the Lease directly to
Lender to be applied against the Loan balance.
2.5 Reimbursement of Expenses. It is anticipated that Borrower and
Lender will enter into a series of loan transactions on the date hereof
("Transactions") and in conjunction therewith Borrower shall pay Lender the
aggregate sum of $7,500 for all out of pocket expenses of any kind incurred by
Lender in connection with the Transactions, including reasonable attorneys fees,
UCC searches, the cost of filing financing statements, continuation, amendment
and termination statements, search fees and any other fees incurred solely in
connection with the negotiation, drafting and closing of the Transactions and
perfection of its security interest in the Collateral.
2.6 Use of Proceeds. The proceeds of the Loan shall be used solely to
finance or refinance Borrower's purchase of the Lease(s) or Leased Property.
2.7 Limited Recourse. Subject to the Lender's rights and Borrower's
recourse liability under Sections 2.5 and 12.4 or as otherwise agreed to between
Borrower and Lender from time to time, Lender's recourse against Borrower under
the Note shall be limited to the Collateral.
SECTION 3. Collateral
3.1 Security Interest. As security for repayment of the Loan and all
Liabilities of Borrower to Lender arising hereunder or under the Note, Borrower
grants to Lender a first priority security interest in, and assigns to Lender
the Collateral.
3.2 Financing Statements. Borrower will, from time to time, join with
Lender in executing financing statements, assignments and continuation
statements, under the Uniform Commercial Code covering the Collateral and any
portion thereof and such other instruments and documents as may be necessary to
perfect Lender's security interest in the Collateral or otherwise effectuate the
purposes of this Agreement. Borrower irrevocably grants to Lender a power of
attorney to execute for Borrower all such financing statements, and any
amendments thereto. Further, Borrower irrevocably authorizes the filing of a
carbon, photographic or other reproduction of this Agreement or of a financing
statement as a financing statement and agrees that such filing is sufficient as
a financing statement.
3.3 Sole Original Leases. Borrower shall deliver the sole original of
Counterpart 1 of each Lease Schedule to the Lender and all other existing copies
of such Leases shall be marked "copy" or "this lease has been assigned to
Interpool, Inc. as security for the obligations pursuant to that Limited
Recourse Loan and Security Agreement dated March 27, 1998." For purposes of this
paragraph the term "sole original of Counterpart 1 of each Lease Schedule" shall
not include a master lease agreement where a schedule to a master lease
agreement is assigned to the Lender and such schedule incorporates the terms of
such master lease agreement by reference and the schedule is a separate lease
for "chattel paper" purposes under the Uniform Commercial Code and possession of
such schedule constitutes possession of "chattel paper" under the Uniform
Commercial Code.
SECTION 4. Representations and Warranties
The Borrower represents and warrants to the Lender, which
representations and warranties shall survive the execution hereof and all action
hereunder as follows:
4.1 Borrower is a corporation duly organized, validly existing, and in
good standing under the laws of the State of its incorporation and has the power
to carry on its business as now constituted, is qualified as a foreign
corporation and is in good standing in other jurisdictions where the nature of
its business makes such qualification necessary.
4.2 The execution and delivery by Borrower of this Agreement and the
performance by it of the transactions herein contemplated are and will be within
its corporate powers, have been and will be duly authorized, and are not and
will not be in contravention of any order of court or other agency of
government, of law or the terms of its Articles of Incorporation, By-Laws, or of
any indenture, agreement or undertaking to which it is a party or by which it or
its property is bound, or be in conflict with, result in a breach of or
constitute (with due notice and/or lapse of time) a default under any such
indenture, agreement or undertaking, or result in the imposition of any lien,
charge or encumbrance of any nature on any of Borrower's properties.
4.3 This Agreement, the Note, all Leases and any assignment or other
document when delivered, will be the valid, legal and binding obligations of
Borrower, enforceable in accordance with their respective terms.
4.4 There are no suits in law or equity or proceedings before any
governmental instrumentality or agency against Borrower, now pending or to the
knowledge of Borrower's officers is there threatened or likely any litigation or
any proceedings against or affecting Borrower, the outcome of which might
materially and adversely affect the Collateral.
4.5 All Collateral is free and clear of all liens, claims, encumbrances
and security interests, except those granted to Lender hereunder.
4.6 All taxes, federal, state and local, due by Borrower have been paid
or accrued to date.
4.7 Borrower's tax identification number is as follows: 38-237-9524.
4.8 All operations of the Borrower have been carried on in accordance
with all applicable laws, statutes, ordinances, rules and regulations. No
investigation by any governmental authority, federal, state or local, is pending
or threatened against Borrower.
4.9 All places of business of Borrower are listed on Exhibit "4.9"
attached hereto and made a part hereof.
4.10 Within five (5) years prior to the Closing, Borrower has not
conducted business under or used any other name (whether corporate or assumed).
4.11 The following representations and warranties are made with respect
to each Lease and/or items of Leased Property and shall be true and correct at
the time each such Lease is assigned to Lender:
(a) Each Lease is genuine, based on contracts that
are enforceable in accordance with its terms against the Lessee and the Leased
Property named and referenced therein, constitutes the entire agreement for the
leasing of the Leased Property thereby covered, has not been altered or amended,
except as set forth in the related schedules, and Borrower's Books and Records
relating thereto are accurate, complete and genuine;
(b) The sole original of each Lease has been
delivered to Lender and any counterpart of any lease which has not been
delivered to the Lender bears the legend "Copy" or "This Lease has been assigned
to Interpool, Inc. as security for the obligations pursuant to that certain
Limited Recourse Loan and Security Agreement dated March 27, 1998," or similar
language on the face thereof;
(c) Where the Lease consists of a Master Lease
Agreement and specific schedules which describe the terms of any specific items
to be leased pursuant to such schedule, delivery of the original schedule shall
constitute delivery of the original Lease, provided that the terms of the Master
Lease Agreement and the schedule make it clear that for purposes of "Chattel
Paper" under the Uniform Commercial Code, the sole original schedule delivered
to Lender is a separate lease and that possession of such schedule constitutes
possession of "Chattel Paper" under the Uniform Commercial Code;
(d) With respect to each Lease, unless Lender agrees
otherwise in writing, Borrower will file within ten (10) days of receipt by
Lessee of possession of Leased Property, such UCC financing statements (listing
Borrower as Secured Party, the Lessee as Debtor, Lender as Assignee and such
Leased Property as Collateral) in such locations as would be required by
applicable law (if Borrower were a Secured Party and Lessee were a Debtor) in
order to perfect a security interest in such Leased Property under the UCC in
favor of Lender as Borrower's Assignee;
(e) The original amount and unpaid balance of each
Lease shown on Borrower's Books and Records and on any statement or schedule
delivered to Lender in connection therewith is the true and correct amount
actually owed to Lender, no portion of which, except as specifically provided
for in the Lease, has been prepaid;
(f) The amounts due under the Leases are not and will
not be subject to any claim or reduction, counterclaim, setoff, recoupment, or
any other claim, allowance or adjustment and no Lease has been re-negotiated,
restructured or compromised except as renewed in the ordinary course of
business;
(g) All security agreements, title retention
instruments and other documents and instruments which are security for any
Lease, and/or each Lease, contained a correct and sufficient description of the
Leased Property covered thereby and all security interests granted therein to
Borrower (either directly or as assignee) have been properly perfected and
assigned to Lender;
(h) Borrower has not and will not enter into any
agreement with a Lessee of any Leased Property which provides, directly or
indirectly, for the crediting of any obligation or liability of Borrower to such
Lessee against future rentals accruing under the Lease;
(i) Each item of Leased Property is in good
condition, ordinary wear and tear excepted, has not been lost, stolen, destroyed
or damaged;
(j) Each item of Leased Property has been delivered
to and, in all instances, unconditionally accepted by the Lessee and has not
been removed from service or the place of installation indicated in the Lease;
(k) Each Lease has been duly executed by the lessor
named therein and each Lessee, and is a valid, legal and binding obligation of
Borrower, and such Lessee, and is enforceable against Borrower and such Lessee
in accordance with its terms. Following the making of the Loan in accordance
with Borrower's instructions to Lender, Borrower, subject to the security
interest of Lender, will be the sole owner of the Collateral and has the
authority to assign all of its right, title and interest therein upon the terms
herein set forth;
(l) All costs, fees, and expenses incurred in making
and closing each of the Leases has been paid and each Lease is or will be
current at the time of the assignment thereof to Lender. No event exists which
with the giving of notice or the passage of time or both, will result in the
occurrence of a default of any obligation as expressed in any Lease;
(m) All rentals, fees, costs, expenses and charges
paid or payable by the Lessee under any Lease, including without limitation, any
brokerage and other fees paid to Borrower do not violate any laws relating to
the maximum fees, costs, expenses or charges that can be charged in any state in
which any Leased Property is located or in which the corresponding Lessee is
located, or in which a transaction was consummated, or in any other state which
may have jurisdiction with respect to any such Leased Property, Lease or Lessee;
(n) Lender has a first lien security interest in the
Collateral subject to no other security interest or other interest. Borrower has
taken all steps necessary to maintain Lender's first lien security interest in
the Collateral, including, if required, perfecting the Borrower's security
interest through filing financing statements, amendments thereto, or
assignments;
(o) Each item of Leased Property has been insured in
the ordinary course of Borrower's or the corresponding Lessee's business;
(p) Neither Borrower nor to the best of Borrower's
knowledge has any lessor or prior lender holding a security interest in any of
the Collateral received notice of a Bankruptcy, receivership, reorganization,
insolvency or financial embarrassment of any Lessee;
(q) No Lessee is a subsidiary, or affiliate of
Borrower, or under common control with Borrower or is an officer or employee of
Borrower;
(r) No Lease is a Defaulted Lease;
(s) No Lease constitutes a sublease of the
corresponding Leased Property.
SECTION 5. Affirmative Covenants
Borrower covenants with Lender as follows:
5.1 Borrower will take the necessary steps to preserve its rights to
conduct business in all jurisdictions in which the nature of its business shall
require qualifications to do business or where the failure to so qualify may
have a material adverse effect on the ability of Borrower or Lender to enforce
any Lease or realize on any Leased Property.
5.2 Borrower will notify Lender, in writing, not less than thirty (30)
days prior to any change in the location of the Chief Executive Office or if the
Collateral is moved to a location other than that specified in the corresponding
Lease.
5.3 Borrower will comply with and observe all laws, statutes,
ordinances, rules and regulations material to the operation of its business and
maintain all licenses and permits necessary for the operation of its business,
and Borrower will pay all taxes, assessments and governmental charges required
by law.
5.4 Borrower shall permit Lender, and any representative designated by
Lender, to visit and inspect any of Borrower's property, assets, Books and
Records, and finance and other records, including, without limitation, financial
statements and Leases, and to discuss Borrower's affairs, finances and accounts
as they relate to the Collateral with Borrower's agents, officers and employees
(including Borrower's independent accountants) at such reasonable times and as
often as Lender may reasonably request.
5.5 Unless Lender consents otherwise in writing, Borrower shall at all
times keep all Collateral free and clear of all liens, encumbrances and security
interests of every kind without limitation.
5.6 Borrower shall mark its Books and Records to indicate the Lender's
security interest in the Collateral, including the Lease(s) and, unless Lender
consents otherwise in writing, Borrower shall retain title at all times to the
Leased Property. However, where Lender consents in writing to an assignment of
any of Borrower's right, title and interest in the Lease and/or the Collateral,
(which consent shall not be unreasonably withheld) and provided Borrower
complies with the requirements of a Transferee Agreement (which Transferee
Agreement shall be the same in form and substance as that attached hereto as
Exhibit 5.6), Borrower may sell, assign or transfer its right, title and
interest, subject always to the prior rights of Lender, in the Lease and/or
Collateral.
5.7 Borrower shall join with Lender to notify all Lessee(s) of the
Lender's security interest in the Collateral and direct payment under the
Lease(s) to be made directly to Lender and Lender may, in its own name or in the
name of the Borrower collect, sue for and receive payment of any or all
Lease(s), and settle, compromise and adjust the same on any terms as may be
satisfactory to Lender, in its sole and absolute discretion for any reason or
without reason.
5.8 Borrower will immediately notify Lender of the institution or
threat of any litigation, administrative proceeding or investigation or any
other event or happening which might have a material adverse affect on the
Collateral or Borrower's or Lender's ability to enforce their respective rights
under the Lease(s).
5.9 Borrower shall, at Lender's request, within ninety (90) days after
the close of the fiscal year, furnish Lender with a complete financial audit
prepared by Borrower's independent certified public accounting firm acceptable
to Lender, including a balance sheet, income statement and statement of cash
flows prepared in accordance with GAAP.
SECTION 6. Negative Covenants
Borrower covenants with Lender that it will not:
6.1 Without the prior written consent of Lender, sell, assign or
transfer any portion of the Collateral. However, where Lender consents in
writing to an assignment of any of Borrower's right, title and interest in the
Lease and/or the Collateral, (which consent shall not be unreasonably withheld)
and provided Borrower complies with the requirements of a Transferee Agreement
(which Transferee Agreement shall be the same in form and substance as that
attached hereto as Exhibit 5.6), Borrower may sell, assign or transfer its
right, title and interest, subject always to the prior rights of Lender, in the
Lease and/or Collateral.
6.2 Without the prior written consent of Lender, liquidate, dissolve or
discontinue normal operations with the intention to liquidate, dissolve, sell,
lease, transfer or otherwise dispose of any substantial part of its assets.
Lender acknowledges that the Borrower anticipates a merger with other entities
that may occur during the term hereof, however, according to the terms thereof,
Varilease Corporation will be a wholly owned subsidiary and will continue to
operate in the same or like manner as prior to said merger.
6.3 Without the prior written consent of Lender, permit the removal,
other than in the ordinary course of business, of any Books and Records or
Leased Property from the place of business where presently located.
6.4 Without providing to Lender thirty (30) days prior written notice,
change its name or any trade style it uses, or adopt any new name or trade
style.
SECTION 7. Events of Default
The occurrence of any one or more of the following events with
respect to Borrower shall constitute an event of default ("Event of Default")
hereunder:
7.1 Termination of existence, business failure or the making of an
assignment for the benefit of creditors;
7.2 Non-payment of any sum or sums due to Lender or others hereunder or
otherwise when due or non-performance of any contractual obligation to Lender
including without limitation a breach of a Lease by the Lessee or Borrower that
results in a Lease becoming a Defaulted Lease;
7.3 Institution of Bankruptcy, arrangement, composition,
reorganization, liquidation or receivership proceedings, voluntary or
involuntary, or the appointment of a receiver, trustee, conservator,
sequestrator or other judicial representative, similar or dissimilar;
7.4 Any financial statements of Borrower, warranties or representations
herein, or in any other document or certificate heretofore or hereafter made by
Borrower are false, misleading, incomplete or incorrect in any material manner;
7.5 If Borrower has engaged in any activity which may reasonably result
in the forfeiture of any Collateral to any governmental entity, federal, state
or local; then, in any such event which is not cured within seven (7) days of
the earlier of receipt of notice from Lender of the Event of Default or Borrower
obtaining knowledge of the Event of Default, Lender, at its option may declare
the unpaid principal balance, accrued interest, and all other sums due to Lender
hereunder or otherwise immediately due and payable (except with respect to an
Event of Default arising under paragraph 7.1 or 7.3 above, in which case all of
Borrower's obligations and liabilities to Lender shall be automatically deemed
to be immediately due and payable).
SECTION 8. Remedies on Default
8.1 (a) Upon the occurrence of an Event of Default hereunder, Borrower
grants to Lender in addition to any rights, powers or remedies Lender may have
under any applicable law, all of which shall be cumulative, the right, subject
always to the rights of Lessees under the Leases, to do any or all of the
following (which list is given by way of example and is not intended to be an
exhaustive list of all rights and remedies):
(i) By its own means, with or without judicial
assistance, enter any of Borrower's premises or other locations where Collateral
is kept, and take possession of the Collateral, or render it unusable, or
dispose of the Collateral on such premises without any liability for rent,
storage, utilities or other sums, and Borrower shall not resist or interfere
with such action; and
(ii) Lender shall have all rights, remedies and
powers of Borrower under the Leases as lessor, including without limitation, the
right to collect and receive all rental, insurance proceeds and other payments,
payable pursuant to the Leases; amend or terminate any Lease; and take such
action upon default under any Lease, as any lessor may do, in Lender's or
Borrower's name, including without limitation repossession of any Leased
Property and commencement of suit, and to exercise any rights and remedies as
lessor under the Lease(s).
(b) Anything herein to the contrary notwithstanding,
the execution of this Agreement and the exercise by Lender of any of its rights
hereunder shall not (i) release Borrower from any of its duties or obligations
under the Leases, and (ii) shall not obligate Lender (x) to perform any of
Borrower's obligations or duties under the Leases, or (y) to take any action to
collect or enforce any claim for payment.
(c) Borrower hereby agrees that a notice received by
it at least ten (10) days before the time of any intended public sale or at the
time after which any private sale or other disposition of the Collateral is to
be made, shall be deemed to be commercially reasonable notice of such sale or
other disposition. If permitted by law, any Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrower.
8.2 Lender shall have the right to proceed against all or any portion
of the Collateral in any order and may apply such Collateral to the Liabilities
of Borrower to Lender in any order. All rights and remedies granted Lender
hereunder and under any agreement referred to herein, or otherwise available at
law or in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Lender may proceed with any number of remedies at the same time
until all existing and future Liabilities of Borrower to Lender, are satisfied
in full. The exercise of any one right or remedy shall not be deemed a waiver or
release of any other right or remedy, and upon the occurrence of an Event of
Default, Lender may proceed against Borrower and/or the Collateral, at any time,
under any agreement, with any available remedy and in any order.
8.3 Notwithstanding anything to the contrary contained in this Section
8 or Section 7 above, the occurrence of an Event of Default due solely to the
non-payment of sums owed to Lender resulting from a Lease becoming a Defaulted
Lease shall constitute an Event of Default hereunder only with respect to the
Loan and Lender's recourse to Borrower with respect to amounts due under such
Loan shall be limited to the Collateral.
SECTION 9. Termination
9.1 Lender shall have the right to retain, until final payment in full
of all Liabilities of the Borrower all of the Collateral and all of its rights
with respect thereto; provided, however, that so long as no Event of Default has
occurred, Lender shall release its lien on Collateral at the time the Loan is
repaid in full. All terms, conditions and provisions of this Agreement shall
remain in full force and effect until such time as all sums owed Lender
hereunder are paid in full.
SECTION 10. Waivers
Borrower waives presentment, demand, protest, notice of default,
non-payment, partial payments and all other notices and formalities relating to
this Agreement other than notices specifically required hereunder. Borrower
consents to and waives notice of the granting of indulgences or extensions of
time or payment, the taking or releasing of security, the addition or release of
persons primarily or secondarily liable on or with respect to the Liabilities.
No delay by the Lender in exercising any right, power or remedy hereunder and no
indulgence given to Borrower in case of any default shall impair any such right
or power or be construed as a waiver of any default by Lender or any
acquiescence therein or as a violation or waiver of any of the terms or
provisions of this Agreement.
SECTION 11. Notices
All notices and other communications hereunder shall be in writing or
confirmed in writing, and they shall be deemed to have been duly delivered or
given, if hand delivered, if telecopied, if sent by nationally recognized
overnight courier, or if mailed via certified mail, return receipt requested
when delivered, as follows:
(a) If to Borrower:
Varilease Corporation
28525 Orchard Lake Road
Farmington Hills, MI 48334
Attention: Gary F. Miller, Senior Vice President
Telecopy:(248) 488-0162
(b) If to Lender:
Interpool, Inc.
211 College Road East
Princeton, NJ 08540
Attention:Raoul J. Witteveen, President
Telecopy: (609)951-0362
and
Interpool, Inc.
211 College Road East
Princeton, NJ 08540
Attention: Richard W. Gross, Senior Vice
President
Telecopy: (609)951-0362
and
MicroTech Leasing Corporation
211 College Road East
Princeton, NJ 08540
Attention: Allen M. Olinger, President
Telecopy: (609) 987-1011
SECTION 12. Miscellaneous
12.1 Borrower agrees that Lender may sell or assign this Loan or grant
participation(s) in this Loan and may without liability furnish information with
respect to this Loan to any prospective purchaser, assignee or participant(s).
12.2 Borrower hereby irrevocably appoints Lender as Borrower's attorney
in fact with full authority in the place and stead of Borrower and in the name
of Borrower, Lender or otherwise in Lender's discretion, to take any action and
to execute any instrument, agreement or document which Lender may reasonably
deem necessary or advisable to accomplish the purposes of this Agreement.
Without limiting the generality of the foregoing, Lender may:
(a) obtain and adjust insurance that Borrower or
Lessee is required to maintain;
(b) ask, demand, collect, sue for, recover, compound,
receive or give acquittance and receipts for money due and to become due under
or in respect of any of the Collateral;
(c) receive, endorse and collect any drafts or other
instruments, documents or chattel paper, in connection with (a) or (b) above;
(d) after the occurrence of an Event of Default, file
any claim or take any action or institute any proceedings which Lender may deem
necessary or desirable for the collection of any of the Collateral or otherwise
to enforce the rights of Lender with respect to any of the Collateral; and
(e) after the occurrence of an Event of Default, with
respect to a Defaulted Lease, execute in Borrower's name, a bill of sale
relating to any Collateral, transferring title to such Collateral to a third
party purchaser.
12.3 If Borrower fails to perform any agreement contained herein,
Lender may (but is not obligated to) perform or cause performance of, such
agreement, at Borrower's expense payable on demand.
12.4 (a) Borrower shall pay, on demand, all of Lender's costs and
expenses (including but not limited to all legal fees and costs) (i) in
connection with the negotiation or preparation of any extensions, modifications,
amendments, waivers or consents to this Agreement, any note, or any other
instrument, agreement or document in connection herewith (but not including the
Lease(s) or corresponding equipment schedules and agreements), and (ii) in
connection with the enforcement of any right, remedy or power pursuant to this
Agreement, any note or any other instrument, agreement, or document in
connection herewith as such rights pertain to the Liabilities. In no event shall
Borrower be personally liable for any of said costs or fees relating to a
default by the Lessee under the Lease which does not also constitute or result
in a breach of any representation, warranty or covenant made by Borrower to or
in favor of Lender; and
(b) Borrower shall indemnify, defend (with counsel
satisfactory to Lender) and hold harmless Lender against and in respect of (i)
any loss, damage or deficiency related to any breach of warranty or
representation or non-fulfillment of any agreement by Borrower under this
Agreement or any related instrument, agreement, document, schedule, exhibit or
other legal obligations in connection herewith, and (ii) all actions, suits,
proceedings, demands, assessments, judgments, costs, legal fees and expenses
incident to any of the foregoing. Any amount reasonably required to be paid
pursuant to the foregoing shall be paid by Borrower to Lender on demand and may
at Lender's option be deducted from or set off against any existing or future
debt, liability or obligation of Lender to Borrower relating to this
transaction. In no event shall Borrower be personally liable for any of said
costs or fees relating to a default by the Lessee under the Lease which does not
also constitute or result in a breach of any representation, warranty or
covenant made by Borrower to or in favor of Lender.
12.5 This Agreement and all rights hereunder shall be governed by the
substantive law of the State of New Jersey. This Agreement shall bind Lender and
Borrower and shall inure to the benefit of Lender and the terms "Lender" and
"Borrower" as used in this Agreement shall include the respective parties and
their respective successors and assigns.
12.6 The terms of this Agreement shall be in addition to those of any
other evidence of liability held by the Lender, all of which shall be construed
as complementary to each other, except as herein otherwise expressly provided
and such other agreements, instruments and documents not modified or superseded
pursuant to the terms hereof remain in full force and effect.
12.7 This Agreement contains the entire agreement between the parties
hereto and may not be modified or changed in any way except in writing signed by
all parties.
12.8 Any express waiver by Lender of any power, right, remedy,
obligation or duty shall not under any circumstances be deemed to constitute a
waiver of Lender's powers, rights or remedies upon the later occurrence or
reoccurrence of any event, transaction or matter. No course of dealing between
Lender and Borrower shall operate as or be deemed to constitute a waiver of
Lender's rights hereunder or affect the duties or obligations of Borrower.
12.9 All powers, rights and remedies of Lender hereunder shall be
cumulative and not exclusive of other powers, rights or remedies granted or
available to Lender under any applicable law unless specifically stated
otherwise.
12.10 All warranties, covenants and representations, whether
affirmative or negative, shall survive the making of this Agreement and the loan
of monies hereunder and each shall be deemed to be continuing in force and
effect and substantial and material in nature.
12.11 Borrower irrevocably consents to the exclusive jurisdiction of
the State Courts of New Jersey or the United States District Court for the
District of New Jersey in any and all actions and proceedings whether arising
hereunder or under any other agreement or undertaking and irrevocably agrees to
service of process by certified mail, return receipt requested to the address of
Borrower set forth herein.
12.12 Borrower waives and shall not interpose any objection of forum
non conveniens or to venue and waives any right to remove any proceeding
commenced in a state court to a federal court.
12.13 BORROWER AND LENDER AS INDEPENDENT COVENANTS IRREVOCABLY WAIVE
JURY TRIAL AND THE RIGHT THERETO IN ANY AND ALL DISPUTES BETWEEN BORROWER AND
LENDER WHETHER HEREUNDER OR UNDER ANY OTHER AGREEMENTS, NOTES, PAPERS,
INSTRUMENTS OR DOCUMENTS HERETOFORE, NOW OR HEREAFTER EXECUTED.
12.14 Headings preceding the text of the several Sections hereof are
for the convenience of reference only and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
12.15 This Agreement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, and such
counterparts shall together constitute one and the same instrument.
12.16 All instruments, agreements and documents to be executed or
delivered by Borrower shall be in form and substance satisfactory to Lender in
its sole discretion.
12.17 Time is of the essence.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
LENDER: Interpool, Inc.
ATTEST: /s/ Kathleen Francis BY: /s/ Richard W. Gross
----------------------------- ------------------------------
Kathleen Francis
Assistant Secretary
Name: Richard W. Gross
Title: Senior Vice President
BORROWER: VARILEASE CORPORATION
ATTEST: /s/ Jennifer Charles-Rentz BY: /s/ Marjorie Biglin
----------------------- -------------------------------
Name: Marjorie Biglin
Title: Assistant Secretary
<PAGE>
SCHEDULE "A"
LEASES
<PAGE>
TERM NOTE (LIMITED RECOURSE)
$1,265,300.08 Princeton, NJ
March 27, 1998
FOR VALUE RECEIVED and intending to be legally bound, the undersigned,
Varilease Corporation ("Borrower"), a Michigan corporation, with a place of
business at 28525 Orchard Lake Road, Farmington Hills, MI 48334, promises to
pay, in lawful money of the United States, to the order of Interpool, Inc. and
its assigns ("Lender"), at Lender's offices at 211 College Road East, Princeton,
NJ 08540, the sum of One Million Two Hundred Sixty Five Thousand Three Hundred
and 08/100 ($1,265,300.08) Dollars in thirty-six (36) equal consecutive monthly
installments of principal and interest of $40,266.00 each commencing on April 1,
1998 and on the first day of each month thereafter with a final payment of the
entire outstanding principal balance of the Loan and all accrued but unpaid
interest, fees, costs and expenses due on March 1, 2001. The actual amount due
and owing from time to time hereunder shall be evidenced by Lender's records of
disbursements and receipts with respect to the Loan which shall be presumptive
conclusive evidence of such amount.
Interest shall accrue on the unpaid principal amount outstanding
hereunder from time to time at the per annum rate equal to nine and one-half
percent (9.50%) ("Contract Rate"). Interest shall be calculated on a basis of a
year of 360 days but computed for the actual number of days elapsed. After the
occurrence of an Event of Default (as defined in the Loan Agreement) such rate
shall be increased to a per annum rate equal to three percent (3%) in excess of
the Contract Rate. In no event shall the amount of interest paid or agreed to be
paid to Lender hereunder exceed the highest lawful rate permissible under any
law which a court of competent jurisdiction may deem applicable hereto. In such
event, the interest rate shall automatically be reduced to the maximum rate
permitted by such law and Lender shall apply any such excess to principal, in
the inverse order of maturity.
This Term Note is the Note referred to in the Limited Recourse Loan and
Security Agreement between Borrower and Lender dated of even date herewith
("Loan Agreement"). This Term Note ("Note") shall evidence Borrower's obligation
to repay all sums advanced by Lender pursuant to this Note, provided however
that Borrower's obligations under this Note are with limited recourse as more
fully set forth below and in the Loan Agreement. If Borrower fails to make any
payment required hereunder or if an Event of Default occurs under the Loan
Agreement, Lender may declare Borrower in default hereunder and declare the
unpaid principal balance of this Note to be immediately due and payable. Lender
shall thereupon have the option at any time and from time to time to exercise
all rights and remedies set forth herein, and in the Loan Agreement, as well as
all rights and remedies otherwise available to Lender at law or in equity, to
collect the unpaid indebtedness hereunder and thereunder. This Note is secured
by the Collateral described in the Loan Agreement. This Note may be prepaid only
in accordance with the terms and conditions of the Loan Agreement.
Borrower hereby waives protest, demand, notice of nonpayment and all
other notices in connection with the delivery, acceptance, performance or
enforcement of this Note. Any failure or delay of Lender to exercise any right
hereunder shall not be construed as a waiver of the right to exercise the same
or any other right at any other time or times. The waiver by Lender of a breach
or default of any provision of this Note shall not operate or be construed as a
waiver of any subsequent breach or default thereof. Subject to the terms of the
Loan Agreement, Borrower agrees to reimburse Lender for all expenses, including,
without limitation, attorneys' fees, incurred by Lender to enforce the
provisions of this Note, to protect, preserve and defend Lender's rights under
the Loan Agreement, and collect Borrower's obligations hereunder as described in
the Loan Agreement.
Notwithstanding the entry of any judgment under this Note, the unpaid
principal balance under this Note shall continue to bear interest at the
applicable rate set forth above.
This Note shall be construed and governed by the laws of the State of
New Jersey, without regard to its otherwise applicable principles of conflict of
laws. The provisions of this Note are severable and the invalidity or
unenforceability of any provision shall not alter or impair the remaining
provisions of this Note. All capitalized terms not otherwise defined herein
shall have the respective meanings as set forth in the Loan Agreement.
BORROWER AND LENDER AS INDEPENDENT COVENANTS IRREVOCABLY WAIVE JURY
TRIAL AND THE RIGHT THERETO IN ANY AND ALL DISPUTES BETWEEN BORROWER AND LENDER
WHETHER HEREUNDER OR UNDER ANY OTHER AGREEMENTS, NOTES, PAPERS, INSTRUMENTS OR
DOCUMENTS HERETOFORE, NOW OR HEREAFTER EXECUTED.
Lender, and any subsequent holder of this Note, by acceptance of the
Note agrees that except as provided in the Loan Agreement, Borrower shall have
no personal liability or obligation with respect to payment of principal,
interest and other amounts payable under this Note and such amounts are payable
from the proceeds received by Lender (or the Lender's successors or assigns)
from Lender's right, title and interest in and to the Collateral.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Borrower
has executed these presents the day and year first above written.
VARILEASE CORPORATION
By: /s/ Marjorie Biglin Attest: /s/ Jennifer Charles-Rentz
------------------------------- -------------------------------
Name: Marjorie Biglin
Title: Assistant Secretary
<PAGE>
LIMITED RECOURSE
LOAN AND SECURITY AGREEMENT
AGREEMENT made this 27th day of March, 1998, by and among Varilease
Corporation ("Borrower"), a Michigan corporation and Interpool, Inc. ("Lender"),
a Delaware corporation.
B A C K G R O U N D
A. Borrower is in the business of leasing personal property to third
party lessees. Borrower desires to borrow funds on a limited recourse basis from
Lender and Lender is willing to lend such funds to Borrower under the terms and
provisions set forth below.
B. The parties desire to define the terms and conditions of the Loan as
defined in Section 2.2 and to reduce their agreements to writing.
NOW, THEREFORE, with the foregoing Background incorporated herein by
reference and intending to be legally bound, the parties hereto agree as
follows:
SECTION 1. Definitions
1.1 "Books and Records" means all of Borrower's original ledger cards,
payment schedules, credit applications, contract rights, liens, security
instruments, guarantees and other General Intangibles relating in any way to the
Lease(s) or Leased Property.
1.2 "Collateral" means the Lease(s), Leased Property and all now or
hereafter existing Books and Records and all cash and noncash proceeds, thereof,
including insurance proceeds.
1.3 "Contract Rate" shall have the meaning set forth in Section 2.3.
1.4 "Defaulted Lease" means any Lease where (i) the Lessee is in
default under the terms of such Lease, (ii) the Lease or Leased Property is
subject to any tax lien or security interest, lien or encumbrance other than
Lender's, except as otherwise consented to by Lender in writing, or (iii) the
Lessee has prepaid any amounts and such prepayment has not been delivered to
Lender within ten days of receipt by Borrower, or (iv) the Leased Property is
destroyed.
1.5 "Equipment" shall have the meaning ascribed thereto in the New
Jersey Uniform Commercial Code.
1.6 "GAAP" means generally accepted accounting principles and practices
at the time for companies engaged in similar businesses, consistently applied.
1.7 "General Intangibles" shall have the meaning ascribed thereto in
the New Jersey Uniform Commercial Code and shall include, but not be limited to,
all contract rights (including without limitation rights under remarketing
agreements), chattel paper, documents, instruments, books, records, ledgers,
journals, check books, print outs, designs, computer programs, computer tapes,
customer lists, causes of action, claims, goodwill, designs and plans, licenses,
license agreements, tax and all other types of refunds, returned and unearned
insurance premiums, rights and claims under insurance policies, patents, patent
application, trademarks, trade names, trade styles, trademark applications and
copyrights.
1.8 "Inventory" shall have the meaning ascribed thereto in the New
Jersey Uniform Commercial Code.
1.9 "Lease" means all of Borrower's Accounts, Documents, General
Intangibles, Instruments and Chattel Paper arising in connection with each and
every equipment lease and/or schedule to a master lease agreement identified on
Schedule "A" attached hereto and made a part hereof. The term "Lease" includes
(i) all payments to be made thereunder, (ii) all rights of Borrower therein, and
(iii) any and all amendments, renewals, extensions or guarantees thereof.
1.10 "Leased Property" means any property leased or to be leased by
Borrower to a Lessee pursuant to a Lease; the term "Leased Property" includes
all of Borrower's Inventory or Equipment so leased and any and all additions,
improvements, accessions, attachments, upgrades (except to the extent such
upgrades are severable without diminishing the value of the underlying Leased
Property), replacements and substitutions thereto and therefor.
1.11 "Lessee" means the lessee(s) or obligor(s) responsible for payment
and/or performance under a Lease.
1.12 "Liability" or "Liabilities" means all existing and future
recourse liabilities of Borrower to Lender, including without limitation, the
obligations of Borrower under Sections 2.5, and 12.4 of this Agreement and all
other recourse liabilities and obligations of every kind or nature whatsoever of
Borrower to Lender, whether now existing or hereafter incurred, joint or
several, matured or unmatured, direct or indirect, primary or secondary, related
or unrelated or due or to become due, including but not limited to, any
extensions, modifications, substitutions, increases and renewals thereof, and
substitutions therefor.
1.13 "New Jersey Uniform Commercial Code" shall mean the Uniform
Commercial Code as enacted in New Jersey as the same shall be amended from time
to time.
1.14 "Note" means all notes evidencing the Loan made by Lender to
Borrower hereunder, as may be amended, modified, replaced or restated from time
to time.
1.15 All other capitalized terms used but not defined herein shall have
the meanings ascribed thereto in the New Jersey Uniform Commercial Code unless
the text clearly indicates otherwise.
SECTION 2. The Loans
2.1 Preconditions to Loan. All of the following events must occur prior
to Lender making the Loan hereunder:
(a) The Board of Directors and, if stockholder
approval is deemed necessary, the stockholders of Borrower shall have adopted
appropriate general or specific resolutions authorizing the execution and
delivery of this Agreement and the taking of all action called for herein;
(b) Counsel for Borrower shall have furnished general
or specific opinions satisfactory to Lender that include without limitation that
the corporate action of Borrower referred to in Section 2.1(a) is satisfactory
to such counsel and that this Agreement has been duly authorized, executed and
delivered by the Borrower, and it constitutes, and the Loan to Borrower
hereunder will constitute, legal, valid and binding obligations of Borrower in
accordance with the terms of this Agreement;
(c) There must not exist an Event of Default or event
which with the lapse of time or notice or both would become an Event of Default
under Section 7;
(d) There has been no material adverse change in the
business, operations or condition (financial or otherwise) of Borrower since the
date of the most recent financial statement of Borrower delivered to the Lender;
(e) Borrower has delivered or caused to be delivered
such other documents, instruments and agreements reasonably required by Lender
or required by the terms of this Agreement; and
(f) Borrower shall have delivered the following to
Lender:
(i) A written statement setting forth the
Lessee and a description of the Lease and the Leased Property;
(ii) A fully executed counterpart of this
Agreement;
(iii) A Note executed by Borrower in form
and substance satisfactory to Lender;
(iv) Invoices showing the true cost of the
Leased Property net of any servicing or maintenance charges, brokers' fees or
similar type of "soft costs";
(v) Uniform Commercial Code financing
statements listing Lender as secured party and Borrower as debtor, to be filed
in all locations satisfactory to Lender;
(vi) Each original counterpart of each
Lease, together with, if Borrower is not the original lessor, an original
counterpart of an assignment of the Lease to Borrower by the original and
intermediary lessors thereof;
(vii) The original Certificate of Acceptance
evidencing that the Lessee has received and accepted the Leased Property;
(viii) The Notice and Acknowledgement of
Assignment of Lease executed and delivered by Lessee agreeing to pay Lender
directly;
(ix) All guaranties, agreements, sureties,
insurance policies, subordination agreements and opinions of counsel arising
pursuant to or in connection with, the Collateral;
(x) Such additional UCC financing statements
as Lender may request in number, form and substance satisfactory to Lender
necessary to perfect Lender's security interest in the Lease and Leased Property
including without limitation UCC-1 financing statements filed by Borrower, as
secured party, against Lessee, as Debtor, and assigned to Lender;
(xi) Such UCCs, federal tax lien, and
judgment searches as Lender requests showing that the Collateral is free and
clear of all liens, claims and encumbrances other than those granted to Lender
hereunder;
(xii) Such other agreements, instruments and
documents and information (financial or otherwise) concerning Borrower or Lessee
as Lender may reasonably request; and
(xiii) Evidence that Leased Property is
insured against all risks in form and amount, with an insurer satisfactory to
Lender, against fire (with extended coverage), liability and such other hazards
as are customary with companies in the same or similar business as the Lessee
and cause Lender's security interest as indicated in Section 3.1, to be endorsed
on all policies of insurance as lender loss payee, so that: (i) all payments for
losses will be paid solely to Lender; (ii) the policy shall cover and insure
Lender's interest in the Collateral notwithstanding any act or neglect of
Borrower or Lessee, and (iii) the Borrower shall furnish Lender upon request
with evidence of such insurance together with a certificate thereof requiring
not less than thirty (30) days written notice to Lender prior to cancellation or
termination.
2.2 Limited Recourse Loan. Upon the occurrence of all events set forth
in Section 2.1 above, and simultaneously with the execution hereof (the
"Closing") and of all instruments or documents necessary or in the opinion of
Lender proper to effectuate the intention of the parties hereto, the Lender
shall lend to Borrower the sum of $1,265,300.08 for the purpose of financing
Leases or Leased Property on a limited recourse basis ("Loan").
2.3 Interest. Interest on the outstanding principal balance of the Loan
will be paid monthly (with such payments coinciding with the lease payments on
the Collateral) at the per annum rate equal to nine and 50/100 percent (9.50%)
("Contract Rate"). Upon the occurrence of an Event of Default hereunder,
interest shall accrue on the outstanding principal balance of the Loan at a per
annum rate of three percent (3%) in excess of the Contract Rate except, however,
where any amount due by Lessee under the Lease is more than five (5) days past
due, interest on such amount shall accrue at the interest rate set forth in the
Lease. Interest shall be charged on a 360 day year counting the actual days
elapsed. Interest at the applicable rate shall be paid and continue to be paid
even after default, maturity, acceleration, recovery of judgment, Bankruptcy,
insolvency proceedings of any kind or the happening of any event or occurrence
similar or dissimilar. In no event shall any interest accrued pursuant to the
second sentence of this paragraph be a recourse liability of Borrower unless the
same accrued as a result of an Event of Default which gives rise to a Liability.
2.4 Invoices. Each month, Lessor under the Lease shall render to
Lessee, an invoice for the Lease payments due and owing. Lessee shall be
instructed to, and shall agree to, make all payments under the Lease directly to
Lender to be applied against the Loan balance.
2.5 Reimbursement of Expenses. It is anticipated that Borrower and
Lender will enter into a series of loan transactions on the date hereof
("Transactions") and in conjunction therewith Borrower shall pay Lender the
aggregate sum of $7,500 for all out of pocket expenses of any kind incurred by
Lender in connection with the Transactions, including reasonable attorneys fees,
UCC searches, the cost of filing financing statements, continuation, amendment
and termination statements, search fees and any other fees incurred solely in
connection with the negotiation, drafting and closing of the Transactions and
perfection of its security interest in the Collateral.
2.6 Use of Proceeds. The proceeds of the Loan shall be used solely to
finance or refinance Borrower's purchase of the Lease(s) or Leased Property.
2.7 Limited Recourse. Subject to the Lender's rights and Borrower's
recourse liability under Sections 2.5 and 12.4 or as otherwise agreed to between
Borrower and Lender from time to time, Lender's recourse against Borrower under
the Note shall be limited to the Collateral.
SECTION 3. Collateral
3.1 Security Interest. As security for repayment of the Loan and all
Liabilities of Borrower to Lender arising hereunder or under the Note, Borrower
grants to Lender a first priority security interest in, and assigns to Lender
the Collateral.
3.2 Financing Statements. Borrower will, from time to time, join with
Lender in executing financing statements, assignments and continuation
statements, under the Uniform Commercial Code covering the Collateral and any
portion thereof and such other instruments and documents as may be necessary to
perfect Lender's security interest in the Collateral or otherwise effectuate the
purposes of this Agreement. Borrower irrevocably grants to Lender a power of
attorney to execute for Borrower all such financing statements, and any
amendments thereto. Further, Borrower irrevocably authorizes the filing of a
carbon, photographic or other reproduction of this Agreement or of a financing
statement as a financing statement and agrees that such filing is sufficient as
a financing statement.
3.3 Sole Original Leases. Borrower shall deliver the sole original of
Counterpart 1 of each Lease Schedule to the Lender and all other existing copies
of such Leases shall be marked "copy" or "this lease has been assigned to
Interpool, Inc. as security for the obligations pursuant to that Limited
Recourse Loan and Security Agreement dated March 27, 1998." For purposes of this
paragraph the term "sole original of Counterpart 1 of each Lease Schedule" shall
not include a master lease agreement where a schedule to a master lease
agreement is assigned to the Lender and such schedule incorporates the terms of
such master lease agreement by reference and the schedule is a separate lease
for "chattel paper" purposes under the Uniform Commercial Code and possession of
such schedule constitutes possession of "chattel paper" under the Uniform
Commercial Code.
SECTION 4. Representations and Warranties
The Borrower represents and warrants to the Lender, which
representations and warranties shall survive the execution hereof and all action
hereunder as follows:
4.1 Borrower is a corporation duly organized, validly existing, and in
good standing under the laws of the State of its incorporation and has the power
to carry on its business as now constituted, is qualified as a foreign
corporation and is in good standing in other jurisdictions where the nature of
its business makes such qualification necessary.
4.2 The execution and delivery by Borrower of this Agreement and the
performance by it of the transactions herein contemplated are and will be within
its corporate powers, have been and will be duly authorized, and are not and
will not be in contravention of any order of court or other agency of
government, of law or the terms of its Articles of Incorporation, By-Laws, or of
any indenture, agreement or undertaking to which it is a party or by which it or
its property is bound, or be in conflict with, result in a breach of or
constitute (with due notice and/or lapse of time) a default under any such
indenture, agreement or undertaking, or result in the imposition of any lien,
charge or encumbrance of any nature on any of Borrower's properties.
4.3 This Agreement, the Note, all Leases and any assignment or other
document when delivered, will be the valid, legal and binding obligations of
Borrower, enforceable in accordance with their respective terms.
4.4 There are no suits in law or equity or proceedings before any
governmental instrumentality or agency against Borrower, now pending or to the
knowledge of Borrower's officers is there threatened or likely any litigation or
any proceedings against or affecting Borrower, the outcome of which might
materially and adversely affect the Collateral.
4.5 All Collateral is free and clear of all liens, claims, encumbrances
and security interests, except those granted to Lender hereunder.
4.6 All taxes, federal, state and local, due by Borrower have been paid
or accrued to date.
4.7 Borrower's tax identification number is as follows: 38-237-9524.
4.8 All operations of the Borrower have been carried on in accordance
with all applicable laws, statutes, ordinances, rules and regulations. No
investigation by any governmental authority, federal, state or local, is pending
or threatened against Borrower.
4.9 All places of business of Borrower are listed on Exhibit "4.9"
attached hereto and made a part hereof.
4.10 Within five (5) years prior to the Closing, Borrower has not
conducted business under or used any other name (whether corporate or assumed).
4.11 The following representations and warranties are made with respect
to each Lease and/or items of Leased Property and shall be true and correct at
the time each such Lease is assigned to Lender:
(a) Each Lease is genuine, based on contracts that
are enforceable in accordance with its terms against the Lessee and the Leased
Property named and referenced therein, constitutes the entire agreement for the
leasing of the Leased Property thereby covered, has not been altered or amended,
except as set forth in the related schedules, and Borrower's Books and Records
relating thereto are accurate, complete and genuine;
(b) The sole original of each Lease has been
delivered to Lender and any counterpart of any lease which has not been
delivered to the Lender bears the legend "Copy" or "This Lease has been assigned
to Interpool, Inc. as security for the obligations pursuant to that certain
Limited Recourse Loan and Security Agreement dated March 27, 1998," or similar
language on the face thereof;
(c) Where the Lease consists of a Master Lease
Agreement and specific schedules which describe the terms of any specific items
to be leased pursuant to such schedule, delivery of the original schedule shall
constitute delivery of the original Lease, provided that the terms of the Master
Lease Agreement and the schedule make it clear that for purposes of "Chattel
Paper" under the Uniform Commercial Code, the sole original schedule delivered
to Lender is a separate lease and that possession of such schedule constitutes
possession of "Chattel Paper" under the Uniform Commercial Code;
(d) With respect to each Lease, unless Lender agrees
otherwise in writing, Borrower will file within ten (10) days of receipt by
Lessee of possession of Leased Property, such UCC financing statements (listing
Borrower as Secured Party, the Lessee as Debtor, Lender as Assignee and such
Leased Property as Collateral) in such locations as would be required by
applicable law (if Borrower were a Secured Party and Lessee were a Debtor) in
order to perfect a security interest in such Leased Property under the UCC in
favor of Lender as Borrower's Assignee;
(e) The original amount and unpaid balance of each
Lease shown on Borrower's Books and Records and on any statement or schedule
delivered to Lender in connection therewith is the true and correct amount
actually owed to Lender, no portion of which, except as specifically provided
for in the Lease, has been prepaid;
(f) The amounts due under the Leases are not and will
not be subject to any claim or reduction, counterclaim, setoff, recoupment, or
any other claim, allowance or adjustment and no Lease has been re-negotiated,
restructured or compromised except as renewed in the ordinary course of
business;
(g) All security agreements, title retention
instruments and other documents and instruments which are security for any
Lease, and/or each Lease, contained a correct and sufficient description of the
Leased Property covered thereby and all security interests granted therein to
Borrower (either directly or as assignee) have been properly perfected and
assigned to Lender;
(h) Borrower has not and will not enter into any
agreement with a Lessee of any Leased Property which provides, directly or
indirectly, for the crediting of any obligation or liability of Borrower to such
Lessee against future rentals accruing under the Lease;
(i) Each item of Leased Property is in good
condition, ordinary wear and tear excepted, has not been lost, stolen, destroyed
or damaged;
(j) Each item of Leased Property has been delivered
to and, in all instances, unconditionally accepted by the Lessee and has not
been removed from service or the place of installation indicated in the Lease;
(k) Each Lease has been duly executed by the lessor
named therein and each Lessee, and is a valid, legal and binding obligation of
Borrower, and such Lessee, and is enforceable against Borrower and such Lessee
in accordance with its terms. Following the making of the Loan in accordance
with Borrower's instructions to Lender, Borrower, subject to the security
interest of Lender, will be the sole owner of the Collateral and has the
authority to assign all of its right, title and interest therein upon the terms
herein set forth;
(l) All costs, fees, and expenses incurred in making
and closing each of the Leases has been paid and each Lease is or will be
current at the time of the assignment thereof to Lender. No event exists which
with the giving of notice or the passage of time or both, will result in the
occurrence of a default of any obligation as expressed in any Lease;
(m) All rentals, fees, costs, expenses and charges
paid or payable by the Lessee under any Lease, including without limitation, any
brokerage and other fees paid to Borrower do not violate any laws relating to
the maximum fees, costs, expenses or charges that can be charged in any state in
which any Leased Property is located or in which the corresponding Lessee is
located, or in which a transaction was consummated, or in any other state which
may have jurisdiction with respect to any such Leased Property, Lease or Lessee;
(n) Lender has a first lien security interest in the
Collateral subject to no other security interest or other interest. Borrower has
taken all steps necessary to maintain Lender's first lien security interest in
the Collateral, including, if required, perfecting the Borrower's security
interest through filing financing statements, amendments thereto, or
assignments;
(o) Each item of Leased Property has been insured in
the ordinary course of Borrower's or the corresponding Lessee's business;
(p) Neither Borrower nor to the best of Borrower's
knowledge has any lessor or prior lender holding a security interest in any of
the Collateral received notice of a Bankruptcy, receivership, reorganization,
insolvency or financial embarrassment of any Lessee;
(q) No Lessee is a subsidiary, or affiliate of
Borrower, or under common control with Borrower or is an officer or employee of
Borrower;
(r) No Lease is a Defaulted Lease;
(s) No Lease constitutes a sublease of the
corresponding Leased Property.
SECTION 5. Affirmative Covenants
Borrower covenants with Lender as follows:
5.1 Borrower will take the necessary steps to preserve its rights to
conduct business in all jurisdictions in which the nature of its business shall
require qualifications to do business or where the failure to so qualify may
have a material adverse effect on the ability of Borrower or Lender to enforce
any Lease or realize on any Leased Property.
5.2 Borrower will notify Lender, in writing, not less than thirty (30)
days prior to any change in the location of the Chief Executive Office or if the
Collateral is moved to a location other than that specified in the corresponding
Lease.
5.3 Borrower will comply with and observe all laws, statutes,
ordinances, rules and regulations material to the operation of its business and
maintain all licenses and permits necessary for the operation of its business,
and Borrower will pay all taxes, assessments and governmental charges required
by law.
5.4 Borrower shall permit Lender, and any representative designated by
Lender, to visit and inspect any of Borrower's property, assets, Books and
Records, and finance and other records, including, without limitation, financial
statements and Leases, and to discuss Borrower's affairs, finances and accounts
as they relate to the Collateral with Borrower's agents, officers and employees
(including Borrower's independent accountants) at such reasonable times and as
often as Lender may reasonably request.
5.5 Unless Lender consents otherwise in writing, Borrower shall at all
times keep all Collateral free and clear of all liens, encumbrances and security
interests of every kind without limitation.
5.6 Borrower shall mark its Books and Records to indicate the Lender's
security interest in the Collateral, including the Lease(s) and, unless Lender
consents otherwise in writing, Borrower shall retain title at all times to the
Leased Property. However, where Lender consents in writing to an assignment of
any of Borrower's right, title and interest in the Lease and/or the Collateral,
(which consent shall not be unreasonably withheld) and provided Borrower
complies with the requirements of a Transferee Agreement (which Transferee
Agreement shall be the same in form and substance as that attached hereto as
Exhibit 5.6), Borrower may sell, assign or transfer its right, title and
interest, subject always to the prior rights of Lender, in the Lease and/or
Collateral.
5.7 Borrower shall join with Lender to notify all Lessee(s) of the
Lender's security interest in the Collateral and direct payment under the
Lease(s) to be made directly to Lender and Lender may, in its own name or in the
name of the Borrower collect, sue for and receive payment of any or all
Lease(s), and settle, compromise and adjust the same on any terms as may be
satisfactory to Lender, in its sole and absolute discretion for any reason or
without reason.
5.8 Borrower will immediately notify Lender of the institution or
threat of any litigation, administrative proceeding or investigation or any
other event or happening which might have a material adverse affect on the
Collateral or Borrower's or Lender's ability to enforce their respective rights
under the Lease(s).
5.9 Borrower shall, at Lender's request, within ninety (90) days after
the close of the fiscal year, furnish Lender with a complete financial audit
prepared by Borrower's independent certified public accounting firm acceptable
to Lender, including a balance sheet, income statement and statement of cash
flows prepared in accordance with GAAP.
SECTION 6. Negative Covenants
Borrower covenants with Lender that it will not:
6.1 Without the prior written consent of Lender, sell, assign or
transfer any portion of the Collateral. However, where Lender consents in
writing to an assignment of any of Borrower's right, title and interest in the
Lease and/or the Collateral, (which consent shall not be unreasonably withheld)
and provided Borrower complies with the requirements of a Transferee Agreement
(which Transferee Agreement shall be the same in form and substance as that
attached hereto as Exhibit 5.6), Borrower may sell, assign or transfer its
right, title and interest, subject always to the prior rights of Lender, in the
Lease and/or Collateral.
6.2 Without the prior written consent of Lender, liquidate, dissolve or
discontinue normal operations with the intention to liquidate, dissolve, sell,
lease, transfer or otherwise dispose of any substantial part of its assets.
Lender acknowledges that the Borrower anticipates a merger with other entities
that may occur during the term hereof, however, according to the terms thereof,
Varilease Corporation will be a wholly owned subsidiary and will continue to
operate in the same or like manner as prior to said merger.
6.3 Without the prior written consent of Lender, permit the removal,
other than in the ordinary course of business, of any Books and Records or
Leased Property from the place of business where presently located.
6.4 Without providing to Lender thirty (30) days prior written notice,
change its name or any trade style it uses, or adopt any new name or trade
style.
SECTION 7. Events of Default
The occurrence of any one or more of the following events with
respect to Borrower shall constitute an event of default ("Event of Default")
hereunder:
7.1 Termination of existence, business failure or the making of an
assignment for the benefit of creditors;
7.2 Non-payment of any sum or sums due to Lender or others hereunder or
otherwise when due or non-performance of any contractual obligation to Lender
including without limitation a breach of a Lease by the Lessee or Borrower that
results in a Lease becoming a Defaulted Lease;
7.3 Institution of Bankruptcy, arrangement, composition,
reorganization, liquidation or receivership proceedings, voluntary or
involuntary, or the appointment of a receiver, trustee, conservator,
sequestrator or other judicial representative, similar or dissimilar;
7.4 Any financial statements of Borrower, warranties or representations
herein, or in any other document or certificate heretofore or hereafter made by
Borrower are false, misleading, incomplete or incorrect in any material manner;
7.5 If Borrower has engaged in any activity which may reasonably result
in the forfeiture of any Collateral to any governmental entity, federal, state
or local; then, in any such event which is not cured within seven (7) days of
the earlier of receipt of notice from Lender of the Event of Default or Borrower
obtaining knowledge of the Event of Default, Lender, at its option may declare
the unpaid principal balance, accrued interest, and all other sums due to Lender
hereunder or otherwise immediately due and payable (except with respect to an
Event of Default arising under paragraph 7.1 or 7.3 above, in which case all of
Borrower's obligations and liabilities to Lender shall be automatically deemed
to be immediately due and payable).
SECTION 8. Remedies on Default
8.1 (a) Upon the occurrence of an Event of Default hereunder, Borrower
grants to Lender in addition to any rights, powers or remedies Lender may have
under any applicable law, all of which shall be cumulative, the right, subject
always to the rights of Lessees under the Leases, to do any or all of the
following (which list is given by way of example and is not intended to be an
exhaustive list of all rights and remedies):
(i) By its own means, with or without judicial
assistance, enter any of Borrower's premises or other locations where Collateral
is kept, and take possession of the Collateral, or render it unusable, or
dispose of the Collateral on such premises without any liability for rent,
storage, utilities or other sums, and Borrower shall not resist or interfere
with such action; and
(ii) Lender shall have all rights, remedies and
powers of Borrower under the Leases as lessor, including without limitation, the
right to collect and receive all rental, insurance proceeds and other payments,
payable pursuant to the Leases; amend or terminate any Lease; and take such
action upon default under any Lease, as any lessor may do, in Lender's or
Borrower's name, including without limitation repossession of any Leased
Property and commencement of suit, and to exercise any rights and remedies as
lessor under the Lease(s).
(b) Anything herein to the contrary notwithstanding,
the execution of this Agreement and the exercise by Lender of any of its rights
hereunder shall not (i) release Borrower from any of its duties or obligations
under the Leases, and (ii) shall not obligate Lender (x) to perform any of
Borrower's obligations or duties under the Leases, or (y) to take any action to
collect or enforce any claim for payment.
(c) Borrower hereby agrees that a notice received by
it at least ten (10) days before the time of any intended public sale or at the
time after which any private sale or other disposition of the Collateral is to
be made, shall be deemed to be commercially reasonable notice of such sale or
other disposition. If permitted by law, any Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrower.
8.2 Lender shall have the right to proceed against all or any portion
of the Collateral in any order and may apply such Collateral to the Liabilities
of Borrower to Lender in any order. All rights and remedies granted Lender
hereunder and under any agreement referred to herein, or otherwise available at
law or in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Lender may proceed with any number of remedies at the same time
until all existing and future Liabilities of Borrower to Lender, are satisfied
in full. The exercise of any one right or remedy shall not be deemed a waiver or
release of any other right or remedy, and upon the occurrence of an Event of
Default, Lender may proceed against Borrower and/or the Collateral, at any time,
under any agreement, with any available remedy and in any order.
8.3 Notwithstanding anything to the contrary contained in this Section
8 or Section 7 above, the occurrence of an Event of Default due solely to the
non-payment of sums owed to Lender resulting from a Lease becoming a Defaulted
Lease shall constitute an Event of Default hereunder only with respect to the
Loan and Lender's recourse to Borrower with respect to amounts due under such
Loan shall be limited to the Collateral.
SECTION 9. Termination
9.1 Lender shall have the right to retain, until final payment in full
of all Liabilities of the Borrower all of the Collateral and all of its rights
with respect thereto; provided, however, that so long as no Event of Default has
occurred, Lender shall release its lien on Collateral at the time the Loan is
repaid in full. All terms, conditions and provisions of this Agreement shall
remain in full force and effect until such time as all sums owed Lender
hereunder are paid in full.
SECTION 10. Waivers
Borrower waives presentment, demand, protest, notice of default,
non-payment, partial payments and all other notices and formalities relating to
this Agreement other than notices specifically required hereunder. Borrower
consents to and waives notice of the granting of indulgences or extensions of
time or payment, the taking or releasing of security, the addition or release of
persons primarily or secondarily liable on or with respect to the Liabilities.
No delay by the Lender in exercising any right, power or remedy hereunder and no
indulgence given to Borrower in case of any default shall impair any such right
or power or be construed as a waiver of any default by Lender or any
acquiescence therein or as a violation or waiver of any of the terms or
provisions of this Agreement.
SECTION 11. Notices
All notices and other communications hereunder shall be in writing or
confirmed in writing, and they shall be deemed to have been duly delivered or
given, if hand delivered, if telecopied, if sent by nationally recognized
overnight courier, or if mailed via certified mail, return receipt requested
when delivered, as follows:
(a) If to Borrower:
Varilease Corporation
28525 Orchard Lake Road
Farmington Hills, MI 48334
Attention: Gary F. Miller, Senior Vice President
Telecopy:(248) 488-0162
(b) If to Lender:
Interpool, Inc.
211 College Road East
Princeton, NJ 08540
Attention:Raoul J. Witteveen, President
Telecopy: (609)951-0362
and
Interpool, Inc.
211 College Road East
Princeton, NJ 08540
Attention: Richard W. Gross, Senior Vice
President
Telecopy: (609)951-0362
and
MicroTech Leasing Corporation
211 College Road East
Princeton, NJ 08540
Attention: Allen M. Olinger, President
Telecopy: (609) 987-1011
SECTION 12. Miscellaneous
12.1 Borrower agrees that Lender may sell or assign this Loan or grant
participation(s) in this Loan and may without liability furnish information with
respect to this Loan to any prospective purchaser, assignee or participant(s).
12.2 Borrower hereby irrevocably appoints Lender as Borrower's attorney
in fact with full authority in the place and stead of Borrower and in the name
of Borrower, Lender or otherwise in Lender's discretion, to take any action and
to execute any instrument, agreement or document which Lender may reasonably
deem necessary or advisable to accomplish the purposes of this Agreement.
Without limiting the generality of the foregoing, Lender may:
(a) obtain and adjust insurance that Borrower or
Lessee is required to maintain;
(b) ask, demand, collect, sue for, recover, compound,
receive or give acquittance and receipts for money due and to become due under
or in respect of any of the Collateral;
(c) receive, endorse and collect any drafts or other
instruments, documents or chattel paper, in connection with (a) or (b) above;
(d) after the occurrence of an Event of Default, file
any claim or take any action or institute any proceedings which Lender may deem
necessary or desirable for the collection of any of the Collateral or otherwise
to enforce the rights of Lender with respect to any of the Collateral; and
(e) after the occurrence of an Event of Default, with
respect to a Defaulted Lease, execute in Borrower's name, a bill of sale
relating to any Collateral, transferring title to such Collateral to a third
party purchaser.
12.3 If Borrower fails to perform any agreement contained herein,
Lender may (but is not obligated to) perform or cause performance of, such
agreement, at Borrower's expense payable on demand.
12.4 (a) Borrower shall pay, on demand, all of Lender's costs and
expenses (including but not limited to all legal fees and costs) (i) in
connection with the negotiation or preparation of any extensions, modifications,
amendments, waivers or consents to this Agreement, any note, or any other
instrument, agreement or document in connection herewith (but not including the
Lease(s) or corresponding equipment schedules and agreements), and (ii) in
connection with the enforcement of any right, remedy or power pursuant to this
Agreement, any note or any other instrument, agreement, or document in
connection herewith as such rights pertain to the Liabilities. In no event shall
Borrower be personally liable for any of said costs or fees relating to a
default by the Lessee under the Lease which does not also constitute or result
in a breach of any representation, warranty or covenant made by Borrower to or
in favor of Lender; and
(b) Borrower shall indemnify, defend (with counsel
satisfactory to Lender) and hold harmless Lender against and in respect of (i)
any loss, damage or deficiency related to any breach of warranty or
representation or non-fulfillment of any agreement by Borrower under this
Agreement or any related instrument, agreement, document, schedule, exhibit or
other legal obligations in connection herewith, and (ii) all actions, suits,
proceedings, demands, assessments, judgments, costs, legal fees and expenses
incident to any of the foregoing. Any amount reasonably required to be paid
pursuant to the foregoing shall be paid by Borrower to Lender on demand and may
at Lender's option be deducted from or set off against any existing or future
debt, liability or obligation of Lender to Borrower relating to this
transaction. In no event shall Borrower be personally liable for any of said
costs or fees relating to a default by the Lessee under the Lease which does not
also constitute or result in a breach of any representation, warranty or
covenant made by Borrower to or in favor of Lender.
12.5 This Agreement and all rights hereunder shall be governed by the
substantive law of the State of New Jersey. This Agreement shall bind Lender and
Borrower and shall inure to the benefit of Lender and the terms "Lender" and
"Borrower" as used in this Agreement shall include the respective parties and
their respective successors and assigns.
12.6 The terms of this Agreement shall be in addition to those of any
other evidence of liability held by the Lender, all of which shall be construed
as complementary to each other, except as herein otherwise expressly provided
and such other agreements, instruments and documents not modified or superseded
pursuant to the terms hereof remain in full force and effect.
12.7 This Agreement contains the entire agreement between the parties
hereto and may not be modified or changed in any way except in writing signed by
all parties.
12.8 Any express waiver by Lender of any power, right, remedy,
obligation or duty shall not under any circumstances be deemed to constitute a
waiver of Lender's powers, rights or remedies upon the later occurrence or
reoccurrence of any event, transaction or matter. No course of dealing between
Lender and Borrower shall operate as or be deemed to constitute a waiver of
Lender's rights hereunder or affect the duties or obligations of Borrower.
12.9 All powers, rights and remedies of Lender hereunder shall be
cumulative and not exclusive of other powers, rights or remedies granted or
available to Lender under any applicable law unless specifically stated
otherwise.
12.10 All warranties, covenants and representations, whether
affirmative or negative, shall survive the making of this Agreement and the loan
of monies hereunder and each shall be deemed to be continuing in force and
effect and substantial and material in nature.
12.11 Borrower irrevocably consents to the exclusive jurisdiction of
the State Courts of New Jersey or the United States District Court for the
District of New Jersey in any and all actions and proceedings whether arising
hereunder or under any other agreement or undertaking and irrevocably agrees to
service of process by certified mail, return receipt requested to the address of
Borrower set forth herein.
12.12 Borrower waives and shall not interpose any objection of forum
non conveniens or to venue and waives any right to remove any proceeding
commenced in a state court to a federal court.
12.13 BORROWER AND LENDER AS INDEPENDENT COVENANTS IRREVOCABLY WAIVE
JURY TRIAL AND THE RIGHT THERETO IN ANY AND ALL DISPUTES BETWEEN BORROWER AND
LENDER WHETHER HEREUNDER OR UNDER ANY OTHER AGREEMENTS, NOTES, PAPERS,
INSTRUMENTS OR DOCUMENTS HERETOFORE, NOW OR HEREAFTER EXECUTED.
12.14 Headings preceding the text of the several Sections hereof are
for the convenience of reference only and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
12.15 This Agreement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, and such
counterparts shall together constitute one and the same instrument.
12.16 All instruments, agreements and documents to be executed or
delivered by Borrower shall be in form and substance satisfactory to Lender in
its sole discretion.
12.17 Time is of the essence.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
LENDER: Interpool, Inc.
ATTEST: /s/ Kathleen Francis BY: /s/ Richard W. Gross
---------------------------- ------------------------------
Kathleen Francis
Assistant Secretary
Name: Richard W. Gross
Title: Senior Vice President
BORROWER: VARILEASE CORPORATION
ATTEST: /s/ Jennifer Charles-Rentz BY: /s/ Marjorie Biglin
-------------------------------- ----------------------------
Name: Marjorie Biglin
Title: Assistant Secretary
<PAGE>
SCHEDULE "A"
LEASES
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, 1999 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1998.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
23rd day of February, 1999.
/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, 1999 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1998.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
23rd day of February, 1999.
/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, 1999 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1998.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
23rd day of February, 1999.
/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, 1999 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1998.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
23rd day of February, 1999.
/s/ Harold R. Somerset
-------------------------
Harold R. Somerset
<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, 1999 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1998.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
23rd day of February, 1999.
/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, 1999 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1998.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
23rd day of February, 1999.
/s/ Warren G. Lichtenstein
-------------------------------------------
Warren G. Lichtenstein
<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, 1999 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1998.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
23rd day of February, 1999.
/s/ Howard M. Lorber
----------------------------------------
Howard M. Lorber
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