<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
-------------------------------------------------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-18364
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American Income Partners V-A Limited Partnership
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3057303
- ------------------------------------ -----------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
88 Broad St., Sixth Floor, Boston, MA 02110
- -------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
------------------------------
Securities registered pursuant to Section 12(b) of the Act NONE
----------------------
Title of each class Name of each exchange on which registered
- -------------------------- ----------------------------------------------
- -------------------------- ----------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
1,380,661 Units Representing Limited Partnership Interest
- --------------------------------------------------------------------------------
(Title of class)
- --------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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|_|
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. Not applicable. Securities are nonvoting for this purpose.
Refer to Item 12 for further information.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to security holders for
the year ended December 31, 1999 (Part I and II)
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
PART I
<S> <C> <C>
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for the Partnership's Securities and Related Security Holder Matters 6
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 7
Item 8. Financial Statements and Supplementary Data 8
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 8
PART III
Item 10. Directors and Executive Officers of the Partnership 9
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain Beneficial Owners and Management 11
Item 13. Certain Relationships and Related Transactions 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14-17
</TABLE>
2
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PART I
Item 1. Business.
(a) General Development of Business
American Income Partners V-A Limited Partnership (the "Partnership") was
organized as a limited partnership under the Massachusetts Uniform Limited
Partnership Act (the "Uniform Act") on July 24, 1989 for the purpose of
acquiring and leasing to third parties a diversified portfolio of capital
equipment. Partners' capital initially consisted of contributions of $1,000 from
the General Partner (AFG Leasing IV Incorporated) and $100 from the Initial
Limited Partner (AFG Assignor Corporation). On September 29, 1989, the
Partnership issued 1,380,661 units, representing assignments of limited
partnership interests (the "Units"), to 1,815 investors. Unitholders and Limited
Partners (other than the Initial Limited Partner) are collectively referred to
as Recognized Owners. The Partnership has one General Partner, AFG Leasing IV
Incorporated, a Massachusetts corporation formed in 1987 and an affiliate of
Equis Financial Group Limited Partnership (formerly known as American Finance
Group), a Massachusetts limited partnership ("EFG"). The common stock of the
General Partner is owned by AF/AIP Programs Limited Partnership, of which EFG
and a wholly-owned subsidiary are the 99% limited partners and AFG Programs,
Inc., which is wholly-owned by EFG, is the 1% general partner. The General
Partner is not required to make any other capital contributions except as may be
required under the Uniform Act and Section 6.1(b) of the Amended and Restated
Agreement and Certificate of Limited Partnership (the "Restated Agreement, as
amended").
(b) Financial Information about Industry Segments
The Partnership is engaged in only one industry segment: the business of
acquiring capital equipment and leasing the equipment to creditworthy lessees on
a full payout or operating lease basis. Full payout leases are those in which
aggregate undiscounted noncancellable rents equal or exceed the acquisition cost
of the leased equipment. Operating leases are those in which the aggregate
undiscounted noncancellable rental payments are less than the acquisition cost
of the leased equipment. Industry segment data is not applicable.
(c) Narrative Description of Business
The Partnership was organized to acquire a diversified portfolio of capital
equipment subject to various full payout and operating leases and to lease the
equipment to third parties as income-producing investments. More specifically,
the Partnership's primary investment objectives were to acquire and lease
equipment that would:
1. Generate quarterly cash distributions;
2. Preserve and protect invested capital; and
3. Maintain substantial residual value for ultimate sale.
The Partnership has the additional objective of providing certain federal
income tax benefits.
The Closing Date of the Offering of Units of the Partnership was
September 29, 1989. The initial purchase of equipment and the associated
lease commitments occurred on September 29, 1989. The acquisition of the
equipment and its associated leases is described in Note 3 to the financial
statements included in Item 14, herein. The Restated Agreement, as amended,
provides that the Partnership will terminate no later than December 31, 2000.
Notwithstanding the Partnership's prescribed dissolution date, the
Partnership is a Nominal Defendant in a Class Action Lawsuit (described in
Note 7 to the financial statements in the accompanying 1999 Annual Report),
the outcome of which could significantly alter the nature of the
Partnership's organization and its future business operations. The General
Partner does not expect that the Partnership will be dissolved until such
time that the Class Action Lawsuit is adjudicated and settled. In the absence
of a final settlement being effected before December 31, 2000, dissolution of
the Partnership would most likely be deferred until a later date, as
permitted under section 2.6 "Term and Dissolution" of the Restated Agreement,
as amended.
The Partnership has no employees; however, it is managed pursuant to a
Management Agreement with EFG or one of its affiliates (the "Manager"). The
Manager's role, among other things, is to (i) evaluate, select, negotiate, and
consummate the acquisition of equipment, (ii) manage the leasing, re-leasing,
financing, and refinancing of
3
<PAGE>
equipment, and (iii) arrange the resale of equipment. The Manager is compensated
for such services as provided for in the Restated Agreement, as amended,
described in Item 13 herein, and in Note 5 to the financial statements included
in Item 14, herein.
The Partnership's investment in equipment is, and will continue to be,
subject to various risks, including physical deterioration, technological
obsolescence and defaults by lessees. A principal business risk of owning and
leasing equipment is the possibility that aggregate lease revenues and equipment
sale proceeds will be insufficient to provide an acceptable rate of return on
invested capital after payment of all debt service costs and operating expenses.
In addition, the leasing industry is very competitive. The Partnership is
subject to encounter considerable competition when equipment is re-leased or
sold at the expiration of primary lease terms. The Partnership must compete with
lease programs offered directly by manufacturers and other equipment leasing
companies, including limited partnerships and trusts organized and managed
similarly to the Partnership and including other EFG sponsored partnerships and
trusts, which may seek to re-lease or sell equipment within their own portfolios
to the same customers as the Partnership. Many competitors have greater
financial resources and more experience than the Partnership, the General
Partner and the Manager. In addition, default by a lessee under a lease may
cause equipment to be returned to the Partnership at a time when the General
Partner or the Manager is unable to arrange for the re-lease or sale of such
equipment. This could result in the loss of anticipated revenue.
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1999, 1998 and 1997 is
incorporated herein by reference to Note 2 to the financial statements in the
1999 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with the
Securities and Exchange Commission.
EFG is a Massachusetts limited partnership formerly known as American
Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Manager or Advisor to the Partnership and several other
direct-participation equipment leasing programs sponsored or co-sponsored by EFG
(the "Other Investment Programs"). The Company arranges to broker or originate
equipment leases, acts as remarketing agent and asset manager, and provides
leasing support services, such as billing, collecting, and asset tracking.
The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by Gary
D. Engle, its President, Chief Executive Officer and sole Director. Equis
Corporation also owns a controlling 1% general partner interest in EFG's 99%
limited partner, GDE Acquisition Limited Partnership ("GDE LP"). Mr. Engle
established Equis Corporation and GDE LP in December 1994 for the sole purpose
of acquiring the business of AFG.
In January 1996, the Company sold certain assets of AFG relating primarily
to the business of originating new leases, and the name "American Finance
Group," and its acronym, to a third party. AFG changed its name to Equis
Financial Group Limited Partnership after the sale was concluded. Pursuant to
terms of the sale agreements, EFG specifically reserved the rights to continue
using the name American Finance Group and its acronym in connection with the
Partnership and the Other Investment Programs and to continue managing all
assets owned by the Partnership and the Other Investment Programs.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales
Not applicable.
Item 2. Properties.
Incorporated herein by reference to Note 3 to the financial statements in
the 1999 Annual Report.
4
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Item 3. Legal Proceedings.
Incorporated herein by reference to Note 7 to the financial statements in
the 1999 Annual Report.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
5
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PART II
Item 5. Market for the partnership's Securities and Related Security Holder
Matters.
(a) Market Information
There is no public market for the resale of the Units and it is not
anticipated that a public market for resale of the Units will develop.
(b) Approximate Number of Security Holders
At December 31, 1999, there were 1,640 record holders of Units in the
Partnership.
(c) Dividend History and Restrictions
Historically, the amount of cash distributions to be paid to the Partners
has been determined on a quarterly basis. Each quarter's distribution may have
varied in amount and was made 95% to the Limited Partners and 5% to the General
Partner. Generally, cash distributions have been paid within 15 days after the
completion of each calendar quarter.
The Partnership is a Nominal Defendant in a Class Action Lawsuit described
in Note 7 to the accompanying Annual Report. The proposed settlement to that
lawsuit, if effected, will materially change the future organizational structure
and business interests of the Partnership, as well as its cash distribution
policies. In addition, commencing with the first quarter of 2000, the General
Partner believes that it will be in the Partnership's best interests to suspend
the payment of quarterly cash distributions pending final resolution of the
Class Action Lawsuit. Accordingly, future cash distributions are not expected to
be paid until the Class Action Lawsuit is adjudicated.
Distributions in 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
General Recognized
Total Partner Owners
---------- ------------ -----------
<S> <C> <C> <C>
Total 1999 distributions $ 545,003 $ 27,250 $ 517,753
Total 1998 distributions 545,002 27,250 517,752
---------- ------------ -----------
Total $1,090,005 $ 54,500 $ 1,035,505
========== ============ ===========
</TABLE>
Distributions payable were $136,250 at both December 31, 1999 and 1998.
There are no formal restrictions under the Restated Agreement, as amended,
that materially limit the Partnership's ability to pay cash distributions,
except that the General Partner may suspend or limit cash distributions to
ensure that the Partnership maintains sufficient working capital reserves to
cover, among other things, operating costs and potential expenditures, such as
refurbishment costs to remarket equipment upon lease expiration. Liquidity is
especially important as the Partnership matures and sells equipment, because the
remaining equipment base consists of fewer revenue-producing assets that are
available to cover prospective cash disbursements. Insufficient liquidity could
inhibit the Partnership's ability to sustain its operations or maximize the
realization of proceeds from remarketing its remaining assets.
Cash distributions consist of Distributable Cash From Operations and
Distributable Cash From Sales or Refinancings.
6
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"Distributable Cash From Operations" means the net cash provided by the
Partnership's normal operations after general expenses and current liabilities
of the Partnership are paid, reduced by any reserves for working capital and
contingent liabilities to be funded from such cash, to the extent deemed
reasonable by the General Partner, and increased by any portion of such reserves
deemed by the General Partner not to be required for Partnership operations and
reduced by all accrued and unpaid Equipment Management Fees and, after Payout,
further reduced by all accrued and unpaid Subordinated Remarketing Fees.
Distributable Cash from Operations does not include any Distributable Cash from
Sales or Refinancings.
"Distributable Cash From Sales or Refinancings" means Cash From Sales or
Refinancings as reduced by (i)(a) amounts realized from any loss or destruction
of equipment which the General Partner determines shall be reinvested in similar
equipment for the remainder of the original lease term of the lost or destroyed
equipment, or in isolated instances, in other equipment, if the General Partner
determines that investment of such proceeds will significantly improve the
diversity of the Partnership's equipment portfolio, and subject in either case
to satisfaction of all existing indebtedness secured by such equipment to the
extent deemed necessary or appropriate by the General Partner, or (b) the
proceeds from the sale of an interest in equipment pursuant to any agreement
governing a joint venture which the General Partner determines will be invested
in additional equipment or interests in equipment and which ultimately are so
reinvested and (ii) any accrued and unpaid Equipment Management Fees and, after
Payout, any accrued and unpaid Subordinated Remarketing Fees.
"Cash From Sales or Refinancings" means cash received by the Partnership
from sale or refinancing transactions, as reduced by (i)(a) all debts and
liabilities of the Partnership required to be paid as a result of sale or
refinancing transactions, whether or not then due and payable (including any
liabilities on an item of equipment sold which are not assumed by the buyer and
any remarketing fees required to be paid to persons not affiliated with the
General Partner, but not including any Subordinated Remarketing Fees whether or
not then due and payable) and (b) any reserves for working capital and
contingent liabilities funded from such cash to the extent deemed reasonable by
the General Partner and (ii) increased by any portion of such reserves deemed by
the General Partner not to be required for Partnership operations. In the event
the Partnership accepts a note in connection with any sale or refinancing
transaction, all payments subsequently received in cash by the Partnership with
respect to such note shall be included in Cash From Sales or Refinancings,
regardless of the treatment of such payments by the Partnership for tax or
accounting purposes. If the Partnership receives purchase money obligations in
payment for equipment sold, which are secured by liens on such equipment, the
amount of such obligations shall not be included in Cash From Sales or
Refinancings until the obligations are fully satisfied.
"Payout" is defined as the first time when the aggregate amount of all
distributions to the Recognized Owners of Distributable Cash From Operations and
Distributable Cash From Sales or Refinancings equals the aggregate amount of the
Recognized Owners' original capital contributions plus a cumulative annual
return of 11% (compounded quarterly and calculated beginning with the last day
of the month of the Partnership's Closing Date) on their aggregate unreturned
capital contributions. For purposes of this definition, capital contributions
shall be deemed to have been returned only to the extent that distributions of
cash to the Recognized Owners exceed the amount required to satisfy the
cumulative annual return of 11% (compounded quarterly) on the Recognized Owners'
aggregate unreturned capital contributions, such calculation to be based on the
aggregate unreturned capital contributions outstanding on the first day of each
fiscal quarter.
Item 6. Selected Financial Data.
Incorporated herein by reference to the section entitled "Selected Financial
Data" in the 1999 Annual Report. Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Incorporated herein by reference to the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
1999 Annual Report.
7
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Item 8. Financial Statements and Supplementary Data.
Incorporated herein by reference to the financial statements and
supplementary data included in the 1999 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
8
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1 of this
report, AFG Leasing IV Incorporated is the sole General Partner of the
Partnership. Under the Restated Agreement, as amended, the General Partner is
solely responsible for the operation of the Partnership's properties. The
Limited Partners have no right to participate in the control of the
Partnership's general operations, but they do have certain voting rights, as
described in Item 12 herein. The names, titles and ages of the Directors and
Executive Officers of the General Partner as of March 15, 2000 are as follows:
DIRECTORS AND EXECUTIVE OFFICERS OF
THE GENERAL PARTNER (See Item 13)
<TABLE>
<CAPTION>
Name Title Age Term
---- ----- --- ----
<S> <C> <C>
Geoffrey A. MacDonald Chairman and a member of the Until a
Executive Committee of EFG successor
and President and a Director is duly
of the General Partner 51 elected
and
Gary D. Engle President and Chief Executive qualified
Officer and member of the
Executive Committee of EFG and a
Director of the General Partner 51
Gary M. Romano Executive Vice President and Chief
Operating Officer of EFG and
Clerk of the General Partner 40
James A. Coyne Executive Vice President of EFG 39
Michael J. Butterfield Senior Vice President, Finance and
Treasurer of EFG and Treasurer of the
General Partner 40
Sandra L. Simonsen Senior Vice President, Information
Systems of EFG 49
Gail D. Ofgant Senior Vice President, Lease
Operations of EFG 34
</TABLE>
(c) Identification of Certain Significant Persons
None.
(d) Family Relationship
No family relationship exists among any of the foregoing Partners, Directors
or Executive Officers.
9
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(e) Business Experience
Mr. MacDonald, age 51, is a co-founder, Chairman and a member of the
Executive Committee of EFG and President and a Director of the General Partner.
Mr. MacDonald was also a co-founder, Director, and Senior Vice President of
EFG's predecessor corporation from 1980 to 1988. Mr. MacDonald is President of
American Finance Group Securities Corp. and a limited partner in Atlantic
Acquisition Limited Partnership ("AALP") and Old North Capital Limited
Partnership ("ONC"). Prior to co-founding EFG's predecessors, Mr. MacDonald held
various executive and management positions in the leasing and pharmaceutical
industries. Mr. MacDonald holds a M.B.A. from Boston College and a B.A. degree
from the University of Massachusetts (Amherst).
Mr. Engle, age 51, is President and Chief Executive Officer of EFG and sole
shareholder and Director of its general partner, Equis Corporation and a member
of the Executive Committee of EFG and President of AFG Realty Corporation. Mr.
Engle joined EFG in 1990 as Executive Vice President and acquired control of EFG
and its subsidiaries in December 1994. Mr. Engle is Vice President and a
Director of certain of EFG's subsidiaries and affiliates, a limited partner in
AALP and ONG and controls the general partners of AALP and ONC. Mr. Engle is
also Chairman, Chief Executive Officer, and a member of the Board of Directors
of Semele Group, Inc. ("Semele"). From 1987 to 1990, Mr. Engle was a principal
and co-founder of Cobb Partners Development, Inc., a real estate and mortgage
banking company. From 1980 to 1987, Mr. Engle was Senior Vice President and
Chief Financial Officer of Arvida Disney Company, a large-scale community
development company owned by Walt Disney Company. Prior to 1980, Mr. Engle
served in various management consulting and institutional brokerage capacities.
Mr. Engle has a MBA from Harvard University and a BS degree from the University
of Massachusetts (Amherst).
Mr. Romano, age 40, became Executive Vice President and Chief Operating
Officer of EFG, and Secretary of Equis Corporation in 1996 and is Secretary or
Clerk of several of EFG's subsidiaries and affiliates. Mr. Romano joined EFG in
November 1989, became Vice President and Controller in April 1993 and Chief
Financial Officer in April 1995. Mr. Romano assumed his current position in
April 1996. Mr. Romano is also Vice President and Chief Financial Officer of
Semele. Prior to joining EFG, Mr. Romano was Assistant Controller for a
privately held real estate development and mortgage origination company that he
joined in 1987. Previously, Mr. Romano was an Audit Manager at Ernst & Whinney
(now Ernst & Young LLP), where he was employed from 1982 to 1986. Mr. Romano is
a Certified Public Accountant and holds a B.S. degree from Boston College.
Mr. Coyne, age 39, is Executive Vice President, Capital Markets of EFG and
President, Chief Operating Officer and a member of the Board of Directors of
Semele. Mr. Coyne joined EFG in 1989, remained until May 1993, and rejoined EFG
in November 1994. In September 1997, Mr. Coyne was appointed Executive Vice
President of EFG. Mr. Coyne is a limited partner in AALP and ONC. From May 1993
through November 1994, he was employed by the Raymond Company, a private
investment firm, where he was responsible for financing corporate and real
estate acquisitions. From 1985 through 1989, Mr. Coyne was affiliated with a
real estate investment company and an equipment leasing company. Prior to 1985,
he was with the accounting firm of Ernst & Whinney (now Ernst & Young LLP). He
has a BS in Business Administration from John Carroll University, a Masters
Degree in Accounting from Case Western Reserve University and is a Certified
Public Accountant.
Mr. Butterfield, age 40, is Senior Vice President, Finance and Treasurer of
EFG and certain of its affiliates and is Treasurer of the General Partner and
Semele. Mr. Butterfield joined EFG in June 1992, became Vice President, Finance
and Treasurer of EFG and certain of its affiliates in April 1996 and was
promoted to Senior Vice President, Finance and Treasurer of EFG and certain of
its affiliates in July 1998. Prior to joining EFG, Mr. Butterfield was an Audit
Manager with Ernst & Young LLP, which he joined in 1987. Mr. Butterfield was
employed in public accounting and industry positions in New Zealand and London
(UK) prior to coming to the United States in 1987. Mr. Butterfield attained his
Associate Chartered Accountant (A.C.A.) professional qualification in New
Zealand and has completed his CPA requirements in the United States. He holds a
Bachelor of Commerce degree from the University of Otago, Dunedin, New Zealand.
Ms. Simonsen, age 49, joined EFG in February 1990 and was promoted to Senior
Vice President, Information Systems of EFG in April 1996. Prior to joining EFG,
Ms. Simonsen was Vice President, Information Systems with Investors Mortgage
Insurance Company, which she joined in 1973. Ms. Simonsen provided systems
consulting
10
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for a subsidiary of American International Group and authored a software program
published by IBM. Ms. Simonsen holds a BA degree from Wilson College.
Ms. Ofgant, age 34, is Senior Vice President, Lease Operations of EFG and
certain of its affiliates. Ms. Ofgant joined EFG in July 1989, was promoted to
Manager Lease Operations in April 1994, and became Vice President of Lease
Operations in April 1996. In July 1998, Ms. Ofgant was promoted to Senior Vice
President of Lease Operations. Prior to joining EFG, Ms. Ofgant was employed by
Security Pacific National Trust Company. Ms. Ofgant holds a BS degree in Finance
from Providence College.
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
See Item 10 (a-b) above.
Item 11. Executive Compensation.
(a) Cash Compensation
Currently, the Partnership has no employees. However, under the terms of the
Restated Agreement, as amended, the Partnership is obligated to pay all costs of
personnel employed full or part-time by the Partnership, including officers or
employees of the General Partner or its Affiliates. There is no plan at the
present time to make any officers or employees of the General Partner or its
Affiliates employees of the Partnership. The Partnership has not paid and does
not propose to pay any options, warrants or rights to the officers or employees
of the General Partner or its Affiliates.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
Although the Partnership has no employees, as discussed in Item 11(a),
pursuant to section 10.4 of the Restated Agreement, as amended, the Partnership
incurs a monthly charge for personnel costs of the Manager for persons engaged
in providing administrative services to the Partnership. A description of the
remuneration paid by the Partnership to the Manager for such services is
included in Item 13, herein and Note 5 to the financial statements included in
Item 14, herein.
(d) Compensation of Directors
None.
(e) Termination of Employment and Change of Control Arrangement
There exists no remuneration plan or arrangement with the General Partner or
its Affiliates which results or may result from their resignation, retirement or
any other termination.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
By virtue of its organization as a limited partnership, the Partnership has
no outstanding securities possessing traditional voting rights. However, as
provided in Section 11.2(a) of the Restated Agreement, as amended (subject to
Sections 11.2(b) and 11.3), a majority interest of the Recognized Owners has
voting rights with respect to:
11
<PAGE>
1. Amendment of the Restated Agreement;
2. Termination of the Partnership;
3. Removal of the General Partner; and
4. Approval or disapproval of the sale of all, or substantially all, of the
assets of the Partnership (except in the orderly liquidation of the
Partnership upon its termination and dissolution).
As of March 1, 2000, the following person or group owns beneficially more
than 5% of the Partnership's 1,380,661 outstanding Units:
<TABLE>
<CAPTION>
Name and Amount Percent
Title Address of of Beneficial of
of Class Beneficial Owner Ownership Class
- -------------------- ---------------------------------------- ------------ --------
<S> <C> <C> <C>
Units Representing Atlantic Acquisition Limited Partnership
Limited Partnership 88 Broad Street 125,843 Units 9.11%
Interests Boston, MA 02110
</TABLE>
Messrs. Engle, MacDonald and Coyne have ownership interests in AALP. The
general partner of AALP is controlled by Gary D. Engle. See Item 10 and Item 13
of this report.
The ownership and organization of EFG is described in Item 1 of this report.
Item 13. Certain Relationships and Related Transactions.
The General Partner of the Partnership is AFG Leasing IV Incorporated, an
affiliate of EFG.
(a) Transactions with Management and Others
All operating expenses incurred by the Partnership are paid by EFG on behalf
of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during the years ended December 31,
1999, 1998 and 1997, which were paid or accrued by the Partnership to EFG or its
Affiliates, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- ---------- ----------
<S> <C> <C> <C>
Equipment management fees $ 4,597 $ 23,344 $ 81,303
Administrative charges 92,651 58,836 55,668
Reimbursable operating expenses
due to third parties 257,186 584,743 270,409
--------- ---------- ----------
Total $ 354,434 $ 666,923 $ 407,380
========= ========== ==========
</TABLE>
As provided under the terms of the Management Agreement, EFG is compensated
for its services to the Partnership. Such services include acquisition and
management of equipment. For acquisition services, EFG was compensated by an
amount equal to 2.23% of Equipment Base Price paid by the Partnership. For
management services, EFG is compensated by an amount equal to 5% of gross
operating lease rental revenues and 2% of gross full payout lease rental revenue
received by the Partnership. Both acquisition and management fees are subject to
certain limitations defined in the Management Agreement.
Administrative charges represent amounts owed to EFG, pursuant to Section
10.4 of the Amended and Restated Agreement and Certificate of Limited
Partnership (the "Restated Agreement, as amended"), for persons employed by EFG
who are engaged in providing administrative services to the Partnership.
Reimbursable operating expenses due to third parties represent costs paid by EFG
on behalf of the Partnership which are reimbursed to EFG at actual cost.
12
<PAGE>
All equipment was purchased from EFG, one of its affiliates or from
third-party sellers. The Partnership's acquisition cost was determined by the
method described in Note 2 to the financial statements included in Item 14,
herein.
All rents and proceeds from the sale of equipment are paid directly to EFG.
EFG temporarily deposits collected funds in a separate interest-bearing escrow
account prior to remittance to the Partnership. At December 31, 1999, the
Partnership was owed $7,360 by EFG for such funds and the interest thereon.
These funds were remitted to the Partnership in January 2000.
During 1997, the Partnership and certain affiliated investment programs
sponsored by EFG exchanged their ownership interests in certain vessels for
aggregate consideration of $11,565,375. The Partnership's share of such
consideration was $2,018,804, consisting of common stock in Semele valued at
$512,153, a note receivable from Semele of $771,450 and cash of $735,201. For
further discussion, see Note 4, "Investment Securities - Affiliate I Note
Receivable - Affiliate", to the financial statements included in Item 14 herein
and Item 10.
Certain affiliates of the General Partner own Units in the Partnership as
follows:
<TABLE>
<CAPTION>
Number of Percent of Total
Affiliate Units Owned Outstanding Units
<S> <C> <C>
Atlantic Acquisition Limited
Partnership 125,843 9.11%
Old North Capital Limited
Partnership 4,452 0.32%
</TABLE>
Atlantic Acquisition Limited Partnership ("AALP") and Old North Capital
Limited Partnership ("ONC") are both Massachusetts limited partnerships formed
in 1995 and affiliates of EFG. The general partners of AALP and ONC are
controlled by Gary D. Engle. In addition, the limited partnership interests of
ONO are owned by Semele Group, Inc. (Semele"). Gary D. Engle is Chairman and CEO
of Semele.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Partnership
None.
(d) Transactions with Promoters
See Item 13(a) above.
13
<PAGE>
PART IV
Item 14. Exhibits Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements:
Report of Independent Auditors ....................................*
Statement of Financial Position
at December 31, 1999 and 1998 .....................................*
Statement of Operations
for the years ended December 31, 1999, 1998 and 1997 ..............*
Statement of Changes in Partners' Capital
for the years ended December 31, 1999, 1998 and 1997 ..............*
Statement of Cash Flows
for the years ended December 31, 1999, 1998 and 1997 ..............*
Notes to the Financial Statements .................................*
(2) Financial Statement Schedules:
None required.
(3) Exhibits:
Except as set forth below, all Exhibits to Form 10-K, as set forth
in Item 601 of Regulation S-K, are not applicable.
A list of exhibits filed or incorporated by reference is as follows:
Exhibit
Number
------
2.1 Plaintiffs' and Defendants' Joint Motion to Modify Order
Preliminarily Approving Settlement, Conditionally Certifying
Settlement Class and Providing for Notice of, and Hearing on, the
Proposed Settlement was filed in the Registrant's Annual Report on
Form 10-K/A for the year ended December 31, 1998 as Exhibit 2.1 and
is incorporated herein by reference.
2.2 Plaintiffs' and Defendants' Joint Memorandum in Support of Joint
Motion to Modify Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing for Notice
of, and Hearing on, the Proposed Settlement was filed in the
Registrant's Annual Report on Form 10-K/A for the year ended
December 31, 1998 as Exhibit 2.2 and is incorporated herein by
reference.
*Incorporated herein by reference to the appropriate portion of the 1999 Annual
Report to security holders for the year ended December 31, 1999 (see Part II).
14
<PAGE>
Exhibit
Number
------
2.3 Order Preliminarily Approving Settlement, Conditionally Certifying
Settlement Class and Providing for Notice of, and Hearing on, the
Proposed Settlement (August 20, 1998) was filed in the Registrant's
Annual Report on Form 10-K/A for the year ended December 31, 1998 as
Exhibit 2.3 and is incorporated herein by reference.
2.4 Modified Order Preliminarily Approving Settlement, Conditionally
Certifying Settlement Class and Providing for Notice of, and Hearing
on, the Proposed Settlement (March 22, 1999) was filed in the
Registrant's Annual Report on Form 10-K/A for the year ended
December 31,1998 as Exhibit 2.4 and is incorporated herein by
reference.
2.5 Plaintiffs' and Defendants' Joint Memorandum in Support of Joint
Motion to Further Modify Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing for Notice
of, and Hearing on, the Proposed Settlement is filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31,1999 as Exhibit 2.5 and is included herein.
2.6 Second Modified Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing for Notice
of, and Hearing on, the Proposed Settlement (March 5, 2000) is filed
in the Registrant's Annual Report on Form 10-K for the year ended
December 31,1999 as Exhibit 2.6 and is included herein.
4 Amended and Restated Agreement and Certificate of Limited
Partnership included as Exhibit A to the Prospectus, which is
included in Registration Statement on Form S-1 (No.33-27828).
10.1 Promissory Note in the principal amount of $2,160,000 dated March 8,
2000 between the Registrant, as lender, and Echelon Residential
Holdings LLC, as borrower, is filed in the Registrant's Annual
Report on Form 10-K for the year ended December 31,1999 as Exhibit
10.1 and is included herein.
10.2 Pledge Agreement dated March 8, 2000 between Echelon Residential
Holdings LLC (Pledgor) and American Income Partners V-A Limited
Partnership, as Agent for itself and others, is filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1999 as Exhibit 10.2 and is included herein.
13 The 1999 Annual Report to security holders, a copy of which is
furnished for the information of the Securities and Exchange
Commission. Such Report, except for those portions thereof which are
incorporated herein by reference, is not deemed "filed" with the
Commission.
23 Consent of Independent Auditors.
99(a) Lease agreement with Gearbulk Shipowning Ltd. (formerly Kristian
Gerhard Jebsen Skipsrederi A/S) was filed in the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993 as Exhibit
28 (c) and is incorporated herein by reference.
99(b) Lease agreement with Sunworld International Airlines, Inc. was filed
in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 as Exhibit 99(d) and is incorporated herein by
reference.
15
<PAGE>
Exhibit
Number
------
99(c) Lease agreement with Transmeridian Airlines was filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1998 as Exhibit 99(e) and is incorporated herein by reference.
99(d) Lease agreement with Amoco Corporation is filed in the Registrant's
Annual Report on Form 10-K for the year ended December 31,1999 and
is included herein.
99(e) Lease agreement with International Paper is filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31,1999 and is included herein.
99(f) Lease agreement with Tenneco Packaging Company is filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1999 and is included herein.
(b) Reports on Form 8-K
None.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity and
on the date indicated.
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
By: AFG Leasing IV Incorporated,
a Massachusetts corporation and the
General Partner of the Registrant.
By: /s/ Geoffrey A. MacDonald By: /s/ Gary D. Engle
---------------------------- ----------------------------
Geoffrey A. MacDonald Gary D. Engle
Chairman and a member of the President and Chief Executive
Executive Committee of EFG and Officer and a member of the
President and a Director of the Executive Committee of EFG and a
General Partner Director of the General Partner
(Principal Executive Officer)
Date: March 30, 2000 Date: March 30, 2000
------------------------- -------------------------
By: /s/ Gary M. Romano By: /s/ Michael J. Butterfield
---------------------------- ----------------------------
Gary M. Romano Michael J. Butterfield
Executive Vice President and Chief Senior Vice President, Finance and
Operating Officer of EFG and Clerk Treasurer of EFG and Treasurer
of the General Partner of the General Partner
(Principal Financial Officer) (Principal Accounting Officer)
Date: March 30, 2000 Date: March 30, 2000
------------------------- -------------------------
17
<PAGE>
EXHIBIT INDEX
1999 Form 10-K
Exhibit
- -------
2.5 Plaintiffs' and Defendants' Joint Memorandum in Support of Joint
- Motion to Further Modify Order Preliminarily Approving
Settlement, Conditionally Certifying Settlement Class and
Providing for Notice of, and Hearing on, the Proposed Settlement
2.6 Second Modified Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing for
Notice of, and Hearing on, the Proposed Settlement (March 5,
2000)
10.1 Promissory Note in the principal amount of $2,160,000 dated
March 8, 2000 between the Registrant, as lender, and Echelon
Residential Holdings LLC, as borrower.
10.2 Pledge Agreement dated March 8, 2000 between Echelon Residential
Holdings LLC (Pledgor) and American Income Partners V-A Limited
Partnership, as Agent for itself and others.
99(d) Lease agreement with Amoco Corporation.
99(e) Lease agreement with International Paper.
99(f) Lease agreement with Tenneco Packaging Company.
18
<PAGE>
Exhibit 2.5
IN THE UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 98-8030-CIV-HURLEY
- --------------------------------------------------------------------------------
LEONARD ROSENBLUM, J/B INVESTMENT PARTNERS, SMALL AND REBECCA BARMACK, PARTNERS,
BARBARA HALL, HENRY R. GRAHAM, ANNE R. GRAHAM, MARGO CORTELL, PATRICK M. RHODES,
BERNICE M. HUELS, GARRETT N. VOIGHT, CLAIRE E. FULCHER, MARCELLA LEVY, RICHARD
HODGSON, CITY PARTNERSHIPS, HELMAN PARSONS AND CLEVA PARSONS, on behalf of
themselves and all others similarly situated and derivatively on behalf of the
Nominal Defendants,
Plaintiffs,
vs.
EQUIS FINANCIAL GROUP LIMITED PARTNERSHIP, a Massachusetts, Limited Partnership,
EQUIS CORPORATION, a Massachusetts Corporation, GDE ACQUISITION LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AFG LEASING INCORPORATED, a
Massachusetts Corporation, AFG LEASING IV INCORPORATED, a Massachusetts
Corporation, AFG LEASING VI INCORPORATED, a Massachusetts Corporation, AFG
AIRCRAFT MANAGEMENT CORPORATION, a Massachusetts Corporation, AFG ASIT
CORPORATION, a Massachusetts Corporation, AF/AIP PROGRAMS LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, GARY D. ENGLE and GEOFFREY A. MACDONALD,
Defendants,
AIRFUND I INTERNATIONAL LIMITED PARTNERSHIP, a Massachusetts Limited
Partnership, AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME 4 LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME 5 LIMITED PARTNERSHIP, a Massachusetts
<PAGE>
Limited Partnership, AMERICAN INCOME 6 LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME 7 LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME 8 LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME PARTNERS III-A LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-B LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-C
LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME
PARTNERS III-D LIMITED PARTNERSHIP, a Massachusetts Limited Partnership,
AMERICAN INCOME PARTNERS IV-A LIMITED PARTNERSHIP, a Massachusetts Limited
Partnership, AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME PARTNERS IV-C LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-D LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS V-A
LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME
PARTNERS V-B LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN
INCOME PARTNERS V-C LIMITED PARTNERSHIP, a Massachusetts Limited Partnership,
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP, a Massachusetts Limited
Partnership, AMERICAN INCOME FUND I-B, a Massachusetts Limited Partnership,
AMERICAN INCOME FUND I-C, a Massachusetts Limited Partnership, AFG INVESTMENT
TRUST A, a Delaware business trust, AFG INVESTMENT TRUST B, a Delaware business
trust, AFG INVESTMENT TRUST C, a Delaware business trust, and AFG INVESTMENT
TRUST D, a Delaware business trust,
Nominal Defendants.
- --------------------------------------------------------------------------------
2
<PAGE>
PLAINTIFFS' AND DEFENDANTS' JOINT MEMORANDUM IN
SUPPORT OF JOINT MOTION TO FURTHER MODIFY ORDER
PRELIMINARILY APPROVING SETTLEMENT, CONDITIONALLY
CERTIFYING SETTLEMENT CLASS AND PROVIDING
FOR NOTICE OF, AND HEARING ON, THE PROPOSED SETTLEMENT
Plaintiffs ("Plaintiffs" or "Class Counsel") and Defendants submit this
Joint Memorandum in support of their Joint Motion To Further Modify Order
Preliminarily Approving Settlement, Conditionally Certifying Settlement Class
and Providing For Notice of, And Hearing On, The Proposed Settlement.
Background
By Order dated August 20, 1998, this Court preliminarily approved the
original Stipulation of Settlement dated July 16, 1998, conditionally certified
the Settlement Class, and three sub-classes,(1) and provided for Notice of, and
Hearing on, the proposed Settlement (the "Settlement"). A true and complete copy
of the Court's August 20, 1998 Order (the "Preliminary Approval Order") is
attached to the Motion as Exhibit 1.
As part of the settlement of the claims brought by the Operating
Partnership Sub-Class, the Settlement provides for Defendants to pursue and
cause the consummation of an exchange transaction (the "Exchange"), pursuant to
which eleven (11) of the limited partnerships named as Nominal Defendants (the
"Operating Partnerships") would be restructured, and converted into a
publicly-traded entity ("Newco") whose securities would be listed and traded on
the NASDAQ National Market System or other national securities exchange.
On or about August 24, 1998, four days after the Court's entry of the
Preliminary Approval Order, Defendants filed a Consent Solicitation Statement
(Form 14A) to be used in
3
<PAGE>
connection with the solicitation of the Operating Partnership Sub-Class' consent
to the Exchange for review with the U.S. Securities and Exchange Commission (the
"SEC"). The parties had anticipated that the SEC would be able to complete the
review within several months, and thereafter the Notice of the Settlement and
fairness hearing would be sent to all Class members, with the Consent
Solicitation Statement included only with the Notice sent to the Operating
Partnership Sub-Class members.
However, after encountering numerous unanticipated delays in the SEC
review process, the parties entered into an Amended Stipulation of Settlement
dated March 15, 1999 (the "Amended Stipulation"). On March 22, 1999, after a
hearing, this Court entered an order modifying the preliminary approval order
(the "Modified Preliminary Approval Order"). A true and complete copy of the
Modified Preliminary Approval Order is attached the Motion as Exhibit 2.
Pursuant to the Modified Preliminary Approval Order, the settlement process was
bifurcated into two phases. In the first phase, the parties asked the Court to
approve the settlement with respect to the claims brought by the so-called RSL
and Trust Sub-Classes.(2) In the second phase, the parties will seek the Court's
final approval of the settlement with respect to the claims brought by the
Operating Partnership Sub-Class.
Due to the delays caused by the SEC review process, certain financial
information upon which the settlement was based has become outdated.
Accordingly, the parties have agreed to further modifications to the Amended
Stipulation to reflect updated valuations of
- --------------------------------------------------------------------------------
(1) The three sub-classes are referred to as: (a) the "RSL Sub-Class"; (b) the
"Operating Partnership Sub-Class'; and (c) the "Trust Sub-Class".
(2) A hearing on the final approval of the settlement with respect to the RSL
and Trust Sub-Classes was held on May 21, 1999. After that hearing, on May 26,
1999, the Court entered an order approving the settlement with respect to the
RSL and Trust Sub-Classes.
4
<PAGE>
the Operating Partnerships and Management Assets and revised allocations of
Shares in Newco based on those valuations.
The Proposed Amendments
The following is a description of the proposed amendments to the
Settlement that were negotiated on an arm's-length basis by Class Counsel and
the Defendants. The vast majority of the original Stipulation and the Amended
Stipulation have not been altered, and the sub-classes, which were conditionally
certified by the Court in its August 20, 1998 Order, remain the same. The
parties have agreed to the following amendments to the Amended Stipulation:
(a) amend the $10 million cash distribution schedule (see Chart #1)
in Section 2.2(a) to reflect the updated cash reserves held by each
of the Operating Partnerships as of September 30, 1999;
(b) amend the allocations of Newco Shares in Sections 2.2(c) and
2.2(d) (see Chart #2 and #3) to reflect updated valuations of the
Operating Partnerships and Management Assets;
(c) amend Section 2.2(d) to increase the payment by Equis of Newco
Shares to the Operating Partnership Sub-Class members from $8
million to $9 million;
(d) eliminate Section 2.2(g) which offered so-called "appraisal
rights" for Participating Investors who did not wish to retain their
Shares in Newco;
(e) eliminate Section 2.2(i) which required that twenty-five percent
(25%) of the Shares of Newco allocated to the Equis Owners be placed
in an escrow account:
and
5
<PAGE>
(f) amend Section 4.1(i) to clarify that the Operating Partnerships
may invest a total of $32 million in New Investments, to be
increased only upon the further agreement of the parties, which
amount corresponds to forty percent (40%) of the total aggregate net
asset values of all the Operating Partnerships as of March 19, 1999.
1. Amendments Pertaining to Updated Financial Information, Including
Valuations and Allocations
The information which is fundamental to the terms of the original
Stipulation and Amended Stipulation has become outdated. Specifically, the data
supporting the valuation of the Operating Partnerships and the Management Assets
was prepared as of September 1998 and now has changed. The Partnerships have
sold various of their equipment assets and, in certain instances, they have
entered into agreements to renew existing leases or otherwise to re-lease their
equipment assets. In addition, information that was used to assess the potential
market value of the common stock of Newco, and the value of the Management
Assets to be contributed by the Defendants, such as price earnings ratios and
other market multiples for companies comparable to Newco and the Management
Assets, has changed due to the passage of time and resulting changes in the
business environment and stock markets. Therefore, the parties believe that it
is in the best interests of the limited partners of the Partnerships to update
the valuation of the transaction using the same methodology employed before and
to revise the Amended Stipulation to simplify and improve upon its terms.
The Defendants have updated and revised the valuation information as of
September 30, 1999 and based on this latest analysis and negotiations with Class
Counsel, Equis has agreed to reduce its net allocation of Newco Shares for the
Management Assets
6
<PAGE>
to 14.72% from the prior 22.335%, representing a reduction of approximately 34%.
Accordingly, the parties have amended Sections 2.2(c) and 2.2(d) of the Amended
Stipulation to reflect the updated valuations of the Operating Partnerships and
Management Assets. Set forth below is a schedule showing the revised valuations
and allocations as of September 30, 1999 in comparison with the September 30,
1998 valuations and allocations (3):
REVISED VALUATIONS AND ALLOCATIONS
---------------------------------------------------------
September 30, 1999 September 30, 1998
---------------------------------------------------------
Value Percent Value Percent
---------------------------------------------------------
Partnerships $64,686,726 85.28% $ 78,042,346 77.665%
Management Assets 11,165,280 14.72% 22,443,000 22.335%
---------------------------------------------------------
$75,852,006 100.00% $100,485,346 100.000%
---------------------------------------------------------
2. Amendments Pertaining To Increased Payment by Equis of Newco Shares
from $8 Million to $9 Million and Elimination of Promissory Notes
and Escrow Account Provisions
Equis has also agreed to increase the reallocation of Newco Shares it
would have received for the Management Assets to the Partnerships from $8
million to $9 million. By increasing the payment to $9 million, Equis will give
up a much greater percentage of the estimated value of the Management Assets in
favor of the limited partners (44.6% compared to the previous 26.3%). In
exchange for the substantial benefits to the limited partners caused by the
changes described above, the parties have agreed to eliminate the requirement
that the Defendants defer retention of 25% of the Newco Shares allocated to them
for the Management Assets in escrow pending attainment of future target net
income
- ----------
(3) The allocations above are net of the $10 million cash distribution and
reflect the re-allocation of $9 million of value from Equis' Management Assets
to the Partnerships.
7
<PAGE>
levels. Under the prior settlement agreement, the Defendants would have received
16.75% of Newco's common stock in exchange for the Management Assets, assuming
that none of the escrow shares were retained by the Defendants, and 22.335%,
assuming that all of the escrow shares were retained by the Defendants. Under
the revised settlement agreement, the Defendants will receive a smaller stock
allocation of 14.72% for the Management Assets and the escrow concept will be
eliminated. The elimination of the escrow shares concept will permit management
to focus on Newco's long-term success while having the added benefit of
accelerating finalization of the settlement to a date coincident to the date of
Consolidation.
In addition, the parties have agreed to eliminate the option for the
limited partners to elect to receive promissory notes instead of common stock in
order to simplify the capital structure of Newco and eliminate any form of
"equity" debt service upon the Consolidation. This revision will cause all
limited partners of the Operating Partnerships (and the general partners) to
have uniform financial interests and will simplify the choices presented to the
limited partners to either (a) object to their Partnership participating in the
Consolidation, or (b) approve of its participation.
3. Amendments to Clarify Maximum Amount Which May be Reinvested In New
Investments
In its Modified Preliminary Approval Order, this Court approved amendments
to the Settlement which permitted the Operating Partnerships, pending the
completion of the SEC review process and ultimately the Exchange, to reinvest a
certain portion of the money (40% of the total aggregate net asset value of the
Partnerships) they have received from the sales of equipment. The parties now
seek to clarify the Amended Stipulation to make clear that the Operating
Partnerships may invest a total of $32 million in New
8
<PAGE>
Investments, to be increased only upon the further agreement of the parties,
which amount corresponds to forty percent (40%) of the total aggregate net asset
values of all the Operating Partnerships as of March 19, 1999.
Conclusion
For the foregoing reasons, Plaintiffs and Defendants request that this
Court grant the Joint Motion To Further Modify Order Preliminarily Approving
Settlement, Conditionally Certifying Settlement Class and Providing For Notice
of, And Hearing On, The Proposed Settlement.
Respectfully submitted,
this 24 day of February 2000,
ATTORNEYS FOR DEFENDANTS:
/s/ [ILLEGIBLE]
--------------------------------------
RICHMAN GREER WEIL BRUMBAUGH
MIRABITO & CHRISTENSEN, PA.
Gerald F. Richman
Joseph F. Hession
Phillips Point - East Tower
777 South Flager Drive - Suite 1100
West Palm Beach, Florida 33401
(561) 803-3500
NIXON PEABODY LLP
Deborah L. Thaxter, P.C.
Gregory P. Deschenes
101 Federal Street
Boston, MA 02110 - 1832
(617) 345-1000
9
<PAGE>
ATTORNEYS FOR PLAINTIFFS:
/s/ [ILLEGIBLE] /FOR/
--------------------------------------
LERNER & PEARCE, P.A.
Allan M. Lerner
2888 East Oakland Park Boulevard
Ft. Lauderdale, FL 33306
(954) 563-8111
/s/ [ILLEGIBLE] /FOR/
--------------------------------------
WINCHESTER HARWOOD HALEBIAN
& FEFFER LLP
Andrew D. Friedman
488 Madison Avenue, 8th Floor
New York, NY 10022
(212) 935-7400
LAW OFFICES OF VINCENT T.
GRESHAM
Vincent T. Gresham
6065 Roswell Road, Ste. 1445
Atlanta, GA 30328
(770) 552-5270
GILMAN AND PASTOR
Peter A. Lagorio
One Boston Place
Boston, MA 02108-4400
(617) 589-3750
BENJAMIN S. SCHWARTZ,
CHARTERED
Benjamin S. Schwartz
4600 Olympic Way
Evergreen, CO 80439
(303) 670-5941
LAW OFFICES OF LIONEL Z. GLANCY
Lionel Z. Glancy
1801 Avenue of the Stars, Suite 306
Los Angeles, CA 90067
(310) 201-9150
10
<PAGE>
LAW OFFICES OF JAMES V. BASHIAN
500 Fifth Avenue, Ste. 2700
New York, NY 10110
(212) 921-4100
THOMAS A. HOADLEY, PA
310 Australian Avenue
Palm Beach, FL 33480
(561) 792-9006
GOODKIND, LABATAN, RUDOFF &
SUCHAROW, LLP
Lynda J. Grant
Robert N. Cappucci
100 Park Avenue
New York, NY 10017
(212) 907-0700
LASKY & RIFKIND, LTD.
Leigh Lasky
30 North LaSalle Street, Ste. 2140
Chicago, IL 60602
(312) 759-7670
HAROLD B. OBSTFELD, P.C.
Harold B. Obstfeld
260 Madison Avenue
New York, NY 10116
(212) 696-1212
11
<PAGE>
Exhibit 2.6
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
- --------------------------------------------------------------------------------
LEONARD ROSENBLUM, J/B INVESTMENT PARTNERS, SMALL and REBECCA BARMACK, PARTNERS,
BARBARA HALL, HENRY R. GRAHAM, ANNE R. GRAHAM, MARGO CORTELL. PATRICK M RHODES,
BERNICE M. HUELS, GARRETT N. VOIGHT, CLAIRE E. FULCHER, MARCELLA LEVY, RICHARD
HODGSON, CITY PARTNERSHIPS, HELMAN PARSONS AND CLEVA PARSONS, on behalf of
themselves and all others similarly situated and derivatively on behalf of the
Nominal Defendants,
Plaintiffs,
v. Case No. 98-8030
EQUIS FINANCIAL GROUP LIMITED PARTNERSHIP, a Massachusetts Limited Partnership.
EQUIS CORPORATION, a Massachusetts Corporation, GDE ACQUISITION LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AFG LEASING INCORPORATED, a
Massachusetts Corporation, AFG LEASING IV INCORPORATED, a Massachusetts
Corporation. AFG LEASING VI INCORPORATED, a Massachusetts Corporation, AFG
AIRCRAFT MANAGEMENT CORPORATION, a Massachusetts Corporation, AFG ASIT
CORPORATION. a Massachusetts Corporation, AF/AIP PROGRAMS LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, GARY D. ENGLE and GEOFFREY A. MACDONALD.
Defendants,
AIRFUND I INTERNATIONAL LIMITED PARTNERSHIP, a
- --------------------------------------------------------------------------------
<PAGE>
Massachusetts Limited Partnership, AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP,
a Massachusetts Limited Partnership, AMERICAN INCOME 4 LIMITED PARTNERSHIP. a
Massachusetts Limited partnership, AMERICAN INCOME 5 LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME 6 LIMITED PARTNERSHIP, a
Massachusetts Limited partnership, AMERICAN INCOME 7 LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME 8 LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-A LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-B
LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME
PARTNERS III-C LIMITED PARTNERSHIP, a Massachusetts Limited Partnership,
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP, a Massachusetts Limited
Partnership, AMERICAN INCOME PARTNERS IV-A LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-C LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-D
LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME
PARTNERS V-A LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN
INCOME PARTNERS V-B LIMITED PARTNERSHIP, a Massachusetts Limited Partnership,
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP, a Massachusetts Limited
Partnership, AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership,
- --------------------------------------------------------------------------------
-2-
<PAGE>
AMERICAN INCOME FUND I-B, a Massachusetts Limited Partnership, AMERICAN INCOME
FUND I-C, a Massachusetts Limited Partnership, AMERICAN INCOME FUND I-D, a
Massachusetts Limited Partnership, AMERICAN INCOME FUND I-E, a Massachusetts
Limited Partnership, AFG INVESTMENT TRUST A, a Delaware business trust, AFG
INVESTMENT TRUST B, a Delaware business trust, AFG INVESTMENT TRUST C, a
Delaware business trust, and AFG INVESTMENT TRUST D, a Delaware business trust,
Nominal Defendants.
- --------------------------------------------------------------------------------
SECOND MODIFIED ORDER PRELIMINARILY APPROVING SETTLEMENT,
CONDITIONALLY CERTIFYING SETTLEMENT CLASS AND PROVIDING
FOR NOTICE OF, AND HEARING ON, THE PROPOSED SETTLEMENT
WHEREAS, by Order dated August 20, 1998 (the "Preliminary Approval
Order"), this Court issued an order in the above captioned action (the "Action")
preliminarily approving the Settlement, conditionally certifying the settlement
class and providing for notice of, and hearing on the proposed settlement, and
by order dated March 22, 1999, this Court entered an order modifying the
Preliminary Approval Order ("Modified Preliminary Approval Order"), and the
parties to the Action have now agreed to further amend the Stipulation of
Settlement ("Second Amended Stipulation"), this Court having read and considered
the Second Amended Stipulation and the exhibits annexed thereto;
-3-
<PAGE>
NOW, THEREFORE, IT IS HEREBY ORDERED THAT THE COURT FURTHER MODIFIES THE
ORDER INSOFAR AS SET FORTH BELOW:
1. A hearing (the "Hearing") shall be held before this Court on Thursday,
July 27, 2000, at 701 Clematis Street, West Palm Beach, Florida, 4:00 p.m., in
Courtroom 5, to determine whether the proposed Settlement of the Action on the
terms and conditions provided for in the Second Amended Stipulation, with
respect to the Operating Partnership Sub-Class, including the issuance and
exchange of the securities in the Exchange, is fair, reasonable and adequate and
should be finally approved by the Court; whether a final judgment as provided in
the Second Amended Stipulation should be entered herein with respect to the
claims brought by the Operating Partnership Sub-Class: and whether Class
Counsels application(s) for attorneys' fees, awards to the Class Plaintiffs and
the reimbursement of out-of-pocket expenses should be granted. The Court may
continue the Hearing without further notice to Class Members.
2. The Court approves, as to form and content, the Notices of Class Action
Determination, Proposed Settlement and Fairness Hearing (the "Notices"), and
finds that the mailing of the Notices substantially in the manner and form set
forth in paragraph 3 of this Order meets the requirements of Rule 23 of the
Federal Rules of Civil Procedure, the Constitution of the United States and any
other applicable law, is the best notice practicable
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under the circumstances, and constitutes due and sufficient notice to all
persons entitled thereto.
3. (a) Within five (5) days following review by the SEC of the Consent
Solicitation Statement (said 5th day being referred to hereafter as the "Notice
Date), the Defendants shall cause a copy of the Notice and the Consent
Solicitation Statement to be mailed to all Operating Partnership Sub-Class
Members at their last known address as appearing in the records maintained by
the Partnerships;
(b) At or prior to the Hearing, Defendants' counsel shall serve and
file with the Court proof, by affidavit or declaration, of such mailing to the
Operating Partnership Sub-Class; and
(c) All reasonable costs incurred in identifying and notifying Class
Members shall be paid as set forth in the Second Amended Stipulation. In the
event that the Settlement is not approved by the Court, or otherwise fails to
become effective, Defendants shall not have any recourse against the Plaintiffs,
Class Counsel or the Claims Administrator for such costs and expenses which have
been incurred or advanced pursuant to the Second Amended Stipulation or Second
Modified Court Order.
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4. Class Members may enter an appearance in the Action, at their own
expense, individually or through counsel of their own choice. If they do not
enter an appearance, they will be represented by Class Counsel.
5. Pending final determination of whether the Settlement should be
approved, neither the Class Plaintiffs nor any Class Member, either directly,
representatively, derivatively, or in any other capacity, shall commence or
prosecute against any of the Defendants or the Released Parties, any action or
proceeding in any court or tribunal asserting any of the Settled Claims.
6. Pending final determination of whether the Settlement should be
approved, the Class Plaintiffs and all other Class Members are barred and
permanently enjoined from (i) transferring, selling, assigning, giving,
pledging, hypothesizing or otherwise disposing of any Units of the Operating
Partnerships to any person other than a family member or in cases of divorce,
incapacity or death of the Unitholder; (ii) granting a proxy to object to the
Exchange; or (iii) commencing a tender offer for the Units. In addition, pending
final determination of whether the Settlement should be approved, the General
Partners of the Operating Partnerships are enjoined from (i) recording any
transfers made in violation of the Order and (ii) providing the list
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of investors in any Operating Partnership to any person for the purpose of
conducting a tender offer.
7. In addition effective March 19, 1999, the Operating Partnerships may
collectively invest up to forty percent (40%), to be Increased only upon
agreement of the parties, of the total aggregate net asset values of all
Operating Partnerships, in any investment, including, but not limited to
additional equipment and other business activities, that the General Partner and
the Manager reasonably believe to be consistent with the operating objectives
and business interests of Newco after the Exchange (the New Investments"),
subject to the following limitations:
a. Under no circumstances may the Operating Partnership reduce its cash
balance to an amount less than the amount required to pay the
Operating Partnership's share of the $10 Million Cash Distribution
provided for herein, plus such additional amount as the General
Partner reasonably believes to be necessary to meet working capital
and other cash reserve requirements of the Operating Partnership.
b. To the extent that New Investments are made in additional equipment,
the Manager will (i) defer, until the earlier of the effective date
of the Exchange or December 31, 1999, any Acquisition Fees resulting
therefrom and (ii) limit its Management Fee on all such assets to 2%
of rental income. In the event the
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Exchange is consummated, all such Acquisition and Management Fees
related to the New Investments will be paid to Newco.
c. To the extent that New Investments are not represented by equipment
(ie: business acquisitions), the Manager will forego any Acquisition
Fees and Management Fees related to such assets.
d. Except for permitting New Investments, or as otherwise provided for
herein, all other provisions of the Partnership Agreements governing
the investment objectives and policies of the Partnership shall
remain in full force and effect.
e. In the event that an Operating Partnership has acquired New
Investments pursuant to Section 4.1 (i)(a) through (d) of the Second
Amended Stipulation, and is not a party to the Exchange, Newco shall
acquire all such New Investments from such Operating Partnership for
an amount equal to the Operating Partnership's net equity investment
in such New Investments plus an annualized return thereon of 7.5%.
f. In the event that an Operating Partnership has acquired New
Investments pursuant to Section 4.1(i)(a) through (d) of the Second
Amended Stipulation, and the Exchange is not consummated, the
General Partner(s) shall (i) use its (their) best efforts to divest
all such New Investments in an orderly and timely fashion, and (ii)
cancel or return to each Operating Partnership any accumulated or
deferred fees on such New Investments.
g. The parties agree the Operating Partnerships may invest a total of
$32 million in New Investments, to be increased only upon the
further agreement of the
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parties, which amount corresponds to forty percent (40%) of the
total aggregate net asset values of all Operating Partnerships as of
March 19, 1999.
8. Any Member of the Settlement Class may appear at the Settlement
Hearings and object to (a) the approval of the proposed Settlement of the Action
as fair, reasonable and adequate, (b) the entrance of a final judgment, and/or
(c) the application(s) for attorneys' fees and expenses; provided, however, that
no Class Member or any other person shall be heard or entitled to contest the
approval of the terms and conditions of the proposed Settlement, or, if
approved, the judgment to be entered thereto approving the same, or the
attorneys' fees and expenses to Class Counsel, unless on or before fourteen (14)
days prior to the Hearing, that person has served, by hand or by first-class
mail, written objections and copies of any papers and briefs desired to be
considered by the Court, together with proof of membership in the Settlement
Class, upon both Plaintiffs' Lead Counsel: Andrew D. Friedman, Esq., Wechsler
Harwood Halebian & Feffer, LLP, 488 Madison Avenue, New York, N.Y. 10022; and
Defendants' Counsel: Deborah L. Thaxter, P.C., Nixon Peabody LLP, 101 Federal
Street, Boston, Massachusetts 02110, and filed said objections, papers and
briefs with the Clerk of the United States District Court for the Southern
District of Florida. Any Member of the Settlement Class who does not make his or
her objection in the manner provided herein shall be deemed to have waived such
objection, including the right to appeal, and shall forever be foreclosed
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from making any objection to the fairness or adequacy of the proposed Settlement
as incorporated in the Second Amended Stipulation and the award of attorneys'
fees and expenses to Class Counsel, unless otherwise ordered by the Court.
9. The Court reserves the right to continue the date of the Hearing and
any continuation thereof without further notice to the members of the Settlement
Class, and retains jurisdiction to consider all further applications arising out
of or connected with the proposed Settlement.
DONE and SIGNED in Chambers at West Palm Beach, Florida, this 5th day of
March, 2000.
/s/ Daniel T.K. Hurley
-----------------------------------
Daniel T.K. Hurley
United States District Judge
Copies To All Counsel Of Record
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Exhibit 10.1
PROMISSORY NOTE
$2,160,000 As of March 8, 2000
FOR VALUE RECEIVED, the undersigned, Echelon Residential Holdings LLC, a
Delaware limited liability company with a principal address of 450 Carillon
Parkway, Suite 200, St. Petersburg, FL 33716 (hereinafter "the Maker"), promises
to pay to the order of American Income Partners V-A Limited Partnership, with a
principal address of 88 Broad Street, Boston, MA 02110 (together with any other
holder hereof, the "Payee") or at such address or at such other place as the
Payee may from time to time designate in writing, the principal sum of
TWO MILLION ONE HUNDRED SIXTY THOUSAND DOLLARS
($2,160,000), together with interest on the unpaid principal balance hereof from
time to time at a fixed rate equal to fourteen percent (14.0%) per annum through
that date which is twenty-four (24) months from the date hereof and eighteen
percent (18%) per annum thereafter. Such interest shall accrue and compound on a
monthly basis but shall not be due and payable until the Maturity Date. In the
absence of demonstrable error, the books and records of the Payee shall
constitute conclusive evidence of the unpaid principal balance hereof from time
to time.
This Note may be prepaid, in whole or from time to time in part, at any
time, without premium or penalty. All payments shall be applied first to
collection costs, then to accrued interest and any remainder in payment of
principal. The principal amount prepaid, if any, may not at any time be
reborrowed.
If not sooner paid, all outstanding principal and accrued and unpaid
interest thereon shall be due and payable on that date which is thirty (30)
months from the date hereof (the "Maturity Date").
All payments hereunder shall be payable in lawful money of the United
States which shall be legal tender for public and private debts at the time of
payment. Interest shall be calculated on the basis of a year consisting of 360
days and payable for the actual number of days elapsed (including the first day
but excluding the last day), including any time extended by reason of Saturdays,
Sundays and holidays.
It is expressly agreed that the occurrence of any one or more of the
following shall constitute an "Event of Default" hereunder:
(a) any failure to pay any amount or installment of interest or principal
and interest whereon the same is payable as above expressed;
(b) any representation or warranty made by the Maker in connection
herewith be untrue when made or not be fulfilled;
<PAGE>
(c) failure to observe or perform any other covenant, agreement,
condition, term or provision hereof;
(d) the Borrower or any guarantor or any member or joint venturer in the
Borrower shall be involved in financial difficulties as evidenced by: (1) its
commencement of a voluntary case under Title 11 of the United States Code as
from time to time in effect, or its authorizing, by appropriate proceedings, the
commencement of such a voluntary case; (2) its filing an answer or other
pleading admitting or failing to deny the material allegations of a petition
filed against it commencing an involuntary case under said Title 11, or seeking,
consenting to or acquiescing in the relief therein provided, or by its failing
to controvert timely the material allegations of any such petition; (3) the
entry of an order for relief in any involuntary case commenced under said Title
11; (4) its seeking relief as a debtor under any applicable law, other than said
Title 11, of any jurisdiction relating to the liquidation or reorganization of
debtors or to the modification or alteration of the rights of creditors, or its
consenting to or acquiescing in such relief; (5) the entry of an order by a
court of competent jurisdiction (i) finding it to be bankrupt or insolvent, (ii)
ordering or approving its liquidation, reorganization or any modification or
alteration of the rights of creditors, or (iii) assuming custody of, or
appointing a receiver or other custodian for, all or a substantial part of its
property; or (6) its making an assignment for the benefit of, or entering into a
composition with, its creditors, or appointing or consenting to the appointment
of a receiver or other custodian for all or a substantial part of its property.
If any such Event of Default hereunder shall occur, the Payee may declare
to be immediately due and payable the then outstanding principal balance under
this Note, together with all accrued and unpaid interest thereon, and all other
amounts payable to the Payee hereunder, whereupon all such amounts shall become
and be due and payable immediately. The failure of the Payee to exercise said
option to accelerate shall not constitute a waiver of the right to exercise the
same at any other time.
The Maker will pay on demand all costs and expenses, including reasonable
attorneys' fees, incurred or paid by the Payee in enforcing or collecting any of
the obligations of the Maker hereunder. The Maker agrees that all such costs and
expenses and all other expenditures by the Payees on account hereof which are
not reimbursed by the Maker immediately upon demand, and all amounts due under
this Note after maturity and any amounts due hereunder if an Event of Default
shall occur hereunder shall bear interest at a rate equal to the lesser of
eighteen percent (18.0%) per annum or the maximum rate permitted by law until
such expenditures are repaid or this Note and such amounts are paid in full to
the Payee.
Notwithstanding any other provision hereof; the Maker shall not be
required to pay any amount pursuant hereto which is in excess of the maximum
amount permitted under applicable law. It is the intention of the parties hereto
to conform strictly to any applicable usury law, and it is agreed that if any
amount contracted for, chargeable or receivable under this Note shall exceed the
maximum amount permitted under any such law, any such excess shall be deemed a
mistake and cancelled automatically and, if theretofore paid, shall be refunded
to the Maker or, at the Payee's sole option, shall be applied as set forth
above.
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All notices required or permitted to be given hereunder shall be given in
the writing and shall be effective when mailed, postage prepaid, by registered
or certified mail, addressed in the case of the Maker to it at the address of
the Maker set forth above and in the case of the Payee to it at the address of
the Payee set forth above or to such other address as either the Maker or the
Payee may from time to time specify by like notice.
All of the provisions of this Note shall be binding upon and inure to the
benefit of the Maker and the Payee and their respective successors and assigns.
This Note shall be governed by and construed in accordance with the internal
laws of The Commonwealth of Massachusetts.
The Maker and every indorser and guarantor hereof hereby consents to any
extension of time of payment hereof; release of all or any part of the security
for the payment hereof; or release of any party liable for this obligation, and
waives presentment for payment, demand, protest and notice of dishonor. Any such
extension or release may be made without notice to the Maker and without
discharging their liability.
IN WITNESS WHEREOF, the Maker has executed and delivered this Note, under
seal, on the day and year first written above.
ECHELON RESIDENTIAL HOLDINGS LLC
/s/ James A. Coyne
-------------------------
James A. Coyne, Manager
B0S364061.1
<PAGE>
Exhibit 10.2
PLEDGE AGREEMENT
(PARTNERSHIPS)
FOR VALUE RECEIVED, the undersigned, Echelon Residential Holdings
LLC, a Delaware limited liability company (the "Pledgor") and the sole member of
Echelon Residential LLC, a Delaware limited liability company ("Residential"),
hereby assigns and pledges to American Income Partners V-A Limited Partnership,
a Massachusetts limited partnership, in its capacity as collateral agent (the
"Agent") for itself and each of American Income Partners V-B Limited
Partnership, a Massachusetts limited partnership, American Income Partners V-C
Limited Partnership, a Massachusetts limited partnership, American Income
Partners V-D Limited Partnership, a Massachusetts limited partnership, American
Income Fund I-A Limited Partnership, a Massachusetts limited partnership,
American Income Fund I-B Limited Partnership, a Massachusetts limited
partnership, American Income Fund I-C Limited Partnership, a Massachusetts
limited partnership, American Income Fund I-D Limited Partnership, a
Massachusetts limited partnership, American Income Fund I-E Limited Partnership,
a Massachusetts limited partnership, AIRFUND International Limited Partnership,
a Massachusetts limited partnership and AIRFUND II International Limited
Partnership, a Massachusetts limited partnership and their respective successors
and assigns (collectively, the "Lenders"), and grants to the Agent a security
interest in all of the Pledgor's right, title and interest in and to its
membership interests in Residential, wherever located and whether now owned or
hereafter acquired, together with (i) all payments and distributions, whether in
cash, property or otherwise, at any time owing or payable to the Pledgor on
account of its interest as a member of Residential, (ii) all of the Pledgor's
rights and interests under the operating agreement of Residential (the
"Operating Agreement"), including all voting and management rights and all
rights to grant or withhold consents or approvals, (iii) all rights of access
and inspection to and use of all books and records, including computer software
and computer software programs, of Residential, (iv) all other rights,
interests, property or claims to which the Pledgor may be entitled to in its
capacity as a member of Residential, (v) any and all substitutions and
replacements thereof, including any securities or other instruments into which
any of the foregoing may at any time and from time to time be converted or
exchanged, and (vi) any and all proceeds and products of the foregoing, cash and
non-cash (collectively, the "Pledged Interest"). The Pledgor irrevocably waives
any and all provisions of the Operating Agreement that (i) prohibit, restrict,
condition or otherwise affect the grant hereunder of any lien, security interest
or encumbrance on the Pledged Interest or any enforcement action which may be
taken in respect of any such lien, security interest or encumbrance, or (ii)
otherwise conflict with the terms of this Pledge Agreement.
This Pledge Agreement is entered into in connection with and secures the
payment of amounts due to the Lenders from the Pledgor pursuant to those certain
Promissory Notes of even date herewith (each a "Note" and collectively, the
"Notes") made by the Pledgor in favor of each of the Lenders, together with all
covenants and agreements contained herein (collectively, the "Secured
Liabilities").
<PAGE>
The Pledgor and each of the Lenders hereby represent, warrant, covenant
and agree as follows:
1. Pledgor hereby represents and warrants that (i) the Operating
Agreement, a true, correct and complete copy of which is attached hereto as
Exhibit A, is in full force and effect and has not been amended or modified in
any respect, except for such amendments or modifications as are attached to the
copy thereof delivered herewith; (ii) it is a duly constituted and is the sole
member of Residential pursuant to the Operating Agreement, although such
membership is not evidenced by any certificate issued by Residential; (iii) the
Pledged Interest are validly issued, non-assessable and fully paid membership
interests in Residential; (iv) Pledgor has full right, power and authority to
make this Pledge Agreement (including the provisions enabling the Agent, upon
the occurrence of an Event of Default, to exercise the voting or other rights
provided for herein, under the Operating Agreement and under applicable law,
without the consent, approval or authorization of, or notice to, any other
person, including any regulatory authority or any person having any interest in
Residential, except for such consents as have been duly received; and (v) this
Pledge Agreement has been duly executed and delivered by the Pledgor and is the
legal, valid and binding obligation of the Pledgor enforceable in accordance
with its terms.
2. Pledgor shall protect and preserve the Pledged Interest. Pledgor will
not permit or agree to any amendment or modification of the Operating Agreement,
or waive any rights or benefits under the Operating Agreement, without the prior
written consent of the Agent. Pledgor hereby represents and warrants that
Pledgor has and will continue to have good and marketable title to the Pledged
Interest, free and clear of all liens, encumbrances and security interests,
except those created hereby, and agrees to preserve such unencumbered title and
the Lenders' security interest in the Pledged Interest and to defend it against
all parties. Risk of loss of, damage to, or destruction of, the Pledged Interest
shall be the responsibility of Pledgor, although the Agent shall exercise
reasonable care in the custody and preservation of the Pledged Interest in its
possession to the extent applicable. The Agent shall be deemed to have exercised
such reasonable care if it takes such action for that purpose as the Pledgor
shall reasonably request in writing, but no omission to do any act not requested
by the Pledgor shall be deemed a failure to exercise reasonable care, and no
omission to comply with any request of the Pledgor shall of itself be deemed a
failure to exercise reasonable care. The Pledgor shall execute and deliver to
the Agent and the Lenders any financing statements, continuation statements,
assignments, or other instruments, or take any other action deemed necessary by
the Agent or the Lenders to perfect or continue the perfection of its security
interest in the Pledged Interest. The Agent is hereby irrevocably appointed
attorney-in-fact of the Pledgor to do all acts and things which the Agent may
deem necessary or advisable to perfect and continue perfected their security
interest in the Pledged Interest. The address of the Pledgor is listed below the
Pledgor's signature hereto.
3. This Pledge Agreement has been entered into under and pursuant to the
Massachusetts Uniform Commercial Code, except that perfection and the effect of
perfection of Secured Party's security interest in collateral in another
jurisdiction will be governed by the Uniform Commercial Code ("UCC") of such
other jurisdiction, and the Agent has all the rights
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and remedies of a secured party under the Uniform Commercial Code or applicable
legislation of the applicable jurisdiction. If any one or more of the provisions
hereof should for any reason be invalid, illegal or unenforceable in any
respect, the remaining provisions contained herein shall not in any way be
affected or impaired thereby, and such invalid, illegal, or unenforceable
provision shall be deemed modified to the extent necessary to render it valid
while most nearly preserving its original intent. The Pledgor has (i) caused
Residential to duly register the security interest granted hereby on
Residential's books and has furnished the Agent with evidence thereof in form
and substance satisfactory to the Agent, (ii) has duly executed and caused any
financing statements with respect to the Pledged Interest to be filed in such a
manner and in such places as may be required by applicable law in order to fully
protect the rights of the Agent and the Lenders hereunder and (iii) will cause
any financing statements with respect to the Pledged Interest at all times to be
kept recorded and filed at the Pledgor's sole cost and expense in such a manner
and in such places as may be required by law in order to fully perfect the
interests and protect the rights of the Agent and the Lenders hereunder.
4. Any one or more of the following events shall constitute an "Event of
Default" hereunder: (i) the Pledgor shall fail to comply with, observe or
perform any obligation hereunder or shall fail to make any payment when due
under any Note; (ii) any representation or warranty made or furnished to the
Agent or the Lenders by or on behalf of the Pledgor in connection with this
Pledge Agreement or any document or instrument furnished, or to be furnished, in
connection herewith or therewith, proves to have been untrue in any material
respect when so made or furnished; (iii) the Pledgor shall commence a voluntary
case under the federal bankruptcy laws (as now or hereafter in effect), file a
petition seeking to take advantage of any other laws relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of debts or
the marshaling of assets ("Bankruptcy Laws"), consent to or fail to contest in a
timely and appropriate manner, any petition filed against the Pledgor in any
involuntary case under any Bankruptcy Laws or other laws, apply for, consent to,
indicate its approval of, acquiesce to or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator for the Pledgor or of a substantial
part of the Pledgor's property, admit in writing its inability to pay debts as
they become due, make a general assignment for the benefit of creditors, make a
conveyance fraudulent as to creditors under any state or federal law, or take
any action for the purpose of effecting any of the foregoing; (iv) a case or
other proceeding shall be commenced against the Pledgor in any court of
competent jurisdiction seeking relief under any Bankruptcy Laws, (v) the
appointment of a trustee, receiver, custodian, liquidator or the like for the
Pledgor, or of all or any substantial part of its assets; or (vi) the Pledgor
shall fail to perform any of its obligations under the Operating Agreement.
5. During the continuance of an Event of Default, the Agent shall have, in
addition to the rights, powers and authorizations to collect the sums assigned
hereunder, all rights and remedies of a secured party under the Uniform
Commercial Code and under other applicable law with respect to the Pledged
Interest, including, without limitation, the following rights and remedies: (i)
the Agent may, in its sole discretion, exercise any management or voting rights
relating to the Pledged Interest (whether or not the same shall have been
transferred into its name
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or the name of its nominee or nominees) for any lawful purpose, including for
the amendment or modification of the Operating Agreement or other governing
documents or the liquidation of the assets of Residential, give all consents,
waivers, approvals, and ratifications in respect of such Pledged Interest, and
otherwise act with respect thereto as though it were the outright owner thereof
(the Pledgor hereby irrevocably constituting and appointing the Lenders the
proxy and attorney-in-fact of the Pledgor, with full power and authority of
substitution, to do so); (ii) the Agent may, in its sole discretion, demand, sue
for, collect, compromise, or settle any rights or claims in respect of the
Pledged Interest; (iii) the Agent may, in its sole discretion, sell, resell,
assign, deliver, or otherwise dispose of any or all of the Pledged Interest, for
cash or credit or both and upon such terms, in such manner, at such place or
places, at such time or times, and to such persons or entities as the Agent
think expedient, all without demand for performance by the Pledgor or any notice
or advertisement whatsoever except as expressly provided herein or as may
otherwise be required by applicable law; and (iv) the Agent may, in its sole
discretion, cause all or any part of the Pledged Interest held by it to be
transferred into its name or the name of its nominee or nominees.
The proceeds of any collection, sale or other disposition of the Pledged
Interest or any part thereof shall, after the Agent has made all deductions of
expenses, including but not limited to attorneys' fees and other expenses
incurred in connection with repossession, collection, sale, or disposition of
the Pledged Interest or in connection with the enforcement of Agent's rights
with respect to the Pledged Interest in any insolvency, bankruptcy or
reorganization proceedings, be applied against any of the Secured Liabilities,
whether or not all the same shall be then due and payable, in such manner as the
Agent and the Lenders shall in their sole discretion determine.
No single or partial exercise by the Agent of any right, power or remedy
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. Each right, power and remedy herein
specifically granted to the Agent or otherwise available to them shall be
cumulative, and shall be in addition to every other right, power, and remedy
herein specifically given or now or hereafter existing at law, in equity, or
otherwise. Each such right, power and remedy, whether specifically granted
herein or otherwise existing, may be exercised at any time and from time to time
and as often and in such order as may be deemed expedient by the Agent in its
sole discretion. Nothing contained in this Agreement shall be construed to
require the Agent to take any action with respect to the Pledged Interest,
whether by way of foreclosure or otherwise and except as required by any
Operating Agreement, in order to permit the Agent to become a substitute member
of Residential under the Operating Agreement.
6. If any notification of intended sale of any of the Pledged Interest is
required by law, such notification shall be deemed reasonable if mailed at least
ten (10) days before such sale, postage prepaid, (i) addressed to the Pledgor at
its notice address herein, and (ii) to any other secured party from whom the
Agent or the Lenders have received (prior to notification of the Pledgor or the
Pledgor's renunciation of his rights after default) written notice of a claim of
an interest in the Pledged Interest.
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7. Any delay or omission by the Agent or the Lenders to exercise any
rights or powers arising from any default or any partial exercise thereof shall
not impair any such rights or powers, nor shall the same be construed to be a
waiver thereof or any acquiescence therein, nor shall any action or non-action
by the Agent or the Lenders in the event of any default alter or impair the
rights of the Agent or the Lenders in respect of any subsequent default, or
impair or affect any rights or powers resulting therefrom. This Pledge Agreement
shall remain in full force and effect until such time as all amounts due under
the Notes shall have been fully and irrevocably paid in full.
8. All notices, statements, requests, and demands given to or made upon
the any party hereto shall be given or made to such party at the address of such
party as set forth below its signature block herein.
9. The provisions of this Pledge Agreement shall be binding upon the
Pledgor, the Agent and the Lenders, and their respective heirs, personal
representatives, successors and assigns.
10. The Agent is hereby appointed by the Indemnities as their collateral
agent and each of the Lenders irrevocably authorize the Agent to act as the
collateral agent of such Lender. The Agent shall not have a fiduciary
relationship in respect of any Lender by reason of this Pledge Agreement, and
the nature of Agent's duties shall be mechanical and administrative in nature
only.
The Agent shall have and may exercise such powers hereunder as are
specifically delegated to or required by at least two-thirds of the Lenders (the
"Required Lenders") by the terms hereof or under any related document, together
with such powers as are reasonably incidental thereto. The Agent shall have no
implied duties to the Lenders or any obligation to the Lenders to take any
action hereunder except any action hereunder specifically provided hereunder or
under any related document to be taken by the Lenders. Notwithstanding the
foregoing, if the Agent shall receive a specific written instruction which shall
be inconsistent in any way with the foregoing, or which contradicts or
purportedly supersedes a previous instruction, the Agent agrees to honor and be
bound by such written instruction.
Neither the Agent nor any of its directors, officers, agents or employees
shall be liable to the Lenders for any action taken or omitted to be taken by it
or them hereunder except for its or their own gross negligence or willful
misconduct.
The Lenders agree to keep the Agent informed on a prompt and timely basis
of any information required by the Agent to perform its duties hereunder and
under any related documents.
If the Agent shall request instructions from the Lenders with respect to
any act or action (including failure to act) in connection with this Pledge
Agreement or any related documents, the Agent shall be entitled to refrain from
such act or taking such action unless and until the Agent
5
<PAGE>
shall have received instructions from the Required Lenders, and the Agent shall
not incur liability to any person by reason of so refraining.
The Agent may consult with legal counsel, independent public accountants
and any other experts selected by it. Notwithstanding anything herein to the
contrary, neither the Agent nor its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by any of them in
good faith reliance upon the advice of such persons.
The Lenders severally (on the basis of the pro rata principal amounts of
each of the Notes) agree to reimburse and indemnify the Agent for and against
any expenses incurred by the Agent on behalf of the Lenders in connection with
the administration and enforcement of this Pledge Agreement and any related
documents and any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
performing its duties hereunder or under any related documents or in any way
relating to or arising out of this Pledge Agreement or any related documents;
provided, however that the Lenders shall not be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
Agent.
This Agent may be removed by the Lenders at any time upon delivery of
written notice to the Agent and the Pledgor.
[Remainder of page left blank intentionally.]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused their authorized representatives to execute this Pledge Agreement
under seal as of the 8th day of March, 2000.
ECHELON RESIDENTIAL
HOLDINGS LLC
By: /s/ James A. Coyne
------------------
James A. Coyne, Member
Address: 450 Carillon Parkway,
Suite 200
St. Petersburg, FL 33716
AMERICAN INCOME PARTNERS V-A
LIMITED PARTNERSHIP
By: AFG Leasing IV Incorporation, their
general partner
By: /s/ Gail D. Ofgant
------------------
Gail Ofgant, Senior Vice President
Address: 88 Broad Street
Boston, MA 02110
The undersigned hereby acknowledges the foregoing Pledge Agreement and
consents to the terms contained therein.
ECHELON RESIDENTIAL LLC
By: Equis/Echelon Management Corp.,
its Manager
By: /s/ Michael J. Butterfield
--------------------------
Michael J. Butterfield, Vice Pres.
Address: 450 Carillon Parkway, Suite 200
St. Petersburg, FL 33716
7
<PAGE>
Exhibit 13
AMERICAN INCOME PARTNERS V
American Income Partners V-A Limited Partnership
Annual Report to the Partners, December 31, 1999
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
INDEX TO ANNUAL REPORT TO THE PARTNERS
Page
----
SELECTED FINANCIAL DATA 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 3-8
FINANCIAL STATEMENTS:
Report of Independent Auditors 9
Statement of Financial Position
at December 31, 1999 and 1998 10
Statement of Operations
for the years ended December 31, 1999, 1998 and 1997 11
Statement of Changes in Partners' Capital
for the years ended December 31,1999,1998 and 1997 12
Statement of Cash Flows
for the years ended December 31,1999,1998 and 1997 13
Notes to the Financial Statements 14-26
ADDITIONAL FINANCIAL INFORMATION:
Schedule of Excess (Deficiency) of Total Cash
Generated to Cost of Equipment Disposed 27
Statement of Cash and Distributable Cash
From Operations, Sales and Refinancings 28
Schedule of Costs Reimbursed to the General Partner
and its Affiliates as Required by Section 10.4 of the
Amended and Restated Agreement and Certificate
of Limited Partnership 29
<PAGE>
SELECTED FINANCIAL DATA
The following data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
financial statements.
For each of the five years in the period ended December 31, 1999:
<TABLE>
<CAPTION>
Summary of
Operations 1999 1998 1997 1996 1995
---------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Lease revenue $ 91,942 $ 466,883 $ 1,626,206 $ 3,616,524 $ 3,993,645
Net income (loss) $ 1,570,441 $ (361,806) $ 698,307 $ 2,922,308 $ 974,602
Per Unit:
Net income (loss) $ 1.08 $ (0.25) $ 0.48 $ 2.01 $ 0.67
Cash distributions $ 0.38 $ 0.38 $ 0.47 $ 4.18 $ 2.00
Financial Position
------------------
Total assets $ 4,374,707 $ 4,155,864 $ 3,794,549 $ 4,266,781 $ 9,980,073
Total long-term obligations $ -- $ -- $ -- $ 144,594 $ 2,231,365
Partners' capital $ 3,983,777 $ 2,902,855 $ 3,621,873 $ 3,792,601 $ 6,952,468
</TABLE>
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Year ended December 31, 1999 compared to the year
ended December 31, 1998 and the year ended December 31, 1998
compared to the year ended December 31, 1997
Certain statements in this annual report of American Income Partners V-A
Limited Partnership (the "Partnership") that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to a variety of risks and
uncertainties. There are a number of factors that could cause actual results to
differ materially from those expressed in any forward-looking statements made
herein. These factors include, but are not limited to, the outcome of the Class
Action Lawsuit described in Note 7 to the accompanying financial statements, and
the remarketing of the Partnership's equipment.
Overview
The Partnership was organized in 1989 as a direct-participation equipment
leasing program to acquire a diversified portfolio of capital equipment
subject to lease agreements with third parties. Presently, the Partnership is
a Nominal Defendant in a Class Action Lawsuit, the outcome of which could
significantly alter the nature of the Partnership's organization and its
future business operations. See Note 7 to the accompanying financial
statements. Pursuant to the Restated Agreement, as amended, the Partnership
is scheduled to be dissolved by December 31, 2000. However, the General
Partner does not expect that the Partnership will be dissolved until such
time that the Class Action Lawsuit is adjudicated and settled. In the absence
of a final settlement being effected before December 31, 2000, dissolution of
the Partnership would most likely be deferred until a later date.
Year 2000 Issue
The Partnership uses information systems provided by Equis Financial Group
Limited Partnership ("EFG") and has no information systems of its own. EFG
completed all Year 2000 readiness work prior to December 31, 1999 and did not
experience any significant problems. Additionally, EFG is not aware of any
outside customer or vendor that experienced a Year 2000 issue that would have a
material effect on the Partnership's results of operations, liquidity, or
financial position. However, EFG has no means of ensuring that all customers,
vendors and third-party servicers have conformed to Year 2000 standards. The
effect of this risk to the Partnership is not determinable.
Results of Operations
For the year ended December 31, 1999, the Partnership recognized lease
revenue of $91,942 compared to $466,883 and $1,626,206 for the years ended
December 31, 1998 and 1997, respectively. The decrease in lease revenue from
1998 to 1999 resulted principally from the sale of the Partnership's interest in
two aircraft which provided a total of $9,221 and $362,357 of lease revenue for
the years ended December 31, 1999 and 1998, respectively (see further discussion
below). The decrease in lease revenue from 1997 to 1998 resulted principally
from the exchange of the Partnership's interest in a vessel during 1997 (see
below). In 1997, the Partnership recognized lease revenue of $1,110,453 related
to this vessel including $991,703 representing a prepayment of the remaining
contracted rent due under the vessel's lease agreement. In the future, lease
revenue will continue to decline due to lease term expirations and equipment
sales.
The Partnership's equipment portfolio (until the second quarter of 1999)
included certain assets in which the Partnership held a proportionate ownership
interest. In such cases, the remaining interests were owned by an affiliated
equipment leasing program sponsored by EFG. Proportionate equipment ownership
enabled the Partnership to further diversify its equipment portfolio at
inception by participating in the ownership of selected assets, thereby reducing
the general levels of risk which could have resulted from a concentration in any
single equipment type, industry or lessee. The Partnership and each affiliate
individually reported, in proportion to their respective ownership interests,
their respective shares of assets, liabilities, revenues, and expenses
associated with the equipment.
3
<PAGE>
Interest income for the year ended December 31, 1999 was $264,870 compared
to $202,483 and $131,575, for the years ended December 31, 1998 and 1997,
respectively. Interest income is generated principally from temporary investment
of rental receipts and equipment sale proceeds in short-term instruments.
Interest income included $77,145 in both 1999 and 1998, and $15,215 in 1997
earned on a note receivable from Semele Group, Inc. ("Semele") (see Note 4 to
the accompanying financial statements). The note receivable from Semele is
scheduled to mature in April 2001. The amount of future interest income is
expected to fluctuate as a result of changing interest rates and the amount of
cash available for investment, among other factors. See discussion below
regarding on investment made by the Partnership in 2000.
In 1999, the Partnership sold fully depreciated equipment to existing
lessees and third parties. These sales resulted in a net gain, for financial
statement purposes, of $1,568,063 compared to $19,725, on fully depreciated
equipment in 1998. The net gain in 1999 includes $1,523,200 related to the sale
of the Partnership's interests in two aircraft (see further discussion below).
The results of future sales of equipment will be dependent upon the condition
and type of equipment being sold and its marketability at the time of sale.
In 1997, the Partnership sold fully depreciated equipment resulting in a net
gain, for financial statement purposes, of $102,027. In addition, during 1997,
the Partnership also exchanged its interest in a vessel with an original cost
and net book value of $3,666,680 and $1,385,750, respectively. In connection
with this transaction, the Partnership realized proceeds of $1,027,101, which
resulted in a net loss for financial statement purposes, of $358,649. In
addition, as this vessel was disposed of prior to the expiration of the related
lease term, the Partnership received a prepayment of the remaining contracted
rent due under the vessel's lease agreement (see above).
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time. EFG attempts to monitor these changes in order to identify
opportunities which may be advantageous to the Partnership and which will
maximize total cash returns for each asset.
The total economic value realized for each asset is comprised of all primary
lease term revenue generated from that asset, together with its residual value.
The latter consists of cash proceeds realized upon the asset's sale in addition
to all other cash receipts obtained from renting the asset on a re-lease,
renewal or month-to-month basis. The Partnership classifies such residual rental
payments as lease revenue. Consequently, the amount of gain or loss reported in
the financial statements is not necessarily indicative of the total residual
value the Partnership achieved from leasing the equipment.
Depreciation expense was $80,952 and $392,082 for the years ending December
31, 1998 and 1997 respectively. The Partnership's equipment was fully
depreciated during 1998. Management fees were approximately 5% of lease revenue
during each of the years ended December 31, 1999, 1998, and 1997.
Interest expense was $3,390, or less than 1% of lease revenue for the year
ending December 31, 1997. The Partnership's notes payable were fully amortized
during the year ending December 31, 1997.
Write-down of investment securities-affiliate was $303,022 for the year
ended December 31, 1998. The General Partner determined that the decline in
market value of its Semele common stock was other-than-temporary at December
31,1998. As a result, the Partnership wrote down the cost of the Semele common
stock from $15 per share to $4.125 per share (the quoted price of Semele stock
on NASDAQ at December 31, 1998). See further discussion below.
Operating expenses were $349,837, $643,579 and $326,077 for the years ended
December 31, 1999, 1998 and 1997, respectively. Operating expenses in 1999
include approximately $26,000 related to the refurbishment of an aircraft engine
(see discussion below) and approximately $52,000 accrued for certain legal and
administrative expenses related to the Class Action Lawsuit described in Note 7
to the financial statements. During the year ended December 31, 1998, the
Partnership incurred or accrued approximately $305,000 for such costs related to
the Class Action Lawsuit. In addition, the Partnership expensed $83,776 related
to the
4
<PAGE>
refurbishment an aircraft engine and engine leasing costs (see Note 7 to the
financial statements). Significant operating expenses were incurred during the
year ended December 31, 1997 due to heavy maintenance and airframe overhaul
costs incurred in connection with the Partnership's interests in two Boeing 727
aircraft. Other operating expenses consist principally of professional service
costs, such as audit and legal fees, as well as printing, distribution and other
remarketing expenses. In certain cases, equipment storage or repairs and
maintenance costs may be incurred in connection with equipment being remarketed.
Liquidity and Capital Resources and Discussion of Cash Flows
In connection with a preliminary settlement agreement for the Class Action
Lawsuit described in Note 7 to the accompanying financial statements, the
Partnership is permitted to invest in new equipment or other business
activities, subject to certain limitations. On March 8, 2000, the Partnership
invested $2,160,000 in a debt instrument that matures in September 2002. (See
Notes 7 and 8 to the accompanying financial statements for additional
information concerning this transaction.)
The Partnership by its nature is a limited life entity. As an equipment
leasing program, the Partnership's principal operating activities derive from
asset rental transactions. Historically, the Partnership's principal source of
cash from operations was provided by the collection of periodic rents, however,
in 1999 the principal source of such cash resulted from the receipt of interest
income. Cash inflows are used to pay management fees and operating costs. In
addition, in 1997 cash inflows were used to pay debt service obligations
associated with leveraged leases. Operating activities generated a net cash
outflow of $74,217 in 1999, and net cash inflows of $359,965 and $1,605,911 in
1998 and 1997, respectively. Net cash from operating activities in 1997 included
lease termination rents as described above. Future renewal, re-lease and
equipment sale activities will cause a decline in the Partnership's lease
revenues and corresponding sources of operating cash. The amount of future
interest income is expected to fluctuate as a result of changing interest rates
and the level of cash available for investment, among other factors. Overall,
expenses associated with rental activities, such as management fees, and net
cash flow from operating activities will also decline as the Partnership
experiences a higher frequency of remarketing events.
Cash realized from asset disposal transactions is reported under investing
activities on the accompanying Statement of Cash Flows. During the year ended
December 31, 1999, the Partnership realized net cash proceeds of $1,568,063
compared to $19,725 and $102,027 in 1998 and 1997, respectively. Future inflows
of cash from asset disposals will vary in timing and amount and will be
influenced by many factors including, but not limited to, the frequency and
timing of lease expirations, the type of equipment being sold, its condition and
age, and future market conditions.
In January 1999, upon expiration of the lease term, the Partnership and
certain affiliated investment programs (collectively, the "Programs") entered
into an agreement to sell a Boeing 727-251 ADV jet aircraft to the lessee for
$2,450,000. In aggregate, the Partnership received $548,800 for its interest in
this aircraft. The Partnership's interest in the aircraft had a cost of
$2,175,454 and was fully depreciated, resulting in a net gain, for financial
statement purposes, of $548,800.
In November 1998, the Programs entered into a separate agreement to sell
their ownership interests in a different Boeing 727-251 ADV jet aircraft and
three engines (collectively the "Aircraft") to a third party (the "Purchaser")
for $4,350,000. In December 1998, the Purchaser remitted $3,350,000 for the
Aircraft, excluding one of three engines which had been damaged while the
Aircraft was leased to Transmeridian Airlines ("Transmeridian"). (See Note 7 to
the accompanying financial statements regarding legal action undertaken by the
Programs related to Transmeridian and the damaged engine). The Purchaser also
deposited $1,000,000 into a third-party escrow account (the "Escrow") pending
repair of the damaged engine and re-installation of the refurbished engine on
the Aircraft. Upon installation, the escrow agent was obligated to transfer the
Escrow amount plus interest thereon to the Programs. The engine was refurbished
at the expense of the Programs. The associated cost was approximately $374,000,
of which the Partnership's share was approximately $84,000. The Partnership
accrued $58,000 of these costs in 1998 and the balance was accrued or incurred
in the year ended December 31, 1999.
5
<PAGE>
The Programs also were required to reimburse the Purchaser for its cost to
lease a substitute engine during the period that the damaged engine was being
repaired. This cost was approximately $114,000, of which the Partnership's share
was approximately $26,000, all of which was accrued in 1998 in connection with
the litigation referenced above.
In addition, the purchase and sale agreement permitted the Purchaser to
return the Aircraft to the Programs, subject to a number of conditions, for
$4,350,000, reduced by an amount equivalent to $450 multiplied by the number of
flight hours since the Aircraft's most recent C Check. Among the conditions
precedent to the Purchaser's returning the Aircraft, the Purchaser must have
completed its intended installation of hush-kitting on the Aircraft to conform
to Stage 3 noise regulations. This work was completed in January 1999. The
Purchaser's return option was to expire on May 15, 1999.
Due to the contingent nature of the sale, the Partnership deferred
recognition of the sale and a resulting gain until expiration of the Purchaser's
return option on May 15, 1999. The Partnership's share of the December proceeds
was $750,400, which amount was deposited into EFG's customary escrow account and
transferred to the Partnership, together with the Partnership's other December
rental receipts, in January 1999. At December 31, 1998, the entire amount was
classified as other liabilities, with an equal amount included in accounts
receivable -- affiliate on the accompanying Statement of Financial Position.
Upon the installation of the refurbished engine on the Aircraft, the remainder
of the sale consideration, or $1,000,000 and the interest thereon, was released
from the escrow account to the Programs. The Partnership's share of this payment
was $227,548, including interest of $3,548. In aggregate, the Partnership
received sales proceeds of $974,400 for its interest in the Aircraft. The
Partnership's interest in the Aircraft had a cost of $2,420,734 and was fully
depreciated, resulting in a net gain, for financial statement purposes, of
$974,400.
At December 31, 1999, the Partnership was due aggregate future minimum lease
payments of $14,378 from contractual lease agreements (see Note 2 to the
financial statements). At the expiration of the individual renewal lease terms
underlying the Partnership's future minimum lease payments, the Partnership will
sell the equipment or enter re-lease or renewal agreements when considered
advantageous by the General Partner and EFG. Such future remarketing activities
will result in the realization of additional cash inflows in the form of
equipment sale proceeds or rents from renewals and re-leases, the timing and
extent of which cannot be predicted with certainty. This is because the timing
and extent of remarketing events often is dependent upon the needs and interests
of the existing lessees. Some lessees may choose to renew their lease contracts,
while others may elect to return the equipment. In the latter instances, the
equipment could be re-leased to another lessee or sold to a third-party.
As a result of the vessel exchange in 1997, the Partnership became the
beneficial owner of 341,435 shares of Semele common stock (valued at $512,153
($1.50 per share) at the time of the exchange transaction). This investment was
reduced by a dividend of $68,287 received in 1997 representing a return of
equity to the Partnership. The Partnership also received a beneficial interest
in the Semele Note of $771,450 in connection with the exchange. The Semele Notes
bears an annual interest rate of 10% and is scheduled to mature in April 2001.
The note also requires mandatory principal reductions, if and to the extent that
net proceeds are received by Semele from the sale or refinancing of Semele's
Rancho Malibu property.
On June 30, 1998, Semele effected a 1-for-300 reverse stock split followed
by a 30-for-1 forward stock split resulting in a reduction of the number of
shares of Semele common stock owned by the Partnership to 34,144 shares. During
the year ended December 31, 1998, the Partnership decreased the carrying value
of its investment in Semele common stock to $4.125 per share (the quoted price
of the Semele stock on NASDAQ at December 31, 1998) resulting in an unrealized
loss in 1998 of $115,232. In 1997, the Partnership recorded an unrealized loss
of $187,790 relate to its investment in the Semele common stock. Each of these
losses was reported as a component of comprehensive income or loss, included in
partners' capital. At December 31, 1998, the General Partner determined that the
decline in market value of the Semele common stock was other-than-temporary. As
a result, the Partnership wrote down the cost of the Semele stock to $4.125 per
share for a total realized loss of $303,022 in 1998. During the year ended
December 31, 1999, the Partnership increased the carrying value of its
investment in Semele common stock to $5.75 per share (the quoted price on the
NASDAQ SmalICap market at December 31, 1999), resulting in an unrealized gain in
1999 of $55,484. This gain was reported as a component of comprehensive income
included in partners' capital.
6
<PAGE>
The Partnership obtained long-term financing in connection with certain
equipment leases. The repayments of principal related to such indebtedness are
reported as a component of financing activities. The Partnership's notes
payables were fully amortized during the year ended December 31, 1997.
There are no formal restrictions under the Restated Agreement, as amended,
that materially limit the Partnership's ability to pay cash distributions,
except that the General Partner may suspend or limit cash distributions to
ensure that the Partnership maintains sufficient working capital reserves to
cover, among other things, operating costs and potential expenditures, such as
refurbishment costs to remarket equipment upon lease expiration. Liquidity is
especially important as the Partnership matures and sells equipment, because the
remaining equipment base consists of fewer revenue-producing assets that are
available to cover prospective cash disbursements. Insufficient liquidity could
inhibit the Partnership's ability to sustain its operations or maximize the
realization of proceeds from remarketing its remaining assets.
Cash distributions to the General Partner and Recognized Owners have been
declared and generally paid within fifteen days following the end of each
calendar quarter. The payment of such distributions is reported under financing
activities on the accompanying Statement of Cash Flows. For the year ended
December 31, 1999, the Partnership declared total cash distributions of
Distributable Cash From Operations and Distributable Cash From Sales and
Refinancing of $545,003. In accordance with the Restated Agreement, as amended,
the Recognized Owners were allocated 95% of these distributions, or $517,753,
and the General Partner was allocated 5%, or $27,250. The fourth quarter 1999
cash distribution was paid on January 14, 2000.
Cash distributions paid to the Recognized Owners consist of both a return of
and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
determined with any certainty until conclusion of the Partnership and will be
dependent upon the collection of all future contracted rents, the generation of
renewal and/or re-lease rents, and the residual value realized for each asset at
its disposal date.
The Partnership's future cash distributions will be adversely affected by
the bankruptcy of a former lessee of the Partnership, Midway Airlines, Inc.
("Midway"). In 1993, the Partnership's interests in two DC-9-30 aircraft leased
by Midway were transferred to a designee of the lender in lieu of foreclosure.
Although this bankruptcy had no immediate adverse effect on the Partnership's
cash flow, as the Partnership had almost fully leveraged its ownership interest
in the underlying aircraft, this event resulted in the Partnership's loss of any
future interest in the residual value of the aircraft. Notwithstanding such
adverse impact, the overall investment results to be achieved by the Partnership
will be dependent upon the collective performance results of all of the
Partnership's equipment leases.
The Partnership's capital account balances for federal income tax and for
financial reporting purposes are different primarily due to differing treatments
of income and expense items for income tax purposes in comparison to financial
reporting purposes (generally referred to as permanent or timing differences;
see Note 6 to the financial statements presented in the Partnership's 1999
Annual Report). For instance, selling commissions, organization and offering
costs pertaining to syndication of the Partnership's limited partnership units
are not deductible for federal income tax purposes, but are recorded as a
reduction of partners' capital for financial reporting purposes. Therefore, such
differences are permanent differences between capital accounts for financial
reporting and federal income tax purposes. Other differences between the bases
of capital accounts for federal income tax and financial reporting purposes
occur due to timing differences. Such items consist of the cumulative difference
between income or loss for tax purposes and financial statement income or loss,
the difference between distributions (declared vs. paid) for income tax and
financial reporting purposes, and the treatment of unrealized gains or losses on
investment securities, if any, for book and tax purposes. The principal
component of the cumulative difference between financial statement income or
loss and tax income or loss results from different depreciation policies for
book and tax purposes.
For financial reporting purposes, the General Partner has accumulated a
capital deficit at December 31, 1999. This is the result of aggregate cash
distributions to the General Partner being in excess of its capital contribution
of $1,000 and its allocation of financial statement net income or loss.
Ultimately, the existence of a capital deficit for the General Partner for
financial reporting purposes is not indicative of any further capital
obligations to the
7
<PAGE>
Partnership by the General Partner. The Restated Agreement, as amended, requires
that upon the dissolution of the Partnership, the General Partner will be
required to contribute to the Partnership an amount equal to any negative
balance which may exist in the General Partner's tax capital account. At
December 31, 1999, the General Partner had a positive tax capital account
balance.
The outcome of the Class Action Lawsuit described in Note 7 to the
accompanying financial statements will be the principal factor in determining
the future of the Partnership's operations. The proposed settlement to that
lawsuit, if effected, will materially change the future organizational structure
and business interests of the Partnership, as well as its cash distribution
policies. In addition, commencing with the first quarter of 2000, the General
Partner believes that it will be in the Partnership's best interests to suspend
the payment of quarterly cash distributions pending final resolution of the
Class Action Lawsuit. Accordingly, future cash distributions are not expected to
be paid until the Class Action Lawsuit is adjudicated.
8
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of American Income Partners V-A Limited Partnership:
We have audited the accompanying statements of financial position of
American Income Partners V-A Limited Partnership, as of December 31, 1999 and
1998, and the related statements of operations, changes in partners' capital,
and cash flows for each of the three years in the period ended December 31,
1999. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Income Partners V-A
Limited Partnership at December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31,1999, in conformity with accounting principles generally accepted in
the United States.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Additional Financial Information
identified in the Index to Annual Report to the Partners is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ERNST & YOUNG LLP
Boston, Massachusetts
March 10, 2000
9
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,397,803 $ 2,448,960
Rents receivable 1,766 6,643
Accounts receivable - affiliate 7,360 787,967
Note receivable - affiliate 771,450 771,450
Investment securities - affiliate 196,328 140,844
Equipment at cost, net of accumulated
depreciation of $681,290 and $5,498,839
at December 31, 1999 and 1998, respectively -- --
----------- -----------
Total assets $ 4,374,707 $ 4,155,864
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accrued liabilities $ 248,367 $ 350,276
Accrued liabilities - affiliate 6,313 6,864
Deferred rental income -- 9,219
Other liabilities -- 750,400
Cash distributions payable to partners 136,250 136,250
----------- -----------
Total liabilities 390,930 1,253,009
----------- -----------
Partners' capital (deficit):
General Partner (1,331,783) (1,385,829)
Limited Partnership Interests
(1,380,661 Units; initial purchase
price of $25 each) 5,315,560 4,288,684
----------- -----------
Total partners' capital 3,983,777 2,902,855
----------- -----------
Total liabilities and partners' capital $ 4,374,707 $ 4,155,864
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
10
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
for the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income:
Lease revenue $ 91,942 $ 466,883 $ 1,626,206
Interest income 187,725 125,338 116,360
Interest income - affiliate 77,145 77,145 15,215
Gain on sale of equipment 1,568,063 19,725 102,027
Loss on exchange of equipment -- -- (358,649)
----------- ----------- -----------
Total income 1,924,875 689,091 1,501,159
----------- ----------- -----------
Expenses:
Depreciation -- 80,952 392,082
Interest expense -- -- 3,390
Equipment management fees 4,597 23,344 81,303
Write-down of investment securities
- affiliate -- 303,022 --
Operating expenses - affiliate 349,837 643,579 326,077
----------- ----------- -----------
Total expenses 354,434 1,050,897 802,852
----------- ----------- -----------
Net income (loss) $ 1,570,441 $ (361,806) $ 698,307
=========== =========== ===========
Net income (loss)
per limited partnership unit $ 1.08 $ (0.25) $ 0.48
=========== =========== ===========
Cash distributions declared
per limited partnership unit $ 0.38 $ 0.38 $ 0.47
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
11
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
for the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
General Recognized Owners
Partner --------------------
Amount Units Amount Total
------ ----- ------ -----
<S> <C> <C> <C> <C>
Balance at December 31, 1996 (1,341,341) 1,380,661 5,133,942 3,792,601
Net income - 1997 34,915 -- 663,392 698,307
Unrealized loss on investment securities (9,390) -- (178,400) (187,790)
----------- ----------- ----------- -----------
Comprehensive income 25,525 -- 484,992 510,517
----------- ----------- ----------- -----------
Cash distributions declared (34,062) -- (647,183) (681,245)
----------- ----------- ----------- -----------
Balance at December 31, 1997 (1,349,878) 1,380,661 4,971,751 3,621,873
Net loss - 1998 (18,091) -- (343,715) (361,806)
Unrealized loss on investment securities (5,762) -- (109,470) (115,232)
Less: Reclassification adjustment for
write-down of investment securities 15,152 -- 287,870 303,022
----------- ----------- ----------- -----------
Comprehensive loss (8,701) -- (165,315) (174,016)
----------- ----------- ----------- -----------
Cash distributions declared (27,250) -- (517,752) (545,002)
----------- ----------- ----------- -----------
Balance at December 31, 1998 (1,385,829) 1,380,661 4,288,684 2,902,855
Net income -1999 78,522 -- 1,491,919 1,570,441
Unrealized gain on investment securities 2,774 -- 52,710 55,484
----------- ----------- ----------- -----------
Comprehensive income 81,296 -- 1,544,629 1,625,925
----------- ----------- ----------- -----------
Cash distributions declared (27,250) -- (517,753) (545,003)
----------- ----------- ----------- -----------
Balance at December 31, 1999 $(1,331,783) 1,380,661 $ 5,315,560 $ 3,983,777
=========== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
12
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
for the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from (used in) operating activities:
Net income (loss) $ 1,570,441 $ (361,806) $ 698,307
Adjustments to reconcile net income (loss)
to net cash from (used in) operating
activities:
Depreciation -- 80,952 392,082
Gain on sale of equipment (1,568,063) (19,725) (102,027)
Write-down of investment securities - affiliate -- 303,022 --
Loss on exchange of equipment -- -- 358,649
Decrease in allowance for doubtful accounts -- -- (5,000)
Non-cash proceeds on termination rents -- -- (256,502)
Changes in assets and liabilities:
Decrease (increase) in:
Rents receivable 4,877 (2,672) 215,367
Accounts receivable - affiliate 780,607 (720,139) 416,530
Increase (decrease) in:
Accrued interest -- -- (1,836)
Accrued liabilities (101,909) 341,076 (29,230)
Accrued liabilities - affiliate (551) (10,004) (79,123)
Deferred rental income (9,219) (1,139) (1,306)
Other liabilities (750,400) 750,400 --
----------- ----------- -----------
Net cash from (used in) operating activities (74,217) 359,965 1,605,911
----------- ----------- -----------
Cash flows from investing activities:
Dividend received -- -- 68,287
Proceeds from equipment sales 1,568,063 19,725 102,027
----------- ----------- -----------
Net cash from investing activities 1,568,063 19,725 170,314
----------- ----------- -----------
Cash flows used in financing activities:
Principal payments - notes payable -- -- (144,594)
Distributions paid (545,003) (545,002) (726,660)
----------- ----------- -----------
Net cash used in financing activities (545,003) (545,002) (871,254)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 948,843 (165,312) 904,971
Cash and cash equivalents at beginning of year 2,448,960 2,614,272 1,709,301
----------- ----------- -----------
Cash and cash equivalents at end of year $ 3,397,803 $ 2,448,960 $ 2,614,272
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ -- $-- $ 5,226
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
13
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
December 31, 1999
NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS
American Income Partners V-A Limited Partnership (the "Partnership") was
organized as a limited partnership under the Massachusetts Uniform Limited
Partnership Act (the "Uniform Act") on July 24,1989 for the purpose of acquiring
and leasing to third parties a diversified portfolio of capital equipment.
Partners' capital initially consisted of contributions of $1,000 from the
General Partner (AFG Leasing IV Incorporated) and $100 from the Initial Limited
Partner (AFG Assignor Corporation). On September 29, 1989, the Partnership
issued 1,380,661 units, representing assignments of limited partnership
interests (the "Units"), to 1,815 investors. Unitholders and Limited Partners
(other than the Initial Limited Partner) are collectively referred to as
Recognized Owners. The Partnership has one General Partner, AFG Leasing IV
Incorporated, a Massachusetts corporation formed in 1987 and an affiliate of
Equis Financial Group Limited Partnership (formerly known as American Finance
Group), a Massachusetts limited partnership ("EFG"). The common stock of the
General Partner is owned by AF/AIP Programs Limited Partnership, of which EFG
and a wholly-owned subsidiary are the 99% limited partners and AFG Programs,
Inc., which is wholly-owned by EFG, is the 1% general partner. The General
Partner is not required to make any other capital contributions except as may be
required under the Uniform Act and Section 6.1(b) of the Amended and Restated
Agreement and Certificate of Limited Partnership (the "Restated Agreement, as
amended").
Significant operations commenced September 29, 1989 when the Partnership
made its initial equipment purchase. Pursuant to the Restated Agreement, as
amended, Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings will be allocated 95% to the Recognized Owners and 5% to the
General Partner.
Under the terms of a management agreement between the Partnership and AF/AIP
Programs Limited Partnership and the terms of an identical management agreement
between AF/AIP Programs Limited Partnership and EFG (collectively, the
"Management Agreement") management services are provided by EFG to the
Partnership at fees which the General Partner believes to be competitive for
similar services (see Note 5).
EFG is a Massachusetts limited partnership formerly known as American
Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general
partnership and succeeded American Finance Group, Inc., a Massachusetts
corporation organized in 1980. EFG and its subsidiaries (collectively, the
"Company") are engaged in various aspects of the equipment leasing business,
including EFG's role as Manager or Advisor to the Partnership and several other
direct-participation equipment leasing programs sponsored or co-sponsored by EFG
(the "Other Investment Programs"). The Company arranges to broker or originate
equipment leases, acts as remarketing agent and asset manager, and provides
leasing support services, such as billing, collecting, and asset tracking.
The general partner of EFG, with a 1% controlling interest, is Equis
Corporation, a Massachusetts corporation owned and controlled entirely by Gary
D. Engle, its President, Chief Executive Officer and sole Director. Equis
Corporation also owns a controlling 1% general partner interest in EFG's 99%
limited partner, GDE Acquisition Limited Partnership ("GDE LP"). Mr. Engle
established Equis Corporation and GDE LP in December 1994 for the sole purpose
of acquiring the business of AFG.
In January 1996, the Company sold certain assets of AFG relating primarily
to the business of originating new leases, and the name "American Finance
Group", and its acronym, to a third-party. AFG changed its name to Equis
Financial Group Limited Partnership after the sale was concluded. Pursuant to
terms of the sale agreements, EFG specifically reserved the rights to continue
using the name American Finance Group and its acronym in connection with the
Partnership and the Other Investment Programs and to continue managing all
assets owned by the Partnership and the Other Investment Programs.
14
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Cash Flows
The Partnership considers liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents. From time to time, the
Partnership invests excess cash with large institutional banks in federal agency
discount notes and in reverse repurchase agreements with overnight securities.
Under the terms of the agreements, title to the underlying securities passes to
the Partnership. The securities underlying the agreements are book entry
securities. At December 31, 1999, the Partnership had $3,282,141 invested in
federal agency discount notes, repurchase agreements secured by U.S. Treasury
Bills or interests in U.S. Government securities, or other highly liquid
overnight investments.
Revenue Recognition
Rents are payable to the Partnership monthly or quarterly and no significant
amounts are calculated on factors other than the passage of time. The leases are
accounted for as operating leases and are noncancellable. Rents received prior
to their due dates are deferred. In certain instances, the Partnership may enter
renewal or re-lease agreements which expire beyond the Partnership's anticipated
dissolution date. This circumstance is not expected to prevent the orderly
wind-up of the Partnership's business activities as the General Partner and EFG
would seek to sell the then-remaining equipment assets either to the lessee or
to a third party, taking into consideration the amount of future noncancellable
rental payments associated with the attendant lease agreements. See also Note 7
regarding the Class Action Lawsuit. Future minimum rents of $14,378 are due as
follows:
For the year ending December 31, 2000 $ 10,418
2001 3,960
---------
Total $ 14,378
---------
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1999, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Tenneco Packaging Company $ 25,951 $ -- $ --
International Paper $ 21,475 $ -- $ --
Amoco Corporation $ 16,487 $ -- $ --
Sunworld International Airlines, Inc. $ 9,221 $ 174,720 $ 174,720
Transmeridian Airlines $ -- $ 187,637 $ --
Gearbulk Shipowning Ltd. (formerly Kristian
Gerhard Jebsen Skipsrederi A/S) $ -- $ -- $1,110,453
</TABLE>
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
15
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
Equipment on Lease
All equipment was acquired from EFG, one of its Affiliates or from
third-party sellers. Equipment Cost means the actual cost paid by the
Partnership to acquire the equipment, including acquisition fees. Where
equipment was acquired from EFG or an Affiliate, Equipment Cost reflects the
actual price paid for the equipment by EFG or the Affiliate plus all actual
costs incurred by EFG or the Affiliate while carrying the equipment, including
all liens and encumbrances, less the amount of all primary term rents earned by
EFG or the Affiliate prior to selling the equipment. Where the seller of the
equipment was a third party, Equipment Cost reflects the seller's invoice price.
Depreciation
The Partnership's depreciation policy was intended to allocate the cost of
the equipment over the period during which it produced economic benefit. The
principal period of economic benefit was considered corresponded to each asset's
primary lease term, which term generally represents the period of greatest
revenue potential for each asset. Accordingly, to the extent that an asset was
held on primary lease term, the Partnership depreciated the difference between
(i) the cost of the asset and (ii) the estimated residual value of the asset on
a straight-line basis over such term. For purposes of this policy, estimated
residual values represented estimates of equipment values at the date of primary
lease expiration. To the extent that an asset was held beyond its primary lease
term, the Partnership continued to depreciate the remaining net book value of
the asset on a straight-line basis over the asset's remaining economic life.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological advances,
and many other events can converge to enhance or detract from asset values at
any given time.
Investment Securities - Affiliate
The Partnership's investment in Semele Group, Inc. is considered to be
available-for-sale and as such is carried at fair value with unrealized gains
and losses reported as a separate component of Partner's Capital.
Other-than-temporary declines in market value are recorded as write-down of
investment securities in the Statement of Operations (see Note 4). Unrealized
gains or losses on the Partnership's available-for-sale securities, are required
to be included in comprehensive income. During the year ended December 31,1999,
total comprehensive income amounted to $1,625,925.
Accrued Liabilities - Affiliate
Unpaid operating expenses paid by EFG on behalf of the Partnership and
accrued but unpaid administrative charges and management fees are reported as
Accrued Liabilities - Affiliate (see Note 5).
Contingencies
It is the Partnership's policy to recognize a liability for goods and
services during the period when the goods or services are received. To the
extent that the Partnership has a contingent liability, meaning generally a
liability the payment of which is subject to the outcome of a future event, the
Partnership recognizes a liability in accordance with Statement of Financial
Accounting Standards No. 5 "Accounting for Contingencies" ("SFAS No. 5"). SFAS
No. 5 requires the recognition of contingent liabilities when the amount of
liability can be reasonably estimated and the liability is likely to be
incurred.
The Partnership is a Nominal Defendant in a Class Action Lawsuit. In 1998, a
settlement proposal to resolve that litigation was negotiated and remains
pending (see Note 7). The Partnership's estimated exposure for costs anticipated
to be incurred in pursuing the settlement proposal is approximately $357,000
consisting principally of
16
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
legal fees and other professional service costs. These costs are expected to be
incurred regardless of whether the proposed settlement ultimately is effected
and, therefore, the Partnership accrued approximately $305,000 of these costs in
1998 following the Court's approval of the settlement plan. The cost estimate is
subject to change and is monitored by the General Partner based upon the
progress of the settlement proposal and other pertinent information. As a
result, the Partnership accrued and expensed an additional $52,000 for such
costs in 1999.
Allocation of Profits and Losses
For financial statement purposes, net income or loss is allocated to each
Partner according to their respective ownership percentages (95% to the
Recognized Owners and 5% to the General Partner). See Note 6 concerning
allocation of income or loss for income tax purposes.
Net Income (Loss) and Cash Distributions Per Unit
Net income (loss) and cash distributions per Unit are based on 1,380,661
Units outstanding during each of the three years in the period ended December
31, 1999 and computed after allocation of the General Partner's 5% share of net
income (loss) and cash distributions.
Provision for Income Taxes
No provision or benefit from income taxes is included in the accompanying
financial statements. The Partners are responsible for reporting their
proportionate shares of the Partnership's taxable income or loss and other tax
attributes on their tax returns.
NOTE 3- EQUIPMENT
The following is a summary of equipment owned by the Partnership at December
31, 1999. Remaining Lease Term (Months), as used below, represents the number of
months remaining from December 31, 1999 under contracted lease terms and is
presented as a range when more than one lease agreement is contained in the
stated equipment category. A Remaining Lease Term equal to zero reflects
equipment either held for sale or release or being leased on a month-to-month
basis. In the opinion of EFG, the acquisition cost of the equipment did not
exceed its fair market value.
<TABLE>
<CAPTION>
Remaining
Lease Term Equipment
Equipment Type (Months) at Cost Location
-------------- ------- ------- --------
<S> <C> <C> <C>
Materials handling 0-21 $ 640,298 IL/IN/MA/MI/NC/NY/PA/SC/TX
Communications 0 40,992 MO
----------
Total equipment cost 681,290
Accumulated depreciation (681,290)
---------
Equipment, net of accumulated depreciation $ --
=========
</TABLE>
Generally, the costs associated with maintaining, insuring and operating the
Partnership's equipment are incurred by the respective lessees pursuant to terms
specified in their individual lease agreements with the Partnership.
17
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
As equipment is sold to third parties, or otherwise disposed of, the
Partnership recognizes a gain or loss equal to the difference between the net
book value of the equipment at the time of sale or disposition and the proceeds
realized upon sale or disposition. The ultimate realization of estimated
residual value in the equipment is dependent upon, among other things, EFG's
ability to maximize proceeds from selling or re-leasing the equipment upon the
expiration of the primary lease terms. At December 31, 1999, the Partnership was
not holding any equipment not subject to a lease and no equipment was held for
sale or re-lease.
In November 1998, the Partnership and certain affiliated investment programs
(collectively, the "Programs") entered into an agreement to sell their ownership
interests in a Boeing 727-251 ADV jet aircraft and three engines (collectively
the "Aircraft") to a third party (the "Purchaser") for $4,350,000. In December
1998, the Purchaser remitted $3,350,000 for the Aircraft, excluding one of three
engines which had been damaged while the Aircraft was leased to Transmeridian
Airlines ("Transmeridian"). (See Note 7 to the financial statements regarding
legal action undertaken by the Programs related to Transmeridian and the damaged
engine). The Purchaser also deposited $1,000,000 into a third-party escrow
account (the "Escrow") pending repair of the damaged engine and re-installation
of the refurbished engine on the Aircraft. Upon installation, the escrow agent
was obligated to transfer the Escrow amount plus interest thereon to the
Programs. The engine was refurbished at the expense of the Programs. The
associated cost was approximately $374,000, of which the Partnership's share was
approximately $84,000. The Partnership accrued $58,000 of these costs in 1998
and the balance was accrued or incurred in the year ended December 31, 1999.
The Programs also were required to reimburse the Purchaser for its cost to
lease a substitute engine during the period that the damaged engine was being
repaired. This cost was approximately $114,000, of which the Partnership's share
was approximately $26,000, all of which was accrued in 1998 in connection with
the litigation referenced above.
In addition, the purchase and sale agreement permitted the Purchaser to
return the Aircraft to the Programs, subject to a number of conditions, for
$4,350,000, reduced by an amount equivalent to $450 multiplied by the number of
flight hours since the Aircraft's most recent C-Check. Among the conditions
precedent to the Purchaser's returning the Aircraft, the Purchaser must have
completed its intended installation of hush-kitting on the Aircraft to conform
to Stage 3 noise regulations. This work was completed in January 1999. The
Purchaser's return option was to expire on May 15, 1999.
Due to the contingent nature of the sale, the Partnership deferred
recognition of the sale and a resulting gain until expiration of the Purchaser's
return option on May 15, 1999. The Partnership's share of the December proceeds
was $750,400, which amount was deposited into EFG's customary escrow account and
transferred to the Partnership, together with the Partnership's other December
rental receipts, in January 1999. At December 31, 1998, the entire amount was
classified as other liabilities, with an equal amount included in accounts
receivable -- affiliate on the Statement of Financial Position. Upon the
installation of the refurbished engine on the Aircraft, the remainder of the
sale consideration, or $1,000,000 and the interest thereon, was released from
the escrow account to the Programs. The Partnership's share of this payment was
$227,548, including interest of $3,548. In aggregate, the Partnership received
sales proceeds of $974,400 for its interest in the Aircraft. The Partnership's
interest in the Aircraft had a cost of $2,420,734 and was fully depreciated,
resulting in a net gain, for financial statement purposes, of $974,400.
NOTE 4- INVESTMENT SECURITIES - AFFILIATE I NOTE RECEIVABLE - AFFILIATE
On April 30, 1997, the vessel partnerships, in which the Partnership and
certain affiliated investment programs are limited partners and through which
the Partnership and the affiliated investment programs shared economic interests
in three cargo vessels (the "Vessels") leased by Gearbulk Shipowning Ltd
(formerly Kristian Gerhard Jebsen Skipsrederi A/S) (the "Lessee"), exchanged
their ownership interests in the Vessels for aggregate
18
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
consideration of $11,565,375, consisting of 1,987,000 newly issued shares (at
$1.50 per share) of common stock in Semele Group, Inc. ("Semele") (formerly
Banyan Strategic Land Fund II), a purchase money note of $8,219,500 (the "Note")
and cash of $365,375. Semele is a Delaware corporation organized on April 14,
1987 and has its common stock listed on NASDAQ Small Cap Market effective
January 5,1999 (previously NASDAQ). At the date of the exchange transaction, the
common stock of Semele had a net book value of approximately $1.50 per share and
closing market value of $1.00 per share. Semele has one principal real estate
asset consisting of an undeveloped 274 acre parcel of land near Malibu,
California ("Rancho Malibu").
The exchange was organized through an intermediary company (Equis Exchange
LLC, 99% owned by Semele and 1% owned by EFG), which was established for the
sole purpose of facilitating the exchange. There were no fees paid to EFG by
Equis Exchange LLC or Semele or by any other party that otherwise would not have
been paid to EFG had the Partnership sold its beneficial interest in the Vessels
directly to the Lessee. The Lessee prepaid all of its remaining contracted
rental obligations and purchased the Vessels in two closings occurring on May
6,1997 and May 12, 1997. The Note was repaid with $3,800,000 of cash and
delivery of a $4,419,500 note from Semele (the "Semele Note").
As a result of the exchange transaction and its original 46.46% beneficial
ownership interest in Larkfield, one of the three Vessels, the Partnership
received $735,201 in cash, became the beneficial owner of 341,435 shares of
Semele common stock (valued at $512,153 ($1.50 per share) at the time of the
exchange transaction) and received a beneficial interest in the Semele Note of
$771,450. The Semele Note bears an annual interest rate of 10% and is scheduled
to mature in April 2001. The note also requires mandatory principal reductions,
if and to the extent that net proceeds are received by Semele from the sale or
refinancing of Rancho Malibu. The Partnership recognized interest income of
$77,145 in both 1999 and 1998 and $15,215 in 1997, related to the Semele Note.
The Partnership's interest in the vessel had an original cost and net book value
of $3,666,680 and $1,385,750, respectively. The proceeds realized by the
Partnership of $1,027,101 resulted in a net loss, for financial statement
purposes, of $358,649. In addition, as this vessel was disposed of prior to the
expiration of the related lease term, the Partnership received a prepayment of
the remaining contracted rent due under the vessel's lease agreement of
$991,703.
Cash equal to the amount of the Semele Note was placed in escrow for the
benefit of Semele in a segregated account pending the outcome of certain
shareholder proposals. Specifically, as part of the exchange, Semele agreed to
seek consent ("Consent") from its shareholders to: (1) amend its certificate of
incorporation and by-laws; (2) make additional amendments to restrict the
acquisition of its common stock in a way to protect Semele's net operating loss
carry-forwards, and (3) engage EFG to provide administrative services to Semele,
which services EFG will provide at cost. On October 21, 1997, such Consent was
obtained from Semele's shareholders. The Consent also allowed for (i) the
election of a new Board of Directors nominated by EFG for terms of up to three
years and an increase in the size of the Board to as many as nine members,
provided a majority of the Board shall consist of members independent of Semele,
EFG or any affiliate; and (ii) an amendment extending Semele's life to perpetual
and changing its name from Banyan Strategic Land Fund II. Contemporaneously with
the Consent being obtained, Semele declared a $0.20 per share dividend to be
paid on all shares, including those beneficially owned by the Partnership. A
dividend of $68,287 was paid to the Partnership on November 17, 1997. This
dividend represented a return of equity to the Partnership, which
proportionately reduced the Partnership's investment in Semele. Subsequent to
the exchange transaction, Gary D. Engle, President and Chief Executive Officer
of EFG, was elected to the Board of Directors and appointed Chief Executive
Officer of Semele and James A. Coyne, Executive Vice President of EFG was
appointed Semele's President and Chief Operating Officer, and was elected to the
Board of Directors.
On June 30, 1998, Semele effected a 1-for-300 reverse stock split followed
by a 30-for-1 forward stock split resulting in a reduction of the number of
shares of Semele common stock owned by the Partnership to 34,144 shares. During
the year ended December 31, 1998, the Partnership decreased the carrying value
of its investment in Semele common stock to $4,125 per share (the quoted price
of the Semele stock on NASDAQ at
19
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
December 31, 1998) resulting in an unrealized loss in 1998 of $115,232. In 1997,
the Partnership recorded an unrealized loss of $187,790 relate to its investment
in the Semele common stock. Each of these losses was reported as a component of
comprehensive income or loss, included in partners' capital. At December 31,
1998, the General Partner determined that the decline in market value of the
Semele common stock was other-than-temporary. As a result, the Partnership wrote
down the cost of the Semele stock to $4,125 per share for a total realized loss
of $303,022 in 1998. During the year ended December 31, 1999, the Partnership
increased the carrying value of its investment in Semele common stock to $5.75
per share (the quoted price on the NASDAQ SmallCap market at December 31, 1999),
resulting in an unrealized gain in 1999 of $55,484. This gain was reported as a
component of comprehensive income included in partners' capital.
NOTE 5- RELATED PARTY TRANSACTIONS
All operating expenses incurred by the Partnership are paid by EFG on behalf
of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during each of the years ended
December 31, 1999, 1998 and 1997 which were paid or accrued by the Partnership
to EFG or its Affiliates, are as follows:
1999 1998 1997
---- ---- ----
Equipment management fees $ 4,597 $ 23,344 $ 81,303
Administrative charges 92,651 58,836 55,668
Reimbursable operating expenses
due to third parties 257,186 584,743 270,409
----------- ----------- -----------
Total $ 354,434 $ 666,923 $ 407,380
----------- ----------- -----------
As provided under the terms of the Management Agreement, EFG is compensated
for its services to the Partnership. Such services include acquisition and
management of equipment. For acquisition services, EFG was compensated by an
amount equal to 2.23% of Equipment Base Price paid by the Partnership. For
management services, EFG is compensated by an amount equal to 5% of gross
operating lease rental revenue and 2% of gross full payout lease rental revenue
received by the Partnership. Both acquisition and management fees are subject to
certain limitations defined in the Management Agreement.
Administrative charges represent amounts owed to EFG, pursuant to Section
10.4 of the Amended and Restated Agreement and Certificate of Limited
Partnership (the "Restated Agreement, as amended"), for persons employed by EFG
who are engaged in providing administrative services to the Partnership.
All equipment was acquired from EFG, one of its Affiliates or from
third-party sellers. The Partnership's Purchase Price was determined by the
method described in Note 2, Equipment on Lease.
All rents and proceeds from the sale of equipment are paid directly to EFG.
EFG temporarily deposits collected funds in a separate interest-bearing escrow
account prior to remittance to the Partnership. At December 31, 1999, the
Partnership was owed $7,360 by EFG for such funds and the interest thereon.
These funds were remitted to the Partnership in January 2000.
20
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
Certain affiliates of the General Partner own Units in the Partnership as
follows:
Number of Percent of Total
Affiliate Units Owned Outstanding Units
--------- ----------- -----------------
Atlantic Acquisition Limited
Partnership 125,843 9.11%
Old North Capital Limited
Partnership 4,452 0.32%
Atlantic Acquisition Limited Partnership ("AALP") and Old North Capital
Limited Partnership ("ONC") are both Massachusetts limited partnerships formed
in 1995 and affiliates of EFG. The general partners of AALP and ONC are
controlled by Gary D. Engle. In addition, the limited partnership interests of
ONC are owned by Semele. Gary D. Engle is Chairman and CEO of Semele.
NOTE 6-INCOME TAXES
The Partnership is not a taxable entity for federal income tax purposes.
Accordingly, no provision for income taxes has been recorded in the accounts of
the Partnership.
For financial statement purposes, the Partnership allocates net income or
loss to each class of partner according to their respective ownership
percentages (95% to the Recognized Owners and 5% to the General Partner). This
convention differs from the income or loss allocation requirements for income
tax and Dissolution Event purposes as delineated in the Restated Agreement, as
amended. For income tax purposes, the Partnership allocates net income or net
loss, in accordance with the provisions of such agreement. The Restated
Agreement, as amended, requires that upon dissolution of the Partnership, the
General Partner will be required to contribute to the Partnership an amount
equal to any negative balance which may exist in the General Partner's tax
capital account. At December 31, 1999, the General Partner had a positive tax
capital account balance.
The following is a reconciliation between net income (loss) reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income (loss) $ 1,570,441 $ (361,806) $ 698,307
Financial statement depreciation
less than tax depreciation (109,207) (340,912) (162,802)
Deferred rental income (9,219) (1,139) (1,306)
Other (579,981) 337,798 148,614
----------- ----------- -----------
Net income (loss) for federal income tax
reporting purposes $ 872,034 $ (366,059) $ 682,813
=========== =========== ===========
</TABLE>
The principal component of "Other" consists of the difference between the
tax and financial statement gain or loss on equipment disposals.
The following is a reconciliation between partners' capital reported for
financial statement and federal income tax reporting purposes for the years
ended December 31, 1999 and 1998:
21
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Partners' capital $ 3,983,777 $ 2,902,855
Unrealized gain on investment securities (55,484) --
Add back selling commissions and organization
and offering costs 3,878,114 3,878,114
Financial statement distributions in excess of
tax distributions -- 6,812
Cumulative difference between federal income tax
and financial statement income (loss) 337,786 1,036,193
----------- -----------
Partners' capital for federal income tax reporting purposes $ 8,144,193 $ 7,823,974
=========== ===========
</TABLE>
Unrealized gain on investment securities, financial statement distributions
in excess of tax distributions and cumulative difference between federal income
tax and financial statement income (loss) represent timing differences.
NOTE 7- LEGAL PROCEEDINGS
In January 1998, certain plaintiffs (the "Plaintiffs") filed a class and
derivative action, captioned Leonard Rosenblum, et al. v. Eguis Financial Group
Limited Partnership, et al., in the United States District Court for the
Southern District of Florida (the "Court") on behalf of a proposed class of
investors in 28 equipment leasing programs sponsored by EFG, including the
Partnership (collectively, the "Nominal Defendants"), against EFG and a number
of its affiliates, including the General Partner, as defendants (collectively,
the "Defendants"). Certain of the Plaintiffs, on or about June 24, 1997, had
filed an earlier derivative action, captioned Leonard Rosenblum. et al. v. Eguis
Financial Group Limited Partnership, et al., in the Superior Court of the
Commonwealth of Massachusetts on behalf of the Nominal Defendants against the
Defendants. Both actions are referred to herein collectively as the "Class
Action Lawsuit".
The Plaintiffs have asserted, among other things, claims against the
Defendants on behalf of the Nominal Defendants for violations of the Securities
Exchange Act of 1934, common law fraud, breach of contract, breach of fiduciary
duty, and violations of the partnership or trust agreements that govern each of
the Nominal Defendants. The Defendants have denied, and continue to deny, that
any of them have committed or threatened to commit any violations of law or
breached any fiduciary duties to the Plaintiffs or the Nominal Defendants.
On July 16, 1998, counsel for the Defendants and the Plaintiffs executed a
Stipulation of Settlement setting forth terms pursuant to which a settlement of
the Class Action Lawsuit is intended to be achieved and which, among other
things, is expected to reduce the burdens and expenses attendant to continuing
litigation. The Stipulation of Settlement was preliminarily approved by the
Court on August 20, 1998 when the Court issued its "Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and Providing
for Notice of, and Hearing on, the Proposed Settlement" (the "August 20 Order").
On March 12, 1999, counsel for the Plaintiffs and the Defendants entered
into an amended stipulation of settlement (the "Amended Stipulation") which was
filed with the Court on March 12, 1999. The Amended Stipulation was
preliminarily approved by the Court by its "Modified Order Preliminarily
Approving Settlement,
22
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
Conditionally Certifying Settlement Class and Providing For Notice of, and
Hearing On, the Proposed Settlement" dated March 22, 1999 (the "March 22
Order"). The Amended Stipulation, among other things, divided the Class Action
Lawsuit into two separate sub-classes that could be settled individually. On May
26, 1999, the Court issued an Order and Final Judgment approving settlement of
one of the sub-classes. Settlement of the second sub-class, involving the
Partnership and 10 affiliated partnerships (collectively referred to as the
"Exchange Partnerships"), remains pending due, in part, to the complexity of the
proposed settlement pertaining to this class.
In February 2000, counsel for the Plaintiffs and the Defendants entered into
a second amended stipulation of settlement (the "Second Amended Stipulation")
which modified certain of the settlement terms contained in the Amended
Stipulation. The Second Amended Stipulation was preliminarily approved by the
Court by its "Second Modified Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing For Notice of, and
Hearing On, the Proposed Settlement" dated March 6, 2000 (the "March 2000
Order"). Prior to issuing a final order approving the settlement of the second
sub-class involving the Partnership, the Court will hold a fairness hearing that
will be open to all interested parties and permit any party to object to the
settlement. The investors of the Partnership and all other plaintiff sub-class
members will receive a Notice of Settlement and other information pertinent to
the settlement of their claims that will be mailed to them in advance of the
fairness hearing.
The settlement of the second sub-class is premised on the consolidation of
the Exchange Partnerships' net assets (the "Consolidation"), subject to certain
conditions, into a single successor company ("Newco"). Under the proposed
Consolidation, the partners of the Exchange Partnerships would receive both
common stock in Newco and a cash distribution; and thereupon the Exchange
Partnerships would be dissolved. In addition, EFG would contribute certain
management contracts, operations personnel, and business opportunities to Newco
and cancel its current management contracts with all of the Exchange
Partnerships. Newco would operate principally as a finance company and would use
its best efforts to list its shares on the NASDAQ National Market or another
national exchange or market as soon after the Consolidation as Newco deems that
market conditions and its business operations are suitable for listing its
shares and Newco has satisfied all necessary regulatory and listing
requirements. The potential benefits and risks of the Consolidation will be
presented in a Solicitation Statement that will be mailed to all of the partners
of the Exchange Partnerships as soon as the associated regulatory review process
is completed and at least 60 days prior to the fairness hearing. A preliminary
Solicitation Statement was filed with the Securities and Exchange Commission on
August 24, 1998 and remains pending. Class members will be notified of the
actual fairness hearing date when it is confirmed.
One of the principal objectives of the Consolidation is to create a company
that would have the potential to generate more value for the benefit of existing
limited partners than other alternatives, including continuing the Partnership's
customary business operations until all of its assets are disposed in the
ordinary course of business. To facilitate the realization of this objective,
the Amended Stipulation provided, among other things, that commencing March
22, 1999, the Exchange Partnerships could collectively invest up to 40% of the
total aggregate net asset values of all of the Exchange Partnerships in any
investment, including additional equipment and other business activities that
the general partners of the Exchange Partnerships and EFG reasonably believed to
be consistent with the anticipated business interests and objectives of Newco,
subject to certain limitations. The Second Amended Stipulation, among other
things, quantified the 40% limitation using a whole dollar amount of $32 million
in the aggregate.
On March 8, 2000, the Exchange Partnerships collectively invested $32
million as permitted by the Second Amended Stipulation approved by the Court.
The Partnership's portion of the aggregate investment is $2,160,000. The
investment consists of a term loan to Echelon Residential Holdings LLC, a
newly-formed real estate development company that will be owned by several
investors, including James A. Coyne, Executive Vice President of EFG. Mr. Coyne,
in his individual capacity, is the only investor in Echelon Residential Holdings
LLC who is related to EFG. The loan proceeds were used by Echelon Residential
Holdings LLC in the formation of a subsidiary, Echelon Residential LLC, that in
turn acquired various real estate assets from Echelon International Corporation,
a Florida based real estate company. The loan has a term of 30 months maturing
on September 7,
23
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
2002 and bears interest at the annual rate of 14% for the first 24 months and
18% for the final six months of the term. Interest accrues and compounds
monthly but is not payable until maturity. Echelon Residential Holdings LLC
has pledged a security interest in all of its right, title and interest in
and to its membership interests in Echelon Residential LLC to the Exchange
Partnerships as collateral.
In the absence of the Court's authorization to enter into new investment
activities, the Partnership's Restated Agreement, as amended, would not permit
such activities without the approval of limited partners owning a majority of
the Partnership's outstanding Units. Consistent with the Amended Stipulation,
the Second Amended Stipulation provides terms for unwinding any new investment
transactions in the event that the Consolidation is not effected or the
Partnership objects to its participation in the Consolidation.
The Second Amended Stipulation, as well as the Amended Stipulation and the
original Stipulation of Settlement, prescribe certain conditions necessary to
effect a final settlement, including providing the partners of the Exchange
Partnerships with the opportunity to object to the participation of their
partnership in the Consolidation. Assuming the proposed settlement is effected
according to present terms, the Partnership's share of legal fees and expenses
related to the Class Action Lawsuit and the Consolidation is estimated to be
approximately $357,000, of which approximately $305,000 was accrued and expensed
by the Partnership in 1998 and approximately $52,000 was accrued and expensed in
1999.
While the Court's August 20 Order enjoined certain class members, including
all of the partners of the Partnership, from transferring, selling, assigning,
giving, pledging, hypothecating, or otherwise disposing of any Units pending the
Court's final determination of whether the settlement should be approved, the
March 22 Order permitted the partners to transfer Units to family members or as
a result of the divorce, disability or death of the partner. No other transfers
are permitted pending the Court's final determination of whether the settlement
should be approved. The provision of the August 20 Order which enjoined the
General Partners of the Exchange Partnerships from, among other things,
recording any transfers not in accordance with the Court's order remains
effective.
There can be no assurance that settlement of the sub-class involving the
Exchange Partnerships will receive final Court approval and be effected. There
also can be no assurance that all or any of the Exchange Partnerships will
participate in the Consolidation because if limited partners owning more than
one-third of the outstanding Units of a partnership object to the Consolidation,
then that partnership will be excluded from the Consolidation. Notwithstanding
the extent of delays experienced thus far in achieving a final settlement of the
Class Action Lawsuit with respect to the Exchange Partnerships, the General
Partner and its affiliates, in consultation with counsel, continue to feel that
there is a reasonable basis to believe that a final settlement of the sub-class
involving the Exchange Partnerships ultimately will be achieved. However, in the
absence of a final settlement approved by the Court, the Defendants intend to
defend vigorously against the claims asserted in the Class Action Lawsuit.
Neither the General Partner nor its affiliates can predict with any degree of
certainty the cost of continuing litigation to the Partnership or the ultimate
outcome.
In addition to the foregoing, the Partnership is a party to other lawsuits
that have arisen out of the conduct of its business, principally involving
disputes or disagreements with lessees over lease terms and conditions as
described below:
Action involving Transmeridian Airlines
On November 9, 1998, First Security Bank, N.A., as trustee of the
Partnership and certain affiliated investment programs (collectively, the
"Plaintiffs), filed an action in Superior Court of the Commonwealth of
Massachusetts in Suffolk County against Prime Air, Inc. d/b/a Transmeridian
Airlines ("Transmeridian"), Atkinson & Mullen Travel, Inc., and Apple Vacations,
West, Inc., both d/b/a Apple Vacations, asserting various causes of action for
24
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
declaratory judgment and breach of contract. The action subsequently was removed
to United States District Court for the District of Massachusetts. Transmeridian
filed counterclaims for breach of contract, quantum meruit, conversion, breach
of the implied covenant of good faith and fair dealing, and violation of M.G.L.
c. 93A. The Plaintiffs subsequently filed an Amended Complaint asserting claims
for breaches of contract and covenant of good faith and fair dealing against
Transmeridian and breach of guaranty against Apple Vacations.
The Plaintiffs are seeking damages for, among other things, breach of
contract arising out of Transmeridian's refusal to repair or replace burned
engine blades found in one engine during a pre-return inspection of an aircraft
leased by Transmeridian from the Plaintiffs, a Boeing 727-251 ADV aircraft (the
"Aircraft"). The estimated cost to repair the engine and lease a substitute
engine during the repair period was approximately $488,000. Repairs were
completed in June 1999. The Plaintiffs intend to enforce written guarantees
issued by Apple Vacations that absolutely and unconditionally guarantee
Transmeridian's performance under the lease agreement and are seeking recovery
of all costs, lost revenue and monetary damages in connection with this matter.
Notwithstanding the foregoing, the Plaintiffs were required to advance the cost
of repairing the engine and leasing a substitute engine and cannot be certain
whether the guarantees will be enforced. Therefore, the Partnership accrued and
expensed its share of these costs, or approximately $84,000 in 1998 and $26,000
in 1999. Discovery is ongoing and a trial date has been tentatively scheduled
for January 15, 2001. The General Partner plans to vigorously pursue this
action; however, it is too early to predict the Plaintiffs' likelihood of
success. This aircraft was sold in June 1999.
Action involving National Steel Corporation
EFG, on behalf of the Partnership and certain affiliated investment programs
(collectively, the "Plaintiffs"), filed an action in the Commonwealth of
Massachusetts Superior Court, Department of the Trial Court in and for the
County of Suffolk on July 27, 1995, for damages and declaratory relief against a
lessee of the Partnership, National Steel Corporation ("National Steel"). The
Complaint sought reimbursement from National Steel of certain sales and/or use
taxes paid to the State of Illinois in connection with equipment leased by
National Steel from the Plaintiffs and other remedies provided under the Master
Lease Agreement ("MLA"). On August 30, 1995, National Steel filed a Notice of
Removal, which removed the case to United States District Court, District of
Massachusetts. On September 7, 1995, National Steel filed its Answer to the
Plaintiff's Complaint along with Affirmative Defenses and Counterclaims and
sought declaratory relief, alleging breach of contract, implied covenant of good
faith and fair dealing, and specific performance. The Plaintiffs filed an Answer
to National Steel's Counterclaims on September 29, 1995. The parties discussed
settlement with respect to this matter for some time; however, the negotiations
were unsuccessful. The Plaintiffs filed an Amended and Supplemental Complaint
alleging further default under the MLA and filed a motion for Summary Judgment
on all claims and Counterclaims. The Court held a hearing on the Plaintiffs
motion in December 1997 and later entered a decision dismissing certain of
National Steel's Counterclaims, finding in favor of the Plaintiffs on certain
issues and in favor of National Steel on other issues. On May 11, 1999, the
parties executed a comprehensive settlement agreement to resolve all outstanding
issues, including reimbursement to the Partnership for the disputed sales tax
items referenced above. This matter did not have a material effect on the
Partnership's financial position or results of operations.
Action involving Northwest Airlines, Inc.
On September 22, 1995, Investors Asset Holding Corp. and First Security
Bank, N.A., trustees of the Partnership and certain affiliated investment
programs (collectively, the "Plaintiffs"), filed an action in United States
District Court for the District of Massachusetts against a lessee of the
Partnership, Northwest Airlines, Inc. ("Northwest"). The Complaint alleges that
Northwest did not fulfill its maintenance obligations under its Lease Agreements
with the Plaintiffs and seeks declaratory judgment concerning Northwest's
obligations and monetary damages. Northwest filed an Answer to the Plaintiffs'
Complaint and a motion to transfer the venue of this proceeding to Minnesota.
The Court denied Northwest's motion. On June 29, 1998, a United States
Magistrate Judge recommended entry of partial summary judgment in favor of the
Plaintiffs. Northwest appealed this decision. On April 15, 1999, the United
States District Court Judge adopted the Magistrate Judge's
25
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
recommendation and entered partial summary judgment in favor of the Plaintiffs
on their claims for declaratory judgment. The Plaintiffs have made a demand upon
Northwest for settlement. If no settlement is reached, the Plaintiffs will
proceed to trial for an assessment of damages. No firm trial date has been
established at this time; however, if a trial should become necessary, it is not
expected to occur before November 2000. The General Partner believes that the
Plaintiffs claims ultimately will prevail and that the Partnership's financial
position will not be adversely affected by the outcome of this action.
NOTE 8- SUBSEQUENT EVENT
On March 8, 2000, the Exchange Partnerships (see Note 7) collectively loaned
$32 million to Echelon Residential Holdings LLC, a newly-formed real estate
development company that will be owned by several investors, including James A.
Coyne, Executive Vice President of EFG. Mr. Coyne, in his individual capacity,
is the only investor in Echelon Residential Holdings LLC who is related to EFG.
The Partnership's participation in the loan is $2,160,000. Echelon
Residential Holdings LLC, through a subsidiary (Echelon Residential LLC),
used the loan proceeds to acquire various real estate assets from Echelon
International Corporation, a Florida based real estate company. The loan has
a term of 30 months maturing on September 7, 2002 and bears interest at the
annual rate of 14% for the first 24 months and 18% for the final six months
of the term. Interest accrues and compounds monthly but is not payable until
maturity. In connection with the transaction, Echelon Residential Holdings
LLC has pledged a security interest in all of its right, title and interest
in and to its membership interests in Echelon Residential LLC to the Exchange
Partnerships as collateral.
26
<PAGE>
ADDITIONAL FINANCIAL INFORMATION
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH GENERATED TO COST
OF EQUIPMENT DISPOSED
for the years ended December 31, 1999, 1998 and 1997
The Partnership classifies all rents from leasing equipment as lease
revenue. Upon expiration of the primary lease terms, equipment may be sold,
rented on a month-to-month basis or re-leased for a defined period under a new
or extended lease agreement. The proceeds generated from selling or re-leasing
the equipment, in addition to any month-to-month revenues, represent the total
residual value realized for each item of equipment. Therefore, the financial
statement gain or loss, which reflects the difference between the net book value
of the equipment at the time of sale or disposition and the proceeds realized
upon sale or disposition, may not reflect the aggregate residual proceeds
realized by the Partnership for such equipment.
The following is a summary of cash excess associated with equipment
dispositions occurring in the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Rents earned prior to disposal of
equipment, net of interest charges $ 4,744,936 $ 616,787 $ 1,800,550
Sale proceeds realized upon
disposition of equipment 1,568,063 19,725 102,027
----------- ----------- -----------
Total cash generated from rents
and equipment sale proceeds 6,312,999 636,512 1,902,577
Original acquisition cost of equipment
disposed 4,817,549 406,571 1,551,218
----------- ----------- -----------
Excess of total cash generated to cost
of equipment disposed $ 1,495,450 $ 229,941 $ 351,359
=========== =========== ===========
</TABLE>
27
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
STATEMENT OF CASH AND DISTRIBUTABLE CASH FROM OPERATIONS
SALES AND REFINANCINGS
for the year ended December 31,1999
<TABLE>
<CAPTION>
Sales and
Operations Refinancings Total
----------- ----------- -----------
<S> <C> <C> <C>
Net income $ 2,378 $ 1,568,063 $ 1,570,441
Add:
Management fees 4,597 -- 4,597
----------- ----------- -----------
Cash from operations, sales and
refinancings 6,975 1,568,063 1,575,038
Less:
Management fees (4,597) -- (4,597)
----------- ----------- -----------
Distributable cash from operations,
sales and refinancings 2,378 1,568,063 1,570,441
Other sources and uses of cash:
Cash at beginning of year 2,448,960 -- 2,448,960
Net change in receivables and
accruals (76,595) -- (76,595)
Less:
Cash distributions paid -- (545,003) (545,003)
----------- ----------- -----------
Cash at end of year $ 2,374,743 $ 1,023,060 $ 3,397,803
=========== =========== ===========
</TABLE>
28
<PAGE>
AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP
SCHEDULE OF COSTS REIMBURSED TO THE
GENERAL PARTNER AND ITS AFFILIATES AS REQUIRED
BY SECTION 10.4 OF THE AMENDED AND RESTATED
AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP
December 31, 1999
For the year ended December 31, 1999, the Partnership reimbursed the General
Partner and its Affiliates for the following costs:
Operating expenses $ 450,840
29
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of American Income Partners V-A Limited Partnership, of our report dated
March 10, 2000, included in the 1999 Annual Report to the Partners of American
Income Partners V-A Limited Partnership.
ERNST & YOUNG LLP
Boston, Massachusetts
March 10, 2000
<PAGE>
Exhibit 99(d)
MASTER LEASE AGREEMENT
NO. 8703ILG271
Dated as of
March 31, 1987
between
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION
AS TRUSTEE
LESSOR
AND
AMOCO CORPORATION
LESSEE
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. Master Lease Agreement ...................................... 1
2. Lease Term. Lessee's Right To Quiet Enjoyment ............... 1
3. Basic Rent. Net Lease. Lessee's Indemnity. No Warranties
By Lessor ................................................. 1
4. Use And Location Of Equipment. Titling and Registration.
Maintenance And Repairs. No
Liens. No Assignment Or Sublease By Lessee ................ 2
5. Loss, Damage Or Destruction Of Equipment .................... 2
6. Taxes And Fees .............................................. 3
7. Insurance ................................................... 3
8. Financial Statements. Inspection. Reports ................... 3
9. Agreement For Lease Only. Identification Marks. Financing
Statements. Further Assurances ............................ 4
10. Late Payment Charges. Lessor's Right To Perform For Lessee .. 4
11 Lessee's Options Upon Lease Expiration ...................... 4
12. Lessee's Representations And Warranties ..................... 5
13. Events Of Default. Lessor's Remedies On Default ............. 6
14. Assignment and Sublease ..................................... 9
15. Notice. Governing Law. Execution In Counterparts ............ 9
16. Participation as Trustee .................................... 10
17. Definitions ................................................. 11
<PAGE>
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT NO. 8703ILG271, dated as of March 31, 1987, between
First Security Bank of Utah, National Association, not in its individual
capacity but solely as Trustee under that certain trust agreement "AFG/Amoco
Trust" dated as of March 31, 1987 (the "Trust Agreement") having its principal
place of business and address for purposes of notice hereunder at 79 South Main
Street, Salt Lake City, Utah 84111 Attn: Corporate Trust Department, as Lessor
("Lessor"), and Amoco Corporation, an Indiana corporation having a principal
place of business and address for purposes of notice hereunder at 200 East
Randolph Drive, Chicago, Illinois 60680, as Lessee.
1. MASTER LEASE.
This Master Lease Agreement sets forth the terms and conditions that
govern the lease by Lessor to Lessee of items of Equipment specified on Rental
Schedules executed and delivered by the parties from time to time. Each Rental
Schedule incorporates by reference this Master Lease Agreement and specifies the
Lease Term, the amount of Basic Rent, the Payment Dates on which Basic Rent is
due, and such other information and provisions as Lessor and Lessee may agree.
Each Rental Schedule constitutes a separate and independent lease.
2. LEASE TERM. LESSEE'S RIGHT TO QUIET ENJOYMENT.
Each Rental Schedule is for a non-cancellable Lease Term commencing on the
date of acceptance of the Equipment for lease and ending on the Expiration Date
specified on such Rental Schedule. Lessor and Lessee cannot, for any reason,
except as provided in the Rental Schedule, terminate the Rental Schedule or
suspend payment or performance of any of their obligations thereunder. Subject
to there being no Event of Default by Lessee under the Rental Schedule, Lessee
will have quiet possession and use of the Equipment throughout the Lease Term,
and Lessor shall defend and protect such quiet possession and use against all
persons claiming by, through or under Lessor.
3. BASIC RENT. NET LEASE. LESSEE'S INDEMNITY. NO WARRANTIES BY LESSOR.
Basic Rent is payable in the amount specified on the Rental Schedule. All
payments of Basic Rent shall be made to Lessor in good funds on the Payment
Dates specified in the Rental Schedule. Lessee agrees to pay, and will indemnify
and hold Lessor and any assignee of Lessor harmless from and against all
operating costs the same as if Lessee owned the Equipment (including, without
limitation, maintenance and repair), third party personal injury or property
damage claims (including claims of product liability or strict liability in
tort), losses or liabilities relating to Lessee's possession, control,
maintenance or repair of the Equipment or its use of such Equipment, that are
incurred by or asserted against Lessee, any permitted sublease of Lessee, Lessor
or any assignee of Lessor and arise out of matters occurring after Lessee
accepts the Equipment and prior to its return of the equipment to Lessor or its
designee. Lessee agrees to defend all claims through counsel acceptable to
Lessor. Lessee's obligations, such as, to pay the Basic Rent
<PAGE>
are not subject to defense, counterclaim, set-off, abatement or ecoupment, and
Lessee waives all rights to terminate or surrender the Rental Schedule, for any
reason, including, without limitation, defect in the Equipment or nonperformance
by Lessor, provided, however, that Lessee specifically retains the right to seek
recourse against Lessor by way of separate action either at law or in equity in
the event of nonperformance by Lessor under this Agreement including the Rental
Schedule. EXCEPT AS OTHERWISE PROVIDED HEREIN, LESSOR HEREBY DISCLAIMS ALL
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, IMPLIED
WARRANTIES OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE. Lessor will
assign to Lessee all manufacturer or vendor warranties and will cooperate with
Lessee in asserting any claims under such warranties. Lessor warrants that upon
the commencement of the Primary Tern with respect to any item of Equipment, the
vendor thereof will have been paid the full purchase price thereof by or on
behalf of Lessor. Lessor further warrants its ownership of all Equipment leased
pursuant to this Lease.
4. USE AND LOCATION OF EQUIPMENT. TITLING AND REGISTRATION. MAINTENANCE AND
REPAIRS. NO LIENS. NO ASSIGNMENT OR SUBLEASE BY LESSEE.
The Equipment is to be used exclusively by Lessee in the conduct of its
business or that of any company wholly-owned, directly or indirectly, by Amoco
Corporation, only for the purposes for which it was designed and in compliance
with all applicable laws, rules and regulations. Lessee will obtain and maintain
all necessary licenses, permits and approvals. Lessee shall cause the Equipment
to be properly and lawfully titled and registered at all times in the name of
"AFG/Amoco Trust" in care of Lessee and reflecting such party as Lessor shall
designate as first lienholder and Lessor hereby appoints Lessee as its agent and
attorney-in-fact for the express and limited purpose of effecting and
maintaining such titles and registrations. Upon request from Lessor at intervals
not more than once a year, Lessee shall provide Lessor with a list locating all
Equipment specified on each Rental Schedule. In the event Lessor moves the
Equipment (other than on a temporary basis in the normal course of Lessee's
business) to a location other than that specified on the Rental Schedule, Lessee
agrees at its own cost and expense to re-title and/or re-register the Equipment
as required by applicable law listing "AFG/Amoco Trust" as owner and the Lender
(or its assignee) as lien holder. In no event may the Equipment be moved (other
than on a temporary basis in the normal course of Lessee's business) to a
terminal location outside the continental United States. Lessee will effect all
maintenance and repairs to the Equipment in the same manner and using the same
standards Lessee uses in maintaining equipment similar to the Equipment owned by
it and will keep written records thereof. All maintenance and repairs will be
made in accordance with the manufacturer's recommendations and by authorized
representatives of the manufacturer or by persons of equal skill and knowledge
whose work will not adversely affect any applicable manufacturer's or vendor's
warranty. Lessee will keep the Equipment and its interest therein free and clear
of all liens and encumbrances other than those created by Lessor or arising out
of claims against Lessor and not related to the lease of the Equipment to
Lessee. Lessor, upon Lessee's request, shall provide evidence reasonably
acceptable to Lessee evidencing its payment of the purchase price of each item
of Equipment and its ownership thereof. The Rental Schedule may not be assigned
by Lessee. The Equipment may not be subleased without the prior written consent
of Lessor, which consent will not unreasonably be denied.
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<PAGE>
5. LOSS, DAMAGE OR DESTRUCTION OF EQUIPMENT.
Lessee will notify Lessor promptly in writing if any item of Equipment is
lost, stolen, requisitioned by a governmental authority or damaged beyond repair
(each a "Casualty"), describing the Casualty in reasonable detail, and will
promptly file a claim under applicable policies of insurance. Lessee may, with
the prior written consent of Lessor, replace the Equipment suffering a Casualty
with similar items of Equipment of reasonably equal fair market value and
utility. In the event Lessor and Lessee cannot agree on the value of the unit
replacing the Equipment suffering a Casualty, the fair market value of such
replacement unit shall be determined by an independent equipment appraiser of
nationally recognized standing, selected by Lessor and reasonably acceptable to
Lessee. The cost of appraisal shall be shared equally by Lessee and Lessor. If
Lessee does not repair or replace the Equipment, Lessee will pay to Lessor on or
before the second Payment Date following the Casualty, in addition to Basic Rent
and other sums due on that date, an amount equal to the Casualty Value specified
on the Rental Schedule. The Rental Schedule, solely as it relates to the
Equipment (including the obligation to pay Basic Rent) suffering the Casualty,
will terminate and ownership of the Equipment suffering the Casualty, including
all claims for insurance proceeds or condemnation awards, will pass to Lessee
upon receipt of such payment by Lessor. It is understood and agreed that an item
can be declared to have suffered a Casualty if the cost of maintaining and
repairing such item of Equipment renders it uneconomic to continue to operate
such item.
6. TAXES AND FEES.
Lessee agrees to prepare and file all required returns or reports and to
pay all sales, use, gross receipts and other taxes (including highway use and
vehicle excise taxes, where applicable), fees, interest, fines or penalties
imposed by any governmental authority relating in any way to the Equipment or
the Rental Schedule, and excepting only taxes imposed upon the net income of
Lessor. Notwithstanding the foregoing, Lessor will report and pay all use taxes
and Lessee will pay to Lessor, on each Basic Rent Payment Date, as additional
rent, an amount equal to the use taxes attributable to that payment of Basic
Rent if any. Lessor agrees all taxes, fees and other expenses connected with
acquisition of the Equipment and which may be appropriately capitalized shall be
added to the Equipment Cost set forth on the Rental Schedule.
7. INSURANCE.
Lessee agrees to maintain policies of insurance or self insurance on the
Equipment in amounts, against risks and on terms and conditions applicable to
other equipment owned or leased by Lessee and similar to the Equipment. Such
insurance will at a minimum include (i) physical damage and theft insurance in
an amount at least equal to the Casualty Value set forth on the Rental Schedule
and (ii) comprehensive liability insurance in the amount of at least $5,000,000
per occurrence, in each case with deductibles not in excess of $100,000. All
policies (A) are to be maintained with insurers acceptable to Lessor; (B) are to
name Lessor and its assignees as loss payees with respect to physical damage and
theft and as additional insureds with respect to
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liability, as to[ILLEGIBLE] - interests may appear; and (C) are to provide
[ILLEGIBLE] they may not be altered or cancelled except upon thirty days prior
written notice to Lessor and each of Lessor's assignees named as additional
insured and loss payee. Lessee agrees to deliver to Lessor such certificates of
insurance as Lessor may, from time to tine, request. Lessor may hold any
insurance proceeds as security for Lessee's performance of its obligations with
respect to the Equipment on behalf of which the proceeds were paid and the
payment of all Basic Rent and other sums then due and unpaid under the Rental
Schedule and will pay such proceeds over to Lessee only upon receipt of
satisfactory evidence thereof.
8. FINANCIAL STATEMENTS. INSPECTION. REPORTS.
Lessee will provide to Lessor copies of Lessee's annual audited balance
sheet, profit and loss statement and statement of changes in financial
condition, and, if generally available quarterly profit and loss statement, all
prepared in accordance with generally accepted accounting principles,
consistently applied. Lessor may from time to time, upon reasonable notice and
during Lessee's normal business hours, inspect the Equipment and Lessee's
records with respect thereto and discuss Lessee's financial condition with
knowledgeable representatives of Lessee. Lessee will, if requested, provide a
report on the condition of the Equipment, a record of its maintenance and
repair, a summary of all items suffering a Casualty, a certificate of no default
or such other information or evidence of compliance with Lessee's obligations
under the Rental Schedule as Lessor may reasonably request.
9. AGREEMENT FOR LEASE ONLY. IDENTIFICATION MARKS. FINANCING STATEMENTS.
FURTHER ASSURANCES.
Each Rental Schedule is intended to be a true lease and not a lease in the
nature of a security agreement. If requested by Lessor, Lessee will affix to the
Equipment all notices of Lessor's ownership of the Equipment furnished by Lessor
in a form reasonably acceptable to Lessee. Lessee will execute and deliver and
Lessor may file Uniform Commercial Code financing statements or other similar
documents notifying the public of Lessor's ownership of the Equipment and Lessee
hereby appoints Lessor as its agent and attorney-in-fact to execute and file the
same on its behalf. Lessee agrees to promptly execute and deliver to Lessor such
further documents or other assurances, and to take such further action, as
Lessor may from time to time reasonably request in order to establish and
protect the rights and remedies created by the Rental Schedule.
10. LATE PAYMENT CHARGES. LESSOR'S RIGHT TO PERFORM FOR LESSEE.
A Late Payment Charge equal to (A) the greater of 1% per annum above the
debt rate charged to Lessor in connection with the financing of its purchase of
the Equipment or 1% per annum above the prime or base lending rate of The First
National Bank of Boston, as announced from time to time, or (B) if less, the
highest rate not prohibited by law, will accrue on any sum not paid when due for
each day not paid. If Lessee fails to duly and promptly pay or perform any of
its obligations hereunder, Lessor may itself pay or perform such obligations for
the account of Lessee without thereby waiving any default
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and Lessee will pay to Lessor, on demand and in addition to Basic Rent, an
amount equal to all sums so paid or expenses so incurred, plus a Late Payment
Charge accruing from the date such sums were paid or expenses incurred by
Lessor.
11. LESSEE'S OPTIONS UPON LEASE EXPIRATION.
Lessee has the option at the expiration of the Lease Term, exercisable
with respect to each such items of Equipment leased pursuant to Rental Schedules
having the same expiration date, (i) to return the Equipment to Lessor, or (ii)
to renew the Rental Schedule at fair rental value for a renewal term the length
of which shall be determined by agreement of Lessee and Lessor. Lessee agrees to
provide Lessor written notice of its decision to return the Equipment or renew
the Rental Schedule not less than 120 days prior to the expiration date. If
Lessee fails to give Lessor 120 days written notice, the Lease Term may, at
Lessor's option be extended and continue until 120 days from the date Lessor
receives written notice of Lessee's decision to return the Equipment or renew
the Rental Schedule.
At the expiration of the Lease Term or any extension or renewal thereof,
the Equipment will be returned with all original equipment or the substantial
equivalent thereof installed, ordinary wear and tear excepted, free of all
Lessee's markings and free of all liens and encumbrances other than those
granted by or asserted against Lessor and not caused by or related to the lease
of the Equipment to Lessee.
Lessee agrees to have maintained the Leased Equipment during the period
of the lease in the same manner and follow the same maintenance procedures as
Lessee follows for like equipment it owns and in accordance with the
manufacturer's recommended schedule of maintenance. Lessee further agrees that
upon return of the tractor and trailer Equipment to the Lessor at the
termination of this Lease the Equipment will meet on the aggregate for each unit
the following minimum condition requirements.
(i) The cost of necessary glass, fiberglass or sheet metal repairs will
not exceed $750 for each tractor returned and $500 for each trailer returned
except that such limitation shall not apply to cosmetic defects that do not
adversly affect the market value of the Equipment;
(ii) Brake linings shall have a minimum of 40% lining remaining on disc
brakes and 40% lining remaining on drum brakes, with measurement to be taken
from the middle of the shoe;
(iii) All tires shall be of the original type (e.g. radial) and shall have
a minimum remaining tread depth of 40% of their original tread depth, and can
include recapped tires;
(iv) The power train including engine, transmission and driveline shall be
in efficient operating condition for delivery service for its originally
intended purpose, normal wear and tear excepted, for the number of years
operated.
Notwithstanding any other provision of this Section 11, all tractor and
trailer units, upon their return to Lessor, shall meet all applicable United
States Department of Transportation minimum standards applicable to such units
and may
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be legally operated on the public highways of the state in which such units are
then garaged. The Rental Schedule shall continue in full force and effect and
Lessee shall continue to pay Basic Rent through and including the date on which
the Equipment is returned by Lessee.
12. LESSEE'S REPRESENTATIONS AND WARRANTIES.
Lessee represents, warrants and certifies as of the date of execution and
delivery of each Rental Schedule as follows:
(a) Lessee is duly organized, validly existing and in good standing
under the laws of the state of its incorporation, with full power to
enter into and to pay and perform its obligations under the Rental
Schedule and this Master Lease Agreement as incorporated therein by
reference, and is duly qualified and in good standing in all other
jurisdictions where its failure to so qualify would adversely affect
the conduct of its business or the performance of its obligations
under or the enforceablility of the Rental Schedule;
(b) the Rental Schedule, this Master Lease Agreement and all related
documents have been duly authorized, executed and delivered by
Lessee, are enforceable against Lessee in accordance with their
terms and do not and will not contravene any provisions of or
constitute a default under Lessee's organizational documents or its
By Laws, any agreement to which it Is a party or by which it or its
property is bound, or any law, regulation or order of any
governmental authority;
(c) Lessor's right, title and interest in and to the Rental Schedule,
this Master Lease Agreement and the Equipment and the rentals
therefrom will not be affected or impaired by the terms of any
agreement or instrument by which Lessee or its property is bound;
(d) no approval of, or filing with, any governmental authority or other
person is required in connection with Lessee's entering into or the
payment or performance of its obligations under the Rental Schedule
or this Master Lease Agreement as incorporated therein by reference;
(e) there are no suits or proceedings pending or threatened before any
court or governmental agency against or affecting Lessee which, if
decided adversely to Lessee, would materially adversely affect
Lessee's business or financial condition or its ability to perform
any of its obligations under the Rental Schedule or this Master
Lease Agreement as incorporated therein by reference; and
(f) there has been no material adverse change to Lessee's financial
condition since the date of its most recent audited financial
statement.
13. EVENTS OF DEFAULT. LESSOR'S REMEDIES ON DEFAULT.
Each of the following events constitutes an Event of Default:
(a) default in the payment of any amount when due under the Rental
Schedule continuing for a period of five business days after notice
of nonpayment of any such amount is delivered to Lessee;
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<PAGE>
(b) default in the observance or performance of any other covenant,
condition or agreement to be observed or performed by Lessee under
the Rental Schedule and this Master Lease Agreement as incorporated
therein by reference, continuing for more than 30 days after written
notice thereof, unless Lessee shall be diligently proceeding to cure
such default and such default does not subject the Equipment to
forfeiture, in which event, Lessee shall have 60 days from the date
of notice in which to cure such default;
(c) any material representation or warranty made by Lessee herein or
in the Rental Schedule or this Master Lease Agreement as
incorporated therein by reference or in any document or certificate
furnished in connection herewith shall at any time prove to have
been incorrect in any material respect when made;
(d) any attempt by Lessee other than as set forth in Section 14
hereof, without Lessor's prior written consent, to assign the Rental
Schedule, to sublease the Equipment or to transfer possession of the
Equipment;
(e) Lessee, without Lessor's prior written consent, is a party to a
merger or consolidation and the surviving entity's credit-worthiness
is materially impaired because of such merger or consolidation in
the reasonable opinion of Lessor;
(f) Lessee, without Lessor's prior written consent, sells or
transfers, either in a single transaction or in a series of related
transactions, all or substantially all its assets other than its
rights under the Rental Schedules, and after such sale or series of
sales, Lessee's credit-worthiness is materially impaired in the
reasonable opinion of Lessor;
(g) Lessee, without Lessor's prior written consent, either in a
single transaction or in a series of related transactions, purchases
a substantial portion of its stock and after such purchase Lessee's
credit-worthiness is materially impaired in the reasonable opinion
of Lessor;
(h) Lessee (A) ceases doing business as a going concern; (B) makes
an assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they mature or generally falls to pay
its debts as they become due; (C) initiates any voluntary bankruptcy
or insolvency proceeding; (D) fails to obtain the discharge of any
bankruptcy or insolvency proceeding initiated against it by others
within 60 days of the date such proceedings were initiated; (E)
requests or consents to the appointment of a trustee or receiver; or
(F) a trustee or receiver is appointed for Lessee or for a
substantial part of Lessee's property; or
(i) Lessee shall not return the Equipment or shall not return the
Equipment in the required condition at the expiration of the Rental
Schedule or any extension or renewal thereof.
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Upon the occurrence of an Event of Default, Lessor may, without notice to
Lessee, declare the applicable Rental Schedule in default and may exercise any
of the following remedies:
I. at Lessor's option, and in its sole discretion either:
(a) declare all Basic Rent and other sums due or to become due under
the Rental Schedule immediately due and payable, and sue to enforce
the payment thereof; or
(b) receive from Lessee (and sue to enforce the payment thereof), as
liquidated damages for loss of the bargain and not as a penalty, and
in addition to all accrued and unpaid Basic Rent and other sums due
under the Rental Schedule, an amount equal to the greater of (A) the
Casualty Value set forth on the Rental Schedule calculated after the
last payment of Basic Rent actually received by Lessor or (B) the
fair market value of the Equipment as of the date of default
determined by an appraiser selected by Lessor, plus, in either case,
interest thereon at the Late Payment Charge rate from the date of
default until the date of payment, and, after receipt in good funds
of the sums described above, Lessor will, if it has not already done
so, terminate the Rental Schedule and, at its option, either pay
over to Lessee as, when and if received, any net proceeds (after all
costs and expenses) from any disposition of the Equipment, or convey
to Lessee all of its right, title and interest in and to the
Equipment, as is, where is and with all faults, without recourse and
without warranty; and
II. without regard to whether Lessor has elected either option in
subsection I. above, Lessor may
(a) proceed by appropriate court action either at law or in equity
to enforce performance by Lessee of the covenants and terms of the
Rental Schedule and to recover damages for the breach thereof; or
(b) terminate the Rental Schedule by written notice to Lessee,
whereupon all right of Lessee to use the Equipment will immediately
cease and Lessee will forthwith return the Equipment to Lessor in
accordance with the provisions hereof; or
(c) repossess the Equipment and without notice to Lessee, dispose of
it by private or public, cash or credit sale or by lease to a
different lessee, in all events free and clear of any rights of
Lessee, and for this purpose Lessee hereby grants to Lessor and its
agents the right to enter upon the premises where the Equipment is
located and to remove the Equipment therefrom and Lessee agrees not
to interfere with the peaceful repossesion of the Equipment; and
(d) recover from Lessee all costs and expenses arising out of
Lessee's default, including, without limitation, expenses of
repossession, storage, appraisal, repair, reconditioning and
disposition of the Equipment and reasonable attorneys' fees and
expenses.
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Lessor's remedies are cumulative and not exclusive, and are in addition to all
remedies at law or in equity. Nothing in this Section 13 shall be construed as
permitting Lessor in the event of a default hereunder by Lessee, of recovering
its damages twice. No failure by Lessor to declare a default shall constitute a
waiver of such default or restrict Lessor's ability to declare a default at a
later date.
14. ASSIGNMENT AND SUBLEASE
Lessor may at any time and from time to time grant liens on the Equipment,
and assign, as collateral security or otherwise, its rights in the Rental
Schedule and this Master Lease Agreement as incorporated therein by reference,
in each case subject and subordinate to Lessee's rights thereunder (including,
without limitation, its right of quiet enjoyment set forth in Section 2 hereof),
without notice to or consent by Lessee. Lessee acknowledges that Lessor may
assign the Rental Schedule to a Lender in connection with the financing of its
purchase of the Equipment and agrees, in the event of such assignment, to
execute and deliver a Rent Assignment Letter acknowledging that the Lender has
(and may exercise either in its own name or in the name of Lessor) all of the
rights, privileges and remedies, but none of the obligations, of Lessor under
the Rental Schedule; waiving for the benefit of the Lender (but not Lessor) any
defense, counterclaim, set-off, abatement, reduction or recoupment that Lessee
may have against Lessor; and agreeing to make all payments of Basic Rent and
other sums due under the Rental Schedule to the Lender or as the Lender may
direct. Lessee also agrees to deliver opinions of counsel, insurance
certificates and such other documents as Lessor may reasonably request for the
benefit of the Lender in connection with the collateral assignment of the Rental
Schedule. Notwithstanding any other provision of this Master Lease, Lessor
hereby agrees that Lessee may sublease any item of Equipment leased hereunder to
a domestic subsidiary of Lessee; no such sublease shall relieve Lessee of any of
its obligations hereunder with respect to any such item of Equipment which
obligations remain those of a principle and not of a surety.
15. NOTICE. GOVERNING LAW. EXECUTION IN COUNTERPARTS.
All notices required hereunder shall be effective upon receipt in writing
delivered by hand or by other receipt-acknowledged method of delivery at the
address first above written. The Initial Beneficiary as agent for Lessor may
give any notices required or permitted hereunder and any such notice to Lessor
shall not be effective unless a copy of such notice shall be given to the
Initial Beneficiary at its address at Exchange Place, Boston, MA 02109. This
Master Lease Agreement and the Rental Schedule shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts. This
Master Lease Agreement and the Rental Schedule may be executed in multiple
counterparts all of which together shall constitute one and the same instrument.
16. PARTICIPATION OF TRUSTEE
It is expressly understood and agreed by and between the parties hereto,
anything herein to the contrary notwithstanding, that each and all of the
representations, warranties, undertakings and agreements in this Lease on the
part of the Lessor are each and every one of them made and intended not as
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personal representations, warranties, undertakings and agreements by First
Security Bank of Utah, National Association or for the purpose or with the
intention of binding the said First Security Bank of Utah, National Association,
personally but are made and intended for the purpose of binding only the Trust
Estate as such term is defined in the Trust Agreement executed and delivered by
First Security Bank of Utah, National Association, solely in the exercise of the
powers expressly conferred upon it as trustee under the Trust Agreement; and
that no personal liability or personal responsibility is assumed by or shall at
any time be asserted or enforceable against said First Security Bank of Utah,
National Association (except for the willful misconduct or gross negligence of
said First Security Bank of Utah, National Association), all such personal
liability, if any, being expressly waived and released by Lessee; however, it is
agreed that the Lessee may look for satisfaction of the obligations of the
Lessor hereunder to the Initial Beneficiary (or any successor in interest to the
Initial Beneficiary). During the term of this Master lease as it relates to each
Rental Schedule, Lessor agrees that Lessor shall retain title to the Equipment
covered hereunder under the terms and conditions set forth in the Trust
Agreement and that the trust created by the Trust Agreement shall not be subject
to revocation during the Lease Term without the prior written consent of Lessee.
17. DEFINITIONS - The following terms shall have the following meanings for all
purposes of this Lease:
"ACQUISITION COST" of any item of Equipment means an amount equal to
the sum of (i) the purchase price of such item of Equipment paid by Lessor,
plus, (ii) any excise, sales or use tax paid by Lessor on or with respect to
such item of Equipment, plus (iii) any reasonable costs, expenses and fees paid
or incurred by Lessor in obtaining, delivering and installing such item of
Equipment.
"BASIC RENT" shall have the meaning specified in Section 1 hereof.
"CASUALTY OCCURRENCE" shall have the meaning specified in Section 12
hereof.
"CASUALTY VALUE" shall have the meaning specified in Section 5
hereof.
"COMMENCEMENT DATE" with respect to an item of Equipment means the
date of the commencement of the Lease Term of such item and shall be the date
such item is accepted by Lessee for lease hereunder.
"EQUIPMENT" means the equipment described on each Rental Schedule
executed pursuant to this Master Lease, and owned by Lessor and leased by Lessor
to Lessee or ordered by Lessor for lease to Lessee as provided herein and any
attachments, accessories, or additions thereto or substitutions therefor.
"EVENTS OF DEFAULT" shall have the meaning specified in Section 13
hereof.
"EXPIRATION DATE" with respect to an item of Equipment means the
date of the expiration of the Lease term of such item as provided in the Rental
Schedule.
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"INITIAL BENEFICIARY' shall mean American Finance Group, Inc. a
Massachusetts corporation.
"INTERIM TERM" for this Lease shall commence upon the commencement
date set forth in the applicable Rental Schedule and shall end on the
commencement date of the Primary Term.
"LATE PAYMENT CHARGE" shall have the meaning of such term set forth
in Section 10 hereof.
"LEASE TERM" with respect to an item of Equipment shall mean the
"Interim Term" plus the "Primary Term", including any period of renewal provided
for herein.
"LENDER" shall mean the lending institution providing the debt
financing with respect to the Rental Schedule in question.
"MASTER LEASE" shall have the meaning specified in Section 1 hereof.
"PAYMENT DATES" shall have the meaning specified in Section 1
hereof.
"PRIMARY TERM" for this Lease shall commence and shall end on the
respective dates set forth in the Rental Schedule.
"RENEWAL TERM" shall have the meaning specified in Section 11
hereof.
"RENTAL SCHEDULE" means each schedule, substantially in the form of
"Exhibit 1" attached hereto, executed by Lessor and Lessee pursuant to this
Master Lease, setting forth a description of Equipment to be leased hereunder,
its location, its Acquisition Cost, the amount of Basic Rent payable by Lessee
with respect thereto, the lease term thereof, the Commencement Date with respect
thereto, and such other matters as Lessor and Lessee may agree upon.
"TERMINATION DATE" means the expiration or termination of the
Primary Term or Renewal Term of any item of Equipment, whether by the passage of
time or otherwise.
"TRUST AGREEMENT" shall mean that certain trust agreement "AFG/Amoco
Trust" dated as of March 31, 1987 by and between American Finance Group, Inc.,
as Trustor and First Security Bank of Utah, National Association, as Trustee.
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IN WITNESS WHEREOF, Lessor and Lessee have caused this Master Agreement to
be executed and delivered by their duly authorized representatives as of the
date first above written.
LESSOR LESSEE
FIRST SECURITY BANK OF UTAH, AMOCO CORPORATION
NATIONAL ASSOCIATION, not in
its individual capacity but
solely as Trustee
By: /s/ Nancy M. Dahl By: /s/[Illegible]
-------------------------- -----------------------------
Title: CORPORATE TRUST COUNSEL Title: General Manager-Purchasing
----------------------- --------------------------
The Initial Beneficiary hereby agrees
to its covenants and undertakings set
forth in Section 16 herein.
AMERICAN FINANCE GROUP, INC.
By: /s/ [Illegible]
-----------------------
Title: Exec. Vice President
--------------------
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EXHIBIT 1
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO.______
This RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE, dated as of March 11,
1987, between First Security Bank of Utah, National Association, trustee under
the "AFG/Amoco Trust" ("Lessor") and Amoco Corporation ("Lessee") incorporates
by reference the terms and conditions of Master Lease Agreement No. 8703ILG271
dated as of March 31, 1987 (the "Master Lease"). Lessor hereby leases to Lessee
and Lessee hereby leases from Lessor the following described items of Equipment
for the Lease Term and at the Basic Rent payable on the Payment Dates
hereinafter set forth, on the terms and conditions set forth in the Master
Lease.
1. EQUIPMENT
Serial AFG Lessor's Acceptance
Number Unit No. Year Make Model Cost Date
---------- -------- ---- ---- ----- -------- ----------
TOTAL EQUIPMENT COST: $
==========
EQUIPMENT GARAGED AT:
2. LEASE TERM
The Lease Term for each item of Equipment is for an Interim Term
commencing on the date of acceptance of such item of Equipment for lease*, as
set forth above, and continuing through and including _______________________
and for a Primary Term of ______ months, commencing on ______________ and
continuing through and including the Expiration Date of __________________.
* such Acceptance Dates being the date Lessor paid the purchase price of the
item of Equipment in question to the vendor thereof.
3. BASIC RENT. PAYMENT DATES.
Interim Term Basic Rent is due and payable in full on the first day of the
Primary Term. Basic Rent for the Primary Term is due and payable in
_________________ payments of $_______________ each commencing on
___________________ and continuing __________________________ thereafter,
through and including ______________________.
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RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO.______
PAGE TWO
Interim Term Basic Rent is computed by multiplying the Total Equipment
Cost by the Per Diem Lease Rate set forth below and multiplying the product by
the number of days in the Interim Term. Primary Term Basic Rent is computed by
multiplying the Total Equipment Cost by the Periodic Lease Rate set forth below.
Per Diem Lease Rate: ___________
Periodic Lease Rate: ___________
4. INVESTMENT TAX CREDIT
Lessor agrees to pass through to Lessee all investment tax credits, if
any, available with respect to the Equipment under federal or state income tax
laws, and to execute an ITC Transfer Letter evidencing the same.
5. ACCEPTANCE CERTIFICATE
Lessee hereby represents, warrants and certifies (a) that the Equipment
described herein has been delivered to and inspected and found satisfactory by
Lessee and is accepted for Lease by Lessee under this Rental Schedule and the
Master Lease as incorporated herein by reference, as of the Acceptance Date set
forth above; (b) the representations and warranties of Lessee set forth in the
Master Lease are true and correct as of the date hereof.
6. ENTIRE AGREEMENT. MODIFICATION AND WAIVERS. EXECUTION IN COUNTERPARTS.
This Rental Schedule and the Master Lease constitute the entire agreement
between Lessee and Lessor with respect to the leasing of the Equipment. To the
extent any of the terms and conditions set forth in this Rental Schedule
conflict with or are inconsistent with the Master Lease, this Rental Schedule
shall govern and control. No amendment, modification or waiver of this Rental
Schedule or the Master Lease will be effective unless evidenced by a writing
signed by the party to be charged. This Rental Schedule may be executed in
counterparts, all of which together shall constitute one and the same
instrument.
7. LESSEE'S RIGHT TO TERMINATE.
Lessee may terminate this Rental Schedule, in whole or in part, on the
______ Payment Date or on any subsequent anniversary of such Payment Date (the
Termination Date) upon 180 days prior written notice to Lessor provided that
Lessee is not in default hereunder. The Rental Schedule may not be terminated on
any Payment Date other than a Payment Date indicated in the Termination Value
Schedule below. Such notice shall specify the Equipment to be terminated.
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During the period from the giving of such notice until the termination
Date, Lessor and Lessee shall solicit written bids for the remarketing of the
Equipment to be terminated, and shall exchange copies of all bids received. On
the Termination Date, Lessor shall then lease such Equipment to the bidder
submitting the highest bid on terms and conditions substantially similar to
those contained in this Lease, provided such bidder's credit standing and
intended use of the Equipment are reasonably acceptable to Lessor. The "highest
bid" shall mean the highest remarketing lease bid discounted to present value at
the rate of interest obtained by Lessor on a non-recourse basis to finance said
lease.
Prior to the closing of such actual remarketing, Lessor shall have
received funds, in a form acceptable to Lessor, in the aggregate amount for such
Equipment returned at one time of (i) the highest bid, (ii) the Basic Rent
Payment due and payable on such Termination Date and all other sums then
remaining due and unpaid under this Rental Schedule, and (iii) in the event that
the highest bid is less than the Termination Value computed in accordance with
the schedule below, the amount of the difference between the highest bid and the
Termination Value. If the foregoing amounts are not paid in full on the
Termination Date, then this Lease shall continue in full force and effect until
the date on which such amounts are paid in full and upon such payment, all
obligations of Lessee to pay rent hereunder shall cease.
- --------------------------------------------------------------------------------
TERMINATION VALUE SCHEDULE
Termination Value as a
If Termination Date is Percentage of Equipment Cost
Rent Payment Date No. as defined in this Rental Schedule
- --------------------- ----------------------------------
-15-
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Rental Schedule and
Acceptance Certificate to be executed and delivered by their duly authorized
representative as of the date first above written.
LESSOR LESSEE
FIRST SECURITY BANK OF UTAH AMOCO CORPORATION
NATIONAL ASSOCIATION, not in
its individual capacity but
soley as trustee
By: _________________________ By: ________________________
Title: ______________________ Title: _____________________
Date: _______________________ Date: ______________________
-16-
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-F-1
This RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE, dated as of March 15,
1990, between First Security Bank of Utah, National Association, trustee under
the "AFG/Amoco Trust" ("Lessor") and Amoco Corporation ("Lessee") incorporates
by reference the terms and conditions of Master Lease Agreement No. 8703ILG271
dated as of March 31, 1987 (the "Master Lease"). Lessor hereby leases to Lessee
and Lessee hereby leases from Lessor the following described items of Equipment
for the Lease Term and at the Basic Rent payable on the Payment Dates
hereinafter set forth, on the terms and conditions set forth in the Master
Lease.
1. EQUIPMENT
Six (6) 1990 Clark Forklifts, (1) Marklift Forklift and (1) Tennant Scrubber as
further described on the attached Schedule A.
TOTAL EQUIPMENT COST: $127,861.04
-----------
EQUIPMENT GARAGED AT: See Equipment Location on attached Schedule A
Lessee Billing Location: See Billing Location on attached Schedule A
2. LEASE TERM
The Lease Term is for an Interim Term commencing on the date of acceptance
of the Equipment for lease, as set forth on Schedule A attached hereto, and
continuing through and including March 31, 1990, and for a Primary Term of 60
months, commencing on April 1, 1990 and continuing through and including the
Expiration Date of March 31, 1995.
3. BASIC RENT. PAYMENT DATES.
Interim Term Basic Rent is due and payable in full on the first day of the
Primary Term. Basic Rent for the Primary Term is due and payable in 60 payments
of $2,315.29 each commencing on April 1, 1990 and continuing monthly in advance
thereafter, through and including March 1, 1995.
Interim Term Basic Rent is computed by multiplying the Total Equipment
Cost by the Per Diem Lease Rate set forth below and multiplying the product by
the number of days in the Interim Term. Primary Term Basic Rent is computed by
multiplying the Total Equipment Cost by the Periodic Lease Rate set forth below.
Periodic Lease Rate: .018107
------
Per Diem Lease Rate: .000604
------
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-F-1
PAGE TWO
4. SPECIAL MAINTENANCE AND RETURN CONDITIONS. In furtherance, and not in
limitation of, the use, maintenance and return conditions for the Equipment set
forth in Sections 4 and 9 of the Master Lease, Lessee hereby agrees to return
the Equipment to Lessor in accordance with all of the terms and conditions of
the Master Lease and in compliance with the following special return conditions:
1. When loaded to its rated capacity, each Unit shall:
(a) Start under its own power and idle without water or fuel
leaks.
(b) Move through its normal speed ranges in both forward and
reverse, in normal operating manner.
(c) Steer normally right and left in both forward and reverse.
(d) Be able to stop with its service brakes within a safe
distance, in both forward and reverse.
(e) Lift, lower, and tilt normally with and without a load a
minimum of three (3) times. Carriage, lift chains and channel
assembly shall be in working condition, normal wear and tear
excepted.
(f) Electric trucks, if purchased with batteries, must be returned
with batteries that are capable of sustaining a charge that
will permit use of the equipment for an eight (8) hour shift.
(g) All motors shall operate without arcing and/or sparking.
2. Each Unit's attachment(s), if any, shall perform all of its required
functions, and each Unit's horn, parking brake, and lights shall be
operational.
3. The Units shall, on average, have tires with at least fifty percent
(50%) remaining tread.
4. Each Unit shall be complete with all originally-installed parts and
pieces or suitable substitutes therefor.
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-F-1
PAGE THREE
5. INVESTMENT TAX CREDIT
Lessor agrees to pass through to Lessee all investment tax credits
available with respect to the Equipment under federal or state income tax laws,
and to execute an ITC Transfer Letter evidencing the same.
6. TAX INDEMITY.
Lessee acknowledges that this Master Lease Agreement has been entered into
on the basis that Lessor shall be entitled for federal and state income tax
purposes (i) to claim the deductions for depreciation on the total original cost
of the Equipment pursuant to the Accelerated Cost Recovery System under Section
168 of the Internal Revenue Code of 1986, as amended ("Code") or for state
income tax purposes, any other depreciation deduction method that is permitted
by certain state law; and (ii) to claim under Section 163 of the
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-F-1
PAGE FOUR
Code a tax deduction for the full amount of any interest paid by Lessor or
accrued under Lessor's method of tax accounting on any indebtedness secured by
the Equipment (hereinafter referred to collectively as the "Tax Benefits").
Lessee agrees to fully indemnify Lessor for any loss, disallowance,
unavailability or recapture of the Tax Benefits as a result of any act,
omission, misrepresentation or failure to act by Lessee, any sublessee, or any
other person authorized by the Lessee to use or maintain the Equipment. If
Lessor shall lose, shall not have the right to claim, or if there shall be
disallowed or recaptured, all or any portion of such Tax Benefits, Lessee shall
pay to Lessor as additional rent (a) an amount equal to the value, determined at
the highest marginal tax rate on a present value basis discounted at the
Lessor's then current cost of funds, of the Tax Benefits so disallowed or made
unavailable plus (b) all interest, penalties, or additions to tax resulting from
such loss, disallowance, unavailability or recapture of any of the foregoing,
plus (c) all taxes required to by paid by the Lessor, its successors, assigns,
or affiliates under any federal, state and local law upon receipt of any of the
indemnifications set forth in this Section.
7. ACCEPTANCE CERTIFICATE
Lessee hereby represents, warrants and certifies (a) that the Equipment
described herein has been delivered to and inspected and found satisfactory by
Lessee and is accepted for Lease by Lessee under this Rental Schedule and the
Master Lease as incorporated herein by reference, as of the Acceptance Date set
forth above; (b) all items of Equipment are new and unused as of the Acceptance
Date, except as otherwise specified above, and (c) the representations and
warranties of Lessee set forth in the Master Lease are true and correct as of
the date hereof.
8. ENTIRE AGREEMENT. MODIFICATION AND WAIVERS. EXECUTION IN COUNTERPARTS.
This Rental Schedule and the Master Lease constitute the entire agreement
between Lessee and Lessor with respect to the leasing of the Equipment. To the
extent any of the terms and conditions set forth in this Rental Schedule
conflict with or are inconsistent with the Master Lease, this Rental Schedule
shall govern and control. No amendment, modification or waiver of this Rental
Schedule or the Master Lease will be effective unless evidenced by a writing
signed by the party to be charged. This Rental Schedule may be executed in
counterparts, all of which together shall constitute one and the same
instrument.
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-F-1
PAGE FIVE
IN WITNESS WHEREOF the parties hereto have caused this Rental Schedule and
Acceptance Certificate to be executed and delivered by their duly authorized
representatives as of the date first above written.
FIRST SECURITY BANK OF UTAH
NATIONAL ASSOCIATION, not in
its individual capacity but
solely as trustee AMOCO CORPORATION
LESSOR LESSEE
By /s/ Nancy M. Dahl By /s/ [Illegible]
---------------------------- -------------------------
Title ASSISTANT VICE PRESIDENT Title
------------------------- ----------------------
Date April 13, 1990 Date
-------------------------- -----------------------
<PAGE>
3/15/90 AMOCO CORPORATION (AMOCO FOAM PRODUCTS) Page 1
RENTAL SCHEDULE A-F-1
SCHEDULE A
<TABLE>
<CAPTION>
Accept. Date Vendor name Invoice # Unit cost Serial Number Zip Code State City Street Address
- ------------ ----------- --------- ---------- ------------- -------- ----- ------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3/05/90 Tennant Company 593198-00 8,212.00 480-20721 30080 GA Smyrna 2907 Log Cabin Dr
1/10/90 Clark Material Handlin M31020 22,576.74 GX230 50662 IA Delwein 951 Second Ave SE
1/10/90 Clark Material Handlin M30946 16,633.06 GX230-1697-71 50662 IA Delwein 951 Second Ave SE
12/15/89 Clark Material Handlin M30128 16,627.12 GX230-1698-71 50662 IA Delwein 951 Second Ave SE
12/15/89 Clark Material Handlin M30128 16,627.13 GX230-1727-71 50662 IA Delwein 951 Second Ave SE
12/07/89 Clark Material Handlin M29703 17,280.49 GX230-0906-71 29842 SC Beech Island Old Jackson Hwy 28
12/07/89 Clark Material Handlin M29703 17,280.50 GX230-0907-71 29842 SC Beech Island Old Jackson Hwy 28
3/15/90 Georgia Hi-Lift 5613 12,630.00 1289-19486 30080 GA Seyrna 2907 Log Cabin Dr
-----------
TOTAL EQUIPMENT COST: $127,867.84
Accept. Date Manuf. Eqpt. Model Eqpt. Type Comments for remarketing
- ------------ -------- ----------- ---------- -------------------------------------
<S> <C> <C> <C> <C>
3/05/90 Tennant 480 SCRUBBER 2907 Log Cabin Dr., Smyrna, GA 30080
1/10/90 Clark GPX25 FORKLIFT 951 Second Ave., SE Delwein, IA 50662
1/10/90 Clark GPX25 FORKLIFT 951 Second Ave., SE Delwein, IA 50662
12/15/89 Clark GPX25 FORKLIFT 951 Second Ave., SE Delwein, IA 50662
12/15/89 Clark GPX25 FORKLIFT 951 Second Ave., SE Delwein, IA 50662
12/07/89 Clark GPX25 FORKLIFT P.O. Box 2526, Augusta, GA 30903
12/07/89 Clark GPX25 FORKLIFT P.O. Box 2526, Augusta, GA 30903
3/15/90 Marklift J-19EP FORKLIFT 2907 Log Cabin Dr., Smyrna, GA 30080
</TABLE>
<PAGE>
AMOCO CORPORATION
EXHIBIT 1 TO RENTAL SCHEDULE A-F-1
CASUALTY VALUES
(Stated as Percentage of Equipment Cost)
AFTER AFTER
PRIMARY PRIMARY
TERM CASUALTY TERM CASUALTY
PAYMENT NO. VALUE PAYMENT NO. VALUE
- ----------- ----------- ----------- ---------
Prior to 1 112.00
1 111.37 31 88.16
2 110.74 32 87.22
3 110.10 33 86.26
4 109.45 34 85.29
5 108.79 35 84.31
6 108.12 36 83.31
7 107.45 37 82.30
8 106.76 38 81.27
9 106.06 39 80.24
10 105.36 40 79.19
11 104.65 41 78.12
12 103.92 42 77.04
13 103.19 43 75.95
14 102.45 44 74.84
15 101.69 45 73.71
16 100.93 46 72.57
17 100.16 47 71.42
18 99.37 48 70.25
19 98.58 49 69.06
20 97.77 50 67.86
21 96.96 51 66.65
22 96.13 52 65.41
23 95.29 53 64.16
24 94.44 54 62.90
25 93.58 55 61.61
26 92.71 56 60.31
27 91.82 57 58.99
28 90.93 58 57.66
29 90.02 59 56.30
30 89.10 60 55.00
<PAGE>
Exhibit 99(e)
MASTER EQUIPMENT LEASE AGREEMENT NO. 8504NJG193, dated as of April 5,
1985, between AMERICAN FINANCE GROUP, INC. (hereinafter called "Lessor"), a
Massachusetts corporation having its principal place of business at Exchange
Place, Boston, Massachusetts 02109, and FEDERAL PAPER BOARD COMPANY, INC. &
Subsidiaries (hereinafter called "Lessee"), a New York corporation with its
principal place of business at 75 Chestnut Ridge Road, Montvale, NJ 07645.
In consideration of the mutual covenants hereafter contained, Lessor and
Lessee agree as follows:
1. AGREEMENT FOR LEASE OF EQUIPMENT -- Lessor shall lease to Lessee and
Lessee shall lease from Lessor such Equipment upon the terms and conditions
specified in this Master Equipment Lease Agreement (this "Master Lease") and the
applicable Rental Schedule. Each Rental Schedule shall incorporate the terms of
this Master Lease and shall constitute a separate lease (the term "this Lease"
shall refer collectively to the applicable Rental Schedule and this Master
Lease).
2. DELIVERY AND ACCEPTANCE OF EQUIPMENT -- (a) Lessor and Lessee
understand that the vendor of the Equipment will deliver the Equipment to the
location specified In the Rental Schedule. As between Lessor and Lessee,
Lessee's acceptance for lease hereunder of any Equipment (as evidenced by its
execution and delivery to Lessor of a Certificate of Inspection and Acceptance
with respect to such Equipment) constitutes Lessee's acknowledgement that such
Equipment in all respects conforms to the requirements of this Lease and is
subject to all of the terms and conditions of this Lease. Lessor hereby
authorizes Lessee as its agent to accept for Lessor, and in Lessor's name, the
Equipment from the Manufacturer or vendor thereof upon delivery; (b) with
respect to any items of Equipment that are titled vehicles, Lessee will, on
behalf of the Lessor and at the Lessee's expense, promptly obtain an application
for the Lessor's title for each Item of Equipment, reflecting the Lessor or its
assignee as owner and whomever the Lessor shall designate as first lienholder,
the Manufacturer's certificate of title and a certificate of registration issued
in the name of the Lessor or its assignee. Certificates of ownership shall be
delivered to the Lessor or to whomever the Lessor shall designate. The Lessee
shall, at Lessee's expense, take such action as shall be necessary from time to
time to avoid suspension or revocation of any certificates of ownership and to
renew and maintain all certificates of registration. If the Lessee is required
to obtain any new certificate of ownership or of registration, the Lessee shall,
at Lessee's sole expense and after prior written notice to the Lessor, obtain
such new certificate of ownership or of registration in the manner provided
herein. The Lessor appoints the Lessee its attorney-in-fact for the purpose of
carrying out the Lessee's obligations pursuant to this Section 2. The Lessee
shall notify the Lessor of the state in which each item of Equipment is titled
and registered, the license plate number of each item of Equipment, and any
changes of such state or license plate number.
3. NO WARRANTIES BY LESSOR -- LESSOR HEREBY MAKES NO EXPRESS OR IMPLIED
WARRANTIES OR REPRESENTATIONS, REGARDING THE CONDITION, SELECTION, QUALITY,
SUITABILITY OR OPERATION OF ANY EQUIPMENT, THE MERCHANTABILITY, OR FITNESS FOR
ANY PARTICULAR PURPOSE, AND THE LESSEE LEASES THE EQUIPMENT "AS IS" AND "WHERE
IS." Lessor shall not be liable to Lessee for any (a) defects in any of the
Equipment or for any direct or consequential damage therefrom; (b) loss of use
** CERTAIN RIGHTS OF AMERICAN FINANCE GROUP UNDER RENTAL SCHEDULE F-61-1 TO THIS
MASTER LEASE HAVE BEEN ASSIGNED TO JOHN HANCOCK LEASING CORPORATION.
<PAGE>
of any of the Equipment or for any interruption in Lessee's business occasioned
by Lessee's inability to use any of the Equipment for any reason whatsoever; and
(c) damages in the event that the Manufacturer delays delivery of the Equipment.
Lessor hereby transfers and assigns to Lessee during the Lease Term all its
rights and interest in the Manufacturer's warranty with respect to any and all
of the Equipment, and agrees to execute all documents necessary to effect such
transfer and assignment.
4. LEASE TERM -- The Lease Term shall commence and expire on the dates set
forth in the Rental Schedule applicable to the item of Equipment in question.
5. RENT -- (a) This Lease is a net lease and Lessee shall pay to Lessor
when due as rent for the Equipment during the Lease Term, the amount set forth
in the Rental Schedule ("Basic Rent") on the dates set forth therein ("Payment
Dates"), at the location of Lessor set forth on the applicable Rental Schedule.
Lessor agrees to invoice Lessee at least ten days prior to the due date of each
payment; notwithstanding the foregoing, the failure by Lessor to submit an
invoice to Lessee shall not excuse Lessee's non-payment of Basic Rent.
(b) Lessee shall also pay to Lessor, all amounts which Lessee Is required
to pay Lessor pursuant to this Lease (other than Basic Rent) together with every
fine, interest and cost which may be added for non-payment or late payment
thereof. Such amounts shall constitute additional rent ("Additional Rent") and
shall be payable by Lessee within five days of Lessor's written notice to Lessee
that such Additional Rent is due and payable. If Lessee shall fail to pay any
Additional Rent, Lessor shall have all rights, powers and remedies with respect
thereto as are provided herein or by law in the case of nonpayment of Basic
Rent. With respect to any amount of Basic Rent or Additional Rent not paid when
due hereunder, Lessee shall pay to Lessor interest on such amount from the due
date thereof until payment is received by Lessor at the lower of: (i) two
percent (2%) above the Prime Rate but in no event less than two percent (2%) per
annum above the permanent debt rate of the Rental Schedule(s) applicable to such
overdue amount, or (ii) the highest rate of interest permitted by law ("Default
Interest Rate"). Lessee shall perform all its obligations under this Lease at
its sole cost and expense, and shall pay all Basic Rent and Additional Rent when
due.
6. LESSEE'S REPRESENTATIONS AND WARRANTIES -- Lessee represents and
warrants (and if requested by Lessor, will provide other supporting documents to
the effect) that as of the date any Equipment is accepted for lease hereunder:
(a) all items of Equipment are new and unused unless otherwise specified in the
applicable Rental Schedule; (b) Lessee is an entity validly existing, in good
standing under the laws of the jurisdiction of its organization, with full power
to enter into this Lease and to pay and perform its obligations under this
Lease, and is qualified to do business in the location(s) where the Equipment is
installed; (c) this Lease has been duly authorized, executed and delivered by
Lessee, is enforceable in accordance with its terms and Lessee's execution,
delivery and performance thereunder does not and will not contravene the
provisions of any contract or other instrument by which it is bound; (d) no
approval is required from any public regulatory body nor from any other person,
with respect to the entering into or performance of this Lease by Lessee; (e)
there are no suits or proceedings
-2-
<PAGE>
pending, or to the knowledge of Lessee threatened, in any court or any
governmental agency against or affecting Lessee, which, if decided against
Lessee, would impair Lessee's ability to perform any of its obligations under
this Lease; and (f) there has been no material adverse change to Lessee's
financial condition since the date of Lessee's most recent financial statement
furnished Lessor.
7. IDENTIFICATION MARKS -- If requested by Lessor or required by law,
Lessor shall furnish to Lessee and Lessee shall, affix to the Equipment a sign,
or reasonable form of notice to disclose Lessor's ownership of, or the interest
of any Assignee in, the Equipment and Lessee shall keep and maintain such sign
or other form of notice affixed to the Equipment throughout the Lease Term.
8. FEES AND TAXES -- Lessee agrees to pay promptly when due, and to
Indemnify and hold Lessor harmless from, all license, title and registration
fees whatsoever, all taxes (including without limitation all sales, use,
franchise, personal property and stamp taxes) and all other charges (together
with any penalties, fines or interest thereon), which are assessed, levied or
imposed by any governmental or taxing authority against Lessor, with respect to
any Equipment or the purchase, acquisition, ownership, delivery, leasing,
possession, use, operation, control or return thereof, or the rents, receipts or
earnings arising therefrom which accrue during the term of this Lease,
excluding, however, any taxes measured by Lessor's net income. Lessor shall pay
personal property taxes directly to a levying authority. Lessor shall submit to
Lessee a copy of its personal property tax return and its receipt evidencing
payment of the tax and Lessee will then promptly reimburse Lessor for the full
amount of such personal property taxes so paid by Lessor. All of the obligations
of Lessee under this Section 8 accrued during the term of this Lease and until
the Equipment shall be returned to Lessor at the expiration thereof shall
continue in full force and effect notwithstanding such termination of this
Lease.
Lessor shall obtain a sales tax exemption, where available, with respect
to its purchase of the Equipment.
9. INDEMNIFICATION BY LESSEE: SPECIAL TAX INDEMNITY -- (a) Lessee shall
indemnify Lessor and its Assignees against, and agrees to defend, protect, save
and keep them harmless from any and all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, costs, expenses and disbursements,
including attorneys' fees and expenses, of whatsoever kind and nature asserted
against Lessor (including, without limitation, by way of strict or absolute
liability), in any way relating to or arising out of the ordering, construction,
installation, possession, use, maintenance, operation, control, condition, or
other use of the Equipment during the Lease Term and until such time the
Equipment is returned to Lessor pursuant to the provisions hereof. In case any
action, suit or proceeding is brought against Lessor or any of its Assignees by
reason of any of the foregoing, Lessee, at Lessee's expense, shall cause the
claim upon which such action, suit or proceeding is based to be discharged, or
shall cause such action, suit or proceeding to be resisted or defended by
counsel designated by Lessee, such counsel to be recognized as skilled in
representing clients like Lessor in actions such as that brought
-3-
<PAGE>
against Lessor. The indemnification by Lessee under this Section 9(a) shall
survive the payment of all obligations under, and the termination of, this
Lease.
(b) If during the period between the commitment by Lessor to lease an item
of Equipment hereunder and the acceptance of such item of Equipment for lease,
there are changes in the federal income tax laws, the regulations issued
thereunder or the administrative or judicial interpretations thereof, so that
the net after-tax economic return of said item (i.e. the after-tax cash flow,
periodic return on investment and timing and recognition of income or
deductions) resulting from ownership and lease of the Equipment hereunder is
reduced, Lessee shall pay as additional Basic Rent, the amounts required to
provide Lessor the same net after-tax economic return that would have resulted
from the ownership and lease of the Equipment if such changes had not occurred.
10. USE OF EQUIPMENT; LIENS -- During the Lease Term, Lessee warrants and
agrees that the Equipment will be operated and otherwise be in compliance with
all statutes, regulations and orders of any governmental body having power to
regulate the Equipment. Lessee shall not permit the Equipment to be used for any
purpose for which, in the opinion of the Manufacturer, the Equipment is not
designed or suited.
During the Lease Term, Lessee will not directly or indirectly create,
incur, assume or suffer to exist any mortgage, security interest, lien, or
encumbrance on the Equipment, Lessor's or any Assignee's title thereto, or
interest therein, except:
(a) the respective rights of Lessor (and its Assignees, as hereinafter
defined, if any) and Lessee as herein provided;
(b) liens or encumbrances granted or placed thereon by Lessor (or its
assigns, if any);
(c) liens or encumbrances resulting from claims against Lessor but not
against Lessee and unrelated to this Lease, and not resulting from
any default, act or omission of Lessee;
(d) liens for taxes either not yet due or being contested in good faith
and by appropriate proceedings;
(e) inchoate materialmen's, mechanics', workmen's, repairmen's,
employees' or other like liens arising in the ordinary course of
business and not delinquent; and
(f) liens arising out of judgments against Lessee with respect to which
an appeal or proceeding for review is being prosecuted in good faith
and with respect to which there has been secured a stay of execution
pending such appeal or proceeding for review; provided, however,
that the liens referred to in clauses (d) and (f) of this Section 10
may remain only so long as the existence thereof does not subject
the Equipment in question to forfeiture, seizure or otherwise
adversely affect the rights of Lessor or any Assignee.
-4-
<PAGE>
Lessee, at its own expense, will promptly take such action as may be necessary
to keep the Equipment free and clear of, and to duly discharge, any such
mortgage, security interest, lien, or encumbrance not excepted above. Lessee
agrees to procure and maintain in effect all licenses, permits and other
approvals and consents required by laws in connection with Lessee's possession,
use, operation and maintenance of the Equipment. Lessee agrees to notify Lessor
of any change in the location of the principal place of garaging of Equipment
from the location specified in the Rental Schedule for any item of such
Equipment, or permit any Equipment to be used by anyone other than Lessee,
Lessee's employees, or an independent contractor engaged by Lessee. All
principal places of garaging shall be locations owned or leased by Lessee within
the 48 contiguous states of the United States of America.
11. EQUIPMENT MAINTENANCE, REPAIR, AND ADDITIONS (a) During the Lease Term
with respect thereto, Lessee, at Lessee s sole expense, will maintain the
Equipment in good and efficient operating repair, appearance and condition
except for ordinary wear and tear of the kind experienced by equipment utilized
in the forest products industry. All maintenance and repairs to the Equipment
shall be made by the Manufacturer thereof or those of substantially equal skill
or knowledge in maintaining and repairing the Equipment.
(b) Provided that the value of the Equipment or any item thereof shall not
be reduced thereby, Lessee shall have the right at any time to connect
additional compatible equipment to the Equipment whether such compatible
equipment is owned by Lessee or a third party. In each case, Lessee shall
disconnect or detach such equipment upon the termination of this Lease, or such
equipment shall become the property of the Lessor. Lessee agrees that during the
Lease Term, 100%. of the use of the Equipment shall be "qualified business use"
as that term is defined in Section 280F of the Code, which use shall be
calculated in accordance with Regulations promulgated thereunder and shall be
supported by records maintained in accordance with Section 280F and the
Regulations thereunder. Lessee agrees to indemnify and hold Lessor harmless from
any loss or damage caused to the Equipment by the connection to, or
disconnection from, any compatible equipment.
12. LOSS, DAMAGE OR DESTRUCTION OF EQUIPMENT -- Lessee shall bear all
risks of damage to, taking of, or loss or destruction of, any item of Equipment
during the Lease Term thereof and until such Equipment has been returned to
Lessor.
In the event that any item of Equipment shall become lost, stolen,
destroyed or irreparably damaged from any cause whatsoever, or if any item of
Equipment or Lessor's title thereto shall be requisitioned or seized by any
governmental authority (each such occurrence being hereafter called a "Casualty
Occurrence") during its Lease Term and until it has been returned to Lessor,
Lessee shall promptly notify Lessor in writing of such fact, fully informing
Lessor of all details of the Casualty Occurrence in question, and shall pay
Lessor in cash the "Stipulated Loss Value" as set forth in the Exhibit to the
Rental Schedule pursuant to which such item of Equipment is leased hereunder
calculated as of the Payment Date immediately preceding the date of the Casualty
Occurrence or, if the Casualty Occurrence occurs on a Payment Date, calculated
as of the date of the Casualty Occurrence. This payment shall be made on the
next succeeding Payment Date following the Casualty Occurrence.
-5-
<PAGE>
Upon the payment of the Stipulated Loss Value of the Equipment in question
in accordance with the terms of this Section 12, and the payment of all Basic
Rent and all other sums then due hereunder, this Lease shall terminate with
respect to the Equipment or part thereof suffering the Casualty Occurrence and
all Lessor's rights and title to the Equipment shall pass to Lessee, "as is" and
"where is" without warranty or recourse, as evidenced by a duly executed bill of
sale naming Lessor as the seller and Lessee as the buyer to be furnished by
Lessor within 30 days of Lessor being notified that the item of Equipment in
question has suffered a Casualty Occurrence.
13. REPORTS -- Once each calendar year Lessee will cause to be furnished
to Lessor, if requested, a statement showing the location, condition and such
other information regarding the Equipment as Lessor may reasonably request.
Lessor shall have the right, upon reasonable notice to Lessee, to inspect
the Equipment.
14. INSURANCE - Lessee will procure and maintain at its expense all risk
insurance on all Equipment for the related full Lease Term public liability
insurance in the amount of at least $1,000,000 insuring Lessor, the Secured
Party and any Assignee, as their interests may appear, against liability for
death, bodily injury and property damage resulting from ownership, maintenance,
use or operation of the Equipment. All such insurance shall name Lessor and any
Assignee as additional insureds, and shall provide that the same may not be
altered or cancelled except after thirty (30) days prior written notice to
Lessor. Lessee shall deliver to Lessor, prior to the beginning of the Lease Term
with respect to any Equipment, or prior to the effective date of any
cancellation or expiration of such insurance, as the case may be, a certificate
or other evidence satisfactory to Lessor of the maintenance of such insurance.
Lessor shall be under no duty to examine such policies, certificates or other
evidences of insurance, or to advise Lessee in the event that its insurance is
not in compliance with this Lease. In the event of failure on the part of the
Lessee to provide such insurance, Lessor may, at its option, provide such
insurance and add the amount of the premiums to the rents due hereunder, and
Lessee shall, upon Lessor's demand pay the same as Additional Rent;
notwithstanding the foregoing, Lessor may provide insurance as herein before
provided only if it has given Lessee at least 5 days prior notice of its intent
to provide such insurance and if the cost of any such insurance is commercially
reasonable. Lessee may self assume some or all of its obligations hereunder with
the prior written consent of Lessor, such consent not to be unreasonably
withheld.
15. RETURN OF EQUIPMENT - (a) Upon the Termination Date Lessee will
forthwith return possession of such Equipment to Lessor, in its original
condition and appearance, reasonable wear and tear being excepted, and otherwise
in the condition required by Section 11 hereof, at Lessee's loading dock or
other place where such Equipment could be conveniently picked up by a common
carrier designated by Lessor, with reasonable notice thereof being provided to
Lessee.
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<PAGE>
(b) Lessee shall give Lessor at least 90 days prior written notice of its
intention to return the Equipment to Lessor on the Termination Date. In the
event Lessee shall fail to give Lessor 90 days' notice in writing, this Lease,
at the sole discretion of the Lessor, shall be extended and continue at the same
rental as the rental in effect on the Payment Date immediately preceding the
Termination Date until 90 days after Lessor receives such notice in writing from
Lessee.
(c) In the event that Lessee fails to return the Equipment at the end of
the Lease Term this Lease, at the sole discretion of the Lessor, shall be
extended and continue at the same Basic Rent in effect on applicable Lease Term
until the Equipment has been returned to Lessor.
16. LESSOR'S OWNERSHIP: EQUIPMENT TO BE AND REMAIN PERSONAL PROPERTY -
Lessee acknowledges and agrees it does not have or obtain any title to the
Equipment, nor any property right or interest therein, except its rights as
Lessee hereunder and subject to the terms hereof. All of the Equipment shall be
and remain personal property notwithstanding the manner in which the Equipment
may be attached or affixed to realty, and that upon the expiration or other
termination of the Lease Term of Equipment, Lessee shall have the obligation,
and Lessor shall have the right, to remove, or cause the removal of, such
Equipment, from the premises whereon the same is then located.
If Lessee is unable to return, or is prevented from returning, any
Equipment to Lessor upon the termination of the Lease Term, for any reason
whatsoever, including, but not limited to, the assertion by any third party of
any claim against such Equipment, or of any right with respect thereto, such
Equipment shall, for all purposes of this Lease, be deemed to have been the
subject of a Casualty Occurrence, and Lessee shall pay to Lessor the amounts
provided in Section 12 hereof, with respect to such Equipment, at the time, in
the manner, and with the consequences provided in such Section.
17. EVENTS OF DEFAULT -- (a) If, during the continuance of this Lease, one
or more of the following events (hereinafter called "Events of Default") shall
occur:
(1) default shall be made in the payment of any Basic or Additional Rent
due hereunder, and any such default shall continue for more than five (5) days
after written notice of the non-payment of such Basic or Additional Rent;
(2) Lessee shall default in the observance and/or performance of any other
covenant, condition and agreement on the part of Lessee to be observed and/or
performed under this Lease and such default shall continue for thirty (30) days
after written notice from Lessor to Lessee specifying the default and demanding
the same to be remedied.
(3) any representation or warranty made by Lessee herein or in any
document or certificate furnished to Lessor in connection herewith shall at any
time prove to be incorrect when made in any material respect;
(4) Lessee shall make or permit any unauthorized assignment or transfer of
this Lease or of Lessee's rights and obligations hereunder, or Lessee shall make
or permit any unauthorized sublease or transfer of any Equipment, or the
possession of same;
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(5) Lessee shall make an assignment for the benefit of creditors, or cease
doing business as a going concern, or generally fail to pay its debts as they
become due, or become insolvent or bankrupt or admit in writing its inability to
pay its debts as they mature, or consent to the appointment of a trustee or
receiver, or a trustee or a receiver shall be appointed on decree or order of a
court of competent jurisdiction, for Lessee or for a substantial part of
Lessee's property without Lessee's consent and such decree or order shall
continue undischarged and unstayed for a period of sixty (60) days;
(6) if pursuant to the merger of Lessee into another corporation where
Lessee is not the surviving corporation, or the consolidation of Lessee with one
or more other corporations and the sale or other disposition of all or
substantially all the assets of Lessee to one or more other entities, the
surviving entity or transferee of assets, as the case may be, shall not deliver
to Lessor and to any Assignee an acknowledged instrument in recordable form,
assuming all obligations, covenants and responsibilities of Lessee hereunder and
under any instrument executed by Lessee, and acknowledging the assignment of
Lessor's interest in this Lease as security for indebtedness; or
(7) Lessee shall be in default under any other Rental Schedule to this
Master Lease if the Equipment leased pursuant to such other Rental Schedule is
owned by the Transferee of this Lease;
(b) then, in any such case, Lessor, at its option, may do any one or more
of the following;
(1) declare this Lease, with respect to the Rental Schedule in question,
in default upon written notice to Lessee, and proceed by appropriate court
action to enforce performance by Lessee of the covenants and terms of this Lease
and/or to recover damages for the breach thereof;
(2) terminate this Lease upon written notice to Lessee; whereupon all
right of Lessee to use the Equipment shall immediately terminate;
(3) once this Lease is terminated, repossess the Equipment, wherever
found, with legal process, and for this purpose Lessor and/or its agents may
enter upon any premises of or under the control or jurisdiction of Lessee or any
agent of Lessee, and remove the Equipment therefrom;
(4) with respect to any Equipment returned to or repossessed by Lessor,
hold or use such Equipment for any purpose whatsoever, including selling the
same at a private or public, cash or credit sale, or Lessor may re-lease such
Equipment in all the foregoing events free and clear of any rights of the Lessee
and without any duty to account to the Lessee with respect to such action or
inaction;
(5) whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights set forth above in this Section 17(b) with
respect to any item of Equipment, and upon written notice to the Lessee
specifying a payment date demand that the Lessee pay to the Lessor, and the
Lessee shall pay to the Lessor on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Basic Rent for such Equipment due after the payment date specified in such
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notice), an amount equal to the excess of 115%. of the Stipulated Loss Value for
such item of Equipment computed as of the Payment Date next preceding the
payment date specified in such notice or if such payment date occurs on a
Payment Date, then computed as of such Payment Date over whichever of the
following three amounts the Lessor, in its sole discretion, shall specify in
such notice:
(i) the present value of the fair market rental value (determined as
hereafter provided in this Section 17(b)) of such item of Equipment
for the remainder of the Lease Term as of the date of such notice,
such present value to be computed on the basis of a 7% per annum
rate of discount from the respective dates upon which such rent
would be paid;
(ii) the fair market sales value (determined as hereafter provided
in this Section l7(b)) of such item of Equipment as of the date of
such notice; or
(iii) if the Lessor shall have sold any item of Equipment pursuant
to paragraph (4) above, the net proceeds of such sale; and
(6) whether or not any Equipment is returned to, or repossessed by Lessor,
as aforesaid, Lessee shall also be liable for, and Lessor may forthwith recover
from Lessee, all Basic Rent and Additional Rent that accrued prior to the date
of Lessee's default.
In addition to the foregoing, Lessor may also recover from Lessee all
costs and expenses arising out of Lessee's default, including without limitation
expenses of repossession of the Equipment and the storage, repairs,
reconditioning, sale and releasing thereof, and reasonable attorneys' fees
incurred by Lessor in exercising any of its rights or remedies hereunder. For
the purposes of this Section 17, "fair market rental value" and "fair market
sales value" shall be determined by an appraisal of an independent appraiser
chosen by the Lessor, and the cost of any such appraisal shall be borne by
Lessee.
18. ASSIGNMENT AND TRANSFER BY LESSOR. - (a) Lessor may assign this Lease,
any item of Equipment, and all sums at any time due and to become due, by the
Lessee to Lessor under this Lease without notice to or consent of Lessee to a
security assignee (the "Secured Party") for the purpose of securing a loan to
the Lessor. The Secured Party shall not be obligated to perform any duty,
covenant or condition required to be performed by Lessor under this Lease.
Lessor, at its sole discretion, may also sell or transfer the Equipment and/or
this Lease to a partnership, trust or other person or entity (the "Transferee"
and collectively with the Secured Party an "Assignee"), subject to the rights of
the Lessee under this Lease. During the term of this Lease neither Lessor nor
any Assignee may cumulatively assign this Lease more than two (2) times without
the prior written consent of Lessee, which consent shall not be unreasonably
withheld.
(b) Lessee agrees that notwithstanding any assignment to a Secured Party,
each and every covenant, agreement, representation and warranty of Lessor under
this Lease shall be and remain the sole liability of the Lessor and of every
successor in interest of Lessor or, in the case of assignment to a
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Transferee, shall become and remain the sole liability of the Transferee. Lessee
further acknowledges and agrees that from and after the receipt by Lessee of
written notice of such an assignment from Lessor, Lessee shall comply with the
directions or demands given in writing by the Secured Party and the Secured
Party shall have the right to exercise (either in its own name or in the name of
the Lessor) such rights, privileges and remedies of Lessor provided for herein.
Lessee shall not assert against the Secured Party any defense, counterclaim,
set-off, abatement, reduction or recoupment that Lessee may have against Lessor
or any Transferee. After any assignment to the Secured Party, this Lease may not
be amended or modified without the prior written consent of any such Secured
Party. Lessee agrees to execute and Lessor or its Assignee may record any
instruments relating to such assignment, mortgage or security interest desired
by the Lessor or any Assignee and the Lessee shall promptly provide such
documents as may be requested by the Lessor or any Assignee.
19. OPTION TO RENEW - (a) Upon the expiration of the Primary Term of this
Lease with respect to each Rental Schedule, and provided that no Event of
Default, and no event which with the giving of notice or lapse of time, or both,
would constitute an Event of Default, has occurred and then remains unremedied
to Lessor's satisfaction, Lessee shall have the option, exercisable on at least
90 days prior written notice to Lessor to renew the Lease Term with respect to
any item of Equipment then subject to said Rental Schedule, either:
(1) on a month-to-month renewal basis, terminable by either Lessor or
Lessee upon thirty days written notice, at the same rate, terms and
conditions as described herein; or
(2) up to three (3) successive additional terms (each of which being
herein called a "Renewal Term") for one year each at a rental for
each such Renewal Term at a rate that would be obtained in an
arms-length transaction between an informed and willing prospective
lessee and an informed and willing lessor under no compulsion to
lease (said rate being herein called the "Fair Rental Rate").
(b) If, on or before a date 60 days prior to the expiration of the Lease
Term with respect to each Rental Schedule for which notice of Renewal has been
given, Lessor and Lessee are unable to agree upon a determination of the Fair
Rental Rate for the Equipment, Lessee shall have no obligation to renew this
Lease. However, if Lessee wishes to proceed with its option, Lessee shall give
written notice to Lessor to that effect and the Equipment shall be leased during
the Renewal Term at the Fair Rental Rate determined in accordance with the
procedure for Appraisal below.
(c) "Appraisal" shall mean a procedure whereby two recognized Independent
equipment appraisers, one chosen by Lessee and one by Lessor shall mutually
agree upon the amount in question. Lessor or Lessee, as the case may be, shall
deliver a written notice to the other party appointing its appraiser within 15
days after receipt from the other party of a notice appointing that party's
appraiser. If within 15 days after appointment of the two appraisers as
described above, the two appraisers are unable to agree upon the amount in
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question, a third recognized independent appraiser shall be chosen within five
days thereafter by the mutual agreement of such first two appraisers, or if such
first two appraisers fail to agree upon the appointment of a third appraiser,
such appointment shall be made by an authorized representative of the American
Arbitration Association, and the appraisal of the third appraiser so appointed
and chosen shall be given within a period of ten (10) days after the selection
of such third appraiser. The average of the three appraisals arrived at by said
three appraisers shall be binding and conclusive on Lessor and Lessee. Lessor
and Lessee shall pay the fees of the respective appraisers appointed by them and
shall share equally the fees and expenses of the third appraiser, if any, and
those of the American Arbitration Association, if applicable.
(d) After a determination of the Fair Rental Rate of the Equipment has
been made in accordance with the procedure described above, Lessee's exercise of
its option shall be effective upon the expiration of the Primary Term or Rental
Term as the case may be.
20. OPTION TO PURCHASE - (a) Upon the expiration of the Primary Term or
any Renewal Term with respect to each Rental Schedule, provided that Lessee has
paid all rentals and all other sums then due by Lessee to Lessor, or which would
become due upon request of Lessor, as required under the provisions of this
Lease, and provided that no Event of Default, and no event which with the giving
of notice or lapse of time, or both, would constitute an Event of Default, has
occurred and then remains unremedied to Lessor's satisfaction, Lessee shall have
the option, exercisable on at least 90 days prior written notice to Lessor to
purchase any item of Equipment at such item's then Fair Market Value, unless
otherwise specified on the applicable Rental Schedule.
(b) If, on or before a date 60 days prior to the expiration of the Primary
Term or any Renewal Term with respect to each Rental Schedule, Lessor and Lessee
are unable to agree upon a determination of the Fair Market Value for the
Equipment, Lessee shall have no obligation to purchase the Equipment. However,
if Lessee wishes to exercise its option at Fair Market Value it shall so notify
Lessor in writing, and such value shall be determined in accordance with the
procedure for Appraisal as set forth in Section 19 hereto.
(c) After a determination of the Fair Market Value of the Equipment has
been made in accordance with the procedure described above, Lessee may purchase
the Equipment by payment to Lessor of the Fair Market Value upon the expiration
of the term of the applicable Rental Schedule. Upon payment by Lessee to Lessor
of the Fair Market Value, Lessor shall deliver to Lessee title to the Equipment
evidenced by a valid bill of sale conveying title from Lessor to Lessee
delivered within thirty (30) days of the purchase of the Items of Equipment in
question.
21. ADDITIONAL RIGHTS OF LESSOR. - Receipt by Lessor of any Basic Rent or
Additional Rent with knowledge of the breach of any provision hereof shall not
constitute a waiver of such breach and no waiver by Lessor of any provision
hereof shall be deemed to have been made unless made in writing. Lessor shall be
entitled to injunctive relief in case of the violation, or attempted or
threatened violation, of any of the provisions hereof, or to a decree compelling
performance of any of the provisions hereof or to any other remedy allowed to
Lessor by law.
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22. NET LEASE; NON-TERMINABILITY. - This Lease is an absolutely net lease
and, except as otherwise expressly provided herein, shall not terminate, nor
shall Lessee be entitled to any abatement, reduction, set-off, counterclaim,
defense or deduction with respect to any Basic Rent or Additional Rent nor shall
the obligations of Lessee hereunder be affected, other than as expressly set
forth in this Lease, by reason of any damage to or destruction of any item of
the Equipment or any taking of any item of the Equipment by condemnation or
otherwise.
23. LESSEE'S RIGHT TO SUBLEASE - Provided that no Event of Default has
occurred and is continuing, Lessee shall have the right to sublease the
Equipment for a term or terms expiring no later than the Termination Date of
this Lease subject to the prior written approval of the Lessor, which approval
shall not be unreasonably withheld. No sublease of the Equipment by Lessee shall
relieve Lessee of any of its obligations hereunder.
24. INVESTMENT TAX CREDIT - Lessor agrees to pass to Lessee any Investment
Tax Credit otherwise available to Lessor and agrees that it will exercise the
available election therefor.
25. QUIET ENJOYMENT - So long as no Event of Default has occurred and is
continuing hereunder, Lessee shall have peaceful and quiet use and enjoyment of
the Equipment against acts of Lessor or anyone claiming solely by, through, or
under Lessor.
26. NOTICES - Any notice required or permitted to be given under this
Lease shall be deemed to have been given upon its receipt, in writing, by the
receiving party at its address set forth below, or to such other address as
either party shall hereafter furnish to the other in writing.
1. If to Lessee: Federal Paper Board Company, Inc.
75 Chestnut Ridge Road
Montvale, NJ 07645
Attn: Manager - Corporate Purchasing
2. If to Lessor: American Finance Group, Inc.
Exchange Place, 14th Floor
Boston, MA 02109
Attn: Treasurer
27. ENTIRE AGREEMENT, SEVERABILITY, EFFECT AND MODIFICATION OF LEASE -
This Lease constitutes the entire agreement between the parties with respect to
the leasing of the Equipment. Any provision of this Lease which is unenforceable
in any jurisdiction, shall be, as to such jurisdiction, ineffective to the
extent of such unenforceability without invalidating the remaining provisions
hereof. No variation or modification of this Lease and no waiver of any of its
provisions or conditions shall be valid unless in writing and signed by a duly
authorized representative of the party against whom enforcement is sought.
28. GOVERNING LAW - Lessor and Lessee agree that this Lease shall be
governed by and construed in accordance with the laws of the State of New York.
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29. AGREEMENT FOR LEASE ONLY - Lessor and Lessee agree that this Lease is
and is intended to be a true lease (and not a lease in the nature of a security
interest) and further agree to treat this Lease as a true lease for all
purposes, including without limitation, tax purposes.
30. FINANCIAL STATEMENTS - Lessee agrees to furnish, upon Lessor's
request such financial information concerning Lessee as Lessor or any Assignee
may reasonably require during the term of this Lease.
31. MISCELLANEOUS. The captions in this Master Lease and this Lease are
for convenience of reference only. This Lease may be executed in separate
counterparts, all of which together shall constitute one instrument. Lessor and
Lessee agree that to the extent that this Lease constitutes chattel paper under
the Uniform Commercial Code, no security interest on this Lease may be created
through the transfer or possession of any counterpart of this Lease but only
through transfer and possession of that counterpart of the Rental Schedule to
this Lease marked "Lender's Original".
32. DEFINITIONS - The following terms shall have the following meanings
for all purposes of this Lease:
"ACQUISITION COST" of any item of Equipment means an amount equal to
the sum of (i) the purchase price of such item of Equipment paid by Lessor,
plus, (ii) any excise, sales or use tax paid by Lessor on or with respect to
such item of Equipment, plus (iii) any reasonable costs, expenses and fees paid
or incurred by Lessor in obtaining, delivering and installing such Item of
Equipment.
"ADDITIONAL RENT" shall have the meaning specified in Section 5(b)
hereof.
"APPRAISAL" shall have the meaning specified in Section 19(c)
hereof.
"ASSIGNEE" shall have the meaning specified in Section 18(a) hereof.
"BASIC RENT" shall have the meaning specified in Section 5(a)
hereof.
"CASUALTY OCCURRENCE" shall have the meaning specified in Section 12
hereof.
"CERTIFICATE OF INSPECTION AND ACCEPTANCE" means the certification
contained in or which is an Exhibit to each Rental Schedule to be executed by
Lessee, substantially in the form of "Exhibit 1" attached hereto whereby Lessee
evidences its acceptance of an item of Equipment for lease hereunder.
"DEFAULT INTEREST RATE" shall mean the rate of interest set forth in
Section 5(b) hereof.
"EQUIPMENT" means the equipment described on each Rental Schedule
executed pursuant to this Master Lease, and owned by Lessor and leased by Lessor
to Lessee or ordered by Lessor for lease to Lessee as provided herein and any
attachments, accessories, or additions thereto or substitutions therefor.
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"EVENTS OF DEFAULT" shall have the meaning specified in Section
17(a) hereof.
"FAIR MARKET VALUE" means the appraised value of the Equipment in
question determined by the procedure for Appraisal.
"FAIR RENTAL RATE" shall have the meaning specified in Section
19(a)(2) hereof.
"INTERIM TERM" for this Lease shall commence upon the commencement
date set forth in the applicable Rental Schedule and shall end on the
commencement date of the Primary Term.
"INVESTMENT TAX CREDIT" shall mean any investment tax credit
provided for in Section 38 et seq. of the Internal Revenue Code of 1954, as
amended.
"LEASE" shall have the meaning specified in Section 1 hereof.
"LEASE COMMENCEMENT DATE" with respect to an item of Equipment means
the date of the commencement of the Lease Term of such item and shall be the
date such item is accepted by Lessee for lease hereunder.
"LEASE TERM" with respect to an item of Equipment shall mean the
"Interim Term" plus the "Primary Term", including any period of renewal provided
for herein.
"MANUFACTURER(S)" shall mean the manufacturer(s) of each item of
Equipment.
"MASTER LEASE" shall have the meaning specified in Section 1 hereof.
"PAYMENT DATES" shall have the meaning specified in Section 5(a)
hereof.
"PRIMARY TERM" for this Lease shall commence and shall end on the
respective dates set forth in the Rental Schedule.
"PRIME RATE" shall mean the rate of interest per annum announced
from time to time as its "Prime Rate" by the lending institution providing the
permanent debt financing with respect to the Rental Schedule in question; if
there is no permanent debt financing or if the lending institution in question
has no PRIME RATE, then Lessor and Lessee agree that the Prime Rate announced
from time to time by Morgan Guaranty Trust Company of New York, in New York City
shall apply hereunder.
"RENEWAL TERM" shall have the meaning specified in Section 19(a)(2)
hereof.
"RENTAL SCHEDULE" means each schedule, substantially in the form of
"Exhibit 1" attached hereto, executed by Lessor and Lessee pursuant to this
Master Lease, setting forth a description of Equipment to be leased hereunder,
its location, its Acquisition Cost, the amount of Basic Rent payable by Lessee
with respect thereto, the lease term thereof, the Lease Commencement Date with
respect thereto, and such other matters as Lessor and Lessee may agree upon.
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"SECURED PARTY" shall have the meaning specified in Section 18(a)
hereof.
"STIPULATED LOSS VALUE" shall have the meaning specified in Section
12(ii) hereof.
"TERMINATION DATE" means the expiration or termination of the
Primary Term or Renewal Term of any item of Equipment, whether by the passage of
time or otherwise.
"TRANSFEREE" shall have the meaning specified in Section 18(a)
hereof.
IN WITNESS WHEREOF, the duly authorized representatives of Lessor and
Lessee have executed this Master Lease as of the date first above written.
LESSOR: AMERICAN FINANCE GROUP, INC. LESSEE: FEDERAL PAPER BOARD COMPANY, INC.
By: /s/ [ILLEGIBLE] By:/s/ Jack E. Spengler
---------------------------- -----------------------------------
Jack E. Spengler
Title: Vice President Title: Vice President
------------------------ -------------------------------
Dated: June 14, 1985
-------------------------------
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RENEWAL RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NO. NO. B-24-33RN1
(the "Renewal Rental Schedule")
DATED AS OF NOVEMBER 7, 1995
TO MASTER LEASE AGREEMENT NO. 8504NJG193 (the "Master Lease")
DATED AS OF APRIL 5, 1985
LESSOR LESSEE
AMERICAN INCOME PARTNERS V-A FEDERAL PAPER BOARD COMPANY, INC
LIMITED PARTNERSHIP 75 CHESTNUT RIDGE ROAD
c/o AMERICAN FINANCE GROUP MONTVALE, NJ 07645
98 NORTH WASHINGTON STREET
BOSTON, MA 02114
1. LEASE TERM. PAYMENT DATES.
This Renewal Rental Schedule, between American Finance Group,
successor-in-interest to American Finance Group, Inc., as lessor, lessor's
interest therein having been previously sold and assigned to the
above-referenced Lessor and Lessee incorporates by reference the terms and
conditions of the Master Lease. Lessor hereby leases to Lessee and Lessee hereby
leases from Lessor those items of Equipment described on the attached Schedule
B, for the Renewal Lease Term and at the Renew Term Basic Rent payable on the
Payment Dates hereinafter set forth on the attached Schedule A, on the terms and
conditions set forth in the Master Lease.
2. BASIC RENT.
Renewal Term Basic Rent is computed by multiplying the total Equipment
Cost by the Renewal Lease Rate set forth on the attached Schedule A.
3. SPECIAL RETURN CONDITIONS. STIPULATED LOSS VALUE.
Notwithstanding the provision of Section 12 of the Master Lease, the
Stipulated Loss Value for the Equipment during the Renewal Lease Term shall be
equal to $28,000.00.
4. LESSEE' S OPTION AT RENTAL SCHEDULE EXPIRATION.
Lessee may, at its option, at the expiration of this agreement, purchase
all, but not less than all, items of Equipment leased pursuant to this Renewal
Rental Schedule on October 1, 1996 (or the next succeeding business day), for
$10,500.00, plus any and all applicable sales tax due and owning thereunder. To
exercise its option, Lessee shall give Lessor at least 90 days prior written
notice of its intention to purchase the Equipment.
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RENEWAL RENTAL SCHEDULE NO. B-24-33RN1
PAGE TWO
5. ENTIRE AGREEMENT. MODIFICATION AND WAIVERS. EXECUTION IN COUNTERPARTS.
This Renewal Rental Schedule and the Master Lease constitute the entire
agreement between Lessee and Lessor with respect to the leasing of the
Equipment. Lessee hereby represents, warrants and certifies that the
representations and warranties of Lessee set forth in the Master Lease are true
and correct as of the date hereof. Capitalized terms not defined herein shall
have the meaning assigned to them in the Master Lease. To the extent any of the
items and conditions set forth in this Renewal Rental Schedule conflict with or
are inconsistent with the Master Lease, this Renewal Rental Schedule shall
govern and control. No amendment, modification or waiver of this Renewal Rental
Schedule or the Master Lease will be effective unless evidenced by a writing
signed by the party to be charged. This Renewal Rental Schedule may be executed
in counterparts, all of which together shall constitute one and the same
instrument.
The undersigned, being then duly authorized representative of the Lessee, hereby
certifies that the items of Equipment described on the attached Schedule B have
been duly delivered to the Lessee in good order and duly inspected and accepted
by the Lessee as confirming in all respects with the requirements and provisions
of the Master Lease, as of the Renewal Term Commencement Date stated on the
attached Schedule A.
LESSOR LESSEE
AMERICAN INCOME PARTNERS V-A FEDERAL PAPER BOARD COMPANY, INC.
LIMITED PARTNERSHIP
BY: AFG Leasing IV Incorporated
TITLE: Managing General Partner
By: /s/ EW Baker By: /s/ [ILLEGIBLE]
---------------------- ----------------------------
Title: Manager Title: MGR. CORPORATE LEASING
------------------- -------------------------
Date: 11-20-95 Date: 11-9-95
-------------------- --------------------------
COUNTERPART NO. 1 OF 2 SERIALLY NUMBERED MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES
CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY
INTEREST MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY
COUNTERPART OTHER THAN COUNTERPART NO. 1.
<PAGE>
LLR4OD-01 AMERICAN FINANCE GROUP 11/03/95 13255:33 PAGE 1
Schedule A -- Rental Schedule Economics
LESSEE: FEDERAL PAPER BOARD COMPANY, INC.
LESSOR: AMERICAN FINANCE GROUP
RENTAL SCHEDULE: B-24-33RN1
LEASE TERM (months): 12
PRIMARY START DATE: 10/01/1995
LEASE EXPIRATION DATE: 9/30/1996
PAYMENT FREQUENCY: QUARTERLY
ADVANCE /ARREARS: ARREARS
LEASE RATE: .044532510
PER DIEM LEASE RATE: .000494806
PERIODIC RENT: $2,500.00
NUMBER OF PAYMENTS: 4
TOTAL INTERIM RENT: $ .00
PAYMENT COMMENCEMENT DATE: 1/01/1996
TOTAL EQUIPMENT COST: $56,138.76
DOCUMENTATION FEE: 0
----------
/s/ [ILLEGIBLE] LESSEE INITIALS
- ---------------
/s/ EWB LESSOR INITIALS
- ---------------
<PAGE>
LLR41D-Ol AMERICAN FINANCE GROUP 11/03/95 13:55:40 PAGE 1
Schedule B Equipment Description
LESSEE: FEDERAL PAPER BOARD COMPANY, INC.
RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NUMBER: B-24-33RN1
LESSOR: AMERICAN FINANCE GROUP
Acceptance
Equipment Cost Serial Number Year Manufacturer Model Type Date
- --------------------------------------------------------------------------------
13,229.12 175723A KOMATSU 4000 FORKLIFT 10/01/1995
10,360.40 182447-A KOMATSU 3000 LIFT TRUCK 10/01/1995
17,295.94 177356A KOMATSU 6000 LIFT TRUCK 10/01/1995
15,253.30 177543A KOMATSU 6000 LIFT TRUCK 10/01/1995
- ---------
56,138.76 Total for Location 2221 JR KENNEDY DR WILMINGTON NC 28405
=========
56,138.76 Total Equipment Cost
<PAGE>
L2Rl3D
AMERICAN FINANCE GROUP 11/03/95 13:55:30 PAGE 1
ASSET ACTIVITY CHECKLIST REPORT
PREPARED BY: SAUNDRA GUADAGNO
APPROVALS: /s/ EWB
TYPE OF TRANSACTION
|X| RENEWAL LEASE |_| CASUALTY AT STIPULATED LOSS VALUE
|_| SALE TO ORIGINAL USER |_| EARLY TERMINATION
|_| SALE TO THIRD PARTY USER |_| WAREHOUSE OF ASSETS
|_| OTHER ___________________________
PRIMARY TERM DATA
ORIGINAL LESSEE FEDERAL PAPER BOARD COMPANY, INC.
STREET ADDRESS 1 75 CHESTNUT RIDGE RD
STREET ADDRESS 2
CITY, STATE, ZIP MONTVALE NJ 07645
CONTACT NAME REBECCA TERRIAN
PHONE NUMBER 201-307-4569 FAX NUMBER 207-307-4652
MASTER LEASE NUMBER 8504NJG193
LEASE DATE 4/05/1985
RENTAL SCHEDULE B-24-33
START DATE 10/01/1989
EXPIRATION DATE 9/30/1994
PAYMENT FREQUENCY Q/ARR
LEASE RATE FACTOR .056376000
ASSUMED DEBT RATE 9.4700
TREASURY RATE 7.97
LENDER/LOAN NUMBER
EQUITY OWNER(S) 1051
100.000000000
1 |_| ORIGINAL TITLES N/A 3 |X| TOP BILL FORM 10/25/95
2 |X| PRODUCE IRR REPORT 4 |_| COLLATERAL DOCS REQUESTED N/A
I. WAREHOUSE DATA (SEE ATTACHED EQUIPMENT LIST)
WAREHOUSE COST $_____________________
DATE WAREHOUSED ______________________ STOP BILL DATE __________________
<PAGE>
L2R13D
AMERICAN FINANCE GROUP 11/03/95 13:55:30 PAGE 2
ASSET ACTIVITY CHECKLIST REPORT
II. EQUIPMENT SALE DATA (SEE ATTACHED EQUIPMENT AND PRICE LIST)
NEW LESSEE OR BUYER
STREET ADDRESS 1
STREET ADDRESS 2
CITY, STATE, ZIP
CONTACT NAME
PHONE NUMBER FAX NUMBER
SALE TYPE BS LS OS RS
TAX EXEMPTION STATUS YES NO EXEMPTION NUMBER
TOTAL SALE PRICE $____________________ BROKERAGE FEE $___________
SALE DATE/STOP BILL DATE _____________________
1 |_| CREATE MEMO CODE 6 |_| CHANGE MEMO CODE
2 |_| AS/400 INPUT 7 |_| REMOVE RS COUNTERPART
3 |_| MISCELLANEOUS INVOICE IF ALL ASSETS ARE SOLD
4 |_| PRODUCE DOCUMENTS/SEND TO BUYER 8 |_| PREP FOR SCANNING
S |_| RECEIPT OF PAYMENT 9 |_| FINAL DOCUMENTS TO BUYER
III. RENEWAL DATA (ATF MAY NEED TO BE CREATED)
NEW RENTAL SCHEDULE B-24-35RN1 TERM 12 mos
START DATE 10/1/95 EXPIRATION DATE 9/30/96
PAYMENT FREQUENCY M/ADV Q/ADV S/ADV A/ADV M/ARR (Q/ARP) S/ARR A/RR
STIPULATED LOSS VALUE $28,000.00 (50%) LRF/RENT $2500
SEND DOCUMENTS TO LESSEE |X| END OF LEASE OPTIONS RT/RV/P
1 |X| AS/400 INPUT 5 |X| ACTIVATION REPORT
2 |X| UPDATE EQUITY OWNER 6 |_| PREP FOR SCANNING
3 |X| PRODUCE DOCUMENTS/SEND TO 7 |_| FINAL DOCUMENTS TO LESSEE
4 |X| REQUEST UPDATED INSURANCE LETTER TO LESSEE
IV. NOTES, COMMENTS AND OTHER INFORMATION
Purchase options for $10,500 at end of renewal
<PAGE>
L2R14D AMERICAN FINANCE GROUP 11/03/95 13:55:37 PAGE 1
ASSET ACTIVITY REPORT - EQUIPTMENT DESCRIPTION
LESSEE: FEDERAL PAPER BOARD COMPANY, INC.
RENTAL SCHEDULE: B-24-33
<TABLE>
<CAPTION>
Asset Equipment Cost Serial Number Manufacturer Model Type Status Bill Code
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0038017 13,229.12 175723A KOMATSU 4000 FORKLIFT RENEWAL NC007
0038018 10,360.40 182447-A KOMATSU 3000 LIFT TRUCK RENEWAL NC007
0038019 17,295.94 177356A KOMATSU 6000 LIFT TRUCK RENEWAL NC007
0038020 15,253.30 177543A KOMATSU 6000 LIFT TRUCK RENEWAL NC007
---------
56,138.76 Total for Location 2221 JR KENNEDY DR WILMINGTON NC 28405 CODE NC009
---------
---------
56,138.76 Total Equipment Cost
</TABLE>
** END OF REPORT **
<PAGE>
RENEWAL RENTAL SCHEDULE NO. A-61--7ORN1A (the "Renewal Rental Schedule")
DATED AS OF OCTOBER 1, 1992
TO MASTER LEASE AGREEMENT NO. 8504NJG193 (the "Master Lease")
DATED AS OF APRIL 5, 1985
LESSOR LESSEE
AMERICAN INCOME PARTNERS V-A LIMITED FEDERAL PAPER BOARD COMPANY, INC.
PARTNERSHIP 75 CHESTNUT RIDGE ROAD
c/o AMERICAN FINANCE GROUP MONTVALE, NJ 07645
EXCHANGE PLACE
BOSTON, MA 02109
1. LEASE TERM. PAYMENT DATES.
This Renewal Rental Schedule, between American Finance Group, as lessor,
lessor's interest therein having been previously sold and assigned to the
above-referenced Lessor and Lessee incorporates by reference the terms and
conditions of the Master Lease. Lessor hereby leases to Lessee and Lessee hereby
leases from Lessor those items of Equipment described on the attached Schedule
B, for the Renewal Lease Term and at the Renewal Term Basic Rent payable on the
Payment Dates hereinafter set forth on the attached Schedule A, on the terms and
conditions set forth in the Master Lease.
2. BASIC RENT.
Renewal Term Basic Rent is computed by multiplying the Total Equipment
Cost by the Renewal Lease Rate set forth on the attached Schedule A.
3. SPECIAL RETURN CONDITIONS. STIPULATED LOSS VALUE.
Notwithstanding the provision of Section 12 of the Master Lease, the
Stipulated Loss Value for the Equipment during the Renewal Lease Term shall be
equal to $10,000.00.
5. ENTIRE AGREEMENT. MODIFICATION AND WAIVERS. EXECUTION IN COUNTERPARTS.
This Renewal Rental Schedule and the Master Lease constitute the entire
agreement between Lessee and Lessor with respect to the leasing of the
Equipment. Lessee hereby represents, warrants and certifies that the
representations and warranties of Lessee set forth in the Master Lease are true
and correct as of the date hereof. Capitalized terms not defined herein shall
have the meanings assigned to them in the Master Lease. To the extent any of the
terms and conditions set forth in this Renewal Rental Schedule conflict with or
are inconsistent with the Master Lease, this Renewal Rental Schedule shall
govern and control. No amendment, modification or waiver of this Renewal Rental
Schedule or the Master Lease will be effective unless
<PAGE>
RENEWAL RENTAL SCHEDULE NO. A-61-7ORN1
PAGE TWO
evidenced by a writing signed by the party to be charged. This Renewal Rental
Schedule may be executed in counterparts, all of which together shall constitute
one and the same instrument.
The undersigned, being the duly authorized representative of the Lessee, hereby
certifies that the items of Equipment described on the attached Schedule B have
been duly delivered to the Lessee in good order and duly inspected and accepted
by the Lessee as conforming in all respects with the requirements and provisions
of the Master Lease, as of the Renewal Term Commencement Date stated on the
attached Schedule A.
AMERICAN INCOME PARTNERS V-A LIMITED FEDERAL PAPER BOARD COMPANY, INC.
PARTNERSHIP
Lessor Lessee
By /s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
--------------------------- --------------------------------
Title Manager Title MGR, CORPORATE LEASING
----------------------- AND TELECOMMUNICATIONS
----------------------
COUNTERPART NO. 1 OF 2 SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS.
T0 THE EXTENT IF ANY THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER
THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST MAY BE CREATED THROUGH
THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO.
1
3764i/7
<PAGE>
AMERICAN FINANCE GROUP
Schedule A
LESSEE: FEDERAL PAPER BOARD COMPANY, INC.
LESSOR: AMERICAN FINANCE GROUP
RENTAL SCHEDULE A-61-7ORN1A
LEASE TERM (months): 24
PRIMARY START DATE: 10/01/1992
LEASE EXPIRATION DATE: 9/30/1994
PAYMENT FREQUENCY: QUARTERLY
ADVANCE/ARREARS: ARREARS
LEASE RATE: .037687600
PER DIEM LEASE RATE: .000418751
PERIODIC RENT: $1,150.00
NUMBER OF PAYMENTS: 8
TOTAL INTERIM RENT: $.00
PAYMENT COMMENCEMENT DATE: 10/01/1992
TOTAL EQUIPMENT COST: $30,514.00
DOCUMENTATION FEE: 0 FPB Unit# 226
-------------
/s/ [ILLEGIBLE] LESSEE INITIALS
- ---------------
/s/ [ILLEGIBLE] LESSOR INITIALS
- ---------------
<PAGE>
[ILLEGIBLE] AMERICAN FINANCE GROUP 7/07/92 16:05:25 PAGE 1
Schedule B Equipment Description
RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NUMBER: A-61-70RN1
LESSEE: FEDERAL PAPER BOARD COMPANY, INC.
LESSOR: AMERICAN FINANCE GROUP
<TABLE>
<CAPTION>
Acceptance
Equipment Cost Serial Number Year Manufacturer Model Type Date Street City St Zip
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30,514.00 2064 Waldon 5100 Traction 10/01/92 RIEGELWOOD OPERATIONS RIEGELWOOD NC 28456
=========
30,514.00 TOTAL EQUIPMENT COST
</TABLE>
<PAGE>
RENEWAL RENTAL SCHEDULE CHECKLIST
DATE: 7/7/92
LESSEE: Federal P LF&A APPROVAL [ILLEGIBLE]
RENEWAL RENTAL SCHEDULE(S) A-61-70RN1A COMMENTS: (BINDER #24)____________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
STATUS DATE TASK
|X|4 / 7/7 1. DETERMINE STATUS OF LEASE RECEIVABLES FOR PRIMARY LEASE.
|X| / 2. DETERMINE STATUS OF UCC STATEMENTS FOR PRIMARY LEASE.
--- / 3. DETERMINE STATUS OF ORIGINAL CERTIFICATES OF TITLE.
|X| / 4. DETERMINE THE CURRENT EQUITY OWNER STATUS FOR THE ORIGINAL
RENTAL SCHEDULE.
|X| / 5. ESTABLISH THE REMARKETING AWARD NUMBER ON THE AS400 FOR USE ON
THE RENEWAL LEASE.
|X| / 6. SUSPEND BILLING ON THE ASSET/RENTAL SCHEDULE LEVEL.
|X| / 7. SELECT RENEW OPTION IN RENTAL SCHEDULE MODE AND COMPLETE
SCREENS TO ESTABLISH RENEWAL RENTAL SCHEDULE INCLUDING THE
SELECTION OF RENEWED ASSETS.
|X| / 8. ENTER RENEWAL TERM START DATE AS THE ACCEPTANCE DATE FOR EACH
SELECTED ASSET.
|X| / 9. ENTER THE EQUITY OWNER DETERMINED ABOVE AS THE EQUITY OWNER
FOR THE RENEWAL SCHEDULE, USING THE RENEWAL START DATE AS THE
SALE DATE.
|X| / 10. CREATE SCHEDULE A AND SCHEDULE B TO RENEWAL RENTAL SCHEDULE ON
AS400 SYSTEM.
|X| / 11. CONTINUE AND/OR AMEND L/L FINANCING STATEMENTS.
|X| / 12. OBTAIN NECESSARY APPROVALS FROM LF&A.
|X| / 13. MAIL COMPLETE EXECUTION PACKAGE TO LESSEE USING (2)
COUNTERPARTS OF RENEWAL RENTAL SCHEDULE ONLY.
|X| / 14. UPON RETURN, HAVE AFG COUNTERSIGN EXECUTION PACKAGE AND MAIL
LESSEE ITS COUNTERPART.
|X| / 15. FILE UCC STATEMENTS WITH PROPER JURISDICTIONS.
|X| / 16. PRINT AND DISTRIBUTE AS400 PRODUCED ACTIVATION REPORT.
|X| / 17. UPON RECEIPT OF UCC FILING INFORMATION, UPDATE AS400 UCC
SYSTEM AND COPY FOR AFG'S FILES.
|X| / 18. OBTAIN ORIGINAL CERTIFICATES OF TITLE AND UPDATE THE ASSET
ACQUISITION SCREEN WITH THE TITLE NUMBER AND STATE WHICH THE
TITLE HELD (TITLED EQUIPMENT ONLY). PLACE ORIGINAL TITLES IN
THE TITLE FILE UNDER THE LESSEE AND RENTAL SCHEDULE.
--- / 19. OBTAIN UPDATED INSURANCE CERTIFICATE IF NECESSARY
|X| / 20. BIND TRANSACTION
DOCUMENT ID NUMBER PAGE DOCUMENT ID NUMBER PAGE
- --------------------------------------------------------------------------------
UCC'S 3509i p23, 26, 27
DOCS 3764i p22
<PAGE>
ASSET ACTIVITY FORM
TYPE OF TRANSACTION Date of Request: 6/19/92
|X| Renewal Lease
|_| Release to New User (Existing Lessee) Prepared by: Caf
|_| Release to New User (New Lessee)
|_| Sale to Original User Asset Mgmt Approval: DAD
|_| Sale to Third Party User
|_| Casualty at Stipulated Loss Value
|_| Warehouse of Assets
|_| Other ___________________________
PRIMARY TERM DATA:
Original Lessee Name & Address
Federal Paper Bd. Co, Inc Rental Schedule No.: A-61-70
- -------------------------------------
Riegelwood Operations Expiration Date: 9/30/92
- -------------------------------------
Riegelwood, NC 28456 Equity Owner: V-A
- -------------------------------------
Master Lease No.: 8504NJG193
- -------------------------------------
Lease Date: 4-5-85
- -------------------------------------
Contact Name: Donna Varion
Phone: 201-907-4598 Fax: 201-307-6125
NEW LESSEE OR BUYER NAME & ADDRESS LESSEE OR BUYER CONTACT NAME:
- ---------------------------------- --------------------------------------
- ---------------------------------- --------------------------------------
- ---------------------------------- Phone:________________________________
CIRCLE ONE: BS LS OS RS Fax:__________________________________
TAX EXEMPTION STATUS: YES NO
SPECIAL ARRANGEMENTS WITH LESSEE/BUYER:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANTICIPATED CLOSING DATE:_______________________________________________________
<PAGE>
I. RENEWAL OR NEW LEASE TRANSACTION DATA:
EQPT MFG/MODEL/TYPE SERIAL NUMBER ORIGINAL OEC LRF TERM
================================================================================
(1) Model 5100 Waldon 2064 $30,514 3.76876 2yrs.
Tractor with boom &
bucket. A-61-70Rn1
RENEWAL OR RELEASE START DATE: 10/1/92 STIP LOSS VALUE: 10,000
PAYMENT FREQUENCY: quarterly ADVANCE/ARREARS: arrears
NEW EQUIPMENT LOCATION: same
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
SPECIAL RETURN CONDITIONS:
------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL TRANSACTION NOTES: * Please reference FPB Unit #226 on renewal
schedule!!! All renewal docs. sent to Donna Varion in Montval, NJ.
<PAGE>
Exhibit 99(f)
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT NO. 87071LG313, dated as of July 1, 1987, between
American Finance Group, Inc., a Massachusetts corporation having a principal
place of business and address for purposes of notice hereunder at Exchange
Place, Boston, Massachusetts 02109, Attention: Manager, Lease Financing Group,
as Lessor, and Packaging Corporation of America, a Delaware corporation having a
principal place of business and address for purposes of notice hereunder at 1603
Orrington Avenue, Evanston, IL 60204 Attention: Treasurer, as Lessee.
1. MASTER LEASE.
This Master Lease Agreement sets forth the terms and conditions that
govern the lease by Lessor to Lessee of items of Equipment specified on Rental
Schedules executed and delivered by the parties from time to time. Each Rental
Schedule incorporates by reference this Master Lease Agreement and specifies the
Lease Term, the amount of Basic Rent, the Payment Dates on which Basic Rent is
due, and such other information and provisions as Lessor and Lessee may agree.
Each Rental Schedule constitutes a separate and independent lease.
2. LEASE TERM. LESSEE'S RIGHT TO QUIET ENJOYMENT.
Each Rental Schedule is for a non-cancellable Lease Term commencing on the
date of acceptance of the Equipment for lease and ending on the Expiration Date
specified on such Rental Schedule. Lessee cannot, for any reason, terminate the
Rental Schedule or suspend payment or performance of any of its obligations
thereunder. Subject to there being no Event of Default under the Rental
Schedule, Lessee will have quiet possession and use of the Equipment throughout
the Lease Term, and Lessor shall defend and protect such quiet possession and
use against all persons claiming by, through or under Lessor.
3. BASIC RENT. NET LEASE. LESSEE'S INDEMNITY. NO WARRANTIES BY LESSOR.
Basic Rent is payable in the amount specified on the Rental Schedule. All
payments of Basic Rent shall be made to Lessor in good funds on the Payment
Dates specified in the Rental Schedule. Basic Rent is net of, and Lessee agrees
to pay, and will indemnify and hold Lessor and any assignee of Lessor harmless
from and against, all costs (including, without limitation, maintenance, repair
and insurance costs), claims (including claims of product liability or strict
liability in tort), losses or liabilities relating to the Equipment or its use
that are incurred by or asserted against Lessee, any permitted sublessee of
Lessee, Lessor or any assignee of Lessor and arise out of matters occurring
prior to the return of the Equipment. Lessee agrees to defend all claims through
counsel acceptable to Lessor. The Rental Schedule is a triple net lease.
Lessee's obligations are not subject to defense, counterclaim, set-off,
abatement or recoupment, and Lessee waives all rights to terminate or surrender
the Rental Schedule, for any reason, including, without limitation, defect in
the Equipment or nonperformance by Lessor, provided, however, that Lessee
specifically retains the right to seek recourse against Lessor by way of
separate action either at law or in equity in the
-1-
<PAGE>
event of nonperformance by Lessor under the Rental Schedule. LESSOR HEREBY
DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING. WITHOUT
LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. Lessor will assign to Lessee all manufacturer or vendor warranties and
will cooperate with Lessee in asserting any claims under such warranties.
4. USE AND LOCATION OF EQUIPMENT. MAINTENANCE AND REPAIRS. NO LIENS. NO
ASSIGNMENT LESSEE'S RIGHT TO SUBLEASE BY LESSEE.
The Equipment is to be used exclusively by Lessee in the conduct of its
business, only for the purposes for which it was designed and in compliance with
all applicable laws, rules and regulations. Lessee will obtain and maintain all
necessary licenses, permits and approvals. The Equipment is not to be removed
from the location specified on the Rental Schedule except upon prior written
notice to Lessor, and in no event may the Equipment be moved to a location
outside the continental United States. Lessee will effect all maintenance and
repairs necessary to keep the Equipment in good and efficient operating
condition and appearance, reasonable wear and tear excepted, and will keep
written records thereof. All maintenance and repairs will be made in accordance
with the manufacturer's recommendations and by authorized representatives of the
manufacturer or by persons of equal skill and knowledge whose work will not
adversely affect any applicable manufacturer's or vendor's warranty. Lessee
will keep the Equipment and its interest therein free and clear of all liens and
encumbrances other than those created by Lessor or arising out of claims against
Lessor and not related to the lease of the Equipment to Lessee. The Rental
Schedule may not be assigned by Lessee. Lessee may sublease the Equipment only
upon prior written notice to Lessor, in which notice Lessee represents and
warrants to Lessor that such sublease is specifically made subject to the prior
rights of Lessor under the Rental Schedule, does not create any obligation on
the part of Lessor in favor of such sublessee and does not relieve Lessee of any
of its obligations under the Rental Schedule.
5. LOSS, DAMAGE OR DESTRUCTION OF EQUIPMENT.
Lessee will notify Lessor promptly in writing if any item of Equipment is
lost, stolen, requisitioned by a governmental authority or damaged beyond repair
(each a "Casualty"), describing the Casualty in reasonable detail, and will
promptly file a claim under appropriate policies of insurance. Lessee may, with
the prior written consent of Lessor, replace the Equipment suffering a Casualty
with similar items of at least equal value and utility. If Lessee does not
replace the Equipment, Lessee will pay to Lessor on the next Payment Date
following the Casualty, in addition to Basic Rent and other sums due on that
date, an amount equal to the greater of the Casualty Value specified on the
Rental Schedule or the fair market value of such Equipment. The Rental Schedule,
solely as it relates to the Equipment suffering the Casualty, will terminate and
ownership of the Equipment suffering the Casualty, including all claims for
insurance proceeds or condemnation awards, will pass to Lessee upon receipt of
such payment by Lessor. The fair market value of the Equipment will be
determined by agreement of Lessee and Lessor, or, if the parties cannot agree,
by an independent equipment appraiser of nationally recognized standing,
selected by Lessor and reasonably acceptable to Lessee. The cost of appraisal
will be shared equally by Lessee and Lessor.
-2-
<PAGE>
6. TAXES AND FEES.
Lessee agrees to prepare and file all required returns or reports and to
pay all sales, gross receipts and other taxes (including highway use and vehicle
excise taxes, where applicable), fees, interest, fines or penalties imposed by
any governmental authority relating in any way to the Equipment, including any
documentary, stamp or recordation taxes assessed in connection with the
financing of Lessor's purchase of the Equipment and excepting only taxes imposed
upon the net income of Lessor. Notwithstanding the foregoing, Lessor will report
and pay all use taxes and Lessee will pay to Lessor, on each Basic Rent Payment
Date, as additional rent, an amount equal to the use taxes attributable to that
payment of Basic Rent.
7. INSURANCE.
Lessee agrees to maintain policies of insurance on the Equipment in
amounts, against risks and on terms and conditions applicable to other equipment
owned or leased by Lessee and similar to the Equipment. Such insurance will at a
minimum include (1) physical damage and theft insurance in an amount at least
equal to the greater of the Casualty Value set forth on the Rental Schedule or
the fair market value of the Equipment and (ii) comprehensive liability
insurance in the amount of at least $5,000,000 per occurrence, in each case with
deductibles not in excess of $100,000. All policies (A) are to be maintained
with insurers acceptable to Lessor; (B) are to name Lessor and its assignees as
loss payees with respect to physical damage and theft and as additional insureds
with respect to liability, as their interests may appear; and (C) are to provide
that they may not be altered or cancelled except upon thirty days prior written
notice to Lessor and each of Lessor's assignees named as additional insured and
loss payee. Notwithstanding the foregoing Lessee may self-insure against
physical damage and theft only. Lessee agrees to deliver to Lessor such
certificates of insurance or self-insurance as Lessor may, from time to time,
request. Lessor may hold any insurance proceeds as security for Lessee's
performance of its obligations with respect to the Equipment on behalf of which
the proceeds were paid and the payment of all Basic Rent and other sums then due
and unpaid under the Rental Schedule and will pay such proceeds over to Lessee
only upon receipt of satisfactory evidence thereof.
8. FINANCIAL STATEMENTS. INSPECTION. REPORTS.
Lessee will provide to Lessor copies of Lessee's annual balance sheet,
profit and loss statement and statement of changes in financial condition, and,
if generally available to Lessee's Lenders, quarterly unaudited balance sheet
and profit and loss statement, all prepared in accordance with generally
accepted accounting principles, consistently applied, all either audited by
independent outside auditors or certified by the Lessee's Chief Financial
Officer, Lessor may from time to time, upon reasonable notice and during
Lessee's normal business hours, inspect the Equipment and Lessee's records with
respect thereto and discuss Lessee's financial condition with knowledgeable
representatives of Lessee. Lessee will, if requested, provide a report on the
condition of the Equipment, a record of its maintenance and repair, a summary of
all items suffering a Casualty, a certificate of no default or such other
information or evidence of compliance with Lessee's obligations under the Rental
Schedule as Lessor may reasonably request.
-3-
<PAGE>
9. AGREEMENT FOR LEASE ONLY. IDENTIFICATION MARKS. FINANCING STATEMENTS.
FURTHER ASSURANCES.
Each Rental Schedule is intended to be a true lease and not a lease in the
nature of a security agreement. Lessee will affix to the Equipment all notices
of Lessor's ownership of the Equipment furnished by Lessor. Lessee will execute
and deliver and Lessor may file Uniform Commercial Code financing statements or
other similar documents notifying the public of Lessor's ownership of the
Equipment and Lessee hereby appoints Lessor as its agent and attorney-in-fact to
execute and file the same on its behalf. Lessee agrees to promptly execute and
deliver to Lessor such further documents or other assurances, and to take such
further action, including obtaining landlord and mortgagee waivers, as Lessor
may from time to time reasonably request in order to establish and protect the
rights and remedies created by the Rental Schedule.
10. LATE PAYMENT CHARGES. LESSOR'S RIGHT TO PERFORM FOR LESSEE.
A Late Payment Charge equal to (A) the greater of 21% per annum above the
debt rate charged to Lessor in connection with the financing of its purchase of
the Equipment or 2% per annum above the prime or base lending rate of The First
National Bank of Boston, as announced from time to time, or (B) if less, the
highest rate not prohibited by law, will accrue on any sum not paid when due for
each day not paid. If Lessee fails to duly and promptly pay or perform any of
its obligations hereunder, Lessor may, upon notice to Lessee specifying such
nonperformance, itself pay or perform such obligations for the account of Lessee
without thereby waiving any default and Lessee will pay to Lessor, on demand and
in addition to Basic Rent, an amount equal to all sums so paid or expenses so
incurred, plus a Late Payment Charge accruing from the date such sums were paid
or expenses incurred by Lessor.
11. LESSEE'S OPTIONS UPON LEASE EXPIRATION.
Lessee has the option at the expiration of the Lease Term, exercisable
with respect to all, but not less than all, items of Equipment leased pursuant
to Rental Schedules having the same Expiration Date, (i) to return the Equipment
to Lessor, or (ii) to renew the Rental Schedule at fair rental value for a
Renewal Term the length of which shall be determined by agreement of Lessee and
Lessor. Lessee agrees to provide Lessor written notice of its decision to return
the Equipment or renew the Rental Schedule not less than 120 days prior to the
Expiration Date. If Lessee fails to give Lessor 120 days written notice, the
Lease Term may, at Lessor's option, be extended and continue until 120 days from
the date Lessor receives written notice of Lessee's decision to return the
Equipment or renew the Rental Schedule. Fair rental value and useful life will
be determined by agreement of Lessor and Lessee, or if the parties cannot agree,
by an independent equipment appraiser selected by Lessor and reasonably
acceptable to Lessee. The cost of an appraisal will be shared equally by Lessor
and Lessee. At the expiration of the Lease Term or any extension or renewal
thereof, Lessee will, at its expense, assemble, pack, and crate the Equipment,
all in accordance with manufacturer's recommendations, if any, and deliver it by
common carrier, freight and insurance prepaid, to a place to be designated by
Lessor; provided, however, that shall be responsible for only so much of the
cost of shipping as does not exceed the cost of shipping the Equipment a
distance of 1500 miles. The Equipment will be returned in good and efficient
operating
-4-
<PAGE>
condition and appearance, reasonable wear and tear excepted, and eligible for
manufacturer's maintenance, if available, free of all Lessee's markings and free
of all liens and encumbrances other than those created by Lessor or arising out
of claims against Lessor and not related to the lease of the Equipment to
Lessee. The Rental Schedule shall continue in full force and effect and Lessee
shall continue to pay Basic Rent through and including the date on which the
Equipment is returned by Lessee.
12. LESSEE'S REPRESENTATIONS AND WARRANTIES.
Lessee represents, warrants and certifies as of the date of execution and
delivery of each Rental Schedule as follows:
(a) Lessee is duly organized, validly existing and in good standing
under the laws of the state of its incorporation, with full power to
enter into and to pay and perform its obligations under the Rental
Schedule and this Master Lease Agreement as incorporated therein by
reference, and is duly qualified and in good standing in all other
jurisdictions where its failure to so qualify would adversely affect
the conduct of its business or the performance of its obligations
under or the enforceability of the Rental Schedule;
(b) the Rental Schedule, this Master Lease Agreement and all related
documents have been duly authorized, executed and delivered by
Lessee, are enforceable against Lessee in accordance with their
terms and do not and will not contravene any provisions of or
constitute a default under Lessee's organizational documents or its
By Laws, any agreement to which it is a party or by which it or its
property is bound, or any law regulation or order of any
governmental authority;
(c) Lessor's right, title and interest in and to the Rental Schedule,
this Master Lease Agreement and the Equipment and the rentals
therefrom will not be affected or impaired by the terms of any
agreement or instrument by which Lessee or its property is bound;
(d) no approval of, or filing with, any governmental authority or other
person is required in connection with Lessee's entering into or the
payment or performance of its obligations under the Rental Schedule
or this Master Lease Agreement as incorporated therein by reference;
(e) there are no suits or proceedings pending or threatened before any
court or governmental agency against or affecting Lessee which, if
decided adversely to Lessee, would materially adversely affect
Lessee's business or financial condition or its ability to perform
any of its obligations under the Rental Schedule or this Master
Lease Agreement as incorporated therein by reference; and
-5-
<PAGE>
(f) there has been no material adverse change to Lessee's financial
condition since the date of its most recent audited financial
statement.
13. EVENTS OF DEFAULT. LESSOR'S REMEDIES ON DEFAULT.
Each of the following events constitutes an Event of Default:
(a) default in the payment of any amount when due under the Rental
Schedule continuing for a period of ten days after written notice of
nonpayment thereof;
(b) default in the observance or performance of any other covenant,
condition or agreement to be observed or performed by Lessee under
the Rental Schedule and this Master Lease Agreement as incorporated
therein by reference, continuing for more than 30 days after written
notice thereof, unless Lessee shall be diligently proceeding to cure
such default and such default does not subject the Equipment to
forfeiture, in which event, Lessee shall have 60 days from the date
of notice, or such other longer period as Lessor may consent to in
writing, in which to cure such default;
(c) any representation or warranty made by Lessee herein or in the
Rental Schedule or this Master Lease Agreement as incorporated
therein by reference or in any document or certificate furnished in
connection herewith shall at any time prove to have been incorrect
in any material respect when made;
(d) any attempt by Lessee, without Lessor's prior written consent,
to assign the Rental Schedule, to make any unauthorized sublease of
the Equipment or to transfer possession of the Equipment;
(e) Lessee (A) ceases doing business as a going concern; (B) makes
an assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they mature or generally fails to pay
its debts as they become due; (C) initiates any voluntary bankruptcy
or insolvency proceeding; (D) fails to obtain the discharge of any
bankruptcy or insolvency proceeding initiated against it by others
within 60 days of the date such proceedings were initiated; (E)
requests or consents to the appointment of a trustee or receiver; or
(F) a trustee or receiver is appointed for Lessee or for a
substantial part of Lessee's property; or
(f) Lessee shall not return the Equipment at the expiration of the
Lease Term or any extension or renewal thereof, or if Lessor has
advised Lessee that the Equipment is not in the required condition
upon return and Lessee fails to make appropriate repairs or
reconditionings.
Upon the occurrence of an Event of Default, Lessor may, without notice to
Lessee, declare the applicable Rental Schedule in default and may exercise any
of the following remedies:
-6-
<PAGE>
I. at Lessor's option, and in its sole discretion either:
(a) declare all Basic Rent and other sums due or to become due under
the Rental Schedule immediately due and payable, and sue to enforce
the payment thereof; or
(b) receive from Lessee (and sue to enforce the payment thereof), as
liquidated damages for loss of the bargain and not as a penalty, and
in addition to all accrued and unpaid Basic Rent and other sums due
under the Rental Schedule, an amount equal to the greater of (A) the
Casualty Value set forth on the Rental Schedule calculated after the
last payment of Basic Rent actually received by Lessor or (B) the
fair market value of the Equipment as of the date of default
determined by an appraiser selected by Lessor, plus, in either case,
interest thereon at the Late Payment Charge rate from the date of
default until the date of payment, and, after receipt in good funds
of the sums described above, Lessor will, if it has not already done
so, terminate the Rental Schedule and, at its option, either pay
over to Lessee as, when and if received, any net proceeds (after all
costs and expenses) from any disposition of the Equipment, or convey
to Lessee all of its right, title and interest in and to the
Equipment, as is, where is and with all faults, without recourse and
without warranty; and
II. without regard to whether Lessor has elected either option in
subsection I. above, Lessor may
(a) proceed by appropriate court action either at law or in equity
to enforce performance by Lessee of the covenants and terms of the
Rental Schedule and to recover damages for the breach thereof; and
(b) terminate the Rental Schedule by written notice to Lessee,
whereupon all right of Lessee to use the Equipment will immediately
cease and Lessee will forthwith return the Equipment to Lessor in
accordance with the provisions hereof; and
(c) repossess the Equipment and without notice to Lessee, dispose of
it by private or public, cash or credit sale or by lease to a
different lessee, in all events free and clear of any rights of
Lessee, and for this purpose Lessee hereby grants to Lessor and its
agents the right to enter upon the premises where the Equipment is
located and to remove the Equipment therefrom and Lessee agrees not
to interfere with the peaceful repossession of the Equipment; and
(d) recover from Lessee all costs and expenses arising out of
Lessee's default, including, without limitation, expenses of
repossession, storage, appraisal, repair, reconditioning and
disposition of the Equipment and reasonable attorneys' fees and
expenses.
Lessor's remedies are cumulative and not exclusive, and are in addition to all
remedies at law or in equity. No failure by Lessor to declare a default shall
constitute a waiver of such default or restrict Lessor's ability to declare a
default at a later date.
-7-
<PAGE>
14. ASSIGNMENT BY LESSOR.
Lessor may at any time and from time to time sell, transfer or grant liens
on the Equipment, and assign, as collateral security or otherwise, its rights in
the Rental Schedule and this Master Lease Agreement as incorporated therein by
reference, in each case subject and subordinate to Lessee's rights thereunder,
without notice to or consent by Lessee. Lessee acknowledges that Lessor may
assign the Rental Schedule to a Lender in connection with the financing of its
purchase of the Equipment and agrees, in the event of such assignment, to
execute and deliver a Rent Assignment Letter acknowledging that the Lender has
(and may exercise either in its own name or in the name of Lessor) all of the
rights, privileges and remedies, but none of the obligations, of Lessor under
the Rental Schedule; waiving for the benefit of the Lender (but not Lessor) any
defense, counterclaim, set-off, abatement, reduction or recoupment that Lessee
may have against Lessor; and agreeing to make all payments of Basic Rent and
other sums due under the Rental Schedule to the Lender or as the Lender may
direct. Lessee also agrees to deliver opinions of counsel, insurance
certificates and such other documents as Lessor may reasonably request for the
benefit of the Lender in connection with the collateral assignment of the Rental
Schedule.
15. NOTICE. GOVERNING LAW. EXECUTION IN COUNTERPARTS.
All notices required hereunder shall be effective upon receipt in writing
delivered by hand or by other receipt-acknowledged method of delivery at the
address first above written. This Master Lease Agreement and the Rental Schedule
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts. This Master Lease Agreement and the Rental
Schedule may be executed in multiple counterparts all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Master Lease
Agreement to be executed and delivered by their duly authorized representatives
as of the date first above written.
AMERICAN FINANCE GROUP, INC. PACKAGING CORPORATION OF AMERICA
By: [ILLEGIBLE] By: [ILLEGIBLE]
--------------------------------- --------------------------------
Title: Senior Vice President Title: Senior Vice President
------------------------------ -----------------------------
Date: 8/6/87 Date: 8-3-87
------------------------------- -----------------------------
-8-
<PAGE>
RENEWAL RENTAL SCHEDULE NO. B-7RN3 (the "Renewal Rental Schedule")
DATED AS 0F AUGUST 5, 1999
TO MASTER LEASE AGREEMENT NO. 8707ILG313 (the "Master Lease")
DATED AS 0F JULY 1, 1987
LESSOR LESSEE
AMERICAN INCOME PARTNERS V-A PACKAGING CORPORATION OF AMERICA
LIMITED PARTNERSHIP 1900 W. Field Court
c/o EQUIS FINANCAL GROUP Lake Forest, IL. 60045
88 BROAD STREET
BOSTON, MA 02110
1. LEASE TERM. PAYMENT DATES.
This Renewal Rental Schedule, between American Income Partners V-A L.P.,
as Lessor, Lessor's interest therein having been previously sold and assigned by
American Finance Group and Lessee incorporates by reference the terms and
conditions of the Master Lease. Lessor hereby leases to Lessee and Lessee hereby
leases from Lessor those items of Equipment described on the attached Schedule
B, for the Renewal Lease Term and at the Renewal Term Basic Rent payable on the
Payment Dates hereinafter set forth on the attached Schedule A, on the terms and
conditions set forth in the Master Lease.
2. BASIC RENT.
Renewal Term Basic Rent is computed by multiplying the Total Equipment
Cost by the Renewal Lease Rate set forth on the attached Schedule A.
3. STIPULATED LOSS VALUE.
Notwithstanding the provision of the Master Lease, the Stipulated Loss
Value for the Equipment during the Renewal Lease Term shall be equal to forty
percent (40%) of the original equipment cost for each item of Equipment.
4. ENTIRE AGREEMENT. MODIFICATION AND WAIVERS. EXECUTION IN COUNTERPARTS.
This Renewal Rental Schedule and the Master Lease constitute the entire
agreement between Lessee and Lessor with respect to the leasing of the
Equipment. Lessee hereby represents, warrants and certifies that the
representations and warranties of Lessee set forth in the Master Lease are true
and correct as of the date hereof. Capitalized terms not defined herein shall
have the meanings assigned to them in the Master Lease. To the extent any of the
terms and conditions set forth in this Renewal Rental Schedule conflict with or
are inconsistent with the Master Lease, this Renewal Rental Schedule shall
govern and control. No amendment, modification or waiver of this Renewal Rental
Schedule or the Master Lease will be effective unless evidenced in writing
<PAGE>
RENEWAL RENTAL SCHEDULE NO. B-7RN3
PAGE TWO
signed by the party to be charged. This Renewal Rental Schedule may be executed
in counterparts, all of which together shall constitute one and the same
instrument.
The undersigned, being the duly authorized representative of the Lessee, hereby
certifies that the items of Equipment described on the attached Schedule B have
been duly delivered to the Lessee in good order and duly inspected and accepted
by the Lessee as conforming in all respects with the requirements and provisions
of the Master Lease, as of the Renewal Term Commencement Date stated on the
attached Schedule A.
AMERICAN INCOME PARTNERS V-A PACKAGING CORPORATION OF AMERICA
LIMITED PARTNERSHIP
Lessor Lessee
By: AFG Leasing IV Incorporated
Title: General Partner
By: /s/ Gail D. Ofgant By: /s/ [ILLEGIBLE]
--------------------------------- -----------------------------------
Title: Sr. Vice President Title: Corporate Packaging Mgr.
------------------------------ --------------------------------
COUNTERPART NO. 1 OF 2 SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS.
TO THE EXTENT IF ANY THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER
THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST MAY BE CREATED THROUGH
THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO.
1
<PAGE>
LLR40D-O1 EQUIS FINANCIAL GROUP 8/05/99 16:03:46 PAGE 1
Schedule A - Rental Schedule Economics
LESSEE: TENNECO PACKAGING
LESSOR: EQUIS FINANCIAL GROUP
RENTAL SCHEDULE: B-7RN3
LEASE TERM (months): 24
PRIMARY START DATE: 10/01/1999
LEASE EXPIRATION DATE: 9/30/2001
PAYMENT FREQUENCY: MONTHLY
ADVANCE/ARREARS: ADVANCE
LEASE RATE: .008073394
PER DIEM LEASE RATE: .000269113
PERIODIC RENT: $440.00
NUMBER OF PAYMENTS: 24
TOTAL INTERIM RENT: $ .00
PAYMENT COMMENCEMENT DATE: 10/01/1999
TOTAL EQUIPMENT COST: 54,500.00
DOCUMENTATION FEE: _________________
/s/ [ILLEGIBLE] LESSEE INITIALS
- -----------------
/s/ GDO LESSOR INITIALS
- -----------------
<PAGE>
LLR41D-O1 EQUIS FINANCIAL GROUP 8/05/99 16:03:46 PAGE 1
Schedule B Equipment Description
RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NUMBER: B-7RN3
LESSEE: TENNECO PACKAGING
LESSOR: EQUIS FINANCIAL GROUP
<TABLE>
<CAPTION>
Acceptance
Equipment Cost Serial Number Year Manufacturer Model Type Date
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
30,382.00 E357-0803-7255 CLARK ECS25 FORKLIFT 10/01/1999
24,118.00 C108V09303K HYSTER E5OXL FORKLIFT 10/01/1999
- --------------
54,500.00 Total for Location 525 MT TOM RD NORTHAMPTON MA 01060
==============
54,500.00 Total Equipment Cost
</TABLE>
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. B-6
This RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE, dated as of September 12,
1989, between American Finance Group, a Massachusetts general partnership and
successor in interest to American Finance Group, Inc. ("Lessor"), a
Massachusetts corporation and Packaging Corporation of America ("Lessee")
incorporates by reference the terms and conditions of Master Lease Agreement No.
8707ILG313 (the "Master Lease"). Lessor hereby leases to Lessee and Lessee
hereby leases from Lessor the following described items of Equipment for the
Lease Term and at the Basic Rent payable on the Payment Dates hereinafter set
forth, on the terms and conditions set forth in the Master Lease.
1. EQUIPMENT
Description
(Manufacturer,
Item Type, Model and Equipment Acceptance
No. Serial Number) Cost Location Date
- ---- -------------- --------- -------- ----------
VARIOUS FORKLIFTS AND EQUIPMENT AS MORE FULLY DESCRIBED
ON THE ATTACHED SCHEDULE A AND INVOICES See Schedule A
GRAND TOTAL EQUIPMENT COST: $16,451.40
BILL TO: Packaging Corporation of America
1001 113th Street
Arlington, TX 76011
2. LEASE TERM
The Lease Term is for an Interim Term commencing on the date of acceptance
of the Equipment for lease, as set in the attached Schedule A, and continuing
through and including September 30, 1989 and for a Primary Term of 60 months,
commencing on October 1, 1989 and continuing through and including the
Expiration Date of September 30, 1994.
3. BASIC RENT. PAYMENT DATES.
Interim Term Basic Rent is due and payable in full on the first day of the
Primary Term. Basic Rent for the Primary Term is due and payable in 60 payments
of $297.39 each commencing on October 1, 1989 and continuing monthly in advance
thereafter, through and including September 1, 1994.
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. B-6
PAGE TWO
Interim Term Basic Rent is computed by multiplying the Total Equipment
Cost by the Per Diem Lease Rate set forth below and multiplying the product by
the number of days in the Interim Term. Primary Term Basic Rent is computed by
multiplying the Total Equipment Cost by the Periodic Lease Rate set forth below.
Per Diem Lease Rate: .000603
Periodic Lease Rate: .018077
4. SPECIAL MAINTENANCE AND RETURN CONDITIONS. In furtherance, and not in
limitation of, the use, maintenance and return conditions for the Equipment set
forth in Sections 4 and 9 of the Master Lease, Lessee hereby agrees to return
the Equipment to Lessor in accordance with all of the terms and conditions of
the Master Lease and in compliance with the following special return conditions:
1. When loaded to its rated capacity, each Unit shall:
(a) Start under its own power and idle without water or fuel
leaks.
(b) Move through its normal speed ranges in both forward and
reverse, in normal operating manner.
(c) Steer normally right and left in both forward and reverse.
(d) Be able to stop with its service brakes within a safe
distance, in both forward and reverse.
(e) Lift, lower, and tilt normally with and without a load a
minimum of three (3) times. Carriage, lift chains and channel
assembly shall be in working condition, normal wear and tear
excepted.
(f) Electric trucks, if purchased with batteries, must be returned
with batteries that are capable of sustaining a charge that
will permit use of the equipment for an eight (8) hour shift.
(g) All motors shall operate without arcing and/or sparking.
2. Each Unit's attachment(s), if any, shall perform all of its required
functions, and each Unit's horn, parking brake, and lights shall be
operational.
3. The Units shall, on average, have tires with at least fifty percent
(50%) remaining tread.
4. Each Unit shall be complete with all originally-installed parts and
pieces.
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. B-6
PAGE THREE
5. TAX INDEMNITY
Lessee acknowledges that this Rental Schedule and the Master Lease
Agreement has been entered into on the basis that Lessor shall be entitled for
federal and state income tax purposes (i) to claim the deductions for
depreciation on the total original cost of the Equipment pursuant to the
Accelerated Cost Recovery System under Section 168 of the Internal Revenue Code
of 1986, as amended ("Code") or for state income tax purposes, any other
depreciation deduction method that is permitted by certain state law; and (ii)
to claim under Section 163 of the Code a tax deduction for the full amount of
any interest paid by Lessor or accrued under Lessor's method of tax accounting
on any indebtedness secured by the Equipment (hereinafter referred to
collectively as the "Tax Benefits"). Lessee agrees to fully indemnify Lessor for
any loss, disallowance, unavailability or recapture of the Tax Benefits as a
result of any act, omission, misrepresentation or failure to act by Lessee, any
sublessee, or any other person authorized by the Lessee to use or maintain the
Equipment. If Lessor shall lose, shall not have the right to claim, or if there
shall be disallowed or recaptured, all or any portion of such Tax Benefits,
Lessee shall pay to Lessor as additional rent (a) an amount equal to the value,
determined at the highest marginal tax rate on a present value basis discounted
at the Lessor's then current cost of funds, of the Tax Benefits so disallowed or
made unavailable plus (b) all interest, penalties, or additions to tax resulting
from such loss, disallowance, unavailability or recapture of any of the
foregoing, plus (c) all taxes required to by paid by the Lessor, its successors,
assigns, or affiliates under any federal, state and local law upon receipt of
any of the indemnifications set forth in this Section.
6. ACCEPTANCE CERTIFICATE
Lessee hereby represents, warrants and certifies (a) that the Equipment
described herein has been delivered to and inspected and found satisfactory by
Lessee and is accepted for Lease by Lessee under this Rental Schedule and the
Master Lease as incorporated herein by reference, as of the Acceptance Date set
forth above; (b) all items of Equipment are new and unused as of the Acceptance
Date, except as otherwise specified above, and (c) the representations and
warranties of Lessee set forth in the Master Lease are true and correct as of
the date hereof.
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. B-6
PAGE FOUR
7. ENTIRE AGREEMENT. MODIFICATION AND WAIVERS. EXECUTION IN COUNTERPARTS.
This Rental Schedule and the Master Lease constitute the entire agreement
between Lessee and Lessor with respect to the leasing of the Equipment. To the
extent any of the terms and conditions set forth in this Rental Schedule
conflict with or are inconsistent with the Master Lease, this Rental Schedule
shall govern and control. No amendment, modification or waiver of this Rental
Schedule or the Master Lease will be effective unless evidenced by a writing
signed by the party to be charged. This Rental Schedule may be executed in
counterparts, all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF the parties hereto have caused this Rental Schedule and
Acceptance Certificate to be executed and delivered by their duly authorized
representatives as of the date first above written.
AMERICAN FINANCE GROUP PACKAGING CORPORATION OF AMERICA
successor in interest to Lessee
AMERICAN FINANCE GROUP, INC.
Lessor
By /s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
----------------------------- --------------------------------------
Title Vice President Title
--------------------------- -----------------------------------
<PAGE>
9/11/99 PACKAGING CORPORATION SCHEDULE A Page 6
<TABLE>
<CAPTION>
Acceptance
Date Vendor name Invoice number Unit cost Serial Number Zip Code State
- ---------- ----------- -------------- --------- ------------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
7/15/89 Caterpillar Indust 58923 16,451.40 BE907966 76011 TX
==========
SCHEDULE A TOTAL $16,451.40
<CAPTION>
Acceptance
Date Vendor name City Street Address Eqpt. Manufacturer Eqpt. Model Eqpt. Type
- ---------- ----------- ---- -------------- ------------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
7/15/89 Caterpillar Indust Arlington 1001 113th St Caterpillar 150D FORKLIFT
</TABLE>
<PAGE>
PACKAGING CORP. OF AMERICA
EXHIBIT 1 TO RENTAL SCHEDULES
B-1, B-2, B-3, B-4, B-5, B-6, B-7, & B-8
CASUALTY VALUES
(Stated as Percentage of Equipment Cost)
AFTER AFTER
PRIMARY PRIMARY
TERM CASUALTY TERM CASUALTY
PAYMENT NO. VALUE PAYMENT NO. VALUE
- ----------- ----------- ----------- --------------
Prior to 1 112.00
1 111.32 31 86.13
2 110.64 32 85.10
3 109.94 33 84.06
4 109.24 34 83.00
5 108.53 35 81.93
6 107.80 36 80.84
7 107.07 37 79.74
8 106.33 38 78.63
9 105.57 39 77.50
10 104.81 40 76.35
11 104.03 41 75.19
12 103.25 42 74.02
13 102.45 43 72.82
14 101.65 44 71.62
15 100.83 45 70.39
16 100.00 46 69.15
17 99.16 47 67.89
18 98.31 48 66.62
19 97.45 49 65.32
20 96.57 50 64.02
21 95.68 51 62.69
22 94.79 52 61.34
23 93.88 53 59.98
24 92.95 54 58.60
25 92.02 55 57.20
26 91.07 56 55.78
27 90.11 57 54.34
28 89.13 58 52.88
29 88.14 59 51.41
30 87.14 60 50.00
<PAGE>
RENEWAL RENTAL SCHEDULE NO. B-7RN2 (the "Renewal Rental Schedule")
DATED AS OF AUGUST 16, 1996
TO MASTER LEASE AGREEMENT NO. 8707ILG313 (the "Master Lease")
DATED AS OF JULY 1, 1987
LESSOR LESSEE
AMERICAN INCOME PARTNERS V-A PACKAGING CORPORATION OF AMERICA
LIMITED PARTNERSHIP 1603 ORRINGTON AVENUE
c/o EQUIS FINANCAL GROUP EVANSTON, IL 60204
98 NORTH WASHINGTON STREET
BOSTON, MA 02114
1. LEASE TERM. PAYMENT DATES.
This Renewal Rental Schedule, between American Income Partners V-A, as
Lessor, Lessor's interest therein having been previously sold and assigned by
American Finance Group and Lessee incorporates by reference the terms and
conditions of the Master Lease. Lessor hereby leases to Lessee and Lessee hereby
leases from Lessor those items of Equipment described on the attached Schedule
B, for the Renewal Lease Term and at the Renewal Term Basic Rent payable on the
Payment Dates hereinafter set forth on the attached Schedule A, on the terms and
conditions set forth in the Master Lease.
2. BASIC RENT.
Renewal Term Basic Rent is computed by multiplying the Total Equipment
Cost by the Renewal Lease Rate set forth on the attached Schedule A.
3. STIPULATED LOSS VALUE.
Notwithstanding the provision of the Master Lease, the Stipulated Loss
Value for the Equipment during the Renewal Lease Term shall be equal to fifty
percent (50%) of the original equipment cost for each item of Equipment.
4. ENTIRE AGREEMENT. MODIFICATION AND WAIVERS. EXECUTION IN COUNTERPARTS.
This Renewal Rental Schedule and the Master Lease constitute the entire
agreement between Lessee and Lessor with respect to the leasing of the
Equipment. Lessee hereby represents, warrants and certifies that the
representations and warranties of Lessee set forth in the Master Lease are true
and correct as of the date hereof. Capitalized terms not defined herein shall
have the meanings assigned to them in the Master Lease. To the extent any of the
terms and conditions set forth in this Renewal Rental Schedule conflict with or
are inconsistent with the Master Lease, this Renewal Rental Schedule shall
govern and control. No amendment, modification or waiver of this Renewal Rental
Schedule or the Master Lease will be effective unless
<PAGE>
RENEWAL RENTAL SCHEDULE NO. B-7RN2
PAGE TWO
evidenced by a writing signed by the party to be charged. This Renewal Rental
Schedule may be executed in counterparts, all of which together shall constitute
one and the same instrument.
The undersigned, being the duly authorized representative of the Lessee, hereby
certifies that the items of Equipment described on the attached Schedule B have
been duly delivered to the Lessee in good order and duly inspected and accepted
by the Lessee as conforming in all respects with the requirements and provisions
of the Master Lease, as of the Renewal Term Commencement Date stated on the
attached Schedule A.
Tenneco Packaging, formerly:
AMERICAN INCOME PARTNERS V-A PACKAGING CORPORATION OF AMERICA
LIMITED PARTNERSHIP Lessee
Lessor
By: AFG Leasing IV Incorporated
Title: General Partner
By: /s/ Gail Ofgant By: /s/ [ILLEGIBLE]
-------------------------------- --------------------------------
Title: Vice-President Title: Dir. of Purchasing
----------------------------- -----------------------------
COUNTERPART NO. 1 OF 2 SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS.
TO THE EXTENT IF ANY THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER
THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST MAY BE CREATED THROUGH
THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO.
1
<PAGE>
LLR40D-O1 EQUIS FINANCIAL GROUP 8/14/96 9:30:35 PAGE 1
Schedule A -- Rental Schedule Economics
LESSEE: PACKAGING CORPORATION OF AMERICA
LESSOR: AMERICAN FINANCE GROUP, INC.
RENTAL SCHEDULE: B-7RN2
LEASE TERM (months): 24
PRIMARY START DATE: 10/01/1996
LEASE EXPIRATION DATE: 10/31/1998
PAYMENT FREQUENCY: MONTHLY
ADVANCE/ARREARS: ADVANCE
LEASE RATE: .009014017
PER DIEM LEASE RATE: .000300467
PERIODIC RENT: $600.00
NUMBER OF PAYMENTS: 24
TOTAL INTERIM RENT: $.00
PAYMENT COMMENCEMENT DATE: 11/01/1996
TOTAL EQUIPMENT COST: $66,563.00
DOCUMENTATION FEE: _________________
/s/ [ILLEGIBLE] LESSEE INITIALS
- -----------------
/s/ GDO LESSOR INITIALS
- -----------------
<PAGE>
LLR41D-O1 EQUIS FINANCIAL GROUP 8/14/96 9:30:37 PAGE 1
Schedule B Equipment Description
LESSEE: PACKAGING CORPORATION OF AMERICA
LESSOR: AMERICAN FINANCE GROUP, INC.
<TABLE>
<CAPTION>
Acceptance
Equipment Cost Serial Number Year Manufacturer Model Type Date
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
30,382.00 E357-0803-7255 CLARK ECS25 FORKLIFT 11/01/1996
1,683.00 89E-2731 GNB GTC18-965T1 CHARGER 11/01/1996
3,460.00 PEP-3708 GNB 18-85C-23 BATTERIES 11/01/1996
3,460.00 PEP-3709 GNB 18-85C-23 BATTERIES 11/01/1996
3,460.00 PEP-3710 GNB 18-85C-23 BATTERIES 11/01/1996
24,118.00 C108V09303K HYSTER E50XL FORKLIFT 11/01/1996
- --------------
66,563.00 Total for Location 525 MT TOM RD NORTHAMPTON NA 01060
==============
66,563.00 Total Equipment Cost
</TABLE>
<PAGE>
[LETTERHEAD TENNECO PACKAGING]
August 5, 1996
Attn: Sandra Mirra
Equis Financial Group
98 North Washington Street
Boston, MA 02114
RE: Two Year Renewal Rental Schedule B-7RN1
Dear Sandra:
Tenneco Packaging Northampton would like the two year renewal rate for Rental
Schedule B-7RN1 which is $600.00 to be payable monthly in advance. We understand
that the renewal rate will be effective 120 days upon receipt of this letter.
This is based on the letter and fax that we received from you dated July 12,
1996.
Thank you for your prompt attention to this matter.
Sincerely,
/s/ Tom Dougherty
Tom Dougherty
Production Manager
<PAGE>
L2R13D EQUIS FINANCIAL GROUP 8/09/96 12:57:14 PAGE 1
ASSET ACTIVITY CHECKLIST REPORT
PREPARED BY SANDRA MIRRA
APPROVALS: /s/ [ILLEGIBLE]/
--------------- ----------------
TYPE OF TRANSACTION
|X| RENEWAL LEASE |_| CAUSALTY AT STIPULATED LOSS VALUE
|_| SALE TO ORIGINAL USER |_| EARLY TERMINATION
|_| SALE TO THIRD PARTY USER |_| WAREHOUSE OF ASSETS
|_| OTHER ____________________________
PRIMARY TERM DATE
ORIGINAL LEASEE PACKAGING CORPORATION OF AMERICA
STREET ADDRESS 1 1603 ORRINGTON AVE
STREET ADDRESS 2
CITY, STATE, ZIP EVANSTON IL 60204
CONTACT NAME GEORGE LUBNIEWSKI
PHONE NUMBER 847-492-6977 FAX NUMBER: 847-492-4452
MASTER LEASE NUMBER 8707ILG313
LEASE DATE 7/01/1987
RENTAL SCHEDULE B-7RN1
START DATE 11/01/1994
EXPIRATION DATE 10/31/1996
PAYMENT FREQUENCY M/ADV
LEASE RATE FACTOR .011748300
ASSUMED DEBT RATE 8.6500
TREASURY RATE 7.15
LENDER/LOAN NUMBER
EQUITY OWNER(S) 1051
100.000000000
1 |_| ORIGINAL TITLES 3 |_| STOP BILL FORM
2 |_| PRODUCE IRR REPORT 4 |_| COLLATERAL DOCS REQUESTED
I. WAREHOUSE DATE (SEE ATTACHED EQUIPMENT LIST)
WAREHOUSE COST $__________________
DATE WAREHOUSED ___________________ STOP BILL DATE __________________
<PAGE>
L2R13D AMERICAN FINANCE GROUP 8/09/96 12:57:14 PAGE 2
ASSET ACTIVITY CHECKLIST REPORT
II. EQUIPMENT SALE DATE (SEE ATTACHED EQUIPMENT AND PRICE LIST)
NEW LESSEE OR BUYER
STREET ADDRESS 1
STREET ADDRESS 2
CITY, STATE, ZIP
CONTACT NAME
PHONE NUMBER FAX NUMBER:
SALE TYPE BS LS OS RS
TAX EXEMPTION STATUS YES NO EXEMPTION NUMBER
TOTAL SALE PRICE $_________ BROKERAGE FEE $________
SALE DATE/STOP BILL DATE __________
1 |_| CREATE MEMO CODE
2 |_| AS/400 INPUT
3 |_| MISCELLANEOUS INVOICE
4 |_| PRODUCE DOCUMENTS/SEND TO BUYER
5 |_| RECEIPT OF PAYMENT
6 |_| CHANGE MEMO CODE
7 |_| DELIVERY INSTRUCTIONS
8 |_| REMOVE RS COUNTERPART IF ALL ASSETS SOLD
9 |_| PREP FOR SCANNING
10 |_| FINAL DOCUMENTS TO BUYER
III. RENWAL DATA (ATF MAY NEED TO BE CREATED)
NEW RENTAL SCHEDULE B-7RN2 TERM TWO YEARS
----------------- ----------------------
START DATE 11/1/96 EXPIRATION DATE 10/31/98
----------------- ----------------------
PAYMENT FREQUENT [M/ADV] Q/ADV S/ADV A/ADV M/ARR Q/ARR S/ARR A/ARR
STIPULATED LOSS VALUE $ LFR/RENT $.009014017/$600.--
---------------- ----------------------
SEND DOCUMENTS TO LESSEE END OF LEASE OPTIONS
-------------- ----------------
1 |X| AS/400 INPUT
2 |X| UPDATE EQUITY OWNER
3 |_| PRODUCE DOCUMENTS/ SEND TO LESSEE
4 |X| REQUEST UPDATED INSURANCE
5 |X| ACTIVATION REPORT
6 |_| PREP FOR SCANNING
7 |_| FINAL DOCUMENTS TO LESSEE
IV. NOTES, COMMENTS AND OTHER INFORMATION
----------------------------------------------------------
----------------------------------------------------------
<PAGE>
L2R41D EQUIS FINANCIAL GROUP 8/09/96 12:57:16 PAGE 1
ASSET ACTIVITY REPORT - EQUIPMENT DESCRIPTION
LESSEE: PACKAGING CORPORATION OF AMERICA
RENTAL SCHEDULE: B-7RN1
<TABLE>
<CAPTION>
Acceptance
Asset Equipment Cost Serial Number Year Manufacturer Model Type Date
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0019808 30,382.00 E357-0803-7255 CLARK BCS25 FORKLIFT 11/01/1996
0019809 1,683.00 89E-2731 GNB GTC18-965T1 CHARGER 11/01/1996
0019810 3,460.00 PEP-3108 GNB 18-85C-23 BATTERIES 11/01/1996
0019811 3,460.00 PEP-3709 GNB 18-85C-23 BATTERIES 11/01/1996
0019812 3,460.00 PEP-3710 GNB 18-85C-23 BATTERIES 11/01/1996
0019813 24,113.00 C108V09303K HYSTER E50XL FORKLIFT 11/01/1996
--------------
66,563.00 Total for Location 525 MT TOM RD NORTHAMPTON MA 01060
==============
66,563.00 Total Equipment Cost
</TABLE>
** END OF REPORT **
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,397,803
<SECURITIES> 196,328
<RECEIVABLES> 780,576
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,374,707
<PP&E> 681,290
<DEPRECIATION> (681,290)
<TOTAL-ASSETS> 4,374,707
<CURRENT-LIABILITIES> 390,930
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,983,777
<TOTAL-LIABILITY-AND-EQUITY> 4,374,707
<SALES> 0
<TOTAL-REVENUES> 1,924,875
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 354,434
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,570,441
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,570,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,570,441
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
