<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|XX| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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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 0-18365
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American Income Partners V-B Limited Partnership
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3061971
- -------------------------------------------- --------------------
(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:
1,547,930 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 XX 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-B 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
<PAGE>
PART I
Item 1. Business.
(a) General Development of Business
American Income Partners V-B Limited Partnership (the "Partnership") was
organized as a limited partnership under the Massachusetts Uniform Limited
Partnership Act (the "Uniform Act") on September 29, 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 December 27, 1989, the
Partnership issued 1,547,930 units, representing assignments of limited
partnership interests (the "Units"), to 2,402 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 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 Partnership 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 December
27, 1989. The initial purchase of equipment and the associated lease commitments
occurred on December 28, 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
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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 6 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 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
<PAGE>
Item 3. Legal Proceedings.
Incorporated herein by reference to Note 8 to the financial statements in
the 1999 Annual Report.
Item 4. Submission of Matters to a Vote of Security Holders.
5
<PAGE>
None.
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 2,220 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 8 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 $ 855,440 $ 42,772 $ 812,668
Total 1998 distributions 855,440 42,772 812,668
---------------- ---------------- ---------------
Total $ 1,710,880 $ 85,544 $ 1,625,336
================ ================ ===============
</TABLE>
Distributions payable were $213,860 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.
"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
6
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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
<PAGE>
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 lV 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> <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 ONC 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 6 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 1,547,930 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 94,570 Units 6.11%
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 $ 6,879 $ 64,755 $ 150,289
Administrative charges 95,666 59,736 56,929
Reimbursable operating expenses
due to third parties 373,853 799,508 484,845
--------------- --------------- ---------------
Total $ 476,398 $ 923,999 $ 692,063
=============== =============== ===============
</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 Restated Agreement, as amended, for persons employed by EFG who are
engaged in providing administrative services to the
12
<PAGE>
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.
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
either EFG or a lender. 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 $5,747 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 $2,326,015 consisting of common stock in Semele valued at
$590,091, a note receivable from Semele of $888,844 and cash of $847,080. For
further discussion, see Note 4, "Investment Securities - Affiliate / 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 94,570 6.11%
----------------------------------------------- -------------------- -----------------------
Old North Capital Limited Partnership 17,594 1.14%
----------------------------------------------- -------------------- -----------------------
</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
ONC 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 (PageMarch
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 $5,700,000 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 itselfPage and
the Registrant 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. was filed in
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995 as Exhibit 99 (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, 1996 as Exhibit 99 (e) and is
incorporated herein by reference.
15
<PAGE>
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, 1997 as Exhibit 99 (e) and is incorporated
herein by reference.
99(d) Lease agreement with American National Can Company 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 Conwell 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(f) Lease agreement with Ford Motor 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-B 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 $5,700,000
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
the Registrant.
99(d) Lease agreement with American National Can Company.
99(e) Lease agreement with Conwell Corporation.
99(f) Lease agreement with Ford Motor Company.
<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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
Exhibit 10.1
PROMISSORY NOTE
$5,700,000 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-B 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
FIVE MILLION SEVEN HUNDRED THOUSAND DOLLARS
($5,700,000), 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.
<PAGE>
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
<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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<PAGE>
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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<PAGE>
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-B Limited Partnership
Annual Report to the Partners, December 31, 1999
<PAGE>
AMERICAN INCOME PARTNERS V-B 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 14-27
ADDITIONAL FINANCIAL INFORMATION:
Schedule of Excess (Deficiency) of Total Cash
Generated to Cost of Equipment Disposed 28
Statement of Cash and Distributable Cash
From Operations, Sales and Refinancings 29
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 30
<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 $ 165,831 $ 1,323,344 $ 3,033,098 $ 2,823,191 $ 3,901,359
Net income $ 4,431,377 $ 580,743 $ 717,643 $ 710,319 $ 458,868
Per Unit:
Net income $ 2.72 $ 0.36 $ 0.44 $ 0.44 $ 0.28
Cash distributions $ 0.53 $ 0.53 $ 0.66 $ 2.42 $ 2.50
Financial Position
- -----------------------------
Total assets $ 9,506,374 $ 8,089,683 $ 5,715,354 $ 7,289,920 $ 11,486,422
Total long-term obligations $ -- $ -- $ 24,608 $ 707,842 $ 1,157,906
Partners' capital $ 8,994,283 $ 5,326,675 $ 5,385,006 $ 5,953,024 $ 9,177,708
</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-B
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 8 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 8 to the accompanying financial statements. Pursuant to the
Amended and Restated Agreement and Certificate of Limited Partnership (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 $165,831 compared to $1,323,344 and $3,033,098 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 interests
in two aircraft which provided a total of $24,700 and $970,600 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
$1,279,436 related to this vessel including $1,142,614 representing a prepayment
of the remaining contracted rent due under the vessel's lease agreement. Other
reductions in lease revenue from 1997 to 1998 resulted from lease term
expirations and the sale of equipment. In the future, lease revenue will
continue to decline due to lease term expirations and equipment sales.
The Partnership's equipment portfolio includes certain assets in which the
Partnership holds a proportionate ownership interest. In such cases, the
remaining interests are 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 report, 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 $523,770 compared
to $267,765 and $138,683 for the years ended December 31, 1998 and 1997,
respectively. Interest income is typically generated from temporary investment
of rental receipts and equipment sale proceeds in short-term instruments.
Interest income included $88,884 in both 1999 and 1998 and $17,530 in 1997,
earned on a note receivable from Semele Group, Inc. ("Semele") (see below and
Note 4 to the financial statements herein). 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 $4,260,478, compared to a net gain in 1998 of $775,111 on
equipment having a net book value of $873,626 and a net gain in 1997 of $138,167
on equipment having a net book value of $21,691. The net gain in 1999 includes
$4,080,000 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 also exchanged its interest in a vessel with an
original cost and net book value of $4,205,030 and $1,597,566, respectively. In
connection with this transaction, the Partnership realized proceeds of
$1,183,401, which resulted in a net loss for financial statement purposes of
$414,165. 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).
It cannot be determined whether future sales of equipment will result in a
net gain or a net loss to the Partnership, as such transactions will be
dependent upon the condition and type of equipment being sold and its
marketability at the time of sale. In addition, the amount of gain or loss
reported for financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.
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.
In June 1999, the Partnership acquired equipment for the purpose of re-sale
in the amount of $996,322. This equipment was sold in July 1999 for proceeds of
$999,615. These proceeds included interest income of $3,293 earned by the
Partnership for the period the equipment was held.
Depreciation expense was $42,304, $512,339, and $1,461,252 for the years
ended December 31, 1999, 1998 and 1997, respectively. For financial reporting
purposes, to the extent that an asset is held on primary lease term, the
Partnership depreciates 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 represent
estimates of equipment values at the date of primary lease expiration. To the
extent that an asset is held beyond its primary lease term, the Partnership
continues to depreciate the remaining net book value of the asset on a
straight-line basis over the asset's remaining economic life.
Interest expense was $24,825 or less than 1% of lease revenue in 1997. The
Partnership's notes payable were fully amortized by non-cancelable rents at
January 1, 1998.
4
<PAGE>
Management fees were approximately 4.1%, 4.9%, and 5.0% of lease revenue
during the years ended December 31, 1999, 1998 and 1997, respectively.
Management fees are based on 5% of gross lease revenue generated by operating
leases and 2% of gross lease revenue generated by full payout leases.
Write-down of investment securities-affiliate was $349,139 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 $469,519, $859,244, and $541,774 for the years
ended December 31, 1999, 1998 and 1997, respectively. Operating expenses in 1999
include approximately $68,000 related to the refurbishment of an aircraft engine
(see discussion below) and approximately $50,000 accrued for certain legal and
Consolidation expenses related to the Class Action Lawsuit described in Note 8
to the financial statements. During the year ended December 31, 1998, the
Partnership incurred or accrued approximately $319,000 for such expenses related
to the Class Action Lawsuit. In addition, the Partnership expensed $224,400 in
1998 related to the refurbishment of an aircraft engine and engine leasing costs
(see Note 8 to the financial statements). Significant operating expenses were
incurred during the year ending December 31, 1997 due to heavy maintenance 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 8 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 $5,700,000 in a debt instrument that matures in September 2002. (See
Notes 8 and 9 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, prior to 1999, cash inflows were used to satisfy debt service
obligations associated with leveraged leases. Operating activities generated net
cash inflows of $54,253, $1,187,218, and $2,430,133 in 1999, 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 also will 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 $4,260,478
compared to $1,648,737 and $159,858 in 1998 and 1997, respectively. Sale
proceeds in 1999 include $4,080,000 related to the Partnership's interests in
two Boeing 727-251 ADV jet aircraft. 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 $1,470,000 for its interest
in this aircraft. The Partnership's
5
<PAGE>
interest in the aircraft had a cost of $5,827,110 and was fully depreciated,
resulting in a net gain, for financial statement purposes, of $1,470,000.
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 8 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 $224,000. The Partnership
accrued $156,000 of these costs in 1998 and the balance was 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 $68,000, 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 $2,010,000, 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 $609,504, including interest of $9,504. In aggregate, the
Partnership received sales proceeds of $2,610,000 for its interest in the
Aircraft. The Partnership's interest in the Aircraft had a cost of $6,484,110
and was fully depreciated, resulting in a net gain, for financial statement
purposes, of $2,610,000.
At December 31, 1999, the Partnership was due aggregate future minimum
lease payments of $141,213 from contractual lease agreements (see Note 2 to the
financial statements). At the expiration of the individual 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 a vessel exchange in 1997, the Partnership became the
beneficial owner of 393,394 shares of Semele common stock (valued at $590,091
($1.50 per share) at the time of the exchange transaction). This investment was
reduced by a dividend of $78,679 received in 1997 representing a return of
equity to the Partnership. The Partnership also received a beneficial interest
in the Semele Note of $888,844 in connection with the exchange. The Semele Note
bears an annual interest rate of 10% and is scheduled to mature in April 2001.
6
<PAGE>
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 its Rancho
Malibu property (see Note 4 to the financial statements).
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 39,339 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 $132,773. In 1997, the Partnership recorded an unrealized loss
of $216,366 relate to its investment in the Semele common stock. Each of these
losses was reported as a component of comprehensive income, 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 $349,139 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 $63,926.
In April 1999, the Partnership purchased marketable securities in the
amount of $214,215. The Partnership increased the carrying value of its
investment in these securities based on the quoted price of the securities on
the New York Stock Exchange at December 31, 1999, resulting in an unrealized
gain for the year ended December 31, 1999 of $27,745. This gain and the
unrealized gain related to the Semele common stock were reported as a component
of comprehensive income included in partners' capital. In addition, the
Partnership acquired equipment for the purpose of resale in the amount of
$996,322. This equipment was sold in July 1999 (see Results of Operations).
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 payable
were fully amortized at January 1, 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 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 $855,440. In accordance with the Restated Agreement, as amended,
the Recognized Owners were allocated 95% of these distributions, or $812,668,
and the General Partner was allocated 5% or $42,772. 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 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 7 to the accompanying financial statements). For instance, selling
commissions and organization and offering costs pertaining to syndication of the
Partnership's limited partnership units are not deductible for federal income
tax
7
<PAGE>
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 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 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 8 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-B Limited Partnership:
We have audited the accompanying statements of financial position of
American Income Partners V-B 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-B
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-B LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 8,007,462 $ 4,762,386
Rents receivable 4,251 2,978
Accounts receivable - affiliate 10,747 2,103,987
Note receivable - affiliate 888,844 888,844
Investment securities - affiliate 226,199 162,273
Marketable securities 241,960 --
Equipment at cost, net of accumulated
depreciation of $330,707 and $13,395,899
at December 31, 1999 and 1998, respectively 126,911 169,215
------------------- -------------------
Total assets $ 9,506,374 $ 8,089,683
=================== ===================
LIABILITIES AND PARTNERS' CAPITAL
Accrued liabilities $ 285,939 $ 504,900
Accrued liabilities - affiliate 6,315 9,548
Deferred rental income -- 24,700
Other liabilities 5,977 2,010,000
Cash distributions payable to partners 213,860 213,860
------------------- -------------------
Total liabilities 512,091 2,763,008
------------------- -------------------
Partners' capital (deficit):
General Partner (1,266,821) (1,450,202)
Limited Partnership Interests
(1,547,930 Units; initial purchase price of $25 each) 10,261,104 6,776,877
------------------- -------------------
Total partners' capital 8,994,283 5,326,675
------------------- -------------------
Total liabilities and partners' capital $ 9,506,374 $ 8,089,683
=================== ===================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
10
<PAGE>
AMERICAN INCOME PARTNERS V-B 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 $ 165,831 $ 1,323,344 $ 3,033,098
Interest income 434,886 178,881 121,153
Interest income - affiliate 88,884 88,884 17,530
Gain on sale of equipment 4,260,478 775,111 138,167
Loss on exchange of equipment -- -- (414,165)
------------------ ------------------ ------------------
Total income 4,950,079 2,366,220 2,895,783
------------------ ------------------ ------------------
Expenses:
Depreciation 42,304 512,339 1,461,252
Interest expense -- -- 24,825
Equipment management fees - affiliate 6,879 64,755 150,289
Write-down of investment securities
- affiliate -- 349,139 --
Operating expenses - affiliate 469,519 859,244 541,774
------------------ ------------------ ------------------
Total expenses 518,702 1,785,477 2,178,140
------------------ ------------------ ------------------
Net income $ 4,431,377 $ 580,743 $ 717,643
================== ================== ==================
Net income per limited partnership unit $ 2.72 $ 0.36 $ 0.44
================== ================== ==================
Cash distributions declared
per limited partnership unit $ 0.53 $ 0.53 $ 0.66
================== ================== ==================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
11
<PAGE>
AMERICAN INCOME PARTNERS V-B 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 $(1,418,884) 1,547,930 $ 7,371,908 $ 5,953,024
Net income - 1997 35,882 -- 681,761 717,643
Unrealized loss on investment securities (10,818) -- (205,548) (216,366)
----------- --------- ------------ -----------
Comprehensive income 25,064 -- 476,213 501,277
----------- --------- ------------ -----------
Cash distributions declared (53,465) -- (1,015,830) (1,069,295)
----------- --------- ------------ -----------
Balance at December 31, 1997 (1,447,285) 1,547,930 6,832,291 5,385,006
Net income - 1998 29,037 -- 551,706 580,743
Unrealized loss on investment securities (6,639) -- (126,134) (132,773)
Less: Reclassification adjustment for write-
down of investment 17,457 -- 331,682 349,139
----------- --------- ------------ -----------
Comprehensive income 39,855 -- 757,254 797,109
----------- --------- ------------ -----------
Cash distributions declared (42,772) -- (812,668) (855,440)
----------- --------- ------------ -----------
Balance at December 31, 1998 (1,450,202) 1,547,930 6,776,877 5,326,675
Net income - 1999 221,569 -- 4,209,808 4,431,377
Unrealized gains on investment and
marketable securities 4,584 -- 87,087 91,671
----------- --------- ------------ -----------
Comprehensive income 226,153 -- 4,296,895 4,523,048
----------- --------- ------------ -----------
Cash distributions declared (42,772) -- (812,668) (855,440)
----------- --------- ------------ -----------
Balance at December 31, 1999 $(1,266,821) 1,547,930 $ 10,261,104 $ 8,994,283
=========== ========= ============ ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
12
<PAGE>
AMERICAN INCOME PARTNERS V-B 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 $ 4,431,377 $ 580,743 $ 717,643
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 42,304 512,339 1,461,252
Gain on sale of equipment (4,260,478) (775,111) (138,167)
Write-down of investment securities - affiliate -- 349,139 --
Loss on exchange of equipment -- -- 414,165
Decrease in allowance for doubtful accounts -- -- (10,000)
Non-cash proceeds on termination rents -- -- (295,533)
Changes in assets and liabilities:
Decrease (increase) in:
Rents receivable (1,273) 1,585 239,006
Accounts receivable - affiliate 2,093,240 (1,938,745) 293,796
Increase (decrease) in:
Accrued interest -- (209) (7,219)
Accrued liabilities (218,961) 495,700 (55,550)
Accrued liabilities - affiliate (3,233) (17,205) (199,544)
Deferred rental income (24,700) (31,018) 10,284
Other liabilities (2,004,023) 2,010,000 --
---------------- ---------------- ----------------
Net cash from operating activities 54,253 1,187,218 2,430,133
---------------- ---------------- ----------------
Cash flows from (used in) investing activities:
Dividend received -- -- 78,679
Purchase of marketable securities (214,215) -- --
Purchase of equipment held for re-sale (996,322) -- --
Proceeds from equipment held for re-sale 999,322 -- --
Proceeds from equipment sales 4,260,478 1,648,737 159,858
---------------- ---------------- ----------------
Net cash from investing activities 4,046,263 1,648,737 238,537
---------------- ---------------- ----------------
Cash flows used in financing activities:
Principal payments - notes payable -- (24,608) (683,234)
Distributions paid (855,440) (855,440) (1,140,580)
---------------- ---------------- ----------------
Net cash used in financing activities (855,440) (880,048) (1,823,814)
---------------- ---------------- ----------------
Net increase in cash and cash equivalents 3,245,076 1,955,907 844,856
Cash and cash equivalents at beginning of year 4,762,386 2,806,479 1,961,623
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 8,007,462 $ 4,762,386 $ 2,806,479
================ ================ ================
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ -- $ 209 $ 32,044
================ ================ ================
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
See Notes 4 and 5 to the financial statements.
The accompanying notes are an integral part of
these financial statements.
13
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
December 31, 1999
NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS
American Income Partners V-B Limited Partnership (the "Partnership") was
organized as a limited partnership under the Massachusetts Uniform Limited
Partnership Act (the "Uniform Act") on September 29, 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 December 27, 1989, the
Partnership issued 1,547,930 units, representing assignments of limited
partnership interests (the "Units"), to 2,402 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 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 December 28, 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 6).
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-B 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 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 $7,892,379 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 8 regarding the Class Action Lawsuit. Future minimum
rents of $141,213 are due as follows:
For the year ending December 31, 2000 $ 47,071
2001 47,071
2002 47,071
-------------
Total $ 141,213
=============
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1999, 1998, and 1997 are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
Conwell Corporation $ 47,071 $ -- $ --
Ford Motor Company $ 32,208 $ -- $ --
Sunworld International Airlines, Inc. $ 24,700 $ 468,000 $ 468,000
American National Can Company $ 20,435 $ -- $ --
Transmeridian Airlines $ -- $ 502,600 $ 385,400
Gearbulk Shipowning Ltd. $ -- $ -- $ 1,279,436
</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-B 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 is intended to allocate the cost of
equipment over the period during which it produces economic benefit. The
principal period of economic benefit is considered to correspond 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 is
held on primary lease term, the Partnership depreciates 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 represent estimates of equipment values at the date of primary
lease expiration. To the extent that an asset is held beyond its primary lease
term, the Partnership continues to depreciate the remaining net book value of
the asset on a straight-line basis over the asset's remaining economic life.
Periodically, the General Partner evaluates the net carrying value of equipment
to determine whether it exceeds estimated net realizable value. Adjustments to
reduce the net carrying value of equipment are recorded in those instances where
estimated net realizable value is considered to be less than net carrying value.
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 and Marketable Securities
The Partnership's investments in Semele Group, Inc. and marketable
securities are considered to be available-for-sale and as such are 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 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 $4,523,048.
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 6).
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.
16
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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 8). The Partnership's estimated exposure for costs anticipated
to be incurred in pursuing the settlement proposal is approximately $369,000
consisting principally of 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
$319,000 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
$50,000 for such costs during 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 7 concerning
allocation of income or loss for income tax purposes.
Net Income and Cash Distributions Per Unit
Net income and cash distributions per Unit are based on 1,547,930 units
outstanding during the years ended December 31, 1999, 1998 and 1997 and computed
after allocation of the General Partner's 5% share of net income 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.
A Remaining Lease Term equal to zero reflects equipment either held for sale or
re-lease 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>
Trailers/intermodal containers 36 $ 299,643 OK
Materials handling equipment 0 127,655 CA/DE/LA/MI/NC/OK/TX
Retail store fixtures 0 30,320 NC/VA
-----------------
Total equipment cost 457,618
Accumulated depreciation (330,707)
-----------------
Equipment, net of accumulated depreciation $ 126,911
=================
</TABLE>
17
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
In certain cases, the cost of the Partnership's equipment represents a
proportionate ownership interest. The remaining interests are owned by EFG or an
affiliated equipment leasing program sponsored by EFG. The Partnership and each
affiliate individually report, in proportion to their respective ownership
interests, their respective shares of assets, liabilities, revenues, and
expenses associated with the equipment. 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. At December 31, 1999, the
Partnership's equipment portfolio included equipment having a proportionate
original cost of $299,650, representing approximately 65% of total equipment
cost.
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.
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 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 a separate 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 8
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 $224,000. The Partnership accrued $156,000
of these costs in 1998 and the balance was 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 $68,000, 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 $2,010,000, 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
18
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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 $609,504, including interest of $9,504.
In aggregate, the Partnership received sales proceeds of $2,610,000 for its
interest in the Aircraft. The Partnership's interest in the Aircraft had a cost
of $6,484,110 and was fully depreciated, resulting in a net gain, for financial
statement purposes, of $2,610,000.
NOTE 4 - INVESTMENT SECURITIES - AFFILIATE / 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 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 53.54% beneficial
ownership interest in Larkfield, one of the three Vessels, the Partnership
received $847,080 in cash, became the beneficial owner of 393,394 shares of
Semele common stock (valued at $590,091 ($1.50 per share) at the time of the
exchange transaction) and received a beneficial interest in the Semele Note of
$888,844. 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
$88,884 in both 1999 and 1998 and $17,530 in 1997 related to the Semele Note.
The Partnership's interest in the vessel had an original cost and net book value
of $4,205,030 and $1,597,566, respectively. The proceeds realized by the
Partnership of $1,183,401 resulted in a net loss, for financial statement
purposes, of $414,165. 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
$1,142,614.
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
19
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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 $78,679 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 39,339 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 resulting in an
unrealized loss in 1998 of $132,773. In 1997, the Partnership recorded an
unrealized loss of $216,366 relate to its investment in the Semele common stock.
Each of these losses was reported as a component of comprehensive income,
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 (the quoted price of the Semele stock on NASDAQ
a December 31, 1998) for a total realized loss of $349,139 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 $63,926. This gain was reported as a component of comprehensive
income included in partners' capital.
NOTE 5 - MARKETABLE SECURITIES
In April 1999, the Partnership purchased marketable securities in the
amount of $214,215. The Partnership increased the carrying value of its
investment in these securities based on the quoted price of the securities on
the New York Stock Exchange at December 31, 1999, resulting in an unrealized
gain for the year ended December 31, 1999 of $27,745. This gain was reported as
a component of comprehensive income included in partners' capital.
NOTE 6 - 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 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 $ 6,879 $ 64,755 $ 150,289
Administrative charges 95,666 59,736 56,929
Reimbursable operating expenses
due to third parties 373,853 799,508 484,845
------------------ ------------------ ------------------
Total $ 476,398 $ 923,999 $ 692,063
================== ================== ==================
</TABLE>
20
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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
revenues 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 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.
All equipment was acquired from EFG, one of its affiliates, including other
equipment leasing programs sponsored by EFG, 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 $5,747 by EFG for such funds and the interest thereon.
These funds were remitted to the Partnership in January 2000.
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 94,570 6.11%
------------------------------------------------ ---------------------- -----------------------
Old North Capital Limited Partnership 17,594 1.14%
------------------------------------------------ ---------------------- -----------------------
</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
ONC are owned by Semele. Gary D. Engle is Chairman and CEO of Semele.
NOTE 7 - 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 balance. At December 31, 1999, the General Partner had a
positive tax capital balance.
21
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
The following is a reconciliation between net income 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 $ 4,431,377 $ 580,743 $ 717,643
Financial statement depreciation in
excess of (less than) tax depreciation (300,195) (678,927) 71,967
Deferred rental income (24,700) (31,018) 10,284
Other (1,012,501) 1,418,759 (414,936)
------------------ ------------------ ------------------
Net income for federal income tax
reporting purposes $ 3,093,981 $ 1,289,557 $ 384,958
================== ================== ==================
</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:
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
Partners' capital $ 8,994,283 $ 5,326,675
Unrealized gains on marketable and investment securities (91,671) --
Add back selling commissions and organization
and offering costs 4,348,553 4,348,553
Financial statement distributions in excess of
tax distributions -- 10,693
Cumulative difference between federal income tax
and financial statement income (loss) 222,226 1,559,622
------------------ ------------------
Partners' capital for federal income tax reporting purposes $ 13,473,391 $ 11,245,543
================== ==================
</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 8 - LEGAL PROCEEDINGS
In January 1998, certain plaintiffs (the "Plaintiffs") filed a class and
derivative action, captioned Leonard Rosenblum, et al. v. Equis 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. Equis
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".
22
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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, 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
23
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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 $5,700,000. 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, 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 $369,000, of which approximately $319,000 was accrued and expensed
by the Partnership in 1998 and approximately $50,000 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.
24
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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
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 $224,000 in 1998 and $68,000
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
25
<PAGE>
AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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 Plaintiff's 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 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 Plaintiff's claims
ultimately will prevail and that the Partnership's financial position will not
be adversely affected by the outcome of this action.
NOTE 9 - SUBSEQUENT EVENT
On March 8, 2000, the Exchange Partnerships (see Note 8) 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 $5,700,000. 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-B 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 $ 12,719,680 $ 6,558,696 $ 2,422,146
Sale proceeds realized upon disposition
of equipment 4,260,478 1,648,737 159,858
------------------ ------------------ ------------------
Total cash generated from rents
and equipment sale proceeds 16,980,158 8,207,433 2,582,004
Original acquisition cost of equipment
Disposed 13,107,496 5,897,499 1,968,246
------------------ ------------------ ------------------
Excess of total cash generated to cost
of equipment disposed $ 3,872,662 $ 2,309,934 $ 613,758
================== ================== ==================
</TABLE>
27
<PAGE>
AMERICAN INCOME PARTNERS V-B 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 $ 170,899 $ 4,260,478 $ 4,431,377
Add:
Depreciation 42,304 -- 42,304
Management fees 6,879 -- 6,879
------------------ ------------------ ------------------
Cash from operations, sales and
refinancings 220,082 4,260,478 4,480,560
Less:
Management fees (6,879) -- (6,879)
------------------ ------------------ ------------------
Distributable cash from operations,
sales and refinancings 213,203 4,260,478 4,473,681
Other sources and uses of cash:
Cash at beginning of year 3,969,089 793,297 4,762,386
Net change in receivables and accruals (158,950) -- (158,950)
Purchase of marketable securities -- (214,215) (214,215)
Less:
Cash distributions paid -- (855,440) (855,440)
------------------ ------------------ ------------------
Cash at end of year $ 4,023,342 $ 3,984,120 $ 8,007,462
================== ================== ==================
</TABLE>
28
<PAGE>
AMERICAN INCOME PARTNERS V-B 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 $ 687,041
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-B Limited Partnership, of our report dated
March 10, 2000, included in the 1999 Annual Report to the Partners of American
Income Partners V-B Limited Partnership.
ERNST & YOUNG LLP
Boston, Massachusetts
March 10, 2000
17
<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> 8,007,462
<SECURITIES> 2,468,159
<RECEIVABLES> 903,842
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,379,463
<PP&E> 457,618
<DEPRECIATION> (330,707)
<TOTAL-ASSETS> 9,506,374
<CURRENT-LIABILITIES> 512,091
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,994,283
<TOTAL-LIABILITY-AND-EQUITY> 9,506,374
<SALES> 0
<TOTAL-REVENUES> 4,950,079
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 518,702
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,431,377
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,431,377
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,431,377
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99(d)
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT NO. 8712ILG331, dated as of December 10, 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 American National Can Company, a Delaware corporation
having a principal place of business and address for purposes of notice
hereunder at 8101 Higgins Road, Chicago, IL 60631, 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 arising out of matters occurring
prior to the return of the Equipment, except such cost, claims, losses, or
liabilities resulting from the misconduct or negligence of Lessor. 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 event of
nonperformance by Lessor under the Rental Schedule and this Master Lease
Agreement as incorporated therein by reference. LESSOR HEREBY
<PAGE>
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.
4. USE AND LOCATION OF EQUIPMENT. MAINTENANCE AND REPAIRS. NO LIENS. NO
ASSIGNMENT BY LESSEE. LESSEE'S RIGHT TO SUBLEASE.
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 may be removed from the
location specified on the Rental Schedule only upon written notice to Lessor
given within 30 days following such relocation, 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. 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 without prior written approval of Lessor,
which approval shall not be unreasonably withheld. 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 for a term not longer
than the related Lease Term, is not made to a tax-exempt entity or govermental
agency, is specifically made subject to the prior rights of Lessor and its
assignees 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 including, without limitation, Lessee's
obligations with respect to (a) the payment of Basic Rent and other sums due or
to become due, (b) use and maintenance of the Equipment and (c) provisions for
the return of the Equipment at the expiration of the Lease Term.
5. LOSS, DAMAGE OR DESTRUCTION OF EQUIPMENT.
Lessee will bear all risk of loss with respect to the Equipment during the
Lease Term and until the Equipment is returned to Lessor. 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
<PAGE>
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.
6. TAXES AND FEES.
Lessee agrees to prepare and file all required returns or reports and to
pay all sales, gross receipts, personal property 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 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 item of
Equipment is located in a taxing jurisdication that does not allow Lessee to
report and pay personal property taxes directly, Lessee will prepare an
appropriate tax return to be delivered, together with funds equal to the taxes
Lessee claims are due on such return, to Lessor not less than ten (10) days
prior to the date such taxes are due.
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 (i) 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 $500,000. All policies (A) are to be maintained
with insurers reasonably acceptable to Lessor; (B) are to name Lessor and its
assignees as loss payees jointly with Lessee 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. Lessee agrees to deliver
to Lessor such certificates of insurance as Lessor may, from time to time,
request. Lessor may hold any insurance proceeds paid separately and covering
only the Equipment suffering casualty 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. Lessee may self-insure in accordance
with respect to other practices common in Lessee's industry and followed by
Lessee with self-insurance similar items of equipment owned or leased by Lessee.
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 to Lessee's Lenders, quarterly unaudited
balance sheet and profit and loss statement, all prepared in accordance with
generally accepted accounting principles, consistently applied. If Lessee's
obligations are
<PAGE>
guaranteed by any other party, then Lessee will also provide similar financial
information with respect to the Guarantor. 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 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. 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 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 2% 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 bylaw, 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 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, exerciseable
with respect to all, but not less than all, items of Equipment leased pursuant
to Rental Schedules, (i) to return the Equipment to Lessor, (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 or (iii) to purchase the
Equipment for cash at its then fair market value. Lessee agrees to provide
Lessor written notice of its decision to return or purchase the Equipment or
renew the Rental Schedule not less than 90 days prior to the Expiration Date. If
Lessee falls to give Lessor 90 days written notice,, the Lease Term may, at
Lessor's option, be extended and continue until 90 days from the date Lessor
receives written notice of Lessee's decision to return or purchase the Equipment
or renew the Rental Schedule. Fair market value, fair rental value and useful
life will equal the amount obtainable in an arm's-length transaction between an
informed and willing buyer, under no compulsion to buy, and an informed and
willing seller, under no compulsion to sell, as determined by
<PAGE>
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, if appropriate, 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 within the Continental United States. All packaging will include, to the
extent available, related maintenance logs, operating manuals, and other related
materials and will be clearly marked so as to identify the contents thereof. The
Equipment will be returned in good operating condition and appearance,
reasonable wear and tear excepted, and, in the case of aircraft, computers or
telecommunications equipment, 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. Lessor may, but is not
required to, inspect the Equipment prior to its return. If, upon inspection,
Lessor determines that the condition of any item of Equipment does not conform
to the minimum requirements, Lessor will promptly notify Lessee of such
determination, specifying the repairs or refurbishments needed to place the
Equipment in the minimum acceptable condition. Lessor may, at its option, either
require Lessee to effect such repairs or itself effect such repairs. Lessor may
re-inspect the Equipment and require further repairs as often as necessary until
the Equipment is placed in acceptable condition. In either case, all costs of
repair and refurbishment will be paid by 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 accepted for return by
Lessee, provided that Lessor has given Lessee reasonable advance notification
with respect to the ship-to location.
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 qualifed 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;
<PAGE>
(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, to the best of the
Lessee's knowledge, 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 ten days;
(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 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
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 or, if Lessee's obligations are guaranteed by any other
party, any Guarantor (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 any Guarantor or for a substantial part of Lessee's or any
Guarantor's property; or
<PAGE>
(f) 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.
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, subject to
its obligation to mitigate damages in accordance with applicable
law:
(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 except warranty of good and marketable title; and
II. notwithstanding that 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 in a peacable and lawful manner 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 in a peacable and lawful manner 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
<PAGE>
(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.
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 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. AMERICAN NATIONAL CAN COMPANY
By: /s/ Timothy P. McDonald By: /s/ Alan H. [Illegible]
----------------------- ----------------------------
Title: Vice President.` Title: _________________________
--------------------
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-48
This RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE, dated as of June 27,
1990, between American Finance Group, a Massachusetts general partnership and
successor in interest to American Finance Group, Inc. ("Lessor") and American
National Can Company ("Lessee") incorporates by reference the terms and
conditions of Master Lease Agreement No. 8712ILG331 dated as of December 10,
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
Description
(Manufacturer,
Type, Model and Acceptance
Serial Number) Cost Location Date
- --------------- ---- -------- ----------
(1) Silent Hoist Lift $112,435.00 See Attached Schedule A
as more fully described
on the attached vendor
invoices and Schedule A
TOTAL EQUIPMENT COST: $112,435.00
-----------
EQUIPMENT BILLING LOCATION: AMERICAN NATIONAL CAN COMPANY
8770 WEST BRYN MAWR AVENUE
CHICAGO, IL 60631
ATTN: D.M. BYRD
2. LEASE TERM
The Lease Term is for an Interim Term commencing on the Acceptance Date of
the Equipment for lease, as set forth on the attached Schedule A, and continuing
through and including July 31, 1990 and for a Primary Term of 60 months,
commencing on August 1, 1990 and continuing through and including the Expiration
Date of July 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 20 payments
of $6,130.52 each commencing on November 1, 1990 and continuing quarterly in
arrears thereafter, through and including August 1, 1995.
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-48
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.
Periodic Lease Rate: .054525
Per Diem Lease Rate: .000606
4. 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.
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) all items of Equipment were originally placed in service by
Lessee not earlier than twelve months prior to 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.
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.
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-48
PAGE THREE
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 AMERICAN NATIONAL CAN COMPANY
successor in interest in to Lessee
AMERICAN FINANCE GROUP, INC.
Lessor
By /s/ [Illegible] By /s/ Dennis M Byrd
--------------------------- -----------------------------
Title Manager Title Manager - Finance
------------------------ -------------------------
COUNTERPART NO. 2 OF 4 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>
6/27/90 AMERICAN NATIONAL CAN COMPANY Page 1
SCHEDULE A
<TABLE>
<CAPTION>
Vendor Name Invoice Number Unit Cost Serial Number Eqpt. Manufacturer Eqpt. Model Eqpt. Type
- ------------------ -------------- ------------ ------------- ------------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Silent Hoist & Cra 90012 112,435.00 20795 Silent Hoist 3600 FKS13 FORKLIFT
==========
$112,435.00 = TOTAL EQUIPMENT COST
<CAPTION>
Vendor Name Street City State Zip Code Acceptance Date Rental Schedule
- ------------------ ---------------- ----------- ----- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Silent Hoist & Cra 2050 Williams St. San Leandro CA 94577 7/16/90 A-48
</TABLE>
<PAGE>
AMERICAN NATIONAL CAN COMPANY
EXHIBIT ONE TO RENTAL SCHEDULE A-48
CASUALTY VALUES
(Stated as Percentage of Equipment Cost)
AFTER
PRIMARY
TERM CASUALTY
PAYMENT NO. VALUE
- ----------- --------
Prior to 1 112.00
2 110.09
3 108.10
4 106.02
5 103.87
6 101.62
7 99.29
8 96.86
9 94.34
10 91.71
11 88.98
12 86.14
13 83.19
14 80.12
15 76.92
16 73.60
17 70.15
18 66.55
19 62.82
20 58.93
55.00
<PAGE>
Exhibit 99(e)
MASTER LEASE AGREEMENT
This MASTER LEASE AGREEMENT, dated as of the 21st day of November, 1995
("Lease Agreement"), is made at Boston, Massachusetts by and between FFE LEASING
TRUST NO. 95-01 ("Lessor"), a Massachusetts trust with its principal place of
business at 98 N. Washington St. Boston, MA 02114, and Conwell Corporation
("Lessee"), a Delaware corporation with its principal place of business at 1145
Empire Central, Dallas, Texas 75265.
IN CONSIDERATION OF the mutual promises and covenants contained herein,
Lessor and Lessee hereby agree as follows:
1. Property Leased. At the request of Lessee and subject to the terms and
conditions of this Lease Agreement, Lessor shall lease to Lessee and Lessee
shall lease from Lessor such personal property ("Equipment") as may be mutually
agreed upon by Lessor and Lessee. The Equipment shall be selected by or ordered
at the request of Lessee, identified in one or more equipment schedules
substantially in the form of Exhibit A attached hereto ("Equipment Schedule")
and accepted by Lessee in one or more certificates of acceptance ("Certificate
of Acceptance") in the form of Exhibit B attached hereto. Each Equipment
Schedule executed by Lessor and Lessee and each Certificate of Acceptance
executed by Lessee shall constitute a part of this Lease Agreement.
2. Certain Definitions.
2.1 The "Acquisition Cost" shall mean the total cost of the Equipment paid
by Lessor as set forth in the applicable Equipment Schedule.
2.2 The "Commencement Date" shall mean the later of the following dates:
(i) the date on which the Equipment identified in the applicable Equipment
Schedule is accepted and placed in service by Lessee under this Lease Agreement
or (ii) the date the Lessor pays the Acquisition Cost to the Vendor(s) of the
Equipment, provided, however, that Lessee shall bear the risk of loss of the
Equipment and shall indemnify and hold Lessor harmless in the manner as set
forth in Section 9 below prior to the Commencement Date. Each Commencement Date
shall be evidenced by the Certificate of Acceptances applicable to such
Equipment Schedule.
2.3 The "Rent Start Date" shall mean the Commencement Date.
2.4 The "Monthly Rent" shall mean the amount set forth in the applicable
Equipment Schedule as Monthly Rent for the Equipment identified on such
Equipment Schedule.
2.5 The "Daily Rent" shall mean one-thirtieth (1/30) of the Monthly Rent.
2.6 The words "herein," "hereof," and "hereunder" shall refer to this
Lease Agreement as a whole and not to any particular section. All other
capitalized terms defined in this Lease Agreement shall have the meanings
assigned thereto.
<PAGE>
3. Initial Term of Lesse; Payment of Rent.
3.1 The term of lease for the Equipment ("Initial Term") shall begin on
the Commencement Date set forth in the applicable Certificate of Acceptance and
shall continue during and until the expiration of the number of full calendar
months set forth in the applicable Equipment Schedule, measured from the Rent
Start Date, subject, however, to the provisions of Section 12.1 below. The
Initial Term may not be canceled or terminated except as set forth in Section
10.2 below.
3.2 At the expiration of the Initial Term, Lessor and Lessee may extend
the lease of the Equipment for any period not less than one year as they may
agree upon in writing ("Extended Term") at the then fair market rental value of
the Equipment, as determined in good faith by Lessor.
3.3 Aggregate Daily Rent shall be due and payable by Lessee on the Rent
Start Date in an amount equal to the Daily Rent multiplied by the actual number
of days elapsed from, and including, the Commencement Date to, but excluding,
the Rent Start Date. The Monthly Rent shall be due and payable on the Rent Start
Date and, thereafter on the first day of each month of the Initial Term or any
Extended Term. All Daily Rents and Monthly Rents shall be paid to Lessor at its
office in P.O. Box 360178 Pittsburgh, PA 15251-6178.
4. Acceptance of Equipment; Exclusion of Warranties.
4.1 Lessee shall signify its acceptance of the Equipment identified in the
applicable Equipment Schedule by promptly executing and delivering to Lessor a
Certificate of Acceptance. Lessee acknowledges that its execution and delivery
of the Certificate of Acceptance shall conclusively establish, as between Lessor
and Lessee, that the Equipment has been inspected by Lessee, is in good repair
and working order, is of the design, manufacture and capacity selected by
Lessee, and is accepted by Lessee under this Lease Agreement.
4.2 In the event the Equipment is ordered by Lessor from a manufacturer or
supplier at the request of Lessee, Lessor shall not be required to pay the
Acquisition Cost for such Equipment unless and until the applicable Certificate
of Acceptance has been received by Lessor. Lessee hereby agrees to indemnify,
defend and hold Lessor harmless from any liability to any manufacturer or
supplier arising from the failure of Lessee to lease any Equipment which is
ordered by Lessor at the request of Lessee or for which Lessor has assumed
Lessee's obligation to purchase.
4.3 Lessor leases the Equipment to Lessee and Lessee leases the Equipment
from Lessor "AS IS" and "WITH ALL FAULTS." Lessee hereby acknowledges that (i)
Lessor is not a manufacturer, supplier or dealer of such Equipment nor an agent
thereof; and (ii) LESSOR HAS NOT MADE, DOES NOT MAKE, AND HEREBY DISCLAIMS ANY
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE
EQUIPMENT INCLUDING, BUT NOT LIMITED TO, ITS DESIGN, CAPACITY, CONDITION,
MERCHANTABILITY, OR FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE. Lessee
further acknowledges that Lessor is not responsible for any repairs,
maintenance, service, latent or other defects in the Equipment or in the
operation thereof, or for compliance of
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any Equipment with requirements of any laws, ordinances, governmental rules or
regulations including, but not limited to, laws with respect to environmental
matters, patent, trademark, copyright or trade secret infringement, or for any
direct or consequential damages arising out of the use of or inability to use
the Equipment.
4.4 Provided no Event of Default, as defined in Section 15 below, has
occurred and is continuing, Lessor agrees to cooperate with Lessee, at the sole
cost and expense of Lessee, in making any claim against a manufacturer or
supplier of the Equipment arising from a defect in such Equipment. At the
request of Lessee, Lessor shall assign to Lessee all warranties on the Equipment
available from any manufacturer or supplier to the full extent permitted by the
terms of such warranties and by applicable law.
5. Ownership; Inspection; Maintenance and Use.
5.1 The Equipment shall at all times be the sole and exclusive property of
Lessor. Any Equipment subject to titling and registration laws shall be titled
and registered by Lessee on behalf of and in the name of Lessor at the sole cost
and expense of Lessee. Lessee shall cooperate with and provide Lessor with any
information or documents necessary for titling and registration of the
Equipment. Upon the request of Lessor, Lessee shall execute any documents or
instruments which may be necessary or appropriate to confirm, to record or to
give notice of the ownership of the Equipment by Lessor including, but not
limited to, financing statements under the Uniform Commercial Code. Lessee, at
the request of Lessor, shall affix to the Equipment, in a conspicuous place, any
label, plaque or other insignia supplied by Lessor designating the ownership of
the Equipment by Lessor.
5.2 The Equipment shall be located at the address specified in the
applicable Equipment Schedule and shall not be removed therefrom without the
prior written consent of Lessor. Lessor, its agents or employees shall have the
right to enter the premises of Lessee, upon reasonable notice and during normal
business hours, for the purpose of inspecting the Equipment.
5.3 Lessee shall pay all costs, expenses, fees and charges whatsoever
incurred in connection with the use and operation of the Equipment. Lessee
shall, at all times and at its own expense, keep the Equipment in good repair
and working order, reasonable wear and tear excepted. Any maintenance contract
required by a manufacturer or supplier for the care and upkeep of the Equipment
shall be entered into by Lessee at its sole cost and expense. Lessee shall
permit the use and operation of the Equipment only by personnel authorized by
Lessee and shall comply with all laws, ordinances or governmental rules and
regulations relating to the use and operation of the Equipment.
6. Alterations and Modifications. Lessee may make, or cause to be made on
its behalf, any improvement, modification or addition to the Equipment with the
prior written consent of Lessor, provided, however, that such improvement,
modification or addition is readily removable without causing damage to or
impairment of the functional effectiveness of the Equipment. To the extent that
such improvement, modification or addition is not so removable, it shall
immediately become the property of Lessor and thereupon shall be considered
Equipment for all purposes of this Lease Agreement.
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7. Quiet Enjoyment; No Defense, Set-Off or Counterclaims.
7.1 Provided no Event of Default, as defined in Section 15 below, has
occurred and is continuing, Lessee shall have the quiet enjoyment and use of the
Equipment in the ordinary course of its business during the Initial Term or any
Extended Term without interruption by Lessor or any person or entity claiming
through or under Lessor.
7.2 Lessee acknowledges and agrees that ANY DAMAGE TO OR LOSS,
DESTRUCTION, OR UNFITNESS OF, OR DEFECT IN THE EQUIPMENT, OR THE INABILITY OF
LESSEE TO USE THE EQUIPMENT FOR ANY REASON WHATSOEVER, SHALL NOT (i) GIVE RISE
TO ANY DEFENSE, COUNTERCLAIM, OR RIGHT OF SET-OFF AGAINST LESSOR, OR (ii) PERMIT
ANY ABATEMENT OR RECOUPMENT OF, OR REDUCTION IN DAILY OR MONTHLY RENT, OR (iii)
RELIEVE LESSEE OF THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS LEASE AGREEMENT
INCLUDING, BUT NOT LIMITED TO, ITS OBLIGATION TO PAY THE FULL AMOUNT OF DAILY
RENT AND MONTHLY RENT, WHICH OBLIGATIONS ARE ABSOLUTE AND UNCONDITIONAL, unless
and until this Lease Agreement is terminated with respect to such Equipment in
accordance with the provisions of Section 10.2 below. Any claim that Lessee may
have which arises from a defect in or deficiency of the Equipment shall be
brought solely against the manufacturer or supplier of the Equipment and Lessee
shall, notwithstanding any such claim, continue to pay Lessor all amounts due
and to become due under this Lease Agreement.
8. Adverse Claims and Interests.
8.1 Except for any liens, claims, mortgages, pledges, encumbrances or
security interests created by Lessor, Lessee shall keep the Equipment, at all
times, free and clear from all liens, claims, mortgages, pledges, encumbrances
and security interests and from all levies, seizures and attachments. Without
limitation of the covenants and obligations of Lessee set forth in the preceding
sentence, Lessee shall immediately notify Lessor in writing of the imposition of
any prohibited lien, claim, levy or attachment on or seizure of the Equipment at
which time Lessee shall provide Lessor with all relevant information in
connection therewith.
8.2 Lessee agrees that the Equipment shall be and at all times shall
remain personal property. Accordingly, Lessee shall take such steps as may be
necessary to prevent any person from acquiring, having or retaining any rights
in or to the Equipment by reason of its being affixed or attached to real
property.
9. Indemnities; Payment of Taxes.
9.1 Lessee hereby agrees to indemnify, defend and hold harmless Lessor,
its agents, employees, successors and assigns from and against any and all
claims, actions, suits, proceedings, costs, expenses, damages and liabilities
whatsoever arising out of or in connection with the manufacture, ordering,
selection, specifications, availability, delivery, titling, registration,
rejection, installation, possession, maintenance, ownership, use, leasing,
operation or return of the Equipment including, but not limited to, any claim or
demand based upon any STRICT OR ABSOLUTE LIABILITY IN TORT and upon any
infringement or alleged
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<PAGE>
infringement of any patent, trademark, trade secret, license, copyright or
otherwise. All costs and expenses incurred by Lessor in connection with any of
the foregoing including, but not limited to, reasonable legal fees, shall be
paid by Lessee on demand.
9.2 Lessee hereby agrees to indemnify, defend and hold Lessor harmless
against all Federal, state and local taxes, assessments, licenses, withholdings,
levies, imposts, duties, assessments, excise taxes, registration fees and other
governmental fees and charges whatsoever, which are imposed, assessed or levied
on or with respect to the Equipment or its use or related in any way to this
Lease Agreement ("Tax Assessments"), except for taxes on or measured by the net
income of Lessor determined substantially in the same manner as under the
Internal Revenue Code of 1986, as amended. Lessee shall file all returns,
reports or other such documents required in connection with the Tax Assessments
and shall provide Lessor with copies thereof. If, under local law or custom,
Lessee is not authorized to make the filings required by a taxing authority,
Lessee shall notify Lessor in writing and Lessor shall thereupon file such
returns, reports or documents. Without limiting any of the foregoing, Lessee
shall indemnify, defend and hold Lessor harmless from all penalties, fines,
interest payments, claims and expenses including, but not limited to, reasonable
legal fees, arising from any failure of Lessee to comply with the requirements
of this Section 9.2.
9.3 The obligations and indemnities of Lessee under this Section 9 for
events occurring or arising during the Initial Term or any Extended Term shall
continue in full force and effect, notwithstanding the expiration or other
termination of this Lease Agreement.
10. Risk of Loss; Loss of Equipment.
10.1 Lessee hereby assumes and shall bear the entire risk of loss for
theft, damage, seizure, condemnation, destruction or other injury whatsoever to
the Equipment from any and every cause whatsoever. Such risk of loss shall be
deemed to have been assumed by Lessee from and after such risk passes from the
manufacturer or supplier by agreement or pursuant to applicable law.
10.2 In the event of any loss, seizure, condemnation or destruction of the
Equipment or damage to the Equipment which cannot be repaired by Lessee, Lessee
shall immediately notify Lessor in writing. Within thirty (30) days of such
notice, during which time Lessee shall continue to pay Monthly Rent, Lessee
shall, at the option of Lessor, either (i) replace the Equipment with equipment
of the same type and manufacture and in good repair, condition and working
order, and transfer title to such equipment to Lessor free and clear of all
liens, claims and encumbrances, whereupon such equipment shall be deemed
Equipment for all purposes of this Lease Agreement, or (ii) terminate this Lease
Agreement with respect to such Equipment by paying to Lessor the stipulated loss
value ("Stipulated Loss Value") as defined in Exhibit A, which is attached to
each Equipment Schedule, for the date, appearing on such Exhibit, which next
follows the date on which the Equipment is lost, seized, condemned, destroyed or
damaged ("Stipulated Loss Payment Date"). Upon payment of the Stipulated Loss
Value and any Monthly Rent or other sums due and owing by Lessee to Lessor, the
Lease Agreement shall terminate with respect to such Equipment and all right,
title and interest of Lessor in and to the Equipment shall vest in Lessee. Any
insurance proceeds or awards relating to the loss, seizure, condemnation or
destruction of or damage to the Equipment,
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<PAGE>
which are paid directly to Lessor, shall either be credited or paid over by
Lessor to Lessee up to the amount of any Stipulated Loss Value, either payable
or paid by Lessee. Any insurance or condemnation proceeds received by Lessor
shall be credited to the obligation of Lessee under this Section 10.2 and the
remainder of such proceeds, if any, shall be paid to Lessee by Lessor in full
compensation for the loss of the leasehold interest in the Equipment by Lessee.
10.3 Upon any replacement of or payment for the Equipment as provided in
Section 10.2 above, this Lease Agreement shall terminate only with respect to
the Equipment so replaced or paid for, and Lessor shall transfer to Lessee title
only to such Equipment "AS IS," "WITH ALL FAULTS," and WITH NO WARRANTIES
WHATSOEVER, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY PARTICULAR PURPOSE.
Lessee shall pay any sales or use taxes due on such transfer.
11. Insurance.
11.1 Lessee shall keep the Equipment insured against all risks of loss or
damage from every cause whatsoever occurring during the Initial Term, or any
Extended Term for an amount not less than the higher of the full replacement
value of the Equipment or the aggregate of unpaid Daily Rent and Monthly Rent
for the balance of the Initial Term, or the Extended Term. Lessee shall also
carry public liability insurance, both personal injury and property damage,
covering the Equipment, and Lessee shall be liable for any deductible portions
of all required insurance.
11.2 All insurance required under this Section 11 shall name Lessor as
additional insured and loss payee. Such insurance shall also be with such
insurers and shall be in such forms and amounts as are satisfactory to Lessor.
All applicable policies shall provide that no act, omission or breach of
warranty by Lessee shall give rise to any defense against payment of the
insurance proceeds to Lessor. Lessee shall pay the premiums for such insurance
and, at the request of Lessor, deliver to Lessor evidence satisfactory to Lessor
of such insurance coverage. In any event, Lessee shall provide Lessor with
endorsements upon the policies issued by the insurers which evidence the
existence of insurance coverage required by this Section 11 and by which the
insurers agree to give Lessor written notice at least twenty (20) days prior to
the effective date of any expiration, modification, reduction, termination or
cancellation of any such policies.
11.3 The proceeds of insurance required under this Section 11 and payable
as a result of loss or damage to the Equipment shall be applied as set forth in
Section 10.2 above. Upon the occurrence of an Event of Default as defined in
Section 15 below, Lessee hereby irrevocably appoints Lessor as its
attorney-in-fact, which power shall be deemed coupled with an interest, to make
claim for, receive payment of, execute and endorse all documents, checks or
drafts received in payment for loss or damage under any insurance policies
required by this Section 11.
11.4 Notwithstanding anything herein, Lessor shall not be under any duty
to examine any evidence of insurance furnished hereunder, or to ascertain the
existence of any
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policy or coverage, or to advise Lessee of any failure to comply with the
provisions of this Section 11.
12. Surrender to Lessor.
12.1 Immediately upon the expiration of the Initial Term or any Extended
Term, Lessee shall surrender the Equipment to Lessor; provided, however that
Lessee has given 90 days prior written notice of its intent to surrender the
Equipment. The term of lease shall be automatically extended for successive
monthly periods ("Extended Term") until terminated by Lessee in accordance with
such notice. No notice of termination by Lessee shall be effective earlier than
the last day of the Initial Term, any Extended Term under Section 3.2 above, or
any Extended Term under this Section 12.1, nor shall any such notice be required
in the event of a termination of this Lease Agreement by Lessor upon the
occurrence of an Event of Default. All Equipment surrendered to Lessor shall be
in good repair and working order, reasonable wear and tear excepted, by
delivering the Equipment to any location as may be designated by Lessor within
100 miles of a major terminal operated by Lessee in any of the following cities:
Dallas, Texas; Chicago, Illinois; New York, New York; Atlanta, Georgia; Los
Angeles, California; or Denver, Colorado. All costs of removal and delivery of
such Equipment to the place designated by Lessor shall be borne by Lessee.
12.2 Without limiting the obligations of Lessee under either Section 5.3
and 12.1, Lessee shall, at its expense, do the following,
12.2.1 Lessee shall ensure that all Equipment and Equipment
operations conform to all applicable local, state, and federal laws, health and
safety guidelines. Upon return, the Equipment will be complete and operational
with all components as originally supplied and will have passed U.S. Department
of Transportation ("DOT') or appropriate regulatory agency requirements for
operation. If applicable, an inspection sticker or certificate will be furnished
to Lessor verifying compliance with any regulatory requirements. Lessee shall
satisfy all legal and regulatory conditions necessary for Lessor to sell or
lease the Equipment to a third party. Lessee will keep all licenses and
operating certificate required for operation of the Equipment current during the
Initial Term or any Extended Term of this Lease Agreement. Lessee will at all
times use the Equipment in compliance with all applicable laws and regulations
of any governmental, local and regulatory agency.
12.2.2 Lessee shall provide safe, secure storage for the Equipment
for sixty (60) days after expiration or earlier termination of the Lease
Agreement (by acceleration or otherwise) at not more than eight (8) locations
selected by Lessor.
12.2.3 Lessee shall take such action as may be required so that,
upon return, each unit of Equipment shall meet all of its manufacturer's
specifications for performance under full rated loads and all of the following
conditions:
(i) Tires: All tires shall be of the same type (original size) and
manufacturer (i.e. matched) and have a minimum of fifty percent
(50%) remaining tread on original or recapped casings without flat
or bald spots, dry rot, exposed cord or cuts in sidewall,
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(ii) General Condition: Upon return, there shall be no structural or
mechanical damage. The Equipment must be air, wind and water tight
Floors, interior linings, scuffboards, exterior panels, roofs, and
doors are to be secure and free of holes, rips, tears, or any other
material damage. Doors, including hinges, hardware and seals, will
be complete and operate as originally intended by the manufacturer.
Interior linings and floors will be repaired in a manner that
maintains the original geometric profile of the structure and
resulting air flow pattern. All rust or corrosion must be treated in
a manner consistent with standard industry practices. The equipment
must be able to pass a FHWA inspection. All patches shall be
permanent and sealed properly. (Tape patches shall not be deemed
acceptable. Existing self sealing pop rivets are acceptable, except
that drive rivet patches shall not be acceptable.) All Equipment
must have a good overall appearance and no material damage. The
Equipment shall be structurally sound, in good appearance, clean,
free of rust and corrosion with no missing or damaged parts. There
may not be any broken or cracked exterior surfaces, inside linings,
seals, doors, latches, or floors. Upon return, all commercial logos,
advertising, graffiti, insignia and lettering shall be removed in a
workmanlike manner so as not to damage the Equipment. The surfaces
shall be repainted in such a way that the area blends in with the
remainder of the unit. Manufacturer's identity plates and markings
shall not be removed. With respect to each unit of Equipment, the
total cost of necessary repairs for damages or other related costs
necessary to place the Equipment in such condition as to be in
complete compliance with this Lease Agreement may not exceed $500.
All units shall be cleaned and cosmetically acceptable with all
Lessee installed decals and markings properly removed. Fuel tanks
must be at least twenty-five percent (25%) full;
(iii) Documents and Records: Written records of scheduled and other
maintenance and repair work done shall be kept, dated, and signed by
the appropriate authority. A service history or log will be
maintained during the Initial Term and any Extended Term of the
Lease Agreement and a copy provided to Lessor upon request during
the Initial Term and any Extended Term of the Lease Agreement, or at
the expiration or other termination (by acceleration or otherwise)
of the Lease Agreement. All maintenance records, maintenance record
jackets, repair jackets, repair orders, license plates, registration
certificates and all other similar documents, in their entirety,
must be returned to Lessor;
(iv) Brakes: Brake drums and linings shall not be cracked and shall
not exceed manufacturers' recommended wear limits. Brake linings
shall have fifty percent (50%) remaining wear;
(v) Maintenance: Lessee shall strictly follow the manufacturer's
recommended maintenance and service schedule, as required to
validate any warranty, at Lessee's sole cost and expense. Any
maintenance or repair work shall comply with the guidelines and
procedures as specified by the manufacturers of the Equipment or
each component of the Equipment. Lessee
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will use only original manufacturer's approved replacement parts and
components in the performance of any maintenance and repair of the
Equipment. Lessee will at all times maintain the Equipment in good
operational condition and appearance, and shall not discriminate
such maintenance between owned or leased equipment; and
(vi) Refrigeration Units: With respect to all refrigeration units,
upon return, each shall be mechanically sound and in good operating
order and capable of satisfactorily passing any test for
refrigeration or cooling loss as recommended by the manufacturer and
performed by an authorized factory representative, at Lessee's sole
cost and expense. Refrigeration unit specifications must be in
compliance with DOT. The refrigeration units must have at least 50%
time-wear remaining before the next overhaul or replacement as
recommended by Reefer Manufacturer's and published in standard
maintenance manuals;
(vii) Refrigerants: Lessee shall use only non-CFC refrigerants in
the refrigeration units. In the event that Lessee wishes to convert
the operating refrigerant to an alternative refrigerant, the Lessee
will obtain the prior approval of the Lessor. Any such modifications
will be done in accordance with the Reefer Manufacturer's suggested
procedures. All such modifications will be completed at Lessee's
expense. These modifications will become the property of Lessor;
(viii) Use: Lessee guarantees that the Equipment will not be or have
been loaded beyond the rated capacity as certified by the
manufacturer at any time during the Initial Term or any Extended
Term of the Lease Agreement Lessee will not discriminate in the use
of the Equipment from any other similar equipment in its fleet;
(ix) Alterations: Lessee will not modify the Equipment without the
prior written approval of Lessor, in any event, Lessee will not make
any modifications or alterations that would impair the Equipment's
use, value marketability or manufacturer's warranty and
recommendations. Lessee will not make any alterations, to the
Equipment that would damage or restrict the use of the Equipment
from its initial use and design and that cannot be removed without
damage to the unit. Changes, modifications or additions to the
Equipment mandated by Federal or state authorities will be completed
by the Lessee and become property of the Lessor; and
(x) Regulatory Standards: Without limiting any of the foregoing,
Lessee shall insure that, upon surrender to Lessor, all coolants and
other materials contained in any unit of Equipment comply with all
then current standards and/or regulations promulgated by the
Environmental Protection Agency, or any successor agency, or other
governmental or quasi-governmental agency having jurisdiction over
the Equipment, and such compliance with standards and regulations is
necessary in order for such units of Equipment to be marketable for
the purposes such units were intended.
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12.2.4 Prior to any surrender of the Equipment, an in depth physical
inspection will be conducted by a manufacturer's service representative(s)
(Great Dane, Utility and Trailmobile, collectively the "Trailer Manufacturers"
and Thermo King for the trailers having Thermo King refrigeration units and
Carrier for those units having Carrier refrigeration units, collectively the
"Reefer Manufacturers") on behalf of Lessor, and paid for by Lessee. Any part,
component or function found not to be within the manufacturer's tolerances and
operational specifications will be replaced or brought with in those tolerances
and specifications to the satisfaction of Lessor.
13. Financial Statements. Lessee shall annually, within ninety (90) days
after the close of the fiscal year for Lessee, furnish, or cause to be
furnished, to Lessor financial statements of Frozen Foods Express Industries,
Inc., the quarantor of the obligations of Lessee hereunder (the "Guarantor"),
including a balance sheet as of the close of such year and statements of income
and retained earnings for such year, prepared in accordance with generally
accepted accounting principles, consistently applied from year to year, and
certified by independent public accountants for Guarantor. If requested by
Lessor, Guarantor shall also provide quarterly financial statements of
Guarantor, similarly prepared for each of the first three quarters of each
fiscal year, certified (subject to normal year-end audit adjustments) by the
chief financial officer of Guarantor and furnished to Lessor within sixty (60)
days following the end of the quarter, and such other financial information as
may be reasonably requested by Lessor.
14. Delayed Payment Charge. Lessee shall pay to Lessor interest upon the
amount of any Daily Rent, Monthly Rent or other sums not paid by Lessee when due
and owing under this Lease Agreement, from the due date thereof until paid, at
the rate of one and one half (1-1/2) percent per month, but if such rate
violates applicable law, then the maximum rate of interest allowed by such law.
15. Default.
15.1 The occurrence of any of the following events shall constitute an
event of default ("Event of Default") under this Lease Agreement.
(a) Lessee fails to pay any Daily Rent or any Monthly Rent when due
and such failure to pay continues for ten (10) consecutive days; or
(b) Lessee fails to pay any other sum required hereunder, and such
failure continues for a period of ten (10) days following written notice
from Lessor; or
(c) Lessee fails to maintain the insurance as required by Section 11
above and such failure continues for ten (10) days after written notice
from Lessor; or
(d) Lessee or Guarantor violates or fails to perform any other term,
covenant or condition of this Lease Agreement or any other document,
agreement or instrument executed pursuant hereto or in connection
herewith, which failure is not cured within thirty (30) days after written
notice from Lessor; or
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(e) Lessee or Guarantor ceases to exist or terminates its
independent operations by reason of any discontinuance, dissolution,
liquidation, merger, sale of substantially all of its assets, or otherwise
ceases doing business as a going concern; or
(f) Lessee or Guarantor (i) applies for or consents to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar official for itself or for all or a
substantial part of its property, (ii) is generally not paying its debts
as such debts become due, (iii) makes a general assignment for the benefit
or its creditors, (iv) commences a voluntary case under the United States
Bankruptcy Code, as now or hereafter in effect, seeking liquidation,
reorganization or other relief with respect to itself or its debts, (v)
files a petition seeking to take advantage of any other law providing for
the relief of debtors, (vi) takes any action under the laws of its
jurisdiction of incorporation or organization similar to any of the
foregoing, or (vii) takes any corporate action for the purpose of
effecting any of the foregoing, or
(g) A proceeding or case is commenced, without the application or
consent of Lessee or Guarantor, in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, dissolution, winding up of
Lessee or Guarantor or composition or readjustment of the debts of Lessee
or Guarantor, (ii) the appointment of a trustee, receiver, custodian,
liquidator or similar official for Lessee or Guarantor or for all or any
substantial part of its assets, or (iii) similar relief with respect to
Lessee or Guarantor under any law providing for the relief of debtors; or
an order for relief is entered with respect to Lessee or Guarantor in an
involuntary case under the United States Bankruptcy Code, as now or
hereafter in effect, or an action under the laws of the jurisdiction of
incorporation or organization of Lessee or Guarantor, similar to any of
the foregoing, is taken with respect to Lessee or Guarantor without its
application or consent, or
(h) Lessee or Guarantor makes any representation or warranty herein
or in any statement or certificate at any time given in writing pursuant
to or in connection with this Lease Agreement which is false or misleading
in any material respect, or
(i) Lessee or Guarantor defaults under any promissory note, credit
agreement, loan agreement, conditional sales contract, guaranty, lease,
indenture, bond, debenture or other material obligation whatsoever, and a
party thereto or a holder thereof is entitled to accelerate the
obligations of Lessee or Guarantor thereunder; or Lessee or Guarantor
defaults in meeting any of its trade, tax or other current obligations as
they mature, unless such obligations are being contested diligently and in
good faith; or
(j) Any party to any guaranty, letter of credit, subordination or
credit agreement or other undertaking, given for the benefit of Lessor and
obtained in connection with this Lease Agreement, breaches, fails to
continue, contests, or purports to terminate or to disclaim such guaranty,
letter of credit, subordination or credit agreement or other undertaking,
or such guaranty, letter of credit, subordination agreement or other
undertaking becomes unenforceable; or a guarantor of this Lease Agreement
shall die, cease to exist or terminate its independent operations.
-11-
<PAGE>
15.2 No waiver by Lessor of any Event of Default shall constitute a waiver
of any other Event of Default or of the same Event of Default at any other time.
16. Remedies.
16.1 Upon the occurrence of an Event of Default and while such Event of
Default is continuing, Lessor, at its sole option, upon its declaration, and to
the extent not inconsistent with applicable law, may exercise any one or more of
the following remedies:
(a) Lessor may terminate this Lease Agreement whereupon all rights
of Lessee to the quiet enjoyment and use of the Equipment shall cease;
(b) Whether or not this Lease Agreement is terminated, Lessor may
cause Lessee, at the sole cost and expense of Lessee, to return any or all
of the Equipment promptly to the possession of Lessor in good repair and
working order, reasonable wear and tear excepted. Lessor, at its sole
option and through its employees, agents or contractors, may peaceably
enter upon the premises where the Equipment is located and take immediate
possession of and remove the Equipment, all without liability to Lessor,
its employees, agents or contractors for such entry. LESSEE HEREBY WAIVES,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO NOTICE
AND/OR HEARING PRIOR TO THE REPOSSESSION OR REPLEVIN OF THE EQUIPMENT BY
LESSOR, ITS EMPLOYEES, AGENTS OR CONTRACTORS;
(c) Lessor may proceed by court action to enforce performance by
Lessee of this Lease Agreement or pursue any other remedy Lessor may have
hereunder, at law, in equity or under any applicable statute, and recover
such other actual damages as may be incurred by Lessor;
(d) Lessor may recover from Lessee damages, not as a penalty but as
liquidation for all purposes and without limitation of any other amounts
due from Lessee under this Lease Agreement, in an amount equal to the sum
of (i) any unpaid Daily Rents and/or Monthly Rents due and payable for
periods prior to the repossession of the Equipment by Lessor plus any
interest due thereon pursuant to Section 14 above (ii) the present value
of all future Monthly Rents required to be paid over the remaining Initial
Term or any Extended Term after repossession of the Equipment by Lessor,
determined by discounting such future Monthly Rents to the date of payment
by Lessee at a rate of five (5) percent per annum, and (iii) all costs and
expenses incurred in searching for, taking, removing, storing, repairing,
restoring, refurbishing and leasing or selling such Equipment; or
(e) Lessor may sell, lease or otherwise dispose of any or all of the
Equipment, whether or not in the possession of Lessor, at public or
private sale and with or without notice to Lessee, which notice is hereby
expressly waived by Lessee, to the extent permitted by and not
inconsistent with applicable law. Lessor shall then apply against the
obligations of Lessee hereunder the net proceeds of such sale, lease or
other disposition, after deducting therefrom (i) the present value of the
residual value of the Equipment at the expiration of the Initial Term,
which is anticipated by Lessor and
-12-
<PAGE>
Lessee to be not less than the Stipulated Loss Value for the last
Stipulated Loss Payment Date set forth on Exhibit A to the applicable
Equipment Schedule, such present value to be determined by discounting the
residual value to the date of sale, lease or other disposition at a rate
of five (5) percent per annum, and (ii) all costs incurred by Lessor in
connection with such sale, lease or other disposition including, but not
limited to, costs of transportation, repossession, storage, refurbishing,
advertising or other fees. Lessee shall remain liable for any deficiency,
and any excess of such proceeds over the total obligations owed by Lessee
shall be retained by Lessor. If any notice of such sale, lease or other
disposition of the Equipment is required by applicable law, ten (10) days
written notice to Lessee shall be deemed reasonable.
16.2 No failure on the part of Lessor to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof. No
single or partial exercise of any right or remedy hereunder shall preclude any
other or further exercise thereof or the exercise of any other right or remedy.
Each right and remedy provided hereunder is cumulative and not exclusive of any
other right or remedy including, without limitation, any right or remedy
available to Lessor at law, by statute or in equity.
16.3 Lessee shall pay all costs and expenses including, but not limited
to, reasonable legal fees incurred by Lessor arising out of or in connection
with any Event of Default under this Lease Agreement. Lessee shall also be
liable for any amounts due and payable to Lessor under any other provision of
this Lease Agreement including, but not limited to, amounts due and payable
under Section 17 below.
17. Tax Indemnification
17.1 This Lease Agreement has been entered into by Lessor and Lessee under
the assumption that Lessor or its affiliated group ("Affiliated Group"), as
defined in Section 1504 of the Internal Revenue Code of 1986, as amended, (the
"Code") will be treated as the owner Of the Equipment and will be entitled to
such deductions and other benefits that are provided by the Code including,
without limitation, deductions for the recovery of the Acquisition Cost of the
Equipment, over the recovery period ("Recovery Period") set forth on the
applicable Equipment Schedule, using the Accelerated Cost Recovery System as
provided by Section 168 of the Code ("ACRS Deductions").
17.2 Lessee represents, covenants and warrants the following,
(a) Neither Lessee, nor any affiliate of Lessee, nor any other party
(i) has claimed or will claim any ACRS Deductions, or any other deductions
in the nature of cost recovery or depreciation with respect to the
Equipment, or (ii) has made or will make any election under the Code
regarding the method or the period for cost recovery or deductions for
personal property which will be binding upon Lessor and which will
adversely affect the assumptions set forth in Section 17.1 above with
respect to the Equipment or (iii) shall, at any time, take any action or
file any returns or other documents inconsistent with the assumptions set
forth in Section 17.1 above.
-13-
<PAGE>
(b) In the event the Equipment has been sold to Lessor by Lessee and
leased back from Lessor by Lessee, such Equipment does not constitute
property placed in service in a churning transaction within the meaning of
Section 168(f)(5) of the Code.
(c) The Equipment has not been manufactured or produced in any
foreign country which is subject to an Executive Order of the President of
the United States that would deny the availability of ACRS Deductions to
Lessor.
(d), The Acquisition Cost of the Equipment does not exceed the fair
market value of the Equipment.
(e) When delivered and accepted under the Lease Agreement, the
Equipment will not require any improvements, modifications, or additions
(other than ancillary or incidental items of removable equipment) in order
to be rendered complete for its intended use by Lessee.
(t) At the time the Equipment is accepted under the Lease Agreement,
Lessee and, if applicable, any member of its Affiliated Group shall have
been fully reimbursed for any portion of the Acquisition Cost of the
Equipment which it may have furnished; furthermore, on the applicable
Commencement Date and during the Initial Term, neither Lessee nor any
member of its Affiliated Group shall have any investment in the Equipment.
(g) The Equipment will be placed in service on the applicable
Commencement Date and will be used in a trade or business or will be held
for the production of income within the meaning of Section 167 of the
Code.
(h) From the applicable Commencement Date and during the Initial
Term, the Equipment will constitute and will be treated as (i) "recovery
property" within the meaning of Section 168 of the Code, and (ii) property
with the Recovery Period set forth in the applicable Equipment Schedule
determined in accordance with Section 168(c) of the Code.
(i) From the applicable Commencement Date and during the Initial
Term, the Equipment will not constitute, or be treated as, (I) "tax exempt
use property" within the meaning of Section 168(h) of the Code which would
cause Lessor to fail to realize, lose, or suffer diminution, deferral, or
recapture of any of the ACRS Deductions described in Section 17.1 above,
or (ii) "limited use property" within the meaning of Rev. Proc. 76-30,
1976C. B. 647.
(j) During the Initial Term, the Equipment will not be used
"predominantly outside the United States" within the meaning of Section
168(g)(4) of the Code.
(k) During the Initial Term, Lessor shall not be required to include
in its gross income for Federal income tax purposes any amount derived
from the cost of any alteration, addition, improvement, modification,
replacement, or substitution of the
-14-
<PAGE>
Equipment or from any refund or credit from the manufacturer or supplier
of the Equipment.
17.3 A tax loss ("Tax Loss") shall be deemed to have occurred under this
Section 17 if Lessor or its Affiliated Group, for Federal income tax purposes,
shall not be entitled to, shall not be allowed, shall suffer recapture of or
shall lose any of the ACRS Deductions, as a result of:
(a) Lessee's breach of, or its failure to comply with, any
representation, covenant, or warranty set forth in Section 17.2 above, or
the inaccuracy of any such representation;
(b) the occurrence of an Event of Default as defined in Section 15
of the Lease Agreement;
(c) the replacement, substitution, loss, seizure, condemnation,
destruction or governmental requisitioning of the Equipment; or
(d) any act (whether or not permitted or required under this Lease
Agreement) or any omission of Lessee, any affiliate of Lessee, any
sublessee or assignee of Lessee, or any entity, other than Lessor, having
possession, control or use of the Equipment (whether or not such
possession, control or use may be authorized or unauthorized).
17.4 If a Tax Loss occurs, then Lessee shall pay to Lessor, upon demand, a
sum to be computed by Lessor in the following manner. Such sum, after deduction
of all Federal, state and local income taxes payable by Lessor as a result of
the receipt of such sum, shall be sufficient to restore Lessor or its Affiliated
Group to substantially the same position, on an aftertax basis, as it would have
been in but for the loss of such ACRS Deductions. In making its computation,
Lessor or its Affiliated Group shall consider, but shall not be limited to, the
following factors: (i) the amounts and timing of any net loss of tax benefits
resulting from any such lack of entitlement to or loss, recapture, or
disallowance of ACRS Deductions but offset by any tax benefits derived from any
depreciation or other capital recovery deductions or exclusions from income
allowed to Lessor or its Affiliated Group with respect to the same Equipment;
(ii) penalties, interest or other charges imposed; (iii) difference in tax years
involved; and (iv) the time value of money at a reasonable rate determined, in
good faith, by Lessor. For purposes of computation only, the amount of
indemnification payments hereunder shall be calculated on the assumption that
Lessor and its Affiliated Group have or will have, in all tax years involved,
sufficient taxable income and tax liability to realize all tax benefits and
incur all losses of tax benefits at the highest marginal Federal corporate
income tax rate in each year. Upon request, Lessor shall provide Lessee with the
methods of computation used in determining any sum that may be due and payable
by Lessee under this Section 17.
17.5 The representations, obligations and indemnities of Lessee under this
Section 17 shall continue in full force and effect, notwithstanding the
expiration or other termination of this Lease Agreement
18. Assignment; Sublease.
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<PAGE>
18.1 Lessor may sell, assign or otherwise transfer all or any part of its
right, title and interest in and to the Equipment and/or this Lease Agreement to
a third-party assignee, subject to the terms and conditions of this Lease
Agreement including, but not limited to, the right to the quiet enjoyment of the
Equipment by Lessee as set forth in Section 7.1 above. Such assignee shall
assume all of the rights and obligations of Lessor under this Lease Agreement
and shall relieve Lessor therefrom. Thereafter, all references to Lessor herein
shall mean such assignee. Notwithstanding any such sale, assignment or transfer,
the obligations hereunder shall remain absolute and unconditional as set forth
in Section 7.2 above.
18.2 Lessor may also pledge, mortgage or grant a security interest in the
Equipment and assign this Lease Agreement as collateral. Each such pledgee,
mortgagee, lienholder or assignee shall have any and all rights as may be
assigned by Lessor but none of the obligations of Lessor hereunder. Any pledge,
mortgage or grant of security interest in the Equipment or assignment of this
Lease Agreement shall be subject to the terms and conditions hereof including,
but not limited to, the right to the quiet enjoyment of the Equipment by Lessee
as set forth in Section 7.1 above. Lessee, by reason of such pledge, mortgage,
grant of security interest or collateral assignment, shall not be relieved of
any of its obligations hereunder which shall remain absolute and unconditional
as set forth in Section 7.2 above. Upon the written request of Lessor, Lessee
shall acknowledge such obligations to the pledgee, mortgagee, lienholder or
assignee.
18.3 LESSEE SHALL NOT SELL, TRANSFER, ASSIGN, SUBLEASE, CONVEY OR PLEDGE
ANY OF ITS INTEREST IN THIS LEASE AGREEMENT OR ANY OF THE EQUIPMENT, WITHOUT THE
PRIOR WRITITEN CONSENT OF LESSOR. Any such sale, transfer, assignment, sublease,
conveyance or pledge, whether by operation of law or otherwise, without the
prior written consent of Lessor, shall be void.
19. Optional Performance by Lessor. If an Event of Default, as defined in
Section 15 above, occurs and is continuing, Lessor in its sole discretion may
pay or perform such obligation in whole or in part, without thereby becoming
obligated to pay or to perform the same on any other occasion or to pay any
other obligation of Lessee. Any payment or performance by Lessor shall not be
deemed to cure any Event of Default hereunder. Upon such payment or performance
by Lessor, Lessee shall pay forthwith to Lessor the amount of such payment or an
amount equal to all costs and expenses of such performance, as well as any
delayed payment charges on such amounts as set forth in Section 14 above.
20. Compliance and Approvals. Lessee warrants and agrees that this Lease
Agreement and the performance by Lessee of all of its obligations hereunder have
been duly authorized, do not and will not conflict with any provision of the
charter or bylaws of Lessee or of any agreement, indenture, lease or other
instrument to which Lessee is a party or by which Lessee or any of its property
is or may be bound. Lessee warrants and agrees that this Lease Agreement does
not and will not require any governmental authorization, approval, license or
consent except those which have been duly obtained and will remain in effect
during the entire Initial Term and any Extended Term.
21. Miscellaneous.
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<PAGE>
21.1 The section headings are inserted herein for convenience of reference
and are not part of and shall not affect the meaning or interpretation of this
Lease Agreement
21.2 Any provision of this Lease Agreement which is unenforceable in whole
or in part in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such unenforceability without invalidating any remaining
part or other provision hereof and shall not be affected m any manner by reason
of such enforceability in any other jurisdiction. The validity and
interpretation of this Lease Agreement and the rights and obligations of the
parties hereto shall be governed in all respects by the laws of The Commonwealth
of Massachusetts without giving effect to the conflicts of laws provisions
thereof.
21.3 This Lease Agreement, including all Equipment Schedules and
Certificates of Acceptance, constitutes the entire agreement between Lessor and
Lessee. Lessor and Lessee agree that this Lease Agreement shall not be amended,
altered or changed except by a written agreement signed by the parties hereto.
LESSEE ACKNOWLEDGES THAT THERE HAVE BEEN NO REPRESENTATIONS, EXPRESS OR IMPLIED,
BY LESSOR OTHER THAN AS SET FORTH HEREIN AND LESSEE EXPRESSLY CONFIRMS THAT IT
HAS NOT RELIED UPON ANY REPRESENTATIONS BY LESSOR, EXCEPT THOSE SET FORTH
HEREIN, AS A BASIS FOR ENTERING INTO THIS LEASE AGREEMENT.
21.4 Any notice required to be given by Lessee or Lessor hereunder shall
be deemed adequately given if sent by registered or certified mail, return
receipt requested, to the other party at their respective addresses stated
herein or at such other place as either party may designate in writing to the
other.
21.5 Lessee agrees to execute and deliver such additional documents and to
perform such further acts as may be reasonably requested by Lessor in order to
carry out and effectuate the purposes of this Lease Agreement Upon the written
request of Lessor, Lessee further agrees to execute any instrument necessary for
filing or recording this Lease Agreement or to confirm the ownership of the
Equipment by Lessor. Lessor is hereby authorized to insert in any Equipment
Schedule the serial numbers of the Equipment and other identifying marks or
similar information and to sign, on behalf of Lessee, any Uniform Commercial
Code financing statements.
21.6 This Lease Agreement cannot be canceled or terminated except as
expressly provided herein.
21.7 Whenever the context of this Lease Agreement requires, the singular
includes the plural and the plural includes the singular. Whenever the word
Lessor is used herein, it includes all assignees and successors in interest of
Lessor. If more than one Lessee are named in this Lease Agreement, the liability
of each shall be joint and several.
21.8 All agreements, indemnities, representations and warranties of Lessee
made herein and all rights and remedies of Lessor shall survive the expiration
or other termination of this Lease Agreement, whether or not expressly provided
herein.
-17-
<PAGE>
21.9 Any waiver of any power, right, remedy or privilege of Lessor
hereunder shall not be effective unless in writing signed by Lessor.
21.10 This Lease Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument
IN WITNESS WHEREOF, Lessor and Lessee, each by its duly authorized officer
or agent, have duly executed and delivered this Lease Agreement, which is
intended to take effect as a sealed instrument, as of the day and year first
written above.
Conwell Corporation
By: /s/ [ILLEGIBLE]
----------------------------------
Title: [ILLEGIBLE]
--------------------------------
Accepted at Boston, Massachusetts
FFE LEASING TRUST NO. 95-01
By: /s/ Gail Ofgant
------------------------------
TRUSTEE
By:
------------------------------
TRUSTEE
-18-
<PAGE>
EXHIBIT A TO
SECTION 10.2 OF
MASTER LEASE AGREEMENT
With reference to Section 10.2 of the Master Lease Agreement as applicable to
the Equipment set forth on Equipment Schedule No. 002, Lessor and Lessee agree
that the Stipulated Loss Value shall mean the product obtained by multiplying
the Acquisition Cost of the Equipment terminated pursuant to Section 10.2 by the
appropriate percentage for the Stipulated Loss Payment Date.
STIPULATED LOSS STIPULATED LOSS
PAYMENT DATE PERCENTAGE PAYMENT DATE PERCENTAGE
------------ ---------- ------------ ----------
1-1-96 104.64 7-1-99 76.16
2-1-96 104.13 8-1-99 75.36
3-1-96 103.60 9-1-99 74.56
4-1-96 103.04 10-1-99 73.74
5-1-96 102.49 11-1-99 72.93
6-1-96 101.93 12-1-99 72.10
7-1-96 101.37 1-1-00 71.26
8-1-96 100.79 2-1-00 70.43
9-1-96 100.21 3-1-00 69.59
10-1-96 99.61 4-1-00 68.73
11-1-96 99.01 5-1-00 67.89
12-1-96 98.40 6-1-00 67.03
1-1-97 97.78 7-1-00 66.17
2-1-97 97.15 8-1-00 65.30
3-1-97 96.52 9-1-00 64.43
4-1-97 95.87 10-1-00 63.55
5-1-97 95.22 11-1-00 62.66
6-1-97 94.56 12-1-00 61.79
7-1-97 93.89 1-1-01 60.90
8-1-97 93.22 2-1-01 60.01
9-1-97 92.55 3-1-01 59.11
10-1-97 91.86 4-1-01 58.21
11-1-97 91.17 5-1-01 57.30
12-1-97 90.48 6-1-01 56.39
1-1-98 89.77 7-1-01 55.46
2-1-98 89.06 8-1-01 54.55
3-1-98 88.35 9-1-01 53.62
4-1-98 87.63 10-1-01 52.70
5-1-98 86.90 11-1-01 51.77
6-1-98 86.17 12-1-01 50.84
7-1-98 85.43 1-1-02 49.90
8-1-98 84.69 2-1-02 48.96
9-1-98 83.93 3-1-02 48.01
10-1-98 83.18 4-1-02 47.07
11-1-98 82.42 5-1-02 48.12
12-1-98 81.66 6-1-02 45.16
1-1-99 80.90 7-1-02 44.19
2-1-99 80.12 8-1-02 43.25
3-1-99 79.35 9-1-02 42.29
4-1-99 78.58 10-1-02 41.35
5-1-99 77.77 11-1-02 40.41
6-1-99 76.98 12-1-02 39.45
Thereafter 39.50
FFE LEASING TRUST NO. 95-01 CONWELL CORPORATION
BY: /s/ Gail Ofgant BY: /s/ [ILLEGIBLE]
-------------------------------- -----------------------------------
TITLE: Manager TITLE: Controller
------------------------------ ---------------------------------
BY:
--------------------------------
TITLE:
------------------------------
<PAGE>
EXHIBIT A
EQUIPMENT SCHEDULE NO. 002
This Equipment Schedule No.002 is hereby made a part of the MASTER LEASE
AGREEMENT dated as of November 21, 1995 between FFE LEASING TRUST NO. 95-01, as
Lessor, and Conwell Corporation, as Lessee.
1. EQUIPMENT DESCRIPTION (including quantity, model/feature, identification
and/or serial number):
See Attached Exhibit 1
2. ACQUISITION COST: $1,249,505.28
3. LEASE TERM: 84 months
4. MONTHLY RENT: $14,431.79 in advance/in arrears
5. RECOVERY PERIOD: 5 years
6. INSTALLATION SITE: 203 Hal Muldrow
----------------------------------------------------------
Address
Norman Cleveland OK 73069
----------------------------------------------------------
City County State Zip Code
LESSOR LESSEE:
FFE LEASING TRUST NO. 95-01 Conwell Corporation
By: /s/ Gail Ofgant By: /s/ [ILLEGIBLE]
---------------------------- ----------------------------
Title: TRUSTEE Title: Controller
-------------------------
By:
----------------------------
Title: TRUSTEE
<PAGE>
EXHIBIT 1
4 1996 Great Dane Super Seal 48' x 102.31" x 13'6" Swing doors, slide
tandem, Bridgestone 295/75R22.5 R194 FFE tires, Carrier unit, Lift pads
and decals.
Equip# Vin# Carrier Ultra Unit
11654 1GRAA9622TWO21602 EAF90311372
11656 1GRAA9626TWO21604 EAE90311375
11659 1GRAA9621TWO21607 EAE90311371
11679 1GRAA9627TWO21627 FAF90315009
21 1996 Great Dane Super Seal 48' x 102.31" x 13'6" Swing doors, slide
tandem, Bridgestone 295/75R22.5 R194 FFE tires, Carrier unit, Lift pads
and decals.
Equip# Vin# Carrier Ultra Unit
11653 1GRAA9620TWO21601 EAE90311367
11655 1GRAA9624TWO21603 EAF90311370
11657 1GRAA9628TWO21605 EAE90311369
11658 1GRAA962XTWO21606 EAE90311374
11660 1GRAA9623TWO21608 EAE90315405
11661 1GRAA9625TWO21609 FAE90315007
11662 1GRAA9621TWO21610 EAF90315003
11663 1GRAA9623TWO21611 EAF90315005
11664 1GRAA9625TWO21612 EAE90315008
11666 1GRAA9629TWO21614 FAF90315002
11667 1GRAA9620TWO21615 EAF90315013
11668 1GRAA9622TWO21616 FAF90315006
11669 1GRAA9624TWO21617 FAF90315402
11670 1GRAA9626TWO21618 FAF90311366
11671 1GRAA9628TWO21619 FAF90315011
11672 1GRAA9624TWO21620 FAF90315396
11673 1GRAA9626TWO21621 FAF90315403
11674 1GRAA9628TWO21622 FAF90315397
11675 1GRAA962XTWO21623 FAF90315404
11681 1GRAA9620TWO21629 EAF90315004
11680 1GRAA9629TWO21628 EAE90311373
7 1996 Great Dane Super Seal 48' x 102.31" x 13'6" Swing doors, slide
tandem, Bridgestone 295/75R22.5 R 194 FFE tires, Carrier unit, Lift pads
and decals.
Equip# Vin# Carrier Ultra Unit
11665 1GRAA9627TWO21613 EAE90315010
11676 1GRAA9621TWO21624 EAE90315407
11677 1GRAA9623TWO21625 FAE90315014
11678 1GRAA9625TWO21626 EAE90315012
11682 1GRAA9627TWO21630 EAE90315138
11683 1GRAA9629TWO21631 EAF90315481
11684 1GRAA9620TWO21632 EAF90315398
<PAGE>
EXHIBIT B
CERTIFICATE OF ACCEPTANCE
To: FFE LEASING TRUST NO. 95-01
Pursuant to the MASTER LEASE AGREEMENT dated as of November 21, 1995, (the
"Lease Agreement") between FFE LEASING TRUST NO. 95-01 (the "Lessor") and the
undersigned (the "Lessee"), the equipment described on Equipment Schedule No.
002 (the "Equipment") has been delivered to the location set forth in such
Equipment Schedule, has been tested and inspected by Lessee, and has been found
to be in good repair and working order.
The Equipment has been accepted and placed in service by Lessee for all
purposes under the Lease Agreement on December [illegible] 19 [illegible] (the
"Commencement Date").
Lessee represents, warrants and covenants that: (a) as of the Commencement
Date, all representations set forth in Section 18 of the Lease Agreement apply
to the Equipment accepted hereunder; (b) in the event of a sale and leaseback of
the Equipment, neither Lessee nor any member of its Affiliated Group as defined
in the Lease Agreement has made or will make any election under the Internal
Revenue Code of 1986, as amended (the "Code") affecting the depreciation of the
Equipment or of any class of property which would apply to the Equipment after
the sale of the Equipment to Lessor by Lessee; (c) in the event of a sale and
leaseback of the Equipment, the Equipment will not constitute property placed in
service in a churning transaction within the meaning of Section 168(f)(5) of the
Code; (d) neither Lessee nor any member of its Affiliated Group filing a
consolidated Federal income tax return will take any deduction for recovery of
the cost of the Equipment; (e) the Equipment has been placed in service under
the Lease Agreement on the Commencement Date; and (f) neither Lessee nor any
member of its Affiliated Group has any investment in the cost of the Equipment
The execution of this Certificate of Acceptance by Lessee shall not be
construed, in any way, to release or to waive the obligations of any
manufacturer or supplier for any warranties with respect to the Equipment.
This Certificate of Acceptance applicable to Equipment Schedule No. 002
shall constitute a part of the Lease Agreement.
IN WITNESS WHEREOF Lessee, by its duly authorized officer or agent, has
executed and delivered this Certificate of Acceptance which is intended to take
effect as a sealed instrument.
Conwell Corporation
By: /s/ [ILLEGIBLE]
----------------------------------
Title: Controller
--------------------------------
<PAGE>
LLR4OD-01 12/15/95 9:42:39 PAGE 1
AMERICAN FINANCE GROUP
Schedule A Rental Schedule Economics
LESSEE: CONWELL CORPORATION
LESSOR: AMERICAN FINANCE GROUP
RENTAL SCHEDULE: 002
LEASE TERM (months): 84
PRIMARY START DATE: 1/01/1996
LEASE EXPIRATION DATE: 12/31/2002
PAYMENT FREQUENCY: MONTHLY
ADVANCE /ARREARS. ADVANCE
LEASE RATE: .011550000
PER DIEM LEASE RATE: .000385000
PERIODIC RENT: $14,431.68
NUMBER OF PAYMENTS: 84
TOTAL INTERIM RENT: $6,734.72
PAYMENT COMMENCEMENT DATE: 1/01/1996
TOTAL EQUIPMENT COST: $1,249,505.28
DOCUMENTATION FEE:
-----------------
_______________________ LESSEE INITIALS
_______________________ LESSOR INITIALS
<PAGE>
LLR41D--01 12/15/95 9:42:42 PAGE 1
AMERICAN FINANCE GROUP
Schedule B Equipment Description
RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NUMBER: 002
LESSEE: CONWELL CORPORATION
LESSOR: AMERICAN FINANCE GROUP
<TABLE>
<CAPTION>
Acceptance
Equipment Cost Serial Number Year Manufacturer Model Type Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
39,047.04 1GRAA962OTWO216O1 1996 GREAT DANE & CARRIER REFER # 1367 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9622TW021602 1996 GREAT DANE & CARRIER REFER # 1372 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9624TW021603 1996 GREAT DANE & CARRIER REFER # 1370 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9626TW021604 1996 GREAT DANE & CARRIER REFER # 1375 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9628TW021605 1996 GREAT DANE & CARRIER REFER # 1369 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA962XTWO216O6 1996 GREAT DANE & CARRIER REFER # 1374 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9621TW021607 1996 GREAT DANE & CARRIER REFER # 1371 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9623TW021608 1996 GREAT DANE & CARRIER REFER # 5405 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9625TW021609 1996 GREAT DANE & CARRIER REFER # 5007 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9621TW021610 1996 GREAT DANE & CARRIER REFER # 5003 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9623TW021611 1996 GREAT DANE & CARRIER REFER # 5005 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9625TW021612 1996 GREAT DANE & CARRIER REFER # 5008 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9627TW021613 1996 GREAT DANE & CARRIER REFER # 5010 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9629TW021614 1996 GREAT DANE & CARRIER REFER # 5002 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9620TW021615 1996 GREAT DANE & CARRIER REFER # 5013 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9622TW021616 1996 GREAT DANE & CARRIER REFER # 5006 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9624TW021617 1996 GREAT DANE & CARRIER REFER # 5402 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9626TW021618 1996 GREAT DANE & CARRIER REFER # 1366 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9628TW021619 1996 GREAT DANE & CARRIER REFER # 5011 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9624TW021620 1996 GREAT DANE & CARRIER REFER # 5396 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9626TW021621 1996 GREAT DANE & CARRIER REFER # 5403 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9628TW021622 1996 GREAT DANE & CARRIER REFER # 5397 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA962XTW021623 1996 GREAT DANE & CARRIER REFER # 5404 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9621TW021624 1996 GREAT DANE & CARRIER REFER # 5407 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9623TW021625 1996 GREAT DANE & CARRIER REFER # 5014 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9625TW021626 1996 GREAT DANE & CARRIER REFER # 5012 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9627TW021627 1996 GREAT DANE & CARRIER REFER # 0000 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9629TW021628 1996 GREAT DANE & CARRIER REFER # 1373 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9620TW021629 1996 GREAT DANE & CARRIER REFER # 5009 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9627TW021630 1996 GREAT DANE & CARRIER REFER # 3138 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9629TW021631 1996 GREAT DANE & CARRIER REFER # 5401 1996 SUPER SEAL REEFER TR 12/18/1995
39,047.04 1GRAA9622TW021632 1996 GREAT DANE & CARRIER REFER # 5398 1996 SUPER SEAL REEFER TR 12/18/1995
- ----------------
1,249,505.28 Total for Location 203 HAL MULDROW NORMAN OK 73069
- ----------------
- ----------------
1,249,505.28 Total Equipment Cost
</TABLE>
<PAGE>
LLR49D-0l
AMERICAN FINANCE GROUP
Vertex Messages and Procedures
RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NUMBER: 002
LESSEE: CONWELL CORPORATION
LESSOR: AMERICAN FINANCE GROUP
<TABLE>
<CAPTION>
Invoice Equipment
Required Location Type Category Procedures
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OK 20 PREPAYMENT EXEMPTION REQUIRES EXCISE TAX BE PAID AT REGISTRATION. OBTAIN PROOF OF PAYMENT, CODE ASSE
REFUNDABLE EXEMPTION MANUFACTURER EXEMPTIONS GRANTED, HOWEVER, LESSEE MUST PAY TAXES ON PURCHASE PRI
URCHASE PRICE, CODE ASSETS '3' AND INSTRUCT LESSEE TO FILE FOR REFUND
Asset#/Exempt Reason Code 133060 133061 133062 133063 133064 133065
133070 133071 133072 133073 133074 133075
133080 133081 133082 133083 133084 133085
133090 133091
** END OF REPORT **
</TABLE>
<PAGE>
397G
ATTACHMENT A To LEASE/PURCHASE ORDER NO. ______________________
Lessor: AMERICAN FINANCE GROUP, INC.
Address: Exchange Place
Boston, Massachusetts 02109
Lessee: FORD MOTOR COMPANY
Address: The American Road
Dearborn, MI 48121
LEASE ORDER TERMS AND CONDITIONS
1. Lease; Entire Agreement
This Attachment, dated as of April 5, 1988, sets forth the terms and
conditions governing the lease of certain items of personal property (the
"Equipment") described on the face of the Lease Order to which this
document is attached. This attachment, such lease/purchase order and any
other attachments thereto shall constitute the "Lease Order" as such term
is used herein and the entire agreement between the parties thereto;
provided, however, that the printed terms and conditions (if any) on the
reverse side of such lease/purchase Order shall have no force and effect.
In the event of a conflict between the typewritten terms and conditions on
the face of the Lease Order and the terms and conditions set forth herein,
the typewritten terms and conditions on the face of the Lease Order shall
govern.
2. Term; Rental Payments
(a) The term of the Lease Order is set forth on the face of this Lease
Order and shall commence on the Rental Start Date as defined herein.
(b) Lessee shall make rental payments to Lessor for lease of the
Equipment in the amounts and on the dates specified in this Lease
Order. All rental or other payments by Lessee to Lessor shall be
made to Lessor at the address set forth in this Lease Order or at
such other address as Lessor may hereafter direct in writing.
3. Net Lease; Lessee's indemnity; No Warranties By Lessor.
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 (but excluding third-party suits based solely on a claim 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 (i) unless Lessor's intentional misconduct or negligence is the
direct and proximate cause of the foregoing, and (ii) other than liens and
security interests created by Lessor and (iii) other than taxes, fees,
charges and assessments described in section 5(b) hereof. The Lease Order
is for
<PAGE>
purposes of providing lease financing only. Lessor is not a dealer,
supplier, manufacturer or vendor of the Equipment, and Lessee is solely
responsible for the selection of the Equipment, the manufacturer and
vendor thereof in accordance with Lessee's specifications and for the
inspection, acceptance, use and maintenance of the Equipment. Lessee
agrees that it shall not initiate or participate, by joinder or otherwise,
in a claim or counterclaim against Lessor of product liability or strict
liability in tort and will object by appropriate proceeding to the
inclusion of Lessor as a defendant in any proceeding based upon such a
claim. The Lease Order 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 Lease Order, 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 the Lease Order. 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.
4. Use, Maintenance and Repairs
The Equipment is to be used exclusively by Lessee in the conduct of its
business, only for the purposes for which it was designed. The Equipment
is not to be removed from the location specified on the Lease Order except
upon prior written notice to Lessor, and in no event may the Equipment be
moved to a location outside the continental United States without the
prior written consent of Lessor, which consent shall not be unreasonably
withheld. 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. 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.
5. Compliance with Laws; Taxes
(a) Lessee shall comply with and conform to all laws and regulations
relating to the possession, use and maintenance of the Equipment,
and shall save Lessor harmless against actual or asserted violations
thereof.
(b) Lessee agrees to prepare and file all required returns or reports
and to pay all sales, gross receipts, personal property and other
taxes, fees, interest, fines or penalties imposed by any
governmental authority relating in any way to the Equipment, except
taxes measured by the net worth, net or gross income or profit of
Lessor, including the Michigan Single Business Tax, which shall be
solely the responsibility 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 item of Equipment is located in a taxing jurisdication
that does not allow Lessee to report and pay personal property taxes
directly, Lessee will prepare an appropriate tax return to be
delivered, together with funds equal to the taxes Lessee claims are
due on such return, to
-2-
<PAGE>
Lessor not less than ten (10) days prior to the date such taxes are
due. The state and local retail sales and use tax status of the
Equipment shall be indicated on the face of this Lease Order.
6. Acceptance
Lessee shall accept the Equipment if the Equipment has operated
efficiently for the period indicated in this Lease Order as the
"Acceptance Period" in conformance with both technical specifications
therefor and any proposal submitted to Lessee by Lessor. Lessee's
acceptance shall be evidenced by its execution and delivery to Lessor of
the "Certificate of Acceptance" in the form attached as Exhibit A. Lessee
represents and warrants that Lessor is entitled to rely without
independent verification or investigation on each such Certificate of
Acceptance bearing a signature purporting to be that of a representative
of Lessee as a true and genuine signature of a duly authorized agent of
Lessee, valid and binding against Lessee for purposes of acceptance
hereunder. Rental shall begin to accrue as of the first day of the
acceptance period (the "Rental Start Date") at the Daily Acceptance Period
Rent per unit of Equipment accepted shown on the Lease Order (such Daily
Acceptance Period Rate being calculated as the per diem amount, per unit
accepted, of the Monthly Rent based on a thirty-day month). Rental at the
Monthly Rent shown on the Lease Order shall accrue and be payable in
advance commencing as of the first day of month following the month in
which the last unit of Equipment under a Lease Order has been accepted.
(Lease Rate Factors shown on the Lease Order are the multiple which,
applied to the per Unit or aggregate Equipment Cost (as the case may be),
produce the Acceptance Period Rent per Unit or the Monthly Rent,
respectively.)
7. License
Lessor grants to Lessee a nonexclusive, nontransferable license to use the
software products, including related documentation, provided with the
Equipment solely for Lessee's own use on or with the Equipment. Lessee
will not sell, transfer, disclose, or otherwise make available such
software products or copies thereof to third parties; provided, however,
that the software products may be disclosed on a need-to-know basis to
Lessee's employees or independent contractors using the Equipment. No
title or ownership of the software products or any portion thereof is
transferred to Lessee. The license granted herein shall terminate upon
termination of this Lease Order, and Lessee agrees, upon termination, to
return or destroy the software products and all portions or copies
thereof.
8. Transportation Expenses
(a) Unless otherwise indicated in this Lease Order, all Equipment
transportation, rigging and drayage charges shall be paid by Lessee.
Lessee shall furnish such labor as may be necessary for packing and
unpacking Equipment when in the possession of Lessee.
(b) All shipments of Equipment shall be made by a method specified by
Lessee.
9. Risk of Loss.
Lessee will bear all risk of loss with respect to the Equipment during the
Lease Term and until the Equipment is returned to Lessor. Lessee will
-3-
<PAGE>
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
Casualty Value specified on the Lease Order for such Equipment. The Lease
Order, 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.
10. Insurance.
Lessee agrees, directly or through an agent, 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 (i)
physical damage and theft insurance in an amount at least equal to the
Casualty Value set forth on the Lease Order for such 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. Lessee agrees to deliver to Lessor such
certificates of 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 rent and other sums
then due and unpaid under the Lease Order and will pay such proceeds over
to Lessee only upon receipt of satisfactory evidence thereof. Lessor
accepts Lessees current practices of self-insurance in satisfaction of
the requirements set forth above.
11. Quiet Possession and Use
(a) Title to the Equipment shall remain in Lessor, and Lessee shall keep
the Equipment free and clear of any and all liens, charges and
encumbrances of any party claiming by or through Lessee.
(b) Lessor convenants and warrants to and with Lessee that Lessor is the
lawful owner of the Equipment, free from all encumbrances, and that,
subject to Lessee performing the conditions hereof, Lessee shall
peaceably and quietly hold, possess and use the Equipment during the
term of this Lease Order. Lessor shall indemnify and hold harmless
Lessee and will protect and defend, at its sole expense, the rights
of Lessee described in this Paragraph against any claims against or
encumbrances on the Equipment asserted by or through Lessor.
-4-
<PAGE>
12. Lessee's Right to Sublease and Assign
Provided that Lessee is not in default hereunder, Lessee shall have the
following rights to sublease the Equipment or assign this Lease Order for
the remainder of the applicable lease term; provided, however, that Lessee
shall remain responsible for all provisions and obligations of this Lease
Order:
(a) Lessee may sublease the Equipment to a Ford Affiliated Company upon
reasonable prior notice to Lessor (a "Ford Affiliated Company" is
any subsidiary or affiliate of Lessee 51% of the voting stock or
assets of which are indirectly or directly owned or controlled by
Lessee); or
(b) Lessee may sublease the Equipment or assign this Lease Order to any
other party upon 30 days prior written notice to Lessor and provided
that Lessor consents in writing to such sublessee or assignee and
all terms and conditions of such sublease or assignment, such
consent not to be unreasonably withheld.
13. Assignment by Lessor
(a) Lessor may at any time and from time to time transfer, assign or
grant a security interest in its rights under this Lease Order, the
Equipment and/or the rental payments and other sums at any time due
and to become due, or at any time owing or payable, by Lessee to
Lessor under any of the provisions of this Lease Order, provided
that Lessor gives Lessee 30 days prior written notice of any
proposed transfer, assignment or grant occurring under this
Paragraph 16(a) and obtains Lessee's prior written approval, which
approval shall not be unreasonably withheld, provided, however, that
no notice to or consent by Lessee is required for an assignment to a
trust, limited partnership or other entity sponsored and managed by
Lessor or its affiliates. Any such assignment may be either absolute
or as collateral security for indebtedness of Lessor. There shall be
only one absolute assignee and one collateral assignee at any one
time. It shall be reasonable for Lessee to withhold its approval if
the proposed transfer, assignment or grant of a security interest
would in any way affect any then existing loan commitments or lines
of credit of Lessee or any member of Lessee's "Affiliated Group"
with such assignee or with any corporation that is a member of an
"Affiliated Group" of which such assignee is also a member. The term
"Affiliated Group" shall have the meaning set forth in Section
1504(a) of the Internal Revenue Code.
(b) No such assignee shall be obligated to perform any duty, covenant or
condition required to be performed by Lessor under any of the terms
and conditions hereof; provided, however, that such assignee shall
be obligated to comply with this Paragraph in the event such
assignee proposes to further transfer, assign or grant a security
interest in its rights under this Lease Order. Notwithstanding any
such assignment, each and every covenant, agreement, representation
and warranty of Lessor shall survive any such assignment and shall
be and remain the sole liability of Lessor and of every person, firm
or corporation succeeding (by merger, consolidation, purchase of
assets or otherwise) to all or substantially all of the business
assets or good will of Lessor. Without limiting the foregoing,
Lessee acknowledges and agrees that from and after the receipt by
Lessee of
-5-
<PAGE>
written notice of an assignment from Lessor (i) if so directed, all
rental and other payments which are the subject matter of the
assignment shall be paid to the assignee thereof at the place of
payment designated in such notice, (ii) if such assignment was made
for collateral purposes, the rights of any such assignee in and to
the rental and other payments by Lessee under any provisions of this
Lease Order shall be absolute and unconditional and shall not be
subject to any abatement whatsoever, or to any defense, set-off,
counterclaim or recoupment whatsoever by reason of any damage to or
loss or destruction of the Equipment, or any defect in or failure of
title of Lessor to the Equipment, or any interruption from
whatsoever cause (other than from any wrongful act of such assignee)
in the use, operation or possession of the Equipment or any
indebtedness or liability howsoever and whenever arising of Lessor
to Lessee or to any other person, firm, corporation or governmental
agency or taxing authority, or any misconduct or negligence of
Lessor, and (iii) the assignee shall have the sole right to exercise
all rights, privileges, consents and remedies (either in its own
name or in the name of Lessor for the use and benefit of the
assignee) which are permitted or provided to be exercised by Lessor.
Lessee shall confirm the above to such assignee in writing in such
form as such assignee may reasonably require. Lessee does not hereby
waive any claim which it may have against Lessor, any assignee or
any other party.
(c) It is further understood and agreed that if a security interest in
the Equipment is granted to an assignee of the rental payments as
additional security for indebtedness of Lessor, the security
agreement covering the Equipment shall expressly provide that the
right, title and interest of the secured party thereunder is subject
to the right and interest of Lessee in and to the Equipment pursuant
to this Lease Order.
14. Alterations and Attachments
Lessee may make or have made on its behalf alterations in and additions or
attachments to the Equipment which are necessary or desirable for the
maintenance or improvement of the Equipment, all at Lessee's sole cost and
expense, provided that no such alteration, addition or attachment reduces
the value or impairs the capabilities or efficiency of the Equipment or
violates the provisions of Revenue Procedure 79-48 or any successor rule,
regulation or Revenue Procedure. Lessor shall, at Lessee's sole expense,
execute and deliver from time to time such instruments, including but not
limited to orders for new equipment, components or modifications, and do
such other matters and things as may be necessary or appropriate to
Lessee's rights under this Paragraph 14. Any part, attachment,
appurtenance or accessory constituting a physical part of the Equipment
which cannot be readily removed without impairing the value or utility of
the Equipment and shall be deemed to be an accession to the Equipment and
shall from that time be deemed part of the Equipment, with title thereto
vesting in Lessor. Such alterations, additions or attachments shall not
modify the term of the lease of the Equipment with respect to which such
alterations, additions or attachments are made unless agreed to by Lessor
and Lessee. If Lessee shall affix the Equipment to any real property, the
Equipment shall remain personalty and shall not become part of the realty.
-6-
<PAGE>
15. Recordation
Lessee, upon demand in writing from Lessor, shall assist Lessor to cause
the Lease Order, all attachments and exhibits hereto and any and all
additional instruments or statements which shall be executed pursuant to
the terms hereof, so far as permitted by applicable law or regulations, to
be kept, filed, and recorded and to be re-executed, refiled, and
re-recorded at all times in the appropriate office and in such other
places, whether within or without the United States, as Lessor may
reasonably request to perfect and preserve its rights hereunder.
16. Inspection; Reports
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 Lease Order as Lessor may
reasonably request.
17. Late Payment Charges; Lessor's Right to Perform for Lessee
A Late Payment Charge equal to the lesser of the late payment charge
assessed against 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, will
accrue on any sum not paid when due for each day not paid, provided that
Lessor has furnished Lessee with an invoice therefor thirty (30) days
prior to the due date thereof and given ten business days' written notice
of such nonpayment. If Lessee falls 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
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.
18. Lessee's Options Upon Lease Expiration
Lessee has the option at the expiration of the Lease Term, exerciseable
with respect to all, but not less than all, items of Equipment leased
pursuant to Lease Orders having the same Expiration Date, (i) to return
the Equipment to Lessor, (ii) to renew the Lease Order at fair rental
value for a Renewal Term the length of which shall be determined by
agreement of Lessee and Lessor or (iii) to purchase the Equipment for cash
at its then fair market value. Lessee agrees to provide Lessor written
notice of its decision to return or purchase the Equipment or renew the
Lease Order not less than 90 days prior to the Expiration Date. If Lessee
fails to give Lessor 90 days' written notice, the Lease Term may, at
Lessor's option, be extended and continue until 90 days from the date
Lessor receives written notice of Lessee's decision to return or purchase
the Equipment or renew the Lease Order. Fair market value, 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
-7-
<PAGE>
appraiser of nationally recognized standing selected by mutual agreement
of and paid 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
within the continental United States. All packaging will include related
maintenance logs, operating manuals, and other related materials and will
be clearly marked so as to identify the contents thereof. The Equipment
will be returned in good and efficient operating 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. Lessor may, but is not required to, inspect the Equipment prior to
its return. If, upon inspection, Lessor determines that the condition of
any item of Equipment does not conform to the minimum requirements set
forth on Exhibit B hereto, Lessor will promptly notify Lessee of such
determination, specifying the repairs or refurbishments needed to place
the Equipment in the minimum acceptable condition. Lessor may, at its
option, either require Lessee to effect such repairs or itself effect such
repairs. Lessor may re-inspect the Equipment and require further repairs
as often as necessary until the Equipment is placed in acceptable
condition. In either case, all costs will be paid by Lessee. The Lease
Order 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
accepted for return by Lessor.
19. Lessee's Representations and Warranties
Lessee represents, warrants and certifies as of the date of execution and
delivery of each Lease Order 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 Lease
Order, 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 Lease Order;
(b) the Lease Order and all related documents (including, without
limitation, the Certificate of Acceptance) 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 Lease Order, 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 Lease Order;
-8-
<PAGE>
(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 Lease Order 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.
20. Default
(a) If, during the continuance of this Lease Order, one or more of the
following events ("Events of Default") shall occur:
(i) Lessee shall fail to make any part of the rental payments
provided in Section 2 hereof within ten days after receipt of
written notice of nonpayment;
(ii) Lessee shall make or permit any unauthorized assignment or
transfer of this Lease Order or possession of the Equipment to
any third party.
(iii) Lessee shall fail to observe or perform any other material
covenant, condition and agreement of Lessee contained herein
and such failure shall continue for 30 days after written
notice thereof from Lessor to Lessee. If such Event of Default
is of such a nature that it cannot reasonably be cured within
30 days, then Lessee shall not be deemed in default during any
period of time that it takes Lessee to cure such Event of
Default, provided that Lessee notifies Lessor in writing that
efforts to cure such defaults have been commenced and Lessee
is diligently pursuing such cure in good faith;
(iv) Lessee shall have entered against it by a court of competent
jurisdiction a decree or order for relief in respect of the
Lessee in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Lessee or
for any substantial part of its property, or ordering the
winding up or liquidation of its affairs and such decree or
order shall remain unstayed and in effect for a period of 90
consecutive days; or
(v) Lessee shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law nor or hereafter
in effect, or consent or the entry of an order for relief in
an involuntary case under any such law, or consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or similar
official of the Lessee) or for any substantial part of its
property, or make any general assignment for the benefit of
creditors, or fail generally to pay its debts as they become
due, or take any corporate action in furtherance of any of the
foregoing.
-9-
<PAGE>
(b) Upon the occurrence of an Event of Default, Lessor may, without
notice to Lessee, declare the applicable Lease Order in default and
may exercise any of the following remedies:
I. at Lessor's option, and in its sole discretion either:
(i) declare all Basic Rent and other sums due or to become due under
the Lease Order immediately due and payable, and sue to enforce the
payment thereof; or
(ii) 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 Lease Order, an amount equal to the greater of (A) the
Casualty Value set forth on the Lease Order 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 Lease Order 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
(i) proceed by appropriate court action either at law or in equity
to enforce performance by Lessee of the covenants and terms of the
Lease Order and to recover damages for the breach thereof; and
(ii) terminate the Lease Order 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
(iii) 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
(iv) 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.
-10-
<PAGE>
(c) The remedies provided for in this Lease Order shall not be deemed
exclusive, but shall be cumulative, and shall be in addition to all
other remedies existing at law or in equity. The failure or delay of
either party in exercising any rights granted it hereunder upon any
occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuation or
recurrence of any of such contingencies or similar contingencies and
any single or partial exercise of any particular right shall not
exhaust the same or constitute a waiver of any other right provided
herein.
21. Notice; Governing Law
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 Lease Order shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts.
AMERICAN FINANCE GROUP, INC. FORD MOTOR COMPANY
By: /s/ [ILLEGIBLE] By: /s/ J. L. Scicluna
------------------------ -------------------------------
J. L. Scicluna
Title: Vice President Title: Director, Facilities
-------------------------------
and Tools Purchasing Office
-11-
<PAGE>
Exhibit A
To Lease Order Terms and Conditions
Between American Finance Group, Inc., Lessor,
and Ford Motor Company. Lessee,
dated April __ , 1988.
ACCEPTANCE CERTIFICATE
The undersigned Ford Motor Company ("Lessee"), by its duly authorized
representative whose signature appears below, hereby represents, warrants and
certifies (a) that the Equipment described on the Internal Combustion Truck
Pre-Delivery/Delivery Report has been delivered to and inspected and found
satisfactory by Lessee and is accepted for lease by Lessee under Lease Order No.
_________ and the Lease Order Terms and Conditions dated April __, 1988 as
incorporated therein by reference, as of the Acceptance Date set forth below;
(b) all items of Equipment are new and unused as of the Acceptance Date, except
as otherwise specified, and (c) the representations and warranties of Lessee set
forth in the Lease Order Terms and Conditions are true and correct as of the
date hereof.
ACCEPTANCE DATE: _______________________
FORD MOTOR COMPANY
By: ____________________________
Authorized Signer
Accepted and Agreed To:
AMERICAN FINANCE GROUP, INC.
By ________________________________
Authorized Signer
0250F
<PAGE>
[ATTACH INTERNAL COMBUSTION TRUCK PRE-DELIVERY/DELIVERY REPORT]
<PAGE>
<TABLE>
<CAPTION>
[ILLEGIBLE]
- ------------------------------------------------------------------------------------------------------------------------------------
DATE DELIVERED LEASE SALE RENTAL DEMO HOUR METER MODEL SERIAL NUMBER
|_| |_| |_| |_|
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENGINE UPRIGHT CARRIAGE TYPE
Manufacturer ____________________ Lift Height __________________________ Pt. No. _____________________________
Serial No. ______________________ Pt. No. ______________________________ Size ________________________________
Model ___________________________ Control No. __________________________ |_| Hook |_| Pin
|_| Int. Free Lift |_| Standard
FUEL |_| Free Lift |_| 3-Stage FORK
|_| Gas |_| L.P.G. |_| Diesel |_| Wide 3-Stage |_| Heavy Duty Pt. No. _____________________________
|_| 4-Stage |_| SPED |_| Hook |_| Pin |_| Other
DIFFERENTIAL |_| Other
|_| Std. |_| Lo-speed ATTACHMENT
CYL. ASSY. NO. & MFG. CODE Type ________________________________
TRANSMISSION Main _________________________________ Mfg. ________________________________
Manufacturer ____________________ Free Lift ____________________________ Model _______________________________
Serial No. ______________________ Serial No. __________________________
Pt. No. _________________________ TIRE SIZE AND TYPE
Drive ____________ Steer ____________ DEALER INSTALLED OPTIONS OR
TYPE |_| Std. _________ |_| Std. _________ ACCESSORIES
|_| Standard |_| Powershift |_| Poly _________ |_| Poly _________ _______________________________________
|_| Other ________ |_| Other ________ _______________________________________
_______________________________________
<CAPTION>
- -------------------------------------------------------------------------
Pre-Delivery Check List
Mark box with "X" when item is checked and/or corrected per specifi- -------------------------------------------------------
cations prior to delivery. Mark box with "O" when item does not apply. CUSTOMER DELIVERY SERVICE CHECK LIST
<S> <C> <C>
|_| Engine oil level |_| Inching qualities Review Owners & Operators Guide and Explain
|_| Cooling system fluid level |_| Brake operation Each Item to the Customer. Mark Each Box With an
|_| Battery acid level |_| Upright mounting hardware "X" When Complete.
|_| Brake fluid level |_| Upright adjustment & lube
|_| Steering gear oil level |_| Tilt limiters correct |_| Capacity Limitations
|_| Differential oil level |_| Attachment mounting |_| Operator Safety Rules
|_| Transmission oil level |_| Steering operation |_| Name Plate Correct
|_| Hydraulic system oil level |_| hydraulic system operation |_| Location and Use of Instruments & Controls
|_| General lubrication (cold) |_| Demonstrate Operator Procedures & Techniques
|_| Tire inflation (cold) |_| Hydraulic system operation |_| Routine Maintenance & Lube Requirements
|_| Hoses routed properly (loaded) |_| Operation & Maintenance of Attachment
|_| Air cleaner hose connections |_| Attachment operation |_| Warranty Policy
|_| Electrical connections & |_| Oil & fluid leaks |_| Parts Ordering Procedures
wire routing |_| Engine r.p.m. (idle & |_| Dealer's After-Delivery Services
|_| Horn governed) |_| Parts Book Delivered
|_| Warning lights & guages |_| Engine starting (hot) |_| Keys Delivered
|_| Optional equipment |_| Wheel lugs & axle studs |_| O. & O. Guide Delivered
|_| Engine starting (cold) retorqued |_| S.I.O. Package (if applicable)
|_| Clutch operation |_| Unit matches customer specs -------------------------------------------------------
|_| Gear shifting |_| Condition of paint
|_| Name plate correct
|_| U.L. Tag
Serviceman's Signature ______________________________
Date ____________________________________
- -------------------------------------------------------------------------
<CAPTION>
<S> <C>
______________________________________________________________
Owner
______________________________________________________________
Dealer ______________________________________________________________
Address
______________________________________________________________
Address ______________________________________________________________
City State Zip
______________________________________________________________
City State Zip This machine has been received in satisfactory condition. We
have received the Owner's and Operator's Guide and
At the time of delivery, the Parts Manual, Owner's and instruction regarding the operation, maintenance, safety
Operator's Guide and Warranty Policy were explained and practices and warranty policy in accordance with the Delivery
delivered. The delivery service was conducted as noted above. Check List and O & O Guide.
X ________________________________________ _________________ X ________________________________________ _________________
Dealer Representative's Date Customer Representative's Date
Signature Signature
599824 R1
FACTORY COPY
</TABLE>
<PAGE>
Exhibit B
To Lease Order Terms and Conditions
Between American Finance Group, Inc., Lessor,
and Ford Motor Company, Lessee,
dated April __, 1988.
CONDITION OF EQUIPMENT AT EXPIRATION OF LEASE TERM:
1. When loaded to its rated capacity, each Unit shall:
(a) Start under its own power and idle without water or fuel leaks and
without oil leaks in excess of one drip per minute.
(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. Oil leakage must not be such that there is more
than one drip per minute. 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. Each Unit shall have tires with at least thirty-five percent (35%)
remaining tread, and without flat spots. Chunking shall be permitted, but
there shall be no chunks larger than a half dollar in size.
4. Each Unit shall be complete with all parts and pieces.
0250F
<PAGE>
FIRST AMENDMENT TO
LEASE ORDER TERMS
AND CONDITIONS
This FIRST AMENDMENT, dated as of June 28, 1988, between Ford Motor
Company ("Lessee") and American Finance Group ("Lessor") amends Lease Order
Terms and Conditions dated as of April 5, 1988, between Lessee and Lessor (the
"Lease Order"), as follows.
1. Section 6 of the Lease Order Terms and Conditions is hereby amended
and restated to read in its entirety as follows:
"6. Acceptance
Lessee shall accept the Equipment if the Equipment has operated
efficiently for the period indicated in this Lease Order as the "Acceptance
Period" in conformance with both technical specifications therefor and any
proposal submitted to Lessee by Lessor. Lessee s acceptance shall be evidenced
by its execution and delivery to Lessor of the "Certificate of Acceptance" in
the form attached as Exhibit A. Lessee represents and warrants that Lessor is
entitled to rely without independent verification or investigation on each such
Certificate of Acceptance bearing a signature purporting to be that of a
representative of Lessee as a true and genuine signature of a duly authorized
agent of Lessee, valid and binding against Lessee for purposes of acceptance
hereunder. Rental shall begin to accrue as of the first day of the acceptance
period (the "Rental Start Date") at the Daily Acceptance Period Rent per unit of
Equipment accepted shown on the Lease Order (such Daily Acceptance Period Rent
being calculated as the per diem amount, per unit accepted, of the Monthly Rent
based on a thirty-day month). Rental at the Monthly Rent shown on the Lease
Order shall accrue and be payable in advance commencing as of the first day of
calender quarter following the month in which the last unit of Equipment under a
Lease Order has been accepted. (Lease Rate Factors shown on the Lease Order are
the multiple which, applied to the per Unit or aggregate Equipment Cost (as the
case may be), produce the Acceptance Period Rent per Unit or the Monthly Rent,
respectively.)"
2. This First Amendment shall apply to all equipment leased pursuant to
Lease Orders for which the Rental Start Date is on or after May 5,
1988.
IN WITNESS WHEREOF the parties hereto have caused this First Amendment to
be executed and delivered by their duly authorized representatives as of the
date first above written.
AMERICAN FINANCE GROUP
By: /s/ [ILLEGIBLE]
----------------------------------------------------
Title: Associate General Counsel and Assistant Secretary
-------------------------------------------------
FORD MOTOR COMPANY
By: /s/ J.L. Siciluna
----------------------------------------------------
Title: Director
-------------------------------------------------
Facilities & Tools Purchasing Office
<PAGE>
SECOND AMENDMENT TO LEASE ORDER TERMS AND CONDITIONS
This SECOND AMENDMENT, dated as of May 19, 1989, between Ford Motor
Company ("Lessee") and American Finance Group ("Lessor") amends Lease Order
Terms and Conditions dated as of April 5, 1988, between Lessee and Lessor (as
successor in interest to American Finance Group, Inc.) (the "Lease Order Terms
and Conditions"), as follows:
1. Section 6 of the Lease Order Terms and Conditions is hereby amended and
restated to read in its entirety as follows:
"6. Acceptance
Lessee shall accept the Equipment if the Equipment has operated
efficiently for the period indicated in this Lease Order as the
"Acceptance period" in conformance with both technical specifications
therefor and any proposal submitted to Lessee by Lessor. Lessee's
acceptance shall be evidenced by its execution and delivery to Lessor of
the "Acceptance Certificate" in the form attached as Exhibit A. Lessee
represents and warrants that Lessor is entitled to rely without
independent verification or investigation on each such Acceptance
Certificate bearing a signature purporting to be that of a representative
of Lessee as a true and genuine signature of a duly authorized agent of
Lessee, valid and binding against Lessee for purposes of acceptance
hereunder and for purposes of enforcement of the Lease. Rentals shall
begin to accrue as of the first day of the acceptance period (the "Rental
Start Date") at the Daily Acceptance Period Rent per unit of Equipment
accepted shown on the Lease Order (such Daily Acceptance Period Rent being
calculated as the per diem amount, per unit accepted, of the Monthly Rent
based on a thirty-day month). Rental at the Monthly Rent shown on the
Lease Order shall accrue and be payable in advance commencing as of the
first day of the month following the month in which the last unit of
Equipment under a Lease Order has been accepted. (Lease Rate Factors shown
on the Lease Order are the multiple which, applied to the per Unit or
aggregate Equipment Cost (as the case may be), produce the Acceptance
Period Rent per Unit or the Monthly Rent, respectively.)"
2. For all purposes under the Lease Order Terms and Conditions and Lease
Orders, "Basic Rent" and "Monthly Rent" shall be synonymous.
3. This Second Amendment shall apply to all equipment leased pursuant to
Lease Orders for which the Rental Start Date is on or after May 19, 1989.
As amended hereby, the Lease Order Terms and Conditions are hereby
approved, confirmed and ratified and are in full force and effect.
IN WITNESS WHEREOF the parties hereto have caused this Second Amendment to
be executed and delivered by their duly authorized representatives as of the
date first above written.
FORD MOTOR COMPANY AMERICAN FINANCE GROUP
By: /s/ [ILLEGIBLE] 12-18-90 By: /s/ [ILLEGIBLE]
------------------------------ ----------------------------------
Title: Buyer Title:
--------------------------- -------------------------------
0526F/2
<PAGE>
[FORD LOGO]
FORD MOTOR COMPANY, A DELAWARE CORPORATION SHOW THIS PURCHASE ORDER NUMBER ON
BUYER WILL PURCHASE AND RECEIVE, AND SHIPPING AND BILLING PAPERS
-----------------
PURCHASE ORDER AP-5300-034222-0
-----------------
LESSOR/MANUFACTURER
American Finance Group, Inc.
Correspondence to: DATE OF ORDER DATE OF DELIVERY
Fraza Equipment 8-30-90 3-07-91
15725 Twelve Mile Road
Roseville, MI 48066-1859 REQUISITION NO. PAYMENT TERMS
PN-5300-034222 1st day of each
Supplier Duns month per lease
Code Number
SELLER, WILL SELL AND DELIVER SUPPLIES OR SERVICES SPECIFIED HEREIN,
SUBJECT TO THE TERMS AND CONDITIONS ON THE FACE AND REVERSE SIDE HEREOF.
ROUTING SHIPPING POINT
Vendor's Delivery Houston, TX
FOLD
SALES - USE TAX STATUS - To be paid by Lessee.
DELIVERY TRANSPORTATION COSTS
F.O.B. - Destination Prepaid and add to invoice
SHIP TO: INVOICE TO: PAYMENTS TO BE SENT:
Ford Motor Company Ford Motor Company American Finance
Dearborn Assembly Plant Dearborn Assembly Plant Group, Inc.
Rouge Area Rec AA P.O. Box 1659 Exchange Place
Dearborn, MI 48121 Dearborn, MI 48121 Boston, MA 02109
ATTN: Lease Financing
QUANTITY EQUIPMENT DESCRIPTION
- -------- ---------------------
1) Caterpillar Model #T100D fork lift truck per Ford Motor
Company ZA-1 Standards, OSHA Regulations, and Lessor's
Proposal dated 8-16-90. Above to be leased per Master
lease dated April 5, 1988.
A. Unit Value: Each $29,063.00
B. Fixed Monthly Rent: Each $ 696.11
C. Aggregate Rent: Each $25,060.00
D. Monthly Rental Factor: Each .023952
E. Lease Term: Each 3 yrs.
Lease term begins on date of delivery to Ford.
CONFIRMING CONTACT: Ed Patrick, 8/30/90
PROJECT AND ITEM NUMBERS: 50241L
By: /s/ R. R. Cronan
------------------------
FORD MOTOR CO., PURCHASING
R. R. Cronan, 125
Requested By: B. Gray
[ILLEGIBLE], DATE TYPED: 9/17/90
TG/RC/ms
(70591/20)
Page 1
SUPPLY STAFF (P) ORIGINAL
MAY 87 492F Previous Editions May Not Be Used.
<PAGE>
[FORD LOGO]
Purchase Notification
AMENDMENT AMENDMENT AMENDMENT |_| Requisition
- --------------------------------------------------------------------------------
Show these numbers on shipping and billing documents
- --------------------------------------------------------------------------------
Blanket order number (if any) Purchase Order Number, or Release Authori-
zation when blanket order is entered at left.
No. G 28 P089 204034 D.
- --------------------------------------------------------------------------------
F.O.B. (Title transfer point) (other) Date of order
|X| Carrier seller's plant |_| Destination 4/16/92
- --------------------------------------------------------------------------------
Transportation Terms (other) Delivery date
|_| Collect |X| Prepaid 5/01/90
- --------------------------------------------------------------------------------
Payment terms Shipping point
NET 30 DAYS
- --------------------------------------------------------------------------------
Routing
|X| Seller's delivery |_| By destination traffic FUNDS =USD
- --------------------------------------------------------------------------------
Ford Motor company, buyer, agrees to purchase and receive, and
AMER FINANCE GROUP INC
TREAS DEPT 14TH FLOOR
EXCHANGE PLC
BOSTON MA 02139
Seller, agrees to sell and deliver supplies or services specified herein
subject to the terms and conditions on the face and reverse side hereof.
- --------------------------------------------------------------------------------
* Ship to:
FORD MOTOR COMPANY
AUTOVIDRIO, S.A. DE C.V.
11405 ROJAS DRIVE UNIT 9/10
EL PASO, TX 79936
ATTN: RECEIVING
- --------------------------------------------------------------------------------
SALES AND USE TAXES
|x| Do not bill sales or use tax because purchases are covered by direct pay
permits or exemptions.
|_| Do not bill sales or use tax because purchases are for resale.
See Section 15 for additional information and instructions.
- --------------------------------------------------------------------------------
* Invoice to:
FORD MOTOR COMPANY
FORD MOTOR COMPANY
P.O. BOX 1248
DEARBORN, MI. 48121
================================================================================
INVOICE SHOULD BE DATED BETWEEN THE FIRST AND THE FIFTEENTH
OF THE MONTH PRECEEDING DUE DATE. C0NTACT PERSON AT FORD
IS DEBRA LAPANSEE AT 313 390 5850.
- --------------------------------------------------------------------------------
LINE # * ITEM NUMBER * QUANTITY * U/M * PRC/QTY U/M UNIT PRICE
- --------------------------------------------------------------------------------
- ------------ DESCRIPTION ---------------- ---------- DESCRIPTION -----------
PURPOSE: FORKLIFTS AND MULES - PHASE II
CLAUSES HAVE BEEN CHANGED TO:
ATTENTION: INVOICING INSTRUCTIONS HAVE BEEN CHANGED TO:
***********************************************************
***********************************************************
** **
** BILL P.O. BOX 6049, DEARBORN, MI. 48121 **
***********************************************************
***********************************************************
*THESE ITEMS MUST APPEAR ON ALL SHIPPING AND BILLING DOCUMENTS
PAYEE SHOULD BE JOB9L - AMERICAN FINANCE GROUP P.O. BOX
360178, PITTSBURGH, PA 15251-6178/
REQUESTOR IS: S. ALBIN (915)-779-8806
* SUPPLIER CODE - JOV9A BUYER IS: MARY ARREOLA (915)-592-7811
--------------------------------
By /S/ [ILLEGIBLE]
----------------------------
Ford Motor Company, Purchasing
- --------------------------------------------------------------------------------
R089284R02 Estimated cost *For additional information contact:
Name - Phone No.
PAGE 0001 OF 0001 Mary Arreola
- --------------------------------------------------------------------------------
Approved by Date Approved by Date
- --------------------------------------------------------------------------------
Approved by Date Approved by Date
- --------------------------------------------------------------------------------
(P)
OCT, 89 234-492 Ca4 1
<PAGE>
[FORD LOGO]
Purchase Notification
|_| Release |X| Purchase Order |_| Requisition
- --------------------------------------------------------------------------------
Ford Motor company, buyer, agrees to purchase and receive, and
MEDLEY MATERIAL HANDLING INC.
11640 ROJAS DR
EL PASO TX
79936
Seller, agrees to sell and deliver supplies or services specified herein
subject to the terms and conditions on the face and reverse side hereof.
- --------------------------------------------------------------------------------
Show these numbers on shipping and billing documents
- --------------------------------------------------------------------------------
Blanket order number (if any) Purchase Order Number, or Release Authori-
zation when blanket order is entered at left.
No. G 28 P089 204034
- --------------------------------------------------------------------------------
F.O.B. (Title transfer point) (other) Date of order
|X| Carrier seller's plant |_| Destination 12/06/89
- --------------------------------------------------------------------------------
Transportation Terms (other) Delivery date
|_| Collect |X| Prepaid PPD & ADD 5/01/90
- --------------------------------------------------------------------------------
Payment terms Shipping point
NET 30 DAYS
- --------------------------------------------------------------------------------
Routing
|X| Seller's delivery |_| By destination traffic FUNDS =USD
- --------------------------------------------------------------------------------
* Ship to:
FORD MOTOR COMPANY
AUTOVIDRIO, S.A. DE C.V.
11405 ROJAS DRIVE UNIT 9/10
EL PASO, TX 79936
ATTN: RECEIVING
- --------------------------------------------------------------------------------
SALES AND USE TAXES
|x| Do not bill sales or use tax because purchases are covered by direct pay
permits or exemptions.
|_| Do not bill sales or use tax because purchases are for resale.
See Section 15 for additional information and instructions.
- --------------------------------------------------------------------------------
* Invoice to:
FORD MOTOR COMPANY
DPO - ACCOUNTING
P.O. BOX 1248
DEARBORN, MI. 48121
================================================================================
$$ EFF 10/24/88, SEE NEW "INVOICE TO" LOCATION & ZIP CODE $$
MAIL INVOICES TO ABOVE ADDRESS - SHOW COMPLETE PROCUREMENT
NUMBER X-XX-XXXX-XXXXXX-XX, LINE NUMBERS XXX, ITEM NUMBERS
XX-XX-XXX ANP YOUR SUPPLIER CODE XXXXX ON ALL INVOICES.
- --------------------------------------------------------------------------------
LINE # * ITEM NUMBER * QUANTITY * U/M * PRC/QTY U/M UNIT PRICE
- --------------------------------------------------------------------------------
- ------------ DESCRIPTION ---------------- ---------- DESCRIPTION -----------
001 MI SC 902414 18O MTH 492.76000
FIVE YEAR LEASE FOR THREE (3) NEW YALE ELECTRIC FORKLIFT TRUCKS WITH l0,O0O#
CAPACITY AT 24" LOAD CENTER EQUIPPED AS SPECIFIED PER PROPOSAL # 063166 AND
QUOTE G28Q089284Q01. MODEL # ERC1OOHBN48SEO85. LEASE PAYMENTS TO BE BILLED
ON A MONTHLY BASIS.
002 MI SC 902415 12O MTH 71.13000
FIVE YEAR LEASE ON TWO (2) NEW YALE WORKSAVER TOW TRACTOR (TUGGERS) WITH A
10,000# ROLLING LOAD CAPACITY EQUIPPED AS SPECIFIED IN PROPOSAL # 063168 AND
QUOTE #G28Q089284Q01. MODEL # MTWR750LAN24S. LEASE PAYMENTS TO BE BILLED ON
A MONTHLY BASIS.
*THESE ITEMS MUST APPEAR ON ALL SHIPPING AND BILLING DOCUMENTS
TOTAL PRICE 97232.40
********** TEXAS TAX EXEMPT - 16-1-38-0549190-2 **********
REQUESTOR IS: S. ALBIN (915)-779-8806
* SUPPLR. CODE - DV08D BUYER IS:
--------------------------------
By /S/ [ILLEGIBLE]
----------------------------
Ford Motor Company, Purchasing
- --------------------------------------------------------------------------------
R089284R02 Estimated cost *For additional information contact:
Name - Phone No.
PAGE 0001 OF 0001 S ALBIN 915-779-8806
- --------------------------------------------------------------------------------
Approved by Date Approved by Date
- --------------------------------------------------------------------------------
Approved by Date Approved by Date
- --------------------------------------------------------------------------------
(P) B&A
MAR. 87 492ca-8 1
<PAGE>
[FORD LOGO]
FORD MOTOR COMFANY, A DELAWARE CORPORATION SHOW THIS PURCHASE ORDER NUMBER ON
BUYER WILL PURCHASE AND RECEIVE, AND SHIPPING AND BILLING PAPERS
--------------
PURCHASE ORDER AP-43-399968-9a
AMENDMENT
-------------- AMENDMENT NUMBER
American Finance Group, Inc 2
Correspondence to:
Clark Equipment Company AMENDMENT DATE
4300 Delemere Court
Royal Oak, MI 48073 12-21-89
Supplier Duns EFFECTIVE DATE
Code Number
12-21-89
SELLER WILL SELL AND DELIVER SUPPLIES OR SERVICES SPECIFIED HEREIN.
SUBJECT TO THE TERMS AND CONDITIONS ON THE FACE AND REVERSE SIDE HEREOF.
FOLD
CODE NUMBER:
DESCRIPTION OF MATERIAL: Rental of (6) Clark Fork Trucks
THE ABOVE PURCHASE ORDER IS HEREBY AMENDED BY CHANGING THE:
Price and Specifications
FROM TO
- -------------------------------------- ---------------------------------------
PRICE PRICE
(1) - Truck:
------------
A. Unit Value $22,045.00 A. Unit Value $22,245.00
B. Monthly Rent $ 398.79 B. Monthly Rent $ 402.41
C. Aggregate Rent $23,927.00 C. Aggregate Rent $24,l45.00
D. Monthly Rental Factor .018090 D. Monthly Rental Factor .018090
E. Lease Term 5 yrs. E. Lease Term 5 yrs.
ON9673/SR354709
(1) - Truck:
------------
A. Unit Value $23,955.00
B. Monthly Rent $ 433.34
C. Aggregate Rent $26,000.00
D. Monthly Rental .018090
E. Lease Term 5 years
ON9674/82354710
(4) Trucks No Change
Na 1/5/90
REASON: Specification Change on (2) trucks - (4) remain as written.
"BILL TO" LOCATION: "SHIP TO" LOCATION:
Wayne Assembly Wayne Assembly
By: /s/ R. Cronan
ON9673/SR354709 -----------------------------------
& ON9674/SR354710 Ford Motor Co., Purchasing
Na 1/5/90 R. R. Cronan, Buyer 125
Requestor: D. Turnwald TYPING DATE: 12/22/89
Phone: (313) 322-6531
6657I/1)ms
DELIVERY TO REMAIN UNCHANGED UNLESS INDICATED ABOVE
This purchase order amendment does not require acknowledgement. It is assumed
that the provisions of this amendment are acceptable to you. If you do not
accept it as written, please return it with your counterproposal immediately.
Page 1
SUPPLY STAFF (P) ORIGINAL
MAY 87 492F Previous Editions May Not Be Used
<PAGE>
[FORD LOGO]
FORD MOTOR COMFANY, A DELAWARE CORPORATION SHOW THIS PURCHASE ORDER NUMBER ON
BUYER WILL PURCHASE AND RECEIVE, AND SHIPPING AND BILLING PAPERS
--------------
PURCHASE ORDER AP-43-399968-9
AMENDMENT
-------------- AMENDMENT NUMBER
American Finance Group, Inc 1
% Clark Equipment Company
4300 Delemere Court AMENDMENT DATE
Royal Oak, MI 48073
4/07/89
Supplier Duns
Code Number EFFECTIVE DATE
4/07/89
SELLER WILL SELL AND DELIVER SUPPLIES OR SERVICES SPECIFIED HEREIN.
SUBJECT TO THE TERMS AND CONDITIONS ON THE FACE AND REVERSE SIDE HEREOF.
FOLD
CODE NUMBER:
DESCRIPTION OF MATERIAL: Fork Trucks
THE ABOVE PURCHASE ORDER IS HEREBY AMENDED BY CHANGING THE:
Price and Specifications
FROM TO
- ------------------------------------ ---------------------------------------
PRICE PRICE
A. Unit Value $17,640.00 A. Unit Value $22,045.00
B. Monthly Rent $ 319.10 B. Monthly Rent $ 398.79
C. Aggregate Rent $19,146.00 C. Aggregate Rent $23,927.00
D. Monthly Rental Factor .018090 D. Monthly Rental Factor .018090
E. Lease Term 5 years E. Lease Term 5 years
ON9504/ER118989
MG 4/20/89
REASON: Specification Change
CONFIRMING CONTACT:
"BILL TO" LOCATION: "SHIP TO" LOCATION:
P.O. Box 6004 Wayne Assembly Plant
By: /s/ R. Cronan
-----------------------------------
Ford Motor Co., Purchasing
R. R. Cronan, Buyer 125
TG/RC/ms TYPING DATE: 4/17/89
(6180I/1)
Requested: D. G. Turnwald, Issued date: 2/21/89
NAAO, 1529-A, phone 322-6531
DELIVERY TO REMAIN UNCHANGED UNLESS INDICATED ABOVE
This purchase order amendment does not require acknowledgement. It is
assumed that the provisions of this amendment are acceptable to you. If you
do not accept it as written, please return it with your counterproposal
immediately.
Page 1
SUPPLY STAFF (P) ORIGINAL
MAY 87 492F Previous Editions May Not Be Used
<PAGE>
[FORD LOGO]
FORD MOTOR COMFANY, A DELAWARE CORPORATION SHOW THIS PURCHASE ORDER NUMBER ON
BUYER WILL PURCHASE AND RECEIVE, AND SHIPPING AND BILLING PAPERS
-----------------
PURCHASE ORDER AP-4300-399968-9
-----------------
LESSOR/MANUFACTURER DATE OF ORDER DATE OF DELIVERY
American Finance Group, Inc. 1-18-89 6-28-89
% Clark Equipment Company
4300 Delemere Court REQUISITION NO. PAYMENT TERMS
Royal Oak, MI 48073 PN-4300-399968 1st day of each
month per lease
Supplier Duns
Code Number
SELLER, WILL SELL AND DELIVER SUPPLIES OR SERVICES SPECIFIED HEREIN,
SUBJECT TO THE TERMS AND CONDITIONS ON THE FACE AND REVERSE SIDE HEREOF.
FOLD
ROUTING SHIPPING POINT
Vendor's Delivery Lexington, KY.
SALES - USE TAX STATUS - To be paid by Lessee.
DELIVERY TRANSPORTATION COSTS
F.O.B. - Destination Prepaid and add to invoice
SHIP TO: INVOICE TO: PAYMENTS TO BE SENT
Ford Motor Company Ford Motor Company American Finance
Wayne Assembly Plant Wayne Assembly Plant Group, Inc.
37500 Van Born P.O. Box 6004 Exchange Place
Wayne, MI 48183 Dearborn, MI 48121 Boston, MA 02109
ATTN: Lease Financing
QUANTITY EQUIPMENT DESCRIPTION
- -------- ---------------------
(4) Clark Model #ECS-27 fork lift truck per Ford Motor
Company ZA-1 Standards, Body and Assembly
Specifications, OSHA Regulations, and Lessor's Proposal
#CAM 9-18 dated 9/18/88. Above to be leased per Master
Lease dated April 5, 1988.
A. Unit Value: Each $17,640.00
B. Fixed Monthly Rent: Each $ 319.10
C. Aggregate Rent: Each $19,146.00
D. Monthly Rental Factor: Each .018090
E. Lease Term: Each 5 yrs.
Lease term begins on date of delivery to Ford.
ON 9504/ER 118989
POA LETTER SENT 2/20/89
CONFIRMING CONTACT: Chuck Movalson, phone 1/18/89 /s/ [ILLEGIBLE] 2/20/89
PROJECT AND ITEM NUMBERS: 20218-L-1
By: /s/ R. R. Cronan
------------------------
FORD MOTOR CO., PURCHASING
R. R. Cronan, 125
Requested By: B. Gray, Issued Date: 9/1/88
Room 1529A- NAAO, phone: 322-6510 DATE TYPED: 9/17/90
TG/RC/ms
(5911I/1)
Page 1
SUPPLY STAFF (P) ORIGINAL
MAY 87 492F Previous Editions May Not Be Used.
<PAGE>
[FORD LOGO]
FORD MOTOR COMFANY, A DELAWARE CORPORATION SHOW THIS PURCHASE ORDER NUMBER ON
BUYER WILL PURCHASE AND RECEIVE, AND SHIPPING AND BILLING PAPERS
-----------------
PURCHASE ORDER AP-5300-692727-0
-----------------
LESSOR/MANUFACTURER
American Finance Group, Inc. DATE OF ORDER DATE OF DELIVERY
Correspondence to: 8-30-90 3-07-91
Fraza Equipment
15725 Twelve Mile Road REQUISITION NO. PAYMENT TERMS
Roseville, MI 48066-1859 PN-5300-692727 1st day of each
month per lease
Supplier Duns
Code Number
SELLER, WILL SELL AND DELIVER SUPPLIES OR SERVICES SPECIFIED HEREIN,
SUBJECT TO THE TERMS AND CONDITIONS ON THE FACE AND REVERSE SIDE HEREOF.
FOLD
ROUTING SHIPPING POINT
Vendor's Delivery Houston, TX
SALES - USE TAX STATUS - To be paid by Lessee.
DELIVERY TRANSPORTATION COSTS
F.O.B. - Destination Prepaid and add to invoice
SHIP TO: INVOICE TO: PAYMENTS TO BE SENT
Ford Motor Company Ford Motor Company American Finance
Dearborn Assembly Plant Dearborn Assembly Plant Group, Inc.
Rouge Area Rec AA P.O. Box 1659 Exchange Place
Dearborn, MI 48121 Dearborn, MI 48121 Boston, MA 02109
ATTN: Lease Financing
QUANTITY EQUIPMENT DESCRIPTION
- -------- ---------------------
1) Caterpillar Model #T-70D fork lift truck per Ford Motor
Company ZA-1 Standards, OSHA Regulations, and Lessor's
Proposal dated 8-20-90. Above to be leased per Master
lease dated April 5, 1988.
A. Unit Value: Each $24,190.00
B. Fixed Monthly Rent: Each $ 597.39
C. Aggregate Rent: Each $20,858.00
D. Monthly Rental Factor: Each .023952
E. Lease Term: Each 3 yrs.
Lease term begins on date of delivery to Ford.
CONFIRMING CONTACT: Ed Patrick, 8/30/90
PROJECT AND ITEM NUMBERS: 50241L
By: /s/ R. R. Cronan
------------------------
FORD MOTOR CO., PURCHASING
R. R. Cronan, 125
Requested By: B. Gray
[ILLEGIBLE], DATE TYPED: 9/17/90
TG/RC/ms
(7059I/17)
Page 1
SUPPLY STAFF (P) ORIGINAL
MAY 87 492F Previous Editions May Not Be Used.
<PAGE>
[FORD LOGO]
FORD MOTOR COMFANY, A DELAWARE CORPORATION SHOW THIS PURCHASE ORDER NUMBER ON
BUYER WILL PURCHASE AND RECEIVE, AND SHIPPING AND BILLING PAPERS
--------------
PURCHASE ORDER AP-53-692727-0
AMENDMENT
-------------- AMENDMENT NUMBER
American Finance Group 1
Correspondence to:
Fraza Equipment Company AMENDMENT DATE
15725 Twelve Mile Road
Roseville, MI 48066-1859 5-06-91
Supplier Duns EFFECTIVE DATE
Code Number
3-07-91
SELLER WILL SELL AND DELIVER SUPPLIES OR SERVICES SPECIFIED HEREIN.
SUBJECT TO THE TERMS AND CONDITIONS ON THE FACE AND REVERSE SIDE HEREOF
FOLD
CODE NUMBER:
DESCRIPTION OF MATERIAL: (1) Cat. Model T-70-D - Lease
THE ABOVE PURCHASE ORDER IS HEREBY AMENDED BY CHANGING THE:
Price and Specifications
FROM TO
- ------------------------------------ ---------------------------------------
PRICE PRICE
(1) Unit (1) Unit
-------- --------
A. Unit Value $24,190.00 A. Unit Value $30.070.00
B. Monthly Rent $ 579.39 B. Monthly Rent $ 720.24
C. Aggregate Rent $20,858.00 C. Aggregate Rent $25,929.00
D. Monthly Rental Factor .023952 D. Monthly Rental Factor .023952
E. Lease Term 3 yrs. E. Lease Term 3 yrs.
REASON: Specification Change
"BILL TO" LOCATION: "SHIP TO" LOCATION:
P.O. Box 1659 Dearborn Assembly
By: /s/ R. Cronan
-----------------------------------
Ford Motor Co., Purchasing
R. R. Cronan, Buyer 125
Requestor: D. Graham TYPING DATE: 5/17/91
Dept. 2A32, NAA0
7309I/4)ms
DELIVERY TO REMAIN UNCHANGED UNLESS INDICATED ABOVE
This purchase order amendment does not require acknowledgement. It is assumed
that the provisions of this amendment are acceptable to you. If you do not
accept it as written, please return it with your counterproposal immediately.
Page 1
SUPPLY STAFF (P) ORIGINAL
MAY 87 492F Previous Editions May Not Be Used
