<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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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 _______________________
Commission file number 0-19135
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American Income Partners V-D Limited Partnership
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(Exact name of registrant as specified in its charter)
Massachusetts 04-3090151
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(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
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Title of each class Name of each exchange on which registered
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- -------------------------------- --------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
480,227 Units Representing Limited Partnership Interest
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(Title of class)
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. Not applicable. Securities are nonvoting for this purpose. Refer
to Item 12 for further information.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to security holders for
the year ended December 31, 1999 (Part I and II)
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AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP
FORM 10-K
TABLE OF CONTENTS
Page
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PART I
Item 1. Business 3
Item 2. Properties 4
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
2
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PART I
Item 1. Business.
(a) General Development of Business
American Income Partners V-D Limited Partnership (the "Partnership") was
organized as a limited partnership under the Massachusetts Uniform Limited
Partnership Act (the "Uniform Act") on May 21, 1990 for the purpose of acquiring
and leasing to third parties a diversified portfolio of capital equipment.
Partners' capital initially consisted of contributions of $1,000 from the
General Partner (AFG Leasing IV Incorporated) and $100 from the Initial Limited
Partner (AFG Assignor Corporation). On September 27, 1990, the Partnership
issued 480,227 units, representing assignments of limited partnership interests
(the "Units"), to 806 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 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 exceed the acquisition cost of the
leased equipment. Operating leases are those in which the aggregate
undiscounted, noncancellable rental payments are less than the acquisition cost
of the leased equipment.) Industry segment data is not applicable.
(c) Narrative Description of Business
The Partnership was organized to acquire a diversified portfolio of capital
equipment subject to various full payout and operating leases and to lease the
equipment to third parties as income-producing investments. More specifically,
the Partnership's primary investment objectives were to acquire and lease
equipment that would:
1. Generate quarterly cash distributions;
2. Preserve and protect invested capital; and
3. Maintain substantial residual value for ultimate sale.
The Partnership has the additional objective of providing certain federal
income tax benefits.
The Closing Date of the Offering of Units of the Partnership was September
27, 1990. The initial purchase of equipment and the associated lease commitments
occurred on September 28, 1990. 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. However, 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 6 to the financial statements in the
1999 Annual Report.
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 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 4 to
the financial statements included in Item 14, herein.
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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 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.
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Item 3. Legal Proceedings.
Incorporated herein by reference to Note 6 to the financial statements in the
1999 Annual Report.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
5
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PART II
Item 5. Market for the Partnership's Securities and Related Security Holder
Matters.
(a) Market Information
There is no public market for the resale of the Units and it is not
anticipated that a public market for resale of the Units will develop.
(b) Approximate Number of Security Holders
At December 31, 1999, there were 757 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 6 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 $ 227,476 $ 11,374 $ 216,102
Total 1998 distributions 227,476 11,374 216,102
----------- ----------- -----------
Total $ 454,952 $ 22,748 $ 432,204
=========== =========== ===========
</TABLE>
Distributions payable were $56,869 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
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Item 8. Financial Statements and Supplementary Data.
Incorporated herein by reference to the financial statements and
supplementary data included in the 1999 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
8
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PART III
Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1 of this
report, AFG Leasing IV Incorporated is the sole General Partner of the
Partnership. Under the Restated Agreement, as amended, the General Partner is
solely responsible for the operation of the Partnership's properties. The
Recognized Owners have no right to participate in the control of the
Partnership's 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)
Name Title Age Term
- ---------------------- ---------------------------------- --- ---------
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
(c) Identification of Certain Significant Persons
None.
(d) Family Relationship
No family relationship exists among any of the foregoing Partners, Directors
or Executive Officers.
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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
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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 in Note 4 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:
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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).
No person or group is known by the General Partner to own beneficially more
than 5% of the Partnership's 480,227 outstanding Units as of March 1, 2000.
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 $ 9,848 $ 13,512 $ 30,066
Administrative charges 101,381 61,764 58,303
Reimbursable operating expenses
due to third parties 158,780 390,029 84,399
---------- ---------- -----------
Total $ 270,009 $ 465,305 $ 172,768
========== ========== ===========
</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 is compensated by an
amount equal to 2.23% of Equipment Base Price paid by the Partnership. For
management services, EFG is compensated by an amount equal to 5% of gross
operating lease rental revenue and 2% of gross full payout lease rental revenue
received by the Partnership. Both acquisition and management fees are subject to
certain limitations defined in the Management Agreement.
Administrative charges represent amounts owed to EFG, pursuant to Section
10.4 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 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 to 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 $41,585 by EFG for such funds and
the interest thereon. These funds were remitted to the Partnership in January
2000.
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Certain affiliates of the General Partner own Units in the Partnership as
follows:
----------------------------------------------------------------------
Number of Percent of Total
Affiliate Units Owned Outstanding Units
----------------------------------------------------------------------
Atlantic Acquisition Limited
Partnership 20,888 4.35%
----------------------------------------------------------------------
Old North Capital Limited
Partnership 1,000 0.21%
----------------------------------------------------------------------
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.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements:
Report of Independent Auditors........................................*
Statement of Financial Position
at December 31, 1999 and 1998.........................................*
Statement of Operations
for the years ended December 31, 1999, 1998 and 1997..................*
Statement of Changes in Partners' Capital
for the years ended December 31, 1999, 1998 and 1997..................*
Statement of Cash Flows
for the years ended December 31, 1999, 1998 and 1997..................*
Notes to the Financial Statements.....................................*
(2) Financial Statement Schedules:
None required.
(3) Exhibits:
Except as set forth below, all Exhibits to Form 10-K, as set forth in
Item 601 of Regulation S-K, are not applicable.
A list of exhibits filed or incorporated by reference is as follows:
Exhibit
Number
- ------
2.1 Plaintiffs' and Defendants' Joint Motion to Modify Order Preliminarily
Approving Settlement, Conditionally Certifying Settlement Class and
Providing for Notice of, and Hearing on, the Proposed Settlement was
filed in the Registrant's Annual Report on Form 10-K/A for the year
ended December 31, 1998 as Exhibit 2.1 and is incorporated herein by
reference.
2.2 Plaintiffs' and Defendants' Joint Memorandum in Support of Joint
Motion to Modify Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing for Notice of,
and Hearing on, the Proposed Settlement was filed in the Registrant's
Annual Report on Form 10-K/A for the year ended December 31, 1998 as
Exhibit 2.2 and is incorporated herein by reference.
*Incorporated herein by reference to the appropriate portion of the 1999
Annual Report to security holders for the year ended December 31, 1999
(see Part II).
14
<PAGE>
Exhibit
Number
- ------
2.3 Order Preliminarily Approving Settlement, Conditionally Certifying
Settlement Class and Providing for Notice of, and Hearing on, the
Proposed Settlement (August 20, 1998) was filed in the Registrant's
Annual Report on Form 10-K/A for the year ended December 31, 1998 as
Exhibit 2.3 and is incorporated herein by reference.
2.4 Modified Order Preliminarily Approving Settlement, Conditionally
Certifying Settlement Class and Providing for Notice of, and Hearing
on, the Proposed Settlement (March 22, 1999) was filed in the
Registrant's Annual Report on Form 10-K/A for the year ended December
31, 1998 as Exhibit 2.4 and is incorporated herein by reference.
2.5 Plaintiffs' and Defendants' Joint Memorandum in Support of Joint
Motion to Further Modify Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing for Notice of,
and Hearing on, the Proposed Settlement is filed in the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1999 as
Exhibit 2.5 and is included herein.
2.6 Second Modified Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing for Notice of,
and Hearing on, the Proposed Settlement (March 5, 2000) is filed in
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1999 as Exhibit 2.6 and is included herein.
4 Amended and Restated Agreement and Certificate of Limited Partnership
included as Exhibit A to the Prospectus, which is included in
Registration Statement on Form S-1 (No. 33-35148).
10.1 Promissory Note in the principal amount of $2,730,000 dated March 8,
2000 between the Registrant, as lender, and Echelon Residential
Holdings LLC, as borrower, is filed in the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1999 as Exhibit 10.1 and
is included herein.
10.2 Pledge Agreement dated March 8, 2000 between Echelon Residential
Holdings LLC (Pledgor) and American Income Partners V-A Limited
Partnership, as Agent for itself and 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 Awin Leasing Company, Inc. was filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1997 as Exhibit 99 (c) and is incorporated herein by reference.
99(b) Lease agreement with Ford Motor Company was filed in the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1997 as
Exhibit 99 (d) and is incorporated herein by reference.
99(c) Lease agreement with Transnet Limited 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.
15
<PAGE>
99(d) Lease agreement with Tenneco Packaging Company was filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1998 as Exhibit 99 (f) and is incorporated herein by reference.
99(e) Lease agreement with Mobil Oil Corporation was filed in the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1998 as Exhibit 99 (g) and is incorporated herein by reference.
99(f) Lease agreement with Continental Food Packaging, Inc. 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-D 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 1-
2.6 Second Modified Order Preliminarily Approving Settlement,
Conditionally Certifying Settlement Class and Providing for
Notice of, and Hearing on, the Proposed Settlement (March 5,
2000)
10.1 Promissory Note in the principal amount of $2,730,000 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(f) Lease agreement with Continental Food Packaging, Inc.
18
<PAGE>
Exhibit 2.5
IN THE UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 98-8030-CIV-HURLEY
- --------------------------------------------------------------------------------
LEONARD ROSENBLUM, J/B INVESTMENT PARTNERS, SMALL AND REBECCA BARMACK, PARTNERS,
BARBARA HALL, HENRY R. GRAHAM, ANNE R. GRAHAM, MARGO CORTELL, PATRICK M. RHODES,
BERNICE M. HUELS, GARRETT N. VOIGHT, CLAIRE E. FULCHER, MARCELLA LEVY, RICHARD
HODGSON, CITY PARTNERSHIPS, HELMAN PARSONS AND CLEVA PARSONS, on behalf of
themselves and all others similarly situated and derivatively on behalf of the
Nominal Defendants,
Plaintiffs,
vs.
EQUIS FINANCIAL GROUP LIMITED PARTNERSHIP, a Massachusetts, Limited Partnership,
EQUIS CORPORATION, a Massachusetts Corporation, GDE ACQUISITION LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AFG LEASING INCORPORATED, a
Massachusetts Corporation, AFG LEASING IV INCORPORATED, a Massachusetts
Corporation, AFG LEASING VI INCORPORATED, a Massachusetts Corporation, AFG
AIRCRAFT MANAGEMENT CORPORATION, a Massachusetts Corporation, AFG ASIT
CORPORATION, a Massachusetts Corporation, AF/AIP PROGRAMS LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, GARY D. ENGLE and GEOFFREY A. MACDONALD,
Defendants,
AIRFUND I INTERNATIONAL LIMITED PARTNERSHIP, a Massachusetts Limited
Partnership, AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME 4 LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME 5 LIMITED PARTNERSHIP, a Massachusetts
<PAGE>
Limited Partnership, AMERICAN INCOME 6 LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME 7 LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME 8 LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME PARTNERS III-A LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-B LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-C
LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME
PARTNERS III-D LIMITED PARTNERSHIP, a Massachusetts Limited Partnership,
AMERICAN INCOME PARTNERS IV-A LIMITED PARTNERSHIP, a Massachusetts Limited
Partnership, AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME PARTNERS IV-C LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-D LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS V-A
LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME
PARTNERS V-B LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN
INCOME PARTNERS V-C LIMITED PARTNERSHIP, a Massachusetts Limited Partnership,
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP, a Massachusetts Limited
Partnership, AMERICAN INCOME FUND I-B, a Massachusetts Limited Partnership,
AMERICAN INCOME FUND I-C, a Massachusetts Limited Partnership, AFG INVESTMENT
TRUST A, a Delaware business trust, AFG INVESTMENT TRUST B, a Delaware business
trust, AFG INVESTMENT TRUST C, a Delaware business trust, and AFG INVESTMENT
TRUST D, a Delaware business trust,
Nominal Defendants.
- --------------------------------------------------------------------------------
2
<PAGE>
PLAINTIFFS' AND DEFENDANTS' JOINT MEMORANDUM IN
SUPPORT OF JOINT MOTION TO FURTHER MODIFY ORDER
PRELIMINARILY APPROVING SETTLEMENT, CONDITIONALLY
CERTIFYING SETTLEMENT CLASS AND PROVIDING
FOR NOTICE OF, AND HEARING ON, THE PROPOSED SETTLEMENT
Plaintiffs ("Plaintiffs" or "Class Counsel") and Defendants submit this
Joint Memorandum in support of their Joint Motion To Further Modify Order
Preliminarily Approving Settlement, Conditionally Certifying Settlement Class
and Providing For Notice of, And Hearing On, The Proposed Settlement.
Background
By Order dated August 20, 1998, this Court preliminarily approved the
original Stipulation of Settlement dated July 16, 1998, conditionally certified
the Settlement Class, and three sub-classes,(1) and provided for Notice of, and
Hearing on, the proposed Settlement (the "Settlement"). A true and complete copy
of the Court's August 20, 1998 Order (the "Preliminary Approval Order") is
attached to the Motion as Exhibit 1.
As part of the settlement of the claims brought by the Operating
Partnership Sub-Class, the Settlement provides for Defendants to pursue and
cause the consummation of an exchange transaction (the "Exchange"), pursuant to
which eleven (11) of the limited partnerships named as Nominal Defendants (the
"Operating Partnerships") would be restructured, and converted into a
publicly-traded entity ("Newco") whose securities would be listed and traded on
the NASDAQ National Market System or other national securities exchange.
On or about August 24, 1998, four days after the Court's entry of the
Preliminary Approval Order, Defendants filed a Consent Solicitation Statement
(Form 14A) to be used in
3
<PAGE>
connection with the solicitation of the Operating Partnership Sub-Class' consent
to the Exchange for review with the U.S. Securities and Exchange Commission (the
"SEC"). The parties had anticipated that the SEC would be able to complete the
review within several months, and thereafter the Notice of the Settlement and
fairness hearing would be sent to all Class members, with the Consent
Solicitation Statement included only with the Notice sent to the Operating
Partnership Sub-Class members.
However, after encountering numerous unanticipated delays in the SEC
review process, the parties entered into an Amended Stipulation of Settlement
dated March 15, 1999 (the "Amended Stipulation"). On March 22, 1999, after a
hearing, this Court entered an order modifying the preliminary approval order
(the "Modified Preliminary Approval Order"). A true and complete copy of the
Modified Preliminary Approval Order is attached the Motion as Exhibit 2.
Pursuant to the Modified Preliminary Approval Order, the settlement process was
bifurcated into two phases. In the first phase, the parties asked the Court to
approve the settlement with respect to the claims brought by the so-called RSL
and Trust Sub-Classes.(2) In the second phase, the parties will seek the Court's
final approval of the settlement with respect to the claims brought by the
Operating Partnership Sub-Class.
Due to the delays caused by the SEC review process, certain financial
information upon which the settlement was based has become outdated.
Accordingly, the parties have agreed to further modifications to the Amended
Stipulation to reflect updated valuations of
- --------------------------------------------------------------------------------
(1) The three sub-classes are referred to as: (a) the "RSL Sub-Class"; (b) the
"Operating Partnership Sub-Class'; and (c) the "Trust Sub-Class".
(2) A hearing on the final approval of the settlement with respect to the RSL
and Trust Sub-Classes was held on May 21, 1999. After that hearing, on May 26,
1999, the Court entered an order approving the settlement with respect to the
RSL and Trust Sub-Classes.
4
<PAGE>
the Operating Partnerships and Management Assets and revised allocations of
Shares in Newco based on those valuations.
The Proposed Amendments
The following is a description of the proposed amendments to the
Settlement that were negotiated on an arm's-length basis by Class Counsel and
the Defendants. The vast majority of the original Stipulation and the Amended
Stipulation have not been altered, and the sub-classes, which were conditionally
certified by the Court in its August 20, 1998 Order, remain the same. The
parties have agreed to the following amendments to the Amended Stipulation:
(a) amend the $10 million cash distribution schedule (see Chart #1)
in Section 2.2(a) to reflect the updated cash reserves held by each
of the Operating Partnerships as of September 30, 1999;
(b) amend the allocations of Newco Shares in Sections 2.2(c) and
2.2(d) (see Chart #2 and #3) to reflect updated valuations of the
Operating Partnerships and Management Assets;
(c) amend Section 2.2(d) to increase the payment by Equis of Newco
Shares to the Operating Partnership Sub-Class members from $8
million to $9 million;
(d) eliminate Section 2.2(g) which offered so-called "appraisal
rights" for Participating Investors who did not wish to retain their
Shares in Newco;
(e) eliminate Section 2.2(i) which required that twenty-five percent
(25%) of the Shares of Newco allocated to the Equis Owners be placed
in an escrow account:
and
5
<PAGE>
(f) amend Section 4.1(i) to clarify that the Operating Partnerships
may invest a total of $32 million in New Investments, to be
increased only upon the further agreement of the parties, which
amount corresponds to forty percent (40%) of the total aggregate net
asset values of all the Operating Partnerships as of March 19, 1999.
1. Amendments Pertaining to Updated Financial Information, Including
Valuations and Allocations
The information which is fundamental to the terms of the original
Stipulation and Amended Stipulation has become outdated. Specifically, the data
supporting the valuation of the Operating Partnerships and the Management Assets
was prepared as of September 1998 and now has changed. The Partnerships have
sold various of their equipment assets and, in certain instances, they have
entered into agreements to renew existing leases or otherwise to re-lease their
equipment assets. In addition, information that was used to assess the potential
market value of the common stock of Newco, and the value of the Management
Assets to be contributed by the Defendants, such as price earnings ratios and
other market multiples for companies comparable to Newco and the Management
Assets, has changed due to the passage of time and resulting changes in the
business environment and stock markets. Therefore, the parties believe that it
is in the best interests of the limited partners of the Partnerships to update
the valuation of the transaction using the same methodology employed before and
to revise the Amended Stipulation to simplify and improve upon its terms.
The Defendants have updated and revised the valuation information as of
September 30, 1999 and based on this latest analysis and negotiations with Class
Counsel, Equis has agreed to reduce its net allocation of Newco Shares for the
Management Assets
6
<PAGE>
to 14.72% from the prior 22.335%, representing a reduction of approximately 34%.
Accordingly, the parties have amended Sections 2.2(c) and 2.2(d) of the Amended
Stipulation to reflect the updated valuations of the Operating Partnerships and
Management Assets. Set forth below is a schedule showing the revised valuations
and allocations as of September 30, 1999 in comparison with the September 30,
1998 valuations and allocations (3):
REVISED VALUATIONS AND ALLOCATIONS
---------------------------------------------------------
September 30, 1999 September 30, 1998
---------------------------------------------------------
Value Percent Value Percent
---------------------------------------------------------
Partnerships $64,686,726 85.28% $ 78,042,346 77.665%
Management Assets 11,165,280 14.72% 22,443,000 22.335%
---------------------------------------------------------
$75,852,006 100.00% $100,485,346 100.000%
---------------------------------------------------------
2. Amendments Pertaining To Increased Payment by Equis of Newco Shares
from $8 Million to $9 Million and Elimination of Promissory Notes
and Escrow Account Provisions
Equis has also agreed to increase the reallocation of Newco Shares it
would have received for the Management Assets to the Partnerships from $8
million to $9 million. By increasing the payment to $9 million, Equis will give
up a much greater percentage of the estimated value of the Management Assets in
favor of the limited partners (44.6% compared to the previous 26.3%). In
exchange for the substantial benefits to the limited partners caused by the
changes described above, the parties have agreed to eliminate the requirement
that the Defendants defer retention of 25% of the Newco Shares allocated to them
for the Management Assets in escrow pending attainment of future target net
income
- ----------
(3) The allocations above are net of the $10 million cash distribution and
reflect the re-allocation of $9 million of value from Equis' Management Assets
to the Partnerships.
7
<PAGE>
levels. Under the prior settlement agreement, the Defendants would have received
16.75% of Newco's common stock in exchange for the Management Assets, assuming
that none of the escrow shares were retained by the Defendants, and 22.335%,
assuming that all of the escrow shares were retained by the Defendants. Under
the revised settlement agreement, the Defendants will receive a smaller stock
allocation of 14.72% for the Management Assets and the escrow concept will be
eliminated. The elimination of the escrow shares concept will permit management
to focus on Newco's long-term success while having the added benefit of
accelerating finalization of the settlement to a date coincident to the date of
Consolidation.
In addition, the parties have agreed to eliminate the option for the
limited partners to elect to receive promissory notes instead of common stock in
order to simplify the capital structure of Newco and eliminate any form of
"equity" debt service upon the Consolidation. This revision will cause all
limited partners of the Operating Partnerships (and the general partners) to
have uniform financial interests and will simplify the choices presented to the
limited partners to either (a) object to their Partnership participating in the
Consolidation, or (b) approve of its participation.
3. Amendments to Clarify Maximum Amount Which May be Reinvested In New
Investments
In its Modified Preliminary Approval Order, this Court approved amendments
to the Settlement which permitted the Operating Partnerships, pending the
completion of the SEC review process and ultimately the Exchange, to reinvest a
certain portion of the money (40% of the total aggregate net asset value of the
Partnerships) they have received from the sales of equipment. The parties now
seek to clarify the Amended Stipulation to make clear that the Operating
Partnerships may invest a total of $32 million in New
8
<PAGE>
Investments, to be increased only upon the further agreement of the parties,
which amount corresponds to forty percent (40%) of the total aggregate net asset
values of all the Operating Partnerships as of March 19, 1999.
Conclusion
For the foregoing reasons, Plaintiffs and Defendants request that this
Court grant the Joint Motion To Further Modify Order Preliminarily Approving
Settlement, Conditionally Certifying Settlement Class and Providing For Notice
of, And Hearing On, The Proposed Settlement.
Respectfully submitted,
this 24 day of February 2000,
ATTORNEYS FOR DEFENDANTS:
/s/ [ILLEGIBLE]
--------------------------------------
RICHMAN GREER WEIL BRUMBAUGH
MIRABITO & CHRISTENSEN, PA.
Gerald F. Richman
Joseph F. Hession
Phillips Point - East Tower
777 South Flager Drive - Suite 1100
West Palm Beach, Florida 33401
(561) 803-3500
NIXON PEABODY LLP
Deborah L. Thaxter, P.C.
Gregory P. Deschenes
101 Federal Street
Boston, MA 02110 - 1832
(617) 345-1000
9
<PAGE>
ATTORNEYS FOR PLAINTIFFS:
/s/ [ILLEGIBLE] /FOR/
--------------------------------------
LERNER & PEARCE, P.A.
Allan M. Lerner
2888 East Oakland Park Boulevard
Ft. Lauderdale, FL 33306
(954) 563-8111
/s/ [ILLEGIBLE] /FOR/
--------------------------------------
WINCHESTER HARWOOD HALEBIAN
& FEFFER LLP
Andrew D. Friedman
488 Madison Avenue, 8th Floor
New York, NY 10022
(212) 935-7400
LAW OFFICES OF VINCENT T.
GRESHAM
Vincent T. Gresham
6065 Roswell Road, Ste. 1445
Atlanta, GA 30328
(770) 552-5270
GILMAN AND PASTOR
Peter A. Lagorio
One Boston Place
Boston, MA 02108-4400
(617) 589-3750
BENJAMIN S. SCHWARTZ,
CHARTERED
Benjamin S. Schwartz
4600 Olympic Way
Evergreen, CO 80439
(303) 670-5941
LAW OFFICES OF LIONEL Z. GLANCY
Lionel Z. Glancy
1801 Avenue of the Stars, Suite 306
Los Angeles, CA 90067
(310) 201-9150
10
<PAGE>
LAW OFFICES OF JAMES V. BASHIAN
500 Fifth Avenue, Ste. 2700
New York, NY 10110
(212) 921-4100
THOMAS A. HOADLEY, PA
310 Australian Avenue
Palm Beach, FL 33480
(561) 792-9006
GOODKIND, LABATAN, RUDOFF &
SUCHAROW, LLP
Lynda J. Grant
Robert N. Cappucci
100 Park Avenue
New York, NY 10017
(212) 907-0700
LASKY & RIFKIND, LTD.
Leigh Lasky
30 North LaSalle Street, Ste. 2140
Chicago, IL 60602
(312) 759-7670
HAROLD B. OBSTFELD, P.C.
Harold B. Obstfeld
260 Madison Avenue
New York, NY 10116
(212) 696-1212
11
<PAGE>
Exhibit 2.6
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
- --------------------------------------------------------------------------------
LEONARD ROSENBLUM, J/B INVESTMENT PARTNERS, SMALL and REBECCA BARMACK, PARTNERS,
BARBARA HALL, HENRY R. GRAHAM, ANNE R. GRAHAM, MARGO CORTELL. PATRICK M RHODES,
BERNICE M. HUELS, GARRETT N. VOIGHT, CLAIRE E. FULCHER, MARCELLA LEVY, RICHARD
HODGSON, CITY PARTNERSHIPS, HELMAN PARSONS AND CLEVA PARSONS, on behalf of
themselves and all others similarly situated and derivatively on behalf of the
Nominal Defendants,
Plaintiffs,
v. Case No. 98-8030
EQUIS FINANCIAL GROUP LIMITED PARTNERSHIP, a Massachusetts Limited Partnership.
EQUIS CORPORATION, a Massachusetts Corporation, GDE ACQUISITION LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AFG LEASING INCORPORATED, a
Massachusetts Corporation, AFG LEASING IV INCORPORATED, a Massachusetts
Corporation. AFG LEASING VI INCORPORATED, a Massachusetts Corporation, AFG
AIRCRAFT MANAGEMENT CORPORATION, a Massachusetts Corporation, AFG ASIT
CORPORATION. a Massachusetts Corporation, AF/AIP PROGRAMS LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, GARY D. ENGLE and GEOFFREY A. MACDONALD.
Defendants,
AIRFUND I INTERNATIONAL LIMITED PARTNERSHIP, a
- --------------------------------------------------------------------------------
<PAGE>
Massachusetts Limited Partnership, AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP,
a Massachusetts Limited Partnership, AMERICAN INCOME 4 LIMITED PARTNERSHIP. a
Massachusetts Limited partnership, AMERICAN INCOME 5 LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME 6 LIMITED PARTNERSHIP, a
Massachusetts Limited partnership, AMERICAN INCOME 7 LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME 8 LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-A LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-B
LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME
PARTNERS III-C LIMITED PARTNERSHIP, a Massachusetts Limited Partnership,
AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP, a Massachusetts Limited
Partnership, AMERICAN INCOME PARTNERS IV-A LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership, AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP, a
Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-C LIMITED
PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-D
LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME
PARTNERS V-A LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN
INCOME PARTNERS V-B LIMITED PARTNERSHIP, a Massachusetts Limited Partnership,
AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP, a Massachusetts Limited
Partnership, AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP, a Massachusetts
Limited Partnership,
- --------------------------------------------------------------------------------
-2-
<PAGE>
AMERICAN INCOME FUND I-B, a Massachusetts Limited Partnership, AMERICAN INCOME
FUND I-C, a Massachusetts Limited Partnership, AMERICAN INCOME FUND I-D, a
Massachusetts Limited Partnership, AMERICAN INCOME FUND I-E, a Massachusetts
Limited Partnership, AFG INVESTMENT TRUST A, a Delaware business trust, AFG
INVESTMENT TRUST B, a Delaware business trust, AFG INVESTMENT TRUST C, a
Delaware business trust, and AFG INVESTMENT TRUST D, a Delaware business trust,
Nominal Defendants.
- --------------------------------------------------------------------------------
SECOND MODIFIED ORDER PRELIMINARILY APPROVING SETTLEMENT,
CONDITIONALLY CERTIFYING SETTLEMENT CLASS AND PROVIDING
FOR NOTICE OF, AND HEARING ON, THE PROPOSED SETTLEMENT
WHEREAS, by Order dated August 20, 1998 (the "Preliminary Approval
Order"), this Court issued an order in the above captioned action (the "Action")
preliminarily approving the Settlement, conditionally certifying the settlement
class and providing for notice of, and hearing on the proposed settlement, and
by order dated March 22, 1999, this Court entered an order modifying the
Preliminary Approval Order ("Modified Preliminary Approval Order"), and the
parties to the Action have now agreed to further amend the Stipulation of
Settlement ("Second Amended Stipulation"), this Court having read and considered
the Second Amended Stipulation and the exhibits annexed thereto;
-3-
<PAGE>
NOW, THEREFORE, IT IS HEREBY ORDERED THAT THE COURT FURTHER MODIFIES THE
ORDER INSOFAR AS SET FORTH BELOW:
1. A hearing (the "Hearing") shall be held before this Court on Thursday,
July 27, 2000, at 701 Clematis Street, West Palm Beach, Florida, 4:00 p.m., in
Courtroom 5, to determine whether the proposed Settlement of the Action on the
terms and conditions provided for in the Second Amended Stipulation, with
respect to the Operating Partnership Sub-Class, including the issuance and
exchange of the securities in the Exchange, is fair, reasonable and adequate and
should be finally approved by the Court; whether a final judgment as provided in
the Second Amended Stipulation should be entered herein with respect to the
claims brought by the Operating Partnership Sub-Class: and whether Class
Counsels application(s) for attorneys' fees, awards to the Class Plaintiffs and
the reimbursement of out-of-pocket expenses should be granted. The Court may
continue the Hearing without further notice to Class Members.
2. The Court approves, as to form and content, the Notices of Class Action
Determination, Proposed Settlement and Fairness Hearing (the "Notices"), and
finds that the mailing of the Notices substantially in the manner and form set
forth in paragraph 3 of this Order meets the requirements of Rule 23 of the
Federal Rules of Civil Procedure, the Constitution of the United States and any
other applicable law, is the best notice practicable
-4-
<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.
-5-
<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
-6-
<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
-7-
<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
-8-
<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
-10-
<PAGE>
Exhibit 10.1
PROMISSORY NOTE
---------------
$2,730,000 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-D Limited Partnership, with a
principal address of 88 Broad Street, Boston, MA 02110 (together with any other
holder hereof, the "Payee") or at such address or at such other place as the
Payee may from time to time designate in writing, the principal sum of
TWO MILLION SEVEN HUNDRED THIRTY THOUSAND DOLLARS
($2,730,000), 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
BOS364119.1
<PAGE>
Exhibit 10.2
PLEDGE AGREEMENT
(PARTNERSHIPS)
FOR VALUE RECEIVED, the undersigned, Echelon Residential Holdings
LLC, a Delaware limited liability company (the "Pledgor") and the sole member of
Echelon Residential LLC, a Delaware limited liability company ("Residential"),
hereby assigns and pledges to American Income Partners V-A Limited Partnership,
a Massachusetts limited partnership, in its capacity as collateral agent (the
"Agent") for itself and each of American Income Partners V-B Limited
Partnership, a Massachusetts limited partnership, American Income Partners V-C
Limited Partnership, a Massachusetts limited partnership, American Income
Partners V-D Limited Partnership, a Massachusetts limited partnership, American
Income Fund I-A Limited Partnership, a Massachusetts limited partnership,
American Income Fund I-B Limited Partnership, a Massachusetts limited
partnership, American Income Fund I-C Limited Partnership, a Massachusetts
limited partnership, American Income Fund I-D Limited Partnership, a
Massachusetts limited partnership, American Income Fund I-E Limited Partnership,
a Massachusetts limited partnership, AIRFUND International Limited Partnership,
a Massachusetts limited partnership and AIRFUND II International Limited
Partnership, a Massachusetts limited partnership and their respective successors
and assigns (collectively, the "Lenders"), and grants to the Agent a security
interest in all of the Pledgor's right, title and interest in and to its
membership interests in Residential, wherever located and whether now owned or
hereafter acquired, together with (i) all payments and distributions, whether in
cash, property or otherwise, at any time owing or payable to the Pledgor on
account of its interest as a member of Residential, (ii) all of the Pledgor's
rights and interests under the operating agreement of Residential (the
"Operating Agreement"), including all voting and management rights and all
rights to grant or withhold consents or approvals, (iii) all rights of access
and inspection to and use of all books and records, including computer software
and computer software programs, of Residential, (iv) all other rights,
interests, property or claims to which the Pledgor may be entitled to in its
capacity as a member of Residential, (v) any and all substitutions and
replacements thereof, including any securities or other instruments into which
any of the foregoing may at any time and from time to time be converted or
exchanged, and (vi) any and all proceeds and products of the foregoing, cash and
non-cash (collectively, the "Pledged Interest"). The Pledgor irrevocably waives
any and all provisions of the Operating Agreement that (i) prohibit, restrict,
condition or otherwise affect the grant hereunder of any lien, security interest
or encumbrance on the Pledged Interest or any enforcement action which may be
taken in respect of any such lien, security interest or encumbrance, or (ii)
otherwise conflict with the terms of this Pledge Agreement.
This Pledge Agreement is entered into in connection with and secures the
payment of amounts due to the Lenders from the Pledgor pursuant to those certain
Promissory Notes of even date herewith (each a "Note" and collectively, the
"Notes") made by the Pledgor in favor of each of the Lenders, together with all
covenants and agreements contained herein (collectively, the "Secured
Liabilities").
<PAGE>
The Pledgor and each of the Lenders hereby represent, warrant, covenant
and agree as follows:
1. Pledgor hereby represents and warrants that (i) the Operating
Agreement, a true, correct and complete copy of which is attached hereto as
Exhibit A, is in full force and effect and has not been amended or modified in
any respect, except for such amendments or modifications as are attached to the
copy thereof delivered herewith; (ii) it is a duly constituted and is the sole
member of Residential pursuant to the Operating Agreement, although such
membership is not evidenced by any certificate issued by Residential; (iii) the
Pledged Interest are validly issued, non-assessable and fully paid membership
interests in Residential; (iv) Pledgor has full right, power and authority to
make this Pledge Agreement (including the provisions enabling the Agent, upon
the occurrence of an Event of Default, to exercise the voting or other rights
provided for herein, under the Operating Agreement and under applicable law,
without the consent, approval or authorization of, or notice to, any other
person, including any regulatory authority or any person having any interest in
Residential, except for such consents as have been duly received; and (v) this
Pledge Agreement has been duly executed and delivered by the Pledgor and is the
legal, valid and binding obligation of the Pledgor enforceable in accordance
with its terms.
2. Pledgor shall protect and preserve the Pledged Interest. Pledgor will
not permit or agree to any amendment or modification of the Operating Agreement,
or waive any rights or benefits under the Operating Agreement, without the prior
written consent of the Agent. Pledgor hereby represents and warrants that
Pledgor has and will continue to have good and marketable title to the Pledged
Interest, free and clear of all liens, encumbrances and security interests,
except those created hereby, and agrees to preserve such unencumbered title and
the Lenders' security interest in the Pledged Interest and to defend it against
all parties. Risk of loss of, damage to, or destruction of, the Pledged Interest
shall be the responsibility of Pledgor, although the Agent shall exercise
reasonable care in the custody and preservation of the Pledged Interest in its
possession to the extent applicable. The Agent shall be deemed to have exercised
such reasonable care if it takes such action for that purpose as the Pledgor
shall reasonably request in writing, but no omission to do any act not requested
by the Pledgor shall be deemed a failure to exercise reasonable care, and no
omission to comply with any request of the Pledgor shall of itself be deemed a
failure to exercise reasonable care. The Pledgor shall execute and deliver to
the Agent and the Lenders any financing statements, continuation statements,
assignments, or other instruments, or take any other action deemed necessary by
the Agent or the Lenders to perfect or continue the perfection of its security
interest in the Pledged Interest. The Agent is hereby irrevocably appointed
attorney-in-fact of the Pledgor to do all acts and things which the Agent may
deem necessary or advisable to perfect and continue perfected their security
interest in the Pledged Interest. The address of the Pledgor is listed below the
Pledgor's signature hereto.
3. This Pledge Agreement has been entered into under and pursuant to the
Massachusetts Uniform Commercial Code, except that perfection and the effect of
perfection of Secured Party's security interest in collateral in another
jurisdiction will be governed by the Uniform Commercial Code ("UCC") of such
other jurisdiction, and the Agent has all the rights
2
<PAGE>
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
3
<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.
4
<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-D Limited Partnership
Annual Report to the Partners, December 31, 1999
<PAGE>
AMERICAN INCOME PARTNERS V-D 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 3-6
FINANCIAL STATEMENTS:
Report of Independent Auditors 7
Statement of Financial Position
at December 31, 1999 and 1998 8
Statement of Operations
for the years ended December 31, 1999, 1998 and 1997 9
Statement of Changes in Partners' Capital
for the years ended December 31, 1999, 1998 and 1997 10
Statement of Cash Flows
for the years ended December 31, 1999, 1998 and 1997 11
Notes to the Financial Statements 12-21
ADDITIONAL FINANCIAL INFORMATION:
Schedule of Excess (Deficiency) of Total Cash
Generated to Cost of Equipment Disposed 22
Statement of Cash and Distributable Cash
From Operations, Sales and Refinancings 23
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 24
<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 $ 247,818 $ 321,107 $ 653,111 $1,816,273 $2,179,607
Net income $ 296,465 $ 575,168 $ 720,339 $1,656,646 $ 733,938
Per Unit:
Net income $ 0.59 $ 1.14 $ 1.42 $ 3.28 $ 1.45
Cash distributions $ 0.45 $ 0.45 $ 0.56 $ 4.52 $ 2.00
Financial Position
- --------------------
Total assets $4,069,905 $4,032,879 $3,443,037 $3,551,413 $4,132,437
Total long-term
obligations $ -- $ -- $ -- $ 307,479 $ 86,802
Partners' capital $3,780,387 $3,711,398 $3,363,706 $2,927,711 $3,555,934
</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-D
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 6 to the accompanying financial statements and
the remarketing of the Partnership's equipment.
Overview
The Partnership was organized in 1990 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 6 to the accompanying financial statements. Pursuant to the
Restated Agreement, as amended, the Partnership is scheduled to be dissolved by
December 31, 2001.
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 $247,818, compared to $321,107 and $653,111 for the years ended
December 31, 1998 and 1997, respectively. The decrease in lease revenue from
1997 to 1999 resulted principally 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 also earns interest income
from temporary investments of rental receipts and equipment sales proceeds in
short-term instruments.
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.
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 $191,523 compared to a net gain $672,899 in 1998 on equipment
having a net book value of $272,578 and a net gain of $389,295 in 1997 on
equipment having a net book value of $709,387.
3
<PAGE>
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.
Depreciation expense was $64,562, $115,523, and $261,657 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 equipment 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 $18,835 or 2.9% of lease revenue in 1997. The
Partnership's notes payable were fully amortized during the year ending December
31, 1997.
Management fees were 4%, 4.2% and 4.6% 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.
Operating expenses were $260,161, $451,793, and $142,702 for the years ended
December 31, 1999, 1998 and 1997, respectively. Operating expenses in 1999
include approximately $50,000 accrued for certain legal and Consolidation
expenses related to the Class Action Lawsuit described in Note 6 to the
financial statements. During 1998, the Partnership accrued approximately
$297,000 for such costs related to the Class Action Lawsuit. Other operating
expenses consist principally of professional service costs, such as audit and
other legal fees, as well as printing, distribution and 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 6 to the accompanying financial statements, the
Partnership is permitted to invest in new equipment or other business
activities, subject to certain limitations. On March 8, 2000, the Partnership
invested $2,730,000 in a debt instrument that matures in September 2002. (See
Notes 6 and 7 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. Accordingly, the Partnership's principal source of
cash from operations is generally provided by the collection of periodic rents.
These cash inflows are used to pay management fees and operating costs and prior
to 1998, also were used to satisfy debt service obligations associated with
leveraged leases. Operating activities generated net cash inflows of $153,455,
$270,559, and $611,077 in 1999, 1998 and 1997, respectively. 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
4
<PAGE>
investment, among other factors. Overall, expenses associated with rental
activities, such as management fees, and net cash flow from operating activities
will also decline as the Partnership experiences a higher frequency of
remarketing events.
Cash realized from asset disposal transactions is reported under investing
activities on the accompanying Statement of Cash Flows. During 1999, the
Partnership realized $191,523 in equipment sale proceeds compared to $945,477
and $904,590 in 1998 and 1997, respectively. Future inflows of cash from asset
disposals will vary in timing and amount and will be influenced by many factors
including, but not limited to, the frequency and timing of lease expirations,
the type of equipment being sold, its condition and age, and future market
conditions.
At December 31, 1999, the Partnership had aggregate future minimum lease
payments of $143,262 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.
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 during 1997.
There are no formal restrictions under the Restated Agreement, as amended,
that materially limit the Partnership's ability to pay cash distributions,
except that the General Partner may suspend or limit cash distributions to
ensure that the Partnership maintains sufficient working capital reserves to
cover, among other things, operating costs and potential expenditures, such as
refurbishment costs to remarket equipment upon lease expiration. Liquidity is
especially important as the Partnership matures and sells equipment, because the
remaining equipment base consists of fewer revenue-producing assets that are
available to cover prospective cash disbursements. Insufficient liquidity could
inhibit the Partnership's ability to sustain its operations or maximize the
realization of proceeds from remarketing its remaining assets.
Cash distributions to the General Partner and Recognized Owners have been
declared and generally paid within fifteen days following the end of each
calendar quarter. The payment of such distributions is reported under financing
activities on the accompanying Statement of Cash Flows. For the year ended
December 31, 1999, the Partnership declared total cash distributions of
Distributable Cash From Operations and Distributable Cash From Sales and
Refinancings of $227,476. In accordance with the Restated Agreement, as amended,
the Recognized Owners were allocated 95% of these distributions, or $216,102 and
the General Partner was allocated 5%, or $11,374. 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 5 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 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 and the difference between
distributions (declared vs.
5
<PAGE>
paid) for income tax and financial reporting 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 6 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.
6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners of American Income Partners V-D Limited Partnership:
We have audited the accompanying statements of financial position of American
Income Partners V-D 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-D
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
7
<PAGE>
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP
STATEMENT OF FINANCIAL POSITION
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 3,878,824 $ 3,761,322
Rents receivable 6,821 38,480
Accounts receivable - affiliate 41,585 25,840
Equipment at cost, net of accumulated
depreciation of $1,026,150 and $1,670,057
at December 31, 1999 and 1998,
respectively 142,675 207,237
------------- -------------
Total assets $ 4,069,905 $ 4,032,879
============= =============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accrued liabilities $ 224,936 $ 258,500
Accrued liabilities - affiliate 7,713 6,112
Cash distributions payable to partners 56,869 56,869
------------- -------------
Total liabilities 289,518 321,481
------------- -------------
Partners' capital (deficit):
General Partner (343,034) (346,483)
Limited Partnership Interests
(480,227 Units; initial purchase price
of $25 each) 4,123,421 4,057,881
------------- -------------
Total partners' capital 3,780,387 3,711,398
------------- -------------
Total liabilities and partners' capital $ 4,069,905 $ 4,032,879
============= =============
</TABLE>
The accompanying notes are an integral part of
these financial statements
8
<PAGE>
AMERICAN INCOME PARTNERS V-D 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 $ 247,818 $ 321,107 $ 653,111
Interest income 191,695 161,990 131,193
Gain on sale of equipment 191,523 672,899 389,295
------------ ------------ ------------
Total income 631,036 1,155,996 1,173,599
------------ ------------ ------------
Expenses:
Depreciation 64,562 115,523 261,657
Interest expense -- -- 18,835
Equipment management fees
- affiliate 9,848 13,512 30,066
Operating expenses - affiliate 260,161 451,793 142,702
------------ ------------ ------------
Total expenses 334,571 580,828 453,260
------------ ------------ ------------
Net income $ 296,465 $ 575,168 $ 720,339
============ ============ ============
Net income per limited
partnership unit $ 0.59 $ 1.14 $ 1.42
============ ============ ============
Cash distributions declared
per limited partnership unit $ 0.45 $ 0.45 $ 0.56
============ ============ ============
</TABLE>
The accompanying notes are an integral part of
these financial statements
9
<PAGE>
AMERICAN INCOME PARTNERS V-D 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 $ (385,667) 480,227 $ 3,313,378 $ 2,927,711
Net income - 1997 36,017 -- 684,322 720,339
Cash distributions declared (14,217) -- (270,127) (284,344)
----------- ----------- ----------- -----------
Balance at December 31, 1997 (363,867) 480,227 3,727,573 3,363,706
Net income - 1998 28,758 -- 546,410 575,168
Cash distributions declared (11,374) -- (216,102) (227,476)
----------- ----------- ----------- -----------
Balance at December 31, 1998 (346,483) 480,227 4,057,881 3,711,398
Net income - 1999 14,823 -- 281,642 296,465
Cash distributions declared (11,374) -- (216,102) (227,476)
----------- ----------- ----------- -----------
Balance at December 31, 1999 $ (343,034) 480,227 $ 4,123,421 $ 3,780,387
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements
10
<PAGE>
AMERICAN INCOME PARTNERS V-D 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 $ 296,465 $ 575,168 $ 720,339
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation 64,562 115,523 261,657
Gain on sale of equipment (191,523) (672,899) (389,295)
Changes in assets and liabilities:
Decrease (increase) in:
Rents receivable 31,659 225 (22,846)
Accounts receivable - affiliate (15,745) 10,392 65,066
Increase (decrease) in:
Accrued interest -- -- (1,336)
Accrued liabilities (33,564) 249,300 (14,045)
Accrued liabilities - affiliate 1,601 (6,710) (8,015)
Deferred rental income -- (440) (448)
----------- ----------- -----------
Net cash from operating activities 153,455 270,559 611,077
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from equipment sales 191,523 945,477 904,590
----------- ----------- -----------
Net cash from investing activities 191,523 945,477 904,590
----------- ----------- -----------
Cash flows used in financing activities:
Principal payments - notes payable -- -- (307,479)
Distributions paid (227,476) (227,476) (303,300)
----------- ----------- -----------
Net cash used in financing activities (227,476) (227,476) (610,779)
----------- ----------- -----------
Net increase in cash and cash equivalents 117,502 988,560 904,888
Cash and cash equivalents at beginning of year 3,761,322 2,772,762 1,867,874
----------- ----------- -----------
Cash and cash equivalents at end of year $ 3,878,824 $ 3,761,322 $ 2,772,762
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ -- $ -- $ 20,171
=========== =========== ===========
Supplemental disclosure of non-cash investing and financing activity:
At December 31, 1996, cash received of $194,092, representing an equipment purchase option,
was classified as deferred rental income on the Statement of Financial Position. During the
year ended December 31, 1997, the Partnership sold the equipment and such funds were
recognized as sales proceeds.
</TABLE>
The accompanying notes are an integral part of
these financial statements
11
<PAGE>
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP
Notes to the Financial Statements
December 31, 1999
NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS
American Income Partners V-D Limited Partnership (the "Partnership") was
organized as a limited partnership under the Massachusetts Uniform Limited
Partnership Act (the "Uniform Act") on May 21, 1990 for the purpose of acquiring
and leasing to third parties a diversified portfolio of capital equipment.
Partners' capital initially consisted of contributions of $1,000 from the
General Partner (AFG Leasing IV Incorporated) and $100 from the Initial Limited
Partner (AFG Assignor Corporation). On September 27, 1990, the Partnership
issued 480,227 units, representing assignments of limited partnership interests
(the "Units"), to 806 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 AFG and a wholly-owned subsidiary are the
99% limited partners and AFG Programs, Inc., which is wholly-owned by Geoffrey
A. MacDonald, is the 1% General Partner. The General Partner is not required to
make any other capital contributions except as may be required under the Uniform
Act and Section 6.1(b) of the Amended and Restated Agreement and Certificate of
Limited Partnership (the "Restated Agreement, as amended").
Significant operations commenced September 28, 1990 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 4).
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"). Equis
Corporation and GDE LP were established in December 1994 by Mr. Engle 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.
12
<PAGE>
AMERICAN INCOME PARTNERS V-D 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 repurchase agreements with overnight maturities. Under the
terms of the agreements, title to the underlying securities passes to the
Partnership. The securities underlying the agreements are book entry securities.
At December 31, 1999, the Partnership had $3,762,992 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 6
regarding the Class Action Lawsuit. Future minimum rents of $143,262 are due as
follows:
For the year ending December 31, 2000 $ 93,608
2001 49,654
--------
Total $143,262
========
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1999, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Awin Leasing Company, Inc. $ 84,778 $ 84,778 $ 84,778
Ford Motor Company $ 32,915 $ 37,600 $ 90,897
Tenneco Packaging Company $ 32,153 $ 39,359 $ --
Mobil Oil Corporation $ 30,690 $ 34,425 $ --
Continental Food Packaging, Inc. $ 26,831 $ -- $ --
Transnet Limited $ -- $ -- $ 161,114
</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.
13
<PAGE>
AMERICAN INCOME PARTNERS V-D 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.
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 4).
Contingencies
It is the Partnership's policy to recognize a liability for goods and
services during the period when the goods or services are received. To the
extent that the Partnership has a contingent liability, meaning generally a
liability the payment of which is subject to the outcome of a future event, the
Partnership recognizes a liability in accordance with Statement of Financial
Accounting Standards No. 5 "Accounting for Contingencies" ("SFAS No. 5"). SFAS
No. 5 requires the recognition of contingent liabilities when the amount of
liability can be reasonably estimated and the liability is likely to be
incurred.
The Partnership is a Nominal Defendant in a Class Action Lawsuit. In 1998, a
settlement proposal to resolve that litigation was negotiated and remains
pending (See Note 7). The Partnership's estimated exposure for costs anticipated
to be incurred in pursuing the settlement proposal is approximately $347,000
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
$297,000 for 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 in 1999.
14
<PAGE>
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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 5 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 480,227 Units
outstanding during each of the three years in the period ended December 31, 1999
and computed after allocation of the General Partner's 5% share of net income
and cash distributions.
Provision for Income Taxes
No provision or benefit from income taxes is included in the accompanying
financial statements. The Partners are responsible for reporting their
proportionate shares of the Partnership's taxable income or loss and other tax
attributes on their tax returns.
NOTE 3 - EQUIPMENT
The following is a summary of equipment owned by the Partnership at December
31, 1999. Remaining Lease Term (Months), as used below, represents the number of
months remaining from December 31, 1999 under contracted lease terms and is
presented as a range when more than one lease agreement is contained in the
stated equipment category. A Remaining Lease Term equal to zero reflects
equipment either held for sale or 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>
Materials handling 0-8 $ 385,895 CA/MI/MN/NE/NY/OH/WA/WI
Trailers/intermodal containers 18-19 357,886 GA
Research and test 0 105,805 CA
Manufacturing 0 95,460 NJ
Communications 0 80,063 CA
Motor vehicles 0 64,367 NJ
Tractors and heavy duty trucks 0 46,921 NJ
Construction and mining 16 31,282 AL
Computer and peripherals 0 1,146 TX
-----------
Total equipment cost 1,168,825
Accumulated depreciation (1,026,150)
-----------
Equipment, net of accumulated depreciation $ 142,675
===========
</TABLE>
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
15
<PAGE>
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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 $171,719, representing approximately 15% 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. The summary above includes fully depreciated
equipment held for re-lease or sale with an original cost of approximately
$106,000 at December 31, 1999. The General Partner is actively seeking the sale
or re-lease of all equipment not on lease.
NOTE 4 - 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 $ 9,848 $ 13,512 $ 30,066
Administrative charges 101,381 61,764 58,303
Reimbursable operating expenses
due to third parties 158,780 390,029 84,399
------------ ------------ ------------
Total $ 270,009 $ 465,305 $ 172,768
============ ============ ============
</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 revenue and 2% of gross full payout lease rental revenue
received by the Partnership. Both acquisition and management fees are subject to
certain limitations defined in the Management Agreement.
Administrative charges represent amounts owed to EFG, pursuant to Section
10.4 of the Restated Agreement, as amended, for persons employed by EFG who are
engaged in providing administrative services to the Partnership.
All equipment was acquired from EFG, one of its Affiliates or from
third-party sellers. The Partnership's Purchase Price was determined by the
method described in Note 2, Equipment on Lease.
16
<PAGE>
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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 $41,585 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:
------------------------------------------------------------------
Percent of
Total
Number of Outstanding
Affiliate Units Owned Units
------------------------------------------------------------------
Atlantic Acquisition Limited
Partnership 20,888 4.35%
------------------------------------------------------------------
Old North Capital Limited
Partnership 1,000 0.21%
------------------------------------------------------------------
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.
NOTE 5 - INCOME TAXES
The Partnership is not a taxable entity for federal income tax purposes.
Accordingly, no provision for income taxes has been recorded in the accounts of
the Partnership.
For financial statement purposes, the Partnership allocates net income or
loss to each class of partner according to their respective ownership
percentages (95% to the Recognized Owners and 5% to the General Partner). This
convention differs from the income or loss allocation requirements for income
tax and Dissolution Event purposes as delineated in the Restated Agreement, as
amended. For income tax purposes, the Partnership allocates net income or net
loss in accordance with the provisions of such agreement. The Restated
Agreement, as amended, requires that upon dissolution of the Partnership, the
General Partner will be required to contribute to the Partnership an amount
equal to any negative balance which may exist in the General Partner's tax
capital account. At December 31, 1999, the General Partner had a positive tax
capital account balance.
The following is a reconciliation between net income 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 $ 296,465 $ 575,168 $ 720,339
Financial statement depreciation
in excess of (less than) tax depreciation 25,906 42,853 (24,133)
Deferred rental income -- (440) (194,540)
Other 46,380 201,840 639,021
----------- ----------- -----------
Net income for federal income tax
reporting purposes $ 368,751 $ 819,421 $ 1,140,687
=========== =========== ===========
</TABLE>
17
<PAGE>
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
The principal component of "Other" consists of the differences 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 $ 3,780,387 $ 3,711,398
Add back selling commissions and organization
and offering costs 1,345,638 1,345,638
Financial statement distributions in excess of
tax distributions -- 2,843
Cumulative difference between federal income tax
and financial statement income (loss) (86,716) (159,002)
----------- -----------
Partners' capital for federal income tax reporting purposes $ 5,039,309 $ 4,900,877
=========== ===========
</TABLE>
Financial statement distributions in excess of tax distributions and
cumulative difference between federal income tax and financial statement income
(loss) represent timing differences.
NOTE 6 - 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".
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").
18
<PAGE>
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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 Partnership's
customary business operations until all of its assets are disposed in the
ordinary course of business. To facilitate the realization of this objective,
the Amended Stipulation provided, among other things, that commencing March 22,
1999, the Exchange Partnerships could collectively invest up to 40% of the total
aggregate net asset values of all of the Exchange Partnerships in any
investment, including additional equipment and other business activities that
the general partners of the Exchange Partnerships and EFG reasonably believed to
be consistent with the anticipated business interests and objectives of Newco,
subject to certain limitations. The Second Amended Stipulation, among other
things, quantified the 40% limitation using a whole dollar amount of $32 million
in the aggregate.
On March 8, 2000, the Exchange Partnerships collectively invested $32 million
as permitted by the Second Amended Stipulation approved by the Court. The
Partnership's portion of the aggregate investment is $2,730,000. 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
19
<PAGE>
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
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 $347,000, of which $297,000 was accrued and expensed by the
Partnership in 1998 and $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. 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.
NOTE 7 - SUBSEQUENT EVENT
On March 8, 2000, the Exchange Partnerships (see Note 6) collectively loaned
$32 million to Echelon Residential Holdings LLC, a newly-formed real estate
development company that will be owned by several
20
<PAGE>
AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP
Notes to the Financial Statements
(Continued)
investors, including James A. Coyne, Executive Vice President of EFG. Mr. Coyne,
in his individual capacity, is the only investor in Echelon Residential Holdings
LLC who is related to EFG.
The Partnership's participation in the loan is $2,730,000. 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.
21
<PAGE>
ADDITIONAL FINANCIAL INFORMATION
<PAGE>
AMERICAN INCOME PARTNERS V-D 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 revenue, 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 $1,485,102 $1,898,154 $2,680,821
Sale proceeds realized upon
disposition of equipment 191,523 945,477 1,098,682
---------- ---------- ----------
Total cash generated from rents
and equipment sale proceeds 1,676,625 2,843,631 3,779,503
Original acquisition cost of equipment
disposed 708,469 1,637,002 2,813,225
---------- ---------- ----------
Excess of total cash generated
to cost of equipment disposed $ 968,156 $1,206,629 $ 966,278
========== ========== ==========
</TABLE>
22
<PAGE>
AMERICAN INCOME PARTNERS V-D 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 $ 104,942 $ 191,523 $ 296,465
Add:
Depreciation 64,562 -- 64,562
Management fees 9,848 -- 9,848
----------- ----------- -----------
Cash from operations, sales and
refinancings 179,352 191,523 370,875
Less:
Management fees (9,848) -- (9,848)
----------- ----------- -----------
Distributable cash from operations,
sales and refinancings 169,504 191,523 361,027
Other sources and uses of cash:
Cash at beginning of year 3,043,321 718,001 3,761,322
Net change in receivables and
accruals (16,049) -- (16,049)
Less:
Cash distributions paid -- (227,476) (227,476)
----------- ----------- -----------
Cash at end of year $ 3,196,776 $ 682,048 $ 3,878,824
=========== =========== ===========
</TABLE>
23
<PAGE>
AMERICAN INCOME PARTNERS V-D 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 $ 292,345
24
<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-D Limited Partnership, of our report dated
March 10, 2000, included in the 1999 Annual Report to the Partners of American
Income Partners V-D Limited Partnership.
ERNST & YOUNG LLP
Boston, Massachusetts
March 10, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,878,824
<SECURITIES> 0
<RECEIVABLES> 48,406
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,927,230
<PP&E> 1,168,825
<DEPRECIATION> (1,026,150)
<TOTAL-ASSETS> 4,069,905
<CURRENT-LIABILITIES> 289,518
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,780,387
<TOTAL-LIABILITY-AND-EQUITY> 4,069,905
<SALES> 0
<TOTAL-REVENUES> 631,036
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 334,571
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 296,465
<INCOME-TAX> 0
<INCOME-CONTINUING> 296,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 296,465
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99(f)
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT NO. 8910CTG389, dated as of November 10, 1989
between American Finance Group, a Massachusetts general partnership 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 Continental Food Packaging, Inc., a Delaware corporation
having a principal place of business and address for purposes of notice
hereunder at 800 Continental Avenue, P.O. Box 5410, Norwalk, CT 06856,
Attention: President, 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, except under the terms of
this Master Lease Agreement, 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. If payment is to be made by check, the
Lessee will mall the check at least four (4) days before the Payment Date.
Lessor will exercise its best efforts to invoice Lessee thirty (30) days prior
to each Payment Date. Failure to provide timely invoices will not relieve Lessee
of its obligation to pay Basic Rent on the Payment Date. 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 reasonable costs (including, without
limitation, maintenance, repair and insurance costs), claims (including claims
of product liability or strict liability in tort), losses or liabilities
relating to the Equipment or its use that are incurred by or asserted against
Lessee, any permitted sublessee of Lessee, Lessor or any assignee of Lessor and
arise out of matters occurring prior to the return of the Equipment. Lessee
agrees to defend all claims, provided, however, Lessee shall have the right to
appoint legal counsel for Lessor, compromise the claim and otherwise control the
prosecution or the defense of the claim as Lessee deems advisable. 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
<PAGE>
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. 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 fully with
Lessee in asserting any claims under such warranties or relating to product
liability or strict liability in tort.
Lessee acknowledges that this Master Lease Agreement has been entered into
on the basis that Lessor shall be entitled for federal and state income tax
purposes (i) to claim the deductions for depreciation on the total original cost
of the Equipment pursuant to the Modified Accelerated Cost Recovery System under
Section 168 of the Internal Revenue Code of 1986, as amended ("Code") or for
state income tax purposes, any other depreciation deduction method that is
permitted by certain state law; and (ii) to claim under Section 163 of the Code
a tax deduction for the full amount of any interest paid by Lessor or accrued
under Lessor's method of tax accounting on any indebtedness secured by the
Equipment (hereinafter referred to collectively as the "Tax Benefits"). Lessee
agrees to fully indemnify Lessor for any loss, disallowance, unavailability or
recapture of the Tax Benefits as a result of any affirmative act, omission or
misrepresentation by Lessee, any sublessee, or any other person authorized by
the Lessee to use or maintain the Equipment. If Lessor shall lose, shall not
have the right to claim, or if there shall be disallowed or recaptured, all or
any portion of such Tax Benefits as a result of any such affirmative act,
omission or misrepresentation, Lessee shall pay to Lessor as additional rent (a)
an amount equal to the value, determined at Lessor's actual marginal tax rate on
a present value basis discounted at the Lessor's then current cost of funds, of
the Tax Benefits so disallowed or made unavailable plus (b) all interest,
penalties, or additions to tax resulting from such loss, disallowance,
unavailability or recapture of any of the foregoing, plus (c) all taxes required
to be paid by the Lessor, its successors, assigns, or affiliates under any
federal, state and local law upon receipt of any of the indemnifications set
forth in this Section. Notwithstanding the foregoing, the tax indemnification
set forth in this paragraph shall not apply in any circumstances in which Lessor
is otherwise compensated under this Master Lease Agreement, including, without
limitation, in the event of a Casualty under Section 5 hereof, in the event that
Lessee elects to exercise its purchase option under Section 11 hereof, in
connection with the payment of liquidated damages subsequent to an Event of
Default under Section 11 hereof, or in the event of an Early Termination
pursuant to Section 15 hereof, in which event Lessee shall have no obligations
under this paragraph.
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 upon prior written notice to Lessor,
but 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
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<PAGE>
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. 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
governmental 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 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
agreement of Lessor and Lessee, which agreement shall not be unreasonably
withheld. 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 net Income of Lessor. Notwithstanding the
foregoing, Lessor will report and pay all use taxes and Lessee will pay to
Lessor, on each Basic Rent Payment Date, as additional rent, an amount equal to
the use taxes attributable to that payment of Basic Rent. If any item of
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<PAGE>
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. All policies (A)
are to be maintained with insurers acceptable to Lessor; (B) are, to the extent
of Lessee's indemnity obligation contained herein, to name Lessor and its
assignees 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. Lessee agrees to deliver to Lessor such
certificates of insurance as Lessor may, from time to time, request.
Notwithstanding the foregoing, Lessee's parent company, Peter Kiewit & Sons,
Inc., may satisfy all or any part of the foregoing insurance requirements
through self-insurance.
8. FINANCIAL STATEMENTS. INSPECTION. REPORTS.
Lessee will provide to Lessor, promptly upon Lessor's request, copies of
Lessee's most recent annual balance sheet and profit and loss statement and, for
so long as Lessee is a subsidiary thereof, copies of Continental Can Company,
Inc.'s audited balance sheet, profit and loss statement and statement of changes
in financial condition, all prepared in accordance with generally accepted
accounting principles, consistently applied. Lessor may from time to time, upon
reasonable notice and during Lessee's normal business hours, inspect the
Equipment and Lessee's records with respect thereto and discuss Lessee's
financial condition with knowledgeable representatives of Lessee. Lessee will,
if requested, provide a report on the condition of the Equipment, a record of
its maintenance and repair, a summary of all items suffering a Casualty, a
certificate of no default or such other information or evidence of compliance
with Lessee's obligations under the Rental Schedule as Lessor may reasonably
request.
9. AGREEMENT FOR LEASE ONLY. IDENTIFICATION MARKS. FINANCING STATEMENTS. FURTHER
ASSURANCES.
Each Rental Schedule is intended to be a true lease and not a lease in the
nature of a security agreement. Lessee will affix to the Equipment all notices
of Lessor's ownership of the Equipment furnished by Lessor. Lessee will upon
Lessor's reasonable request 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.
Each party agrees to promptly execute and deliver to the other party such
further documents or other assurances, and to take such further action,
including obtaining landlord and mortgagee waivers, as the other party
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<PAGE>
may from time to time reasonably request in order to establish and protect the
rights and remedies created by the Rental Schedule, including the transfer of
title to the Equipment to Lessee if Lessee elects to purchase the Equipment
pursuant to Section 11 hereof.
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 by law, will accrue on any sum not paid when due for
each day not paid. If Lessee fails to duly and promptly pay or perform any of
its obligations hereunder continuing for more than 30 days after written notice
thereof by Lessor, provided that Lessee shall be diligently proceeding to cure
such nonperformance and such nonperformance does not subject the Equipment to
forfeiture, 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
reasonable 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 having the same Expiration Date, (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 the
Equipment or renew the Rental Schedule not less than 120 days prior to the
Expiration Date. If Lessee fails to give Lessor 120 days written notice, the
Lease Term may, at Lessor's option, be extended and continue until 120 days from
the date Lessor receives written notice of Lessee's decision to return the
Equipment or renew the Rental Schedule. Fair 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 appraiser of nationally
recognized standing selected by agreement of Lessor and Lessee, which agreement
shall not be unreasonably withheld. 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, provided that Lessee has not elected to purchase
the Equipment in accordance with the terms hereof, 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. 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 reasonably
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<PAGE>
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 reasonably needed to place the
Equipment in the minimum acceptable condition. Lessee shall thereupon effect
such repairs; if Lessee does not proceed to effect such repairs within a
reasonable period of time, Lessor may, at its option, effect such repairs.
Lessor may re-inspect the Equipment and require further repairs as often as
necessary until the Equipment is placed in reasonably acceptable condition. In
either case, all reasonable out-of-pocket costs 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 Lessor.
12. LESSEE'S REPRESENTATIONS AND WARRANTIES.
Lessee represents, warrants and certifies as of the date of execution and
delivery of each Rental Schedule as follows:
(a) Lessee is duly organized, validly existing and in good standing under the
laws of the state of its incorporation, with full power to enter into and
to pay and perform its obligations under the Rental Schedule and this
Master Lease Agreement as incorporated therein by reference, and is duly
qualified and in good standing in all other jurisdictions where its
failure to so qualify would adversely affect the conduct of its business
or the performance of its obligations under or the enforceablility of the
Rental Schedule;
(b) the Rental Schedule, this Master Lease Agreement and all related documents
have been duly authorized, executed and delivered by Lessee, are
enforceable against Lessee in accordance with their terms and do not and
will not contravene any provisions of or constitute a default under
Lessee's organizational documents or its By Laws, any agreement to which
it is a party or by which it or its property is bound, or any law,
regulation or order of any governmental authority;
(c) Lessor's right, title and interest in and to the Rental Schedule, this
Master Lease Agreement and the Equipment and the rentals therefrom will
not be affected or impaired by the terms of any agreement or instrument by
which Lessee or its property is bound;
(d) no approval of, or filing with, any governmental authority or other person
is required in connection with Lessee's entering into or the payment or
performance of its obligations under the Rental Schedule or this Master
Lease Agreement as incorporated therein by reference;
(e) there are no suits or proceedings pending or threatened before any court
or governmental agency against or affecting Lessee which, if decided
adversely to Lessee, would materially adversely affect Lessee's business
or financial condition or its ability to perform any of its obligations
under the Rental Schedule or this Master Lease Agreement as incorporated
therein by reference; and
(f) there has been no material adverse change to Lessee's financial condition
since the date of its most recent audited financial statement.
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<PAGE>
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 fails to pay its debts as
they become due; (C) initiates any voluntary bankruptcy or insolvency
proceeding; (D) fails to obtain the discharge of any bankruptcy or
insolvency proceeding initiated against it by others within 60 days of the
date such proceedings were initiated; (E) requests or consents to the
appointment of a trustee or receiver; or (F) a trustee or receiver is
appointed for Lessee or any Guarantor or for a substantial part of
Lessee's or any Guarantor's property; or
(f) unless Lessee has elected to purchase the Equipment as provided
elsewhere in this Master Lease Agreement, 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:
(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 (provided, however, that sums accelerated hereunder shall
be discounted to present value at the Late Payment Rate); or
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<PAGE>
(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 independent equipment
appraiser of nationally recognized standing 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 reasonable costs and expenses) from any
disposition of the Equipment, or convey to Lessee all of its right, title and
interest in and to the Equipment, as is, where is and with all faults, without
recourse and without warranty; and
II. without regard to whether Lessor has elected either option in subsection
I. above, Lessor may
(a) proceed by appropriate court action either at law or in equity to
enforce performance by Lessee of the covenants and terms of the Rental
Schedule and to recover damages for the breach thereof; and
(b) terminate the Rental Schedule by written notice to Lessee, whereupon
all right of Lessee to use the Equipment will immediately cease and Lessee
will forthwith return the Equipment to Lessor in accordance with the
provisions hereof; and
(c) upon reasonable prior notice to Lessee, repossess the Equipment (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, 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
(d) recover from Lessee all reasonable 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, except as indicated herein, 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
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<PAGE>
Lessor may assign the Rental Schedule to a Lender in connection with the
financing of its purchase of the Equipment and agrees, in the event of such
assignment, to execute and deliver a Rent Assignment Letter acknowledging that
the Lender has (and may exercise either in its own name or in the name of
Lessor) all of the rights, privileges and remedies, but none of the obligations,
of Lessor under the Rental Schedule; waiving for the benefit of the Lender (but
not Lessor) any defense, counterclaim, set-off, abatement, reduction or
recoupment that Lessee may have against Lessor; and agreeing to make all
payments of Basic Rent and other sums due under the Rental Schedule to the
Lender or as the Lender may direct. Lessee also agrees to deliver opinions of
counsel, insurance certificates and such other documents as Lessor may
reasonably request for the benefit of the Lender in connection with the
collateral assignment of the Rental Schedule.
15. EARLY TERMINATION OPTION.
Notwithstanding anything contained herein to the contrary, Lessee shall
have the right, with respect to any Rental Schedule having an Early Termination
Table appended thereto and made a part thereof, to terminate such Rental
Schedule on any Rent Payment Date by giving Lessor at least thirty (30) days'
prior written notice thereof and paying to Lessor on such Rent Payment Date in
good funds the applicable Early Termination Payment and all other sums then due
and payable under the Rental Schedule. Upon receipt of such Early Termination
Payment and other sums, Lessor shall promptly deliver to Lessee a warranty bill
of sale for the Equipment under such Rental Schedule, warranting Lessee's title
to the Equipment but disclaiming any other warranties with respect thereto.
16. 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 CONTINENTAL FOOD PACKAGING, INC.
By:/s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
-------------------- -------------------
Title: Vice President Title: President
Date: 11/28/89 Date: DECEMBER 1, 1989
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<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-1
This RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE, dated as of February 1,
1990, between American Finance Group ("Lessor") and Continental Food Packaging,
Inc. ("Lessee") incorporates by reference the terms and conditions of Master
Lease Agreement No. 8910CTG389 dated as of November 10, 1989 (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
(Manfacturer,
Item Type, Model and Equipment Acceptance
No. Serial Number) Cost Location Date
- --- --------------- --------- -------- ----------
7 Hyster Forklift See Attached Schedule A
Trucks as more fully
described on the
attached Schedule A
TOTAL EQUIPMENT COST: $138,065.00
Lessee Billing Locations (by state in which equipment is located):
Nebraska: Continental Can Washington: 18340 Segal Park Dr.
4133 South 72nd St. P0 Box 58468
Omaha, NE 68117 Seattle, WA 98188
Attn: Norman Aldridge Attn: Mike Tierney
California: Continental Can
1951 Fairway Dr.
San Leandro, CA 94577
Attn: R. Denton
2. LEASE TERM
The Lease Term is for an Interim Term commencing on the date of acceptance
of the Equipment for lease, as set forth above, and continuing through and
including January 31, 1990 and for a Primary Term of 60 months, commencing on
February 1, 1990 and continuing through and including the Expiration Date of
January 31, 1995.
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-1
PAGE TWO
3. BASIC RENT. PAYMENT DATES.
Interim Term Basic Rent is due and payable in full on the first day of
the Primary Term. Basic Rent for the Primary Term is due and payable in 60
payments of $2,500.91 each commencing on February 1, 1990 and continuing monthly
in advance thereafter, through and including January 1, 1995.
Interim Term Basic Rent is computed by multiplying the Total Equipment
Cost by the Per Diem Lease Rate set forth below and multiplying the product by
the number of days in the Interim Term. Primary Term Basic Rent is computed by
multiplying the Total Equipment Cost by the Periodic Lease Rate set forth below.
Per Diem Lease Rate: .000604
Periodic Lease Rate: .018114
4. SPECIAL RETURN CONDITIONS
Notwithstanding anything contained in the Master Lease to the contrary, it
is agreed that for purposes of returning the Equipment in accordance with
Section 11 of the Master Lease, the standard "good and efficient operating
condition and appearance, reasonable wear and tear excepted" shall be satisfied
if the Equipment satisfies the following special return conditions:
1. When loaded to its rated capacity, each Unit shall:
(a) Start under its own power and idle without water or fuel
leaks.
(b) Move through its normal speed ranges in both forward and
reverse, in normal operating manner.
(c) Steer normally right and left in both forward and reverse.
(d) Be able to stop with its service brakes within a safe
distance, in both forward and reverse.
(e) Lift, lower, and tilt normally with and without a load a
minimum of three (3) times. Carriage, lift chains and channel
assembly shall be in working condition, normal wear and tear
excepted.
(f) Electric trucks, if purchased with batteries, must be returned
with batteries that are capable of sustaining a charge that
will permit use of the equipment for an eight (8) hour shift.
(g) All motors shall operate without arcing and/or sparking.
<PAGE>
RENTAL SCHEDULE
AND
ACCEPTANCE CERTIFICATE
NO. A-1
PAGE THREE
2. Each Unit's attachment(s), if any, shall perform all of its required
functions, and each Unit's horn, parking brake, and lights shall be
operational.
3. The Units shall, on average, have tires with at least thirty-five
percent (35%) remaining tread.
4. Each Unit shall be complete with all originally-installed parts and
pieces which may be replacement, reconditioned or rehabilitated
parts and pieces.
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 are new and unused as of the Acceptance
Date, except as otherwise specified above, and (c) the representations and
warranties of Lessee set forth in the Master Lease are true and correct as of
the date hereof.
6. ENTIRE AGREEMENT. MODIFICATTON AND WAIVERS. EXECUTION IN COUNTERPARTS.
This Rental Schedule and the Master Lease constitute the entire agreement
between Lessee and Lessor with respect to the leasing of the Equipment. To the
extent any of the terms and conditions set forth in this Rental Schedule
conflict with or are inconsistent with the Master Lease, this Rental Schedule
shall govern and control. No amendment, modification or waiver of this Rental
Schedule or the Master Lease will be effective unless evidenced by a writing
signed by the party to be charged. This Rental Schedule may be executed in
counterparts, all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF the parties hereto have caused this Rental Schedule and
Acceptance Certificate to be executed and delivered by their duly authorized
representatives as of the date first above written.
AMERICAN FINANCE GROUP CONTINENTAL FOOD PACKAGING, INC.
Lessor Lessee
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
----------------------- ------------------------
Title: Vice President Title:
------------------- ---------------------
<PAGE>
CONTINENTAL FOOD PACKAGING, INC.
EXHIBIT 1 TO RENTAL SCHEDULE A-1
CASUALTY VALUES
(Stated as Percentage of Equipment Cost)
AFTER AFTER
PRIMARY PRIMARY
TERM CASUALTY TERM CASUALTY
PAYMENT NO. VALUE PAYMENT NO. VALUE
- ----------- ---------- ----------- ---------
Prior to 1 112.00
1 111.38 31 88.17
2 110.74 32 87.22
3 110.10 33 86.26
4 109.45 34 85.29
5 108.79 35 84.31
6 108.13 36 83.31
7 107.45 37 82.30
8 106.76 38 81.27
9 106.07 39 80.24
10 105.36 40 79.18
11 104.65 41 78.12
12 103.93 42 77.04
13 103.19 43 75.94
14 102.45 44 74.83
15 101.70 45 73.71
16 100.93 46 72.57
17 100.16 47 71.41
18 99.38 48 70.24
19 98.58 49 69.06
20 97.78 50 67.86
21 96.96 51 66.64
22 96.13 52 65.40
23 95.29 53 64.15
24 94.44 54 62.88
25 93.58 55 61.60
26 92.71 56 60.30
27 91.83 57 58.98
28 90.93 58 57.64
29 90.02 59 56.29
30 89.10 60 55.00
<PAGE>
CONTINENTAL CAN COMPANY
EXHIBIT 1 TO RENTAL SCHEDULE A-1
TERMIMATION BY SALE AND CASUALTY VALUES
(State as Percentage of Equipment Cost)
AFTER
PRIMARY
TERM TERMINATION CASUALTY
PAYMENT NO. BY SALE VALUE
- ----------- ----------- ---------
Prior to 1 112.00
1 114.38 111.38
2 113.74 110.74
3 113.10 110.10
4 112.45 109.45
5 111.79 108.79
6 111.13 108.13
7 110.45 107.45
8 109.76 106.76
9 109.07 106.07
10 108.37 105.37
11 107.65 104.65
12 106.93 103.93
13 106.20 103.20
14 105.45 102.45
15 104.70 101.70
16 103.94 100.94
17 103.16 100.16
18 102.38 99.38
19 101.58 98.58
20 100.78 97.78
21 99.96 96.96
22 99.14 96.14
23 98.30 95.30
24 97.45 94.45
25 96.59 93.59
26 95.71 92.71
27 94.83 91.83
28 93.93 90.93
29 93.02 90.02
30 92.10 89.10
<PAGE>
CONTINENTAL CAN COMPANY
EXHIBIT 1 TO RENTAL SCHEDULE A-1
TERMINATION BY SALE AND CASUALTY VALUES
(Stated as Percentage of Equipment Cost)
AFTER
PRIMARY
TERM TERMINATION CASUALTY
PAYMENT NO. BY SALE VALUE
- ----------- ----------- ---------
31 91.17 88.17
32 90.23 87.23
33 89.27 86.27
34 88.30 85.30
35 87.31 84.31
36 86.32 83.32
37 85.30 82.30
38 84.28 81.28
39 83.24 80.24
40 82.19 79.19
41 81.12 78.12
42 80.04 77.04
43 78.95 75.95
44 77.84 74.84
45 76.72 73.72
46 75.58 72.58
47 74.42 71.42
48 73.25 70.25
49 72.07 69.07
50 70.86 67.86
51 69.65 66.65
52 68.41 65.41
53 67.16 64.16
54 65.89 62.89
55 64.61 61.61
56 63.31 60.31
57 61.99 58.99
58 60.65 57.65
59 59.30 56.30
60 58.00 55.00
<PAGE>
1/30/90 Continental Food Packaging, Inc. Page 1
Rental Schedule A-1
Schedule A
<TABLE>
<CAPTION>
Acceptance Date Vendor name Invoice no. Unit cost Serial Number Zip Code State City
- --------------- ----------- ----------- --------- ------------- -------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1/30/90 Hyster Company 0033477 15,660.00 B010306630K 68117 NE Omaha
12/24/89 Hyster Company 0033516 16,115.00 A187V15527K 98188 WA Seattle
12/27/89 Hyster Company 0033517 16,115.00 A187V15528K 98188 WA Seattle
12/27/89 Hyster Company 0033518 16,115.00 A187V15529K 98188 WA Seattle
1/19/90 Hyster Company 0035294 32,050.00 D004V03437K 68117 NE Omaha
1/5/90 Hyster Company 0035630 26,470.00 D004V03432K 94577 CA San Leandro
1/19/90 Hyster Company 0035631 15,540.00 A187V1578SL 68117 NE Omaha
==========
Total Equipment Cost: 138,065.00
<CAPTION>
Acceptance Date Vendor name Invoice no. Street Address Eqpt. Manf. Eqpt. Model Eqpt. Type
- --------------- -------------- ----------- ---------------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
1/30/90 Hyster Company 0033477 4133 South 72nd Street Hyster S35IL FORKLIFT
12/24/89 Hyster Company 0033516 8810 Northrup Street Hyster S50IL FORKLIFT
12/27/89 Hyster Company 0033517 8810 Northrup Street Hyster S50IL FORKLIFT
12/27/89 Hyster Company 0033518 8810 Northrup Street Hyster S50IL FORKLIFT
1/19/90 Hyster Company 0035294 4133 South 72nd Street Hyster S120ILB FORKLIFT
1/5/90 Hyster Company 0035630 1951 Fairway Street Hyster S70IL FORKLIFT
1/19/90 Hyster Company 0035631 4133 South 72nd Street Hyster S55IL FORKLIFT
</TABLE>
<PAGE>
RENEWAL RENTAL SCHEDULE NO. A-1RN1
(the "Renewal Rental Schedule")
DATED AS OF MAY 13,1998
TO MASTER LEASE AGREEMENT NO. 891OCTG389
(the "Master Lease")
DATED AS OF NOVEMBER 10,1989
LESSOR LESSEE
AMERICAN INCOME PARTNERS V-D CROWN, CORK & SEAL COMPANY, INC.
LIMITED PARTNERSHIP BY ASSIGNMENT FROM CONTINENTAL
C/O EQUIS FINANCIAL GROUP FOOD PACKAGING, INC.
88 BROAD STREET 8300 ASHTON ROAD
BOSTON, MA 02110 PHILADELPHIA, PA 19138
1. LEASE TERM. PAYMENT DATES.
This Renewal Rental Schedule, between American Income Partners V-D, as
lessor, lessor's interest therein having been previously sold and assigned by
American Finance Group and Lessee incorporates by reference the terms and
conditions of the Master Lease. Lessor hereby leases to Lessee and Lessee hereby
leases from Lessor those items of Equipment described on the attached Schedule
B, for the Renewal Lease Term and at the Renewal Term Basic Rent payable on the
Payment Dates hereinafter set forth on the attached Schedule A, on the terms and
conditions set forth in the Master Lease.
2. BASIC RENT
Renewal Term Basic Rent is computed by multiplying the Total Equipment
Cost by the Renewal Lease Rate set forth on the attached Schedule A.
3. SPECIAL RETURN CONDITIONS. STIPULATED LOSS VALUE.
In furtherance, and not in limitation of, the use, maintenance and return
conditions for the Equipment set forth in Sections 4, 8 and 11 of the Master
Lease, Lessee hereby agrees to return the Equipment to Lessor in accordance with
all of the terms and conditions of the Master Lease and in compliance with the
following special return conditions:
1. When loaded to its rated capacity, each Unit shall:
(a) Start under its own power and idle without water, hydraulic or
fuel leaks.
(b) Move through its normal speed ranges in both forward and
reverse, in normal operating manner, with and without full load.
(c) Steer right and left in both forward and reverse at
manufacturer's designed turning radius (180 degrees).
<PAGE>
RENEWAL RENTAL SCHEDULE NO. A-1RN1
PAGE TWO
(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. Uprights, rollers, carriage, lift chains and
channel assemble shall be in working condition, not twisted,
cracked, bent or welded, normal wear and tear expected.
(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 with no
leaks.
(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. In addition, each Unit shall have no torn seats.
3. The Units shall have tires with at least fifty percent (50%) remaining
tread each.
4. Each Unit shall be complete with all originally-installed parts and
pieces or same manufacturers new parts and pieces.
5. All decals, numbers and customer identification shall be removed from
Equipment. If removal is by Lessor or Lessor's agent, Lessee shall pay any
reasonable costs associated therewith.
6. Each Unit shall be cleaned, washed and without rust before being
returned.
Notwithstanding the provision of the Master Lease, the Stipulated Loss
Value for the Equipment during the Renewal Lease Term shall be equal to
$11,900.00.
4. ENTIRE AGREEMENT. MODIFICATION AND WAIVERS. EXECUTION IN COUNTERPARTS.
This Renewal Rental Schedule and the Master Lease constitute the entire
agreement between Lessee and Lessor with respect to the leasing of the
Equipment. Lessee hereby represents, warrants and certifies that the
representations and warranties of Lessee set forth in the Master Lease are true
and correct as of the date hereof. Capitalized terms not defined herein shall
have the meanings assigned to them in the Master Lease. To the extent any of the
terms and conditions set forth in this Renewal Rental Schedule conflict with or
are inconsistent with the Master Lease, this Renewal Rental Schedule shall
govern and control. No amendment, modification or waiver of this Renewal Rental
Schedule or the Master Lease will be effective unless evidenced by a writing
signed by the parry to be charged. This Renewal Rental Schedule may be executed
in counterparts, all of which together shall constitute one and the same
instrument.
<PAGE>
RENEWAL RENTAL SCHEDULE NO. A-1RN1
PAGE THREE
The undersigned, being the duly authorized representative of the Lessee, hereby
certifies that the items of Equipment described on the attached Schedule B have
been duly delivered to the Lessee in good order and duly inspected and accepted
by the Lessee as conforming in all respects with the requirements and provisions
of the Master Lease, as of the Renewal Term Commencement Date stated on the
attached Schedule A.
LESSOR LESSEE
AMERICAN INCOME PARTNERS V-D CROWN, CORK & SEAL COMPANY INC.,
LIMITED PARTNERSHIP AS ASSIGNED BY CONTINENTAL FOOD
By: AFG LEASING IV INCORPORATED FOOD PACKAGING, INC.
Title: GENERAL PARTNER
By: /s/ Gail D. Ofgant By: /s/ [ILLEGIBLE]
----------------------- ------------------------
Title: Vice President Title: Plant Manager
COUNTERPART NO. 1 OF 2 SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE
EXTENT IF ANY THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM
COMMERCIAL CODE, NO SECURITY INTEREST MAY BE CREATED THROUGH THE TRANSFER AND
POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.
<PAGE>
[ILLEGIBLE] EQUIS FINANCIAL GROUP 5/13/98 11:14:30 PAGE 1
Schedule A - Rental Schedule Economics
LESSEE: CONTINENTAL FOOD PACKAGING, INC.
LESSOR: EQUIS FINANCIAL GROUP
RENTAL SCHEDULE: 1-1RN1
LEASE TERM: 24
PRIMARY START DATE: 6/01/1998
LEASE EXPIRATION DATE: 5/31/2000
PAYMENT FREQUENCY: MONTHLY
ADVANCE/ARREARS: ADVANCE
LEASE RATE: .011713370
PER ITEM LEASE RATE: .000390379
PERIODIC RENT: $310.00
NUMBER OF PAYMENTS: 24
TOTAL INTERIM RENT: $.00
PAYMENT COMMENCEMENT DATE: 6/01/1998
TOTAL EQUIPMENT COST: $26,470.00
DOCUMENT FEE: ______________
/s/ [ILLEGIBLE] LESSEE INITIALS
- ---------------
/s/ [ILLEGIBLE] LESSOR INITIALS
- ---------------
<PAGE>
[ILLEGIBLE] EQUIS FINANCIAL GROUP 5/13/98 11:14:35 PAGE 1
Schedule B Equipment Description
LESSEE: CONTINENTAL FOOD PACKAGING, INC.
RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NUMBER A-[ILLEGIBLE]
LESSOR: EQUIS FINANCIAL GROUP
<TABLE>
<CAPTION>
Equipment Cost Serial Number Year Manufacturer Model Type Date
- -------------- ------------- ----------------- ----- -------- ---------
<S> <C> <C> <C> <C> <C>
26,870.00 D064V03432K HYSTER S70KL FORKLIFT 6/01/1998
---------
26,870.00 Total for Location 41099 ROICE MD FREMONT CA 94538
=========
26,870.00 Total Equipment Cost
</TABLE>
