UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 33-32258
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PLM EQUIPMENT GROWTH FUND V
(Exact name of registrant as specified in its charter)
California 94-3104548
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower
Suite 800, San Francisco, CA 94105-1301
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code (415) 974-1399
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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 ______
Aggregate Market Value of Voting Stock: N/A
An index of exhibits filed with this Form 10-K is located at page 44.
Total number of pages in this report: 47.
<PAGE>
PART I
ITEM 1. BUSINESS
(A) Background
In November 1989, PLM Financial Services, Inc. (FSI or the General Partner), a
wholly-owned subsidiary of PLM International, Inc. (PLM International), filed a
Registration Statement on Form S-1 with the Securities and Exchange Commission
with respect to a proposed offering of 10,000,000 Depositary Units (including
2,500,000 option units) (the Units) in PLM Equipment Growth Fund V, a California
limited partnership (the "Partnership", the "Registrant" or "EGF V"). The
Registration Statement also proposed offering an additional 1,250,000 Class B
units through a reinvestment plan. The General Partner has determined that it
will not adopt this reinvestment plan for the Partnership. The Partnership's
offering became effective on April 11, 1990. FSI, as General Partner, owns a 5%
interest in the Partnership. The Partnership engages in the business of owning
and leasing transportation equipment to various commodity shippers and
transportation companies.
The Partnership was formed to engage in the business of owning and managing
a diversified pool of used and new transportation-related equipment and certain
other items of equipment. The Partnership's primary objectives are:
(i) to acquire a diversified portfolio of low obsolescence equipment with
long lives and high residual values with the net proceeds of the initial
partnership offering, supplemented by debt financing if deemed appropriate by
the General Partner. The General Partner intends to acquire the equipment at
what it believes to be below inherent values and to place the equipment on lease
or under other contractual arrangements with creditworthy lessees and operators
of equipment;
(ii)to generate sufficient net operating cash flow from lease operations to
meet liquidity requirements and to generate cash distributions to the Limited
Partners until such time as the General Partner commences the orderly
liquidation of the Partnership assets or unless the Partnership is terminated
earlier upon sale of all Partnership property or by certain other events;
(iii) to selectively sell and purchase other equipment to add to the
Partnership's initial equipment portfolio. The General Partner intends to sell
equipment when it believes that, due to market conditions, market prices for
equipment exceed inherent equipment values or expected future benefits from
continual ownership of a particular asset will not equal or exceed other
equipment investment opportunities. Proceeds from these sales, together with
excess net operating cash flow from operations that remains after cash
distributions have been made to the partners, will be used to acquire additional
equipment throughout the six year reinvestment phase of the Partnership;
(iv)to preserve and protect the value of the portfolio through quality
management, maintaining diversity and constantly monitoring equipment markets.
The offering of the Units of the Partnership closed on December 23, 1991.
As of December 31, 1996, there were 9,169,019 Units outstanding. The General
Partner contributed $100 for its 5% general partner interest in the Partnership.
Beginning in the Partnership's seventh year of operations, which commences
January 1, 1999, the General Partner will stop reinvesting cash flow and surplus
funds, all of which, if any, less reasonable reserves, will be distributed to
the partners. In the ninth year of operations of the Partnership, the General
Partner will begin to liquidate the assets of the Partnership in an orderly
fashion, unless the Partnership is terminated earlier upon sale of all of the
Partnership's equipment or by certain other events. It is anticipated that the
liquidation will be completed by the end of the tenth year of operations of the
Partnership.
<PAGE>
Table 1, below, lists the equipment and the cost of the equipment in the
Partnership portfolio as of December 31, 1996 (in thousands of dollars):
<TABLE>
TABLE 1
<CAPTION>
Units Type Manufacturer Cost
---------------------------------------------------------------------------------------------------------------
Owned equipment held for operating leases:
<S> <C> <C> <C>
1 Product tanker KK Uwajima Zosen $ 17,254
1 Product tanker Kaldnes M/V 16,276
1 Panamax bulk carrier China S.B. Corp. 18,729
5 737-200 Stage II commercial aircraft Boeing 26,405
2 Metro III commuter aircraft Fairchild 1,515
2 DHC-8-102 commuter aircraft DeHavilland 7,629
1 DHC-8-300 commuter aircraft DeHavilland 5,748
1 DC-9-32 commercial aircraft McDonnell Douglas 10,056
1 Stage III aircraft engine RB-211-535E4 Rolls Royce 5,852
752 Refrigerated marine containers Various 13,208
3,236 Various marine containers Various 11,243
126 Covered hopper cars Various 2,972
106 Anhydrous ammonia tank cars GATX 2,483
44 Mill gondola cars Bethlehem Steel 1,248
85 Sulphur tank cars ACF/RTC 2,786
73 Tank cars Various 1,917
183 Refrigerated trailers Various 5,529
154 Dry trailers Various 1,878
149 Piggyback refrigerated trailers Oshkosh 2,276
-----------
Total equipment held for operating leases $ 155,004<F1>
===========
Investment in equipment owned by unconsolidated special purpose entities:
0.5 Bulk carrier Nipponkai and Toyama $ 9,705<F2>
0.5 Product tanker Kaldnes M/V 8,249<F2>
0.17 Two Trusts comprised of:
Three 737-200 Stage II commercial aircraft Boeing 4,706<F3>
Two aircraft engines Pratt Whitney 195<F3>
Portfolio of aircraft rotables Various 325<F3>
0.25 Equipment on direct finance lease:
Two DC-9 commercial aircraft McDonnell Douglas 3,004<F4>
-----------
Total investments $ 26,184<F1>
===========
Owned equipment on direct finance lease:
1 Stage III hushkit installed on B727-200 $ 2,525
===========
<FN>
<F1> Includes proceeds from capital contributions, undistributed cash flow from
operations, and partnership borrowings invested in equipment. Includes
costs capitalzied subsequent to the date of acquisition, and equipment
acquisition fees paid to PLM Transportation Equipment Corporation (TEC), a
wholly-owned subsidiary of FSI, or PLM Worldwide Management Services (WMS),
a wholly-owned subsidiary of PLM International. All equipment was used
equipment at the time of purchase, except 125 dry van trailers and 150
piggyback refrigerated trailers.
<F2> Jointly owned: EGF V and an affiliated partnership.
<F3> Jointly owned: EGF V (17%) and three affiliated partnerships.
<F4> Jointly owned: EGF V (25%) and two affiliated partnerships.
</FN>
</TABLE>
The equipment is generally leased under operating leases with terms of one
to six years. Some of the Partnership's marine containers are leased to
operators of utilization-type leasing pools with equipment owned by unaffiliated
parties. In such instances, revenues received by the Partnership consist of a
specified percentage of revenues generated by leasing the pooled equipment to
sublessees, after deducting certain direct operating expenses of the pooled
equipment.
At December 31, 1996, approximately 69% of the Partnership's trailer
equipment operated in rental yards owned and maintained by PLM Rental, Inc., the
short-term trailer rental subsidiary of PLM International. Revenues collected
under short-term rental agreements with the rental yards' customers are credited
to the owners of the related equipment as received. Direct expenses associated
with the equipment are charged directly to the Partnership. An allocation of
other direct expenses of the rental yard operations are billed to the
Partnership monthly.
The lessees of the equipment include, but are not limited to: America West
Airlines, Inc., Chevron USA, Mobil Oil Corporation, Chembulk Trading, Inc.,
Halla Merchant Marine Company, Ltd., Scanports Shipping Ltd., E.I.
Dupont,.Transamerica Leasing, Marfort Shipping, Inc., and Continental Airlines,
Inc.
(B) Management of Partnership Equipment
The Partnership has entered into an equipment management agreement with PLM
Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI, for the
management of the equipment. IMI has agreed to perform all services necessary to
manage the transportation equipment on behalf of the Partnership and to perform
or contract for the performance of all obligations of the lessor under the
Partnership's leases. In consideration for its services and pursuant to the
Partnership Agreement, IMI is entitled to a monthly management fee (see
Financial Statements notes 1 and 3).
(C) Competition
(1) Operating Leases vs. Full Payout Leases
Generally, the equipment owned or invested in by the Partnership is leased out
on an operating lease basis wherein the rents owed during the initial
noncancelable term of the lease are insufficient to recover the Partnership's
purchase price of the equipment. The short to mid-term nature of operating
leases generally commands a higher rental rate than the longer term, full payout
leases and offers lessees relative flexibility in their equipment commitment. In
addition, the rental obligation under an operating lease need not be capitalized
on the lessee's balance sheet.
The Partnership encounters considerable competition from lessors utilizing
full payout leases on new equipment, i.e., leases which have terms equal to the
expected economic life of the equipment. Full payout leases are written for
longer terms and for lower monthly rates than the Partnership offers. While some
lessees prefer the flexibility offered by a shorter term operating lease, other
lessees prefer the rate advantages possible with a full payout lease.
Competitors of the Partnership may write full payout leases at considerably
lower rates, or larger competitors with a lower cost of capital may offer
operating leases at lower rates, and as a result, the Partnership may be at a
competitive disadvantage.
(2) Manufacturers and Equipment Lessors
The Partnership also competes with equipment manufacturers who offer operating
leases and full payout leases. Manufacturers may provide ancillary services
which the Partnership cannot offer, such as specialized maintenance service
(including possible substitution of equipment), training, warranty services, and
trade-in privileges.
The Partnership competes with many equipment lessors including ACF
Industries, Inc. (Shippers Car Line Division), General Electric Railcar Services
Corporation, Greenbrier Leasing Company, General Electric Capital Aviation
Services Corporation, and other limited partnerships which lease the same types
of equipment.
(D) Demand
The Partnership invests in transportation-related capital equipment and in
"relocatable environments." "Relocatable environments" refers to capital
equipment constructed to be self-contained in function but transportable,
examples of which include mobile offshore drilling units, storage units, and
relocatable buildings. A general distinction can be drawn between equipment used
for the transport of either materials and commodities or people. With the
exception of aircraft leased to passenger air carriers, the Partnership's
equipment is used primarily for the transport of materials and commodities.
The following describe the markets for the Partnership's equipment:
(1) Commercial Aircraft
The market for commercial aircraft continued to improve in 1996 representing two
consecutive years of growth and profits in the airline industry. The $5.7
billion in net profits recorded by the world's top 100 airlines in 1995 grew to
over $6 billion in 1996. The profits are a result of the continued management
emphasis on costs. The demand for ever-lower unit costs by airline management
has caused a significant reduction of surplus used Stage II and Stage III
commercial aircraft. The result is a return to supply/demand equilibrium. On the
demand side, passenger traffic is improving, cargo movement is up, and load
factors are generally higher across the major markets.
These changes are reflected in the performance of the world's 62 major airlines
that operate 60% of the world airline fleet but handle 78% of world passenger
traffic. Focusing on the supply/demand for Partnership-type narrowbody
commercial aircraft, there were 213 used narrowbody aircraft available at year
end 1995. In the first 10 months of 1996, this supply was reduced to 119
narrowbody aircraft available for sale or lease. Forecasts for 1997 see a
continuing supply/demand equilibrium due to air travel growth and balanced
aircraft supply.
The Partnership's narrowbody fleet is primarily late-model (post 1974) Boeing
737-200 Advanced aircraft. There are a total of 939 Boeing 737-200 aircraft in
service, with 219 built prior to 1974. Independent forecasts estimate that 250
total 737-200s will be retired, leaving approximately 700 aircraft in service
after 2003. The forecasts regarding hushkits estimate that half of the 700
Boeing 737-200's, will be hushed to meet Stage III noise levels. The
Partnership's aircraft are all prospects for Stage III hushkits due to their
age, hours, cycles, engine configurations, and operating weights.
Independent projections for the Boeing 727-200 aircraft indicate there are 1,050
in service, with 299 built prior to 1974. The Partnership's aircraft are all
1974 or earlier model 727-100/200s and are expected to be retired prior to 2003.
The current strategy is to optimize their remaining value based on the present
value of lease cash flows and projected residuals.
The Partnership's Douglas DC-9-32s are late model aircraft. There are 663
DC-9-30/40/50 series aircraft in-service, 437 built prior to 1974. Independent
forecasts estimate that 300 older DC-9 aircraft will be retired by the year
2003. The remaining fleet will total approximately 350 aircraft and most of
these aircraft will be hushed to Stage III. The aircraft will remain in active
airline service. The lessees are likely to be secondary airlines operating in
markets outside the United States.
(2) Commuter/Regional Aircraft
Independent forecasts show the regional aircraft market is growing at a rate of
5.5% per year through 2013. This is slightly higher than the comparable growth
rate in commercial aircraft of 4.7% over the same period. Currently there are
4,390 regional aircraft in service in the 15 to 70 seat class. Independent
forecasts show this will grow to over 5,000 aircraft during the next 17 years.
The highest growth markets are the 30 to 50 seat turboprops. The emphasis on the
larger aircraft in the future is a result of growing passenger numbers, airport
congestion and the extension of regional airline route networks requiring longer
range aircraft. These events will continue the current trend of the major
airlines to hand down the operations of their marginal shorthaul routes to
affiliated regional carriers.
The Partnership leases regional aircraft that are in the 19 seat, 36 seat and 50
seat categories. The 19 seat aircraft are in North America and New Zealand. We
expect to sell all 19 seat class aircraft in 1997. The Partnership's 30 to 50
seat regional aircraft are in North America, which is the highest growth market
for this class. The 30 seat market is growing at the expense of the smaller 19
seat aircraft. The 50 seat market is growing as a result of the major airlines
taking +100 seat jets off "thin" routes which are more economically served by
the large turboprop powered aircraft.
<PAGE>
(3) Aircraft Engines
The demand for spare engines has increased as a result of the air travel
industry's expansion over the last two years. The most significant area of
increase is in the Pratt & Whitney Stage II JT8D engine which powers many of the
Partnership's Stage II commercial aircraft. Today there are over 3000 Stage II
commercial jets in service. In December 1993 there were 288 Stage II narrowbody
aircraft available for sale or lease. As of October 1996, the number of
available Stage II narrowbody's was only 107 aircraft. The increase in the Stage
II fleet has placed over 450 engines back into service. This level of demand has
placed a premium on spare JT8D engines and resulted in a good leasing market for
available engines. The Partnership's spare engines will all be re-leased or sold
over the next two years during this market cycle.
The demand for spare Stage III engines has also risen due to the growth in Stage
III aircraft. The Partnership leases one Stage III spare engine manufactured by
Rolls Royce (RR). This engine is an RB211-535E4 and powers the Boeing 757 series
aircraft. Today, there are 257 B757's operating the RB211 engine with 52
different airlines. The engine fleet is approximately 600 engines operating over
3000 hours per year. Approximately every three years each engine on wing
requires removal for overhaul. This results in the need for a spare engine to
allow the aircraft to operate during this interim period. The Partnership's
engine will be available for sale or lease during 1997.
(4) Aircraft Rotables
Aircraft rotables are replacement spare parts held by an airline in inventory.
These parts are components that are removable from an aircraft or engine,
undergo overhaul, and are recertified and refit to the aircraft in an "as new"
condition. Components or rotables, carry specific identification numbers
allowing each part to be individually tracked. The types of rotables owned and
leased by the Partnership include landing gear, certain engine components,
avionics, auxiliary power units (APU's), replacement doors, control surfaces,
pumps, valves and other comparable equipment. Generally a rotable has a useful
life that is either measured in terms of time in service or number of cycles
(takeoffs and landings). While there are no specific guidelines that apply to
the time or cycles between overhauls for rotable equipment, there is no
limitation on the number of times a rotable may be overhauled and recertified.
The component will be overhauled until the cost of such overhaul becomes
uneconomic relative to the units' replacement cost.
The Partnership's rotable parts will be available for sale or lease in 1997.
Rotables generally reflect the market conditions of the aircraft they support.
The Partnership's rotables support primarily Boeing 737-300/400/500 and the
Boeing 737-200 Advanced aircraft. Independent forecasts for 1997 indicate a
supply-demand equilibrium for these aircraft types.
(5) Marine Containers
At the end of 1995, the consensus of industry sources was that 1996 would see
both higher container utilization and strengthening per diem lease rates. Such
was not the case as there was no appreciable cyclical improvement in the
container market following the traditional winter slow down. Industry
utilization continues to be under pressure with per diem rates being impacted as
well.
A substantial portion of the Partnership's containers are on long-term
utilization leases which were entered into with Trans Ocean Leasing as lessee.
The industry has seen a major consolidation as Transamerica Leasing late in the
fourth quarter of 1996, acquired Trans Ocean Leasing. Transamerica Leasing is
the second largest container leasing company in the world. Transamerica Leasing
is the substitute lessee for Trans Ocean Leasing. Long term, such industry
consolidation should bring more rationalization to the market and result in
higher utilization and per diem rates.
(6) Railcars
Pressurized Tank Cars
These cars are used primarily in the petro-chemical and fertilizer industries.
They transport liquefied petroleum gas ("LPG") and anhydrous ammonia. The
utilization rate on the Partnership's fleet of pressurized tank cars was over
98% during 1996. Independent forecasts show the demand for natural gas to grow
during 1997 to 1999, as the developing world, former Communist countries and the
industrialized world all increase their demand for energy. The fertilizer
industry was undergoing a rapid restructuring toward the end of 1996 after a
string of major mergers, which began in 1995. These mergers reduce the number of
companies that use pressurized tank cars for fertilizer service. Whether or not
the economies of the mergers allow the total fleet size to be reduced remains to
be seen.
Non-Pressurized Tank Cars
General purpose or non-pressurized tank cars are used to transport a wide
variety of bulk liquid commodities such as petroleum fuels, lubricating oils,
vegetable oils, molten sulphur, corn syrup, asphalt, and specialty chemicals.
Demand for general purpose tank cars in the Partnership's fleet has remained
healthy over the last two years with utilization remaining above 98%. The demand
for petroleum is anticipated to grow during 1997 to 1999, as the developing
world, former communist countries and the industrialized world all increase
their demand for energy. Chemical carloadings for the first 40 weeks of 1996 are
up one tenth of one percent (0.1%) as compared to the same period in 1995.
Covered Hopper Cars
Through October 5, 1996, grain car loadings were down 13% compared to the same
period for 1995. Even with the greatly reduced loadings, the on-lease rate
during 1996 for the Partnership grain cars remained at 100%. Industry-wide, the
covered hopper is one car type that has increased in number over the last ten
years, going from a total of 299,172 cars in 1985 to 325,882 cars in 1995. It is
possible that another poor crop year, combined with more available cars, could
place downward pressure on grain car rental rates during 1997.
Mill Gondola Cars
The Partnership's net per diem rental income remained high during 1996, as the
demand for mill gondolas remained strong. Quoting from the December, 1996 issue
of Railway Age magazine: "Significant building programs have lessened shortages
somewhat, as have changes in rules on railroad cars and car assignments.
However, gondolas are still in short supply in many places..." The November,
1996 WEFA Group report indicates that they anticipate scrap metal demands to
grow as electric furnace process gain share. Also, they anticipate demand for
steel mill products to expand by 2.5 - 3%, on average, from 1997 to 2000.
(7) Marine Vessels
The Partnership owns or has investments in small to medium-sized dry bulk
vessels and product tankers, which are traded in worldwide markets, carrying
commodity cargoes.
The freight rates in the dry bulk shipping market are dependent on the
balance of supply and demand for shipping commodities and trading patterns for
such dry bulk commodities. In 1995, dry bulk shipping demand was robust (growing
at 5%t over 1994) and there was a significant infusion of new vessel tonnage
especially late in the year, causing some decline in freight rates after a peak
in mid-year. The slide in freight rates continued in the first half of 1996, as
new tonnage was delivered and shipping demand slipped from the high growth rates
of 1995. In the third quarter of 1996, there was a significant acceleration in
the drop of freight rates, primarily caused by the lack of significant grain
shipment volumes and the infusion of new tonnage. The low freight rates induced
many ship owners to scrap older tonnage and to defer or cancel new building
orders. In the fourth quarter, a strong grain harvest worldwide gave the market
new strength and freight rates recovered to the levels experienced in early
1996, but not to 1995 levels. Overall 1996 was a soft year for shipping with dry
bulk demand growing only 1.8% and the dry bulk fleet growing 3% in tonnage. The
outlook for 1997 shows an expected improvement in demand with growth at 2.4%,
but a high orderbook remains. 1997 is expected to be a soft year with relatively
low freight rates; however, prospects may be strengthened by continued scrapping
of older vessels in the face of soft rates and deferment or canceling of orders.
Demand for commodity shipping closely tracks worldwide economic growth;
however, economic development may alter demand patterns from time to time. The
general partner operates its funds' vessels in spot charters, period charters
and pooled vessel operations. This operating approach provides the flexibility
to adapt to changing demand patterns.
Independent forecasts show the longer term outlook (past 1997) should bring
improvement in freight rates earned by vessels; however, this is dependent on
the supply/demand balance and stability in growth levels. The newbuilding
orderbook currently is slightly lower than at the end of 1995 in tonnage.
Shipyard capacity is booked through late 1998; however, it remains to be seen
how many of these orders will actually be fulfilled. Historically, demand has
averaged approximately 3 percent annual growth, fluctuating between flat growth
and 6 percent annually. With predictable long term demand growth, the long term
outlook depends on the supply side, which is affected by interest rates,
governmental shipbuilding subsidy programs, and prospects for reasonable capital
returns in shipping.
(8) Trailers
Intermodal Trailers
The robust intermodal trailer market that began 4 years ago began to soften in
1995 and reduced demand continued in 1996. Intermodal trailer loadings were flat
in 1996 versus 1995's depressed levels. This lack of growth has been the result
of many factors ranging from truckload firms aggressively recapturing market
share from the railroads through aggressive pricing, to the continuing
consolidation activities and asset efficiency improvements of the major U.S.
railroads.
All of these factors helped make 1996 a year of equalizing equipment supply
as railroads and lessors were pressured to retire older and less efficient
trailers. The two largest suppliers of railroad trailers reduced the available
fleet in 1996 by over 15%. Overall utilization for intermodal trailers,
including the Partnership's fleet , was lower in 1996 than in previous years.
Over-the-Road Dry Trailers
The over-the-road dry trailer market was weak in 1996 with utilization down 15%.
The trailer industry experienced a record year in 1994 for new production and
1995 production levels were similar to 1994. However, in 1996 , the truck
freight recession, along with an over building situation, contributed to 1996's
poor performance. 1996 had too little freight and too much equipment.
Over-the-Road Refrigerated Trailers
The Partnership experienced fairly strong demand levels in 1996 for its
refrigerated trailers. With over 37% of the fleet in over the road refrigerated
trailers, the Partnership, PLM and affiliated partnerships combined, is the
largest supplier of short-term rental refrigerated trailers in the U.S..
(E) Government Regulations
The use, maintenance, and ownership of equipment is regulated by federal, state,
local, and/or foreign governmental authorities. Such regulations may impose
restrictions and financial burdens on the Partnership's ownership and operation
of equipment. Changes in government regulations, industry standards, or
deregulation may also affect the ownership, operation, and resale of the
equipment. Substantial portions of the Partnership's equipment portfolio are
either registered or operated internationally. Such equipment may be subject to
adverse political, government, or legal actions, including the risk of
expropriation or loss arising from hostilities. Certain of the Partnership's
equipment is subject to extensive safety and operating regulations which may
require the removal from service or extensive modification of such equipment to
meet these regulations at considerable cost to the Partnership. Such regulations
include (but are not limited to):
(1) the U.S. Oil Pollution Act of 1990 (which established liability for
operators and owners of vessels, mobile offshore drilling units, etc. that
create environmental pollution);
(2) the U.S. Department of Transportation's Aircraft Capacity Act of 1990
(which limits or eliminates the operation of commercial aircraft in the
U.S. that do not meet certain noise, aging, and cor- rosion criteria);
(3) the Montreal Protocol on Substances that Deplete the Ozone Layer and
the U.S. Clean Air Act Amendments of 1990 (which call for the control and
eventual replacement of substances that have been found to cause or
contribute significantly to harmful effects on the stratospheric ozone
layer and which are used extensively as refrigerants in refrigerated
marine cargo containers, over-the-road trailers, etc.);
(4) the U.S. Department of Transportation's Hazardous Materials Regulations
(which regulate the classification of and packaging requirements for
hazardous materials and which apply particularly to the Partnership's tank
cars).
ITEM 2. PROPERTIES
The Partnership neither owns nor leases any properties other than the equipment
it has purchased for leasing purposes. At December 31, 1996, the Partnership
owned a portfolio of transportation equipment and investments in equipment owned
by special purpose entities as described in Part I, Table 1. The Partnership
acquired equipment with the proceeds of the Partnership offering through
approximately the first quarter of 1992.
The Partnership maintains its principal office at One Market, Steuart
Street Tower, Suite 800, San Francisco, California 94105-1301. All office
facilities are provided by FSI without reimbursement by the Partnership.
ITEM 3. LEGAL PROCEEDINGS
PLM International (PLMI) along with FSI, IMI, TEC and PLM Securities Corp (PLM
Securities), and collectively with PLMI, FSI, IMI, TEC and PLM Securities, (the
"PLM Entities"), were named as defendants in a class action lawsuit filed in the
Circuit Court of Mobile County, Mobile, Alabama, Case No. CV-97-251. The PLM
Entities received service of the complaint on February 10, 1997, and pursuant to
an extension of time granted by plaintiffs' attorneys, have sixty days to
respond to the complaint. PLM International is currently reviewing the substance
of the allegations with its counsel, and believes the allegations to be
completely without merit and intends to defend this matter vigorously.
The plaintiffs, who filed the complaint on their own and on behalf of all
class members similarly situated, are six individuals who allegedly invested in
certain California limited partnerships sponsored by PLM Securities, for which
FSI acts as the general partner, including the Partnership, PLM Equipment Growth
Fund IV, PLM Equipment Growth Fund VI, and PLM Equipment Growth and Income Fund
VII (the "PLM Growth Funds"). The complaint purports eight causes of action
against all defendants as follows: fraud and deceit, suppression, negligent
misrepresentation and suppression, intentional breach of fiduciary duty,
negligent breach of fiduciary duty, unjust enrichment, conversion, and
conspiracy. Additionally, plaintiffs allege a cause of action for breach of
third party beneficiary contracts against and in violation of the National
Association of Securities Dealers (NASD) rules of fair practice by PLM
Securities alone.
Plaintiffs allege that each defendant owed plaintiffs and the class certain
duties due to their status as fiduciaries, financial advisors, agents, general
partner, and control persons. Based on these duties, plaintiffs assert liability
against the PLM Entities for improper sales and marketing practices,
mismanagement of the PLM Growth Funds, and concealing such mismanagement from
investors in the PLM Growth Funds. Plaintiffs seek unspecified compensatory and
recissory damages, as well as punitive damages, and have offered to tender their
limited partnership units back to the defendants.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Partnership's limited partners during
the fourth quarter of its fiscal year ended December 31, 1996.
<PAGE>
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S EQUITY AND RELATED UNITHOLDER MATTERS
Pursuant to the terms of the Partnership Agreement, the General Partner is
generally entitled to a 5% interest in the profits and losses and distributions
of the Partnership. The General Partner is the sole holder of such interests.
Gross income in each year of the Partnership is specially allocated to the
General Partner to the extent, if any, necessary to cause the capital account
balance of the General Partner to be zero as of the close of such year. The
remaining interests in the profits and losses and distributions of the
Partnership are owned, as of December 31, 1996, by the approximately 10,000
holders of Units in the Partnership.
There are several secondary exchanges which will facilitate sales and
purchases of limited partnership units. Secondary markets are characterized as
having few buyers for limited partnership interests and, therefore, generally
are viewed as inefficient vehicles for the sale of partnership units. There is
presently no public market for the Units and none is likely to develop. To
prevent the Units from being considered "publicly traded" and, thereby, to avoid
taxation of the Partnership as an association treated as a corporation under the
Internal Revenue Code, the Units will not be transferred without the consent of
the General Partner, which may be withheld in its absolute discretion. The
General Partner intends to monitor transfers of Units in an effort to ensure
that they do not exceed the number permitted by certain safe harbors promulgated
by the Internal Revenue Service. A transfer may be prohibited if the intended
transferee is not a U.S. Citizen or if the transfer would cause any portion of
the Units to be treated as "plan assets". The Partnership may also be obligated
to redeem a certain number of Units each year beginning January 1, 1994. At
December 31, 1996, the Partnership agreed to purchase approximately 120,000
Units for an aggregate price of approximately $1,171,000. The General Partner
anticipates that these Units will be repurchased in the first and second
quarters of 1997.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Table 2, below, lists selected financial data for the Partnership:
<TABLE>
TABLE 2
For the years ended December 31, 1996, 1995, 1994,
1993, and 1992, (In thousands of dollars except
per unit amounts)
<CAPTION>
1996 1995 1994 1993 1992
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating results:
Total revenues $ 44,322 $ 39,142 $ 44,291 $ 38,476 $ 38,497
Net gain (loss) on disposition
of equipment 14,199 3,835 4,920 (584 ) (273 )
Loss on revaluation of
equipment -- -- -- (4,125 ) --
Equity in net loss of unconsolidated
special purpose entities (116 ) -- -- -- --
Net income (loss) 12,441 2,045 3,193 (8,443 ) (4,119 )
At year-end:
Total assets $ 98,419 $ 102,109 $ 120,114 $ 135,582 $ 162,111
Total liabilities 46,123 44,092 44,221 43,462 42,117
Notes payable 40,463 38,000 38,000 38,000 38,000
Cash distributions $ 18,083 $ 19,342 $ 19,420 $ 19,430 $ 19,180
Cash distributions which represent
a return of capital $ 5,642 $ 17,297 $ 16,227 $ 18,460 $ 18,228
Per weighted average of Limited
Partnership Depositary Unit:
Net income (loss) $ 1.26 $ 0.12 $ 0.24 $ (1.02 ) $ (0.55 )
Cash distributions $ 1.87 $ 2.00 $ 2.00 $ 2.00 $ 200
Cash distributions which represent
a return of capital $ 0.61 $ 1.89 $ 1.76 $ 2.00 $ 2.00
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
Management's Discussion and Analysis of Financial Condition and Results of
Operations relates to the Financial Statements of the Partnership. The following
discussion and analysis of operations focuses on the performance of the
Partnership's equipment in various sectors of the transportation industry, and
its effect on the Partnership's overall financial condition.
Results of Operations - Factors Affecting Performance
(A) Re-leasing and Repricing Activity
The exposure of the Partnership's equipment portfolio to repricing risk occurs
whenever the leases for the equipment expire or are otherwise terminated and the
equipment must be remarketed. Major factors influencing the current market rate
for transportation equipment include supply and demand for similar or comparable
types or kinds of transport capacity, desirability of the equipment in the lease
market, market conditions for the particular industry segment in which the
equipment is to be leased, various regulations concerning the use of the
equipment, and others. Equipment that is idle or out of service between the
expiration of one lease and the assumption of a subsequent lease can result in a
reduction of contribution to the Partnership. The Partnership experienced
re-leasing or repricing activity in 1996 primarily in its trailer, marine vessel
and marine container portfolios.
(1) Trailers: The majority of the Partnership's trailer portfolio operates
in short-term rental facilities or short-line railroad systems. The relatively
short duration of most leases in these operations exposes the trailers to
considerable re-leasing activity. Contributions from the Partnership's trailers
increased during 1996 due to the expiration of various term leases and the
transfer of these trailers to the PLM short-term rental facilities which started
earning a higher lease;
(2) Marine Vessels: Certain of the Partnership's marine vessels transferred
to the voyage charter market from the time charter market during 1996. Voyage
charters are usually short in duration and reflect the short-term demand and
pricing trends in the vessel market. The Partnership experienced an increase in
marine vessel contribution due to higher average rates for these short-term
charters in 1996;
(3) Marine Containers: All of the Partnership's marine containers are
leased to operators of utilization-type leasing pools and, as such, are highly
exposed to repricing activity. The decline in marine containers contributions
was due to soft market conditions that caused a decline in repricing activity.
(4) While market conditions and other factors may have had some impact on
lease rates in markets in which the Partnership owns the remainder of its
equipment portfolio, the majority of this equipment was unaffected.
(B) Equipment Liquidations and Nonperforming Lessees
Liquidation of Partnership equipment, unless accompanied by an immediate
replacement of additional equipment earning similar rates (see below in
"Reinvestment Risk"), represents a reduction in the size of the equipment
portfolio, and may result in a reduction of contribution to the Partnership.
Lessees not performing under the terms of their leases, either by not paying
rent, not maintaining or operating the equipment in accordance with the
conditions of the leases, or other possible departures from the leases can
result not only in reductions in contribution, but also may require the
Partnership to assume additional costs to protect its interests under the
leases, such as repossession, legal fees, etc.
(1) Liquidations: During the year, the Partnership received proceeds of
approximately $30.0 million from the sale of a mobile offshore drilling unit
(rig), 926 marine containers, 2 aircraft engines, 1 commuter aircraft, 1
trailer, and 4 railcars. The sales proceeds represented approximately 81% of the
original cost of the assets. By year end, the Partnership had reinvested
approximately all of the $30.0 million received.
(2) Nonperforming Lessees: At December 31, 1996, the lessee of the
Partnership's hushkit and a small number of other lessees were delinquent in
making their lease payments. The Partnership established reserves against these
receivables and the General Partner is in the process of taking the necessary
steps to repossess the huskit and certain other collateral from the lessee.
(C) Reinvestment Risk
Reinvestment risk occurs when 1) the Partnership cannot generate sufficient
surplus cash after fulfillment of operating obligations and distributions to
reinvest in additional equipment during the reinvestment phase of Partnership
operations; 2) equipment is sold or liquidated for less than threshold amounts;
3) proceeds from sales, losses, or surplus cash available for reinvestment
cannot be reinvested at threshold lease rates; or 4) proceeds from sales or
surplus cash available for reinvestment cannot be deployed in a timely manner.
During the first six years of operations, the Partnership intends to
increase its equipment portfolio by investing surplus cash available in
additional equipment after fulfilling operating requirements and payments of
distributions to the partners. Subsequent to the end of the reinvestment period,
the Partnership will continue to operate for another two years and then begin an
orderly liquidation over an anticipated two-year period. The operating lease
income generated, together with the proceeds from sales of this equipment, are
intended to enhance financial returns to the partners.
Other nonoperating funds for reinvestment are generated from the sale of
equipment, the receipt of funds realized from the payment of stipulated loss
values on equipment lost or disposed of during the time it is subject to lease
agreements, or the exercise of purchase options written into certain lease
agreements. Equipment sales generally result from evaluations by the General
Partner that continued ownership of certain equipment is either inadequate to
meet Partnership performance goals, or that market conditions, market values,
and other considerations indicate it is the appropriate time to sell certain
equipment.
During 1996, the Partnership purchased four 737-200 Boeing stage II
commercial aircraft for $21.9 million, $5.7 million was used to purchase a
DHC-8-300 commuter aircraft, and $3.0 million was used to purchase a partial
interest in an entity which owns two DC-9 commercial aircraft on a direct
finance lease. The deployment of the majority of funds occurred in a timely
manner; consequently, Partnership performance was largely unaffected by any lack
of reinvestment of available funds.
(D) Equipment Valuation
In March 1995, the Financial Accounting Standards Board (FASB) issued statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of" (SFAS 121). This standard is effective for years
beginning after December 15, 1995. The Partnership adopted SFAS 121 during 1995,
the effect of which was not material as the method previously employed by the
Partnership was consistent with SFAS 121. In accordance with SFAS 121, the
General Partner reviews the carrying value of the Partnership's equipment
portfolio at least annually in relation to expected future market conditions for
the purpose of assessing the recoverability of the recorded amounts. If the
projected future lease revenue plus residual values are less than the carrying
value of the equipment, a loss on revaluation is recorded. There were no
reductions required to the carrying value of equipment during 1996.
As of December 31, 1996, the General Partner estimated the current fair market
value of the Partnership's equipment portfolio, including equipment owned by
unconsolidated special purpose entities (USPE's), to be approximately $124.6
million.
Financial Condition - Capital Resources, Liquidity, and Unit Redemption Plan
The General Partner purchased the Partnership's initial equipment portfolio with
capital raised from its initial equity offering, borrowings from the Committed
Bridge Facility of $2.5 million, and permanent debt financing of $38 million. No
further capital contributions from original partners are permitted under the
terms of the Partnership's Limited Partnership Agreement, while the
Partnership's total outstanding debt, currently $40.5 million, can only be
increased by a maximum of $4.5 million subject to specific covenants in existing
debt agreements. The Partnership relies on operating cash flow to meet its
operating obligations, make cash distributions to Limited Partners, and increase
the Partnership's equipment portfolio with any remaining available surplus cash.
For the year ended December 31, 1996, the Partnership generated sufficient
operating cash to meet its operating obligations and pay distributions, but used
undistributed available cash from prior periods of approximately $2.0 million to
maintain the current level of distributions (total 1996 of approximately $18.1
million) to the partners
On September 26, 1996, the existing senior loan agreement was amended and
restated to reduce the interest rate, to grant increased flexibility in
allowable collateral, to pledge additional equipment to the lenders and to amend
the loan repayment schedule from 16 consecutive equal quarterly installments to
20 consecutive quarterly installments with lower principle payments for the
first four payments. The Partnership incurred a loan amendment fee of $133,000
to the lender in connection with the restatement of this loan. Pursuant to the
terms of the loan agreement the Partnership must comply with certain financial
covenants and maintain certain financial ratios. The General Partner believes
that the book value of the note payable approximates fair value due to its
variable interest rate.
Pursuant to the terms of the Limited Partnership agreement, beginning
January 1, 1994, the Partnership can become obligated under certain conditions
to redeem up to 2% of the outstanding Depositary Units each year. The purchase
price to be offered for such outstanding units will be equal to 110% of the
unrecovered principal attributed to the units - where unrecovered principal is
defined as the excess of the capital contribution attributable to a unit over
the distributions from any source paid with respect to that Unit. At December
31, 1996, the Partnership agreed to purchase approximately 120,000 Units for an
aggregate price of approximately $1,171,000. The General Partner anticipates
that these Units will be repurchased in the first and second quarters of 1997.
The General Partner has entered into a joint $50 million credit facility
(the "Committed Bridge Facility") on behalf of the Partnership, PLM Equipment
Growth Fund IV, PLM Equipment Growth Fund VI, PLM Equipment Growth & Income Fund
VII and Professional Lease Management Income Fund I ("Fund I"), all affiliated
investment programs, TEC Acquisub, Inc. ("TECAI"), an indirect wholly-owned
subsidiary of the General Partner, and American Finance Group, Inc. (AFG), a
subsidiary of PLM International Inc., which may be used to provide interim
financing of up to (i) 70% of the aggregate book value or 50% of the aggregate
net fair market value of eligible equipment owned by the Partnership , plus (ii)
50% of unrestricted cash held by the borrower. The Committed Bridge Facility
became available on December 20, 1993, and was amended and restated on October
31, 1996, to expire on October 31, 1997 and increased the available borrowings
for AFG to $50 million. The Partnership, TECAI, Fund I and the other
partnerships collectively may borrow up to $35 million of the Committed Bridge
Facility. The Committed Bridge Facility also provides for a $5 million Letter of
Credit Facility for the eligible borrowers. Outstanding borrowings by Fund I,
TECAI, AFG or PLM Equipment Growth Funds IV through VII reduce the amount
available to each other under the Committed Bridge Facility. Individual
borrowings may be outstanding for no more than 179 days, with all advances due
no later than October 31, 1997. The Committed Bridge Facility prohibits the
Partnership from incurring any additional indebtedness. Interest accrues at
either the prime rate or adjusted LIBOR plus 2.5% at the borrowers option and is
set at the time of an advance of funds. Borrowings by the Partnership are
guaranteed by the General Partner. As of December 31, 1996, the Partnership had
borrowings of $2.5 million, PLM Equipment Growth Fund VI had $1.3 million, PLM
Equipment Growth and Income Fund VII had $2.0 million, AFG had $26.9 million,
and TECAI had $4.1 million in outstanding borrowings. Neither PLM Equipment
Growth Fund IV nor Fund I had any outstanding borrowings.
The General Partner has not planned any expenditures, nor is it aware of
any contingencies that would cause it to require any additional capital to that
mentioned above.
Results of Operations - Year to Year Detailed Comparison
Comparison of the Partnership's Operating Results for the Years Ended
December 31, 1996 and 1995
(A) Owned equipment operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating, and asset specific insurance expenses) on owned equipment
decreased during the year ended December 31, 1996, when compared to the same
period of 1995. The following table presents lease revenues less direct expenses
by owned equipment type (in thousands):
<TABLE>
<CAPTION>
For the years ended
December 31,
1996 1995
----------------------------
<S> <C> <C>
Aircraft and aircraft engines $ 6,348 $ 4,727
Marine vessels 4,910 3,542
Trailers 1,567 1,436
Rail equipment 1,532 1,797
Marine containers 2,790 3,939
Mobile offshore drilling unit 1,062 2,553
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $6.5 million and $0.1
million, respectively, for the year ended December 31, 1996, compared to $4.7
million and $35,000, respectively during the same period of 1995. The increase
in aircraft contribution was due to the purchase of five aircraft during the
later half of the second quarter 1995. This equipment was on lease for the
entire year of 1996, compared to being on lease for only seven months of 1995.
In addition, lease revenues from owned equipment in 1996 reflects a transfer of
2 aircraft from USPE's to comply with the credit agreement (See Note 2). The
increase in aircraft contribution was offset, in part, by the sale of two
aircraft engines during the third quarter of 1996;
Marine vessels: Marine vessel lease revenues and direct expenses were $14.0
million and $9.1 million, respectively, for the year ended December 31, 1996,
compared to $13.5 and $10.0 million, respectively during the same period of
1995. The increase in marine vessel contribution was due primarily to two marine
vessels which were operating under a voyage charter during the first six months
of 1996, transferring to a time charter during the third quarter of 1996
compared to operating under a time charter during all of 1995. Marine vessels
typically earn a higher lease rate while under a voyage charter when compared to
a time charter. Marine vessel direct expenses remained relatively constant for
both periods except dry docking expenses which decreased significantly during
1996 due to an increase in the number of months between required dry docking;
Trailers: Trailer lease revenues and direct expenses were $2.0 million and $0.5
million, respectively, for the year ended December 31, 1996, compared to $1.5
and $0.1 million, respectively during the same period of 1995. The trailer fleet
remained virtually constant for both periods, however, over the past twelve
months the number of trailers in the PLM affiliated short-term rental yards has
increased due to expiration of term leases. These trailers are now earning a
higher utilization rate while in the rental yards compared to the fixed term
leases. Due to the increase of trailers in the PLM affiliated short-term rental
yards, repairs to maintain these trailers in running condition has also
increased;
Rail equipment: Rail equipment lease revenues and direct expenses were $2.4
million and $0.9 million, respectively, for the year ended December 31, 1996,
compared to $2.5 million and $0.7 million, respectively during the same period
of 1995. The decrease in railcar contribution is due to the sale of 98 railcars
in May of 1995.
Marine containers: Marine container lease revenues and direct expenses were $2.8
million and $25,000, respectively, for the year ended December 31, 1996,
compared to $4.1 million and $123,000, respectively during the same period of
1995. The number of marine containers owned by the Partnership has been
declining over the past twelve months due to sales and dispositions. The result
of this declining fleet has resulted in a decrease in marine container net
contribution. In addition, the container fleet is experiencing a decline in the
utilization rate during 1996 compared to 1995.
Mobile offshore drilling unit: Rig lease revenues and direct expenses were $1.1
million and $3,000, respectively, for the year ended December 31, 1996, compared
to $2.6 million and $3,000, respectively during the same quarter of 1995. The
decrease in the rig contribution was due to the sale of this equipment during
the later part of the second quarter of 1996;
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $21.1 million for the year ended December 31, 1996,
increased from $20.8 million for the same period in 1995. The significant
variances are explained below:
(1) The $0.3 million decrease in interest expense was due to a lower interest
rate charged to the Partnership on the existing senior loan during 1996;
(2) Depreciation and amortization expenses decreased $0.3 million from 1995
levels reflecting the double declining balance method of depreciation and the
sale of certain assets during 1996 and 1995. The decrease was offset, in part,
by the purchase of two commercial aircraft during 1996 ;
(3) Administrative expenses increased $0.6 million due primarily to the
additional costs to transfer the off-lease trailers to the PLM affiliated rental
yards and the additional allocation of rental yard costs incurred due to the
increased number of trailers in the rental yards. The Partnership also incurred
higher professional services during 1996 when compared to the same period of
1995. Also, during 1995, the Partnership received a $0.1 million refund of
services not performed, a similar refund was not received during 1996;
(4) A $0.3 million increase in bad debt expenses due to an increase in
uncollectable amounts due from certain lessees;
(C) Net gain on disposition of owned equipment
Net gain on disposition of equipment for the year ended December 31, 1996
totaled $14.2 million which resulted from the sale of a rig with a net book
value of $10.7 million for proceeds of $21.3 million, 2 aircraft engines, 1
commuter aircraft, 926 marine containers, 1 trailer and 4 railcars with an
aggregate net book value of $5.1 million for proceeds of $8.7 million. Net gain
on disposition of equipment during the twelve months ended December 31, 1995,
was realized on the disposal of 1,519 marine containers, 2 marine vessels, 1
aircraft, and 98 railcars with an aggregate net book value of $15.8 million for
proceeds of $18.3 million. Included in the gain on sale of one of the marine
vessels, is the unused portion of dry docking reserves and commissions in the
net amount of $1.3 million.
(D) Interest and other income
Interest and other income increased $0.4 million during the year ended December
31, 1996 due primarily to a business interruption claim of $0.3 million which
was received during 1996 and interest earned from the finance lease which was
not in place during 1995. This increase was offset by a decrease in interest
income earned on cash investments during 1996 due to lower cash available for
investment.
(E) Equity in net income (loss) of unconsolidated special purpose entities
represents net income generated from the operation of jointly-owned assets
accounted for under the equity method (see Note 2 to the financial statements).
<TABLE>
<CAPTION>
For the year ended
December 31,
1996 1995
----------------------------
<S> <C> <C>
Aircraft, aircraft rotable, and aircraft engines $ (265 ) $ (87 )
Marine vessels 149 135
</TABLE>
Aircraft, aircraft rotable, and aircraft engines: As of December 31 1996, the
Partnership has an interest in two trusts which own 3 commercial aircraft, 2
aircraft engines and a portfolio of aircraft rotables. The Partnership also had
purchased an interest in an additional trust during 1996 which was transferred
into equipment held for operating lease during the later part of the third
quarter of 1996 (see Note 2 and 4 to the financial statements). Revenues earned
by these trusts during the year ended December 31, 1996 of $3.3 million were
offset by depreciation and amortization expense, management fees and
administrative costs of $3.5 million. As of December 31 1995, the Partnership
has an interest in three trusts which own 4 commercial aircraft, 2 aircraft
engines and a portfolio of aircraft rotables which was purchased at the end of
the last two quarters of 1995. Revenues earned by these trusts during the same
period of 1995 of $0.7 million were offset by depreciation and amortization
expense, and management fees of $0.8 million.
Marine vessels: As of December 31, 1996, the Partnership owns a 50%-interest in
two entities which own marine vessels. The revenues generated by this equipment
decreased $0.9 million when compared to the same period of 1995 due to one of
the marine vessels transferring to a time charter during 1996 from a voyage
charter during the same period of 1995. The $0.6 million decrease in 1996 marine
operating expenses when compare to the same period of 1995 was also due to the
one marine vessel which was transferred to a time charter during 1996 from a
voyage charter during the same period of 1995. Depreciation expense decreased
$0.2 million due to the double-declining balance method of depreciation.
(F) Net Income
As a result of the foregoing, the Partnership's net income of $12.4 million for
the year ended December 30, 1996, increased from net income of $2.0 million
during the same period in 1995. The Partnership's ability to operate and
liquidate assets, secure leases, and re-lease those assets whose leases expire
during the duration of the Partnership is subject to many factors and the
Partnership's performance in the twelve months ended December 31. 1996 is not
necessarily indicative of future periods. In the twelve months ended December
31, 1996, the Partnership distributed $17.2 million to the Limited Partners, or
$1.87 per weighted average Depositary Unit.
Comparison of the Partnership's Operating Results for the Years Ended
December 31, 1995 and 1994
- - -----------------------------------------------------------------------
(A) Revenues
Total revenues for the years ended December 31, 1995 and 1994, were $39.1
million and $44.3 million, respectively. This decrease in 1995 revenues was
primarily attributable to lower lease revenues and a lower gain recorded on the
sale of equipment, offset partially by increased interest and other income. The
Partnership's ability to acquire, operate, or liquidate assets, secure leases,
and re-lease those assets whose leases expire during the duration of the
Partnership is subject to many factors, therefore, the Partnership's performance
in 1995 or 1994 in this regard is not necessarily indicative of future periods.
(1) The Partnership's lease revenue decreased to $34.3 million in the year
ended December 31, 1995, from $38.8 million during the same period in 1994.
The following table presents lease revenues earned by equipment type (in
thousands):
<TABLE>
<CAPTION>
For the year ended December
31,
1995 1994
-------------------------------
<S> <C> <C>
Marine vessels $ 18,194 $ 21,501
Mobile offshore drilling units 2,556 5,167
Marine containers 4,061 4,646
Aircraft 5,471 3,265
Rail equipment 2,475 2,945
Trailers 1,541 1,233
==============================
$ 34,298 $ 38,757
==============================
</TABLE>
Significant revenue component changes resulted primarily from:
(a) An increase of $2.2 million in aircraft revenues due primarily to the
acquisition and lease of five commuter aircraft and an interest in three trusts
containing commercial aircraft during 1995;
(b) An increase of $0.3 million in trailer revenues due primarily to the
acquisition and lease of 150 trailers during the first quarter of 1995;
(c) The net decline of $3.3 million in marine vessel revenues is due to a
number of factors:
(c-1) Revenues declined $2.1 million during the year ended December 31,
1995, due to the sale of two marine vessels during the first and second quarters
of 1995 which were on lease during 1994;
(c-2) Revenues declined $2.5 million due to one marine vessel which was
on voyage charter (see below) for all of 1994, switching to a time charter
arrangement during most of the first two quarters of 1995 before switching back
to voyage charter. This marine vessel was also off-hire for 41 days for
drydocking during the later part of 1995;
(c-3) These declines were partially offset by an increase of $1.3
million in revenues earned by three marine vessels which are currently operating
under time charter and voyage charter. Although two of these marine vessels went
into drydocking for an aggregate of 50 days during 1995, increases in the time
charter rates earned during the last two quarters of 1995 plus profit sharing
from the time charter, gave these marine vessels the increased earnings when
compared to 1994;
Voyage charters are short-term leases lasting the duration of specific
voyages, typically 30 to 45 days. Voyage charters have higher revenues
associated with them since the owner pays for costs, such as bunkers and port
costs, normally borne by the lessees under time or bareboat charters. To
position the Partnership's marine vessel fleet for a potential upturn in the
marine vessel market, the Partnership has entered some of its marine vessels
into voyage charters and plans to enter into longer-term contracts as the market
improves;
(d) Declines of $2.6 million in revenues earned by the mobile offshore
drilling unit (rig) were primarily due to the sale of a rig during the later
part of December 1994, which was on lease during 1994 and to a lower re-lease
rate earned on the remaining rig;
(e) Declines of $0.6 million in marine container revenues due primarily to
the disposal of 1,519 marine containers in service between the 1995 and 1994
periods offset, in part, by higher utilization and rents earned during 1995;
(f) Declines of $0.4 million in rail equipment revenues was due primarily
to the sale of 98 railcars during 1995 which were on lease during 1994.
(2) Interest and other income increased $0.4 million when compared to 1994
due primarily to higher cash balances available for investment and an increase
in the interest rate earned on cash equivalents.
(3) Net gain on disposition of equipment during the year ended December 31,
1995, was realized on the disposal of 1,519 marine containers, 2 marine vessels,
1 commuter aircraft, and 98 railcars with an aggregate net book value of $15.8
million for proceeds of $18.3 million. Included in the gain on sale of one of
the marine vessels is the unused portion of drydocking reserves and commissions
in the net amount of $1.3 million. During the year ended December 31, 1994, the
Partnership disposed of 1 mobile offshore drilling unit with a net book value of
$7.9 for proceeds of $12.6 million, and 1,086 marine containers and 26 railcars
with an aggregate net book value of $2.0 million for aggregate proceeds of $2.2
million.
(B) Expenses
Total expenses of $37.1 million for the year ended December 31, 1995, decreased
from $41.1 million for the same period in 1994. The decrease in 1995 expenses
was attributable to lower depreciation expense, management fees to affiliate,
and equipment operating expenses, partially offset by increases in repairs and
maintenance, interest expense, insurance expense, and administrative expenses.
(1) Direct operating expenses (defined as repairs and maintenance,
insurance expenses, and equipment operating expenses) decreased to $13.8 million
in the year ending December 31, 1995, from $15.6 million in the same period in
1994. This change resulted from:
(a) A decrease of $2.4 million in marine equipment operating costs is due
primarily to two of the Partnership's marine vessels switching from short-term
voyage charters, in which the Partnership pays all marine vessel operating
costs, such as crew costs and stores, as well as certain additional costs, such
as bunkers and port costs, to a longer-term time charter. When the marine vessel
is operating under a time charter, a portion of the above expenses are paid by
the charterer and not the Partnership. During the same period in 1994, two
marine vessels operated on a short-term voyage charter and the lessee of the
remaining marine vessels paid for the majority of the above mentioned costs
compared to one marine vessel on voyage charter in 1995;
(b) An increase of $0.3 million in repairs and maintenance costs from 1994
levels was due primarily to additional repairs charged to two of the
Partnership's marine vessels during their drydocking in the fourth quarter 1995
which were not anticipated and additional upgrades required to another marine
vessel during 1995. The increase to marine vessel repairs and maintenance was
offset, in part, by a reduction to repairs and maintenance caused by the sale of
two marine vessels during 1995;
(c) An increase of $0.3 million in insurance expense during the year ended
December 31, 1995, when compared to the same period in 1994, is due to overall
escalating insurance premiums charged to the marine vessels. Also, during 1994,
the Partnership received a refund of $131,000 from an insurance company due to
lower loss of hire claims; a similar refund was not received in 1995;
(2) Indirect operating expenses (defined as depreciation and amortization
expense, management fees, interest expense, and general and administrative
expenses) decreased to $23.3 million in the year ended December 31, 1995 from
$25.5 million in the year ended December 31, 1994. This change resulted
primarily from:
(a) A decrease in depreciation and amortization expense of $2.9 million
from 1994 levels reflecting the Partnership's double-declining depreciation
method and the sale of a rig during December of 1994 and two marine vessels and
other equipment during 1995. The decrease was offset in part by the purchase of
six additional aircraft and a partial beneficial interest in two trusts owning
aircraft during 1995;
(b) An increase of $0.8 million in interest expenses due to a rise in the
base rate of interest charged on the Partnership's debt;
(c) A decrease of $0.3 million in management fees due to a decrease in
lease revenues;
(d) An increase of $0.2 million in administrative expenses due to higher
bank charges to the Partnership, an increase in professional services needed,
and a loan fee charged the Partnership.
(C) Net Income
The Partnership's net income of $2.0 million in the year ended December 31,
1995, decreased from a net income of $3.2 million in the year ended December 31,
1994. The Partnership's ability to acquire, operate, or liquidate assets, secure
leases, and re-lease those assets whose leases expire during the duration of the
Partnership, is subject to many factors and the Partnership's performance in the
year ended December 31, 1995, is not necessarily indicative of future periods.
In the year ended December 31, 1995, the Partnership distributed $18.4 million
to the Limited Partners, or $2.00 per weighted average Depositary Unit.
Geographic Information
The Partnership operates its equipment in international markets. Although these
operations expose the Partnership to certain currency, political, credit and
economic risks, the Manager believes these risks are minimal or has implemented
strategies to control the risks as follows: Currency risks are at a minimum
because all invoicing, with the exception of a small number of railcars
operating in Canada, is conducted in U.S. dollars. Political risks are minimized
generally through the avoidance of operations in countries that do not have a
stable judicial system and established commercial business laws. Credit support
strategies for lessees range from letters of credit supported by U.S. banks to
cash deposits. Although these credit support mechanisms generally allow the
Partnership to maintain its lease yield, there are risks associated with
slow-to-respond judicial systems when legal remedies are required to secure
payment or repossess equipment. Economic risks are inherent in all international
markets and the Manager strives to minimize this risk with market analysis prior
to committing equipment to a particular geographic area. Refer to the Financial
Statements, Note 4 for information on the revenues, income, and assets in
various geographic regions.
Revenues and net operating income by geographic region are impacted by the
time period the asset is owned and the useful life ascribed to the asset for
depreciation purposes. Net income (loss) from equipment is significantly
impacted by depreciation charges which are greatest in the early years due to
the use of 200% declining balance method of depreciation. The relationships of
geographic revenues, net income (loss) and net book value are expected to
significantly change in the future as assets come off lease and decisions are
made to redeploy the assets in the most advantageous geographic location or sell
the assets.
The Partnership's equipment on lease to U.S. domiciled lessees consists of
trailers, railcars and aircraft. During 1996, U.S. lease revenues accounted for
22% of the total lease revenues while net income accounted for 12% of the net
income for the Partnership. The primary reason for this relationship is that
there was a large gain realized from the sale of an asset in another geographic
region and the Partnership depreciates its rail equipment over a fifteen year
period versus twelve years for other equipment types owned and leased in other
geographic regions.
The Partnership's owned equipment and investments in equipment owned by
USPE's on lease to Canadian domiciled lessees consists of aircraft and railcars.
During 1996, Canadian lease revenues accounted for 9% of the total lease
revenues and recorded a net loss of $1.3 million when compared to the net income
for the Partnership of $12.4 million. The primary reason for this relationship
is that there was a large gain realized from the sale of an asset in another
geographic region.
The Partnership's owned aircraft on lease to a South American domiciled
lessee during 1996, accounted for 2% of the total lease revenues and recorded a
net loss of $1.4 million when compared to the net income for the Partnership of
$12.4 million. The primary reason for this relationship is that there was a
large gain realized from the sale of an asset in another geographic region.
The Partnership owned a rig which was on lease to a lessee domiciled in
Asia. Lease revenues in this region accounted for 3% of the total lease revenues
while net income accounted for 86% of the net income for the Partnership. The
primary reason for this relationship is that during 1996, the Partnership sold
this rig for a gain which accounted for 85% of total net income for the
Partnership. At December 31, 1996. the Partnership did not have any remaining
assets in the region surrounding Asia.
The Partnership's owned equipment and investments in equipment owned by
USPE's on lease to lessees in Europe consisted of aircraft which accounted for
6% of lease revenues while net income accounted for 30% of the net income for
the Partnership. The primary reason for this relationship is that the
Partnership sold some of the aircraft equipment and realized a gain on the sales
The Partnership's owned equipment and investments in USPE's on lease to
lessees in the rest of the world consists of marine vessels and marine
containers. During 1996, lease revenues for these lessees accounted for 58% of
the total lease revenues and recorded a net income of 21% when compared to the
net income for the Partnership. The primary reason for this relationship is that
there was a large gain realized from the sale of an asset in another geographic
region.
Inflation
There was no significant impact on the Partnership's operations as a result of
inflation during 1996, 1995 or 1994.
Forward Looking Information
Except for historical information contained herein, the discussion in this Form
10-K contains forward-looking statements that involve risks and uncertainties,
such as statements of the Partnership's plans, objectives, expectations and
intentions. The cautionary statements made in this Form 10-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Partnership's actual results could differ materially from
those discussed here.
Outlook for the Future
Several factors may affect the Partnership's operating performance in 1997 and
beyond, including changes in the markets for the Partnership's equipment and
changes in the regulatory environment in which that equipment operates.
The Partnership's operation of a diversified equipment portfolio in a broad
base of markets is intended to reduce its exposure to volatility in individual
equipment sectors. In 1996, market conditions, supply and demand equilibrium,
and other factors varied in several markets. In the container and refrigerated
over-the-road trailer markets, oversupply conditions, industry consolidations,
and other factors resulted in falling rates and lower returns. In the dry
over-the-road trailer markets, strong demand and a backlog of new equipment
deliveries produced high utilization and returns. The marine vessel, rail, and
mobile offshore drilling unit markets could be generally categorized by
increasing rates as the demand for equipment is increasing faster than new
additions net of retirements. Finally, demand for narrowbody stage II aircraft,
such as those owned by the Partnership, has increased as expected savings from
newer narrowbody aircraft have not materialized and deliveries of the newer
aircraft have slowed down. These different markets have had individual effects
on the performance of Partnership equipment - in some cases resulting in
declining performance, and in others, in improved performance.
The ability of the Partnership to realize acceptable lease rates on its
equipment in the different equipment markets is contingent on many factors, such
as specific market conditions and economic activity, technological obsolescence,
governmental or other regulations, and others. The unpredictability of some of
these factors, or of their occurrence, makes it difficult for the General
Partner to clearly define trends or influences that may impact the performance
of the Partnership's equipment. The General Partner continuously monitors both
the equipment markets and the performance of the Partnership's equipment in
these markets. The General Partner may make an evaluation to reduce the
Partnership's exposure to equipment markets in which it determines that it
cannot operate equipment and achieve acceptable rates of return. Alternatively,
the General Partner may make a determination to enter equipment markets in which
it perceives opportunities to profit from supply-demand instabilities or other
market imperfections.
The Partnership intends to use excess cash flow, if any, after payment of
expenses, loan principal, and cash distributions to acquire additional equipment
during the first seven years of Partnership operations. The General Partner
believes these acquisitions may cause the Partnership to generate additional
earnings and cash flow for the Partnership.
(A) Repricing and Reinvestment Risk
Certain portions of the Partnership's marine container, marine vessel, and
trailer portfolios will be remarketed in 1997 as existing leases expire,
exposing the Partnership to considerable repricing risk/opportunity.
Additionally, the General Partner may select to sell certain underperforming
equipment, or equipment whose continued operation may become prohibitively
expensive, and thus faces reinvestment risk. In either case, the General Partner
intends to re-lease or sell equipment at prevailing market rates; however, the
General Partner cannot predict these future rates with any certainty at this
time and cannot accurately assess the effect of such activity on future
Partnership performance.
(B) Impact of Government Regulations on Future Operations
The General Partner operates the Partnership's equipment in accordance with
current applicable regulations (see Item 1, Section E, Government Regulations).
However, the continuing implementation of new or modified regulations by some of
the authorities mentioned previously, or others, may adversely affect the
Partnership's ability to continue to own or operate equipment in its portfolio.
Additionally, regulatory systems vary from country to country, which may
increase the burden to the Partnership of meeting regulatory compliance for the
same equipment operated between countries. Currently, the General Partner has
observed rising insurance costs to operate certain vessels into U.S. ports
resulting from implementation of the U.S. Oil Pollution Act of 1990. Ongoing
changes in the regulatory environment, both in the U.S. and internationally,
cannot be predicted with any accuracy, and preclude the General Partner from
determining the impact of such changes on Partnership operations, purchases, or
sale of equipment.
(C) Distributions
Pursuant to the Limited Partnership Agreement, the Partnership will cease to
reinvest in additional equipment beginning in its seventh year of operations
which commences on January 1, 1998. The General Partner intends to continue its
strategy of selectively redeploying equipment to achieve competitive returns. By
the end of the reinvestment period, the General Partner intends to have
assembled an equipment portfolio capable of achieving a level of operating cash
flow for the remaining life of the Partnership sufficient to meet its
obligations and sustain a predictable level of distributions to the partners.
The General Partner believes the current level of distributions to the
partners can be maintained throughout 1997 using cash from operations,
undistributed available cash from prior periods, and proceeds from sales or
dispositions of equipment if necessary. Subsequent to this period, the General
Partner will evaluate the level of distributions the Partnership can sustain
over extended periods of time, and together with other considerations, may
adjust the level of distributions accordingly. In the long term, the difficulty
in predicting market conditions and the availability of suitable equipment
acquisitions preclude the General Partner from accurately determining the impact
of its redeployment strategy on liquidity or future distribution levels.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements for the Partnership are listed on the Index to
Financial Statements included in Item 14(a) of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
(this space intentionally left blank)
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
As of the date of this Annual Report, the directors and executive officers of
PLM International (and key executive officers of its subsidiaries) are as
follows:
<TABLE>
<CAPTION>
Name Age Position
-------------------------------------- ------------------ -------------------------------------------------------
<S> <C> <C>
J. Alec Merriam 61 Director, Chairman of the Board, PLM International,
Inc.; Director, PLM Financial Services, Inc.
Douglas P. Goodrich 50 Director and Senior Vice President, PLM
International; Director and President, PLM Financial
Services, Inc.; Senior Vice President, PLM
Transportation Equipment Corporation; President, PLM
Railcar Management Services, Inc.
Walter E. Hoadley 80 Director, PLM International, Inc.
Robert L. Pagel 60 Director, Chairman of the Executive Committee, PLM
International, Inc.; Director, PLM Financial
Services, Inc.
Harold R. Somerset 62 Director, PLM International, Inc.
Robert N. Tidball 58 Director, President and Chief Executive Officer, PLM
International, Inc.
J. Michael Allgood 48 Vice President and Chief Financial Officer, PLM
International, Inc. and PLM Financial Services, Inc.
Stephen M. Bess 50 President, PLM Investment Management, Inc.;
President, PLM Securities Corp.; Vice President, PLM
Financial Services, Inc.
David J. Davis 40 Vice President and Corporate Controller, PLM
International and PLM Financial Services, Inc.
Frank Diodati 42 President, PLM Railcar Management Services Canada
Limited.
Steven O. Layne 42 Vice President, PLM Transportation Equipment
Corporation; Vice President and Director, PLM
Worldwide Management Services, Ltd.
Stephen Peary 48 Senior Vice President, General Counsel and Secretary,
PLM International, Inc.; Vice President, General
Counsel and Secretary, PLM Financial Services, Inc.,
PLM Investment Management, Inc., PLM Transportation
Equipment Corporation; Vice President, PLM
Securities, Corp.
Thomas L. Wilmore 54 Vice President, PLM Transportation Equipment
Corporation; Vice President, PLM Railcar Management
Services, Inc.
</TABLE>
<PAGE>
J. Alec Merriam was appointed Chairman of the Board of Directors of PLM
International in September 1990, having served as a director since February
1988. In October 1988, he became a member of the Executive Committee of the
Board of Directors of PLM International. From 1972 to 1988, Mr. Merriam was
Executive Vice President and Chief Financial Officer of Crowley Maritime
Corporation, a San Francisco area-based company engaged in maritime shipping and
transportation services. Previously, he was Chairman of the Board and Treasurer
of LOA Corporation of Omaha, Nebraska and served in various financial positions
with Northern Natural Gas Company, also of Omaha.
Douglas P. Goodrich was elected to the Board of Directors in July 1996, and
appointed Director and President of PLM Financial Services in June 1996, and
appointed Senior Vice President of PLM International in March 1994. Mr. Goodrich
has also served as Senior Vice President of PLM Transportation Equipment
Corporation since July 1989, and as President of PLM Railcar Management
Services, Inc. since September 1992 having been a Senior Vice President since
June 1987. Mr. Goodrich was an Executive Vice President of G.I.C. Financial
Services Corporation, a subsidiary of Guardian Industries Corp. of Chicago,
Illinois from December 1980 to September 1985.
Dr. Hoadley joined PLM International's Board of Directors and its Executive
Committee in September, 1989. He served as a Director of PLM, Inc. from November
1982 to June 1984 and PLM Companies, Inc. from October 1985 to February 1988.
Dr. Hoadley has been a Senior Research Fellow at the Hoover Institute since
1981. He was Executive Vice President and Chief Economist for the Bank of
America from 1968 to 1981, and Chairman of the Federal Reserve Bank of
Philadelphia from 1962 to 1966. Dr. Hoadley served as a Director of Transcisco
Industries, Inc. from 1988 through August of 1995.
Robert L. Pagel was appointed Chairman of the Executive Committee of the
Board of Directors of PLM International in September 1990, having served as a
director since February 1988. In October 1988, he became a member of the
Executive Committee of the Board of Directors of PLM International. From June
1990 to April 1991, Mr. Pagel was President and Co-Chief Executive Officer of
The Diana Corporation, a holding company traded on the New York Stock Exchange.
He is the former President and Chief Executive Officer of FanFair Corporation
which specializes in sports fans' gift shops. He previously served as President
and Chief Executive Officer of Super Sky International, Inc., a publicly traded
company, located in Mequon, Wisconsin, engaged in the manufacture of skylight
systems. He was formerly Chairman and Chief Executive Officer of Blunt, Ellis &
Loewi, Inc., a Milwaukee-based investment firm. Mr. Pagel retired from Blunt,
Ellis & Loewi in 1985 after a career spanning 20 years in all phases of the
brokerage and financial industries. Mr. Pagel has also served on the Board of
Governors of the Midwest Stock Exchange.
Harold R. Somerset was elected to the Board of Directors of PLM
International in July 1994. From February 1988 to December 1993, Mr. Somerset
was President and Chief Executive Officer of California & Hawaiian Sugar
Corporation (C&H), a recently-acquired subsidiary of Alexander & Baldwin, Inc.
Mr. Somerset joined C&H in 1984 as Executive Vice President and Chief Operating
Officer, having served on its Board of Directors since 1978, a position in which
he continues to serve. Between 1972 and 1984, Mr. Somerset served in various
capacities with Alexander & Baldwin, Inc., a publicly-held land and agriculture
company headquartered in Honolulu, Hawaii, including Executive Vice President -
Agricultures, Vice President, General Counsel and Secretary. In addition to a
law degree from Harvard Law School, Mr. Somerset also holds degrees in civil
engineering from the Rensselaer Polytechnic Institute and in marine engineering
from the U.S. Naval Academy. Mr. Somerset also serves on the Boards of Directors
for various other companies and organizations, including Longs Drug Stores,
Inc., a publicly-held company.
Robert N. Tidball was appointed President and Chief Executive Officer of
PLM International in March 1989. At the time of his appointment, he was
Executive Vice President of PLM International. Mr. Tidball became a director of
PLM International in April 1989 and a member of the Executive Committee of the
Board of Directors of PLM International in September 1990. Mr. Tidball was
elected President of PLM Railcar Management Services, Inc. in January 1986. Mr.
Tidball was Executive Vice President of Hunter Keith, Inc., a Minneapolis-based
investment banking firm, from March 1984 to January 1986. Prior to Hunter Keith,
Inc., he was Vice President, a General Manager and a Director of North American
Car Corporation, and a Director of the American Railcar Institute and the
Railway Supply Association.
J. Michael Allgood was appointed Vice President and Chief Financial Officer
of PLM International in October 1992. Between July 1991 and October 1992, Mr.
Allgood was a consultant to various private and public sector companies and
institutions specializing in financial operational systems development. In
October 1987, Mr. Allgood co-founded Electra Aviation Limited and its holding
company, Aviation Holdings Plc of London where he served as Chief Financial
Officer until July 1991. Between June 1981 and October 1987, Mr. Allgood served
as a First Vice President with American Express Bank, Ltd. In February 1978, Mr.
Allgood founded and until June 1981, served as a director of Trade Projects
International/Philadelphia Overseas Finance Company, a joint venture with
Philadelphia National Bank. From March 1975 to February 1978, Mr. Allgood served
in various capacities with Citibank, N.A.
Stephen M. Bess was appointed President of PLM Securities, Corp. in June
1996 and President of PLM Investment Management, Inc. in August 1989, having
served as Senior Vice President of PLM Investment Management, Inc. beginning in
February 1984 and as Corporate Controller of PLM Financial Services, Inc.
beginning in October 1983. Mr. Bess served as Corporate Controller of PLM, Inc.,
beginning in December 1982. Mr. Bess was Vice President-Controller of Trans
Ocean Leasing Corporation, a container leasing company, from November 1978 to
November 1982, and Group Finance Manager with the Field Operations Group of
Memorex Corp., a manufacturer of computer peripheral equipment, from October
1975 to November 1978.
David J. Davis was appointed Vice President and Controller of PLM
International in January 1994. From March 1993 through January 1994, Mr. Davis
was engaged as a consultant for various firms, including PLM. Prior to that Mr.
Davis was Chief Financial Officer of LB Credit Corporation in San Francisco from
July 1991 to March 1993. From April 1989 to May 1991, Mr. Davis was Vice
President and Controller for ITEL Containers International Corporation which was
located in San Francisco. Between May 1978 and April 1989, Mr. Davis held
various positions with Transamerica Leasing Inc., in New York, including that of
Assistant Controller for their rail leasing division.
Frank Diodati was appointed President of PLM Railcar Management Services
Canada Limited in 1986. Previously, Mr. Diodati was Manager of Marketing and
Sales for G.E. Railcar Services Canada Limited.
Steven O. Layne was appointed Vice President, PLM Transportation Equipment
Corporation's Air Group in November 1992, and was appointed Vice President and
Director of PLM Worldwide Management Services, Ltd. in September 1995. Mr. Layne
was PLM Transportation Equipment Corporation's Vice President, Commuter and
Corporate Aircraft beginning in July 1990. Prior to joining PLM, Mr. Layne was
the Director, Commercial Marketing for Bromon Aircraft Corporation, a joint
venture of General Electric Corporation and the Government Development Bank of
Puerto Rico. Mr. Layne is a Major in the United States Air Force Reserves and
senior pilot with 13 years of accumulated service.
Stephen Peary became Vice President, Secretary, and General Counsel of PLM
International in February 1988 and Senior Vice President in March 1994. Mr.
Peary was Assistant General Counsel of PLM Financial Services, Inc. from August
1987 through January 1988. Previously, Mr. Peary was engaged in the private
practice of law in San Francisco. Mr. Peary is a graduate of the University of
Illinois, Georgetown University Law Center, and Boston University (Masters of
Taxation Program).
Thomas L. Wilmore was appointed Vice President - Rail, PLM Transportation
Equipment Corporation, in March 1994 and has served as Vice President, Marketing
for PLM Railcar Management Services, Inc. since May 1988. Prior to joining PLM,
Mr. Wilmore was Assistant Vice President Regional Manager for MNC Leasing Corp.
in Towson, Maryland from February 1987 to April 1988. From July 1985 to February
1987, he was President and Co-Owner of Guardian Industries Corp., Chicago,
Illinois, and between December 1980 and July 1985, Mr. Wilmore was an Executive
Vice President for its subsidiary, G.I.C. Financial Services Corporation. Mr.
Wilmore also served as Vice President of Sales for Gould Financial Services
located in Rolling Meadows, Illinois from June 1978 to December 1980.
The directors of the General Partner are elected for a one-year term or
until their successors are elected and qualified. There are no family
relationships between any director or any executive officer of the General
Partner.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no directors, officers, or employees. The Partnership
has no pension, profit sharing, retirement, or similar benefit plan in effect as
of December 31, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The General Partner is generally entitled to 5% interest in the profits
and losses and distributions of the Partnership. At December 31, 1996,
no investor was known by the General Partner to beneficially own more
than 5% of the Units of the Partnership.
(b) Security Ownership of Management
Neither the General Partner and its affiliates nor any officer or
director of the General Partner and its affiliates own any Units of the
Partnership as of December 31, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
During 1996, the Partnership paid or accrued the following fees to FSI
or its affiliates: management fees - $1,458,000; equipment acquisition
fees - $936,000 and lease negotiation fees - $214,000. The Partnership
reimbursed FSI or its affiliates $838,000 for administrative and data
processing services performed on behalf of the Partnership. The
Partnership paid Transportation Equipment Indemnity Company Ltd. (TEI),
a wholly-owned, Bermuda-based subsidiary of PLM International $768,000
for insurance coverages during 1996, which amounts were paid
substantially to third party reinsurance underwriters or placed in risk
pools managed by TEI on behalf of affiliated partnerships and PLM
International which provide threshold coverages on marine vessel loss
of hire and hull and machinery damage. All pooling arrangement funds
are either paid out to cover applicable losses or refunded pro rata by
TEI.
During 1996, the USPE's paid or accrued the following fees to FSI
or its affiliates (based on the Partnership's proportional share of
ownership): management fees - $304,000; administrative and data
processing services - $73,000; equipment acquisition fees - $382,000
and lease negotiation fees - $85,000. The USPE's also paid TEI $231,000
for insurance coverages during 1996
(b) Certain Business Relationships
None.
(c) Indebtedness of Management
None.
(d) Transactions With Promoters
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements are filed as part of this Annual Report.
(b) Reports on Form 8-K
None.
(c) Exhibits
4. Limited Partnership Agreement of Partnership. Incorporated by
reference to the Partnership's Registration Statement on Form
S-1 (Reg. No. 33-32258) which became effective with the
Securities and Exchange Commission on April 11, 1990.
10.1 Management Agreement between Partnership and PLM Investment
Management, Inc. Incorporated by reference to the
Partnership's Registration Statement on Form S-1 (Reg. No.
33-32258) which became effective with the Securities and
Exchange Commission on April 11, 1990.
10.2 Loan Agreement, amended and restated as of September 26, 1996
regarding Senior Notes due November 8, 1999. Incorporated by
reference to the Partnership's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 30,
1992.
10.4 Second Amended and restated Warehousing Credit Agreement,
dated as of May 31, 1996 with First Union National Bank of
North Carolina.
10.5 Amendment No. 1 to Second Amended and restated Warehousing
Credit Agreement, dated as of November 5, 1996 with First
Union National Bank of North Carolina.
24. Powers of Attorney.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
The Partnership has no directors or officers. The General Partner has
signed on behalf of the Partnership by duly authorized officers.
Dated: March 11, 1997 PLM EQUIPMENT GROWTH FUND V
PARTNERSHIP
By: PLM Financial Services, Inc.
General Partner
By: /s/ Douglas P. Goodrich
------------------------
Douglas P. Goodrich
President and Director
By: /s/ David J. Davis
------------------------
David J. Davis
Vice President and
Corporate Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following directors of the Partnership's General
Partner on the dates indicated.
Name Capacity Date
*_______________________
J. Alec Merriam Director - FSI March 11, 1997
*_______________________
Robert L. Pagel Director - FSI March 11, 1997
* Stephen Peary, by signing his name hereto, does sign this document on behalf
of the persons indicated above pursuant to powers of attorney duly executed by
such persons and filed with the Securities and Exchange Commission.
/s/ Stephen Peary
- - ----------------------
Stephen Peary
Attorney-in-Fact
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
Page
Report of Independent Auditors 29
Balance sheets as of December 31, 1996 and 1995 30
Statements of income for the years ended
December 31, 1996, 1995, and 1994 31
Statements of changes in partners' capital for the
years ended December 31, 1996, 1995, and 1994 32
Statements of cash flows for the years ended
December 31, 1996, 1995, and 1994 33
Notes to financial statements 34 - 43
All other financial statement schedules have been omitted as the required
information is not pertinent to the Registrant or is not material, or because
the information required is included in the financial statements and notes
thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
PLM Equipment Growth Fund V:
We have audited the accompanying financial statements of PLM Equipment Growth
Fund V as listed in the accompanying index. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PLM Equipment Growth Fund V as
of December 31, 1996 and 1995 and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/S/ KPMG PEAT MARWICK LLP
- - --------------------------------
SAN FRANCISCO, CALIFORNIA
February 28, 1997
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
BALANCE SHEETS
December 31,
(Dollars in thousands)
<TABLE>
ASSETS
<CAPTION>
1996 1995
-----------------------------------
<S> <C> <C>
Equipment held for operating leases, at cost $ 155,004 $ 159,314
Less accumulated depreciation (81,541 ) (85,564 )
---------------------------------
Net equipment 73,463 73,750
Cash and cash equivalents 4,662 5,583
Restricted cash 553 223
Investments in unconsolidated special purpose entities 12,673 16,158
Accounts receivable, net of allowance for doubtful accounts of
$236 in 1996 and $54 in 1995 3,481 2,731
Net investment in direct finance lease 2,282 2,637
Notes receivable 27 322
Lease negotiation fees to affiliate, net of accumulated
amortization of $184 in 1996 and $805 in 1995 319 143
Debt issuance and loan costs, net of accumulated amortization
of $255 in 1996 and $199 in 1995 268 187
Debt placement fees to affiliate, net of accumulated
amortization of $245 in 1996 and $198 in 1995 134 182
Prepaid expenses and other assets 557 193
---------------------------------
Total assets $ 98,419 $ 102,109
=================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to affiliates $ 699 $ 1,116
Accounts payable and accrued expenses 1,060 1,360
Lessee deposits and reserve for repairs 3,901 3,616
Short term note payable 2,463 --
Note payable 38,000 38,000
---------------------------------
Total liabilities 46,123 44,092
Partners' capital:
Limited Partners (9,169,019 Depositary Units in 1996
and 9,175,944 Depositary Units in 1995) 52,296 58,017
General Partner -- --
---------------------------------
Total partners' capital 52,296 58,017
---------------------------------
Total liabilities and partners' capital $ 98,419 $ 102,109
=================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF INCOME
For the years ended December 31,
(In thousands of dollars, except per unit amounts)
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------
Revenues:
<S> <C> <C> <C>
Lease revenue $ 28,763 $ 34,298 $ 38,757
Interest and other income 1,360 1,009 614
Net gain on disposition of equipment 14,199 3,835 4,920
-----------------------------------------
Total revenues 44,322 39,142 44,291
Expenses:
Depreciation and amortization 14,941 17,321 20,266
Management fees to affiliate 1,458 1,767 2,097
Repairs and maintenance 2,843 4,004 3,657
Interest expense 2,789 3,048 2,235
Equipment operating expenses 6,016 7,736 10,089
Insurance expense to affiliate 768 1,015 841
Other insurance expense 985 1,080 996
General and administrative expenses to affiliates 838 612 436
Other general and administrative expenses 903 514 481
Provision for bad debts 224 -- --
-----------------------------------------
Total expenses 31,765 37,097 41,098
-----------------------------------------
Equity in net loss of unconsolidated special purpose entities (116 ) -- --
-----------------------------------------
Net income $ 12,441 $ 2,045 $ 3,193
=========================================
Partners' share of net income:
Limited Partners $ 11,524 $ 1,077 $ 2,222
General Partner 917 968 971
=========================================
Total $ 12,441 $ 2,045 $ 3,193
=========================================
Net income per weighted average Depositary Unit (9,181,074 Units
at December 31, 1996, 9,175,460 Units at
December 31, 1995; 9,219,932 Units at December 31, 1994) $ 1.26 $ 0.12 $ 0.24
=========================================
Cash distributions $ 18,083 $ 19,342 $ 19,420
=========================================
Cash distribution per Depositary Unit $ 1.87 $ 2.00 $ 2.00
=========================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the years ended December 31, 1996, 1995, and 1994
(In thousands)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
--------------------------------------------------
<S> <C> <C> <C>
Partners' capital at December 31, 1993 $ 92,120 $ -- $ 92,120
Net income 2,222 971 3,193
Cash distributions (18,449 ) (971 ) (19,420 )
------------------------------------------------
Partners' capital at December 31, 1994 75,893 -- 75,893
Net income 1,077 968 2,045
Repurchase of Depositary Units (579 ) -- (579 )
Cash distributions (18,374 ) (968 ) (19,342 )
------------------------------------------------
Partners' capital at December 31, 1995 58,017 -- 58,017
Net income 11,524 917 12,441
Repurchase of Depositary Units (79 ) -- (79 )
Cash distributions (17,166 ) (917 ) (18,083 )
------------------------------------------------
Partners' capital at December 31, 1996 $ 52,296 $ -- $ 52,296
================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31,
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 12,441 $ 2,045 $ 3,193
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 14,941 17,321 20,266
Net gain on disposition of equipment (14,199 ) (3,835 ) (4,920 )
Equity in net loss of unconsolidated special purpose entities 116 -- --
Changes in operating assets and liabilities, net:
(Increase) decrease in accounts receivable, net (750 ) 1,532 (1,010 )
Collections on notes receivable 295 441 396
Increase in prepaid expenses and other assets (364 ) (152 ) (24 )
(Decrease) increase in due to affiliates (414 ) 785 296
(Decrease) increase in accounts payable and accrued
expenses (294 ) 7 368
Increase in lessee deposits and reserve for repairs 285 620 74
Increase in restricted cash (330 ) (36 ) --
--------------------------------------------
Net cash provided by operating activities 11,727 18,728 18,639
--------------------------------------------
Investing activities:
Proceeds from disposition of equipment 29,992 18,375 14,827
Payments for purchase of equipment (21,378 ) (27,128 ) (654 )
Investment in direct finance lease, net (2,639 ) --
Principal payments received on direct finance lease 327 -- --
Investment in and equipment purchased and placed in
unconsolidated special purpose entities (8,952 ) -- --
Distributions from unconsolidated special purpose entities 4,348 -- --
Payments of acquisition fees to affiliate (936 ) (1,198 ) --
Payments of lease negotiation fees to affiliate (214 ) (266 ) --
--------------------------------------------
Net cash provided by (used in) investing activities 3,187 (12,856 ) 14,173
--------------------------------------------
Financing activities:
Proceeds from short-term note payable 8,073 -- --
Payments of short-term note payable (5,610 ) -- --
Cash distributions paid to an affiliate (917 ) (968 ) (971 )
Cash distributions paid to the limited partners (17,166 ) (18,374 ) (18,449 )
Payment for loan costs (136 )
Repurchase of Depositary Units (79 ) (579 ) --
--------------------------------------------
Net cash used in financing activities (15,835 ) (19,921 ) (19,420 )
--------------------------------------------
Net (decrease) increase in cash and cash
equivalents (921 ) (14,049 ) 13,392
Cash and cash equivalents at beginning of year (See Note 2) 5,583 20,200 6,808
--------------------------------------------
Cash and cash equivalents at end of year $ 4,662 $ 6,151 $ 20,200
============================================
Supplemental information:
Non-cash transfer of equipment at net book value from
unconsolidated special purpose entities $ 7,901 -- $ --
============================================
Interest paid $ 2,815 $ 2,970 1,808
============================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation
Organization
PLM Equipment Growth Fund V, a California limited partnership (the
Partnership), was formed on November 14, 1989. The Partnership offering
became effective April 11, 1990. The Partnership commenced significant
operations in May 1990. PLM Financial Services, Inc. (FSI) is the General
Partner. FSI is a wholly-owned subsidiary of PLM International, Inc. (PLM
International). The Partnership engages in the business of owning and
leasing primarily used transportation equipment.
The Partnership will terminate on December 31, 2010, unless terminated
earlier upon sale of all equipment or by certain other events. Beginning in
the Partnership's seventh year of operations, which commences on January 1,
1999, the General Partner will stop reinvesting excess cash if any, which,
less reasonable reserves, will be distributed to the Partners. Beginning in
the Partnership's ninth year of operations, the General Partner intends to
begin an orderly liquidation of the Partnership's assets. The General
Partner anticipates that the liquidation of the assets will be completed by
the end of the Partnership's tenth year of operations.
FSI manages the affairs of the Partnership. The net income (loss) and
distributions of the Partnership are generally allocated 95% to the Limited
Partners and 5% to the General Partner (see Net Income (Loss) and
Distributions per Depositary Unit, below). The General Partner is entitled
to a subordinated incentive fee equal to 5% of Cash Available for
Distribution and of Net Disposition Proceeds (as defined in the Partnership
Agreement) which are distributed by the Partnership after the Limited
Partners have received a certain minimum rate of return.
The General Partner has determined that it will not adopt a
reinvestment plan for the Partnership. Based on this decision, beginning
January 1, 1994, the Partnership may be obligated to redeem up to 2% of the
outstanding units each year, subject to the General Partner's good faith
determination that such redemption's should not (i) cause the Partnership
to be taxed as a corporation under Section 7704 of the IRS Code or (ii)
impair the capital or operations of the Partnership. The purchase price to
be offered by the Partnership for the outstanding units will be equal to
110% of the unrecovered principal attributable to the units. The
unrecovered principal for any unit will be equal to the excess of (i) the
capital contribution attributable to the unit over (ii) the distributions
from any source paid with respect to the units. For the years ended
December 31, 1996 and 1995, the Partnership had repurchased 6,925 and
43,988 Depositary Units, for $79,000 and $579,000, respectively.
At December 31, 1996, the Partnership agreed to repurchase
approximately 120,000 Units for an aggregate price of approximately
$1,171,000. The General Partner anticipates that these Units will be
repurchased in the first and second quarters of 1997.
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
This requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Operations
The equipment of the Partnership is managed, under a continuing management
agreement, by PLM Investment Management, Inc. (IMI), a wholly-owned
subsidiary of FSI. IMI receives a monthly management fee from the
Partnership for managing the equipment (see Note 3). FSI, in conjunction
with its subsidiaries, syndicates investor programs, sells transportation
equipment to investor programs and third parties, manages pools of
transportation equipment under agreements with the investor programs, and
is a General Partner of other Limited Partnerships.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation (continued)
Accounting for Leases
The Partnership's leasing operations generally consist of operating leases.
Under the operating lease method of accounting, the leased asset is
recorded at cost and depreciated over its estimated useful life. Rental
payments are recorded as revenue over the lease term. Lease origination
costs are capitalized and amortized over the term of the lease.
Periodically, the Partnership leases equipment with lease terms that
qualify for direct finance lease classification as required by Statement of
Financial Accounting Standards No. 13 (SFAS 13).
Depreciation and Amortization
Depreciation of transportation equipment, held for operating leases, is
computed on the 200% declining balance method, taking a full month's
depreciation in the month of acquisition, based upon estimated useful lives
of 15 years for railcars and 12 years for all other types of equipment. The
depreciation method changes to straight line when annual depreciation
expense using the straight line method exceeds that calculated by the 200%
declining balance method. Acquisition fees and certain acquisition costs
have been capitalized as part of the cost of the equipment. Lease
negotiation fees are amortized over the initial equipment lease term. Debt
issuance costs are amortized over the term of the loan for which they were
paid. Major expenditures which are expected to extend the useful lives or
reduce operating expenses for equipment are capitalized.
Transportation Equipment
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" (SFAS 121). This standard is
effective for years beginning after December 15, 1995. The Partnership
adopted SFAS 121 during 1995, the effect of which was not material as the
method previously employed by the Partnership was consistent with SFAS 121.
In accordance with SFAS 121, the General Partner reviews the carrying value
of the Partnership's equipment at least annually in relation to expected
future market conditions for the purpose of assessing recoverability of the
recorded amounts. If projected future lease revenue plus residual values
are less than the carrying value of the equipment, a loss on revaluation is
recorded. There were no reductions to the carrying value of equipment
required during 1996.
Investments in Unconsolidated Special Purpose Entities
The Partnership has interests in unconsolidated special purpose entities
which own transportation equipment. These interests are accounted for using
the equity method.
The Partnership's investment in unconsolidated special purpose entities
includes acquisition and lease negotiation fees paid by the Partnership to
PLM Transportation Equipment Corporation (TEC). The Partnership's equity
interest in net income of unconsolidated special purpose entities (USPE) is
reflected net of management fees paid or payable to IMI and the
amortization of acquisition and lease negotiation fees paid to TEC.
Repairs and Maintenance
Maintenance costs are usually the obligation of the lessee. If they are not
covered by the lessee they are charged against operations as incurred.
Estimated costs associated with marine vessel drydockings are accrued and
charged to income ratably over the period prior to such drydocking. The
reserve accounts are included in the balance sheet as lessee deposits and
reserve for repairs.
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation (continued)
Net Income (Loss) and Distributions per Depositary Unit
The net income (loss) and distributions of the Partnership are generally
allocated 95% to the Limited Partners and 5% to the General Partner. Gross
income in each year is specially allocated to the General Partner to the
extent, if any, necessary to cause the capital account balance of the
General Partner to be zero as of the close of such year. The Limited
Partners' net income (loss) and distributions are allocated among the
Limited Partners based on the number of Depositary Units owned by each
Limited Partner and on the number of days of the year each Limited Partner
is in the Partnership.
Cash distributions are recorded when paid. Cash distributions to
investors in excess of net income are considered to represent a return of
capital. Cash distributions to the Limited Partners of $5,642,000,
$17,297,000 and $16,227,000 in 1996, 1995, and 1994, respectively, were
deemed to be a return of capital.
Cash distributions of $2,785,000, $3,493,000, and $3,511,000 related to
the fourth quarter of 1996, 1995 and 1994, respectively, were paid or are
payable during January and February 1997, 1996, or 1995, depending on
whether the individual Unitholder elected to receive a monthly or quarterly
distribution check.
Cash and Cash Equivalents
The Partnership considers highly liquid investments that are readily
convertible to known amounts of cash with original maturities of three
months or less as cash equivalents. The carrying amount of cash equivalents
approximates fair market value due to the short-term nature of the
investments. Lessee security deposits held by the Partnership are
considered restricted cash.
2. Investments in Unconsolidated Special Purpose Entities (USPE)
During the second half of 1995, the Partnership began to increase the level
of its participation in the ownership of large-ticket transportation assets
to be owned and operated jointly with affiliated programs.
This trend continued during 1996.
Prior to 1996, the Partnership accounted for operating activities
associated with joint ownership of transportation equipment as undivided
interests, including its proportionate share of each asset with similar
wholly-owned assets in its financial statements. Under generally accepted
accounting principles, the effects of such activities, if material, should
be reported using the equity method of accounting. Therefore, effective
January 1, 1996, the Partnership adopted the equity method to account for
its investment in such jointly-held assets.
The principle differences between the previous accounting method and
the equity method relate to the presentation of activities relating to
these assets in the statement of operations. Whereas, under the equity
method of accounting the Partnership's proportionate share is presented as
a single net amount, equity in net income (loss) of USPE's, under the
previous method, the Partnership's statement of operations reflected its
proportionate share of each individual item of revenue and expense.
Accordingly, the effect of adopting the equity method of accounting has no
cumulative effect on previously reported partner's capital or on the
Partnership's net income (loss) for the period of adoption. Because the
effects on previously issued financial statements of applying the equity
method of accounting to investments in jointly-owned assets are not
considered to be material to such financial statements taken as a whole,
previously issued financial statements have not been restated. However,
certain items have been reclassified in the previously issued balance sheet
to conform to the current period presentation. The beginning cash and cash
equivalent for 1996 is different from the ending cash and cash equivalent
for 1995 on the statement of cash flows due to
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
2. Investments in Unconsolidated Special Purpose Entities (continued)
this reclassification.
During 1996, the Partnership purchased an interest in a trust owning
five commercial aircraft for $5.6 million and an interest in an entity
owning two commercial aircraft on a direct finance lease for $2.9 million
and incurred acquisition and lease negotiation fees of $0.3 million to PLM
Worldwide Management Services (WMS), an affiliate of the General Partner.
The following summarizes the financial information for the special
purpose entities and the Partnership's interest therein as of and for the
year ended December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
Net
Total Interest of
USPE Partnership
------------------------------
<S> <C> <C>
Net Investments $ 48,660 $ 12,673
Revenues 30,337 7,054
Net loss (1,692 ) (116 )
</TABLE>
The net investments in USPE's include the following jointly-owned
equipment (and related assets and liabilities) at December 31 1996 and
1995, (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------------------------------
<S> <C> <C>
50% interest in an entity owning a bulk carrier $ 3,196 $ 3,778
50% interest in an entity owning a product tanker 2,144 2,841
25% interest in two commercial aircraft on direct finance lease 2,768 --
17% interest in two trusts owning three commercial aircraft, two
aircraft engines, and a portfolio of aircraft rotables 4,565 5,334
14% interest in a Trust that owns seven commercial aircraft (see below
note) -- 4,205
----------------------------
Net investments $ 12,673 $ 16,158
============================
</TABLE>
The Partnership had beneficial interests in two USPE's that own
multiple aircraft (the "Trusts"). These Trusts contained certain
provisions, under certain circumstances, for allowing the removal of
specific aircraft to the beneficial owners. A renegotiation of the
Partnership's senior loan agreement during the third quarter of 1996 (see
note 6), required the Partnership to remove from the Trusts the aircraft
designated to the Partnership for loan collateral purposes. As of December
31, 1996, the two Boeing 737 aircraft, one of which was purchased during
1995 and the other which was purchased during 1996, are now reported as
owned equipment by the Partnership.
3. General Partner and Transactions with Affiliates
An officer of PLM Securities Corp. (PLM Securities) contributed
$100 of the Partnership's initial capital. Under the equipment management
agreement, IMI receives a monthly management fee attributable to either
owned equipment or interests in equipment owned by the USPE's equal to the
lesser of (i) the fees which would be charged by an independent third party
for similar services for similar equipment or (ii) the sum of (A) 5% of the
Gross Lease Revenues attributable to equipment which is subject to
operating leases, (B) 2% of the Gross Lease Revenues, as defined in the
agreement which is subject to full payout net leases, and (C) 7% of the
Gross Lease Revenues attributable to Equipment, if any, which is subject to
per diem leasing arrangements and thus is operated by the Partnership.
Partnership management fees of $952,000, and $1,459,000 were payable as of
December 31, 1996 and 1995, respectively. The Partnership's proportional
share of USPE's management fees of $26,000, and $0 were payable as of
December 31, 1996 and 1995, respectively. The Partnership's proportional
share of USPE's management fees expense during 1996
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. General Partner and Transactions with Affiliates (continued)
was $304,000. An affiliate of the General Partner was reimbursed for data
processing and administrative expenses directly attributable to the
Partnership, in the amount of $838,000, $612,000, and $436,000, during
1996, 1995, and 1994, respectively. The Partnership's proportional share of
USPE's data processing and administrative expenses was $73,000 during 1996.
Debt placement fees are paid to FSI in an amount equal to 1% of the
Partnership's long-term borrowings.
The Partnership and USPE's paid or accrued lease negotiation and
equipment acquisition fees of $1,617,000 and $1,603,000 to TEC and WMS in
1996 and 1995, respectively. During 1994, the Partnership did not purchase
any equipment; therefore, neither of these fees were required to be accrued
or paid. TEC is a wholly-owned subsidiary of FSI. WMS is a wholly-owned
subsidiary of PLM International. The Partnership paid $768,000, $1,015,000,
and $841,000 in 1996, 1995, and 1994, respectively, to Transportation
Equipment Indemnity Company, Ltd. (TEI) which provides marine insurance
coverage and other insurance brokerage services. The Partnership's
proportional share of USPE's marine insurance coverage paid to TEI was
$231,000 during 1996. TEI is an affiliate of the General Partner. A
substantial portion of this amount was paid to third-party reinsurance
underwriters or placed in risk pools managed by TEI on behalf of affiliated
partnerships and PLM International which provide threshold coverages on
marine vessel loss of hire and hull and machinery damage. All pooling
arrangement funds are either paid out to cover applicable losses or
refunded pro rata by TEI.
As of December 31, 1996, approximately 69% of the Partnership's trailer
equipment is in rental facilities operated by an affiliate of the General
Partner. Revenues collected under short-term rental agreements with the
rental yards' customers are credited to the owners of the related equipment
as received. Direct expense associated with the equipment are charged
directly to the Partnership. An allocation of other direct expenses of the
rental yard operations are billed to the Partnership monthly.
The Partnership owns certain equipment in conjunction with affiliated
partnerships. At December 31, 1996, this equipment included an interest in
two entities owning marine vessels, an interest in two trusts comprised of
three aircraft, two aircraft engines, and a package of aircraft rotables,
and an interest in a trust comprised of two commercial aircraft on a direct
finance lease. At December 31, 1995, this equipment included an interest in
two entities owning marine vessels, an interest in two trusts comprised of
three aircraft, two aircraft engines, and a package of aircraft rotables,
and an interest in a trust comprised of seven commercial aircraft.
The balance due to affiliates at December 31, 1996, includes $0.9
million due to FSI and its affiliates and $0.3 million due from affiliated
investments in USPE's. The balance due to affiliates at December 31, 1995,
includes $1.3 million due to FSI and its affiliates and $0.3 million due
from affiliated investments in USPE's.
4. Equipment
The components of equipment at December 31, 1996 and 1995, are as follows
(in thousands):
<TABLE>
<CAPTION>
Equipment held for operating leases: 1996 1995
-------------------------------------
<S> <C> <C>
Marine vessels $ 52,259 $ 52,259
Mobile offshore drilling units -- 25,204
Marine containers 24,451 28,278
Aircraft 57,205 32,903
Rail equipment 11,406 11,041
Trailers 9,683 9,629
------------------------------------
155,004 159,314
Less accumulated depreciation (81,541 ) (85,564 )
------------------------------------
====================================
Net equipment $ 73,463 $ 73,750
====================================
</TABLE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
4. Equipment (continued)
Revenues are earned by placing the equipment under operating leases
which are billed monthly or quarterly. Some of the Partnership's marine
containers and marine vessels are leased to operators of utilization-type
leasing pools which include equipment owned by unaffiliated parties. Insuch
instances revenues received by the Partnership consist of a specified
percentage of revenues generated by leasing the pooled equipment to
sublessees, after deducting certain direct operating expenses of the pooled
equipment.
Rents for other equipment are based on fixed rates.
As of December 31, 1996, all equipment was on lease or operating in
PLM-affiliated short-term trailer rental yards except 14 railcars with a
net book value of $0.2 million. As of December 31, 1995, all equipment was
on lease or operating in PLM-affiliated short-term trailer rental yards.
One commercial aircraft is on lease to Continental Airlines Inc.
(Continental). Continental filed for protection under Chapter 11 of the
U.S. Bankruptcy code in December 1990. Unpaid past due rent payments
totaling $1.4 million were converted into 2 promissory notes by the
Bankruptcy Court with terms of 42 and 48 equal monthly installments, with
interest accruing at the rate of 8.64% and 12% per annum. As of December
31, 1996, $27,000 was outstanding under these notes ($322,000 outstanding
as of December 31, 1995).
Continental remains current on all payments due under the promissory notes.
During 1996, the Partnership disposed of a rig with a net book value of
$10.7 million for proceeds of $21.3 million, 2 aircraft engines, 1 commuter
aircraft, 926 marine containers, 1 trailer and 4 railcars with an aggregate
net book value of $5.1 million for proceeds of $8.7 million.
During 1995, the Partnership disposed of 1,519 marine containers, 1
commuter aircraft, 1 railcar, and 1 marine vessel with an aggregate net
book value of $10.0 million for proceeds of $10.6 million. The Partnership
also sold 97 railcars, which were held for sale as of December 31, 1994,
with a net book value of $1.9 million at the date of sale for proceeds of
$2.6 million and 1 marine vessel, which was also held for sale, with a net
book value of $4.0 million at the date of sale for proceeds of $5.1
million. Included in the gain of $2.9 million from sale of the marine
vessels, is the unused portion of accrued drydocking of $1.3 million and
commissions related to the sale.
Periodically, PLM International will purchase groups of assets whose
ownership may be allocated among affiliated partnerships and PLM
International. Generally in these cases, only assets that are on lease will
be purchased by the affiliated partnerships. PLM International will
generally assume the ownership and remarketing risks associated with
off-lease equipment. Allocation of the purchase price will be determined by
a combination of third party industry sources, and recent transactions or
published fair market value references. During 1996, PLM International
realized $0.7 million of gains on the sale of 69 off-lease railcars
purchased by PLM International as part of a group of assets in 1994 which
had been allocated to PLM Equipment Growth Funds IV, VI, VII, Professional
Lease Management Income Fund I, L.L.C. (Fund I) and PLM International. At
December 31, 1995, PLM International included these assets as held for
sale. During 1995, PLM International realized $1.3 million in gains on
sales of railcars and aircraft purchased by PLM International in 1994 and
1995 as part of a group of assets which had been allocated to the
Partnership, PLM Equipment Growth Funds IV, VI, VII, Fund I, and PLM
International.
All leases are being accounted for as operating leases except one
finance lease. Future minimum rentals receivable under noncancelable
operating leases at December 31, 1996, for owned and partially owned
equipment during each of the next five years are approximately $14,900,000
- 1997; $11,200,000 - 1998; $9,200,000 - 1999; $7,900,000 -2000; and
$8,100,000 - thereafter. Contingent rentals based upon utilization were
approximately $3,107,000, $4,785,000, and $6,431,000 in 1996, 1995, and
1994, respectively.
The Partnership owns certain equipment which is leased and operated
internationally. A limited number of the Partnership's transactions are
denominated in a foreign currency. Gains or losses
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
4. Equipment (continued)
resulting from foreign currency transactions are included in the results of
operations and are not material.
The Partnership leases or leased its aircraft, railcars, mobile
offshore drilling unit and trailers to lessees domiciled in five geographic
regions: North America, South America, Europe, Asia, and Australia. Marine
vessels and marine containers are leased to multiple lessees in different
regions who operate the marine vessels and marine containers worldwide. The
tables below set forth geographic information about the Partnership's owned
equipment and investments in USPE's grouped by domicile of the lessee as of
and for the years ended December 31, 1996, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
Investments
in U.S.P.E. Owned Equipment
---------------- --------------------------------------
Region 1996 1996 1995 1994
------------------------- ------------ ---------------------------------------
<S> <C> <C> <C> <C>
Revenues:
United States $ -- $ 7,806 $ 6,666 $ 7,734
Canada 1,509 1,821 892 713
South America -- 763 -- --
Asia -- 1,062 2,556 3,080
Australia -- -- 258 --
Europe 1,765 493 1,671 1,083
Rest of the world 3,780 16,818 22,255 26,147
============ =========================================
Total revenues $ 7,054 $ 28,763 $ 34,298 $ 38,757
============ =========================================
</TABLE>
The following table sets forth identifiable net income (loss)
information by region for the owned equipment and investments in USPE for
the years ended December 31, 1996, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
Investments
in U.S.P.E. Owned Equipment
---------------- --------------------------------------
Region 1996 1996 1995 1994
------------------------------------------ ----------- -----------------------------------------
<S> <C> <C> <C> <C>
Net income (loss):
United States $ -- $ 1,543 $ 2,142 $ 1,680
Canada (753 ) (555 ) (75 ) 125
South America -- (1,419 ) -- --
Asia -- 10,715 114 58
Australia -- -- 646 --
Europe 490 3,190 410 284
Mexico (2 ) -- -- 5,152
Rest of the world 149 2,500 2,085 (1,143 )
----------- -----------------------------------------
Total identifiable income (loss) (116 ) 15,974 5,322 6,156
Administrative and other -- (3,417 ) (3,277 ) (2,963 )
=========== =========================================
Total net income (loss): $ (116 ) $ 12,557 $ 2,045 $ 3,193
=========== =========================================
</TABLE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
4. Equipment (continued)
The net book value of these assets at December 31, 1996, 1995 and 1994
are as follows (in thousands):
<TABLE>
Investments
in U.S.P.E. Owned Equipment
------------------ ------------------------------------------------------
Region 1996 1995 1996 1995 1994
------------------------------ ----------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
Net book value:
United States $ -- $ -- $ 20,465 $ 24,971 $ 15,355
Canada -- 4,205 14,065 2,187 2,106
South America -- -- 13,909 -- --
Mexico 2,768 -- -- -- --
Asia -- -- -- 11,540 13,849
Europe 4,565 5,334 -- 3,377 4,052
Rest of the world 5,340 6,619 25,024 31,675 52,528
----------------------------- ---------------------------------------------
12,673 16,158 73,463 73,750 87,890
Equipment held for sale -- -- -- -- 6,082
============================= =============================================
$ 12,673 $ 16,158 $ 73,463 $ 73,750 $ 93,972
============================= =============================================
</TABLE>
The lessees accounting for 10% or more of the total revenues during
1996 and 1995 were Halla Merchant Marine Company, Ltd. (11.6% in 1995),
Chembulk Trading, Inc. (12.2% in 1996; 11.1% in 1995), During 1994, there
were no lessees which accounted for 10% or more of the total revenues.
5. Net Investment in Direct Finance Lease
During December 1995, the Partnership entered into a direct finance lease
related to the installation of a Stage III hushkit on an advanced B727-200
aircraft for $2.5 million. The Partnership incurred acquisition and lease
negotiation fees of $139,000 to TEC related to this transaction. Gross
lease payments of $3.8 million are to be received over a five-year period,
which commenced in December of 1995.
The components of the net investment in direct finance lease at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
Total minimum lease payments $ 2,978,000 $ 3,738,000
Residual value 125,000 125,000
Less: Unearned income (821,000 ) (1,226,000 )
=================================
$ 2,282,000 $ 2,637,000
=================================
</TABLE>
Future minimum rentals receivable under the direct finance lease at
December 31, 1996, for the next five years are approximately $760,000 -
1997; $760,000 - 1998; $760,000 - 1999; and $698,000 -2000.
6. Notes Payable
In November 1991, the Partnership borrowed $38,000,000 under a nonrecourse
loan agreement. The loan was secured by certain marine containers, five
marine vessels, and one mobile offshore drilling unit owned by the
Partnership.
During 1996, the Partnership sold some of the assets in which the
lender had a secured interest. On September 26, 1996, the existing senior
loan agreement was amended and restated to reduce the interest rate, to
grant increased flexibility in allowable collateral, to pledge additional
equipment
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
6. Notes Payable (continued)
to the lenders and to amend the loan repayment schedule from 16 consecutive
equal quarterly installments to 20 consecutive quarterly installments with
lower principle payments for the first four payments. The Partnership
incurred a loan amendment fee of $133,000 to the lender in connection with
the restatement of this loan. Pursuant to the terms of the loan agreement
the Partnership must comply with certain financial covenants and maintain
certain financial ratios
During 1996, the loan required interest-only quarterly payments at a
rate of approximately LIBOR plus 1.2 percent per annum (6.825% at December
31, 1996). During 1995, the loan required interest-only quarterly payments
at a rate of approximately LIBOR plus 1.5 percent per annum (7.4375% at
December 31, 1995). The General Partner believes that the book value of the
note payable approximates fair value due to its variable interest rate.
The General Partner has entered into a joint $50 million credit
facility (the "Committed Bridge Facility") on behalf of the Partnership,
PLM Equipment Growth Fund IV, PLM Equipment Growth Fund VI, PLM Equipment
Growth & Income Fund VII and Professional Lease Management Income Fund I
("Fund I"), all affiliated investment programs, TEC Acquisub, Inc.
("TECAI"), an indirect wholly-owned subsidiary of the General Partner, and
American Finance Group, Inc. (AFG), a subsidiary of PLM International Inc.,
which may be used to provide interim financing of up to (i) 70% of the
aggregate book value or 50% of the aggregate net fair market value of
eligible equipment owned by the Partnership , plus (ii) 50% of unrestricted
cash held by the borrower. The Committed Bridge Facility became available
on December 20, 1993, and was amended and restated on October 31, 1996, to
expire on October 31, 1997 and increased the available borrowings for AFG
to $50 million. The Partnership, TECAI, Fund I and the other partnerships
collectively may borrow up to $35 million of the Committed Bridge Facility.
The Committed Bridge Facility also provides for a $5 million Letter of
Credit Facility for the eligible borrowers. Outstanding borrowings by Fund
I, TECAI, AFG or PLM Equipment Growth Funds IV through VII reduce the
amount available to each other under the Committed Bridge Facility.
Individual borrowings may be outstanding for no more than 179 days, with
all advances due no later than October 31, 1997. The Committed Bridge
Facility prohibits the Partnership from incurring any additional
indebtedness. Interest accrues at either the prime rate or adjusted LIBOR
plus 2.5% at the borrowers option and is set at the time of an advance of
funds. Borrowings by the Partnership are guaranteed by the General Partner.
As of December 31, 1996, the Partnership had borrowings of $2.5 million,
PLM Equipment Growth Fund VI had $1.3 million, PLM Equipment Growth and
Income Fund VII had $2.0 million, AFG had $26.9 million, and TECAI had $4.1
million in outstanding borrowings. Neither PLM Equipment Growth Fund IV nor
Fund I had any outstanding borrowings.
7. Income Taxes
The Partnership is not subject to income taxes as any income or loss is
included in the tax returns of the individual Partners. Accordingly, no
provision for income taxes has been made in the accounts of the
Partnership.
At December 31, 1996, there were temporary differences of approximately
$15,426,000 between the financial statement carrying values of assets and
liabilities and the federal income tax bases of such assets and
liabilities, principally due to the differences in depreciation methods.
8. Subsequent Event
PLM International (PLMI) along with FSI, IMI, TEC and PLM Securities,
and collectively with PLMI, FSI, IMI, TEC and PLM Securities, (the "PLM
Entities"), were named as defendants in a class action lawsuit filed in the
Circuit Court of Mobile County, Mobile, Alabama, Case No. CV-97-251. The
PLM Entities received service of the complaint on February 10, 1997, and
pursuant to an extension of time granted by plaintiffs' attorneys, have
sixty days to respond to the complaint. PLM
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
8. Subsequent Event continued)
International is currently reviewing the substance of the allegations with
its counsel, and believes the allegations to be completely without merit
and intends to defend this matter vigorously.
The plaintiffs, who filed the complaint on their own and on behalf of
all class members similarly situated, are six individuals who allegedly
invested in certain California limited partnerships sponsored by PLM
Securities, for which FSI acts as the general partner, including the
Partnership, PLM Equipment Growth Fund IV, PLM Equipment Growth Fund VI,
and PLM Equipment Growth and Income Fund VII (the "PLM Growth Funds"). The
complaint purports eight causes of action against all defendants as
follows: fraud and deceit, suppression, negligent misrepresentation and
suppression, intentional breach of fiduciary duty, negligent breach of
fiduciary duty, unjust enrichment, conversion, and conspiracy.
Additionally, plaintiffs allege a cause of action for breach of third party
beneficiary contracts against and in violation of the National Association
of Securities Dealers (NASD) rules of fair practice by PLM Securities
alone.
Plaintiffs allege that each defendant owed plaintiffs and the class
certain duties due to their status as fiduciaries, financial advisors,
agents, general partner, and control persons. Based on these duties,
plaintiffs assert liability against the PLM Entities for improper sales and
marketing practices, mismanagement of the PLM Growth Funds, and concealing
such mismanagement from investors in the PLM Growth Funds. Plaintiffs seek
unspecified compensatory and recissory damages, as well as punitive
damages, and have offered to tender their limited partnership units back to
the defendants.
(this space intentionally left blank)
<PAGE>
PLM EQUIPMENT GROWTH FUND V
INDEX OF EXHIBITS
Exhibit Page
4. Limited Partnership Agreement of Partnership. *
10.1 Management Agreement between the Partnership and *
PLM Investment Management, Inc.
10.2 Amended and restated $38,000,000 Loan Agreement,
dated as of September 26, 1996 *
10.4 Second Amended and restated Warehousing Credit Agreement,
dated as of May 31, 1996 with First Union National Bank
of North Carolina *
10.5 Amendment No. 1 to Second Amended and restated
Warehousing Credit Agreement, dated as of November 5, 1996
with First Union National Bank of North Carolina *
24. Powers of Attorney. *
* Incorporated by reference. See page 23 of this report.
AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of September 26, 1996
respecting a loan
of up to $38,000,000
among
PLM EQUIPMENT GROWTH FUND V
TRADER VESSEL LIMITED PARTNERSHIP
TRADER VESSEL INC.
CALIFORNIA VESSEL LIMITED PARTNERSHIP
CALIFORNIA VESSEL INC.
COLUMBUS VESSEL LIMITED PARTNERSHIP
COLUMBUS VESSEL INC.
REDCAR INVESTMENTS LIMITED
as Companies
and
CHRISTIANIA BANK OG KREDITKASSE
INTERNATIONALE NEDERLANDEN LEASE STRUCTURED FINANCE B.V.
AND SUCH OTHER BANKS AND FINANCIAL INSTITUTIONS
AS MAY HEREAFTER BE NAMED HEREIN
as Lenders
and
CHRISTIANIA BANK OG KREDITKASSE,
NEW YORK BRANCH
as Agent and Security Trustee
Watson, Farley & Williams
380 Madison Avenue
New York, New York 10017
<PAGE>
INDEX
CLAUSE PAGE
1 LOAN, PURPOSE 2
2 DEFINITIONS AND INTERPRETATION 2
3 INTEREST AND INTEREST PERIODS 10
4 REPAYMENT AND PREPAYMENT 11
5 CONDITIONS PRECEDENT 12
6 REPRESENTATIONS AND WARRANTIES 16
7 COVENANTS 19
8 SECURITY TRUSTEE 27
9 EVENTS OF DEFAULT 41
10 FEES AND EXPENSES 46
11 PAYMENTS AND CALCULATIONS 46
12 NO COUNTERCLAIM, TAXATION 47
13 CHANGES IN CIRCUMSTANCES 47
14 FUNDING LOSSES 49
15 SECURITY 50
16 COMMUNICATIONS 50
17 ASSIGNMENTS 51
18 MISCELLANEOUS 51
19 LAW AND JURISDICTION 52
20 RIGHTS OF CONTRIBUTION 53
21 NONRECOURSE 53
22 RELEASE OF CERTAIN COMPANIES 54
<PAGE>
(ii)
SCHEDULE 1 THE LENDERS
SCHEDULE 2 LIENS
SCHEDULE 3 APPROVED LIST OF APPRAISERS
APPENDIX A FORM OF PROMISSORY NOTE
APPENDIX B FORM OF LIBERIAN MORTGAGE
APPENDIX C FORM OF DEED OF COVENANTS
APPENDIX D [Intentionally omitted.]
APPENDIX E FORM OF SECURITY AGREEMENT
APPENDIX F FORM OF ASSIGNMENT OF CHARTER
APPENDIX G FORM OF PLEDGE AGREEMENT
APPENDIX H FORM OF AIRCRAFT MORTGAGE
APPENDIX I FORM OF BENEFICIAL INTEREST SECURITY AGREEMENT
APPENDIX J FORM OF COMPLIANCE CERTIFICATE
APPENDIX K FORM OF ASSIGNMENT OF LIMITED PARTNERSHIP INTERESTS
APPENDIX L FORM OF NOTICE AND ACKNOWLEDGMENT OF MORTGAGE
<PAGE>
-1-
THIS AMENDED AND RESTATED LOAN AGREEMENT (the "Agreement") dated as of September
26, 1996
BY AND AMONG
(1) PLM EQUIPMENT GROWTH FUND V, a California limited partnership
(hereinafter called "EGF V");
(2) TRADER VESSEL LIMITED PARTNERSHIP, a California limited partnership
(hereinafter called "Trader");
(3) TRADER VESSEL INC., a California corporation (hereinafter called
"TVI");
(4) CALIFORNIA VESSEL LIMITED PARTNERSHIP, a California limited
partnership (hereinafter called "California");
(5) CALIFORNIA VESSEL INC., a Wyoming corporation (hereinafter called
"CVI");
(6) COLUMBUS VESSEL LIMITED PARTNERSHIP, a California limited partnership
(hereinafter called "Columbus");
(7) COLUMBUS VESSEL INC., a Wyoming corporation (hereinafter called
"COVI");
(8) REDCAR INVESTMENTS LIMITED, a Hong Kong company (hereinafter called
"Redcar", and together with EGF V, Trader, TVI, California, CVI,
Columbus and COVI, as joint and several borrowers, hereinafter called
the "Companies");
(9) The LENDERS listed on Schedule 1 hereto (hereinafter called the
"Lenders"); and -------
(10) CHRISTIANIA BANK OG KREDITKASSE, New York Branch ("CBK"), as agent
and security trustee (hereinafter called "Agent" or "Security
Trustee").
RECITALS
(A) The Lenders made available to the Companies a loan facility of up to
Thirty Eight Million Dollars ($38,000,000) pursuant to, upon and
subject to the terms and conditions of the Loan Agreement dated as of
November 8, 1991, as amended by an Addendum No. 1 dated as of April
27, 1992 (as so amended, the "Original Loan") as evidenced by a
Secured Joint and Several Promissory Note of the Companies dated
November 14, 1991 as endorsed by Endorsement to Secured Promissory
Note dated as of April 27, 1992 executed by Redcar Investments
Limited.
(B) Pursuant to an Assignment of Cash Collateral dated May 30, 1996
executed by EGF V in favor of the Agent, the Lenders released their
first preferred mortgage on DUAL RIG 86, and EGF V granted to the
Agent a security interest in a $10,750,000 cash collateral deposit.
(C) The parties hereto desire to amend certain covenants and other
provisions contained in the Original Loan Agreement; to add certain
additional obligors; to pledge additional equipment (which is owned
by the Owner Trustee for the benefit of EGF V pursuant to the Trust
Agreement) to the Agent and the Lenders to secure the repayment of
the Loan and the obligation of the Companies under this Agreement,
the Note and the Security Documents; to release Balboa Marine Limited
Partnership, a California limited partnership ("Balboa"), Balboa
Marine Inc., a California corporation ("BMI"), Divisadero ------ ---
Vessel Limited Partnership, a California limited partnership
("Divisadero"), Divisadero Vessel Inc., a ---------- California
corporation ("DVI"), Ashbury Street Limited Partnership, a California
limited partnership --- ("Ashbury") and Ashbury Street Inc., a
California corporation ("ASI") from the obligations under the
--------- --- Original Loan Agreement; and to restate the Original
Loan Agreement as set forth herein.
NOW THEREFORE the parties hereto agree that, upon satisfaction of the
conditions set forth in Section 5, the Original Loan Agreement shall be amended
and restated to read in its entirety as follows:
1. LOAN, PURPOSE
1.01 Subject to the terms of this Agreement and in reliance on the
representations and warranties of the Companies set out in Clause
6.01 of the Original Loan Agreement, the Lenders made available to
the Companies on a joint and several basis a loan facility having an
aggregate principal amount of up to $38,000,000 for the purposes of
financing the acquisition of additional equipment for EGF V's
equipment portfolio and to provide working capital for the Companies,
the entire principal amount of which is outstanding on the date
hereof.
2. DEFINITIONS AND INTERPRETATION
2.01 In this Agreement, the words, expressions and other provisions
specified below shall, except where the context otherwise requires,
have the meanings and effect prescribed below.
"Act" has the meaning specified in Clause 8.04 hereof;
"Agent" means Christiania Bank og Kreditkasse, New York branch,
acting in its capacity as agent for the Lenders under this Agreement
and includes (a) any other branch or office through which the Agent
may be acting from time to time and (b) where the context so admits,
the Agent's successors and assigns;
"Aircraft" means (i) Aircraft 1, Aircraft 2, Aircraft 3, Aircraft 4,
Aircraft 5, Aircraft 6 and (ii) such other aircraft as the Companies
may hereafter mortgage as security for the obligations of the
Companies under this Agreement, the Note and the Security Documents,
or any of them as the context requires, as the same are further
described in the respective Aircraft Mortgages;
"Aircraft 1" means the Canadian registered Boeing 737-200 (msn.
22257), as the same is further described in the relevant Aircraft
Mortgage;
"Aircraft 2" means the Canadian registered Boeing 737-200 (msn.
22264), as the same is further described in the relevant Aircraft
Mortgage;
"Aircraft 3" means the Canadian registered DHC-8-102 (msn. 190), as
the same is further described in the relevant Aircraft Mortgage;
"Aircraft 4" means the U.S. registered McDonnel-Douglas DC-9-32 (msn.
48112), as the same is further described in the relevant Aircraft
Mortgage;
"Aircraft 5" means the U.S. registered De Havilland DHC-8-102 (msn.
016), as the same is further described in the relevant Aircraft
Mortgage;
"Aircraft 6" means the U.S. registered De Havilland DHC-8-102 (msn.
019), as the same is further described in the relevant Aircraft
Mortgage;
"Aircraft Mortgages" means (i) each first priority Aircraft Mortgage
and Security Agreement executed by the Owner Trustee in favor of the
Security Trustee in respect of Aircraft 4, Aircraft 5 and Aircraft 6,
(ii) each first priority Aircraft Mortgage and Security Agreement
executed by the Owner Trustee in favor of the Security Trustee in
respect of Aircraft 1, Aircraft 2 and Aircraft 3 and (iii) any other
aircraft mortgage in respect of Aircraft executed in favor of the
Security Trustee by the owner of such Aircraft or any of them as the
context requires, each in form and substance satisfactory to the
Agent, as the same may be amended, supplemented or modified from time
to time;
"Approved List" means the approved list of sale and purchase brokers
attached hereto as Schedule 3;
"Approved Manager" means IMI or any other company which the Agent
may, in its reasonable discretion, approve from time to time as the
manager of the Vessels or any other Equipment;
"Approved Management Agreement" means the agreement between EGF V and
the Approved Manager providing for the complete maintenance,
operation, repair, certification and upkeep of the Vessels or any
other Equipment;
"Assignment of Limited Partnership Interests" means (i) the
assignments executed or to be executed in favor of the Security
Trustee by EGF V for the limited partnership interests in Clement and
Montgomery, respectively, and (ii) such other assignment of limited
partnership interests executed in favor of the Security Trustee as
security for the obligations of the Companies under this Agreement,
the Notes and the Security Documents, each in form and substance
satisfactory to the Agent, as the same may be amended, supplemented
or modified from time to time;
"Beneficial Interest Security Agreement" means the security agreement
executed or to be executed by the Security Trustee, the Owner Trustee
and EGF V in respect of its beneficial interest in the Aircraft
pursuant to the Trust Agreement, in form and substance satisfactory
to the Agent, as the same may be amended, supplemented or modified
from time to time;
"Business Day" means a day on which banks are open for the
transaction of business of the nature required by this Agreement in
the place or places from time to time specified;
"California" means California Vessel Limited Partnership, a
California limited partnership having its principal offices at One
Market, Steuart Tower, Suite 800, San Francisco, CA 94105;
"Cash Collateral Account" means the cash collateral account no.
406-246-5001 in the name of the Companies maintained by the Security
Trustee and under the dominion and control of the Security Trustee,
as further described in Clause 7.04;
"Cash Equivalents" means any of the following, to the extent owned by
the Companies free and clear of all Security Interests and having a
maturity not greater than 360 days (or such other period as is
specified) from the date of issuance thereof: (a) direct obligations
of the Government of the United States or any agency or
instrumentality thereof or obligations unconditionally guaranteed by
the full faith and credit of the Government of the United States; (b)
certificates of deposit or time deposits with (i) Christiania Bank og
Kreditkasse or (ii) any commercial bank that (x) is organized under
the laws of the United States or any State thereof or any member
country of the Organization for Economic Cooperation and Development
and (y) has combined capital and surplus of at least $300,000,000 and
whose debt is rated A by Standard and Poors, provided such
certificates of deposit or time deposits described in this clause (b)
will not in the aggregate exceed $20,000,000 and do not in any
individual case have a maturity in excess of 180 days, (c) commercial
paper having a maturity not to exceed 180 days in an aggregate amount
of not more than $20,000,000 per issuer outstanding at any time,
issued by Christiania Bank og Kreditkasse or any corporation
organized under the laws of any State of the United States and rated
at least " Prime-1 " (or the then equivalent grade) by Moody's
Investors Services, Inc. or " A- I " (or the then equivalent grade)
by Standard & Poor's Ratings Group or an equivalent rating or higher
from at least one nationally recognized rating agency; (d) repurchase
obligations with a term of not more than 30 days for securities of
the types listed in clause (a) with a bank meeting the qualification
described in clause (b); or (e) shares of money market mutual or
similar funds having assets in excess of $100,000,000 and which
invest exclusively in assets satisfying the requirements of clauses
(a) through (d) of this definition;
"CBK" means Christiania Bank og Kreditkasse, New York Branch;
"Classification Society" shall mean Det norske Veritas with respect
to M/T STOLT TRADER, American Bureau of Shipping with respect to M/V
CALIFORNIA, and Lloyd's Register of Shipping with respect to M/T
COLUMBUS or such other classification society as is selected by the
Companies with the consent of the Agent;
"CLVI" means Clement Vessel, Inc., a Wyoming corporation having its
principal offices at One Market, Steuart Tower, Suite 800, San
Francisco, CA 94105;
"Clement" means Clement Vessel Limited Partnership, a California
limited partnership having its principal offices at One Market,
Steuart Tower, Suite 800, San Francisco, CA 94105;
"Columbus" means Columbus Vessel Limited Partnership, a California
limited partnership having its principal offices at One Market,
Steuart Tower, Suite 800, San Francisco, CA 94105;
"Companies" means each of EGF V, Trader, TVI, California, CVI,
Columbus, COVI and Redcar, as such list may be from time to time
amended;
"Containers" means those refrigerated and dry marine containers
listed in Schedule 1 to Appendix E;
"COVI" means Columbus Vessel Inc., a Wyoming corporation having its
principal offices at One Market, Steuart Tower, Suite 800, San
Francisco, CA 94105;
"CVI" means California Vessel Inc., a Wyoming corporation having its
principal offices at One Market, Steuart Tower, Suite 800, San
Francisco, CA 94105;
"Deeds of Covenants" means the Deeds of Covenants supplemental to the
Mortgages executed in favor of the Security Trustee by (i) Redcar on
M/V CALIFORNIA and (ii) Columbus on M/T COLUMBUS, and such other
deeds of covenants supplemental to a Mortgage executed in favor of
the Security Trustee by the mortgagor in respect of such Mortgage,
each in form and substance satisfactory to the Agent, as the same may
be amended, supplemented or modified from time to time;
"Default" means an event or occurrence that with the giving of notice
or lapse of time or both would constitute an Event of Default;
"Dollars" and "$" means the lawful currency for the time being of the
United States of America;
"Drawdown Date" means the date upon which the Companies requested the
drawdown of the Loan pursuant to Clause 2 of the Original Loan
Agreement, or (as the context requires) the date on which the Loan
was actually drawn down thereunder;
"EGF V" means PLM Equipment Growth Fund V, a California limited
partnership having its principal offices at One Market, Steuart
Tower, Suite 800, San Francisco, CA, 94105;
"Equipment" means all aircraft, aircraft engines, drilling rigs,
vessels, railcars, truck trailers, truck tractors, chassis and
containers owned directly or beneficially by EGF V or a subsidiary or
affiliate of EGF V, including any Company other than EGF V;
"Estate" has the meaning specified in Clause 8.02 hereof;
"Event of Default" means any one of the events listed in Clause 9.01;
"FSI" means PLM Financial Services, Inc., a Delaware corporation
having its principal offices at One Market, Steuart Tower, Suite 800,
San Francisco, CA 94105;
"IMI" means PLM Investment Management, Inc., a California corporation
with its principal place of business at One Market, Steuart Tower,
Suite 800, San Francisco, CA 94105;
"Indebtedness" has the meaning specified in Clause 8.02, together
with such other amounts as may be owing to the Security Trustee by
any of the Companies under the Security Documents;
"Indenture" means the trust indenture created by Clause 8 of this
Agreement and the Security Documents;
"Insurance Assignments" means the assignments executed or to be
executed in favor of the Security Trustee by (i) Trader for the
insurances of M/T TRADER; (ii) Redcar for the insurances of M/V
CALIFORNIA, (iii) Columbus for the insurances of M/T COLUMBUS and
(iv) EGF V for the insurances on the Containers, and such other
assignment of insurances in respect of any other Vessel, Aircraft or
other Equipment executed in favor of the Security Trustee by the
owner of such Vessel or Aircraft, each in form and substance
satisfactory to the Agent, as the same may be amended, supplemented
or modified from time to time;
"Interest Period" means a period of either one (1), three (3) or six
(6) months as determined pursuant to Clause 3;
"Interest Rate Agreements" means any agreements entered into from
time to time between any Lender and the Companies or any of them
providing for the hedging of interest rate risks; provided, the
Companies shall first offer to the Agent the opportunity to provide
such hedging of interest rate risks;
"Lenders" mean the Lenders listed on Schedule 1 hereto, as the same
may be amended from time to time, and their successors and assigns;
"LIBOR" means (i) the rate per annum equal to the rate quoted by the
Agent as appearing on the Telerate Page 3750 at or about 11:00 A.M.
(London time) for the applicable Interest Period on the second
Business Day prior to the commencement of such Interest Period or
(ii) if such rate does not appear on the Telerate Page 3750, the rate
at which deposits in Dollars in an amount approximately equal to the
Loan (or any relevant part thereof) are offered to the Agent in the
London Interbank Dollar Market at or about 11:00 a.m. (London time)
for the applicable Interest Period on the second Business Day prior
to the commencement of such Interest Period for a period equal to
such Interest Period;
"Loan" means the aggregate principal amount of all borrowings by the
Companies under this Agreement or (as the context requires) the
aggregate principal amount thereof for the time being advanced and
outstanding under this Agreement;
"Majority Lenders" means the Lenders owning at least 51% of the
Indebtedness;
"Margin" means one and two-tenths percent (1.20%) per annum, plus any
applicable margin imposed on the Companies or the Lenders as a result
of the operation of Regulation D (Code of Federal Regulations, Title
12, Chapter II, Part 204) or any successor or replacement regulation
as in effect from time to time;
"Montgomery" means Montgomery Vessel Limited Partnership, a
California limited partnership having its principal offices at One
Market, Steuart Tower, Suite 800, San Francisco, CA 94105;
"Mortgages" means (a) the First Preferred Liberian ship mortgages
executed in favor of the Security Trustee by Trader on M/T TRADER,
(b) the Statutory First Priority Bahamian mortgages executed in favor
of the Security Trustee by Columbus on M/T COLUMBUS, (c) the First
Priority Hong Kong Ship Mortgage executed in favor of the Security
Trustee by Redcar on M/V CALIFORNIA, (d) the Aircraft Mortgages, and
such other mortgage in respect of a Vessel or an Aircraft executed in
favor of the Security Trustee by the owner of such Vessel or
Aircraft, as the case may be, each in form and substance satisfactory
to the Agent, as the same may be amended, supplemented or modified
from time to time;
"M/T COLUMBUS" means the Bahamian flag product tanker named COLUMBUS,
as the same is further described in the relevant Mortgage;
"M/T TRADER" means the Liberian flag chemical tanker named TRADER
(formerly known as STOLT TRADER), as the same is further described in
the relevant Mortgage;
"M/V CALIFORNIA" means the Hong Kong flag bulk carrier named
CALIFORNIA, as the same is further described in the relevant
Mortgage;
"M/V CLEMENT" means the Bahamian flag oil tanker named CLEMENT, duly
documented under the laws and flag of the Bahamas, official number
713619;
"M/V PACIFIC SPLENDOR" means the Bahamian flag bulk carrier named
PACIFIC SPLENDOR, duly documented under the laws and flag of the
Bahamas, official number 706810;
"MVI" means Montgomery Vessel, Inc., a Wyoming corporation having its
principal offices at One Market, Steuart Tower, Suite 800, San
Francisco, CA 94105;
"New Security Documents" means (i) the Aircraft Mortgages, (ii) the
amendments to the Mortgage delivered or to be delivered pursuant to
Clause 5.01 (c), (iii) the Pledge Agreement, (iv) the Assignment of
Limited Partnership Interests, and (v) the Beneficial Interest
Security Agreements;
"Note" means the Secured Promissory Note evidencing the Loan, in
substantially the form of Appendix A and any amended and restated
Secured Promissory Note evidencing the Loan;
"Owner Trustee" means First Security Bank of Utah, National
Association, as owner trustee pursuant to the Trust Agreement (or any
successor owner trustee);
"Permitted Liens" means (i) liens in favor of the Lenders, the Agent
or the Security Trustee, (ii) with respect to the Vessels and the
Aircraft, the meaning for such term set forth in the respective
Mortgages and (iii) with respect to all other Equipment (a) liens
incident to expenses of current operations incurred in the ordinary
course of business of EGF V; (b) liens set forth on Schedule 2
hereto, (c) purchase money liens in favor of the Warehousing Agent
securing amounts borrowed by EGF V and outstanding under the
Warehousing Agreement provided that such liens are released within
180 days of the day they were created, (d) liens imposed by any
governmental authority for taxes, assessments or charges not yet due
(after giving effect to any applicable grace period) or which are
being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of
the Companies in accordance with generally accepted accounting
principals, (e) liens securing claims which are completely covered by
insurance and the deductible applicable thereto, so long as there has
not been any action by the lienholder to enforce such lien and (f)
judgment or other similar liens provided that there shall be no
period of more than 20 consecutive days (or such longer appeal period
as may be provided by local court procedural rules) during which a
stay of enforcement of the related judgment shall not be in effect;
"Person" means any individual, corporation (including a business
trust), company, voluntary association, partnership, joint venture or
other entity, trust, incorporated organization or government (or any
agency, instrumentality or political subdivision thereof);
"Pledge Agreement" means the pledge agreements executed or to be
executed in favor of the Security Trustee by EGF V in respect of the
shares of each of the CLVI and MVI;
"Pledged Equipment" means Equipment that is subject to a first
priority lien in favor of the Security Trustee, the Agent or the
Lenders and which secures the obligations of the Companies under this
Agreement, the Note and the Security Documents;
"Pledged Shares" means the shares of CLVI and MVI, respectively,
pledged by EGF V to the Security Trustee for the benefit of the
Lenders pursuant to the Pledge Agreement;
"Qualified Assets" means the three (3) Boeing model 737-200 aircraft
msns. 21003, 21008 and 21009 and registration marks "PP-VMH",
"PP-VMM" and "PP-VMN", respectively;
"Redcar" means Redcar Investments Limited, a Hong Kong company having
its principal offices at 702 Tower One Admiralty Centre, 18 Harcourt
Road, Hong Kong;
"Repayment Date" means each of the dates determined pursuant to
Clause 4.01;
"Repurchase Units" means each unit representing a limited partnership
interest in EGF V which has been repurchased by EGF V from the holder
thereof;
"Request" means a request set forth in a written instrument signed by
an officer or attorney-in-fact of EGF V on behalf of the Companies;
"Security Agreement" means the security agreement executed in favor
of the Security Trustee by EGF V with respect to the Containers and
related collateral, in form and substance satisfactory to the Agent,
as the same may be amended, supplemented or modified from time to
time;
"Security Documents" means (a) the Mortgages, the Deed of Covenants,
the Insurance Assignments, the Security Agreement, the Pledge
Agreement, the Assignment of Limited Partnership Interests, the
Beneficial Interest Security Agreements, any Interest Rate
Agreements, any assignments of charters, leases or accounts entered
into pursuant hereto and (where the context so permits) this
Agreement and (b) any other agreement or document that may be
executed at any time by the Companies or any other person as security
for all or any part of the Loan, interest thereon or any other moneys
payable to the Lenders under or in connection with this Agreement,
the Note and/or any of the documents to which these definitions
refer;
"Security Interest" means a mortgage, pledge, lien, hypothecation,
encumbrance, assignment, trust arrangement, title retention or other
security interest or other arrangement of any kind having the effect
of conferring security;
"Security Period" means the period commencing on the Drawdown Date
and terminating on the date upon which all moneys payable or to
become payable at any time and from time to time pursuant to the
terms of this Agreement, the Note and/or any of the Security
Documents shall have been paid and discharged in full;
"Security Trustee" means CBK in its capacity as trustee hereunder
until a successor Security Trustee shall have become such under the
applicable provisions of Clause 8 hereof, and thereafter such
successor Security Trustee;
"Taxes" includes all present and future income, corporation or
value-added taxes and all stamp and other taxes and levies, imposts,
deductions, duties, charges and withholdings whatsoever together with
interest thereon and penalties with respect thereto, if any, and
charges, fees or other amounts made on or in respect thereof other
than (and references to "Taxation" shall be construed accordingly);
(i) taxes on, based on or measured by the net income of the
Lenders imposed by the United States of America or the
State of New York or any political subdivision of either
thereof;
(ii) any withholding of United States federal income tax which
would not have been imposed had the payee been entitled to
provide and had it timely provided to the Companies a duly
completed and signed Form 4224 of the United States
Internal Revenue Service (the "IRS") --- entitling the
payee to a complete exemption from such withholding or a
certification that the payee is a corporation or
partnership established under the laws of the United States
or a State thereof and having its principal office located
in the United States (or such successor form(s) as shall be
adopted from time to time by the relevant United States
taxing authorities);
(iii) any withholding of any tax to the extent such withholding
would not have been imposed had the payee been entitled to
provide and had it timely provided to the Companies a duly
completed and signed Form 1001 of the IRS (or such
successor form(s) as shall be adopted from time to time by
the relevant United States taxing authorities) entitling
the payee to an exemption from or reduction of the rate of
such withholding; and
(iv) any tax which would not have been so imposed but for the
failure of the Agent or any Lender, as applicable, to
comply with any certification, identification or other
similar requirement under United States income tax laws or
regulations (including backup withholding) to establish
entitlement to exemption from such tax;
"Trader" means Trader Vessel Limited Partnership, a California
limited partnership having its principal offices at One Market,
Steuart Tower, Suite 800, San Francisco, CA 94105;
"Trust Agreement" means the Trust Agreement dated as of October 16,
1989, as amended by a First Amendment to Trust Agreement dated as of
May 11, 1990, a Trust Agreement Amendment dated as of May 8, 1995,
and a Trust Agreement Amendment dated as of September 26, 1996,
between the Owner Trustee and EGF V, as the same may be amended,
supplemented or modified from time to time);
"TVI" means Trader Vessel Inc., a California corporation having its
principal offices at One Market, Steuart Tower, Suite 800, San
Francisco, CA 94105;
"Total Loss", in relation to any of the Vessels or any of the
Aircraft, shall have the meaning ascribed to such term in the
respective Mortgages;
"Valuation" means the market value of each of the Vessels, the
Aircraft and Containers determined at the relevant time by means of a
valuation made pursuant to Clause 7.03. Valuation shall be made with
or without physical inspection of the Vessels, the Aircraft and
Containers (as the Agent may require), on the basis of a sale for
prompt delivery for cash at arm's length on normal commercial terms
as between a willing seller and a willing buyer, and shall be with
charter lease or existing contract of employment for Vessels or
Aircraft, as the case may be, as to which sale is subject to a
charter or lease, otherwise free of any existing charter, lease or
other contract of employment. The Companies agree to supply to the
Agent, and to any such brokers, such information concerning the
Vessels, the Aircraft or the Containers, as the case may be, and
their condition as such brokers may require for the purpose of making
such valuation;
"Vessels" means (a)(i) the Liberian flag chemical tanker M/T TRADER,
(ii) the Hong Kong flag bulk carrier M/V CALIFORNIA and (iii) the
Bahamian flag product tanker M/T COLUMBUS and (b) such other vessels
as the Companies may hereafter mortgage as security for the
obligations of the Companies under this Agreement, the Note and the
Security Documents, or any of them as the context requires, as the
same are further described in the Mortgages;
"Warehousing Agent" means First Union National Bank of North
Carolina, as agent under the Warehousing Agreement (or any successor
agent);
"Warehousing Agreement" means the Second Amended and Restated
Warehousing Credit Agreement dated May 31, 1996 among PLM Equipment
Growth Fund III, PLM Equipment Growth Fund IV, EGF V, PLM Equipment
Growth Fund VI, PLM Equipment Growth & Income Fund VII, Professional
Lease Management Income Fund I, L.L.C., FSI, First Union National
Bank of North Carolina and the other lenders party thereto and the
Warehousing Agent (as the same may be amended, supplemented or
modified from time to time).
<PAGE>
Words importing the singular number only shall include the plural and
vice versa. Words importing persons shall include companies, firms,
corporations and their respective successors and assigns.
All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted U.S. accounting
principles consistently applied and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such
principles.
3. INTEREST AND INTEREST PERIODS
3.01 Subject to the terms of this Agreement, the Companies shall specify
which Interest Period they choose to apply to the Loan.
3.02 The Companies shall jointly and severally pay accrued interest on the
outstanding amount of the Loan at a rate per annum equal to LIBOR
plus the Margin in arrears on the last day of such Interest Period,
provided that in the case of Interest Periods of six (6) months,
accrued interest shall be paid at the end of three (3) months and at
the last day of such Interest Period.
3.03 The duration of each Interest Period shall be one (1) month, three
(3) months or six (6) months as notified by the Companies to the
Agent in writing by 11:00 A.M. New York time at least three (3)
Business Days prior to the commencement of such Interest Period,
provided that:
(a) if the Companies fail to select an Interest Period as
provided in this Clause 3.03, the Borrowers shall be deemed
to have selected an Interest Period of three months;
(b) the selection of Interest Periods under this Clause 3.03
shall be made in such manner as to ensure that an Interest
Period expires on each Repayment Date in respect of an
amount of the Loan at least equal to the repayment
installment which is then due to be repaid under Clauses
4.01 or 4.02 on such Repayment Date; and
(c) the Agent, in its sole and absolute discretion, is
satisfied that deposits in Dollars for a period equal to
such Interest Period will be available to the Agent in the
London Interbank Dollar Market at the commencement of such
Interest Period and, if the Agent is not so satisfied, such
Interest Period shall be of such duration as the Agent and
the Companies shall agree (or, in the absence of such
agreement, as the Agent shall specify).
3.04 In the event that the Agent does not receive on the due date any sum
due under this Agreement, the Note or any of the Security Documents
to which any of the Companies is a party (or any agreement entered
into by the Companies in connection herewith or therewith), the
Companies shall jointly and severally pay to the Agent on demand
interest on such sum from and including the due date therefor to the
date of actual payment (as well after as before judgment) at the rate
per annum determined by the Agent to be: (a) if such sum is principal
of the Loan or interest thereon calculated on the basis of two
percent (2%) above the higher of the rates set out at (i) and (ii)
below and (b) if such sum is other than such principal, two percent
(2%) above the rate set out in (ii) below:
(i) the rate (inclusive of the Margin) applicable to such
overdue principal immediately prior to the due date (and in
any event only for the unexpired part of any Interest
Period relative to such overdue principal); and
(ii) the Margin plus the rate per annum at which deposits in
Dollars in an amount equal to such overdue amount are
offered to the Agent by leading banks in the London
Interbank Dollar Market on call or for successive periods
of any duration up to three months, as the Agent may
determine from time to time. Such interest rate shall be
determined on the commencement of each such period. If the
Agent determines that Dollar deposits are not being made
available to it by leading banks in the London Interbank
Dollar Market in the ordinary course of business, such
interest rate shall be determined by reference to the cost
of funds to the Agent from such other sources as the Agent
may from time to time determine.
Any such interest which is not paid when due shall be compounded at
the end of each such Interest Period or other period as the case may
be (both before and after any notice of demand by the Agent under
Clause 9.02).
4. REPAYMENT AND PREPAYMENT
4.01 The Companies shall jointly and severally repay the Loan in twenty
consecutive quarterly installments commencing on February 12, 1997
whereof the first four installments shall be in the amount of
$1,500,000 and the remaining sixteen installments shall be in the
amount of $2,000,000. In no event shall the Loan be repaid later than
December 12, 2001.
4.02 The Companies may prepay without penalty the whole or any part of the
Loan on the last day of any Interest Period relating thereto,
provided that:
(a) the Agent shall have received from the Companies not less
than five (5) days' prior irrevocable written notice of its
intention to make such prepayment which specifies the
amount and date on which such prepayment is to be made;
(b) the amount of any such partial prepayment shall be not less
than $1,000,000. Should the Companies wish to make a
prepayment in an amount in excess of $1,000,000, such
additional prepayment shall be made in increments of
$1,000,000;
(c) no amount prepaid under this Clause 4.02 may be reborrowed;
(d) each prepayment under this Clause 4.02 shall be made
together with accrued interest on the amount prepaid and
all other sums payable thereon under the terms of this
Agreement; and
(e) each partial prepayment of the Loan shall be applied pro
rata against the remaining installments of the Loan.
4.03 After December 31, 1997, the Companies shall prepay the Loan as
follows:
(a) In respect of each fiscal quarter of EGF V, the Companies
shall prepay the Loan in an amount equal to the sum of (i)
the excess of the aggregate cash balances of the Companies
(not including amounts on deposit in the Cash Collateral
Account) over $20,000,000 (as measured at the end of each
such fiscal quarter and disclosed on the reports delivered
to the Agent pursuant to Clause 7.01(a)(ii) of this
Agreement) plus (ii) an amount equal to 60% of the
aggregate proceeds from the sale of any Equipment during
such fiscal quarter;
(b) After December 31, 1997, any and all amounts on deposit in
the Cash Collateral Account shall be applied on the next
succeeding Repayment Date as a prepayment of the Loan;
(c) no amount prepaid under this Clause 4.03 may be reborrowed;
(d) each prepayment under this Clause 4.03 shall be made on the
Repayment Date next succeeding the end of the fiscal
quarter for which the prepayment was calculated together
with accrued interest on the amount prepaid and all other
sums payable thereon under the terms of this Agreement;
(e) each partial prepayment of the Loan shall be applied pro
rata against the remaining installments of the Loan.
5. CONDITIONS
5.01 Conditions Precedent. The effectiveness of this Agreement is
expressly conditioned upon receipt by the Agent of the following
documents and evidence, in all respects in form and substance
satisfactory to the Agent and its legal advisers:
(a) the Notes, substantially in the form of Appendix A;
(b) the first priority Aircraft Mortgages on each of the
Aircraft, in form and substance satisfactory to the Agent
(and notice in the form of APPENDIX L shall have been given
to each of the lessees thereunder);
(c) an amendment to the First Preferred Liberian Mortgage on
M/T TRADER, in form and substance satisfactory to the
Agent;
(d) an Assignment of Charter relating to the Time Charter Party
between Trader and Chembulk Trading Inc. in respect of M/T
TRADER, with notice to Chembulk Trading Inc., in form and
substance satisfactory to the Agent;
(e) [Intentionally omitted];
(f) [Intentionally omitted];
(g) Letter from relevant Companies reaffirming the first
priority Insurance Assignment for the insurances on each of
the Vessels and on the Containers, in form and substance
satisfactory to the Agent;
(h) the Pledge Agreement in respect of (i) the shares of CLVI
and MVI, respectively, together with certificates
representing the Pledged Shares referred to therein
accompanied by undated stock powers executed in blank and
an irrevocable proxy to vote the Pledged Shares, in form
and substance satisfactory to the Agent;
<PAGE>
(i) the Assignment of Limited Partnership Interests in respect
of EGF V's limited partnership interest in Clement and
Montgomery, respectively, in form and substance
satisfactory to the Agent;
(j) copies of the Agreement and Articles of Limited
Partnership, as amended, and forms LP-1 and as applicable,
LP-2 issued by the appropriate authority of the State of
California, for each of Clement and Montgomery;
(k) certificates of each of FSI, TVI, CVI, COVI, each in its
capacity as general partner of EGF V, Trader, California
and Columbus, respectively, certifying that there have been
no amendments or modifications to the Agreement and
Articles of Limited Partnership, Form LP-1 or Form LP-2, as
applicable, of each such limited partnership since the last
date that certified copies of such documents were delivered
to the Agent;
(l) copies of the Certificates of Status issued by the
appropriate authority of the State of California for each
of EGF V, Trader, California, Columbus, Clement and
Montgomery;
(m) Certificate of the Secretary or Assistant Secretary of CLVI
and MVI as to (i) Articles of Incorporation and By-Laws
(and all amendments thereto) and (ii) authorized and issued
share capital;
(n) certificates of the Secretary or Assistant Secretary of
each of FSI, TVI, CVI, COVI and Redcar certifying that
there have been no amendments or modifications to the
Articles of Incorporation and By-Laws of each such
corporation since the last date that certified copies of
such documents were delivered to the Agent;
(o) certificates of good standing issued by the appropriate
authority of the jurisdiction of incorporation of each of
FSI, TVI, CVI, COVI, Redcar, CLVI and MVI;
(p) copies of resolutions duly adopted by the board of
directors and shareholders of each of TVI, CVI, COVI and
Redcar evidencing approval of the making and performance of
this Agreement and the New Security Documents to which each
is a party and authorizing appropriate officers or
attorneys to execute the same and to sign all notices
required to be given hereunder or thereunder on their
behalf, or other evidence of such approvals and
authorizations as shall be acceptable to the Agent;
(q) copies of resolutions duly adopted by the board of
directors of each of FSI, TVI, CVI and COVI, each in its
capacity as general partner of EGF V, Trader, California
and Columbus, respectively, evidencing approval of the
making and performance of this Agreement and the New
Security Documents to which each such limited partnership
is a party and authorizing appropriate officers or
attorneys to execute the same and to sign all notices
required to be given hereunder or thereunder on its behalf,
or other evidence of such approvals and authorizations as
shall be acceptable to the Agent;
(r) the original of any power of attorney issued in favor of
any person executing this Agreement, the Notes or any of
the New Security Documents on behalf of the Companies;
<PAGE>
(s) a list specifying the directors and officers of each of the
Companies (together with their specimen signatures) and
specifying the authorized and issued share capital of each
of FSI, TVI, CVI, COVI, Redcar, CLVI and MVI;
(t) copies of all governmental and other consents, licenses,
approvals and authorizations as may be necessary to
authorize the performance by the Companies of their
respective obligations under the terms of this Agreement,
the Notes and the New Security Documents to which each is a
party;
(u) the Beneficial Interest Security Agreement, in form and
substance satisfactory to the Agent;
(v) a favorable opinion from an independent insurance
consultant acceptable to the Lenders as to compliance of
insurances with the terms of the Aircraft Mortgages on each
of the Aircraft;
(w) such further evidence as the Agent may require as to
placement of insurances on each of the Aircraft in
compliance with the terms of the Aircraft Mortgages on each
of the Aircraft and of this Agreement;
(x) all items and documents required to be delivered pursuant
to the New Security Documents, including (but without
limitation) all notices and acknowledgements pursuant to
the Insurance Assignments, and UCC financing statements;
(y) evidence satisfactory to the Agent that:
(i) each of the Aircraft is duly permanently
registered in the name of the Owner Trustee and
prior to the registration of the Aircraft
Mortgages is free and clear of recorded liens,
mortgages and charges;
(ii) each Aircraft has been issued a Certificate of
Airworthiness and a Certificate of Registration,
issued by the appropriate office of the U.S.
Federal Aviation Administration or the Canadian
Aviation Authority;
(iii) each of the Aircraft Mortgages has been duly
recorded against the respective Aircraft as a
valid first priority aircraft mortgage in
accordance with the laws of the United States and
Canada, as the case may be.
(z) evidence that CBK has received an amendment fee, as
separately agreed between the Companies and CBK;
(aa) appraisals of each of the Aircraft satisfactory to the
Agent;
(bb) a Certificate from an officer of each of the Companies
representing that no Default or Event of Default shall have
occurred and be continuing;
(cc) IRS Form 1001 or 4224, as appropriate, from each of the
Lenders;
(dd) the opinion of Stephen Peary, General Counsel to the
Companies in form and substance satisfactory to the Agent;
(ee) the opinion of Messrs. Graham, Thompson & Co., Bahamian
Counsel to the Lenders, in form and substance satisfactory
to the Agent;
(ff) the opinion of MacCleod, Dicksen, special Canadian counsel
to the Lenders on matters of Canadian law regarding the
Aircraft Mortgages in form and substance satisfactory to
the Agent;
(gg) the opinion of (i) Messrs. Ray Quinney, counsel to the
Owner Trustee and (ii) Messrs. Deacons Graham & James,
special Hong Kong counsel to the Lenders, in each case in
form and substance satisfactory to the Agent;
(hh) the opinion of Messrs. Watson, Farley & Williams, in such
form as the Agent shall specify;
(ii) a certificate by an officer acting on behalf of the Owner
Trustee respecting any amounts due and owing under each
current lease with respect to each respective Aircraft,
together with a copy of each such lease and any guarantees
for performance thereof, in a form satisfactory to the
Agent;
(jj) a consent of the charterer in respect of the M/T TRADER to
the amendment of the Mortgage covering such Vessel, in a
form satisfactory to the Agent;
(kk) a copy of (i) the Trust Agreement (with all amendments
thereto) and (ii) the Warehousing Agreement;
(ll) a Certificate of an officer of FSI as general partner of
EGF V certifying that (i) the equity of EGF V consists of
9,169,019 units as of September 15, 1996 and (ii) EGF V is
the legal and beneficial owner of (A) the sole limited
partnership interest in each of Trader, California and
Columbus and (B) 50% of the limited partnership interest in
each of Clement and Montgomery;
(mm) a Certificate of the Owner Trustee with respect to (i)
execution of the Aircraft Mortgages, the Beneficial
Interest Security Agreement and the Trust Agreement and
(ii) incumbency and specimen signatures of appropriate
officers, in form and substance satisfactory to the Agent;
Each of the documents specified in sub-clauses (j), (l), (m), (p),
(q), (r), (s) with respect to the leases (ii) above, and (kk) shall
be certified as a true and up-to-date copy by an officer of the
relevant Company or Companies, as the case may be.
5.02 Conditions Subsequent. The effectiveness of this Agreement is
expressly subject to the condition subsequent that the Agent shall
have received within 30 days of the date of this Agreement a Notice
and Acknowledgment of Mortgage (substantially in the form of Appendix
L) duly acknowledged by each lessee of an Aircraft with respect to
the respective Aircraft Mortgages, in all respects in form and
substance satisfactory to the Agent and its legal advisers.
<PAGE>
6. REPRESENTATIONS AND WARRANTIES
6.01 The Companies hereby represent and warrant to the Lenders and to each
of them severally that:
(a) each of FSI, TVI, CVI, COVI, Redcar, CLVI and MVI is a
company duly organized and validly existing and in good
standing under the laws of its respective jurisdiction of
incorporation and is qualified to do business in all
jurisdictions where the conduct of its business so
necessitates;
(b) each of EGF V, Trader, California, Columbus, Clement and
Montgomery is a limited partnership duly organized and
existing and in good standing under the laws of California
and is qualified to do business in all jurisdictions where
the conduct of its business so necessitates;
(c) each of the Companies has full power and authority to (i)
own and operate its Equipment and to carry on its business
as presently conducted or proposed to be conducted, (ii)
execute, deliver and perform under this Agreement, the Note
and the Security Documents to which it is a party, (iii)
borrow under this Agreement, (iv) execute and perform under
any Approved Management Agreement to which it is a party
and (v) comply with the provisions of, and perform all its
obligations under, this Agreement, the Note and the
Security Documents to which it is a party;
(d) each of the Companies has complied with all statutory,
regulatory and other requirements relative to the ownership
and (in all material respects) the operation of each of the
Vessels, Containers, the Aircraft and other Equipment and
the making and performance of this Agreement;
(e) (i) the Companies have taken all necessary actions to
authorize the execution, delivery and performance of this
Agreement and the Security Documents to which each such
Company is a party and the borrowing and giving of security
contemplated hereby, and (ii) this Agreement, the Note and
the Security Documents to which each such Company is a
party, constitute or, as the case may be, will, upon
execution and delivery thereof (and, where applicable,
registration thereof as provided for in this Agreement and
the Security Documents), constitute legal, valid and
binding obligations of such Companies enforceable against
such Companies in accordance with their respective terms
except to the extent limited by applicable bankruptcy,
insolvency and reorganization laws and other similar laws
affecting the rights of creditors generally; and to the
extent that enforcement is subject to general principles of
equity (including but not limited to all matters of public
policy) regardless of whether such enforceability is
considered in a proceeding in equity or at law;
(f) the making and performance by each of the Companies of this
Agreement, the Note and the Security Documents to which the
Companies are a party, do not, and will not during the
Security Period, violate in any respect (i) the
constitutional documents of such Companies, or in any
material respect (ii) any law or regulation of any
governmental or official authority or body, or (iii) any
agreement, contract or other undertaking to which any of
such Companies is a party or which is binding on any of
such Companies or any of its assets;
(g) all consents, licenses, approvals and authorizations
(including, without limitation, any approvals of the
Bahamian, Liberian and Canadian governmental authorities)
required in connection with the entry into, performance,
validity and enforceability of this Agreement and the
Security Documents have been obtained and are in full force
and effect;
(h) save for such registrations and filings contemplated by
this Agreement and the Security Documents and the filing of
required extensions under the Uniform Commercial Code, it
is not necessary for the legality, validity, enforceability
or admissibility in evidence of this Agreement, the Note or
the Security Documents that any of them or any document
relating thereto be registered, filed, recorded or enrolled
with any court or authority in any relevant jurisdiction or
that any stamp, registration or similar Taxes be paid on or
in relation to this Agreement or any of the Security
Documents;
(i) except as set forth in the most recent Form 10-K and Form
10-Q reports referred to in Clause 6.01(k), no action,
suit, proceeding, litigation or dispute against any of the
Companies is currently pending or, to the knowledge of the
Companies, threatened, nor is there outstanding any
judgment or award given or basis for any judgment or award
against any of the Companies before any court, tribunal,
board of arbitration or other body which, in either case,
could or might result in any material adverse change in the
business or condition (financial or otherwise) of such
Companies;
(j) none of the Companies or FSI is in default in the
performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in (i) any
agreement to which it is a party, which default might have
a material adverse effect on the business, properties,
assets, operations or condition (financial or otherwise) of
EGF V and the Companies taken as a whole or (ii) any
agreement or instrument evidencing or governing
indebtedness for borrowed money, and no Event of Default
(or event which, with the giving of notice and/or lapse of
time or other applicable condition might constitute an
Event of Default) has occurred and is continuing and no
such Event of Default (or such event) will result from the
making and performance by the Companies of this Agreement,
the Note and the Security Documents to which any of the
Companies is or will be a party;
(k) the Companies have made available to the Agent copies of
the EGF V consolidated annual report on Form 10-K for the
fiscal year ended December 31, 1995 and quarterly reports
on Form 10-Q for the first and second quarters of 1996. The
financial statements contained in the annual report on Form
10-K, including the schedules and notes thereto, and the
condensed financial statements contained in the quarterly
reports, fairly present (in the case of quarterly reports
on an unaudited basis), in accordance with generally
accepted accounting principles (in the case of quarterly
reports, to the extent such principles have been
established with respect to quarterly reporting), the
financial condition and results of operations of EGF V and
its consolidated subsidiaries as of the respective dates
thereof and for the periods covered by such financial
statements. All such financial statements have been
prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods
involved, except as otherwise stated in the preceding
sentence or in the notes thereto. Since June 30, 1996 there
has been no material adverse change in the financial
condition of EGF V and its consolidated subsidiaries and,
except as otherwise disclosed to the Agent in writing,
neither EGF V nor any of its consolidated subsidiaries has
incurred any liabilities which are material to EGF V and
its consolidated subsidiaries as a whole otherwise than in
the ordinary course of business.
(l) all financial and other information furnished by or on
behalf of each of the Companies in connection with the
negotiation of this Agreement, or in the most recent Form
10K and Form 10-Q reports filed with the Securities and
Exchange Commission and referred to in Clause 6.01(k) is
true and accurate in all material respects and there are no
other material facts or matters the omission of which would
have made any statement or information contained therein
misleading;
(m) all payments made or to be made by the Companies under or
pursuant to this Agreement and the Security Documents to
which any of the Companies is a party may be made free and
clear of, and without deduction or withholding for or in
account of, any Taxes;
(n) the chief place of business of the Companies is located at
One Market, Steuart Tower, Suite 800, San Francisco, CA USA
and the corporate documents and records concerning the
transactions contemplated hereby, are kept only at such
offices;
(o) the provisions of the Employee Retirement Income Security
Act of 1974, as amended, are not applicable to any of the
Companies;
(p) none of the proceeds of the Loan will be used to purchase
or carry margin stock within the meanings of Regulations G,
T, U and X of the Board of Governors of the Federal Reserve
System. None of the Companies is engaged in the business of
extending credit for the purpose of purchasing or carrying
margin stock within the meaning of Regulations G, T, U or X
of the Board of Governors of the Federal Reserve System;
(q) none of the Companies is an "investment company" or a
company "controlled" by an "investment company" (as each of
such terms is defined or used in the Investment Company Act
of 1940, as amended); and
(r) prior to the date hereof, none of the Companies has
incurred any material indebtedness except as explicitly set
forth in the most recent Form 10-K and Form 10-Q reports
referred to in clause 6.01(k) or as disclosed in writing to
the Agent.
(s) The authorized capital stock of CLVI consists of 1000
shares of common stock, no par value, and of MVI consists
of 1000 shares of common stock, no par value. All of the
capital stock of each of CLVI and MVI is outstanding, has
been validly issued, is fully paid and non-assessable and
fifty percent (50%) of the capital stock of each such
company is owned beneficially and of record by EGF V free
and clear of all Liens.
(t) EGF V owns, directly or indirectly, 50% of the limited
partnership interests in each of Clement and Montgomery.
(u) The M/V CLEMENT is duly documented in the absolute and
unencumbered ownership of Clement under the laws and flag
of the Bahamas. The M/V PACIFIC SPLENDOR is duly documented
in the absolute and unencumbered ownership of Montgomery
under the laws and flag of the Bahamas.
6.02 The Companies hereby further represent and warrant to the Lenders and
to each of them severally that:
(a) The Aircraft are duly documented in the absolute and
unencumbered ownership of the Owner Trustee under the laws
and flag of the United States and Canada, as the case may
be, free and clear of all Security Interests other than
Permitted Liens;
(b) The Aircraft are operationally airworthy and have been
issued Certificates of Airworthiness by the jurisdiction in
which the Aircraft are respectively registered;
(c) The Aircraft comply with all relevant laws, regulations and
requirements (including environmental laws, statutory or
otherwise) as are applicable to (i) aircraft documented
under the laws of such flag, as applicable, and (ii)
aircraft engaged in a trade similar to that performed by
the Aircraft, respectively;
(d) The Aircraft are insured in accordance with the provisions
of this Agreement and the respective Aircraft Mortgages and
the requirements herein and therein for insurances have
been complied with.
7. COVENANTS
7.01 The Companies hereby covenant and agree that, as and from the date of
this Agreement and throughout the Security Period, they will comply
in full with the following covenants and undertakings:
(a) each of the Companies will send (or procure that there is
sent) to the Agent:
(i) as soon as possible, but in no event later than
one hundred twenty (120) days after the end of
each fiscal year of EGF V, the EGF V consolidated
audited annual or other published accounts of all
financial statements as required by law, such
financial statements to be prepared in accordance
with generally accepted accounting principles
consistently applied and certified as to their
correctness by KPMG Peat Marwick or other
independent accounting firm of national
reputation;
(ii) as soon as possible, but in no event later than
sixty (60) days after the end of each fiscal
quarter of each financial year of EGF V, the EGF
V quarterly consolidated financial statements as
at the end of such period and for the period then
ending, such statements to be prepared in
accordance with generally accepted accounting
principles consistently applied and certified as
to their correctness by the chief financial
officer or controller of FSI, together with a
certificate by an officer of each of the
Companies (substantially in the form of Appendix
J hereto) confirming (i) that the representations
and warranties stated in Clause 6.01 and 6.02 are
true and correct on and as of the date of such
certificate as if made on such date, (ii) that no
Default or Event of Default has occurred and is
continuing and (iii) that EGF V and the other
Companies have complied with all of the covenants
contained in Clause 7 (setting forth in
reasonable detail the calculations required to
establish that such covenants were complied with
on the date of such financial statements) and
furnished to the Agent copies of any new charters
and/or leases entered into with respect of any of
the Vessels or the Aircraft, respectively with an
indicated duration in excess of six months;
(iii) as soon as possible but in no event later than
sixty (60) days after the end of each fiscal
quarter in each fiscal year of EGF V, EGF V's
valuation (as set forth in the certificate
referred to in sub-clause (ii) of this Clause
7.01) of the fair market value of the Vessels,
Containers, Aircraft and other Equipment,
together with a list of the Equipment indicating
all sales of Equipment, the purchase of
additional Equipment and any Equipment that has
become a Total Loss and identifying each charter
or lease in effect with respect to each Vessel
and Aircraft, respectively;
(iv) copies of all reports filed with the Securities
and Exchange Commission and all other public
reports furnished to the limited partners of EGF
V or any of its subsidiaries;
(v) promptly after the same is instituted (or, to the
knowledge of the Companies, threatened), details
of any litigation, arbitration or administrative
proceedings against or involving any of the
Companies, the Approved Manager, or any of the
Vessels, Aircraft or Containers or Equipment
which is likely to have a material adverse effect
on the financial condition of the Companies taken
as a whole, the operation of any Vessel, the
operation of any Aircraft or the operation of the
Equipment taken as a whole;
(vi) copies of all reports relating to the Aircraft
that are required to be filed by any governmental
agency of the jurisdiction in which each such
Aircraft is registered and/or operated.
(vii) from time to time, and promptly upon demand, such
additional financial or other information
relating to the Companies, the Equipment and/or
any relevant subsidiary or affiliate of the
Companies as may be reasonably requested by the
Agent.
(b) each of the Companies will notify the Agent of any Event of
Default (or event which, with the giving of notice and/or
lapse of time or other applicable condition, would
constitute an Event of Default) forthwith upon the
occurrence thereof;
(c) each of the Companies and FSI will maintain its corporate
existence or existence as a limited partnership, as the
case may be, and, in the case of Trader, its qualification
as a foreign maritime entity under Liberian law, and shall
remain duly organized and validly existing and in good
standing under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and will
obtain and promptly renew from time to time, and will
promptly furnish certified copies to the Agent of, all such
authorizations, approvals, consents and licenses as may be
required under any applicable law or regulation to enable
the Companies to perform their respective obligations under
this Agreement, the Note and the Security Documents to
which any such Company is a party or required for the
validity or enforceability of this Agreement, the Note and
the Security Documents or required to enable the relevant
Companies to continue to own and operate the respective
Vessels, Aircraft and Containers and the Companies shall
comply with the terms of the same;
(d) each of the Companies will promptly and in any event within
five days notify the Agent in writing of any change or
development which would materially adversely affect the
assets, properties, liabilities, business results or
operations or financial or other condition of the Companies
taken as a whole or threaten the validity, enforceability
or performance of this Agreement, the Note or the Security
Documents, and the Companies will permit the Agent or its
authorized representatives at reasonable times to inspect
and copy the books, records, accounts, logs and discuss
with the Companies their affairs, finances and business
plan;
(e) each of the Companies will comply in all material respects
with all applicable statutes, regulations and orders of and
applicable restrictions (including, without limitation, all
applicable environmental laws) of any governmental
authority of any jurisdiction applicable to the Companies;
(f) each of the Companies will obtain and promptly renew from
time to time, all authorizations, approvals, consents and
licenses required under any applicable law or licenses
required under any applicable law or regulation with
respect to this Agreement, the Note and the Security
Documents;
(g) the Companies will procure that EGF V and its consolidated
subsidiaries shall maintain the following financial ratios:
1. The ratio of net cash provided by operating
activities (defined as net income before
extraordinary items plus interest expense plus
depreciation and amortization plus cash from
unconsolidated special purpose entities plus loss
on sale of assets or minus gains on sale of
assets) to interest expenses shall at all times
be at least 3:1.
2. The ratio of total liabilities (minus the balance
in the Cash Collateral Account) to total
value-adjusted assets (defined as unrestricted
cash and Cash Equivalents plus the fair market
value of all Equipment) shall be no greater than
0.4:1.
3. The combined market value of the Pledged
Equipment (as determined pursuant to Clause
7.03(c)) shall at all times be equal to or
greater than 135% of the excess of (x) the
outstanding principal amount of the Loan over (y)
the aggregate amount of cash on deposit in the
Cash Collateral Account.
(h) each of the Companies shall insure or cause to be insured
and keep insured, with financially sound and reputable
insurers, so much of the properties of each such Company
and its subsidiaries in such amounts and against such risks
as are usually and customarily insured against by companies
in a similar business with respect to properties of a
similar character;
(i) each of the Companies will send (or procure that there is
sent) to the Agent a survey or drydock or inspection report
on each Vessel by the Approved Manager or its agent no less
often than once every 2 years;
(j) each of the Companies will send (or procure that there is
sent) to the Agent copies of all survey or inspection
reports delivered or required to be delivered pursuant to
the leases in respect of each Aircraft; provided, that if
any such lease does not require the periodic delivery of
reports relating to the use, operation and maintenance of
the Aircraft, then the Companies will send (or procure that
there is sent) to the Agent (no less often than once every
2 years commencing on the Closing Date) such information
relating to the use, operation and maintenance of the
Aircraft as the Agent may request;
(k) the Companies will procure that the sum of regular
dividends paid and other regular distributions of assets or
profits declared for a calendar year and payable to any
partner or shareholder of the Companies plus Repurchase
Units for each such calendar year shall not exceed the
lower of (x) $20,000,000 and (y) the net cash provided by
operating activities (defined as net income before
extraordinary items plus interest expense plus depreciation
and amortization plus cash from unconsolidated special
purpose entities plus loss on sale of assets or minus gains
on sale of assets) during such year; provided, that
notwithstanding the foregoing (and subject to Clauses 4.03
and 7.03), so long as (i) no Default shall have occurred
and be continuing and (ii) the Companies have made the
deposit required to be made into the Cash Collateral
Account pursuant to Clause 7.03(a)(iii)(A) and (B), after
December 31, 1997 the Companies may pay special dividends
and make other special distributions of assets or profits
so long as the sum of all such special distributions for
each calendar year does not exceed 40% of the aggregate
proceeds from the sale of any Equipment during such fiscal
year;
(l) for so long as any amount remains outstanding under this
Agreement, the Note or any of the Security Documents, EGF V
shall maintain a diversified portfolio of Equipment;
(m) EGF V shall at all times own, beneficially and of record,
at least (i) 50% of the issued and outstanding stock of
each of CLVI and MVI and (ii) 49.5% of the limited
partnership interests in each of Clement and Montgomery.
(n) If (i) any Company intends to acquire an asset for a
purchase price greater than $2,000,000 or (ii) any Company
intends to acquire an asset for a purchase price less than
$2,000,000 while a Default shall have occurred and be
continuing, the Companies shall give the Agent 5 Business
Days notice of such intended acquisition and upon the
request of the Agent (which request shall be made within 5
Business Days of the receipt of such notice), the Companies
shall procure that such acquiring Company deliver such
documents, certificates and instruments, and take all such
actions, as the Agent deems necessary so as to create a
fully perfected first priority lien in such acquired asset
in favor of the Security Trustee; provided that with
respect to the acquisition of any Qualified Assets (x) the
Companies shall not be required to notify the Agent of such
acquisition pursuant to sub-clause (i) hereof unless and
until an Event of Default shall have occurred and (y) the
Companies shall not be required to grant the Security
Trustee a first priority mortgage lien on any Qualified
Assets (but nothing herein shall be deemed to limit the
obligation of the Companies to grant the Security Trustee a
first priority lien in any other interest, beneficial or
otherwise, in the Qualified Assets or in the earnings or
insurances relating thereto);
(o) Upon the occurrence of a Default, the Companies shall
deliver all such documents, certificates and instruments,
and shall take all such actions, as the Agent may request
in order to create a fully perfected first priority lien in
favor of the Security Trustee in any assets of the
Companies that are at such time free and clear of all
Security Interests and that are not Pledged Equipment;
(p) The Aircraft shall not be used for any purpose or in any
manner not fully covered by the insurances relating
thereto, or outside any geographical limit imposed by such
insurances, or for any illegal purpose or in any illegal
manner.
(q) The Aircraft shall be maintained in the absolute and
unencumbered ownership of the Owner Trustee, free and clear
of all Security Interests other than Permitted Liens;
(r) Each of the Companies shall comply in all respects with all
applicable statues, regulations and orders of any
governmental authority of any jurisdiction applicable to
the Aircraft or the operation thereof and shall at all
times maintain in full force and effect all necessary
certificates, licenses, permits and authorizations required
for the use and operation of the Aircraft;
(s) The Aircraft shall be maintained in good and efficient
repair, condition and appearance consistent with first
class aircraft ownership and management practices and
operationally airworthy in all respects, ordinary wear and
tear excepted;
(t) The Companies shall cause the Warehousing Agreement to be
amended (no later than the Commitment Termination Date (as
defined in the Warehousing Agreement)) to reflect the
amendment and restatement of the Original Loan Agreement
pursuant to this Agreement and to reflect the granting of
Security Interests by the Companies in the Collateral
pursuant to the Security Documents.
7.02 Each of the Companies further undertakes that it will not, as and
from the date of this Agreement and throughout the Security Period,
without the prior written consent of the Agent:
(a) conduct any business or activity other than the ownership,
chartering, leasing and operation of the Equipment; or
(b) if an Event of Default shall have occurred and be
continuing, or if an Event of Default would occur as a
consequence of the declaration or payment of a dividend or
distribution, declare or pay any dividend or make any other
distribution of its assets or profits to any partner or
shareholder; or
(c) repay any loans (other than intercompany advances in the
ordinary course of business) made by any general partner or
limited partner to any limited partnership or any other
loans advanced to any Company by any person, or make any
loans or advances to any person, except that (i) each
Company may lend to and borrow from another Company,
provided that such loans shall be subordinated to the Loan
and any lending Company shall enter into a subordination
undertaking in form and substance satisfactory to the Agent
with respect to any such loan and (ii) EGF V may repay
amounts outstanding under the Warehousing Agreement; or
(d) except for indebtedness evidenced by this Agreement, the
Note and the Security Documents, and except for any other
indebtedness contemplated in this Agreement or any Security
Document, incur or agree to incur or issue any
indebtedness, extend any guarantees (other than for
performance by another Company as owner under any charter
of a Vessel or any lease of an Aircraft), or make any other
commitments with respect thereto; provided that EGF V may
borrow up to a maximum outstanding amount at any one time
of $10,000,000 under the Warehousing Agreement so long as
such borrowings are repaid within 180 days of the day such
borrowings are made; or
(e) create, assume or permit to exist any Security Interest or
encumbrance upon any of its properties or Equipment except
Permitted Liens; or
(f) consolidate or amalgamate with, or merge into, any other
entity other than EGF V or a subsidiary of EGF V; or
(g) employ a manager of any of the Vessels or the Aircraft
other than the Approved Manager; or
(h) except as contemplated by this Agreement or in accordance
with Clause 7.03, sell, convey, transfer, lease, or
otherwise dispose of (i) Pledged Equipment or (ii) all or a
substantial part of its assets (whether by one transaction
or a series of transactions and whether related or not); or
(i) change the location of its principal place of business on
less than thirty (30) days written notice to the Agent; or
(j) amend, supplement or modify, or permit the amendment,
supplementation or modification of, any of the Agreement
and Articles of Limited Partnership of EGF V, Trader,
California, Columbus, Clement or Montgomery;
(k) so long as the Pledge Agreement is in effect, amend,
supplement or modify, or permit the amendment,
supplementation or modification of, the Articles of
Incorporation and By-laws of CLVI and MVI;
(l) except under terms agreed to by the Agent, enter into any
charter, contract of affreightment, lease or similar
agreement with respect to any of the Vessels or Aircraft
which contains any prohibition on Vessel or Aircraft sale
without the prior consent of the charterer or lessee, as
the case may be, unless such sale provision is subject to
rights which the Security Trustee has in the event of
default under the relevant Mortgage; or
(m) enter into any charter, contract of affreightment, lease or
similar agreement with respect to any Vessel or Aircraft
which (i) has an indicated duration in excess of six (6)
months or (ii) at the time such contract is entered into
materially adversely affects the collateral value of any
Vessel or Aircraft or the legal position of the Lenders;
provided, that the Companies may enter into any such
charter, contract of affreightment, lease or similar
agreement which is on substantially the same terms
(including relevant assignments and consents), with rates
subject to market conditions, as those previously accepted
by the Agent.
7.03 (a) The Companies shall be entitled to dispose of any
portion of the Pledged Equipment provided that (i) prior to
such disposition no Default or Event of Default shall have
occurred and be then continuing, (ii) the disposition
occurs in an arm's-length transaction at fair market value
for cash consideration and (iii) with respect to the
disposition of:
(A) Pledged Equipment other than Containers, (I) the
Agent shall have received prior written notice of
the intention of the Companies to effect such
disposition and (II) after December 31, 1997, 60%
of the proceeds of such disposition (or 100% of
the proceeds in the event that a Default or an
Event of Default would occur as a consequence of
such disposition) are deposited into the Cash
Collateral Account within 5 days of such
disposition; and
(B) Containers, the Companies shall deliver to the
Agent within 45 days of the end of each fiscal
quarter of each financial year of EGF V a report
showing (x) the details of the disposition of any
Containers for such quarterly period and (y)
after December 31, 1997, confirmation of the
deposit into the Cash Collateral Account of 60%
of the proceeds (or 100% of the proceeds in the
event that a Default or Event of Default would
occur as a consequence of such disposition)
within 45 days of the end of such quarterly
period.
(b) Notwithstanding anything to the contrary in the Security
Documents, should the Companies be entitled to dispose of
any Pledged Equipment in accordance with Clause 7.03(a),
the Agent shall release the security interest in such
assets and shall release the corresponding Company from its
obligations under the relevant Security Documents.
(c) Each of the Companies jointly and severally agrees that if,
and so often as, the Companies are not in compliance with
Clause 7.01(g)(3), they will, within (x) sixty (60) days,
in the case of subclause (i) below, and (y) thirty (30)
days, in the case of subclause (ii) below, of being
notified by the Agent of such requirement (which
notification shall be conclusive and binding on the
Companies) or becoming aware of such non-compliance:
(i) provide the Lenders with, or procure the
provision to the Lenders of, such additional
Pledged Equipment as shall be acceptable to the
Lenders to bring the Companies into compliance
with Clause 7.01(g)(3), which additional Pledged
Equipment shall consist of such assets, and be
mortgaged to the Agent by such documentation and
be entered into between such parties as the Agent
may approve or require (and, if the Companies do
not make proposals satisfactory to the Agent in
relation to such additional Pledged Equipment
within ten (10) days of the date of the
notification by the Agent to the Companies as
aforesaid, shall be deemed to have elected to
prepay in accordance with (ii) below); or
(ii) prepay (in accordance with Clauses 4.02 except
that such prepayment shall be made on the next
succeeding Repayment Date) such part of the Loan
(together with accrued interest thereon) as will
ensure that the Companies comply with Clause
7.01(g)(3). If the prepayment shall not occur on
the last day of an Interest Period, the Companies
will pay to the Agent for the account of the
Lenders such amounts as the Agent may certify as
necessary to compensate the Lenders for any loss
or expense on account of funds borrowed,
contracted for or utilized in order to fund the
Loan.
(d) On or prior to December 31, 1997, the Companies may request
that amounts held on deposit in the Cash Collateral Account
be released to them to be applied towards the purchase of
additional Pledged Equipment provided that (x) such
additional Pledged Equipment takes such form, is
constituted by such documentation and is entered into
between such parties as the Agent may approve or require
and is otherwise satisfactory to the Agent and (y) after
the purchase of such additional Pledged Equipment, the
Companies are either in compliance with Clause 7.01(g)(3)
or they comply with Clause 7.03(c);
(e) For the purposes of Clause 7.01(g)(3) and 7.03(a), the
market value of the Vessels, Aircraft and Containers shall
be determined as follows: (1) EGF V shall provide to the
Agent its internal Valuations at the intervals provided
herein and at such additional times as the Agent may
reasonably request. (2) At any such time as the Agent may
reasonably request, the Companies shall furnish to the
Agent a Valuation made by the appraisers in respect of each
category of Equipment appointed by the Agent from the
Approved List (which Valuation shall be at the expense of
the Companies with respect to the first such Valuation and
thereafter shall be for the account of the party specified
in subclause (c)(4) below). The Agent and the Companies
agree to accept any Valuation made by such appraisers
appointed as aforesaid as conclusive evidence of the market
value of the Vessels, Aircraft or Containers, as the case
may be, at the date of such Valuation. (3) If an
independent Valuation is obtained as provided in subclause
(2) above, the cost of such Valuation shall be for the
account of the Agent if the Valuation provided by the
appraisers establishes that the Companies are in compliance
with Clause 7.01(g)(3). If, however, the appraisers'
Valuation establishes that the Companies are not in
compliance with Clause 7.01(g)(3), the cost of such
appraisers' Valuation shall be for the account of the
Companies.
(f) For the purpose of Clause 7.03 (c) and (d), the market
value of any additional security provided or to be provided
to the Lenders shall be reasonably determined by the Agent
through reference to well established and generally
accepted markets, indexes and exchanges for such additional
security.
(g) In connection with any additional security provided in
accordance with Clause 7.03 (c) or (d), the Lenders shall
be entitled to receive certified copies of such documents
of the kinds to which sub-clauses (a), (b), (c), (d), (e),
(f), (g), (h), (i), (j), (k), (l), (m), (n) and (u)
(inclusive) of Clause 5.01 refer which apply to the type of
security provided and such favorable legal opinions as the
Agent shall reasonably require.
7.04 The Companies shall at all times maintain at the offices of CBK the
Cash Collateral Account in the name of the Companies and under the
sole dominion and control of the Security Trustee, which account
shall be a special interest-bearing account and the accrued interest
shall be payable to the Companies. Each of the Companies hereby
grants to the Security Trustee a security interest in all monies and
property from time to time in the Cash Collateral Account and the
proceeds thereof. The balance from time to time in the Cash
Collateral Account shall constitute part of the collateral hereunder
and shall not constitute payment of the Loan until applied as
provided in Clause 4.03.
8. SECURITY TRUSTEE AND AGENT
8.01 Recital. Each of the Companies has authorized the execution and
delivery of this Clause 8 pursuant to which the Security Trustee will
act as the Mortgagee of each of the Vessels and Aircraft, as Security
Trustee and secured party with respect to the Containers, as Assignee
and secured party with respect to the insurances of the Vessels,
Aircraft and Containers, as Pledgee, Assignee and secured party with
respect to the Pledged Shares and the limited partnership interests
in Clement and Montgomery, as secured party with respect to the
beneficial interest in the Trust Agreement, and as secured party with
respect to any proceeds thereof.
8.02 Granting Clause. To secure the payment of all sums of money from time
to time owing to the Lenders under this Agreement, the Note and the
Security Documents in the maximum principal amount of $38,000,000
plus any amounts due under the Interest Rate Agreements and accrued
interest thereon and all other amounts owing to the Lenders or the
Security Trustee pursuant to this Agreement, the Note and the
Security Documents ("Indebtedness"), and the performance of the
covenants of the Companies herein and therein contained, and in
consideration of the premises and of the covenants herein contained
and of the extensions of credit by the Lenders, and of the sum of One
Dollar paid to the Companies by the Security Trustee at or before the
delivery hereof, the receipt whereof is hereby acknowledged, the
Security Trustee does hereby declare that it will hold as such
trustee in trust for the benefit of the Lenders, from and after the
execution and delivery thereof, all of its right, title and interest
as mortgagee in, to and under each of the Mortgages, its right, title
and interest as Assignee and secured party under the Insurance
Assignment, its right, title and interest as Pledgee, Assignee and
secured party under the Pledge Agreement, the Assignment of Limited
Partnership Interests and the Beneficial Interest Security Agreement
and its right, title and interest as Security Trustee and secured
party under the Security Agreement.
The right, title and interest of the Security Trustee in and to the
property, rights and privileges described above, from and after the
execution and delivery thereof, and all property hereafter
specifically subjected to the lien of the indenture created hereby
and by the Security Documents by any amendment hereto or thereto are
herein collectively called the "Estate".
TO HAVE AND TO HOLD the Estate unto the Security Trustee and its
successors and assigns forever.
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit
and security of the Lenders and their respective successors and
assigns without any priority of any one over any other.
UPON CONDITION that, unless and until an Event of Default under this
Agreement shall have occurred and be continuing, the respective
Company having title to each Vessel and Aircraft shall be permitted,
to the exclusion of the Security Trustee, to possess and use each
Vessel and Aircraft and EGF V shall be permitted to possess and use
the Containers.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that all property
subject or to become subject hereto is to be held, subject to the
further covenants, conditions, uses and trusts hereinafter set forth,
and each of the Companies, for itself and its successors and assigns,
hereby covenants and agrees to and with the Security Trustee and its
successors in said trust, for the equal and proportionate benefit and
security of the Lenders as hereinafter set forth.
8.03 Appointment of Agent.
Each Lender hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this
Agreement, the Notes and the Security Documents as are delegated to
the Agent by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto (including, without limitation,
the power to determine whether the Companies will be required to
grant a Security Interest in any of their assets where the provisions
of this Agreement provide for the Agent to make such determination).
As to any matters not expressly provided for by this Agreement, the
Notes or the Security Documents (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the
instructions of the Majority Lenders, and such instructions shall be
binding upon all Lenders and all holders of Notes; provided, however,
that the Agent shall not be required to take any action which exposes
the Agent to personal liability or which is contrary to this
Agreement or applicable law. The Agent agrees to give to each Lender
prompt notice of each notice and other report given to it by the
Companies pursuant to the terms of this Agreement.
8.04. Acts of Lenders.
Any request, demand, direction, consent, notice, waiver or other
action provided by this Agreement to be given or taken by Lenders may
be embodied in and evidenced by one or any number of concurrent
written instruments of substantially similar tenor signed by such
Lenders in person or by an agent duly appointed in writing, and such
action shall become effective when such instrument or instruments are
delivered to the Security Trustee. Such a written instrument (and the
action embodied therein and evidenced thereby) is herein sometimes
referred to as the "Act" of the Lenders party to such instrument or
instruments. Proof of the execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose
of this Agreement and shall be conclusive in favor of the Security
Trustee or of the Companies if made in the manner provided in this
Clause 8.04.
The fact and date of the execution by any person of any such
instrument or writing may be proved by the affidavit of a witness of
such execution or by the certificate of any notary public or other
officer authorized by law to take acknowledgments of deeds,
certifying that the person signing such instrument or writing
acknowledged to him the execution thereof.
Any request, demand, authorization, direction, notice, consent,
waiver or other action by a Lender shall bind any subsequent assignee
of such Lender.
8.05. Notices, etc., to Agent, Security Trustee and the Companies.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Lenders or other document provided or permitted by
this Agreement to be made upon, given or furnished to, or filed with,
(1) the Agent or the Security Trustee by any Lender or by the
Companies shall be sufficient for every purpose hereunder if made,
given, furnished or filed in writing to or with the Security Trustee
as provided in Clause 16 hereof,
(2) the Companies by any Lender or by the Security Trustee shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Companies as provided in Clause 16
hereof.
8.06 Notice to Lenders; Waiver.
Where this Indenture provides for notice to Lenders of any event,
such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, postage prepaid, by
certified or registered mail, return receipt requested, telexed or
telefaxed to each Lender in care of the Agent, not later than the
latest date, and not earlier than the earliest date, prescribed for
the giving of such notice.
Where this Agreement provides for notice in any manner, such notice
may be waived in writing by the person entitled to receive such
notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Lenders shall be
filed with the Security Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance
upon such waiver.
8.07 Satisfaction and Discharge of Indenture; Release of Estate.
When all payments to the Lenders in respect of the Loan or otherwise
due under this Agreement, the Note and any Security Documents shall
have been made, the Security Trustee shall release the Estate from
the lien of the indenture created by this Clause 8 and the Security
Documents and neither the Security Trustee nor the Lenders shall have
any further interest in or other right with respect to the Estate.
Notwithstanding the satisfaction and discharge of the indenture
created by this Clause 8 and the Security Documents, the obligations
of the Companies to the Security Trustee under Clause 8.23 hereof
shall survive.
8.08 Power of Sale; Suits for Enforcement.
(a) In case one or more Events of Default under this Agreement or the
Security Documents shall have occurred and shall not have been
remedied, the Security Trustee and/or the Agent (as the case may be),
personally or by agents, with or without entry, upon the written
instructions of the Majority Lenders, exercise such rights and
remedies as are provided in the Agreement and the Security Documents.
8.09 Security Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to any of the Companies or the
property of any of them, the Security Trustee (irrespective of
whether the sums owing to the Lenders under this Agreement, the Note
and the Security Documents shall then be due and payable in
accordance with this Agreement, the Note or the Security Documents or
otherwise) shall be entitled and empowered to intervene in such
proceeding or otherwise and shall be entitled, upon the written
instructions of the Majority Lenders,
(a) to file and prove a claim for the whole amount of the sums owing
and unpaid under the Agreement, the Note and the Security Documents
and interest thereon and to file such other papers or documents as
may be necessary or advisable to have the claims of the Security
Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Security Trustee, its
agents and counsel) and of the Lenders allowed in such judicial
proceeding; any claim filed by the Security Trustee shall expressly
preserve all rights and remedies of each Lender in the Estate, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby
authorized by each Lender to make such payments to the Security
Trustee, and if the Security Trustee shall consent to the making of
such payments directly to such Lender, to pay to the Security Trustee
any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Security Trustee, its agents and
counsel, and any other amounts due the Security Trustee under Clause
8.23 hereof.
Nothing herein contained shall be deemed to authorize the Security
Trustee to authorize or consent to or accept or adopt on behalf of
any Lender any plan of reorganization, arrangement, adjustment or
composition affecting the sums owing under the Agreement or the Note
or the rights of any Lender, or to authorize the Security Trustee to
vote in respect of the claim of any Lender in any such proceeding,
except upon the written instructions of such Lender.
8.10 Indenture Trustee May Enforce Claims.
All rights of action and claims under this Agreement, the Note, the
Mortgages, the Beneficial Interest Security Agreement, the Insurance
Assignments, the Pledge Agreement, the Assignment of Limited
Partnership Interests, the Security Agreement or any other Security
Document, may be prosecuted and enforced by the Security Trustee in
its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Security
Trustee, its agents and counsel, be for the ratable benefit of the
Lenders.
8.11 Restoration of Rights and Remedies.
If the Security Trustee or any Lender has instituted any proceeding
to enforce any right or remedy or in the exercise of any power under
this Clause 8 or any of the Security Documents by foreclosure, entry
or otherwise and such proceeding has been discontinued or abandoned
for any reason, or has been determined adversely to the Security
Trustee or to such Lender, then and in every such case the relevant
Company or Companies, the Security Trustee and the Lenders shall,
subject to any determination in such proceeding, be restored
severally and respectively to their former positions and rights
hereunder, including the position and rights of the Security Trustee
with respect to the Estate, and thereafter all rights, powers and
remedies of the Security Trustee and the Lenders shall continue as
though no such proceeding had been instituted.
8.12 Rights and Remedies Cumulative.
No right, power or remedy herein conferred upon or reserved to the
Security Trustee or to the Lenders is intended to be exclusive of any
other right, power or remedy. Every right, power and remedy shall, to
the extent permitted by law, be cumulative and in addition to every
other right, power and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise and may be exercised from
time to time and as often and in such order as may be deemed
expedient by the Security Trustee or the Lenders. The exercise of any
right, power or remedy shall not be construed as a waiver of the
right to exercise at the same time or thereafter any other right,
power or remedy.
8.13 Delay or Omission not Waiver.
No delay or omission of the Security Trustee, the Agent or of any
Lender to exercise any right, power or remedy accruing upon any Event
of Default shall impair any such right, power or remedy or constitute
a waiver of any such Event of Default or an acquiescence therein.
Every right, power and remedy given by this Agreement or by law to
the Security Trustee, the Agent or the Lenders may be exercised from
time to time, and as often as may be deemed expedient, by the
Security Trustee, the Agent or by the Lenders, as the case may be.
8.14 Control by Lenders.
The Majority Lenders have the right, during the continuance of an
Event of Default:
(a) to require the Security Trustee to proceed to enforce this
Agreement, the Note and the Security Documents either by judicial
proceedings for the enforcement of the payment of such unpaid sums
and the foreclosure of the Mortgages, enforcement under the
Beneficial Interest Security Agreement, the Insurance Assignments,
Pledge Agreement, the Assignment of Limited Partnership Interests and
Security Agreement and the sale of the Estate or, at the election of
the Security Trustee, by the exercise of the power of entry and/or
sale conferred by the relevant Security Document, and
(b) to direct the time, method and place of conducting any proceeding
for any remedy available to the Security Trustee or exercising any
trust or power conferred on the Security Trustee; provided that
(i) such direction shall not be in conflict with any
rule of law or with the provisions of the
Security Documents or this Agreement, and
(ii) the Security Trustee may take any other action
deemed proper by the Security Trustee which is
not inconsistent with such direction.
8.15 Waiver of Appraisement, etc., Laws.
Each of the Companies hereby covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage
of, any appraisement, valuation, stay, extension or redemption law
wherever enacted, now or at any time hereafter in force, to prevent
or hinder the enforcement of the indenture created by this Clause 8
or the Security Documents or the absolute sale of the Estate, or any
part thereof, or the possession thereof by any purchaser at any sale
under the Security Documents; and each such Company, for itself and
all who may claim under it, so far as it now or hereafter lawfully
may, hereby waives the benefit of all such laws. Each such Company,
for itself and all who may claim under it, waives, to the extent
lawful, all right to have the property in the Estate marshalled upon
any foreclosure hereof, and agrees that any court having jurisdiction
to foreclose this Indenture may order the sale of the Estate as an
entirety.
If any law in this Clause 8.15 referred to and now in force, of which
the Owner or its successors might take advantage despite this Clause
8.15, shall hereafter be repealed or cease to be in force, such law
shall not thereafter be deemed to constitute any part of the contract
herein contained or to preclude the application of this Clause 8.15.
8.16 Acceptance of Trusts.
CBK hereby accepts the trusts imposed upon it as Security Trustee by
this Agreement, and the Security Trustee covenants and agrees to
perform the same as herein expressed and agrees to receive and
disburse all monies constituting part of the Estate in accordance
with the terms hereof.
8.17 Certain Duties and Responsibilities of the Security Trustee.
(a) Except during the continuance of an Event of Default,
(i) the Security Trustee undertakes to perform such duties and only
such duties as are specifically set forth herein and in the Security
Documents, and no implied covenants or obligations shall be read into
this Agreement or the Security Documents against the Security
Trustee, and the Security Trustee agrees that it will not manage,
control, use, sell, dispose of or otherwise deal with the Estate,
except as required by the terms of the Security Documents and as
otherwise provided herein; and
(ii) in the absence of bad faith on its part, the Security Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Security Trustee and conforming to the
requirements of this Agreement; but in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Security Trustee, the
Security Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Agreement.
(b) In case an Event of Default has occurred and is continuing, the
Security Trustee shall exercise such of the rights and powers vested
in it by this Agreement and the Security Documents, and shall use the
same degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Agreement shall be construed to relieve the
Security Trustee from liability for its own grossly negligent action,
its own grossly negligent failure to act, or its own willful
misconduct, except that
(i) this subsection (c) shall not be construed to limit the
effect of subsection (a) of this Clause 8.17;
(ii) the Security Trustee shall not be liable for any error of
judgment made in good faith by a director, officer, agent
or employee of the Security Trustee, unless it shall be
proved that the Security Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Security Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Majority Lenders
relating to the time, method and place of conducting any
proceeding for any remedy available to the Security
Trustee, or exercising any trust or power conferred upon
the Security Trustee, under this Indenture; and
(iv) no provision of this Agreement shall require the Security
Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights
or powers.
(d) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of
or affording protection to the Security Trustee shall be subject to
the provisions of this Section 8.17.
8.18 Notice of Default.
As promptly as possible after an officer of the Security Trustee
shall obtain actual knowledge of any default hereunder, the Security
Trustee shall transmit by mail, telefax or telex notice of such
default to the Lenders, unless such default shall have been cured or
waived. For the purpose of this Section 8.18, the term "default"
means any event which is an Event of Default.
8.19 Certain Rights of Security Trustee and the Agent.
Except as otherwise provided in Section 8.17 hereof:
(a) the Security Trustee and the Agent may rely upon and shall be
protected in acting or refraining from acting in reliance upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond or other paper or
document reasonably believed by it to be genuine and to have been
signed or presented by the proper person or persons;
(b) any request or direction of the Companies mentioned herein shall
be sufficiently evidenced by a certificate or request signed by an
officer or director of EGF V or its general partner or a duly
authorized attorney-in-fact for EGF V;
(c) whenever in the administration of the indenture or the
obligations created by this Agreement and the Security Documents, the
Security Trustee or the Agent, as the case may be, shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Security Trustee or
the Agent (unless other evidence be herein specifically prescribed)
may, in the absence of bad faith on its part, rely upon a certificate
signed by an officer or director of any of the Companies or a duly
authorized attorney-in-fact for such Company or Companies;
(d) the Security Trustee and the Agent may consult with counsel and
the written advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(e) neither the Security Trustee nor the Agent shall be under any
obligation to exercise any of the rights or powers vested in it or in
the Lenders by this Agreement or the Security Documents at the
request or direction of any of the Lenders, unless such Lenders shall
have offered to the Security Trustee or the Agent, as the case may
be, reasonable security or indemnity (including the advancement of
funds) against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) neither the Security Trustee nor the Agent shall be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond or other paper or document, but the
Security Trustee or the Agent, as the case may be, in its discretion,
may make such further inquiry or investigation into such facts or
matters as it may see fit;
(g) the Security Trustee may execute any of the trusts, and the
Security Trustee and the Agent may execute any of the powers
hereunder or perform any duties hereunder, either directly or by or
through agents or attorneys; and
(h) neither the Security Trustee nor the Agent shall be personally
liable, in case of entry by it upon the Estate, for debts contracted
or liabilities or damages incurred in the management or operation of
the Estate.
8.20 Security Trustee not Responsible for Recitals; Warranty.
Neither the Security Trustee nor the Agent makes any representation
as to the value or condition of the Estate or any part thereof, as to
the title of any of the Companies thereto or as to the security
afforded thereby or hereby, or as to the validity or genuineness of
any security at any time pledged or deposited with the Security
Trustee or the Agent hereunder. Neither the Security Trustee nor the
Agent shall have any responsibility with respect to the recording,
re-recording, filing or re-filing, under the laws of any
jurisdiction, of this Indenture or any other document or statement
that may be required or permitted to be recorded, re-recorded, filed
or re-filed under any such laws to perfect or protect the security
interests created by or pursuant to Clause 8.02 of this Agreement.
Neither the Security Trustee nor the Agent (i) makes any warranty or
representation to any Lender and shall not be responsible to any
Lender for any statements, warranties, or representations (whether
written or oral) made in or in connection with this Agreement, the
Notes or the Security Documents; (ii) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement, the Notes or
the Security Documents on the part of the Companies or to inspect the
property (including the books and records) of the Companies.
8.21 Capacity in Which Acting.
CBK as Security Trustee and Agent, is acting hereunder not in its
individual capacity but solely as trustee and agent, respectively,
except as otherwise expressly provided herein, and all persons having
any claim against the Security Trustee and/or the Agent by reason of
the transactions contemplated hereby shall look only to the Estate
for payment or satisfaction and neither the Security Trustee nor the
Agent shall not be accountable under any circumstances in its
individual capacity, except for its own wilful misconduct or gross
negligence.
With respect to the Loan and the Note issued to it, CBK shall have
the same rights and powers under this Agreement, the Note and the
Security Documents as any other Lender and may exercise the same as
though it were not the Security Trustee and the Agent, respectively,
and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include CBK hereunder in its individual capacity. CBK and
its affiliates may accept deposits from, lend money to, act as
trustee under indentures of, accept investment banking engagements
from and generally engage in any kind of business with, the Companies
and any of the Companies' subsidiaries and any Person who may do
business with or own securities of the Companies or any such
subsidiary, all as if CBK were not the Security Trustee and the
Agent, respectively, and without any duty to account therefor to the
Lenders.
8.22 Funds May be Held by Security Trustee.
Subject to Clause 8.34 hereof, any monies held by the Security
Trustee hereunder as part of the Estate may, until paid out by the
Security Trustee as herein provided, be carried by the Security
Trustee on deposit with itself, and neither the Security Trustee nor
the Agent shall have any liability for interest upon any such monies.
8.23 Compensation and Reimbursement.
The Companies hereby jointly and severally agree:
(a) except as otherwise expressly provided herein, to reimburse the
Security Trustee and the Agent upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Security
Trustee or the Agent, as the case may be, in accordance with any
provision of this Agreement and the Security Documents (including the
reasonable expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be
attributable to its gross negligence or willful misconduct; and
(b) to indemnify each of the Security Trustee and the Agent (in its
individual capacity and as trustee or agent, respectively, and
including its successors, assigns, officers, directors, agents and
servants) for, and to hold it harmless against, any loss, liability
or expense incurred without gross negligence or willful misconduct on
its part, arising out of or in connection with the acceptance or
administration of the indenture or agency created by this Agreement
and the Security Documents, including, but not limited to, the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder, and any loss, liability, expense or claim arising
out of its possession, management, control use or operation of the
Estate.
As security for the performance of the obligations of the Companies
under this Clause 8.23, the Security Trustee and the Agent shall be
secured under this Indenture and Agreement by a lien on the Estate
prior to the lien thereon of the Lenders, and for the payment of such
expense, reimbursements and indemnity the Security Trustee shall have
the right to use and apply any moneys held by it hereunder in the
Estate.
The indemnity contained in this Clause 8.23 shall survive the
termination of this Agreement and the Security Documents.
8.24 Corporate Trustee Required; Eligibility.
There shall at all times be a Security Trustee hereunder which shall
be CBK or any other corporation organized and doing business under
the laws of the United States of America or of any State or of any
foreign government recognized by the Securities and Exchange
Commission pursuant to Sections 406-408 of the Trust Indenture Reform
Act of 1990, 15 USC ss.77jjj, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at
least $150,000, subject to supervision or examination by Federal or
State authority, and any other applicable law or regulation. If such
corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then for the purpose of this Clause 8.24, the
combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Security Trustee
shall cease to be eligible in accordance with the provisions of this
Clause 8.24, it shall resign immediately in the manner and with the
effect hereinafter specified herein.
8.25 Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Security Trustee or the Agent
and no appointment of a successor Security Trustee or Agent pursuant
to this Clause 8.25 shall become effective until the acceptance of
appointment by the successor Security Trustee or Agent, as the case
may be, under Clause 8.26 hereof. Until such acceptance the Security
Trustee or Agent, as the case may be, shall continue to carry out its
duties hereunder.
(b) The Security Trustee and the Agent may resign at any time by
giving written notice thereof to the Companies and the Lenders. If an
instrument of acceptance by a successor Security Trustee or Agent
shall not have been delivered to the Companies and the Security
Trustee or Agent, as the case may be, within 30 days after the giving
of such notice of resignation, the resigning Security Trustee or
Agent may petition any court of competent jurisdiction for the
appointment of a successor Security Trustee or Agent, as the case may
be.
(c) Each of the Security Trustee and the Agent may be removed at any
time by Act of the Majority Lenders, delivered to the Security
Trustee or the Agent, as the case may be, and to the Companies.
(d) If at any time:
(i) the Security Trustee shall cease to be eligible under
Clause 8.24 hereof and shall fail to resign after written
request therefor by any such Lender, or
(ii) the Security Trustee or the Agent shall become incapable of
acting or shall be adjudged a bankrupt or insolvent, or a
receiver of the Security Trustee or the Agent or of their
respective properties shall be appointed, or any public
officer shall take charge or control of the Security
Trustee or the Agent or of their respective properties or
affairs for the purpose of rehabilitation, conservation or
liquidation, any Lender may petition any court of competent
jurisdiction for the removal of the Security Trustee or the
Agent, as the case may be, and the appointment of a
successor Security Trustee or Agent, as the case may be.
(e) If the Security Trustee or the Agent shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office
of Security Trustee or the Agent for any cause, the Majority Lenders
shall promptly select a successor Security Trustee or Agent, as the
case may be, and the Companies shall appoint such selected person as
a successor Security Trustee or Agent, as the case may be. If no
successor Security Trustee or Agent shall have been so appointed by
the Lenders and the Companies and accepted appointment in the manner
hereinafter provided, the Security Trustee or Agent, as the case may
be, or any Lender for at least six months may, on behalf of itself
and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Security Trustee or
Agent, as the case may be.
(f) Each of the Security Trustee and the Agent shall give notice of
each resignation and each removal of the Security Trustee or Agent,
as the case may be, and each appointment of a successor Security
Trustee or Agent by mailing written notice of such event to the
Lenders. Each notice shall include the name of the successor Security
Trustee or Agent, as the case may be, and the address of its office
for purposes of Clause 8.05 hereof.
8.26 Acceptance of Appointment by Successor.
Every successor Security Trustee or Agent appointed hereunder shall
execute, acknowledge and deliver to the Companies and to the retiring
Security Trustee or Agent, as the case may be, an instrument
accepting such appointment, and thereupon the resignation or removal
of the retiring Security Trustee or Agent shall become effective and
such successor Security Trustee or Agent, without any further act
deed, or conveyance, shall become vested with all the estates,
properties, rights, powers, trusts and duties of the retiring
Security Trustee or Agent, as the case may be; but such retiring
Security Trustee or Agent shall, upon payment of its charges, execute
and deliver, together with the successor Security Trustee or Agent,
an amendment hereto, and such amendments to the Mortgages, the
Beneficial Interest Security Agreement, Insurance Assignments, Pledge
Agreement, the Assignment of Limited Partnership Interests and
Security Agreement, in due form, and in the required number of
counterparts, as may be required for recording, conveying and
transferring to such successor Security Trustee or Agent, as the case
may be, upon the trusts herein expressed all the estates, properties,
rights, powers and trusts of the retiring Security Trustee or Agent,
as the case may be, and shall duly assign, transfer and deliver to
such successor Security Trustee or Agent all property and money held
by such retiring Security Trustee or Agent, as the case may be,
hereunder. Upon request of any such successor Security Trustee or
Agent, the Companies shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor
Security Trustee or Agent all such estates, properties, rights,
powers and trusts.
No successor Security Trustee shall accept its appointment unless at
the time of such acceptance such successor Security Trustee shall be
qualified and eligible under Clause 8.24.
8.27 Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Security Trustee may be merged or converted
or with which it may be consolidated, or any Person resulting from
any merger, conversion or consolidation to which the Security Trustee
shall be a party, or any Person succeeding to all or substantially
all of the corporate trust business of the Security Trustee, shall be
the successor of the Security Trustee hereunder, provided such Person
shall be otherwise qualified and eligible under Clause 8.24, without
the execution or filing of any paper or any further act on the part
of any of the parties hereto.
8.28 Amendments With Consent of the Security Trustee.
The Companies and the Security Trustee, at any time and from time to
time, may enter into any one or more amendments supplemental hereto
or amendments to the Security Documents, all in form satisfactory to
the Security Trustee, for the following purposes:
(a) to correct or amplify the description of any property at any time
subject to the lien of the indenture created by this Agreement and
the Security Documents or to subject to the lien of this Indenture
any additional property; or
(b) to evidence the succession of another Person to any of the
Companies, and the assumption by any such successor of the covenants
of the Companies herein and in the Security Documents contained; or
(c) to add to the covenants of the Companies for the benefit of the
Lenders, or to surrender any right or power or in the Security
Documents herein conferred upon the Companies; or
(d) to correct or supplement any defective or inconsistent provision
herein or to convey, transfer, assign, mortgage or pledge any
property to or with the indenture created by this Agreement and the
Security Documents; or
(e) to cure any ambiguity or to add or modify any other provisions
and agreements in this Agreement or any Security Document in any
manner which will not adversely affect the interests of the Lenders;
or
(f) to provide for the appointment of any successor Security Trustee
hereunder, in accordance with this Clause 8.
8.29 Amendments with Consent of Lenders (and Agent).
With the consent of the Majority Lenders, by Act of such Lenders
delivered to the Companies and the Security Trustee, the Companies
may, and the Security Trustee, subject to Section 8.30 hereof, shall
enter into an amendment supplemental hereto to add any provisions to
or change in any manner or eliminate any of the provisions of this
Agreement or the Security Documents or modify in any manner the
rights of the Lenders under this Agreement or the Security Documents
or to release property from the lien of this Indenture pursuant to
this Agreement and the Security Documents; provided that no such
amendment or waiver shall, without the consent of the all the Lenders
(and, if such amendment or waiver affects the rights and obligations
of the Agent, the Agent),
(a) change the maturity of the principal of, or any installment of
interest on, the Indebtedness or any portion thereof, or reduce the
principal amount thereof or the interest thereon, or change the place
of payment where, or the coin or currency in which, or the interest
thereon, is payable or impair the right to institute suit for the
enforcement of any such payment on or after the maturity thereof, or
(b) create any security interest with respect to the Estate ranking
prior to, or on a parity with, the security interest created by this
Agreement and the Security Documents, or deprive any Lender of the
lien created by this Agreement and the Security Documents on the
Estate, except as expressly permitted herein or in any Security
Document, or
(c) change, modify or amend the definition of Majority Lenders, whose
consent is required for any such amendment or any waiver (of
compliance with certain provisions of this Indenture or of certain
defaults hereunder and their consequences) provided for herein or in
any Security Document, or
(d) modify any of the provisions of this Clause 8.29 or Clause 8.14
hereof, except to increase any percentage herein or therein or to
provide that certain other provisions of this Agreement or other
documents referred to herein cannot be modified or waived without the
consent of the Majority Lenders.
8.30 Documents Affecting Immunity or Indemnity.
If in the opinion of the Security Trustee or the Agent any document
required to be executed pursuant to the terms of Clause 8.29 hereof
affects any interest or right or duty or immunity or indemnity in
favor of the Security Trustee or the Agent under this Agreement or
any Security Document, the Security Trustee or the Agent, as the case
may be, may in its discretion decline to execute such document.
8.31 Execution of Amendments.
In executing, or accepting the additional trusts created by, any
amendment permitted by this Clause 8 or the modifications thereby of
the trusts created hereby, the Security Trustee and/or the Agent
shall be entitled to receive and (subject to Clause 8.17 hereof)
shall be fully protected in relying upon, an opinion of counsel
satisfactory to the Security Trustee or the Agent, as the case may
be, stating that the execution of such amendment is authorized or
permitted by this Agreement.
Promptly after the execution by the Companies and the Security
Trustee of any amendment, the Companies shall duly mail or deliver
otherwise a conformed copy of such amendment to the Agent (if
different from the Security Trustee). The validity of any such
amendment, however, shall not be impaired or affected by failure to
give such notice or by any defect therein.
8.32 Effect of Amendment.
Upon the execution of any amendment hereunder, this Agreement shall
be modified in accordance therewith, and such amendment shall form a
part of this Agreement for all purposes; and every Lender theretofore
or thereafter issued and delivered hereunder shall be bound thereby.
8.33 Indemnification by the Companies.
The Companies hereby jointly and severally covenant and agree that
the Estate shall be free of any lien, claim or encumbrance created by
any Company and not contemplated or permitted by the transactions
described in this Agreement or in the Security Documents arising as a
result of claims against any of the Companies not related to the
ownership of the Vessels, the Aircraft or the Containers and that it
will promptly take such action as may be necessary to duly discharge
any such lien, claim or encumbrance.
8.34 Cash Held by Security Trustee.
(a) All cash held by the Security Trustee hereunder or under any
Security Document shall be held as a special deposit in trust for the
purposes for which held.
(b) Cash held by the Security Trustee hereunder or under any Security
Document (i) need not be segregated; (ii) shall not be invested or
reinvested; and (iii) shall bear interest only as may be agreed by
the Companies and the Security Trustee.
8.35 Distribution of Payments Received After an Event of Default.
All payments received and amounts realized by the Security Trustee
after an Event of Default shall have occurred and be continuing, as
well as all payments or amounts then held or thereafter received by
the Security Trustee as part of the Estate while such Event of
Default shall be continuing, shall be distributed by the Security
Trustee in accordance with the Security Documents.
8.36 Distributions Withheld From the Companies.
Anything in this Agreement to the contrary notwithstanding, after a
director, officer, agent or employee of the Security Trustee shall
have actual knowledge of an Event of Default, all amounts which would
otherwise be distributable to the Companies shall be held by the
Security Trustee as part of the Estate and, if such an Event of
Default shall cease to be continuing before the time such amounts may
become distributable pursuant hereto, such amounts shall be
distributed to the Companies.
9. EVENTS OF DEFAULT
9.01 Each of the following events shall constitute an Event of Default
(whether such event shall occur or come about voluntarily or
involuntarily or by operation of law or regulation or pursuant to, or
in compliance with, any judgment, decree or order of any court or
other authority):
(a) any of the Companies or any other party to any of the
Security Documents (i) fails to pay on the due date any
principal due in respect of the Loan or the Note; or (ii)
default shall be made in the payment of interest due in
respect of the Loan or the Note, when and as the same shall
be due and payable, and such default shall continue in
respect thereof for three (3) Business Days; or (iii)
default shall be made in the payment of any other sum
payable pursuant to this Agreement, the Note or any of the
Security Documents, or any agreement entered into in
connection with this Agreement, the Note or any of the
Security Documents, when and as the same shall be due and
payable, and such default shall continue in respect thereof
for five (5) Business Days; or
(b) any of the Companies breaches any of the Covenants in
Clause 7.03; or
(c) any of the Companies defaults under, or in the due and
punctual observance and performance of, any other material
provision of this Agreement and where, in the reasonable
opinion of the Lenders, such default is capable of remedy,
such default is not remedied or the relevant Company or
Companies shall not have taken and be diligently pursuing
all necessary steps to remedy such default within 15 days
after written notice from the Lenders requesting action to
remedy the same; provided, that notwithstanding the
foregoing, any such default shall be remedied within 45
days after such written notice; or
(d) an Event of Default under any of the Mortgages or any other
of the Security Documents shall have occurred and be
continuing; or
(e) any representation or warranty made by the Companies or any
other party to any of the Security Documents, in or
pursuant to this Agreement or any of the Security Documents
or in any notice, certificate, instrument or statement
contemplated hereby or thereby or made or delivered
pursuant hereto or thereto is, or proves to be, untrue or
incorrect in any material respect when made or deemed to be
repeated; or
(f) (i) any material indebtedness of any of the Companies is
not paid when due or becomes prematurely payable or capable
of being prematurely declared payable as a consequence of a
default with respect thereto or any Security Interest over
any assets of any of the Companies is enforced or becomes
capable of being enforced; or (ii) any of the Companies
defaults in the payment of any obligation, whether direct
or contingent, for borrowed money or the acquisition of
capital equipment on a finance lease or title retention
basis or in the performance or observance of the material
terms of any instrument pursuant to which such obligation
was created or securing such obligation or providing for
any such acquisition or lease or (iii) a default occurs in
respect of any such obligation of any person, firm or
corporation, the payment or performance of which has been
guaranteed, directly or indirectly, by any of the
Companies; or
(g) (i) any preparatory or other steps are taken by any person
to convene a meeting of any of the Companies for the
purposes of considering or passing any resolution or
petition for the winding-up or dissolution of any of the
Companies (other than any Company that does not at that
time own, directly or indirectly, any assets), or (ii) a
petition is presented or an order is made or a resolution
is passed for the winding-up or dissolution of any of the
Companies (other than any Company that does not at that
time own, directly or indirectly, any assets), or (iii) any
of the Companies becomes insolvent or is deemed unable to
pay its debts within the meaning of the appropriate
bankruptcy laws or any of the Companies becomes unable to
pay its debts as they fall due, or (iv) any of the
Companies stops or threatens to stop making payments
generally or declares or threatens to declare a moratorium
or suspension of payments with respect to all or any part
of its debts or enters into any composition, scheme,
compromise or other arrangement with its creditors
generally (or any class of them), or (v) any preparatory or
other steps are taken by any person to appoint an
administrative or other receiver or similar official of any
of the Companies or any of its assets, or (vi) any meeting
of any of the Companies is convened or any other
preparatory or other steps are taken for the purpose of
considering an application for an administration order for
any of the Companies or such an administration order is
made by a court, or (vii) anything analogous to any of the
foregoing events occurs in any applicable jurisdiction; or
(h) a marshall, sheriff or other official takes possession of
the whole or any material part of the assets of any of the
Companies or a distress, execution or other process is
levied or enforced upon or sued out against the whole or a
material part of the assets of any of the Companies and
such taking or process is not released or terminated within
the time provided herein or in the Security Documents; or
(i) there shall occur a material adverse change in the
financial conditions, results of operations or financial
position of any of the Companies taken as a whole or any
event occurs which renders it unlawful or impossible for
(i) any of the Companies to perform or observe, or to
procure the performance or observance of, any of its
material obligations or undertakings contained in this
Agreement, the Note, or any of the Security Documents, or
(ii) the Lenders to exercise any of the material rights and
remedies conferred on the Lenders under this Agreement or
any of the Security Documents; or
(j) any authorization, approval, consent, license, exemption,
filing or registration or other requirement necessary to
enable any of the Companies to comply with any of its
material obligations or undertakings contained in this
Agreement, the Note or any of the Security Documents is
materially modified, revoked or withheld or does not remain
in full force and effect; or
(k) without the prior consent of the Agent, FSI shall (i) be
removed or resign from its position or otherwise fail to
continue as general partner of EGF V or (ii) sell,
transfer, exchange or otherwise dispose of all or any
portion of its general partnership interest in EGF V; or
(l) without the prior consent of the Agent, any of TVI, CVI or
COVI shall (i) be removed or resign from its position or
otherwise fail to continue as general partner of each of
Trader, California or Columbus, respectively or (ii) sell,
transfer, exchange or otherwise dispose of all or any
portion of its general partnership interest in each of
Trader, California or Columbus, respectively; or
(m) any of the Vessels or Aircraft shall become a Total Loss
and either (x) the Agent does not receive within 120 days
(or such longer period as the Agent may agree) following
the occurrence of such Total Loss, insurance proceeds
arising from such Total Loss in an amount not less than the
amount for which such Vessel or Aircraft, as the case may
be, is required to be insured under the relevant Mortgage
as at the date of the event or circumstances giving rise to
such Total Loss or any of the insurers shall disclaim
coverage with respect to such Total Loss or (y) the
Companies do not provide the Lenders with, or procure the
provision to the Lenders of, additional Pledged Equipment
in accordance with Clause 7.03(c)(i) of this Agreement. For
the purpose of this Clause 9.01(m), (i) an actual Total
Loss of such Vessel or Aircraft, as the case may be, shall
be deemed to have occurred at the date and time when such
Vessel or Aircraft, as the case may be, was lost but if the
date of the loss is unknown the actual Total Loss shall be
deemed to have occurred on the date on which such Vessel or
Aircraft, as the case may be, was last reported, (ii) a
constructive Total Loss shall be deemed to have occurred at
the date and time at which notice of abandonment of such
Vessel or Aircraft, as the case may be, is given to the
insurers of such Vessel or Aircraft and (iii) a
compromised, agreed or arranged Total Loss shall be deemed
to have occurred on the date of the relevant compromise,
agreement or arrangement; or
(n) for any reason whatsoever, any of the Vessels or Aircraft
ceases to be managed by the Approved Manager, in either
case on terms substantially in accordance with those
approved by the Agent; or
(o) the security constituted by any of the Security Documents
is materially imperilled or jeopardised; or
(p) this Agreement, the Note or any of the other Security
Documents ceases at any time to be the legal, valid and
binding obligations of any of the Companies or any other
party thereto (other than the Lenders); or
(q) any encumbrance other than one permitted hereunder or under
the Security Documents shall be created over any of the
assets or property of any of the Companies; or
(r) a final judgment against any of the Companies in an amount
greater than or equal to One Million Dollars ($1,000,000)
shall be rendered and, within thirty (30) days after entry
thereof, such judgment shall not have been discharged or
execution stayed or, within thirty days after the
expiration of any such stay, such judgment shall not have
been discharged.
9.02 Upon the occurrence of any other Event of Default:
(a) the Agent, by notice to the Companies, may terminate the
obligations of the Lenders under this Agreement, whereupon
the same shall be so terminated; and/or
(b) if it is an Event of Default specified in paragraph
(g)(iii)-(vi) of Clause 9.01, the Lender's obligations
hereunder shall automatically terminate and the unpaid
balance of the Loan and accrued interest thereon and all
other amounts payable under this Agreement, the Notes and
the Security Documents shall be immediately due and
payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived; and/or
(c) the Agent, by notice to the Companies, may declare the
Loan, accrued interest thereon and all other amounts
payable under this Agreement, the Note and the Security
Documents either immediately due and payable or payable on
demand, whereupon the Loan, accrued interest thereon and
all other amounts payable under this Agreement, the Note
and the Security Documents shall become immediately due and
payable or (as the case may be) payable on demand by the
Agent and in such event the Agent may also by notice to the
Companies require that the Companies refrain from declaring
or paying any dividend or making any other distribution of
assets or profits to any partner or shareholder; and/or
(d) the Agent may take any other action, exercise any other
right or pursue any other remedy conferred upon the Agent
by this Agreement and/or by all or any of the Security
Documents or by any applicable law or regulation as a
consequence of such Event of Default.
9.03 Upon the occurrence of an Event of Default, the Agent may apply all
moneys received by the Agent (including proceeds realized on the sale
or liquidation of any collateral security, insurance proceeds and
other moneys of any of the Companies or for the account of any of the
Companies the application of which has not elsewhere herein or in the
Security Documents been specifically provided for) as follows:
FIRST, to the payment or reimbursement of all the
reasonable costs of the Agent incurred or made in the
exercise, protection or pursuance by the Agent of its
rights or remedies under this Agreement, the Note or any
Security Document including, but not limited to, the
expenses of any sale or of any taking, attorneys' fees and
court costs, together with interest thereon as provided
herein and to provide adequate indemnity to the Agent
against security interests, liens, charges, encumbrances or
rights claiming priority over or equality with the Security
Interest or liens created under the Security Documents;
SECOND, to the payment of accrued interest on and principal
of the Loan and the Note whether due or not;
THIRD, to the payment of all other sums payable by the
Companies to the Lenders whether under this Agreement or
otherwise, including without limitation sums payable under
any Interest Rate Agreements between any of the Companies
and the Lenders, whether due or not, together with interest
thereon as provided herein and of all damages, liquidated
or otherwise; and
FOURTH, to the payment of any surplus thereafter remaining
to the Borrowers or to whomsoever may be entitled thereto.
9.04 the Agent may exercise any right of counterclaim, setoff, banker's
lien or otherwise which it may have with respect to moneys or other
property of the Companies held by the Agent.
9.05 the Agent may to the extent permitted by applicable law bring suit at
law, in equity, in admiralty or in any other appropriate proceeding
or forum for any purpose including, but not limited to (i) for the
specific performance of any covenant or agreement contained in any
Security Document; (ii) for any injunction against a violation of any
of the terms thereof; (iii) in aid of the exercise of any power
granted thereby or by law; or (iv) to recover judgment for any and
all amounts due on the Loan or the Note or under any Security
Document.
10. FEES AND EXPENSES
10.01 The Companies shall jointly and severally pay to the Agent:
(a) an amendment fee as separately agreed between the Companies
and CBK upon execution and delivery by the Agent of this
Agreement.
(b) an annual agency fee of $40,000 per annum payable quarterly
in advance.
10.02 The Companies shall reimburse the Agent promptly on demand for all
reasonable costs, fees and expenses (including, but not limited to,
legal fees and expenses and Valuations as provided herein) incurred
by the Agent or the Lenders in connection with:
<PAGE>
(a) the negotiation, preparation and execution of this
Agreement and the Security Documents; and/or
(b) the maintaining, preserving or enforcing of, or attempting
to preserve or enforce, any of their rights under this
Agreement and the Security Documents (or any of them);
and/or
(c) any variation of, or amendment or supplement to, any of the
terms of this Agreement, the Note and the Security
Documents (or any of them); and/or
(d) any consent or waiver required from the Agent or the
Lenders arising from this Agreement, the Note and the
Security Documents (or any of them), and in each case,
regardless of whether the same is actually implemented,
completed or granted, as the case may be.
10.03 The Companies shall jointly and severally pay promptly all stamp,
documentary and other like duties and Taxes to which this Agreement,
the Note and the Security Documents (or any of them) may be subject
or give rise and shall indemnify the Agent and the Lenders on demand
against any and all liabilities with respect to or resulting from any
delay or omission on the part of the Companies to pay any such duties
or Taxes.
11. PAYMENTS AND CALCULATIONS
11.01 All payments to be made by the Companies to the Agent for the Lenders
under this Agreement, the Note and any of the Security Documents to
which the Companies are a party shall be made by not later than 11.00
a.m. (New York City time) on the due date in same day Dollar funds
settled through the New York Interbank Payments System (or in such
other Dollar funds and/or settled in such other manner as the Agent
shall specify as being customary at the time for the settlement of
transactions of the type contemplated by this Agreement) to the
Agent, or to such other account with such other bank as the Agent
shall from time to time notify to the Companies.
11.02 If any sum payable by the Companies under this Agreement, the Note or
any of the Security Documents to which any of the Companies is a
party shall become due on a day which is not a Business Day, the due
date therefor shall be extended to the next succeeding Business Day,
unless such Business Day falls in the next calendar month, in which
event such due date shall be the immediately preceding Business Day,
and interest shall be payable on such sum during any such extension
at the rate payable on the original due date.
11.03 The Agent shall maintain accounts showing the amounts from time to
time lent by the Lenders under this Agreement, and all other sums
owing by the Companies under this Agreement, the Note and the
Security Documents and all payments in respect thereof made by the
Companies from time to time. Such accounts, in the absence of
manifest error, shall be conclusive evidence as to any amounts from
time to time owing by the Companies under this Agreement, the Note
and the Security Documents.
11.04 All payments of interest, commitment fees and any other payments
hereunder of an annual or periodic nature shall accrue from
day-to-day and shall be calculated on the basis of the actual number
of days elapsed in a 360 day year.
12. NO COUNTERCLAIM, TAXATION
12.01 All payments to be made by or on behalf of the Companies to the Agent
pursuant to this Agreement, the Note and any of the Security
Documents to which any of the Companies is a party shall be made (a)
without set-off, counterclaim or condition whatsoever and (b) free
and clear of, and without deduction for or on account of, any present
or future Taxes unless the Company are required by law or regulation
to make any such payment subject to any Taxes.
<PAGE>
12.02 In the event that any of the Companies is required by any law or
regulation to make any deduction or withholding on account of any
Taxes which arise as a consequence of any payment due under this
Agreement, the Note or any of the Security Documents to which any of
the Companies is a party, then:
(a) the Companies shall notify the Agent promptly as soon as
they become aware of such requirement;
(b) the Companies shall remit promptly the amount of such Taxes
to the appropriate taxation authority, and in any event
prior to the date on which penalties attach thereto;
(c) such payment shall be increased by such amount as may be
necessary to ensure that the Agent receives a net amount
which, after deducting or withholding such Taxes, is equal
to the full amount which the Agent would have received had
such payment not been subject to such Taxes; and
(d) the Companies shall indemnify the Lenders and the Agent
against any liability of the Lenders for such Taxes.
12.03 Not later than thirty days after each deduction or withholding of any
such Taxes, the Companies shall forward to the Lender evidence
satisfactory to the Agent that such Taxes have been remitted to the
appropriate taxation authority.
13. CHANGES IN CIRCUMSTANCES
13.01 In the event that by reason of:
(a) the introduction of, or any change in, any applicable law
or regulation, or any change in the interpretation or
application thereof; or
(b) compliance by the Lenders with any directive, request or
requirement (whether or not having the force of law) of any
central bank, government, or analogous monetary authority,
it becomes unlawful, prohibited or contrary to such directive,
request or requirement for the Lenders to maintain or give effect to
any of their obligations as contemplated by this Agreement, then the
Agent shall notify the Borrowers thereof and, if the Loan or any
portion thereof has been advanced by the Lenders, the Borrowers shall
consult with Agent to determine ways to avoid the effect of such
measures but if no such mechanism can be determined the Borrowers
shall prepay the Loan forthwith in accordance with the terms of this
Agreement and the obligations of the Lenders shall thereupon
terminate.
13.02 If the Agent shall reasonably conclude and certify to the Companies
that:
(a) the effect of any applicable law, regulation or regulatory
requirements, or the interpretation or application thereof,
or any change therein (including the imposition of Taxes on
payments hereunder, other than Taxes on the overall net
income of the Lenders); or
(b) the effect of complying with any applicable directive,
request or requirement (whether or not having the force of
law) of any central bank, governmental or analogous
monetary authority (including any type of liquidity, stock
or capital adequacy controls or other banking or monetary
controls or requirements which affects the manner in which
the Lenders allocate capital resources to their obligations
hereunder),
is to:
(i) increase the cost to the Lenders of making, funding or
maintaining their commitment hereunder or the Loan or being
a party to this Agreement; or
(ii) reduce the amount of any payment to the Agent for the
Lenders under this Agreement or the effective return to the
Lenders on their capital under this Agreement,
then, and in any such case, the Agent shall notify the Companies as
soon as practicable thereof and the Companies shall from time to
time, jointly and severally, pay to the Agent on demand such amounts
as the Agent shall reasonably specify to be necessary to compensate
the Lenders for such increased cost or such reduction.
13.03 If and each time that prior to any Interest Period the Agent shall
have determined in good faith that, by reason of circumstances (the
"Circumstances") affecting the London Interbank Dollar Market,
either:
(a) adequate and fair means do not exist for ascertaining the
rate of interest applicable to the Loan (or any part
thereof) during such Interest Period pursuant to Clause 3
hereof; or
(b) Dollars are not available to the Lender in order to fund
the Loan (or any part thereof) during such Interest Period,
then the Agent shall as soon as practicable give notice of such
determination to the Companies and, if such notice shall be given
prior to the advance of the Loan (or the relevant part thereof) by
the Lender, the right of the Borrowers to borrow hereunder shall be
suspended during the continuance of the Circumstances, provided,
however, that during the thirty days following such notice, the
Companies and the Agent shall negotiate in good faith in order to
arrive at an alternative interest rate or (as the case may be) an
alternative basis for the Lenders to fund or continue to fund the
Loan (or the relevant part thereof) during such Interest Period. If
within such thirty day period an alternative interest rate or (as the
case may be) an alternative basis to fund or to continue to fund the
Loan (or the relevant part thereof) is agreed upon, such alternative
interest rate or (as the case may be) such alternative basis shall
take effect in accordance with its terms. If the Companies and the
Agent fail to agree on such an alternative interest rate or (as the
case may be) alternative basis within such thirty day period and the
Circumstances are continuing at the end of such thirty day period,
then the Agent shall set an interest period and interest rate
representing the cost to the Lender of funding the Loan plus the
Margin in Dollars. If the Circumstances shall continue at the end of
such interest period, the procedure in this Clause 13.03 shall be
repeated. If the Companies shall not agree with such rate then the
Companies shall give not less than 15 Business Days' irrevocable
notice of prepayment to the Lender in which case the commitment of
the Lenders hereunder for the Loan (or the relevant part thereof)
shall thereupon be canceled and, if the Loan (or the relevant part
thereof) is outstanding, the Borrowers shall, jointly and severally,
prepay the Loan (or the relevant part thereof) on the first Business
Day after such period in accordance with the terms of this Agreement
and the obligations of the Lender shall thereupon terminate to such
extent.
14. FUNDING LOSSES
14.01 The Companies shall, jointly and severally, compensate the Lenders,
upon its written certification (which certification shall set forth
in reasonable detail the basis for demanding such amounts and the
calculation thereof and shall, absent manifest error, be final and
conclusive and binding upon all parties hereto), for all reasonable
costs, losses, expenses and liabilities (including, without
limitation, any loss, interest, expense, penalty or other amounts
paid or incurred by the Lenders arising from the liquidation or
re-employment of deposits or funds required by it to make or carry
the Loan), which the Lenders sustain:
(a) if any repayment or prepayment (including, without
limitation, payment after acceleration) of the Loan occurs
on a date which is not the last day of an Interest Period
applicable thereto;
(b) as the result of any default by any of the Borrowers in
repaying the Loan or any other amounts arising from the
Loan when required by the terms of this Agreement; or
(c) as the result of the occurrence and/or continuance of any
Event of Default (or event which, with the giving of notice
and/or lapse of time or other applicable condition, might
constitute an Event of Default) and/or the acceleration of
repayment of the Loan pursuant to Clause 9.02.
14.02 If, under any applicable law or regulation, and whether pursuant to a
judgment being made or registered against the Companies (or any of
them) or the liquidation of the Companies (or any of them) or for any
other reason, any payment due under or in connection with this
Agreement is made or fails to be satisfied in a currency (the
"payment currency") other than the currency in which such payment is
due under or in connection with this Agreement (the "contractual
currency"), then to the extent that the amount of such payment
actually received by the Agent, when converted into the contractual
currency at the rate of exchange, falls short of the amount due under
or in connection with this Agreement, the Companies, jointly and
severally and as a separate and independent obligation, shall
indemnify and hold harmless the Lenders against the amount of such
shortfall. For the purposes of this Clause 14.02, "rate of exchange"
means the rate at which the Lenders are able on or about the date of
such payment to purchase the contractual currency with the payment
currency and shall take into account any premium and other costs of
exchange with respect thereto.
15. SECURITY
15.01 The Companies hereby undertake with the Agent and the Lenders to
execute, deliver and perform the provisions of, and procure the
execution, delivery and performance by the other parties thereto
(other than the Agent or the Lenders) of, the Security Documents and
the provisions thereof at the times and in the manner provided in
this Agreement and in the Security Documents so that all such
documents shall both at the date of such execution and delivery and
at all times during the Security Period be valid and binding
obligations of the Companies and such other parties enforceable in
accordance with their respective terms.
16. COMMUNICATIONS
16.01 Except as otherwise provided for in this Agreement, all notices or
other communications arising from this Agreement to any party hereto
shall be in writing and shall be deemed to be duly given or made when
delivered (in the case of personal delivery or letter) and when
dispatched (in the case of telex or telefax) to such party addressed
to it at the address appearing below (or at such address as such
party may hereafter specify for such purpose to the other by notice
in writing):
(a) in the case of the Companies:
PLM Equipment Growth Fund V
c/o PLM Financial Services, Inc.
One Market
Steuart Tower, Suite 800
San Francisco, CA 94105
Attn: Corporate Controller and General Counsel
Telex: 34430
Telefax: (415) 905-7256
(b) in the case of the Lenders:
At the respective addresses set forth on Schedule 1 as from
time to time amended
(c) in the case of the Agent and Security Trustee:
Christiania Bank og Kreditkasse,
New York Branch
11 West 42nd Street, 7th Floor
New York, New York 10036
Attn: Loan Administration
Telex: 824-277 CBNY UF
Telefax: 212-827-4888
A written notice includes a notice by telex or telefax. A notice or
other communication received on a non-working day or after business
hours in the place of receipt, shall be deemed to be served on the
next following working day in such place.
17. ASSIGNMENTS
17.01 This Agreement shall be binding upon and inure to the benefit of the
Agent, the Lenders, the Companies and their respective successors and
permitted assigns.
17.02 The Companies may not assign or transfer all or any part of their
rights and/or obligations under this Agreement.
17.03 The Lenders may assign, transfer, participate or syndicate (with the
Agent acting as agent), at no cost to the Companies, all or any part
of Lenders' rights or obligations under this Agreement, the Note and
the Security Documents or change its lending office, in any such
case, with the prior consent of EGF V, which consent shall not be
unreasonably withheld. Each such Lender shall notify the Companies
promptly following any such assignment or transfer or change of
lending office.
17.04 The Agent may disclose to any potential assignee or transferee of all
or any part of any Lender's rights or obligations under this
Agreement, the Note and the Security Documents or to any such
participant or any other person who may otherwise enter into
contractual relations with the Agent or any such Lender in relation
to this Agreement, the Note and the Security Documents, information
about this Agreement, the Note and/or the Security Documents (or any
of them) and the Companies and/or its related entities with the prior
consent of EGF V, which consent shall not be unreasonably withheld,
and on a confidential basis with respect to any nonpublic
information.
18. MISCELLANEOUS
18.01 No delay or omission on the part of the Agent or the Lenders in
exercising any right, power or remedy under this Agreement shall
impair such right, power or remedy or be construed as a waiver
thereof nor shall any single or partial exercise of any such right,
power or remedy preclude any further exercise thereof or the exercise
of any other right, power or remedy. The rights, powers and remedies
herein provided are cumulative and not exclusive of any rights,
powers and remedies provided by law and may be exercised from time to
time and as often as the Agent deems expedient.
18.02 Except as provided in, and subject to Clause 8, no waiver of any
provision of this Agreement or the Notes, or any consent or approval
to any departure by the Companies therefrom, shall be effective
unless the same shall be given in writing and signed by the Majority
Lenders and then only for the purpose and upon the terms for which it
is given.
18.03 If at any time any one or more of the provisions in this Agreement is
or becomes invalid, illegal or unenforceable in any respect under any
law or regulation, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be in any way
affected or impaired thereby.
18.04 The obligations of the Companies under this Agreement shall remain in
full force and effect until the Lenders shall have received all
amounts due or to become due to it hereunder and under the Security
Documents in accordance with the terms hereof and thereof. Without
prejudice to the foregoing, the obligations of the Companies under
Clauses 10, 12, 13.02 and 14 shall survive the repayment of the Loan.
18.05 The Clause and subclause headings herein and the Table of Contents
are for convenience only and shall not affect the construction
hereof.
19. LAW AND JURISDICTION
19.01 THIS AGREEMENT, THE NOTE AND THE SECURITY DOCUMENTS SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK. EACH OF THE PARTIES HERETO, TO THE MAXIMUM EXTENT IT CAN
LEGALLY DO SO, HEREBY WAIVES ITS RIGHT TO A JURY TRIAL IN CONNECTION
WITH THIS AGREEMENT, THE NOTE AND THE SECURITY DOCUMENTS.
19.02 The Companies hereby irrevocably submit to the jurisdiction of the
courts of the State of New York and of the United States District
Court for the Southern District of New York in any action or
proceeding brought against any of them by the Lenders, the Agent or
the Security Trustee under this Agreement or any instrument delivered
hereunder and hereby irrevocably appoint CT Corporation System with a
place of business at 1633 Broadway, New York, NY 10019, as their
attorney-in-fact and agent for service of summons or other legal
process thereon, which service may be made by serving a copy of any
summons or other legal process in any such action or proceeding on
such agent and such agent is hereby authorized and directed to accept
by and on behalf of the Companies service of summons and other legal
process of any such action or proceeding against the Companies. The
service, as herein provided, of such summons or other legal process
in any such action or proceeding shall be deemed personal service and
accepted by the Companies as such, and shall be legal and binding
upon the Companies for all the purposes of any such action or
proceeding. Final judgment (a certified or exemplified copy of which
shall be conclusive evidence of the fact and of the amount of any
indebtedness of the Companies to the Lenders) against the Companies
in any such legal action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment. The
Companies further covenant and agree that so long as the Companies
shall be obligated to the Lender hereunder the Companies shall
maintain a duly appointed agent for the service of summons or other
legal process in New York, New York, for purposes of any legal action
or proceeding brought by the Lender hereunder. The Companies will
advise the Agent promptly of any change of address of the foregoing
agent or of the substitution of another agent therefor. In the event
that the foregoing agent or any other agent appointed by the
Companies shall not be conveniently available for such service or if
the Companies fail to maintain an agent as provided herein, the
Companies hereby irrevocably appoint the person who then is the
Secretary of State of New York as such attorney-in-fact and agent.
Each Company will advise the foregoing agent of the appointment made
hereby but failure so to advise shall not affect the appointment made
hereby. Notwithstanding anything herein to the contrary, the Agent
may bring any legal action or proceeding in any other appropriate
jurisdiction.
20. RIGHTS OF CONTRIBUTION
20.01 To provide for just and equitable contribution among the Companies,
the Companies hereby agree, as between themselves, that if any
payment is made by a Company (a "Funding Company") under this
Agreement, such Funding Company shall be entitled to a contribution
from the other Companies for such payment, such contribution to be
made in the manner and to the extent set forth in this Clause 20. Any
amount payable as a contribution hereunder shall be determined as of
the date on which the related payment is made by a Funding Company.
Each other Company shall be liable to such Funding Company in an
aggregate amount, subject to Clause 20.02 hereof, equal to (i) the
ratio of (x) the Net Assets of such Company to (y) the aggregate Net
Assets of all of the Companies multiplied by (ii) the amount of such
payment made by, or on account of, such Funding Company. For purposes
of any calculations pursuant to this Clause 20, "Net Assets" for any
Company shall mean an amount equal to the excess of the fair saleable
value of the assets of such Company as at such date (without taking
into account the rights of such Company under this Clause 20), and
excluding the value of any shares of stock owned by such Company in
any other Company on such date over the amount that would be required
to pay the probable liabilities of such Company determined as at such
date (excluding the obligations of such Company under this Clause 20)
on all of its debts. Any contribution hereunder may be made by
adjustment to the intercompany accounts maintained by EGF V with
respect to each Company.
20.02 The Companies acknowledge that the right of contribution hereunder
shall constitute an asset of the party to which such contribution is
owing.
21. NONRECOURSE
21.01 Notwithstanding anything to the contrary contained herein, the
Lenders agree that no judgment based on each of the Note, this
Agreement or the Security Documents shall be sought or obtained
against FSI individually and that any judgment against the Companies,
and the sole recourse of the Lenders for a default hereunder, shall
be limited to the assets of the Companies. This limitation of
liability shall not apply to any damages sustained by the Lenders by
reason of fraud in the making of the Loan by the Companies or FSI.
22. RELEASE OF CERTAIN COMPANIES
22.01 The Lenders, the Agent and the Security Trustee hereby agree that
each of Balboa, BMI, Divisadero, DVI, Ashbury and ASI is hereby
released from its obligations under this Agreement, the Notes and the
Security Documents to which it is a party.
<PAGE>
IN WITNESS whereof the parties hereto have entered into this Agreement on the
date first above written.
PLM EQUIPMENT GROWTH FUND V by its General Partner, PLM
Financial Services, Inc.
By:____________________________
Its:
TRADER VESSEL LIMITED PARTNERSHIP by its General Partner,
Trader Vessel Inc.
By:____________________________
Its:
TRADER VESSEL INC.
By:____________________________
Its:
CALIFORNIA VESSEL LIMITED PARTNERSHIP by its General
Partner, California Vessel Inc.
By:____________________________
Its:
CALIFORNIA VESSEL INC.
By:____________________________
Its:
<PAGE>
COLUMBUS VESSEL LIMITED PARTNERSHIP by its General Partner,
Columbus Vessel Inc.
By:____________________________
Its:
COLUMBUS VESSEL INC.
By:____________________________
Its:
REDCAR INVESTMENTS LIMITED
By:____________________________
Its:
CHRISTIANIA BANK OG KREDITKASSE, as Lender
By:____________________________
Its:
By:____________________________
Its:
<PAGE>
ING LEASE STRUCTURED FINANCE B.V., as Lender
By:____________________________
Its:
CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH as Agent
and Security Trustee
By:____________________________
Its:
By:____________________________
Its:
<PAGE>
SCHEDULE 1
The Lenders
Name Commitment
Christiania Bank og Kreditkasse $25,000,000
New York Branch
11 West 42nd Street, 7th Floor
New York, New York 10036
ING Lease Structured Finance B.V. $13,000,000
Karspeldreef 14
Amsterdam - Zuidoost
The Netherlands
<PAGE>
SCHEDULE 2
Liens
1. Liens in favor of PLM Worldwide Leasing Corp. in respect of the
Qualified Assets.
<PAGE>
SCHEDULE 3
Approved Appraisers
SECOND AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
AMONG
PLM EQUIPMENT GROWTH FUND III
PLM EQUIPMENT GROWTH FUND IV
PLM EQUIPMENT GROWTH FUND V
PLM EQUIPMENT GROWTH FUND VI
PLM EQUIPMENT GROWTH & INCOME FUND VII
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
PLM FINANCIAL SERVICES, INC.
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
AND SUCH OTHER FINANCIAL INSTITUTIONS
AS SHALL BECOME LENDERS HEREUNDER
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
AS AGENT
May 31, 1996
<PAGE>
<PAGE>
WAREHOUSING CREDIT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS..............................................2
1.1 Defined Terms............................................2
1.2 Accounting Terms........................................18
1.3 Other Terms.............................................18
1.4 Schedules And Exhibits..................................19
SECTION 2. AMOUNT AND TERMS OF CREDIT..............................19
2.1 Commitment To Lend......................................19
2.1.1 Revolving Facility...........................19
(a) Facility Commitments..................19
(b) Each Loan.............................20
2.1.2 Funding......................................21
2.1.3 Utilization Of The Loans.....................21
2.2 Repayment And Prepayment................................21
2.2.1 Repayment....................................21
2.2.2 Voluntary Prepayment.........................21
2.2.3 Mandatory Prepayments........................22
2.3 Calculation Of Interest; Post-Maturity Interest.........22
2.4 Manner Of Payments......................................23
2.5 Payment On Non-Business Days............................23
2.6 Application Of Payments.................................23
2.7 Procedure For The Borrowing Of Loans....................23
2.7.1 Notice Of Borrowing..........................23
2.7.2 Unavailability Of LIBOR Loans................24
2.8 Conversion And Continuation Elections...................24
2.8.1 Election.....................................24
2.8.2 Notice Of Conversion.........................24
2.8.3 Interest Period..............................25
2.8.4 Unavailability Of LIBOR Loans................25
2.9 Discretion Of Lenders As To Manner Of Funding...........25
2.10 Distribution Of Payments................................25
2.11 Agent's Right To Assume Funds Available For Advances....25
2.12 Agent's Right To Assume Payments Will Be Made By Borrower..26
2.13 Capital Requirements....................................26
2.14 Taxes...................................................27
2.14.1 No Deductions................................27
2.14.2 Miscellaneous Taxes..........................27
2.14.3 Indemnity....................................27
2.14.4 Required Deductions..........................27
2.14.5 Evidence of Payment..........................27
2.14.6 Foreign Persons..............................28
2.14.7 Income Taxes.................................28
2.14.8 Reimbursement Of Costs.......................29
2.14.9 Jurisdiction.................................29
2.15 Illegality..............................................29
2.15.1 LIBOR Loans..................................29
2.15.2 Prepayment...................................29
2.15.3 Prime Rate Borrowing.........................30
2.16 Increased Costs.........................................30
2.17 Inability To Determine Rates............................30
2.18 Prepayment Of LIBOR Loans...............................30
SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND
THE MAKING OF LOANS............... 31
3.1 Effectiveness of This Agreement.........................31
3.1.1 Partnership, Company And Corporate Documents..31
3.1.2 Notes........................................31
3.1.3 Opinion Of Counsel...........................31
3.1.4 Reaffirmation of Guaranty....................31
3.1.5 TEC AcquiSub Amendment.......................31
3.1.6 AFG Agreement................................31
3.1.7 Bringdown Certificate........................31
3.1.8 Fees.........................................32
3.1.9 Other Documents..............................32
3.2 All Loans...............................................32
3.2.1 Notice Of Borrowing..........................32
3.2.2 No Event Of Default..........................32
3.2.3 Representations And Warranties...............32
3.2.4 Insurance....................................32
3.2.5 Other Instruments............................32
3.3 Further Conditions To All Loans.........................32
3.3.1 General Partner Or Manager...................32
3.3.2 Removal Of General Partner Or Manager........33
3.3.3 Purchaser....................................33
SECTION 4. BORROWERS' AND FSI'S REPRESENTATIONS AND WARRANTIES.....33
4.1 General Representations And Warranties..................33
4.1.1 Existence And Power..........................33
4.1.2 Loan Documents And Notes Authorized; Binding
Obligations........................... 33
4.1.3 No Conflict; Legal Compliance................34
4.1.4 Financial Condition..........................34
4.1.5 Executive Offices............................34
4.1.6 Litigation...................................34
4.1.7 Material Contracts...........................35
4.1.8 Consents And Approvals.......................35
4.1.9 Other Agreements.............................35
4.1.10 Employment And Labor Agreements..............35
4.1.11 ERISA........................................35
4.1.12 Labor Matters................................36
4.1.13 Margin Regulations...........................36
4.1.14 Taxes........................................36
4.1.15 Environmental Quality........................36
4.1.16 Trademarks, Patents, Copyrights, Franchises And
Licenses........................... 37
4.1.17 Full Disclosure..............................37
4.1.18 Other Regulations............................37
4.1.19 Solvency.....................................38
4.2 Representations And Warranties At Time Of First Advance..38
4.2.1 Power And Authority..........................38
4.2.2 No Conflict..................................38
4.2.3 Consents And Approvals.......................38
4.3 Survival Of Representations And Warranties..............38
SECTION 5. BORROWERS' AND FSI'S AFFIRMATIVE COVENANTS..............38
5.1 Records And Reports.....................................39
5.1.1 Quarterly Statements.........................39
5.1.2 Annual Statements............................39
5.1.3 Borrowing Base Certificate...................39
5.1.4 Compliance Certificate.......................40
5.1.5 Reports......................................40
5.1.6 Insurance Reports............................40
5.1.7 Certificate Of Responsible Officer...........40
5.1.8 Employee Benefit Plans.......................40
5.1.9 ERISA Notices................................41
5.1.10 Pension Plans................................41
5.1.11 SEC Reports..................................41
5.1.12 Tax Returns..................................41
5.1.13 Additional Information.......................41
5.2 Existence; Compliance With Law..........................42
5.3 Insurance...............................................42
5.4 Taxes And Other Liabilities.............................42
5.5 Inspection Rights; Assistance...........................43
5.6 Maintenance Of Facilities; Modifications................43
5.6.1 Maintenance Of Facilities....................43
5.6.2 Certain Modifications To The Equipment.......43
5.7 Supplemental Disclosure.................................43
5.8 Further Assurances......................................43
5.9 Lockbox.................................................44
5.10 Environmental Laws......................................44
SECTION 6. BORROWER'S AND FSI'S NEGATIVE COVENANTS.................44
6.1 Liens; Negative Pledges; And Encumbrances...............44
6.2 Acquisitions............................................45
6.3 Limitations On Indebtedness.............................45
6.4 Use Of Proceeds.........................................46
6.5 Disposition Of Assets...................................46
6.6 Restriction On Fundamental Changes......................46
6.7 Transactions With Affiliates............................47
6.8 Maintenance Of Business.................................47
6.9 No Distributions........................................47
6.10 Events Of Default.......................................47
6.11 ERISA...................................................47
6.12 No Use Of Any Lender's Name.............................47
6.13 Certain Accounting Changes..............................47
6.14 Amendments Of Limited Partnership Or Operating Agreements..48
SECTION 7. FINANCIAL COVENANTS OF BORROWER AND FSI.................48
7.1 Maximum Funded Debt Ratio...............................48
7.2 Minimum Debt Service Ratio..............................48
7.3 Minimum Consolidated Tangible Net Worth.................48
7.4 Cash Balances...........................................48
SECTION 8. EVENTS OF DEFAULT AND REMEDIES..........................48
8.1 Events Of Default.......................................48
8.1.1 Failure To Make Payments.....................48
8.1.2 Other Agreements.............................49
8.1.3 Breach Of Covenants..........................49
8.1.4 Breach Of Representations Or Warranties......49
8.1.5 Failure To Cure..............................49
8.1.6 Insolvency...................................50
8.1.7 Bankruptcy Proceedings.......................50
8.1.8 Material Adverse Effect......................50
8.1.9 Judgments, Writs And Attachments.............50
8.1.10 Legal Obligations............................51
8.1.11 TEC AcquiSub Agreement.......................51
8.1.12 AFG Agreement................................51
8.1.13 Change Of General Partner Or Manager.........51
8.1.14 Change Of Purchaser..........................51
8.1.15 Criminal Proceedings.........................51
8.1.16 Action By Governmental Authority.............52
8.1.17 Governmental Decrees.........................52
8.2 Waiver Of Default.......................................52
8.3 Remedies................................................52
8.4 Set-Off.................................................53
8.5 Rights And Remedies Cumulative..........................54
SECTION 9. AGENT...................................................54
9.1 Appointment.............................................54
9.2 Delegation Of Duties....................................54
9.3 Exculpatory Provisions..................................55
9.4 Reliance By Agent.......................................55
9.5 Notice Of Default.......................................55
9.6 Non-Reliance On Agent And Other Lenders.................56
9.7 Indemnification.........................................56
9.8 Agent In Its Individual Capacity........................56
9.9 Resignation And Appointment Of Successor Agent..........57
SECTION 10. EXPENSES AND INDEMNITIES................................57
10.1 Expenses................................................57
10.2 Indemnification.........................................58
10.2.1 General Indemnity............................58
10.2.2 Environmental Indemnity......................58
10.2.3 Survival; Defense............................59
SECTION 11. MISCELLANEOUS...........................................59
11.1 Survival................................................59
11.2 No Waiver By Agent Or Lenders...........................59
11.3 Notices.................................................59
11.4 Headings................................................60
11.5 Severability............................................60
11.6 Entire Agreement; Construction; Amendments And Waivers..60
11.7 Reliance By Lenders.....................................61
11.8 Marshalling; Payments Set Aside.........................61
11.9 No Set-Offs By Borrowers................................61
11.10 Binding Effect, Assignment..............................61
11.11 Counterparts............................................63
11.12 Equitable Relief........................................63
11.13 Written Notice Of Claims; Claims Bar....................63
11.14 Waiver Of Punitive Damages..............................63
11.15 Relationship Of Parties.................................63
11.16 Obligations Of Each Borrower............................64
11.17 Co-Borrower Waivers.....................................65
11.18 Governing Law...........................................66
11.19 Consent To Jurisdiction.................................66
11.20 No Novation.............................................66
11.21 Waiver Of Jury Trial....................................66
<PAGE>
INDEX OF EXHIBITS
Exhibit A-1 Form of Revolving Promissory Note - EGF III
Exhibit A-2 Form of Revolving Promissory Note - EGF IV
Exhibit A-3 Form of Revolving Promissory Note - EGF V
Exhibit A-4 Form of Revolving Promissory Note - EGF VI
Exhibit A-5 Form of Revolving Promissory Note - EGF VII
Exhibit A-6 Form of Revolving Promissory Note - Income Fund I
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Reaffirmation of Guaranty
Exhibit D Form of Opinion of Counsel (Stephen Peary)
Exhibit E Form of Compliance Certificate
Exhibit F Form of Lockbox Agreement
Exhibit G Form of Notice of Borrowing
Exhibit H Form of Notice of Conversion/Continuation
Exhibit I Form of Assignment and Acceptance
<PAGE>
INDEX OF SCHEDULES
Schedule A Commitments
Schedule 1.1 Amendments to Schedule A
Schedule 4.1.5 Executive Offices and Principal Places of Business
Schedule 4.1.6 Litigation
Schedule 4.1.7 Material Contracts
Schedule 4.1.8 Consent and Approvals
Schedule 4.1.15 Environmental Disclosures
Schedule 6.1 Existing Liens
Schedule 6.3(a) Existing Indebtedness
Schedule 6.3(b) Anticipated Indebtedness
1
<PAGE>
SECOND AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT is
entered into as of May 31, 1996, by and among PLM EQUIPMENT GROWTH FUND III, a
California limited partnership ("EGF III"), PLM EQUIPMENT GROWTH FUND IV, a
California limited partnership ("EGF IV"), PLM EQUIPMENT GROWTH FUND V, a
California limited partnership ("EGF V"), PLM EQUIPMENT GROWTH FUND VI, a
California limited partnership ("EGF VI"), PLM EQUIPMENT GROWTH & INCOME FUND
VII, a California limited partnership ("EGF VII"), and PROFESSIONAL LEASE
MANAGEMENT INCOME FUND I, L.L.C., a Delaware limited liability company ("Income
Fund I") (EGF III, EGF IV, EGF V, EGF VI, EGF VII and Income Fund I each
individually being a "Borrower" and, collectively, the "Borrowers"), and PLM
FINANCIAL SERVICES, INC., a Delaware corporation and the sole general partner,
in the case of EGF III, EGF IV, EGF V, EGF VI and EGF VII, and the sole manager,
in the case of Income Fund I ("FSI"), and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA ("FUNB") and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to Section 11.10 (each individually being a "Lender," and collectively,
the "Lenders"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as agent on
behalf and for the benefit of the Lenders (not in its individual capacity, but
solely as agent, the "Agent"). This Agreement amends, restates and supersedes
the Growth Fund Agreement (as defined below).
RECITALS
A. Borrowers, PLM Equipment Growth Fund II, a California limited
partnership ("EGF II"), Lenders and Agent have entered into that certain Amended
and Restated Warehousing Credit Agreement dated as of September 27, 1995 (the
"Growth Fund Agreement").
B. Borrowers, FSI, Lenders and Agent desire to amend and restate the
Growth Fund Agreement with this amended and restated Agreement and to remove EGF
II as a borrower under the revolving credit facility.
C. Borrowers desire, on a several but not joint basis, to obtain from
Lenders a revolving credit facility with an aggregate principal availability up
to but not to exceed the maximum amount set forth on Schedule A for the purpose
of financing the purchase of transportation equipment for periods up to one
hundred seventy-nine (179) days, all as more particularly described below.
D. Lenders have agreed to make such credit available to Borrowers, but
only upon the terms and subject to the conditions hereinafter set forth and in
reliance on the representations and warranties set forth herein. This Agreement
amends, restates and supersedes the Growth Fund Agreement in the its entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants hereinafter set forth, and intending to be legally bound, the
parties hereto agree as follows:
<PAGE>
. 1. DEFINITIONS
. As used herein, the following terms have the following meanings:
"Acquisition" means, with respect to any Borrower, any transaction, or
any series of related transactions, by which such Borrower, FSI or any of FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, directly or
indirectly (a) acquires any ongoing business or all or substantially all of the
assets of any Person or division thereof, whether through a purchase of assets,
merger or otherwise, or (b) acquires (in one transaction or as the most recent
transaction in a series of transactions) control of at least a majority of the
stock of a corporation having ordinary voting power for the election of
directors, or (c) acquires control of at least a majority of the ownership
interests in any partnership or joint venture.
"Adjusted LIBOR" means, for each Interest Period in respect of LIBOR
Loans, an interest rate per annum (rounded upward to the nearest 1/16th of one
percent (0.0625%)) determined pursuant to the following formula:
Adjusted LIBOR = LIBOR
----------------------------------------
1.00 - Eurodollar Reserve Percentage
1The Adjusted LIBOR shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Advance" means any Advance made or to be made by any Lender to any
Borrower as set forth in Section 2.1.1.
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, through one or more intermediaries, owns or controls,
whether beneficially or as a trustee, guardian or other fiduciary, five percent
(5.0%) or more of the stock having ordinary voting power in the election of
directors of such Person or of the ownership interests in any partnership or
joint venture, (b) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person, or (c) each of
such Person's officers, directors, joint venturers and partners; provided,
however, that in no case shall any Lender or Agent be deemed to be an Affiliate
of any Borrower or FSI for purposes of this Agreement. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"AFG" means American Finance Group, Inc., a Delaware corporation.
"AFG Agreement" means the Warehousing Credit Agreement dated as of the
date hereof, by and among AFG, and Lenders and Agent, as the same from time to
time may be amended, modified, supplemented, renewed, extended or restated.
"Agent" means FUNB solely when acting in its capacity as the Agent
under this Agreement or any of the other Loan Documents, and any successor
Agent.
"Agent's Side Letter" means the side letter agreement dated as of the
date hereof by and between Borrowers, TEC AcquiSub, AFG and Agent.
"Agreement" means this Second Amended and Restated Warehousing Credit
Agreement dated as of May 31, 1996, including all amendments, modifications and
supplements hereto, renewals, extensions or restatements hereof, and all
appendices, exhibits and schedules to any of the foregoing, and shall refer to
the Agreement as the same may be in effect from time to time.
"Aircraft" means any corporate, commuter, or commercial aircraft or
helicopters, with modifications (as applicable) and replacement or spare parts
used in connection therewith, including, without limitation, engines, rotables
or propellers, and any engines, rotables and propellers used on a stand-lone
basis.
"Applicable Margin" means:
(a) with respect to Prime Rate Loans, zero percent (0.00%);
and
(b) with respect to LIBOR Loans, two percent (2.00%).
"Assignment and Acceptance" has the meaning set forth in Section
10.11.2.
"Bank Affiliate" means a Person engaged primarily in the business of
commercial banking and that is an Affiliate of a Lender or of a Person of which
a Lender is an Affiliate.
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended, as
codified under Title 11 of the United States Code, and the Bankruptcy Rules
promulgated thereunder, as the same may be in effect from time to time.
"Borrowing Base" means, as calculated separately for each Borrower
individually as at any date of determination, an amount not to exceed the sum
of:
(a) fifty percent (50.0%) of the unrestricted cash
available for the purchase of Eligible Inventory by such Borrower,
plus
(b) an amount equal to the lesser of (i) seventy
percent (70.0%) of the aggregate net book value or (ii) fifty percent (50.0%) of
the aggregate net fair market value of all Eligible Inventory then owned by such
Borrower or a Marine Subsidiary or owned of record by an Owner Trustee for the
beneficial interest of such Borrower or any Marine Subsidiary of such Borrower
(provided, however, that there shall be excluded from this clause (b) the
aggregate net book value or aggregate net fair market value, as the case may be,
of all items of Eligible Inventory which are either (i) off-lease or (ii)
subject to a Lease under which any applicable lease or rental payment is more
than ninety (90) days past due, but only to the extent and in the amount that
the aggregate net book value or net fair market value, as the case may be, of
such otherwise excluded Eligible Inventory exceeds fifteen percent (15.0%) of
the respective net book value or net fair market value of all Eligible Inventory
included in this clause (b) notwithstanding this proviso),
less
(c) the aggregate Consolidated Funded Debt of such
Borrower then outstanding, excluding the aggregate principal amounts of the
Loans outstanding for such Borrower under the Facility,
in each case computed, (1) with respect to any requested Loan, as of the
requested Funding Date (and shall include the item(s) of Eligible Inventory to
be acquired with the proceeds of the requested Loan), and (2) with respect to
the delivery of any monthly Borrowing Base Certificate to be furnished pursuant
to Section 5.1.3, as of the last day of the calendar month for which such
Borrowing Base Certificate is furnished (provided, that for the purpose of
computing the Borrowing Base, in the event that any Borrower or a Marine
Subsidiary of such Borrower shall own less than one hundred percent (100.0%) of
the record or beneficial interests in any item of Eligible Inventory, with one
or more of the other Equipment Growth Funds owning of record or beneficially the
remaining interests, there shall be included only such Borrower's or such Marine
Subsidiary's, as the case may be, ratable interest in such item of Eligible
Inventory).
"Borrowing Base Certificate" means, with respect to any Borrower, a
certificate with appropriate insertions setting forth the components of the
Borrowing Base of such Borrower as of the last day of the month for which such
certificate is submitted or as of a requested Funding Date, as the case may be,
which certificate shall be substantially in the form set forth in Exhibit B and
certified by a Responsible Officer of such Borrower.
"Business Day" means any day which is not a Saturday, Sunday or a legal
holiday under the laws of the States of California or North Carolina or is not a
day on which banking institutions located in the States of California or North
Carolina are authorized or permitted by law or other governmental action to
close and, with respect to LIBOR Loans, means any day on which dealings in
foreign currencies and exchanges may be carried on by Agent and Lenders in the
London interbank market.
"Casualty Loss" means any of the following events with respect to any
item of Eligible Inventory: (a) the actual total loss or compromised total loss
of such item of Eligible Inventory; (b) such item of Eligible Inventory shall
become lost, stolen, destroyed, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever; (c) the seizure of such item of
Eligible Inventory for a period exceeding sixty (60) days or the condemnation or
confiscation of such item of Eligible Inventory; or (d) such item of Eligible
Inventory shall be deemed under its lease to have suffered a casualty loss as to
the entire item of Eligible Inventory.
"Charges" means, with respect to any Borrower, all federal, state,
county, city, municipal, local, foreign or other governmental taxes, levies,
assessments, charges or claims, in each case then due and payable, upon or
relating to (a) the Loans made to such Borrower hereunder, (b) such Borrower's
employees, payroll, income or gross receipts, (c) such Borrower's ownership or
use of any of its Properties or assets or (d) any other aspect of such
Borrower's business.
"Closing" means the time at which each of the conditions precedent set
forth in Section 3 to the making of the first Loan hereunder shall have been
duly fulfilled or satisfied by each Borrower.
"Closing Date" means the date on which Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, the
Treasury Regulations adopted thereunder and the Treasury Regulations proposed
thereunder (to the extent Requisite Lenders, in their sole discretion,
reasonably determine that such proposed regulations set forth the regulations
that apply in the circumstances), as the same may be in effect from time to
time.
"Commitment" means with respect to each Lender the amounts set forth on
Schedule A and "Commitments" means all such amounts collectively, as each may be
amended from time to time upon the execution and delivery of an instrument of
assignment pursuant to Section 11.10, which amendments shall be evidenced on
Schedule 1.1.
"Commitment Termination Date" means May 23, 1997.
"Compliance Certificate" means, with respect to any Borrower, a
certificate signed by a Responsible Officer of such Borrower, substantially in
the form of Exhibit E, with such changes as Agent may from time to time
reasonably request for the purpose of having such certificate disclose the
matters certified therein and the method of computation thereof.
"Consolidated EBITDA" means, for any Borrower, as measured as at any
date of determination for any period on a consolidated basis, the sum of (a) the
Consolidated Net Income of such Borrower, plus (b) all amounts treated as
expenses for depreciation and the amortization of intangibles of any kind, plus
(c) all accrued taxes on or measured by income, plus (d) Consolidated Interest
Expense, and in the cases of clauses (b), (c) and (d), above, each to the extent
included in the determination of Consolidated Net Income.
"Consolidated Funded Debt" means, for any Borrower, as measured at any
date of determination on a consolidated basis, the total amount of all interest
bearing obligations (including Indebtedness for borrowed money) of such
Borrower, capital lease obligations of such Borrower as a lessee and the stated
amount of all outstanding undrawn letters of credit issued on behalf of such
Borrower or for which such Borrower is liable.
"Consolidated Intangible Assets" means, for any Person, as measured at
any date of determination on a consolidated basis, all intangible assets of such
Person.
"Consolidated Interest Expense" means, for any Borrower, as measured at
any date of determination for any period on a consolidated basis, the gross
interest expense of such Borrower for the period (including all commissions,
discounts, fees and other charges in connection with standby letters of credit
and similar instruments), less interest income for that period.
"Consolidated Net Income" means, for any Borrower, as measured at any
date of determination for any period on a consolidated basis, the net income (or
loss) of such Borrower for such period taken as a single accounting period.
"Consolidated Net Worth" means, for any Person, as measured at any date
of determination, the difference between Consolidated Total Assets and
Consolidated Total Liabilities.
"Consolidated Tangible Net Worth" means, for any Person, as measured at
any date of determination, the difference between Consolidated Net Worth and
Consolidated Intangible Assets.
"Consolidated Total Assets" means, for any Person, as measured at any
date of determination on a consolidated basis, all assets of such Person.
"Consolidated Total Liabilities" means, for any Person, as measured at
any date of determination on a consolidated basis, all liabilities of such
Person.
"Contingent Obligation" means, as to any Person, (a) any Guaranty
Obligation of that Person and (b) any direct or indirect obligation or
liability, contingent or otherwise, of that Person, (i) in respect of any letter
of credit or similar instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings, (ii) with
respect to the Indebtedness of any partnership or joint venture of which such
Person is a partner or a joint venturer, (iii) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered, or (iv) in respect of any interest rate protection contract that is
not entered into in connection with a bona fide hedging operation that provides
offsetting benefits to such Person. The amount of any Contingent Obligation
shall (subject, in the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty Obligation") be deemed equal to the maximum reasonably
anticipated liability in respect thereof, and shall, with respect to clause
(b)(iv) of this definition, be marked to market on a current basis.
"Debt Service Ratio" means, as measured separately for each Borrower as
at any date of determination, the ratio of (a) Consolidated EBITDA to (b) the
sum of (i) Consolidated Interest Expense plus (ii) an amount equal to three and
one-eighths percent (3.125%) of Consolidated Funded Debt (Consolidated EBITDA
and Consolidated Interest Expense to be measured on a quarterly basis for the
current fiscal quarter).
"Default Rate" has the meaning set forth in Section 2.3.
"Designated Deposit Account" means a demand deposit account maintained
by Borrowers with FUNB designated by written notice from Borrowers to Agent.
"Dollars" and the sign "$" means lawful money of the United States of
America.
"EGF" means PLM Equipment Growth Fund, a California limited
partnership.
"EGF II" means PLM Equipment Growth Fund II, a California limited
partnership.
"EGF III" means PLM Equipment Growth Fund III, a California limited
partnership.
"EGF IV" has the meaning set forth in the Preamble to this Agreement.
"EGF V" has the meaning set forth in the Preamble to this Agreement
"EGF VI" has the meaning set forth in the Preamble to this Agreement
"EGF VII" has the meaning set forth in the Preamble to this Agreement.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000, (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United States, and
(c) any Bank Affiliate.
"Eligible Inventory" means, with respect to any Borrower, all Trailers,
Aircraft and Aircraft engines, Railcars, cargo-containers, marine vessels and,
if approved by Requisite Lenders, other related Equipment, in each case owned by
such Borrower or a Marine Subsidiary of such Borrower (or jointly by such
Borrower and one or more of the other Equipment Growth Funds) or, subject to the
approval of Agent, any owner trust of which such Borrower is the sole
beneficiary or owner (or is the beneficiary or owner jointly with one or more of
the other Equipment Growth Funds), as applicable, or solely with respect to any
marine vessel registered in Liberia, The Bahamas, Hong Kong, Singapore or other
registry acceptable to Agent in its sole discretion, any nominee entity of which
such Borrower or a Marine Subsidiary of such Borrower is the sole beneficiary or
direct or indirect owner (or as the beneficiary or direct or indirect owner
jointly with one or more of the other Equipment Growth Funds).
"Employee Benefit Plan" means, with respect to any Borrower, any
Pension Plan and any employee welfare benefit plan, as defined in Section 3(1)
of ERISA, that is maintained for the employees of such Borrower, FSI or any of
FSI's Subsidiaries or any ERISA Affiliate of such Borrower.
"Environmental Claims" means, with respect to any Borrower, all claims,
however asserted, by any Governmental Authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law or
for release or injury to the environment or threat to public health, personal
injury (including sickness, disease or death), property damage, natural
resources damage, or otherwise alleging liability or responsibility for damages
(punitive or otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or other type of
relief, resulting from or based upon (a) the presence, placement, discharge,
emission or release (including intentional and unintentional, negligent and
non-negligent, sudden or non-sudden, accidental or non-accidental placement,
spills, leaks, discharges, emissions or releases) of any Hazardous Material at,
in, or from Property, whether or not owned by such Borrower, FSI or any
Subsidiary of FSI, or (b) any other circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all foreign, federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act and the Emergency Planning and
Community Right-to-Know Act.
"Environmental Permit" has the meaning set forth in Section 4.1.15.
"Equipment" means, with respect to any Borrower, all items of
transportation related equipment owned directly or beneficially by such Borrower
or by any Marine Subsidiary of such Borrower and held for lease or rental, and
shall include items of equipment legal or record title to which is held by any
owner trust or nominee entity in which such Borrower or any Marine Subsidiary of
such Borrower holds the sole beneficial interest.
"Equipment Growth Funds" means any and all of EGF, EGF II, EGF III, EGF
IV, EGF V, EGF VI, EGF VII and Income Fund I.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, as the same may be in effect from time to time, and any successor
statute.
"ERISA Affiliate" means, as applied to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Code.
"Eurodollar Reserve Percentage" means the maximum reserve percentage
(expressed as a decimal, rounded upward to the nearest 1/100th of one percent
(0.01%)) in effect from time to time (whether or not applicable to any Lender)
under regulations issued by the Federal Reserve Board for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency liabilities having a
term comparable to such Interest Period.
"Event of Default" means any of the events set forth in Section 8.1.
"Facility" means the total Commitments described in Schedule A, as such
Schedule A may be amended from time to time as set forth on Schedule 1.1, for
the revolving credit facility described in Section 2.1.1 to be provided by
Lenders to Borrowers, on a several but not joint basis, according to each
Lender's Pro Rata Share.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective Rate". If on
any relevant day the appropriate rate for such previous day is not yet published
in either H.15(519) or the Composite 3:30 p.m. Quotation, the rate for such day
will be the arithmetic mean of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System and any successor thereto.
"Fee Letter" means the fee letter agreement dated as of the date
hereof, by and among Borrowers, TEC AcquiSub, AFG, and Agent, on behalf and for
the benefit of Lenders.
"Form 1001" has the meaning set forth in Section 2.14.6.
"Form 4224" has the meaning set forth in Section 2.14.6.
"FSI" means PLM Financial Services, Inc., a Delaware corporation.
"Funded Debt Ratio" means, as measured separately for each Borrower as
at any date of determination, the ratio of (a) the Consolidated Funded Debt of
such Borrower to (b) the sum of (i) the aggregate net fair market value of the
Equipment owned of record and beneficially by such Borrower or any Marine
Subsidiary of such Borrower or owned of record by an Owner Trustee for the
beneficial interest of such Borrower or any Marine Subsidiary of such Borrower
plus (ii) the unrestricted cash available for the purchase of Eligible Inventory
for such Borrower (provided, that for the purpose of computing the Funded Debt
Ratio, in the event that any Borrower or a Marine Subsidiary of such Borrower
shall own less than one hundred percent (100.0%) of the record or beneficial
interests in any item of Equipment, with one or more of the other Equipment
Growth Funds owning of record or beneficially the remaining interests, there
shall be included any such Borrower's or such Marine Subsidiary's, as the case
may be, ratable interest in such item of Equipment).
"Funding Date" means with respect to any proposed borrowing hereunder,
the date funds are advanced to any Borrower for any Loan requested by such
Borrower.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar function of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means (a) any federal, state, county,
municipal or foreign government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.
"Guaranty" means that certain Guaranty dated as of September 27, 1995,
executed by FSI in favor of Lenders and Agent.
"Guaranty Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease for
capital equipment other than Equipment, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person, whether or not contingent,
(a) to purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, or (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect thereof. The
amount of any Guaranty Obligation shall be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such Guaranty
Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof.
"Hazardous Materials" means all those substances which are regulated
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"IMI" means PLM Investment Management, Inc., a California corporation
and a wholly-owned Subsidiary of FSI.
"Income Fund I" has the meaning set forth in the Preamble to this
Agreement.
"Indebtedness" means, as to any Person, (a) all indebtedness of such
Person for borrowed money, (b) all leases of equipment of such Person as lessee,
(c) to the extent not included in clause (b), above, all capital leases of such
Person as lessee, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than trade or other accounts payable in the
ordinary course of business and not more than ninety (90) days past due), (e)
any obligation of such Person that is secured by a Lien on assets of such
Person, whether or not that Person has assumed such obligation or whether or not
such obligation is non-recourse to the credit of such Person, (f) obligations of
such Person arising under acceptance facilities or under facilities for the
discount of accounts receivable of such Person and (g) any obligation of such
Person to reimburse the issuer of any letter of credit issued for the account of
such Person upon which a draw has been made.
"Indemnified Liability" has the meaning set forth in Section 10.2.
"Indemnified Person" has the meaning set forth in Section 10.2.
"Interest Differential" means, with respect to any prepayment of a
LIBOR Loan on a day other than an Interest Payment Date on which such LIBOR Loan
matures, the difference between (a) the per annum interest rate payable with
respect to such LIBOR Loan as of the date of the prepayment and (b) the Adjusted
LIBOR on, or as near as practicable to, the date of the prepayment for a LIBOR
Loan commencing on such date and ending on the last day of the applicable
Interest Period. The determination of the Interest Differential by Agent shall
be conclusive in the absence of manifest error.
"Interest Payment Date" means, with respect to any LIBOR Loan, the last
day of each Interest Period applicable to such Loan and, with respect to Prime
Rate Loans, the first Business Day of each calendar month following the Funding
Date of such Prime Rate Loan; provided, however, that if any Interest Period for
a LIBOR Loan exceeds three (3) months, interest shall also be paid on the date
which falls three (3) months after the beginning of such Interest Period.
"Interest Period" means, with respect to any LIBOR Loan, the one-month,
two-month or three-month period selected by the Requesting Borrower pursuant to
Section 2, in each instance commencing on the applicable Funding Date of the
Loan; provided, however, that any Interest Period which would otherwise end on a
day that is not a Business Day shall end on the next succeeding Business Day
except that in the instance of any LIBOR Loan, if such next succeeding Business
Day falls in the next calendar month, the Interest Period shall end on the next
preceding Business Day.
"Investment Company Act" means the Investment Company Act of 1940, as
amended (15 U.S.C. ss. 80a-1 et seq.), as the same may be in effect from time to
time, or any successor statute thereto.
"IRS" means the Internal Revenue Service and any successor thereto.
"Lease" means, for any Borrower, each and every item of chattel paper,
installment sales agreement, equipment lease or rental agreement (including
progress payment authorizations) relating to an item of Equipment of which such
Borrower is the record or beneficial lessor and in respect of which the lessee
and lease terms (including, without limitation, as to rental rate, maturity and
insurance coverage) are acceptable to Agent, in its reasonable discretion. The
term "Lease" includes (a) all payments to be made thereunder, (b) all rights of
such Borrower therein, and (c) any and all amendments, renewals, extensions or
guaranties thereof.
"Lending Office" means, with respect to any Lender, the office or
offices of the Lender specified as its lending office opposite its name on the
applicable signature page hereto, or such other office or offices of the Lender
as it may from time to time notify Borrowers and Agent.
"LIBOR" means, with respect to any Loan to be made, continued as or
converted into a LIBOR Loan, the London Inter-Bank Offered Rate (determined
solely by Agent), rounded upward to the nearest 1/16th of one percent (0.0625%),
at which Dollar deposits are offered to Agent by major banks in the London
interbank market at or about 11:00 a.m., London time, on the second Business Day
prior to the first day of the related Interest Period with respect to such Loan
in an aggregate amount approximately equal to the amount of such Loan and for a
period of time comparable to the number of days in the applicable Interest
Period. The determination of LIBOR by Agent shall be conclusive in the absence
of manifest error.
"LIBOR Loan" means a Loan that bears interest based on Adjusted LIBOR.
"Lien" means any mortgage, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any Property, including any agreement to grant any of the foregoing,
any conditional sale or other title retention agreement, any lease in the nature
of a security interest, and the filing of or agreement to file or deliver any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
"Limited Partnership Agreement" means (a) for EGF III, the Limited
Partnership Agreement dated as of October 15, 1987, as amended by the First
Amended and Restated Limited Partnership Agreement as of February 9, 1988, the
Second Amended and Restated Limited Partnership Agreement as of March 10, 1988,
a First Amendment to the Second Amended and Restated Limited Partnership
Agreement as of November 18, 1991 and the Reformed First Amendment to the Second
Amended and Restated Limited Partnership Agreement as of November 18, 1991, (b)
for EGF IV, the Amended and Restated Limited Partnership Agreement dated as of
May 22, 1989, (c) for EGF V, the Limited Partnership Agreement dated as of
November 14, 1989, (d) for EGF VI, the Amended and Restated Limited Partnership
Agreement dated as of December 20, 1991, and (e) for EGF VII, the Third Amended
and Restated Limited Partnership Agreement of EGF VII dated as of May 10, 1993,
as amended by the First Amendment to the Third Amended and Restated Limited
Partnership Agreement dated May 28, 1993 and by the Second Amendment to Third
Amended and Restated Limited Partnership Agreement dated as of January 21, 1994.
"Loan" has the meaning set forth in Section 2.1.1.
"Loan Document" when used in the singular and "Loan Documents" when
used in the plural means any and all of this Agreement, the Notes, the Lockbox
Agreement and the Guaranty and any and all other agreements, documents and
instruments executed and delivered by or on behalf or support of any Borrower to
Agent or any Lender or any of their respective authorized designees evidencing
or otherwise relating to the Advances and the Liens granted to Agent, on behalf
of Lenders, with respect to the Advances, as the same may from time to time be
amended, modified, supplemented or renewed.
"Lockbox" has the meaning set forth in Section 5.9.
"Lockbox Agreement" means the Agreement of even date herewith between
Borrowers, FUNB and Agent on behalf of Lenders, substantially in the form of
Exhibit F, relating to the Lockbox.
"Marine Subsidiary" means, for any Borrower, a Subsidiary of such
Borrower (in which the remaining record or beneficial ownership interests may be
held by TEC AcquiSub or any Equipment Growth Fund) organized for the purpose of
holding legal record title to one or more marine vessels or to aircraft rotables
and spare parts.
"Material Adverse Effect" means, with respect to any Borrower, any set
of circumstances or events which (a) has or could reasonably be expected to have
any material adverse effect whatsoever upon the validity or enforceability of
any Loan Document, (b) is or could reasonably be expected to be material and
adverse to the condition (financial or otherwise) or business operations of such
Borrower or FSI, (c) materially impairs or could reasonably be expected to
materially impair the ability of such Borrower or FSI to perform its
Obligations, or (d) materially impairs or could reasonably be expected to
materially impair the ability of Agent or any Lender to enforce any of its or
their legal remedies pursuant to the Loan Documents.
"Maturity Date" means, with respect to each Loan advanced by Lenders
hereunder, the date which is one hundred seventy-nine (179) days after the
Funding Date of such Loan or such earlier or later date as requested by the
Requesting Borrower and approved by Requisite Lenders, in their sole and
absolute discretion; provided, however, in no event shall any Maturity Date be a
date which is later than the Commitment Termination Date.
"Maximum Availability" has the meaning set forth in Section 2.1.1.
"Multiemployer Plan" means, with respect to any Borrower, a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA, and to which
such Borrower, FSI or any of FSI's Subsidiaries or any ERISA Affiliate of such
Borrower, FSI or any of FSI's Subsidiaries is making, or is obligated to make,
contributions or has made, or been obligated to make, contributions within the
preceding five (5) years.
"Note" has the meaning set forth in Section 2.1.1(a)(i), and any and
all replacements, substitutions and renewals thereof.
"Notice of Borrowing" means a notice given by any Borrower to Agent in
accordance with Section 2.7, substantially in the form of Exhibit G, with
appropriate insertions.
"Notice of Conversion/Continuation" means a notice given by any
Borrower to Agent in accordance with Section 2.8, substantially in the form of
Exhibit H, with appropriate insertions.
"Obligations" means, with respect to any Borrower, all loans, advances,
liabilities and obligations for monetary amounts owing by such Borrower to any
Lender or Agent, whether due or to become due, matured or unmatured, liquidated
or unliquidated, contingent or non-contingent, and all covenants and duties
regarding such amounts, of any kind or nature, arising under any of the Loan
Documents. This term includes, without limitation, all principal, interest
(including interest that accrues after the commencement of a case or proceeding
against such Borrower under the Bankruptcy Code), fees, including, without
limitation, any and all prepayment fees, facility fees, commitment fees,
arrangement fees, agent fees and attorneys' fees and any and all other fees,
expenses, costs or other sums chargeable to such Borrower under any of the Loan
Documents.
"Operating Agreement" means the Fifth Amended and Restated Operating
Agreement of Income Fund I, entered into as of January 24, 1995.
"Opinion of Counsel" means the favorable written legal opinion of
Stephen Peary, general counsel of FSI on behalf of FSI for itself and as the
sole general partner or managing member, as applicable, of each Borrower,
substantially in the form of Exhibit D, together with copies of any officer's
certificate or legal opinion of another counsel or law firm specifically
identified and expressly relied upon by such counsel in its opinion.
"Other Taxes" has the meaning set forth in Section 2.14.2.
"Overadvance" has the meaning set forth in Sections 2.1.1(a)(iii) and
(iv).
"Owner Trustee" means any Person acting in the capacity of (a) a
trustee for any owner trust or (b) a nominee entity, in each case holding title
to any Eligible Inventory pursuant to a trust or similar agreement with any
Borrower or FSI.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Pension Plan" means, with respect to any Borrower, any employee
pension benefit plan, as defined in Section 3(2) of ERISA, that is maintained
for the employees of such Borrower, FSI or any of FSI's Subsidiaries or any
ERISA Affiliate of such Borrower, FSI or any of FSI's Subsidiaries, other than a
Multiemployer Plan.
"Permitted Liens" has the meaning set forth in Section 6.1.
"Permitted Rights of Others" means, as to any Property in which a
Person has an interest, (a) an option or right to acquire a Lien that would be a
Permitted Lien, (b) the reversionary interest of a lessor under a lease of such
Property and (c) an option or right of the lessee under a lease of such Property
to purchase such property at fair market value.
"Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or Governmental Authority.
"PLMI" means PLM International, Inc., a Delaware corporation.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, will constitute an Event of Default.
"Prepayment Date" has the meaning set forth in Section 2.2.2.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by FUNB as its prime rate. Each change in
the Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by FUNB as its Prime Rate is an index or base rate and shall
not necessarily be its lowest rate charged to FUNB's customers or other banks.
"Prime Rate Loan" means any borrowing which bears interest at a rate
determined with reference to the Prime Rate.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"Pro Rata Share" means, for any Lender, the proportion such Lender's
Commitment with respect to the Facility has to the aggregate of all Commitments
with respect to the Facility.
"Public Utility Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended (15 U.S.C. ss. 79 et seq.) as the same shall be
in effect from time to time, and any successor statute thereto.
"Railcar" means all railroad rolling stock, including, without
limitation, all coal, timber, plastic pellet, tank, hopper, flat and box cars
and locomotives.
"Reaffirmation of Guaranty" means the Acknowledgement and Reaffirmation
of Guaranty, dated as of the date hereof, executed by FSI in favor of Lenders
reaffirming its obligations under the Guaranty.
"Regulations G, T, U and X" means, collectively, Regulations G, T, U
and X adopted by the Federal Reserve Board (12 C.F.R. Parts 207, 220, 221 and
224, respectively) and any other regulation in substance substituted therefor.
"Requesting Borrower" means any Borrower requesting a Loan pursuant to
Section 2.1.1.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule, regulation, guideline or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property is
subject.
"Requisite Lenders" means any combination of Lenders whose combined Pro
Rata Share (and voting interest with respect thereto) of all amounts outstanding
under this Agreement, or, in the event there are no amounts outstanding, the
Commitments, is greater than sixty percent (60.0%) of all such amounts
outstanding or the total Commitments, as the case may be.
"Responsible Officer" means for (i) FSI, any of the President,
Executive Vice President, Chief Financial Officer, Secretary or Corporate
Controller of FSI having authority to request Advances or perform other duties
required hereunder, and (ii) Borrowers, any of the President, Executive Vice
President, Chief Financial Officer, Secretary or Corporate Controller of FSI as
the sole general partner of EGF III, EGF IV, EGF V, EGF VI or EGF VII, as the
case may be, or sole manager of Income Fund I, in each case having authority to
request Advances or perform other duties required hereunder
"SEC" means the Securities and Exchange Commission and any successor
thereto.
"Solvent" means, as to any Person at any time, that (a) the fair value
of the Property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code; (b) the present fair saleable value of the
Property in an orderly liquidation of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
Property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute unreasonably small capital.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company or other business entity
(other than Equipment Growth Funds) of which an aggregate of fifty percent
(50.0%) or more of the beneficial interest (in the case of a partnership) or
fifty percent (50%) or more of the outstanding stock, units or other voting
interest having ordinary voting power to elect a majority of the directors,
managers or trustees of such Person (irrespective of whether, at the time, the
stock, units or other voting interest of any other class or classes of such
Person shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person.
"Taxes" has the meaning set forth in Section 2.14.1.
"TEC" means PLM Transportation Equipment Corporation, a California
corporation and a wholly-owned Subsidiary of FSI.
"TEC AcquiSub" means TEC AcquiSub, Inc., a California special purpose
corporation and a wholly-owned Subsidiary of TEC.
"TEC AcquiSub Agreement" means the Amended and Restated Warehousing
Credit Agreement dated as of September 27, 1995, as amended by the TEC AcquiSub
Amendment, by and among TEC AcquiSub, Lenders and Agent, and as the same may
from time to time be further amended, modified, supplemented, renewed, extended
or restated.
"TEC AcquiSub Amendment" means the Amendment No. 1 to Amended and
Restated Warehousing Credit Agreement dated as of the date hereof, by and among
TEC AcquiSub, Lenders and Agent.
"Termination Event" means, with respect to any Borrower, (a) a
"reportable event" described in Section 4043 of ERISA and the regulations issued
thereunder (other than a reportable event not subject to the provision for
30-day notice to the PBGC under such regulations), or (b) the withdrawal of such
Borrower, FSI or any of FSI's Subsidiaries or any of their ERISA Affiliates from
a Pension Plan during a plan year in which any of them was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a
notice of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA, or (d) the institution
of proceedings to terminate a Pension Plan by the PBGC, or (e) any other event
or condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan.
"Trailer" means (a) vehicles having a minimum length of twenty (20)
feet used in trailer or freight car service and constructed for the transport of
commodities or containers from point to point and (b) associated equipment.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of North Carolina; provided, however, in the
event that, by reason of mandatory provisions of law, any and all of the
attachment, perfection or priority of the Lien of Agent, on behalf of Lenders,
in and to any collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than the State of North Carolina, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
"Utilization Leases" means Leases for Equipment held for lease in
pooling or similar arrangements where the actual rental payments under such
Lease is based on and for the actual period of utilization of such item of
Equipment rather than the Lease term.
. Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial data required to be submitted by this
Agreement shall be prepared and computed, unless otherwise specifically provided
herein, in accordance with GAAP. That certain terms or computations are
explicitly modified by the phrase "in accordance with GAAP" shall in no way be
construed to limit the foregoing. In the event that GAAP changes during the term
of this Agreement such that the covenants contained in Section 7 would then be
calculated in a different manner or with different components, (a) the parties
hereto agree to amend this Agreement in such respects as are necessary to
conform those covenants as criteria for evaluating each Borrower's financial
condition to substantially the same criteria as were effective prior to such
change in GAAP and (b) each Borrower shall be deemed to be in compliance with
the covenants contained in the aforesaid subsections during the sixty (60) day
period following any such change in GAAP if and to the extent that each Borrower
would have been in compliance therewith under GAAP as in effect immediately
prior to such change.
. All other undefined terms contained in this Agreement shall, unless
the context indicates otherwise, have the meanings provided for by the UCC to
the extent the same are used or defined therein. The words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole, including the Exhibits and Schedules hereto, all of which are by this
reference incorporated into this Agreement, as the same may from time to time be
amended, modified or supplemented, and not to any particular section, subsection
or clause contained in this Agreement. The term "including" shall not be
limiting or exclusive, unless specifically indicated to the contrary. The term
"or" is disjunctive; the term "and" is conjunctive. The term "shall" is
mandatory; the term "may" is permissive. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and plural, and pronouns stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and the neuter.
. Any reference to a "Section," "Subsection," "Exhibit," or "Schedule"
shall refer to the relevant Section or Subsection of or Exhibit or Schedule to
this Agreement, unless specifically indicated to the contrary.
. 2. AMOUNT AND TERMS OF CREDIT
. 1 Commitment To Lend
. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Borrowers set forth herein,
Lenders hereby agree to make Advances (as defined below) of immediately
available funds to Borrowers, on a revolving basis, from the Closing Date until
the Business Day immediately preceding the Commitment Termination Date, in the
aggregate principal amount outstanding at any time not to exceed the lesser of
(a) the total Commitments for the Facility less the aggregate principal amounts
then outstanding under the TEC AcquiSub Agreement and under the AFG Agreement or
(b) for any one Borrower, its respective Borrowing Base (such lesser amount
being the "Maximum Availability"), as more fully set forth in this Section
2.1.1. The obligation of Borrowers to repay the Advances made to any Borrower
shall be several but not joint.
. (a) Facility Commitments
(i) On the Funding Date requested by any
Borrower (the "Requesting Borrower"), after such Borrower shall have
satisfied all applicable conditions precedent set forth in Section 3,
each Lender shall advance immediately available funds to Agent (each
such advance being an "Advance") evidencing such Lender's Pro Rata
Share of a loan ("Loan"). Agent shall immediately advance such
immediately available funds to such Borrower at the Designated Deposit
Account (or such other deposit account at FUNB or such other financial
institution as to which such Borrower and Agent shall agree at least
three (3) Business Days prior to the requested Funding Date) on the
Funding Date with respect to such Loan. The Requesting Borrower shall
pay interest accrued on the Loan at the rates and in the manner set
forth in Section 2.1.1(b). Subject to the terms and conditions of this
Agreement, the unpaid principal amount of each Loan and all unpaid
interest accrued thereon, together with all other fees, expenses, costs
and other sums chargeable to the Requesting Borrower incurred in
connection therewith shall be due and payable no later than the
Maturity Date of such Loan. Each Loan advanced hereunder shall be
evidenced by the Requesting Borrower's revolving promissory note
substantially in the form of Exhibits A-1 through A-6, as applicable
(the "Notes").
(ii) The obligation of Lenders to make any Loan
from time to time hereunder shall be limited to the then applicable
Maximum Availability. For the purpose of determining the amount of the
Borrowing Base available at any one time, the amount available shall be
the total amount of the Borrowing Base as set forth in the Borrowing
Base Certificate delivered to Agent pursuant to Section 3.2.1 with
respect to such requested Loan. Nothing contained in this Agreement
shall under any circumstance be deemed to require any Lender to make
any Advance under the Facility which, in the aggregate principal
amount, either (1) taking into account such Lender's portion of the
principal amounts outstanding under this Agreement and the making of
such Advance, exceeds the lesser of (A) such Lender's Commitment for
the Facility and (B) such Lender's Pro Rata Share of the Requesting
Borrower's Borrowing Base, or (2) taking into account such Lender's
portion of the aggregate principal amounts outstanding under this
Agreement, under the TEC AcquiSub Agreement, under the AFG Agreement
and the making of such Advance, exceeds such Lender's Commitment for
the Facility.
(iii) If at any time and for any reason the
aggregate principal amount of the Loan(s) then outstanding to any
Borrower shall exceed the Maximum Availability for such Borrower (the
amount of such excess, if any, being an "Overadvance"), such Borrower
shall immediately repay the full amount of such Overadvance, together
with all interest accrued thereon; provided, however, that if such
Overadvance occurs solely as a result of a decrease in the amount of
the Borrowing Base due solely to a decrease in the computation of the
Borrowing Base under clause (b), as set forth on a Borrowing Base
Certificate delivered to Agent pursuant to Section 5.1.3, then, to the
extent of such decrease, such Borrower shall not be required under this
Section 2.1.1(a)(iii) to prepay such Overadvance but Lenders shall have
no obligation to make or fund any Loans hereunder so long as such
Overadvance condition shall remain in effect.
(iv) Amounts borrowed by Borrowers under this
Facility may be repaid and, prior to the Commitment Termination Date
and subject to the applicable terms and conditions precedent to
borrowings hereunder, reborrowed; provided, however, that no Loan shall
have a Maturity Date which is later than the Commitment Termination
Date and no LIBOR Loan shall have an Interest Period ending after the
Maturity Date.
(v) Each request for a Loan hereunder shall
constitute a reaffirmation by the Requesting Borrower and the
Responsible Officer requesting the same that the representations and
warranties contained in this Agreement are true, correct and complete
in all material respects to the same extent as though made on and as of
the date of the request, except to the extent such representations and
warranties specifically relate to an earlier date, in which event they
shall be true, correct and complete in all material respects as of such
earlier date.
. Each Loan made by Lenders hereunder shall, at the
Requesting Borrower's option in accordance with the terms of this Agreement, be
either in the form of a Prime Rate Loan or a LIBOR Loan. Subject to the terms
and conditions of this Agreement, each Loan shall bear interest on the sum of
the unpaid principal balance thereof outstanding on each day from the date when
made, continued or converted until such Loan shall have been fully repaid at a
rate per annum equal to the Prime Rate, as the same may fluctuate on a daily
basis, or the Adjusted LIBOR, as the case may be, plus the Applicable Margin.
Interest on each Loan funded hereunder shall be due and payable by the
Requesting Borrower in arrears on each Interest Payment Date, with all accrued
but unpaid interest on such Loan being due and payable on the date such Loan is
repaid, whether by prepayment or at maturity, and with all accrued but unpaid
interest being due and payable by the Requesting Borrower on the Maturity Date
for such Loan.
Each Advance made by a Lender as part of a Loan hereunder and all
repayments of principal with respect to such Advance shall be evidenced by
notations made by such Lender on the books and records of such Lender; provided,
however, that the failure by such Lender to make such notations shall not limit
or otherwise affect the obligations of any Borrower with respect to the
repayments of principal or payments of interest on any Advance or Loan. The
aggregate unpaid amount of each Advance set forth on the books and records of a
Lender shall be presumptive evidence of such Lender's Pro Rata Share of the
principal amount owing and unpaid by any Borrower under its Note.
. Promptly following the receipt of such documents required
pursuant to Section 3.2.1 and approval of a Loan by the Agent, Agent shall
notify by telephone, telecopier, facsimile or telex each Lender of the (a)
Requesting Borrower, (b) the principal amount (including Lender's Pro Rata Share
thereof) and (c) Funding Date of the Loan requested by such Requesting Borrower.
Not later than 1:00 p.m., North Carolina time, on the Funding Date for any Loan,
each Lender shall make an Advance to Agent for the account of Requesting
Borrower in the amount of its Pro Rata Share of the Loan being requested. Upon
satisfaction of the applicable conditions precedent set forth in Section 3, all
Advances shall be credited in immediately available funds to the Designated
Deposit Account.
. The Loans made under the Facility may be used solely for the
purpose of acquiring the specific items of Equipment.
. 2 Repayment And Prepayment
. Unless prepaid pursuant to Section 2.2.2, the principal
amount of each Loan hereunder made to a Requesting Borrower shall be repaid by
the Requesting Borrower to Lenders not later than the Maturity Date of such
Loan.
. Subject to Section 2.18, any Borrower may in the ordinary
course of such Borrower's business, upon at least three (3) Business Days'
written notice, or telephonic notice promptly confirmed in writing to Agent,
which notice shall be irrevocable, prepay any Loan in whole or in part. Such
notice of prepayment shall specify the date and amount of such prepayment and
whether such prepayment is of Prime Rate Loans or LIBOR Loans, or any
combination thereof. Such prepayment of Loans, together with any amounts
required pursuant to Section 2.18, shall be in immediately available funds and
delivered to Agent not later than 1:00 p.m., North Carolina time, on the date
for prepayment stated in such notice (the "Prepayment Date"). With respect to
any prepayment under this Section 2.2.2, all interest on the amount prepaid
accrued up to but excluding the date of such prepayment shall be due and payable
on the Prepayment Date.
. .3 Mandatory Prepayments
(a) In the event that any item of Eligible
Inventory shall be sold or assigned by any Borrower or any Marine Subsidiary of
such Borrower, or the ownership interests (whether Stock or otherwise) of any
Borrower in any Marine Subsidiary of such Borrower owning record or beneficial
title to any item of Eligible Inventory shall be sold or transferred, then such
Borrower shall immediately prepay the Loan made with respect to such Eligible
Inventory so sold or assigned or with respect to the Eligible Inventory owned by
such Marine Subsidiary so sold or transferred, together with any accrued
interest on such Loan to the date of prepayment and any amounts required
pursuant to Section 2.18. The sale or assignment of Eligible Inventory by an
Owner Trustee, or the sale or assignment of any Borrower's or any Marine
Subsidiary's beneficial interest in any owner trust (or nominee entity) holding
title to Eligible Inventory, shall be considered a sale or assignment, as the
case may be, of such Eligible Inventory by such Borrower or such Marine
Subsidiary, as the case may be.
(b) In the event that any of the Eligible
Inventory shall have sustained a Casualty Loss, the applicable Borrower shall
promptly notify Agent and Lenders of such Casualty Loss and make arrangements
reasonably acceptable to the Agent to cause any and all cash proceeds received
by such Borrower to be paid to Lenders as a prepayment hereunder. To the extent
not so prepaid, the Loan funded with respect to such Eligible Inventory will
nevertheless be paid by such Borrower as provided in Section 2.2.1.
. Interest on the Loans shall be computed on the basis of a 365/366-day
year for all Prime Rate Loans and a 360-day year for all LIBOR Loans and the
actual number of days elapsed in the period during which such interest accrues.
In computing interest on any Loan, the date of the making of such Loan shall be
included and the date of payment shall be excluded. Each change in the interest
rate of Prime Rate Loans based on changes in the Prime Rate and each change in
the Adjusted LIBOR based on changes in the Eurodollar Reserve Percentage shall
be effective on the effective date of such change and to the extent of such
change. Agent shall give Borrowers notice of any such change in the Prime Rate;
provided, however, that any failure by Agent to provide Borrowers with notice
hereunder shall not affect Agent's right to make changes in the interest rate of
any Loan based on changes in the Prime Rate. Upon the occurrence and during the
continuation of any Event of Default under this Agreement, Advances under this
Agreement will, at the option of Requisite Lenders, bear interest at a rate per
annum which is determined by adding two percent (2.00%) to the Applicable Margin
for such Loan (the "Default Rate"). This may result in the compounding of
interest. The imposition of a Default Rate will not constitute a waiver of any
Event of Default.
. All repayments or prepayments of principal and all payments of
interest, fees, costs, expenses and other sums chargeable to Borrowers under
this Agreement, the Notes or any of the other Loan Documents shall be in lawful
money of the United States of America in immediately available funds and
delivered to Agent, for the account of Lenders, not later than 1:00 p.m., North
Carolina time, on the date due at First Union National Bank of North Carolina,
One First Union Center, 301 South College Street, Charlotte, North Carolina
28288, Attention: Hannah Carmody, or such other place as shall have been
designated in writing by Agent.
. Whenever any payment to be made under this Agreement, the Note or any
of the other Loan Documents shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in the computation of the
payment of interest thereon; provided, however, that no Loan shall have remained
outstanding after the Maturity Date of such Loan.
. All payments to or for the benefit of Lenders hereunder shall be
applied to the Obligations of any Borrower making payment in the following
order: (a) then due and payable fees as set forth in Section 2.1.1(a)(i) and, at
the direction of such Borrower or upon prior notice given to such Borrower by
Agent, other then due and payable fees, expenses and costs; (b) then due and
payable interest payments and mandatory prepayments; and (c) then due and
payable principal payments and optional prepayments; provided that if an Event
of Default shall have occurred and be continuing, Lenders shall have the
exclusive right to apply any and all such payments against the then due and
owing Obligations of such Borrower as Lenders may deem advisable. To the extent
any Borrower fails to make payment required hereunder or under any of the other
Loan Documents, each Lender is authorized to, and at its sole option may, make
such payments on behalf of such Borrower. To the extent permitted by law, all
amounts advanced by any Lender hereunder or under other provisions of the Loan
Documents shall accrue interest at the same rate as Loans hereunder.
. 7 Procedure For The Borrowing Of Loans
. Each borrowing of Loans shall be made upon any Requesting
Borrower's irrevocable written notice delivered to Agent in the form of a Notice
of Borrowing, executed by a Responsible Person of such Requesting Borrower, with
appropriate insertions (which Notice of Borrowing must be received by Lender
prior to 12:00 noon, Charlotte, North Carolina time, three (3) Business Days
prior to the requested Funding Date) specifying:
(a) the amount of the requested borrowing, which, if a
LIBOR Loan is requested, shall be not less than One Million Dollars
($1,000,000);
(b) the requested Funding Date, which shall be a
Business Day;
(c) whether the borrowing is to be comprised of one or
more LIBOR Loans or Prime Rate Loans; and
(d) the duration of the Interest Period applicable to
any such LIBOR Loans included in such Notice of Borrowing. If the
Notice of Borrowing shall fail to specify the duration of the Interest
Period for any borrowing comprised of LIBOR Loans, such Interest Period
shall be three (3) months.
. Unless Agent shall otherwise consent, during the existence
of an Event of Default or Potential Event of Default, Borrowers may not elect to
have a Loan made as a LIBOR Loan.
. 8 Conversion And Continuation Elections
. Each Borrower may, upon irrevocable written notice to Agent:
(a) elect to convert on any Business Day, any Prime Rate
Loan (or any portion thereof in an amount equal to at least One Million
Dollars ($1,000,000)) into a LIBOR Loan; or
(b) elect to convert on any Interest Payment Date any
LIBOR Loan maturing on such Interest Payment Date (or any portion
thereof) into a Prime Rate Loan; or
(c) elect to continue on any Interest Payment Date any
LIBOR Loan maturing on such Interest Payment Date (or any portion
thereof in an amount equal to at least One Million Dollars
($1,000,000));
provided, that if the aggregate amount of LIBOR Loans outstanding to such
Borrower shall have been reduced, by payment, prepayment, or conversion of
portion thereof, to be less than $1,000,000, such LIBOR Loans shall
automatically convert into Prime Rate Loans, and on and after such date the
right of such Borrower to continue such Loans as, and convert such Loans into,
LIBOR Loans shall terminate.
. Each conversion or continuation of Loans shall be made upon
any Borrower's irrevocable written notice delivered to Agent in the form of a
Notice of Conversion/Continuation, executed by a Responsible Person of such
Borrower, with appropriate insertions (which Notice of Conversion/Continuation
must be received by Lender prior to 12:00 noon, Charlotte, North Carolina time,
at least three (3) Business Days in advance of the proposed conversion date or
continuation date specifying:
(a) the proposed conversion date or continuation date;
(b) the aggregate amount of Loans to be converted or
continued;
(c) the nature of the proposed conversion or
continuation; and
(d) the duration of the requested Interest Period.
. If upon the expiration of any Interest Period applicable to
any LIBOR Loan, the Requesting Borrower has failed to select a new Interest
Period to be applicable to such LIBOR Loan, such Borrower shall be deemed to
have elected to convert such LIBOR Loan into a Prime Rate Loan effective as of
the last day of such current Interest Period.
. Unless Agent shall otherwise consent, during the existence
of an Event of Default or Potential Event of Default, Borrowers may not elect to
have a Loan converted into or continued as a LIBOR Loan.
. Notwithstanding any provision of this Agreement to the contrary, each
Lender shall be entitled to fund and maintain its funding of all or any part of
its LIBOR Loans in any manner it elects, it being understood, however, that for
the purposes of this Agreement all determinations hereunder shall be made as if
such Lender actually funded and maintained each LIBOR Loan through the purchase
of deposits having a maturity corresponding to the maturity of the LIBOR Loan
and bearing an interest rate equal to the LIBOR rate (whether or not, in any
instance, Lender shall have granted any participations in such Loan). Each
Lender may, if it so elects, fulfill any commitment to make LIBOR Loans by
causing a foreign branch or affiliate to make or continue such LIBOR Loans;
provided, however, that in such event such Loans shall be deemed for the
purposes of this Agreement to have been made by such Lender, and the obligation
of Borrowers to repay such Loans shall nevertheless be to such Lender and shall
be deemed held by such Lender, to the extent of such Loans, for the account of
such branch or affiliate.
. Agent shall immediately distribute to each Lender, at such address as
each Lender shall designate, its respective interest in all repayments and
prepayments of principal and all payments of interest and all fees, expenses and
costs received by Agent on the same day and in the same type of funds as payment
was received. In the event Agent does not distribute such payments on the same
day received, if such payments are received by Agent by 1:00 p.m., North
Carolina time, or if received after such time, on the next succeeding Business
Day, such payment shall accrue interest at the Federal Funds Rate.
. Unless Agent shall have been notified by any Lender no later than the
Business Day prior to the respective Funding Date of a Loan that such Lender
does not intend to make available to Agent an Advance in immediately available
funds equal to such Lender's Pro Rata Share of the total principal amount of
such Loan, Agent may assume that such Lender has made such Advance to Agent on
the date of the Loan and Agent may, in reliance upon such assumption, make
available to the Requesting Borrower a corresponding Advance. If Agent has made
funds available to such Borrower based on such assumption and such Advance is
not in fact made to Agent by such Lender, Agent shall be entitled to recover the
corresponding amount of such Advance on demand from such Lender. If such Lender
does not promptly pay such corresponding amount upon Agent's demand, Agent shall
notify such Requesting Borrower and such Requesting Borrower shall repay such
Advance to Agent. Agent also shall be entitled to recover from such Lender
interest on such Advance in respect of each day from the date such Advance was
made by Agent to such Requesting Borrower to the date such corresponding amount
is recovered by Agent at the Federal Funds Rate. Nothing in this Section 2.11
shall be deemed to relieve any Lender from its obligation to fulfill its
Commitment or to prejudice any rights which Agent or such Requesting Borrower
may have against such Lender as a result of any default by such Lender under
this Agreement.
. Unless Agent shall have been notified by any Borrower prior to the
date on which any payment to be made by such Borrower hereunder is due that such
Borrower does not intend to remit such payment, Agent may, in its sole
discretion, assume that such Borrower has remitted such payment when so due and
Agent may, in its sole discretion and in reliance upon such assumption, make
available to each Lender on such payment date an amount equal to such Lender's
Pro Rata Share of such assumed payment. If such Borrower has not in fact
remitted such payment to Agent, each Lender shall forthwith on demand repay to
Agent the amount of such assumed payment made available to such Lender, together
with interest thereon in respect of each date from and including the date such
amount was made available by Agent to such Lender to the date such amount is
repaid to Agent at the Federal Funds Rate.
. If any Lender determines that compliance with any law or regulation
or with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law) has or would have the effect
of reducing the rate of return on the capital of such Lender or any corporation
controlling such Lender as a consequence of, or with reference to, such Lender's
Commitment or its making or maintaining its Pro Rata Share of the Loans below
the rate which such Lender or such other corporation could have achieved but for
such compliance (taking into account the policies of such Lender or corporation
with regard to capital), then each Borrower shall, from time to time, upon
written demand by such Lender (with a copy of such demand to Agent), immediately
pay to such Lender (a) such additional amounts as shall be sufficient to
compensate such Lender or other corporation for such reduction resulting from
such Borrower's Loans or (b) in the case where such reduction results from
compliance with any such law, regulation, guideline or request affecting only
the Commitments and not the Loans, such additional amounts as shall be
sufficient to compensate such Lender or other corporation for such reduction
based on each Borrower's percentage of average usage of the Commitments versus
the total average usage by all Borrowers. A certificate submitted by such Lender
to any Borrower, stating that the amounts set forth as payable to such Lender
are true and correct, shall be conclusive and binding for all purposes, absent
manifest error. Each Lender agrees promptly to notify effected Borrowers and
Agent of any circumstances that would cause any Borrower to pay additional
amounts pursuant to this section, provided that the failure to give such notice
shall not affect Borrowers' obligation to pay any such additional amounts.
. 14 Taxes
. Subject to Subsection 2.14.7, any and all payments by each
Borrower to each Lender or Agent under this Agreement shall be made free and
clear of, and without deduction or withholding for, any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and
Agent, such taxes (including income taxes or franchise taxes) as are imposed on
or measured by each Lender's net income (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes").
. In addition, Borrowers shall pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Documents (hereinafter referred to as "Other Taxes").
. Subject to Subsection 2.14.7, each Borrower shall indemnify
and hold harmless each Lender and Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender or Agent in relation to any
payments made by or Obligations of such Borrower and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made within thirty
(30) days from the date any Lender or Agent makes written demand therefor.
. If any Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or Agent, then, subject to Subsection 2.14.7:
(a) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14) such
Lender or Agent, as the case may be, receives an amount equal to the
sum it would have received had no such deductions been made;
(b) such Borrower shall make such deductions, and
(c) such Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with
applicable law.
. Within thirty (30) days after the date of any payment by any
Borrower of Taxes or Other Taxes, such Borrower shall furnish to Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to Agent.
. Each Lender which is a foreign person (i.e., a person other
than a United States person for United States Federal income tax purposes)
shall:
(a) No later than the date upon which such Lender
becomes a party hereto deliver to Borrowers through Agent two (2)
accurate and complete signed originals of IRS Form 4224 or any
successor thereto ("Form 4224"), or two accurate and complete signed
originals of IRS Form 1001 or any successor thereto ("Form 1001"), as
appropriate, in each case indicating that such Lender is on the date of
delivery thereof entitled to receive payments of principal, interest
and fees under this Agreement free from withholding of United States
Federal income tax;
(b) If at any time such Lender makes any changes
necessitating a new Form 4224 or Form 1001, with reasonable promptness
deliver to Borrowers through Agent in replacement for, or in addition
to, the forms previously delivered by it hereunder, two accurate and
complete signed originals of Form 4224; or two accurate and complete
signed originals of Form 1001, as appropriate, in each case indicating
that the Lender is on the date of delivery thereof entitled to receive
payments of principal, interest and fees under this Agreement free from
withholding of United States Federal income tax;
(c) Before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in
(ii) above) requiring a change in or renewal of the most recent Form
4224 or Form 1001 previously delivered by such Lender, deliver to
Borrowers through Agent two accurate and complete original signed
copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by the Lender; and
(d) Promptly upon any Borrower's or Agent's reasonable
request to that effect, deliver to such Borrower or Agent (as the case
may be) such other forms or similar documentation as may be required
from time to time by any applicable law, treaty, rule or regulation in
order to establish such Lender's tax status for withholding purposes.
. Borrowers will not be required to pay any additional amounts
in respect of United States Federal income tax pursuant to Subsection 2.14.4 to
Lender for the account of any Lending Office of such Lender:
(a) If the obligation to pay such additional amounts
would not have arisen but for a failure by such Lender to comply with
its obligations under Subsection 2.14.6 in respect of such Lending
Office;
(b) If such Lender shall have delivered to Borrowers a
Form 4224 in respect of such Lending Office pursuant to Subsection
2.14.6 and such Lender shall not at any time be entitled to exemption
from deduction or withholding of United States Federal income tax in
respect of payments by Borrowers hereunder for the account of such
Lending Office for any reason other than a change in United States law
or regulations or in the official interpretation of such law or
regulations by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the
force of law) after the date of delivery of such Form 4224; or
(c) If such Lender shall have delivered to Borrowers a
Form 1001 in respect of such Lending Office pursuant to Subsection
2.14.6, and such Lender shall not at any time be entitled to exemption
from deduction or withholding of United States Federal income tax in
respect of payments by Borrowers hereunder for the account of such
Lending Office for any reason other than a change in United States law
or regulations or any applicable tax treaty or regulations or in the
official interpretation of any such law, treaty or regulations by any
Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law) after
the date of delivery of such Form 1001.
. If, at any time, any Borrower requests any Lender to deliver
any forms or other documentation pursuant to Subsection 2.14.6(a), then such
Borrower shall, on demand of such Lender through Agent, reimburse such Lender
for any costs and expenses (including reasonable attorney fees) reasonably
incurred by such Lender in the preparation or delivery of such forms or other
documentation.
. If any Borrower is required to pay additional amounts to any
Lender or Agent pursuant to Subsection 2.14.4, then such Lender shall use its
reasonable good faith efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by such Borrower which may thereafter
accrue if such change, in the judgment of such Lender, is not otherwise
disadvantageous to such Lender.
. 15 Illegality
. If any Lender shall determine that the introduction of any
Requirement of Law, or any change in any Requirement of Law or in the
interpretation or administration thereof, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for such Lender or its Lending Office to make LIBOR Loans, then, on notice
thereof by Lender to the Requesting Borrower, the obligation of such Lender to
make LIBOR Loans shall be suspended until such Lender shall have notified the
Requesting Borrower that the circumstances giving rise to such determination no
longer exists.
. If a Lender shall determine that it is unlawful to maintain
any LIBOR Loan, Borrowers shall prepay in full all LIBOR Loans of such Lender
then outstanding, together with interest accrued thereon, either on the last day
of the Interest Period thereof if such Lender may lawfully continue to maintain
such LIBOR Loans to such day, or immediately, if such Lender may not lawfully
continue to maintain such LIBOR Loans, together with any amounts required to be
paid in connection therewith pursuant to Section 2.18.
. If any Borrower is required to prepay any LIBOR Loan
immediately as provided in Section 2.2.3, then concurrently with such
prepayment, such Borrower shall borrow, in the amount of such prepayment, a
Prime Rate Loan.
. If any Lender shall determine that, due to either (a) the
introduction of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the LIBOR) in or
in the interpretation of any Requirement of Law or (b) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Lender of agreeing to make or making, funding or maintaining any
LIBOR Loans, then Borrowers shall be liable on a joint and several basis for,
and shall from time to time, upon demand therefor by such Lender, pay to such
Lender such additional amounts as are sufficient to compensate such Lender for
such increased costs.
. If Agent shall have determined that for any reason adequate and
reasonable means do not exist for ascertaining the LIBOR for any requested
Interest Period with respect to a proposed LIBOR Loan or that the LIBOR
applicable for any requested Interest Period with respect to a proposed LIBOR
Loan does not adequately and fairly reflect the cost to Lenders of funding such
Loan, Agent will forthwith give notice of such determination to Borrowers and
each Lender. Thereafter, the obligation of Lenders to make or maintain LIBOR
Loans, as the case may be, hereunder shall be suspended until Agent, upon
instruction from Requisite Lenders, revokes such notice in writing. Upon receipt
of such notice, Borrowers may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted. If a Borrower does not revoke such
notice, Lenders shall make, convert or continue the Loans, as proposed by such
Borrower, in the amount specified in the applicable notice submitted by such
Borrower, but such Loans shall be made, converted or continued as Prime Rate
Loans instead of LIBOR Loans, as the case may be.
. Each Borrower agrees, severally but not jointly, that in the event
that such Borrower prepays or is required to prepay any LIBOR Loan by
acceleration or otherwise or fails to draw down or convert to a LIBOR Loan after
giving notice thereof, it shall reimburse each Lender for its funding losses due
to such prepayment or failure to draw. Borrowers and Lenders hereby agree that
such funding losses shall consist of the sum of the discounted monthly
differences for each month during the applicable or requested Interest Period,
calculated as follows for each such month:
(a) Principal amount of such LIBOR Loan times (number
of days between the date of prepayment and the last day in the
applicable Interest Period divided by 360), times the
applicable Interest Differential, plus
(b) all actual out-of-pocket expenses (other than
those taken into account in the calculation of the Interest
Differential) incurred by Lenders and Agent (excluding
allocation of any expense internal to Lenders and Agent) and
reasonably attributable to such payment, prepayment or failure
to draw down or convert as described above; provided that no
prepayment fee shall be payable (and no credit or rebate shall
be required) if the product of the foregoing formula is not a
positive number.
.. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND THE
MAKING OF LOANS
. The effectiveness of this Agreement is subject to the satisfaction of
the following conditions precedent:
. Agent shall have received, in form and substance
satisfactory to Lenders and their respective counsel a certified copy of the
records of all actions taken by each Borrower and FSI, including all resolutions
of each Borrower and corporate resolutions of FSI, authorizing or relating to
the execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby and
thereby.
. Agent shall have received new Notes, in form and substance
satisfactory to Lenders, and duly executed and delivered by each Borrower, which
Notes shall replace and supersede the Notes issued by Borrowers to Agent
pursuant to the Growth Fund Agreement.
. Agent shall have received an originally executed Opinion of
Counsel, in form and substance satisfactory to Lenders, dated as of the Closing
Date and addressed to Lenders, together with copies of any officer's certificate
or legal opinion of other counsel or law firm specifically identified and
expressly relied upon by such counsel.
. Agent shall have received the Reaffirmation of Guaranty, in
form and substance satisfactory to Lenders, duly executed and delivered by FSI.
. Agent shall have received the TEC AcquiSub Amendment, duly
executed and delivered by TEC AcquiSub, and all conditions precedent to the
effectiveness of the TEC AcquiSub Amendment shall have been satisfied.
. Agent shall have received the AFG Agreement, duly executed
and delivered by AFG, and all conditions precedent to the effectiveness of the
AFG Agreement shall have been satisfied.
. Separate certificates, dated as of the Closing Date, of the
Chief Financial Officer or Corporate Controller of FSI, in its capacity as the
sole general partner of EGF III, EGF IV, EGF V, EGF VI and EGF VII and as the
sole manager of Income Fund I, to the effect that (i) the representations and
warranties of each Borrower contained in Section 4 are true, accurate and
complete in all material respects as of the Closing Date as though made on such
date and (ii) no Event of Default or Potential Event of Default under this
Agreement has occurred.
. Agent shall have received the Fee Letter and the Agent's
Side Letter, duly executed by Borrowers, TEC AcquiSub and AFG, and the
arrangement fee and the Agent's fee described in the Fee Letter and Agent's Side
Letter, respectively.
. Agent shall have received such other documents, information
and items from Borrowers and FSI as reasonably requested by Agent.
. Unless waived in writing by Requisite Lenders, the obligation of any
Lender to make any Advance is subject to the satisfaction of the following
further conditions precedent:
. At least three (3) Business Days before each Loan hereunder
with respect to any acquisition of Equipment by any Borrower, Agent shall have
received (i) Notice of Borrowing and (ii) a Borrowing Base Certificate, with
appropriate insertions, executed by the Chief Financial Officer or Corporate
Controller of such Borrower.
. No event shall have occurred and be continuing or would
result from the making of any Loan on such Funding Date which constitutes an
Event of Default or Potential Event of Default under this Agreement or under
(and as separately defined in) the TEC AcquiSub Agreement or under (and as
separately defined in) the AFG Agreement, or which with notice or lapse of time
or both would constitute an Event of Default or Potential Event of Default under
this Agreement or under the TEC AcquiSub Agreement or the AFG Agreement.
. All representations and warranties contained in the Loan
Documents shall be true, accurate and complete in all material respects with the
same effect as though such representations and warranties had been made on and
as of such Funding Date (except to the extent such representations and
warranties specifically relate to an earlier date, in which case they shall be
true, accurate and complete in all material respects as of such earlier date).
. The insurance required to be maintained by such Borrower
pursuant to the Loan Documents shall be in full force and effect.
. Agent shall have received such other instruments and
documents as it may have reasonably requested from Borrowers in connection with
the Loans to be made on such date.
. Notwithstanding anything to the contrary contained in this Agreement,
unless waived in writing by Requisite Lenders, no Lender shall have any
obligation hereunder to make any Advance if any of the following events shall
occur:
. FSI shall have ceased to be the sole general partner of any
of EGF III, EGF IV, EGF V, EGF VI or EGF VII or the sole manager of Income Fund
I, whether due to the voluntary or involuntary withdrawal, substitution, removal
or transfer of FSI from or of all or any portion of FSI's general partnership
interest or capital contribution in such Borrower.
. Twenty five percent (25.0%) or more of the limited partners
(measured by such partners' percentage interest) of any Equipment Growth Fund
shall at any time vote to remove FSI as the general partner of such Equipment
Growth Fund or a majority in interest of Class A members, as that term is
defined in the Operating Agreement, of Income Fund I shall at any time vote to
remove FSI as manager of Income Fund I, in each case, regardless of whether FSI
is actually removed.
Requesting Borrower, TEC AcquiSub, FSI or their Subsidiaries
shall have ceased to be the purchaser of Eligible Inventory for such Requesting
Borrower.
. 4. BORROWERS' AND FSI'S REPRESENTATIONS AND WARRANTIES
. Each Borrower, severally, as to itself, but not jointly as to the
other Borrowers and FSI, and FSI, jointly and severally with each Borrower as to
each such Borrower and as to itself, hereby warrant and represent to Agent and
each Lender as follows, and agree that each of said warranties and
representations shall be deemed to continue until full, complete and
indefeasible payment and performance of the Obligations and shall apply anew to
each borrowing hereunder:
. Each Borrower is a limited partnership or, in the case of
Income Fund I, a limited liability company, and FSI is a corporation, each duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified and licensed as a foreign
corporation, partnership or limited liability company, as applicable, and
authorized to do business in each jurisdiction within the United States where
its ownership of Property and assets or conduct of business requires such
qualification. Each Borrower and FSI has the power and authority, rights and
franchises to own their Property and assets and to carry on their businesses as
now conducted. Each Borrower and FSI has the power and authority to execute and
deliver the Loan Documents (to the extent each is a party thereto) and all other
instruments and documents contemplated hereby or thereby.
. The execution, delivery and performance of this Agreement
and each of the other Loan Documents to which any Borrower is a party and
delivery and payment of such Borrower's respective Note have been duly
authorized by all necessary and proper action on the part of such Borrower. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents to which FSI is a party have been duly authorized by all necessary and
proper corporate action on the part of FSI. The Loan Documents constitute
legally valid and binding obligations of each Borrower and FSI, as the case may
be, enforceable against each Borrower and FSI, to the extent any one of them is
a party thereto, in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights generally.
. (a) The execution, delivery and performance of this
Agreement, and each of the other Loan Documents and the execution, delivery and
payment of the Notes will not: (i) contravene any provision of FSI's certificate
of incorporation or bylaws; (ii) contravene any provision of any Borrowers'
Limited Partnership Agreements or, in the case of Income Fund I, Operating
Agreement or other formation or organization document; or (iii) contravene,
conflict with or violate any applicable law or regulation, or any order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority, which contravention, conflict or violation, in the aggregate, may
have Material Adverse Effect; and (b) the execution and delivery of this
Agreement, and each of the other Loan Documents and the execution and delivery
of the Notes will not violate or result in the breach of, or constitute a
default under any indenture or other loan or credit agreement, or other
agreement or instrument which are, in the aggregate, material and to which any
Borrower or FSI is a party or by which any Borrower, FSI or their Property and
assets may be bound or affected. Neither any Borrower nor FSI is in violation or
breach of or default under any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or any contract, agreement, lease,
license, indenture or other instrument to which any one of them is a party, the
non-compliance with, the violation or breach of or the default under which
would, with reasonable likelihood, have a Material Adverse Effect.
. Each Borrower's and FSI's audited consolidated financial
statements as of December 31, 1995 and Borrowers' and FSI's unaudited
consolidated financial statements as of March 31, 1996, copies of which
heretofore have been delivered to Agent by such Borrower and FSI, respectively,
and all other financial statements and other data submitted in writing by any
Borrower and FSI to Agent or any Lender in connection with the request for
credit granted by this Agreement, are true, accurate and complete in all
material respects, and said financial statements and other data fairly present
the consolidated financial condition of such Borrower and FSI, as of the date
thereof, and have been prepared in accordance with GAAP, subject to fiscal
year-end audit adjustments. There has been no material adverse change in the
business, properties or assets, operations, prospects, profitability or
financial or other condition of any Borrower or FSI since March 31, 1996.
. The current location of each Borrower's and FSI's chief
executive offices and principal places of business is set forth on Schedule
4.1.5.
. Except as disclosed on Schedule 4.1.6, there are no claims,
actions, suits, proceedings or other litigation pending or, to the best of each
Borrower's and FSI's knowledge, after due inquiry, threatened against any
Borrower, FSI or any of FSI's Subsidiaries, including, without limitation, TEC
AcquiSub, at law or in equity before any Governmental Authority or, to the best
of each Borrower's and FSI's knowledge, after due inquiry, any investigation by
any Governmental Authority of any Borrower's or FSI's or any of FSI's
Subsidiaries', including, without limitation, TEC AcquiSub's, affairs,
Properties or assets which would, with reasonable likelihood, if adversely
determined, have a Material Adverse Effect. Other than any liability incident to
the litigation or proceedings disclosed on Schedule 4.1.6, neither any Borrower,
nor FSI nor any of FSI's Subsidiaries, including, without limitation, TEC
AcquiSub, has any Contingent Obligations which are not provided for or disclosed
in the financial statements delivered to Agent pursuant to Sections 4.1.4 and
5.1.
. Schedule 4.1.7 lists all currently effective contracts and
agreements (whether written or oral) to which each Borrower is a party and which
(i) could involve the payment or receipt by such Borrower after the date of this
Agreement of more than $250,000 or (ii) otherwise materially affect the
business, operations or financial condition of any Borrower (the "Material
Contracts"). Except as disclosed on Schedule 4.1.7, there are no material
defaults under any such Material Contract by any Borrower, to the best of each
Borrower's knowledge, by any other party to any such Material Contract. Each
Borrower has delivered to Agent true and correct copies of all such contracts or
agreements (or, with respect to oral contracts or agreements, written
descriptions of the material terms thereof).
. Except as set forth in Schedule 4.1.8, all consents and
approvals of, filings and registrations with, and other actions in respect of,
all Governmental Authorities required to be obtained by any Borrower, FSI or any
of FSI's Subsidiaries in order to make or consummate the transactions
contemplated under the Loan Documents have been, or prior to the time when
required will have been, obtained, given, filed or taken and are or will be in
full force and effect.
. Neither any Borrower, FSI nor any of FSI's Subsidiaries,
including, without limitation, TEC AcquiSub, is a party to or is bound by any
agreement, contract, lease, license or instrument, or is subject to any
restriction under its respective charter or formation documents, which has, or
is likely in the foreseeable future to have, a Material Adverse Effect. Neither
any Borrower nor FSI has entered into and, as of the Closing Date does not
contemplate entering into, any material agreement or contract with any Affiliate
of any Borrower or FSI on terms that are less favorable to such Borrower or FSI
than those that might be obtained at the time from Persons who are not such
Affiliates.
. There are no collective bargaining agreements or other labor
agreements covering any employees of any Borrower, FSI or any of FSI's
Subsidiaries.
. No Borrower has an Employee Benefit Plan subject to ERISA.
All Pension Plans of FSI and any of FSI's Subsidiaries, that are intended to be
qualified under Section 401(a) of the Code have been determined by the IRS to be
qualified or FSI or any of FSI's Subsidiaries will obtain such determination
prior to instituting such a Pension Plan. All Pension Plans existing as of the
date hereof continue to be so qualified. No "reportable event" (as defined in
Section 4043 of ERISA) has occurred and is continuing with respect to any
Pension Plan for which the thirty-day notice requirement may not be waived other
than those of which the appropriate Governmental Authority has been notified.
All Employee Benefit Plans of FSI or any of FSI's Subsidiaries have been
operated in all material respects in accordance with their terms and applicable
law, including ERISA, and no "prohibited transaction" (as defined in ERISA and
the Code) that would result in any material liability to FSI or any of FSI's
Subsidiaries has occurred with respect to any such Employee Benefit Plan.
. There are no strikes or other labor disputes against any
Borrower, FSI or any of FSI's Subsidiaries or, to the best of each Borrower's
and FSI's knowledge, after due inquiry, threatened against any Borrower, FSI or
any of FSI's Subsidiaries, which would, with reasonable likelihood, have a
Material Adverse Effect. All payments due from any Borrower or FSI on account of
employee health and welfare insurance which would, with reasonable likelihood,
have a Material Adverse Effect if not paid have been paid or, if not due,
accrued as a liability on the books of such Borrower or FSI.
. Neither any Borrower nor FSI own any "margin security", as
that term is defined in Regulations G and U of the Federal Reserve Board, and
the proceeds of the Loans under this Agreement will be used only for the
purposes contemplated hereunder. None of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans under this Agreement to be considered a "purpose
credit" within the meaning of Regulations G, T, U and X. Neither any Borrower
nor FSI will take or permit any agent acting on its behalf to take any action
which might cause this Agreement or any document or instrument delivered
pursuant hereto to violate any regulation of the Federal Reserve Board.
. All federal, state, local and foreign tax returns, reports
and statements required to be filed by any Borrower, FSI and, to the best of
each Borrower's and FSI's knowledge, after due inquiry, by any of FSI's
Subsidiaries have been filed with the appropriate Governmental Authorities where
failure to file would, with reasonable likelihood, have a Material Adverse
Effect, and all material Charges and other impositions shown thereon to be due
and payable by any Borrower, FSI or such Subsidiary have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof, or any such fine, penalty, interest, late charge or loss
has been paid, or such Borrower, FSI or such Subsidiary is contesting its
liability therefore in good faith and has fully reserved all such amounts
according to GAAP in the financial statements provided to Agent pursuant to
Section 5.1. Each Borrower, FSI and, to the best of each Borrower's and FSI's
knowledge, after due inquiry, each of FSI's Subsidiaries has paid when due and
payable all material Charges upon the books of any Borrower, FSI or such
Subsidiary and no Government Authority has asserted any Lien against any
Borrower, FSI or any of FSI's Subsidiaries with respect to unpaid Charges.
Proper and accurate amounts have been withheld by each Borrower, FSI and, to the
best of each Borrower's and FSI's knowledge, after due inquiry, each of FSI's
Subsidiaries from its employees for all periods in full and complete compliance
with the tax, social security and unemployment withholding provisions of
applicable federal, state, local and foreign law and such withholdings have been
timely paid to the respective Governmental Authorities.
. .15 Environmental Quality
(a) Except as specifically disclosed in Schedule 4.1.15,
the on-going operations of each Borrower, FSI and each of FSI's Subsidiaries
comply in all material respects with all Environmental Laws, except such
non-compliance which would not (if enforced in accordance with applicable law)
result in liability in excess of $250,000 in the aggregate.
(b) Except as specifically disclosed in Schedule 4.1.15,
each Borrower, FSI and each of FSI's Subsidiaries has obtained all licenses,
permits, authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for its ordinary course operations, all
such Environmental Permits are in good standing, and each Borrower, FSI and each
of FSI's Subsidiaries is in compliance with all material terms and conditions of
such Environmental Permits.
(c) Except as specifically disclosed in Schedule 4.1.15,
neither any Borrower, FSI or any of FSI's Subsidiaries nor any of their
respective present Property or operations is subject to any outstanding written
order from or agreement with any Governmental Authority nor subject to any
judicial or docketed administrative proceeding, respecting any Environmental
Law, Environmental Claim or Hazardous Material.
(d) Except as specifically disclosed in Schedule 4.1.15,
there are no Hazardous Materials or other conditions or circumstances existing
with respect to any Property, or arising from operations prior to the Closing
Date, of any Borrower, FSI or any of FSI's Subsidiaries that would reasonably be
expected to give rise to Environmental Claims with a potential liability of any
Borrower, FSI or any of FSI's Subsidiaries in excess of $250,000 in the
aggregate for any such condition, circumstance or Property.
. Each Borrower and FSI and, to the best of their knowledge,
after due inquiry, each of FSI's Subsidiaries possess and owns all necessary
trademarks, trade names, copyrights, patents, patent rights, franchises and
licenses which are material to the conduct of their business as now operated.
. As of the Closing Date, no information contained in this
Agreement, the other Loan Documents or any other documents or written materials
furnished by or on behalf of any Borrower or FSI to Agent or any Lender pursuant
to the terms of this Agreement or any of the other Loan Documents contains any
untrue or inaccurate statement of a material fact or omits to state a material
fact necessary to make the statement contained herein or therein not misleading
in light of the circumstances under which made.
. Neither any Borrower nor FSI is: (a) a "public utility
company" or a "holding company," or an "affiliate" or a "subsidiary company" of
a "holding company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act or (b) an
"investment company," or an "affiliated person" of, or a "promoter" or
"principal underwriter" for, an "investment company," as such terms are defined
in the Investment Company Act. The making of the Loans hereunder and the
application of the proceeds and repayment thereof by each Borrower and the
performance of the transactions contemplated by this Agreement and the other
Loan Documents will not violate any provision of the Investment Company Act or
the Public Utility Holding Company Act, or any rule, regulation or order issued
by the SEC thereunder.
. Each Borrower and FSI are Solvent.
. At the time any Borrower makes a request for an initial borrowing
hereunder, each such Borrower, severally, as to itself, but not jointly as to
the other Borrowers and FSI, and FSI, jointly and severally with each Borrower
as to each such Borrower and as to itself, hereby warrant and represent to Agent
and each Lender as follows, and agree that each of said warranties and
representations shall be deemed to continue until full, complete and
indefeasible payment and performance of the Obligations and shall apply anew to
each additional borrowing hereunder:
. Each Borrower and FSI has the power and authority to perform
the terms of the Loan Documents (to the extent each is a party thereto) and all
other instruments and documents contemplated hereby or thereby.
. The performance of this Agreement, and each of the other
Loan Documents and the payment of the Notes will not violate or result in the
breach of, or constitute a default under any indenture or other loan or credit
agreement, or other agreement or instrument which are, in the aggregate,
material and to which any Borrower or FSI is a party or by which any Borrower,
FSI or their Property and assets may be bound or affected.
. No approval, authorization or consent of any trustee or
holder of any indebtedness or obligation of any Borrower or FSI or of any other
Person under any such material agreement, contract, lease or license or similar
document or instrument to which such Borrower, FSI or any of FSI's Subsidiaries
is a party or by which such Borrower, FSI or any such Subsidiary is bound, is
required to be obtained by any such Borrower, FSI or any such Subsidiary in
order to make or consummate the transactions contemplated under the Loan
Documents.
. So long as any of the Commitments shall be available and until
payment and performance in full of the Obligations, the representations and
warranties contained herein shall have a continuing effect as having been true
when made.
. 5. BORROWERS' AND FSI'S AFFIRMATIVE COVENANTS
Each Borrower, severally, as to itself, but not jointly as to the other
Borrowers and FSI, and FSI, jointly and severally with each Borrower as to each
Borrower and as to itself (and, where applicable, PLMI) covenant and agree that,
so long as any of the Commitments shall be available and until full, complete
and indefeasible payment and performance of the Obligations, unless Requisite
Lenders shall otherwise consent in writing, each Borrower and FSI shall do or
cause to have done all of the following:
. Maintain, and cause each of FSI's Subsidiaries to maintain, a system
of accounting administered in accordance with sound business practices to permit
preparation of financial statements in conformity with GAAP, and deliver to
Agent or caused to be delivered to Agent:
. As soon as practicable and in any event within sixty (60)
days after the end of each quarterly accounting period of each Borrower, FSI and
PLMI, except with respect to the final fiscal quarter of each fiscal year, in
which case as soon as practicable and in any event within one hundred twenty
(120) days after the end of such fiscal quarter, consolidated and consolidating
balance sheets of FSI and PLMI and a balance sheet of each Borrower as at the
end of such period and the related consolidated (and, as to statements of income
only for FSI, consolidating) statements of income and stockholders' or members'
equity of each Borrower and FSI and the related consolidated statements of
income, stockholders' or members' equity and cash flows of PLMI (and, as to
statements of income only, consolidating) for such quarterly accounting period,
setting forth in each case in comparative form the consolidated figures for the
corresponding periods of the previous year, all in reasonable detail and
certified by the Chief Financial Officer or Corporate Controller of the general
partner or manager of each Borrower, as applicable, FSI and PLMI that they (i)
are complete and fairly present the financial condition of such Borrower, FSI
and PLMI as at the dates indicated and the results of their operations and
changes in their cash flow for the periods indicated, (ii) disclose all
liabilities of each Borrower, FSI and PLMI that are required to be reflected or
reserved against under GAAP, whether liquidated or unliquidated, fixed or
contingent and (iii) have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end adjustment;
. As soon as practicable and in any event within one hundred
twenty (120) days after the end of each fiscal year of each Borrower, FSI and
PLMI, consolidated and consolidating balance sheets of FSI and PLMI and a
balance sheet of each Borrower as at the end of such year and the related
consolidated (and, as to statements of income only for FSI and PLMI,
consolidating) statements of income, stockholders' or members' equity and cash
flows of each Borrower, if applicable, FSI and PLMI for such fiscal year,
setting forth in each case, in comparative form the consolidated figures for the
previous year, all in reasonable detail and (i) in the case of such consolidated
financial statements, accompanied by a report thereon of an independent public
accountant of recognized national standing selected by each Borrower, FSI and
PLMI and satisfactory to Agent, which report shall contain an opinion which is
not qualified in any manner or which otherwise is satisfactory to Requisite
Lenders, in their sole discretion, and (ii) in the case of such consolidating
financial statements, certified by the Chief Financial Officer or Corporate
Controller of FSI and PLMI;
. As soon as practicable, and in any event not later than
fifteen (15) days after the end of each calendar month in which a Loan has been,
or is, outstanding, a Borrowing Base Certificate dated as of the last day of
such month, duly executed by a Chief Financial Officer or Corporate Controller
of the general partner or manager of each Borrower, with appropriate insertions;
. As soon as practicable, and in any event not later than
forty-five (45) days after the end of each fiscal quarter of each Borrower, a
Compliance Certificate dated as of the last day of such fiscal quarter, and
executed by the Chief Financial Officer or Corporate Controller of the general
partner or manager of such Borrower, with appropriate insertions.
. At Agent's request, promptly upon receipt thereof, copies of
all reports submitted to each Borrower, FSI or PLMI by independent public
accountants in connection with each annual, interim or special audit of the
financial statements of such Borrower, FSI or PLMI made by such accountants;
. (i) On the date six months after the Closing Date and
thereafter upon Agent's reasonable request, which request will not be made more
than once during any calendar year (unless an Event of Default shall have
occurred and be continuing), a report from each Borrower's insurance broker, in
such detail as Agent may reasonably request, as to the insurance maintained or
caused to be maintained by each Borrower pursuant to this Agreement,
demonstrating compliance with the requirements hereof and thereof, and (ii) as
soon as possible and in no event later than fifteen (15) days prior to the
expiration date of any insurance policy of any Borrower, a written confirmation
that such policy is in process of renewal and is not terminated or subject to a
notice of non-renewal from such Borrower's insurance broker; provided, however,
that such Borrower shall give Agent prompt written notice if changes affecting
risk coverage will be made to such policy or if the policy will be terminated;
. Promptly upon any officer of any Borrower or FSI obtaining
knowledge (a) of any condition or event which constitutes an Event of Default or
Potential Event of Default under this Agreement, (b) that any Person has given
any notice to any Borrower, FSI, TEC, TEC AcquiSub or PLMI or taken any other
action with respect to a claimed default or event or condition of the type
referred to in Section 8.1.2, (c) of the institution of any litigation or of the
receipt of written notice from any Governmental Authority as to the commencement
of any formal investigation involving an alleged or asserted liability of any
Borrower, FSI, TEC, TEC AcquiSub or PLMI equal to or greater than $500,000 or
any adverse judgment in any litigation involving a potential liability of any
Borrower, FSI, TEC, TEC AcquiSub or PLMI equal to or greater than $500,000, or
(d) of a material adverse change in the business, operations, properties, assets
or condition (financial or otherwise) of any Borrower, FSI, TEC, TEC AcquiSub or
PLMI, a certificate of a Responsible Officer of any Borrower or FSI, as
applicable, specifying the notice given or action taken by such Person and the
nature of such claimed default, Event of Default, Potential Event of Default,
event or condition and what action such Borrower, FSI, TEC, TEC AcquiSub or PLMI
has taken, is taking and proposes to take with respect thereto;
. Promptly upon becoming aware of the occurrence of any (a)
Termination Event in connection with any Pension Plan or (b) "prohibited
transaction" (as such term is defined in ERISA and the Code) in connection with
any Employee Benefit Plan or any trust created thereunder, a written notice
specifying the nature thereof, what action any Borrower or any of its ERISA
Affiliates has taken, is taking or proposes to take with respect thereto, and,
when known, any action taken or threatened by the IRS or the PBGC with respect
thereto;
. With reasonable promptness, copies of (a) all notices
received by any Borrower, FSI, any of FSI's Subsidiaries or any of their ERISA
Affiliates of the PBGC's intent to terminate any Pension Plan or to have a
trustee appointed to administer any Pension Plan, (b) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by any Borrower, FSI,
any of FSI's Subsidiaries or any of their ERISA Affiliates with the IRS with
respect to each Pension Plan covering employees of any Borrower, FSI or any of
FSI's Subsidiaries, and (c) all notices received by any Borrower, FSI, any of
FSI's Subsidiaries or any of their ERISA Affiliates from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA;
. Promptly upon receipt by any Borrower, FSI or any of FSI's
Subsidiaries, any challenge by the IRS to the qualification under Section 401 or
501 of the Code of any Pension Plan;
. As soon as available and in no event later than five (5)
days after the same shall have been filed with the SEC, a copy of each Form 8-K
Current Report, Form 10-K Annual Report, Form 10-Q Quarterly Report, Annual
Report to Shareholders, Proxy Statement and Registration Statement of any
Borrower and PLMI;
. Upon the request of Agent, copies of all federal, state,
local and foreign tax returns and reports in respect of income, franchise or
other taxes on or measured by income (excluding sales, use or like taxes) filed
by or on behalf of any Borrower and FSI; and
. Such other information respecting the condition or
operations, financial or otherwise, of any Borrower and PLMI and its
Subsidiaries as Agent or any Lender may from time to time reasonably request,
and such information regarding the lessees under Leases as any Borrower from
time to time receives or Agent or any Lender reasonably requests.
All financial statements of Borrowers, FSI and PLMI to be delivered by
any Borrower and FSI to Agent pursuant to this Section 5.1 will be complete and
correct and present fairly the financial condition of each Borrower, FSI and
PLMI as of the date thereof; will disclose all liabilities of each Borrower, FSI
and PLMI that are required to be reflected or reserved against under GAAP,
whether liquidated or unliquidated, fixed or contingent; and will have been
prepared in accordance with GAAP. All tax returns submitted to Agent by
Borrowers and FSI will, to the best of each Borrower's and FSI's knowledge,
after due inquiry, be true and correct. Each Borrower and FSI hereby agree that
each time any one of them submits a financial statement or tax return to Agent,
such Borrower and FSI shall be deemed to represent and warrant to Lenders that
such financial statement or tax return complies with all of the preceding
requirements set forth in this paragraph.
. Each Borrower and FSI shall preserve and maintain, and FSI shall
cause each of FSI's Subsidiaries, including, without limitation, TEC AcquiSub,
to preserve and maintain, their existence and all of their licenses, permits,
governmental approvals, rights, privileges and franchises necessary or desirable
in the normal conduct of their businesses as now conducted or presently proposed
to be conducted (including, without limitation, their qualification to do
business in each jurisdiction in which such qualification is necessary or
desirable in view of its business); conduct, and cause each of FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, and any Owner Trustee
to conduct, its business in an orderly and regular manner; and comply, and cause
each of FSI's Subsidiaries, including, without limitation, TEC AcquiSub, and any
Owner Trustee, to comply, with (a) as to any Borrower, its Limited Partnership
Agreement, Operating Agreement and other organizational documents, as
applicable, and as to FSI and each of its Subsidiaries, including, without
limitation, TEC AcquiSub, the provisions of its respective certificate or
articles of incorporation, as applicable, and bylaws and (b) the requirements of
all applicable laws, rules, regulations or orders of any Governmental Authority
and requirements for the maintenance of any Borrower's, FSI's or such
Subsidiary's insurance, licenses, permits, governmental approvals, rights,
privileges and franchises, except, in either case, to the extent that the
failure to comply therewith would not, in the aggregate, with reasonable
likelihood, have a Material Adverse Effect.
. Each Borrower and FSI shall maintain and keep in force, and cause
each of FSI's Subsidiaries, including, without limitation, TEC AcquiSub, to
maintain and keep in force insurance of the types and in amounts then
customarily carried in lines of business similar to that of Borrowers, FSI or
any of FSI's Subsidiaries as the case may be, including, but not limited to,
fire, extended coverage, public liability, property damage, environmental hazard
and workers' compensation, in each case carried with financially sound Persons
and in amounts satisfactory to Requisite Lenders (subject to commercial
reasonableness as to each type of insurance); provided, however, that the types
and amounts of insurance shall not provide any less coverage for any Borrower
than provided as of the Closing Date by the existing blanket policies of
insurance for PLMI and its Subsidiaries. All such policies as to liability
insurance shall carry endorsements naming Agent and each Lender as an additional
insured and, upon the reasonable request of Agent, all such policies of property
insurance shall carry endorsements naming Agent as principal loss payee as to
any property owned by Borrowers and financed by Lenders, and in each case
indicating that (a) any loss thereunder shall be payable to Agent or Lenders, as
the case may be, notwithstanding any action, inaction or breach of
representation or warranty by any Borrower or FSI; (b) there shall be no
recourse against any Lender for payment of premiums or other amounts with
respect thereto, and (c) at least fifteen (15) days' prior written notice of
cancellation, lapse or material change in coverage shall be given to Agent by
the insurer.
. Promptly pay and discharge and cause each of FSI's Subsidiaries,
including, without limitation, TEC AcquiSub, promptly to pay and discharge all
material Charges when due and payable, except (a) such as may be paid thereafter
without penalty or (b) such as may be contested in good faith by appropriate
proceedings and for which an adequate reserve has been established and is
maintained in accordance with GAAP. Each Borrower and FSI shall promptly notify
Agent of any material challenge, contest or proceeding pending by or against any
Borrower, FSI and PLMI or any of FSI's Subsidiaries before any taxing authority.
. At any reasonable time and from time to time during normal business
hours, permit Agent or any Lender or any agent, representative or employee
thereof, to examine and make copies of and abstracts from the financial records
and books of account of each Borrower, FSI or any of FSI's Subsidiaries,
including, without limitation, TEC AcquiSub, and other documents in the
possession or under the control of any Borrower, FSI or any of FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, relating to any
obligation of any Borrower or FSI arising under or contemplated by this
Agreement and to visit the offices of any Borrower or FSI to discuss the
affairs, finances and accounts of any Borrower or FSI with any of the officers
of any Borrower or FSI, and, upon reasonable notice and during normal business
hours (unless an Event of Default or Potential Event of Default shall have
occurred and be continuing, in which event no notice is required), to conduct
audits of and appraise Equipment. Such audits and appraisals shall be subject to
the lessee's right to quiet enjoyment as set forth in the respective lease.
. 6 Maintenance Of Facilities; Modifications
. Each Borrower and FSI shall keep and cause each of FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, to keep, all of their
respective Properties which are useful or necessary to such Borrower's, FSI's or
such Subsidiary's business, in good repair and condition, normal wear and tear
excepted, and from time to time make, and cause each such Subsidiary to make
necessary repairs thereto, and renewals and replacements thereof so that each
Borrower's, FSI's or such Subsidiary's Properties shall be fully and efficiently
preserved and maintained.
. Subject to Section 5.6.1, each Borrower and FSI shall
promptly make, or cause to be made, all modifications, additions and adjustments
to the Eligible Inventory as may from time to time be required by any
Governmental Authority having jurisdiction over the operation, safety or use
thereof.
. From time to time as may be necessary (in the event that such
information is not otherwise delivered by Borrowers or FSI to Agent or Lenders
pursuant to this Agreement), so long as there are Obligations outstanding
hereunder, disclose to Agent in writing any material matter hereafter arising
which, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described by any Borrower or FSI in this Agreement
or any of the other Loan Documents (including all Schedules and Exhibits hereto
or thereto) or which is necessary to correct any information set forth or
described by Borrowers or FSI hereunder or thereunder or in connection herewith
which has been rendered inaccurate thereby.
. In addition to the obligations and documents which this Agreement
expressly requires Borrowers or FSI to execute, deliver and perform, each
Borrower or FSI shall execute, deliver and perform, and shall cause FSI's
Subsidiaries to execute, deliver and perform, any and all further acts or
documents which Agent or Lenders may reasonably require to effectuate the
purposes of this Agreement or any of the other Loan Documents.
. Each Borrower shall, unless otherwise directed in writing by Agent,
cause all remittances made by the obligor under any Lease to be made to a lock
box (the "Lockbox") maintained with FUNB pursuant to the Lockbox Agreement.
Unless otherwise directed by Agent in writing, all invoices and other
instructions submitted by any Borrower to the obligor relating to Lease payments
shall designate the Lockbox as the place to which such payments shall be made.
. Each Borrower and FSI shall, and FSI shall cause each of its
Subsidiaries to, conduct its operations and keep and maintain its Property in
material compliance with all Environmental Laws.
. 6. BORROWER'S AND FSI'S NEGATIVE COVENANTS
So long as any of the Commitments shall be available and until full,
complete and indefeasible payment and performance of the Obligations, unless
Requisite Lenders shall otherwise consent in writing, each Borrower, severally,
as to itself, but not jointly as to the other Borrowers and FSI, and FSI,
jointly and severally with each Borrower as to such Borrower and to itself,
covenant and agree as follows:
. Each Borrower and FSI shall not create, incur, assume or suffer to
exist, and shall not permit any Marine Subsidiary of such Borrower or Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI to create, incur, assume or suffer to exist,
and FSI shall not permit any of its Subsidiaries (including, without limitation,
TEC and TEC AcquiSub) to create, incur, assume or suffer to exist, any Lien of
any nature upon or with respect to any of their respective Property, whether now
or hereafter owned, leased or acquired, except (collectively, the "Permitted
Liens"):
.1 Existing Liens disclosed on Schedule 6.1, provided
that the obligations secured thereby are not increased;
.2 Liens for Charges if payment shall not at the time
be required to be made in accordance with Section 5.4;
.3 Liens in respect of pledges, obligations or
deposits (a) under workers' compensation laws, unemployment insurance and other
types of social security or similar legislation, (b) in connection with surety,
appeal and similar bonds incidental to the conduct of litigation, (c) in
connection with bid, performance or similar bonds and mechanics', laborers' and
materialmen's and similar statutory Liens not then delinquent, or (d) incidental
to the conduct of the business of such Borrower, any Marine Subsidiary of such
Borrower, FSI or any Owner Trustee or any of FSI's Subsidiaries and which were
not incurred in connection with the borrowing of money or the obtaining of
advances or credit; provided that the Liens permitted by this Section 6.1.3 do
not in the aggregate materially detract from the value of any assets or property
of or materially impair the use thereof in the operation of the business of such
Borrower, FSI or any Owner Trustee or any of FSI's Subsidiaries; and provided
further that the adverse determination of any claim or liability, contingent or
otherwise, secured by any of such Liens would not either individually or in the
aggregate, with reasonable likelihood, have a Material Adverse Effect;
.4 Permitted Rights of Others; and
.5 Liens granted in favor of Agent on behalf of
Lenders under the TEC AcquiSub Agreement and the security agreement and other
loan documents delivered by TEC AcquiSub pursuant thereto.
. Each Borrower shall not, and shall not permit any Marine Subsidiary
of such Borrower to, and FSI shall not permit TEC and TEC AcquiSub to, make any
Acquisition or enter into any agreement to make any Acquisition, other than with
respect to the purchase of Equipment in the ordinary course of business or the
formation or acquisition of a Marine Subsidiary.
. Each Borrower and FSI shall not create, incur, assume or suffer to
exist, nor permit any Marine Subsidiary of such Borrower or Owner Trustee
holding record title to any Eligible Inventory for the beneficial interest of
such Borrower or FSI to create, incur, assume or suffer to exist, and FSI shall
not permit any of its Subsidiaries (including, without limitation, TEC and TEC
AcquiSub) to create, incur, assume or suffer to exist, any Indebtedness or
Contingent Obligation; provided, however, that this Section 6.3 shall not be
deemed to prohibit:
.1 The Obligations to Lenders and Agent arising
hereunder and under the other Loan Documents;
.2 Existing Indebtedness disclosed on Schedule 6.3(a)
and anticipated Indebtedness disclosed on Schedule 6.3(b);
.3 Indebtedness of any Subsidiary of FSI, provided
that such Indebtedness is non-recourse as to FSI, TEC and TEC AcquiSub;
.4 The acquisition of goods, supplies or merchandise
on normal trade credit;
.5 The endorsement of negotiable instruments received
in the ordinary course of any Borrower's business as presently conducted;
.6 Indebtedness incurred in respect of the deferred
purchase price for an item of Equipment, but only to the extent that the
incurrence of such Indebtedness is customary in the industry with respect to the
purchase of this type of equipment (provided that such Indebtedness shall only
be permitted under this clause (d) if, taking into account the incurrence of
such Indebtedness, the Borrower incurring such Indebtedness shall not be in
violation of any of the financial covenants set forth in Section 7 if measured
as of the date of incurrence as determined by GAAP);
.7 Any Guaranty Obligations of any Borrower in the
form of performance guaranties undertaken on behalf of a Marine Subsidiary of
such Borrower in favor of the charter party in connection with the leasing of a
marine vessel on a time charter; and
.8 Contingent Obligations (but excluding specifically
Guaranty Obligations which shall be prohibited) of FSI solely in its capacity as
a general partner or manager of the Equipment Growth Funds.
. Each Borrower and FSI shall not, and shall not permit any Marine
Subsidiary of such Borrower or Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI to, use
the proceeds of any Loan except for the purpose set forth in Recital D, above,
and shall not, and shall not permit any such Marine Subsidiary or such Owner
Trustee to, use the proceeds to repay any loans or advances made by any other
Person.
. Each Borrower and FSI shall not, and shall not permit any Marine
Subsidiary of such Borrower or any Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI to, sell,
assign or otherwise dispose of, any of its or their respective assets, except
for full, fair and reasonable consideration, or enter into any sale and
leaseback agreement covering any of its or their respective fixed or capital
assets.
. Each Borrower and FSI shall not, and shall not permit any Marine
Subsidiary of such Borrower to, enter into any transaction of merger,
consolidation or recapitalization, directly or indirectly, whether by operation
of law or otherwise, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
part of its business, Property or assets, whether now owned or hereafter
acquired, or acquire by purchase or otherwise all or substantially all the
business, Property or assets of, or stock or other evidence of beneficial
ownership of, any Person, except (a) sales of Equipment in the ordinary course
of business (for the purposes of this Section 6.6, with respect to any Borrower
and any Marine Subsidiary of such Borrower, ordinary course of business shall
refer to the business of the Equipment Growth Funds and all Marine Subsidiaries,
collectively), and (b) any Subsidiary of FSI (other than TEC AcquiSub) may be
merged or consolidated with or into FSI or any wholly-owned Subsidiary of FSI,
or be liquidated, wound up or dissolved, or all or substantially all of its
business, property or assets may be conveyed, sold, leased, transferred or
otherwise disposed of, in one transaction or a series of transactions, to, FSI
or any wholly-owned Subsidiary of FSI; provided that, in the case of such a
merger or consolidation, FSI or such wholly-owned Subsidiary shall be the
continuing or surviving corporation.
. Each Borrower shall not, and shall not permit any Marine Subsidiary
of such Borrower to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any of its
Affiliates on terms that are less favorable to such Borrower or such Marine
Subsidiary than those that might be obtained at the time from Persons who are
not such Affiliates.
. Each Borrower and FSI shall not, and FSI shall not permit any of its
existing Subsidiaries to, engage in any business materially different than the
business currently engaged in by such Person.
. Each Borrower shall not make, pay or set apart any funds for the
payment of distribution to its partners or members if such distribution would
cause or result in an Event of Default or Potential Event of Default.
. Each Borrower and FSI shall not take or omit to take any action,
which act or omission would, with the lapse of time, or otherwise constitute (a)
a default, event of default or Event of Default under any of the Loan Documents
or (b) a default or an event of default under any other material agreement,
contract, lease, license, mortgage, deed of trust or instrument to which either
is a party or by which either or any of their Properties or assets is bound,
which default or event of default would, with reasonable likelihood, have a
Material Adverse Effect.
. If any Borrower or FSI or any of their ERISA Affiliates incurs any
obligation to contribute to any Pension Plan, then such Borrower or FSI, as the
case may be, shall not (a) terminate, or permit such ERISA Affiliate to
terminate, any Pension Plan so as to result in any liability that would, with
reasonable likelihood, have a Material Adverse Effect or (b) make or permit such
ERISA Affiliate to make a complete or partial withdrawal (within the meaning of
Section 4201 of ERISA) from any Multiemployer Plan so as to result in any
liability that would, with reasonable likelihood, have a Material Adverse
Effect.
. Each Borrower and FSI shall not use or authorize others to use any
Lender's name or marks in any publication or medium, including, without
limitation, any prospectus, without such Lender's advance written authorization.
. Each Borrower and FSI shall not change their fiscal year end from
December 31, nor make any change in their accounting treatment and reporting
practices except as permitted by GAAP; provided, however, that should any
Borrower or FSI change its accounting treatment or reporting practices in a way
that would cause a change in the calculation, or in the results of a
calculation, of any of the financial covenants set forth in Section 7, below,
then such Borrower or FSI, as applicable, shall continue to calculate such
covenants as if such accounting treatment or reporting practice had not been
changed unless otherwise agreed to by Requisite Lenders.
. Each Borrower and FSI shall not, shall not cause to occur and shall
not permit any amendment, modification or supplement of or to any of the terms
or provisions of such Borrower's Limited Partnership Agreement or, in the case
of Income Fund I, its Operating Agreement, which amendment, modification or
supplement would affect, limit or otherwise impair such Borrower's ability to
pay the Obligations or perform its obligations under this Agreement or any of
the other Loan Documents.
. 7. FINANCIAL COVENANTS OF BORROWER AND FSI
Each Borrower, severally, as to itself, but not jointly as to the other
Borrowers and FSI, and FSI, jointly and severally with each Borrower as to each
Borrower and as to itself, covenant and agree that, so long as the Commitments
hereunder shall be available, and until full, complete and indefeasible payment
and performance of the Obligations, including, without limitation, all Loans
evidenced by the Notes, unless Requisite Lenders shall otherwise consent in
writing, Borrowers and FSI shall perform the following financial covenants. Each
Borrower and FSI agree and understand that (except as expressly provided herein)
all covenants under this Section 7 shall be subject to quarterly compliance or
compliance as of the date of any request for a Loan pursuant to Section 3.2.1
(as measured on the last day of each fiscal quarter of such Borrower, or FSI, as
the case may be, or as of the date of any request for a Loan pursuant to Section
3.2.1), and in each case review by Lenders of the respective fiscal quarter's
consolidated financial statements delivered to Agent by each Borrower and FSI
pursuant to Section 5.1; provided, however, that the following financial
covenants shall apply only as to those Borrowers requesting a Loan or as to
which a Loan remains outstanding.
. Each Borrower shall maintain a Funded Debt Ratio of not greater than
0.5:1.0.
. Each Borrower shall maintain a Debt Service Ratio of not less than
1.75:1.0.
. FSI shall maintain a Consolidated Tangible Net Worth of not less than
$20,000,000.
. The Equipment Growth Funds of which FSI is the sole general partner
shall maintain aggregate unrestricted cash balances of $10,000,000.
. 8. EVENTS OF DEFAULT AND REMEDIES
. As to any Borrower, the occurrence of any one or more of the
following shall constitute an Event of Default for each such Borrower
individually:
. Such Borrower, any Marine Subsidiary of such Borrower or any
Owner Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI fails to pay any sum due to Lenders or Agent
arising under this Agreement, the Note of such Borrower or any of the other Loan
Documents when and as the same shall become due and payable, whether by
acceleration or otherwise and such failure shall not have been cured to Lenders'
satisfaction within five (5) calendar days; or
. (a) Such Borrower, any Marine Subsidiary of such Borrower,
FSI, TEC, TEC AcquiSub or any Owner Trustee holding record title to any Eligible
Inventory for the beneficial interest of such Borrower defaults in the repayment
of any principal of or the payment of any interest on any Indebtedness of such
Borrower, any such Marine Subsidiary, FSI, TEC, TEC AcquiSub or any such Owner
Trustee, respectively, or breaches any term of any evidence of such Indebtedness
or defaults in any payment in respect of any Contingent Obligation (excluding,
as to FSI, any Contingent Obligation of FSI arising solely as a result of FSI's
status as a general partner of any Person other than such Borrower), in each
case exceeding, in the aggregate outstanding principal amount, $2,000,000, or
such Borrower, any Marine Subsidiary, FSI, TEC, TEC AcquiSub or any Owner
Trustee breaches or violates any term or provision of any evidence of such
Indebtedness or Contingent Obligation or of any such loan agreement, mortgage,
indenture, guaranty or other agreement relating thereto if the effect of such
breach is to permit acceleration under the applicable instrument, loan
agreement, mortgage, indenture, guaranty or other agreement and such failure
shall not have been cured within the applicable cure period, or there is an
acceleration under the applicable instrument, loan agreement, mortgage,
indenture, guaranty or other agreement; or (b) PLMI defaults in the repayment of
any principal of or the payment of any interest on any Indebtedness or defaults
in any payment in respect of any Contingent Obligation, in each case exceeding,
in the aggregate outstanding principal amount, $2,000,000, or PLMI breaches or
violates any term or provision of any evidence of such Indebtedness or
Contingent Obligation or of any such loan agreement, mortgage, indenture,
guaranty or other agreement relating thereto with the result that such
Indebtedness or Contingent Obligation becomes or is caused to become then due
and payable in its entirety, whether by acceleration of otherwise; or
. Such Borrower or FSI fails or neglects to perform, keep or
observe any of the covenants contained in Sections 2.1.3, 5.2, 5.3, 5.9, 6.1,
6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9 or 6.13, or any of the financial
covenants contained in Section 7 of this Agreement; or
. Any representation or warranty made by or on behalf of such
Borrower or FSI in this Agreement or any statement or certificate at any time
given in writing pursuant hereto or in connection herewith shall be false,
misleading or incomplete in any material respect when made; or
. Except as provided in Sections 8.1.1 and 8.1.3, such
Borrower, FSI or any Marine Subsidiary of such Borrower or Owner Trustee holding
record title to any Eligible Inventory for the beneficial interest of such
Borrower or FSI fails or neglects to perform, keep or observe any covenant or
provision of this Agreement or of any of the other Loan Documents or any other
document or agreement executed by such Borrower, FSI or any Marine Subsidiary of
such Borrower or Owner Trustee holding record title to any Eligible Inventory
for the beneficial interest of such Borrower or FSI in connection therewith and
the same has not been cured to Requisite Lenders' satisfaction within thirty
(30) calendar days after such Borrower, FSI or any Marine Subsidiary of such
Borrower or Owner Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI shall become aware thereof, whether
by written notice from Agent or any Lender or otherwise; or
. Such Borrower, any Marine Subsidiary of such Borrower, TEC
AcquiSub, any other Borrower (but only for so long as Obligations of such other
Borrower remain or Commitments to such other Borrower are available under this
Agreement), FSI, TEC, PLMI or any Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI or any
other guarantor of any of such Borrower's or FSI's obligations to Lenders shall
(a) cease to be Solvent, (b) admit in writing its inability to pay its debts as
they mature, (c) make an assignment for the benefit of creditors, (d) apply for
or consent to the appointment of a receiver, liquidator, custodian or trustee
for it or for a substantial part of its Properties or business, or such a
receiver, liquidator, custodian or trustee otherwise shall be appointed and
shall not be discharged within sixty (60) days after such appointment; or
. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against such Borrower, any
Marine Subsidiary of such Borrower, TEC AcquiSub, any other Borrower (but only
for so long as Obligations of such other Borrower remain or Commitments to such
other Borrower are available under this Agreement), FSI, TEC, PLMI or any Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI or any other guarantor of any of such
Borrower's or FSI's obligations to Lenders or any order, judgment or decree
shall be entered against such Borrower, any Marine Subsidiary of such Borrower,
TEC AcquiSub, any other Borrower (but only for so long as Obligations of such
other Borrower remain or Commitments to such other Borrower are available under
this Agreement), FSI, TEC, PLMI or any Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI or any
other guarantor of any of such Borrower's or FSI's obligations to Lenders
decreeing its dissolution or division; provided, however, with respect to an
involuntary petition in bankruptcy, such petition shall not have been dismissed
within sixty (60) days after the filing of such petition; or
. There shall have been a change in the assets, liabilities,
financial condition, operations, affairs or prospects of such Borrower, any
Marine Subsidiary of such Borrower, TEC AcquiSub, FSI, TEC, PLMI or any Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI or any other guarantor of any of such
Borrower's or FSI's obligations to Lenders which, in the reasonable
determination of Requisite Lenders has, either individually or in the aggregate,
had a Material Adverse Effect; or
. There shall be a money judgment, writ or warrant of
attachment or similar process entered or filed against such Borrower, any Marine
Subsidiary of such Borrower, TEC AcquiSub, FSI, TEC or any Owner Trustee holding
record title to any Eligible Inventory for the beneficial interest of such
Borrower or FSI which (net of insurance coverage) remains unvacated, unbonded,
unstayed or unpaid or undischarged for more than sixty (60) days (whether or not
consecutive) or in any event later than five (5) calendar days prior to the date
of any proposed sale thereunder, which, together with all such other unvacated,
unbonded, unstayed, unpaid and undischarged judgments or attachments against
such Borrower or any Marine Subsidiary of such Borrower exceeds in the aggregate
$1,000,000; against FSI exceeds in the aggregate $500,000; against TEC or TEC
AcquiSub exceeds in the aggregate $500,000; or against any Owner Trustee holding
record title to any Eligible Inventory for the beneficial interest of such
Borrower or FSI exceeds in the aggregate $1,000,000; or against any combination
of the foregoing Persons exceeds in the aggregate $1,000,000; or
. Any of the Loan Documents shall for any reason other than
the full, complete and indefeasible satisfaction of the Obligations thereunder
cease to be, or be asserted by such Borrower, FSI or any Marine Subsidiary of
such Borrower or Owner Trustee holding record title to any Eligible Inventory
for the beneficial interest of such Borrower or FSI not to be, a legal, valid
and binding obligation of such Borrower, FSI or any Marine Subsidiary of such
Borrower or Owner Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI, respectively enforceable against
such Person in accordance with its terms; or
. The occurrence of any "Event of Default" as defined under
the TEC AcquiSub Agreement or any other loan or security document related to the
TEC AcquiSub Agreement; or
. The occurrence of any "Event of Default" as defined under
the AFG Agreement or any other loan or security document related to the AFG
Agreement; or
. FSI shall cease to be the sole general partner or the sole
manager, as applicable, of such Borrower, whether due to the voluntary or
involuntary withdrawal, substitution, removal or transfer of FSI from or of all
or any portion of FSI's general partnership interest or capital contribution in
such Borrower; or
. Requesting Borrower, TEC AcquiSub, FSI or their Subsidiaries
shall cease to be the purchaser of Eligible Inventory for such Requesting
Borrower.
. A criminal proceeding shall have been filed in any court
naming any Borrower, FSI or any Marine Subsidiary of such Borrower or Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI as a defendant for which forfeiture is a
potential penalty under applicable federal or state law which, in the reasonable
determination of Requisite Lenders, may have a Material Adverse Effect; or
. Any Governmental Authority enters a decree, order or ruling
("Government Action") which will materially and adversely affect any Borrower's,
any Marine Subsidiary of such Borrower's, FSI's, TEC's, TEC AcquiSub's or PLMI's
financial condition, operations or ability to perform or pay such party's
obligations arising under this Agreement or any instrument or agreement executed
pursuant to the terms of this Agreement or which will similarly affect any Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI. Such Borrower or FSI shall have thirty (30)
days from the earlier of the date (a) Borrower or FSI, as applicable, first
discovers it is the subject of Government Action or (b) a Lender or any agency
gives notice of Government Action to take such steps as are necessary to obtain
relief from the Government Action. For the purpose of this paragraph, "relief
from Government Action" means to discharge or to obtain a dismissal of or
release or relief from (i) any Government Action so that the affected party or
parties do not incur monetary liability (A) of more than $1,000,000 in the case
of any Borrower or any Marine Subsidiary of such Borrower, (B) of more than
$500,000 in the case of FSI, (C) of more than $500,000 in the case of TEC, (D)
of more than $250,000 in the case of TEC AcquiSub, (E) of more than $1,000,000
in the case of PLMI, or (F) of more than $1,000,000, in the aggregate, in the
case of any combination of the foregoing Persons, or (ii) any disqualification
of or other limitation on the operation of any Borrower, any Marine Subsidiary
of such Borrower, FSI, TEC, TEC AcquiSub and PLMI, or any of them, which in the
reasonable determination of Requisite Lenders may have a Material Adverse
Effect; or
. Any Governmental Authority, including, without limitation,
the SEC, shall enter a decree, order or ruling prohibiting the Equipment Growth
Funds from releasing or paying to FSI any funds in the form of management fees,
profits or otherwise which, in the reasonable determination of Requisite
Lenders, may have a Material Adverse Effect.
. An Event of Default may be waived only with the written consent of
Requisite Lenders, or if expressly provided, of all Lenders. Any Event of
Default so waived shall be deemed to have been cured and not to be continuing;
but no such waiver shall be deemed a continuing waiver or shall extend to or
affect any subsequent like default or impair any rights arising therefrom.
. Upon the occurrence and continuance of any Event of Default or
Potential Event of Default, Lenders shall have no further obligation to advance
money or extend credit to or for the benefit of the defaulting Borrower or any
other Borrower, regardless of whether such Event of Default or Potential Event
of Default has occurred with respect to such Borrower or another Borrower.
In addition, upon the occurrence and during the continuance of an Event
of Default, except an Event of Default arising under Section 8.1.11 hereof (the
remedies for which shall be limited to those set forth in the preceding
paragraph), Lenders or Agent, on behalf of Lenders, may, as to such defaulting
Borrower, or as to all Borrowers should such Event of Default result from the
actions or inactions of FSI, at the option of Requisite Lenders, do any one or
more of the following, all of which are hereby authorized by each Borrower and
FSI:
.1 Declare all or any of the Obligations of such
Borrower under this Agreement, the Note of such Borrower, the other Loan
Documents and any other instrument executed by such Borrower pursuant to the
Loan Documents to be immediately due and payable, and upon such declaration such
obligations so declared due and payable shall immediately become due and
payable; provided that if such Event of Default is under part 8.1.6 or 8.1.7 of
Section 8.1, then all of the Obligations of each Borrower shall become
immediately due and payable forthwith without the requirement of any notice or
other action by Lenders or Agent;
.2 Terminate this Agreement as to any future
liability or obligation of Agent or Lenders as to such Borrower or as to each
Borrower if such Event of Default results from the actions, inactions or
violation of any covenant of or by FSI (excluding, as to FSI, Events of Default
under Section 8.1.2 arising in relation to Contingent Obligation of FSI arising
solely as a result of FSI's status as a general partner of any Person other than
such Borrower); and
.3 Exercise in addition to all other rights and
remedies granted hereunder, any and all rights and remedies granted under the
Loan Documents or otherwise available at law or in equity.
. 4 Set-Off
.1 During the continuance of an Event of Default, any
deposits or other sums credited by or due from any Lender to any Borrower or FSI
(exclusive of deposits in accounts expressly held in the name of third parties
or held in trust for benefit of third parties) may be set-off against the
Obligations of such Borrower and any and all other liabilities, due or existing
or hereafter arising and owing by such Borrower or FSI to Lenders. Each Lender
agrees to notify promptly Borrowers and FSI and Agent of any such set-off;
provided, that the failure to give such notice shall not affect the validity of
any such set-off.
.2 Each Lender agrees that if it shall, whether by
right of set-off, banker's lien or similar remedy pursuant to Section 8.4.1,
obtain any payment as a result of which the outstanding and unpaid principal
portion of the Commitments of such Lender shall be less than such Lender's Pro
Rata Share of the outstanding and unpaid principal portion of the aggregate of
all Commitments, such Lender receiving such payment shall simultaneously
purchase from each other Lender a participation in the Commitments held by such
Lenders so that the outstanding and unpaid principal amount of the Commitments
and participations in Commitments of such Lender shall be in the same proportion
to the unpaid principal amount of the aggregate of all Commitments then
outstanding as the unpaid principal amount under the Commitments of such Lender
outstanding immediately prior to receipt of such payment was to the unpaid
principal amount of the aggregate of all Commitments outstanding immediately
prior to such Lender's receipt of such payment; provided, however, that if any
such purchase shall be made pursuant to this Section 8.4.2 and the payment
giving rise thereto shall thereafter be recovered, such purchase shall be
rescinded to the extent of such recovery and the purchase price restored without
interest. Each Borrower expressly consents to the foregoing arrangements and
agrees that any Lender holding a participation in a Commitment deemed to have
been so purchased may exercise any and all rights of set-off, banker's lien or
similar remedy with respect to any and all moneys owing by Borrower to such
Lender as fully as if such Lender held a Commitment in the amount of such
participation.
. The enumeration of the rights and remedies of Agent and Lenders set
forth in this Agreement is not intended to be exhaustive and the exercise by
Agent and Lenders of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder or under the Loan
Documents or that may now or hereafter exist in law or in equity or by suit or
otherwise. No delay or failure to take action on the part of Agent and Lenders
in exercising any right, power or privilege shall operate as a waiver hereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any Event of Default
or Potential Event of Default. No course of dealing between any Borrower, FSI,
Agent, or any Lender or their respective agents or employees shall be effective
to change, modify or discharge any provision of this Agreement or any of the
Loan Documents or to constitute a waiver of any Event of Default or Potential
Event of Default.
. 9. AGENT
. Each of the Lenders hereby irrevocably designates and appoints First
Union National Bank of North Carolina as the Agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes First Union National Bank of North Carolina as the Agent for such
Lender to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Agent by the terms of this Agreement and such
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the other Loan Documents or otherwise exist against Agent. To the
extent any provision of this Agreement permits action by Agent, Agent shall,
subject to the provisions of this Section 9, take such action if directed in
writing to do so by Requisite Lenders.
. Agent may execute any of its duties under this Agreement and the
other Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
. Neither Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or the other Loan Documents (except for its or such Person's own
gross negligence or willful misconduct), or (b) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by any
Borrower or any officer thereof contained in this Agreement or the other Loan
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by Agent under or in connection with, this
Agreement or the other Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the other Loan
Documents or for any failure of any Borrower to perform its obligations
hereunder or thereunder. Agent shall not be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
Properties, books or records of any Borrower.
. Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to Borrowers), independent accountants and other experts
selected by Agent. Agent may deem and treat the payee of any promissory note
issued pursuant to this Agreement as the owner thereof for all purposes unless
such promissory note shall have been transferred in accordance with Section
11.10 hereof. Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of Requisite Lenders as it deems appropriate
or it shall first be indemnified to its satisfaction by Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action except for its own gross negligence or
willful misconduct. Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request of
Requisite Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all Lenders.
. Agent shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default or Potential Event of Default hereunder
unless Agent has received notice from a Lender or any Borrower referring to this
Agreement, describing such Event of Default or Potential Event of Default and
stating that such notice is a "notice of default". In the event that Agent
receives such a notice, Agent shall promptly give notice thereof to Lenders. The
Agent shall take such action with respect to such Event of Default or Potential
Event of Default as shall be reasonably directed by Requisite Lenders; provided
that unless and until Agent shall have received such directions, Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Event of Default or Potential Event of Default as it shall
deem advisable in the best interests of Lenders.
. Each Lender expressly acknowledges that neither Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by Agent hereinafter
taken, including any review of the affairs of Borrower, shall be deemed to
constitute any representation or warranty by Agent to any Lender. Each Lender
represents to Agent that it has, independently and without reliance upon Agent
or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of each Borrower and FSI and made its own decision to make its
Loans hereunder and enter into this Agreement. Each Lender also represents that
it will, independently and without reliance upon Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of each Borrower and FSI. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by Agent hereunder
or by the other Loan Documents, Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, operations, property, financial and other condition or
creditworthiness of each Borrower and FSI which may come into the possession of
Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
. Each Lender agrees to indemnify Agent in its capacity as such (to the
extent not reimbursed by Borrowers and without limiting the obligation of
Borrowers to do so), ratably according to the respective amounts of their Pro
Rata Share of the Commitments, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against Agent in any way relating to or
arising out of this Agreement or the other Loan Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by Agent under or
in connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's bad faith, gross negligence or willful misconduct.
The agreements in this Section 9.7 shall survive the repayment of the Loans and
all other amounts payable hereunder.
. Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with any Borrower or FSI as though
Agent were not Agent hereunder. With respect to Advances made or renewed by it,
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not
Agent, and the terms "Lender" and "Lenders" shall include Agent in its
individual capacity.
. Agent may resign at any time by giving thirty (30) days' prior
written notice thereof to Lenders and Borrowers; provided, however, that the
retiring Agent shall continue to serve until a successor Agent shall have been
selected and approved pursuant to this Section 9.9. Upon any such notice, Agent
shall have the right to appoint a successor Agent; provided, however, that if
such successor shall not be a signatory to this Agreement, such appointment
shall be subject to the consent of Requisite Lenders. Agent may be replaced by
Requisite Lenders, with or without cause; provided, however, that any successor
agent shall be subject to Borrowers' consent, which consent shall not be
unreasonably withheld. Upon the acceptance of any appointment as an Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 9 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement.
. 10. EXPENSES AND INDEMNITIES
. Borrowers and Lenders agree that, as the following costs, expenses,
charges and other disbursements benefit each Borrower and as such costs,
expenses, charges and other disbursements cannot easily be ratably allocated to
the account of any Borrower or Borrowers, each Borrower, unless otherwise
specified in this Section 10.1, shall pay, as its Obligation, promptly on
demand, and in any event within thirty (30) days of the invoice date therefor,
(a) all costs, expenses, charges and other disbursements (including, without
limitation, all reasonable attorneys' fees and allocated expenses of outside
counsel and in-house legal staff) incurred by or on behalf of Agent or any
Lender in connection with the preparation of the Loan Documents and all
amendments and modifications thereof, extensions thereto or substitutions
therefor, and all costs, expenses, charges or other disbursements incurred by or
on behalf of Agent or any Lender (including, without limitation all reasonable
attorney's fees and allocated expenses of outside counsel and in-house legal
staff) in connection with the furnishing of opinions of counsel (including,
without limitation, any opinions requested by Lenders as to any legal matters
arising hereunder) and of Borrowers' performance of and compliance with all
agreements and conditions contained herein or in any of the other Loan Documents
on its part to be performed or complied with; (b) all other costs, expenses,
charges and other disbursements incurred by or on behalf of Agent or any Lender
in connection with the negotiation, preparation, execution, administration,
continuation and enforcement of the Loan Documents, and the making of the Loans
hereunder; (c) all costs, expenses, charges and other disbursements (including,
without limitation, all reasonable attorney's fees and allocated expenses of
outside counsel and in-house legal staff) incurred by or on behalf of Agent or
any Lender in connection with the assignment or attempted assignment to any
other Person of all or any portion of any Lender's interest under this Agreement
pursuant to Section 11.10; and (d) regardless of the existence of an Event of
Default or Potential Event of Default, all legal, appraisal, audit, accounting,
consulting or other fees, costs, expenses, charges or other disbursements
incurred by or on behalf of Agent or any Lender in connection with any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Lenders, Agent, any Borrower or any other Person) seeking to enforce any
Obligations of, or collecting any payments due from, any Borrower under this
Agreement and the Notes, all of which amounts shall be deemed to be part of the
Obligations; provided, however, that Lenders shall be entitled to collect the
full amount of such costs, expenses, charges and other disbursements only once.
Notwithstanding anything to the contrary contained in this Section 10.1, so long
as no Event of Default or Potential Event of Default shall have occurred and be
continuing, all appraisals of the Eligible Inventory shall be at the expense of
Lenders. If an Event of Default or Potential Event of Default shall have
occurred and be continuing, such appraisals shall be at the expense of the
Requesting Borrower.
. Whether or not the transactions contemplated hereby shall be
consummated:
. Each Borrower, as to itself, and FSI, jointly and severally
as to itself and each Borrower, shall pay, indemnify, and hold each Lender,
Agent and each of their respective officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses or disbursements (including
reasonable attorney's fees and the allocated cost of in-house counsel) of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and any other Loan Documents,
or the transactions contemplated hereby and thereby, and with respect to any
investigation, litigation or proceeding (including any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate proceeding) related to this Agreement or the Loans or
the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that Borrowers and FSI shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnified Person.
. .2 Environmental Indemnity
(a) Each Borrower, to the extent of its pro rata share
of ownership of Property involved in any investigation, litigation or
proceeding, as set forth below, and FSI hereby jointly and severally
agree to indemnify, defend and hold harmless each Indemnified Person,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or
disbursements (including reasonable attorneys' fees and the allocated
cost of in-house counsel and of internal environmental audit or review
services), which may be incurred by or asserted against such
Indemnified Person in connection with or arising out of any pending or
threatened investigation, litigation or proceeding, or any action taken
by any Person, with respect to any Environmental Claim arising out of
or related to any Property owned, leased or operated by such Borrower.
No action taken by legal counsel chosen by Agent or any Lender in
defending against any such investigation, litigation or proceeding or
requested remedial, removal or response action shall (except for
actions which constitute fraud, willful misconduct, gross negligence or
material violations of law) vitiate or in any way impair Borrowers' or
FSI's obligation and duty hereunder to indemnify and hold harmless
Agent and each Lender. Agent and all Lenders agree to use reasonable
efforts to cooperate with Borrowers respecting the defense of any
matter indemnified hereunder, except insofar as and to the extent that
their respective interests may be adverse to Borrowers' or FSI's in
Agent's or such Lender's sole discretion.
(b) In no event shall any site visit, observation, or
testing by Agent or any Lender be deemed a representation or warranty
that Hazardous Materials are or are not present in, on, or under the
site, or that there has been or shall be compliance with any
Environmental Law. Neither Borrowers, FSI nor any other Person is
entitled to rely on any site visit, observation, or testing by Agent or
any Lender. Except as otherwise provided by law, neither Agent nor any
Lender owes any duty of care to protect Borrowers, or any one of them,
or any other Person against, or to inform Borrowers or any other party
of, any Hazardous Materials or any other adverse condition affecting
any site or Property. Neither Agent nor any Lender shall be obligated
to disclose to Borrowers, FSI or any other Person any report or
findings made as a result of, or in connection with, any site visit,
observation, or testing by Agent or any Lender.
. The obligations in this Section 10.2 shall survive payment
of all other Obligations. At the election of any Indemnified Person, Borrowers
shall defend such Indemnified Person using legal counsel satisfactory to such
Indemnified Person in such Person's reasonable discretion, at the sole cost and
expense of Borrowers, which cost and expense shall be allocated to Borrowers
according to such Borrower's pro rata share of ownership of any Property in
relation to which such obligations arise. All amounts owing under this Section
10.2 shall be paid within thirty (30) days after written demand.
. 11. MISCELLANEOUS
. All covenants, agreements, representations and warranties made herein
shall survive the execution and delivery of the Loan Documents and the making of
the Loans hereunder.
. No failure or delay on the part of Agent or any Lender in the
exercise of any power, right or privilege under this Agreement, the Note or any
of the other Loan Documents shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.
. Except as otherwise provided in this Agreement, any notice or other
communication herein required or permitted to be given shall be in writing and
may be delivered in person, with receipt acknowledged, or sent by telex,
facsimile, telecopy, computer transmission or by United States mail, registered
or certified, return receipt requested, or by Federal Express or other
nationally recognized overnight courier service, postage prepaid and
confirmation of receipt requested, and addressed as set forth on the signature
pages to this Agreement or at such other address as may be substituted by notice
given as herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly given or served on the date on which the same
shall have been personally delivered, with receipt acknowledged, or sent by
telex, facsimile, telecopy or computer transmission (with appropriate
answerback), three (3) Business Days after the same shall have been deposited in
the United States mail or on the next succeeding Business Day if the same has
been sent by Federal Express or other nationally recognized overnight courier
service. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication.
. Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
. Whenever possible, each provision of this Agreement, the Note and
each of the other Loan Documents shall be interpreted in such a manner as to be
valid, legal and enforceable under the applicable law of any jurisdiction.
Without limiting the generality of the foregoing sentence, in case any provision
of this Agreement, the Note or any of the other Loan Documents shall be invalid,
illegal or unenforceable under the applicable law of any jurisdiction, the
validity, legality and enforceability of the remaining provisions, or of such
provision in any other jurisdiction, shall not in any way be affected or
impaired thereby.
. 6 Entire Agreement; Construction; Amendments And Waivers
.1 This Agreement, the Notes and each of the other
Loan Documents dated as of the date hereof, taken together, constitute and
contain the entire agreement among Borrowers, Lenders and Agent and supersede
any and all prior agreements, negotiations, correspondence, understandings and
communications between the parties, whether written or oral, respecting the
subject matter hereof.
.2 This Agreement is the result of negotiations
between and has been reviewed by each Borrower, FSI, and each Lender executing
this Agreement as of the Closing Date and Agent and their respective counsel;
accordingly, this Agreement shall be deemed to be the product of the parties
hereto, and no ambiguity shall be construed in favor of or against Borrowers,
FSI, Lenders or Agent. Borrowers, FSI, Lenders and Agent agree that they intend
the literal words of this Agreement and the other Loan Documents and that no
parol evidence shall be necessary or appropriate to establish Borrowers', FSI's
any Lender's or Agent's actual intentions.
.3 No amendment, modification, discharge or waiver of
or consent to any departure by any Borrower or FSI from, any provision in this
Agreement or any of the other Loan Documents relating to (a) the definition of
"Borrowing Base" or "Requisite Lenders," (b) any increase of the amount of any
Commitment, (c) any reduction of principal, interest or fees payable hereunder,
(d) any postponement of any date fixed for any payment or prepayment of
principal or interest hereunder or (e) this Section 11.6.3 shall be effective
without the written consent of all Lenders. Any and all other amendments,
modifications, discharges or waivers of, or consents to any departures from any
provision of this Agreement or of any of the other Loan Documents shall not be
effective without the written consent of Requisite Lenders. Any waiver or
consent with respect to any provision of the Loan Documents shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on any Borrower or FSI in any case shall entitle
any Borrower or FSI to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, waiver or consent effected in
accordance with this Section 11.6 shall be binding upon each Lender then party
hereto and each subsequent Lender, on Borrower, and on FSI.
. All covenants, agreements, representations and warranties made herein
by each Borrower or FSI shall, notwithstanding any investigation by Lenders or
Agent be deemed to be material to and to have been relied upon by Lenders.
. Lenders shall be under no obligation to marshall any assets in favor
of any Borrower or any other person or against or in payment of any or all of
the Obligations. To the extent that any Borrower makes a payment or payments to
Lenders or Agent, or Lenders or Agent, on behalf of Lenders, enforce their or
its Liens or exercises their or its rights of set-off, and such payment or
payments or the proceeds of such enforcement or set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under Title
11 of the United States Code or under any other similar federal or state law,
common law or equitable cause, then to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or set-off had not occurred.
. All sums payable by Borrowers or FSI pursuant to this Agreement, the
Note or any of the other Loan Documents shall be payable without notice or
demand and shall be payable in United States Dollars without set-off or
reduction of any manner whatsoever.
. 10 Binding Effect, Assignment
.1 This Agreement, the Note and the other Loan
Documents shall be binding upon and shall inure to the benefit of the parties
hereto and thereto and their respective successors and assigns, except that no
Borrower nor FSI may assign its rights hereunder or thereunder or any interest
herein or therein without the prior written consent of each Lender. Each Lender
shall (a) have the right in accordance with this Section 11.10 to sell and
assign to any Eligible Assignee all or any portion of its interest (provided
that any such partial assignment shall not be for a principal amount of less
than Five Million Dollars ($5,000,000)) under this Agreement, the Notes and the
other Loan Documents, together with a ratable interest in the AFG Agreement and
the TEC AcquiSub Agreement and the related Notes and other Loan Documents (as
separately described and defined in those agreements), subject to the prior
written consent of the affected Borrower, which consent shall not be
unreasonably withheld, and (b) to grant any participation or other interest
herein or therein, except that each potential participant to which a Lender
intends to grant any rights under Sections 2.9, 2.10, 5.1 or 10.2 shall be
subject to the prior written consent of the affected Borrower, which consent
shall not be unreasonably withheld; provided, however, that no such sale,
assignment or participation grant shall result in requiring registration under
the Securities Act of 1933, as amended, or qualification under any state
securities law.
.2 Subject to the limitations of this Section
11.10.2, each Lender may sell and assign, from time to time, all or any portion
of its Pro Rata Share of the Commitments to any of its Affiliates or, with the
approval of the affected Borrower and FSI (which approval shall not be
unreasonably withheld), to any other financial institution acceptable to Agent,
subject to the assumption by such assignee of the share of the Commitments so
assigned. The assignment to such Affiliate or other financial institution shall
be evidenced by an Assignment and Assumption in the form of Exhibit I
("Assignment and Acceptance") executed by the assignor Lender (hereinafter from
time to time referred to as the "Assignor Lender") and such Affiliate or other
financial institution (which, upon such assignment shall become a Lender
hereunder (hereinafter from time to time referred to as the "Assignee Lender")).
The Assignment and Assumption need not include any of the economic or financial
terms upon which such Assignee Lender receives the assignment from the Assignor
Lender, and such terms need not be disclosed to or approved by such Borrower or
FSI; provided only that such terms do not diminish the obligations undertaken by
such Assignee Lender in the Assignment and Assumption or increase the
obligations of Borrowers or FSI under this Agreement. Upon execution of such
Assignment and Assumption, (a) the definition of "Commitments" in Section 1
hereof and the Pro Rata Shares set forth therein shall be deemed to be amended
to reflect each Lender's share of the Commitments, giving effect to the
assignment and (b) the Assignee Lender shall, from the effective date of the
instrument of assignment and assumption, be subject to all of the obligations,
and entitled to all of the rights, of a Lender hereunder, except as may be
expressly provided to the contrary in the Assignment and Assumption. To the
extent the obligations hereunder of the Assignor Lender are assumed by the
Assignee Lender, the Assignor Lender shall be relieved of such obligations. Upon
the assignment of any interest by any Assignor Lender pursuant to this Section
11.10.2, such Assignor Lender agrees to supplement Schedule 1.1 to show the date
of such assignment, the Assignor Lender, the Assignee Lender, the Assignee
Lender's address for notice purposes and the amount of the Commitments so
assigned.
.3 Subject to the limitations of this Section
11.10.3, any Lender may also grant, from time to time, participation interests
in the interests of such Lender under this Agreement, the Notes and the other
Loan Documents to any other financial institution without notice to, or approval
of, any Borrower or FSI. The grant of such a participation interest shall be on
such terms as the granting Lender determines are appropriate, provided only that
(a) the holder of such participation interest shall not have any of the rights
of a Lender under this Agreement except, if the participation agreement
expressly provides, rights under Sections 2.9, 2.10, 5.1 and 10.2, and (b) the
consent of the holder of such a participation interest shall not be required for
amendments or waivers of provisions of the Loan Documents other than, if the
participation agreement expressly provides, those which (i) increase the
monetary amount of any Commitment, (ii) decrease any fee or any other monetary
amount payable to Lenders, or (iii) extend the date upon which any monetary
amount is payable to Lenders.
. This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts, and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute
but one and the same instrument. Each such agreement shall become effective upon
the execution of a counterpart hereof or thereof by each of the parties hereto
or thereto, delivery of each such counterpart to Agent.
. Borrowers and FSI recognize that, in the event any Borrower or FSI
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, the Notes or any of the other Loan Agreements, any remedy
at law may prove to be inadequate relief to Lenders or Agent; therefore,
Borrowers and FSI agree that Lenders or Agent, if Lenders or Agents so request,
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
. EACH BORROWER AND FSI HEREBY AGREE THAT EACH SHALL GIVE PROMPT
WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES IT HAS, OR MAY SEEK
TO ASSERT OR ALLEGE AGAINST ANY LENDER OR AGENT, WHETHER SUCH CLAIM IS BASED IN
LAW OR EQUITY, ARISING UNDER OR RELATED TO THIS AGREEMENT, THE NOTES OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO THE LOANS CONTEMPLATED HEREBY OR THEREBY OR ANY
ACT OR OMISSION TO ACT BY ANY LENDER OR AGENT WITH RESPECT HERETO OR THERETO,
AND THAT IF IT SHALL FAIL TO GIVE SUCH PROMPT NOTICE TO AGENT WITH REGARD TO ANY
SUCH CLAIM OR CAUSE OF ACTION, IT SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE
FOREVER BARRED FROM BRINGING OR ASSERTING SUCH CLAIM OR CAUSE OF ACTION IN ANY
SUIT, ACTION OR PROCEEDING IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY.
. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT,
EACH BORROWER AND FSI HEREBY AGREE THAT EACH SHALL NOT SEEK FROM LENDERS OR
AGENT, UNDER ANY THEORY OF LIABILITY, INCLUDING, WITHOUT LIMITATION, ANY THEORY
IN TORTS, ANY PUNITIVE DAMAGES.
. The relationship between Borrowers and FSI, on the one hand, and
Lenders and Agent, on the other, is, and at all time shall remain solely that of
a borrower and lenders. Neither Lenders nor Agent shall under any circumstances
be construed to be partners or joint venturers of Borrowers or FSI or any of
their Affiliates; nor shall Lenders nor Agent under any circumstances be deemed
to be in a relationship of confidence or trust or a fiduciary relationship with
Borrowers or FSI or any of their Affiliates, or to owe any fiduciary duty to any
Borrower or any of its Affiliates. Lenders and Agent do not undertake or assume
any responsibility or duty to Borrowers or FSI or any of their Affiliates to
select, review, inspect, supervise, pass judgment upon or otherwise inform
Borrowers or any of their Affiliates of any matter in connection with its or
their Property, any collateral held by Agent or any Lender or the operations of
Borrowers or FSI or any of their Affiliates. Borrowers and each of their
Affiliates shall rely entirely on their own judgment with respect to such
matters, and any review, inspection, supervision, exercise of judgment or supply
of information undertaken or assumed by any Lender or Agent in connection with
such matters is solely for the protection of Lenders and Agent and neither
Borrowers nor any Affiliate is entitled to rely thereon.
. Each Borrower and FSI agrees that its liability hereunder shall be
the immediate, direct, and primary obligation of such Borrower or FSI, as the
case may be, and shall not be contingent upon the Agent's or any Lender's
exercise or enforcement of any remedy it may have against any other Borrower,
FSI or any other person, or against any collateral or any security for the
Obligations. Without limiting the generality of the foregoing, the Obligations
shall remain in full force and effect without regard to and shall not be
impaired or affected by, nor shall such Borrower or FSI be exonerated or
discharged by, any of the following events:
.1 Insolvency, bankruptcy, reorganization,
arrangement, adjustment, composition, assignment for the benefit of creditors,
death, liquidation, winding up or dissolution of any Borrower or any guarantor
of the Obligations of any Borrower;
.2 Any limitation, discharge, or cessation of the
liability of any other Borrower or any guarantor for the Obligations of such
other Borrower due to any statute, regulation or rule of law, or any invalidity
or unenforceability in whole or in part of the documents evidencing the
Obligations of such other Borrower or any guaranty of the Obligations of such
other Borrower;
.3 Any merger, acquisition, consolidation or change
in structure of any Borrower or any guarantor of the Obligations of any Borrower
or any sale, lease, transfer or other disposition of any or all of the assets,
shares or interests in or of any Borrower or any guarantor of the Obligations of
any Borrower;
.4 Any assignment or other transfer, in whole or in
part, of any Lender's interests in and rights under this Agreement or any of the
other Loan Documents, including, without limitation, any assignment or other
transfer, in whole or in part, of Banks' interests in and to any collateral;
.5 Any claim, defense, counterclaim or setoff, other
than that of prior performance, that any Borrower or any guarantor of the
Obligations of any Borrower may have or assert, including, but not limited to,
any defense of incapacity or lack of corporate or other authority to execute any
documents relating to the Obligations of any Borrower or any collateral;
.6 Agent's or any Lender's amendment, modification,
renewal, extension, cancellation or surrender of any agreement, document or
instrument relating to this Agreement, the Obligations of any Borrower or any
collateral, or any exchange, release, or waiver of any collateral;
.7 Agent's or any Lender's exercise or nonexercise of
any power, right or remedy with respect to the Obligations of any Borrower or
any collateral, including, but not limited to, the compromise, release,
settlement or waiver with or of any Borrower or any other person;
.8 Agent's or any Lender's vote, claim, distribution,
election, acceptance, action or inaction in any bankruptcy case related to the
Obligations of any Borrower or any collateral; and
.9 Any impairment or invalidity of any collateral or
any failure to perfect any of Agent's liens thereon.
. Each Borrower and FSI hereby expressly waives (a) diligence,
presentment, demand for payment and protest affecting any other Borrower's or
FSI's liability under the Loan Documents; (b) discharge due to any disability of
any Borrower or FSI; (c) any defenses of any other Borrower or FSI to
obligations under the Loan Documents not arising under the express terms of the
Loan Documents or from a material breach thereof by Agent or any Lender which
under applicable law has the effect of discharging any other Borrower from the
Obligations of any Borrower as to which this Agreement is sought to be enforced;
(d) the benefit of any act or omission by Agent or any Lender which directly or
indirectly results in or aids the discharge of any other Borrower from any of
the Obligations of any such Borrower by operation of law or otherwise; (e) all
notices whatsoever, including, without limitation, notice of acceptance of the
incurring of the Obligations of any Borrower; (f) any right it may have to
require Agent or any Lender to disclose to it any information that Agent or
Lenders may now or hereafter acquire concerning the financial condition or any
circumstances that bear on the risk of nonpayment by any other Borrower,
including the release of such other Borrower from its Obligations hereunder; and
(g) any requirement that Agent and Lenders exhaust any right, power or remedy or
proceed against any other Borrower or any other security for, or any guarantor
of, or any other party liable for, any of the Obligations of any Borrower, or
any portion thereof (including without limitation any requirements set forth in
Section 26-7 of the North Carolina General Statutes). Each Borrower specifically
agrees that it shall not be necessary or required, and Borrowers shall not be
entitled to require, that Agent or any Lender (i) file suit or proceed to assert
or obtain a claim for personal judgment against any other Borrower for all or
any part of the Obligations of any Borrower; (ii) make any effort at collection
or enforcement of all or any part of the Obligations of any Borrower from any
Borrower; (iii) foreclose against or seek to realize upon any collateral or any
other security now or hereafter existing for all or any part of the Obligations
of any Borrower; (iv) file suit or proceed to obtain or assert a claim for
personal judgment against any Borrower or any guarantor or other party liable
for all or any part of the Obligations of any Borrower; (v) exercise or assert
any other right or remedy to which Agent or any Lender is or may be entitled in
connection with the Obligations of any Borrower or any security or guaranty
relating thereto to assert; or (vi) file any claim against assets of one
Borrower before or as a condition of enforcing the liability of any other
Borrower under this Agreement or the Notes.
. Except as otherwise expressly provided in any of the Loan Documents,
in all respects, including all matters of construction, validity and
performance, this Agreement and the Obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of North Carolina applicable to contracts made and performed in such
state, without regard to the principles thereof regarding conflict of laws, and
any applicable laws of the United States of America.
. Each Borrower and FSI hereby irrevocably consent to the personal
jurisdiction of the state and federal courts located in Mecklenburg County,
North Carolina, in any action, claim or other proceeding arising out of any
dispute in connection with this Agreement, the Note and the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations. Each Borrower hereby irrevocably consents to the
service of a summons and complaint and other process in any action, claim or
proceeding brought by Agent or any Lender in connection with this Agreement or
the other Loan Documents, any rights or obligations hereunder or thereunder, or
the performance of such rights and obligations, on behalf of itself or its
Property, in the manner specified in Section 11.3. Nothing in this Section 11.19
shall affect the right of the Agent or any Lender to serve legal process in any
other manner permitted by applicable law or affect the right of Agent or any
Lender to bring any action or proceeding against any Borrower or its properties
in the courts of any other jurisdictions.
. This Agreement is not intended to be, and shall not be construed to
create, a novation or accord and satisfaction, and, except as otherwise provided
herein, the Growth Fund Agreement, as executed and delivered on September 27,
1995, shall remain in full force and effect. Without limiting the generality of
the foregoing, Section 10.2 of the Growth Fund Agreement shall survive the
effectiveness of the Agreement and shall remain enforceable against both the
Borrowers and EGF II.
. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER AND FSI, BY
EXECUTION HEREOF, AND THE AGENT AND EACH LENDER, BY ACCEPTANCE HEREOF,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS AGREEMENT, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED
TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE AGENT
AND EACH LENDER TO ACCEPT THIS AGREEMENT AND THE NOTES EXECUTED AND DELIVERED BY
EACH BORROWER PURSUANT TO THIS AGREEMENT.
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORROWER PLM EQUIPMENT GROWTH FUND III
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
-----------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH FUND IV
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
-----------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH FUND V
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
------------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH FUND VI
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
------------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH & INCOME FUND VII
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
-----------------------------
J. Michael Allgood
Chief Financial Officer
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I,
L.L.C.
BY PLM FINANCIAL SERVICES, INC.,
ITS MANAGER
By /s/ J. Michael Allgood
------------------------------
J. Michael Allgood
Chief Financial Officer
Notice to any Borrower to be sent to:
[Insert name of Borrower]
c/o PLM Financial Services, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: J. Michael Allgood
Vice President of Finance
and Chief Financial Officer
Telephone: 415/974-1399
Telecopy: 415/882-0860
With a copy to:
TEC AcquiSub, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: General Counsel
Telephone: 415/896-1138
Facsimile: 415/882-0860
FSI PLM FINANCIAL SERVICES, INC.
By /s/ J. Michael Allgood
-----------------------------------
J. Michael Allgood
Chief Financial Officer
Notice to be sent to:
PLM Financial Services, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: J. Michael Allgood
Vice President of Finance
and Chief Financial Officer
Telephone: 415/974-1399
Telecopy: 415/882-0860
AGENT FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By /s/ Bill A. Shirley
-----------------------------------
Bill A. Shirley
Vice President
Notice to be sent to:
First Union National Bank of North Carolina
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: 704/383-5164
Facsimile: 704/374-4092
LENDERS FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By /s/ Bill A. Shirley
-----------------------------------
Bill A. Shirley
Vice President
Notice to be sent to:
First Union National Bank of North Carolina
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: 704/383-5164
Facsimile: 704/374-4092
The undersigned acknowledges and agrees to Section 11.20 of this Agreement.
PLM EQUIPMENT GROWTH FUND II
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
-----------------------------------
J. Michael Allgood
Chief Financial Officer
<PAGE>
SCHEDULE A
(COMMITMENTS)
Pro
Rate
Lender Commitment Share
First Union National Bank $35,000,000 35/35 x 100%
of North Carolina
AMENDMENT NO. 1
TO SECOND AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
(Growth Funds)
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED WAREHOUSING CREDIT
AGREEMENT dated as of November 5, 1996 (the "Amendment"), is entered into by and
among PLM EQUIPMENT GROWTH FUND IV, a California limited partnership ("EGF IV"),
PLM EQUIPMENT GROWTH FUND V, a California limited partnership ("EGF V"), PLM
EQUIPMENT GROWTH FUND VI, a California limited partnership ("EGF VI"), PLM
EQUIPMENT GROWTH & INCOME FUND VII, a California limited partnership ("EGF
VII"), and PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C., a Delaware
limited liability company ("Income Fund I") (EGF IV, EGF V, EGF VI, EGF VII and
Income Fund I each individually being a "Borrower" and, collectively, the
"Borrowers"), and PLM FINANCIAL SERVICES, INC., a Delaware corporation and the
sole general partner, in the case of EGF IV, EGF V, EGF VI and EGF VII, and the
sole manager, in the case of Income Fund I ("FSI"), FIRST UNION NATIONAL BANK OF
NORTH CAROLINA ("FUNB"), FLEET BANK, N.A. ("Fleet") and each other financial
institution which may hereafter execute and deliver an instrument of assignment
pursuant to Section 11.10 of the Credit Agreement (as defined below) (any one
financial institution individually, a "Lender," and collectively, "Lenders"),
and FUNB, as agent on behalf of Lenders (not in its individual capacity, but
solely as agent, "Agent"). Capitalized terms used herein without definition
shall have the same meanings herein as given to them in the Credit Agreement.
RECITAL
<PAGE>
in respect of pledA.Annual Borrowers, PLM Equipment Growth Fund III, a
California limited partnership ("EGF III"), Lenders and Agent have entered into
that certain Second Amended and Restated Warehousing Credit Agreement dated as
of May 31, 1996 (the "Credit Agreement"), by and among Borrowers, EGF III, FUNB
(as the sole Lender party thereto), and Agent pursuant to which Lenders have
agreed to extend and make available to Borrowers certain advances of money.
B. Borrowers desire that Lenders and Agent amend the Credit
Agreement to increase the aggregate amount of the Commitments by $15,000,000, to
extend the Commitment Termination Date, to remove EGF III as a borrower under
the revolving credit facility, to add PLM International, Inc., a Delaware
corporation ("PLMI"), as a guarantor of FSI's Obligations under the Credit
Agreement and FSI's Guaranty Obligations under its Guaranty, as more fully set
forth herein.
C. FUNB is currently the sole Lender under the Credit
Agreement. On the terms and conditions set forth below, Fleet desires to become
a Lender under the Credit Agreement and to make Loans to Borrowers with an
aggregate Commitment of $15,000,000.
D. Subject to the representations and warranties of Borrowers
and upon the terms and conditions set forth in this Amendment, Lenders and Agent
are willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
2. AMENDMENTS. The Credit Agreement is hereby amended
as follows:
1 Section 1.1 Defined Terms (Commitment). The definition of
"Commitment" set forth in Section 1.1 of the Credit Agreement is amended by
deleting Schedule A to the Credit Agreement entitled "Commitments" referred to
in such definition in its entirety and replacing such Schedule A with the
Schedule A attached to this Amendment, and the respective Commitment of each
Lender in effect from and after the effective date of this Amendment shall be
equal to the amount set forth opposite such Lender's name in Schedule A.
1.2 Section 1.1 Defined Terms (Commitment Termination Date). The
definition of "Commitment Termination Date" set forth in Section 1.1 of the
Credit Agreement is deleted and replaced with the following:
"Commitment Termination Date" means October 3, 1997.
2 Section 1.1 Defined Terms (Guaranty). The definition of
"Guaranty" set forth in Section 1.1 of the Credit Agreement is deleted and
replaced with the following:
"Guaranty" means, collectively, that certain Guaranty dated as
of June 30, 1993, executed by FSI in favor of Lenders and Agent and
that certain Guaranty dated as of November 5, 1996, executed by PLMI in
favor of Lenders and Agent.
3 Section 1.1 Defined Terms (Responsible Officer). The
definition of "Responsible Officer" set forth in Section 1.1 of the Credit
Agreement is deleted and replaced with the following:
"Responsible Officer" means for (i) FSI, any of the President,
Executive Vice President, Chief Financial Officer, Secretary or
Corporate Controller of FSI having authority to request Advances or
perform other duties required hereunder, and (ii) Borrowers, any of the
President, Executive Vice President, Chief Financial Officer, Secretary
or Corporate Controller of FSI as the sole general partner of EGF IV,
EGF V, EGF VI or EGF VII, as the case may be, or sole manager of Income
Fund I, in each case having authority to request Advances or perform
other duties required hereunder.
4 Section 1.1 Defined Terms (Requisite Lenders). The
definition of "Requisite Lenders" set forth in Section 1.1 of the Credit
Agreement is deleted and replaced with the following:
"Requisite Lenders" means any combination of Lenders whose
combined Pro Rata Share (and voting interest with respect thereto) of
all amounts outstanding under this Agreement, or, in the event there
are no amounts outstanding, the Commitments, is greater than sixty-six
and two-thirds percent (66 2/3%) of all such amounts outstanding or the
total Commitments, as the case may be; provided, however, that in the
event there are only two (2) Lenders, Requisite Lenders means both
Lenders.
5 Section 2.2.1 Revolving Facility. The portion of Section
2.1.1 of the Credit Agreement preceding subsection (a) is deleted and replaced
with the following:
2.1.1 Revolving Facility. Subject to the terms and
conditions of this Agreement and in reliance upon the representations
and warranties of Borrowers set forth herein, Lenders hereby agree to
make Advances (as defined below) of immediately available funds to
Borrowers, on a revolving basis, from the Closing Date until the
Business Day immediately preceding the commitment Termination Date, in
the aggregate principal amount outstanding at any time not to exceed
the lesser of (a) the total Commitments for the Facility less the
aggregate principal amount then outstanding under the TEC AcquiSub
Agreement and under the AFG Agreement or (b) for any one Borrower, its
respective Borrowing Base or (c) $35,000,000 (such lesser amount being
the "Maximum Availability"), as more fully set forth in this Section
2.1.1. The obligation of Borrowers to repay the Advances made to any
Borrower shall be several but not joint.
6 Section 2.1.1(a)(i) Facility Commitments. Section
2.1.1(a)(i) of the Credit Agreement is deleted and replaced with the following:
(i) On the Funding Date requested by any Borrower
(the "Requesting Borrower"), after such Borrower shall have satisfied
all applicable conditions precedent set forth in Section 3, each Lender
shall advance immediately available funds to Agent (each such advance
being an "Advance") evidencing such Lender's Pro Rata Share of a loan
("Loan"). Agent shall immediately advance such immediately available
funds to such Borrower at the Designated Deposit Account (or such other
deposit account at FUNB or such other financial institution as to which
such Borrower and Agent shall agree at least three (3) Business Days
prior to the requested Funding Date) on the Funding Date with respect
to such Loan. The Requesting Borrower shall pay interest accrued on the
Loan at the rates and in the manner set forth in Section 2.1.1(b).
Subject to the terms and conditions of this Agreement, the unpaid
principal amount of each Loan and all unpaid interest accrued thereon,
together with all other fees, expenses, costs and other sums chargeable
to the Requesting Borrower incurred in connection therewith shall be
due and payable no later than the Maturity Date of such Loan. Each Loan
advanced hereunder by each Lender shall be evidenced by the Requesting
Borrower's revolving promissory note substantially in the form of
Exhibit A (each a "Note").
7 Section 3.3.1 General Partner or Manager. Section 3.3.1 of
the Credit Agreement is deleted and replaced with the following:
3.3.1 General Partner Or Manager. FSI shall have
ceased to be the sole general partner of any of EGF IV, EGF V, EGF VI
or EGF VII or the sole manager of Income Fund I, whether due to the
voluntary or involuntary withdrawal, substitution, removal or transfer
of FSI from or of all or any portion of FSI's general partnership
interest or capital contribution in such Borrower.
8 Section 5 Annual Statements. Section 5.1.2 of the Credit
Agreement is deleted and replaced with the following:
Annual Statements. As ( in the case of such consolidated financial statements,
accompanied by a report thereon of an independent public accountant of
recognized national standing selected by each Borrower and PLMI and
satisfactory to Agent, which report shall contain an opinion which is
not qualified in any manner or which otherwise is satisfactory to
Requisite Lenders, in their sole discretion, and (B) in the case of
such consolidating financial statements, certified by the Chief
Financial Officer or Corporate Controller of PLMI;
9 Section 6 Borrowers' and FSI's Negative Covenants. Section 6
of the Credit Agreement is deleted and replaced with the following:
SECTION 6. BORROWERS' AND FSI'S NEGATIVE COVENANTS.
So long as any of the Commitments shall be available
and until full, complete and indefeasible payment and performance of
the Obligations, unless Requisite Lenders shall otherwise consent in
writing, each Borrower, severally, as to itself, but not jointly as to
the other Borrowers and FSI, and FSI, jointly and severally with each
Borrower as to such Borrower and to itself, covenants and agrees as
follows:
6.1 Liens; Negative Pledges; And Encumbrances. Each Borrower
shall not create, incur, assume or suffer to exist, and shall not
permit any Marine Subsidiary of such Borrower or Owner Trustee holding
record title to any Eligible Inventory for the beneficial interest of
such Borrower to create, incur, assume or suffer to exist, and FSI
shall not permit any of its Subsidiaries (including, without
limitation, TEC and TEC AcquiSub) to create, incur, assume or suffer to
exist, any Lien of any nature upon or with respect to any of their
respective Property, whether now or hereafter owned, leased or
acquired, except (collectively, the "Permitted Liens"):
6.1.1 Existing Liens disclosed on Schedule 6.1,
provided that the obligations secured thereby are not increased;
6.1.2 Liens for Charges if payment shall not at the
time be required to be made in accordance with Section 5.4;
(a) in respect of pledg( under workers' compensation laws, unemployment
insurance and other types of social security or similar legislation,
(b) in connection with surety, appeal and similar bonds incidental to
the conduct of litigation, (c) in connection with bid, performance or
similar bonds and mechanics', laborers' and materialmen's and similar
statutory Liens not then delinquent, or (d) incidental to the conduct
of the business of such Borrower, any Marine Subsidiary of such
Borrower, or any Owner Trustee or any of FSI's Subsidiaries and which
were not incurred in connection with the borrowing of money or the
obtaining of advances or credit; provided that the Liens permitted by
this Section 6.1.3 do not in the aggregate materially detract from the
value of any assets or property of or materially impair the use thereof
in the operation of the business of such Borrower, any Owner Trustee or
any of FSI's Subsidiaries; and provided further that the adverse
determination of any claim or liability, contingent or otherwise,
secured by any of such Liens would not either individually or in the
aggregate, with reasonable likelihood, have a Material Adverse Effect;
6.1.4 Permitted Rights of Others; and
6.1.5 Liens granted in favor of Agent on behalf of
Lenders under the TEC AcquiSub Agreement and the security agreement and
other loan documents delivered by TEC AcquiSub pursuant thereto.
6.2 Acquisitions. Each Borrower shall not, and shall not
permit any Marine Subsidiary of such Borrower to, and FSI shall not
permit TEC and TEC AcquiSub to, make any Acquisition or enter into any
agreement to make any Acquisition, other than with respect to the
purchase of Equipment in the ordinary course of business or the
formation or acquisition of a Marine Subsidiary.
6.3 Limitations On Indebtedness. Each Borrower shall not
create, incur, assume or suffer to exist, nor permit any Marine
Subsidiary of such Borrower or Owner Trustee holding record title to
any Eligible Inventory for the beneficial interest of such Borrower to
create, incur, assume or suffer to exist, and FSI shall not permit any
of its Subsidiaries (including, without limitation, TEC and TEC
AcquiSub) to create, incur, assume or suffer to exist, any Indebtedness
or Contingent Obligation; provided, however, that this Section 6.3
shall not be deemed to prohibit:
6.3.1 The Obligations to Lenders and Agent arising
hereunder and under the other Loan Documents;
6.3.2 Existing Indebtedness disclosed on Schedule
6.3(a) and anticipated Indebtedness disclosed on Schedule 6.3(b);
6.3.3 Indebtedness of any Subsidiary of FSI, provided
that such Indebtedness is non-recourse as to FSI, TEC and TEC AcquiSub;
6.3.4 The acquisition of goods, supplies or
merchandise on normal trade credit;
6.3.5 The endorsement of negotiable instruments
received in the ordinary course of any Borrower's business as presently
conducted;
6.3.6 Indebtedness incurred in respect of the
deferred purchase price for an item of Equipment, but only to the
extent that the incurrence of such Indebtedness is customary in the
industry with respect to the purchase of this type of equipment
(provided that such Indebtedness shall only be permitted under this
Section 6.3.6 if, taking into account the incurrence of such
Indebtedness, the Borrower incurring such Indebtedness shall not be in
violation of any of the financial covenants set forth in Section 7 if
measured as of the date of incurrence as determined by GAAP); and
6.3.7 Any Guaranty Obligations of any Borrower in the
form of performance guaranties undertaken on behalf of a Marine
Subsidiary of such Borrower in favor of the charter party in connection
with the leasing of a marine vessel on a time charter;
6.4 Use Of Proceeds. Each Borrower and FSI shall not, and
shall not permit any Marine Subsidiary of such Borrower or Owner
Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI to, use the proceeds of any
Loan except for the purpose set forth in Recital C, above, and shall
not, and shall not permit any such Marine Subsidiary or such Owner
Trustee to, use the proceeds to repay any loans or advances made by any
other Person.
6.5 Disposition Of Assets. Each Borrower and FSI shall not,
and shall not permit any Marine Subsidiary of such Borrower or any
Owner Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI to, sell, assign or
otherwise dispose of, any of its or their respective assets, except for
full, fair and reasonable consideration, or enter into any sale and
leaseback agreement covering any of its or their respective fixed or
capital assets.
6.6 Restriction On Fundamental Changes. Each Borrower and FSI
shall not, and shall not permit any Marine Subsidiary of such Borrower
to, enter into any transaction of merger, consolidation or
recapitalization, directly or indirectly, whether by operation of law
or otherwise, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, Property or assets,
whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or substantially all the business, Property or assets of,
or stock or other evidence of beneficial ownership of, any Person,
except sales (a) of Equipment in the ordinary course of business (for
the purposes of this Section 6.6, with respect to any Borrower and any
Marine Subsidiary of such Borrower, ordinary course of business shall
refer to the business of the Equipment Growth Funds and all Marine
Subsidiaries, collectively) and (b) any Subsidiary of FSI (other than
TEC AcquiSub) may be merged or consolidated with or into FSI or any
wholly-owned Subsidiary of FSI, or be liquidated, wound up or
dissolved, or all or substantially all of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or a series of transactions, to, FSI or any
wholly-owned Subsidiary of FSI; provided that, in the case of such a
merger or consolidation, FSI or such wholly-owned Subsidiary shall be
the continuing or surviving corporation.
6.7 Transactions With Affiliates. Each Borrower shall not, and
shall not permit any Marine Subsidiary of such Borrower to, directly or
indirectly, enter into or permit to exist any transaction (including,
without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any of its Affiliates on
terms that are less favorable to such Borrower or such Marine
Subsidiary than those that might be obtained at the time from Persons
who are not such Affiliates.
6.8 Maintenance Of Business. Each Borrower shall not, and FSI
shall not permit any of its existing Subsidiaries to, engage in any
business materially different than the business currently engaged in by
such Person.
6.9 No Distributions. Each Borrower shall not make, pay or set
apart any funds for the payment of distribution to its partners or
members if such distribution would cause or result in an Event of
Default or Potential Event of Default.
6.10 Events Of Default. Each Borrower and FSI shall not take
or omit to take any action, which act or omission would, with the lapse
of time, or otherwise constitute (a) a default, event of default or
Event of Default under any of the Loan Documents or (b) a default or an
event of default under any other material agreement, contract, lease,
license, mortgage, deed of trust or instrument to which either is a
party or by which either or any of their Properties or assets is bound,
which default or event of default would, with reasonable likelihood,
have a Material Adverse Effect.
6.11 ERISA. If any Borrower or FSI or any of their ERISA
Affiliates incurs any obligation to contribute to any Pension Plan,
then such Borrower or FSI, as the case may be, shall not (a) terminate,
or permit such ERISA Affiliate to terminate, any Pension Plan so as to
result in any liability that would, with reasonable likelihood, have a
Material Adverse Effect or (b) make or permit such ERISA Affiliate to
make a complete or partial withdrawal (within the meaning of Section
4201 of ERISA) from any Multiemployer Plan so as to result in any
liability that would, with reasonable likelihood, have a Material
Adverse Effect.
6.12 No Use Of Any Lender's Name. Each Borrower and FSI shall
not use or authorize others to use any Lender's name or marks in any
publication or medium, including, without limitation, any prospectus,
without such Lender's advance written authorization.
6.13 Certain Accounting Changes. Each Borrower shall not
change its fiscal year end from December 31, nor make any change in its
accounting treatment and reporting practices except as permitted by
GAAP; provided, however, that should any Borrower change its accounting
treatment or reporting practices in a way that would cause a change in
the calculation, or in the results of a calculation, of any of the
financial covenants set forth in Section 7, below, then such Borrower
shall continue to calculate such covenants as if such accounting
treatment or reporting practice had not been changed unless otherwise
agreed to by Requisite Lenders.
6.14 Amendments Of Limited Partnership Or Operating
Agreements. Each Borrower shall not, shall not cause to occur and shall
not permit any amendment, modification or supplement of or to any of
the terms or provisions of such Borrower's Limited Partnership
Agreement or, in the case of Income Fund I, its Operating Agreement,
which amendment, modification or supplement would affect, limit or
otherwise impair such Borrower's ability to pay the Obligations or
perform its obligations under this Agreement or any of the other Loan
Documents.
<PAGE>
11 Note. The forms of Note set forth as Exhibits A-1 through
A-6 of the Credit Agreement are deleted and replaced with Exhibit A attached
hereto.
12 Borrowing Base Certificate. The Borrowing Base Certificate
set forth as Exhibit B of the Credit Agreement is deleted and replaced with
Exhibit B attached hereto.
3. LIMITATIONS ON AMENDMENTS.
1 The amendments set forth in Section 1, above, are
effective for the purposes set forth herein and shall be limited precisely as
written and shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document or (ii)
otherwise prejudice any right or remedy which Lenders or Agent may now have or
may have in the future under or in connection with any Loan Document.
2 This Amendment shall be construed in connection
with and as part of the Loan Documents and all terms, conditions,
representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein waived or amended, are hereby ratified and confirmed
and shall remain in full force and effect.
4. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders
and Agent to enter into this Amendment, each Borrower represents and warrants to
each Lender and Agent as follows:
(a) Immediately after giving effect to this Amendment
(i) the representations and warranties contained in the Loan Documents (other
than those which expressly speak as of a different date) are true, accurate and
complete in all material respects as of the date hereof and (ii) no Default or
Event of Default, or event which constitutes a Potential Event of Default, has
occurred and is continuing;
(b) Each Borrower has the corporate power and
authority to execute and deliver this Amendment and to perform its Obligations
under the Credit Agreement, as amended by this Amendment, and each of the other
Loan Documents to which it is a party;
(c) The articles of incorporation, bylaws and other
organizational documents of each Borrower delivered to each Lender as a
condition precedent to the effectiveness of the Credit Agreement are true,
accurate and complete and have not been amended, supplemented or restated and
are and continue to be in full force and effect;
(d) The execution and delivery by each Borrower of
this Amendment and the performance by each Borrower of its respective
Obligations under the Credit Agreement, as amended by this Amendment, and each
of the other Loan Documents to which it is a party have been duly authorized by
all necessary corporate action on the part of such Borrower;
(e) The execution and delivery by each Borrower of
this Amendment and the performance by each Borrower of its respective
Obligations under the Credit Agreement, as amended by this Amendment, and each
of the other Loan Documents to which it is a party do not and will not
contravene (i) any law or regulation binding on or affecting such Borrower, (ii)
the articles of incorporation, bylaws, or other organizational documents of such
Borrower, (iii) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on such Borrower,
or (iv) any contractual restriction binding on or affecting such Borrower;
(f) The execution and delivery by each Borrower of
this Amendment and the performance by each Borrower of its respective
Obligations under the Credit Agreement, as amended by this Amendment, and each
of the other Loan Documents to which it is a party do not require any order,
consent, approval, license, authorization or validation of, or filing, recording
or registration with, or exemption by any governmental or public body or
authority, or subdivision thereof, binding on such Borrower, except as already
has been obtained or made; and
(g) This Amendment has been duly executed and
delivered by each Borrower and is the binding Obligation of each Borrower,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation, moratorium or other similar laws of general application and
equitable principles relating to or affecting creditors' rights.
5. REAFFIRMATION. Each Borrower hereby reaffirms its
Obligations under each Loan Document to which it is a party.
6. EFFECTIVENESS. This Amendment shall become effective upon
the last to occur of:
(a) The execution and delivery of this Amendment,
whether the same or different copies, by Borrowers, Lenders and Agent.
(b) The execution and delivery of the Acknowledgement
of Amendment and Reaffirmation of Guaranty attached to this Amendment by FSI.
(c) Receipt by Agent, in form and substance
satisfactory to Lenders, of a Guaranty of FSI's Obligations under the Credit
Agreement and FSI's Guaranty Obligations under its Guaranty dated as of the date
hereof executed by PLMI in favor of Lenders and Agent.
(d) Receipt by Agent, in form and substance
satisfactory to Lenders, of a certified copy of the records of all actions taken
by each Borrower, FSI and PLMI, including all corporate resolutions of each
Borrower, FSI and PLMI authorizing or relating to the execution, delivery and
performance of this Amendment and the Guaranty, as the case may be.
(e) Receipt by Agent, in form and substance
satisfactory to Lenders, of Notes executed by each Borrower in favor of each
Lender in the stated principal amount equal to each Lender's Pro Rata Share of
the Commitments, which Notes will replace and supersede the existing Notes dated
May 31, 1996, issued by Borrowers to Agent.
(f) Receipt by Agent, in form and substance
satisfactory to Lenders, of a supplemental fee letter (the "Supplemental Fee
Letter") and a supplemental agent's side letter (the "Supplemental Agent's Side
Letter"), each duly executed by each Borrower, AFG and TEC AcquiSub, and the
Supplemental Arrangement Fee and the Supplemental Agent's Fee described in the
Supplemental Fee Letter and the Supplemental Agent's Side Letter, respectively.
(g) Receipt by Agent of an originally executed legal
opinion of Stephen Peary, general counsel of each Borrower and Guarantor, on
behalf of each Borrower and Guarantor, in form and substance satisfactory to
Lenders, dated as of the effective date of this Amendment and addressed to
Lenders, together with copies of any officer's certificate or legal opinion of
other counsel or law firm specifically identified and expressly relied upon by
such counsel.
(h) Satisfaction, to the approval of Lenders and
Agent, of all conditions precedent to the effectiveness of Amendment No. 2 to
Amended and Restated Warehousing Credit Agreement dated as of the date hereof by
and among TEC AcquiSub, Lenders and Agent.
(i) Satisfaction, to the approval of Lenders and
Agent, of all conditions precedent to the effectiveness of Amendment No. 1 to
Warehousing Credit Agreement dated as of the date hereof by and among AFG,
Lenders and Agent.
7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NORTH CAROLINA.
8. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF. EACH
BORROWER HEREBY REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS NO
KNOWLEDGE OF ANY FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR
RIGHT OF SET-OFF.
9. FLEET AS LENDER. Upon the execution and delivery of this
Amendment, Fleet shall be a Lender and a party to the Credit Agreement, and
shall be entitled to the rights and benefits of the Loan Documents and, to the
extent of the percentage equivalent of Fleet's Commitment under the Facility
divided by the aggregate Commitment of all Lenders under the Facility, have the
rights and obligations of a Lender thereunder.
10. COUNTERPARTS. This Amendment may be signed in any number
of counterparts, and by different parties hereto in separate counterparts, with
the same effect as if the signatures to each such counterpart were upon a single
instrument. All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWERS PLM EQUIPMENT GROWTH FUND IV
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
---------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH FUND V
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
--------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH FUND VI
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
---------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH & INCOME FUND VII
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
---------------------------
J. Michael Allgood
Chief Financial Officer
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
BY PLM FINANCIAL SERVICES, INC.,
ITS MANAGER
By /s/ J. Michael Allgood
---------------------------
J. Michael Allgood
Chief Financial Officer
FSI PLM FINANCIAL SERVICES, INC.
By /s/ J. Michael Allgood
--------------------------
J. Michael Allgood
Chief Financial Officer
LENDERS FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By /s/ Bill A. Shirley
-------------------------
Bill A. Shirley
Vice President
FLEET BANK, N.A.
By /s/ Felix Herrera
----------------------
Printed Name: Felix Herrera
Title: Vice President
AGENT FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
By /s/ Bill A. Shirley
-----------------------
Bill A. Shirley
Vice President
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(Growth Funds)
11. PLM Financial Services, Inc. ("FSI") hereby acknowledges
and confirms that it has reviewed and approved the terms and conditions of this
Amendment No. 1 to Second Amended and Restated Warehousing Credit Agreement
("Amendment").
12. FSI hereby consents to this Amendment and agrees that its
Guaranty of the Obligations of Borrower under the Credit Agreement shall
continue in full force and effect, shall be valid and enforceable and shall not
be impaired or otherwise affected by the execution of this Amendment or any
other document or instrument delivered in connection herewith.
13. FSI represents and warrants that, after giving effect to
this Amendment, all representations and warranties contained in its Guaranty are
true, accurate and complete as if made the date hereof.
GUARANTOR PLM FINANCIAL SERVICES, INC.
By /s/ J. Michael Allgood
----------------------------
J. Michael Allgood
Chief Financial Officer
<PAGE>
SCHEDULE A
COMMITMENTS
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $35,000,000 35/50 x 100%
of North Carolina
Fleet Bank, N.A. $15,000,000 15/50 x 100%
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
[LENDER]
$____________ San Francisco, California
Date: November 5, 1996
[BORROWER], a _____________________ (the "Borrower"), FOR VALUE
RECEIVED, hereby unconditionally promises to pay to the order of [LENDER]
("[_________________]"), in lawful money of the United States of America, the
aggregate outstanding principal amount of [_________________]'s Pro Rata Share
of all Loans made to the Borrower under the Credit Agreement referred to below,
payable in the amounts, on the dates and in the manner set forth below.
This revolving promissory note (this "Note") is one of the Notes
referred to and defined in that certain Second Amended and Restated Warehousing
Credit Agreement dated as of May 31, 1996, as amended by that certain Amendment
No. 1 to Second Amended and Restated Warehousing Credit Agreement dated as of
even date herewith (as the same may from time to time be further amended,
modified, supplemented, renewed, extended or restated, the "Credit Agreement")
by and among the Borrower, PLM Equipment Growth Fund V, PLM Equipment Growth
Fund VI, PLM Equipment Growth & Income Fund VII, Professional Lease Management
Income Fund I, L.L.C., PLM Financial Services, Inc. ("FSI"), First Union
National Bank Of North Carolina, solely in its capacity as agent (solely in such
capacity, the "Agent") for [_________________] and such other financial
institutions as shall from time to time become "Lenders" pursuant to Section
11.10 of the Credit Agreement (such entities, together with their respective
successors and assigns being collectively referred to herein as the "Lenders"),
and the Lenders, and amends, restates and replaces that certain Revolving
Promissory Note dated May 31, 1996, executed and delivered by the Borrower in
favor of and to the Agent, on behalf of the Lenders. All capitalized terms used
but not defined herein shall have the same meaning as given to them in the
Credit Agreement.
<PAGE>
14. Principal Payments. Subject to the terms and conditions of
the Credit Agreement, including, without limitation, terms relating to mandatory
prepayments of principal (Section 2.2.3), the entire principal amount
outstanding under each Loan evidenced by this Note shall be due and payable on
the Maturity Date with respect to such Loan, with any and all unpaid and not
previously due and payable principal amounts under each such Loan being due and
payable on the Commitment Termination Date.
15. Interest Rate. The Borrower further promises to pay
interest on the sum of the daily unpaid principal balance of all Loans evidenced
by this Note outstanding on each day in lawful money of the United States of
America, from the Closing Date until all such principal amounts shall have been
repaid in full, which interest shall be payable at the rates per annum and on
the dates determined pursuant to the Credit Agreement.
16. Place Of Payment. All amounts payable hereunder shall be
payable to the Agent, on behalf of [_________________], at the office of First
Union National Bank of North Carolina, One First Union Center, 301 South College
Street, Charlotte, North Carolina 28288, Attention: Elisha Sabido, or such other
place of payment as may be specified by the Agent in writing.
17. Application Of Payments; Acceleration. Payments on this
Note shall be applied in the manner set forth in the Credit Agreement. The
Credit Agreement contains provisions for acceleration of the maturity of the
Loans upon the occurrence of certain stated events and also provides for
mandatory and optional prepayments of principal prior to the stated maturity on
the terms and conditions therein specified.
Each Advance made by [_________________] to the Borrower constituting
[_________________]'s Pro Rata Share of a Loan made to the Borrower pursuant to
the Credit Agreement shall be recorded by [_________________] on its books and
records. The failure of [_________________] to record any such Advance or any
repayment or prepayment made on account of the principal balance thereof shall
not limit or otherwise affect the obligation of the Borrower under this Note and
under the Credit Agreement to pay the principal, interest and other amounts due
and payable thereunder.
18. Default. The Borrower's failure to pay timely any of the
principal amount due under this Note or any accrued interest or other amounts
due under this Note on or within five (5) calendar days after the date the same
becomes due and payable shall constitute a default under this Note. Upon the
occurrence of a default hereunder or an Event of Default under the Credit
Agreement with respect to the Borrower, all unpaid principal, accrued interest
and other amounts owing hereunder shall, at the option of the Required Lenders,
be immediately collectible by the Lenders and the Agent pursuant to the Credit
Agreement and applicable law.
19. Waivers. The Borrower waives presentment and demand for
payment, notice of dishonor, protest and notice of protest of this Note, and
shall pay all costs of collection when incurred by or on behalf of the Lenders,
including, without limitation, reasonable attorneys' fees, costs and other
expenses as provided in the Credit Agreement.
20. Governing Law. This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of North
Carolina, excluding conflict of laws principles that would cause the application
of laws of any other jurisdiction.
21. Successors And Assigns. The provisions of this Note shall
inure to the benefit of and be binding on any successor to the Borrower and
shall extend to any holder hereof.
BORROWER [BORROWER]
By: PLM FINANCIAL SERVICES, INC.,
a Delaware corporation
its general partner/manager
By
J. Michael Allgood
Chief Financial Officer
<PAGE>
EXHIBIT B
BORROWING BASE CERTIFICATE
[Insert Borrower's Name]
__________________, 199_
First Union National Bank of North Carolina, as Agent
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson
Re: Second Amended and Restated Warehousing Credit Agreement dated as of
May 31, 1996, as amended by Amendment No. 1 to Second Amended and
Restated Warehousing Agreement dated as of November 5, 1996 (as the
same may from time to time be further amended, modified, supplemented
or restated, the "Credit Agreement"), by and among PLM Equipment Growth
Fund IV, a California limited partnership, PLM Equipment Growth Fund V,
a California limited partnership, PLM Equipment Growth Fund VI, a
California limited partnership, PLM Equipment Growth & Income Fund VII,
a California limited partnership, Professional Lease Management Income
Fund I, L.L.C., a Delaware limited partnership (any one individually, a
"Borrower," and collectively "Borrowers"), PLM Financial Services,
Inc., a Delaware corporation and the sole general partner or manager of
the Borrowers ("FSI"), First Union National Bank of North Carolina
("FUNB"), Fleet Bank, N.A. and each other lender whose name is set
forth on the signature pages to the Agreement or which may hereafter
execute and deliver an instrument of assignment pursuant to Section
11.10 of the Agreement (any one individually, a "Lender," and
collectively, "Lenders") and FUNB as Agent, on behalf of Lenders
Ladies and Gentlemen:
Reference is made to the Credit Agreement. The capitalized terms used in this
Borrowing Base Certificate and not defined herein have the same meaning as given
to them in the Credit Agreement.
Pursuant to Section 5.1.3 of the Credit Agreement, the undersigned Borrower
hereby certifies as follows:
<PAGE>
22. The information furnished in Schedule 1 attached hereto
was true, accurate and complete as of the last day of the calendar month
immediately preceding the date of this Borrowing Base Certificate; provided,
however, that if such certificate is being delivered with respect to a requested
borrowing of a Loan under the Credit Agreement, then if expressly provided, so
stated in Schedule 1, such information shall be true, accurate and complete
through the requested Funding Date. The calculation of each item is subject to
the more detailed description thereof set forth in the Credit Agreement.
23. Except as disclosed in Schedule 2 attached hereto, the
representations and warranties set forth in Section 4 of the Credit Agreement
are true, accurate and complete as of the date hereof; provided, however, that
those representations and warranties expressly referring to another date shall
be deemed to be made as of such date; and
24. The Borrower does not have knowledge of the existence, as
of the date hereof, of any Event of Default or Potential Event of Default,
except for such conditions or events listed on Schedule 2 attached hereto and
incorporated herein by this reference, specifying the nature and period of
existence thereof and what action the Borrower has taken, is taking and proposes
to take with respect thereto.
IN WITNESS WHEREOF, this Borrowing Base Certificate is executed by the
undersigned this ____ day of , 199 .
[INSERT BORROWER NAME]
By: PLM FINANCIAL SERVICES, INC.,
a Delaware corporation,
its general partner/manager
By:
Printed Name:
Title:
Received by:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
in its capacity as Agent
under the Credit Agreement
By:
Printed Name:
Title:
Date:
<PAGE>
SCHEDULE 1 TO
BORROWING BASE CERTIFICATE
Dated , 199
<TABLE>
<CAPTION>
Calculated separately for each Borrower:
<S> <C>
$----------
1. Fifty percent (50.0%) of the unrestricted cash available for
purchase of Eligible Inventory by Borrower
25. The lesser of Line 2(a)(vi) or Line 2(b)(vi): $__________
(a) (i) The aggregate net book value of all Eligible
Inventory $__________ (including the item(s) of Eligible
Inventory being financed with this Loan if this
certificate is supplied in connection with a Loan
request) owned of record by Borrower or a Marine
Subsidiary or of record by an Owner Trustee for the
beneficial interest of Borrower or any Marine Subsidiary
.1 The aggregate net book value of all Eligible Inventory listed $__________
in Line 2(a)(i) that is off-lease or that is subject to a Lease under
which any applicable lease or rental payment is more than ninety (90)
days past due
.2 Fifteen percent (15.0%) of Line 2(a)(i) $__________
.3 The amount, if any, by which Line 2(a)(ii) exceeds Line $__________
2(a)(iii)
.4 Line 2(a)(i) minus Line 2(a)(iv) $__________
.5 Seventy percent (70.0%) of Line 2(a)(v) $__________
or
2 (i) The aggregate net fair market value of all Eligible Inventory $__________
(including the item(s) of Eligible Inventory being financed with this
Loan if this certificate is supplied in connection with a Loan request)
owned of record by Borrower or a Marine Subsidiary or of record by an
Owner Trustee for the beneficial interest of Borrower or any Marine
Subsidiary
.1 The aggregate net fair market value of all Eligible Inventory $__________
listed in Line 2(b)(i) that is off-lease or that is subject to a Lease
under which any applicable lease or rental payment is more than ninety
(90) days past due
.2 Fifteen percent (15.0%) of Line 2(b)(i) $__________
.3 The amount, if any, by which Line 2(b)(ii) exceeds Line $__________
2(b)(iii)
.4 Line 2(b)(i) minus Line 2(a)(iv) $__________
.5 Fifty percent (50.0%) of Line 2(b)(v)
3. The aggregate Consolidated Funded Debt of Borrower excluding the $__________
principal amount of any Loans outstanding to Borrower under the Credit Agreement
4. Line 1 plus Line 2 minus Line 3 $__________
NOTE: Lines 1, 2 and 3 to be computed (a) with respect to any requested Loan,
as of the requested Funding Date, and (b) with respect to the delivery
of any monthly Borrowing Base Certificate to be furnished pursuant to
Section 5.1.3, as of the last day of the calendar month for which such
Borrowing Base Certificate is furnished (provided, that for the purpose
of computing the Borrowing Base under this Line 1, in the event that
Borrower or a Marine Subsidiary shall own less than one hundred percent
(100.0%) of the record or beneficial interests in any item of Eligible
Inventory, with one or more of the other Equipment Growth Funds owning
of record or beneficially the remaining interests, there shall be
included only Borrower's or such Marine Subsidiary's, as the case may
be, ratable interest in such item of Eligible Inventory)
26. Aggregate amount outstanding under TEC AcquiSub Agreement and
the AFG $__________ Agreement
27. Aggregate amount outstanding under the Credit Agreement for
all $__________ Borrowers (include any amounts to be drawn or
proposed to be drawn by any other Borrower as of the date of this
certificate and not reflected as outstanding under the Credit
Agreement)
28. $50,000,000 less Line 5 plus 6 $__________
29. Lesser of (a) Line 4 and (b) Line 7 $__________
30. Lesser of Line 8 and $35,000,000 $__________
31. Amount request to be advanced (must not be greater than Line 9) $__________
</TABLE>
<PAGE>
SCHEDULE 2 TO
BORROWING BASE CERTIFICATE
Dated ________________, 199_
LIST OF EXCEPTIONS
Condition(s) or event(s) constituting an Event of Default or Potential Event of
Default:
Period of existence:
Remedial action with respect to such condition or event:
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM Financial Services, Inc., as
General Partner of PLM Equipment Growth Fund V, to comply with the Securities
Exchange Act of 1934, as amended (the "Act"), and any rules and regulations
thereunder, in connection with the preparation and filing with the Securities
and Exchange Commission of annual reports on Form 10-K on behalf of PLM
Equipment Growth Fund V, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1997 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
__ day of February, 1997.
/s/ Douglas P. Goodrich
- - ------------------------------------
Douglas P. Goodrich
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM Financial Services, Inc., as
General Partner of PLM Equipment Growth Fund V, to comply with the Securities
Exchange Act of 1934, as amended (the "Act"), and any rules and regulations
thereunder, in connection with the preparation and filing with the Securities
and Exchange Commission of annual reports on Form 10-K on behalf of PLM
Equipment Growth Fund V, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1997 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
__ day of February, 1997.
/s/ Robert L. Pagel
- - ----------------------------------
Robert L. Pagel
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM Financial Services, Inc., as
General Partner of PLM Equipment Growth Fund V, to comply with the Securities
Exchange Act of 1934, as amended (the "Act"), and any rules and regulations
thereunder, in connection with the preparation and filing with the Securities
and Exchange Commission of annual reports on Form 10-K on behalf of PLM
Equipment Growth Fund V, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned, in any and all capacities, to such annual reports, to any and all
amendments thereto, and to any and all documents or instruments filed as a part
of or in connection therewith; and the undersigned hereby ratifies and confirms
all that each of the said attorneys, or his substitute or substitutes, shall do
or cause to be done by virtue hereof. This Power of Attorney is limited in
duration until May 1, 1997 and shall apply only to the annual reports and any
amendments thereto filed with respect to the fiscal year ended December 31,
1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
__ day of February, 1997.
/s/ J. Alec Merriam
- - ---------------------------------
J. Alec Merriam
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,215
<SECURITIES> 0
<RECEIVABLES> 3,481
<ALLOWANCES> (236)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 155,004
<DEPRECIATION> (81,541)
<TOTAL-ASSETS> 98,419
<CURRENT-LIABILITIES> 4,222
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 52,296
<TOTAL-LIABILITY-AND-EQUITY> 98,419
<SALES> 0
<TOTAL-REVENUES> 44,322
<CGS> 0
<TOTAL-COSTS> 31,765
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,789
<INCOME-PRETAX> 12,441
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,441
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
