UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal quarter ended June 30, 1998
[ ] 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
-----------------------
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
-----------------------
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 ____
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------------------------
<S> <C> <C>
Assets
Equipment held for operating lease, at cost $ 111,037 $ 104,902
Less accumulated depreciation (65,224) (62,320 )
---------------------------------------
Net equipment 45,813 42,582
Cash and cash equivalents 3,025 9,884
Restricted cash 108 111
Accounts receivable, net of allowance for doubtful
accounts of $128 in 1998 and $113 in 1997 4,002 3,229
Investments in unconsolidated special-purpose entities 16,457 22,758
Prepaid expenses and other assets 49 114
Deferred charges, net of accumulated amortization of
$910 in 1998 and $948 in 1997 392 435
Equipment acquisition deposit -- 920
---------------------------------------
Total assets $ 69,846 $ 80,033
=======================================
Liabilities and partners' capital
Liabilities:
Accounts payable and accrued expenses $ 706 $ 1,826
Due to affiliates 377 477
Short-term note payable 1,600 --
Lessee deposits and reserve for repairs 1,833 1,644
Note payable 27,519 32,000
---------------------------------------
Total liabilities 32,035 35,947
---------------------------------------
Partners' capital:
Limited partners (9,081,028 limited partnership units as of
June 30, 1998 and 9,086,608 as of December 31, 1997) 37,811 44,086
General Partner -- --
---------------------------------------
Total partners' capital 37,811 44,086
---------------------------------------
Total liabilities and partners' capital $ 69,846 $ 80,033
=======================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF INCOME
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Lease revenue $ 6,551 $ 8,371 $ 11,763 $ 16,338
Interest and other income 99 78 260 129
Net gain on disposition of equipment 359 2,146 494 2,225
--------------------------------------------------------------------
Total revenues 7,009 10,595 12,517 18,692
--------------------------------------------------------------------
Expenses
Depreciation and amortization 2,880 4,010 5,521 8,128
Management fees to affiliate 318 399 574 774
Repairs and maintenance 450 752 774 1,420
Equipment operating expenses 1,680 2,226 2,671 4,012
Interest expense 512 650 1,045 1,318
Insurance expense to affiliate (66) 177 (56) 436
Other insurance expense 8 256 79 452
General and administrative expenses
to affiliates 234 216 471 464
Other general and administrative expenses 154 206 294 341
Provision for bad debt 25 41 32 379
--------------------------------------------------------------------
Total expenses 6,195 8,933 11,405 17,724
--------------------------------------------------------------------
Equity in net income of unconsolidated
special-purpose entities 269 205 305 354
--------------------------------------------------------------------
Net income $ 1,083 $ 1,867 $ 1,417 $ 1,322
====================================================================
Partners' share of net income:
Limited partners $ 891 $ 1,676 $ 1,034 $ 938
General Partner 192 191 383 384
--------------------------------------------------------------------
Total $ 1,083 $ 1,867 $ 1,417 $ 1,322
====================================================================
Net income per weighted-average limited
partnership unit (9,083,175 units and
9,127,849 units as of June 30, 1998
and 1997, respectively) $ 0.10 $ 0.18 $ 0.11 $ 0.10
====================================================================
Cash distributions $ 3,825 $ 3,834 $ 7,650 $ 7,694
====================================================================
Cash distributions per weighted-average
limited partnership unit $ 0.40 $ 0.40 $ 0.80 $ 0.80
====================================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
( A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the period from December 31, 1996 to June 30, 1998 (in thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
----------------------------------------------------------
<S> <C> <C> <C>
Partners' capital as of December 31, 1996 $ 52,296 $ -- $ 52,296
Net income 7,154 767 7,921
Repurchase of limited partnership units (785) -- (785)
Cash distributions (14,579) (767) (15,346)
------------------------------------------------------------
Partners' capital as of December 31, 1997 44,086 -- 44,086
Net income 1,034 383 1,417
Repurchase of limited partnership units (42) -- (42)
Cash distributions (7,267) (383) (7,650)
------------------------------------------------------------
Partners' capital as of June 30, 1998 $ 37,811 $ -- $ 37,811
============================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
---------------------------
<S> <C> <C>
Operating activities
Net income $ 1,417 $ 1,322
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,521 8,128
Net gain on disposition of equipment (494 ) (2,225)
Equity in net income from unconsolidated
special-purpose entities (305 ) (354)
Changes in operating assets and liabilities, net:
Restricted cash 3 403
Accounts receivable, net (764 ) (745)
Prepaid expenses and other assets 65 202
Accounts payable and accrued expenses (1,120 ) (210)
Due to affiliates (100 ) 24
Lessee deposits and reserve for repairs 189 (1,464)
-----------------
---------------
Net cash provided by operating activities 4,412 5,081
-------------------------------
Investing activities
Payments for equipment purchases and capital improvements (8,285 ) (132)
Payments of acquisition fees to affiliate (414 ) --
Payments of lease negotiation fees to affiliate (92 ) --
Liquidation proceeds from unconsolidated
special-purpose entity 3,724 --
Distributions from unconsolidated special-purpose entities 2,882 1,617
Proceeds from disposition of equipment 1,487 4,678
-------------------------------
Net cash (used in) provided by investing activities (698 ) 6,163
-------------------------------
Financing activities
Payments of short-term note payable -- (2,463)
Payments of note payable (4,481 ) (3,000)
Proceeds from short-term note payable 1,600 --
Cash distributions paid to limited partners (7,267 ) (7,310)
Cash distributions paid to General Partner (383 ) (384)
Repurchase of limited partnership units (42 ) (774)
Payment of loan costs -- (1)
-------------------------------
Net cash used in financing activities (10,573 ) (13,932)
-------------------------------
Net decrease in cash and cash equivalents (6,859 ) (2,688)
Cash and cash equivalents at beginning of period 9,884 4,662
-------------------------------
Cash and cash equivalents at end of period $ 3,025 $ 1,974
===============================
Supplemental information
Interest paid $ 1,091 $ 1,355
=============================
Supplemental disclosure of noncash investing and financing activities:
Sale proceeds included in accounts receivable $ 13 $ --
===============================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (FSI or the
General Partner), the accompanying unaudited financial statements contain all
adjustments necessary, consisting primarily of normal recurring accruals, to
present fairly the financial position of PLM Equipment Growth Fund V (the
Partnership) as of June 30, 1998 and December 31, 1997, the statements of income
for the three and six months ended June 30, 1998 and 1997, the statements of
changes in partners' capital for the period from December 31, 1996 to June 30,
1998, and the statements of cash flows for the six months ended June 30, 1998
and 1997. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the accompanying financial
statements. For further information, reference should be made to the financial
statements and notes thereto included in the Partnership's Annual Report on Form
10-K for the year ended December 31, 1997, on file with the Securities and
Exchange Commission.
2. Repurchase of Limited Partnership Units
In 1997, the Partnership agreed to repurchase approximately 9,000 limited
partnership units for an aggregate purchase price of up to $0.1 million. During
the six months ended June 30, 1998, the Partnership had repurchased 5,580
limited partnership units for $42,000. The General Partner may repurchase the
additional units in the future.
3. Cash Distributions
Cash distributions are recorded when paid and totaled $3.8 million and $7.7
million for the three and six months ended June 30, 1998 and 1997, respectively.
Cash distributions to limited partners in excess of net income represent a
return of capital. Cash distributions to the limited partners of $6.2 million
and $6.4 million for the six months ended June 30, 1998 and 1997, respectively,
were deemed to be a return of capital. Cash distributions of $2.7 million
relating to the results from the second quarter of 1998 were paid during the
third quarter of 1998.
4. Transactions with General Partner and Affiliates
The Partnership's proportional share of the affiliated expenses incurred by the
unconsolidated special-purpose entities (USPEs) during 1998 and 1997 is listed
in the following table (in thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 96 $ 60 $ 187 $ 136
Data processing and administrative
expenses 23 15 48 31
Insurance expense (2) 56 -- 148
</TABLE>
Transportation Equipment Indemnity Company, Ltd. (TEI), an affiliate of the
General Partner, provided certain marine insurance coverage for the
Partnership's equipment and other insurance brokerage services during 1998 and
1997. TEI did not provide the same insurance coverage during 1998 as had been
provided during 1997. These services were provided by an unaffiliated third
party.
During 1998, the Partnership received a $0.1 million loss-of-hire insurance
refund from TEI due to lower claims from the insured Partnership and other
insured affiliated partnerships.
The balance due to affiliates as of June 30, 1998 includes $0.3 million due to
FSI and its affiliate for management fees and $0.1 million due to affiliated
USPEs. The balance due to affiliates as of
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
4. Transactions with General Partner and Affiliates (continued)
December 31, 1997 includes $0.4 million due to FSI and its affiliate for
management fees and $0.1 million due to affiliated USPEs.
The Partnership's proportional share of USPE-affiliated management fees of
$44,000 and $0.1 million was payable as of June 30, 1998 and December 31, 1997,
respectively.
During the six months ended June 30, 1998, the Partnership purchased a marine
vessel at a cost of $9.2 million and paid FSI $0.5 million for acquisition and
lease negotiation fees.
5. Equipment
Owned equipment held for operating lease is stated at cost. The components of
owned equipment held for operating leases are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------------------------
<S> <C> <C>
Aircraft $ 49,838 $ 49,838
Marine vessels 25,890 16,276
Marine containers 14,576 17,592
Rail equipment 11,428 11,500
Trailers 9,305 9,696
------------- --------------
111,037 104,902
Less accumulated depreciation (65,224 ) (62,320)
Net equipment $ 45,813 $ 42,582
============= ==============
</TABLE>
As of June 30, 1998 and December 31, 1997, all of the equipment was on lease or
operating in PLM-affiliated short-term trailer rental facilities.
During March 1998, the Partnership purchased a marine vessel for $9.6 million,
including acquisition fees of $0.4 million paid to FSI. The Partnership made a
deposit of $0.9 million toward this purchase in 1997, which is included in the
balance sheet as of December 31, 1997 as an equipment acquisition deposit.
During the six months ended June 30, 1998, the Partnership disposed of marine
containers, railcars, and trailers with an aggregate net book value of $1.0
million for $1.5 million.
During the six months ended June 30, 1997, the Partnership disposed of an
aircraft engine, marine containers, trailers, and a railcar, with an aggregate
net book value of $2.5 million, for $4.7 million, which included $1.5 million of
unused engine reserves.
(this space intentionally left blank)
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
6. Investments in Unconsolidated Special-Purpose Entities
The net investments in USPEs include the following jointly-owned equipment and
related assets and liabilities (in thousands of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------------------------------------
<S> <C> <C>
48% interest in an entity owning a product tanker $ 7,465 $ 8,266
25% interest in a trust owning two commercial aircraft on direct
finance lease 2,769 2,863
17% interest in two trusts owning three commercial aircraft, two
aircraft engines, and a portfolio of aircraft rotables 2,303 4,027
50% interest in an entity owning a bulk carrier 2,087 2,277
50% interest in an entity owning a product tanker 1,833 1,547
60% interest in a trust that owned a commercial aircraft -- 3,778
Net investments $ 16,457 $ 22,758
============= ===============
</TABLE>
During the six months ended June 30, 1998, the Partnership received liquidating
proceeds of $3.7 million from the sale of its interest in an entity that owned a
commercial aircraft which had a net book value of $3.8 million.
7. Debt
The Partnership made the regularly scheduled installment payments to the lender
of the senior loan of $4.0 million during the six months ended June 30, 1998.
The Partnership also paid the lender of the senior loan an additional $0.5
million from equipment sale proceeds, as required by the loan agreement.
The General Partner entered into a short-term, joint $50.0 million credit
facility. This facility was amended on June 1, 1998 to temporarily increase the
borrowing capacity of American Finance Group, Inc. (AFG), a subsidiary of PLM
International, Inc., from $50.0 million to $55.0 million until September 1,
1998. On June 8, 1998, this facility was amended again to temporarily increase
AFG's borrowing capacity from $55.0 million to $60.0 million until July 8, 1998.
As of June 30, 1998, the Partnership had borrowings of $1.6 million under the
short-term, joint $60.0 million credit facility. Among the other eligible
borrowers, AFG had borrowings of $44.8 million and TEC Acquisub, Inc., an
indirect wholly-owned subsidiary of PLM International, Inc., had borrowings of
$2.0 million under the short-term, joint $60.0 million credit facility as of
June 30, 1998. No other eligible borrower had any outstanding borrowings.
8. Contingencies
PLM International, Inc. (the Company) and various of its affiliates are named as
defendants in a lawsuit filed as a class action on January 22, 1997 in the
Circuit Court of Mobile County, Mobile, Alabama, Case No. CV-97-251 (the Koch
action). 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 (the Funds) for which the Company's
wholly-owned subsidiary, PLM Financial Services, Inc. (FSI), acts as the general
partner, including the Partnership, PLM Equipment Growth Funds IV, and VI, and
PLM Equipment Growth & Income Fund VII. The complaint asserts eight causes of
action against all defendants, as follows: fraud and deceit, suppression,
negligent misrepresentation and suppression, intentional breach of fiduciary
duty, negligent breach of fiduciary duty, unjust enrichment, conversion, and
conspiracy. Additionally, plaintiffs allege a cause of action against PLM
Securities Corp. for breach of third party beneficiary contracts in violation of
the National Association of Securities Dealers rules of fair practice.
Plaintiffs allege that each defendant owed plaintiffs and the class certain
duties due to their
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
8. Contingencies (continued)
status as fiduciaries, financial advisors, agents, and control persons. Based on
these duties, plaintiffs assert liability against the defendants for improper
sales and marketing practices, mismanagement of the Funds, and concealing such
mismanagement from investors in the 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.
In March 1997, the defendants removed the Koch action from the state court to
the United States District Court for the Southern District of Alabama, Southern
Division (Civil Action No. 97-0177-BH-C) based on the district court's diversity
jurisdiction, following which plaintiffs filed a motion to remand the action to
the state court. In September 1997, the district court denied plaintiffs' motion
and dismissed without prejudice the individual claims of the California class
representative, reasoning that he had been fraudulently joined as a plaintiff.
In October 1997, defendants filed a motion to compel arbitration of plaintiffs'
claims, based on an agreement to arbitrate contained in the limited partnership
agreement of each Fund, and to stay further proceedings pending the outcome of
such arbitration. Notwithstanding plaintiffs' opposition, the district court
granted the motion in December 1997.
Following various unsuccessful requests that the district court reverse or
otherwise amend its decisions, plaintiffs filed with the U.S. Court of Appeals
for the Eleventh Circuit a notice of appeal from the district court's order
granting defendants' motion to compel arbitration and to stay the proceedings,
and of the district court's order denying plaintiffs' motion to remand and
dismissing the claims of the California plaintiff. This appeal was voluntarily
dismissed by plaintiffs in June 1998 pending settlement of the Koch action, as
discussed below.
On June 5, 1997, the Company and the affiliates who are also defendants in the
Koch action were named as defendants in another purported class action filed in
the San Francisco Superior Court, San Francisco, California, Case No. 987062
(the Romei action). The plaintiff is an investor in the Partnership, and filed
the complaint on her own behalf and on behalf of all class members similarly
situated who invested in certain California limited partnerships for which FSI
acts as the general partner, including the Funds. The complaint alleges the same
facts and the same nine causes of action as in the Koch action, plus five
additional causes of action against all of the defendants, as follows:
violations of California Business and Professions Code Sections 17200, et seq.
for alleged unfair and deceptive practices, constructive fraud, unjust
enrichment, violations of California Corporations Code Section 1507, and a claim
for treble damages under California Civil Code Section 3345.
On July 31, 1997, the defendants filed with the district court for the Northern
District of California (Case No. C-97-2847 WHO) a petition (the petition) under
the Federal Arbitration Act seeking to compel arbitration of plaintiff's claims
and for an order staying the state court proceedings pending the outcome of the
arbitration. In connection with this motion, plaintiff agreed to a stay of the
state court action pending the district court's decision on the petition to
compel arbitration. In October 1997, the district court denied the Company's
petition to compel arbitration and in November 1997, agreed to hear the
Company's motion for reconsideration of this order. The hearing on this motion
has been taken off calendar and the district court has dismissed the petition
pending settlement of the Romei action, as discussed below. The state court
action continues to be stayed pending such resolution. In connection with her
opposition to the petition to compel arbitration, the plaintiff filed an amended
complaint with the state court in August 1997 alleging two new causes of action
for violations of the California Securities Law of 1968 (California Corporations
Code Sections 25400 and 25500) and for violation of California Civil Code
Sections 1709 and 1710. Plaintiff also served certain discovery requests on
defendants. Because of the stay, no response to the amended complaint or to the
discovery is currently required.
In May 1998, all parties to the Koch and Romei actions entered into a memorandum
of understanding (MOU) related to the settlement of those actions. The MOU
contemplates a settlement and release of all claims in exchange for payment of
up to $6.0 million. The final settlement amount will depend on the
<PAGE>
PLM EQUIPMENT GROWTH FUND V
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
8) Contingencies (continued)
number of authorized claims filed by authorized claimants, the amount of the
administrative costs incurred in connection with the settlement, and the amount
of attorneys' fees awarded by the Alabama district court. The Company will pay
up to $0.3 million of the settlement, with the remainder being funded by an
insurance policy. The defendants will continue to deny each of the claims and
contentions and admit no liability in connection with the proposed settlement.
The settlement remains subject to numerous conditions, including but not limited
to (a) agreement and execution by the parties of a settlement agreement, (b)
notice to and certification of the class for settlement purposes, and (c)
preliminary and final approval of the settlement by the Alabama district court.
The Company continues to believe that the allegations of the Koch and Romei
actions are completely without merit and intends to continue to defend this
matter vigorously if the settlement is not consummated.
9. Subsequent Event
During July 1998, the Partnership repaid its $1.6 million borrowing under the
short-term joint, $60.0 million credit facility.
(this space intentionally left blank)
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of PLM Equipment Growth Fund V's (the Partnership's) Operating
Results for the Three Months Ended June 30, 1998 and 1997
(A) Owned Equipment Operations
Lease revenues less direct expenses on owned equipment (defined as expenses for
repair and maintenance, equipment operation, and asset-specific insurance)
decreased during the three months ended June 30, 1998 when compared to the same
period of 1997. The following table presents lease revenues less direct expenses
by owned equipment type (in thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1998 1997
-------------------------------
<S> <C> <C>
Aircraft and aircraft engines $ 2,200 $ 2,417
Marine vessels 1,077 897
Trailers 501 460
Rail equipment 461 534
Marine containers 235 660
</TABLE>
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$2.2 million and $19,000, respectively, for the three months ended June 30,
1998, compared to $2.4 million and $22,000, respectively, during the same period
of 1997. The decrease in aircraft contribution was due to the sale of two
commuter aircraft and an aircraft engine during 1997.
Marine vessels: Marine vessel lease revenues and direct expenses were $2.8
million and $1.7 million, respectively, for the three months ended June 30,
1998, compared to $4.0 million and $3.1 million, respectively, during the same
period of 1997. The increase in marine vessel contribution was due to the sale
of two marine vessels during the fourth quarter of 1997 that were operating
under a voyage charter which had significantly higher lease revenues and
operating costs, offset, by the purchase of an additional marine vessel that was
operating under a bareboat charter which produces lower lease revenues and
practically no operating costs. The Partnership also received a $0.1 million
loss-of-hire insurance refund during the second quarter of 1998 from
Transportation Equipment Indemnity Company, Ltd. (TEI), an affiliate of the
General Partner, due to lower claims from the insured Partnership and other
insured affiliated partnerships.
Trailers: Trailer lease revenues and direct expenses were $0.7 million and $0.2
million, respectively, for the three months ended June 30, 1998, compared to
$0.6 million and $0.2 million, respectively, during the same period of 1997.
Trailer contribution increased during the second quarter of 1998 due to a higher
percentage of Partnership trailers on hire at the PLM affiliated rental yards.
Rail equipment: Rail equipment lease revenues and direct expenses were $0.6
million and $0.2 million, respectively, for the three months ended June 30,
1998, compared to $0.6 million and $0.1 million, respectively, during the same
period of 1997. The decrease in railcar contribution was due to required repairs
to certain railcars that were not needed during the same period of 1997.
Marine containers: Marine container lease revenues and direct expenses were $0.2
million and $3,000, respectively, for the three months ended June 30, 1998,
compared to $0.7 million and $4,000, respectively, during the same period of
1997. 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 been a decrease in marine container contribution.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.1 million for the quarter ended June 30, 1998
decreased from $5.5 million for the same period in 1997. Significant variances
are explained as follows:
(1) A $1.1 million decrease in depreciation and amortization expenses from
1997 levels was caused primarily by the sale of two marine vessels and two
commuter aircraft during 1997, along with the double-declining balance method of
depreciation. These decreases were partially offset by the purchase of a marine
vessel during the first quarter of 1998.
(2) A $0.1 million decrease in interest expense was due to a lower average
debt balance when compared to the same period of 1997.
(3) A $0.1 million decrease in management fees to affiliate was due to
lower lease revenues.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of equipment for the second quarter of 1998
totaled $0.4 million, which resulted from the sale of marine containers,
railcars and trailers, with an aggregate net book value of $0.7 million, for
proceeds of $1.1 million. Net gain on disposition of equipment for the second
quarter of 1997 totaled $2.1 million, which resulted from the sale of an
aircraft engine, marine containers, and a trailer, with an aggregate net book
value of $2.3 million, for proceeds of $4.4 million which includes $1.5 million
of unused engine reserves.
(D) Equity in Net Income of Unconsolidated Special-Purpose Entities (USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1998 1997
-------------------------------
<S> <C> <C>
Marine vessels $ 176 $ (99 )
Aircraft, rotable components, and aircraft engines 93 304
Equity in net income of USPEs $ 269 $ 205
==================================================================
</TABLE>
Marine vessels: As of June 30, 1998, the Partnership owned an interest in three
marine vessels. As of June 30, 1997, the Partnership owned an interest in two
marine vessels. During the second quarter of 1998, lease revenues of $1.7
million were offset by depreciation and administrative expenses of $1.5 million.
During the same period of 1997, lease revenues of $0.9 million were offset by
depreciation and administrative expenses of $1.0 million. The primary reason for
the increase in lease revenues and depreciation and administrative expenses
during 1998 was the purchase of an interest in an entity that owns a marine
vessel in the third quarter of 1997.
Aircraft, rotable components, and aircraft engines: As of June 30, 1998 and
1997, the Partnership had an interest in two trusts that own three commercial
aircraft, two aircraft engines, and a portfolio of aircraft rotables, and also
had an interest in an entity owning two commercial aircraft on a direct finance
lease. During the second quarter of 1998, revenues of $0.3 million were offset
by depreciation and administrative expenses of $0.2 million. During the same
period of 1997, lease revenues of $0.6 million were offset by depreciation and
administrative expenses of $0.3 million. The decrease in lease revenues was due
to the renewal of the leases for three commercial aircraft, two aircraft
engines, and a portfolio of aircraft rotables at a lower rate than was in place
during the same period of 1997. The decrease in depreciation and administrative
expenses was due to the double-declining balance method of depreciation when
compared to the same period of 1997.
(E) Net Income
As a result of the foregoing, the Partnership's net income for the quarter ended
June 30, 1998 was $1.1 million, compared to a net income of $1.9 million during
the same period in 1997. The Partnership's ability to acquire, operate, and
liquidate assets, secure leases, and re-lease those assets whose leases expire
is subject to many factors, and the Partnership's performance in the second
quarter of 1998 is not necessarily indicative of future periods. In the second
quarter of 1998, the Partnership distributed $3.6 million to the limited
partners, or $0.40 per weighted-average limited partnership unit.
Comparison of the Partnership's Operating Results for the Six Months Ended June
30, 1998 and 1997
(A) Owned Equipment Operations
Lease revenues less direct expenses on owned equipment (defined as expenses for
repair and maintenance, equipment operation, and asset-specific insurance)
decreased during the six months ended June 30, 1998 when compared to the same
period of 1997. The following table presents lease revenues less direct expenses
by owned equipment type (in thousands of dollars):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
-------------------------------
<S> <C> <C>
Aircraft and aircraft engines $ 4,406 $ 4,953
Marine vessels 1,075 1,952
Rail equipment 1,047 1,118
Trailers 1,016 883
Marine containers 761 1,131
</TABLE>
Aircraft and aircraft engines: Aircraft lease revenues and direct expenses were
$4.4 million and $40,000, respectively, for the six months ended June 30, 1998,
compared to $5.0 million and $42,000, respectively, during the same period of
1997. The decrease in aircraft contribution was due to the sale of two commuter
aircraft and an aircraft engine during 1997.
Marine vessels: Marine vessel lease revenues and direct expenses were $4.0
million and $2.9 million, respectively, for the six months ended June 30, 1998,
compared to $7.7 million and $5.7 million, respectively, during the same period
of 1997. The decrease in marine vessel contribution was due to the sale of two
marine vessels during the fourth quarter of 1997, offset in part, by the
purchase of an additional marine vessel during March 1998 and the receipt of a
$0.1 million loss-of-hire insurance refund from TEI due to lower claims from the
insured Partnership and other insured affiliated partnerships.
Rail equipment: Rail equipment lease revenues and direct expenses were $1.3
million and $0.2 million, respectively, for the six months ended June 30, 1998,
compared to $1.3 million and $0.2 million, respectively, during the same period
of 1997. The decrease in railcar contribution was due to required repairs to
certain railcars that were not needed during the same period of 1997.
Trailers: Trailer lease revenues and direct expenses were $1.3 million and $0.3
million, respectively, for the six months ended June 30, 1998, compared to $1.3
million and $0.4 million, respectively, during the same period of 1997. Trailer
contribution increased during the six months of 1998 due to fewer maintenance
repairs needed to trailers at the PLM affiliated rental yards.
Marine containers: Marine container lease revenues and direct expenses were $0.8
million and $6,000, respectively, for the six months ended June 30, 1998,
compared to $1.1 million and $9,000, respectively, during the same period of
1997. The number of marine containers owned by the Partnership has been
declining over the past 12 months due to sales and dispositions. The result of
this declining fleet has been a decrease in marine container contribution.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $7.9 million for the six months ended June 30, 1998
decreased from $11.4 million for the same period in 1997. Significant variances
are explained as follows:
(1) A $2.6 million decrease in depreciation and amortization expenses from
1997 levels was caused primarily by the sale of two marine vessels and two
commuter aircraft during 1997 and equipment sales during 1998, along with the
double-declining balance method of depreciation. These decreases were partially
offset by the purchase of a marine vessel during the first quarter of 1998.
(2) A $0.3 million decrease in bad debt expenses was due to a decrease in
the General Partner's evaluation of the collectability of receivables due from
certain lessees.
(3) A $0.3 million decrease in interest expense was due to a lower average
debt balance when compared to the same period of 1997.
(4) A $0.2 million decrease in management fees to affiliate was due to
lower lease revenues.
(C) Net Gain on Disposition of Owned Equipment
The net gain on the disposition of equipment for the six months ended June 30,
1998 totaled $0.5 million, which resulted from the sale of marine containers,
railcars, and trailers, with an aggregate net book value of $1.0 million, for
proceeds of $1.5 million. The net gain on disposition of equipment for the same
period of 1997 totaled $2.2 million, which resulted from the sale of an aircraft
engine, marine containers, trailers, and a railcar, with an aggregate net book
value of $2.5 million, for proceeds of $4.7, million which included $1.5 million
of unused engine reserves.
(D) Equity in Net Income of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
-------------------------------
<S> <C> <C>
Aircraft, rotable components, and aircraft engines $ 158 $ 612
Marine vessels 147 (258 )
Equity in net income of USPEs $ 305 $ 354
==================================================================
</TABLE>
Aircraft, rotable components, and aircraft engines: As of June 30, 1998 and
1997, the Partnership had an interest in two trusts that own three commercial
aircraft, two aircraft engines, and a portfolio of aircraft rotables, and also
had an interest in an entity owning two commercial aircraft on a direct finance
lease. During the six months ended June 30, 1998, revenues of $0.6 million were
offset by depreciation and administrative expenses of $0.4 million. During the
same period of 1997, lease revenues of $1.1 million were offset by depreciation
and administrative expenses of $0.5 million. The decrease in lease revenues is
due to the renewal of the leases for three commercial aircraft, two aircraft
engines, and a portfolio of aircraft rotables at lower rates than were in place
during the same period of 1997. The decrease in depreciation and administrative
expenses, when compared to the same period of 1997, was due to the
double-declining balance method of depreciation.
Marine vessels: As of June 30, 1998, the Partnership owned an interest in three
marine vessels. As of June 30, 1997, the Partnership owned an interest in two
marine vessels. During the six months ended June 30, 1998, lease revenues of
$3.3 million were offset by depreciation and administrative expenses of $3.1
million. During the same period of 1997, lease revenues of $1.7 million were
offset by depreciation and administrative expenses of $2.0 million. The primary
reason for the increase in lease revenues and depreciation and administrative
expenses during 1998 was the purchase of an interest in an entity that owns a
marine vessel in the third quarter of 1997.
(E) Net Income
As a result of the foregoing, the Partnership's net income for the six months
ended June 30, 1998 was $1.4 million, compared to a net income of $1.3 million
during the same period in 1997. The Partnership's ability to acquire, operate,
and liquidate assets, secure leases, and re-lease those assets whose leases
expire is subject to many factors, and the Partnership's performance during the
six months ended June 30, 1998 is not necessarily indicative of future periods.
In the six months ended June 30, 1998, the Partnership distributed $7.3 million
to the limited partners, or $0.80 per weighted-average limited partnership unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES, LIQUIDITY, AND DISTRIBUTIONS
For the six months ended June 30, 1998, the Partnership generated $7.3 million
in operating cash (net cash provided by operating activities plus
non-liquidating distributions from USPEs) to meet its operating obligations and
maintain the current level of distributions (total for the six months ended June
30, 1998 of $7.6 million) to the partners, but also used undistributed available
cash from prior periods of $0.3 million.
During the six months ended June 30, 1998, the Partnership sold owned equipment
and received aggregate proceeds of $1.5 million. The Partnership received
liquidating proceeds of $3.7 million from the sale of its interest in an entity
that owned a commercial aircraft which had a net book value of $3.8 million.
During the six months ended June 30, 1998, the Partnership purchased a marine
vessel for $9.7 million, including acquisition and lease negotiation fees of
$0.5 million paid to PLM Financial Services, Inc. (FSI or the General Partner).
FSI is a wholly-owned subsidiary of PLM International, Inc. The Partnership made
a $0.9 million deposit on this marine vessel in 1997.
The Partnership made the regularly scheduled installment payments to the lender
of the senior loan of $4.0 million during the six months ended June 30, 1998.
The Partnership also paid the lender of the senior loan an additional $0.5
million from equipment sale proceeds, as required by the loan agreement. The
Partnership is scheduled to make quarterly installments of $2.0 million to the
lender through the year 2001 and a percentage of equipment sale proceeds.
The General Partner has entered into a short-term, joint $50.0 million credit
facility. This facility was amended on June 1, 1998 to temporarily increase the
borrowing capacity of American Finance Group, Inc. (AFG), a subsidiary of PLM
International, Inc., from $50.0 million to $55.0 million until September 1,
1998. As of August 11, 1998, TEC Acquisub, Inc., an indirect wholly-owned
subsidiary of PLM International, Inc., had borrowings of $2.0 million and AFG
had borrowings of $43.0 million under the short-term joint $55.0 million credit
facility. No other eligible borrower had any outstanding borrowings.
(III) YEAR 2000 COMPLIANCE
The General Partner is currently addressing the Year 2000 computer software
issue and is creating a timetable for carrying out any program modifications
that may be required. The General Partner does not anticipate that the cost of
those modifications allocable to the Partnership will be material.
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued two new
statements: SFAS No. 130, "Reporting Comprehensive Income," which requires
enterprises to report, by major component and in total, all changes in equity
from nonowner sources; and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for a public company's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the Partnership's fiscal year ended December
31, 1998. The effect of adoption of these statements will be limited to the form
and content of the Partnership's disclosures and will not impact the
Partnership's results of operations, cash flow, or financial position.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. This statement is effective for all
quarters of fiscal years beginning after June 15, 1999. As of June 30, 1998, the
General Partner is reviewing the effect this standard will have on the
Partnership's consolidated financial statements.
(V) OUTLOOK FOR THE FUTURE
Several factors may affect the Partnership's operating performance in 1998 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.
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,
and government or other regulations. 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 continually monitors both the
equipment markets and the performance of the Partnership's equipment in these
markets. The General Partner may decide to reduce the Partnership's exposure to
those 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, which
concludes December 31, 1998. The General Partner believes that these
acquisitions may cause the Partnership to generate additional earnings and cash
flow for the Partnership.
(VI) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, this Form 10-Q 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-Q should be read as being
applicable to all related forward-looking statements wherever they appear in
this Form 10-Q. The Partnership's actual results could differ materially from
those discussed here.
(this space intentionally left blank)
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 First Amendment to Restated Warehousing Credit Agreement among
American Finance Group, Inc., First Union National Bank of
North Carolina, and Bank of Montreal, dated as of June 1,
1998.
10.2 Second Amendment to Restated Warehousing Credit Agreement
among American Finance Group, Inc., First Union National Bank,
and Bank of Montreal, dated as of June 8, 1998.
(b) Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLM EQUIPMENT GROWTH FUND V
By: PLM Financial Services, Inc.
General Partner
Date: August 11, 1998 By: /s/ Richard K Brock
-------------------
Richard K Brock
Vice President and
Corporate Controller
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,133
<SECURITIES> 0
<RECEIVABLES> 4,130
<ALLOWANCES> (128)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 111,037
<DEPRECIATION> (65,224)
<TOTAL-ASSETS> 69,846
<CURRENT-LIABILITIES> 0
<BONDS> 29,119
0
0
<COMMON> 0
<OTHER-SE> 37,811
<TOTAL-LIABILITY-AND-EQUITY> 69,846
<SALES> 0
<TOTAL-REVENUES> 12,517
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,328
<LOSS-PROVISION> 32
<INTEREST-EXPENSE> 1,045
<INCOME-PRETAX> 1,417
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,417
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,417
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
AMENDMENT NO. 1
TO AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT
(American Finance Group, Inc.)
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED WAREHOUSING CREDIT
AGREEMENT dated as of June 1, 1998 (the "Amendment"), is entered into by and
among AMERICAN FINANCE GROUP, INC., a Delaware corporation ("Borrower"), FIRST
UNION NATIONAL BANK ("FUNB"), BANK OF MONTREAL ("BMO") 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 "Lend ," 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.
RECITALS
A. Borrower, Lenders and Agent have entered into that Amended and Restated
Warehousing Credit Agreement dated as of December 2, 1997 (as the same may
from time to time be amended, the "Credit Agreement"), pursuant to which
Lenders have agreed to extend and make available to Borrower certain
advances of money.
B. Borrower desires that Lenders and Agent amend the Credit Agreement to
increase the Commitments set forth on Schedule A to the Credit Agreement
from $50,000,000 to $55,000,000 for a period of ninety (90) days from the
date first written above.
C. Subject to the representations and warranties of Borrower 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:
Section 1. Amendments.
1.1 Commitment. The definition of "Commitment" set forth in Section 1.1 of
the Credit Agreement is amended by deleting it in its entirety and replacing it
with the following:
"Commitment" means, with respect to each Lender, the amounts set forth
on Schedule A, for each period as set forth therein, and "Commitments" means,
for each such period, 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.
and by deleting Schedule A in its entirety and replacing such schedule with a
new Schedule A in the form attached to this Amendment as Attachment I.
SECTION 2. LIMITATIONS ON AMENDMENTS
2.1 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.
2.2 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 amended, are
hereby ratified and confirmed and shall remain in full force and effect.
SECTION 3. REPRESENTATIONS AND WARRANTIES In order to induce Lenders and
Agent to enter into this Amendment, 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 which shall be true as of such
different date) are true, accurate and complete in all material respects as of
the date hereof and (ii) no Event of Default, or event which constitutes a
Potential Event of Default, has occurred and is continuing;
(b) 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 certificate of incorporation, bylaws and other organizational
documents of 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 Borrower of this Amendment and the
performance by Borrower of its 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
Borrower;
(e) The execution and delivery by Borrower of this Amendment and the
performance by 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 Borrower, (ii) the certificate of incorporation, bylaws,
or other organizational documents of Borrower, (iii) any order, judgment or
decree of any court or other governmental or public body or authority, or
subdivision thereof, binding on Borrower or (iv) any contractual restriction
binding on or affecting Borrower;
(f) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its 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
Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and delivered by Borrower and is
the binding Obligation of 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.
4. REAFFIRMATION. Borrower hereby reaffirms its Obligations under each Loan
Document to which it is a party.
5. 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 each of Borrower, Lenders and Agent.
(b) The execution and delivery by Borrower to FUNB of a promissory note
substantially in the form of Exhibit A hereto which promissory note shall be a
"Note" under and as defined in the Credit Agreement.
(c) The execution and delivery by PLMI to Agent of the Acknowledgment of
Amendment and Reaffirmation of Guaranty attached to this Amendment.
(d) The delivery to Agent of a certificate of secretary or assistant
secretary of Borrower and PLMI (i) certifying that the certified copies of the
certificate of incorporation and bylaws of Borrower or PLMI, as the case may be,
delivered to Agent on the Closing Date are true and accurate and remain in full
force and effect and have not been amended since the Closing Date, (ii)
attaching true and correct copies of all resolutions of the board of directors
of Borrower or PLMI, as the case may be, duly adopted by such board, and
relating to the authorization, execution, delivery and performance of this
Amendment and the Credit Agreement as amended thereby or the Acknowledgement of
Amendment and Reaffirmation of Guaranty and (iii) setting forth the name, title
and signatures of the authorized signers for Borrower or PLMI, as the case may
be.
(e) The delivery to Agent of an originally executed favorable opinion of
counsel on behalf of Borrower and Guarantor, in form and substance satisfactory
to Lenders, dated as of the date hereof 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.
(f) The delivery to Agent of a certificate, dated as of the date hereof, of
the Chief Financial Officer or Corporate Controller of Borrower to the effect
that the representations and warranties of Borrower contained in Section 4 of
the Credit Agreement and in the other Loan Documents are true, accurate and
complete in all material respects as of the date hereof as though made on such
date (other than those which expressly speak as of a different date which shall
be true as of such different date) and no Event of Default or Potential Event of
Default has occurred and is continuing.
6. 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.
SECTION 7. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF. 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.
8. 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.
BORROWER AMERICAN FINANCE GROUP, INC.
By:
Richard K. Brock
Vice President & Corporate Controller
LENDERS FIRST UNION NATIONAL BANK
By:
Printed name:
Title:
BANK OF MONTREAL
By:
Printed name:
Title:
AGENT FIRST UNION NATIONAL BANK , as Agent
By:
Printed name:
Title:
By
Printed Name:
Title:
<PAGE>
ATTACHMENT I
Revised Schedule A
<PAGE>
SCHEDULE A
COMMITMENTS
For the period from and including June 1, 1998 through August 30, 1998:
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $40,000,000 72.73%
Bank of Montreal $15,000,000 27.27%
At all other times:
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $35,000,000 70%
Bank of Montreal $15,000,000 30%
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
(First Union National Bank)
$40,000,000.00 San Francisco, California
Date: June 1, 1998
AMERICAN FINANCE GROUP, INC., a Delaware corporation (the "Borrower"),
FOR VALUE RECEIVED, hereby unconditionally promises to pay to the order of First
Union National Bank ("FUNB"), in lawful money of the United States of America,
the aggregate principal amount of FUNB's Pro Rata Share of all Loans outstanding
under the Credit Agreement referred to below, payable in the amounts, on the
dates and in the manner set forth below.
This revolving promissory note (the "Note") is one of the Notes
referred to in that certain Amended and Restated Warehousing Credit Agreement
dated as of December 2, 1997 (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, FUNB, solely in its capacity as agent
(the "Agent") for FUNB and Bank of Montreal 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. All capitalized terms used but not defined herein shall have
the same meaning as given to them in the Credit Agreement.
1. Principal Payments. Subject to the terms and conditions of the
Credit Agreement, the entire principal amount outstanding under each Loan shall
be due and payable on the Maturity Date with respect to such Loan, with any and
all unpaid and not previously due and payable principal amounts under the Loans
being due and payable on the Commitment Termination Date.
2. Interest Rate. The Borrower further promises to pay interest on the
sum of the daily unpaid principal balance of all Loans outstanding on each day
in lawful money of the United States of America, from the Closing Date until all
such principal amounts shall have been repaid in full, which interest shall be
payable at the rates per annum and on the dates determined pursuant to the
Credit Agreement.
3. Place of Payment. All amounts payable hereunder shall be payable to
the Agent, on behalf of FUNB, at the office of First Union National Bank, One
First Union Center, 301 South College Street, Charlotte, North Carolina 28288,
Attention: Elisha Sabido, or such other place of payment as may be specified by
the Agent in writing.
4. Application of Payments; Acceleration. Payments on this Note shall
be applied in the manner set forth in the Credit Agreement. The Credit Agreement
contains provisions for acceleration of the maturity of the Loans upon the
occurrence of certain stated events and also provides for mandatory and optional
prepayments of principal prior to the stated maturity on the terms and
conditions therein specified.
Each Advance made by FUNB to the Borrower constituting FUNB's Pro Rata
Share of a Loan pursuant to the Credit Agreement shall be recorded by FUNB on
its books and records. The failure of FUNB to record any Advance or any
repayment or prepayment made on account of the principal balance thereof shall
not limit or otherwise affect the obligations of the Borrower under this Note
and under the Credit Agreement to pay the principal, interest and other amounts
due and payable hereunder and thereunder.
5. Default. The Borrower's failure to pay timely any of the principal
amount due under this Note or any accrued interest or other amounts due under
this Note on or within five (5) calendar days after the date the same becomes
due and payable shall constitute a default under this Note. Upon the occurrence
of a default hereunder or an Event of Default under the Credit Agreement, all
unpaid principal, accrued interest and other amounts owing hereunder shall, at
the option of Required Lenders, be immediately collectible by the Lenders and
the Agent pursuant to the Credit Agreement and applicable law.
6. Waivers. The Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and shall pay
all costs of collection when incurred by or on behalf of the Lenders, including,
without limitation, reasonable attorneys' fees, costs and other expenses as
provided in the Credit Agreement.
7. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of North Carolina, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
8. Successors and Assigns. The provisions of this Note shall inure to
the benefit of and be binding on any successor to the Borrower and shall extend
to any holder hereof.
BORROWER AMERICAN FINANCE GROUP, INC.,
a Delaware corporation
By
Richard K. Brock
Vice President & Corporate Controller
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(PLMI/AFG)
SECTION 1. PLM International, Inc. ("PLMI") hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amendment No. 1 to Amended and Restated Warehousing Credit Agreement
("Amendment").
SECTION 2. PLMI 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.
SECTION 3. PLMI 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 on the date hereof.
GUARANTOR PLM INTERNATIONAL, INC.
By
Richard K. Brock
Vice President & Corporate Controller
<PAGE>
AMENDMENT NO. 2
TO AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT
(American Finance Group, Inc.)
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED WAREHOUSING CREDIT
AGREEMENT dated as of June 8, 1998 (the "Amendment"), is entered into by and
among AMERICAN FINANCE GROUP, INC., a Delaware corporation ("Borrower"), FIRST
UNION NATIONAL BANK ("FUNB"), BANK OF MONTREAL ("BMO") 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 "Lend ," 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.
RECITALS
A. Borrower, Lenders and Agent have entered into that Amended and Restated
Warehousing Credit Agreement dated as of December 2, 1997, as amended by
that certain Amendment No. 1 to Amended and Restated Warehousing Credit
Agreement dated as of June 1, 1998 (as the same may from time to time be
further amended, the "Credit Agreement"), pursuant to which Lenders have
agreed to extend and make available to Borrower certain advances of money.
B. Borrower desires that Lenders and Agent amend the Credit Agreement to
increase the Commitments set forth on Schedule A to the Credit Agreement
from $55,000,000 to $60,000,000 for a period of thirty (30) days from the
date first written above.
C. Subject to the representations and warranties of Borrower 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:
Section 1. Amendments.
1.1 Commitment. The definition of "Commitment" set forth in Section 1.1 of
the Credit Agreement is amended by deleting Schedule A in its entirety
and replacing such schedule with a new Schedule A in the form attached
to this Amendment as Attachment I.
2. LIMITATIONS ON AMENDMENTS.
2.1 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.
2.2 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 amended, are hereby ratified and confirmed and shall
remain in full force and effect.
3. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders and Agent to enter
into this Amendment, 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 which shall be
true as of such different date) are true, accurate and complete in all
material respects as of the date hereof and (ii) no Event of Default,
or event which constitutes a Potential Event of Default, has occurred
and is continuing;
(b) 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 certificate of incorporation, bylaws and other organizational
documents of 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 Borrower of this Amendment and the
performance by Borrower of its 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 Borrower;
(e) The execution and delivery by Borrower of this Amendment and the
performance by 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 Borrower, (ii) the
certificate of incorporation, bylaws, or other organizational
documents of Borrower, (iii) any order, judgment or decree of any
court or other governmental or public body or authority, or
subdivision thereof, binding on Borrower or (iv) any contractual
restriction binding on or affecting Borrower;
(f) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its 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 Borrower, except as
already has been obtained or made; and
(g) This Amendment has been duly executed and delivered by Borrower and is
the binding Obligation of 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.
4. REAFFIRMATION. Borrower hereby reaffirms its Obligations under each Loan
Document to which it is a party.
5. 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 each of Borrower, Lenders and Agent.
(b) The execution and delivery by Borrower to FUNB of a promissory note
substantially in the form of Exhibit A hereto which promissory note
shall be a "Note" under and as defined in the Credit Agreement.
(c) The execution and delivery by PLMI to Agent of the Acknowledgment of
Amendment and Reaffirmation of Guaranty attached to this Amendment.
(d) The delivery to Agent of a certificate of secretary or assistant
secretary of Borrower and PLMI (i) certifying that the certified
copies of the certificate of incorporation and bylaws of Borrower or
PLMI, as the case may be, delivered to Agent on the Closing Date are
true and accurate and remain in full force and effect and have not
been amended since the Closing Date, (ii) attaching true and correct
copies of all resolutions of the board of directors of Borrower or
PLMI, as the case may be, duly adopted by such board, and relating to
the authorization, execution, delivery and performance of this
Amendment and the Credit Agreement as amended thereby or the
Acknowledgement of Amendment and Reaffirmation of Guaranty and (iii)
setting forth the name, title and signatures of the authorized signers
for Borrower or PLMI, as the case may be.
(e) The delivery to Agent of an originally executed favorable opinion of
counsel on behalf of Borrower and Guarantor, in form and substance
satisfactory to Lenders, dated as of the date hereof 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.
(f) The delivery to Agent of a certificate, dated as of the date hereof,
of the Chief Financial Officer or Corporate Controller of Borrower to
the effect that the representations and warranties of Borrower
contained in Section 4 of the Credit Agreement and in the other Loan
Documents are true, accurate and complete in all material respects as
of the date hereof as though made on such date (other than those which
expressly speak as of a different date which shall be true as of such
different date) and no Event of Default or Potential Event of Default
has occurred and is continuing.
6. 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.
SECTION 7. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF. 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.
8. 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.
BORROWER AMERICAN FINANCE GROUP, INC.
By:
Richard K. Brock
Vice President & Corporate Controller
LENDERS FIRST UNION NATIONAL BANK
By:
Printed name:
Title:
BANK OF MONTREAL
By:
Printed name:
Title:
AGENT FIRST UNION NATIONAL BANK , as Agent
By:
Printed name:
Title:
By
Printed Name:
Title:
<PAGE>
ATTACHMENT I
Revised Schedule A
<PAGE>
SCHEDULE A
COMMITMENTS
For the period from and including June 8, 1998 through July 8, 1998:
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $45,000,000 75%
Bank of Montreal $15,000,000 25%
For the period from and including June 1, 1998 through August 30, 1998,
excluding the period from June 8, 1998 through July 8, 1998:
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $40,000,000 72.73%
Bank of Montreal $15,000,000 27.27%
At all other times:
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $35,000,000 70%
Bank of Montreal $15,000,000 30%
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
(First Union National Bank)
$45,000,000.00 San Francisco, California
Date: June 8, 1998
AMERICAN FINANCE GROUP, INC., a Delaware corporation (the "Borrower"),
FOR VALUE RECEIVED, hereby unconditionally promises to pay to the order of First
Union National Bank ("FUNB"), in lawful money of the United States of America,
the aggregate principal amount of FUNB's Pro Rata Share of all Loans outstanding
under the Credit Agreement referred to below, payable in the amounts, on the
dates and in the manner set forth below.
This revolving promissory note (the "Note") is one of the Notes
referred to in that certain Amended and Restated Warehousing Credit Agreement
dated as of December 2, 1997, as amended by that certain Amendment No. 1 to
Amended and Restated Warehousing Credit Agreement dated as of June 1, 1998 and
by that certain Amendment No. 2 to 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, FUNB, solely in its capacity as
agent (the "Agent") for FUNB and Bank of Montreal 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. All capitalized terms used but not defined herein shall have
the same meaning as given to them in the Credit Agreement.
1. Principal Payments. Subject to the terms and conditions of the Credit
Agreement, the entire principal amount outstanding under each Loan
shall be due and payable on the Maturity Date with respect to such
Loan, with any and all unpaid and not previously due and payable
principal amounts under the Loans being due and payable on the
Commitment Termination Date.
2. Interest Rate. The Borrower further promises to pay interest on the
sum of the daily unpaid principal balance of all Loans outstanding on
each day in lawful money of the United States of America, from the
Closing Date until all such principal amounts shall have been repaid
in full, which interest shall be payable at the rates per annum and on
the dates determined pursuant to the Credit Agreement.
3. Place of Payment. All amounts payable hereunder shall be payable to
the Agent, on behalf of FUNB, at the office of First Union National
Bank, One First Union Center, 301 South College Street, Charlotte,
North Carolina 28288, Attention: Elisha Sabido, or such other place of
payment as may be specified by the Agent in writing.
4. Application of Payments; Acceleration. Payments on this Note shall be
applied in the manner set forth in the Credit Agreement. The Credit
Agreement contains provisions for acceleration of the maturity of the
Loans upon the occurrence of certain stated events and also provides
for mandatory and optional prepayments of principal prior to the
stated maturity on the terms and conditions therein specified.
Each Advance made by FUNB to the Borrower constituting FUNB's Pro Rata
Share of a Loan pursuant to the Credit Agreement shall be recorded by FUNB on
its books and records. The failure of FUNB to record any Advance or any
repayment or prepayment made on account of the principal balance thereof shall
not limit or otherwise affect the obligations of the Borrower under this Note
and under the Credit Agreement to pay the principal, interest and other amounts
due and payable hereunder and thereunder.
5. Default. The Borrower's failure to pay timely any of the principal
amount due under this Note or any accrued interest or other amounts
due under this Note on or within five (5) calendar days after the date
the same becomes due and payable shall constitute a default under this
Note. Upon the occurrence of a default hereunder or an Event of
Default under the Credit Agreement, all unpaid principal, accrued
interest and other amounts owing hereunder shall, at the option of
Required Lenders, be immediately collectible by the Lenders and the
Agent pursuant to the Credit Agreement and applicable law.
6. Waivers. The Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and
shall pay all costs of collection when incurred by or on behalf of the
Lenders, including, without limitation, reasonable attorneys' fees,
costs and other expenses as provided in the Credit Agreement.
7. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of North Carolina,
excluding conflict of laws principles that would cause the application
of laws of any other jurisdiction.
8. Successors and Assigns. The provisions of this Note shall inure to the
benefit of and be binding on any successor to the Borrower and shall
extend to any holder hereof.
BORROWER AMERICAN FINANCE GROUP, INC.,
a Delaware corporation
By
Richard K. Brock
Vice President & Corporate Controller
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(PLMI/AFG)
SECTION 1. PLM International, Inc. ("PLMI") hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amendment No. 2 to Amended and Restated Warehousing Credit Agreement
("Amendment").
SECTION 2. PLMI 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.
SECTION 3. PLMI 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 on the date hereof.
GUARANTOR PLM INTERNATIONAL, INC.
By
Richard K. Brock
Vice President & Corporate Controller
<PAGE>
