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 33-55796
-----------------------
PLM EQUIPMENT GROWTH & INCOME FUND VII
(Exact name of registrant as specified in its
charter)
California 94-3168838
(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 ____
<PAGE>
PLM EQUIPMENT GROWTH & INCOME FUND VII
(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 $ 61,428 $ 58,844
Less accumulated depreciation (27,646) (24,650 )
---------------------------------------
33,782 34,194
Equipment held for sale 3,721 4,148
---------------------------------------
Net equipment 37,503 38,342
Cash and cash equivalents 8,956 9,327
Restricted cash 193 191
Accounts receivable, less allowance for doubtful accounts
of $508 in 1998 and $522 in 1997 1,053 887
Investments in unconsolidated special-purpose entities 32,314 31,377
Deferred charges, net of accumulated amortization
of $164 in 1998 and $274 in 1997 257 296
Prepaid expenses and other assets 79 49
---------------------------------------
Total assets $ 80,355 $ 80,469
=======================================
Liabilities and partners' capital
Liabilities:
Accounts payable and accrued expenses $ 304 $ 367
Due to affiliates 2,549 4,563
Lessee deposits and reserve for repairs 1,172 1,477
Notes payable 23,000 23,000
---------------------------------------
Total liabilities 27,025 29,407
Partners' capital:
Limited partners (5,334,211 limited partnership units as of
June 30, 1998 and 5,370,297 as of December 31, 1997) 53,330 51,062
General Partner -- --
---------------------------------------
Total partners' capital 53,330 51,062
---------------------------------------
Total liabilities and partners' capital $ 80,355 $ 80,469
=======================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH & INCOME FUND VII
(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 $ 3,403 $ 3,310 $ 6,624 $ 6,456
Interest and other income 87 56 139 105
Net gain (loss) on disposition of equipment (1) 1,790 33 1,800
--------------------------------------------------------------------
Total revenues 3,489 5,156 6,796 8,361
--------------------------------------------------------------------
Expenses
Depreciation and amortization 1,905 2,265 3,844 4,559
Repairs and maintenance 383 386 835 627
Interest expense 422 418 832 855
Management fees to affiliate 193 185 376 361
Equipment operating expense 97 18 106 28
Insurance expense 39 17 61 37
General and administrative expenses
to affiliates 180 138 351 305
Other general and administrative expenses 146 61 267 162
Provision for (recovery of) bad debts 24 (149 ) 42 55
--------------------------------------------------------------------
Total expenses 3,389 3,339 6,714 6,989
--------------------------------------------------------------------
Equity in net income of unconsolidated
special-purpose entities 2,110 339 7,770 518
--------------------------------------------------------------------
Net income $ 2,210 $ 2,156 $ 7,852 $ 1,890
====================================================================
Partners' share of net income
Limited partners $ 2,083 $ 2,029 $ 7,598 $ 1,635
General Partner 127 127 254 255
--------------------------------------------------------------------
Total $ 2,210 $ 2,156 $ 7,852 $ 1,890
====================================================================
Net income per weighted-average
limited partnership unit: (5,348,627
units and 5,370,297 units as of
June 30, 1998 and 1997) $ 0.39 $ 0.38 $ 1.42 $ 0.30
====================================================================
Cash distributions $ 2,529 $ 2,544 $ 5,071 $ 5,089
====================================================================
Cash distributions per weighted-average
limited partnership unit $ 0.45 $ 0.45 $ 0.90 $ 0.90
====================================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH & INCOME FUND VII
( 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 $ 60,137 $ -- $ 60,137
Net income 593 508 1,101
Cash distribution (9,668) (508) (10,176)
------------------------------------------------------------
Partners' capital as of December 31, 1997 51,062 -- 51,062
Net income 7,598 254 7,852
Repurchase of limited partnership units (513) -- (513)
Cash distribution (4,817) (254) (5,071)
------------------------------------------------------------
Partners' capital as of June 30, 1998 $ 53,330 $ -- $ 53,330
============================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH & INCOME FUND VII
(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 $ 7,852 $ 1,890
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,844 4,559
Net gain on disposition of equipment (33) (1,800)
Equity in net income from unconsolidated
special-purpose entities (7,770) (518)
Changes in operating assets and liabilities:
Restricted cash (2) --
Accounts receivable, net (182) 141
Prepaid expenses and other assets (30) 42
Accounts payable and accrued expenses (63) (103)
Due to affiliates 57 261
Lessee deposits and reserve for repairs (305) 154
---------------------------------
Net cash provided by operating activities 3,368 4,626
---------------------------------
Investing activities
Payments for equipment and capitalized repairs (3,020) (87)
Investment in and equipment purchased and placed in
unconsolidated special-purpose entities (14,720) --
Distributions from unconsolidated special-purpose entities 6,751 4,421
Distributions from liquidation of unconsolidated special-purpose entities 14,802 --
Payments of acquisition fees to affiliate (135) --
Payments of lease negotiation fees to affiliate (30) --
Proceeds from disposition of equipment 268 4,363
---------------------------------
Net cash provided by investing activities 3,916 8,697
---------------------------------
Financing activities
Payments of short-term note payable -- (2,000)
Payments of due to affiliates (3,582) --
Increase in due to affiliates 1,511 --
Cash distribution paid to limited partners (4,817) (4,834)
Cash distribution paid to General Partner (254) (255)
Repurchase of limited partnership units (513) --
---------------------------------
Net cash used in financing activities (7,655) (7,089)
---------------------------------
Net (decrease) increase in cash and cash equivalents (371) 6,234
Cash and cash equivalents at beginning of period 9,327 2,468
----------------
-------------------
Cash and cash equivalents at end of period $ 8,956 $ 8,702
=================================
Supplemental information
Interest paid $ 869 $ 822
=================================
Supplemental disclosure of noncash investing and financing activities:
Sale proceeds included in accounts receivable $ 31 $ 5
=================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM EQUIPMENT GROWTH & INCOME FUND VII
(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 & Income Fund VII
(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 cash flows for the six months ended June 30, 1998 and 1997, and the
statements of changes in partners' capital for the period from December 31, 1996
to June 30, 1998. Certain information and note 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- 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 up to 46,000 limited partnership
units for an aggregate purchase price of up to a maximum of $0.7 million. As of
June 30, 1998, the Partnership had repurchased 36,086 limited partnership units
for $0.5 million. The General Partner may repurchase the additional units in the
future.
3. Cash Distributions
Cash distributions are recorded when paid and totaled $2.5 million and $5.1
million for the three and six months ended June 30, 1998 and 1997, respectively.
Cash distributions to limited partners in excess of net income are considered to
represent a return of capital. None of the cash distributions to the limited
partners for the six months ended June 30, 1998 were deemed to be a return of
capital. Cash distributions to the limited partners of $3.2 million for the six
months ended June 30, 1997 were deemed to be a return of capital. Cash
distributions related to the results from the second quarter of 1998, of $1.2
million, 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 are 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 $ 112 $ 125 $ 221 $ 247
Data processing and administrative
expenses 33 34 73 67
Insurance expense 16 48 29 106
</TABLE>
The Partnership's proportional share of USPE-affiliated management fees, of $0.1
million and $0.2 million, was payable as of June 30, 1998 and December 31, 1997,
respectively.
Transportation Equipment Indemnity Company, Ltd. (TEI), an affiliate of the
General Partner, provides marine insurance coverage for the Partnership's
investment in USPEs and other insurance brokerage services. 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.
The Partnership paid FSI $0.2 million for equipment acquisition and lease
negotiation fees during the six months ended June 30, 1998. No similar fees were
paid to FSI during the same period of 1997.
<PAGE>
PLM EQUIPMENT GROWTH & INCOME FUND VII
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
4. Transactions with General Partner and Affiliates (continued)
The Partnership's proportional share of equipment acquisition and lease
negotiation fees paid by USPEs to FSI during the six months ended June 30, 1998
was $0.8 million. No similar fees were paid during the same period of 1997.
The balance due to affiliates as of June 30, 1998 includes $0.1 million due to
FSI and its affiliates for management fees and $2.4 million due to affiliated
USPEs. The balance due to affiliates as of December 31, 1997 includes $0.1
million due to FSI and its affiliates for management fees and $4.5 million due
to an affiliated USPE.
During the six months ended June 30, 1998, the Partnership paid $3.6 million to
affiliated USPEs. The Partnership also paid $1.5 million to affiliated USPEs
during July 1998.
5. Equipment
Owned equipment held for operating leases is stated at cost. Equipment held for
sale is stated at the lower of the equipment's depreciated cost or fair value,
less cost to sell, and is subject to a pending contract for sale. The components
of owned equipment are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------------------------
<S> <C> <C>
Marine vessels $ 22,212 $ 22,212
Trailers 17,554 18,111
Aircraft 8,305 8,305
Rail equipment 10,069 10,063
Portable heaters 3,135 --
Modular buildings 153 153
------------- --------------
61,428 58,844
Less accumulated depreciation (27,646) (24,650)
------------- --------------
33,782 34,194
Equipment held for sale 3,721 4,148
------------- --------------
Net equipment $ 37,503 $ 38,342
============= ==============
</TABLE>
As of June 30, 1998, all of the equipment was on lease or operating in
PLM-affiliated short-term trailer rental facilities, except for two commuter
aircraft that were held for sale. As of December 31, 1997, all of the equipment
was on lease or operating in PLM-affiliated short-term trailer rental
facilities, except for two commuter aircraft that were held for sale and a
railcar. The net book value of the equipment off lease was $3.7 million and $4.1
million as of June 30, 1998 and December 31, 1997, respectively.
The Partnership purchased a portfolio of portable heaters during the six months
ended June 30, 1998 for $3.1 million, including $0.1 million in acquisition fees
paid to FSI.
During the six months ended June 30, 1998, the Partnership disposed of or sold
trailers and a railcar with a net book value of $0.2 million for $0.3 million.
During the six months ended June 30, 1997, the Partnership disposed of or sold
modular buildings and trailers with a net book value of $2.5 million for $4.3
million.
<PAGE>
PLM EQUIPMENT GROWTH & INCOME FUND VII
(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>
50% interest in a trust owning an MD-82 commercial aircraft $ 7,796 $ --
80% interest in an entity owning a bulk-carrier marine vessel 5,687 6,014
50% interest in a trust owning an MD-82 commercial aircraft 5,437 682
33% interest in two trusts owning three 737-200A commercial aircraft,
two aircraft engines, and a portfolio of aircraft rotables 4,590 8,036
24% interest in a trust owning a 767-200ER commercial aircraft 4,413 4,824
44% interest in an entity owning a bulk-carrier marine vessel 2,397 2,439
10% interest in an entity owning a mobile offshore drilling unit 1,595 1,712
50% interest in a trust that owned four 737-200A commercial aircraft 245 4,362
25% interest in a trust that owned four 737-200A commercial aircraft 154 3,308
Net investments $ 32,314 $ 31,377
============= =============
</TABLE>
As of June 30, 1998 and December 31, 1997, the Partnership had an interest in
trusts that owned multiple aircraft (the Trusts). As of December 31, 1997, two
of these Trusts contained provisions, under certain circumstances, for
allocating specific aircraft to the beneficial owners. During the six months
ended June 30, 1998, in one of these Trusts, the Partnership sold two commercial
aircraft assigned to it, with a net book value of $3.4 million, for proceeds of
$8.8 million. During the same period, in another trust, the Partnership also
sold the commercial aircraft assigned to it, with a net book value of $2.7
million, for proceeds of $6.0 million. In addition, in these same two Trusts,
two affiliated programs sold the aircraft designated to them. The remaining
designated commercial aircraft in one of the Trusts was transferred out of the
Trust and to PLM Equipment Growth Fund III, an affiliated program.
During the six months ended June 30, 1998, the Partnership completed its
commitment to purchase an interest in a trust owning an MD-82 Stage III
commercial aircraft for $7.2 million, including acquisition and lease
negotiation fees of $0.4 million that was paid to FSI for the purchase of this
equipment. The Partnership made a deposit of $0.7 million toward this purchase
in 1997. The Partnership also purchased another interest in a trust owning an
MD-82 Stage III commercial aircraft for $8.2 million, including acquisition and
lease negotiation fees of $0.4 million that was paid to FSI for the purchase of
this equipment. The remaining interest in this trust was purchased by an
affiliated program.
7. Debt
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 no borrowing under the short-term joint
$60.0 million credit facility. Among the other eligible borrowers, PLM Equipment
Growth Fund V had borrowings of $1.6 million, 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
<PAGE>
PLM EQUIPMENT GROWTH FUND VII
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
Contingencies (continued)
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, V and VI. 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 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 PLM Equipment Growth Fund V,
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
<PAGE>
PLM EQUIPMENT GROWTH FUND VII
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
8. Contingencies (continued)
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 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.
(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 & Income Fund VII's (the Partnership)
Operating Results for the Three Months Ended June 30, 1998 and 1997
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repair and maintenance,
equipment operation, and asset-specific insurance expenses) on owned equipment
decreased during the second quarter of 1998 when compared to the same quarter 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>
Trailers $ 959 $ 746
Marine vessels 665 902
Rail equipment 529 492
Aircraft 499 501
Portable heaters 231 --
Modular buildings 11 256
</TABLE>
Trailers: Trailer lease revenues and direct expenses were $1.2 million and $0.2
million, respectively, for the three months ended June 30, 1998, compared to
$0.9 million and $0.1 million, respectively, during the same period of 1997. The
increase in trailer contribution was due to the purchase of additional equipment
during the fourth quarter of 1997.
Marine vessels: Marine vessel lease revenues and direct expenses were $0.8
million and $0.1 million, respectively, for the three months ended June 30,
1998, compared to $1.0 million and $0.1 million, respectively, during the same
period of 1997. The decrease in marine vessel contribution was due to a lower
lease rate earned on one marine vessel during the second quarter of 1998, when
compared to the same period of 1997.
Rail equipment: Rail equipment lease revenues and direct expenses were $0.7
million and $0.2 million, respectively, for the three months ended June 30, 1998
and 1997. The increase in railcar contribution during 1998 was due to a decrease
in required repairs during 1998 when compared to the same period of 1997.
Aircraft: Aircraft lease revenues and direct expenses were $0.5 million and
$6,000, respectively, for the three months ended June 30, 1998, compared to $0.5
million and $5,000, respectively, during the same period of 1997.
Portable heaters: Lease revenues and direct expenses for portable heaters were
$0.2 million and $0, respectively, for the three months ended June 30, 1998. The
Partnership purchased this equipment during the first quarter of 1998.
Modular buildings: Modular building lease revenues and direct expenses were
$11,000 and $0, respectively, for the three months ended June 30, 1998, compared
to $0.3 million and $11,000, respectively, during the same period of 1997. The
primary reason for the decrease in lease revenues and direct expenses was the
sale of the majority of this equipment during 1997.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses were $2.9 million for the three months ended June 30,
1998 and 1997. Significant variances are explained as follows:
(1) A $0.4 million decrease in depreciation and amortization expenses from 1997
levels reflects the double-declining balance method of depreciation.
(2) A $0.1 million increase in administrative expenses was due to higher
professional services during 1998, which were not needed during 1997, and to
higher data processing costs.
(3) A $0.2 million increase in the allowance for bad debt was due to the
collection of unpaid invoices in 1997 that had previously been reserved for as a
bad debt. A similar collection did not occur during 1998.
(C) Net Gain (Loss) on Disposition of Owned Equipment
The net loss on disposition of equipment for the second quarter of 1998 totaled
$1,000, and resulted from the sale of trailers and a railcar with an aggregate
net book value of $47,000 for proceeds of $46,000. The net gain on disposition
of equipment for the second quarter of 1997 totaled $1.8 million, and resulted
from the sale of trailers and modular buildings with a net book value of $2.5
million for proceeds of $4.3 million.
(D) Equity in Net Income (Loss) 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>
Aircraft, rotable components, and aircraft engines $ 2,228 $ 432
Mobile offshore drilling unit 14 (40)
Marine vessels (132) (53)
------------------------------------------------ -------------
Equity in net income of USPEs $ 2,110 $ 339
================================================ =============
</TABLE>
Aircraft, rotable components, and aircraft engines: During the second quarter of
1998, lease revenues of $1.4 million and the gain from the sale of the
Partnerships interest in a trust of $2.8 million were offset by depreciation and
administrative expenses of $2.0 million. During the same period of 1997, lease
revenues of $2.1 million were offset by depreciation and administrative expenses
of $1.6 million. Revenues decreased $0.7 million due to the sale of the
Partnership's investment in two trusts containing ten commercial aircraft and a
lower lease rate earned on certain equipment. The decrease in lease revenues was
offset in part by the Partnership's investment in two additional trusts owning
an MD-82 commercial aircraft in each during 1998. The increase in expenses of
$0.4 million was primarily due to depreciation of the investment in two
additional trusts during 1998 partially offset by the sale the Partnership's
interest in two trusts.
Mobile offshore drilling unit: During the three months ended June 30, 1998 and
1997, revenues of $0.1 million were offset by depreciation and administrative
expenses of $0.1 million.
Marine vessels: During the second quarter of 1998, lease revenues of $0.9
million were offset by depreciation and administrative expenses of $1.1 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 increase in
depreciation and administrative expenses was due primarily to an increase in
marine operating expenses.
(E) Net Income
As a result of the foregoing, the Partnership's net income was $2.2 million for
the period ended June 30, 1998 and 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 $2.4 million to the
limited partners, or $0.45 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 (defined as repair and maintenance,
equipment operation, and asset-specific insurance expenses) on owned equipment
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>
Trailers $ 1,966 $ 1,468
Marine vessels 1,448 1,801
Rail equipment 1,063 1,103
Aircraft 892 1,002
Portable heaters 249 --
Modular buildings 26 408
</TABLE>
Trailers: Trailer lease revenues and direct expenses were $2.4 million and $0.4
million, respectively, for the six months ended June 30, 1998, compared to $1.7
million and $0.2 million, respectively, during the same period of 1997. The
increase in trailer contribution was due to the purchase of additional equipment
during the fourth quarter of 1997.
Marine vessels: Marine vessel lease revenues and direct expenses were $1.6
million and $0.1 million, respectively, for the six months ended June 30, 1998,
compared to $1.9 million and $0.1 million, respectively, during the same period
of 1997. The decrease in marine vessel contribution was due to a lower lease
rate earned on one marine vessel during 1998, when compared to the same period
of 1997.
Rail equipment: Rail equipment lease revenues and direct expenses were $1.4
million and $0.3 million, respectively, for the six months ended June 30, 1998
and 1997.
Aircraft: Aircraft lease revenues and direct expenses were $1.0 million and $0.1
million, respectively, for the six months ended June 30, 1998, compared to $1.0
million and $9,000, respectively, during the same period of 1997. The decrease
in aircraft contribution was due to repairs needed to the commuter aircraft
during 1998. Similiar repairs were not needed during 1997.
Portable heaters: Portable heaters lease revenues and direct expenses were $0.2
million and $0, respectively, for the six months ended June 30, 1998. The
Partnership purchased this equipment during the first quarter of 1998.
Modular buildings: Modular building lease revenues and direct expenses were
$26,000 and $0, respectively, for the six months ended June 30, 1998, compared
to $0.4 million and $12,000, respectively, during the same quarter of 1997. The
primary reason for the decrease in lease revenues and direct expenses was the
sale of the majority of this equipment during the second quarter of 1997.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses were $5.7 million for the six months ended June 30,
1998, decreased from $6.3 million for the same period in 1997. Significant
variances are explained as follows:
(1) A $0.7 million decrease in depreciation and amortization expenses from 1997
levels reflects the double-declining balance method of depreciation.
(2) A $0.2 million increase in the administrative expenses was due to higher
professional services during 1998, which were not needed during 1997, and higher
data processing costs.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the six months ended June 30, 1998
totaled $33,000, and resulted from the sale of trailers and a railcar with an
aggregate net book value of $0.2 million for proceeds of $0.3 million. The net
gain on disposition of equipment for the six months ended June 30, 1997 totaled
$1.8 million, and resulted from the sale of modular buildings and trailers with
a net book value of $2.5 million for proceeds of $4.3 million.
(D) Equity in Net Income (Loss) 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 $ 7,980 $ 868
Mobile offshore drilling unit 37 (44)
Marine vessels (247) (306)
------------------------------------------------ -------------
Equity in net income of USPEs $ 7,770 $ 518
================================================ =============
</TABLE>
Aircraft, rotable components, and aircraft engines: During the six months ended
June 30, 1998, lease revenues of $3.3 million and the gain from the sale of the
Partnership's interest in two trusts of $8.8 million were offset by depreciation
and administrative expenses of $4.1 million. During the same period of 1997,
lease revenues of $4.1 million were offset by depreciation and administrative
expenses of $3.2 million. Lease revenues decreased $0.8 million due to the sale
of the Partnership's investment in two trusts containing ten commercial aircraft
and a lower lease rate earned on certain equipment during 1998 when compared to
the same period of 1997. The decrease in lease revenues caused by these sales
was partially offset by the Partnership's investment in two additional trusts
during 1998. The increase in expenses of $0.9 million was due primarily to the
double-declining balance method of depreciation of the investment in two
additional trusts during 1998 partially offset by the sale the Partnership's
interest in two other trusts.
Mobile offshore drilling unit: During the six months ended June 30, 1998 and
1997, revenues of $0.2 million were offset by depreciation and administrative
expenses of $0.2 million. The increase in the contribution from this equipment
was due to a lower depreciation expense caused by the double-declining balance
method of depreciation.
Marine vessels: During the six months ended June 30, 1998, lease revenues of
$1.7 million were offset by depreciation and administrative expenses of $2.0
million. During the same period of 1997, lease revenues of $1.8 million were
offset by depreciation and administrative expenses of $2.1 million. Marine
vessel lease revenues decreased during the six months ended June 30 1998 due to
a slightly lower lease rate earned on one of the marine vessels. The decrease in
depreciation and administrative expenses was due primarily to the
double-declining balance method of depreciation.
(E) Net Income
As a result of the foregoing, the Partnership's net income for the six months
ended June 30, 1998 was $7.9 million, compared to a net income of $1.9 million
during the same period of 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 six
months ended June 30, 1998 is not necessarily indicative of future periods. In
the six months ended June 30, 1998, the Partnership distributed $4.8 million to
the limited partners, or $0.90 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 operating cash
of $10.1 million (net cash provided by operating activities, plus distributions
from USPEs) to meet its operating obligations and maintain the current level of
distributions (total for six months ended June 30, 1998 of approximately $5.1
million) to the partners.
During the six months ended June 30, 1998, PLM Financial Services, Inc. (FSI or
the General Partner), a wholly-owned subsidiary of PLM International, Inc., sold
owned equipment and two investments in USPEs and received aggregate proceeds of
$15.1 million. The Partnership purchased a portfolio of portable heaters for
$3.0 million and paid FSI acquisition and lease negotiation fees of $0.2 million
for this equipment. The Partnership completed its commitment to purchase an
interest in a trust owning an MD- 82 Stage III commercial aircraft for $7.2
million, including acquisition and lease negotiation fees of $0.4 million, that
was paid to FSI for the purchase of this equipment. The Partnership made a
deposit of $0.7 million toward this interest in 1997. The Partnership also
purchased another interest in a trust owning an MD-82 Stage III commercial
aircraft for $8.2 million, including acquisition and lease negotiation fees of
$0.4 million, that was paid to FSI for the purchase of this equipment, the
remaining interest in this trust was purchased by an affiliated program.
During the six months ended June 30, 1998, the Partnership paid $3.6 million due
to affiliated USPEs. As of June 30 1998. $2.4 million was due to affiliated
USPEs. The Partnership subsequently paid $1.5 million to affiliated USPEs during
July 1998.
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 3, 1998, TEC Acquisub, Inc., an indirect wholly-owned
subsidiary of PLM International, Inc., had borrowings of $2.0 million and AFG
had borrowings of $42.6 million under the shor 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 the 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 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, 2001. 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 & INCOME FUND VII
By: PLM Financial Services, Inc.
General Partner
Date: August 3, 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> 9,149
<SECURITIES> 0
<RECEIVABLES> 1,561
<ALLOWANCES> (508)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 61,428
<DEPRECIATION> (27,646)
<TOTAL-ASSETS> 80,355
<CURRENT-LIABILITIES> 0
<BONDS> 23,000
0
0
<COMMON> 0
<OTHER-SE> 53,330
<TOTAL-LIABILITY-AND-EQUITY> 80,355
<SALES> 0
<TOTAL-REVENUES> 6,796
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,840
<LOSS-PROVISION> 42
<INTEREST-EXPENSE> 832
<INCOME-PRETAX> 7,852
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,852
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,852
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.42
</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>
