UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the fiscal year ended
December 31, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 33-83216-01
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PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 94-3209289
(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 executive offices) (Zip code)
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
Aggregate Market Value of Voting Stock: N/A
An index of exhibits filed with this Form 10-K is located at page 37
Total number of pages in this report: 41
<PAGE>
PART I
ITEM 1. BUSINESS
(A) Background
Professional Lease Management Income Fund I, L.L.C., a Delaware Limited
Liability Company (Fund I or the Company) was formed on August 22, 1994, to
purchase, lease, charter, or otherwise invest in, a diversified portfolio of
long-lived, low obsolescence capital equipment that is transportable by and
among prospective users (the Equipment). The securities represent limited
liability company interests (the Class A Units) which are offered to the public.
The Company's offering became effective on January 23, 1995. PLM Financial
Services, Inc. (FSI) is the Manager of the Company and is the initial Class B
Member. The purchase price of the Class A Units was $20.00 per Class A Unit. On
May 13, 1996, the Company ceased its offering for Class A Units ($100,000,000).
As of December 31, 1996, there were 4,999,581 Units outstanding.
The primary objectives of the Company are:
(i)Investment in and leasing of capital equipment: to invest in a
diversified leasing portfolio of low obsolescence Equipment having long lives
and high residual values, at prices that the Manager believes to be below
inherent values and to place the Equipment on lease or under other contractual
arrangements with creditworthy lessees and operators of Equipment;
(ii) Safety through diversification: to create a significant degree of
safety relative to other equipment leasing investments through the purchase of a
diversified Equipment portfolio. This diversification may reduce the exposure to
market fluctuations in any one sector. The purchase of used long-lived, low
obsolescence Equipment typically at prices which are substantially below the
cost of new equipment should also reduce the impact of economic depreciation and
may create the opportunity for appreciation in certain market situations, where
supply and demand return to balance from oversupply conditions;
while providing:
(iii) Cash distributions: to generate cash distributions, which may be
substantially tax-deferred (i.e., distributions which are not subject to current
taxation) during the early years of the Company, to investors beginning in the
month after the minimum number of Class A Units were sold a portion of which may
represent a return of an investor's investment; and
(iv)Growth potential through reinvestment: to increase the Company's
revenue base by reinvesting a portion of its operating cash flow in additional
Equipment in order to grow the size of its portfolio. Since net income and
distributions are affected by a variety of factors, including purchase prices,
lease rates and costs and expenses, growth in the size of the Company's
portfolio does not mean that in all cases the Company's aggregate net income and
distributions will increase upon the reinvestment of operating cash flow.
Between the eighth and tenth years of operations of the Company, the
Manager intends to begin the dissolution and liquidation of the Company in an
orderly fashion, unless the Company is terminated earlier upon sale of all of
the equipment or by certain other events. However, under certain circumstances,
the term of the Company may be extended. In no event will the Company extend
beyond December 31, 2010.
<PAGE>
Table 1, below, lists cumulative offering proceeds, the cost of equipment
in the Company's portfolio, and the cost of investments in unconsolidated
special purpose entities, at December 31, 1996:
<TABLE>
TABLE 1
Use of proceeds (through December 31, 1996)
Total gross offering proceeds: $ 99,991,620
Equipment purchases:
<CAPTION>
Units Type Manufacturer Cost
- -----------------------------------------------------------------------------------------------------------------------
Owned equipment held for operating leases:
<S> <C> <C> <C>
1 Bulk carrier marine vessel Hitachi Shipbuilding & Engineering Co. $ 12,256,531
5 737-200A Stage II Commercial
aircraft Boeing 24,605,000
246 Boxcars Various 4,971,660
325 Pressurized tank cars Various 8,489,898
100 Covered hopper railcars Various 5,414,500
181 Over the Road Refrigerated Trailers Various 7,824,482
450 Piggyback Trailers Various 6,771,028
-------------------
Total equipment $ 70,333,099<F1>
===================
Investments in unconsolidated special purpose entities:
33% Two trusts consisting of:
Three 737-200A Stage II
commercial aircraft Boeing 9,003,825<F2>
Two aircraft engines Pratt Whitney 373,296<F2>
Portfolio of rotable components Various 621,879<F2>
25% Trust consisting of four 737-200A
Stage II commercial aircraft Boeing 5,610,000<F2>
17% Trust consisting of six 737-200A
Stage II commercial aircraft Boeing 4,300,000<F2>
50% Container feeder marine vessel O. C. Staalskibsvaerft A/F 3,750,000<F3>
35% Mobile offshore drilling unit AT & CH de France 7,000,000<F4>
-------------------
Total investments $ 30,659,000<F1>
===================
<FN>
<F1> Includes proceeds from capital contributions and operations invested in
equipment. Includes costs capitalized, subsequent to the date of purchase.
<F2> Jointly owned by Fund I and affiliated partnerships.
<F3> Jointly owned by Fund I and an affiliated partnership.
<F4> Jointly owned by Fund I, affiliated partnerships, and TEC Acquisub, Inc.
</FN>
</TABLE>
The equipment is generally leased under operating leases for a term of one
to six years.
The lessees of the equipment include, but are not limited to: Canadian
Airlines, Transportation Airline Portugal, and Norfolk Southern. As of December
31, 1996, all of the equipment was on lease except for 14 railcars.
(B) Management of Company Equipment
The Company has entered into an equipment management agreement with PLM
Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI, for the
management of equipment. IMI has agreed to perform all services necessary to
manage the transportation equipment on behalf of the Company and to perform or
contract for the performance of all obligations of the lessor under the
Company's leases. In consideration for its services and pursuant to the
Operating Agreement, IMI will be entitled to a monthly management fee. (See
Financial Statements Notes 1 and 2).
(C) Competition
(1) Operating Leases vs. Full Payout Leases
Generally, the equipment owned by the Company is leased out on an operating
lease basis wherein rents owed during the initial noncancelable term of the
lease are insufficient to recover the purchase price of the equipment. The short
to mid-term nature of operating leases generally command a higher rental rate
than longer term, full payout leases and offers lessees relative flexibility in
their equipment commitment. In addition, the rental obligation under an
operating lease need not be capitalized on the lessee's balance sheet.
The Company encounters considerable competition from lessors utilizing full
payout leases on new equipment, i.e., leases which have terms equal to the
expected economic life of the equipment. Full payout leases are written for
longer terms and for lower monthly rates than the Company offers. While some
lessees prefer the flexibility offered by a shorter term operating lease, other
lessees prefer the rate advantages possible with a full payout lease.
Competitors of the Company may write full payout leases at considerably lower
rates, or larger competitors with a lower cost of capital may offer operating
leases at lower rates, and as a result, the Company may be at a competitive
disadvantage.
(2) Manufacturers and Equipment Lessors
The Company also competes with equipment manufacturers who offer operating
leases and full payout leases. Manufacturers may provide ancillary services
which the Company cannot offer, such as specialized maintenance service
(including possible substitution of equipment), training, warranty services, and
trade-in privileges.
The Company competes with many equipment lessors, including ACF Industries,
Inc. (Shippers Car Line Division), General Electric Railcar Services
Corporation, Greenbrier Leasing Company, General Electric Capital Aviation
Services Corporation, and other limited partnerships which lease the same types
of equipment.
(D) Demand
The Company invests in transportation-related capital equipment and in
"relocatable environments." "Relocatable environments" refers to capital
equipment constructed to be self-contained in function but transportable, an
example of which includes a mobile offshore drilling unit. A general distinction
can be drawn between equipment used for the transport of either materials and
commodities or people. With the exception of aircraft leased to passenger air
carriers, the Company's equipment is used primarily for the transport of
materials.
The following describes the markets for the Company's equipment:
(1) Aircraft
Commercial Aircraft
The market for commercial aircraft continued to improve in 1996, representing
two consecutive years of growth and profits in the airline industry. The $5.7
billion in net profits recorded by the world's top 100 airlines in 1995 grew to
over $6 billion in 1996. The profits are a result of the continued management
emphasis on costs. The demand for ever lower unit costs by airline managements
has caused a significant reduction of surplus used Stage II and Stage III
commercial aircraft. The result is a return to supply/demand equilibrium. On the
demand side, passenger traffic is improving, cargo movement is up, and load
factors are generally higher across the major markets.
These changes are reflected in the performance of the world's 62 major
airlines that operate 60% of the world airline fleet but handle 78% of world
passenger traffic. Focusing on the supply/demand for Company type-narrowbody
commercial aircraft, there were 213 used narrowbody aircraft available at year
end 1995. In the first ten months of 1996, this supply was reduced to 119
narrowbody aircraft available for sale or lease. Forecasts for 1997 see a
continuing supply/demand equilibrium due to air travel growth and balanced
aircraft supply.
The Company's narrowbody fleet are late model (post 1974) Boeing 737-200
Advanced aircraft. There are a total of 939 Boeing 737-200 aircraft in service,
with 219 built prior to 1974. Independent forecasts estimate that 250 of the
total 737-200s will be retired, leaving approximately 700 aircraft in service
after 2003. The forecasts regarding hushkits estimate that half of the 700
Boeing 737-200s will be hushed to meet Stage III noise levels. The Company's
Stage II aircraft are all prospects for Stage III hushkits due to their age,
hours, cycles, engine configurations, and operating weights.
Aircraft Engines
The demand for spare engines has increased as a result of the air travel
industry's expansion over the last two years. The most significant area of
increase is in the Pratt & Whitney Stage II JT8D engine which powers many of the
Company's Stage II commercial aircraft. Today there are over 3000 Stage II
commercial jets in service. In December 1993 there were 288 Stage II narrowbody
aircraft available for sale or lease. As of October 1996, the number of
available Stage II narrowbodies was only 107 aircraft. The increase in the Stage
II fleet has placed over 450 engines back into service. This level of demand has
placed a premium on spare JT8D engines and resulted in a good leasing market for
available engines. The Company's spare engines will all be re-leased or sold
over the next two years during this market cycle.
Aircraft Rotables
Aircraft rotables are replacement spare parts held by an airline in inventory.
These parts are components that are removable from an aircraft or engine,
undergo overhaul, and are recertified and refit to the aircraft in an "as new"
condition. Components or rotables, carry specific identification numbers
allowing each part to be individually tracked. The types of rotables owned and
leased by the Company include landing gear, certain engine components, avionics,
auxiliary power units (APU's), replacement doors, control surfaces, pumps,
valves and other comparable equipment. Generally a rotable has a useful life
that is either measured in terms of time in service or number of cycles
(takeoffs and landings). While there are no specific guidelines that apply to
the time or cycles between overhauls for rotable equipment, there is no
limitation on the number of times a rotable may be overhauled and recertified.
The component will be overhauled until the cost of such overhaul becomes
uneconomic relative to the units' replacement cost.
The Company's rotable parts will be available for sale or lease in 1998.
Rotables generally reflect the market conditions of the aircraft they support
which for the Company is the Boeing 737-200 Advanced aircraft. Independent
forecasts for 1997 indicate a supply/demand equilibrium for these aircraft
types.
(2) Railcars
Pressurized Tank Cars
These cars are used primarily in the petrochemical and fertilizer industries.
They transport liquefied petroleum gas (LPG) and anhydrous ammonia. The
utilization rate on the Company's fleet of pressurized tank cars was over 98%
during 1996. Independent forecasts show the demand for natural gas growing
during 1997 to 1999, as the developing world, former Communist countries, and
the industrialized world all increase their demand for energy. The fertilizer
industry was undergoing a rapid restructuring toward the end of 1996 after a
string of major mergers, which began in 1995. These mergers reduce the number of
companies that use pressurized tank cars for fertilizer service. Whether or not
the economies of the mergers allow the total fleet size to be reduced remains to
be seen.
Covered Hopper (Grain) Cars
Through October 5, 1996, grain car loadings were down 13% compared to the same
period for 1995. Even with the greatly reduced loadings, the on-lease rate
during 1996 for the Company-owned grain cars remained at 100%. Industry-wide,
the covered hopper is one car type that has increased in number over the last
ten years, going from a total of 299,172 cars in 1985 to 325,882 cars in 1995.
It is possible that another poor crop year, combined with more available cars,
could place downward pressure on grain car rental rates during 1997.
(3) Marine Vessels
The Company owns or has investments in small- to medium-sized dry bulk vessels,
which are traded in worldwide markets, carrying commodity cargoes.
The freight rates in the dry bulk shipping market are dependent on the
balance of supply and demand for shipping commodities and trading patterns for
such dry bulk commodities. In 1995, dry bulk shipping demand was robust (growing
at 5% over 1994) and there was a significant infusion of new vessel tonnage,
especially late in the year, causing some decline in freight rates after a peak
in midyear. The slide in freight rates continued in the first half of 1996, as
new tonnage was delivered and shipping demand slipped from the high growth rates
of 1995. In the third quarter of 1996, there was a significant acceleration in
the drop of freight rates, primarily caused by the lack of significant grain
shipment volumes and the infusion of new tonnage. The low freight rates induced
many ship owners to scrap older tonnage and to defer or cancel newbuilding
orders. In the fourth quarter, a strong grain harvest worldwide gave the market
new strength, and freight rates recovered to the levels experienced in early
1996, but not to 1995 levels. Overall, 1996 was a soft year for shipping, with
dry bulk demand growing only 1.8% and the dry bulk fleet growing 3% in tonnage.
The outlook for 1997 shows an expected improvement in demand with growth at
2.4%, but a high orderbook remains. The year 1997 is expected to be a soft year
with relatively low freight rates; however, prospects may be strengthened by the
continued scrapping of older vessels in the face of soft rates and the deferment
or canceling of orders.
Demand for commodity shipping closely tracks worldwide economic growth;
however, economic development may alter demand patterns from time to time. The
general partner operates its funds' vessels in spot charters, period charters
and pooled vessel operations. This operating approach provides the flexibility
to adapt to changing demand patterns.
Independent forecasts show that the longer-term outlook (past 1997) should
bring improvement in freight rates earned by vessels; however, this is dependent
on the supply/demand balance and stability in growth levels. The newbuilding
orderbook currently is slightly lower than at the end of 1995 in tonnage.
Shipyard capacity is booked through late 1998; however, it remains to be seen
how many of these orders will actually be fulfilled. Historically, demand has
averaged approximately 3% annual growth, fluctuating between flat growth and 6%
annually. With predictable long-term demand growth, the long-term outlook
depends on the supply side, which is affected by interest rates, government
shipbuilding subsidy programs, and prospects for reasonable capital returns in
shipping.
(4) Mobile Offshore Drilling Units (Rigs)
Worldwide demand for mobile offshore drilling units ("rigs") in 1996 increased
in all sectors of the business over the demand levels experienced in 1995 and
1994. This increase in demand spread over all geographic regions of offshore
drilling; it also affected all equipment types in the offshore drilling sector.
This increase in demand without any increase in supply of rigs gave increased
utilization and higher contract dayrates in the market. The improvement in the
market can be attributed to a number of factors, but primarily it can be
associated with continued growth worldwide in the use of oil and natural gas for
energy. Stable prices at moderate levels have encouraged such growth, while
providing adequate margins for oil and natural gas exploration and production
development.
The floating rig sector also has experienced an improving market.
Technological improvements and more efficient operations have improved the
economics of drilling and production in the deeper water operations for which
floating rigs are utilized. Overall, demand for floating rigs increased from 117
rig-years in 1995 to 128 rig-years in 1996, with no increase in supply of rigs.
The increase in demand and utilization prompted an approximate doubling of
contract dayrates and an associated increase in floating rig market values.
Three floating rigs were ordered in 1996; however, these will not be delivered
until late in 1998 and will have a minimal effect on the market as they are
committed to specific contracts.
The most significant trend in 1996 was the continued consolidation of the
offshore drilling industry. Five major mergers of offshore drilling contractors
occurred in 1996, leading to a more controlled and stable market in which higher
levels of dayrates may be maintained. The consolidation of rig ownership into
fewer hands has a recognizable effect on stabilizing dayrates in times of lower
utilization and quicker improvement in times of increasing utilization.
Demand for floating rigs is projected by industry participants to continue
to increase through 1997, with no significant increases in rig supply. Dayrates
are not yet at levels sufficiently high to justify widespread ordering of new
equipment.
(5) Trailers
Intermodal Trailers
The robust intermodal trailer market that began four years ago began to soften
in 1995 and reduced demand continued in 1996. Intermodal trailer loadings were
flat in 1996 from 1995's depressed levels. This lack of growth has been the
result of many factors, ranging from truckload firms recapturing market share
from the railroads through aggressive pricing to the continuing consolidation
activities and asset efficiency improvements of the major U.S. railroads.
All of these factors helped make 1996 a year of equalizing equipment
supply, as railroads and lessors were pressured to retire older and less
efficient trailers. The two largest suppliers of railroad trailers reduced the
available fleet in 1996 by over 15%. Overall utilization for intermodal
trailers, including the Company's fleet, was lower in 1996 than in previous
years.
Over-The-Road Refrigerated Trailers
PLM experienced fairly strong demand levels in 1996 for its refrigerated
trailers. With over 15% of the fleet in refrigerated trailers, the Company, PLM
and the Partnerships are the largest supplier of short-term rental refrigerated
trailers in the U.S.
In 1996, the Company embarked on a strategy of identifying niche markets
and capitalizing on them. Building on PLM's refrigeration leadership, the
Company purchased new refrigerated foodservice distribution trailers for the
rental operation, and these trailers have been well received by the marketplace
to date.
(E) Government Regulations
The use, maintenance, and ownership of equipment is regulated by federal, state,
local and/or foreign governmental authorities. Such regulations may impose
restrictions and financial burdens on the Company's ownership and operation of
equipment. Changes in government regulations, industry standards, or
deregulation may also affect the ownership, operation, and resale of the
equipment. Substantial portions of the Company's equipment portfolio are either
registered or operated internationally. Such equipment may be subject to adverse
political, government, or legal actions, including the risk of expropriation or
loss arising from hostilities. Certain of the Company's equipment is subject to
extensive safety and operating regulations which may require the removal from
service or extensive modification of such equipment to meet these regulations at
considerable cost to the Company. Such regulations include (but are not limited
to):
(1) the U.S. Oil Pollution Act of 1990 (which established liability for
operators and owners of vessels, mobile offshore drilling units, etc.
that create environmental pollution);
(2) the U.S. Department of Transportation's Aircraft Capacity Act of 1990
(which limits or eliminates the operation of commercial aircraft in the
U.S. that do not meet certain noise, aging, and corrosion criteria);
(3) the Montreal Protocol on Substances that Deplete the Ozone layer and
the U.S. Clean Air Act Amendments of 1990 (which call for the control
and eventual replacement of substances that have been found to cause or
contribute significantly to harmful effects on the stratospheric ozone
layer and which are used extensively as refrigerants in refrigerated
marine cargo containers, over-the-road trailers, etc.);
(4) the U.S. Department of Transportation's Hazardous Materials Regulations
(which regulate the classification of and packaging requirements for
hazardous materials and which could apply particularly to the Company's
tank cars).
ITEM 2. PROPERTIES
The Company neither owns nor leases any properties other than the equipment it
has purchased for leasing purposes. At December 31, 1996, the Company owned a
portfolio of transportation equipment as described in Part I, Table 1. The
Company acquired equipment with the proceeds of the Company offering through the
end of 1996. In December of 1996, the Company closed a $25 million long term
note with an institutional investor. The Company intends to acquire additional
equipment in 1997 with the proceeds of the long term note and any surplus cash
flow.
The Company maintains its principal office at One Market, Steuart Street
Tower, Suite 800, San Francisco, California 94105-1301. All office facilities
are provided by FSI without reimbursement by the Company.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's limited partners
during the fourth quarter of its fiscal year ended December 31, 1996.
(This space intentionally left blank)
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S EQUITY AND RELATED UNITHOLDER MATTERS
Pursuant to the terms of the Operating Agreement, the Manager is generally
entitled to a 1% interest in the profits and losses and 15% of Cash Available
for Distributions of the Company. After the investors receive cash distributions
equal to their original Capital Contributions the Manager's interest will
increase to 25%. The Manager is the sole holder of such interests. Gross income
in each year of the Company will be specially allocated to the Manager in the
amount equal to the lesser of (i) the deficit balance, if any, in the Manager's
capital account calculated under generally accepted accounting principles using
the straight-line method of depreciation, and (ii) the deficit balance, if any,
in the Manager's capital account calculated under Federal income tax
regulations. The remaining interests in the profits and losses and distributions
of the Company are owned as of December 31, 1996, by approximately 3,094 holders
of Units in the Company.
(This space intentionally left blank)
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Table 2, below, lists selected financial data for the Company:
TABLE 2
For the years ended December 31, 1996 and
1995, and for the period from inception
(August 22, 1994)
to December 31, 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------------------------
<S> <C> <C> <C>
Operating results:
Total revenues $ 11,295,107 $ 4,149,484 $ --
Net gain on disposition of
equipment -- 24,593 --
Equity in net income (loss) of
unconsolidated special purpose
entities (255,969 ) 69,619 --
Net loss (2,392,494 ) (617,991 ) --
At year-end:
Total assets $ 87,755,105 $ 62,589,016 $ 100
Total liabilities 1,466,544 1,187,292 --
Cash distributions $ 9,832,146 $ 1,302,566 $ --
Cash distribution which represents
a return of capital to Class A Members $ 8,471,087 $ 1,179,332 $
Per weighted average Class A unit:
Net loss Various, N/A
Cash distributions according to N/A
interim
Cash distributions which represent a return of capital closings N/A
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
Management's Discussion and Analysis of Financial Condition and Results of
Operations relates to the Financial Statements of Professional Lease Management
Income Fund I, L.L.C. (the Company). The following discussion and analysis of
operations focuses on the performance of the Company's equipment in various
sectors of the transportation industry, and its effect on the Company's overall
financial condition.
Results of Operations - Factors Affecting Performance
(A) Re-leasing and Repricing Activity
The exposure of the Company's equipment portfolio to re-pricing risk occurs
whenever the leases for the equipment expire or are otherwise terminated and the
equipment must be remarketed. Major factors influencing the current market rate
for transportation equipment include supply and demand for similar or comparable
types or kinds of transport capacity, desirability of the equipment in the lease
market, market conditions for the particular industry segment in which the
equipment is to be leased, overall economic conditions both domestically and
worldwide, various regulations concerning the use of the equipment, and others.
The equipment portfolio owned by the Company at December 31, 1996, experienced
no re-pricing exposure for the year ended December 31, 1996.
(B) Reinvestment Risk
Reinvestment risk occurs when 1) the Company cannot generate sufficient surplus
cash after fulfillment of operating obligations and distributions to reinvest in
additional equipment during the reinvestment phase of Company operations; 2)
equipment is sold or liquidated for less than threshold amounts; 3) proceeds
from sales, losses, or surplus cash available for reinvestment cannot be
reinvested at threshold lease rates; or 4) proceeds from sales, losses, or
surplus cash available for reinvestment cannot be deployed in a timely manner.
During the first six years of operations, the Company intends to increase
its equipment portfolio by investing surplus cash after fulfilling operating
requirements and payments of distributions to the Members in additional
equipment. Subsequent to the end of the reinvestment period at January 1, 2002,
the Company will continue to operate for an additional two years, then begin an
orderly liquidation over an anticipated two-year period.
Other nonoperating funds for reinvestment are generated from the sale of
equipment, the receipt of funds realized from the payment of stipulated loss
values on equipment lost or disposed of during the time it is subject to lease
agreements, or the exercise of purchase options written into certain lease
agreements. Equipment sales generally result from evaluations by the Manager
that continued ownership of certain equipment is either inadequate to meet
Company performance goals, or that market conditions, market values, and other
considerations indicate it is the appropriate time to sell certain equipment.
During 1996, the Company acquired four commercial 737-200A Stage II
aircraft for $20.6 million, 181 refrigerated trailers for $7.8 million and 113
railcars for $5.8 million. In addition, the Company purchased a 25% interest in
a trust which owns four Boeing 737-200 aircraft for $5.6 million, a 50% interest
in an entity which owns a marine vessel for $3.4 million (a deposit of $0.4
million was lodged in December of 1995) and a 35% interest in an entity which
owns a mobile offshore drilling unit for $7.0 million. The remaining interests
are owned by affiliated partnerships.
(C) Equipment Valuation and Write-downs
In March 1995, the Financial Accounting Standards Board (FASB) issued statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (SFAS 121). This standard is effective for years
beginning after December 15, 1995. The Company adopted SFAS 121 during 1995, the
effect of which was not material as the method previously employed by the
Company was consistent with SFAS 121. In accordance with SFAS 121, the Company
reviews the carrying value of its equipment at least annually in relation to
expected future market conditions for the purpose of assessing the
recoverability of the recorded amounts. If projected undiscounted cash flows
(future lease revenue plus residual values) are less than the carrying value of
the equipment, a loss on revaluation is recorded. No adjustments to reflect
impairment of individual equipment carrying values were required for the year
ended December 31, 1996.
As of December 31, 1996, the Manager estimates the current fair market
value of the Company's equipment portfolio, including equipment owned by
unconsolidated special purpose entities, to be approximately $99.9 million.
Financial Condition - Capital Resources and Liquidity
The Company's initial contributed capital was composed of the proceeds from its
initial offering, expected to be supplemented in March 1997 by permanent debt in
the amount of $25 million. The Company intends to rely on operating cash flow to
meet its operating obligations, make cash distributions to Class A Unitholders,
and grow the Company's equipment portfolio through reinvestment of any remaining
surplus cash available in additional equipment.
The Manager has entered into a joint $50 million credit facility (the
"Committed Bridge Facility") on behalf of the Company, PLM Equipment Growth Fund
IV, PLM Equipment Growth Fund V, PLM Equipment Growth Fund VI, and PLM Equipment
Growth & Income Fund VII, all affiliated investment programs, TEC Acquisub, Inc.
("TECAI"), an indirect wholly-owned subsidiary of the Manager and American
Finance Group ("AFG"), a subsidiary of PLM International, which may be used to
provide interim financing of up to (i) 70% of the aggregate book value or 50% of
the aggregate net fair market value of eligible equipment owned by an affiliate
plus (ii) 50% of unrestricted cash held by the borrower. The Committed Bridge
Facility became available on December 20, 1993, and became available to the
Company on May 8, 1995, and was amended and restated in October 1996 to expire
on October 31, 1997 and increase the available borrowings for AFG to $50
million. The Company, TECAI and the other partnerships collectively may borrow
up to $35 million of the Committed Bridge Facility. The Committed Bridge
Facility also provides for a $5 million Letter of Credit Facility for the
eligible borrowers. Outstanding borrowings by the Company, TECAI, AFG or PLM
Equipment Growth Funds IV through VII reduce the amount available to each other
under the Committed Bridge Facility. Individual borrowings may be outstanding
for no more than 179 days, with all advances due no later than October 31, 1997.
The Committed Bridge Facility prohibits the Company from incurring any
additional indebtedness. Interest accrues at either the prime rate or adjusted
LIBOR at 2.5% at the borrower's option and is set at the time of advance of
funds. To the extent the Company is unable to raise sufficient capital through
the sale of interests to repay its portion of the Committed Bridge Facility, the
Company will continue to be obligated under the Committed Bridge Facility until
the Company generates proceeds from operations or the sale of Equipment
sufficient for repayment. Borrowings by the Company are guaranteed by the
Manager. As of March 6, 1996, PLM Equipment Growth Fund V had borrowings of $1.5
million, AFG had $30.8 million, and TECAI had $12.5 million in outstanding
borrowings. Neither PLM Equipment Growth Fund IV, VI, VII, nor Fund I had any
outstanding borrowings.
For the year ended December 31, 1996, the Company generated sufficient
operating income to meet its operating obligations and pay distributions to
those Class A and B Unitholders.
Results of Operations - Year over Year Comparison
(A) Owned equipment operations
The Company commenced significant operations in May 1995. As of May 13, 1996,
the Company completed its equity-raising stage. As of December 31, 1996, the
Company had purchased and placed into service $70.4 million of equipment,
compared to $36.2 million at December 31, 1995. All of these purchases were
completed with a combination of unrestricted cash, interim financing, and an
advance from an affiliate of the Manager. The nine day advance from the Manager
was repaid (including interest at commercial loan rates) in July of 1995.
Revenues of $11.3 million were generated during the year ended December 31,
1996, compared to $4.1 million in the same period in 1995. The variance is due
to the Company's equipment purchasing activities throughout 1996. Expenses of
$13.4 million for the year ended December 31, 1996 consisted primarily of
depreciation expense, using the double-declining balance method, and normal
operating costs incurred as equipment is being purchased and placed in service.
Expenses for the same period in 1995 totaled $4.8 million, and also consisted of
depreciation expense and normal operating costs incurred when equipment is
purchased and placed in service.
(B) Equity in net loss of unconsolidated special purpose entities represents net
loss generated from the operation of jointly-owned assets accounted for under
the equity method (see Note 4 to the financial statements).
As of December 31, 1996, the Company had interests in entities which purchased
and placed into service $30.7 million of assets. The Company's investment
consists of a 35% interest in an entity which owns a mobile offshore drilling
unit, a 50% interest in an entity which owns a marine vessel, a 17% interest in
a trust which owns six Boeing 737-200A aircraft, a 25% interest in a trust which
owns four Boeing 737-200A aircraft, and a 33% interest in two trusts (the
Trusts) which own three Boeing 737-200A aircraft, two spare Pratt & Whitney
JT8D-17A engines and a rotables package. Revenues of $6.6 million were generated
during the year ended December 31, 1996 compared to $1.3 million in the same
period in 1995. The variance is due to the Company's equipment purchasing
activities throughout 1996. Expenses of $6.8 million for the year ended December
31, 1996, compared to $1.2 million in the same period in 1995, consisted
primarily of depreciation expense for both periods.
During September of 1996, an affiliated Partnership converted its partial
beneficial interests in the trust holding five commercial aircraft and the trust
holding seven commercial aircraft into the sole ownership of two of the
commercial aircraft, resulting in a change in the beneficial interests for the
Company. This change has no effect on the income or loss recognized in the year
ended December 31, 1996.
The Company's performance during 1996 is not necessarily indicative of
future periods.
Geographic Information
The Company operates its equipment in international markets. Although these
operations expose the Company to certain currency, political, credit and
economic risks, the Manager believes these risks are minimal or has implemented
strategies to control the risks as follows: Currency risks are at a minimum
because all invoicing, with the exception of a small number of railcars
operating in Canada, is conducted in U.S. dollars. Political risks are minimized
generally through the avoidance of operations in countries that do not have a
stable judicial system and established commercial business laws. Credit support
strategies for lessees range from letters of credit supported by U.S. banks to
cash deposits. Although these credit support mechanisms generally allow the
Company to maintain its lease yield, there are risks associated with
slow-to-respond judicial systems when legal remedies are required to secure
payment or repossess equipment. Economic risks are inherent in all international
markets and the Manager strives to minimize this risk with market analysis prior
to committing equipment to a particular geographic area. Refer to the Financial
Statements, Note 3 for information on the revenues, income, and assets in
various geographic regions.
Revenues and net operating income by geographic region are impacted by the
time period the assets are owned and the useful life ascribed to the assets for
depreciation purposes. Net income (loss) from equipment is significantly
impacted by depreciation charges which are greatest in the early years due to
the use of the 200% declining balance method of depreciation. The relationships
of geographic revenues, net income (loss) and net book value are expected to
significantly change in the future as additional equipment is purchased in
various equipment markets and geographic areas. An explanation of the current
relationships is presented below:
The Company's equipment on lease to U.S. domiciled lessees accounted for
28% of the revenues generated by owned and partially owned equipment while a net
operating loss of $0.2 million was generated compared to $2.4 million in loss
for the entire Company. The primary reason for this relationship is the fact
that the Company depreciates its rail equipment over a 15 year period versus 5
to 12 years for other equipment types owned and leased in other geographic
regions. The trailers leased to U.S. domiciled lessees are expected to become
profitable in the near future, as the revenue from the trailers is expected to
exceed the operating costs, and the depreciation recorded by the Company
declines in future periods.
The Company's equipment leased to Canadian domiciled lessees consists of
railcars, an aircraft and a partial interest in an entity which owns two
aircraft. Revenues in Canada accounted for 23% of total revenues while these
operations accounted for $0.8 million loss of the $2.4 million total net
operating loss for the entire Company. The net operating loss generated in
Canada was created by the shorter depreciable life on the partially owned
aircraft leased in Canada. While the aircraft in Canada generated losses for the
period, this loss was partially offset by net operating income from the railcar
operations. As the depreciation recorded by the Company declines in future
periods the aircraft is expected to generate net operating income for the
Company.
One wholly owned marine vessel, a 50% investment in an entity which owns a
marine vessel and a 35% investment in an entity which owns a mobile offshore
drilling unit, which were leased in various regions throughout the period,
accounted for 22% of the revenues and $1.3 million of the $2.4 million net
operating loss for the period. These marine assets, representing 23% of the net
book value of the Company's assets and investments in unconsolidated special
purpose entities, generated a significant depreciation charge for the period
that exceeded the revenues less direct operating costs of the vessels. As
depreciation charges in the future decline, the vessels are expected to generate
net income for the Company.
European operations consist of partial interests in entities which own
aircraft and aircraft rotables that are generating revenues that accounted for
21% of combined, owned and partially owned equipment revenues. The net income
generated by this equipment accounted for $1.2 million in income for the period
as lease revenues exceeded depreciation charges. While this equipment is
expected to remain profitable during the lease term expiring in January 1998 the
Company may not be able to remarket this equipment at comparable rates in the
future.
South American operations consist of four aircraft that are generating
revenues that accounted for 6% of the total revenues and $1.9 million of the net
operating loss for the period. The net operating loss was generated as a result
of the shorter depreciable life on the aircraft leased in South America. As the
depreciation recorded by the Company declines in future periods, the aircraft
are expected to generate net operating income for the Company.
Inflation
There was no significant impact on the Company's operations as a result of
inflation during 1996.
Forward Looking Information
Except for historical information contained herein, the discussion in this Form
10-K contains forward-looking statements that involve risks and uncertainties,
such as statements of the Partnership's plans, objectives, expectations and
intentions. The cautionary statements made in this Form 10-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Partnership's actual results could differ materially from
those discussed here.
Outlook for the Future
Several factors may affect the Company's operating performance in 1997 and
beyond, including changes in the markets for the Company's equipment and changes
in the regulatory environment in which the equipment operates.
The Company intends to use excess cash flow, after payment of expenses, and
cash distributions to acquire additional equipment during the first six years of
the Company's operations. The Manager believes these acquisitions may cause the
Company to generate additional earnings and cash flow for the Company.
The Company relies on operating cash flow to meet its operating
obligations, make cash distributions to Class A and B Unitholders, and grow the
Company's equipment portfolio through reinvestment of any remaining surplus cash
available in additional equipment.
(1) Repricing and Reinvestment Risk
Certain portions of the Company's marine vessel and trailer portfolios will be
remarketed in 1997 as existing leases expire, exposing the Company to
considerable repricing risk/opportunity. Additionally, the Manager may select to
sell certain underperforming equipment, or equipment whose continued operation
may become prohibitively expensive, and thus faces reinvestment risk. In either
case, the Manager intends to re-lease or sell equipment at prevailing market
rates; however, the Manager cannot predict these future rates with any certainty
at this time and cannot accurately assess the effect of such activity on future
Company performance.
(2) Residual Risk
A portion of the total return on the Class A and B Unitholders' investment in
the Company is expected to be realized on the sale or liquidation of the
Company's equipment portfolio, the majority of which is anticipated during the
liquidation phase of the Company's operations. The Manager's Credit Review
Committee selects equipment for acquisition based on many factors, including
anticipated residual values from the eventual sale of that equipment. These
residuals may be affected by several factors during the time the equipment is
held, including changes in regulatory environments in which the equipment is
operated, the onset of technological obsolescence, changes in the equipment
markets, perceived values for equipment at the time of sale, and others. As the
impact of any of these factors becomes difficult to forecast with accuracy over
extended time horizons, the Manager cannot predict with certainty that the
anticipated residual values for equipment selected for acquisition will actually
be realized when the equipment is sold.
Prior to the liquidation phase of the Company's operations, the Manager may
decide to selectively sell equipment either when it has determined that
opportunities exist to realize significant gains on the sales; when continuing
ownership of the equipment becomes prohibitively expensive; or when the Manager
determines that continuing ownership of the equipment may result in the
realization of unsatisfactory residual values. At this time, the Manager cannot
predict when such occasions may occur, and thus cannot predict with any
certainty the impact of such events on Company operations.
(B) Impact of Government Regulations on Future Operations
The Manager operates the Company's equipment in accordance with current
applicable regulations (see Item 1, Section E "Government Regulations").
However, the continuing implementation of new or modified regulations by some of
the authorities mentioned previously, or others, may adversely affect the
Company's ability to continue to own or operate equipment in its portfolio.
Additionally, regulatory systems vary from country to country, which may
increase the burden to the Company of meeting regulatory compliance for the same
equipment operated between countries. Currently, the Manager has observed rising
insurance costs to operate certain vessels into U.S. ports resulting from
implementation of the U.S. Oil Pollution Act of 1990. Ongoing changes in the
regulatory environment, both in the U.S. and internationally, cannot be
predicted with any accuracy and preclude the Manager from determining the impact
of such changes on Company operations, purchases, or sale of equipment.
(C) Distributions
Pursuant to the Fifth Amended and Restated Operating Agreement of
Professional Lease Management Income Fund I, L.L.C. (the Agreement), the Company
will cease to reinvest surplus cash in additional equipment beginning in its
seventh year of operations. The Manager intends to pursue a strategy of
selectively redeploying equipment to achieve competitive returns. By the end of
the reinvestment period, the Manager intends to have assembled an equipment
portfolio capable of achieving a level of operating cash flow for the remaining
life of the Company sufficient to meet its obligations and sustain a predictable
level of distributions to the Class A Unitholders.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements for the Company are listed on the Index to
Financial Statements included in Item 14(a) of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
(This space intentionally left blank)
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
As of the date of this Annual Report, the directors and executive officers of
PLM International (and key executive officers of its subsidiaries) are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- -------------------------------------- ------------------- -------------------------------------------------------
<S> <C> <C>
J. Alec Merriam 61 Director, Chairman of the Board, PLM International,
Inc.; Director, PLM Financial Services, Inc.
Douglas P. Goodrich 50 Director and Senior Vice President, PLM
International; Director and President, PLM Financial
Services, Inc.; Senior Vice President, PLM
Transportation Equipment Corporation; President, PLM
Railcar Management Services, Inc.
Walter E. Hoadley 80 Director, PLM International, Inc.
Robert L. Pagel 60 Director, Chairman of the Executive Committee, PLM
International, Inc.; Director, PLM Financial
Services, Inc.
Harold R. Somerset 62 Director, PLM International, Inc.
Robert N. Tidball 58 Director, President and Chief Executive Officer, PLM
International, Inc.
J. Michael Allgood 48 Vice President and Chief Financial Officer, PLM
International, Inc. and PLM Financial Services, Inc.
Stephen M. Bess 50 President, PLM Investment Management, Inc.;
President, PLM Securities, Inc.; Vice President, PLM
Financial Services, Inc.;
David J. Davis 40 Vice President and Corporate Controller, PLM
International and PLM Financial Services, Inc.
Frank Diodati 42 President, PLM Railcar Management Services Canada
Limited.
Steven O. Layne 42 Vice President, PLM Transportation Equipment
Corporation.; Vice President and Director, PLM
Worldwide Management Services, Ltd.
Stephen Peary 48 Senior Vice President, General Counsel and Secretary,
PLM International, Inc.; Vice President, General
Counsel and Secretary, PLM Financial Services, Inc.,
PLM Investment Management, Inc., PLM Transportation
Equipment Corporation; Vice President, PLM
Securities, Corp.
Thomas L. Wilmore 54 Vice President, PLM Transportation Equipment
Corporation; Vice President, PLM Railcar Management
Services, Inc.
</TABLE>
J. Alec Merriam was appointed Chairman of the Board of Directors of PLM
International in September 1990, having served as a director since February
1988. In October 1988 he became a member of the Executive Committee of the Board
of Directors of PLM International. From 1972 to 1988, Mr. Merriam was Executive
Vice President and Chief Financial Officer of Crowley Maritime Corporation, a
San Francisco area-based company engaged in maritime shipping and transportation
services. Previously, he was Chairman of the Board and Treasurer of LOA
Corporation of Omaha, Nebraska and served in various financial positions with
Northern Natural Gas Company, also of Omaha.
Douglas P. Goodrich was elected to the Board of Directors in July 1996 and
appointed Director and President of PLM Financial Services in June 1996 and
Senior Vice President of PLM International in March 1994. Mr. Goodrich has also
served as Senior Vice President of PLM Transportation Equipment Corporation
since July 1989, and as President of PLM Railcar Management Services, Inc. since
September 1992, having been a Senior Vice President since June 1987. Mr.
Goodrich was an Executive Vice President of G.I.C. Financial Services
Corporation, a subsidiary of Guardian Industries Corp. of Chicago, Illinois from
December 1980 to September 1985.
Dr. Hoadley joined PLM International's Board of Directors and its Executive
Committee in September 1989. He served as a Director of PLM, Inc. from November
1982 to June 1984 and PLM Companies, Inc. from October 1985 to February 1988.
Dr. Hoadley has been a Senior Research Fellow at the Hoover Institute since
1981. He was Executive Vice President and Chief Economist for the Bank of
America from 1968 to 1981 and Chairman of the Federal Reserve Bank of
Philadelphia from 1962 to 1966. Dr. Hoadley had served as a Director of
Transcisco Industries, Inc. from February 1988 through August 1995.
Robert L. Pagel was appointed Chairman of the Executive Committee of the
Board of Directors of PLM International in September 1990, having served as a
director since February 1988. In October 1988, he became a member of the
Executive Committee of the Board of Directors of PLM International. From June
1990 to April 1991, Mr. Pagel was President and Co-Chief Executive Officer of
The Diana Corporation, a holding company traded on the New York Stock Exchange.
He is the former President and Chief Executive Officer of FanFair Corporation
which specializes in sports fans' gift shops. He previously served as President
and Chief Executive Officer of Super Sky International, Inc., a publicly traded
company, located in Mequon, Wisconsin, engaged in the manufacture of skylight
systems. He was formerly Chairman and Chief Executive Officer of Blunt, Ellis &
Loewi, Inc., a Milwaukee-based investment firm. Mr. Pagel retired from Blunt,
Ellis & Loewi in 1985 after a career spanning 20 years in all phases of the
brokerage and financial industries. Mr. Pagel has also served on the Board of
Governors of the Midwest Stock Exchange.
Harold R. Somerset was elected to the Board of Directors of PLM
International in July 1994. From February 1988 to December 1993, Mr. Somerset
was President and Chief Executive Officer of California & Hawaiian Sugar
Corporation (C&H), a recently-acquired subsidiary of Alexander & Baldwin, Inc.
Mr. Somerset joined C&H in 1984 as Executive Vice President and Chief Operating
Officer, having served on its Board of Directors since 1978, a position in which
he continues to serve. Between 1972 and 1984, Mr. Somerset served in various
capacities with Alexander & Baldwin, Inc., a publicly-held land and agriculture
company headquartered in Honolulu, Hawaii, including Executive Vice President -
Agricultures, Vice President, General Counsel and Secretary. In addition to a
law degree from Harvard Law School, Mr. Somerset also holds degrees in civil
engineering from the Rensselaer Polytechnic Institute and in marine engineering
from the U.S. Naval Academy. Mr. Somerset also serves on the Boards of Directors
for various other companies and organizations, including Longs Drug Stores,
Inc., a publicly-held company headquartered in Maryland.
Robert N. Tidball was appointed President and Chief Executive Officer of
PLM International in March 1989. At the time of his appointment, he was
Executive Vice President of PLM International. Mr. Tidball became a director of
PLM International in April 1989 and a member of the Executive Committee of the
Board of Directors of PLM International in September 1990. Mr. Tidball was
elected President of PLM Railcar Management Services, Inc. in January 1986. Mr.
Tidball was Executive Vice President of Hunter Keith, Inc., a Minneapolis-based
investment banking firm, from March 1984 to January 1986. Prior to Hunter Keith,
Inc., he was Vice President, a General Manager and a Director of North American
Car Corporation, and a Director of the American Railcar Institute and the
Railway Supply Association.
J. Michael Allgood was appointed Vice President and Chief Financial Officer
of PLM International in October 1992. Between July 1991 and October 1992, Mr.
Allgood was a consultant to various private and public sector companies and
institutions specializing in financial operational systems development. In
October 1987, Mr. Allgood co-founded Electra Aviation Limited and its holding
company, Aviation Holdings Plc of London where he served as Chief Financial
Officer until July 1991. Between June 1981 and October 1987, Mr. Allgood served
as a First Vice President with American Express Bank, Ltd. In February 1978, Mr.
Allgood founded and until June 1981, served as a director of Trade Projects
International/Philadelphia Overseas Finance Company, a joint venture with
Philadelphia National Bank. From March 1975 to February 1978, Mr. Allgood served
in various capacities with Citibank, N.A.
Stephen M. Bess was appointed President of PLM Securities, Inc. in June
1996 and President of PLM Investment Management, Inc. in August 1989, having
served as Senior Vice President of PLM Investment Management, Inc. beginning in
February 1984 and as Corporate Controller of PLM Financial Services, Inc.
beginning in October 1983. Mr. Bess served as Corporate Controller of PLM, Inc.,
beginning in December 1982. Mr. Bess was Vice President-Controller of Trans
Ocean Leasing Corporation, a container leasing company, from November 1978 to
November 1982, and Group Finance Manager with the Field Operations Group of
Memorex Corp., a manufacturer of computer peripheral equipment, from October
1975 to November 1978.
David J. Davis was appointed Vice President and Controller of PLM
International in January 1994. From March 1993 through January 1994, Mr. Davis
was engaged as a consultant for various firms, including PLM. Prior to that Mr.
Davis was Chief Financial Officer of LB Credit Corporation in San Francisco from
July 1991 to March 1993. From April 1989 to May 1991, Mr. Davis was Vice
President and Controller for ITEL Containers International Corporation which was
located in San Francisco. Between May 1978 and April 1989, Mr. Davis held
various positions with Transamerica Leasing Inc., in New York, including that of
Assistant Controller for their rail leasing division.
Frank Diodati was appointed President of PLM Railcar Management Services
Canada Limited in 1986. Previously, Mr. Diodati was Manager of Marketing and
Sales for G.E. Railcar Services Canada Limited.
Steven O. Layne was appointed Vice President, PLM Transportation Equipment
Corporation's Air Group in November 1992, and was appointed Vice President and
Director of PLM Worldwide Management Services, Ltd. in September, 1995. Mr.
Layne was PLM Transportation Equipment Corporation's Vice President, Commuter
and Corporate Aircraft beginning in July 1990. Prior to joining PLM, Mr. Layne
was the Director, Commercial Marketing for Bromon Aircraft Corporation, a joint
venture of General Electric Corporation and the Government Development Bank of
Puerto Rico. Mr. Layne is a Major in the United States Air Force Reserves and
senior pilot with 13 years of accumulated service.
Stephen Peary became Vice President, Secretary, and General Counsel of PLM
International in February 1988 and Senior Vice President in March 1994. Mr.
Peary was Assistant General Counsel of PLM Financial Services, Inc. from August
1987 through January 1988. Previously, Mr. Peary was engaged in the private
practice of law in San Francisco. Mr. Peary is a graduate of the University of
Illinois, Georgetown University Law Center, and Boston University (Masters of
Taxation Program).
Thomas L. Wilmore was appointed Vice President - Rail, PLM Transportation
Equipment Corporation in March 1994 and has served as Vice President, Marketing
for PLM Railcar Management Services, Inc. since May 1988. Prior to joining PLM,
Mr. Wilmore was Assistant Vice President Regional Manager for MNC Leasing Corp.
in Towson, Maryland from February 1987 to April 1988. From July 1985 to February
1987, he was President and Co-Owner of Guardian Industries Corp., Chicago,
Illinois and between December 1980 and July 1985, Mr. Wilmore was an Executive
Vice President for its subsidiary, G.I.C. Financial Services Corporation. Mr.
Wilmore also served as Vice President of Sales for Gould Financial Services
located in Rolling Meadows, Illinois from June 1978 to December 1980.
The directors of the General Partner are elected for a one-year term or
until their successors are elected and qualified. There are no family
relationships between any director or any executive officer of the General
Partner.
ITEM 11. EXECUTIVE COMPENSATION
The Company has no directors, officers or employees. The Company has no
pension, profit sharing, retirement or similar benefit plan in effect as of
December 31, 1996.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The Manager is generally entitled to a 15% interest in the Company's
cash distributions and earnings subject to certain allocation
provisions. After the investors receive cash at December 31, 1996, no
investor was known by the Manager to beneficially own more than 5% of
the Units of the Company.
(b) Security Ownership of Management
Neither the Manager and its affiliates nor any executive officer or
director of the Manager and its affiliates own any Units of the Company
as of December 31, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
During 1996, the Company paid or accrued the following fees to FSI or
its affiliates: management fees - $585,277. The Company reimbursed FSI
and/or its affiliates $313,036 for administrative and data processing
services performed on behalf of the Company during 1996. The Company
paid Transportation Equipment Indemnity Company Ltd. (TEI), a wholly
owned, Bermuda-based subsidiary of PLM International, $7,411 for
insurance coverages during 1996 substantially all of which was paid to
third party reinsurance underwriters or placed in risk pools managed by
TEI on behalf of affiliated partnerships and PLM International which
provide threshold coverages on marine vessel loss of hire and hull and
machinery damage. All pooling arrangement funds are either paid out to
cover applicable losses or refunded pro rata by TEI.
During 1996, the Unconsolidated Special Purpose Entities paid or
accrued the following fees to FSI or its affiliates (based on the
Company's proportional share of ownership): management fees - $240,501;
and administrative and data processing services - $85,261.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management
None.
(d) Transactions With Promoters
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements are filed as part of this Annual Report.
(b) Reports on Form 8-K
None.
(c) Exhibits
4. Limited Partnership Agreement of Partnership, incorporated by
reference to the Partnership's Registration Statement on Form S-1
(Reg. No. 33-55796) which became effective with the Securities and
Exchange Commission on May 25, 1993.
10.1 Management Agreement between Company and PLM Investment Management,
Inc., incorporated by reference to the Company's Registration
Statement on Form S-1 (Reg. No. 33-55796) which became effective
with the Securities and Exchange Commission on May 25, 1993.
10.2 Second Amended and restated Warehousing Credit Agreement, dated as
of May 31, 1996 with First Union National Bank of North Carolina.
10.3 Amendment No.1 to Second Amended and restated Warehousing Credit
Agreement, dated as of November 5, 1996 with First Union National
Bank of North Carolina.
10.4 $25,000,000 Note Agreement, dated as of December 30, 1996.
24. Powers of Attorney.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
The Company has no directors or officers. The Manager has signed on behalf
of the Company by duly authorized officers.
PROFESSIONAL LEASE MANAGEMENT INCOME
Date: March 12, 1997 FUND I
By: PLM Financial Services, Inc.
Manager
By: /s/ Douglas P. Goodrich
---------------------------
Douglas P. Goodrich
President
By: /s/ David J. Davis
----------------------------
David J. Davis
Vice President and
Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following directors of the Company's Manager on the
dates indicated.
Name Capacity Date
*_________________________
J. Alec Merriam Director - FSI March 12, 1997
*_________________________
Robert L. Pagel Director - FSI March 12, 1997
* Stephen Peary, by signing his name hereto does sign this document on behalf of
the persons indicated above pursuant to powers of attorney duly executed by such
persons and filed with the Securities and Exchange Commission.
/s/ Stephen Peary
- ---------------------
Stephen Peary
Attorney-in-Fact
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
Page
Report of Independent Auditors 24
Balance sheets as of December 31, 1996 and 1995 25
Statement of operations for the years ended
December 31, 1996 and 1995 26
Statement of changes in members' equity for the years ended
December 31, 1996, 1995 and the period from
inception (August 22, 1994) through December 31, 1994 27
Statements of cash flows for the years ended December 31,
1996, 1995 and the period from inception (August 22, 1994)
through December 31, 1994 28
Notes to financial statements 29 - 36
All other financial statement schedules have been omitted as the required
information is not pertinent to the Registrant or is not material, or because
the information required is included in the financial statements and notes
thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Members
Professional Lease Management Income Fund I, L.L.C.:
We have audited the financial statements of Professional Lease Management Income
Fund I, L.L.C. as listed in the accompanying index. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Professional Lease Management
Income Fund I, L.L.C. as of December 31, 1996 and 1995, and the results of its
operations for the years ended December 31, 1996 and 1995 and its cash flows for
the years ended December 31, 1996 and 1995 and the period from inception (August
22, 1994) through December 31, 1994, in conformity with generally accepted
accounting principles.
/S/ KPMG PEAT MARWICK LLP
- --------------------------------
SAN FRANCISCO, CALIFORNIA
February 28, 1997
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
BALANCE SHEETS
December 31,
<TABLE>
ASSETS
<CAPTION>
1996 1995
------------------------------------------
<S> <C> <C>
Assets:
Equipment held for operating leases, at cost $ 70,333,099 $ 36,139,950
Less accumulated depreciation (12,189,573 ) (2,869,535 )
------------------------------------------
Net equipment 58,143,526 33,270,415
Cash and cash equivalents 1,691,650 6,803,946
Restricted cash 223,260 6,315,548
Investment in unconsolidated special purpose entities 25,348,602 14,596,206
Accounts receivable, net of allowance for doubtful accounts
of $35,887 in 1996 and $7,835 in 1995 1,534,297 797,097
Prepaid expenses 505,298 416,515
Organization and offering costs, net of accumulated amortization 308,472 389,289
------------------------------------------
Total assets $ 87,755,105 $ 62,589,016
==========================================
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 430,133 $ 664,686
Due to affiliates 162,704 387,197
Lessee deposits and reserves for repairs 873,707 135,409
------------------------------------------
Total liabilities 1,466,544 1,187,292
Subscriptions in escrow -- 6,259,500
Members' equity:
Class A Members (4,999,581 Units at December 31, 1996 and
2,831,388 Units at December 31, 1995) 86,023,701 54,836,617
Class B Member 264,860 305,607
------------------------------------------
Total Members' Equity 86,288,561 55,142,224
------------------------------------------
Total liabilities and members' equity $ 87,755,105 $ 62,589,016
==========================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENT OF OPERATIONS
For the year ended December 31,
<TABLE>
<CAPTION>
1996 1995
--------------------------------------
<S> <C> <C>
Revenues:
Lease revenue $ 9,939,148 $ 3,991,638
Interest and other income 1,355,959 133,253
Gain on disposition of equipment -- 24,593
--------------------------------------
Total revenues 11,295,107 4,149,484
Expenses:
Depreciation and amortization 9,407,974 2,916,682
Management fees to affiliate 585,277 284,376
Repairs and maintenance 1,363,040 570,919
Marine equipment operating expenses 926,179 479,486
Insurance expense to affiliate 7,411 3,860
Other insurance expense 179,998 46,416
Interest expense 8,902 229,660
General and administrative expenses to affiliates 313,036 118,114
Other general and administrative expenses 639,815 187,581
--------------------------------------
Total expenses 13,431,632 4,837,094
Equity in net income (loss) of unconsolidated special purpose entities (255,969 ) 69,619
--------------------------------------
Net loss $ (2,392,494 ) $ (617,991 )
======================================
Members' share of net loss:
Class A Members $ (3,705,689 ) $ (611,811 )
Class B Member 1,313,195 (6,180 )
=====================================
Total $ (2,392,494 ) $ (617,991 )
======================================
Cash distributions $ 9,832,146 $ 1,302,566
======================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENT OF CHANGES IN MEMBERS' EQUITY
For the year ended December 31, 1996, 1995 and for the
period from inception (August 22, 1994)
through December 31, 1994
<TABLE>
<CAPTION>
Class A Class B Total
--------------------------------------------------------
<S> <C> <C> <C>
Member's capital contributions $ 100 $ -- $ 100
--------------------------------------------------------
Member's equity at December 31, 1994 100 -- 100
Members' capital contributions 56,627,660 9,536,106 66,163,766
Syndication costs -- (9,101,085 ) (9,101,085 )
Net loss (611,811 ) (6,180 ) (617,991 )
Distributions (1,179,332 ) (123,234 ) (1,302,566 )
--------------------------------------------------------
Members' equity at December 31, 1995 54,836,617 305,607 55,142,224
Members' capital contributions 43,363,860 5,068,822 48,432,682
Syndication costs -- (5,061,705 ) (5,061,705 )
Net loss (3,705,689 ) 1,313,195 (2,392,494 )
Distributions (8,471,087 ) (1,361,059 ) (9,832,146 )
--------------------------------------------------------
Members' equity at December 31, 1996 $ 86,023,701 $ 264,860 $ 86,288,561
========================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENTS OF CASH FLOWS
For the year ended December 31, 1996, 1995 and for the
period from inception (August 22, 1994)
through December 31, 1994
<TABLE>
<CAPTION>
Cash flows from operating activities: 1996 1995 1994
----------------------------------------------------
<S> <C> <C> <C>
Net loss $ (2,392,494 ) $ (617,991 ) $ --
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 9,407,974 2,916,682
Gain on sale of equipment -- (24,593 )
Equity in net (income) loss unconsolidated special
purpose entities 255,969 (69,619 )
Changes in operating assets and liabilities:
Restricted cash (223,260 )
Accounts receivable, net (737,200 ) (869,097 )
Prepaid expenses (88,783 ) (416,515 )
Accounts payable and accrued expenses (234,553 ) 664,686
Due to affiliates (224,493 ) 387,197
Lessee deposits and reserves for repairs 738,298 207,409
----------------------------------------------------
Net cash provided by operating activities 6,501,458 2,178,159 --
----------------------------------------------------
Investing activities:
Payments to affiliates for purchase of equipment -- (29,707,311 )
Payments for purchase of equipment (34,193,151 ) (6,464,489 )
Investment in and equipment purchased and placed
in unconsolidated special purpose entities (16,067,613 ) (14,676,987 )
Proceeds from disposition of equipment -- 55,028
----------------------------------------------------
Net cash used in investing activities (50,260,764 ) (50,793,759 ) --
----------------------------------------------------
Financing activities:
Proceeds from note payable -- 1,057,221
Proceeds from note payable - affiliates -- 3,956,300
Principal payments on notes payable -- (1,057,221 )
Principal payments on notes payable - affiliates -- (3,956,300 )
Cash distributions to Class A Members (8,471,087 ) (1,179,332 )
Cash distributions to Class B Member (1,361,059 ) (123,234 )
Class A members capital contribution 43,363,860 56,627,660 100
(Decrease) increase in subscriptions in escrow (6,259,500 ) 6,259,500
Decrease (increase) in restricted cash from
subscriptions in escrow, net 6,315,548 (6,315,548 )
Distributions from unconsolidated special purpose
entities 5,059,248 150,400
----------------------------------------------------
----------------------------------------------------
Cash provided by financing activities 38,647,010 55,419,446 100
----------------------------------------------------
Cash and cash equivalents:
Net (decrease) increase in cash and cash equivalents (5,112,296 ) 6,803,846 100
Cash and cash equivalents at beginning of period 6,803,946 100 --
----------------------------------------------------
Cash and cash equivalents at end of period $ 1,691,650 $ 6,803,946 $ 100
====================================================
Supplemental information:
Cash items:
Interest paid ($8,902 paid to affiliate) $ 8,902 $ 229,660 $ --
====================================================
Non cash items:
Syndication and offering costs paid by Class B Member $ 5,068,822 $ 9,536,106 $ --
====================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation
Organization
Professional Lease Management Income Fund I, L.L.C., a Delaware Limited
Liability Company (Fund I or the Company) was formed on August 22, 1994, to
purchase, lease, charter, or otherwise invest in, a diversified portfolio
of long-lived, low obsolescence capital equipment that is transportable by
and among prospective users (the Equipment). The securities represent
limited liability company interests (the Class A Units) which were offered
to the public. The Company's offering became effective on January 23, 1995.
PLM Financial Services, Inc. (FSI) is the Manager of the Company and is the
initial Class B Member.
On May 13, 1996, the Company ceased its offering for Class A Units
($100,000,000). As of December 31, 1996, there were 4,999,581 Units
outstanding.
At December 31, 1996, the Class B Member had capital contributions of
$14,604,931 representing the cash payments for organization and syndication
costs. Syndication costs of $14,162,791 are recorded as a reduction to
Class B Member's equity.
The Manager controls and manages the affairs of the Company. The
Manager will pay out of its own corporate funds (as a capital contribution
to the Company) all organization and syndication expenses incurred in
connection with the offering; therefore, 100% of the cash proceeds received
by the Company from the sale of Class A Units are initially being used to
purchase Equipment and establish any required cash reserves. For its
contribution, the Manager is generally entitled to a 15% interest in the
Company's cash distributions and earnings subject to certain allocation
provisions. After the investors receive cash distributions equal to their
original capital contributions the Manager's interest will increase to 25%.
Between the eighth and tenth years of operations of the Company, the
Manager intends to begin the dissolution and liquidation of the Company in
an orderly fashion, unless the Company is terminated earlier upon sale of
all of the equipment or by certain other events. However, under certain
circumstances, the term of the Company may be extended. In no event will
the Company extend beyond December 31, 2010.
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
This requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Operations
The equipment of the Company is being managed, under a management
agreement, by PLM Investment Management, Inc. (IMI), a wholly-owned
subsidiary of the Manager. IMI receives a monthly management fee from the
Company for managing the equipment (See Note 2). The Manager is also the
General Partner in a series of limited partnerships which own and lease
transportation equipment. The Manager, in conjunction with its
subsidiaries, also sells transportation
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation (continued)
Operations (continued)
equipment to these partnerships and manages transportation equipment under
management agreements with the partnerships.
Accounting for Leases
The Company's leasing operations generally consist of operating leases. Under
the operating lease method of accounting, the leased asset is recorded at
cost and depreciated over its estimated useful life. Rental payments are
recorded as revenue over the lease term. Lease origination costs are
capitalized and amortized over the term of the lease.
Depreciation and Amortization
Depreciation of equipment held for operating leases is computed on the 200%
declining balance method taking a full month's depreciation in the month of
acquisition, based upon estimated useful lives of 12 years for trailers,
and marine vessels, 15 years for railcars, and 8 years, 6 years and 5 years
for aircraft. The depreciation method is changed to straight line when
annual depreciation expense using the straight line method exceeds that
calculated by the 200% declining balance method. Organization costs will be
amortized over a 60 month period. Major expenditures which are expected to
extend the useful lives or reduce future operating expenses of equipment
are capitalized.
Transportation Equipment
In March 1995, the Financial Accounting Standards Board (FASB) issued
statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" (SFAS 121). This standard is
effective for years beginning after December 15, 1995. The Company adopted
SFAS 121 during 1995, the effect of which was not material as the method
previously employed by the Company was consistent with SFAS 121. In
accordance with SFAS 121, the Company reviews the carrying value of its
equipment at least annually in relation to expected future market
conditions for the purpose of assessing the recoverability of the recorded
amounts. If projected undiscounted cash flows (future lease revenue plus
residual values) are less than the carrying value of the equipment, a loss
on revaluation is recorded. There were no writedowns required during 1996.
Investments in Unconsolidated Special Purpose Entities
The Company has interests in unconsolidated special purpose entities which
own transportation equipment. These interests are accounted for using the
equity method.
The Company's equity interest in net income of unconsolidated special
purpose entities is reflected net of management fees paid or payable to
IMI.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation (continued)
Repairs and Maintenance
Maintenance costs are usually the obligation of the lessee. If they are not
covered by the lessee, they are charged against operations as incurred. To
meet the maintenance obligations of certain aircraft airframes and engines,
reserve accounts are prefunded by the lessee. Marine vessel drydocking is a
periodic required maintenance process that generally occurs every five
years. The drydock maintenance process generally lasts from 10 to 21 days.
Estimated costs associated with marine vessel drydockings are accrued and
charged to repair and maintenance expense ratably over the period prior to
such drydocking because wear and tear occurs over the same revenue
generating period. The reserve accounts are included in the balance sheet
as prepaid deposits and reserve for repairs.
Net Income (Loss) and Distributions per Depositary Unit
After giving effect to the special allocations set forth in Sections
3.08(b) and 3.17 of the Company's Operating Agreement, Net Profits and Net
Loss shall be allocated 1% to the Class B Members and 99% to the Class A
Members. During 1996, the Manager received a special allocation of income
of $1,350,627.
Cash distributions are recorded when paid and totaled $9,832,146 and
$1,302,566 for 1996 and 1995, respectively. Cash distributions to Class A
Unitholders in excess of net income are considered to represent a return of
capital. Cash distributions to Class A Unitholders of $8,471,087 and
$1,179,332 in 1996 and 1995, respectively, were deemed to be a return of
capital.
Cash distributions related to the fourth quarter results of $621,000
were paid or are payable during January, 1997, to the Class A Unitholders
of record as of December 31, 1996, for unitholders who elected for monthly
distributions. Quarterly cash distributions of approximately $1,077,000
were declared on January 25, 1997 and were paid on February 15, 1997 to
Class A and Class B Unitholders.
Cash and Cash Equivalents
The Company considers highly liquid investments that are readily convertible to
known amounts of cash with original maturities of three months or less as
cash equivalents.
Restricted Cash
At December 31, 1996, restricted cash includes lessee security deposits. At
December 31, 1995, restricted cash represented subscription deposits for
Units in escrow which were considered restricted cash until the members
were admitted, usually the next day of the following month.
2. Manager and Transactions with Affiliates
An officer of PLM Securities Corp. (PLMS) contributed $100 of the Company's
initial capital. Under the equipment management agreement, IMI, subject to
certain reductions, is entitled to a monthly management fee attributable to
either owned equipment or interests in equipment owned by the
Unconsolidated Special Purpose Entities (USPE) equal to the lesser of (i)
the fees which would be charged by an independent party for similar
services for similar equipment or (ii) the sum of (A) for that Equipment
for which IMI provides only Basic Equipment Management Services (a) 2% of
the Gross Lease Revenues attributable to Equipment which is subject to Full
Payout Net Leases, (b) 5% of the Gross Lease Revenues attributable to
Equipment which is subject to Operating Leases, and (B) for that Equipment
for which IMI provides supplemental Equipment Management Services, 7% of
the Gross Lease Revenues attributable to such Equipment. Company management
fees of $163,524 were payable at December 31, 1996. The Company's
proportional share of the USPE's
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
2. Other Transactions with Affiliates (continued)
management fees of $23,092 and $58,832 were payable as of December 31, 1996
and 1995, respectively. The Company's proportional share of the USPE's
management fees expense during 1996 was $240,501. The Company reimbursed
FSI $313,036 for data processing expenses and administrative services
performed on behalf of the Company during 1996. The Company's proportional
share of the USPE's administrative and data processing expenses was $85,261
during 1996. Transportation Equipment Corporation (TEC) will also be
entitled to receive an equipment liquidation fee equal to the lesser of (i)
3% of the sales price of equipment sold on behalf of the Company, or (ii)
50% of the "Competitive Equipment Sale Commission," as defined, if certain
conditions are met. PLMS and TEC are wholly-owned subsidiaries of the
Manager. In certain circumstances, the Manager will be entitled to a
monthly re-lease fee for re-leasing services following expiration of the
initial lease, charter or other contract for certain Equipment equal to the
lesser of (a) the fees which would be charged by an independent third party
for comparable services for comparable equipment or (b) 2% of Gross Lease
Revenues derived from such re-lease. No re-lease fee, however, shall be
payable if such fee would cause the combination of the equipment management
fee paid to IMI (see Note 1) or the re-lease fees to exceed 7% Gross Lease
Revenues.
The Company paid $7,411 in 1996 to Transportation Equipment Indemnity
Company Ltd. (TEI) which provides marine insurance coverage and other
insurance brokerage services to the Company. The Company's proportional
share of USPE's marine insurance coverage paid to TEI was $1,472 during
1996. TEI is an affiliate of the Manager. A substantial portion of these
amounts was paid to third party reinsurance underwriters or placed in risk
pools managed by TEI on behalf of affiliated partnerships and PLM
International which provide threshold coverages on marine vessel loss of
hire and hull and machinery damage. All pooling arrangement funds are
either paid out to cover applicable losses or refunded pro rata by TEI.
3. Equipment
The components of equipment are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------------------------
<S> <C> <C>
Rail equipment $ 18,876,058 $ 13,112,390
Aircraft 24,605,000 4,000,000
Marine vessel 12,256,531 12,256,532
Trailers 14,595,510 6,771,028
------------------------------------
70,333,099 36,139,950
Less accumulated depreciation (12,189,573 ) (2,869,535 )
------------------------------------
Net equipment $ 58,143,526 $ 33,270,415
====================================
</TABLE>
Revenues are earned by placing the equipment under operating leases
which are generally billed monthly or quarterly. The Company's marine
vessel is leased to an operator of utilization-type leasing pools which
include equipment owned by unaffiliated parties. In such instances,
revenues received by the Company consist of a specified percentage of
revenues generated by leasing the equipment to sublessees, after deducting
certain direct operating expenses of the pooled equipment. Rents for
railcars are based on mileage traveled or a fixed rate; rents for all other
equipment are based on fixed rates.
During the year ended December 31, 1996, the Company purchased four
737-200A Stage II commercial aircraft, 181 refrigerated trailers and 113
railcars for $34.2 million.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. Equipment (continued)
As of December 31, 1996, all equipment in the Company portfolio was
either on lease or operating in PLM-affiliated short-term trailer rental
facilities except for 14 railcars with a carrying value of $333,000. At
December 31, 1995, all equipment in the Company portfolio was either on
lease or operating in PLM-affiliate short-term trailer rental facilities.
All leases are being accounted for as operating leases. Future minimum
rent under noncancelable leases at December 31, 1996 during each of the
next five years are approximately $18,691,000 - 1997; $10,561,000 - 1998;
$8,694,000 - 1999; $8,148,000 - 2000; and $6,355,000 - 2001 and thereafter.
Periodically, PLM International Inc., (PLM) will purchase groups of
assets whose ownership may be allocated among affiliated partnerships and
PLM. Generally in these cases, only assets that are on lease will be
purchased by the affiliated partnerships. PLM will generally assume the
ownership and remarketing risks associated with off-lease equipment.
Allocation of the purchase price will be determined by a combination of
third party industry sources, and recent transactions or published fair
market value references. During 1996, PLM realized $0.7 million of gains on
the sale of 69 off-lease railcars purchased by PLM as part of a group of
assets in 1994 which had been allocated to PLM Equipment Growth Funds IV,
VI, VII, Professional Lease Management Income Fund I, L.L.C. and PLM. These
assets were included in assets held for sale at December 31, 1995. During
1995, PLM realized $1.3 million in gains on sales of railcars and aircraft
purchased by PLM in 1994 and 1995 as part of a group of assets which had
been allocated to EGFs IV, V, VI, VII, Fund I, and PLM.
The Company owns certain equipment which is leased and operated
internationally. A limited number of the Company's transactions are
denominated in a foreign currency. Gains or losses resulting from foreign
currency transactions are included in the results of operations and are not
material.
The Company leases its aircraft, railcars and trailers to lessees
domiciled in four geographic regions: United States, Canada, Europe, and
South America. The vessel is leased to multiple lessees in different
regions who operate the vessel worldwide. The tables below set forth
geographic information about the Company's equipment and the Company's
proportional interest in equipment owned by special purpose entities. The
Company accounts for proportional interest in equipment using the equity
method. The geographic information is grouped by domicile of the lessee as
of and for the year ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Investment in Unconsolidated
Special Purpose Entities
Owned
--------------------------------- -------------------------------
1996 1995 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Various $ 2,668,536 $ 1,491,972 $ 925,948 $ --
United States 4,572,914 2,082,312 -- --
Canada 1,731,181 417,354 2,109,784 78,400
Europe -- -- 3,529,926 1,176,634
South America 966,517 -- -- --
====================================================================
Total revenues $ 9,939,148 $ 3,991,638 $ 6,565,658 $ 1,255,034
====================================================================
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. Equipment (continued)
The following table sets forth Identifiable income (loss) information
by region :
<TABLE>
<CAPTION>
Investment in Unconsolidated
Owned Special Purpose Entities
---------------------------------- --------------------------------
1996 1995 1996 1995
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income (loss):
Various $ (774,488 ) $ (442,731 ) $ (515,558 ) $ --
United States (201,018 ) 197,288 -- --
Canada 128,229 (2,724 ) (896,260 ) (41,045 )
Europe -- -- 1,155,849 110,664
South America (1,918,227 ) -- -- --
----------------------------------------------------------------------
Total identifiable income (loss) (2,765,504 ) (248,167 ) (255,969 ) 69,619
Administrative and other 628,979 (439,443 ) -- --
----------------------------------------------------------------------
Total net income (loss) $ (2,136,525 ) $ (687,610 ) $ (255,969 ) $ 69,619
======================================================================
</TABLE>
The net book value of owned assets and the net investment in the
unconsolidated special purpose entities at December 31, 1996 and 1995 are
as follows:
<TABLE>
<CAPTION>
Investment in Unconsolidated
Owned Special Purpose Entities
----------------------------------- -----------------------------------
1996 1995 1996 1995
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net book value:
Various $ 9,220,776 $ 11,064,923 $ 9,916,538 $ 377,987
United States 26,400,747 16,365,304 -- --
Canada 4,664,333 5,840,188 6,665,213 4,108,555
Europe -- -- 8,766,851 10,109,664
South America 17,857,670 -- -- --
--------------------------------------------------------------------------
Total equipment $ 58,143,526 $ 33,270,415 $ 25,348,602 $ 14,596,206
==========================================================================
</TABLE>
For 1996 and 1995, one lessee, Transportes Aeroes Portugueses, accounted
for more than 10% of the Company's revenues. The total amount of revenue
accounted for by this lessee was $3.5 million or 21% of total revenues in
1996 and $1.2 million or 22% of total revenues in 1995. Thus, the lease
revenues are not reported in Lease Revenue in the Statement of Operations,
but, rather are reported net in Equity in net income of unconsolidated
special purpose entities. Such concentration of revenues are not unusual,
given the early stage of the equity raising period and are expected to
decrease in the future to the extent additional equipment is acquired using
proceeds from the Company's sale of limited liability company interests.
4. Investments in Unconsolidated Special Purpose Entities
During 1996, the Company purchased a 25% interest in a trust which owns
four Boeing 737-200 aircraft for $5.6 million, and a 50% interest in an
entity which owns a marine vessel for $3.4 million (a deposit of $0.4
million was lodged in December of 1995) and a 35% interest in an entity
which owns a drilling marine vessel for $7.0 million. The remaining
interests are owned by affiliated partnerships. During 1995, the Company
purchased a 14% (17% at December 31, 1996) interest in a trust which owns
seven Boeing 737-200A aircraft for $4.3 million, and 33% in two trusts (the
Trusts) which own three 1983 Boeing 737-200A aircraft, equipped with Pratt
& Whitney JT8D-17A engines, two spare Pratt & Whitney JT8D-17A engines and
a rotables package for $10.0 million. The remaining interests are owned by
affiliated partnerships.
The Company accounts for investments in unconsolidated special purpose
entities using the equity method.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
4. Investments in Unconsolidated Special Purpose Entities (continued)
The net investments in unconsolidated special purpose entities include the
following jointly-owned equipment (and related assets and liabilities):
<TABLE>
<CAPTION>
December 31, December 31,
% Ownership Equipment 1996 1995
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
33% Two trusts consisting of:
Three 737-200A Stage II
commercial aircraft
Two aircraft engines
Portfolio of rotable components $ 8,766,851 $ 10,109,664
14% Trust consisting of seven 737-200A
Stage II commercial aircraft (see
note below) -- 4,108,555
17% Trust consisting of six 737-200A
Stage II commercial aircraft (see
note below) 2,683,784 --
25% Trust consisting of four 737-200A
Stage II commercial aircraft 3,981,429 --
35% Drilling marine vessel 6,906,103 --
50% Cargo marine vessel 3,010,435 377,987
----------------------------------------------
Total investments $ 25,348,602 $ 14,596,206
==============================================
</TABLE>
The Company has beneficial interest in two unconsolidated special purpose
entities that own multiple aircraft (the Trusts). These Trusts contain
provisions, under certain circumstances, for allocating specific aircraft
to the beneficial owners. During September 1996, PLM Equipment Growth Fund
V, an affiliated partnership which also has a beneficial interest in the
Trust, renegotiated its senior loan agreement and was required, for loan
collateral purposes, to withdraw the aircraft designated to it from the
Trust. The result was to restate the percentage ownership of the remaining
beneficial owners of the Trusts beginning September 30, 1996. This change
has no effect on the income or loss recognized in the year ended December
31, 1996.
The following summarizes the financial information for the special purpose
entities and the Company's interests therein as of and for the years ended
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Total Numbers Net Interest of Company
----------------------------------- -----------------------------------
1996 1995 1996 1995
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets $ 80,845,706 $ 59,388,644 $ 25,348,602 $ 14,596,206
Revenues 24,675,879 4,777,472 6,565,658 1,255,034
Net Income (loss) (3,071,146 ) (1,021,162 ) (255,969 ) 69,619
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
(A Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
5. Notes Payable
In December 1996, the Company entered into an agreement to issue a
long-term note totaling $25 million to one institutional investor. The note
bears interest at a fixed rate of 7.33% per annum and has a final maturity
in 2006. Interest on the note is payable semi-annually. The note will be
repaid in five principal payments of $3.0 million on December 31, 2000,
2001, 2002, 2003, and 2004 and two principal payments of $5.0 million on
December 31, 2005, and 2006. The agreement requires the Company to maintain
certain financial covenants related to fixed-charge coverage. Proceeds from
the sale of the note will be used to fund additional equipment acquisitions
during the first and second quarters of 1997.
The Manager has entered into a joint $50 million credit facility (the
"Committed Bridge Facility") on behalf of the Company, PLM Equipment Growth
Fund IV, PLM Equipment Growth Fund V, PLM Equipment Growth Fund VI, and PLM
Equipment Growth & Income Fund VII, all affiliated investment programs, TEC
Acquisub, Inc. ("TECAI"), an indirect wholly-owned subsidiary of the
Manager and American Finance Group ("AFG"), a subsidiary of PLM
International, which may be used to provide interim financing of up to (i)
70% of the aggregate book value or 50% of the aggregate net fair market
value of eligible equipment owned by an affiliate plus (ii) 50% of
unrestricted cash held by the borrower. The Committed Bridge Facility
became available on December 20, 1993, and became available to the Company
on May 8, 1995, and was amended and restated in October 1996 to expire on
October 31, 1997 and increase the available borrowings for AFG to $50
million. The Company, TECAI and the other partnerships collectively may
borrow up to $35 million of the Committed Bridge Facility. The Committed
Bridge Facility also provides for a $5 million Letter of Credit Facility
for the eligible borrowers. Outstanding borrowings by the Company, TECAI,
AFG or PLM Equipment Growth Funds IV through VII reduce the amount
available to each other under the Committed Bridge Facility. Individual
borrowings may be outstanding for no more than 179 days, with all advances
due no later than October 31, 1997. The Committed Bridge Facility prohibits
the Company from incurring any additional indebtedness. Interest accrues at
either the prime rate or adjusted LIBOR at 2.5% at the borrower's option
and is set at the time of advance of funds. To the extent the Company is
unable to raise sufficient capital through the sale of interests to repay
its portion of the Committed Bridge Facility, the Company will continue to
be obligated under the Committed Bridge Facility until the Company
generates proceeds from operations or the sale of Equipment sufficient for
repayment. Borrowings by the Company are guaranteed by the Manager. As of
December 31, 1996, PLM Equipment Growth Fund V had borrowings of $2.5
million, PLM Equipment Growth Fund VI had $1.3 million, PLM Equipment
Growth and Income Fund VII had $2.0 million, AFG had $26.9 million, and
TECAI had $4.1 million in outstanding borrowings. Neither PLM Equipment
Growth Fund IV nor the Company had any outstanding borrowings.
6. Income Taxes
The Company is not subject to income taxes as any income or loss is included in
the tax returns of the individual members. Accordingly, no provision for
income taxes has been made in the financial statements of the Company.
As of December 31, 1996, there were temporary differences of
approximately $5,152,000 between the financial statement carrying values of
certain assets and liabilities and the income tax basis of such assets and
liabilities, primarily due to differences in depreciation methods and
equipment reserves.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I
INDEX OF EXHIBITS
Exhibit Page
4. Operating Agreement of Partnership. *
10.1 Management Agreement between Company and *
PLM Investment Management, Inc.
10.2 Second Amended and restated Warehousing Credit Agreement,
dated as of May 31, 1996 with First Union National Bank
of North Carolina. *
10.3 Amendment No. 1 to Second Amended and restated
Warehousing Credit Agreement, dated as of
November 5, 1996 with First Union National Bank
of North Carolina. *
10.4 $25,000,000 Note Agreement, dated as of December 30, 1996. *
24. Powers of Attorney. 38-41
* Incorporated by reference. See page 18 of this report.
SECOND AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
AMONG
PLM EQUIPMENT GROWTH FUND III
PLM EQUIPMENT GROWTH FUND IV
PLM EQUIPMENT GROWTH FUND V
PLM EQUIPMENT GROWTH FUND VI
PLM EQUIPMENT GROWTH & INCOME FUND VII
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
PLM FINANCIAL SERVICES, INC.
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
AND SUCH OTHER FINANCIAL INSTITUTIONS
AS SHALL BECOME LENDERS HEREUNDER
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
AS AGENT
May 31, 1996
<PAGE>
<PAGE>
WAREHOUSING CREDIT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS..............................................2
1.1 Defined Terms............................................2
1.2 Accounting Terms........................................18
1.3 Other Terms.............................................18
1.4 Schedules And Exhibits..................................19
SECTION 2. AMOUNT AND TERMS OF CREDIT..............................19
2.1 Commitment To Lend......................................19
2.1.1 Revolving Facility...........................19
(a) Facility Commitments..................19
(b) Each Loan.............................20
2.1.2 Funding......................................21
2.1.3 Utilization Of The Loans.....................21
2.2 Repayment And Prepayment................................21
2.2.1 Repayment....................................21
2.2.2 Voluntary Prepayment.........................21
2.2.3 Mandatory Prepayments........................22
2.3 Calculation Of Interest; Post-Maturity Interest.........22
2.4 Manner Of Payments......................................23
2.5 Payment On Non-Business Days............................23
2.6 Application Of Payments.................................23
2.7 Procedure For The Borrowing Of Loans....................23
2.7.1 Notice Of Borrowing..........................23
2.7.2 Unavailability Of LIBOR Loans................24
2.8 Conversion And Continuation Elections...................24
2.8.1 Election.....................................24
2.8.2 Notice Of Conversion.........................24
2.8.3 Interest Period..............................25
2.8.4 Unavailability Of LIBOR Loans................25
2.9 Discretion Of Lenders As To Manner Of Funding...........25
2.10 Distribution Of Payments................................25
2.11 Agent's Right To Assume Funds Available For Advances....25
2.12 Agent's Right To Assume Payments Will Be Made By Borrower..26
2.13 Capital Requirements....................................26
2.14 Taxes...................................................27
2.14.1 No Deductions................................27
2.14.2 Miscellaneous Taxes..........................27
2.14.3 Indemnity....................................27
2.14.4 Required Deductions..........................27
2.14.5 Evidence of Payment..........................27
2.14.6 Foreign Persons..............................28
2.14.7 Income Taxes.................................28
2.14.8 Reimbursement Of Costs.......................29
2.14.9 Jurisdiction.................................29
2.15 Illegality..............................................29
2.15.1 LIBOR Loans..................................29
2.15.2 Prepayment...................................29
2.15.3 Prime Rate Borrowing.........................30
2.16 Increased Costs.........................................30
2.17 Inability To Determine Rates............................30
2.18 Prepayment Of LIBOR Loans...............................30
SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND
THE MAKING OF LOANS............... 31
3.1 Effectiveness of This Agreement.........................31
3.1.1 Partnership, Company And Corporate Documents..31
3.1.2 Notes........................................31
3.1.3 Opinion Of Counsel...........................31
3.1.4 Reaffirmation of Guaranty....................31
3.1.5 TEC AcquiSub Amendment.......................31
3.1.6 AFG Agreement................................31
3.1.7 Bringdown Certificate........................31
3.1.8 Fees.........................................32
3.1.9 Other Documents..............................32
3.2 All Loans...............................................32
3.2.1 Notice Of Borrowing..........................32
3.2.2 No Event Of Default..........................32
3.2.3 Representations And Warranties...............32
3.2.4 Insurance....................................32
3.2.5 Other Instruments............................32
3.3 Further Conditions To All Loans.........................32
3.3.1 General Partner Or Manager...................32
3.3.2 Removal Of General Partner Or Manager........33
3.3.3 Purchaser....................................33
SECTION 4. BORROWERS' AND FSI'S REPRESENTATIONS AND WARRANTIES.....33
4.1 General Representations And Warranties..................33
4.1.1 Existence And Power..........................33
4.1.2 Loan Documents And Notes Authorized; Binding
Obligations........................... 33
4.1.3 No Conflict; Legal Compliance................34
4.1.4 Financial Condition..........................34
4.1.5 Executive Offices............................34
4.1.6 Litigation...................................34
4.1.7 Material Contracts...........................35
4.1.8 Consents And Approvals.......................35
4.1.9 Other Agreements.............................35
4.1.10 Employment And Labor Agreements..............35
4.1.11 ERISA........................................35
4.1.12 Labor Matters................................36
4.1.13 Margin Regulations...........................36
4.1.14 Taxes........................................36
4.1.15 Environmental Quality........................36
4.1.16 Trademarks, Patents, Copyrights, Franchises And
Licenses........................... 37
4.1.17 Full Disclosure..............................37
4.1.18 Other Regulations............................37
4.1.19 Solvency.....................................38
4.2 Representations And Warranties At Time Of First Advance..38
4.2.1 Power And Authority..........................38
4.2.2 No Conflict..................................38
4.2.3 Consents And Approvals.......................38
4.3 Survival Of Representations And Warranties..............38
SECTION 5. BORROWERS' AND FSI'S AFFIRMATIVE COVENANTS..............38
5.1 Records And Reports.....................................39
5.1.1 Quarterly Statements.........................39
5.1.2 Annual Statements............................39
5.1.3 Borrowing Base Certificate...................39
5.1.4 Compliance Certificate.......................40
5.1.5 Reports......................................40
5.1.6 Insurance Reports............................40
5.1.7 Certificate Of Responsible Officer...........40
5.1.8 Employee Benefit Plans.......................40
5.1.9 ERISA Notices................................41
5.1.10 Pension Plans................................41
5.1.11 SEC Reports..................................41
5.1.12 Tax Returns..................................41
5.1.13 Additional Information.......................41
5.2 Existence; Compliance With Law..........................42
5.3 Insurance...............................................42
5.4 Taxes And Other Liabilities.............................42
5.5 Inspection Rights; Assistance...........................43
5.6 Maintenance Of Facilities; Modifications................43
5.6.1 Maintenance Of Facilities....................43
5.6.2 Certain Modifications To The Equipment.......43
5.7 Supplemental Disclosure.................................43
5.8 Further Assurances......................................43
5.9 Lockbox.................................................44
5.10 Environmental Laws......................................44
SECTION 6. BORROWER'S AND FSI'S NEGATIVE COVENANTS.................44
6.1 Liens; Negative Pledges; And Encumbrances...............44
6.2 Acquisitions............................................45
6.3 Limitations On Indebtedness.............................45
6.4 Use Of Proceeds.........................................46
6.5 Disposition Of Assets...................................46
6.6 Restriction On Fundamental Changes......................46
6.7 Transactions With Affiliates............................47
6.8 Maintenance Of Business.................................47
6.9 No Distributions........................................47
6.10 Events Of Default.......................................47
6.11 ERISA...................................................47
6.12 No Use Of Any Lender's Name.............................47
6.13 Certain Accounting Changes..............................47
6.14 Amendments Of Limited Partnership Or Operating Agreements..48
SECTION 7. FINANCIAL COVENANTS OF BORROWER AND FSI.................48
7.1 Maximum Funded Debt Ratio...............................48
7.2 Minimum Debt Service Ratio..............................48
7.3 Minimum Consolidated Tangible Net Worth.................48
7.4 Cash Balances...........................................48
SECTION 8. EVENTS OF DEFAULT AND REMEDIES..........................48
8.1 Events Of Default.......................................48
8.1.1 Failure To Make Payments.....................48
8.1.2 Other Agreements.............................49
8.1.3 Breach Of Covenants..........................49
8.1.4 Breach Of Representations Or Warranties......49
8.1.5 Failure To Cure..............................49
8.1.6 Insolvency...................................50
8.1.7 Bankruptcy Proceedings.......................50
8.1.8 Material Adverse Effect......................50
8.1.9 Judgments, Writs And Attachments.............50
8.1.10 Legal Obligations............................51
8.1.11 TEC AcquiSub Agreement.......................51
8.1.12 AFG Agreement................................51
8.1.13 Change Of General Partner Or Manager.........51
8.1.14 Change Of Purchaser..........................51
8.1.15 Criminal Proceedings.........................51
8.1.16 Action By Governmental Authority.............52
8.1.17 Governmental Decrees.........................52
8.2 Waiver Of Default.......................................52
8.3 Remedies................................................52
8.4 Set-Off.................................................53
8.5 Rights And Remedies Cumulative..........................54
SECTION 9. AGENT...................................................54
9.1 Appointment.............................................54
9.2 Delegation Of Duties....................................54
9.3 Exculpatory Provisions..................................55
9.4 Reliance By Agent.......................................55
9.5 Notice Of Default.......................................55
9.6 Non-Reliance On Agent And Other Lenders.................56
9.7 Indemnification.........................................56
9.8 Agent In Its Individual Capacity........................56
9.9 Resignation And Appointment Of Successor Agent..........57
SECTION 10. EXPENSES AND INDEMNITIES................................57
10.1 Expenses................................................57
10.2 Indemnification.........................................58
10.2.1 General Indemnity............................58
10.2.2 Environmental Indemnity......................58
10.2.3 Survival; Defense............................59
SECTION 11. MISCELLANEOUS...........................................59
11.1 Survival................................................59
11.2 No Waiver By Agent Or Lenders...........................59
11.3 Notices.................................................59
11.4 Headings................................................60
11.5 Severability............................................60
11.6 Entire Agreement; Construction; Amendments And Waivers..60
11.7 Reliance By Lenders.....................................61
11.8 Marshalling; Payments Set Aside.........................61
11.9 No Set-Offs By Borrowers................................61
11.10 Binding Effect, Assignment..............................61
11.11 Counterparts............................................63
11.12 Equitable Relief........................................63
11.13 Written Notice Of Claims; Claims Bar....................63
11.14 Waiver Of Punitive Damages..............................63
11.15 Relationship Of Parties.................................63
11.16 Obligations Of Each Borrower............................64
11.17 Co-Borrower Waivers.....................................65
11.18 Governing Law...........................................66
11.19 Consent To Jurisdiction.................................66
11.20 No Novation.............................................66
11.21 Waiver Of Jury Trial....................................66
<PAGE>
INDEX OF EXHIBITS
Exhibit A-1 Form of Revolving Promissory Note - EGF III
Exhibit A-2 Form of Revolving Promissory Note - EGF IV
Exhibit A-3 Form of Revolving Promissory Note - EGF V
Exhibit A-4 Form of Revolving Promissory Note - EGF VI
Exhibit A-5 Form of Revolving Promissory Note - EGF VII
Exhibit A-6 Form of Revolving Promissory Note - Income Fund I
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Reaffirmation of Guaranty
Exhibit D Form of Opinion of Counsel (Stephen Peary)
Exhibit E Form of Compliance Certificate
Exhibit F Form of Lockbox Agreement
Exhibit G Form of Notice of Borrowing
Exhibit H Form of Notice of Conversion/Continuation
Exhibit I Form of Assignment and Acceptance
<PAGE>
INDEX OF SCHEDULES
Schedule A Commitments
Schedule 1.1 Amendments to Schedule A
Schedule 4.1.5 Executive Offices and Principal Places of Business
Schedule 4.1.6 Litigation
Schedule 4.1.7 Material Contracts
Schedule 4.1.8 Consent and Approvals
Schedule 4.1.15 Environmental Disclosures
Schedule 6.1 Existing Liens
Schedule 6.3(a) Existing Indebtedness
Schedule 6.3(b) Anticipated Indebtedness
1
<PAGE>
SECOND AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT is
entered into as of May 31, 1996, by and among PLM EQUIPMENT GROWTH FUND III, a
California limited partnership ("EGF III"), PLM EQUIPMENT GROWTH FUND IV, a
California limited partnership ("EGF IV"), PLM EQUIPMENT GROWTH FUND V, a
California limited partnership ("EGF V"), PLM EQUIPMENT GROWTH FUND VI, a
California limited partnership ("EGF VI"), PLM EQUIPMENT GROWTH & INCOME FUND
VII, a California limited partnership ("EGF VII"), and PROFESSIONAL LEASE
MANAGEMENT INCOME FUND I, L.L.C., a Delaware limited liability company ("Income
Fund I") (EGF III, EGF IV, EGF V, EGF VI, EGF VII and Income Fund I each
individually being a "Borrower" and, collectively, the "Borrowers"), and PLM
FINANCIAL SERVICES, INC., a Delaware corporation and the sole general partner,
in the case of EGF III, EGF IV, EGF V, EGF VI and EGF VII, and the sole manager,
in the case of Income Fund I ("FSI"), and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA ("FUNB") and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to Section 11.10 (each individually being a "Lender," and collectively,
the "Lenders"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as agent on
behalf and for the benefit of the Lenders (not in its individual capacity, but
solely as agent, the "Agent"). This Agreement amends, restates and supersedes
the Growth Fund Agreement (as defined below).
RECITALS
A. Borrowers, PLM Equipment Growth Fund II, a California limited
partnership ("EGF II"), Lenders and Agent have entered into that certain Amended
and Restated Warehousing Credit Agreement dated as of September 27, 1995 (the
"Growth Fund Agreement").
B. Borrowers, FSI, Lenders and Agent desire to amend and restate the
Growth Fund Agreement with this amended and restated Agreement and to remove EGF
II as a borrower under the revolving credit facility.
C. Borrowers desire, on a several but not joint basis, to obtain from
Lenders a revolving credit facility with an aggregate principal availability up
to but not to exceed the maximum amount set forth on Schedule A for the purpose
of financing the purchase of transportation equipment for periods up to one
hundred seventy-nine (179) days, all as more particularly described below.
D. Lenders have agreed to make such credit available to Borrowers, but
only upon the terms and subject to the conditions hereinafter set forth and in
reliance on the representations and warranties set forth herein. This Agreement
amends, restates and supersedes the Growth Fund Agreement in the its entirety.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants hereinafter set forth, and intending to be legally bound, the
parties hereto agree as follows:
<PAGE>
. 1. DEFINITIONS
. As used herein, the following terms have the following meanings:
"Acquisition" means, with respect to any Borrower, any transaction, or
any series of related transactions, by which such Borrower, FSI or any of FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, directly or
indirectly (a) acquires any ongoing business or all or substantially all of the
assets of any Person or division thereof, whether through a purchase of assets,
merger or otherwise, or (b) acquires (in one transaction or as the most recent
transaction in a series of transactions) control of at least a majority of the
stock of a corporation having ordinary voting power for the election of
directors, or (c) acquires control of at least a majority of the ownership
interests in any partnership or joint venture.
"Adjusted LIBOR" means, for each Interest Period in respect of LIBOR
Loans, an interest rate per annum (rounded upward to the nearest 1/16th of one
percent (0.0625%)) determined pursuant to the following formula:
Adjusted LIBOR = LIBOR
----------------------------------------
1.00 - Eurodollar Reserve Percentage
1The Adjusted LIBOR shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Advance" means any Advance made or to be made by any Lender to any
Borrower as set forth in Section 2.1.1.
"Affiliate" means, with respect to any Person, (a) each Person that,
directly or indirectly, through one or more intermediaries, owns or controls,
whether beneficially or as a trustee, guardian or other fiduciary, five percent
(5.0%) or more of the stock having ordinary voting power in the election of
directors of such Person or of the ownership interests in any partnership or
joint venture, (b) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person, or (c) each of
such Person's officers, directors, joint venturers and partners; provided,
however, that in no case shall any Lender or Agent be deemed to be an Affiliate
of any Borrower or FSI for purposes of this Agreement. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"AFG" means American Finance Group, Inc., a Delaware corporation.
"AFG Agreement" means the Warehousing Credit Agreement dated as of the
date hereof, by and among AFG, and Lenders and Agent, as the same from time to
time may be amended, modified, supplemented, renewed, extended or restated.
"Agent" means FUNB solely when acting in its capacity as the Agent
under this Agreement or any of the other Loan Documents, and any successor
Agent.
"Agent's Side Letter" means the side letter agreement dated as of the
date hereof by and between Borrowers, TEC AcquiSub, AFG and Agent.
"Agreement" means this Second Amended and Restated Warehousing Credit
Agreement dated as of May 31, 1996, including all amendments, modifications and
supplements hereto, renewals, extensions or restatements hereof, and all
appendices, exhibits and schedules to any of the foregoing, and shall refer to
the Agreement as the same may be in effect from time to time.
"Aircraft" means any corporate, commuter, or commercial aircraft or
helicopters, with modifications (as applicable) and replacement or spare parts
used in connection therewith, including, without limitation, engines, rotables
or propellers, and any engines, rotables and propellers used on a stand-lone
basis.
"Applicable Margin" means:
(a) with respect to Prime Rate Loans, zero percent (0.00%);
and
(b) with respect to LIBOR Loans, two percent (2.00%).
"Assignment and Acceptance" has the meaning set forth in Section
10.11.2.
"Bank Affiliate" means a Person engaged primarily in the business of
commercial banking and that is an Affiliate of a Lender or of a Person of which
a Lender is an Affiliate.
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended, as
codified under Title 11 of the United States Code, and the Bankruptcy Rules
promulgated thereunder, as the same may be in effect from time to time.
"Borrowing Base" means, as calculated separately for each Borrower
individually as at any date of determination, an amount not to exceed the sum
of:
(a) fifty percent (50.0%) of the unrestricted cash
available for the purchase of Eligible Inventory by such Borrower,
plus
(b) an amount equal to the lesser of (i) seventy
percent (70.0%) of the aggregate net book value or (ii) fifty percent (50.0%) of
the aggregate net fair market value of all Eligible Inventory then owned by such
Borrower or a Marine Subsidiary or owned of record by an Owner Trustee for the
beneficial interest of such Borrower or any Marine Subsidiary of such Borrower
(provided, however, that there shall be excluded from this clause (b) the
aggregate net book value or aggregate net fair market value, as the case may be,
of all items of Eligible Inventory which are either (i) off-lease or (ii)
subject to a Lease under which any applicable lease or rental payment is more
than ninety (90) days past due, but only to the extent and in the amount that
the aggregate net book value or net fair market value, as the case may be, of
such otherwise excluded Eligible Inventory exceeds fifteen percent (15.0%) of
the respective net book value or net fair market value of all Eligible Inventory
included in this clause (b) notwithstanding this proviso),
less
(c) the aggregate Consolidated Funded Debt of such
Borrower then outstanding, excluding the aggregate principal amounts of the
Loans outstanding for such Borrower under the Facility,
in each case computed, (1) with respect to any requested Loan, as of the
requested Funding Date (and shall include the item(s) of Eligible Inventory to
be acquired with the proceeds of the requested Loan), and (2) with respect to
the delivery of any monthly Borrowing Base Certificate to be furnished pursuant
to Section 5.1.3, as of the last day of the calendar month for which such
Borrowing Base Certificate is furnished (provided, that for the purpose of
computing the Borrowing Base, in the event that any Borrower or a Marine
Subsidiary of such Borrower shall own less than one hundred percent (100.0%) of
the record or beneficial interests in any item of Eligible Inventory, with one
or more of the other Equipment Growth Funds owning of record or beneficially the
remaining interests, there shall be included only such Borrower's or such Marine
Subsidiary's, as the case may be, ratable interest in such item of Eligible
Inventory).
"Borrowing Base Certificate" means, with respect to any Borrower, a
certificate with appropriate insertions setting forth the components of the
Borrowing Base of such Borrower as of the last day of the month for which such
certificate is submitted or as of a requested Funding Date, as the case may be,
which certificate shall be substantially in the form set forth in Exhibit B and
certified by a Responsible Officer of such Borrower.
"Business Day" means any day which is not a Saturday, Sunday or a legal
holiday under the laws of the States of California or North Carolina or is not a
day on which banking institutions located in the States of California or North
Carolina are authorized or permitted by law or other governmental action to
close and, with respect to LIBOR Loans, means any day on which dealings in
foreign currencies and exchanges may be carried on by Agent and Lenders in the
London interbank market.
"Casualty Loss" means any of the following events with respect to any
item of Eligible Inventory: (a) the actual total loss or compromised total loss
of such item of Eligible Inventory; (b) such item of Eligible Inventory shall
become lost, stolen, destroyed, damaged beyond repair or permanently rendered
unfit for use for any reason whatsoever; (c) the seizure of such item of
Eligible Inventory for a period exceeding sixty (60) days or the condemnation or
confiscation of such item of Eligible Inventory; or (d) such item of Eligible
Inventory shall be deemed under its lease to have suffered a casualty loss as to
the entire item of Eligible Inventory.
"Charges" means, with respect to any Borrower, all federal, state,
county, city, municipal, local, foreign or other governmental taxes, levies,
assessments, charges or claims, in each case then due and payable, upon or
relating to (a) the Loans made to such Borrower hereunder, (b) such Borrower's
employees, payroll, income or gross receipts, (c) such Borrower's ownership or
use of any of its Properties or assets or (d) any other aspect of such
Borrower's business.
"Closing" means the time at which each of the conditions precedent set
forth in Section 3 to the making of the first Loan hereunder shall have been
duly fulfilled or satisfied by each Borrower.
"Closing Date" means the date on which Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, the
Treasury Regulations adopted thereunder and the Treasury Regulations proposed
thereunder (to the extent Requisite Lenders, in their sole discretion,
reasonably determine that such proposed regulations set forth the regulations
that apply in the circumstances), as the same may be in effect from time to
time.
"Commitment" means with respect to each Lender the amounts set forth on
Schedule A and "Commitments" means all such amounts collectively, as each may be
amended from time to time upon the execution and delivery of an instrument of
assignment pursuant to Section 11.10, which amendments shall be evidenced on
Schedule 1.1.
"Commitment Termination Date" means May 23, 1997.
"Compliance Certificate" means, with respect to any Borrower, a
certificate signed by a Responsible Officer of such Borrower, substantially in
the form of Exhibit E, with such changes as Agent may from time to time
reasonably request for the purpose of having such certificate disclose the
matters certified therein and the method of computation thereof.
"Consolidated EBITDA" means, for any Borrower, as measured as at any
date of determination for any period on a consolidated basis, the sum of (a) the
Consolidated Net Income of such Borrower, plus (b) all amounts treated as
expenses for depreciation and the amortization of intangibles of any kind, plus
(c) all accrued taxes on or measured by income, plus (d) Consolidated Interest
Expense, and in the cases of clauses (b), (c) and (d), above, each to the extent
included in the determination of Consolidated Net Income.
"Consolidated Funded Debt" means, for any Borrower, as measured at any
date of determination on a consolidated basis, the total amount of all interest
bearing obligations (including Indebtedness for borrowed money) of such
Borrower, capital lease obligations of such Borrower as a lessee and the stated
amount of all outstanding undrawn letters of credit issued on behalf of such
Borrower or for which such Borrower is liable.
"Consolidated Intangible Assets" means, for any Person, as measured at
any date of determination on a consolidated basis, all intangible assets of such
Person.
"Consolidated Interest Expense" means, for any Borrower, as measured at
any date of determination for any period on a consolidated basis, the gross
interest expense of such Borrower for the period (including all commissions,
discounts, fees and other charges in connection with standby letters of credit
and similar instruments), less interest income for that period.
"Consolidated Net Income" means, for any Borrower, as measured at any
date of determination for any period on a consolidated basis, the net income (or
loss) of such Borrower for such period taken as a single accounting period.
"Consolidated Net Worth" means, for any Person, as measured at any date
of determination, the difference between Consolidated Total Assets and
Consolidated Total Liabilities.
"Consolidated Tangible Net Worth" means, for any Person, as measured at
any date of determination, the difference between Consolidated Net Worth and
Consolidated Intangible Assets.
"Consolidated Total Assets" means, for any Person, as measured at any
date of determination on a consolidated basis, all assets of such Person.
"Consolidated Total Liabilities" means, for any Person, as measured at
any date of determination on a consolidated basis, all liabilities of such
Person.
"Contingent Obligation" means, as to any Person, (a) any Guaranty
Obligation of that Person and (b) any direct or indirect obligation or
liability, contingent or otherwise, of that Person, (i) in respect of any letter
of credit or similar instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings, (ii) with
respect to the Indebtedness of any partnership or joint venture of which such
Person is a partner or a joint venturer, (iii) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered, or (iv) in respect of any interest rate protection contract that is
not entered into in connection with a bona fide hedging operation that provides
offsetting benefits to such Person. The amount of any Contingent Obligation
shall (subject, in the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty Obligation") be deemed equal to the maximum reasonably
anticipated liability in respect thereof, and shall, with respect to clause
(b)(iv) of this definition, be marked to market on a current basis.
"Debt Service Ratio" means, as measured separately for each Borrower as
at any date of determination, the ratio of (a) Consolidated EBITDA to (b) the
sum of (i) Consolidated Interest Expense plus (ii) an amount equal to three and
one-eighths percent (3.125%) of Consolidated Funded Debt (Consolidated EBITDA
and Consolidated Interest Expense to be measured on a quarterly basis for the
current fiscal quarter).
"Default Rate" has the meaning set forth in Section 2.3.
"Designated Deposit Account" means a demand deposit account maintained
by Borrowers with FUNB designated by written notice from Borrowers to Agent.
"Dollars" and the sign "$" means lawful money of the United States of
America.
"EGF" means PLM Equipment Growth Fund, a California limited
partnership.
"EGF II" means PLM Equipment Growth Fund II, a California limited
partnership.
"EGF III" means PLM Equipment Growth Fund III, a California limited
partnership.
"EGF IV" has the meaning set forth in the Preamble to this Agreement.
"EGF V" has the meaning set forth in the Preamble to this Agreement
"EGF VI" has the meaning set forth in the Preamble to this Agreement
"EGF VII" has the meaning set forth in the Preamble to this Agreement.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000, (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the United States, and
(c) any Bank Affiliate.
"Eligible Inventory" means, with respect to any Borrower, all Trailers,
Aircraft and Aircraft engines, Railcars, cargo-containers, marine vessels and,
if approved by Requisite Lenders, other related Equipment, in each case owned by
such Borrower or a Marine Subsidiary of such Borrower (or jointly by such
Borrower and one or more of the other Equipment Growth Funds) or, subject to the
approval of Agent, any owner trust of which such Borrower is the sole
beneficiary or owner (or is the beneficiary or owner jointly with one or more of
the other Equipment Growth Funds), as applicable, or solely with respect to any
marine vessel registered in Liberia, The Bahamas, Hong Kong, Singapore or other
registry acceptable to Agent in its sole discretion, any nominee entity of which
such Borrower or a Marine Subsidiary of such Borrower is the sole beneficiary or
direct or indirect owner (or as the beneficiary or direct or indirect owner
jointly with one or more of the other Equipment Growth Funds).
"Employee Benefit Plan" means, with respect to any Borrower, any
Pension Plan and any employee welfare benefit plan, as defined in Section 3(1)
of ERISA, that is maintained for the employees of such Borrower, FSI or any of
FSI's Subsidiaries or any ERISA Affiliate of such Borrower.
"Environmental Claims" means, with respect to any Borrower, all claims,
however asserted, by any Governmental Authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law or
for release or injury to the environment or threat to public health, personal
injury (including sickness, disease or death), property damage, natural
resources damage, or otherwise alleging liability or responsibility for damages
(punitive or otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or other type of
relief, resulting from or based upon (a) the presence, placement, discharge,
emission or release (including intentional and unintentional, negligent and
non-negligent, sudden or non-sudden, accidental or non-accidental placement,
spills, leaks, discharges, emissions or releases) of any Hazardous Material at,
in, or from Property, whether or not owned by such Borrower, FSI or any
Subsidiary of FSI, or (b) any other circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all foreign, federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act and the Emergency Planning and
Community Right-to-Know Act.
"Environmental Permit" has the meaning set forth in Section 4.1.15.
"Equipment" means, with respect to any Borrower, all items of
transportation related equipment owned directly or beneficially by such Borrower
or by any Marine Subsidiary of such Borrower and held for lease or rental, and
shall include items of equipment legal or record title to which is held by any
owner trust or nominee entity in which such Borrower or any Marine Subsidiary of
such Borrower holds the sole beneficial interest.
"Equipment Growth Funds" means any and all of EGF, EGF II, EGF III, EGF
IV, EGF V, EGF VI, EGF VII and Income Fund I.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, as the same may be in effect from time to time, and any successor
statute.
"ERISA Affiliate" means, as applied to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Code.
"Eurodollar Reserve Percentage" means the maximum reserve percentage
(expressed as a decimal, rounded upward to the nearest 1/100th of one percent
(0.01%)) in effect from time to time (whether or not applicable to any Lender)
under regulations issued by the Federal Reserve Board for determining the
maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency liabilities having a
term comparable to such Interest Period.
"Event of Default" means any of the events set forth in Section 8.1.
"Facility" means the total Commitments described in Schedule A, as such
Schedule A may be amended from time to time as set forth on Schedule 1.1, for
the revolving credit facility described in Section 2.1.1 to be provided by
Lenders to Borrowers, on a several but not joint basis, according to each
Lender's Pro Rata Share.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)". If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective Rate". If on
any relevant day the appropriate rate for such previous day is not yet published
in either H.15(519) or the Composite 3:30 p.m. Quotation, the rate for such day
will be the arithmetic mean of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System and any successor thereto.
"Fee Letter" means the fee letter agreement dated as of the date
hereof, by and among Borrowers, TEC AcquiSub, AFG, and Agent, on behalf and for
the benefit of Lenders.
"Form 1001" has the meaning set forth in Section 2.14.6.
"Form 4224" has the meaning set forth in Section 2.14.6.
"FSI" means PLM Financial Services, Inc., a Delaware corporation.
"Funded Debt Ratio" means, as measured separately for each Borrower as
at any date of determination, the ratio of (a) the Consolidated Funded Debt of
such Borrower to (b) the sum of (i) the aggregate net fair market value of the
Equipment owned of record and beneficially by such Borrower or any Marine
Subsidiary of such Borrower or owned of record by an Owner Trustee for the
beneficial interest of such Borrower or any Marine Subsidiary of such Borrower
plus (ii) the unrestricted cash available for the purchase of Eligible Inventory
for such Borrower (provided, that for the purpose of computing the Funded Debt
Ratio, in the event that any Borrower or a Marine Subsidiary of such Borrower
shall own less than one hundred percent (100.0%) of the record or beneficial
interests in any item of Equipment, with one or more of the other Equipment
Growth Funds owning of record or beneficially the remaining interests, there
shall be included any such Borrower's or such Marine Subsidiary's, as the case
may be, ratable interest in such item of Equipment).
"Funding Date" means with respect to any proposed borrowing hereunder,
the date funds are advanced to any Borrower for any Loan requested by such
Borrower.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar function of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
"Governmental Authority" means (a) any federal, state, county,
municipal or foreign government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.
"Guaranty" means that certain Guaranty dated as of September 27, 1995,
executed by FSI in favor of Lenders and Agent.
"Guaranty Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease for
capital equipment other than Equipment, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person, whether or not contingent,
(a) to purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, or (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect thereof. The
amount of any Guaranty Obligation shall be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such Guaranty
Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof.
"Hazardous Materials" means all those substances which are regulated
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"IMI" means PLM Investment Management, Inc., a California corporation
and a wholly-owned Subsidiary of FSI.
"Income Fund I" has the meaning set forth in the Preamble to this
Agreement.
"Indebtedness" means, as to any Person, (a) all indebtedness of such
Person for borrowed money, (b) all leases of equipment of such Person as lessee,
(c) to the extent not included in clause (b), above, all capital leases of such
Person as lessee, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than trade or other accounts payable in the
ordinary course of business and not more than ninety (90) days past due), (e)
any obligation of such Person that is secured by a Lien on assets of such
Person, whether or not that Person has assumed such obligation or whether or not
such obligation is non-recourse to the credit of such Person, (f) obligations of
such Person arising under acceptance facilities or under facilities for the
discount of accounts receivable of such Person and (g) any obligation of such
Person to reimburse the issuer of any letter of credit issued for the account of
such Person upon which a draw has been made.
"Indemnified Liability" has the meaning set forth in Section 10.2.
"Indemnified Person" has the meaning set forth in Section 10.2.
"Interest Differential" means, with respect to any prepayment of a
LIBOR Loan on a day other than an Interest Payment Date on which such LIBOR Loan
matures, the difference between (a) the per annum interest rate payable with
respect to such LIBOR Loan as of the date of the prepayment and (b) the Adjusted
LIBOR on, or as near as practicable to, the date of the prepayment for a LIBOR
Loan commencing on such date and ending on the last day of the applicable
Interest Period. The determination of the Interest Differential by Agent shall
be conclusive in the absence of manifest error.
"Interest Payment Date" means, with respect to any LIBOR Loan, the last
day of each Interest Period applicable to such Loan and, with respect to Prime
Rate Loans, the first Business Day of each calendar month following the Funding
Date of such Prime Rate Loan; provided, however, that if any Interest Period for
a LIBOR Loan exceeds three (3) months, interest shall also be paid on the date
which falls three (3) months after the beginning of such Interest Period.
"Interest Period" means, with respect to any LIBOR Loan, the one-month,
two-month or three-month period selected by the Requesting Borrower pursuant to
Section 2, in each instance commencing on the applicable Funding Date of the
Loan; provided, however, that any Interest Period which would otherwise end on a
day that is not a Business Day shall end on the next succeeding Business Day
except that in the instance of any LIBOR Loan, if such next succeeding Business
Day falls in the next calendar month, the Interest Period shall end on the next
preceding Business Day.
"Investment Company Act" means the Investment Company Act of 1940, as
amended (15 U.S.C. ss. 80a-1 et seq.), as the same may be in effect from time to
time, or any successor statute thereto.
"IRS" means the Internal Revenue Service and any successor thereto.
"Lease" means, for any Borrower, each and every item of chattel paper,
installment sales agreement, equipment lease or rental agreement (including
progress payment authorizations) relating to an item of Equipment of which such
Borrower is the record or beneficial lessor and in respect of which the lessee
and lease terms (including, without limitation, as to rental rate, maturity and
insurance coverage) are acceptable to Agent, in its reasonable discretion. The
term "Lease" includes (a) all payments to be made thereunder, (b) all rights of
such Borrower therein, and (c) any and all amendments, renewals, extensions or
guaranties thereof.
"Lending Office" means, with respect to any Lender, the office or
offices of the Lender specified as its lending office opposite its name on the
applicable signature page hereto, or such other office or offices of the Lender
as it may from time to time notify Borrowers and Agent.
"LIBOR" means, with respect to any Loan to be made, continued as or
converted into a LIBOR Loan, the London Inter-Bank Offered Rate (determined
solely by Agent), rounded upward to the nearest 1/16th of one percent (0.0625%),
at which Dollar deposits are offered to Agent by major banks in the London
interbank market at or about 11:00 a.m., London time, on the second Business Day
prior to the first day of the related Interest Period with respect to such Loan
in an aggregate amount approximately equal to the amount of such Loan and for a
period of time comparable to the number of days in the applicable Interest
Period. The determination of LIBOR by Agent shall be conclusive in the absence
of manifest error.
"LIBOR Loan" means a Loan that bears interest based on Adjusted LIBOR.
"Lien" means any mortgage, pledge, hypothecation, assignment for
security, security interest, encumbrance, levy, lien or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any Property, including any agreement to grant any of the foregoing,
any conditional sale or other title retention agreement, any lease in the nature
of a security interest, and the filing of or agreement to file or deliver any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
"Limited Partnership Agreement" means (a) for EGF III, the Limited
Partnership Agreement dated as of October 15, 1987, as amended by the First
Amended and Restated Limited Partnership Agreement as of February 9, 1988, the
Second Amended and Restated Limited Partnership Agreement as of March 10, 1988,
a First Amendment to the Second Amended and Restated Limited Partnership
Agreement as of November 18, 1991 and the Reformed First Amendment to the Second
Amended and Restated Limited Partnership Agreement as of November 18, 1991, (b)
for EGF IV, the Amended and Restated Limited Partnership Agreement dated as of
May 22, 1989, (c) for EGF V, the Limited Partnership Agreement dated as of
November 14, 1989, (d) for EGF VI, the Amended and Restated Limited Partnership
Agreement dated as of December 20, 1991, and (e) for EGF VII, the Third Amended
and Restated Limited Partnership Agreement of EGF VII dated as of May 10, 1993,
as amended by the First Amendment to the Third Amended and Restated Limited
Partnership Agreement dated May 28, 1993 and by the Second Amendment to Third
Amended and Restated Limited Partnership Agreement dated as of January 21, 1994.
"Loan" has the meaning set forth in Section 2.1.1.
"Loan Document" when used in the singular and "Loan Documents" when
used in the plural means any and all of this Agreement, the Notes, the Lockbox
Agreement and the Guaranty and any and all other agreements, documents and
instruments executed and delivered by or on behalf or support of any Borrower to
Agent or any Lender or any of their respective authorized designees evidencing
or otherwise relating to the Advances and the Liens granted to Agent, on behalf
of Lenders, with respect to the Advances, as the same may from time to time be
amended, modified, supplemented or renewed.
"Lockbox" has the meaning set forth in Section 5.9.
"Lockbox Agreement" means the Agreement of even date herewith between
Borrowers, FUNB and Agent on behalf of Lenders, substantially in the form of
Exhibit F, relating to the Lockbox.
"Marine Subsidiary" means, for any Borrower, a Subsidiary of such
Borrower (in which the remaining record or beneficial ownership interests may be
held by TEC AcquiSub or any Equipment Growth Fund) organized for the purpose of
holding legal record title to one or more marine vessels or to aircraft rotables
and spare parts.
"Material Adverse Effect" means, with respect to any Borrower, any set
of circumstances or events which (a) has or could reasonably be expected to have
any material adverse effect whatsoever upon the validity or enforceability of
any Loan Document, (b) is or could reasonably be expected to be material and
adverse to the condition (financial or otherwise) or business operations of such
Borrower or FSI, (c) materially impairs or could reasonably be expected to
materially impair the ability of such Borrower or FSI to perform its
Obligations, or (d) materially impairs or could reasonably be expected to
materially impair the ability of Agent or any Lender to enforce any of its or
their legal remedies pursuant to the Loan Documents.
"Maturity Date" means, with respect to each Loan advanced by Lenders
hereunder, the date which is one hundred seventy-nine (179) days after the
Funding Date of such Loan or such earlier or later date as requested by the
Requesting Borrower and approved by Requisite Lenders, in their sole and
absolute discretion; provided, however, in no event shall any Maturity Date be a
date which is later than the Commitment Termination Date.
"Maximum Availability" has the meaning set forth in Section 2.1.1.
"Multiemployer Plan" means, with respect to any Borrower, a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA, and to which
such Borrower, FSI or any of FSI's Subsidiaries or any ERISA Affiliate of such
Borrower, FSI or any of FSI's Subsidiaries is making, or is obligated to make,
contributions or has made, or been obligated to make, contributions within the
preceding five (5) years.
"Note" has the meaning set forth in Section 2.1.1(a)(i), and any and
all replacements, substitutions and renewals thereof.
"Notice of Borrowing" means a notice given by any Borrower to Agent in
accordance with Section 2.7, substantially in the form of Exhibit G, with
appropriate insertions.
"Notice of Conversion/Continuation" means a notice given by any
Borrower to Agent in accordance with Section 2.8, substantially in the form of
Exhibit H, with appropriate insertions.
"Obligations" means, with respect to any Borrower, all loans, advances,
liabilities and obligations for monetary amounts owing by such Borrower to any
Lender or Agent, whether due or to become due, matured or unmatured, liquidated
or unliquidated, contingent or non-contingent, and all covenants and duties
regarding such amounts, of any kind or nature, arising under any of the Loan
Documents. This term includes, without limitation, all principal, interest
(including interest that accrues after the commencement of a case or proceeding
against such Borrower under the Bankruptcy Code), fees, including, without
limitation, any and all prepayment fees, facility fees, commitment fees,
arrangement fees, agent fees and attorneys' fees and any and all other fees,
expenses, costs or other sums chargeable to such Borrower under any of the Loan
Documents.
"Operating Agreement" means the Fifth Amended and Restated Operating
Agreement of Income Fund I, entered into as of January 24, 1995.
"Opinion of Counsel" means the favorable written legal opinion of
Stephen Peary, general counsel of FSI on behalf of FSI for itself and as the
sole general partner or managing member, as applicable, of each Borrower,
substantially in the form of Exhibit D, together with copies of any officer's
certificate or legal opinion of another counsel or law firm specifically
identified and expressly relied upon by such counsel in its opinion.
"Other Taxes" has the meaning set forth in Section 2.14.2.
"Overadvance" has the meaning set forth in Sections 2.1.1(a)(iii) and
(iv).
"Owner Trustee" means any Person acting in the capacity of (a) a
trustee for any owner trust or (b) a nominee entity, in each case holding title
to any Eligible Inventory pursuant to a trust or similar agreement with any
Borrower or FSI.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.
"Pension Plan" means, with respect to any Borrower, any employee
pension benefit plan, as defined in Section 3(2) of ERISA, that is maintained
for the employees of such Borrower, FSI or any of FSI's Subsidiaries or any
ERISA Affiliate of such Borrower, FSI or any of FSI's Subsidiaries, other than a
Multiemployer Plan.
"Permitted Liens" has the meaning set forth in Section 6.1.
"Permitted Rights of Others" means, as to any Property in which a
Person has an interest, (a) an option or right to acquire a Lien that would be a
Permitted Lien, (b) the reversionary interest of a lessor under a lease of such
Property and (c) an option or right of the lessee under a lease of such Property
to purchase such property at fair market value.
"Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or Governmental Authority.
"PLMI" means PLM International, Inc., a Delaware corporation.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, will constitute an Event of Default.
"Prepayment Date" has the meaning set forth in Section 2.2.2.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by FUNB as its prime rate. Each change in
the Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by FUNB as its Prime Rate is an index or base rate and shall
not necessarily be its lowest rate charged to FUNB's customers or other banks.
"Prime Rate Loan" means any borrowing which bears interest at a rate
determined with reference to the Prime Rate.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"Pro Rata Share" means, for any Lender, the proportion such Lender's
Commitment with respect to the Facility has to the aggregate of all Commitments
with respect to the Facility.
"Public Utility Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended (15 U.S.C. ss. 79 et seq.) as the same shall be
in effect from time to time, and any successor statute thereto.
"Railcar" means all railroad rolling stock, including, without
limitation, all coal, timber, plastic pellet, tank, hopper, flat and box cars
and locomotives.
"Reaffirmation of Guaranty" means the Acknowledgement and Reaffirmation
of Guaranty, dated as of the date hereof, executed by FSI in favor of Lenders
reaffirming its obligations under the Guaranty.
"Regulations G, T, U and X" means, collectively, Regulations G, T, U
and X adopted by the Federal Reserve Board (12 C.F.R. Parts 207, 220, 221 and
224, respectively) and any other regulation in substance substituted therefor.
"Requesting Borrower" means any Borrower requesting a Loan pursuant to
Section 2.1.1.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule, regulation, guideline or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property is
subject.
"Requisite Lenders" means any combination of Lenders whose combined Pro
Rata Share (and voting interest with respect thereto) of all amounts outstanding
under this Agreement, or, in the event there are no amounts outstanding, the
Commitments, is greater than sixty percent (60.0%) of all such amounts
outstanding or the total Commitments, as the case may be.
"Responsible Officer" means for (i) FSI, any of the President,
Executive Vice President, Chief Financial Officer, Secretary or Corporate
Controller of FSI having authority to request Advances or perform other duties
required hereunder, and (ii) Borrowers, any of the President, Executive Vice
President, Chief Financial Officer, Secretary or Corporate Controller of FSI as
the sole general partner of EGF III, EGF IV, EGF V, EGF VI or EGF VII, as the
case may be, or sole manager of Income Fund I, in each case having authority to
request Advances or perform other duties required hereunder
"SEC" means the Securities and Exchange Commission and any successor
thereto.
"Solvent" means, as to any Person at any time, that (a) the fair value
of the Property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code; (b) the present fair saleable value of the
Property in an orderly liquidation of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
Property and pay its debts and other liabilities (including disputed, contingent
and unliquidated liabilities) as they mature in the normal course of business;
(d) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute unreasonably small capital.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, limited liability company or other business entity
(other than Equipment Growth Funds) of which an aggregate of fifty percent
(50.0%) or more of the beneficial interest (in the case of a partnership) or
fifty percent (50%) or more of the outstanding stock, units or other voting
interest having ordinary voting power to elect a majority of the directors,
managers or trustees of such Person (irrespective of whether, at the time, the
stock, units or other voting interest of any other class or classes of such
Person shall have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, owned legally or
beneficially by such Person and/or one or more Subsidiaries of such Person.
"Taxes" has the meaning set forth in Section 2.14.1.
"TEC" means PLM Transportation Equipment Corporation, a California
corporation and a wholly-owned Subsidiary of FSI.
"TEC AcquiSub" means TEC AcquiSub, Inc., a California special purpose
corporation and a wholly-owned Subsidiary of TEC.
"TEC AcquiSub Agreement" means the Amended and Restated Warehousing
Credit Agreement dated as of September 27, 1995, as amended by the TEC AcquiSub
Amendment, by and among TEC AcquiSub, Lenders and Agent, and as the same may
from time to time be further amended, modified, supplemented, renewed, extended
or restated.
"TEC AcquiSub Amendment" means the Amendment No. 1 to Amended and
Restated Warehousing Credit Agreement dated as of the date hereof, by and among
TEC AcquiSub, Lenders and Agent.
"Termination Event" means, with respect to any Borrower, (a) a
"reportable event" described in Section 4043 of ERISA and the regulations issued
thereunder (other than a reportable event not subject to the provision for
30-day notice to the PBGC under such regulations), or (b) the withdrawal of such
Borrower, FSI or any of FSI's Subsidiaries or any of their ERISA Affiliates from
a Pension Plan during a plan year in which any of them was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a
notice of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA, or (d) the institution
of proceedings to terminate a Pension Plan by the PBGC, or (e) any other event
or condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan.
"Trailer" means (a) vehicles having a minimum length of twenty (20)
feet used in trailer or freight car service and constructed for the transport of
commodities or containers from point to point and (b) associated equipment.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of North Carolina; provided, however, in the
event that, by reason of mandatory provisions of law, any and all of the
attachment, perfection or priority of the Lien of Agent, on behalf of Lenders,
in and to any collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction other than the State of North Carolina, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
"Utilization Leases" means Leases for Equipment held for lease in
pooling or similar arrangements where the actual rental payments under such
Lease is based on and for the actual period of utilization of such item of
Equipment rather than the Lease term.
. Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial data required to be submitted by this
Agreement shall be prepared and computed, unless otherwise specifically provided
herein, in accordance with GAAP. That certain terms or computations are
explicitly modified by the phrase "in accordance with GAAP" shall in no way be
construed to limit the foregoing. In the event that GAAP changes during the term
of this Agreement such that the covenants contained in Section 7 would then be
calculated in a different manner or with different components, (a) the parties
hereto agree to amend this Agreement in such respects as are necessary to
conform those covenants as criteria for evaluating each Borrower's financial
condition to substantially the same criteria as were effective prior to such
change in GAAP and (b) each Borrower shall be deemed to be in compliance with
the covenants contained in the aforesaid subsections during the sixty (60) day
period following any such change in GAAP if and to the extent that each Borrower
would have been in compliance therewith under GAAP as in effect immediately
prior to such change.
. All other undefined terms contained in this Agreement shall, unless
the context indicates otherwise, have the meanings provided for by the UCC to
the extent the same are used or defined therein. The words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole, including the Exhibits and Schedules hereto, all of which are by this
reference incorporated into this Agreement, as the same may from time to time be
amended, modified or supplemented, and not to any particular section, subsection
or clause contained in this Agreement. The term "including" shall not be
limiting or exclusive, unless specifically indicated to the contrary. The term
"or" is disjunctive; the term "and" is conjunctive. The term "shall" is
mandatory; the term "may" is permissive. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and plural, and pronouns stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and the neuter.
. Any reference to a "Section," "Subsection," "Exhibit," or "Schedule"
shall refer to the relevant Section or Subsection of or Exhibit or Schedule to
this Agreement, unless specifically indicated to the contrary.
. 2. AMOUNT AND TERMS OF CREDIT
. 1 Commitment To Lend
. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Borrowers set forth herein,
Lenders hereby agree to make Advances (as defined below) of immediately
available funds to Borrowers, on a revolving basis, from the Closing Date until
the Business Day immediately preceding the Commitment Termination Date, in the
aggregate principal amount outstanding at any time not to exceed the lesser of
(a) the total Commitments for the Facility less the aggregate principal amounts
then outstanding under the TEC AcquiSub Agreement and under the AFG Agreement or
(b) for any one Borrower, its respective Borrowing Base (such lesser amount
being the "Maximum Availability"), as more fully set forth in this Section
2.1.1. The obligation of Borrowers to repay the Advances made to any Borrower
shall be several but not joint.
. (a) Facility Commitments
(i) On the Funding Date requested by any
Borrower (the "Requesting Borrower"), after such Borrower shall have
satisfied all applicable conditions precedent set forth in Section 3,
each Lender shall advance immediately available funds to Agent (each
such advance being an "Advance") evidencing such Lender's Pro Rata
Share of a loan ("Loan"). Agent shall immediately advance such
immediately available funds to such Borrower at the Designated Deposit
Account (or such other deposit account at FUNB or such other financial
institution as to which such Borrower and Agent shall agree at least
three (3) Business Days prior to the requested Funding Date) on the
Funding Date with respect to such Loan. The Requesting Borrower shall
pay interest accrued on the Loan at the rates and in the manner set
forth in Section 2.1.1(b). Subject to the terms and conditions of this
Agreement, the unpaid principal amount of each Loan and all unpaid
interest accrued thereon, together with all other fees, expenses, costs
and other sums chargeable to the Requesting Borrower incurred in
connection therewith shall be due and payable no later than the
Maturity Date of such Loan. Each Loan advanced hereunder shall be
evidenced by the Requesting Borrower's revolving promissory note
substantially in the form of Exhibits A-1 through A-6, as applicable
(the "Notes").
(ii) The obligation of Lenders to make any Loan
from time to time hereunder shall be limited to the then applicable
Maximum Availability. For the purpose of determining the amount of the
Borrowing Base available at any one time, the amount available shall be
the total amount of the Borrowing Base as set forth in the Borrowing
Base Certificate delivered to Agent pursuant to Section 3.2.1 with
respect to such requested Loan. Nothing contained in this Agreement
shall under any circumstance be deemed to require any Lender to make
any Advance under the Facility which, in the aggregate principal
amount, either (1) taking into account such Lender's portion of the
principal amounts outstanding under this Agreement and the making of
such Advance, exceeds the lesser of (A) such Lender's Commitment for
the Facility and (B) such Lender's Pro Rata Share of the Requesting
Borrower's Borrowing Base, or (2) taking into account such Lender's
portion of the aggregate principal amounts outstanding under this
Agreement, under the TEC AcquiSub Agreement, under the AFG Agreement
and the making of such Advance, exceeds such Lender's Commitment for
the Facility.
(iii) If at any time and for any reason the
aggregate principal amount of the Loan(s) then outstanding to any
Borrower shall exceed the Maximum Availability for such Borrower (the
amount of such excess, if any, being an "Overadvance"), such Borrower
shall immediately repay the full amount of such Overadvance, together
with all interest accrued thereon; provided, however, that if such
Overadvance occurs solely as a result of a decrease in the amount of
the Borrowing Base due solely to a decrease in the computation of the
Borrowing Base under clause (b), as set forth on a Borrowing Base
Certificate delivered to Agent pursuant to Section 5.1.3, then, to the
extent of such decrease, such Borrower shall not be required under this
Section 2.1.1(a)(iii) to prepay such Overadvance but Lenders shall have
no obligation to make or fund any Loans hereunder so long as such
Overadvance condition shall remain in effect.
(iv) Amounts borrowed by Borrowers under this
Facility may be repaid and, prior to the Commitment Termination Date
and subject to the applicable terms and conditions precedent to
borrowings hereunder, reborrowed; provided, however, that no Loan shall
have a Maturity Date which is later than the Commitment Termination
Date and no LIBOR Loan shall have an Interest Period ending after the
Maturity Date.
(v) Each request for a Loan hereunder shall
constitute a reaffirmation by the Requesting Borrower and the
Responsible Officer requesting the same that the representations and
warranties contained in this Agreement are true, correct and complete
in all material respects to the same extent as though made on and as of
the date of the request, except to the extent such representations and
warranties specifically relate to an earlier date, in which event they
shall be true, correct and complete in all material respects as of such
earlier date.
. Each Loan made by Lenders hereunder shall, at the
Requesting Borrower's option in accordance with the terms of this Agreement, be
either in the form of a Prime Rate Loan or a LIBOR Loan. Subject to the terms
and conditions of this Agreement, each Loan shall bear interest on the sum of
the unpaid principal balance thereof outstanding on each day from the date when
made, continued or converted until such Loan shall have been fully repaid at a
rate per annum equal to the Prime Rate, as the same may fluctuate on a daily
basis, or the Adjusted LIBOR, as the case may be, plus the Applicable Margin.
Interest on each Loan funded hereunder shall be due and payable by the
Requesting Borrower in arrears on each Interest Payment Date, with all accrued
but unpaid interest on such Loan being due and payable on the date such Loan is
repaid, whether by prepayment or at maturity, and with all accrued but unpaid
interest being due and payable by the Requesting Borrower on the Maturity Date
for such Loan.
Each Advance made by a Lender as part of a Loan hereunder and all
repayments of principal with respect to such Advance shall be evidenced by
notations made by such Lender on the books and records of such Lender; provided,
however, that the failure by such Lender to make such notations shall not limit
or otherwise affect the obligations of any Borrower with respect to the
repayments of principal or payments of interest on any Advance or Loan. The
aggregate unpaid amount of each Advance set forth on the books and records of a
Lender shall be presumptive evidence of such Lender's Pro Rata Share of the
principal amount owing and unpaid by any Borrower under its Note.
. Promptly following the receipt of such documents required
pursuant to Section 3.2.1 and approval of a Loan by the Agent, Agent shall
notify by telephone, telecopier, facsimile or telex each Lender of the (a)
Requesting Borrower, (b) the principal amount (including Lender's Pro Rata Share
thereof) and (c) Funding Date of the Loan requested by such Requesting Borrower.
Not later than 1:00 p.m., North Carolina time, on the Funding Date for any Loan,
each Lender shall make an Advance to Agent for the account of Requesting
Borrower in the amount of its Pro Rata Share of the Loan being requested. Upon
satisfaction of the applicable conditions precedent set forth in Section 3, all
Advances shall be credited in immediately available funds to the Designated
Deposit Account.
. The Loans made under the Facility may be used solely for the
purpose of acquiring the specific items of Equipment.
. 2 Repayment And Prepayment
. Unless prepaid pursuant to Section 2.2.2, the principal
amount of each Loan hereunder made to a Requesting Borrower shall be repaid by
the Requesting Borrower to Lenders not later than the Maturity Date of such
Loan.
. Subject to Section 2.18, any Borrower may in the ordinary
course of such Borrower's business, upon at least three (3) Business Days'
written notice, or telephonic notice promptly confirmed in writing to Agent,
which notice shall be irrevocable, prepay any Loan in whole or in part. Such
notice of prepayment shall specify the date and amount of such prepayment and
whether such prepayment is of Prime Rate Loans or LIBOR Loans, or any
combination thereof. Such prepayment of Loans, together with any amounts
required pursuant to Section 2.18, shall be in immediately available funds and
delivered to Agent not later than 1:00 p.m., North Carolina time, on the date
for prepayment stated in such notice (the "Prepayment Date"). With respect to
any prepayment under this Section 2.2.2, all interest on the amount prepaid
accrued up to but excluding the date of such prepayment shall be due and payable
on the Prepayment Date.
. .3 Mandatory Prepayments
(a) In the event that any item of Eligible
Inventory shall be sold or assigned by any Borrower or any Marine Subsidiary of
such Borrower, or the ownership interests (whether Stock or otherwise) of any
Borrower in any Marine Subsidiary of such Borrower owning record or beneficial
title to any item of Eligible Inventory shall be sold or transferred, then such
Borrower shall immediately prepay the Loan made with respect to such Eligible
Inventory so sold or assigned or with respect to the Eligible Inventory owned by
such Marine Subsidiary so sold or transferred, together with any accrued
interest on such Loan to the date of prepayment and any amounts required
pursuant to Section 2.18. The sale or assignment of Eligible Inventory by an
Owner Trustee, or the sale or assignment of any Borrower's or any Marine
Subsidiary's beneficial interest in any owner trust (or nominee entity) holding
title to Eligible Inventory, shall be considered a sale or assignment, as the
case may be, of such Eligible Inventory by such Borrower or such Marine
Subsidiary, as the case may be.
(b) In the event that any of the Eligible
Inventory shall have sustained a Casualty Loss, the applicable Borrower shall
promptly notify Agent and Lenders of such Casualty Loss and make arrangements
reasonably acceptable to the Agent to cause any and all cash proceeds received
by such Borrower to be paid to Lenders as a prepayment hereunder. To the extent
not so prepaid, the Loan funded with respect to such Eligible Inventory will
nevertheless be paid by such Borrower as provided in Section 2.2.1.
. Interest on the Loans shall be computed on the basis of a 365/366-day
year for all Prime Rate Loans and a 360-day year for all LIBOR Loans and the
actual number of days elapsed in the period during which such interest accrues.
In computing interest on any Loan, the date of the making of such Loan shall be
included and the date of payment shall be excluded. Each change in the interest
rate of Prime Rate Loans based on changes in the Prime Rate and each change in
the Adjusted LIBOR based on changes in the Eurodollar Reserve Percentage shall
be effective on the effective date of such change and to the extent of such
change. Agent shall give Borrowers notice of any such change in the Prime Rate;
provided, however, that any failure by Agent to provide Borrowers with notice
hereunder shall not affect Agent's right to make changes in the interest rate of
any Loan based on changes in the Prime Rate. Upon the occurrence and during the
continuation of any Event of Default under this Agreement, Advances under this
Agreement will, at the option of Requisite Lenders, bear interest at a rate per
annum which is determined by adding two percent (2.00%) to the Applicable Margin
for such Loan (the "Default Rate"). This may result in the compounding of
interest. The imposition of a Default Rate will not constitute a waiver of any
Event of Default.
. All repayments or prepayments of principal and all payments of
interest, fees, costs, expenses and other sums chargeable to Borrowers under
this Agreement, the Notes or any of the other Loan Documents shall be in lawful
money of the United States of America in immediately available funds and
delivered to Agent, for the account of Lenders, not later than 1:00 p.m., North
Carolina time, on the date due at First Union National Bank of North Carolina,
One First Union Center, 301 South College Street, Charlotte, North Carolina
28288, Attention: Hannah Carmody, or such other place as shall have been
designated in writing by Agent.
. Whenever any payment to be made under this Agreement, the Note or any
of the other Loan Documents shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in the computation of the
payment of interest thereon; provided, however, that no Loan shall have remained
outstanding after the Maturity Date of such Loan.
. All payments to or for the benefit of Lenders hereunder shall be
applied to the Obligations of any Borrower making payment in the following
order: (a) then due and payable fees as set forth in Section 2.1.1(a)(i) and, at
the direction of such Borrower or upon prior notice given to such Borrower by
Agent, other then due and payable fees, expenses and costs; (b) then due and
payable interest payments and mandatory prepayments; and (c) then due and
payable principal payments and optional prepayments; provided that if an Event
of Default shall have occurred and be continuing, Lenders shall have the
exclusive right to apply any and all such payments against the then due and
owing Obligations of such Borrower as Lenders may deem advisable. To the extent
any Borrower fails to make payment required hereunder or under any of the other
Loan Documents, each Lender is authorized to, and at its sole option may, make
such payments on behalf of such Borrower. To the extent permitted by law, all
amounts advanced by any Lender hereunder or under other provisions of the Loan
Documents shall accrue interest at the same rate as Loans hereunder.
. 7 Procedure For The Borrowing Of Loans
. Each borrowing of Loans shall be made upon any Requesting
Borrower's irrevocable written notice delivered to Agent in the form of a Notice
of Borrowing, executed by a Responsible Person of such Requesting Borrower, with
appropriate insertions (which Notice of Borrowing must be received by Lender
prior to 12:00 noon, Charlotte, North Carolina time, three (3) Business Days
prior to the requested Funding Date) specifying:
(a) the amount of the requested borrowing, which, if a
LIBOR Loan is requested, shall be not less than One Million Dollars
($1,000,000);
(b) the requested Funding Date, which shall be a
Business Day;
(c) whether the borrowing is to be comprised of one or
more LIBOR Loans or Prime Rate Loans; and
(d) the duration of the Interest Period applicable to
any such LIBOR Loans included in such Notice of Borrowing. If the
Notice of Borrowing shall fail to specify the duration of the Interest
Period for any borrowing comprised of LIBOR Loans, such Interest Period
shall be three (3) months.
. Unless Agent shall otherwise consent, during the existence
of an Event of Default or Potential Event of Default, Borrowers may not elect to
have a Loan made as a LIBOR Loan.
. 8 Conversion And Continuation Elections
. Each Borrower may, upon irrevocable written notice to Agent:
(a) elect to convert on any Business Day, any Prime Rate
Loan (or any portion thereof in an amount equal to at least One Million
Dollars ($1,000,000)) into a LIBOR Loan; or
(b) elect to convert on any Interest Payment Date any
LIBOR Loan maturing on such Interest Payment Date (or any portion
thereof) into a Prime Rate Loan; or
(c) elect to continue on any Interest Payment Date any
LIBOR Loan maturing on such Interest Payment Date (or any portion
thereof in an amount equal to at least One Million Dollars
($1,000,000));
provided, that if the aggregate amount of LIBOR Loans outstanding to such
Borrower shall have been reduced, by payment, prepayment, or conversion of
portion thereof, to be less than $1,000,000, such LIBOR Loans shall
automatically convert into Prime Rate Loans, and on and after such date the
right of such Borrower to continue such Loans as, and convert such Loans into,
LIBOR Loans shall terminate.
. Each conversion or continuation of Loans shall be made upon
any Borrower's irrevocable written notice delivered to Agent in the form of a
Notice of Conversion/Continuation, executed by a Responsible Person of such
Borrower, with appropriate insertions (which Notice of Conversion/Continuation
must be received by Lender prior to 12:00 noon, Charlotte, North Carolina time,
at least three (3) Business Days in advance of the proposed conversion date or
continuation date specifying:
(a) the proposed conversion date or continuation date;
(b) the aggregate amount of Loans to be converted or
continued;
(c) the nature of the proposed conversion or
continuation; and
(d) the duration of the requested Interest Period.
. If upon the expiration of any Interest Period applicable to
any LIBOR Loan, the Requesting Borrower has failed to select a new Interest
Period to be applicable to such LIBOR Loan, such Borrower shall be deemed to
have elected to convert such LIBOR Loan into a Prime Rate Loan effective as of
the last day of such current Interest Period.
. Unless Agent shall otherwise consent, during the existence
of an Event of Default or Potential Event of Default, Borrowers may not elect to
have a Loan converted into or continued as a LIBOR Loan.
. Notwithstanding any provision of this Agreement to the contrary, each
Lender shall be entitled to fund and maintain its funding of all or any part of
its LIBOR Loans in any manner it elects, it being understood, however, that for
the purposes of this Agreement all determinations hereunder shall be made as if
such Lender actually funded and maintained each LIBOR Loan through the purchase
of deposits having a maturity corresponding to the maturity of the LIBOR Loan
and bearing an interest rate equal to the LIBOR rate (whether or not, in any
instance, Lender shall have granted any participations in such Loan). Each
Lender may, if it so elects, fulfill any commitment to make LIBOR Loans by
causing a foreign branch or affiliate to make or continue such LIBOR Loans;
provided, however, that in such event such Loans shall be deemed for the
purposes of this Agreement to have been made by such Lender, and the obligation
of Borrowers to repay such Loans shall nevertheless be to such Lender and shall
be deemed held by such Lender, to the extent of such Loans, for the account of
such branch or affiliate.
. Agent shall immediately distribute to each Lender, at such address as
each Lender shall designate, its respective interest in all repayments and
prepayments of principal and all payments of interest and all fees, expenses and
costs received by Agent on the same day and in the same type of funds as payment
was received. In the event Agent does not distribute such payments on the same
day received, if such payments are received by Agent by 1:00 p.m., North
Carolina time, or if received after such time, on the next succeeding Business
Day, such payment shall accrue interest at the Federal Funds Rate.
. Unless Agent shall have been notified by any Lender no later than the
Business Day prior to the respective Funding Date of a Loan that such Lender
does not intend to make available to Agent an Advance in immediately available
funds equal to such Lender's Pro Rata Share of the total principal amount of
such Loan, Agent may assume that such Lender has made such Advance to Agent on
the date of the Loan and Agent may, in reliance upon such assumption, make
available to the Requesting Borrower a corresponding Advance. If Agent has made
funds available to such Borrower based on such assumption and such Advance is
not in fact made to Agent by such Lender, Agent shall be entitled to recover the
corresponding amount of such Advance on demand from such Lender. If such Lender
does not promptly pay such corresponding amount upon Agent's demand, Agent shall
notify such Requesting Borrower and such Requesting Borrower shall repay such
Advance to Agent. Agent also shall be entitled to recover from such Lender
interest on such Advance in respect of each day from the date such Advance was
made by Agent to such Requesting Borrower to the date such corresponding amount
is recovered by Agent at the Federal Funds Rate. Nothing in this Section 2.11
shall be deemed to relieve any Lender from its obligation to fulfill its
Commitment or to prejudice any rights which Agent or such Requesting Borrower
may have against such Lender as a result of any default by such Lender under
this Agreement.
. Unless Agent shall have been notified by any Borrower prior to the
date on which any payment to be made by such Borrower hereunder is due that such
Borrower does not intend to remit such payment, Agent may, in its sole
discretion, assume that such Borrower has remitted such payment when so due and
Agent may, in its sole discretion and in reliance upon such assumption, make
available to each Lender on such payment date an amount equal to such Lender's
Pro Rata Share of such assumed payment. If such Borrower has not in fact
remitted such payment to Agent, each Lender shall forthwith on demand repay to
Agent the amount of such assumed payment made available to such Lender, together
with interest thereon in respect of each date from and including the date such
amount was made available by Agent to such Lender to the date such amount is
repaid to Agent at the Federal Funds Rate.
. If any Lender determines that compliance with any law or regulation
or with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law) has or would have the effect
of reducing the rate of return on the capital of such Lender or any corporation
controlling such Lender as a consequence of, or with reference to, such Lender's
Commitment or its making or maintaining its Pro Rata Share of the Loans below
the rate which such Lender or such other corporation could have achieved but for
such compliance (taking into account the policies of such Lender or corporation
with regard to capital), then each Borrower shall, from time to time, upon
written demand by such Lender (with a copy of such demand to Agent), immediately
pay to such Lender (a) such additional amounts as shall be sufficient to
compensate such Lender or other corporation for such reduction resulting from
such Borrower's Loans or (b) in the case where such reduction results from
compliance with any such law, regulation, guideline or request affecting only
the Commitments and not the Loans, such additional amounts as shall be
sufficient to compensate such Lender or other corporation for such reduction
based on each Borrower's percentage of average usage of the Commitments versus
the total average usage by all Borrowers. A certificate submitted by such Lender
to any Borrower, stating that the amounts set forth as payable to such Lender
are true and correct, shall be conclusive and binding for all purposes, absent
manifest error. Each Lender agrees promptly to notify effected Borrowers and
Agent of any circumstances that would cause any Borrower to pay additional
amounts pursuant to this section, provided that the failure to give such notice
shall not affect Borrowers' obligation to pay any such additional amounts.
. 14 Taxes
. Subject to Subsection 2.14.7, any and all payments by each
Borrower to each Lender or Agent under this Agreement shall be made free and
clear of, and without deduction or withholding for, any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and
Agent, such taxes (including income taxes or franchise taxes) as are imposed on
or measured by each Lender's net income (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes").
. In addition, Borrowers shall pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Documents (hereinafter referred to as "Other Taxes").
. Subject to Subsection 2.14.7, each Borrower shall indemnify
and hold harmless each Lender and Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender or Agent in relation to any
payments made by or Obligations of such Borrower and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made within thirty
(30) days from the date any Lender or Agent makes written demand therefor.
. If any Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or Agent, then, subject to Subsection 2.14.7:
(a) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14) such
Lender or Agent, as the case may be, receives an amount equal to the
sum it would have received had no such deductions been made;
(b) such Borrower shall make such deductions, and
(c) such Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with
applicable law.
. Within thirty (30) days after the date of any payment by any
Borrower of Taxes or Other Taxes, such Borrower shall furnish to Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to Agent.
. Each Lender which is a foreign person (i.e., a person other
than a United States person for United States Federal income tax purposes)
shall:
(a) No later than the date upon which such Lender
becomes a party hereto deliver to Borrowers through Agent two (2)
accurate and complete signed originals of IRS Form 4224 or any
successor thereto ("Form 4224"), or two accurate and complete signed
originals of IRS Form 1001 or any successor thereto ("Form 1001"), as
appropriate, in each case indicating that such Lender is on the date of
delivery thereof entitled to receive payments of principal, interest
and fees under this Agreement free from withholding of United States
Federal income tax;
(b) If at any time such Lender makes any changes
necessitating a new Form 4224 or Form 1001, with reasonable promptness
deliver to Borrowers through Agent in replacement for, or in addition
to, the forms previously delivered by it hereunder, two accurate and
complete signed originals of Form 4224; or two accurate and complete
signed originals of Form 1001, as appropriate, in each case indicating
that the Lender is on the date of delivery thereof entitled to receive
payments of principal, interest and fees under this Agreement free from
withholding of United States Federal income tax;
(c) Before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in
(ii) above) requiring a change in or renewal of the most recent Form
4224 or Form 1001 previously delivered by such Lender, deliver to
Borrowers through Agent two accurate and complete original signed
copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by the Lender; and
(d) Promptly upon any Borrower's or Agent's reasonable
request to that effect, deliver to such Borrower or Agent (as the case
may be) such other forms or similar documentation as may be required
from time to time by any applicable law, treaty, rule or regulation in
order to establish such Lender's tax status for withholding purposes.
. Borrowers will not be required to pay any additional amounts
in respect of United States Federal income tax pursuant to Subsection 2.14.4 to
Lender for the account of any Lending Office of such Lender:
(a) If the obligation to pay such additional amounts
would not have arisen but for a failure by such Lender to comply with
its obligations under Subsection 2.14.6 in respect of such Lending
Office;
(b) If such Lender shall have delivered to Borrowers a
Form 4224 in respect of such Lending Office pursuant to Subsection
2.14.6 and such Lender shall not at any time be entitled to exemption
from deduction or withholding of United States Federal income tax in
respect of payments by Borrowers hereunder for the account of such
Lending Office for any reason other than a change in United States law
or regulations or in the official interpretation of such law or
regulations by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the
force of law) after the date of delivery of such Form 4224; or
(c) If such Lender shall have delivered to Borrowers a
Form 1001 in respect of such Lending Office pursuant to Subsection
2.14.6, and such Lender shall not at any time be entitled to exemption
from deduction or withholding of United States Federal income tax in
respect of payments by Borrowers hereunder for the account of such
Lending Office for any reason other than a change in United States law
or regulations or any applicable tax treaty or regulations or in the
official interpretation of any such law, treaty or regulations by any
Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law) after
the date of delivery of such Form 1001.
. If, at any time, any Borrower requests any Lender to deliver
any forms or other documentation pursuant to Subsection 2.14.6(a), then such
Borrower shall, on demand of such Lender through Agent, reimburse such Lender
for any costs and expenses (including reasonable attorney fees) reasonably
incurred by such Lender in the preparation or delivery of such forms or other
documentation.
. If any Borrower is required to pay additional amounts to any
Lender or Agent pursuant to Subsection 2.14.4, then such Lender shall use its
reasonable good faith efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by such Borrower which may thereafter
accrue if such change, in the judgment of such Lender, is not otherwise
disadvantageous to such Lender.
. 15 Illegality
. If any Lender shall determine that the introduction of any
Requirement of Law, or any change in any Requirement of Law or in the
interpretation or administration thereof, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for such Lender or its Lending Office to make LIBOR Loans, then, on notice
thereof by Lender to the Requesting Borrower, the obligation of such Lender to
make LIBOR Loans shall be suspended until such Lender shall have notified the
Requesting Borrower that the circumstances giving rise to such determination no
longer exists.
. If a Lender shall determine that it is unlawful to maintain
any LIBOR Loan, Borrowers shall prepay in full all LIBOR Loans of such Lender
then outstanding, together with interest accrued thereon, either on the last day
of the Interest Period thereof if such Lender may lawfully continue to maintain
such LIBOR Loans to such day, or immediately, if such Lender may not lawfully
continue to maintain such LIBOR Loans, together with any amounts required to be
paid in connection therewith pursuant to Section 2.18.
. If any Borrower is required to prepay any LIBOR Loan
immediately as provided in Section 2.2.3, then concurrently with such
prepayment, such Borrower shall borrow, in the amount of such prepayment, a
Prime Rate Loan.
. If any Lender shall determine that, due to either (a) the
introduction of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the LIBOR) in or
in the interpretation of any Requirement of Law or (b) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Lender of agreeing to make or making, funding or maintaining any
LIBOR Loans, then Borrowers shall be liable on a joint and several basis for,
and shall from time to time, upon demand therefor by such Lender, pay to such
Lender such additional amounts as are sufficient to compensate such Lender for
such increased costs.
. If Agent shall have determined that for any reason adequate and
reasonable means do not exist for ascertaining the LIBOR for any requested
Interest Period with respect to a proposed LIBOR Loan or that the LIBOR
applicable for any requested Interest Period with respect to a proposed LIBOR
Loan does not adequately and fairly reflect the cost to Lenders of funding such
Loan, Agent will forthwith give notice of such determination to Borrowers and
each Lender. Thereafter, the obligation of Lenders to make or maintain LIBOR
Loans, as the case may be, hereunder shall be suspended until Agent, upon
instruction from Requisite Lenders, revokes such notice in writing. Upon receipt
of such notice, Borrowers may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted. If a Borrower does not revoke such
notice, Lenders shall make, convert or continue the Loans, as proposed by such
Borrower, in the amount specified in the applicable notice submitted by such
Borrower, but such Loans shall be made, converted or continued as Prime Rate
Loans instead of LIBOR Loans, as the case may be.
. Each Borrower agrees, severally but not jointly, that in the event
that such Borrower prepays or is required to prepay any LIBOR Loan by
acceleration or otherwise or fails to draw down or convert to a LIBOR Loan after
giving notice thereof, it shall reimburse each Lender for its funding losses due
to such prepayment or failure to draw. Borrowers and Lenders hereby agree that
such funding losses shall consist of the sum of the discounted monthly
differences for each month during the applicable or requested Interest Period,
calculated as follows for each such month:
(a) Principal amount of such LIBOR Loan times (number
of days between the date of prepayment and the last day in the
applicable Interest Period divided by 360), times the
applicable Interest Differential, plus
(b) all actual out-of-pocket expenses (other than
those taken into account in the calculation of the Interest
Differential) incurred by Lenders and Agent (excluding
allocation of any expense internal to Lenders and Agent) and
reasonably attributable to such payment, prepayment or failure
to draw down or convert as described above; provided that no
prepayment fee shall be payable (and no credit or rebate shall
be required) if the product of the foregoing formula is not a
positive number.
.. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND THE
MAKING OF LOANS
. The effectiveness of this Agreement is subject to the satisfaction of
the following conditions precedent:
. Agent shall have received, in form and substance
satisfactory to Lenders and their respective counsel a certified copy of the
records of all actions taken by each Borrower and FSI, including all resolutions
of each Borrower and corporate resolutions of FSI, authorizing or relating to
the execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby and
thereby.
. Agent shall have received new Notes, in form and substance
satisfactory to Lenders, and duly executed and delivered by each Borrower, which
Notes shall replace and supersede the Notes issued by Borrowers to Agent
pursuant to the Growth Fund Agreement.
. Agent shall have received an originally executed Opinion of
Counsel, in form and substance satisfactory to Lenders, dated as of the Closing
Date and addressed to Lenders, together with copies of any officer's certificate
or legal opinion of other counsel or law firm specifically identified and
expressly relied upon by such counsel.
. Agent shall have received the Reaffirmation of Guaranty, in
form and substance satisfactory to Lenders, duly executed and delivered by FSI.
. Agent shall have received the TEC AcquiSub Amendment, duly
executed and delivered by TEC AcquiSub, and all conditions precedent to the
effectiveness of the TEC AcquiSub Amendment shall have been satisfied.
. Agent shall have received the AFG Agreement, duly executed
and delivered by AFG, and all conditions precedent to the effectiveness of the
AFG Agreement shall have been satisfied.
. Separate certificates, dated as of the Closing Date, of the
Chief Financial Officer or Corporate Controller of FSI, in its capacity as the
sole general partner of EGF III, EGF IV, EGF V, EGF VI and EGF VII and as the
sole manager of Income Fund I, to the effect that (i) the representations and
warranties of each Borrower contained in Section 4 are true, accurate and
complete in all material respects as of the Closing Date as though made on such
date and (ii) no Event of Default or Potential Event of Default under this
Agreement has occurred.
. Agent shall have received the Fee Letter and the Agent's
Side Letter, duly executed by Borrowers, TEC AcquiSub and AFG, and the
arrangement fee and the Agent's fee described in the Fee Letter and Agent's Side
Letter, respectively.
. Agent shall have received such other documents, information
and items from Borrowers and FSI as reasonably requested by Agent.
. Unless waived in writing by Requisite Lenders, the obligation of any
Lender to make any Advance is subject to the satisfaction of the following
further conditions precedent:
. At least three (3) Business Days before each Loan hereunder
with respect to any acquisition of Equipment by any Borrower, Agent shall have
received (i) Notice of Borrowing and (ii) a Borrowing Base Certificate, with
appropriate insertions, executed by the Chief Financial Officer or Corporate
Controller of such Borrower.
. No event shall have occurred and be continuing or would
result from the making of any Loan on such Funding Date which constitutes an
Event of Default or Potential Event of Default under this Agreement or under
(and as separately defined in) the TEC AcquiSub Agreement or under (and as
separately defined in) the AFG Agreement, or which with notice or lapse of time
or both would constitute an Event of Default or Potential Event of Default under
this Agreement or under the TEC AcquiSub Agreement or the AFG Agreement.
. All representations and warranties contained in the Loan
Documents shall be true, accurate and complete in all material respects with the
same effect as though such representations and warranties had been made on and
as of such Funding Date (except to the extent such representations and
warranties specifically relate to an earlier date, in which case they shall be
true, accurate and complete in all material respects as of such earlier date).
. The insurance required to be maintained by such Borrower
pursuant to the Loan Documents shall be in full force and effect.
. Agent shall have received such other instruments and
documents as it may have reasonably requested from Borrowers in connection with
the Loans to be made on such date.
. Notwithstanding anything to the contrary contained in this Agreement,
unless waived in writing by Requisite Lenders, no Lender shall have any
obligation hereunder to make any Advance if any of the following events shall
occur:
. FSI shall have ceased to be the sole general partner of any
of EGF III, EGF IV, EGF V, EGF VI or EGF VII or the sole manager of Income Fund
I, whether due to the voluntary or involuntary withdrawal, substitution, removal
or transfer of FSI from or of all or any portion of FSI's general partnership
interest or capital contribution in such Borrower.
. Twenty five percent (25.0%) or more of the limited partners
(measured by such partners' percentage interest) of any Equipment Growth Fund
shall at any time vote to remove FSI as the general partner of such Equipment
Growth Fund or a majority in interest of Class A members, as that term is
defined in the Operating Agreement, of Income Fund I shall at any time vote to
remove FSI as manager of Income Fund I, in each case, regardless of whether FSI
is actually removed.
Requesting Borrower, TEC AcquiSub, FSI or their Subsidiaries
shall have ceased to be the purchaser of Eligible Inventory for such Requesting
Borrower.
. 4. BORROWERS' AND FSI'S REPRESENTATIONS AND WARRANTIES
. Each Borrower, severally, as to itself, but not jointly as to the
other Borrowers and FSI, and FSI, jointly and severally with each Borrower as to
each such Borrower and as to itself, hereby warrant and represent to Agent and
each Lender as follows, and agree that each of said warranties and
representations shall be deemed to continue until full, complete and
indefeasible payment and performance of the Obligations and shall apply anew to
each borrowing hereunder:
. Each Borrower is a limited partnership or, in the case of
Income Fund I, a limited liability company, and FSI is a corporation, each duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified and licensed as a foreign
corporation, partnership or limited liability company, as applicable, and
authorized to do business in each jurisdiction within the United States where
its ownership of Property and assets or conduct of business requires such
qualification. Each Borrower and FSI has the power and authority, rights and
franchises to own their Property and assets and to carry on their businesses as
now conducted. Each Borrower and FSI has the power and authority to execute and
deliver the Loan Documents (to the extent each is a party thereto) and all other
instruments and documents contemplated hereby or thereby.
. The execution, delivery and performance of this Agreement
and each of the other Loan Documents to which any Borrower is a party and
delivery and payment of such Borrower's respective Note have been duly
authorized by all necessary and proper action on the part of such Borrower. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents to which FSI is a party have been duly authorized by all necessary and
proper corporate action on the part of FSI. The Loan Documents constitute
legally valid and binding obligations of each Borrower and FSI, as the case may
be, enforceable against each Borrower and FSI, to the extent any one of them is
a party thereto, in accordance with their respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights generally.
. (a) The execution, delivery and performance of this
Agreement, and each of the other Loan Documents and the execution, delivery and
payment of the Notes will not: (i) contravene any provision of FSI's certificate
of incorporation or bylaws; (ii) contravene any provision of any Borrowers'
Limited Partnership Agreements or, in the case of Income Fund I, Operating
Agreement or other formation or organization document; or (iii) contravene,
conflict with or violate any applicable law or regulation, or any order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority, which contravention, conflict or violation, in the aggregate, may
have Material Adverse Effect; and (b) the execution and delivery of this
Agreement, and each of the other Loan Documents and the execution and delivery
of the Notes will not violate or result in the breach of, or constitute a
default under any indenture or other loan or credit agreement, or other
agreement or instrument which are, in the aggregate, material and to which any
Borrower or FSI is a party or by which any Borrower, FSI or their Property and
assets may be bound or affected. Neither any Borrower nor FSI is in violation or
breach of or default under any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or any contract, agreement, lease,
license, indenture or other instrument to which any one of them is a party, the
non-compliance with, the violation or breach of or the default under which
would, with reasonable likelihood, have a Material Adverse Effect.
. Each Borrower's and FSI's audited consolidated financial
statements as of December 31, 1995 and Borrowers' and FSI's unaudited
consolidated financial statements as of March 31, 1996, copies of which
heretofore have been delivered to Agent by such Borrower and FSI, respectively,
and all other financial statements and other data submitted in writing by any
Borrower and FSI to Agent or any Lender in connection with the request for
credit granted by this Agreement, are true, accurate and complete in all
material respects, and said financial statements and other data fairly present
the consolidated financial condition of such Borrower and FSI, as of the date
thereof, and have been prepared in accordance with GAAP, subject to fiscal
year-end audit adjustments. There has been no material adverse change in the
business, properties or assets, operations, prospects, profitability or
financial or other condition of any Borrower or FSI since March 31, 1996.
. The current location of each Borrower's and FSI's chief
executive offices and principal places of business is set forth on Schedule
4.1.5.
. Except as disclosed on Schedule 4.1.6, there are no claims,
actions, suits, proceedings or other litigation pending or, to the best of each
Borrower's and FSI's knowledge, after due inquiry, threatened against any
Borrower, FSI or any of FSI's Subsidiaries, including, without limitation, TEC
AcquiSub, at law or in equity before any Governmental Authority or, to the best
of each Borrower's and FSI's knowledge, after due inquiry, any investigation by
any Governmental Authority of any Borrower's or FSI's or any of FSI's
Subsidiaries', including, without limitation, TEC AcquiSub's, affairs,
Properties or assets which would, with reasonable likelihood, if adversely
determined, have a Material Adverse Effect. Other than any liability incident to
the litigation or proceedings disclosed on Schedule 4.1.6, neither any Borrower,
nor FSI nor any of FSI's Subsidiaries, including, without limitation, TEC
AcquiSub, has any Contingent Obligations which are not provided for or disclosed
in the financial statements delivered to Agent pursuant to Sections 4.1.4 and
5.1.
. Schedule 4.1.7 lists all currently effective contracts and
agreements (whether written or oral) to which each Borrower is a party and which
(i) could involve the payment or receipt by such Borrower after the date of this
Agreement of more than $250,000 or (ii) otherwise materially affect the
business, operations or financial condition of any Borrower (the "Material
Contracts"). Except as disclosed on Schedule 4.1.7, there are no material
defaults under any such Material Contract by any Borrower, to the best of each
Borrower's knowledge, by any other party to any such Material Contract. Each
Borrower has delivered to Agent true and correct copies of all such contracts or
agreements (or, with respect to oral contracts or agreements, written
descriptions of the material terms thereof).
. Except as set forth in Schedule 4.1.8, all consents and
approvals of, filings and registrations with, and other actions in respect of,
all Governmental Authorities required to be obtained by any Borrower, FSI or any
of FSI's Subsidiaries in order to make or consummate the transactions
contemplated under the Loan Documents have been, or prior to the time when
required will have been, obtained, given, filed or taken and are or will be in
full force and effect.
. Neither any Borrower, FSI nor any of FSI's Subsidiaries,
including, without limitation, TEC AcquiSub, is a party to or is bound by any
agreement, contract, lease, license or instrument, or is subject to any
restriction under its respective charter or formation documents, which has, or
is likely in the foreseeable future to have, a Material Adverse Effect. Neither
any Borrower nor FSI has entered into and, as of the Closing Date does not
contemplate entering into, any material agreement or contract with any Affiliate
of any Borrower or FSI on terms that are less favorable to such Borrower or FSI
than those that might be obtained at the time from Persons who are not such
Affiliates.
. There are no collective bargaining agreements or other labor
agreements covering any employees of any Borrower, FSI or any of FSI's
Subsidiaries.
. No Borrower has an Employee Benefit Plan subject to ERISA.
All Pension Plans of FSI and any of FSI's Subsidiaries, that are intended to be
qualified under Section 401(a) of the Code have been determined by the IRS to be
qualified or FSI or any of FSI's Subsidiaries will obtain such determination
prior to instituting such a Pension Plan. All Pension Plans existing as of the
date hereof continue to be so qualified. No "reportable event" (as defined in
Section 4043 of ERISA) has occurred and is continuing with respect to any
Pension Plan for which the thirty-day notice requirement may not be waived other
than those of which the appropriate Governmental Authority has been notified.
All Employee Benefit Plans of FSI or any of FSI's Subsidiaries have been
operated in all material respects in accordance with their terms and applicable
law, including ERISA, and no "prohibited transaction" (as defined in ERISA and
the Code) that would result in any material liability to FSI or any of FSI's
Subsidiaries has occurred with respect to any such Employee Benefit Plan.
. There are no strikes or other labor disputes against any
Borrower, FSI or any of FSI's Subsidiaries or, to the best of each Borrower's
and FSI's knowledge, after due inquiry, threatened against any Borrower, FSI or
any of FSI's Subsidiaries, which would, with reasonable likelihood, have a
Material Adverse Effect. All payments due from any Borrower or FSI on account of
employee health and welfare insurance which would, with reasonable likelihood,
have a Material Adverse Effect if not paid have been paid or, if not due,
accrued as a liability on the books of such Borrower or FSI.
. Neither any Borrower nor FSI own any "margin security", as
that term is defined in Regulations G and U of the Federal Reserve Board, and
the proceeds of the Loans under this Agreement will be used only for the
purposes contemplated hereunder. None of the Loans will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans under this Agreement to be considered a "purpose
credit" within the meaning of Regulations G, T, U and X. Neither any Borrower
nor FSI will take or permit any agent acting on its behalf to take any action
which might cause this Agreement or any document or instrument delivered
pursuant hereto to violate any regulation of the Federal Reserve Board.
. All federal, state, local and foreign tax returns, reports
and statements required to be filed by any Borrower, FSI and, to the best of
each Borrower's and FSI's knowledge, after due inquiry, by any of FSI's
Subsidiaries have been filed with the appropriate Governmental Authorities where
failure to file would, with reasonable likelihood, have a Material Adverse
Effect, and all material Charges and other impositions shown thereon to be due
and payable by any Borrower, FSI or such Subsidiary have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof, or any such fine, penalty, interest, late charge or loss
has been paid, or such Borrower, FSI or such Subsidiary is contesting its
liability therefore in good faith and has fully reserved all such amounts
according to GAAP in the financial statements provided to Agent pursuant to
Section 5.1. Each Borrower, FSI and, to the best of each Borrower's and FSI's
knowledge, after due inquiry, each of FSI's Subsidiaries has paid when due and
payable all material Charges upon the books of any Borrower, FSI or such
Subsidiary and no Government Authority has asserted any Lien against any
Borrower, FSI or any of FSI's Subsidiaries with respect to unpaid Charges.
Proper and accurate amounts have been withheld by each Borrower, FSI and, to the
best of each Borrower's and FSI's knowledge, after due inquiry, each of FSI's
Subsidiaries from its employees for all periods in full and complete compliance
with the tax, social security and unemployment withholding provisions of
applicable federal, state, local and foreign law and such withholdings have been
timely paid to the respective Governmental Authorities.
. .15 Environmental Quality
(a) Except as specifically disclosed in Schedule 4.1.15,
the on-going operations of each Borrower, FSI and each of FSI's Subsidiaries
comply in all material respects with all Environmental Laws, except such
non-compliance which would not (if enforced in accordance with applicable law)
result in liability in excess of $250,000 in the aggregate.
(b) Except as specifically disclosed in Schedule 4.1.15,
each Borrower, FSI and each of FSI's Subsidiaries has obtained all licenses,
permits, authorizations and registrations required under any Environmental Law
("Environmental Permits") and necessary for its ordinary course operations, all
such Environmental Permits are in good standing, and each Borrower, FSI and each
of FSI's Subsidiaries is in compliance with all material terms and conditions of
such Environmental Permits.
(c) Except as specifically disclosed in Schedule 4.1.15,
neither any Borrower, FSI or any of FSI's Subsidiaries nor any of their
respective present Property or operations is subject to any outstanding written
order from or agreement with any Governmental Authority nor subject to any
judicial or docketed administrative proceeding, respecting any Environmental
Law, Environmental Claim or Hazardous Material.
(d) Except as specifically disclosed in Schedule 4.1.15,
there are no Hazardous Materials or other conditions or circumstances existing
with respect to any Property, or arising from operations prior to the Closing
Date, of any Borrower, FSI or any of FSI's Subsidiaries that would reasonably be
expected to give rise to Environmental Claims with a potential liability of any
Borrower, FSI or any of FSI's Subsidiaries in excess of $250,000 in the
aggregate for any such condition, circumstance or Property.
. Each Borrower and FSI and, to the best of their knowledge,
after due inquiry, each of FSI's Subsidiaries possess and owns all necessary
trademarks, trade names, copyrights, patents, patent rights, franchises and
licenses which are material to the conduct of their business as now operated.
. As of the Closing Date, no information contained in this
Agreement, the other Loan Documents or any other documents or written materials
furnished by or on behalf of any Borrower or FSI to Agent or any Lender pursuant
to the terms of this Agreement or any of the other Loan Documents contains any
untrue or inaccurate statement of a material fact or omits to state a material
fact necessary to make the statement contained herein or therein not misleading
in light of the circumstances under which made.
. Neither any Borrower nor FSI is: (a) a "public utility
company" or a "holding company," or an "affiliate" or a "subsidiary company" of
a "holding company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act or (b) an
"investment company," or an "affiliated person" of, or a "promoter" or
"principal underwriter" for, an "investment company," as such terms are defined
in the Investment Company Act. The making of the Loans hereunder and the
application of the proceeds and repayment thereof by each Borrower and the
performance of the transactions contemplated by this Agreement and the other
Loan Documents will not violate any provision of the Investment Company Act or
the Public Utility Holding Company Act, or any rule, regulation or order issued
by the SEC thereunder.
. Each Borrower and FSI are Solvent.
. At the time any Borrower makes a request for an initial borrowing
hereunder, each such Borrower, severally, as to itself, but not jointly as to
the other Borrowers and FSI, and FSI, jointly and severally with each Borrower
as to each such Borrower and as to itself, hereby warrant and represent to Agent
and each Lender as follows, and agree that each of said warranties and
representations shall be deemed to continue until full, complete and
indefeasible payment and performance of the Obligations and shall apply anew to
each additional borrowing hereunder:
. Each Borrower and FSI has the power and authority to perform
the terms of the Loan Documents (to the extent each is a party thereto) and all
other instruments and documents contemplated hereby or thereby.
. The performance of this Agreement, and each of the other
Loan Documents and the payment of the Notes will not violate or result in the
breach of, or constitute a default under any indenture or other loan or credit
agreement, or other agreement or instrument which are, in the aggregate,
material and to which any Borrower or FSI is a party or by which any Borrower,
FSI or their Property and assets may be bound or affected.
. No approval, authorization or consent of any trustee or
holder of any indebtedness or obligation of any Borrower or FSI or of any other
Person under any such material agreement, contract, lease or license or similar
document or instrument to which such Borrower, FSI or any of FSI's Subsidiaries
is a party or by which such Borrower, FSI or any such Subsidiary is bound, is
required to be obtained by any such Borrower, FSI or any such Subsidiary in
order to make or consummate the transactions contemplated under the Loan
Documents.
. So long as any of the Commitments shall be available and until
payment and performance in full of the Obligations, the representations and
warranties contained herein shall have a continuing effect as having been true
when made.
. 5. BORROWERS' AND FSI'S AFFIRMATIVE COVENANTS
Each Borrower, severally, as to itself, but not jointly as to the other
Borrowers and FSI, and FSI, jointly and severally with each Borrower as to each
Borrower and as to itself (and, where applicable, PLMI) covenant and agree that,
so long as any of the Commitments shall be available and until full, complete
and indefeasible payment and performance of the Obligations, unless Requisite
Lenders shall otherwise consent in writing, each Borrower and FSI shall do or
cause to have done all of the following:
. Maintain, and cause each of FSI's Subsidiaries to maintain, a system
of accounting administered in accordance with sound business practices to permit
preparation of financial statements in conformity with GAAP, and deliver to
Agent or caused to be delivered to Agent:
. As soon as practicable and in any event within sixty (60)
days after the end of each quarterly accounting period of each Borrower, FSI and
PLMI, except with respect to the final fiscal quarter of each fiscal year, in
which case as soon as practicable and in any event within one hundred twenty
(120) days after the end of such fiscal quarter, consolidated and consolidating
balance sheets of FSI and PLMI and a balance sheet of each Borrower as at the
end of such period and the related consolidated (and, as to statements of income
only for FSI, consolidating) statements of income and stockholders' or members'
equity of each Borrower and FSI and the related consolidated statements of
income, stockholders' or members' equity and cash flows of PLMI (and, as to
statements of income only, consolidating) for such quarterly accounting period,
setting forth in each case in comparative form the consolidated figures for the
corresponding periods of the previous year, all in reasonable detail and
certified by the Chief Financial Officer or Corporate Controller of the general
partner or manager of each Borrower, as applicable, FSI and PLMI that they (i)
are complete and fairly present the financial condition of such Borrower, FSI
and PLMI as at the dates indicated and the results of their operations and
changes in their cash flow for the periods indicated, (ii) disclose all
liabilities of each Borrower, FSI and PLMI that are required to be reflected or
reserved against under GAAP, whether liquidated or unliquidated, fixed or
contingent and (iii) have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end adjustment;
. As soon as practicable and in any event within one hundred
twenty (120) days after the end of each fiscal year of each Borrower, FSI and
PLMI, consolidated and consolidating balance sheets of FSI and PLMI and a
balance sheet of each Borrower as at the end of such year and the related
consolidated (and, as to statements of income only for FSI and PLMI,
consolidating) statements of income, stockholders' or members' equity and cash
flows of each Borrower, if applicable, FSI and PLMI for such fiscal year,
setting forth in each case, in comparative form the consolidated figures for the
previous year, all in reasonable detail and (i) in the case of such consolidated
financial statements, accompanied by a report thereon of an independent public
accountant of recognized national standing selected by each Borrower, FSI and
PLMI and satisfactory to Agent, which report shall contain an opinion which is
not qualified in any manner or which otherwise is satisfactory to Requisite
Lenders, in their sole discretion, and (ii) in the case of such consolidating
financial statements, certified by the Chief Financial Officer or Corporate
Controller of FSI and PLMI;
. As soon as practicable, and in any event not later than
fifteen (15) days after the end of each calendar month in which a Loan has been,
or is, outstanding, a Borrowing Base Certificate dated as of the last day of
such month, duly executed by a Chief Financial Officer or Corporate Controller
of the general partner or manager of each Borrower, with appropriate insertions;
. As soon as practicable, and in any event not later than
forty-five (45) days after the end of each fiscal quarter of each Borrower, a
Compliance Certificate dated as of the last day of such fiscal quarter, and
executed by the Chief Financial Officer or Corporate Controller of the general
partner or manager of such Borrower, with appropriate insertions.
. At Agent's request, promptly upon receipt thereof, copies of
all reports submitted to each Borrower, FSI or PLMI by independent public
accountants in connection with each annual, interim or special audit of the
financial statements of such Borrower, FSI or PLMI made by such accountants;
. (i) On the date six months after the Closing Date and
thereafter upon Agent's reasonable request, which request will not be made more
than once during any calendar year (unless an Event of Default shall have
occurred and be continuing), a report from each Borrower's insurance broker, in
such detail as Agent may reasonably request, as to the insurance maintained or
caused to be maintained by each Borrower pursuant to this Agreement,
demonstrating compliance with the requirements hereof and thereof, and (ii) as
soon as possible and in no event later than fifteen (15) days prior to the
expiration date of any insurance policy of any Borrower, a written confirmation
that such policy is in process of renewal and is not terminated or subject to a
notice of non-renewal from such Borrower's insurance broker; provided, however,
that such Borrower shall give Agent prompt written notice if changes affecting
risk coverage will be made to such policy or if the policy will be terminated;
. Promptly upon any officer of any Borrower or FSI obtaining
knowledge (a) of any condition or event which constitutes an Event of Default or
Potential Event of Default under this Agreement, (b) that any Person has given
any notice to any Borrower, FSI, TEC, TEC AcquiSub or PLMI or taken any other
action with respect to a claimed default or event or condition of the type
referred to in Section 8.1.2, (c) of the institution of any litigation or of the
receipt of written notice from any Governmental Authority as to the commencement
of any formal investigation involving an alleged or asserted liability of any
Borrower, FSI, TEC, TEC AcquiSub or PLMI equal to or greater than $500,000 or
any adverse judgment in any litigation involving a potential liability of any
Borrower, FSI, TEC, TEC AcquiSub or PLMI equal to or greater than $500,000, or
(d) of a material adverse change in the business, operations, properties, assets
or condition (financial or otherwise) of any Borrower, FSI, TEC, TEC AcquiSub or
PLMI, a certificate of a Responsible Officer of any Borrower or FSI, as
applicable, specifying the notice given or action taken by such Person and the
nature of such claimed default, Event of Default, Potential Event of Default,
event or condition and what action such Borrower, FSI, TEC, TEC AcquiSub or PLMI
has taken, is taking and proposes to take with respect thereto;
. Promptly upon becoming aware of the occurrence of any (a)
Termination Event in connection with any Pension Plan or (b) "prohibited
transaction" (as such term is defined in ERISA and the Code) in connection with
any Employee Benefit Plan or any trust created thereunder, a written notice
specifying the nature thereof, what action any Borrower or any of its ERISA
Affiliates has taken, is taking or proposes to take with respect thereto, and,
when known, any action taken or threatened by the IRS or the PBGC with respect
thereto;
. With reasonable promptness, copies of (a) all notices
received by any Borrower, FSI, any of FSI's Subsidiaries or any of their ERISA
Affiliates of the PBGC's intent to terminate any Pension Plan or to have a
trustee appointed to administer any Pension Plan, (b) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by any Borrower, FSI,
any of FSI's Subsidiaries or any of their ERISA Affiliates with the IRS with
respect to each Pension Plan covering employees of any Borrower, FSI or any of
FSI's Subsidiaries, and (c) all notices received by any Borrower, FSI, any of
FSI's Subsidiaries or any of their ERISA Affiliates from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA;
. Promptly upon receipt by any Borrower, FSI or any of FSI's
Subsidiaries, any challenge by the IRS to the qualification under Section 401 or
501 of the Code of any Pension Plan;
. As soon as available and in no event later than five (5)
days after the same shall have been filed with the SEC, a copy of each Form 8-K
Current Report, Form 10-K Annual Report, Form 10-Q Quarterly Report, Annual
Report to Shareholders, Proxy Statement and Registration Statement of any
Borrower and PLMI;
. Upon the request of Agent, copies of all federal, state,
local and foreign tax returns and reports in respect of income, franchise or
other taxes on or measured by income (excluding sales, use or like taxes) filed
by or on behalf of any Borrower and FSI; and
. Such other information respecting the condition or
operations, financial or otherwise, of any Borrower and PLMI and its
Subsidiaries as Agent or any Lender may from time to time reasonably request,
and such information regarding the lessees under Leases as any Borrower from
time to time receives or Agent or any Lender reasonably requests.
All financial statements of Borrowers, FSI and PLMI to be delivered by
any Borrower and FSI to Agent pursuant to this Section 5.1 will be complete and
correct and present fairly the financial condition of each Borrower, FSI and
PLMI as of the date thereof; will disclose all liabilities of each Borrower, FSI
and PLMI that are required to be reflected or reserved against under GAAP,
whether liquidated or unliquidated, fixed or contingent; and will have been
prepared in accordance with GAAP. All tax returns submitted to Agent by
Borrowers and FSI will, to the best of each Borrower's and FSI's knowledge,
after due inquiry, be true and correct. Each Borrower and FSI hereby agree that
each time any one of them submits a financial statement or tax return to Agent,
such Borrower and FSI shall be deemed to represent and warrant to Lenders that
such financial statement or tax return complies with all of the preceding
requirements set forth in this paragraph.
. Each Borrower and FSI shall preserve and maintain, and FSI shall
cause each of FSI's Subsidiaries, including, without limitation, TEC AcquiSub,
to preserve and maintain, their existence and all of their licenses, permits,
governmental approvals, rights, privileges and franchises necessary or desirable
in the normal conduct of their businesses as now conducted or presently proposed
to be conducted (including, without limitation, their qualification to do
business in each jurisdiction in which such qualification is necessary or
desirable in view of its business); conduct, and cause each of FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, and any Owner Trustee
to conduct, its business in an orderly and regular manner; and comply, and cause
each of FSI's Subsidiaries, including, without limitation, TEC AcquiSub, and any
Owner Trustee, to comply, with (a) as to any Borrower, its Limited Partnership
Agreement, Operating Agreement and other organizational documents, as
applicable, and as to FSI and each of its Subsidiaries, including, without
limitation, TEC AcquiSub, the provisions of its respective certificate or
articles of incorporation, as applicable, and bylaws and (b) the requirements of
all applicable laws, rules, regulations or orders of any Governmental Authority
and requirements for the maintenance of any Borrower's, FSI's or such
Subsidiary's insurance, licenses, permits, governmental approvals, rights,
privileges and franchises, except, in either case, to the extent that the
failure to comply therewith would not, in the aggregate, with reasonable
likelihood, have a Material Adverse Effect.
. Each Borrower and FSI shall maintain and keep in force, and cause
each of FSI's Subsidiaries, including, without limitation, TEC AcquiSub, to
maintain and keep in force insurance of the types and in amounts then
customarily carried in lines of business similar to that of Borrowers, FSI or
any of FSI's Subsidiaries as the case may be, including, but not limited to,
fire, extended coverage, public liability, property damage, environmental hazard
and workers' compensation, in each case carried with financially sound Persons
and in amounts satisfactory to Requisite Lenders (subject to commercial
reasonableness as to each type of insurance); provided, however, that the types
and amounts of insurance shall not provide any less coverage for any Borrower
than provided as of the Closing Date by the existing blanket policies of
insurance for PLMI and its Subsidiaries. All such policies as to liability
insurance shall carry endorsements naming Agent and each Lender as an additional
insured and, upon the reasonable request of Agent, all such policies of property
insurance shall carry endorsements naming Agent as principal loss payee as to
any property owned by Borrowers and financed by Lenders, and in each case
indicating that (a) any loss thereunder shall be payable to Agent or Lenders, as
the case may be, notwithstanding any action, inaction or breach of
representation or warranty by any Borrower or FSI; (b) there shall be no
recourse against any Lender for payment of premiums or other amounts with
respect thereto, and (c) at least fifteen (15) days' prior written notice of
cancellation, lapse or material change in coverage shall be given to Agent by
the insurer.
. Promptly pay and discharge and cause each of FSI's Subsidiaries,
including, without limitation, TEC AcquiSub, promptly to pay and discharge all
material Charges when due and payable, except (a) such as may be paid thereafter
without penalty or (b) such as may be contested in good faith by appropriate
proceedings and for which an adequate reserve has been established and is
maintained in accordance with GAAP. Each Borrower and FSI shall promptly notify
Agent of any material challenge, contest or proceeding pending by or against any
Borrower, FSI and PLMI or any of FSI's Subsidiaries before any taxing authority.
. At any reasonable time and from time to time during normal business
hours, permit Agent or any Lender or any agent, representative or employee
thereof, to examine and make copies of and abstracts from the financial records
and books of account of each Borrower, FSI or any of FSI's Subsidiaries,
including, without limitation, TEC AcquiSub, and other documents in the
possession or under the control of any Borrower, FSI or any of FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, relating to any
obligation of any Borrower or FSI arising under or contemplated by this
Agreement and to visit the offices of any Borrower or FSI to discuss the
affairs, finances and accounts of any Borrower or FSI with any of the officers
of any Borrower or FSI, and, upon reasonable notice and during normal business
hours (unless an Event of Default or Potential Event of Default shall have
occurred and be continuing, in which event no notice is required), to conduct
audits of and appraise Equipment. Such audits and appraisals shall be subject to
the lessee's right to quiet enjoyment as set forth in the respective lease.
. 6 Maintenance Of Facilities; Modifications
. Each Borrower and FSI shall keep and cause each of FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, to keep, all of their
respective Properties which are useful or necessary to such Borrower's, FSI's or
such Subsidiary's business, in good repair and condition, normal wear and tear
excepted, and from time to time make, and cause each such Subsidiary to make
necessary repairs thereto, and renewals and replacements thereof so that each
Borrower's, FSI's or such Subsidiary's Properties shall be fully and efficiently
preserved and maintained.
. Subject to Section 5.6.1, each Borrower and FSI shall
promptly make, or cause to be made, all modifications, additions and adjustments
to the Eligible Inventory as may from time to time be required by any
Governmental Authority having jurisdiction over the operation, safety or use
thereof.
. From time to time as may be necessary (in the event that such
information is not otherwise delivered by Borrowers or FSI to Agent or Lenders
pursuant to this Agreement), so long as there are Obligations outstanding
hereunder, disclose to Agent in writing any material matter hereafter arising
which, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described by any Borrower or FSI in this Agreement
or any of the other Loan Documents (including all Schedules and Exhibits hereto
or thereto) or which is necessary to correct any information set forth or
described by Borrowers or FSI hereunder or thereunder or in connection herewith
which has been rendered inaccurate thereby.
. In addition to the obligations and documents which this Agreement
expressly requires Borrowers or FSI to execute, deliver and perform, each
Borrower or FSI shall execute, deliver and perform, and shall cause FSI's
Subsidiaries to execute, deliver and perform, any and all further acts or
documents which Agent or Lenders may reasonably require to effectuate the
purposes of this Agreement or any of the other Loan Documents.
. Each Borrower shall, unless otherwise directed in writing by Agent,
cause all remittances made by the obligor under any Lease to be made to a lock
box (the "Lockbox") maintained with FUNB pursuant to the Lockbox Agreement.
Unless otherwise directed by Agent in writing, all invoices and other
instructions submitted by any Borrower to the obligor relating to Lease payments
shall designate the Lockbox as the place to which such payments shall be made.
. Each Borrower and FSI shall, and FSI shall cause each of its
Subsidiaries to, conduct its operations and keep and maintain its Property in
material compliance with all Environmental Laws.
. 6. BORROWER'S AND FSI'S NEGATIVE COVENANTS
So long as any of the Commitments shall be available and until full,
complete and indefeasible payment and performance of the Obligations, unless
Requisite Lenders shall otherwise consent in writing, each Borrower, severally,
as to itself, but not jointly as to the other Borrowers and FSI, and FSI,
jointly and severally with each Borrower as to such Borrower and to itself,
covenant and agree as follows:
. Each Borrower and FSI shall not create, incur, assume or suffer to
exist, and shall not permit any Marine Subsidiary of such Borrower or Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI to create, incur, assume or suffer to exist,
and FSI shall not permit any of its Subsidiaries (including, without limitation,
TEC and TEC AcquiSub) to create, incur, assume or suffer to exist, any Lien of
any nature upon or with respect to any of their respective Property, whether now
or hereafter owned, leased or acquired, except (collectively, the "Permitted
Liens"):
.1 Existing Liens disclosed on Schedule 6.1, provided
that the obligations secured thereby are not increased;
.2 Liens for Charges if payment shall not at the time
be required to be made in accordance with Section 5.4;
.3 Liens in respect of pledges, obligations or
deposits (a) under workers' compensation laws, unemployment insurance and other
types of social security or similar legislation, (b) in connection with surety,
appeal and similar bonds incidental to the conduct of litigation, (c) in
connection with bid, performance or similar bonds and mechanics', laborers' and
materialmen's and similar statutory Liens not then delinquent, or (d) incidental
to the conduct of the business of such Borrower, any Marine Subsidiary of such
Borrower, FSI or any Owner Trustee or any of FSI's Subsidiaries and which were
not incurred in connection with the borrowing of money or the obtaining of
advances or credit; provided that the Liens permitted by this Section 6.1.3 do
not in the aggregate materially detract from the value of any assets or property
of or materially impair the use thereof in the operation of the business of such
Borrower, FSI or any Owner Trustee or any of FSI's Subsidiaries; and provided
further that the adverse determination of any claim or liability, contingent or
otherwise, secured by any of such Liens would not either individually or in the
aggregate, with reasonable likelihood, have a Material Adverse Effect;
.4 Permitted Rights of Others; and
.5 Liens granted in favor of Agent on behalf of
Lenders under the TEC AcquiSub Agreement and the security agreement and other
loan documents delivered by TEC AcquiSub pursuant thereto.
. Each Borrower shall not, and shall not permit any Marine Subsidiary
of such Borrower to, and FSI shall not permit TEC and TEC AcquiSub to, make any
Acquisition or enter into any agreement to make any Acquisition, other than with
respect to the purchase of Equipment in the ordinary course of business or the
formation or acquisition of a Marine Subsidiary.
. Each Borrower and FSI shall not create, incur, assume or suffer to
exist, nor permit any Marine Subsidiary of such Borrower or Owner Trustee
holding record title to any Eligible Inventory for the beneficial interest of
such Borrower or FSI to create, incur, assume or suffer to exist, and FSI shall
not permit any of its Subsidiaries (including, without limitation, TEC and TEC
AcquiSub) to create, incur, assume or suffer to exist, any Indebtedness or
Contingent Obligation; provided, however, that this Section 6.3 shall not be
deemed to prohibit:
.1 The Obligations to Lenders and Agent arising
hereunder and under the other Loan Documents;
.2 Existing Indebtedness disclosed on Schedule 6.3(a)
and anticipated Indebtedness disclosed on Schedule 6.3(b);
.3 Indebtedness of any Subsidiary of FSI, provided
that such Indebtedness is non-recourse as to FSI, TEC and TEC AcquiSub;
.4 The acquisition of goods, supplies or merchandise
on normal trade credit;
.5 The endorsement of negotiable instruments received
in the ordinary course of any Borrower's business as presently conducted;
.6 Indebtedness incurred in respect of the deferred
purchase price for an item of Equipment, but only to the extent that the
incurrence of such Indebtedness is customary in the industry with respect to the
purchase of this type of equipment (provided that such Indebtedness shall only
be permitted under this clause (d) if, taking into account the incurrence of
such Indebtedness, the Borrower incurring such Indebtedness shall not be in
violation of any of the financial covenants set forth in Section 7 if measured
as of the date of incurrence as determined by GAAP);
.7 Any Guaranty Obligations of any Borrower in the
form of performance guaranties undertaken on behalf of a Marine Subsidiary of
such Borrower in favor of the charter party in connection with the leasing of a
marine vessel on a time charter; and
.8 Contingent Obligations (but excluding specifically
Guaranty Obligations which shall be prohibited) of FSI solely in its capacity as
a general partner or manager of the Equipment Growth Funds.
. Each Borrower and FSI shall not, and shall not permit any Marine
Subsidiary of such Borrower or Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI to, use
the proceeds of any Loan except for the purpose set forth in Recital D, above,
and shall not, and shall not permit any such Marine Subsidiary or such Owner
Trustee to, use the proceeds to repay any loans or advances made by any other
Person.
. Each Borrower and FSI shall not, and shall not permit any Marine
Subsidiary of such Borrower or any Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI to, sell,
assign or otherwise dispose of, any of its or their respective assets, except
for full, fair and reasonable consideration, or enter into any sale and
leaseback agreement covering any of its or their respective fixed or capital
assets.
. Each Borrower and FSI shall not, and shall not permit any Marine
Subsidiary of such Borrower to, enter into any transaction of merger,
consolidation or recapitalization, directly or indirectly, whether by operation
of law or otherwise, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
part of its business, Property or assets, whether now owned or hereafter
acquired, or acquire by purchase or otherwise all or substantially all the
business, Property or assets of, or stock or other evidence of beneficial
ownership of, any Person, except (a) sales of Equipment in the ordinary course
of business (for the purposes of this Section 6.6, with respect to any Borrower
and any Marine Subsidiary of such Borrower, ordinary course of business shall
refer to the business of the Equipment Growth Funds and all Marine Subsidiaries,
collectively), and (b) any Subsidiary of FSI (other than TEC AcquiSub) may be
merged or consolidated with or into FSI or any wholly-owned Subsidiary of FSI,
or be liquidated, wound up or dissolved, or all or substantially all of its
business, property or assets may be conveyed, sold, leased, transferred or
otherwise disposed of, in one transaction or a series of transactions, to, FSI
or any wholly-owned Subsidiary of FSI; provided that, in the case of such a
merger or consolidation, FSI or such wholly-owned Subsidiary shall be the
continuing or surviving corporation.
. Each Borrower shall not, and shall not permit any Marine Subsidiary
of such Borrower to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any of its
Affiliates on terms that are less favorable to such Borrower or such Marine
Subsidiary than those that might be obtained at the time from Persons who are
not such Affiliates.
. Each Borrower and FSI shall not, and FSI shall not permit any of its
existing Subsidiaries to, engage in any business materially different than the
business currently engaged in by such Person.
. Each Borrower shall not make, pay or set apart any funds for the
payment of distribution to its partners or members if such distribution would
cause or result in an Event of Default or Potential Event of Default.
. Each Borrower and FSI shall not take or omit to take any action,
which act or omission would, with the lapse of time, or otherwise constitute (a)
a default, event of default or Event of Default under any of the Loan Documents
or (b) a default or an event of default under any other material agreement,
contract, lease, license, mortgage, deed of trust or instrument to which either
is a party or by which either or any of their Properties or assets is bound,
which default or event of default would, with reasonable likelihood, have a
Material Adverse Effect.
. If any Borrower or FSI or any of their ERISA Affiliates incurs any
obligation to contribute to any Pension Plan, then such Borrower or FSI, as the
case may be, shall not (a) terminate, or permit such ERISA Affiliate to
terminate, any Pension Plan so as to result in any liability that would, with
reasonable likelihood, have a Material Adverse Effect or (b) make or permit such
ERISA Affiliate to make a complete or partial withdrawal (within the meaning of
Section 4201 of ERISA) from any Multiemployer Plan so as to result in any
liability that would, with reasonable likelihood, have a Material Adverse
Effect.
. Each Borrower and FSI shall not use or authorize others to use any
Lender's name or marks in any publication or medium, including, without
limitation, any prospectus, without such Lender's advance written authorization.
. Each Borrower and FSI shall not change their fiscal year end from
December 31, nor make any change in their accounting treatment and reporting
practices except as permitted by GAAP; provided, however, that should any
Borrower or FSI change its accounting treatment or reporting practices in a way
that would cause a change in the calculation, or in the results of a
calculation, of any of the financial covenants set forth in Section 7, below,
then such Borrower or FSI, as applicable, shall continue to calculate such
covenants as if such accounting treatment or reporting practice had not been
changed unless otherwise agreed to by Requisite Lenders.
. Each Borrower and FSI shall not, shall not cause to occur and shall
not permit any amendment, modification or supplement of or to any of the terms
or provisions of such Borrower's Limited Partnership Agreement or, in the case
of Income Fund I, its Operating Agreement, which amendment, modification or
supplement would affect, limit or otherwise impair such Borrower's ability to
pay the Obligations or perform its obligations under this Agreement or any of
the other Loan Documents.
. 7. FINANCIAL COVENANTS OF BORROWER AND FSI
Each Borrower, severally, as to itself, but not jointly as to the other
Borrowers and FSI, and FSI, jointly and severally with each Borrower as to each
Borrower and as to itself, covenant and agree that, so long as the Commitments
hereunder shall be available, and until full, complete and indefeasible payment
and performance of the Obligations, including, without limitation, all Loans
evidenced by the Notes, unless Requisite Lenders shall otherwise consent in
writing, Borrowers and FSI shall perform the following financial covenants. Each
Borrower and FSI agree and understand that (except as expressly provided herein)
all covenants under this Section 7 shall be subject to quarterly compliance or
compliance as of the date of any request for a Loan pursuant to Section 3.2.1
(as measured on the last day of each fiscal quarter of such Borrower, or FSI, as
the case may be, or as of the date of any request for a Loan pursuant to Section
3.2.1), and in each case review by Lenders of the respective fiscal quarter's
consolidated financial statements delivered to Agent by each Borrower and FSI
pursuant to Section 5.1; provided, however, that the following financial
covenants shall apply only as to those Borrowers requesting a Loan or as to
which a Loan remains outstanding.
. Each Borrower shall maintain a Funded Debt Ratio of not greater than
0.5:1.0.
. Each Borrower shall maintain a Debt Service Ratio of not less than
1.75:1.0.
. FSI shall maintain a Consolidated Tangible Net Worth of not less than
$20,000,000.
. The Equipment Growth Funds of which FSI is the sole general partner
shall maintain aggregate unrestricted cash balances of $10,000,000.
. 8. EVENTS OF DEFAULT AND REMEDIES
. As to any Borrower, the occurrence of any one or more of the
following shall constitute an Event of Default for each such Borrower
individually:
. Such Borrower, any Marine Subsidiary of such Borrower or any
Owner Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI fails to pay any sum due to Lenders or Agent
arising under this Agreement, the Note of such Borrower or any of the other Loan
Documents when and as the same shall become due and payable, whether by
acceleration or otherwise and such failure shall not have been cured to Lenders'
satisfaction within five (5) calendar days; or
. (a) Such Borrower, any Marine Subsidiary of such Borrower,
FSI, TEC, TEC AcquiSub or any Owner Trustee holding record title to any Eligible
Inventory for the beneficial interest of such Borrower defaults in the repayment
of any principal of or the payment of any interest on any Indebtedness of such
Borrower, any such Marine Subsidiary, FSI, TEC, TEC AcquiSub or any such Owner
Trustee, respectively, or breaches any term of any evidence of such Indebtedness
or defaults in any payment in respect of any Contingent Obligation (excluding,
as to FSI, any Contingent Obligation of FSI arising solely as a result of FSI's
status as a general partner of any Person other than such Borrower), in each
case exceeding, in the aggregate outstanding principal amount, $2,000,000, or
such Borrower, any Marine Subsidiary, FSI, TEC, TEC AcquiSub or any Owner
Trustee breaches or violates any term or provision of any evidence of such
Indebtedness or Contingent Obligation or of any such loan agreement, mortgage,
indenture, guaranty or other agreement relating thereto if the effect of such
breach is to permit acceleration under the applicable instrument, loan
agreement, mortgage, indenture, guaranty or other agreement and such failure
shall not have been cured within the applicable cure period, or there is an
acceleration under the applicable instrument, loan agreement, mortgage,
indenture, guaranty or other agreement; or (b) PLMI defaults in the repayment of
any principal of or the payment of any interest on any Indebtedness or defaults
in any payment in respect of any Contingent Obligation, in each case exceeding,
in the aggregate outstanding principal amount, $2,000,000, or PLMI breaches or
violates any term or provision of any evidence of such Indebtedness or
Contingent Obligation or of any such loan agreement, mortgage, indenture,
guaranty or other agreement relating thereto with the result that such
Indebtedness or Contingent Obligation becomes or is caused to become then due
and payable in its entirety, whether by acceleration of otherwise; or
. Such Borrower or FSI fails or neglects to perform, keep or
observe any of the covenants contained in Sections 2.1.3, 5.2, 5.3, 5.9, 6.1,
6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9 or 6.13, or any of the financial
covenants contained in Section 7 of this Agreement; or
. Any representation or warranty made by or on behalf of such
Borrower or FSI in this Agreement or any statement or certificate at any time
given in writing pursuant hereto or in connection herewith shall be false,
misleading or incomplete in any material respect when made; or
. Except as provided in Sections 8.1.1 and 8.1.3, such
Borrower, FSI or any Marine Subsidiary of such Borrower or Owner Trustee holding
record title to any Eligible Inventory for the beneficial interest of such
Borrower or FSI fails or neglects to perform, keep or observe any covenant or
provision of this Agreement or of any of the other Loan Documents or any other
document or agreement executed by such Borrower, FSI or any Marine Subsidiary of
such Borrower or Owner Trustee holding record title to any Eligible Inventory
for the beneficial interest of such Borrower or FSI in connection therewith and
the same has not been cured to Requisite Lenders' satisfaction within thirty
(30) calendar days after such Borrower, FSI or any Marine Subsidiary of such
Borrower or Owner Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI shall become aware thereof, whether
by written notice from Agent or any Lender or otherwise; or
. Such Borrower, any Marine Subsidiary of such Borrower, TEC
AcquiSub, any other Borrower (but only for so long as Obligations of such other
Borrower remain or Commitments to such other Borrower are available under this
Agreement), FSI, TEC, PLMI or any Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI or any
other guarantor of any of such Borrower's or FSI's obligations to Lenders shall
(a) cease to be Solvent, (b) admit in writing its inability to pay its debts as
they mature, (c) make an assignment for the benefit of creditors, (d) apply for
or consent to the appointment of a receiver, liquidator, custodian or trustee
for it or for a substantial part of its Properties or business, or such a
receiver, liquidator, custodian or trustee otherwise shall be appointed and
shall not be discharged within sixty (60) days after such appointment; or
. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against such Borrower, any
Marine Subsidiary of such Borrower, TEC AcquiSub, any other Borrower (but only
for so long as Obligations of such other Borrower remain or Commitments to such
other Borrower are available under this Agreement), FSI, TEC, PLMI or any Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI or any other guarantor of any of such
Borrower's or FSI's obligations to Lenders or any order, judgment or decree
shall be entered against such Borrower, any Marine Subsidiary of such Borrower,
TEC AcquiSub, any other Borrower (but only for so long as Obligations of such
other Borrower remain or Commitments to such other Borrower are available under
this Agreement), FSI, TEC, PLMI or any Owner Trustee holding record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI or any
other guarantor of any of such Borrower's or FSI's obligations to Lenders
decreeing its dissolution or division; provided, however, with respect to an
involuntary petition in bankruptcy, such petition shall not have been dismissed
within sixty (60) days after the filing of such petition; or
. There shall have been a change in the assets, liabilities,
financial condition, operations, affairs or prospects of such Borrower, any
Marine Subsidiary of such Borrower, TEC AcquiSub, FSI, TEC, PLMI or any Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI or any other guarantor of any of such
Borrower's or FSI's obligations to Lenders which, in the reasonable
determination of Requisite Lenders has, either individually or in the aggregate,
had a Material Adverse Effect; or
. There shall be a money judgment, writ or warrant of
attachment or similar process entered or filed against such Borrower, any Marine
Subsidiary of such Borrower, TEC AcquiSub, FSI, TEC or any Owner Trustee holding
record title to any Eligible Inventory for the beneficial interest of such
Borrower or FSI which (net of insurance coverage) remains unvacated, unbonded,
unstayed or unpaid or undischarged for more than sixty (60) days (whether or not
consecutive) or in any event later than five (5) calendar days prior to the date
of any proposed sale thereunder, which, together with all such other unvacated,
unbonded, unstayed, unpaid and undischarged judgments or attachments against
such Borrower or any Marine Subsidiary of such Borrower exceeds in the aggregate
$1,000,000; against FSI exceeds in the aggregate $500,000; against TEC or TEC
AcquiSub exceeds in the aggregate $500,000; or against any Owner Trustee holding
record title to any Eligible Inventory for the beneficial interest of such
Borrower or FSI exceeds in the aggregate $1,000,000; or against any combination
of the foregoing Persons exceeds in the aggregate $1,000,000; or
. Any of the Loan Documents shall for any reason other than
the full, complete and indefeasible satisfaction of the Obligations thereunder
cease to be, or be asserted by such Borrower, FSI or any Marine Subsidiary of
such Borrower or Owner Trustee holding record title to any Eligible Inventory
for the beneficial interest of such Borrower or FSI not to be, a legal, valid
and binding obligation of such Borrower, FSI or any Marine Subsidiary of such
Borrower or Owner Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI, respectively enforceable against
such Person in accordance with its terms; or
. The occurrence of any "Event of Default" as defined under
the TEC AcquiSub Agreement or any other loan or security document related to the
TEC AcquiSub Agreement; or
. The occurrence of any "Event of Default" as defined under
the AFG Agreement or any other loan or security document related to the AFG
Agreement; or
. FSI shall cease to be the sole general partner or the sole
manager, as applicable, of such Borrower, whether due to the voluntary or
involuntary withdrawal, substitution, removal or transfer of FSI from or of all
or any portion of FSI's general partnership interest or capital contribution in
such Borrower; or
. Requesting Borrower, TEC AcquiSub, FSI or their Subsidiaries
shall cease to be the purchaser of Eligible Inventory for such Requesting
Borrower.
. A criminal proceeding shall have been filed in any court
naming any Borrower, FSI or any Marine Subsidiary of such Borrower or Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI as a defendant for which forfeiture is a
potential penalty under applicable federal or state law which, in the reasonable
determination of Requisite Lenders, may have a Material Adverse Effect; or
. Any Governmental Authority enters a decree, order or ruling
("Government Action") which will materially and adversely affect any Borrower's,
any Marine Subsidiary of such Borrower's, FSI's, TEC's, TEC AcquiSub's or PLMI's
financial condition, operations or ability to perform or pay such party's
obligations arising under this Agreement or any instrument or agreement executed
pursuant to the terms of this Agreement or which will similarly affect any Owner
Trustee holding record title to any Eligible Inventory for the beneficial
interest of such Borrower or FSI. Such Borrower or FSI shall have thirty (30)
days from the earlier of the date (a) Borrower or FSI, as applicable, first
discovers it is the subject of Government Action or (b) a Lender or any agency
gives notice of Government Action to take such steps as are necessary to obtain
relief from the Government Action. For the purpose of this paragraph, "relief
from Government Action" means to discharge or to obtain a dismissal of or
release or relief from (i) any Government Action so that the affected party or
parties do not incur monetary liability (A) of more than $1,000,000 in the case
of any Borrower or any Marine Subsidiary of such Borrower, (B) of more than
$500,000 in the case of FSI, (C) of more than $500,000 in the case of TEC, (D)
of more than $250,000 in the case of TEC AcquiSub, (E) of more than $1,000,000
in the case of PLMI, or (F) of more than $1,000,000, in the aggregate, in the
case of any combination of the foregoing Persons, or (ii) any disqualification
of or other limitation on the operation of any Borrower, any Marine Subsidiary
of such Borrower, FSI, TEC, TEC AcquiSub and PLMI, or any of them, which in the
reasonable determination of Requisite Lenders may have a Material Adverse
Effect; or
. Any Governmental Authority, including, without limitation,
the SEC, shall enter a decree, order or ruling prohibiting the Equipment Growth
Funds from releasing or paying to FSI any funds in the form of management fees,
profits or otherwise which, in the reasonable determination of Requisite
Lenders, may have a Material Adverse Effect.
. An Event of Default may be waived only with the written consent of
Requisite Lenders, or if expressly provided, of all Lenders. Any Event of
Default so waived shall be deemed to have been cured and not to be continuing;
but no such waiver shall be deemed a continuing waiver or shall extend to or
affect any subsequent like default or impair any rights arising therefrom.
. Upon the occurrence and continuance of any Event of Default or
Potential Event of Default, Lenders shall have no further obligation to advance
money or extend credit to or for the benefit of the defaulting Borrower or any
other Borrower, regardless of whether such Event of Default or Potential Event
of Default has occurred with respect to such Borrower or another Borrower.
In addition, upon the occurrence and during the continuance of an Event
of Default, except an Event of Default arising under Section 8.1.11 hereof (the
remedies for which shall be limited to those set forth in the preceding
paragraph), Lenders or Agent, on behalf of Lenders, may, as to such defaulting
Borrower, or as to all Borrowers should such Event of Default result from the
actions or inactions of FSI, at the option of Requisite Lenders, do any one or
more of the following, all of which are hereby authorized by each Borrower and
FSI:
.1 Declare all or any of the Obligations of such
Borrower under this Agreement, the Note of such Borrower, the other Loan
Documents and any other instrument executed by such Borrower pursuant to the
Loan Documents to be immediately due and payable, and upon such declaration such
obligations so declared due and payable shall immediately become due and
payable; provided that if such Event of Default is under part 8.1.6 or 8.1.7 of
Section 8.1, then all of the Obligations of each Borrower shall become
immediately due and payable forthwith without the requirement of any notice or
other action by Lenders or Agent;
.2 Terminate this Agreement as to any future
liability or obligation of Agent or Lenders as to such Borrower or as to each
Borrower if such Event of Default results from the actions, inactions or
violation of any covenant of or by FSI (excluding, as to FSI, Events of Default
under Section 8.1.2 arising in relation to Contingent Obligation of FSI arising
solely as a result of FSI's status as a general partner of any Person other than
such Borrower); and
.3 Exercise in addition to all other rights and
remedies granted hereunder, any and all rights and remedies granted under the
Loan Documents or otherwise available at law or in equity.
. 4 Set-Off
.1 During the continuance of an Event of Default, any
deposits or other sums credited by or due from any Lender to any Borrower or FSI
(exclusive of deposits in accounts expressly held in the name of third parties
or held in trust for benefit of third parties) may be set-off against the
Obligations of such Borrower and any and all other liabilities, due or existing
or hereafter arising and owing by such Borrower or FSI to Lenders. Each Lender
agrees to notify promptly Borrowers and FSI and Agent of any such set-off;
provided, that the failure to give such notice shall not affect the validity of
any such set-off.
.2 Each Lender agrees that if it shall, whether by
right of set-off, banker's lien or similar remedy pursuant to Section 8.4.1,
obtain any payment as a result of which the outstanding and unpaid principal
portion of the Commitments of such Lender shall be less than such Lender's Pro
Rata Share of the outstanding and unpaid principal portion of the aggregate of
all Commitments, such Lender receiving such payment shall simultaneously
purchase from each other Lender a participation in the Commitments held by such
Lenders so that the outstanding and unpaid principal amount of the Commitments
and participations in Commitments of such Lender shall be in the same proportion
to the unpaid principal amount of the aggregate of all Commitments then
outstanding as the unpaid principal amount under the Commitments of such Lender
outstanding immediately prior to receipt of such payment was to the unpaid
principal amount of the aggregate of all Commitments outstanding immediately
prior to such Lender's receipt of such payment; provided, however, that if any
such purchase shall be made pursuant to this Section 8.4.2 and the payment
giving rise thereto shall thereafter be recovered, such purchase shall be
rescinded to the extent of such recovery and the purchase price restored without
interest. Each Borrower expressly consents to the foregoing arrangements and
agrees that any Lender holding a participation in a Commitment deemed to have
been so purchased may exercise any and all rights of set-off, banker's lien or
similar remedy with respect to any and all moneys owing by Borrower to such
Lender as fully as if such Lender held a Commitment in the amount of such
participation.
. The enumeration of the rights and remedies of Agent and Lenders set
forth in this Agreement is not intended to be exhaustive and the exercise by
Agent and Lenders of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder or under the Loan
Documents or that may now or hereafter exist in law or in equity or by suit or
otherwise. No delay or failure to take action on the part of Agent and Lenders
in exercising any right, power or privilege shall operate as a waiver hereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any Event of Default
or Potential Event of Default. No course of dealing between any Borrower, FSI,
Agent, or any Lender or their respective agents or employees shall be effective
to change, modify or discharge any provision of this Agreement or any of the
Loan Documents or to constitute a waiver of any Event of Default or Potential
Event of Default.
. 9. AGENT
. Each of the Lenders hereby irrevocably designates and appoints First
Union National Bank of North Carolina as the Agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes First Union National Bank of North Carolina as the Agent for such
Lender to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Agent by the terms of this Agreement and such
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the other Loan Documents or otherwise exist against Agent. To the
extent any provision of this Agreement permits action by Agent, Agent shall,
subject to the provisions of this Section 9, take such action if directed in
writing to do so by Requisite Lenders.
. Agent may execute any of its duties under this Agreement and the
other Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
. Neither Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or the other Loan Documents (except for its or such Person's own
gross negligence or willful misconduct), or (b) responsible in any manner to any
Lender for any recitals, statements, representations or warranties made by any
Borrower or any officer thereof contained in this Agreement or the other Loan
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by Agent under or in connection with, this
Agreement or the other Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the other Loan
Documents or for any failure of any Borrower to perform its obligations
hereunder or thereunder. Agent shall not be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
Properties, books or records of any Borrower.
. Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to Borrowers), independent accountants and other experts
selected by Agent. Agent may deem and treat the payee of any promissory note
issued pursuant to this Agreement as the owner thereof for all purposes unless
such promissory note shall have been transferred in accordance with Section
11.10 hereof. Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of Requisite Lenders as it deems appropriate
or it shall first be indemnified to its satisfaction by Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action except for its own gross negligence or
willful misconduct. Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request of
Requisite Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all Lenders.
. Agent shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default or Potential Event of Default hereunder
unless Agent has received notice from a Lender or any Borrower referring to this
Agreement, describing such Event of Default or Potential Event of Default and
stating that such notice is a "notice of default". In the event that Agent
receives such a notice, Agent shall promptly give notice thereof to Lenders. The
Agent shall take such action with respect to such Event of Default or Potential
Event of Default as shall be reasonably directed by Requisite Lenders; provided
that unless and until Agent shall have received such directions, Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Event of Default or Potential Event of Default as it shall
deem advisable in the best interests of Lenders.
. Each Lender expressly acknowledges that neither Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by Agent hereinafter
taken, including any review of the affairs of Borrower, shall be deemed to
constitute any representation or warranty by Agent to any Lender. Each Lender
represents to Agent that it has, independently and without reliance upon Agent
or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of each Borrower and FSI and made its own decision to make its
Loans hereunder and enter into this Agreement. Each Lender also represents that
it will, independently and without reliance upon Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of each Borrower and FSI. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by Agent hereunder
or by the other Loan Documents, Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, operations, property, financial and other condition or
creditworthiness of each Borrower and FSI which may come into the possession of
Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
. Each Lender agrees to indemnify Agent in its capacity as such (to the
extent not reimbursed by Borrowers and without limiting the obligation of
Borrowers to do so), ratably according to the respective amounts of their Pro
Rata Share of the Commitments, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against Agent in any way relating to or
arising out of this Agreement or the other Loan Documents, or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by Agent under or
in connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's bad faith, gross negligence or willful misconduct.
The agreements in this Section 9.7 shall survive the repayment of the Loans and
all other amounts payable hereunder.
. Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with any Borrower or FSI as though
Agent were not Agent hereunder. With respect to Advances made or renewed by it,
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not
Agent, and the terms "Lender" and "Lenders" shall include Agent in its
individual capacity.
. Agent may resign at any time by giving thirty (30) days' prior
written notice thereof to Lenders and Borrowers; provided, however, that the
retiring Agent shall continue to serve until a successor Agent shall have been
selected and approved pursuant to this Section 9.9. Upon any such notice, Agent
shall have the right to appoint a successor Agent; provided, however, that if
such successor shall not be a signatory to this Agreement, such appointment
shall be subject to the consent of Requisite Lenders. Agent may be replaced by
Requisite Lenders, with or without cause; provided, however, that any successor
agent shall be subject to Borrowers' consent, which consent shall not be
unreasonably withheld. Upon the acceptance of any appointment as an Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 9 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement.
. 10. EXPENSES AND INDEMNITIES
. Borrowers and Lenders agree that, as the following costs, expenses,
charges and other disbursements benefit each Borrower and as such costs,
expenses, charges and other disbursements cannot easily be ratably allocated to
the account of any Borrower or Borrowers, each Borrower, unless otherwise
specified in this Section 10.1, shall pay, as its Obligation, promptly on
demand, and in any event within thirty (30) days of the invoice date therefor,
(a) all costs, expenses, charges and other disbursements (including, without
limitation, all reasonable attorneys' fees and allocated expenses of outside
counsel and in-house legal staff) incurred by or on behalf of Agent or any
Lender in connection with the preparation of the Loan Documents and all
amendments and modifications thereof, extensions thereto or substitutions
therefor, and all costs, expenses, charges or other disbursements incurred by or
on behalf of Agent or any Lender (including, without limitation all reasonable
attorney's fees and allocated expenses of outside counsel and in-house legal
staff) in connection with the furnishing of opinions of counsel (including,
without limitation, any opinions requested by Lenders as to any legal matters
arising hereunder) and of Borrowers' performance of and compliance with all
agreements and conditions contained herein or in any of the other Loan Documents
on its part to be performed or complied with; (b) all other costs, expenses,
charges and other disbursements incurred by or on behalf of Agent or any Lender
in connection with the negotiation, preparation, execution, administration,
continuation and enforcement of the Loan Documents, and the making of the Loans
hereunder; (c) all costs, expenses, charges and other disbursements (including,
without limitation, all reasonable attorney's fees and allocated expenses of
outside counsel and in-house legal staff) incurred by or on behalf of Agent or
any Lender in connection with the assignment or attempted assignment to any
other Person of all or any portion of any Lender's interest under this Agreement
pursuant to Section 11.10; and (d) regardless of the existence of an Event of
Default or Potential Event of Default, all legal, appraisal, audit, accounting,
consulting or other fees, costs, expenses, charges or other disbursements
incurred by or on behalf of Agent or any Lender in connection with any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Lenders, Agent, any Borrower or any other Person) seeking to enforce any
Obligations of, or collecting any payments due from, any Borrower under this
Agreement and the Notes, all of which amounts shall be deemed to be part of the
Obligations; provided, however, that Lenders shall be entitled to collect the
full amount of such costs, expenses, charges and other disbursements only once.
Notwithstanding anything to the contrary contained in this Section 10.1, so long
as no Event of Default or Potential Event of Default shall have occurred and be
continuing, all appraisals of the Eligible Inventory shall be at the expense of
Lenders. If an Event of Default or Potential Event of Default shall have
occurred and be continuing, such appraisals shall be at the expense of the
Requesting Borrower.
. Whether or not the transactions contemplated hereby shall be
consummated:
. Each Borrower, as to itself, and FSI, jointly and severally
as to itself and each Borrower, shall pay, indemnify, and hold each Lender,
Agent and each of their respective officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses or disbursements (including
reasonable attorney's fees and the allocated cost of in-house counsel) of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and any other Loan Documents,
or the transactions contemplated hereby and thereby, and with respect to any
investigation, litigation or proceeding (including any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate proceeding) related to this Agreement or the Loans or
the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that Borrowers and FSI shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnified Person.
. .2 Environmental Indemnity
(a) Each Borrower, to the extent of its pro rata share
of ownership of Property involved in any investigation, litigation or
proceeding, as set forth below, and FSI hereby jointly and severally
agree to indemnify, defend and hold harmless each Indemnified Person,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or
disbursements (including reasonable attorneys' fees and the allocated
cost of in-house counsel and of internal environmental audit or review
services), which may be incurred by or asserted against such
Indemnified Person in connection with or arising out of any pending or
threatened investigation, litigation or proceeding, or any action taken
by any Person, with respect to any Environmental Claim arising out of
or related to any Property owned, leased or operated by such Borrower.
No action taken by legal counsel chosen by Agent or any Lender in
defending against any such investigation, litigation or proceeding or
requested remedial, removal or response action shall (except for
actions which constitute fraud, willful misconduct, gross negligence or
material violations of law) vitiate or in any way impair Borrowers' or
FSI's obligation and duty hereunder to indemnify and hold harmless
Agent and each Lender. Agent and all Lenders agree to use reasonable
efforts to cooperate with Borrowers respecting the defense of any
matter indemnified hereunder, except insofar as and to the extent that
their respective interests may be adverse to Borrowers' or FSI's in
Agent's or such Lender's sole discretion.
(b) In no event shall any site visit, observation, or
testing by Agent or any Lender be deemed a representation or warranty
that Hazardous Materials are or are not present in, on, or under the
site, or that there has been or shall be compliance with any
Environmental Law. Neither Borrowers, FSI nor any other Person is
entitled to rely on any site visit, observation, or testing by Agent or
any Lender. Except as otherwise provided by law, neither Agent nor any
Lender owes any duty of care to protect Borrowers, or any one of them,
or any other Person against, or to inform Borrowers or any other party
of, any Hazardous Materials or any other adverse condition affecting
any site or Property. Neither Agent nor any Lender shall be obligated
to disclose to Borrowers, FSI or any other Person any report or
findings made as a result of, or in connection with, any site visit,
observation, or testing by Agent or any Lender.
. The obligations in this Section 10.2 shall survive payment
of all other Obligations. At the election of any Indemnified Person, Borrowers
shall defend such Indemnified Person using legal counsel satisfactory to such
Indemnified Person in such Person's reasonable discretion, at the sole cost and
expense of Borrowers, which cost and expense shall be allocated to Borrowers
according to such Borrower's pro rata share of ownership of any Property in
relation to which such obligations arise. All amounts owing under this Section
10.2 shall be paid within thirty (30) days after written demand.
. 11. MISCELLANEOUS
. All covenants, agreements, representations and warranties made herein
shall survive the execution and delivery of the Loan Documents and the making of
the Loans hereunder.
. No failure or delay on the part of Agent or any Lender in the
exercise of any power, right or privilege under this Agreement, the Note or any
of the other Loan Documents shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.
. Except as otherwise provided in this Agreement, any notice or other
communication herein required or permitted to be given shall be in writing and
may be delivered in person, with receipt acknowledged, or sent by telex,
facsimile, telecopy, computer transmission or by United States mail, registered
or certified, return receipt requested, or by Federal Express or other
nationally recognized overnight courier service, postage prepaid and
confirmation of receipt requested, and addressed as set forth on the signature
pages to this Agreement or at such other address as may be substituted by notice
given as herein provided. The giving of any notice required hereunder may be
waived in writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly given or served on the date on which the same
shall have been personally delivered, with receipt acknowledged, or sent by
telex, facsimile, telecopy or computer transmission (with appropriate
answerback), three (3) Business Days after the same shall have been deposited in
the United States mail or on the next succeeding Business Day if the same has
been sent by Federal Express or other nationally recognized overnight courier
service. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication.
. Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
. Whenever possible, each provision of this Agreement, the Note and
each of the other Loan Documents shall be interpreted in such a manner as to be
valid, legal and enforceable under the applicable law of any jurisdiction.
Without limiting the generality of the foregoing sentence, in case any provision
of this Agreement, the Note or any of the other Loan Documents shall be invalid,
illegal or unenforceable under the applicable law of any jurisdiction, the
validity, legality and enforceability of the remaining provisions, or of such
provision in any other jurisdiction, shall not in any way be affected or
impaired thereby.
. 6 Entire Agreement; Construction; Amendments And Waivers
.1 This Agreement, the Notes and each of the other
Loan Documents dated as of the date hereof, taken together, constitute and
contain the entire agreement among Borrowers, Lenders and Agent and supersede
any and all prior agreements, negotiations, correspondence, understandings and
communications between the parties, whether written or oral, respecting the
subject matter hereof.
.2 This Agreement is the result of negotiations
between and has been reviewed by each Borrower, FSI, and each Lender executing
this Agreement as of the Closing Date and Agent and their respective counsel;
accordingly, this Agreement shall be deemed to be the product of the parties
hereto, and no ambiguity shall be construed in favor of or against Borrowers,
FSI, Lenders or Agent. Borrowers, FSI, Lenders and Agent agree that they intend
the literal words of this Agreement and the other Loan Documents and that no
parol evidence shall be necessary or appropriate to establish Borrowers', FSI's
any Lender's or Agent's actual intentions.
.3 No amendment, modification, discharge or waiver of
or consent to any departure by any Borrower or FSI from, any provision in this
Agreement or any of the other Loan Documents relating to (a) the definition of
"Borrowing Base" or "Requisite Lenders," (b) any increase of the amount of any
Commitment, (c) any reduction of principal, interest or fees payable hereunder,
(d) any postponement of any date fixed for any payment or prepayment of
principal or interest hereunder or (e) this Section 11.6.3 shall be effective
without the written consent of all Lenders. Any and all other amendments,
modifications, discharges or waivers of, or consents to any departures from any
provision of this Agreement or of any of the other Loan Documents shall not be
effective without the written consent of Requisite Lenders. Any waiver or
consent with respect to any provision of the Loan Documents shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on any Borrower or FSI in any case shall entitle
any Borrower or FSI to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, waiver or consent effected in
accordance with this Section 11.6 shall be binding upon each Lender then party
hereto and each subsequent Lender, on Borrower, and on FSI.
. All covenants, agreements, representations and warranties made herein
by each Borrower or FSI shall, notwithstanding any investigation by Lenders or
Agent be deemed to be material to and to have been relied upon by Lenders.
. Lenders shall be under no obligation to marshall any assets in favor
of any Borrower or any other person or against or in payment of any or all of
the Obligations. To the extent that any Borrower makes a payment or payments to
Lenders or Agent, or Lenders or Agent, on behalf of Lenders, enforce their or
its Liens or exercises their or its rights of set-off, and such payment or
payments or the proceeds of such enforcement or set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under Title
11 of the United States Code or under any other similar federal or state law,
common law or equitable cause, then to the extent of such recovery the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or set-off had not occurred.
. All sums payable by Borrowers or FSI pursuant to this Agreement, the
Note or any of the other Loan Documents shall be payable without notice or
demand and shall be payable in United States Dollars without set-off or
reduction of any manner whatsoever.
. 10 Binding Effect, Assignment
.1 This Agreement, the Note and the other Loan
Documents shall be binding upon and shall inure to the benefit of the parties
hereto and thereto and their respective successors and assigns, except that no
Borrower nor FSI may assign its rights hereunder or thereunder or any interest
herein or therein without the prior written consent of each Lender. Each Lender
shall (a) have the right in accordance with this Section 11.10 to sell and
assign to any Eligible Assignee all or any portion of its interest (provided
that any such partial assignment shall not be for a principal amount of less
than Five Million Dollars ($5,000,000)) under this Agreement, the Notes and the
other Loan Documents, together with a ratable interest in the AFG Agreement and
the TEC AcquiSub Agreement and the related Notes and other Loan Documents (as
separately described and defined in those agreements), subject to the prior
written consent of the affected Borrower, which consent shall not be
unreasonably withheld, and (b) to grant any participation or other interest
herein or therein, except that each potential participant to which a Lender
intends to grant any rights under Sections 2.9, 2.10, 5.1 or 10.2 shall be
subject to the prior written consent of the affected Borrower, which consent
shall not be unreasonably withheld; provided, however, that no such sale,
assignment or participation grant shall result in requiring registration under
the Securities Act of 1933, as amended, or qualification under any state
securities law.
.2 Subject to the limitations of this Section
11.10.2, each Lender may sell and assign, from time to time, all or any portion
of its Pro Rata Share of the Commitments to any of its Affiliates or, with the
approval of the affected Borrower and FSI (which approval shall not be
unreasonably withheld), to any other financial institution acceptable to Agent,
subject to the assumption by such assignee of the share of the Commitments so
assigned. The assignment to such Affiliate or other financial institution shall
be evidenced by an Assignment and Assumption in the form of Exhibit I
("Assignment and Acceptance") executed by the assignor Lender (hereinafter from
time to time referred to as the "Assignor Lender") and such Affiliate or other
financial institution (which, upon such assignment shall become a Lender
hereunder (hereinafter from time to time referred to as the "Assignee Lender")).
The Assignment and Assumption need not include any of the economic or financial
terms upon which such Assignee Lender receives the assignment from the Assignor
Lender, and such terms need not be disclosed to or approved by such Borrower or
FSI; provided only that such terms do not diminish the obligations undertaken by
such Assignee Lender in the Assignment and Assumption or increase the
obligations of Borrowers or FSI under this Agreement. Upon execution of such
Assignment and Assumption, (a) the definition of "Commitments" in Section 1
hereof and the Pro Rata Shares set forth therein shall be deemed to be amended
to reflect each Lender's share of the Commitments, giving effect to the
assignment and (b) the Assignee Lender shall, from the effective date of the
instrument of assignment and assumption, be subject to all of the obligations,
and entitled to all of the rights, of a Lender hereunder, except as may be
expressly provided to the contrary in the Assignment and Assumption. To the
extent the obligations hereunder of the Assignor Lender are assumed by the
Assignee Lender, the Assignor Lender shall be relieved of such obligations. Upon
the assignment of any interest by any Assignor Lender pursuant to this Section
11.10.2, such Assignor Lender agrees to supplement Schedule 1.1 to show the date
of such assignment, the Assignor Lender, the Assignee Lender, the Assignee
Lender's address for notice purposes and the amount of the Commitments so
assigned.
.3 Subject to the limitations of this Section
11.10.3, any Lender may also grant, from time to time, participation interests
in the interests of such Lender under this Agreement, the Notes and the other
Loan Documents to any other financial institution without notice to, or approval
of, any Borrower or FSI. The grant of such a participation interest shall be on
such terms as the granting Lender determines are appropriate, provided only that
(a) the holder of such participation interest shall not have any of the rights
of a Lender under this Agreement except, if the participation agreement
expressly provides, rights under Sections 2.9, 2.10, 5.1 and 10.2, and (b) the
consent of the holder of such a participation interest shall not be required for
amendments or waivers of provisions of the Loan Documents other than, if the
participation agreement expressly provides, those which (i) increase the
monetary amount of any Commitment, (ii) decrease any fee or any other monetary
amount payable to Lenders, or (iii) extend the date upon which any monetary
amount is payable to Lenders.
. This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts, and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute
but one and the same instrument. Each such agreement shall become effective upon
the execution of a counterpart hereof or thereof by each of the parties hereto
or thereto, delivery of each such counterpart to Agent.
. Borrowers and FSI recognize that, in the event any Borrower or FSI
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, the Notes or any of the other Loan Agreements, any remedy
at law may prove to be inadequate relief to Lenders or Agent; therefore,
Borrowers and FSI agree that Lenders or Agent, if Lenders or Agents so request,
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
. EACH BORROWER AND FSI HEREBY AGREE THAT EACH SHALL GIVE PROMPT
WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES IT HAS, OR MAY SEEK
TO ASSERT OR ALLEGE AGAINST ANY LENDER OR AGENT, WHETHER SUCH CLAIM IS BASED IN
LAW OR EQUITY, ARISING UNDER OR RELATED TO THIS AGREEMENT, THE NOTES OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO THE LOANS CONTEMPLATED HEREBY OR THEREBY OR ANY
ACT OR OMISSION TO ACT BY ANY LENDER OR AGENT WITH RESPECT HERETO OR THERETO,
AND THAT IF IT SHALL FAIL TO GIVE SUCH PROMPT NOTICE TO AGENT WITH REGARD TO ANY
SUCH CLAIM OR CAUSE OF ACTION, IT SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE
FOREVER BARRED FROM BRINGING OR ASSERTING SUCH CLAIM OR CAUSE OF ACTION IN ANY
SUIT, ACTION OR PROCEEDING IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY.
. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT,
EACH BORROWER AND FSI HEREBY AGREE THAT EACH SHALL NOT SEEK FROM LENDERS OR
AGENT, UNDER ANY THEORY OF LIABILITY, INCLUDING, WITHOUT LIMITATION, ANY THEORY
IN TORTS, ANY PUNITIVE DAMAGES.
. The relationship between Borrowers and FSI, on the one hand, and
Lenders and Agent, on the other, is, and at all time shall remain solely that of
a borrower and lenders. Neither Lenders nor Agent shall under any circumstances
be construed to be partners or joint venturers of Borrowers or FSI or any of
their Affiliates; nor shall Lenders nor Agent under any circumstances be deemed
to be in a relationship of confidence or trust or a fiduciary relationship with
Borrowers or FSI or any of their Affiliates, or to owe any fiduciary duty to any
Borrower or any of its Affiliates. Lenders and Agent do not undertake or assume
any responsibility or duty to Borrowers or FSI or any of their Affiliates to
select, review, inspect, supervise, pass judgment upon or otherwise inform
Borrowers or any of their Affiliates of any matter in connection with its or
their Property, any collateral held by Agent or any Lender or the operations of
Borrowers or FSI or any of their Affiliates. Borrowers and each of their
Affiliates shall rely entirely on their own judgment with respect to such
matters, and any review, inspection, supervision, exercise of judgment or supply
of information undertaken or assumed by any Lender or Agent in connection with
such matters is solely for the protection of Lenders and Agent and neither
Borrowers nor any Affiliate is entitled to rely thereon.
. Each Borrower and FSI agrees that its liability hereunder shall be
the immediate, direct, and primary obligation of such Borrower or FSI, as the
case may be, and shall not be contingent upon the Agent's or any Lender's
exercise or enforcement of any remedy it may have against any other Borrower,
FSI or any other person, or against any collateral or any security for the
Obligations. Without limiting the generality of the foregoing, the Obligations
shall remain in full force and effect without regard to and shall not be
impaired or affected by, nor shall such Borrower or FSI be exonerated or
discharged by, any of the following events:
.1 Insolvency, bankruptcy, reorganization,
arrangement, adjustment, composition, assignment for the benefit of creditors,
death, liquidation, winding up or dissolution of any Borrower or any guarantor
of the Obligations of any Borrower;
.2 Any limitation, discharge, or cessation of the
liability of any other Borrower or any guarantor for the Obligations of such
other Borrower due to any statute, regulation or rule of law, or any invalidity
or unenforceability in whole or in part of the documents evidencing the
Obligations of such other Borrower or any guaranty of the Obligations of such
other Borrower;
.3 Any merger, acquisition, consolidation or change
in structure of any Borrower or any guarantor of the Obligations of any Borrower
or any sale, lease, transfer or other disposition of any or all of the assets,
shares or interests in or of any Borrower or any guarantor of the Obligations of
any Borrower;
.4 Any assignment or other transfer, in whole or in
part, of any Lender's interests in and rights under this Agreement or any of the
other Loan Documents, including, without limitation, any assignment or other
transfer, in whole or in part, of Banks' interests in and to any collateral;
.5 Any claim, defense, counterclaim or setoff, other
than that of prior performance, that any Borrower or any guarantor of the
Obligations of any Borrower may have or assert, including, but not limited to,
any defense of incapacity or lack of corporate or other authority to execute any
documents relating to the Obligations of any Borrower or any collateral;
.6 Agent's or any Lender's amendment, modification,
renewal, extension, cancellation or surrender of any agreement, document or
instrument relating to this Agreement, the Obligations of any Borrower or any
collateral, or any exchange, release, or waiver of any collateral;
.7 Agent's or any Lender's exercise or nonexercise of
any power, right or remedy with respect to the Obligations of any Borrower or
any collateral, including, but not limited to, the compromise, release,
settlement or waiver with or of any Borrower or any other person;
.8 Agent's or any Lender's vote, claim, distribution,
election, acceptance, action or inaction in any bankruptcy case related to the
Obligations of any Borrower or any collateral; and
.9 Any impairment or invalidity of any collateral or
any failure to perfect any of Agent's liens thereon.
. Each Borrower and FSI hereby expressly waives (a) diligence,
presentment, demand for payment and protest affecting any other Borrower's or
FSI's liability under the Loan Documents; (b) discharge due to any disability of
any Borrower or FSI; (c) any defenses of any other Borrower or FSI to
obligations under the Loan Documents not arising under the express terms of the
Loan Documents or from a material breach thereof by Agent or any Lender which
under applicable law has the effect of discharging any other Borrower from the
Obligations of any Borrower as to which this Agreement is sought to be enforced;
(d) the benefit of any act or omission by Agent or any Lender which directly or
indirectly results in or aids the discharge of any other Borrower from any of
the Obligations of any such Borrower by operation of law or otherwise; (e) all
notices whatsoever, including, without limitation, notice of acceptance of the
incurring of the Obligations of any Borrower; (f) any right it may have to
require Agent or any Lender to disclose to it any information that Agent or
Lenders may now or hereafter acquire concerning the financial condition or any
circumstances that bear on the risk of nonpayment by any other Borrower,
including the release of such other Borrower from its Obligations hereunder; and
(g) any requirement that Agent and Lenders exhaust any right, power or remedy or
proceed against any other Borrower or any other security for, or any guarantor
of, or any other party liable for, any of the Obligations of any Borrower, or
any portion thereof (including without limitation any requirements set forth in
Section 26-7 of the North Carolina General Statutes). Each Borrower specifically
agrees that it shall not be necessary or required, and Borrowers shall not be
entitled to require, that Agent or any Lender (i) file suit or proceed to assert
or obtain a claim for personal judgment against any other Borrower for all or
any part of the Obligations of any Borrower; (ii) make any effort at collection
or enforcement of all or any part of the Obligations of any Borrower from any
Borrower; (iii) foreclose against or seek to realize upon any collateral or any
other security now or hereafter existing for all or any part of the Obligations
of any Borrower; (iv) file suit or proceed to obtain or assert a claim for
personal judgment against any Borrower or any guarantor or other party liable
for all or any part of the Obligations of any Borrower; (v) exercise or assert
any other right or remedy to which Agent or any Lender is or may be entitled in
connection with the Obligations of any Borrower or any security or guaranty
relating thereto to assert; or (vi) file any claim against assets of one
Borrower before or as a condition of enforcing the liability of any other
Borrower under this Agreement or the Notes.
. Except as otherwise expressly provided in any of the Loan Documents,
in all respects, including all matters of construction, validity and
performance, this Agreement and the Obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of North Carolina applicable to contracts made and performed in such
state, without regard to the principles thereof regarding conflict of laws, and
any applicable laws of the United States of America.
. Each Borrower and FSI hereby irrevocably consent to the personal
jurisdiction of the state and federal courts located in Mecklenburg County,
North Carolina, in any action, claim or other proceeding arising out of any
dispute in connection with this Agreement, the Note and the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations. Each Borrower hereby irrevocably consents to the
service of a summons and complaint and other process in any action, claim or
proceeding brought by Agent or any Lender in connection with this Agreement or
the other Loan Documents, any rights or obligations hereunder or thereunder, or
the performance of such rights and obligations, on behalf of itself or its
Property, in the manner specified in Section 11.3. Nothing in this Section 11.19
shall affect the right of the Agent or any Lender to serve legal process in any
other manner permitted by applicable law or affect the right of Agent or any
Lender to bring any action or proceeding against any Borrower or its properties
in the courts of any other jurisdictions.
. This Agreement is not intended to be, and shall not be construed to
create, a novation or accord and satisfaction, and, except as otherwise provided
herein, the Growth Fund Agreement, as executed and delivered on September 27,
1995, shall remain in full force and effect. Without limiting the generality of
the foregoing, Section 10.2 of the Growth Fund Agreement shall survive the
effectiveness of the Agreement and shall remain enforceable against both the
Borrowers and EGF II.
. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER AND FSI, BY
EXECUTION HEREOF, AND THE AGENT AND EACH LENDER, BY ACCEPTANCE HEREOF,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS AGREEMENT, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED
TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE AGENT
AND EACH LENDER TO ACCEPT THIS AGREEMENT AND THE NOTES EXECUTED AND DELIVERED BY
EACH BORROWER PURSUANT TO THIS AGREEMENT.
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORROWER PLM EQUIPMENT GROWTH FUND III
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
-----------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH FUND IV
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
-----------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH FUND V
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
------------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH FUND VI
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
------------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH & INCOME FUND VII
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
-----------------------------
J. Michael Allgood
Chief Financial Officer
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I,
L.L.C.
BY PLM FINANCIAL SERVICES, INC.,
ITS MANAGER
By /s/ J. Michael Allgood
------------------------------
J. Michael Allgood
Chief Financial Officer
Notice to any Borrower to be sent to:
[Insert name of Borrower]
c/o PLM Financial Services, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: J. Michael Allgood
Vice President of Finance
and Chief Financial Officer
Telephone: 415/974-1399
Telecopy: 415/882-0860
With a copy to:
TEC AcquiSub, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: General Counsel
Telephone: 415/896-1138
Facsimile: 415/882-0860
FSI PLM FINANCIAL SERVICES, INC.
By /s/ J. Michael Allgood
-----------------------------------
J. Michael Allgood
Chief Financial Officer
Notice to be sent to:
PLM Financial Services, Inc.
One Market Plaza
Steuart Street Tower, Suite 900
San Francisco, CA 94105
Attention: J. Michael Allgood
Vice President of Finance
and Chief Financial Officer
Telephone: 415/974-1399
Telecopy: 415/882-0860
AGENT FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By /s/ Bill A. Shirley
-----------------------------------
Bill A. Shirley
Vice President
Notice to be sent to:
First Union National Bank of North Carolina
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: 704/383-5164
Facsimile: 704/374-4092
LENDERS FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By /s/ Bill A. Shirley
-----------------------------------
Bill A. Shirley
Vice President
Notice to be sent to:
First Union National Bank of North Carolina
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson,
Director
Telephone: 704/383-5164
Facsimile: 704/374-4092
The undersigned acknowledges and agrees to Section 11.20 of this Agreement.
PLM EQUIPMENT GROWTH FUND II
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
-----------------------------------
J. Michael Allgood
Chief Financial Officer
<PAGE>
SCHEDULE A
(COMMITMENTS)
Pro
Rate
Lender Commitment Share
First Union National Bank $35,000,000 35/35 x 100%
of North Carolina
AMENDMENT NO. 1
TO SECOND AMENDED AND RESTATED
WAREHOUSING CREDIT AGREEMENT
(Growth Funds)
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED WAREHOUSING CREDIT
AGREEMENT dated as of November 5, 1996 (the "Amendment"), is entered into by and
among PLM EQUIPMENT GROWTH FUND IV, a California limited partnership ("EGF IV"),
PLM EQUIPMENT GROWTH FUND V, a California limited partnership ("EGF V"), PLM
EQUIPMENT GROWTH FUND VI, a California limited partnership ("EGF VI"), PLM
EQUIPMENT GROWTH & INCOME FUND VII, a California limited partnership ("EGF
VII"), and PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C., a Delaware
limited liability company ("Income Fund I") (EGF IV, EGF V, EGF VI, EGF VII and
Income Fund I each individually being a "Borrower" and, collectively, the
"Borrowers"), and PLM FINANCIAL SERVICES, INC., a Delaware corporation and the
sole general partner, in the case of EGF IV, EGF V, EGF VI and EGF VII, and the
sole manager, in the case of Income Fund I ("FSI"), FIRST UNION NATIONAL BANK OF
NORTH CAROLINA ("FUNB"), FLEET BANK, N.A. ("Fleet") and each other financial
institution which may hereafter execute and deliver an instrument of assignment
pursuant to Section 11.10 of the Credit Agreement (as defined below) (any one
financial institution individually, a "Lender," and collectively, "Lenders"),
and FUNB, as agent on behalf of Lenders (not in its individual capacity, but
solely as agent, "Agent"). Capitalized terms used herein without definition
shall have the same meanings herein as given to them in the Credit Agreement.
RECITAL
<PAGE>
in respect of pledA.Annual Borrowers, PLM Equipment Growth Fund III, a
California limited partnership ("EGF III"), Lenders and Agent have entered into
that certain Second Amended and Restated Warehousing Credit Agreement dated as
of May 31, 1996 (the "Credit Agreement"), by and among Borrowers, EGF III, FUNB
(as the sole Lender party thereto), and Agent pursuant to which Lenders have
agreed to extend and make available to Borrowers certain advances of money.
B. Borrowers desire that Lenders and Agent amend the Credit
Agreement to increase the aggregate amount of the Commitments by $15,000,000, to
extend the Commitment Termination Date, to remove EGF III as a borrower under
the revolving credit facility, to add PLM International, Inc., a Delaware
corporation ("PLMI"), as a guarantor of FSI's Obligations under the Credit
Agreement and FSI's Guaranty Obligations under its Guaranty, as more fully set
forth herein.
C. FUNB is currently the sole Lender under the Credit
Agreement. On the terms and conditions set forth below, Fleet desires to become
a Lender under the Credit Agreement and to make Loans to Borrowers with an
aggregate Commitment of $15,000,000.
D. Subject to the representations and warranties of Borrowers
and upon the terms and conditions set forth in this Amendment, Lenders and Agent
are willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
2. AMENDMENTS. The Credit Agreement is hereby amended
as follows:
1 Section 1.1 Defined Terms (Commitment). The definition of
"Commitment" set forth in Section 1.1 of the Credit Agreement is amended by
deleting Schedule A to the Credit Agreement entitled "Commitments" referred to
in such definition in its entirety and replacing such Schedule A with the
Schedule A attached to this Amendment, and the respective Commitment of each
Lender in effect from and after the effective date of this Amendment shall be
equal to the amount set forth opposite such Lender's name in Schedule A.
1.2 Section 1.1 Defined Terms (Commitment Termination Date). The
definition of "Commitment Termination Date" set forth in Section 1.1 of the
Credit Agreement is deleted and replaced with the following:
"Commitment Termination Date" means October 3, 1997.
2 Section 1.1 Defined Terms (Guaranty). The definition of
"Guaranty" set forth in Section 1.1 of the Credit Agreement is deleted and
replaced with the following:
"Guaranty" means, collectively, that certain Guaranty dated as
of June 30, 1993, executed by FSI in favor of Lenders and Agent and
that certain Guaranty dated as of November 5, 1996, executed by PLMI in
favor of Lenders and Agent.
3 Section 1.1 Defined Terms (Responsible Officer). The
definition of "Responsible Officer" set forth in Section 1.1 of the Credit
Agreement is deleted and replaced with the following:
"Responsible Officer" means for (i) FSI, any of the President,
Executive Vice President, Chief Financial Officer, Secretary or
Corporate Controller of FSI having authority to request Advances or
perform other duties required hereunder, and (ii) Borrowers, any of the
President, Executive Vice President, Chief Financial Officer, Secretary
or Corporate Controller of FSI as the sole general partner of EGF IV,
EGF V, EGF VI or EGF VII, as the case may be, or sole manager of Income
Fund I, in each case having authority to request Advances or perform
other duties required hereunder.
4 Section 1.1 Defined Terms (Requisite Lenders). The
definition of "Requisite Lenders" set forth in Section 1.1 of the Credit
Agreement is deleted and replaced with the following:
"Requisite Lenders" means any combination of Lenders whose
combined Pro Rata Share (and voting interest with respect thereto) of
all amounts outstanding under this Agreement, or, in the event there
are no amounts outstanding, the Commitments, is greater than sixty-six
and two-thirds percent (66 2/3%) of all such amounts outstanding or the
total Commitments, as the case may be; provided, however, that in the
event there are only two (2) Lenders, Requisite Lenders means both
Lenders.
5 Section 2.2.1 Revolving Facility. The portion of Section
2.1.1 of the Credit Agreement preceding subsection (a) is deleted and replaced
with the following:
2.1.1 Revolving Facility. Subject to the terms and
conditions of this Agreement and in reliance upon the representations
and warranties of Borrowers set forth herein, Lenders hereby agree to
make Advances (as defined below) of immediately available funds to
Borrowers, on a revolving basis, from the Closing Date until the
Business Day immediately preceding the commitment Termination Date, in
the aggregate principal amount outstanding at any time not to exceed
the lesser of (a) the total Commitments for the Facility less the
aggregate principal amount then outstanding under the TEC AcquiSub
Agreement and under the AFG Agreement or (b) for any one Borrower, its
respective Borrowing Base or (c) $35,000,000 (such lesser amount being
the "Maximum Availability"), as more fully set forth in this Section
2.1.1. The obligation of Borrowers to repay the Advances made to any
Borrower shall be several but not joint.
6 Section 2.1.1(a)(i) Facility Commitments. Section
2.1.1(a)(i) of the Credit Agreement is deleted and replaced with the following:
(i) On the Funding Date requested by any Borrower
(the "Requesting Borrower"), after such Borrower shall have satisfied
all applicable conditions precedent set forth in Section 3, each Lender
shall advance immediately available funds to Agent (each such advance
being an "Advance") evidencing such Lender's Pro Rata Share of a loan
("Loan"). Agent shall immediately advance such immediately available
funds to such Borrower at the Designated Deposit Account (or such other
deposit account at FUNB or such other financial institution as to which
such Borrower and Agent shall agree at least three (3) Business Days
prior to the requested Funding Date) on the Funding Date with respect
to such Loan. The Requesting Borrower shall pay interest accrued on the
Loan at the rates and in the manner set forth in Section 2.1.1(b).
Subject to the terms and conditions of this Agreement, the unpaid
principal amount of each Loan and all unpaid interest accrued thereon,
together with all other fees, expenses, costs and other sums chargeable
to the Requesting Borrower incurred in connection therewith shall be
due and payable no later than the Maturity Date of such Loan. Each Loan
advanced hereunder by each Lender shall be evidenced by the Requesting
Borrower's revolving promissory note substantially in the form of
Exhibit A (each a "Note").
7 Section 3.3.1 General Partner or Manager. Section 3.3.1 of
the Credit Agreement is deleted and replaced with the following:
3.3.1 General Partner Or Manager. FSI shall have
ceased to be the sole general partner of any of EGF IV, EGF V, EGF VI
or EGF VII or the sole manager of Income Fund I, whether due to the
voluntary or involuntary withdrawal, substitution, removal or transfer
of FSI from or of all or any portion of FSI's general partnership
interest or capital contribution in such Borrower.
8 Section 5 Annual Statements. Section 5.1.2 of the Credit
Agreement is deleted and replaced with the following:
Annual Statements. As ( in the case of such consolidated financial statements,
accompanied by a report thereon of an independent public accountant of
recognized national standing selected by each Borrower and PLMI and
satisfactory to Agent, which report shall contain an opinion which is
not qualified in any manner or which otherwise is satisfactory to
Requisite Lenders, in their sole discretion, and (B) in the case of
such consolidating financial statements, certified by the Chief
Financial Officer or Corporate Controller of PLMI;
9 Section 6 Borrowers' and FSI's Negative Covenants. Section 6
of the Credit Agreement is deleted and replaced with the following:
SECTION 6. BORROWERS' AND FSI'S NEGATIVE COVENANTS.
So long as any of the Commitments shall be available
and until full, complete and indefeasible payment and performance of
the Obligations, unless Requisite Lenders shall otherwise consent in
writing, each Borrower, severally, as to itself, but not jointly as to
the other Borrowers and FSI, and FSI, jointly and severally with each
Borrower as to such Borrower and to itself, covenants and agrees as
follows:
6.1 Liens; Negative Pledges; And Encumbrances. Each Borrower
shall not create, incur, assume or suffer to exist, and shall not
permit any Marine Subsidiary of such Borrower or Owner Trustee holding
record title to any Eligible Inventory for the beneficial interest of
such Borrower to create, incur, assume or suffer to exist, and FSI
shall not permit any of its Subsidiaries (including, without
limitation, TEC and TEC AcquiSub) to create, incur, assume or suffer to
exist, any Lien of any nature upon or with respect to any of their
respective Property, whether now or hereafter owned, leased or
acquired, except (collectively, the "Permitted Liens"):
6.1.1 Existing Liens disclosed on Schedule 6.1,
provided that the obligations secured thereby are not increased;
6.1.2 Liens for Charges if payment shall not at the
time be required to be made in accordance with Section 5.4;
(a) in respect of pledg( under workers' compensation laws, unemployment
insurance and other types of social security or similar legislation,
(b) in connection with surety, appeal and similar bonds incidental to
the conduct of litigation, (c) in connection with bid, performance or
similar bonds and mechanics', laborers' and materialmen's and similar
statutory Liens not then delinquent, or (d) incidental to the conduct
of the business of such Borrower, any Marine Subsidiary of such
Borrower, or any Owner Trustee or any of FSI's Subsidiaries and which
were not incurred in connection with the borrowing of money or the
obtaining of advances or credit; provided that the Liens permitted by
this Section 6.1.3 do not in the aggregate materially detract from the
value of any assets or property of or materially impair the use thereof
in the operation of the business of such Borrower, any Owner Trustee or
any of FSI's Subsidiaries; and provided further that the adverse
determination of any claim or liability, contingent or otherwise,
secured by any of such Liens would not either individually or in the
aggregate, with reasonable likelihood, have a Material Adverse Effect;
6.1.4 Permitted Rights of Others; and
6.1.5 Liens granted in favor of Agent on behalf of
Lenders under the TEC AcquiSub Agreement and the security agreement and
other loan documents delivered by TEC AcquiSub pursuant thereto.
6.2 Acquisitions. Each Borrower shall not, and shall not
permit any Marine Subsidiary of such Borrower to, and FSI shall not
permit TEC and TEC AcquiSub to, make any Acquisition or enter into any
agreement to make any Acquisition, other than with respect to the
purchase of Equipment in the ordinary course of business or the
formation or acquisition of a Marine Subsidiary.
6.3 Limitations On Indebtedness. Each Borrower shall not
create, incur, assume or suffer to exist, nor permit any Marine
Subsidiary of such Borrower or Owner Trustee holding record title to
any Eligible Inventory for the beneficial interest of such Borrower to
create, incur, assume or suffer to exist, and FSI shall not permit any
of its Subsidiaries (including, without limitation, TEC and TEC
AcquiSub) to create, incur, assume or suffer to exist, any Indebtedness
or Contingent Obligation; provided, however, that this Section 6.3
shall not be deemed to prohibit:
6.3.1 The Obligations to Lenders and Agent arising
hereunder and under the other Loan Documents;
6.3.2 Existing Indebtedness disclosed on Schedule
6.3(a) and anticipated Indebtedness disclosed on Schedule 6.3(b);
6.3.3 Indebtedness of any Subsidiary of FSI, provided
that such Indebtedness is non-recourse as to FSI, TEC and TEC AcquiSub;
6.3.4 The acquisition of goods, supplies or
merchandise on normal trade credit;
6.3.5 The endorsement of negotiable instruments
received in the ordinary course of any Borrower's business as presently
conducted;
6.3.6 Indebtedness incurred in respect of the
deferred purchase price for an item of Equipment, but only to the
extent that the incurrence of such Indebtedness is customary in the
industry with respect to the purchase of this type of equipment
(provided that such Indebtedness shall only be permitted under this
Section 6.3.6 if, taking into account the incurrence of such
Indebtedness, the Borrower incurring such Indebtedness shall not be in
violation of any of the financial covenants set forth in Section 7 if
measured as of the date of incurrence as determined by GAAP); and
6.3.7 Any Guaranty Obligations of any Borrower in the
form of performance guaranties undertaken on behalf of a Marine
Subsidiary of such Borrower in favor of the charter party in connection
with the leasing of a marine vessel on a time charter;
6.4 Use Of Proceeds. Each Borrower and FSI shall not, and
shall not permit any Marine Subsidiary of such Borrower or Owner
Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI to, use the proceeds of any
Loan except for the purpose set forth in Recital C, above, and shall
not, and shall not permit any such Marine Subsidiary or such Owner
Trustee to, use the proceeds to repay any loans or advances made by any
other Person.
6.5 Disposition Of Assets. Each Borrower and FSI shall not,
and shall not permit any Marine Subsidiary of such Borrower or any
Owner Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI to, sell, assign or
otherwise dispose of, any of its or their respective assets, except for
full, fair and reasonable consideration, or enter into any sale and
leaseback agreement covering any of its or their respective fixed or
capital assets.
6.6 Restriction On Fundamental Changes. Each Borrower and FSI
shall not, and shall not permit any Marine Subsidiary of such Borrower
to, enter into any transaction of merger, consolidation or
recapitalization, directly or indirectly, whether by operation of law
or otherwise, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, Property or assets,
whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or substantially all the business, Property or assets of,
or stock or other evidence of beneficial ownership of, any Person,
except sales (a) of Equipment in the ordinary course of business (for
the purposes of this Section 6.6, with respect to any Borrower and any
Marine Subsidiary of such Borrower, ordinary course of business shall
refer to the business of the Equipment Growth Funds and all Marine
Subsidiaries, collectively) and (b) any Subsidiary of FSI (other than
TEC AcquiSub) may be merged or consolidated with or into FSI or any
wholly-owned Subsidiary of FSI, or be liquidated, wound up or
dissolved, or all or substantially all of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or a series of transactions, to, FSI or any
wholly-owned Subsidiary of FSI; provided that, in the case of such a
merger or consolidation, FSI or such wholly-owned Subsidiary shall be
the continuing or surviving corporation.
6.7 Transactions With Affiliates. Each Borrower shall not, and
shall not permit any Marine Subsidiary of such Borrower to, directly or
indirectly, enter into or permit to exist any transaction (including,
without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any of its Affiliates on
terms that are less favorable to such Borrower or such Marine
Subsidiary than those that might be obtained at the time from Persons
who are not such Affiliates.
6.8 Maintenance Of Business. Each Borrower shall not, and FSI
shall not permit any of its existing Subsidiaries to, engage in any
business materially different than the business currently engaged in by
such Person.
6.9 No Distributions. Each Borrower shall not make, pay or set
apart any funds for the payment of distribution to its partners or
members if such distribution would cause or result in an Event of
Default or Potential Event of Default.
6.10 Events Of Default. Each Borrower and FSI shall not take
or omit to take any action, which act or omission would, with the lapse
of time, or otherwise constitute (a) a default, event of default or
Event of Default under any of the Loan Documents or (b) a default or an
event of default under any other material agreement, contract, lease,
license, mortgage, deed of trust or instrument to which either is a
party or by which either or any of their Properties or assets is bound,
which default or event of default would, with reasonable likelihood,
have a Material Adverse Effect.
6.11 ERISA. If any Borrower or FSI or any of their ERISA
Affiliates incurs any obligation to contribute to any Pension Plan,
then such Borrower or FSI, as the case may be, shall not (a) terminate,
or permit such ERISA Affiliate to terminate, any Pension Plan so as to
result in any liability that would, with reasonable likelihood, have a
Material Adverse Effect or (b) make or permit such ERISA Affiliate to
make a complete or partial withdrawal (within the meaning of Section
4201 of ERISA) from any Multiemployer Plan so as to result in any
liability that would, with reasonable likelihood, have a Material
Adverse Effect.
6.12 No Use Of Any Lender's Name. Each Borrower and FSI shall
not use or authorize others to use any Lender's name or marks in any
publication or medium, including, without limitation, any prospectus,
without such Lender's advance written authorization.
6.13 Certain Accounting Changes. Each Borrower shall not
change its fiscal year end from December 31, nor make any change in its
accounting treatment and reporting practices except as permitted by
GAAP; provided, however, that should any Borrower change its accounting
treatment or reporting practices in a way that would cause a change in
the calculation, or in the results of a calculation, of any of the
financial covenants set forth in Section 7, below, then such Borrower
shall continue to calculate such covenants as if such accounting
treatment or reporting practice had not been changed unless otherwise
agreed to by Requisite Lenders.
6.14 Amendments Of Limited Partnership Or Operating
Agreements. Each Borrower shall not, shall not cause to occur and shall
not permit any amendment, modification or supplement of or to any of
the terms or provisions of such Borrower's Limited Partnership
Agreement or, in the case of Income Fund I, its Operating Agreement,
which amendment, modification or supplement would affect, limit or
otherwise impair such Borrower's ability to pay the Obligations or
perform its obligations under this Agreement or any of the other Loan
Documents.
<PAGE>
11 Note. The forms of Note set forth as Exhibits A-1 through
A-6 of the Credit Agreement are deleted and replaced with Exhibit A attached
hereto.
12 Borrowing Base Certificate. The Borrowing Base Certificate
set forth as Exhibit B of the Credit Agreement is deleted and replaced with
Exhibit B attached hereto.
3. LIMITATIONS ON AMENDMENTS.
1 The amendments set forth in Section 1, above, are
effective for the purposes set forth herein and shall be limited precisely as
written and shall not be deemed to (i) be a consent to any amendment, waiver or
modification of any other term or condition of any Loan Document or (ii)
otherwise prejudice any right or remedy which Lenders or Agent may now have or
may have in the future under or in connection with any Loan Document.
2 This Amendment shall be construed in connection
with and as part of the Loan Documents and all terms, conditions,
representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein waived or amended, are hereby ratified and confirmed
and shall remain in full force and effect.
4. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders
and Agent to enter into this Amendment, each Borrower represents and warrants to
each Lender and Agent as follows:
(a) Immediately after giving effect to this Amendment
(i) the representations and warranties contained in the Loan Documents (other
than those which expressly speak as of a different date) are true, accurate and
complete in all material respects as of the date hereof and (ii) no Default or
Event of Default, or event which constitutes a Potential Event of Default, has
occurred and is continuing;
(b) Each Borrower has the corporate power and
authority to execute and deliver this Amendment and to perform its Obligations
under the Credit Agreement, as amended by this Amendment, and each of the other
Loan Documents to which it is a party;
(c) The articles of incorporation, bylaws and other
organizational documents of each Borrower delivered to each Lender as a
condition precedent to the effectiveness of the Credit Agreement are true,
accurate and complete and have not been amended, supplemented or restated and
are and continue to be in full force and effect;
(d) The execution and delivery by each Borrower of
this Amendment and the performance by each Borrower of its respective
Obligations under the Credit Agreement, as amended by this Amendment, and each
of the other Loan Documents to which it is a party have been duly authorized by
all necessary corporate action on the part of such Borrower;
(e) The execution and delivery by each Borrower of
this Amendment and the performance by each Borrower of its respective
Obligations under the Credit Agreement, as amended by this Amendment, and each
of the other Loan Documents to which it is a party do not and will not
contravene (i) any law or regulation binding on or affecting such Borrower, (ii)
the articles of incorporation, bylaws, or other organizational documents of such
Borrower, (iii) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on such Borrower,
or (iv) any contractual restriction binding on or affecting such Borrower;
(f) The execution and delivery by each Borrower of
this Amendment and the performance by each Borrower of its respective
Obligations under the Credit Agreement, as amended by this Amendment, and each
of the other Loan Documents to which it is a party do not require any order,
consent, approval, license, authorization or validation of, or filing, recording
or registration with, or exemption by any governmental or public body or
authority, or subdivision thereof, binding on such Borrower, except as already
has been obtained or made; and
(g) This Amendment has been duly executed and
delivered by each Borrower and is the binding Obligation of each Borrower,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation, moratorium or other similar laws of general application and
equitable principles relating to or affecting creditors' rights.
5. REAFFIRMATION. Each Borrower hereby reaffirms its
Obligations under each Loan Document to which it is a party.
6. EFFECTIVENESS. This Amendment shall become effective upon
the last to occur of:
(a) The execution and delivery of this Amendment,
whether the same or different copies, by Borrowers, Lenders and Agent.
(b) The execution and delivery of the Acknowledgement
of Amendment and Reaffirmation of Guaranty attached to this Amendment by FSI.
(c) Receipt by Agent, in form and substance
satisfactory to Lenders, of a Guaranty of FSI's Obligations under the Credit
Agreement and FSI's Guaranty Obligations under its Guaranty dated as of the date
hereof executed by PLMI in favor of Lenders and Agent.
(d) Receipt by Agent, in form and substance
satisfactory to Lenders, of a certified copy of the records of all actions taken
by each Borrower, FSI and PLMI, including all corporate resolutions of each
Borrower, FSI and PLMI authorizing or relating to the execution, delivery and
performance of this Amendment and the Guaranty, as the case may be.
(e) Receipt by Agent, in form and substance
satisfactory to Lenders, of Notes executed by each Borrower in favor of each
Lender in the stated principal amount equal to each Lender's Pro Rata Share of
the Commitments, which Notes will replace and supersede the existing Notes dated
May 31, 1996, issued by Borrowers to Agent.
(f) Receipt by Agent, in form and substance
satisfactory to Lenders, of a supplemental fee letter (the "Supplemental Fee
Letter") and a supplemental agent's side letter (the "Supplemental Agent's Side
Letter"), each duly executed by each Borrower, AFG and TEC AcquiSub, and the
Supplemental Arrangement Fee and the Supplemental Agent's Fee described in the
Supplemental Fee Letter and the Supplemental Agent's Side Letter, respectively.
(g) Receipt by Agent of an originally executed legal
opinion of Stephen Peary, general counsel of each Borrower and Guarantor, on
behalf of each Borrower and Guarantor, in form and substance satisfactory to
Lenders, dated as of the effective date of this Amendment and addressed to
Lenders, together with copies of any officer's certificate or legal opinion of
other counsel or law firm specifically identified and expressly relied upon by
such counsel.
(h) Satisfaction, to the approval of Lenders and
Agent, of all conditions precedent to the effectiveness of Amendment No. 2 to
Amended and Restated Warehousing Credit Agreement dated as of the date hereof by
and among TEC AcquiSub, Lenders and Agent.
(i) Satisfaction, to the approval of Lenders and
Agent, of all conditions precedent to the effectiveness of Amendment No. 1 to
Warehousing Credit Agreement dated as of the date hereof by and among AFG,
Lenders and Agent.
7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NORTH CAROLINA.
8. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF. EACH
BORROWER HEREBY REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS NO
KNOWLEDGE OF ANY FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR
RIGHT OF SET-OFF.
9. FLEET AS LENDER. Upon the execution and delivery of this
Amendment, Fleet shall be a Lender and a party to the Credit Agreement, and
shall be entitled to the rights and benefits of the Loan Documents and, to the
extent of the percentage equivalent of Fleet's Commitment under the Facility
divided by the aggregate Commitment of all Lenders under the Facility, have the
rights and obligations of a Lender thereunder.
10. COUNTERPARTS. This Amendment may be signed in any number
of counterparts, and by different parties hereto in separate counterparts, with
the same effect as if the signatures to each such counterpart were upon a single
instrument. All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWERS PLM EQUIPMENT GROWTH FUND IV
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
---------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH FUND V
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
--------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH FUND VI
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
---------------------------
J. Michael Allgood
Chief Financial Officer
PLM EQUIPMENT GROWTH & INCOME FUND VII
BY PLM FINANCIAL SERVICES, INC.,
ITS GENERAL PARTNER
By /s/ J. Michael Allgood
---------------------------
J. Michael Allgood
Chief Financial Officer
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
BY PLM FINANCIAL SERVICES, INC.,
ITS MANAGER
By /s/ J. Michael Allgood
---------------------------
J. Michael Allgood
Chief Financial Officer
FSI PLM FINANCIAL SERVICES, INC.
By /s/ J. Michael Allgood
--------------------------
J. Michael Allgood
Chief Financial Officer
LENDERS FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By /s/ Bill A. Shirley
-------------------------
Bill A. Shirley
Vice President
FLEET BANK, N.A.
By /s/ Felix Herrera
----------------------
Printed Name: Felix Herrera
Title: Vice President
AGENT FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
By /s/ Bill A. Shirley
-----------------------
Bill A. Shirley
Vice President
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(Growth Funds)
11. PLM Financial Services, Inc. ("FSI") hereby acknowledges
and confirms that it has reviewed and approved the terms and conditions of this
Amendment No. 1 to Second Amended and Restated Warehousing Credit Agreement
("Amendment").
12. FSI hereby consents to this Amendment and agrees that its
Guaranty of the Obligations of Borrower under the Credit Agreement shall
continue in full force and effect, shall be valid and enforceable and shall not
be impaired or otherwise affected by the execution of this Amendment or any
other document or instrument delivered in connection herewith.
13. FSI represents and warrants that, after giving effect to
this Amendment, all representations and warranties contained in its Guaranty are
true, accurate and complete as if made the date hereof.
GUARANTOR PLM FINANCIAL SERVICES, INC.
By /s/ J. Michael Allgood
----------------------------
J. Michael Allgood
Chief Financial Officer
<PAGE>
SCHEDULE A
COMMITMENTS
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $35,000,000 35/50 x 100%
of North Carolina
Fleet Bank, N.A. $15,000,000 15/50 x 100%
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
[LENDER]
$____________ San Francisco, California
Date: November 5, 1996
[BORROWER], a _____________________ (the "Borrower"), FOR VALUE
RECEIVED, hereby unconditionally promises to pay to the order of [LENDER]
("[_________________]"), in lawful money of the United States of America, the
aggregate outstanding principal amount of [_________________]'s Pro Rata Share
of all Loans made to the Borrower under the Credit Agreement referred to below,
payable in the amounts, on the dates and in the manner set forth below.
This revolving promissory note (this "Note") is one of the Notes
referred to and defined in that certain Second Amended and Restated Warehousing
Credit Agreement dated as of May 31, 1996, as amended by that certain Amendment
No. 1 to Second Amended and Restated Warehousing Credit Agreement dated as of
even date herewith (as the same may from time to time be further amended,
modified, supplemented, renewed, extended or restated, the "Credit Agreement")
by and among the Borrower, PLM Equipment Growth Fund V, PLM Equipment Growth
Fund VI, PLM Equipment Growth & Income Fund VII, Professional Lease Management
Income Fund I, L.L.C., PLM Financial Services, Inc. ("FSI"), First Union
National Bank Of North Carolina, solely in its capacity as agent (solely in such
capacity, the "Agent") for [_________________] and such other financial
institutions as shall from time to time become "Lenders" pursuant to Section
11.10 of the Credit Agreement (such entities, together with their respective
successors and assigns being collectively referred to herein as the "Lenders"),
and the Lenders, and amends, restates and replaces that certain Revolving
Promissory Note dated May 31, 1996, executed and delivered by the Borrower in
favor of and to the Agent, on behalf of the Lenders. All capitalized terms used
but not defined herein shall have the same meaning as given to them in the
Credit Agreement.
<PAGE>
14. Principal Payments. Subject to the terms and conditions of
the Credit Agreement, including, without limitation, terms relating to mandatory
prepayments of principal (Section 2.2.3), the entire principal amount
outstanding under each Loan evidenced by this Note shall be due and payable on
the Maturity Date with respect to such Loan, with any and all unpaid and not
previously due and payable principal amounts under each such Loan being due and
payable on the Commitment Termination Date.
15. Interest Rate. The Borrower further promises to pay
interest on the sum of the daily unpaid principal balance of all Loans evidenced
by this Note outstanding on each day in lawful money of the United States of
America, from the Closing Date until all such principal amounts shall have been
repaid in full, which interest shall be payable at the rates per annum and on
the dates determined pursuant to the Credit Agreement.
16. Place Of Payment. All amounts payable hereunder shall be
payable to the Agent, on behalf of [_________________], at the office of First
Union National Bank of North Carolina, One First Union Center, 301 South College
Street, Charlotte, North Carolina 28288, Attention: Elisha Sabido, or such other
place of payment as may be specified by the Agent in writing.
17. Application Of Payments; Acceleration. Payments on this
Note shall be applied in the manner set forth in the Credit Agreement. The
Credit Agreement contains provisions for acceleration of the maturity of the
Loans upon the occurrence of certain stated events and also provides for
mandatory and optional prepayments of principal prior to the stated maturity on
the terms and conditions therein specified.
Each Advance made by [_________________] to the Borrower constituting
[_________________]'s Pro Rata Share of a Loan made to the Borrower pursuant to
the Credit Agreement shall be recorded by [_________________] on its books and
records. The failure of [_________________] to record any such Advance or any
repayment or prepayment made on account of the principal balance thereof shall
not limit or otherwise affect the obligation of the Borrower under this Note and
under the Credit Agreement to pay the principal, interest and other amounts due
and payable thereunder.
18. Default. The Borrower's failure to pay timely any of the
principal amount due under this Note or any accrued interest or other amounts
due under this Note on or within five (5) calendar days after the date the same
becomes due and payable shall constitute a default under this Note. Upon the
occurrence of a default hereunder or an Event of Default under the Credit
Agreement with respect to the Borrower, all unpaid principal, accrued interest
and other amounts owing hereunder shall, at the option of the Required Lenders,
be immediately collectible by the Lenders and the Agent pursuant to the Credit
Agreement and applicable law.
19. Waivers. The Borrower waives presentment and demand for
payment, notice of dishonor, protest and notice of protest of this Note, and
shall pay all costs of collection when incurred by or on behalf of the Lenders,
including, without limitation, reasonable attorneys' fees, costs and other
expenses as provided in the Credit Agreement.
20. Governing Law. This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of North
Carolina, excluding conflict of laws principles that would cause the application
of laws of any other jurisdiction.
21. Successors And Assigns. The provisions of this Note shall
inure to the benefit of and be binding on any successor to the Borrower and
shall extend to any holder hereof.
BORROWER [BORROWER]
By: PLM FINANCIAL SERVICES, INC.,
a Delaware corporation
its general partner/manager
By
J. Michael Allgood
Chief Financial Officer
<PAGE>
EXHIBIT B
BORROWING BASE CERTIFICATE
[Insert Borrower's Name]
__________________, 199_
First Union National Bank of North Carolina, as Agent
One First Union Center
301 South College Street
Charlotte, NC 28288
Attention: Milton Anderson
Re: Second Amended and Restated Warehousing Credit Agreement dated as of
May 31, 1996, as amended by Amendment No. 1 to Second Amended and
Restated Warehousing Agreement dated as of November 5, 1996 (as the
same may from time to time be further amended, modified, supplemented
or restated, the "Credit Agreement"), by and among PLM Equipment Growth
Fund IV, a California limited partnership, PLM Equipment Growth Fund V,
a California limited partnership, PLM Equipment Growth Fund VI, a
California limited partnership, PLM Equipment Growth & Income Fund VII,
a California limited partnership, Professional Lease Management Income
Fund I, L.L.C., a Delaware limited partnership (any one individually, a
"Borrower," and collectively "Borrowers"), PLM Financial Services,
Inc., a Delaware corporation and the sole general partner or manager of
the Borrowers ("FSI"), First Union National Bank of North Carolina
("FUNB"), Fleet Bank, N.A. and each other lender whose name is set
forth on the signature pages to the Agreement or which may hereafter
execute and deliver an instrument of assignment pursuant to Section
11.10 of the Agreement (any one individually, a "Lender," and
collectively, "Lenders") and FUNB as Agent, on behalf of Lenders
Ladies and Gentlemen:
Reference is made to the Credit Agreement. The capitalized terms used in this
Borrowing Base Certificate and not defined herein have the same meaning as given
to them in the Credit Agreement.
Pursuant to Section 5.1.3 of the Credit Agreement, the undersigned Borrower
hereby certifies as follows:
<PAGE>
22. The information furnished in Schedule 1 attached hereto
was true, accurate and complete as of the last day of the calendar month
immediately preceding the date of this Borrowing Base Certificate; provided,
however, that if such certificate is being delivered with respect to a requested
borrowing of a Loan under the Credit Agreement, then if expressly provided, so
stated in Schedule 1, such information shall be true, accurate and complete
through the requested Funding Date. The calculation of each item is subject to
the more detailed description thereof set forth in the Credit Agreement.
23. Except as disclosed in Schedule 2 attached hereto, the
representations and warranties set forth in Section 4 of the Credit Agreement
are true, accurate and complete as of the date hereof; provided, however, that
those representations and warranties expressly referring to another date shall
be deemed to be made as of such date; and
24. The Borrower does not have knowledge of the existence, as
of the date hereof, of any Event of Default or Potential Event of Default,
except for such conditions or events listed on Schedule 2 attached hereto and
incorporated herein by this reference, specifying the nature and period of
existence thereof and what action the Borrower has taken, is taking and proposes
to take with respect thereto.
IN WITNESS WHEREOF, this Borrowing Base Certificate is executed by the
undersigned this ____ day of , 199 .
[INSERT BORROWER NAME]
By: PLM FINANCIAL SERVICES, INC.,
a Delaware corporation,
its general partner/manager
By:
Printed Name:
Title:
Received by:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
in its capacity as Agent
under the Credit Agreement
By:
Printed Name:
Title:
Date:
<PAGE>
SCHEDULE 1 TO
BORROWING BASE CERTIFICATE
Dated , 199
<TABLE>
<CAPTION>
Calculated separately for each Borrower:
<S> <C>
$----------
1. Fifty percent (50.0%) of the unrestricted cash available for
purchase of Eligible Inventory by Borrower
25. The lesser of Line 2(a)(vi) or Line 2(b)(vi): $__________
(a) (i) The aggregate net book value of all Eligible
Inventory $__________ (including the item(s) of Eligible
Inventory being financed with this Loan if this
certificate is supplied in connection with a Loan
request) owned of record by Borrower or a Marine
Subsidiary or of record by an Owner Trustee for the
beneficial interest of Borrower or any Marine Subsidiary
.1 The aggregate net book value of all Eligible Inventory listed $__________
in Line 2(a)(i) that is off-lease or that is subject to a Lease under
which any applicable lease or rental payment is more than ninety (90)
days past due
.2 Fifteen percent (15.0%) of Line 2(a)(i) $__________
.3 The amount, if any, by which Line 2(a)(ii) exceeds Line $__________
2(a)(iii)
.4 Line 2(a)(i) minus Line 2(a)(iv) $__________
.5 Seventy percent (70.0%) of Line 2(a)(v) $__________
or
2 (i) The aggregate net fair market value of all Eligible Inventory $__________
(including the item(s) of Eligible Inventory being financed with this
Loan if this certificate is supplied in connection with a Loan request)
owned of record by Borrower or a Marine Subsidiary or of record by an
Owner Trustee for the beneficial interest of Borrower or any Marine
Subsidiary
.1 The aggregate net fair market value of all Eligible Inventory $__________
listed in Line 2(b)(i) that is off-lease or that is subject to a Lease
under which any applicable lease or rental payment is more than ninety
(90) days past due
.2 Fifteen percent (15.0%) of Line 2(b)(i) $__________
.3 The amount, if any, by which Line 2(b)(ii) exceeds Line $__________
2(b)(iii)
.4 Line 2(b)(i) minus Line 2(a)(iv) $__________
.5 Fifty percent (50.0%) of Line 2(b)(v)
3. The aggregate Consolidated Funded Debt of Borrower excluding the $__________
principal amount of any Loans outstanding to Borrower under the Credit Agreement
4. Line 1 plus Line 2 minus Line 3 $__________
NOTE: Lines 1, 2 and 3 to be computed (a) with respect to any requested Loan,
as of the requested Funding Date, and (b) with respect to the delivery
of any monthly Borrowing Base Certificate to be furnished pursuant to
Section 5.1.3, as of the last day of the calendar month for which such
Borrowing Base Certificate is furnished (provided, that for the purpose
of computing the Borrowing Base under this Line 1, in the event that
Borrower or a Marine Subsidiary shall own less than one hundred percent
(100.0%) of the record or beneficial interests in any item of Eligible
Inventory, with one or more of the other Equipment Growth Funds owning
of record or beneficially the remaining interests, there shall be
included only Borrower's or such Marine Subsidiary's, as the case may
be, ratable interest in such item of Eligible Inventory)
26. Aggregate amount outstanding under TEC AcquiSub Agreement and
the AFG $__________ Agreement
27. Aggregate amount outstanding under the Credit Agreement for
all $__________ Borrowers (include any amounts to be drawn or
proposed to be drawn by any other Borrower as of the date of this
certificate and not reflected as outstanding under the Credit
Agreement)
28. $50,000,000 less Line 5 plus 6 $__________
29. Lesser of (a) Line 4 and (b) Line 7 $__________
30. Lesser of Line 8 and $35,000,000 $__________
31. Amount request to be advanced (must not be greater than Line 9) $__________
</TABLE>
<PAGE>
SCHEDULE 2 TO
BORROWING BASE CERTIFICATE
Dated ________________, 199_
LIST OF EXCEPTIONS
Condition(s) or event(s) constituting an Event of Default or Potential Event of
Default:
Period of existence:
Remedial action with respect to such condition or event:
Draft of December 30, 1996
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
NOTE AGREEMENT
Dated as of December 15, 1996
Re: $25,000,000 7.33% Senior Notes
Due December 31, 2006
<PAGE>
TABLE OF CONTENTS
(Not a Part of the Agreement)
SECTION HEADING PAGE
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT..............1
Section 1.1. Description of Notes.........................1
Section 1.2. Commitment, Execution Date, Closing Dates....1
Section 1.3. Commitment Fee...............................2
SECTION 2. PREPAYMENT OF NOTES..............................3
Section 2.1. Required Prepayments.........................3
Section 2.2. Optional Prepayments.........................3
Section 2.3. Prepayment in Certain Extraordinary Events...5
Section 2.5. Notice of Prepayments........................7
Section 2.6. Allocation of Prepayments....................7
Section 2.7. Direct Payment...............................7
SECTION 3. REPRESENTATIONS..................................8
Section 3.1. Representations of the Company...............8
Section 3.2. Representations of the Purchaser.............8
SECTION 4. CLOSING CONDITIONS...............................10
Section 4.1. Closing Certificate..........................10
Section 4.2. Legal Opinions...............................10
Section 4.3. Existence and Authority......................10
Section 4.4. Private Placement Number.....................10
Section 4.5. Insurance Certificate........................10
Section 4.6. Payment of Commitment Fee....................10
Section 4.7. Funding Instructions.........................11
Section 4.8. Satisfactory Proceedings.....................11
Section 4.9. Waiver of Conditions.........................11
SECTION 5. COMPANY COVENANTS................................11
Section 5.1. Existence, Etc...............................11
Section 5.2. Insurance....................................11
Section 5.3. Taxes, Claims for Labor and Materials,
Compliance with Laws.........................12
Section 5.4. Maintenance, Etc.............................12
Section 5.5. Nature of Business...........................12
Section 5.6. Special Provisions for Marine Vessels and
Aircraft.....................................13
Section 5.7. Fixed Charge Coverage........................14
Section 5.8. Sale and Leaseback...........................14
Section 5.9. Limitations on Indebtedness..................14
Section 5.10. Limitation on Liens..........................15
Section 5.11. Distributions, Certain Payments..............17
Section 5.12. Limitation on Long-Term Leases and Joint
Ownership of Equipment.......................17
Section 5.13. Mergers, Consolidations and Sales of Assets..17
Section 5.14. Guaranties...................................18
Section 5.15. Repurchase of Notes..........................19
Section 5.16. Transactions with Affiliates and
Affiliated Entities..........................19
Section 5.17. Investments..................................19
Section 5.18. Termination of Pension Plans.................20
Section 5.19. Reports and Rights of Inspection.............20
Section 5.20. Certain Appraisals...........................24
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR..........25
Section 6.1. Events of Default............................25
Section 6.2. Notice to Holders............................27
Section 6.3. Acceleration of Maturities...................27
Section 6.4. Rescission of Acceleration...................27
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.................28
Section 7.1. Consent Required.............................28
Section 7.2. Solicitation of Holders......................28
Section 7.3. Effect of Amendment or Waiver................29
SECTION 8. INTERPRETATION OF AGREEMENT......................29
Section 8.1. Definitions..................................29
Section 8.2. Accounting Principles........................39
Section 8.3. Directly or Indirectly.......................40
SECTION 9. MISCELLANEOUS....................................40
Section 9.1. Registered Notes.............................40
Section 9.2. Exchange of Notes............................40
Section 9.3. Loss, Theft, Etc. of Notes...................40
Section 9.4. Expenses, Stamp Tax Indemnity................41
Section 9.5. Powers and Rights Not Waived.................41
Section 9.6. Notices......................................42
Section 9.7. Successors and Assigns.......................42
Section 9.8. Survival of Covenants and Representations....42
Section 9.9. Severability.................................42
Section 9.10. Governing Law................................42
Section 9.11. Submission to Jurisdiction...................42
Section 9.12. Captions.....................................42
Section 9.13. Limitation of Liability......................43
Signature...................................................................44
ATTACHMENTS TO NOTE AGREEMENT:
Schedule I -- Name and Address of Purchaser
Schedule II -- Existing Liens
Schedule III -- Names of Appraisers
Exhibit A -- Form of 7.33% Senior Note due December 31, 2006 Exhibit B --
Closing Certificate of the Company Exhibit C -- Description of Special Counsel's
Closing Opinion Exhibit D -- Description of Closing Opinion of Counsel to the
Company
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
One Market
Steuart Street Tower
Suite 900
San Francisco, CA 94105-1301
NOTE AGREEMENT
Re: $25,000,000 7.33% Senior Notes
Due December 31, 2006
Dated as of
December 15, 1996
Keyport Life Insurance Company
c/o Stein Roe & Farnham Incorporated
1 South Wacker Drive
Chicago, Illinois 60606
Ladies and Gentlemen:
The undersigned, PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C., a
Delaware limited liability company (the "Company"), agrees with you as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. The Company will authorize the
issue and sale of $25,000,000 aggregate principal amount of its 7.33% Senior
Notes (the "Notes") to be dated the date of issue, to bear interest from such
date at the rate of 7.33% per annum, payable semiannually in arrears on the last
day of each June and December in each year (commencing June 30, 1997) and at
maturity and to bear interest on overdue principal (including any overdue
required or optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest at the rate
of 9.33% per annum after maturity or the due date thereof, as applicable,
whether by acceleration or otherwise, until paid, to be expressed to mature on
December 31, 2006, and to be substantially in the form attached hereto as
Exhibit A. Interest on the Notes shall be computed on the basis of a 360-day
year of twelve 30-day months. The Notes are not subject to prepayment or
redemption at the option of the Company prior to their expressed maturity dates
except on the terms and conditions and in the amounts and with the premium, if
any, set forth in Section 2 of this Agreement. The term "Notes" as used herein
shall include each Note delivered pursuant to this Agreement. You are
hereinafter sometimes referred to as the "Purchaser".
Section 1.2. Commitment, Execution Date, Closing Dates. Subject to
the terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth, the Company and you agree to execute and
deliver this Agreement on the Execution Date hereafter mentioned. The Company
further agrees to issue and sell to you, and you further agree to purchase from
the Company, Notes of the Company in the aggregate principal amount set forth
opposite your name in Schedule I, at a price of 100% of the principal amount
thereof allocated as requested by the Company to the Closing Dates hereinafter
mentioned.
Execution and delivery of the Agreement will be made at the offices of
Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603 on December
30, 1996, or such later date as shall be mutually agreed upon by the Company and
the Purchaser (the "Execution Date").
Delivery of the Notes will be made at the offices of Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603, against payment
therefor in Federal or other funds current and immediately available at the
principal office of First Union National Bank, Charlotte, North Carolina, ABA
Routing No. 053000219, in the amount of the purchase price for credit to the
Company's account identified by the Company in the funding instructions
delivered pursuant to ss.4.7 at 10:00 A.M., Chicago time, on up to two separate
dates (not later than March 31, 1997) as shall be mutually agreed upon by the
Company and the Purchaser; provided, that the Company shall provide you with
written notice in the manner provided in ss.9.6 of its desire to consummate each
such closing and the principal amount of Notes it desires to sell at each such
Closing (in the aggregate, equaling $25,000,000) not less than three Business
Days prior to the date of each closing (each, a "Closing Date" and,
collectively, the "Closing Dates"). The Notes delivered to you on each Closing
Date will be delivered to you in the form of a single registered Note for the
full amount of your purchase (unless different denominations are specified by
you), registered in your name or in the name of such nominee as you may specify
and in substantially the form attached hereto as Exhibit A, all as you may
specify at any time prior to the date fixed for delivery.
Section 1.3. Commitment Fee. In consideration of your agreement to
enter into this Agreement on the Execution Date and to delay your actual
purchase of the Notes until the respective Closing Dates as set forth in ss.1.2
hereof, the Company agrees to pay to you on each Closing Date a commitment fee
(the "Commitment Fee") in an amount equal to 0.125% per month of the aggregate
principal amount of the Notes to be purchased by you, computed monthly based on
actual days elapsed, and payable for each month or portion thereof elapsing from
and after the Execution Date to and including the final Closing Date. On the
first Closing Date, the Commitment Fee shall be payable with respect to the
aggregate principal amount of the Notes to be purchased by you on both Closing
Dates, accruing from the Execution Date to and including the first Closing Date.
On the second Closing Date, the Commitment Fee shall be payable with respect to
the remaining aggregate principal amount of the Notes to be purchased by you on
the second Closing Date, accruing from the first Closing Date to and including
the second Closing Date. Two Business Days prior to each Closing Date, the
Company shall telecopy to the Purchaser at the telecopy number set forth in
Schedule I the computation of the Commitment Fee to be paid on such Closing Date
in reasonable detail for approval by the Purchaser.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.1. Required Prepayments. The Company agrees that on each
of the dates set forth in the table below, it will prepay and apply and there
shall become due and payable on the principal indebtedness evidenced by the
Notes the lesser of (a) the amount set opposite such date in the table below and
(b) the then outstanding aggregate principal amount of the Notes:
REQUIRED PREPAYMENT DATES PRINCIPAL PREPAYMENT
December 31, 2000 $3,000,000
December 31, 2001 $3,000,000
December 31, 2002 $3,000,000
December 31, 2003 $3,000,000
December 31, 2004 $3,000,000
December 31, 2005 $5,000,000
The entire unpaid principal amount of the Notes shall become due and
payable on December 31, 2006. No premium shall be payable in connection with any
required prepayment made pursuant to this ss.2.1. For the purposes of this
ss.2.1, any prepayment of less than all of the outstanding Notes if made
pursuant to ss.2.2 or ss.2.3 or otherwise shall be deemed to be applied pro rata
to the payment of all remaining principal payments required by this ss.2.1, so
that each such remaining payment of principal shall thereupon be reduced in the
same proportion that the principal amount of Notes outstanding immediately
preceding the payment pursuant to ss.2.3 was reduced by such prepayment.
Section 2.2. Optional Prepayments. (a) In addition to the payments
required by ss.2.1, upon compliance with ss.2.4, the Company shall have the
privilege at any time and from time to time, of prepaying the outstanding Notes,
either in whole or in part (but if in part, then in units in excess of $100,000)
by payment of the principal amount of the Notes, or portion thereof to be
prepaid, and accrued interest thereon to the date of such prepayment, together
with a premium equal to the Make-Whole Amount, determined two Business Days
prior to the date of such prepayment.
"Make-Whole Amount" shall mean, in connection with any
prepayment, the excess, if any, of (a) the aggregate present value as
of the date of such prepayment of each dollar of principal being
prepaid (taking into account the application of such prepayment
required by ss.2.1) and the amount of interest (exclusive of interest
accrued to the date of prepayment) that would have been payable in
respect of such dollar if such prepayment had not been made, determined
by discounting such amounts at the Reinvestment Rate from the
respective dates on which they would have been payable, over (b) 100%
of the principal amount of the outstanding Notes being prepaid. If the
Reinvestment Rate is equal to or higher than 7.33%, the Make-Whole
Amount shall be zero.
"Reinvestment Rate" shall mean the sum of (a) the Applicable
Spread plus the yield reported on page "USD" of the Bloomberg Financial
Markets Services Screen (or, if not available, any other nationally
recognized trading screen reporting on-line intraday trading in
actively traded marketable United States Treasury fixed interest rate
Securities selected by the Company and acceptable to the Majority
Holders) at 9:00 a.m. (Chicago, Illinois time) for actively traded
marketable United States Treasury fixed interest rate Securities having
a maturity (rounded to the nearest month) corresponding to the
remaining Weighted Average Life to Maturity of the principal of the
Notes being prepaid or paid, or (b) in the event that no such
nationally recognized trading screen reporting on-line intraday trading
in United States Treasury fixed interest rate Securities is available,
Reinvestment Rate shall mean the Applicable Spread plus the arithmetic
mean of the yields for the two columns under the heading "Week Ending"
published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to such Weighted Average Life to Maturity of the
principal of the Notes then being prepaid or paid. If no maturity
exactly corresponds to such Weighted Average Life to Maturity, yields
for the two published maturities most closely corresponding to such
Weighted Average Life to Maturity of the principal of the Notes then
being prepaid or paid shall be calculated pursuant to the immediately
preceding sentence and the Reinvestment Rate for the Notes shall be
interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month. For the
purposes of calculating the Reinvestment Rate of the Notes pursuant to
clause (b) above, the most recent Statistical Release published prior
to the date of determination of the Make-Whole Amount shall be used.
"Applicable Spread" shall mean (a) 1.00% in the case of any
computation of the Make-Whole Amount for purposes of ss.2.4, and (b)
0.50% in the case of any other computation of the Make-Whole Amount for
purposes of this Agreement.
"Statistical Release" shall mean the then most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve System and
which establishes yields on actively traded U.S. Government Securities
adjusted to constant maturities or, if such statistical release is not
published at the time of any determination hereunder, then such other
reasonably comparable index which shall be designated by the Majority
Holders.
"Weighted Average Life to Maturity" of the principal amount of
the Notes being prepaid or paid shall mean, as of the time of any
determination thereof, the number of years obtained by dividing the
then Remaining Dollar-Years of such principal by the aggregate amount
of such principal. The term "Remaining Dollar-Years" of such principal
shall mean the amount obtained by (a) multiplying (x) the remainder of
(i) the amount of principal that would have become due on each
scheduled payment date if such prepayment or payment had not been made,
less (ii) the amount of principal on the Notes scheduled to become due
on such date after giving effect to such prepayment or payment and the
application thereof in accordance with the provisions of ss.2.1, by (y)
the number of years (calculated to the nearest one-twelfth of a year)
which will elapse between the date of determination and such scheduled
payment date, and (b) totaling the products obtained in (a).
(b) In addition to the privilege of optionally prepaying the Notes as
set forth in ss.2.2(a), upon compliance with ss.2.5, the Company shall have the
privilege at any time and from time to time on or after January 1, 2005, of
prepaying the outstanding Notes, either in whole or in part (but if in part,
then in units in excess of $100,000) by payment of the principal amount of the
Notes, or portion thereof to be prepaid, and accrued interest thereon to the
date of such prepayment, but without premium; provided that such optional
prepayment is made solely from the proceeds of the sale or other disposition by
the Company or a Restricted Subsidiary of all or any portion of the Equipment
(other than the Encumbered Equipment) and not from the refinancing or refunding
of Debt of the Company or a Restricted Subsidiary or with funds from any other
source.
Section 2.3. Prepayment in Certain Extraordinary Events. (a) In the
event that (i) any Material Agreement shall be canceled or terminated for any
reason whatsoever or shall be modified or amended in a manner materially adverse
to the rights of the Company thereunder, (ii) the Company shall be dissolved or
its existence otherwise terminated, or (iii) Class A Members holding more than
50% of the Class A Units in the Company shall vote to dissolve the Company (each
herein a "Change Event") and the Company has knowledge of a Change Event or an
impending Change Event, the Company will give written notice (herein called a
"Change Notice") of such fact to all holders of the Notes then outstanding. Such
Change Notice shall be delivered at least 60 days and no more than 90 days prior
to the occurrence of such Change Event; provided, however that if the Company
shall not then have knowledge of such fact, such Change Notice shall be
delivered within two Business Days after receipt of such knowledge by the
Company. In addition to notifying the holders of the Notes of a Change Event or
a proposed Change Event, the Change Notice shall state that the occurrence of
such Change Event entitles said holders to declare the Notes held by them to
become due and payable pursuant to this ss.2.3(a) and the date by which said
holders must respond to such Change Notice pursuant to clause (ii) of the next
succeeding paragraph if they desire to waive such right. The Company shall not
be required to prepay any Notes pursuant to this ss.2.3(a) unless and until such
Change Event shall be consummated.
Upon the receipt of such Change Notice or, if no Change Notice is
given, upon the occurrence of a Change Event, any holder of Notes shall have the
privilege, upon written notice (the "Declaration Notice") to the Company, of
either (i) declaring all Notes held by such holder serving such Declaration
Notice due and payable or (ii) waiving the right of such holder to declare the
Notes held by it to be due and payable. In the event that a Change Notice is
given and a holder of the Notes fails to waive such right in accordance with
this ss.2.3(a), the Notes held by such holder shall irrevocably be deemed to be
and the same shall on the Payment Date (as hereinafter defined) become due and
payable as a result of such Change Event. All Notes declared due and payable
shall become due and payable and paid on such date (the "Payment Date") as the
Company shall specify in a written notice delivered to the holder or holders
which have declared their Notes due and payable (which notice shall be delivered
by the Company to such holder or holders not later than 10 days prior to the
Payment Date) and the Payment Date shall be prior to the consummation of such
Change Event, in the event that such Declaration Notice is served at least 10
days prior to the date of the consummation of such Change Event or 10 days after
the date such Declaration Notice is served, if such Declaration Notice is not at
least 10 days prior to the date of such Change Event. The Company covenants and
agrees to prepay in full on the Payment Date all Notes held by such holder
serving such Declaration Notice to the Company declaring such Notes due and
payable.
In the event that any holder of the Notes shall have declared all of
the Notes held by it to become due and payable pursuant to ss.2.3(a), then the
Company shall promptly, but in any event within five days after the receipt of
the Declaration Notice, deliver written notice of such declaration (the
"Notification of Declaration") to each other holder of the Notes and,
notwithstanding anything to the contrary contained in this Agreement, each such
other holder which has previously waived its right to declare the Notes held by
it to be due and payable pursuant to ss.2.3(a)(ii) shall then have the right to
declare all of the Notes held by it to become due and payable pursuant to
ss.2.3(a)(i) until the later to occur of (x) 60 days after receipt by such
holders of the Change Notice or (y) 20 days after receipt by such holders of a
Notification of Declaration, with respect to a Declaration Notice made by
holders of Notes.
(b) In the event that PLM Financial Services, Inc., a Delaware
corporation, or PLM Investment Management, Inc., a California corporation, or
any successor to either such entity shall give notice of its intention to resign
or withdraw or transfer its interest as Manager or Fund Manager, as the case may
be or shall receive notice that it is to be removed as Manager or Fund Manager,
as the case may be (such event being herein referred to as a "Withdrawal
Event"), then, in such event, the Company will promptly, but in any event within
three days after the giving or receipt of such notice, as the case may be, give
written notice thereof (a "Withdrawal Notice") to the holders of all outstanding
Notes, which notice shall make specific reference to this Section and to the
rights of the holders hereunder. If, within 90 days after the Withdrawal Notice,
the Company procures a successor entity qualified and experienced in performing
functions such as those performed by the Manager or Fund Manager, as the case
may be, the Company shall promptly, but in any event within five days, send
notice thereof to the holders of all outstanding Notes. Should the holders of
50% or more in aggregate principal amount of the Notes then outstanding object
to such successor entity within 10 days of the receipt of such notice, or should
the Company not be able to procure such successor within such 90-day period,
each holder of outstanding Notes shall have the right by written notice to the
Company given not earlier than five days nor later than 45 days after the
expiration of such period (the "Withdrawal Event Prepayment Election Period"),
to either (i) demand that the Company prepay all of the Notes then held by such
holder or (ii) notify the Company that such holder has waived its right to have
the Notes held by it prepaid. In the event that a Withdrawal Notice is given and
a holder of the Notes fails to provide such written notice within the Withdrawal
Event Prepayment Election Period, the Notes held by such holder shall
irrevocably be deemed to be and the same shall on a date five days following the
expiration of the Withdrawal Event Prepayment Election Period become due and
payable. With respect to any prepayment, the prepayment date shall be specified
in writing to each holder by the Company and shall be the same date as the date
established for the prepayment of Notes held by all holders exercising their
rights under this ss.2.3(b) by reason of the occurrence of the Withdrawal Event.
The Company will also promptly notify the holders of the Notes of the
receipt of any demand by any Note holder for the prepayment of its Note pursuant
to this ss.2.3(b).
(c) All prepayments on the Notes pursuant to this ss.2.3 shall be
made by the payment of the aggregate principal amount remaining unpaid on the
Notes to be prepaid and accrued interest thereon to the date of such prepayment,
together with a Make-Whole Amount (computed in the manner described in
ss.2.2(a)).
Section 2.4. Special Prepayment Relating to Covenant Compliance.
(a) In the event that a Default or Event of Default shall occur under ss.5.9(b)
solely as a result of a decline in the Equipment Value of Aggregate Equipment
(herein a "Covenant Compliance Event") or the Company shall have knowledge of
any impending Covenant Compliance Event, the Company will give written notice
(the "Covenant Compliance Notice") of such fact in the manner provided in ss.9.6
hereof to the holders of the Notes. The Covenant Compliance Notice shall be
delivered promptly upon receipt of such knowledge by the Company and in any
event no later than two Business Days following the occurrence of any Covenant
Compliance Event. The Covenant Compliance Notice shall (1) describe the facts
and circumstances of such Covenant Compliance Event in reasonable detail, (2)
make reference to this ss.2.4 and the obligation of the Company to prepay the
Notes to the extent and on the terms and conditions provided for in this ss.2.4,
(3) set forth in reasonable detail the computations which reflect the minimum
aggregate principal amount of Notes necessary (the "Permitted Prepayment
Amount") to be prepaid in order to result in the Company again being in
compliance with the terms of ss.5.9(b), (4) offer in writing to prepay on a pro
rata basis the outstanding Notes to the extent of the Permitted Prepayment
Amount, together with accrued interest to the date of prepayment and a premium
equal to the applicable Make-Whole Amount, and (5) specify a date for such
prepayment (the "Compliance Event Prepayment Date"), which Compliance Event
Prepayment Date shall be not more than 45 days nor less than 15 days following
the date of such Covenant Compliance Notice. Each holder of the then outstanding
Notes shall have the right to accept such offer and require prepayment of such
holder's pro rata share of the Notes to be prepaid by written notice to the
Company given not later than 10 days after receipt of the Covenant Compliance
Notice. The Company shall on the Compliance Event Prepayment Date prepay the
Notes held by holders which have so accepted such offer of prepayment to the
extent and only to the extent of the Permitted Prepayment Amount. The Company
shall not be permitted to prepay Notes under this ss.2.4(a) in excess of the
Permitted Prepayment Amount. The prepayment price of the Notes payable upon the
occurrence of any Covenant Compliance Event shall be an amount equal to 100% of
the outstanding principal amount of the Notes so to be prepaid and accrued
interest thereon to the date of such prepayment, together with a premium equal
to the applicable Make-Whole Amount determined as of two Business Days prior to
the date of such prepayment pursuant to this ss.2.4(a).
(b) Compliance with the provisions of ss.2.4(a) shall not be deemed
to constitute a waiver of, or consent to, any Default or Event of Default under
the provisions of ss.5.9(b) unless and until the Company does in fact prepay the
Notes as provided in ss.2.4(a).
Section 2.5. Notice of Prepayments. The Company will give notice of
any prepayment of the Notes (other than the prepayments required by ss.2.1,
ss.2.3 or ss.2.4) to each holder thereof not less than 30 days nor more than 60
days before the date fixed for such optional prepayment specifying (a) such
date, (b) the section of this Agreement under which the prepayment is to be
made, (c) the principal amount of the holder's Notes to be prepaid on such date,
and (d) the estimated premium, if any, and accrued interest applicable to the
prepayment. Such notice of prepayment shall also certify all facts which are
conditions precedent to any such prepayment. Notice of prepayment having been so
given, the aggregate principal amount of the Notes specified in such notice,
together with the premium, if any, and accrued interest thereon shall become due
and payable on the prepayment date. The Company will also give written notice to
each holder of the Notes, by telecopy or other same day written communication,
setting forth the computation and amount of any premium payable in connection
with such prepayment two Business Days prior to the date of such prepayment.
Section 2.6. Allocation of Prepayments. Except for prepayment of
less than all of the Notes at the time outstanding pursuant to ss.2.3 or ss.2.4,
all partial prepayments shall be applied on all outstanding Notes ratably in
accordance with the unpaid principal amounts thereof but only in units of
$1,000, and to the extent that such ratable application shall not result in an
even multiple of $1,000, adjustment may be made by the Company to the end that
successive applications shall result in substantially ratable payments.
Section 2.7. Direct Payment. Notwithstanding anything to the
contrary in this Agreement or the Notes, in the case of any Note owned by you or
your nominee or owned by any subsequent institutional holder who has given
written notice to the Company requesting that the provisions of this Section
shall apply, the Company will promptly and punctually pay when due the principal
thereof and premium, if any, and interest thereon, without any presentment
thereof directly to you, to your nominee or to such subsequent holder at your
address or your nominee's address set forth in Schedule I or at such other
address as you, your nominee or such subsequent holder may from time to time
designate in writing to the Company or, if a bank account is designated for you
or your nominee on Schedule I hereto or in any written notice to the Company
from you, your nominee or any such subsequent holder, the Company will make such
payments in immediately available funds to such bank account no later than 12:00
Noon Chicago, Illinois time on the date due, marked for attention as indicated,
or in such other manner or to such other account of you, your nominee or such
holder in any bank in the United States as you, your nominee or any such
subsequent holder may from time to time direct in writing. If for any reason
whatsoever the Company does not make any such payment by such 12:00 Noon
Chicago, Illinois time on the date due, such payment shall be deemed to have
been made on the next following Business Day and such payment shall bear
interest at the overdue rate as provided herein. The holder of any Notes to
which this Section applies agrees that in the event it shall sell or transfer
any such Notes it will, prior to the delivery of such Notes (unless it has
already done so), make a notation thereon of all principal, if any, prepaid on
such Notes and will also note thereon the date to which interest has been paid
on such Notes. With respect to Notes to which this Section applies, the Company
shall be entitled to presume conclusively that the original or such subsequent
institutional holder as shall have requested the provisions hereof to apply to
its Notes remains the holder of such Notes until (a) the Company shall have
received notice of the transfer of such Notes, and of the name and address of
the transferee, or (b) such Notes shall have been presented to the Company as
evidence of the transfer.
SECTION 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents
and warrants that all representations set forth in the form of certificate
attached hereto as Exhibit B are true and correct as of the date hereof and are
incorporated herein by reference with the same force and effect as though herein
set forth in full.
Section 3.2. Representations of the Purchaser. (a) You represent,
and in entering into this Agreement the Company understands, that (i) you are an
"accredited investor" within the meaning of Regulation D promulgated by the
Securities and Exchange Commission and (ii) you are acquiring the Notes for the
purpose of investment and not with a view to the distribution thereof, and that
you have no present intention of selling, negotiating or otherwise disposing of
the Notes; provided that the disposition of your Property shall at all times be
and remain within your control.
(b) You further represent that at least one of the following
statements concerning each source of funds to be used by you to purchase the
Notes is accurate as of each of the Closing Dates:
(i) the source of funds to be used by you to pay the purchase
price of the Notes is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption 95-60
("PTE") (issued July 12, 1995) and the purchase of the Notes by you is
eligible for and satisfies the requirements of PTE 95-60;
(ii) all or a part of such funds constitute assets of one or
more separate accounts, trusts or a commingled pension trust maintained
by you, and you have disclosed to the Company names of such employee
benefit plans whose assets in such separate account or accounts or
pension trusts exceed 10% of the total assets or are expected to exceed
10% of the total assets of such account or accounts or trusts as of the
date of such purchase (for the purpose of this clause (ii), all
employee benefit plans maintained by the same employer or employee
organization are deemed to be a single plan);
(iii) all or part of such funds constitute assets of a bank
collective investment fund maintained by you, and you have disclosed to
the Company names of such employee benefit plans whose assets in such
collective investment fund exceed 10% of the total assets or are
expected to exceed 10% of the total assets of such fund as of the date
of such purchase (for the purpose of this clause (iii), all employee
benefit plans maintained by the same employer or employee organization
are deemed to be a single plan);
(iv) all or part of such funds constitute assets of one or
more employee benefit plans, each of which has been identified to the
Company in writing;
(v) you are acquiring the Notes for the account of one or more
pension funds, trust funds or agency accounts, each of which is a
"governmental plan" as defined in Section 3(32) of ERISA;
(vi) the source of funds is an "investment fund" managed by a
"qualified professional asset manager" or "QPAM" (as defined in Part V
of PTE 84-14, issued March 13, 1984), provided that no other party to
the transactions described in this Agreement and no "affiliate" of such
other party (as defined in Section V(c) of PTE 84-14) has at this time,
and during the immediately preceding one year has exercised the
authority to appoint or terminate said QPAM as manager of the assets of
any plan identified in writing pursuant to this clause (vi) or to
negotiate the terms of said QPAM's management agreement on behalf of
any such identified plans; or
(vii) if you are other than an insurance company, all or a
portion of such funds consists of funds which do not constitute "plan
assets".
The Company shall deliver a certificate on each of the Closing Dates
which certificate shall either state that (A) it is neither a "party in
interest" (as defined in Title I, Section 3(14) of ERISA) nor a "disqualified
person" (as defined in Section 4975(e)(2) of the Internal Revenue Code of 1986,
as amended), with respect to any plan identified pursuant to paragraphs (ii),
(iii) or (iv) above, or (B) with respect to any plan identified pursuant to
paragraph (vi) above, neither it nor any "affiliate" (as defined in Section V(c)
of PTE 84-14) is described in the proviso to said paragraph (vi). As used in
this ss.3.2(b), the terms "separate account" and "employee benefit plan" shall
have the respective meanings assigned to them in ERISA and the term "plan
assets" shall have the meaning assigned to it in Department of Labor Regulation
29 C.F.R. ss.2510.3-101.
SECTION 4. CLOSING CONDITIONS.
Your obligation to execute and deliver this Agreement on the Execution
Date and to purchase the Notes on each of the Closing Dates shall be subject to
the performance by the Company of its agreements hereunder which by the terms
hereof are to be performed at or prior to the time of the execution and delivery
of the Agreement or the issuance and delivery of the Notes, as the case may be,
and to the following further conditions precedent:
Section 4.1. Closing Certificate. Concurrently with the execution
and delivery of this Agreement on the Execution Date and the delivery of Notes
to you on each of the Closing Dates, you shall have received a certificate dated
the Execution Date or such Closing Date, as the case may be, signed by an
authorized officer of the Manager substantially in the form attached hereto as
Exhibit B, the truth and accuracy of which shall be a condition to your
obligation to execute and deliver this Agreement or to purchase the Notes
proposed to be sold to you, as the case may be.
Section 4.2. Legal Opinions. Concurrently with the delivery of
Notes to you on each of the Closing Dates, you shall have received from Chapman
and Cutler, who are acting as your special counsel in this transaction, and from
Stephen Peary, General Counsel of the Company, their respective opinions dated
such Closing Date, in form and substance satisfactory to you, and covering the
matters set forth in Exhibits C and D, respectively, hereto.
Section 4.3. Existence and Authority. On or prior to the Execution
Date, you shall have received, in form and substance reasonably satisfactory to
you and your special counsel, such documents and evidence with respect to the
Company and the Manager as you may reasonably request in order to establish to
the existence and good standing of the Company and the Manager and the
authorization of the transactions contemplated by this Agreement.
Section 4.4. Private Placement Number. A Private Placement Number
relating to the Notes shall have been duly ordered from Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("Standard & Poor's").
Section 4.5. Insurance Certificate. On or prior to the Execution
Date, the Company will furnish to you and to your special counsel a report
signed by an independent insurance broker satisfactory to you with respect to
the insurance maintained under this Agreement (including, without limitation, as
to each policy, its number, the amount, the insurer, the named assureds, the
type of risk, the loss payees and the expiration date) and stating the opinion
of said broker that such insurance is in such amounts, against such risks, and
with such insurers as to adequately protect the Company.
Section 4.6. Payment of Commitment Fee. On each of the Closing
Dates, the Company shall have paid to the Purchaser the Commitment Fee referred
to in ss.1.3 by bank wire transfer of Federal or other immediately available
funds to the account specified for such Purchaser in Schedule I.
Section 4.7. Funding Instructions. At least three Business Days
prior to each of the Closing Dates, you shall have received written instructions
executed by an authorized officer of the Manager directing the manner of payment
of funds and setting forth (1) the name of the transferee bank, (2) such
transferee bank's ABA number, (3) the account name and number into which the
purchase price for the Notes is to be deposited, and (4) the name and telephone
number of the account representative responsible for verifying the receipt of
the funds.
Section 4.8. Satisfactory Proceedings. On each of the Execution
Date and the Closing Dates, all proceedings taken in connection with the
transactions contemplated by this Agreement, and all documents necessary to the
consummation thereof, shall be satisfactory in form and substance to you and
your special counsel, and you shall have received a copy (executed or certified
as may be appropriate) of all legal documents or proceedings taken in connection
with the consummation of said transactions.
Section 4.9. Waiver of Conditions. If on the Execution Date the
Company fails to execute and deliver this Agreement or on either of the Closing
Dates the Company fails to tender to you the Notes to be issued to you on such
date, or if on the Execution Date or either of the Closing Dates the conditions
specified in this ss.4 have not been fulfilled, you may thereupon elect to be
relieved of all further obligations under this Agreement. Without limiting the
foregoing, if the conditions specified in this ss.4 have not been fulfilled, you
may waive compliance by the Company with any such condition to such extent as
you may in your sole discretion determine. Nothing in this ss.4.9 shall operate
to relieve the Company of any of its obligations hereunder or to waive any of
your rights against the Company.
SECTION 5. COMPANY COVENANTS.
From and after the Execution Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Existence, Etc. (a) The Company will preserve and keep
in force and effect, and will cause each Restricted Subsidiary to preserve and
keep in force and effect, its existence and all licenses and permits necessary
to the proper conduct of its business, provided that the foregoing shall not
prevent any transaction permitted by ss.5.13.
(b) The Company will take, or will cause to be taken, all such
actions as shall be necessary to preserve its tax treatment as a partnership.
(c) The Company will cause the Manager to retain at all times its
status as a Class B Member.
Section 5.2. Insurance. The Company will maintain, or cause to be
maintained, and will cause each Restricted Subsidiary to maintain, or cause to
be maintained, insurance coverage on the Equipment by financially sound and
reputable hull and other underwriters or protection and indemnity clubs, or
Lloyds of London or a foreign insurer certified by a reputable insurance broker
as a financially sound insurance carrier or domestic insurers accorded a rating
by A.M. Best Company, Inc. of A+ or better at the time of issuance of any policy
in such forms and amounts and against such risks as are customary for businesses
of established reputation engaged in the same or a similar business and owning
and operating similar Properties. Without limiting the foregoing, the Company
will maintain, or cause to be maintained, insurance coverage against third-party
bodily injury and property damage liability in connection with equipment
ownership and operation and will also maintain or cause to be maintained,
insurance coverage with a limit of liability of not less than $500,000 per
occurrence, to insure the Company and its Subsidiaries against loss caused by
the fraud or dishonesty of any of its employees and the employees of the Manager
and its Affiliates.
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with
Laws. (a) The Company will promptly pay and discharge, and will cause each
Restricted Subsidiary promptly to pay and discharge, all lawful taxes,
assessments and governmental charges or levies imposed upon the Company or such
Restricted Subsidiary, respectively, or upon or in respect of all or any part of
the Property or business of the Company or such Restricted Subsidiary, all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor or materials, which if unpaid might become a Lien or
charge upon any Property of the Company or such Restricted Subsidiary; provided
the Company or such Restricted Subsidiary shall not be required to pay any such
tax, assessment, charge, levy, account payable or claim if (i) the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any Property
of the Company or such Restricted Subsidiary or any material interference with
the use thereof by the Company or such Restricted Subsidiary, and (ii) the
Company or such Restricted Subsidiary shall set aside on its books, reserves
deemed by it to be adequate with respect thereto.
(b) The Company will promptly comply and will cause each Subsidiary
to comply with all laws, ordinances or governmental rules and regulations to
which it is subject, including, without limitation, the Delaware Limited
Liability Company Act, the Occupational Safety and Health Act of 1970, ERISA and
any Environmental Law, the violation of which would materially and adversely
affect the properties, business, prospects, profits or condition of the Company
and its Subsidiaries, taken as a whole, or would result in any Lien or charge
upon any Property of the Company or any Subsidiary not permitted by ss.5.10.
Section 5.4. Maintenance, Etc. The Company will maintain, preserve
and keep, or cause to be maintained, preserved and kept, all Properties which
are used or useful in the conduct of the business of the Company and its
Restricted Subsidiaries (whether owned in fee or a leasehold interest) in good
repair and working order and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the efficiency thereof
shall be maintained.
Section 5.5. Nature of Business. The Company and its Restricted
Subsidiaries taken as a whole will not engage in any business other than the
business of owning and leasing a diversified equipment portfolio consisting
primarily of used transportation and transportation-related equipment all as
more fully described in Section 1.05 of the Operating Agreement as in effect on
the date hereof.
Section 5.6. Special Provisions for Marine Vessels and Aircraft.
Without limiting the foregoing provisions of ss.5.2 and ss.5.4, the Company
shall cause any Vessels or Aircraft owned by it or in which it has an ownership
interest to be maintained and insured as provided in this ss.5.6.
(a) Maintenance of Marine Vessels. The Company will at all times
cause any Vessel to be maintained and preserved in good condition, working order
and repair as will entitle her to retain the highest classification and rating
for vessels of the same age and type in the American Bureau of Shipping, Det
Norske Veritas, Bureau Veritas, Lloyds Register, Nippon Kaiji Kyokai,
Germanischer Lloyd or classification societies of similar stature.
(b) Insurance on Marine Vessels. The Company will at all times cause
the following insurance to be carried and maintained with respect to any Vessel:
(i) Marine insurance in an amount at least equal to the
Equipment Value of such Vessel covering the hull and all equipment and
appurtenances of the Vessel, against all usual marine risks;
(ii) Insurance covering the customary protection and indemnity
risks in an amount at least equal to the higher of (1) an amount
customary with operations conducted by any such Vessel and (2) the
Equipment Value of such Vessel;
(iii) Insurance against liability arising out of pollution,
spillage or leakage in connection with operations conducted by any
Vessel in an amount not less than the usual and customary coverage
amounts carried in the international shipping industry for comparable
marine vessels handling or transporting similar cargo; provided that in
no event shall such insurance be maintained in an amount less than that
required by the laws of any jurisdiction in which any such Vessel is
operated for so long as such Vessel is operated under the laws of such
jurisdiction; and
(iv) War risk insurance, if available at commercially
reasonable rates.
(c) Certificate of Financial Responsibility. When required for access
to U.S. ports, the Company shall obtain a Certificate of Financial
Responsibility issued by the United States pursuant to the Federal Water
Pollution Control Act to the extent that the same may be required by law or
regulation.
(d) Maintenance and Servicing of Aircraft. The Company will at all
times cause:
(i) any Aircraft to be serviced, repaired, maintained, tested
and overhauled so as to keep such Aircraft in such operating condition
as may be necessary to enable the airworthiness certification of the
Aircraft to be maintained in good standing at all times under the
Federal Aviation Act or the governmental authority having jurisdiction
over such Aircraft;
(ii) all records, logs and other materials required to be
maintained by the Federal Aviation Administration, or the governmental
authority having jurisdiction over any Aircraft, to be maintained in
respect of each Aircraft (including any item of Equipment included
therein); and
(iii) any Aircraft to comply with all airworthiness directives
issued by any governmental authority having jurisdiction over any
Aircraft.
(e) Public Liability and Property Damage Liability Insurance for
Aircraft. The Company will at all times cause third party aircraft liability
insurance, passenger legal liability insurance, if applicable, and property
damage liability insurance to be carried with respect to any Aircraft.
(f) Insurance Against Loss or Damage to the Aircraft. The Company
shall at all times cause the following to be maintained with respect to any
Aircraft: (i) all-risk ground and flight aircraft hull insurance covering the
airframe and engines of any such Aircraft; (ii) fire, transit and extended
coverage with respect to any engines or parts while removed from such Aircraft;
and (iii) war risk insurance, including, hijacking (air piracy), governmental
confiscation and expropriation insurance.
Section 5.7. Fixed Charge Coverage. The Company will keep and
maintain as of the end of each fiscal quarter the ratio of Consolidated Cash
Flow Available for Fixed Charges for the Four-Quarter Period then ended to
Consolidated Fixed Charges for such Four-Quarter Period at not less than 3.00 to
1.00 (it being understood that any such failure to comply with this covenant at
the end of any fiscal quarter shall be deemed to continue until such time as the
Company shall be in full compliance with this covenant at the end of a
subsequent fiscal quarter).
Section 5.8. Sale and Leaseback. The Company will not, and will not
permit any Restricted Subsidiary to, enter into any arrangement whereby the
Company or any Restricted Subsidiary shall sell or transfer any Property owned
by the Company or any Restricted Subsidiary to any Person other than the Company
or a Restricted Subsidiary and thereupon the Company or any Restricted
Subsidiary shall lease or intend to lease, as lessee, the same Property, except
that the Company shall be permitted to enter into such arrangements to the
extent that the related lease would be permitted under ss.5.12.
Section 5.9. Limitations on Indebtedness. (a) The Company will not,
and will not permit any Restricted Subsidiary to, create, assume or incur or in
any manner be or become liable in respect of any Debt (including, without
limitation, any extension, renewal or replacement thereof), except:
(i) the Notes;
(ii) unsecured Debt of the Company in an aggregate principal
amount not to exceed $2,000,000, incurred in the ordinary course of
business, having an original maturity less than one year and not
renewable at the option of the Company for a term of one year or
greater beyond the date of original issuance, issued and outstanding in
compliance with clause (b) hereof, provided that in each case at the
time of issuance thereof and after giving effect thereto and to the
application of the proceeds thereof, no Default or Event of Default
would exist, provided, further, that such Debt shall be subordinated to
the Notes upon terms reasonably acceptable to the Requisite Holders;
(iii) Debt of a Restricted Subsidiary to the Company or to a
Wholly-Owned Restricted Subsidiary, provided that at the time of
issuance thereof and after giving effect thereto and to the application
of the proceeds thereof, no Default or Event of Default would exist;
and
(iv) Short Term Warehouse Debt in an aggregate principal
amount not to exceed the lesser of (1) $10,000,000 or (2) 50% of the
aggregate principal amount of the Notes outstanding at the time of
issuance thereof; provided that at the time of such issuance and after
giving effect thereto and to the application of the proceeds thereof,
no Default or Event of Default would exist under this Agreement and no
default or event of default would exist under the Warehousing Credit
Agreement (without giving effect to any consent, waiver or amendment
waiving or in effect waiving any default or event of default which
would otherwise arise from such issuance under the Warehousing Credit
Agreement).
(b) The Company will not at any time permit Consolidated Debt to
exceed the lesser of (i) $25,000,000 or (ii) 33-1/3% of the sum of Consolidated
Assets.
(c) The Company will not at any time permit any individual borrowing
by the Company under or pursuant to the Warehousing Credit Agreement to remain
outstanding for more than 180 days from the initial issuance thereof or to
permit any extension, renewal or refunding of any such individual borrowing.
(d) Any corporation, limited liability company or partnership which
becomes a Restricted Subsidiary after the date hereof shall for all purposes of
this ss.5.9 be deemed to have created, assumed or incurred at the time it
becomes a Restricted Subsidiary all Debt of such entity existing immediately
after it becomes a Restricted Subsidiary. Accordingly, the Company shall cause
each such corporation, limited liability company or partnership to retire all of
such Debt (except Debt permitted by ss.5.9(a)(iii)) prior to such corporation,
limited liability company or partnership becoming a Restricted Subsidiary.
Section 5.10. Limitation on Liens. The Company will not, and will
not permit any Restricted Subsidiary to, create or incur, or suffer to be
incurred or to exist, any mortgage, pledge, security interest, encumbrance, Lien
or charge of any kind on its or their Property or assets, whether now owned or
hereafter acquired, or assigned, or upon any income or profits therefrom, or
transfer any Property for the purpose of subjecting the same to the payment of
obligations in priority to the payment of its or their general creditors, or
acquire or agree to acquire, or permit any Restricted Subsidiary to acquire, any
Property or assets upon conditional sales agreements or other title retention
devices, except:
(a) Liens for Property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided that payment thereof is not at the time required
by ss.5.3;
(b) Liens of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Restricted Subsidiary
shall at any time in good faith be prosecuting an appeal or proceeding
for a review and in respect of which a stay of execution pending such
appeal or proceeding for review shall have been secured; provided,
however, that (i) the Company or such Restricted Subsidiary shall have
made adequate reserves for said judgment or award in their financial
statements and (ii) such Liens shall not cause interference with the
use of any Equipment;
(c) Liens incidental to the conduct of business or the
ownership of Properties and assets (including warehousemen's and
attorneys' Liens and statutory landlords' Liens) and deposits, pledges
or Liens to secure the performance of bids, tenders or trade contracts,
or to secure statutory obligations, surety or appeal bonds or other
Liens of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money, provided in
each case, the obligation secured is not overdue or, if overdue, (i) is
being contested in good faith by appropriate actions or proceedings,
(ii) adequate reserves therefor have been set up on the financial
statements of the Company or a Restricted Subsidiary, and (iii) such
Liens shall not cause interference with the use of any Equipment;
(d) minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real Properties, which are necessary for the conduct of the
activities of the Company and its Restricted Subsidiaries or which
customarily exist on properties of corporations engaged in similar
activities and similarly situated and which do not in any event
materially impair their use in the operation of the business of the
Company and its Restricted Subsidiaries;
(e) Liens securing Indebtedness of a Restricted Subsidiary to
the Company or to a Wholly-owned Restricted Subsidiary;
(f) Liens in favor of lessees consisting of, or granted to
secure purchase options contained in or related to leases of Equipment
owned by the Company or a Restricted Subsidiary; provided that the
consideration payable pursuant to any such option shall in no event be
less than the fair market value of the Equipment subject thereto;
(g) Liens securing the Short Term Warehouse Debt; provided
that such Short Term Warehouse Debt has been incurred within the
limitations of ss.5.9(a)(iv); and
(h) Liens existing on the Execution Date and described on
Schedule II hereto.
Section 5.11. Distributions, Certain Payments. The Company will not
directly or indirectly, or through any Subsidiary, make any payment to the
Manager or any Affiliate or Affiliated Entity on account of Management Fees in
excess of the amount provided for in the Operating Agreement or the Equipment
Management Agreement as each such agreement is in effect on the Execution Date,
or make or declare any Distribution, if in each such case, either prior to or
after giving effect thereto, a Default or an Event of Default shall have
occurred and be continuing.
Section 5.12. Limitation on Long-Term Leases and Joint Ownership of
Equipment. (a) The Company will not, and will not permit any Restricted
Subsidiary to, become obligated, as lessee, under any Long-Term Lease if at the
time of entering into any such Long-Term Lease and after giving effect thereto,
the aggregate Rentals payable by the Company and all of its Restricted
Subsidiaries on a consolidated basis in any one fiscal year thereafter under all
Long-Term Leases would exceed 10% of the aggregate amount of all capital
accounts of the Members of the Company determined in accordance with generally
accepted accounting principles.
(b) The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise permit or suffer to exist on or with respect
to any Equipment any right of first refusal or any purchase option other than
purchase options in favor of the lessees of such Equipment for consideration
payable which is not less than the Current Fair Market Value of the related
Equipment at the time such option is exercised.
Section 5.13. Mergers, Consolidations and Sales of Assets. (a) The
Company will not, and will not permit any Restricted Subsidiary to: (i)
consolidate with or be a party to a merger with any other Person or (ii)
license, transfer, sell or otherwise dispose of (herein a "Disposition") all or
any substantial part of the assets of the Company and its Restricted
Subsidiaries, provided, however, that:
(1) any Restricted Subsidiary may merge or consolidate with
or into the Company, any Wholly-owned Restricted Subsidiary or any
other Person so long as in any merger or consolidation involving the
Company, the Company shall be the surviving or continuing entity and in
the case of any merger or consolidation with any other Person, such
Person shall, after giving effect to such merger or consolidation, be a
Wholly-owned Restricted Subsidiary;
(2) any Restricted Subsidiary may sell or otherwise dispose of
all or any part of its assets to the Company or any Wholly-owned
Restricted Subsidiary; and
(3) the Company or any Restricted Subsidiary may sell or
otherwise dispose of any of its assets in the ordinary course of
business for fair value.
(b) The Company will not permit any Restricted Subsidiary to issue or
sell any Equity Capital of such Restricted Subsidiary to any Person other than
the Company or a Wholly-owned Restricted Subsidiary, except:
(1) for the purpose of qualifying directors or the equivalent
thereof; or
(2) in satisfaction of the validly pre-existing preemptive
rights of minority shareholders or the equivalent thereof in connection
with the simultaneous issuance of Equity Capital to the Company and/or
a Restricted Subsidiary whereby the Company and/or such Restricted
Subsidiary maintain their same proportionate interest in such
Restricted Subsidiary; or
(3) to Affiliated Entities in connection with the formation
of a Restricted Subsidiary which is organized as an investment entity
by the Company and such Affiliated Entities and the activities of which
are limited solely to the ownership of Equipment.
(c) The Company will not sell, transfer or otherwise dispose of any
Equity Capital in any Restricted Subsidiary (except to qualify directors or the
equivalent thereof) or any Indebtedness of any Restricted Subsidiary, and will
not permit any Restricted Subsidiary to sell, transfer or otherwise dispose of
(except to the Company or a Wholly-owned Restricted Subsidiary) any Equity
Capital or any Indebtedness of any other Restricted Subsidiary, unless:
(1) simultaneously with such sale, transfer, or disposition,
all shares of Equity Capital and all Indebtedness of such Restricted
Subsidiary at the time owned by the Company and by every other
Subsidiary shall be sold, transferred or disposed of as an entirety;
(2) the Manager shall have determined, as evidenced by a
resolution of the Board of Directors thereof, that the retention of
such Equity Capital and Indebtedness is no longer in the best interests
of the Company;
(3) such Equity Capital and Indebtedness is sold, transferred
or otherwise disposed of to a Person, for a cash consideration and on
terms reasonably deemed by the Manager to be adequate and satisfactory;
and
(4) the Restricted Subsidiary being disposed of shall not
have any continuing investment in the Company or any other Subsidiary
not being simultaneously disposed of.
Section 5.14. Guaranties. The Company will not, and will not permit
any Restricted Subsidiary, to become or be liable in respect of any Guaranty
except Guaranties by the Company of the obligations of any Restricted Subsidiary
as a lessor of Aircraft or Vessels so long as the obligation of the Company as
Guarantor is not in excess of that which the Company would have were it the
lessor of such Aircraft or Vessels.
Section 5.15. Repurchase of Notes. Neither the Company nor any
Restricted Subsidiary or Affiliate, directly or indirectly, may repurchase or
make any offer to repurchase any Notes unless the offer has been made to
repurchase Notes, pro rata, from all holders of the Notes at the same time and
upon the same terms. In case the Company repurchases any Notes, such Notes shall
thereafter be cancelled and no Notes shall be issued in substitution therefor.
Section 5.16. Transactions with Affiliates and Affiliated Entities.
The Company will not, and will not permit any Restricted Subsidiary to, enter
into or be a party to any transaction or arrangement with any Affiliate or
Affiliated Entity (including, without limitation, the purchase from, sale to or
exchange of Property with, or the rendering of any service by or for, any
Affiliate or Affiliated Entity), except in the ordinary course of, and pursuant
to the reasonable requirements of the Company's or such Restricted Subsidiary's,
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than it would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate or Affiliated Entity;
provided, however, that nothing contained in this ss.5.16 shall prohibit any
transaction or arrangement otherwise permitted under Section 2.02(r) of the
Operating Agreement as in effect on the Execution Date.
Section 5.17. Investments. The Company will not, and will not permit
any Restricted Subsidiary to, make any investments in or loans, advances or
extensions of credit to, any Person, except:
(a) investments, loans and advances by the Company and its
Restricted Subsidiaries in and to Restricted Subsidiaries, including
any investment in a Person which, after giving effect to such
investment, will become a Restricted Subsidiary;
(b) investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition by the
Company or any Restricted Subsidiary, is accorded the highest rating by
Standard & Poor's, Moody's Investors Service, Inc. or other nationally
recognized credit rating agency of similar standing;
(c) investments in direct obligations of the United States of
America, or any agency thereof, maturing in twelve months or less from
the date of acquisition thereof and which are backed by the full faith
and credit of the United States;
(d) investments in direct obligations of the federal
government of Canada, or any agency thereof, maturing in twelve months
or less from the date of acquisition thereof and which are backed by
the full faith and credit of the federal government of Canada;
(e) investments in demand deposits and/or certificates of
deposit maturing within one year from the date of acquisition thereof
issued by a bank or trust company organized under the laws of the
United States or any state thereof, having capital, surplus and
undivided profits aggregating at least $100,000,000 and substantially
all of whose assets are located in the United States; provided that at
the time of acquisition thereof by the Company or a Restricted
Subsidiary, the senior unsecured long-term deposits of such bank or
trust company or the senior unsecured long-term debt of the holding
company of such bank or trust company (in the event no such rating
exists for such bank or trust company) is rated "A" or better by
Standard & Poor's or "A2" or better by Moody's Investors Service, Inc.;
(f) investments by the Company and its Restricted Subsidiaries
in Property and Equipment (including investments in Unconsolidated
Special Purpose Entities) to be used in the ordinary course of
business; and
(g) short-term receivables arising from the sale of goods and
services in the ordinary course of business of the Company and its
Restricted Subsidiaries.
For purposes of this ss.5.17, at any time when a corporation, a limited
liability company or a partnership becomes a Restricted Subsidiary, all
investments of such corporation, limited liability company or partnership at
such time shall be deemed to have been made by such corporation, such limited
liability company or such partnership, as a Restricted Subsidiary, at such time.
Section 5.18. Termination of Pension Plans. The Company will not and
will not permit any Subsidiary to permit any employee benefit plan maintained by
it to be terminated in a manner which could result in the imposition of a lien
on any Property of the Company or any Subsidiary pursuant to Section 4068 of
ERISA.
Section 5.19. Reports and Rights of Inspection. The Company will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which full and correct entries will be made of all dealings or transactions
of or in relation to the business and affairs of the Company or such Subsidiary,
in accordance with generally accepted principles of accounting consistently
maintained (except for changes disclosed in the financial statements furnished
to you pursuant to this ss.5.19 and concurred with by the independent public
accountants referred to in ss.5.19(b) hereof), and will furnish to you so long
as you are the holder of any Note and to each other institutional holder of the
then outstanding Notes (in duplicate if so specified below or otherwise
requested):
(a) Quarterly Statements. As soon as available and in any
event within 60 days after the end of each quarterly fiscal period
(except the last) of each fiscal year, duplicate copies of:
(1) a consolidated balance sheet of the Company and
its Restricted Subsidiaries as of the close of such quarter
setting forth in comparative form the consolidated figures for
the end of the preceding fiscal year,
(2) consolidated statements of operations and
changes in members' equity of the Company and its Restricted
Subsidiaries for such quarterly period and for the portion of
the fiscal year ending with such quarter, setting forth in
comparative form the consolidated figures for the
corresponding period of the preceding fiscal year,
(3) consolidated statements of cash flows of the
Company and its Restricted Subsidiaries for such quarterly
period and for the portion of the fiscal year ending with such
quarter, setting forth in comparative form the consolidated
figures for the corresponding period of the preceding fiscal
year, and
(4) a list of all Equipment, all purchases of
additional Equipment and of any Equipment which has become the
subject of a total loss, in any such case during such
quarterly period and the percentage of all Equipment that is
being leased from the Company as at the end of such quarterly
period,
all in reasonable detail and certified as complete and correct, by an
authorized financial officer of the Company or the Manager;
(b) Annual Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Company,
duplicate copies of:
(1) a consolidated balance sheet of the Company and
its Restricted Subsidiaries as of the close of such fiscal
year, and
(2) consolidated statements of operations and
changes in members' equity and cash flows of the Company and
its Restricted Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated figures
for the preceding fiscal year, all in reasonable detail and accompanied
by a report thereon of a firm of independent public accountants of
recognized national standing selected by the Company to the effect that
the consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and present fairly, in
all material respects, the financial condition of the Company and its
Restricted Subsidiaries and that the examination of such accountants in
connection with such financial statements has been made in accordance
with generally accepted auditing standards and accordingly includes
such tests of the accounting records and such other auditing procedures
as were considered necessary to provide a reasonable basis for the
opinion expressed in the report;
(c) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of the Company or any Restricted Subsidiary;
(d) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by the Company to members generally and of each
regular or periodic report, and any registration statement or
prospectus filed by the Company or any Subsidiary or the Manager with
any securities exchange or the Securities and Exchange Commission or
any successor agency, and copies of any orders in any proceedings to
which the Company or any of its Subsidiaries or the Manager is a party,
issued by any governmental agency, Federal or state, having
jurisdiction over the Company or any of its Subsidiaries or the
Manager;
(e) Requested Information. With reasonable promptness, all
such information which at the time you or any successor qualified
institutional buyer (as defined in Rule 144A of the General Rules and
Regulations of the Securities and Exchange Commission) may need to
comply with said Rule 144A upon a sale of Notes pursuant to said Rule
as well as such other data and information as you or any such
institutional holder may reasonably request;
(f) Officer's Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial
officer of the Company or the Manager stating that such officer has
reviewed the provisions of this Agreement and setting forth: (i) the
information and any computations (in sufficient detail) required in
order to establish whether the Company was in compliance with the
requirements of ss.5.7 through ss.5.18, inclusive, at the end of the
period covered by the financial statements then being furnished, (ii)
whether there existed as of the date of such financial statements and
whether, to the best of such officer's knowledge, there exists on the
date of the certificate or existed at any time during the period
covered by such financial statements any Default or Event of Default
and, if any such condition or event exists on the date of the
certificate, specifying the nature and period of existence thereof and
the action the Company is taking and proposes to take with respect
thereto, and (iii) the Equipment Value of Aggregate Equipment as of the
end of such period;
(g) Accountants Certificates. Within the period provided in
paragraph (b) above, a report of the accountants who render an opinion
with respect to such financial statements, stating that they have
reviewed ss.ss.5.7, 5.8, 5.9, 5.11, 5.12 and ss.5.17 of this Agreement
and stating further whether, in making their audit, such accountants
have become aware of any Default or Event of Default under any of the
terms or provisions of this Agreement insofar as any of such terms or
provisions pertain to or involve accounting matters or determinations,
and if any such condition or event then exists, specifying the nature
and period of existence thereof;
(h) Unrestricted Subsidiaries. Within the respective periods
provided in paragraph (b) above, financial statements of the character
and for the dates and periods as in said paragraph (b) provided
covering each Unrestricted Subsidiary (or groups of Unrestricted
Subsidiaries on a consolidated basis);
(i) Reports to Members. Promptly upon their becoming
available copies of all financial statements and reports other than tax
reports sent by the Company to its Members generally, including without
limitation, copies of the annual comparison report prepared by the
Manager pursuant to Section 2.06(e) of the Operating Agreement; and
(j) Annual Insurance Certificates. Within 90 days after the
end of each fiscal year of the Company, a certificate signed by
Carpenter Moore Insurance Services Inc. or any other independent
insurance broker satisfactory to the Majority Holders containing a
statement of the insurance maintained by the Company pursuant to ss.5.6
(including as to each policy, its number, the amount, the insurer, the
named assureds, the type of risk, the loss payees and the expiration
date) and a statement that such insurance is in such amounts, against
such risks and with such insurers as to adequately protect the Company;
and
(k) Accounting Controls. Promptly upon becoming available,
and in any event within three Business Days after receipt, copies of
any report outlining any material inadequacies in the accounting
controls of the Company, the Manager or the Fund Manager submitted by
independent accountants in connection with any audit of the Company,
any Restricted Subsidiary, the Manager or the Fund Manager.
Without limiting the foregoing, the Company will permit you, so long as
you are the holder of any Note, and each institutional holder of 10% or more of
the aggregate principal amount of the then outstanding Notes (or such Persons as
either you or such holder may designate), to visit and inspect, under the
Company's guidance, any of the properties of the Company or any Subsidiary, to
examine all their books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs, finances
and accounts with their respective officers, employees, and independent public
accountants (and by this provision the Company authorizes said accountants to
discuss with you the finances and affairs of the Company and its Subsidiaries)
all at such reasonable times and as often as may be reasonably requested;
provided, however, that any inspections of Equipment shall only be permitted to
be conducted at such times and in such manner as shall not interfere with the
normal and customary use of such Equipment by the lessee thereof. The Company
shall not be required to pay or reimburse you or any such holder for expenses
which you or any such holder may incur in connection with any such visitation or
inspection unless a Default or Event of Default shall have occurred and be
continuing, in which case, any such visitation or inspection shall be at the
sole expense of the Company.
You agree that all non-public information furnished to you pursuant to
this Agreement shall be treated as confidential information by you and that you
will use reasonable efforts to refrain from disclosing such information to any
other Person (excluding any of your officers, employees, agents, auditors and
counsel), provided that (a) you shall not be liable to the Company or any other
Person in damages for any failure to comply with the foregoing covenant except
in any case involving gross negligence, willful misconduct or fraudulent
misconduct on your part, (b) you may disclose any or all of such information if
in your judgment such disclosure is necessary or advisable in connection with
the preservation or protection of your interests as a holder of any Notes or in
connection with selling, or otherwise realizing upon your interest in, the
Notes, and (c) you may disclose any such information to, or in response to the
order or request of, any governmental agency, regulatory or supervisory
authority (including for this purpose the National Association of Insurance
Commissioners) or court or any nationally recognized rating agency in connection
with its rating of the holder of the Notes. The restrictions contained herein
shall not apply to information which (i) is or becomes generally available to
the public other than as a result of a disclosure by you or your
representatives, (ii) becomes available to you on a non-confidential basis from
a source other than the Company or one of its agents or (iii) was known to you
on a non-confidential basis prior to its disclosure to you by the Company or one
of its agents.
The foregoing provisions of this ss.5.19 notwithstanding, the Company
shall not be required to furnish any of the above information which is not
otherwise generally available to the public to any holder of the Notes which is
engaged in the transportation equipment leasing or service business.
Section 5.20. Certain Appraisals. (a) The Requisite Holders shall
have the right, exercisable not more than two times from and after the first
Closing Date, to require that, at the expense of the Company, an appraisal be
made of the Current Fair Market Value of the Equipment (the "Appraised Value").
In addition to such required appraisals at the Company's expense, the Requisite
Holders shall have the further right from time to time to cause the Appraised
Value to be determined (the "Additional Appraisals"); provided, that upon any
determination of the Appraised Value pursuant to any Additional Appraisal, (1)
if the Appraised Value demonstrates that the Company is in compliance with
ss.5.9(b), the holders of the Notes shall bear the expense of such Additional
Appraisal, or (2) if the Appraised Value demonstrates that the Company is not in
compliance with ss.5.9(b), the Company shall bear the expense of such Additional
Appraisal.
In any such event, the Company shall promptly notify all of the holders
of the Notes of the request to have the Appraised Value determined and the
Appraised Value shall thereupon be determined in accordance with the Appraisal
Procedure set forth below. The Company shall make available to any appraiser who
so requests all information regarding the Equipment reasonably requested by any
appraiser. Any appraisal made pursuant to this ss.5.20 shall be limited to an
appraisal of only such Equipment designated by the Company as is necessary to
demonstrate compliance with ss.5.6, ss.5.9 or ss.5.12.
"Appraisal Procedure" shall mean the following procedure for
determining the Current Fair Market Value of any Equipment: If the Requisite
Holders shall have given written notice to the Company requesting determination
of such value by the Appraisal Procedure, the Company shall designate which
nationally recognized appraiser(s) listed on Schedule III hereto shall conduct
the Appraisal Procedure. The Requisite Holders shall have the right to cause any
appraiser listed on Schedule III to be removed from such Schedule III if such
holders shall indicate their objection to any such appraiser to the Company and
state a reasonable basis therefor. If the Company shall seek to designate any
appraiser other than one listed on Schedule III, the Company and such requesting
holders shall consult for the purpose of appointing a qualified independent
appraiser skilled in the valuation of Property such as the Equipment by mutual
agreement. If no such appraiser is so appointed within 15 days after such notice
is given, the Company and such holders shall each appoint a qualified
independent appraiser within 20 days after such notice is given. If one party
appoints an appraiser pursuant to the preceding sentence, the appraisal shall be
made by such appraiser if the other party fails to appoint a second appraiser
within the applicable time limit. If both parties appoint appraisers, the two
appraisers so appointed shall within 30 days after such notice is given, appoint
a third independent appraiser. If no such third appraiser is appointed within 30
days after such notice is given, either party may apply to the American
Arbitration Association to make such appointment, and both parties shall be
bound by any such appointment. If the parties shall have appointed a single
appraiser, his determination of Current Fair Market Value shall be final. If
three appraisers shall be appointed, the Current Fair Market Value determined by
the three appraisers shall be averaged, the determination which differs most
from such average shall be excluded, the remaining two determinations shall be
averaged and such average shall be final and shall constitute the Appraised
Value.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the following
shall constitute an "Event of Default" as the term is used herein:
(a) Default shall occur in the payment of interest on any
Note when the same shall have become due and such default shall
continue for more than five days; or
(b) Default shall occur in the making of any required
prepayment on any of the Notes as provided in ss.2.1; or
(c) Default shall occur in the making of any other payment of
the principal of any Note or the premium thereon at the expressed or
any accelerated maturity date or at any date fixed for prepayment; or
(d) Default shall be made in the payment of the principal of
or interest or premium, if any, on any Indebtedness of the Company or
any Restricted Subsidiary for borrowed money aggregating in excess of
$1,000,000, as and when the same shall become due and payable by the
lapse of time, by declaration, by call for redemption or otherwise, and
such default shall continue beyond the grace period, if any, allowed
with respect thereto; provided however, this ss.6.1(d) shall not apply
to alleged defaults under contracts or leases (other than relating to
Indebtedness for borrowed money) that are being contested in good
faith; or
(e) Default or the happening of any event shall occur under
any indenture, agreement, or other instrument under which any
Indebtedness of the Company or any Restricted Subsidiary for borrowed
money aggregating in excess of $1,000,000 may be issued and such
default or event shall continue for a period of time sufficient to
permit the acceleration of the maturity of any Indebtedness of the
Company or any Restricted Subsidiary outstanding thereunder; provided
however, this ss.6.1(e) shall not apply to alleged defaults under
contracts or leases (other than relating to Indebtedness for borrowed
money) that are being contested in good faith; or
(f) Default shall occur in the observance or performance of
any covenant or agreement contained in ss.5.7 through ss.5.16
(excluding ss.5.9(b)), inclusive, hereof, or in the Letter Agreement
dated the Execution Date between the Company and the Purchaser; or
(g) Default shall occur in the observance or performance of
the provisions of ss.5.9(b) which is not remedied within the earlier of
(1) 45 days of the occurrence thereof or (2) 10 days after any officer
of the Manager shall have received actual knowledge of such Default; or
(h) Default shall occur in the observance or performance of
any other provision of this Agreement which is not remedied within 30
days after any officer of the Manager shall have received actual
knowledge of such Default; or
(i) Any representation or warranty made by the Company
herein, or made by the Company in any statement or certificate
furnished by the Company in connection with the consummation of the
issuance and delivery of the Notes or furnished by the Company pursuant
hereto, is untrue in any material respect as of the date of the
issuance or making thereof; or
(j) The Company or any Restricted Subsidiary becomes
insolvent or bankrupt, is generally not paying its debts as they become
due or makes an assignment for the benefit of creditors, or the Company
or any Restricted Subsidiary applies for or consents to the appointment
of a custodian, trustee or receiver for the Company or such Restricted
Subsidiary or for the major part of the Property of either; or
(k) A custodian, trustee or receiver is appointed for the
Company or any Restricted Subsidiary or for the major part of the
Property of either and is not discharged within 30 days after such
appointment; or
(l) Final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 is or are outstanding against the
Company or any Restricted Subsidiary or against any Property or assets
of either and any one of such judgments has remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of 30 days
from the date of its entry; or
(m) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Restricted Subsidiary and, if instituted
against the Company or any Restricted Subsidiary, are consented to or
are not dismissed within 60 days after such institution; or
(n) Any of the Events of Dissolution described in clauses (a)
through (d) and clause (f) of Section 10.01 of the Operating Agreement
as in effect on the Execution Date shall occur or the Company shall be
terminated.
Notwithstanding the foregoing, if any one or more of the events
described in (j), (k), (l) or (m) above shall have occurred and be continuing
involving one or more Restricted Subsidiaries, it shall not be deemed to
constitute an Event of Default unless the Restricted Subsidiary or Subsidiaries
so involved own, in the aggregate, 5% or more of the Tangible Assets at the time
owned by the Company and its Restricted Subsidiaries.
Section 6.2. Notice to Holders. When any Event of Default described
in the foregoing ss.6.1 has occurred, or if the holder of any Note or of any
other evidence of Indebtedness of the Company gives any notice or takes any
other action with respect to a claimed default, the Company agrees to give
notice within three Business Days of such event to all holders of the Notes then
outstanding, such notice to be in writing and sent by registered or certified
mail or by telegram.
Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a), (b) or (c) of ss.6.1 has happened and is continuing,
any holder of any Note may, and when any Event of Default described in
paragraphs (d) through (l), inclusive, of said ss.6.1 has happened and is
continuing, the holder or holders of 40% or more of the principal amount of
Notes at the time outstanding may, by notice in writing sent by registered or
certified mail to the Company, declare the entire principal and all interest
accrued on all Notes to be, and all Notes shall thereupon become, forthwith due
and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. When any Event of Default
described in paragraph (m) or (n) of ss.6.1 has occurred, then all outstanding
Notes shall immediately become due and payable without presentment, demand or
notice of any kind. Upon the Notes becoming due and payable as a result of any
Event of Default as aforesaid, the Company will forthwith pay to the holders of
the Notes the entire principal and interest accrued on the Notes and, to the
extent permitted by law, an amount, payable as liquidated damages and not as a
penalty, equal to the amount which would be payable if the Company then had
elected to prepay the Notes at a premium pursuant to ss.2.2. No course of
dealing on the part of the holder or holders of any Note nor any delay or
failure on the part of any holder of the Notes to exercise any right shall
operate as a waiver of such right or otherwise prejudice such holder's rights,
powers and remedies. The Company further agrees, to the extent permitted by law,
to pay to the holder or holders of the Notes all costs and expenses incurred by
them in the collection of any Notes upon any default hereunder or thereon,
including reasonable compensation to such holder's or holders' attorneys for all
services rendered in connection therewith.
Section 6.4. Rescission of Acceleration The provisions of ss.6.3
are subject to the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (l), inclusive, of ss.6.1, the Majority Holders may, by written
instrument filed with the Company, waive such default and rescind and annul such
declaration and the consequences thereof, provided that at the time such
declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of
any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other
sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under ss.6.3) shall have
been duly paid; and
(c) each and every Default and Event of Default shall have
been made good, cured or waived pursuant to ss.7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of the Majority Holders; provided that without the
written consent of the holders of all of the Notes then outstanding, no such
waiver, modification, alteration or amendment shall be effective (a) which will
change the time of payment (including any prepayment required by ss.2.1) of the
principal of or the interest on any Note or reduce the principal amount thereof
or change the rate of interest thereon, or (b) which will change any of the
provisions with respect to optional prepayments, (c) which will change any of
the provisions of ss.6, or (d) which will change the percentage of holders of
the Notes required to consent to any such amendment, alteration or modification
or any of the provisions of this ss.7.
Section 7.2. Solicitation of Holders. The Company will not solicit,
request or negotiate for or with respect to any proposed waiver or amendment of
any of the provisions of this Agreement or the Notes unless each holder of the
Notes (irrespective of the amount of Notes then owned by it) shall be informed
thereof by the Company and shall be afforded the opportunity of considering the
same and shall be supplied by the Company with sufficient information to enable
it to make an informed decision with respect thereto. Executed or true and
correct copies of any waiver or consent effected pursuant to the provisions of
this ss.7.2 shall be delivered by the Company to each holder of outstanding
Notes forthwith following the date on which the same shall have been executed
and delivered by the holder or holders of the requisite percentage of
outstanding Notes. The Company will not, directly or indirectly, pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, to any holder of the Notes in consideration for or as an
inducement to any waiver or amendment of any of the terms and provisions of this
Agreement unless such remuneration is concurrently paid, on the same terms,
ratably to the holders of all of the Notes then outstanding.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or
waiver shall apply equally to all of the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the Company,
whether or not such Note shall have been marked to indicate such amendment or
waiver. No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 8.1. Definitions. Unless the context otherwise requires,
the terms hereinafter set forth when used herein shall have the following
meanings and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than an Affiliated Partnership
or a Wholly-owned Restricted Subsidiary) (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Company, (b) which beneficially owns or holds 10% or
more of any class of the Equity Capital of the Company, (c) 10% or more of the
Voting Equity Capital of which is beneficially owned or held by the Company or a
Subsidiary, or (d) Officers and members of the Board of Directors of the
Manager. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Equity Capital, by contract or
otherwise.
"Affiliated Entity" shall mean all partnerships of which the Manager is
a controlling general partner or with respect to which the general partner is
controlled by the Company or any other Affiliated Entity and all limited
liability companies of which the Manager is a controlling manager or with
respect to which the manager is controlled by the Company or any other
Affiliated Entity and, in any such case, which are engaged in the business of
owning and leasing a diversified equipment portfolio consisting primarily of
used transportation and transportation related equipment with a secondary
emphasis on new equipment.
"Agreement" shall mean this Note Agreement dated as of December 15,
1996 between the Company and the Purchaser, as the same may from time to time be
supplemented or amended.
"Aircraft" shall mean any corporate, commuter, or commercial aircraft
or helicopters, purchased, owned and leased or held for lease to others or
otherwise used by or on behalf of the Company or any Restricted Subsidiary as
described in the Operating Agreement, together with all modifications (as
applicable) and replacement or spare parts used in connection therewith,
including, without limitation, engines, rotables or propellers, and any engines,
rotables and propellers used on a stand-alone basis, title to which vests in the
Company or any Restricted Subsidiary or in a trust or other entity of which the
Company or any Restricted Subsidiary is the sole or a participating beneficiary
or owner.
"Appraised Value" shall have the meaning ascribed thereto in ss.5.20.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in San Francisco, California or Chicago, Illinois, are
required by law to close or are customarily closed.
"Capitalized Lease" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a balance sheet of the
lessee in accordance with generally accepted accounting principles.
"Capitalized Rentals" shall mean as of the date of any determination
the amount at which the aggregate Rentals due and to become due under all
Capitalized Leases under which the Company or any Restricted Subsidiary is a
lessee would be reflected as a liability on a consolidated balance sheet of the
Company and its Restricted Subsidiaries.
"Cash Equivalents" shall mean those investments described in clauses
(b) and (c) of ss.5.17 and those investments described in clause (e) of ss.5.17
which mature within 90 days from the date of acquisition thereof.
"Change Event" shall have the meaning ascribed thereto in ss.2.3(a).
"Change Notice" shall have the meaning ascribed thereto in ss.2.3(a).
"Class A Member" shall mean any Person or Persons who, at the time of
any determination thereof, is a Class A Member of the Company under and pursuant
to the terms of the Operating Agreement.
"Class B Member" shall mean any Person or Persons who, at the time of
any determination thereof, is a Class B Member of the Company under and pursuant
to the terms of the Operating Agreement.
"Closing Date" and "Closing Dates" shall have the meanings ascribed
thereto in ss.1.2.
"Commitment Fee" shall have the meaning ascribed thereto in ss.1.3.
"Company" shall have the meaning ascribed thereto in the Preamble.
"Consolidated Assets" as of any date of determination shall mean the
sum of (a) cash, (b) Cash Equivalents and (c) Equipment Value of Aggregate
Equipment.
"Consolidated Cash Flow Available for Fixed Charges" for any period
shall mean the sum of (a) Consolidated Net Income during such period plus (to
the extent deducted in determining Consolidated Net Income), (b) all provisions
for any Federal, state or other income taxes made by the Company and its
Restricted Subsidiaries during such period, (c) all provisions for depreciation
and amortization made during such period (other than such provisions made with
respect to Encumbered Equipment), (d) any loss arising as the result of
revaluation of Equipment (net of revaluation gains) during such period (other
than any such loss relating to Encumbered Equipment), (e) cash payments received
from Unconsolidated Special Purpose Entities (other than Unconsolidated Special
Purpose Entities which constitute Encumbered Equipment) during such period, and
(f) Consolidated Fixed Charges during such period.
"Consolidated Debt" shall mean all Debt of the Company and its
Restricted Subsidiaries (other than Short Term Warehouse Debt), determined on a
consolidated basis eliminating intercompany items.
"Consolidated Fixed Charges" for any period shall mean on a
consolidated basis the sum of (a) all Rentals (other than Rentals on Capitalized
Leases) payable during such period by the Company and its Restricted
Subsidiaries, and (b) all Interest Charges on all Indebtedness (including the
imputed interest applicable to Capitalized Rentals) of the Company and its
Restricted Subsidiaries (other than Interest Charges relating to Short Term
Warehouse Debt).
"Consolidated Net Income" for any period shall mean the gross revenues
of the Company and its Restricted Subsidiaries for such period less all expenses
and other proper charges (including taxes on income), determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied and after eliminating earnings or losses attributable to
outstanding Minority Interests, but excluding in any event:
(a) the proceeds of any life insurance policy;
(b) net earnings and losses of any Restricted Subsidiary
accrued prior to the date it became a Restricted Subsidiary;
(c) net earnings and losses of any corporation (other than a
Restricted Subsidiary), substantially all the assets of which have been
acquired in any manner, realized by such other corporation prior to the
date of such acquisition;
(d) net earnings and losses of any corporation (other than a
Restricted Subsidiary) with which the Company or a Restricted
Subsidiary shall have consolidated or which shall have merged into or
with the Company or a Restricted Subsidiary prior to the date of such
consolidation or merger;
(e) net earnings of any business entity (other than a
Restricted Subsidiary) in which the Company or any Restricted
Subsidiary has an ownership interest unless such net earnings shall
have actually been received by the Company or such Subsidiary in the
form of cash distributions;
(f) any portion of the net earnings of any Restricted
Subsidiary which for any reason is unavailable for payment of dividends
to the Company or any other Restricted Subsidiary;
(g) earnings resulting from any reappraisal, revaluation or
write-up of assets;
(h) any deferred or other credit representing any excess of
the equity in any Subsidiary at the date of acquisition thereof over
the amount invested in such Subsidiary;
(i) any gain arising from the acquisition of any Securities
of the Company or any Restricted Subsidiary;
(j) any reversal of any contingency reserve (other than
maintenance reserves and engine reserves paid by lessees of Equipment
into restricted accounts which, upon the occurrence of a default under,
or expiration of, the related lease, such reserves are paid to the
Company), except to the extent that provision for such contingency
reserve shall have been made from income arising during such period;
and
(k) earnings generated by or attributable to Encumbered
Equipment.
"Current Fair Market Value" with respect to any item of Equipment shall
mean the fair market value thereof as determined by an equally willing and
informed buyer and seller, neither under a short time constraint or compulsion
to buy or sell, for a single unit cash transaction with no hidden value or
liability, as adjusted by prevailing market conditions (whether at, above or
below fair market value), including without limitation: the status of the
economy in which such item of Equipment is used, the status of supply and demand
for items of equipment which are the same as such item of Equipment, the value
of recent transactions involving similar items of equipment and the opinions of
informed buyers and sellers with no immediate constraint or compulsion to buy or
sell.
"Debt" of any Person shall mean and be limited to Indebtedness of such
Person for and in respect of money borrowed, as well as Indebtedness of such
Person of the types described in clauses (a) through (e) of the definition of
Indebtedness set forth below.
"Declaration Notice" shall have the meaning ascribed thereto in
ss.2.3(a).
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default as defined in ss.6.1.
"Disposition" shall have the meaning ascribed thereto in ss.5.13(a).
"Distributions" shall mean and include (a) any payment or distribution
of income or profits of the Company (other than payments of Management Fees),
(b) any other payment or other distribution of Property (including, without
limitation, cash distributions) made by or on behalf of the Company to any of
its Members which under generally accepted accounting principles would be
required to be deducted from the capital account for such Member on the books of
the Company, and (c) any payment or other distribution to any Person to
purchase, redeem or retire any warrant, option or other right to acquire any
Unit or other interest as a Member of the Company.
"Encumbered Equipment" shall mean all items of Equipment the
acquisition of which are financed with borrowings under the Warehousing Credit
Agreement, whether or not secured by any Lien.
"Environmental Law" shall mean any current or future treaty,
convention, statute, law, regulation, ordinance, permit, governmental approval,
injunction, judgment, order, consent decree or other legal requirement
pertaining to (a) the protection of health, safety and the indoor or outdoor
environment, (b) the conservation, management or use of natural resources and
wildlife, (c) the protection or use of surface water and groundwater, (d) the
management, manufacture, possession, presence, use, generation, transportation,
treatment, storage, disposal, release, threatened release, abatement, removal,
remediation or handling of, or exposure to, any hazardous material (including
asbestos and crude oil or any fraction thereof) or (e) pollution (including any
release to air, land, surface water and groundwater), and includes, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. ss.ss.9601 et seq., Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. ss.ss.6901 et seq., Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. ss.ss.1251 et
seq., Clean Air Act of 1966, as amended, 42 U.S.C. ss.ss.7401 et seq., Toxic
Substances Control Act of 1976, 15 U.S.C. ss.ss.2601 et seq., Hazardous
Materials Transportation Act, 49 U.S.C. App. ss.ss.1801 et seq., Occupational
Safety and Health Act of 1970, as amended, 29 U.S.C. ss.ss.651 et seq., Oil
Pollution Act of 1990, 33 U.S.C. ss.ss.2701 et seq., Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss.11001 et seq., National
Environmental Policy Act of 1969, 42 U.S.C. ss.ss.4321 et seq., Safe Drinking
Water Act of 1974, as amended, 42 U.S.C. ss.ss.300(f) et seq., any similar,
implementing or successor law, and any amendment, rule, regulation, order or
directive issued thereunder.
"Equipment" shall mean each item of and all of the transportation
equipment and other personal Property purchased, owned, and leased or held for
lease to others or otherwise used by or on behalf of the Company or any
Restricted Subsidiary as described in the Operating Agreement, together with all
appliances, parts, instruments, appurtenances, accessories, furnishings or other
equipment included therein (including any and all engines originally installed
thereon), and all substitutions, renewals or replacements of, and all additions,
improvements and accessions to, any and all thereof, title to which vests in the
Company or any Restricted Subsidiary or in a trust or other entity of which the
Company or any Restricted Subsidiary is the sole or a participating beneficiary
or owner.
"Equipment Management Agreement" shall mean the Equipment Management
Agreement dated as of January 24, 1995, entered into on behalf of the Company by
the Manager with its Affiliate, PLM Investment Management, Inc., pursuant to
Section 2.02(k) of the Operating Agreement.
"Equipment Value" when used with reference to an item of Equipment
shall mean, as of any date of determination thereof, the Current Fair Market
Value (determined in good faith by the Manager or, if an appraisal shall have
been made within one year of the date of determination pursuant to ss.5.20, the
Appraised Value) of such item of Equipment owned and leased or available for
lease (as lessor) by the Company and its Restricted Subsidiaries.
"Equipment Value of Aggregate Equipment" shall mean, as of any date of
determination thereof, the Current Fair Market Value (determined in good faith
by the Manager or, if an appraisal shall have been made within one year of the
date of determination pursuant to ss.5.20, the Appraised Value) of all of the
Equipment owned and leased or available for lease (as lessor) by the Company and
its Restricted Subsidiaries, including the Company's proportionate share of
Equipment owned jointly through the Company's investments in Unconsolidated
Special Purpose Entities, it being understood and agreed that nothing contained
in this definition of "Equipment Value of Aggregate Equipment" shall be deemed
or construed to relieve the Company of its obligation pursuant to ss.5.6 to
maintain the full amount of insurance required pursuant thereto in respect of
Vessels, Mobile Offshore Drilling Units and Aircraft notwithstanding that the
Company and its Subsidiaries may own less than 100% of any such item of
Equipment. For the purposes of all computations of Equipment Value of Aggregate
Equipment pertaining to ss.5.9(b), there shall be excluded therefrom the
Equipment Value of (a) any item of Equipment which at the time of the
computation of Equipment Value of Aggregate Equipment has not been subject to a
lease with a Person which is not an Affiliate or an Affiliated Entity for more
than 120 days and (b) Encumbered Equipment.
"Equity Capital" shall mean in the case of a corporation, shares of
stock of any class, including as stock any warrants, rights or options to
purchase or otherwise acquire stock or other Securities exchangeable for or
convertible into stock, and in the case of any limited liability company,
partnership or other entity shall mean any membership interest, partnership
interest or like interest constituting equity, and in the case of each of the
foregoing, any part or portion thereof.
"ERISA" is defined in ss.3.2.
"Event of Default" shall have the meaning ascribed thereto in ss.6.1.
"Execution Date" shall have the meaning ascribed thereto in ss.1.2.
"Four-Quarter Period" shall mean a period of four, full, consecutive
quarter-annual fiscal periods, taken together as one accounting period.
"Fund Manager" shall mean PLM Investment Management, Inc., a California
corporation, or any Person or Persons who, at the time of reference thereto,
shall have been appointed as successor to PLM Investment Management, Inc.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (a) to purchase such Indebtedness or obligation or
any Property or assets constituting security therefor, (b) to advance or supply
funds (i) for the purchase or payment of such Indebtedness or obligation, (ii)
to maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, or (iii) to lease Property or to purchase Securities or other
Property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (c) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with generally accepted accounting principles
shall be classified upon a balance sheet of such Person as liabilities of such
Person, and in any event shall include, without duplication, all (a) obligations
of such Person for borrowed money or which has been incurred in connection with
the acquisition of Property or assets, (b) obligations secured by any lien or
other charge upon Property or assets owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations,
excluding, however, any lien which is being contested in good faith and the
continued existence thereof shall not cause any material interference with the
use of the Property, (c) obligations created or arising under any conditional
sale or other title retention agreement with respect to Property acquired by
such Person, notwithstanding the fact that the rights and remedies of the
seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of Property, excluding, however, any arrangement
for the acquisition of Property by such Person where the risk of loss of such
Property has not passed to such Person (d) Capitalized Rentals under any
Capitalized Lease and (e) Guarantees.
"Interest Charges" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Debt for which such
calculations are being made and shall include the imputed interest portion of
Capitalized Rentals. Computations of Interest Charges on a pro forma basis for
Debt having a variable interest rate shall be calculated at the rate in effect
on the date of any determination.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest or lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting Property but shall not include the interests
of any Affiliated Entity, or any subsidiary of the Manager in any Equipment
owned jointly by the Company, such Affiliated Entity and any subsidiary of the
Manager through a trust, a limited liability company or a partnership. For the
purposes of this Agreement, the Company or a Restricted Subsidiary shall be
deemed to be the owner of any Property which it has acquired or holds subject to
a conditional sale agreement, Capitalized Lease or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person
for security purposes and such retention or vesting shall constitute a Lien.
"Long-Term Lease" shall mean any lease of real or personal Property
(other than a Capitalized Lease) having an original term, including any period
for which the lease may be renewed or extended at the option of the lessor, of
more than three years.
"Majority Holders" shall mean as of any date of determination thereof
the holders of not less than 50.1% in aggregate principal amount of outstanding
Notes.
"Management Fees" shall mean (a) the Equipment Management Fee, the
Re-Lease Fee, the Equipment Liquidation Fee (as such terms are defined in the
Operating Agreement) and any premiums, commissions or fees for providing
insurance and risk management services, all as provided in the Operating
Agreement as in effect on the Execution Date, and (b) all fees payable to the
Fund Manager pursuant to the Equipment Management Agreement as in effect on the
Execution Date.
"Manager" shall mean PLM Financial Services, Inc., a Delaware
corporation, or any Person or Persons who, at the time of reference thereto, has
become the Manager of the Company pursuant to the Operating Agreement and if
there is more than one such Manager, the terms "Manager" shall mean the Manager
of the Company vested under the provisions of the Operating Agreement with the
responsibility and authority for the management and direction of the business
and operations of the Company.
"Material Agreement" shall mean the Equipment Management Agreement and
the Operating Agreement.
"Member" shall mean any member, of any class or kind, of the Company.
"Minority Interests" shall mean any Equity Capital of a Restricted
Subsidiary (other than directors' qualifying shares of stock as required by law)
that are not owned by the Company and/or one or more of its Restricted
Subsidiaries. Minority Interests shall be valued by valuing (a) Minority
Interests constituting preferred stock at the voluntary or involuntary
liquidating value of such preferred stock, whichever is greater, (b) Minority
Interests constituting common stock at the book value of capital and surplus
applicable thereto adjusted, if necessary, to reflect any changes from the book
value of such common stock required by the foregoing method of valuing Minority
Interests in preferred stock and (c) Minority Interests constituting membership
interests or limited or general partnership interests at the book value thereof
determined in accordance with generally accepted accounting principles in the
United States.
"Mobile Offshore Drilling Unit" shall mean any jack-up rig,
semi-submersible rig or platform drilling rig, purchased, owned and leased or
held for lease to others or otherwise used by or on behalf of the Company or any
Restricted Subsidiary as described in the Operating Agreement, together with all
appliances, parts, instruments, appurtenances, accessories, furnishings or other
equipment included therein and all substitutions, renewals or replacements of,
and all additions, improvements and accessions to, any and all thereof, title to
which vests in the Company or any Restricted Subsidiary or in a trust or other
entity of which the Company or any Restricted Subsidiary is the sole or a
participating beneficiary or owner.
"Notes" shall have the meaning ascribed thereto in ss.1.1(a).
"Notification of Declaration" shall have the meaning ascribed thereto
in ss.2.3(a).
"Officer" shall mean any officer as provided in the by-laws of the
Manager.
"Operating Agreement" shall mean the Fifth Amended and Restated
Operating Agreement of Professional Lease Management Income Fund I, L.L.C. dated
as of January 24, 1995, by and among PLM Financial Services, Inc., as the
manager and the initial Class B Member, Denise M. Kirchubel, as the initial
Class A Member, and the other Class A Members named therein, as amended by the
First Amendment dated as of March 18, 1996, and as the same may be further
amended, modified, supplemented or restated from time to time.
"Payment Date" shall have the meaning ascribed thereto in ss.2.3(a).
"Person" shall mean an individual, limited liability company,
partnership, corporation, trust, joint venture or unincorporated organization,
and a government or agency or political subdivision thereof.
"Prohibited Transferee" shall mean Bank of America National Trust &
Savings Association and its direct subsidiaries.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
"Rentals" shall mean and include all fixed rents (including as such all
payments which the lessee is obligated to make to the lessor on termination of
the lease or surrender of the Property) payable by the Company or a Restricted
Subsidiary, as lessee or sublessee under a lease of real or personal Property,
but shall be exclusive of any amounts required to be paid by the Company or a
Restricted Subsidiary (whether or not designated as rents or additional rents)
on account of maintenance, repairs, insurance, taxes and similar charges. Fixed
rents under any so-called "percentage leases" shall be computed solely on the
basis of the minimum rents, if any, required to be paid by the lessee regardless
of sales volume or gross revenues.
"Requisite Holders" shall mean as of any date of determination thereof
the holders of not less than 66-2/3% in aggregate principal amount of
outstanding Notes.
"Restricted Subsidiary" shall mean (a) those Subsidiaries designated as
such on the Execution Date and whose names are set forth on Annex A to Exhibit B
and (b) any Subsidiary designated as such by the Manager in a written notice to
the holders of the Notes. Any Subsidiary which has been designated as a
Restricted Subsidiary may not thereafter be designated as an Unrestricted
Subsidiary. The Company shall, notwithstanding the foregoing definition of
"Restricted Subsidiary", include any profits or losses of any Affiliated Entity
in any computation pursuant to ss.5.7 to the extent of, but only to the extent
of, the Equity Capital of such Affiliated Entity owned by the Company, provided
that any such computation pursuant to said ss.5.7 shall so include such profits
and losses to the extent of the Equity Capital of such Affiliated Entity so
owned by the Company for so long as 100% of the Equity Capital of such
Affiliated Entity is owned by the Company and other Affiliated Entities.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Short Term Warehouse Debt" shall mean and include all Indebtedness of
the Company due within one year from the date of the issuance thereof under the
Warehousing Credit Agreement.
"Standard & Poor's" shall have the meaning ascribed thereto in ss.4.4.
The term "subsidiary" shall mean, as to any particular parent entity,
any corporation, limited liability company, partnership or other entity of which
more than 50% of the Voting Equity Capital, and more than 50% of the Equity
Capital shall be owned by such parent entity and/or one or more entities which
are themselves subsidiaries of such parent entity. The term "Subsidiary" shall
mean a subsidiary of the Company.
"Tangible Assets" shall mean, as of the date of any determination
thereof, the total amount of all assets of the Company and its Restricted
Subsidiaries determined in accordance with generally accepted accounting
principles (less depreciation, depletion and other properly deductible valuation
reserves), after deducting goodwill, patents, trade names, trade marks,
copyrights, franchises, experimental expense, organization expense, unamortized
debt discount and expense, deferred assets other than prepaid insurance and
prepaid taxes, the excess of cost of shares acquired over book value of related
assets and such other assets as are properly classified as "intangible assets"
in accordance with generally accepted accounting principles.
"Unconsolidated Special Purpose Entity" shall mean any entity which is
organized solely for the purpose of owning and operating or leasing long-lived,
low obsolescence transportation or oil drilling equipment in a manner consistent
with the purpose of the Company articulated in the Operating Agreement with an
aggregate purchase price of $5,000,000 or more in which the Company and one or
more Affiliates are co-investors and which investment may not, under generally
accepted accounting principles, be consolidated in the preparation of the
financial statements of the Company.
"Units" shall have the same meaning as in the Operating Agreement.
"Unrestricted Subsidiary" shall mean any Subsidiary which is not a
Restricted Subsidiary.
"Vessel" shall mean any marine dry or liquid bulk carrier or tanker
purchased, owned and leased or held for lease to others or otherwise used by or
on behalf of the Company or any Restricted Subsidiary as described in the
Operating Agreement, together with all appliances, parts, instruments,
appurtenances, accessories, furnishings or other equipment included therein
(including any and all engines installed thereon), and all substitutions,
renewals or replacements of, and all additions, improvements and accessions to,
any and all thereof, title to which vests in the Company or any Restricted
Subsidiary or in a trust or other entity of which the Company or any Restricted
Subsidiary is the sole or a participating beneficiary or owner.
"Voting Equity Capital" shall mean Securities, membership interests or
partnership interests of any class or classes, the owners or holders of which
are entitled to elect a majority of the corporate directors (or Persons
performing similar functions).
"Warehousing Credit Agreement" shall mean that certain Second Amended
and Restated Warehousing Credit Agreement dated as of May 31, 1996 (including
any extension, renewal or replacement thereof), as amended by Amendment No. 1
dated as of November 5, 1996, among the Company and certain Affiliates, First
Union National Bank of North Carolina, as Agent, and the Lenders named therein,
established to finance, on a short term basis, the Company's and certain other
Affiliates' purchases of transportation assets, as the same may be further
amended or restated or replaced on substantially similar terms.
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding Equity Capital (except
shares of stock required as directors' qualifying shares) and all Indebtedness
for borrowed money shall be owned by the Company and/or one or more of its
Wholly-owned Subsidiaries.
"Withdrawal Event Prepayment Election Period" shall have the meaning
ascribed thereto in ss.2.3(b).
Section 8.2. Accounting Principles. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in accordance
with generally accepted accounting principles in the United States, to the
extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
SECTION 9. MISCELLANEOUS.
Section 9.1. Registered Notes. The Company shall cause to be kept
at its principal office a register for the registration and transfer of the
Notes, and the Company will register or transfer or cause to be registered or
transferred, as hereinafter provided and under such reasonable regulations as it
may prescribe, any Note issued pursuant to this Agreement.
At any time and from time to time the holder of any Note which has been
duly registered as hereinabove provided may transfer such Note to any person
other than a Prohibited Transferee upon surrender thereof at the principal
office of the Company duly endorsed or accompanied by a written instrument of
transfer duly executed by the holder of such Note or its attorney duly
authorized in writing.
The Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes of this Agreement.
Payment of or on account of the principal, premium, if any, and interest on any
Note shall be made to or upon the written order of such holder.
Section 9.2. Exchange of Notes. At any time and from time to time,
upon not less than ten days' notice to that effect given by the holder of any
Note initially delivered or of any Note substituted therefor pursuant to ss.9.1,
this ss.9.2 or ss.9.3, and, upon surrender of such Note at its office, the
Company will deliver in exchange therefor, without expense to the holder, except
as set forth below, a Note for the same aggregate principal amount as the then
unpaid principal amount of the Note so surrendered or Notes for the same
aggregate principal amount as the then unpaid principal amount of the Note so
surrendered in minimum denominations of $1,000,000 (or such lesser amount as
shall constitute 100% of the Notes of such holder) or any amount in excess
thereof as such holder shall specify, dated as of the date to which interest has
been paid on the Note so surrendered or, if such surrender is prior to the
payment of any interest thereon, then dated as of the date of issue, payable to
such Person or Persons, or registered assigns, as may be designated by such
holder, and otherwise of the same form and tenor as the Notes so surrendered for
exchange. The Company may require the payment of a sum sufficient to cover any
stamp tax or governmental charge imposed upon such exchange or transfer.
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity to the Company in such form and amount as shall be reasonably
satisfactory to the Company, or in the event of such mutilation upon surrender
and cancellation of the Note, the Company will make and deliver without expense
to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Note. If the Purchaser or any subsequent institutional
holder is the owner of any such lost, stolen or destroyed Note, then the
affidavit of an authorized officer of such owner, setting forth the fact of
loss, theft or destruction and of its ownership of the Note at the time of such
loss, theft or destruction shall be accepted as satisfactory evidence thereof
and no further indemnity shall be required as a condition to the execution and
delivery of a new Note other than the written agreement of such owner to
indemnify the Company.
Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement and the transactions contemplated
hereby, including but not limited to the reasonable charges and disbursements of
Chapman and Cutler, your special counsel, duplicating and printing costs and
charges for shipping the Notes, adequately insured to you at your home office or
at such other place as you may designate, any cost or expense incurred in
obtaining the Private Placement Number referred to in ss.4.4 hereof, and all
such expenses relating to any amendment, waivers or consents pursuant to the
provisions hereof, including, without limitation, any amendments, waivers or
consents resulting from any work-out, restructuring or similar proceedings
relating to the performance by the Company of its obligations under this
Agreement and the Notes. The Company agrees that it will pay the charges and
disbursements of Chapman and Cutler not later than fifteen Business Days from
the date of presentation of an invoice therefor subsequent to each of the
Closing Dates. Without limiting the foregoing, the Company also agrees to pay,
within fifteen Business Days of receipt thereof, supplemental statements of
Chapman and Cutler for disbursements unposted or not incurred as of each of the
Closing Dates. The Company further agrees that it will pay and save you harmless
against any and all liability with respect to stamp and other taxes, if any
(other than taxes measured by income), which may be payable or which may be
determined to be payable in connection with the execution and delivery of this
Agreement or the Notes, whether or not any Notes are then outstanding. The
Company agrees to protect and indemnify you against any liability for any and
all brokerage fees and commissions payable or claimed to be payable to any
Person in connection with the transactions contemplated by this Agreement.
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No
delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
holder of any Note are cumulative to and are not exclusive of any rights or
remedies any such holder would otherwise have, and no waiver or consent, given
or extended pursuant to ss.7 hereof, shall extend to or affect any obligation or
right not expressly waived or consented to.
Section 9.6. Notices. All communications provided for hereunder
shall be in writing and, if to you, delivered or mailed by registered or
certified mail, by overnight air courier, or by facsimile transmission (in which
case, such communication shall be concurrently sent by registered or certified
mail or overnight air courier) in each case prepaid and addressed to you at your
address appearing on Schedule I to this Agreement or such other address as you
or the subsequent holder of any Note initially issued to you may designate to
the Company in writing, and if to the Company, delivered or mailed by registered
or certified mail, by overnight air courier, or by facsimile transmission (in
which case, such communication shall be concurrently sent by registered or
certified mail or overnight air courier) in each case prepaid and addressed to
the Company c/o PLM Financial Services, Inc. at One Market, Steuart Tower, Suite
800, San Francisco, CA 94105-1301, Telephone No. (415) 974-1399, Telecopier No.
(415) 882-0860, Attention: Vice President - Chief Financial Officer, or to such
other address as the Company may in writing designate to you or to a subsequent
holder of the Note initially issued to you.
Section 9.7. Successors and Assigns. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to your
benefit and to the benefit of your successors and assigns, including each
successive holder or holders of any Notes.
Section 9.8. Survival of Covenants and Representations. All
covenants, representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Execution Date or either of the Closing Dates, shall survive the closing and the
delivery of this Agreement and the Notes.
Section 9.9. Severability. Should any part of this Agreement for
any reason be declared invalid, such decision shall not affect the validity of
any remaining portion, which remaining portion shall remain in force and effect
as if this Agreement had been executed with the invalid portion thereof
eliminated.
Section 9.10. Governing Law. This Agreement and the Notes issued and
sold hereunder shall be governed by and construed in accordance with the
internal laws of the State of Illinois.
Section 9.11. Submission to Jurisdiction. Any legal action or
proceeding with respect to this Agreement or the Notes or any document related
thereto shall be brought in the courts of the State of Illinois or of the United
States of America for the Northern District of Illinois in no other courts, and,
by execution and delivery of this Agreement, the Company hereby accepts for
itself and in respect of its property generally and unconditionally, the
jurisdiction of the aforesaid courts. The Company hereby irrevocably and
unconditionally waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non conveniens
which it may now or hereafter have to the bringing of any action or proceeding
in such respective jurisdiction.
Section 9.12. Captions. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
Section 9.13. Limitation of Liability. Except in the event of fraud
on the part of the Manager or any of its Affiliates in connection with the
transactions contemplated by this Agreement, no holder of any Note shall have
any right at any time to seek recovery of the Indebtedness evidenced by the
Notes from the assets of the Manager.
<PAGE>
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be executed
in any number of counterparts, each executed counterpart constituting an
original but all together only one agreement.
PROFESSIONAL LEASE MANAGEMENT
INCOME FUND I,
L.L.C.
By: PLM Financial Services, Inc.,
Its Manager
By /s/ J. Michael Allgood
--------------------------
Its Manager
Accepted as of December __, 1996
KEYPORT LIFE INSURANCE COMPANY
By: Stein Roe & Farnham
Incorporated,
as agent
By /s/ Richard A. Hegwood
--------------------------
Its Senior Vice President
<PAGE>
SCHEDULE I
(to Note Agreement)
PRINCIPAL AMOUNT
NAME AND ADDRESSES OF NOTES TO BE
OF PURCHASER PURCHASED
KEYPORT LIFE INSURANCE COMPANY $25,000,000
c/o Stein Roe & Farnham Incorporated
1 South Wacker Drive
Chicago, Illinois 60606
Attention: Private Placements
Telecopier Number: (312) 368-8100
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Professional Lease Management Income Fund I, L.L.C., 7.33% Senior Notes, due
2006, PPN 74316@ AA 0, principal or interest") to:
Bank of Boston/Cust (ABA #011-000-390)
For further credit to: A/C 50757004 - Keyport
Clearance Number 009-8527
Attention: Amy Hansbury, Mail Stop 45-02-03
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: Hare & Co.
Taxpayer I.D. Number: 05-0302931
<PAGE>
SCHEDULE II
(to Note Agreement)
EXISTING LIENS
on the Execution Date
NONE
<PAGE>
SCHEDULE III
(to Note Agreement)
NAMES OF APPRAISERS
List of Approved Appraisal Firms:
GENERAL
1. American Appraisal Associates
2. Marshal & Stevens
3. Valuation Research
4. Manufacturers Appraisal
5. Strategis Asset Valuation & Management
(Alexander & Alexander - Appraisal Division)
6. Valuation Engineering Associates
CONTAINERS
1. Independent Equipment Company
2471 McMullen Booth Rd.
Suite 309
Clearwater, Florida 34619
(813) 796-7733
2. International Equipment Marketing, Inc.
Two Lombard Street
San Francisco, California 94111
(415) 362-0874
3. Unicon
TRAILERS
1. Arrow Truck Sales, Inc.
3200 Manchester Traffic Way
Kansas City, Missouri 64129
(816) 923-5000
2. Taylor & Martin, Inc.
MARINE VESSELS
1. A.L. Burbank - Fort Lee, New Jersey
2. American Marine Advisers
3. Bassoe - Oslo, Norway
4. Fearnleys - Oslo, Norway
5. Clarkson - London, England
6. Jacques Pierot & Sons - New York, NY
7. Victoria Ships Brokers - Hong Kong
8. R.S. Platou (USA) Co. - Houston, Texas
9. R.S. Platou A/S - Oslo, Norway
AIRCRAFT
1. AV Solutions
7518 B. Diplomat Drive
Manassas, VA 22110
(703) 330-0461
2. Avitas Aviation
835 Alexander Bell Drive
Reston, Virginia 22091
(703) 476-2300
3. Aircraft Information Service, Inc.
as successor to
Airclaims Information Services, Inc.
23232 Peralta Drive
Suite 115
Laguna Hills, California 92653
(714) 830-0101
ROLLING STOCK
1. Mr. Robert E. Krause
Railmark, Inc.
10661 Bridger Canyon Road
Bozeman, Montana 59715
(406) 586-3566
2. James D. Husband
R.L. Banks & Associates, Inc.
1717 K. Street, NW
Washington, DC 20006
(202) 296-6700
MOBILE OFFSHORE DRILLING UNITS
1. Bassoe Offshore Consultants
Jonathan B. Fairbanks & Erland Bassoe
2000 West Loop South, Suite 2110
Houston, Texas 77027
(713) 850-9002
2. R.S. Platou (USA) Inc.
Mike Smith - President
3535 Briarpark Drive, Suite 201
Houston, Texas 77042
(713) 974-5505
3. Normarine Offshore Consultants A.S.
Stein Schie
Dronningen 1, Postboks A
Bygdoy, 0211 Oslo Norway
47 22 55 44 55
4. Normarine Offshore Consultants, Inc.
Andrew Simpson & Steve Lawrence
Weslayan Tower, Suite 1620
24 Greenway Plaza
Houston, Texas 77046
<PAGE>
EXHIBIT A
(to Note Agreement)
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
7.33% Senior Note
Due December 31, 2006
No. R- ___________, 199__
$ PPN 74316@ AA 0
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C., a Delaware limited
liability company (the "Company"), for value received, hereby promises to pay to
or registered assigns,
on the thirty-first day of December, 2006
the principal amount of
DOLLARS ($________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 7.33% per annum from the date hereof until maturity, payable
semi-annually on the last day of each June and December in each year commencing
June 30, 1997, and at maturity. The Company agrees to pay interest on overdue
principal (including any overdue required or optional prepayment of principal)
and premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest, at the rate of 9.33% per annum after maturity or the
due date thereof, as applicable, whether by acceleration or otherwise, until
paid.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in San Francisco, California in coin or currency
of the United States of America which at the time of payment shall be legal
tender for the payment of public and private debts. If any amount of principal,
premium, if any, or interest on or in respect of this Note becomes due and
payable on any day which is not a Business Day, such amount shall be payable on
the immediately succeeding Business Day, provided that interest shall be due and
payable through and including such succeeding Business Day. "Business Day" shall
mean any day other than a Saturday, Sunday or other day on which banks in San
Francisco, California or Chicago, Illinois are required by law to close or are
customarily closed.
This Note is one of the 7.33% Senior Notes of the Company in the
aggregate principal amount of $25,000,000 issued or to be issued under and
pursuant to the terms and provisions of the Note Agreement dated as of December
15, 1996 (the "Note Agreement", words and phrases not otherwise defined in this
Note having the meanings ascribed thereto in said Note Agreement) entered into
by the Company with the original purchaser therein referred to and this Note and
the holder hereof are entitled equally and ratably with the holders of all other
Notes outstanding under the Note Agreement to all the benefits and security
provided for thereby or referred to therein, to which Note Agreement reference
is hereby made for the statement thereof.
This Note and the other Notes outstanding under the Note Agreement may
be declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreement.
Except in the event of fraud on the part of the Manager or any of its
Affiliates in connection with the transaction contemplated by the Note
Agreement, no holder of this Note shall have any right at any time to seek
recovery of the Indebtedness evidenced by this Note from the assets of the
Manager.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in Section
2 of the Note Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
This Note and said Note Agreement are governed by and construed in
accordance with the internal laws of the State of Illinois.
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I,
L.L.C.
By: PLM FINANCIAL SERVICES, INC.,
Its Manager
By
Its
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS NOTE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR ANY EXEMPTION THEREFROM UNDER SAID ACT.
UNDER THE TERMS OF THE NOTE AGREEMENT, THE COMPANY IS NOT REQUIRED TO
DELIVER CERTAIN FINANCIAL INFORMATION TO HOLDERS ENGAGED IN THE TRANSPORTATION
EQUIPMENT LEASING OR SERVICING BUSINESS.
UNDER THE TERMS OF THE NOTE AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED
TO CERTAIN PROHIBITED TRANSFEREES.
<PAGE>
EXHIBIT B
(to Note Agreement)
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
CLOSING CERTIFICATE
Keyport Life Insurance Company
c/o Stein Roe & Farnham Incorporated
1 South Wacker Drive
Chicago, Illinois 60606
Ladies and Gentlemen:
This certificate is delivered to you in compliance with the
requirements of the Note Agreement dated as of December 15, 1996 (the
"Agreement"), entered into by the undersigned, Professional Lease Management
Income Fund I, L.L.C., a Delaware limited liability company (the "Company"),
with you, and as an inducement to and as part of the consideration for your
purchase on this date of $25,000,000 aggregate principal amount of the 7.33%
Senior Notes due December 31, 2006 (the "Notes") of the Company pursuant to the
Agreement. The terms which are capitalized herein shall have the same meanings
as in the Agreement.
The Company represents and warrants to you as follows:
1. Subsidiaries. Annex A attached hereto states the name of
each of the Company's Restricted Subsidiaries, its jurisdiction of
organization and the percentage of its Voting Equity Capital or other
Equity Capital owned by the Company and/or its Subsidiaries. The
Company and each Restricted Subsidiary has good and marketable title to
all of the Voting Equity Capital or other Equity Capital it purports to
own of each Restricted Subsidiary, free and clear in each case of any
Lien. All such Voting Equity Capital and other Equity Capital has been
duly issued and are fully paid and non-assessable. The Company has no
Subsidiary which is not a Restricted Subsidiary.
2. Organization and Authority. (a) The Company is a limited
liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company's Manager is PLM
Financial Services, Inc. The Manager and each Subsidiary is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation.
(b) The Company, the Manager and each Subsidiary
(i) has all requisite power and authority
and all necessary licenses and permits to own and
operate its properties and to carry on its business
as now conducted and as presently proposed to be
conducted; and
(ii) is duly licensed or qualified and is in
good standing in each jurisdiction wherein the nature
of the business transacted by it or the nature of the
Property owned or leased by it makes such licensing
or qualification necessary, except where the failure
to be duly licensed or qualified or to be in good
standing would not have a materially adverse effect
on the business or financial condition of the
Company.
3. Business and Property. You have heretofore been furnished
with a copy of the Private Placement Offering Memorandum dated October
1996 (the "Memorandum") prepared by First Union Capital Markets Corp.
which generally sets forth the business conducted and proposed to be
conducted by the Company and its Subsidiaries and the principal
properties of the Company and its Subsidiaries. As disclosed in the
Prospectus of the Company dated January 24, 1995, as supplemented by
the Prospectus Supplement dated November 6, 1995, it is and has been
since the inception of the Company the intention of the Company to
incur Indebtedness in order to finance in part the purchase of
Equipment to be held for lease by the Company. The issue and sale of
the Notes constitutes an incurrence of Indebtedness which is consistent
with the business of the Company as described in the Operating
Agreement and such Prospectus.
4. Financial Statements. (a) The consolidated balance sheet
of the Company and its Subsidiaries as of December 31, 1995, and the
statement of operations and changes in members' capital and the
statement of cash flows for the fiscal year ended on said date
accompanied by a report thereon containing an opinion unqualified as to
scope limitations imposed by the Company and otherwise without
qualification except as therein noted, by KPMG Peat Marwick LLP, have
been prepared in accordance with generally accepted accounting
principles consistently applied except as therein noted, are correct
and complete and present fairly the financial position of the Company
and its Subsidiaries as of such date and the results of their
operations and changes in members' capital and cash flows for such
period. The unaudited consolidated balance sheets of the Company and
its Subsidiaries as of September 30, 1996, and the unaudited statement
of operations and changes in members' capital and the statement of cash
flows for the nine-month period ended on said date prepared by the
Company have been prepared in accordance with generally accepted
accounting principles consistently applied, are correct and complete
and present fairly the financial position of the Company and its
Subsidiaries as of said date and the results of their operations and
changes in members' capital and cash flows for such period.
(b) Since December 31, 1995, there has been no change
in the condition, financial or otherwise, of the Company and its
Subsidiaries as shown on the consolidated balance sheet as of such date
except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
5. Indebtedness. (a) Annex B attached hereto correctly
describes all Debt, including without limitation Debt secured by Liens
within the limitations of ss.5.10, Capitalized Leases anD Long-Term
Leases of the Company and its Restricted Subsidiaries outstanding on
the Execution Date (the "Scheduled Matters"). Annex C-1 and Annex C-2,
to be attached hereto on each of the Closing Dates, correctly describes
the Scheduled Matters outstanding on such respective Closing Dates.
(b) On the date hereof, the aggregate principal
amount of the Notes does not exceed 20% of the aggregate cost of all
Equipment owned by the Company by more than _____%. Within [90] days of
the date hereof, the aggregate principal amount of the Notes shall not
exceed 20% of the aggregate cost of all Equipment then owned by the
Company.
6. Full Disclosure. The financial statements referred to in
paragraph 4 do not, nor does the Memorandum or any other written
statement furnished by the Company to you in connection with the
negotiation of the sale of the Notes (including the Memorandum),
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not
misleading. There is no fact peculiar to the Company or its
Subsidiaries which the Company has not disclosed to you in writing
which materially affects adversely nor, so far as the Company can now
foresee, will materially affect adversely the properties, business,
prospects, profits or condition (financial or otherwise) of the Company
and its Subsidiaries.
7. Pending Litigation. There are no proceedings pending or,
to the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary in any court or before any governmental
authority or arbitration board or tribunal which involve the
possibility of materially and adversely affecting the properties,
business, prospects, profits or condition (financial or otherwise) of
the Company and its Subsidiaries. Neither the Company nor any
Subsidiary is in default with respect to any order of any court or
governmental authority or arbitration board or tribunal.
8. Title to Properties. The Company and each Subsidiary has
good and marketable title in fee simple (or its equivalent under
applicable law) to all the real Property and has good title to all the
other Property it purports to own, including that reflected in the most
recent balance sheet referred to in paragraph 4, except as sold or
otherwise disposed of in the ordinary course of business and except for
material liens disclosed in notes to the financial statements referred
to in paragraph 4 hereof or otherwise permitted by the Agreement.
9. Patents and Trademarks. The Company and each Subsidiary
owns or possesses all the patents, trademarks, trade names, service
marks, copyrights, licenses and rights with respect to the foregoing
necessary for the present and planned future conduct of its business,
without any known conflict with the rights of others.
10. Sale is Legal and Authorized. The sale of the Notes and
the execution and delivery of, and performance by the Company and the
Manager of their respective obligations under, the Agreement and the
Notes have been duly authorized by all requisite action and will not
violate any provision of law, any order, judgment or decree of any
court or other agency of corporate or other government, the Certificate
of Formation of the Company, the Operating Agreement (including,
without limitation, Section 2.02(c) thereof), or the corporate charter
or by-laws of the Manager, or any indenture, agreement or other
instrument to which the Company or the Manager is a party, or by which
the Company or the Manager is bound, or be in conflict with, result in
a breach of, or constitute (with due notice or lapse of time or both) a
default under, or result in the creation or imposition of any Lien of
any nature whatsoever upon any of the Property or assets of the Company
or the Manager pursuant to, any such indenture, agreement or instrument
except as permitted by the Agreement.
11. No Defaults. No Default or Event of Default as defined in
the Agreement has occurred and is continuing. The Company is not in
default in the payment of principal or interest on any Indebtedness for
borrowed money and is not in default under any instrument or
instruments or agreements under and subject to which any Indebtedness
for borrowed money has been issued and no event has occurred and is
continuing under the provisions of any such instrument or agreement
which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.
12. Governmental Consent. (a) No approval, consent or
withholding of objection on the part of any regulatory body, state,
Federal or local, is necessary in connection with the execution and
delivery by the Company of the Agreement or the Notes or compliance by
the Company with any of the provisions of the Agreement or the Notes.
(b) The Registration Statement filed with the SEC relating to
the sale of the Class A Units became effective January 23 1995, and no
stop-orders were issued in connection therewith.
13. Taxes. All tax returns required to be filed by the
Company or any Subsidiary in any jurisdiction have, in fact, been
filed, and all taxes, assessments, fees and other governmental charges
upon the Company or any Subsidiary or upon any of their respective
properties, income or franchises, which are shown to be due and payable
in such returns have been paid, except any such returns for the failure
to file would not have a material adverse effect on the business or
financial condition of the Company and its Restricted Subsidiaries,
taken as a whole. The Company does not know of any proposed additional
tax assessment against it for which adequate provision has not been
made in its accounts, and no material controversy in respect of
additional Federal or state income taxes is pending or to the knowledge
to the Company threatened. The provisions for taxes on the books of the
Company and each Subsidiary are adequate for all open years, and for
its current fiscal period.
14. Use of Proceeds. The net proceeds from the sale of the
Notes will be used to finance the purchase of additional
transportation-related equipment, the refinancing of existing
indebtedness of the Company and other corporate purposes. None of the
transactions contemplated in the Agreement (including, without
limitation thereof, the use of proceeds from the issuance of the Notes)
will violate or result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulation issued pursuant
thereto, including, without limitation, Regulations G, T and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter
II. Neither the Company nor any Subsidiary owns or intends to carry or
purchase any "margin stock" within the meaning of said Regulation G.
None of the proceeds from the sale of the Notes will be used to
purchase, or refinance any borrowing, the proceeds of which were used
to purchase any "security" within the meaning of the Securities
Exchange Act of 1934, as amended.
15. Private Offering. Neither the Company, directly or
indirectly, nor any agent on its behalf has offered or will offer the
Notes or any similar Security or has solicited or will solicit an offer
to acquire the Notes or any similar Security from or has otherwise
approached or negotiated or will approach or negotiate in respect of
the Notes or any similar Security with any Person other than you and
not more than 20 other institutional investors, each of whom was
offered a portion of the Notes at private sale for investment. Neither
the Company, directly or indirectly, nor any agent on its behalf has
offered or will offer the Notes or any similar Security or has
solicited or will solicit an offer to acquire the Notes or any similar
Security from any Person so as to bring the issuance and sale of the
Notes within the provisions of Section 5 of the Securities Act of 1933,
as amended.
16. Employee Retirement Income Security Act of 1974. The
consummation of the transactions provided for in the agreement and
compliance by the Company with the provisions thereof and the Notes
issued thereunder will not involve any prohibited transaction within
the meaning of the Employee Retirement Income Security Act of 1974
("ERISA") or Section 4975 of the Internal Revenue Code of 1986, as
amended. The Company does not maintain any "employee pension benefit
plans", as defined in ERISA.
17. Compliance with Law. Neither the Company nor any
Restricted Subsidiary (i) is in violation of any law, ordinance,
franchise, governmental rule or regulation to which it is subject
(including, without limitation, the filing requirements of Sections 13
and 15(d) of the Securities Exchange Act of 1934, as amended); or (ii)
has failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of its Property
or to the conduct of its business, which violation or failure to obtain
could materially adversely affect the business, prospects, profits,
properties or condition (financial or otherwise) of the Company and its
Restricted Subsidiaries, taken as a whole, or the ability of the
Company to perform its obligations contained in the Agreement or the
Notes.
18. Compliance with Environmental Laws. The Company is not in
violation of any applicable Environmental Law which violation could
have a material adverse effect on the business, prospects, profits,
properties or condition (financial or otherwise) of the Company and its
Restricted Subsidiaries, taken as a whole. The Company does not know of
any liability or class of liability of the Company or any Restricted
Subsidiary under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.),
or the Resource Conservation and Recovery Act of 1976, as amended (42
U.S.C. Section 6901 et seq.).
19. Fungible Securities. When issued, the Notes will
constitute "securities" within the meaning of the Securities Exchange
Act of 1934 (the "Exchange Act") and will not be of the same class as
securities listed on a national security exchange registered under
Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system, and will not be convertible or
exchangeable into any such securities.
20. Investment Company Act. Neither the Company nor any of
its Subsidiaries is an "investment holding company" or "affiliated
company" or a company "controlled by" an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
Dated:
PROFESSIONAL LEASE MANAGEMENT
INCOME FUND I,
L.L.C.
By PLM FINANCIAL SERVICES, INC.,
Its Manager
By
Its
<PAGE>
ANNEX A
(to Closing Certificate)
SUBSIDIARIES OF THE COMPANY
RESTRICTED SUBSIDIARIES:
SUBSIDIARY % OWNED BY COMPANY
Spear Vessel Inc. 50%
United Marine Vessel Inc. 100%
<PAGE>
ANNEX B
(to Closing Certificate)
DESCRIPTION OF DEBT AND LEASES
ON THE EXECUTION DATE
1. Unsecured Debt as of the Execution Date:
None
2. Debt Secured by Liens within the Limitations of ss.5.10, other than
Capitalized Leases, as of thE Execution Date:
None
3. Capitalized Leases as of the Execution Date:
None
4. Long-Term Leases as of the Execution Date:
None
<PAGE>
ANNEX C-1
(to Closing Certificate)
[TO BE COMPLETED ON FIRST CLOSING DATE]
DESCRIPTION OF DEBT AND LEASES
ON THE FIRST CLOSING DATE
1. Unsecured Debt as of the First Closing Date:
2. Debt Secured by Liens within the Limitations of ss.5.10, other than
Capitalized Leases, as of the FirsT Closing Date:
3. Capitalized Leases as of the First Closing Date:
4. Long-Term Leases as of the First Closing Date:
<PAGE>
ANNEX C-2
(to Closing Certificate)
[TO BE COMPLETED ON SECOND CLOSING DATE]
DESCRIPTION OF DEBT AND LEASES
ON THE SECOND CLOSING DATE
1. Unsecured Debt as of the Second Closing Date:
2. Debt Secured by Liens within the Limitations of ss.5.10, other than
Capitalized Leases, as of the SeconD Closing Date:
3. Capitalized Leases as of the Second Closing Date:
4. Long-Term Leases as of the Second Closing Date:
<PAGE>
EXHIBIT C
(to Note Agreement)
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
Purchaser, called for by ss.4.2 of thE Note Agreement, shall be dated the first
Closing Date or second Closing Date, as the case may be, and addressed to the
Purchaser, and shall be satisfactory in form and substance to the Purchaser and
shall be to the effect that:
(1) The Company is a limited liability company, duly
organized and validly existing under the laws of the State of Delaware,
has the power and the authority to execute and deliver the Note
Agreement and to issue the Notes.
(2) The Note Agreement has been duly authorized by all
necessary action on the part of the Company, has been duly executed and
delivered by an authorized officer of the Manager and constitutes a
legal, valid and binding contract of the Company enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors' rights
generally, and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity
or at law).
(3) The Notes have been duly authorized by all necessary
action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Manager and constitute legal,
valid and binding obligations of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally, and
general principles of equity (regardless of whether the application of
such principles is considered in a proceeding in equity or at law).
(4) The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreement does not, under
existing law, require the registration of the Notes under the
Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion of
Stephen Peary, Esq. is satisfactory in scope and form to Chapman and Cutler and
that, in their opinion, the Purchaser is justified in relying thereon and shall
cover such other matters relating to the sale of the Notes as the Purchaser may
reasonably request.
In rendering the opinion set forth in paragraph 1 above, Chapman and
Cutler may rely, as to matters referred to in paragraph 1, solely upon an
examination of the Fifth Amended and Restated Operating Agreement certified by
an authorized officer of the Manager. The opinion of Chapman and Cutler is
limited to the laws of the State of Illinois and the Federal laws of the United
States.
With respect to matters of fact upon which such opinion is based,
Chapman and Cutler may rely on appropriate certificates of public officials and
officers of the Company and upon representatives of the Company and the
Purchaser delivered in connection with the issuance of the Notes.
<PAGE>
EXHIBIT D
(to Note Agreement)
DESCRIPTION OF CLOSING OPINION OF GENERAL COUNSEL TO THE COMPANY
The closing opinion of Stephen Peary, Esq., general counsel of the
Manager, which is called for by ss.4.2 of the Note Agreement, shall be dated the
first Closing Date or the second Closing Date, as the case may be, shall be
addressed to the Purchaser and shall be satisfactory in form and substance to
the Purchaser to the effect that:
(1) The Company is a limited liability company, duly
organized and validly existing under the laws of the State of Delaware,
has all requisite power and authority and is duly authorized to enter
into and perform the Note Agreement and to issue the Notes and incur
the Indebtedness to be evidenced thereby and has full power and
authority to conduct the activities in which it is now engaged and is
duly licensed or qualified and is in good standing as a foreign limited
liability company in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such licensing or qualification necessary,
except where the failure to be duly licensed or qualified or to be in
good standing would not have a materially adverse effect on the
business or financial condition of the Company.
(2) Each Restricted Subsidiary that is a corporation, a
limited liability company or a partnership is a corporation, limited
liability company or partnership, as the case may be, duly organized,
legally existing and in good standing under the laws of its
jurisdiction of organization and is duly licensed or qualified and is
in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such licensing or qualification necessary,
except where the failure to be duly licensed or qualified or to be in
good standing would not have a materially adverse effect on the
business or financial condition of the Company; and all of the issued
and outstanding shares of capital stock of each such Restricted
Subsidiary that is a corporation have been duly issued, are fully paid
and non-assessable and are owned by the Company, by one or more
Restricted Subsidiaries, or by the Company and one or more Restricted
Subsidiaries or an Affiliated Partnership.
(3) The Note Agreement has been duly authorized by all
necessary action on the part of the Company, has been duly executed and
delivered by an authorized officer of the Manager and constitutes a
legal, valid, binding and enforceable contract of the Company
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors'
rights generally and general principles of equity (regardless of
whether the application of such principles is considered in a
proceeding in equity or at law).
(4) The Notes have been duly authorized by all necessary
action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Manager and constitute legal,
valid and binding obligations of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors' rights generally and
general principles of equity (regardless of whether the application of
such principles is considered in a proceeding in equity or at law).
(5) The issuance and sale of the Notes and the execution,
delivery and performance by the Company of the Note Agreement do not
(i) conflict with or contravene any law, rule or regulation applicable
to the Company or (ii) conflict with or result in any breach of any of
the provisions of or constitute a default under or result in the
creation or imposition of any lien or encumbrance upon any of the
property of the Company pursuant to the provisions of the Operating
Agreement or any agreement or other instrument known to such counsel to
which the Company is a party or by which the Company may be bound
except as permitted by the Note Agreement.
(6) The courts of the State of Delaware will give effect to
those provisions of the Note Agreement and the Notes which stipulate
that such documents shall be governed, and construed in accordance
with, the laws of the State of Illinois.
(7) The execution and delivery of the Note Agreement and the
issue and sale of the Notes does not conflict with or violate any of
the provisions of the Operating Agreement.
(8) The payment by the Company of all amounts required to be
paid with respect to the Notes in accordance with the terms and
conditions of the Note Agreement will not violate the provisions of any
applicable state or federal law limiting or regulating the payment of
interest on obligations.
(9) Neither the Company nor any of its Subsidiaries is an
"investment holding company" or "affiliated company" or a company
"controlled by" an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(10) The transaction contemplated by the Note Agreement
(including, without limitation, the use of the proceeds of the Notes)
will not violate Section 7 of the Securities and Exchange Act of 1934
or the provisions of Regulation G, Regulation T or Regulation U
promulgated by the Board of Governors of the Federal Reserve System.
(11) The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreement is an exempt
transaction under the Securities Act of 1933, as amended, and does not
under existing law, as at the date of closing, require the registration
of the Notes under the Securities Act of 1933, as amended, or the
qualification of an indenture in respect thereof under the Trust
Indenture Act of 1939, as amended.
(12) To the knowledge of such counsel, there are no actions,
suits or proceedings pending or threatened against or affecting the
Company, the Manager or any Subsidiary, at law or in equity or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, which are likely to result, either individually or
collectively, in any material adverse change in the business,
Properties, operations or condition, financial or otherwise, of the
Company or of the Company and its Restricted Subsidiaries taken as a
whole, impair the ability of the Company and its Restricted
Subsidiaries to carry on their business substantially as now conducted,
impair the ability of the Company to perform its obligations under the
Note Agreement or under the Notes.
(13) No approval, consent or withholding of objection on the
part of, or filing, registration or qualification with, any
governmental body, Federal, State or local, is necessary in connection
with the execution and delivery of the Note Agreement or the Notes.
The opinion of Stephen Peary, Esq. shall cover such other matters
relating to the sale of the Notes as the Purchaser may reasonably request. With
respect to matters of fact on which such opinion is based, such counsel shall be
entitled to rely on appropriate certificates of public officials and officers of
the Company.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM Financial Services, Inc., as
Manager of Professional Lease Management Income Fund I, L.L.C., to comply with
the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and
regulations thereunder, in connection with the preparation and filing with the
Securities and Exchange Commission of annual reports on Form 10-K on behalf of
Professional Lease Management Income Fund I, L.L.C., including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in any and all capacities, to such annual
reports, to any and all amendments thereto, and to any and all documents or
instruments filed as a part of or in connection therewith; and the undersigned
hereby ratifies and confirms all that each of the said attorneys, or his
substitute or substitutes, shall do or cause to be done by virtue hereof. This
Power of Attorney is limited in duration until May 1, 1997 and shall apply only
to the annual reports and any amendments thereto filed with respect to the
fiscal year ended December 31, 1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
25th day of February, 1997.
/s/ Douglas P. Goodrich
- -------------------------------------
Douglas P. Goodrich
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM Financial Services, Inc., as
Manager of Professional Lease Management Income Fund I, L.L.C., to comply with
the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and
regulations thereunder, in connection with the preparation and filing with the
Securities and Exchange Commission of annual reports on Form 10-K on behalf of
Professional Lease Management Income Fund I, L.L.C., including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in any and all capacities, to such annual
reports, to any and all amendments thereto, and to any and all documents or
instruments filed as a part of or in connection therewith; and the undersigned
hereby ratifies and confirms all that each of the said attorneys, or his
substitute or substitutes, shall do or cause to be done by virtue hereof. This
Power of Attorney is limited in duration until May 1, 1997 and shall apply only
to the annual reports and any amendments thereto filed with respect to the
fiscal year ended December 31, 1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1997.
/s/ Robert L. Pagel
- -----------------------------------
Robert L. Pagel
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM Financial Services, Inc., as
Manager of Professional Lease Management Income Fund I, L.L.C., to comply with
the Securities Exchange Act of 1934, as amended (the "Act"), and any rules and
regulations thereunder, in connection with the preparation and filing with the
Securities and Exchange Commission of annual reports on Form 10-K on behalf of
Professional Lease Management Income Fund I, L.L.C., including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign the name of the undersigned, in any and all capacities, to such annual
reports, to any and all amendments thereto, and to any and all documents or
instruments filed as a part of or in connection therewith; and the undersigned
hereby ratifies and confirms all that each of the said attorneys, or his
substitute or substitutes, shall do or cause to be done by virtue hereof. This
Power of Attorney is limited in duration until May 1, 1997 and shall apply only
to the annual reports and any amendments thereto filed with respect to the
fiscal year ended December 31, 1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
27th day of February, 1997.
/s/ J. Alec Merriam
- -----------------------------------
J. Alec Merriam
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,691,650
<SECURITIES> 0
<RECEIVABLES> 1,534,297
<ALLOWANCES> 35,887
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 70,333,099
<DEPRECIATION> 12,189,573
<TOTAL-ASSETS> 87,755,105
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 86,288,561
<TOTAL-LIABILITY-AND-EQUITY> 87,755,105
<SALES> 0
<TOTAL-REVENUES> 9,939,148
<CGS> 0
<TOTAL-COSTS> 13,422,730
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,902
<INCOME-PRETAX> (2,392,494)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,392,494)
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<EXTRAORDINARY> 0
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<NET-INCOME> (2,392,494)
<EPS-PRIMARY> 0
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</TABLE>
