UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal quarter ended June 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 33-83216-01
-----------------------
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
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
BALANCE SHEETS
(in thousands of dollars, except unit amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------------------------------------
<S> <C> <C>
Assets
Equipment held for operating lease, at cost $ 99,783 $ 79,132
Less accumulated depreciation (30,472) (26,749)
----------------------------------------
Net equipment 69,311 52,383
Cash and cash equivalents 2,334 19,179
Investment in unconsolidated special-purpose entities 28,537 26,252
Accounts receivable, less allowance for doubtful accounts
of $75 in 1998 and $70 in 1997 1,494 2,026
Deposit on equipment -- 920
Prepaid expenses 379 341
Deferred charges, less accumulated amortization
of $291 in 1998 and $238 in 1997 328 381
----------------------------------------
Total assets $ 102,383 $ 101,482
========================================
Liabilities and members' equity
Liabilities:
Accounts payable and accrued expenses $ 741 $ 594
Due to affiliates 234 2,005
Lessee deposits and reserves for repairs 2,206 1,409
Note payable 25,000 25,000
----------------------------------------
Total liabilities 28,181 29,008
----------------------------------------
Members' equity:
Class A members (4,999,581 units as of June 30, 1998
and December 31, 1997) 74,078 72,298
Class B member 124 176
----------------------------------------
Total members' equity 74,202 72,474
----------------------------------------
Total liabilities and members' equity $ 102,383 $ 101,482
========================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENTS OF OPERATIONS
(in thousands of dollars, except weighted-average unit amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, June 30,
1998 1997 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Lease revenue $ 5,006 $ 4,108 $ 9,300 $ 7,625
Interest and other income 92 167 289 215
Net gain on disposition of equipment 2,713 -- 2,741 4
-------------------------------------------------------------------
Total revenues 7,811 4,275 12,330 7,844
-------------------------------------------------------------------
Expenses
Depreciation and amortization 3,424 4,025 6,406 7,602
Repairs and maintenance 508 290 773 559
Equipment operating expenses 351 233 589 475
Interest expense 458 459 916 505
Insurance expense to affiliate 22 2 19 9
Other insurance expense 37 91 87 144
Management fees to affiliate 275 199 512 432
General and administrative expenses
to affiliates 231 155 425 508
Other general and administrative expenses 303 206 464 328
-------------------------------------------------------------------
Total expenses 5,609 5,660 10,191 10,562
-------------------------------------------------------------------
Equity in net income of unconsolidated
special-purpose entities 3,014 78 5,471 215
-------------------------------------------------------------------
Net income (loss) $ 5,216 $ (1,307 ) $ 7,610 $ (2,503 )
===================================================================
Members' share of net income (loss)
Class A members $ 4,764 $ (1,709 ) $ 6,780 $ (3,308 )
Class B member 452 402 830 805
-------------------------------------------------------------------
Total $ 5,216 $ (1,307 ) $ 7,610 $ (2,503 )
===================================================================
Net income (loss) per weighted-average
Class A unit (4,999,581 units as of
June 30, 1998 and 1997) $ 0.95 $ (0.34 ) $ 1.36 $ (0.66 )
===================================================================
Cash distributions $ 2,941 $ 2,941 $ 5,882 $ 5,882
===================================================================
Cash distributions per weighted-average
Class A units $ 0.50 $ 0.50 $ 1.00 $ 1.00
===================================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
STATEMENTS OF CHANGES IN MEMBERS' EQUITY For
the period from December 31, 1996 to June 30, 1998
(in thousands of dollars)
<TABLE>
<CAPTION>
Class A Class B Total
-------------------------------------------------------------
<S> <C> <C> <C>
Members' equity as of December 31, 1996 $ 86,024 $ 265 $ 86,289
Net income (loss) (3,728) 1,676 (2,052 )
Cash distributions (9,998) (1,765) (11,763 )
-------------------------------------------------------------
Members' equity as of December 31, 1997 72,298 176 72,474
Net income 6,780 830 7,610
Cash distributions (5,000) (882) (5,882 )
-------------------------------------------------------------
Members' equity as of June 30, 1998 $ 74,078 $ 124 $ 74,202
=============================================================
</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 Six Months Ended June 30,
(in thousands of dollars)
<TABLE>
<CAPTION>
1998 1997
-------------------------------------------
<S> <C> <C>
Operating activities
Net income (loss) $ 7,610 $ (2,503)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,406 7,602
Net gain on disposition of equipment (2,741) (4)
Equity in net income of unconsolidated
special-purpose entities (5,471) (215)
Changes in operating assets and liabilities:
Restricted cash -- 223
Accounts receivable, net 394 (209)
Prepaid expenses (38) 160
Accounts payable and accrued expenses 147 (137)
Due to affiliates 22 99
Lessee deposits and reserves for repairs 797 212
-------------------------------------------
Net cash provided by operating activities 7,126 5,228
-------------------------------------------
Investing activities
Payments for purchase of equipment and capital
improvements (24,963) (19,062)
Investment in and equipment purchased and placed
in unconsolidated special-purpose entities (13,917) (5,100)
Liquidation distributions from unconsolidated
special-purpose entities 10,990 --
Proceeds from disposition of equipment 5,481 27
Distributions from unconsolidated special-purpose
Entities 6,113 3,978
-------------------------------------------
Net cash used in investing activities (16,296) (20,157)
-------------------------------------------
Financing activities
Proceeds from note payable -- 25,000
Payment due to affiliates (1,793) --
Cash distributions to Class A members (5,000) (5,000)
Cash distributions to Class B member (882) (882)
Payment of debt placement fees -- (177)
-------------------------------------------
Net cash (used in) provided by financing activities (7,675) 18,941
-------------------------------------------
Net (decrease) increase in cash and cash equivalents (16,845) 4,012
Cash and cash equivalents at beginning of period 19,179 1,692
-------------------------------------------
Cash and cash equivalents at end of period $ 2,334 $ 5,704
===========================================
Supplemental information
Interest paid $ 916 $ 505
===========================================
Sale proceeds included in accounts receivable $ 38 $ --
===========================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
1. Opinion of Management
In the opinion of the management of PLM Financial Services, Inc. (the
Manager or FSI), the accompanying unaudited financial statements contain
all adjustments necessary, consisting primarily of normal recurring
accruals, to present fairly the financial position of Professional Lease
Management Income Fund I, L.L.C. (Fund I or the Company) as of June 30,
1998 and December 31, 1997, the statements of operations for the three and
six months ended June 30, 1998 and 1997, the statements of changes in
members' equity for the period from December 31, 1996 to June 30, 1998, and
the statements of cash flows for the six months ended June 30, 1998 and
1997. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted from the accompanying
financial statements. For further information, reference should be made to
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, on file with the
Securities and Exchange Commission.
2. Cash Distributions
Cash distributions are recorded when paid and totaled $2.9 million for each
of the three months ended June 30, 1998 and 1997, and $5.9 million for each
of the six months ended June 30, 1998 and 1997. 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 $0 and $5.0
million for the six months ended June 30, 1998 and 1997, respectively, were
deemed to be a return of capital. Cash distributions related to the results
from the second quarter of 1998, of $1.7 million, were paid during the
third quarter of 1998.
3. Transactions with Manager and Affiliates
The balance due to affiliates as of June 30, 1998 included $0.2 million due
to FSI and its affiliates for management fees. The balance due to
affiliates as of December 31, 1997 included $0.2 million due to FSI and its
affiliates for management fees and $1.8 million due to affiliated
unconsolidated special-purpose entities (USPEs). The Company's proportional
share of management fees affiliated with USPEs of $53,000 and $24,000 were
payable as of June 30, 1998 and December 31, 1997, respectively.
The Company's proportional share of the affiliated expenses incurred by the
USPEs during 1998 and 1997 is listed in the following table (in thousands
of dollars):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees $ 94 $ 99 $ 182 $ 184
Data processing and administrative
expenses 26 25 56 44
Insurance expense (1) 1 (3) 5
</TABLE>
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
3. Transactions with Manager and Affiliates (continued)
Transportation Equipment Indemnity Company, Ltd. (TEI), an affiliate of the
Manager, provides marine insurance coverage for the Company's investment in
USPEs and other insurance brokerage services. TEI did not provide the same
insurance coverage during 1998 as had been provided during 1997. These
services were provided by an unaffiliated third party.
4. Equipment
Owned equipment held for operating lease is stated at cost. The components
of equipment held for operating lease are as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------------------------------
<S> <C> <C>
Marine vessels $ 44,457 $ 20,756
Aircraft 20,605 24,605
Rail equipment 19,936 18,958
Trailers 14,785 14,813
-------------------------------------------
99,783 79,132
Less accumulated depreciation (30,472) (26,749)
-------------------------------------------
Net equipment $ 69,311 $ 52,383
===========================================
</TABLE>
During the six months ended June 30, 1998, the Company purchased 39 rail
equipment, two marine vessels (a deposit of $0.9 million was paid in
December 1997 for the purchase of one of these marine vessels) and a hush
kit for an aircraft for a total of $25.9 million. During the six months
ended June 30, 1997, the Company purchased a mobile offshore drilling unit
and a marine vessel for $19.1 million.
During the six months ended June 30, 1998, the Company sold an aircraft,
trailers and a rail equipment with a net book value of $2.8 million, net of
outstanding receivables, for proceeds of $5.5 million. During the six
months ended June 30, 1997, the Company sold trailers with a net book value
of $22,000, for proceeds of $26,000.
As of June 30, 1998, all equipment was either on lease or operating in
PLM-affiliated short-term trailer rental facilities. As of December 31,
1997, all equipment was either on lease or operating in PLM-affiliated
short-term trailer rental facilities, except for one rail equipment with a
carrying value of $22,000.
<PAGE>
PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
(A Delaware Limited Liability Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
5. Investments in Unconsolidated Special-Purpose Entities
The net investments in USPEs included the following jointly-owned equipment
(and related assets and liabilities) (in thousands of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------------------------------------------
<S> <C> <C>
61% interest in an entity owning a mobile offshore drilling unit $ 9,080 $ 9,766
50% interest in a trust owning an MD-82 commercial aircraft 7,384 --
50% interest in a trust owning an MD-82 commercial aircraft 5,147 682
33% interest in two trusts owning three 737-200A commercial
aircraft, two aircraft engines, and a portfolio of aircraft
rotables 4,386 7,788
50% interest in a trust owning a cargo marine vessel 2,226 2,638
25% interest in a trust that owned four 737-200A commercial
aircraft 165 2,215
25% interest in a trust that owned four 737-200A commercial
aircraft 149 3,163
Net investments $ 28,537 $ 26,252
============================================
</TABLE>
The Company had interests in two USPEs that own multiple aircraft (the
Trusts). These Trusts contain provisions under certain circumstances for
allocating specific aircraft to the beneficial owners. During the six
months ended June 30, 1998, the Company and affiliated programs each sold
the commercial aircraft designated in these Trusts. The Company sold the
commercial aircraft assigned to it with a net book value of $2.7 million
for proceeds of $6.3 million.
In the second Trust, the Company and affiliated programs each sold the
aircraft designated to it during the six months ended June 30, 1998. The
Company sold the commercial aircraft assigned to it with a net book value
of $2.0 million for proceeds of $4.7 million.
During the six months ended June 30, 1998, the Company purchased a 50%
interest in an MD-82 stage III commercial aircraft for $6.8 million (a
deposit of $0.7 million was paid in December of 1997) and a 50% interest in
an MD-82 stage III commercial aircraft for $7.8 million.
6. Debt
The Manager entered into a short-term, joint $50.0 million credit facility.
This facility was amended on June 1, 1998 to temporarily increase the
borrowing capacity of American Finance Group, Inc. (AFG), a subsidiary of
PLM International, Inc., from $50.0 million to $55.0 million until
September 1, 1998. On June 8, 1998, this facility was amended again to
temporarily increase AFG's borrowing capacity from $55.0 million to $60.0
million until July 8, 1998. As of June 30, 1998, the Company had no
borrowings under the short-term joint $60.0 million credit facility. Among
the other eligible borrowers, PLM Equipment Growth Fund V had borrowings of
$1.6 million, AFG had borrowings of $44.8 million, and TEC Acquisub, Inc.,
an indirect wholly-owned subsidiary of PLM International, Inc., had
borrowings of $2.0 million under the short-term joint, $60.0 million credit
facility as of June 30, 1998. No other eligible borrower had any
outstanding borrowings.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(I) RESULTS OF OPERATIONS
Comparison of the Professional Lease Management Income Fund I, L.L.C.'s (Fund I
or the Company) Operating Results for the Three Months Ended June 30, 1998 and
1997
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating expenses, and asset-specific insurance expenses) on owned
equipment increased during the second quarter of 1998, compared to the same
quarter of 1997. The following table presents lease revenues less direct
expenses by owned equipment type (in thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1998 1997
-------------------------------
<S> <C> <C>
Aircraft $ 1,235 $ 1,248
Marine vessels 1,215 304
Rail equipment 885 698
Trailers 765 778
Mobile offshore drilling unit -- 483
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $1.2 million and
$10,000, respectively, for the second quarter of 1998, compared to $1.2 million
and $12,000, respectively, during the same quarter of 1997. The sale of an
aircraft on the last day of the second quarter of 1998 did not have a material
impact on lease revenue and direct expenses.
Marine vessels: Marine vessel lease revenues and direct expenses were $1.8
million and $0.6 million, respectively, for the second quarter of 1998, compared
to $0.6 million and $0.3 million, respectively, during the same quarter of 1997.
Marine vessel contribution increased due to the purchase of a marine vessel at
the end of the second quarter of 1997 and two marine vessels in 1998.
Rail equipment: Rail equipment lease revenues and direct expenses were $1.0
million and $0.1 million, respectively, for the second quarter of 1998, compared
to $0.8 million and $0.1 million, respectively, during the same quarter of 1997.
Rail equipment contribution increased due to the purchase of rail equipments in
the first quarter of 1998.
Trailers: Trailer revenues and direct expenses were $0.9 million and $0.1
million, respectively, for the second quarter of 1998 and 1997. Trailer
contribution remained the same due to the relative stability of the trailer
fleet.
Mobile offshore drilling unit: Revenues and direct expenses were $0.5 million
and $18,000, respectively, during the second quarter of 1997. This rig was sold
in the fourth quarter of 1997 as part of the original purchase agreement that
gave the charterers the option to purchase the rig. The Company did not own any
rigs in the second quarter of 1998.
(B) Interest and Other Income
Interest and other income decreased $0.1 million due to lower average cash
balances in the second quarter of 1998, compared to the same period in 1997.
(C) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $4.7 million for the quarter ended June 30, 1998
decreased from $5.0 million for the same period in 1997. Significant variances
are explained as follows:
(1) A $0.6 million decrease in depreciation and amortization expenses from
1997 levels reflects the Company's double-declining balance depreciation method
and the effects of the sale of the aircraft in the second quarter of 1998 and
the sale of the mobile offshore drilling unit at the end of 1997, which was
partially offset by the purchase of equipment during 1997 and 1998.
(2) A $0.1 million increase in management fees to affiliate reflects the
higher levels of lease revenues in 1998, compared to 1997, due to the purchase
of additional equipment in 1997 and 1998.
(3) A $0.2 million increase in administrative expenses from 1997 levels
resulted from increased administrative costs associated with the short-term
trailer rental facilities. The Company also incurred higher professional
services and printing costs in the second quarter of 1998, compared to the same
period in 1997.
(D) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the second quarter of 1998 totaled
$2.7 million, and resulted from the sale of an aircraft and a trailer with an
aggregate net book value of $2.8 million, net of outstanding receivables, for
proceeds of $5.5 million. There was no sales or dispositions of owned equipment
in the second quarter of 1997.
Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities (USPEs)
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
1998 1997
-------------------------------
<S> <C> <C>
Aircraft $ 3,006 $ 445
Mobile offshore drilling unit 99 (209 )
Marine vessel (91) (158 )
Equity in Net Income (Loss) of USPEs $ 3,014 $ 78
==================================================================
</TABLE>
Aircraft: As of June 30, 1998, the Company owned interests in two trusts that
each own a commercial aircraft, and an interest in two trusts that own three
commercial aircraft, two aircraft engines, and a portfolio of aircraft rotables.
As of June 30, 1997, the Company owned an interest in a trust that owned six
commercial aircraft, an interest in another trust that owns four commercial
aircraft, and an interest in two trusts that owned three commercial aircraft,
two aircraft engines, and a portfolio of aircraft rotables. During the second
quarter of 1998, aircraft lease revenues of $1.1 million and the gain from the
sale of the Company's interest in a trust that owned four commercial aircraft of
$3.6 million was offset by expenses of $1.7 million. During the same period in
1997, lease revenues and expenses were $1.5 million and $1.0 million,
respectively. Lease revenues decreased due to the sale of the Company's
investment in two trusts containing ten commercial aircraft and a lower lease
rate earned on certain equipment. The decrease in lease revenues was offset in
part by the Company's investment in two additional trusts during 1998. The
increase in the expenses was due primarily to the double-declining balance
method of depreciation of the investment in two additional trusts during 1998,
which was offset in part by the sale of the Company's interest in two trusts.
Mobile offshore drilling unit: As of June 30, 1998 and 1997, the Company had an
interest in an entity that owns a mobile offshore drilling unit. Mobile offshore
drilling unit revenues and expenses were $0.6 million and $0.5 million,
respectively, for the second quarter of 1998, compared to $0.6 million and $0.8
million, respectively, during the same quarter of 1997. Expenses decreased in
the second quarter of 1998, due to the use of the double-declining balance
depreciation method, which results in greater depreciation in the early years an
asset is owned.
Marine vessel: As of June 30, 1998 and 1997, the Company had an interest in an
entity that owns a marine vessel. Marine vessel revenues and expenses were $0.3
million and $0.4 million, respectively, for the second quarter of 1998, compared
to $0.3 million and $0.5 million, respectively, during the same period in 1997.
Expenses decreased in the second quarter of 1998 compared to the same period in
1997, due to the use of the double-declining balance depreciation method, which
results in greater depreciation in the early years an asset is owned.
(F) Net Income (Loss)
As a result of the foregoing, the Company had a net income of $5.2 million for
the second quarter of 1998, compared to a net loss of $1.3 million during the
same period of 1997. The Company's ability to acquire, operate and liquidate
assets, secure leases, and re-lease those assets whose leases expire is subject
to many factors, and the Company's performance in the second quarter of 1998 is
not necessarily indicative of future periods. In the second quarter of 1998, the
Company distributed $2.5 million to Class A members, or $0.50 per
weighted-average Class A unit.
Comparison of the Company's Operating Results for the Six Months Ended June 30,
1998 and 1997
(A) Owned Equipment Operations
Lease revenues less direct expenses (defined as repairs and maintenance,
equipment operating expenses, and asset-specific insurance expenses) on owned
equipment increased during the six months ended June 30, 1998, compared to the
same period of 1997. The following table presents lease revenues less direct
expenses by owned equipment type (in thousands of dollars):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
------------------------------
<S> <C> <C>
Aircraft $ 2,487 $ 2,500
Marine vessel 2,172 518
Rail equipment 1,755 1,397
Trailers 1,441 1,492
Mobile offshore drilling unit -- 554
</TABLE>
Aircraft: Aircraft lease revenues and direct expenses were $2.5 million and
$23,000, respectively, during the six months ended June 30, 1998, compared to
$2.5 million and $19,000, respectively, during the same period of 1997. The sale
of an aircraft on the last day of the second quarter of 1998 did not have a
material impact on lease revenues and direct expenses.
Marine vessel: Marine vessel lease revenues and direct expenses were $3.1
million and $0.9 million, respectively, for the six months ended June 30, 1998,
compared to $1.2 million and $0.7 million, respectively, during the same period
of 1997. Marine vessel contribution increased due to the purchase of a marine
vessel at the end of the second quarter of 1997 and two marine vessels in the
six months ended June 30, 1998.
Rail equipment: Rail equipment lease revenues and direct expenses were $2.0
million and $0.2 million, respectively, for the six months ended June 30, 1998,
compared to $1.6 million and $0.2 million, respectively, during the same period
of 1997. Lease revenues increased in the six months of 1998, compared to the
same period of 1997 due to the purchase of rail equipment in the first quarter
of 1998.
Trailers: Trailer revenues and direct expenses were $1.7 million and $0.3
million, respectively, for the six months of 1998, compared to $1.7 million and
$0.2 million, respectively, during the same period in 1997. Lease revenues
increased in the six months ended June 30, 1998, compared to the same period in
1997 due to higher utilization earned on trailers operating in the short-term
rental facilities. Expenses increased due to repairs repairs required on certain
trailers in the six months ended June 30, 1998, which were not needed in the
same period in 1997.
Mobile offshore drilling unit: Revenues and direct expenses were $0.6 million
and $18,000, respectively, during the second quarter of 1997. This rig was sold
in the fourth quarter of 1997 as part of the original purchase agreement that
gave the charterers the option to purchase the rig. The Company did not own any
rigs during the six months ended June 30, 1998.
(B) Indirect Expenses Related to Owned Equipment Operations
Total indirect expenses of $8.7 million for the six months ended June 30, 1998
decreased from $9.4 million for the same period of 1997. Significant variances
are explained as follows:
(1) A $1.2 million decrease in depreciation and amortization expenses from
1997 levels reflects the Company's double-declining balance depreciation method
and the effects of the sale of the aircraft in the second quarter of 1998 and
the mobile offshore drilling unit at the end of 1997, which was partially offset
by the purchase of equipment during 1998 and 1997.
(2) A $0.1 million increase in management fees to affiliate reflects the
higher levels of lease revenues in 1998, compared to 1997, due to the additional
purchase of equipment in 1997 and 1998.
(3) A $0.4 million increase in interest expense was due to higher average
outstanding borrowings in the six months ended June 30, 1998 compared to the
same period in 1997.
(C) Net Gain on Disposition of Owned Equipment
The net gain on disposition of equipment for the six months ended June 30, 1998
totaled $2.7 million, and resulted from the sale of an aircraft, a rail
equipment and trailers with an aggregate net book value of $2.8 million, net of
outstanding receivables, for proceeds of $5.5 million. Net gain on the
disposition of equipment for the six months ended June 30, 1997 totaled $4,000,
and resulted from the sale of trailers with a net book value of $22,000, for
proceeds of $26,000.
(D) Equity in Net Income (Loss) of Unconsolidated Special-Purpose Entities
Net income (loss) generated from the operation of jointly-owned assets accounted
for under the equity method is shown in the following table by equipment type
(in thousands of dollars):
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1998 1997
------------------------------
<S> <C> <C>
Aircraft $ 5,446 $ 892
Mobile offshore drilling unit 242 (473)
Marine vessel (217) (204)
-------------------------------
$ 5,471 $ 215
===============================
</TABLE>
Aircraft: As of June 30, 1998, the Company owned interests in two trusts that
each own a commercial aircraft, and an interest in two trusts that own three
commercial aircraft, two aircraft engines, and a portfolio of aircraft rotables.
As of June 30, 1997, the Company owned an interest in a trust that owned six
commercial aircraft, an interest in another trust that owns four commercial
aircraft, and an interest in two trusts that owned three commercial aircraft,
two aircraft engines, and a portfolio of aircraft rotables. During the six
months ended June 30, 1998, aircraft lease revenues were $2.5 million and the
gain from the sale of the Company's interest in two trusts that owned commercial
aircraft of $6.3 million was offset by expenses of $3.3 million. During the same
period in 1997, lease revenues and expenses were $3.0 million and $2.1 million,
respectively. Lease revenues decreased due to the sale of the Company's
investment in two trusts containing ten commercial aircraft and a lower lease
rate earned on certain equipment. The decrease in lease revenues was offset in
part by the Company's investment in two additional trusts during 1998. The
increase in expenses was due primarily to the double-declining balance method of
depreciation of the investment in two additional trusts during 1998, which was
offset in part by the sale of the Company's interest in two trusts.
Mobile offshore drilling unit: As of June 30, 1998 and 1997, the Company had an
interest in an entity that owns a mobile offshore drilling unit. Mobile offshore
drilling unit revenues and expenses were $1.2 million and $1.0 million,
respectively, for the six months ended June 30, 1998, compared to $0.9 million
and $1.4 million, respectively, during the same period in 1997. Rig contribution
increased in the six months ended June 30, 1998, compared to the same period in
1997 due to the increase of the Company's interest in this investment from 35%
to 61% late in the first quarter of 1997.
Marine vessel: As of June 30, 1998 and 1997, the Company had an interest in an
entity that owns a marine vessel. Marine vessel revenues and expenses were $0.6
million and $0.8 million, respectively, for the six months ended June 30, 1998
and 1997. Expenses decreased due to the use of the double-declining balance
depreciation method, which results in greater depreciation in the first years an
asset is owned, which was offset by the increase in marine operating expenses
due to crew overtime costs in the six months ended June 30, 1998, which did not
occur in the same period in 1997.
(E) Net Income (Loss)
As a result of the foregoing, the Company had a net income of $7.6 million for
the six months ended June 30, 1998, compared to net loss of $2.5 million during
the same period of 1997. The Company's ability to acquire, operate and liquidate
assets, secure leases, and re-lease those assets whose leases expire is subject
to many factors, and the Company's performance in the six months ended June 30,
1998 is not necessarily indicative of future periods. In the six months ended
June 30, 1998, the Company distributed $5.0 million to the Class A members, or
$1.00 per weighted-average Class A unit.
(II) FINANCIAL CONDITION -- CAPITAL RESOURCES AND LIQUIDITY
For the six months ended June 30, 1998, the Company generated $13.4 million in
operating cash (net cash provided by operating activities, plus non-liquidating
distributions from USPEs) to meet its operating obligations, maintain working
capital reserves, and maintain the current level of distributions (total for the
six months ended June 30, 1998 of $5.9 million) to the members.
During the six months ended June 30, 1998, the Company purchased 39 rail
equipment, two marine vessels (a deposit of $0.9 million was paid in December
1997 for the purchase of one of these marine vessels) and a hush kit for an
aircraft for a total of $25.9 million.
The Manager entered into a short-term, joint $50.0 million credit facility. This
facility was amended on June 1, 1998 to temporarily increase the borrowing
capacity of American Finance Group, Inc. (AFG), a subsidiary of PLM
International, Inc., from $50.0 million to $55.0 million until September 1,
1998. As of August 3, 1998, the Company had no borrowing under the short-term
joint $55.0 million credit facility. Among the other eligible borrowers, AFG had
borrowings of $43.0 million, and TEC Acquisub, Inc., an indirect wholly-owned
subsidiary of PLM International, Inc., had borrowings of $2.0 million under the
short-term joint, $55.0 million credit facility as of August 3, 1998. No other
eligible borrower had any outstanding borrowings.
(III) YEAR 2000 COMPLIANCE
The Manager is currently addressing the Year 2000 computer software issue and is
creating a timetable for carrying out any program modifications that may be
required, and does not anticipate that the cost of those modifications
allocatable to the Company will be material.
(IV) ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued two new
statements: SFAS No. 130, "Reporting Comprehensive Income," which requires
enterprises to report, by major component and in total, all changes in equity
from nonowner sources; and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and interim
reporting standards for a public company's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Both statements are effective for the Partnership's fiscal year ended December
31, 1998, with earlier application permitted. The effect of adoption of these
statements will be limited to the form and content of the Partnership's
disclosures and will not impact the Partnership's results of operations, cash
flow, or financial position.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which
standardizes the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. This statement is effective for all
quarters of fiscal years beginning after June 15, 1999. As of June 30, 1998, the
Manager is reviewing the effect this standard will have on the Company's
consolidated financial statements.
(V) OUTLOOK FOR THE FUTURE
Several factors may affect the Company's operating performance in 1998 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's operation of a diversified equipment portfolio in a broad base of
markets is intended to reduce its exposure to volatility in individual equipment
sectors.
The ability of the Company to realize acceptable lease rates on its equipment in
the different equipment markets is contingent on many factors, such as specific
market conditions and economic activity, technological obsolescence, and
government or other regulations. The unpredictability of some of these factors,
or of their occurrence, makes it difficult for the Manager to clearly define
trends or influences that may impact the performance of the Company's equipment.
The Manager continually monitors both the equipment markets and the performance
of the Company's equipment in these markets. The Manager may decide to reduce
the Company's exposure to equipment markets if it determines that it cannot
operate equipment to achieve acceptable rates of return. Alternatively, the
Manager may make a determination to enter equipment markets in which it
perceives opportunities to profit from supply/demand instabilities or other
market imperfections.
The Company intends to use excess cash flow, after payment of expenses, the
maintenance of working capital reserves, and cash distributions, to acquire
additional equipment during the first six years of the Company's operations
which concludes December 31, 2002. The Manager believes that 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,
maintain working capital reserves, make cash distributions to Class A and B
unitholders, and increase the Company's equipment portfolio through reinvestment
of any remaining surplus cash available in additional equipment.
(VI) FORWARD-LOOKING INFORMATION
Except for the historical information contained herein, the discussion in this
Form 10-Q contains forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations, and intentions. The cautionary statements made in this Form 10-Q
should be read as being applicable to all related forward-looking statements
wherever they appear in this Form 10-Q. The Company's actual results could
differ materially from those discussed here.
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 First Amendment to Restated Warehousing Credit Agreement among
American Finance Group, Inc., First Union National Bank of
North Carolina, and Bank of Montreal, dated as of June 1,
1998.
10.2 Second Amendment to Restated Warehousing Credit Agreement
among American Finance Group, Inc., First Union National Bank,
and Bank of Montreal, dated as of June 8, 1998.
(b) Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROFESSIONAL LEASE MANAGEMENT
INCOME FUND I, L.L.C.
By: PLM Financial Services, Inc.
Manager
Date: August 3, 1998 By: /s/ Richard K Brock
---------------------
Richard K Brock
Vice President and
Corporate Controller
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,334
<SECURITIES> 0
<RECEIVABLES> 1,569
<ALLOWANCES> 75
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 99,783
<DEPRECIATION> 30,472
<TOTAL-ASSETS> 102,383
<CURRENT-LIABILITIES> 0
<BONDS> 25,000
0
0
<COMMON> 0
<OTHER-SE> 74,202
<TOTAL-LIABILITY-AND-EQUITY> 102,383
<SALES> 0
<TOTAL-REVENUES> 12,330
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,275
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 916
<INCOME-PRETAX> 7,610
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,610
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,610
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
</TABLE>
AMENDMENT NO. 1
TO AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT
(American Finance Group, Inc.)
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED WAREHOUSING CREDIT
AGREEMENT dated as of June 1, 1998 (the "Amendment"), is entered into by and
among AMERICAN FINANCE GROUP, INC., a Delaware corporation ("Borrower"), FIRST
UNION NATIONAL BANK ("FUNB"), BANK OF MONTREAL ("BMO") and each other financial
institution which may hereafter execute and deliver an instrument of assignment
pursuant to Section 11.10 of the Credit Agreement (as defined below) (any one
financial institution individually, a "Lend ," and collectively, "Lenders"), and
FUNB, as agent on behalf of Lenders (not in its individual capacity, but solely
as agent, "Agent"). Capitalized terms used herein without definition shall have
the same meanings herein as given to them in the Credit Agreement.
RECITALS
A. Borrower, Lenders and Agent have entered into that Amended and Restated
Warehousing Credit Agreement dated as of December 2, 1997 (as the same may
from time to time be amended, the "Credit Agreement"), pursuant to which
Lenders have agreed to extend and make available to Borrower certain
advances of money.
B. Borrower desires that Lenders and Agent amend the Credit Agreement to
increase the Commitments set forth on Schedule A to the Credit Agreement
from $50,000,000 to $55,000,000 for a period of ninety (90) days from the
date first written above.
C. Subject to the representations and warranties of Borrower and upon the
terms and conditions set forth in this Amendment, Lenders and Agent are
willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
Section 1. Amendments.
1.1 Commitment. The definition of "Commitment" set forth in Section 1.1 of
the Credit Agreement is amended by deleting it in its entirety and replacing it
with the following:
"Commitment" means, with respect to each Lender, the amounts set forth
on Schedule A, for each period as set forth therein, and "Commitments" means,
for each such period, all such amounts collectively, as each may be amended from
time to time upon the execution and delivery of an instrument of assignment
pursuant to Section 11.10, which amendments shall be evidenced on Schedule 1.1.
and by deleting Schedule A in its entirety and replacing such schedule with a
new Schedule A in the form attached to this Amendment as Attachment I.
SECTION 2. LIMITATIONS ON AMENDMENTS
2.1 The amendments set forth in Section 1, above, are effective for the
purposes set forth herein and shall be limited precisely as written and shall
not be deemed to (i) be a consent to any amendment, waiver or modification of
any other term or condition of any Loan Document or (ii) otherwise prejudice any
right or remedy which Lenders or Agent may now have or may have in the future
under or in connection with any Loan Document.
2.2 This Amendment shall be construed in connection with and as part of the
Loan Documents and all terms, conditions, representations, warranties, covenants
and agreements set forth in the Loan Documents, except as herein amended, are
hereby ratified and confirmed and shall remain in full force and effect.
SECTION 3. REPRESENTATIONS AND WARRANTIES In order to induce Lenders and
Agent to enter into this Amendment, Borrower represents and warrants to each
Lender and Agent as follows:
(a) Immediately after giving effect to this Amendment (i) the
representations and warranties contained in the Loan Documents (other than those
which expressly speak as of a different date which shall be true as of such
different date) are true, accurate and complete in all material respects as of
the date hereof and (ii) no Event of Default, or event which constitutes a
Potential Event of Default, has occurred and is continuing;
(b) Borrower has the corporate power and authority to execute and deliver
this Amendment and to perform its Obligations under the Credit Agreement, as
amended by this Amendment, and each of the other Loan Documents to which it is a
party;
(c) The certificate of incorporation, bylaws and other organizational
documents of Borrower delivered to each Lender as a condition precedent to the
effectiveness of the Credit Agreement are true, accurate and complete and have
not been amended, supplemented or restated and are and continue to be in full
force and effect;
(d) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its Obligations under the Credit Agreement, as
amended by this Amendment, and each of the other Loan Documents to which it is a
party have been duly authorized by all necessary corporate action on the part of
Borrower;
(e) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its respective Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not and will not contravene (i) any law or regulation
binding on or affecting Borrower, (ii) the certificate of incorporation, bylaws,
or other organizational documents of Borrower, (iii) any order, judgment or
decree of any court or other governmental or public body or authority, or
subdivision thereof, binding on Borrower or (iv) any contractual restriction
binding on or affecting Borrower;
(f) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its Obligations under the Credit Agreement, as
amended by this Amendment, and each of the other Loan Documents to which it is a
party do not require any order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by any
governmental or public body or authority, or subdivision thereof, binding on
Borrower, except as already has been obtained or made; and
(g) This Amendment has been duly executed and delivered by Borrower and is
the binding Obligation of Borrower, enforceable against it in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors'
rights.
4. REAFFIRMATION. Borrower hereby reaffirms its Obligations under each Loan
Document to which it is a party.
5. EFFECTIVENESS. This Amendment shall become effective upon the last to
occur of:
(a) The execution and delivery of this Amendment, whether the same or
different copies, by each of Borrower, Lenders and Agent.
(b) The execution and delivery by Borrower to FUNB of a promissory note
substantially in the form of Exhibit A hereto which promissory note shall be a
"Note" under and as defined in the Credit Agreement.
(c) The execution and delivery by PLMI to Agent of the Acknowledgment of
Amendment and Reaffirmation of Guaranty attached to this Amendment.
(d) The delivery to Agent of a certificate of secretary or assistant
secretary of Borrower and PLMI (i) certifying that the certified copies of the
certificate of incorporation and bylaws of Borrower or PLMI, as the case may be,
delivered to Agent on the Closing Date are true and accurate and remain in full
force and effect and have not been amended since the Closing Date, (ii)
attaching true and correct copies of all resolutions of the board of directors
of Borrower or PLMI, as the case may be, duly adopted by such board, and
relating to the authorization, execution, delivery and performance of this
Amendment and the Credit Agreement as amended thereby or the Acknowledgement of
Amendment and Reaffirmation of Guaranty and (iii) setting forth the name, title
and signatures of the authorized signers for Borrower or PLMI, as the case may
be.
(e) The delivery to Agent of an originally executed favorable opinion of
counsel on behalf of Borrower and Guarantor, in form and substance satisfactory
to Lenders, dated as of the date hereof and addressed to Lenders, together with
copies of any officer's certificate or legal opinion of other counsel or law
firm specifically identified and expressly relied upon by such counsel.
(f) The delivery to Agent of a certificate, dated as of the date hereof, of
the Chief Financial Officer or Corporate Controller of Borrower to the effect
that the representations and warranties of Borrower contained in Section 4 of
the Credit Agreement and in the other Loan Documents are true, accurate and
complete in all material respects as of the date hereof as though made on such
date (other than those which expressly speak as of a different date which shall
be true as of such different date) and no Event of Default or Potential Event of
Default has occurred and is continuing.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA.
SECTION 7. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF. BORROWER
HEREBY REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS NO KNOWLEDGE
OF ANY FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR RIGHT OF
SET-OFF.
8. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, and by different parties hereto in separate counterparts, with the
same effect as if the signatures to each such counterpart were upon a single
instrument. All counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWER AMERICAN FINANCE GROUP, INC.
By:
Richard K. Brock
Vice President & Corporate Controller
LENDERS FIRST UNION NATIONAL BANK
By:
Printed name:
Title:
BANK OF MONTREAL
By:
Printed name:
Title:
AGENT FIRST UNION NATIONAL BANK , as Agent
By:
Printed name:
Title:
By
Printed Name:
Title:
<PAGE>
ATTACHMENT I
Revised Schedule A
<PAGE>
SCHEDULE A
COMMITMENTS
For the period from and including June 1, 1998 through August 30, 1998:
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $40,000,000 72.73%
Bank of Montreal $15,000,000 27.27%
At all other times:
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $35,000,000 70%
Bank of Montreal $15,000,000 30%
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
(First Union National Bank)
$40,000,000.00 San Francisco, California
Date: June 1, 1998
AMERICAN FINANCE GROUP, INC., a Delaware corporation (the "Borrower"),
FOR VALUE RECEIVED, hereby unconditionally promises to pay to the order of First
Union National Bank ("FUNB"), in lawful money of the United States of America,
the aggregate principal amount of FUNB's Pro Rata Share of all Loans outstanding
under the Credit Agreement referred to below, payable in the amounts, on the
dates and in the manner set forth below.
This revolving promissory note (the "Note") is one of the Notes
referred to in that certain Amended and Restated Warehousing Credit Agreement
dated as of December 2, 1997 (as the same may from time to time be further
amended, modified, supplemented, renewed, extended or restated, the "Credit
Agreement") by and among the Borrower, FUNB, solely in its capacity as agent
(the "Agent") for FUNB and Bank of Montreal and such other financial
institutions as shall from time to time become "Lenders" pursuant to Section
11.10 of the Credit Agreement (such entities, together with their respective
successors and assigns being collectively referred to herein as the "Lenders"),
and the Lenders. All capitalized terms used but not defined herein shall have
the same meaning as given to them in the Credit Agreement.
1. Principal Payments. Subject to the terms and conditions of the
Credit Agreement, the entire principal amount outstanding under each Loan shall
be due and payable on the Maturity Date with respect to such Loan, with any and
all unpaid and not previously due and payable principal amounts under the Loans
being due and payable on the Commitment Termination Date.
2. Interest Rate. The Borrower further promises to pay interest on the
sum of the daily unpaid principal balance of all Loans outstanding on each day
in lawful money of the United States of America, from the Closing Date until all
such principal amounts shall have been repaid in full, which interest shall be
payable at the rates per annum and on the dates determined pursuant to the
Credit Agreement.
3. Place of Payment. All amounts payable hereunder shall be payable to
the Agent, on behalf of FUNB, at the office of First Union National Bank, One
First Union Center, 301 South College Street, Charlotte, North Carolina 28288,
Attention: Elisha Sabido, or such other place of payment as may be specified by
the Agent in writing.
4. Application of Payments; Acceleration. Payments on this Note shall
be applied in the manner set forth in the Credit Agreement. The Credit Agreement
contains provisions for acceleration of the maturity of the Loans upon the
occurrence of certain stated events and also provides for mandatory and optional
prepayments of principal prior to the stated maturity on the terms and
conditions therein specified.
Each Advance made by FUNB to the Borrower constituting FUNB's Pro Rata
Share of a Loan pursuant to the Credit Agreement shall be recorded by FUNB on
its books and records. The failure of FUNB to record any Advance or any
repayment or prepayment made on account of the principal balance thereof shall
not limit or otherwise affect the obligations of the Borrower under this Note
and under the Credit Agreement to pay the principal, interest and other amounts
due and payable hereunder and thereunder.
5. Default. The Borrower's failure to pay timely any of the principal
amount due under this Note or any accrued interest or other amounts due under
this Note on or within five (5) calendar days after the date the same becomes
due and payable shall constitute a default under this Note. Upon the occurrence
of a default hereunder or an Event of Default under the Credit Agreement, all
unpaid principal, accrued interest and other amounts owing hereunder shall, at
the option of Required Lenders, be immediately collectible by the Lenders and
the Agent pursuant to the Credit Agreement and applicable law.
6. Waivers. The Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and shall pay
all costs of collection when incurred by or on behalf of the Lenders, including,
without limitation, reasonable attorneys' fees, costs and other expenses as
provided in the Credit Agreement.
7. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of North Carolina, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
8. Successors and Assigns. The provisions of this Note shall inure to
the benefit of and be binding on any successor to the Borrower and shall extend
to any holder hereof.
BORROWER AMERICAN FINANCE GROUP, INC.,
a Delaware corporation
By
Richard K. Brock
Vice President & Corporate Controller
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(PLMI/AFG)
SECTION 1. PLM International, Inc. ("PLMI") hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amendment No. 1 to Amended and Restated Warehousing Credit Agreement
("Amendment").
SECTION 2. PLMI hereby consents to this Amendment and agrees that its
Guaranty of the Obligations of Borrower under the Credit Agreement shall
continue in full force and effect, shall be valid and enforceable and shall not
be impaired or otherwise affected by the execution of this Amendment or any
other document or instrument delivered in connection herewith.
SECTION 3. PLMI represents and warrants that, after giving effect to
this Amendment, all representations and warranties contained in its Guaranty are
true, accurate and complete as if made on the date hereof.
GUARANTOR PLM INTERNATIONAL, INC.
By
Richard K. Brock
Vice President & Corporate Controller
<PAGE>
AMENDMENT NO. 2
TO AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT
(American Finance Group, Inc.)
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED WAREHOUSING CREDIT
AGREEMENT dated as of June 8, 1998 (the "Amendment"), is entered into by and
among AMERICAN FINANCE GROUP, INC., a Delaware corporation ("Borrower"), FIRST
UNION NATIONAL BANK ("FUNB"), BANK OF MONTREAL ("BMO") and each other financial
institution which may hereafter execute and deliver an instrument of assignment
pursuant to Section 11.10 of the Credit Agreement (as defined below) (any one
financial institution individually, a "Lend ," and collectively, "Lenders"), and
FUNB, as agent on behalf of Lenders (not in its individual capacity, but solely
as agent, "Agent"). Capitalized terms used herein without definition shall have
the same meanings herein as given to them in the Credit Agreement.
RECITALS
A. Borrower, Lenders and Agent have entered into that Amended and Restated
Warehousing Credit Agreement dated as of December 2, 1997, as amended by
that certain Amendment No. 1 to Amended and Restated Warehousing Credit
Agreement dated as of June 1, 1998 (as the same may from time to time be
further amended, the "Credit Agreement"), pursuant to which Lenders have
agreed to extend and make available to Borrower certain advances of money.
B. Borrower desires that Lenders and Agent amend the Credit Agreement to
increase the Commitments set forth on Schedule A to the Credit Agreement
from $55,000,000 to $60,000,000 for a period of thirty (30) days from the
date first written above.
C. Subject to the representations and warranties of Borrower and upon the
terms and conditions set forth in this Amendment, Lenders and Agent are
willing to so amend the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and
intending to be legally bound, the parties hereto agree as follows:
Section 1. Amendments.
1.1 Commitment. The definition of "Commitment" set forth in Section 1.1 of
the Credit Agreement is amended by deleting Schedule A in its entirety
and replacing such schedule with a new Schedule A in the form attached
to this Amendment as Attachment I.
2. LIMITATIONS ON AMENDMENTS.
2.1 The amendments set forth in Section 1, above, are effective for the
purposes set forth herein and shall be limited precisely as written
and shall not be deemed to (i) be a consent to any amendment, waiver
or modification of any other term or condition of any Loan Document or
(ii) otherwise prejudice any right or remedy which Lenders or Agent
may now have or may have in the future under or in connection with any
Loan Document.
2.2 This Amendment shall be construed in connection with and as part of
the Loan Documents and all terms, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents,
except as herein amended, are hereby ratified and confirmed and shall
remain in full force and effect.
3. REPRESENTATIONS AND WARRANTIES. In order to induce Lenders and Agent to enter
into this Amendment, Borrower represents and warrants to each Lender and Agent
as follows:
(a) Immediately after giving effect to this Amendment (i) the
representations and warranties contained in the Loan Documents (other
than those which expressly speak as of a different date which shall be
true as of such different date) are true, accurate and complete in all
material respects as of the date hereof and (ii) no Event of Default,
or event which constitutes a Potential Event of Default, has occurred
and is continuing;
(b) Borrower has the corporate power and authority to execute and deliver
this Amendment and to perform its Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party;
(c) The certificate of incorporation, bylaws and other organizational
documents of Borrower delivered to each Lender as a condition
precedent to the effectiveness of the Credit Agreement are true,
accurate and complete and have not been amended, supplemented or
restated and are and continue to be in full force and effect;
(d) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its Obligations under the Credit Agreement,
as amended by this Amendment, and each of the other Loan Documents to
which it is a party have been duly authorized by all necessary
corporate action on the part of Borrower;
(e) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its respective Obligations under the Credit
Agreement, as amended by this Amendment, and each of the other Loan
Documents to which it is a party do not and will not contravene (i)
any law or regulation binding on or affecting Borrower, (ii) the
certificate of incorporation, bylaws, or other organizational
documents of Borrower, (iii) any order, judgment or decree of any
court or other governmental or public body or authority, or
subdivision thereof, binding on Borrower or (iv) any contractual
restriction binding on or affecting Borrower;
(f) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of its Obligations under the Credit Agreement,
as amended by this Amendment, and each of the other Loan Documents to
which it is a party do not require any order, consent, approval,
license, authorization or validation of, or filing, recording or
registration with, or exemption by any governmental or public body or
authority, or subdivision thereof, binding on Borrower, except as
already has been obtained or made; and
(g) This Amendment has been duly executed and delivered by Borrower and is
the binding Obligation of Borrower, enforceable against it in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation,
moratorium or other similar laws of general application and equitable
principles relating to or affecting creditors' rights.
4. REAFFIRMATION. Borrower hereby reaffirms its Obligations under each Loan
Document to which it is a party.
5. EFFECTIVENESS. This Amendment shall become effective upon the last to occur
of:
(a) The execution and delivery of this Amendment, whether the same or
different copies, by each of Borrower, Lenders and Agent.
(b) The execution and delivery by Borrower to FUNB of a promissory note
substantially in the form of Exhibit A hereto which promissory note
shall be a "Note" under and as defined in the Credit Agreement.
(c) The execution and delivery by PLMI to Agent of the Acknowledgment of
Amendment and Reaffirmation of Guaranty attached to this Amendment.
(d) The delivery to Agent of a certificate of secretary or assistant
secretary of Borrower and PLMI (i) certifying that the certified
copies of the certificate of incorporation and bylaws of Borrower or
PLMI, as the case may be, delivered to Agent on the Closing Date are
true and accurate and remain in full force and effect and have not
been amended since the Closing Date, (ii) attaching true and correct
copies of all resolutions of the board of directors of Borrower or
PLMI, as the case may be, duly adopted by such board, and relating to
the authorization, execution, delivery and performance of this
Amendment and the Credit Agreement as amended thereby or the
Acknowledgement of Amendment and Reaffirmation of Guaranty and (iii)
setting forth the name, title and signatures of the authorized signers
for Borrower or PLMI, as the case may be.
(e) The delivery to Agent of an originally executed favorable opinion of
counsel on behalf of Borrower and Guarantor, in form and substance
satisfactory to Lenders, dated as of the date hereof and addressed to
Lenders, together with copies of any officer's certificate or legal
opinion of other counsel or law firm specifically identified and
expressly relied upon by such counsel.
(f) The delivery to Agent of a certificate, dated as of the date hereof,
of the Chief Financial Officer or Corporate Controller of Borrower to
the effect that the representations and warranties of Borrower
contained in Section 4 of the Credit Agreement and in the other Loan
Documents are true, accurate and complete in all material respects as
of the date hereof as though made on such date (other than those which
expressly speak as of a different date which shall be true as of such
different date) and no Event of Default or Potential Event of Default
has occurred and is continuing.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
SECTION 7. CLAIMS, COUNTERCLAIMS, DEFENSES, RIGHTS OF SET-OFF. BORROWER HEREBY
REPRESENTS AND WARRANTS TO AGENT AND EACH LENDER THAT IT HAS NO KNOWLEDGE OF ANY
FACTS THAT WOULD SUPPORT A CLAIM, COUNTERCLAIM, DEFENSE OR RIGHT OF SET-OFF.
8. COUNTERPARTS. This Amendment may be signed in any number of counterparts, and
by different parties hereto in separate counterparts, with the same effect as if
the signatures to each such counterpart were upon a single instrument. All
counterparts shall be deemed an original of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.
BORROWER AMERICAN FINANCE GROUP, INC.
By:
Richard K. Brock
Vice President & Corporate Controller
LENDERS FIRST UNION NATIONAL BANK
By:
Printed name:
Title:
BANK OF MONTREAL
By:
Printed name:
Title:
AGENT FIRST UNION NATIONAL BANK , as Agent
By:
Printed name:
Title:
By
Printed Name:
Title:
<PAGE>
ATTACHMENT I
Revised Schedule A
<PAGE>
SCHEDULE A
COMMITMENTS
For the period from and including June 8, 1998 through July 8, 1998:
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $45,000,000 75%
Bank of Montreal $15,000,000 25%
For the period from and including June 1, 1998 through August 30, 1998,
excluding the period from June 8, 1998 through July 8, 1998:
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $40,000,000 72.73%
Bank of Montreal $15,000,000 27.27%
At all other times:
LENDER COMMITMENT PRO RATA SHARE
First Union National Bank $35,000,000 70%
Bank of Montreal $15,000,000 30%
<PAGE>
EXHIBIT A
REVOLVING PROMISSORY NOTE
(First Union National Bank)
$45,000,000.00 San Francisco, California
Date: June 8, 1998
AMERICAN FINANCE GROUP, INC., a Delaware corporation (the "Borrower"),
FOR VALUE RECEIVED, hereby unconditionally promises to pay to the order of First
Union National Bank ("FUNB"), in lawful money of the United States of America,
the aggregate principal amount of FUNB's Pro Rata Share of all Loans outstanding
under the Credit Agreement referred to below, payable in the amounts, on the
dates and in the manner set forth below.
This revolving promissory note (the "Note") is one of the Notes
referred to in that certain Amended and Restated Warehousing Credit Agreement
dated as of December 2, 1997, as amended by that certain Amendment No. 1 to
Amended and Restated Warehousing Credit Agreement dated as of June 1, 1998 and
by that certain Amendment No. 2 to Amended and Restated Warehousing Credit
Agreement dated as of even date herewith (as the same may from time to time be
further amended, modified, supplemented, renewed, extended or restated, the
"Credit Agreement") by and among the Borrower, FUNB, solely in its capacity as
agent (the "Agent") for FUNB and Bank of Montreal and such other financial
institutions as shall from time to time become "Lenders" pursuant to Section
11.10 of the Credit Agreement (such entities, together with their respective
successors and assigns being collectively referred to herein as the "Lenders"),
and the Lenders. All capitalized terms used but not defined herein shall have
the same meaning as given to them in the Credit Agreement.
1. Principal Payments. Subject to the terms and conditions of the Credit
Agreement, the entire principal amount outstanding under each Loan
shall be due and payable on the Maturity Date with respect to such
Loan, with any and all unpaid and not previously due and payable
principal amounts under the Loans being due and payable on the
Commitment Termination Date.
2. Interest Rate. The Borrower further promises to pay interest on the
sum of the daily unpaid principal balance of all Loans outstanding on
each day in lawful money of the United States of America, from the
Closing Date until all such principal amounts shall have been repaid
in full, which interest shall be payable at the rates per annum and on
the dates determined pursuant to the Credit Agreement.
3. Place of Payment. All amounts payable hereunder shall be payable to
the Agent, on behalf of FUNB, at the office of First Union National
Bank, One First Union Center, 301 South College Street, Charlotte,
North Carolina 28288, Attention: Elisha Sabido, or such other place of
payment as may be specified by the Agent in writing.
4. Application of Payments; Acceleration. Payments on this Note shall be
applied in the manner set forth in the Credit Agreement. The Credit
Agreement contains provisions for acceleration of the maturity of the
Loans upon the occurrence of certain stated events and also provides
for mandatory and optional prepayments of principal prior to the
stated maturity on the terms and conditions therein specified.
Each Advance made by FUNB to the Borrower constituting FUNB's Pro Rata
Share of a Loan pursuant to the Credit Agreement shall be recorded by FUNB on
its books and records. The failure of FUNB to record any Advance or any
repayment or prepayment made on account of the principal balance thereof shall
not limit or otherwise affect the obligations of the Borrower under this Note
and under the Credit Agreement to pay the principal, interest and other amounts
due and payable hereunder and thereunder.
5. Default. The Borrower's failure to pay timely any of the principal
amount due under this Note or any accrued interest or other amounts
due under this Note on or within five (5) calendar days after the date
the same becomes due and payable shall constitute a default under this
Note. Upon the occurrence of a default hereunder or an Event of
Default under the Credit Agreement, all unpaid principal, accrued
interest and other amounts owing hereunder shall, at the option of
Required Lenders, be immediately collectible by the Lenders and the
Agent pursuant to the Credit Agreement and applicable law.
6. Waivers. The Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and
shall pay all costs of collection when incurred by or on behalf of the
Lenders, including, without limitation, reasonable attorneys' fees,
costs and other expenses as provided in the Credit Agreement.
7. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of North Carolina,
excluding conflict of laws principles that would cause the application
of laws of any other jurisdiction.
8. Successors and Assigns. The provisions of this Note shall inure to the
benefit of and be binding on any successor to the Borrower and shall
extend to any holder hereof.
BORROWER AMERICAN FINANCE GROUP, INC.,
a Delaware corporation
By
Richard K. Brock
Vice President & Corporate Controller
<PAGE>
ACKNOWLEDGEMENT OF AMENDMENT
AND REAFFIRMATION OF GUARANTY
(PLMI/AFG)
SECTION 1. PLM International, Inc. ("PLMI") hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of this
Amendment No. 2 to Amended and Restated Warehousing Credit Agreement
("Amendment").
SECTION 2. PLMI hereby consents to this Amendment and agrees that its
Guaranty of the Obligations of Borrower under the Credit Agreement shall
continue in full force and effect, shall be valid and enforceable and shall not
be impaired or otherwise affected by the execution of this Amendment or any
other document or instrument delivered in connection herewith.
SECTION 3. PLMI represents and warrants that, after giving effect to this
Amendment, all representations and warranties contained in its Guaranty are
true, accurate and complete as if made on the date hereof.
GUARANTOR PLM INTERNATIONAL, INC.
By
Richard K. Brock
Vice President & Corporate Controller
<PAGE>
