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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, 2003
-------------------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 Commission File Number 33-94458
ICON Cash Flow Partners L.P. Seven
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3835387
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Fifth Avenue, 10th Floor, New York, New York 10011
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 418-4700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
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. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) [ ] Yes [X] No
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity,
as of the last day of the registrant's most recently completed second fiscal
quarter: Not applicable. There is no established market for units of limited
partnership interest in the registrant.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
TABLE OF CONTENTS
Item Page
- ---- ----
PART I
1. Business 3-4
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 4
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 5
6. Selected Consolidated Financial Data 5
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 6-12
7A. Qualitative and Quantitative Disclosures About Market Risk 13
8. Financial Statements 14-41
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 42
9A. Controls and Procedures 42
PART III
10. Directors and Executive Officers of the Registrant's
General Partner 42-43
11. Executive Compensation 43
12. Security Ownership of Certain Beneficial Owners
and Management 43-44
13. Certain Relationships and Related Transactions 44
14. Principal Accounting Fees and Services 44
PART IV
15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 44-45
SIGNATURES 46
Certifications 47-50
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
PART I
Item 1. Business
--------
General Development of Business
ICON Cash Flow Partners L.P. Seven (the "Partnership"), was formed on May
23, 1995 as a Delaware limited partnership. The Partnership's maximum offering
was $100,000,000. The Partnership commenced business operations on its initial
closing date, January 19, 1996 with the admission of 26,367.95 limited
partnership units at $100 per unit representing $2,636,795 of capital
contributions. From January 19, 1996 through September 16, 1998 (the final
closing date) 973,628.86 additional units were admitted representing $97,362,886
of capital contributions bringing the total admission to 999,996.81 units
aggregating $99,999,681 in capital contributions. The Partnership redeemed
12,449 limited partnership units during the years 1997 through 2003, leaving
987,548 limited partnership units outstanding at December 31, 2003.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership including equipment, leases and
financing transactions under a management agreement with the Partnership.
The Partnership's reinvestment period ended November 2002, and the
disposition period began immediately thereafter. During the disposition period,
the Partnership has and will continue to distribute substantially all
distributable cash from operations and equipment sales to the partners and
continue the orderly termination of its operations and affairs. The Partnership
has and will not invest in any additional finance or lease transactions during
the disposition period.
Segment Information
The Partnership has only one operating segment: the business of acquiring
equipment subject to leases with companies that the Partnership believes to be
creditworthy.
Narrative Description of Business
The Partnership is an equipment leasing income fund. The principal
investment objective of the Partnership is to obtain the maximum economic return
from its investments for the benefit of its partners. To achieve this objective
the Partnership has: (1) acquired a diversified portfolio of leases and
financing transactions; (2) made monthly cash distributions to its limited
partners commencing with each limited partner's admission to the Partnership,
(3) re-invested substantially all undistributed cash from operations and cash
from sales of equipment and financing transactions during the reinvestment
period; and (4) commenced the disposition period and begun to sell the
Partnership's investments and distribute the cash from sales of such investments
to its partners.
The Partnership had leases which accounted for 10% or more of total revenue
for the years ended December 31, 2003, 2002 and 2001. For the year ended
December 31, 2003, Fedex Corporation, Seacor Offshore and Seacor Marine
accounted for 14%, 10% and 17%, respectively. For the year ended December 31,
2002, Fedex Corporation, Seacor Smit and Seacor Marine accounted for 31%, 16%,
and 14, respectively. For the year ended December 31, 2001, Fedex Corporation,
Seacor Smit, Seacor Marine, and Seacor Offshore accounted for 21%, 19%, 18%, and
13%, respectively.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
Lease and Financing Transactions
During the years ended December 31, 2003 and 2002 the Partnership did not
purchase any equipment. The Partnership disposed of equipment that were on lease
after lease expiration in 2003, for a gain of $120,524.
Item 2. Properties
----------
The Partnership neither owns nor leases office space or equipment for the
purpose of managing its day-to-day affairs.
Item 3. Legal Proceedings
-----------------
The Partnership, from time-to-time, in the ordinary course of business,
commences legal actions when necessary to protect or enforce the rights of the
Partnership. We are not a defendant party to any litigation and are not aware of
any pending or threatened litigation against the Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of 2003.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters
The Partnership's limited partnership interests are not publicly traded nor
is there currently a market for the Partnership's limited partnership units. It
is unlikely that any such market will develop.
Number of Equity Security Holders
Title of Class as of February 29, 2004
-------------- ------------------------
Limited Partners 4,597
General Partner 1
The Partnership made distributions on a monthly basis, totaling $1,645,916
and $10,129,308 for the years ended December 31, 2003 and 2002, respectively. In
2003, the Partnership's last distribution payment was in April 2003.
Item 6. Selected Consolidated Financial Data
Year Ended December 31,
-----------------------
2003 2002 2001 2000 1999
---- ---- ---- ----
Total revenue $ 1,576,532 $ 8,326,025 $ 9,159,492 $ 14,713,736 $ 19,572,257
============== ================ =============== ============== =============
Net (loss) income $ (17,300,236) $ (3,661,408) $ (1,477,016) $ 1,293,261 $ 3,514,436
============== ================ =============== ============== =============
Net (loss) income allocable
to Limited Partners $ (17,127,234) $ (3,624,794) $ (1,462,246) $ 1,280,328 $ 3,479,291
============== ================ =============== ============== =============
Net (loss) income allocable
to the General Partner $ (173,002) $ (36,614) $ (14,770) $ 12,933 $ 35,145
============== ================ =============== ============== =============
Weighted average limited
partnership units outstanding 987,458 988,099 989,112 989,929 992,719
============== ================ =============== ============== =============
Net (loss) income per weighted
average limited partnership unit $ (17.34) $ (3.67) $ (1.48) $ 1.29 $ 3.50
============== ================ =============== ============== =============
Distributions to limited partners $ 1,645,916 $ 10,129,308 $ 10,632,716 $ 10,641,411 $ 10,677,316
============== ================ =============== ============== =============
Distributions per weighted average
limited Partnership units $ 1.67 $ 10.25 $ 10.75 $ 10.75 $ 10.75
============== ================ =============== ============== =============
Distributions to the
General Partner $ 16,627 $ 102,316 $ 100,023 $ 107,493 $ 107,872
============== ================ =============== ============== =============
December 31,
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Total assets $ 52,063,566 $ 74,009,303 $ 104,334,907 $ 130,936,301 $ 172,007,288
============== ================ =============== ============== =============
Notes Payable $ 36,156,703 $ 38,769,665 $ 50,984,856 $ 81,889,191 $ 100,544,315
============== ================ =============== ============== =============
Partners' Equity $ 15,403,333 $ 34,366,112 $ 48,294,920 $ 60,551,684 $ 70,045,138
============== ================ =============== ============== =============
The selected financial data should be read in conjunction with the
consolidated financial statements and related notes included in Item 8 of this
report.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
Item 7. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Information - The following discussion and analysis should
be read in conjunction with the audited consolidated financial statements
included herein. Certain statements within this document may constitute
forward-looking statements made pursuant to the safe harbor provision of the
Private Securities Litigation Reform Act of 1995. These statements are
identified by words such as "anticipate," "believe," "estimate," "expects,"
"intend," "predict" or "project" and similar expressions. This information may
involve risks and uncertainties that could cause actual results to differ
materially from the forward-looking statements. Although the Partnership
believes that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected.
Overview - The results of operations reflect the risk factors outlined in
the Partnership's prospectus. Such risk factors include, but are not limited to,
the decline in the value of the Partnership's equipment, no guarantee of
profitability, the potential of lessee default, and economic factors such as
prevailing interest rates. These risk factors affect the Partnership's ability
to realize income, in that they increase the Partnership's expenses by way of
additional depreciation, impairment loss, and provision for bad debts. In
addition, as the Partnership liquidates its portfolio and leases expire the cash
flow will decrease.
Under the Operating Agreement of the Partnership, the term of the
Partnership is limited within the life-span of the leases remaining in the
portfolio during the liquidation period. Therefore, as the leases mature, the
expected revenue from the portfolio will decline. However, the Partnership's
expenses, while declining during the liquidation period will increase as a
percentage of lease revenue as certain expenses are fixed; thereby decreasing
the partnership's cash flow.
As the Partnership is currently operating in its liquidation period, the
General Partner diligently monitors the portfolio for any trends that would
affect equipment values.
The Partnership - The Partnership was formed on May 23, 1995 as a Delaware
limited partnership. The Partnership's maximum offering was $100,000,000. The
Partnership commenced business operations on its initial closing date, January
19, 1996 with the admission of 26,367.95 limited partnership units at $100 per
unit representing $2,636,795 of capital contributions. From January 19, 1996
through September 16, 1998 (the final closing date) 973,628.86 additional units
were admitted representing $97,362,886 of capital contributions bringing the
total admission to 999,996.81 units aggregating $99,999,681 in capital
contributions. The Partnership redeemed 12,449 limited partnership units during
the years 1997 through 2003, leaving 987,548 limited partnership units
outstanding at December 31, 2003.
The Partnership's portfolio consists of net investments in finance leases,
investments in estimated unguaranteed residual values, net investments in
leveraged leases, investments in operating leases, equipment held for sale or
lease and equity investments in unconsolidated joint ventures.
Results of Operations for the Years Ended December 31, 2003 and 2002
Revenues for the year ended December 31, 2003 were $1,576,532 as compared
to $8,326,025 for the year ended December 31, 2002 representing a decrease of
$6,749,493. The decrease in revenues resulted primarily from decreases in income
from leveraged leases of $2,075,270, rental income of $1,162,981, income from
investment in unconsolidated joint ventures of $211,760, finance income of
$823,942, and gain on sales of equipment of $2,591,211. The decrease in gain on
sales of equipment was due to a sale of equipment in the third quarter of 2002
whereas no similar sale occurred in 2003. The decrease in rental income was due
to equipment, previously held as investments in operating leases, which were
subsequently reclassified as equipment held for sale or lease during 2003. The
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
decrease in finance income resulted primarily from a decrease in the average
size of the Partnership's lease portfolio. The decrease in income from
investment in unconsolidated joint ventures was due to net losses in the
operations of several of the unconsolidated joint ventures in 2003 which the
Partnership has an interest in. The decrease in income from leveraged leases was
due to a reduction in the estimated unguaranteed residual value of $3,400,000 of
one of the aircraft as a result of a recent appraisal and a leveraged lease
which came to term in the first quarter of 2003, which was subsequently
reclassified as an investment in operating leases.
Expenses for the year ended December 31, 2003 were $18,876,768 as compared
to $11,987,433 for the year ended December 31, 2002, representing an increase of
$6,889,335. The increase in expenses was primarily attributable to an increase
in depreciation expense of $1,025,613, due primarily to equipment being
reclassified from finance leases or investment in leveraged leases to operating
leases in the third quarter of 2002 and the third quarter of 2003. An increase
in provision for impairment of 7,500,000 due to a decrease in the value of
several of the Partnership's equipment held for sale or lease. An increase in
vessel maintenance of $551,157 was due to the storage and remarketing costs
associated with the off-lease vessels during 2003. The increase in expenses was
partially offset by a decrease in interest expense of $833,118, a decrease in
management fees - General Partner of $380,485, a decrease in administrative
expense reimbursements - General Partner of $176,875, and a decrease in
amortization of initial direct costs of $200,523. The decrease in interest
expense was due to a decrease in the average debt outstanding from 2002 to 2003.
The decreases in management fees - General Partner and administrative expense
reimbursement - General Partner resulted from the overall decrease in the
average size of the Partnership's lease portfolio. The decrease in amortization
of initial direct costs resulted from the decrease in the average size of the
Partnership's finance lease portfolio.
Net loss for the years ended December 31, 2003 and 2002 was $17,300,236 and
$3,661,408, respectively. The net loss per weighted average limited partnership
unit outstanding was $17.34 and $3.67, for the year ended December 31, 2003 and
2002, respectively.
Results of Operations for the Years Ended December 31, 2002 and 2001
Revenues for the year ended December 31, 2002 were $8,326,025 as compared
to $9,159,492 for the year ended December 31, 2001 representing a decrease of
$833,467. The decrease in revenues resulted primarily from decreases in income
from leveraged leases of $1,528,696, finance income of $2,893,964 and rental
income of $827,620. The decrease in revenue was partially offset by increases in
income from investments in unconsolidated joint ventures of $2,006,568 and gain
on sales of equipment of $2,340,354. The decrease in income from leveraged
leases was due to a reduction in the estimated unguaranteed residual value of
$1,835,000 of one of the aircraft as a result of a recent appraisal which
indicated a lower value at lease termination than initially estimated. The
decrease in finance income resulted primarily from (1) a decrease in the average
size of the Partnership's lease portfolio; (2) certain leases which were renewed
and are generating lower levels of finance income during the respective renewal
terms; and (3) certain finance leases which came to term in 2002 and were either
(a) renewed in 2002 and classified as operating leases during their renewal
terms or (b) are currently off lease. The decrease in rental income from 2001
resulted from the rentals associated with equipment which was reclassified to
equipment held for sale or re-lease subsequent to 2001. The increase in income
from equity investment in joint ventures resulted primarily from a provision for
bad debts of $1,825,000 recorded by one of the ventures in 2001 which did not
occur in 2002. Gain on sale of equipment increased primarily due to a sale of
certain equipment which generated a gain of $2,686,609.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
Expenses for the year ended December 31, 2002 were $11,987,433 as compared
to $10,636,508 for the year ended December 31, 2001, representing an increase of
$1,350,925. The increase in expenses was primarily attributable to increases in
depreciation expense of $2,185,030, an impairment of unguaranteed residual value
of $350,000, and vessel maintenance of $351,386. The decrease in expenses was
partially offset by decreases in interest expense of $444,255, management fees -
General Partner of $983,113, administrative expense reimbursements - General
Partner of $241,735 and amortization of initial direct costs of $523,246. The
increase in depreciation expense was due principally to depreciation associated
with equipment reclassified from finance leases to operating leases or equipment
held for sale or lease subsequent in 2001. The increase in loss on writedown of
unguaranteed residual value was due to a reduction in the estimated unguaranteed
residual value of a direct finance lease as a result of a management estimate
which indicated a lower value at lease termination than initially estimated. The
principal reason for the increase in vessel maintenance was the storage and
remarketing costs associated with the off-lease vessels during 2002. The
decreases in management fees - General Partner and administrative expense
reimbursement - General Partner resulted from the overall decrease in the
average size of the Partnership's lease investment portfolio and the timing of
rentals received. The decrease in amortization of initial direct costs was due
to a decrease in the average size of the Partnership's lease portfolio and
certain finance leases which came to term in 2002.
Net loss for the years ended December 31, 2002 and 2001 was $3,661,408 and
$1,477,016, respectively. The loss per weighted average limited partnership unit
outstanding was $3.67 and $1.48, for the years ended December 31, 2002 and 2001,
respectively.
Liquidity and Capital Resources
The Partnership's primary source of liquidity in 2003 were borrowings of
$690,000, proceeds from the sale of equipment of $1,050,865 and distributions
received from unconsolidated joint ventures of $671,137. Distributions to
partners aggregated $1,662,543, the Partnership repaid recourse debt of $453,901
and used cash in operating activities for $1,249,206. As a result of this
activity the Partnership's liquidity was reduced.
The Partnership's cash flow from operating activities may be less than the
Partnership's current level of expenses. To the extent that cash flow is
insufficient to pay such expenses, the Partnership may be required to sell
assets prior to maturity or borrow against future cash flows.
The Partnership's notes payable at December 31, 2003 totaled $36,156,703.
These amounts consisted of $23,790,254 of non-recourse notes and $12,366,449 of
recourse notes payable. $5,751,009 of the recourse notes are secured by the
investments in three aircraft residuals with an aggregate carrying value at
$4,686,758 at December 31, 2003. The recourse notes payable also include amounts
outstanding under the lines of credit discussed below. The non-recourse notes
are secured by, and are payable from the proceeds of sale or lease of various
aircraft and vessels.
On May 30 2002, the Partnership entered into a $17,500,000 joint and
several line of credit agreement dated shared with Income Fund Eight-A L.P. and
Income Fund Eight B L.P. (the "Initial Funds"), with Comerica Bank as lender.
Under the terms of the agreement, the Partnership may borrow at a rate equal to
the Comerica Bank base rate plus 1% (together, 5.00% at December 31, 2003) and
all borrowings are to be jointly and severally collateralized by the present
values of rents receivable and equipment owned by all of the Initial Funds
sharing in the joint line of credit. On December 12, 2002, the agreement was
amended to admit Income Fund Nine LLC, collectively along with the Initial Funds
(the "Funds"), as a borrower sharing the $17,500,000 joint line of credit
agreement. The Funds have entered into a Contribution Agreement, dated as of May
30, 2002, as amended December 12, 2002, pursuant to which the Funds have agreed
to restrictions on the amount and the terms of their respective borrowings under
the line of credit in order to minimize the risk that a Fund would not be able
to repay its allocable portion of the outstanding revolving loan obligation at
any time, including restrictions on any Fund borrowing in excess of the lesser
of (A) an amount each Fund could reasonably expect to repay in one year out of
its projected free cash flow, or (B) the greater of (i) the Borrowing Base (as
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
defined in the line of credit agreement) as applied to such Fund, and (ii) 50%
of the net worth of such Fund. The Contribution Agreement provides that, in the
event a Fund pays an amount under the agreement in excess of its allocable share
of the obligation under the agreement whether by reason of an Event of Default
or otherwise, the other Funds will immediately make a contribution payment to
such Fund in such amount that the aggregate amount paid by each Fund reflects
its allocable share of the aggregate obligations under the agreement.
The Funds' obligations to each other under the Contribution Agreement are
collateralized by a subordinate lien on the assets of each participating Fund.
The line of credit was extended for twelve additional months expiring May 31,
2004. As of December 31, 2003, the Partnership had $6,615,440 outstanding under
the line. Aggregate borrowing by all Funds under the line of credit agreement
aggregated $12,779,986 on December 31, 2003.
The Partnership entered into a $5,000,000 line of credit agreement (the
"Facility") with a bank in 1998 which is secured by certain receivables and
residuals and accrues interest at prime plus one half percent (4.75% at December
31, 2002). At December 31, 2002, the Partnership had $453,901 outstanding under
the Facility. The Facility originally expired in December 2002 and was renewable
on a bi-annual basis. The Partnership did not exercise its renewal option and
paid the outstanding amount in full in February 2003 in the amount of $460,382.
The Partnership has the following contractual obligations as of December
31, 2003. This obligation arises mainly from the acquisition of equipment
subject to lease. Rental payments from the leases associated with this equipment
are assigned to paydown such obligations.
Payments Due By Period
----------------------
Total 2004 2005 2006
----- ---- ---- ----
Long-term obligation (Notes payable) $ 36,156,702 $ 20,405,665 $ - $ 15,751,037
See Note 9 to the consolidated financial statements, as set forth in Part
II, Item 8, Consolidated Financial Statements for information regarding
non-recourse and recourse debt.
Cash distributions to the limited partners for the years ended December 31,
2003 and 2002, which were paid over four months and twelve months respectively,
totaled $1,645,916 and $10,129,308, respectively, which was a return of capital.
The monthly annualized cash distribution rate to limited partners for the years
ended December 31, 2003 and 2001 was 1.67% and 10.25% respectively, which was a
return of capital.
It is anticipated that cash distributions, if any, will not be significant
until the realization of proceeds from the sale or release of equipment
currently on or off lease. There were no cash distributions to the limited
partners since April 2003.
The Partnership's reinvestment period ended November 2002, and the
disposition period began immediately thereafter. During the disposition period,
the Partnership has and will continue to distribute substantially all
distributable cash from operations and equipment sales to the partners and
continue the orderly termination of its operations and affairs. The Partnership
has and will not invest in any additional finance or lease transactions during
the disposition period.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
As of December 31, 2003 there were no known trends or demands, commitments,
events or uncertainties apart from those mentioned above which are likely to
have any material effect on liquidity. As cash is realized from operations and
additional borrowings, the Partnership will continue to invest in equipment
leases and financings where it deems it to be prudent while retaining sufficient
cash to meet its reserve requirements and recurring obligations.
We do not consider the impact of inflation to be material in the analysis
of our overall operations.
Critical Accounting Policies and Management Estimates
The policies discussed below are considered by the General Partner to be
critical to an understanding of the Partnership's consolidated financial
statements because their application places the most significant demands on the
General Partner's judgments, with financial reporting results relying on
estimation about the effect of matters that are inherently uncertain. Specific
risks for these critical accounting policies are described in the following
paragraphs. For all of these policies, the General Partner cautions that future
events rarely develop exactly as forecast, and the best estimates routinely
require adjustment.
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the dates of the financial statements and
revenues and expenses during the reporting periods. Significant estimates
primarily include the allowance for doubtful accounts and unguaranteed residual
values. In addition, management is required to disclose contingent assets and
contingent liabilities. Actual results could differ from those estimates.
Leases and Revenue Recognition - The Partnership accounts for owned
equipment leased to third parties as finance leases, leveraged leases, or
operating leases, as appropriate. Initial direct costs are capitalized and are
amortized over the terms of the related leases using the interest method.
For finance leases, the Partnership records, at the inception of the lease,
the total minimum lease payments receivable, the estimated unguaranteed residual
values, the initial direct costs related to the leases and the related unearned
income. Unearned income represents the difference between the sum of the minimum
lease payments receivable plus the estimated unguaranteed residual minus the
cost of the leased equipment. Unearned income is recognized as finance income
over the terms of the related leases using the interest method.
The Partnership's net investment in leveraged leases consists of minimum
lease payments receivable, the estimated unguaranteed residual values and the
initial direct costs related to the leases, net of the unearned income and
principal and interest on the related non-recourse debt. Unearned income is
recognized as income from leveraged leases over the life of the lease at a
constant rate of return on the positive net investment.
For operating leases, equipment is recorded and depreciated on the
straight-line method over the lease term to its estimated residual value at
lease termination and is subject to the Partnership's impairment policy. Related
lease rentals are recognized on the straight line method over the lease terms.
Billed and uncollected operating lease receivables are included in other assets.
Credit Risk - Financial instruments that potentially subject the
Partnership to concentrations of credit risk include cash and cash equivalents,
direct finance lease receivables and accounts receivable. The Partnership places
its cash deposits and temporary cash investments with creditworthy, high quality
financial institutions. The concentration of such deposits and temporary cash
investments is not deemed to create a significant risk to the Partnership.
Accounts receivable represent amounts due from lessees in various industries,
related to equipment on operating and direct financing leases.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
The Partnership records a provision for doubtful accounts to provide for
estimated credit losses in its portfolio. The allowance for doubtful accounts is
based on an analysis of delinquency, an assessment of overall risk and a review
of historical loss experience. The Partnership's write-off policy is based on an
analysis of the aging of the Partnership's portfolio, a review of the
non-performing receivables and leases, and prior collection experience. An
account is fully reserved for or written-off when the analysis indicates that
the probability of collection of the account is remote.
Equipment Held for Sale or Lease - The vessels that are held for sale or
lease are carried at cost less accumulated depreciation, subject to the
Partnership's impairment policy discussed below.
Investments in Estimated Unguaranteed Residual Values - The Partnership
carries its investments in the future estimated unguaranteed residual values of
assets at cost, which is equal to or less than market values, subject to the
Partnership's policy relating to impairment of review. Proceeds received are
recognized as a recovery of cost due to the uncertainty of ultimate realization.
Proceeds received in excess of costs are recognized as gain.
Impairment - Residual values of the Partnership's asset portfolio are
periodically reviewed to determine whether events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The events
or changes in circumstances which generally indicate that the residual value of
an asset may be impaired are (i) the estimated fair value of the underlying
equipment is less than the Partnership's carrying value or (ii) the lessee is
experiencing financial difficulties and it does not appear likely that the
estimated proceeds from disposition of the asset will be sufficient to satisfy
the remaining obligation to the non-recourse lender and the Partnership's
residual position. Generally in the latter situation, the residual position
relates to equipment subject to third party non-recourse notes payable where the
lessee remits their rental payments directly to the lender and the Partnership
does not recover its residual until the non-recourse note obligation is repaid
in full.
An impairment loss is measured and recognized only if the estimated
undiscounted future cash flows of the asset are less than their net book value.
The estimated undiscounted future cash flows are the sum of the estimated
residual value of the asset at the end of the asset's expected holding period
and estimates of undiscounted future rents. The residual value assumes, among
other things, that the asset is utilized normally in an open, unrestricted and
stable market. Short-term fluctuations in the market place disregarded and it is
assumed that there is no necessity either to dispose of a significant number of
the assets simultaneously, if held in quantity, or to dispose of the asset
quickly. Impairment is measured as the difference between the fair value of the
assets and its carrying value on the measurement date.
New Accounting Pronouncements
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS No. 133. The
Statement requires that contracts with comparable characteristics be accounted
for similarly and clarifies when a derivative contains a financing component
that warrants special reporting in the statement of cash flows. SFAS No. 149 is
effective for contracts entered into or modified after June 30, 2003, except in
certain circumstances, and for hedging relationships designated after June 30,
2003. The adoption of this standard did not have a material effect on the
Partnership's financial position or results of operations.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how an issuer classifies and measures in its
statements of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This Statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. For
nonpublic entities, the effective date of the provisions of SFAS No. 150 that
relate to mandatorily redeemable financial instruments has been deferred until
fiscal years that begin after December 31, 2003. The adoption of this standard
is not expected to have a material effect on the Partnership's financial
position or results of operations.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51. In December 2003, the FASB issued a
revision to FIN 46, or Revised Interpretation, to clarify some of the provisions
of FIN 46. FIN 46 provides guidance on how to identify a variable interest
entity, or VIE, and determine when the assets, liabilities, non-controlling
interests, and results of operations of a VIE must be included in a
Partnership's consolidated financial statements. A Partnership that holds
variable interests in an entity is required to consolidate the entity if the
Partnership's interest in the VIE is such that the Partnership will absorb a
majority of the VIE's expected losses and/or receive a majority of the entity's
expected residual returns, if any. VIE's created after January 31, 2003, but
prior to January 1, 2004, may be accounted for either based on the original
interpretation or the Revised Interpretations. However, the Revised
Interpretations must be applied no later than the first quarter of fiscal year
2004. VIE's created after January 1, 2004 must be accounted for under the
Revised Interpretations. There has been no material impact to the Partnership's
financial statements and there is no expected impact from the adoption of the
deferred provisions in the first quarter of fiscal year 2004.
The Partnership does not believe that any other recently issued, but not
yet effective, accounting standards will have a material effect on the
Partnership's financial position or results of operations.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
----------------------------------------------------------
The Partnership is exposed to certain market risks, including changes in
interest rates and the demand for equipment (and the related residuals) owned by
the Partnership and its investees. Except as described below, the Partnership
believes its exposure to other market risks are insignificant to both its
financial position and results of operations.
The Partnership manages its interest rate risk by obtaining fixed rate debt
for most of its obligations. The fixed rate debt service obligation streams are
generally matched by fixed rate lease receivables streams generated by the
Partnership's lease investments.
The Partnership also borrows funds under a floating rate line of credit and
is therefore exposed to interest rate risk until the floating rate lines of
credit are repaid. The Partnership's aggregate borrowings under the floating
rate line of credit as of December 31, 2003 was $6,615,440. The Partnership
believes the risk associated with rising interest rates under these lines are
not significant.
The Partnership manages its exposure to equipment and residual risk by
monitoring the equipment leasing market and maximizing remarketing proceeds
through either releasing or sale of equipment.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
Item 8. Consolidated Financial Statements
---------------------------------
Index to Consolidated Financial Statements
Page Number
-----------
Independent Auditors' Reports 16-17
Consolidated Balance Sheets as of December 31, 2003 and 2002 18-19
Consolidated Statements of Operations for the Years Ended December 31, 2003,
2002 and 2001 20
Consolidated Statement of Changes in Partners' Equity for the Years Ended
December 31, 2001, 2002 and 2003 21
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2003, 2002 and 2001 22-24
Notes to Consolidated Financial Statements 25-41
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 2003
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Partners
ICON Cash Flow Partners L.P. Seven
We have audited the accompanying consolidated balance sheets of ICON Cash Flow
Partners L.P. Seven (a Delaware limited partnership) and subsidiaries as of
December 31, 2003 and 2002 and the related consolidated statements of
operations, changes in partners' equity and cash flows for each of the two years
in the period ended December 31, 2003. These consolidated financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ICON Cash Flow
Partners L.P. Seven and subsidiaries as of December 31, 2003 and 2002 and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 2003 in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1, the Partnership's reinvestment period ended November 9,
2002 and its disposition period commenced. During the disposition period the
Partnership will distribute substantially all distributable cash from operations
and equipment sales to the partners and begin the orderly termination of its
operations and affairs.
/s/ Hays & Company LLP
March 19, 2004
New York, New York
Independent Auditors' Report
----------------------------
The Partners
ICON Cash Flow Partners L.P. Seven:
We have audited the accompanying consolidated statements of operations,
partners' equity, and cash flows of ICON Cash Flow Partners L.P. Seven (a
Delaware limited partnership) for the year ended December 31, 2001. These
consolidated financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects the results of the operations and the cash
flows of ICON Cash Flow Partners L.P. Seven for the year ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States of America.
/s/KPMG LLP
May 20, 2002
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31, 2003 and 2002
2003 2002
Assets
Cash and cash equivalents $ 301,256 $ 1,257,947
-------------- --------------
Investment in finance leases and financings
Minimum rents receivable 904,811 2,252,134
Estimated unguaranteed residual values 1,188,402 1,717,816
Initial direct costs, net 1,299 36,455
Unearned income (55,036) (137,106)
Allowance for doubtful accounts (239,516) (289,301)
------------- --------------
1,799,960 3,579,998
-------------- ---------------
Net investment in leveraged leases 19,631,879 27,877,708
------------- --------------
Equipment held for sale or lease, net 15,569,831 19,343,546
------------- --------------
Investment in operating leases
Equipment at cost 6,352,370 14,195,791
Accumulated depreciation (1,614,224) (1,703,583)
------------- --------------
4,738,146 12,492,208
------------- --------------
Investments in estimated unguaranteed residual values 4,686,758 4,686,758
------------- --------------
Investments in unconsolidated joint ventures 4,000,169 3,360,145
------------- --------------
Due from General Partner and affiliates 369,071 161,458
------------- --------------
Other assets, net 966,486 1,249,535
------------- --------------
Total assets $ 52,063,556 $ 74,009,303
============= ==============
(continued on next page)
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Balance Sheets (continued)
December 31, 2003 and 2002
2003 2002
---- ----
Liabilities and Partners' Equity
Notes payable - non-recourse $ 23,790,254 $ 27,186,863
Note payable - recourse 12,366,449 11,582,802
Due to affiliates 51,522 155,542
Security deposits, deferred credits and other payables 429,127 664,692
Minority interest in joint venture 22,871 53,292
----------------- ----------------
Total liabilities 36,660,223 39,643,191
----------------- ----------------
Commitments and Contingencies
Partners' equity
General Partner (694,873) (505,244)
Limited partners (987,548 outstanding,
$100 per unit original issue price) 16,098,206 34,871,356
---------------- -----------------
Total partners' equity 15,403,333 34,366,112
Total liabilities and partners' equity $ 52,063,556 $ 74,009,303
================= =================
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31, 2003, 2002 and 2001
2003 2002 2001
Revenues
Rental income $ 1,365,201 $ 2,528,092 $ 3,355,712
Finance income 82,070 906,012 3,799,976
(Loss) income from leveraged leases, net (1,488,462) 586,808 2,115,504
Net gain on sales of equipment and investments 120,524 2,711,735 371,381
Income (loss) from investments
in unconsolidated joint ventures 1,241,857 1,453,617 (552,951)
Interest income and other 255,342 139,761 69,870
Total revenues 1,576,532 8,326,025 9,159,492
============== ============== ==============
Expenses
Interest 2,682,524 3,515,642 3,959,897
Depreciation expense 5,795,265 4,769,652 2,584,622
Management fees - General Partner 595,157 975,642 1,958,755
Vessel maintenance 902,543 351,386 -
General and administrative expense 651,659 1,215,877 1,019,905
Administrative expense
reimbursements - General Partner 242,909 419,784 661,519
Amortization of initial direct costs 184,089 384,612 907,858
Provision from impairment 7,850,000 350,000 -
Minority interest (income) expense (27,378) 4,838 43,952
(Reversal of) provision for bad debts - - (500,000)
Total expenses 18,876,768 11,987,433 10,636,508
============== ============= ==============
Net loss $ (17,300,236) $ (3,661,408) $ (1,477,016)
============== ============= ===============
Net loss allocable to:
Limited partners $ (17,127,234) $ (3,624,794) $ (1,462,246)
General Partner (173,002) (36,614) (14,770)
============== ============== ===============
$ (17,300,236) $ (3,661,408) $ (1,477,016)
Weighted average number of limited
partnership units outstanding 987,548 988,099 989,112
============= ============== ==============
Net loss per weighted average
limited partnership unit $ (17.34) $ (3.67) $ (1.48)
============== ============= ===============
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statement of Changes in Partners' Equity
For the Years Ended December 31, 2001, 2002 and 2003
Limited Partner Distributions
Return of Investment Limited General
Capital Income Partners Partner Total
(Per weighted average unit)
Balance at
January 1, 2001 $ 60,803,205 $ (251,521) $ 60,551,684
Limited partnership units
redeemed (939 units) (47,009) - (47,009)
Cash distributions to partners $ 10.75 $ - (10,632,716) (100,023) (10,732,739)
Net loss (1,462,246) (14,770) (1,477,016)
================ ============= ===============
Balance at
December 31, 2001 48,661,234 (366,314) 48,294,920
Limited partnership units
redeemed (1,101 units) (35,776) - (35,776)
Cash distributions to partners $ 10.25 $ - (10,129,308) (102,316) (10,231,624)
Net loss (3,624,794) (36,614) (3,661,408)
Balance at
December 31, 2002 34,871,356 (505,244) 34,366,112
Cash distributions to partners $ 1.67 $ - (1,645,916) (16,627) (1,662,543)
Net loss (17,127,234) (173,002) (17,300,236)
Balance at
December 31, 2003 $ 16,098,206 $ (694,873) $ 15,403,333
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2003, 2002 and 2001
2003 2002 2001
Cash flows from operating activities:
Net loss $ (17,300,236) $ (3,661,408) $ (1,477,016)
Adjustments to reconcile net loss to
net cash (used in) provided by operating activities:
Net gain on sales of equipment and investments (120,524) (2,711,735) (371,381)
Finance income portion of receivables
paid directly to lenders by lessees - (568,035) (3,127,075)
Rental income paid directly to lender by lessees (674,894) (2,528,092) (2,711,700)
Amortization of initial direct costs 184,089 384,612 907,858
Depreciation expense 5,795,265 4,769,652 2,584,622
(Reversal of) provision for bad debts - - (500,000)
Provision for impairment 7,850,000 350,000 -
Interest expense on non-recourse
financings paid directly by lessees and
interest accreted 1,676,212 2,536,757 3,810,182
Loss (income) from leveraged leases, net 1,488,462 (586,808) (2,115,504)
(Income) loss from investments in
unconsolidated joint ventures (1,241,857) (1,453,617) 552,951
Minority interest (income) expense (27,378) 4,838 43,952
Changes in operating assets and liabilities:
Collection of principal - non-financed
receivables 1,385,804 3,449,559 1,185,981
Due from General Partner and affiliates (207,613) (161,458) -
Other assets, net 283,049 650,162 183,106
Due to affiliates (104,020) (3,740,307) 3,836,727
Security deposits, deferred credits and other payables (235,565) (446,136) 53,875
Total adjustments 16,051,030 (50,608) 4,333,594
Net cash (used in) provided by operating activities (1,249,206) (3,712,016) 2,856,578
Cash flows from investing activities:
Proceeds from the sales of equipment 1,050,865 6,184,106 7,771,021
Proceeds from sale of minority interests
in consolidated joint ventures - - 3,273,407
Distributions received from unconsolidated joint ventures 671,137 1,288,983 255,047
Investments in unconsolidated joint ventures - - (283)
Net cash provided by investing activities 1,722,002 7,473,089 11,299,192
(continued on next page)
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (continued)
For the Years Ended December 31, 2003, 2002 and 2001
2003 2002 2001
Cash flows from financing activities:
Proceeds from notes payable - non-recourse - - 2,111,726
Principal payments on notes payable - non-recourse - (250,000) (3,868,718)
Proceeds from note payable - recourse 690,000 10,800,439 -
Principal payments on notes payable - recourse (453,901) (5,120,036) (4,369,065)
Distribution to minority interest in joint venture (3,043) - -
Cash distributions to partners (1,662,543) (10,231,624) (10,732,739)
Redemption of limited partnership units - (35,776) (47,009)
Net cash used in financing activities (1,429,487) (4,836,997) (16,905,805)
Net decrease in cash and cash equivalents (956,691) (1,075,924) (2,750,035)
Cash and cash equivalents at beginning of year 1,257,947 2,333,871 5,083,906
Cash and cash equivalents at end of year $ 301,256 $ 1,257,947 $ 2,333,871
(continued on next page)
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (continued)
For the Years Ended December 31, 2003, 2002 and 2001
Supplemental Disclosures of Cash Flow Information
During the years ended December 31, 2003, 2002 and 2001, non-cash
activities included the following:
2003 2002 2001
Principal and interest on finance receivables
paid directly to lenders by lessees $ 4,397,927 $ 2,269,884 $ 12,831,791
Rental income assigned - operating lease receivable 674,894 2,528,092 2,711,700
Principal and interest on non-recourse
financings (5,072,821) (4,797,976) (15,543,491)
$ - $ - $ -
Transfer of investment in finance leases
to investments in operating leases $ 2,565,000 $ 9,647,253 $ 30,137,598
Transfer of investment in operating leases, net of
accumulated depreciation, to equipment held for
sale or lease $ 10,389,766 $ 3,258,314 $ 18,769,730
Interest paid directly to lenders by lessees
pursuant to non-recourse financings $ 1,676,212 $ 2,536,757 $ 3,810,182
Interest expense on recourse notes - paid 1,006,312 978,885 149,715
Total interest expense $ 2,682,524 $ 3,515,642 $ 3,959,897
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2003, 2002 and 2001
1. Organization
ICON Cash Flow Partners L.P. Seven (the "Partnership"), was formed on May
23, 1995 as a Delaware limited partnership. The Partnership's maximum offering
was $100,000,000. The Partnership commenced business operations on its initial
closing date, January 19, 1996 with the admission of 26,367.95 limited
partnership units at $100 per unit representing $2,636,795 of capital
contributions. From January 19, 1996 through September 16, 1998 (the final
closing date) 973,628.86 additional units were admitted representing $97,362,886
of capital contributions bringing the total admission to 999,996.81 units
aggregating $99,999,681 in capital contributions. The Partnership redeemed
12,449.00 limited partnership units during the years 1997 through 2003, leaving
987,547.81 limited partnership units outstanding at December 31, 2003.
The Partnership is an equipment leasing income fund. The principal
investment objective of the Partnership is to obtain the maximum economic return
from its investments for the benefit of its partners. To achieve this objective
the Partnership has: (1) acquired a diversified portfolio of leases and
financing transactions; (2) made monthly cash distributions to its limited
partners commencing with each limited partner's admission to the Partnership,
(3) re-invested substantially all undistributed cash from operations and cash
from sales of equipment and financing transactions during the reinvestment
period; and (4) commenced the disposition period and begun to sell the
Partnership's investments and distribute the cash from sales of such investments
to its partners.
On November 9 2002 the Partnership's Reinvestment Period ended and the
Disposition Period began. During this period the Partnership will distribute
substantially all distributable cash from operations and sales to the partners
and begin the orderly termination of its operations. The Partnership will not
reinvest in any additional leased equipment during the Disposition period.
The General Partner of the Partnership is ICON Capital Corp. (the "General
Partner"), a Connecticut corporation. The General Partner manages and controls
the business affairs of the Partnership including equipment, leases and
financing transactions under a management agreement with the Partnership.
Profits, losses, cash distributions and disposition proceeds are allocated
99% to the limited partners and 1% to the General Partner until each limited
partner has received cash distributions and disposition proceeds sufficient to
reduce its adjusted capital contribution account to zero and receive, in
addition, other distributions and allocations which would provide a 10% per
annum cumulative return, compounded daily, on its outstanding adjusted capital
contribution account. After such time, the distributions will be allocated 90%
to the limited partners and 10% to the General Partner.
2. Significant Accounting Policies
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Significant estimates
primarily include the allowance for doubtful accounts and unguaranteed residual
values. In addition, management is required to disclose contingent assets and
contingent liabilities. Actual results could differ from those estimates.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Consolidation - The consolidated financial statements include the accounts
of the Partnership and its majority owned subsidiaries. All inter-company
accounts and transactions have been eliminated in consolidation. The Partnership
accounts for its interests in 50% or less owned joint ventures under the equity
method of accounting. In such cases, the Partnership's original investments are
recorded at cost and adjusted for its share of earnings, losses and
distributions.
Cash and Cash Equivalents - Cash and cash equivalents include cash in banks
and highly liquid investments with original maturity dates of three months or
less. The Partnership's cash and cash equivalents are held principally at one
financial institution and at times may exceed insured limits.
Leases and Revenue Recognition - The Partnership accounts for owned
equipment leased to third parties as finance leases, leveraged leases, or
operating leases, as appropriate. Initial direct costs are capitalized and are
amortized over the terms of the related leases using the interest method.
For finance leases, the Partnership records, at the inception of the lease,
the total minimum lease payments receivable, the estimated unguaranteed residual
values, the initial direct costs related to the leases and the related unearned
income. Unearned income represents the difference between the sum of the minimum
lease payments receivable plus the estimated unguaranteed residual minus the
cost of the leased equipment. Unearned income is recognized as finance income
over the terms of the related leases using the interest method.
The Partnership's net investment in leveraged leases consists of minimum
lease payments receivable, the estimated unguaranteed residual values and the
initial direct costs related to the leases, net of the unearned income and
principal and interest on the related non-recourse debt. Unearned income is
recognized as income from leveraged leases over the life of the lease at a
constant rate of return on the positive net investment.
For operating leases, equipment is recorded and depreciated on the
straight-line method over the lease term to its estimated residual value at
lease termination and is subject to the Partnership's impairment policy. Related
lease rentals are recognized on the straight line method over the lease terms.
Billed and uncollected operating lease receivables are included in other assets.
Credit Risk - Financial instruments that potentially subject the
Partnership to concentrations of credit risk include cash and cash equivalents,
direct finance lease receivables and accounts receivable. The Partnership places
its cash deposits and temporary cash investments with creditworthy, high quality
financial institutions. The concentration of such deposits and temporary cash
investments is not deemed to create a significant risk to the Partnership.
Accounts receivable represent amounts due from lessees in various industries,
related to equipment on operating and direct financing leases.
The Partnership records a provision for doubtful accounts to provide for
estimated credit losses in its portfolio. The allowance for doubtful accounts is
based on an analysis of delinquency, an assessment of overall risk and a review
of historical loss experience. The Partnership's write-off policy is based on an
analysis of the aging of the Partnership's portfolio, a review of the
non-performing receivables and leases, and prior collection experience. An
account is fully reserved or written off when the analysis indicates that the
probability of collection of the account is remote.
Equipment Held for Sale or Lease - As of December 31, 2003, the Partnership
had aircraft parts and rotables that came off lease in 2002 and five vessels
that came off lease in 2001. This equipment is recorded at original equipment
cost less accumulated depreciation, and is subject to the Partnership's
impairment review policy.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Impairment - Residual values of the Partnership's asset portfolio are
periodically reviewed to determine whether events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The events
or changes in circumstances which generally indicate that the residual value of
an asset may be impaired are (i) the estimated fair value of the underlying
equipment is less than the Partnership's carrying value or (ii) the lessee is
experiencing financial difficulties and it does not appear likely that the
estimated proceeds from disposition of the asset will be sufficient to satisfy
the remaining obligation to the non-recourse lender and the Partnership's
residual position. Generally in the latter situation, the residual position
relates to equipment subject to third party non-recourse notes payable where the
lessee remits their rental payments directly to the lender and the Partnership
does not recover its residual until the non-recourse note obligation is repaid
in full.
An impairment loss is measured and recognized only if the estimated
undiscounted future cash flows of the asset are less than their net book value.
The estimated undiscounted future cash flows are the sum of the estimated
residual value of the asset at the end of the asset's expected holding period
and estimates of undiscounted future rents. The residual value assumes, among
other things, that the asset is utilized normally in an open, unrestricted and
stable market. Short-term fluctuations in the market place are disregarded and
it is assumed that there is no necessity either to dispose of a significant
number of the assets, simultaneously if held in quantity, or to dispose of the
asset quickly. Impairment is measured as the difference between the fair value
of the assets and its carrying value on the measurement date.
Investments in Estimated Unguaranteed Residual Values - The Partnership
carries its investments in the future estimated unguaranteed residual values of
assets at unrecovered cost, which is equal to or less than market value, and is
subject to the Partnership's policy relating to impairment review. Proceeds
received are recognized as a recovery of cost due to uncertainty of ultimate
realization. Proceeds received in excess of costs are recognized as gains.
Fair Value of Financial Instruments - Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures About Fair Values of Financial
Instruments," requires disclosures about the fair value of financial
instruments, except for lease related assets and liabilities. Separate
disclosure of fair value information as of December 31, 2003 and 2002 with
respect to the Partnership's assets and liabilities is not separately provided
since (i) SFAS No. 107 does not require fair value disclosures of lease
arrangements and (ii) the carrying value of financial assets, other than lease
related investments, and the recorded value of payables approximates market
value.
Redemption of Limited Partnership Units - The General Partner consented to
the Partnership redeeming 939 units in 2001, 1,101 units in 2002 and no
redemptions in 2003. The redemption amounts are calculated following the
specified redemption formula in accordance with the Partnership Agreement.
Redeemed units have no voting rights and do not share in distributions. The
Partnership Agreement limits the number of units which can be redeemed in any
one year and redeemed units may not be reissued. Redeemed limited partnership
units are accounted for as a reduction from partners' equity.
Income Taxes - No provision for income taxes has been recorded since the
liability for such taxes is that of each of the partners rather than the
Partnership. The Partnership's income tax returns are subject to examination by
the federal and state taxing authorities, and changes, if any could adjust the
individual income tax of the partners.
Reclassifications - Certain items from prior years have been reclassified
to conform to the 2003 classifications.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Recent Accounting Pronouncements - In April 2003, the FASB issued SFAS No.
149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. The Statement requires
that contracts with comparable characteristics be accounted for similarly and
clarifies when a derivative contains a financing component that warrants special
reporting in the statement of cash flows. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003, except in certain
circumstances, and for hedging relationships designated after June 30, 2003. The
adoption of this standard did not have a material effect on the Partnership's
financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how an issuer classifies and measures in its
statements of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This Statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. For
nonpublic entities, the effective date of the provisions of SFAS No. 150 that
relate to mandatorily redeemable financial instruments has been deferred until
fiscal years that begin after December 31, 2003. The adoption of this standard
is not expected to have a material effect on the Partnership's financial
position or results of operations.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51. In December 2003, the FASB issued a
revision to FIN 46, or Revised Interpretation, to clarify some of the provisions
of FIN 46. FIN 46 provides guidance on how to identify a variable interest
entity, or VIE, and determine when the assets, liabilities, non-controlling
interests, and results of operations of a VIE must be included in a company's
consolidated financial statements. A company that holds variable interests in an
entity is required to consolidate the entity if the company's interest in the
VIE is such that the company will absorb a majority of the VIE's expected losses
and/or receive a majority of the entity's expected residual returns, if any.
VIE's created after January 31, 2003, but prior to January 1, 2004, may be
accounted for either based on the original interpretation or the Revised
Interpretations. However, the Revised Interpretations must be applied no later
than the first quarter of fiscal year 2004. VIE's created after January 1, 2004
must be accounted for under the Revised Interpretations. There has been no
material impact to the Partnership's financial statements and there is no
expected impact from the adoption of the deferred provisions in the first
quarter of fiscal year 2004.
The Partnership does not believe that any other recently issued, but not
yet effective, accounting standards will have a material effect on the
Partnership's financial position or results of operations.
3. Joint Venture
The Partnership and its affiliates, entities in which ICON Capital Corp, is
also the general partner formed eight ventures discussed below for the purpose
of acquiring and managing various assets. The Partnership and its affiliates
have identical investment objectives and participate on the same terms and
conditions. The Partnership has a right of first refusal to purchase the
equipment, on a pro-rata basis, if any of the affiliates desire to sell their
interests in the equipment.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Consolidated Joint Venture
The joint venture described below is majority owned and is consolidated
with the Partnership.
ICON Cash Flow Partners L.L.C. III
In December 1996, the Partnership and an affiliate, ICON Cash Flow
Partners, L.P., Series E ("Series E") formed ICON Cash Flow Partners L.L.C. III
("ICON Cash Flow L.L.C. III"), for the purpose of acquiring and managing an
aircraft which was on lease to Continental Airlines, Inc. The aircraft is a 1976
McDonnell Douglas DC-10-30 with an original cost of $11,429,751. The original
lease, which was accounted for as a leveraged lease, expired on April 30, 2003.
Effective May 1, 2003, the aircraft was re-leased to World Airways, Inc. (see
Note 5) on a power-by-the-hour basis and the asset was reclassified as an
investment in operating lease. Profits, losses, excess cash and disposition
proceeds are allocated 99% to the Partnership and 1% to Series E. The
Partnership's financial statements include 100% of the assets and liabilities
and 100% of the revenue and expenses of ICON Cash Flow L.L.C. III. Series E's
investment in ICON Cash Flow L.L.C. III is reflected as minority interest in
consolidated joint venture on the accompanying consolidated balance sheets.
Unconsolidated Joint Ventures
The seven joint ventures described below are 50% or less owned and are
accounted for under the equity method.
ICON Receivables 1997-A LLC
In March and September 1997, the Partnership and affiliates, ICON Cash Flow
Partners L.P. Six ("L.P. Six") and ICON Cash Flow Partners L.P. Series D
("Series D") and Series E contributed and assigned equipment lease and finance
receivables and residuals to ICON Receivables 1997-A LLC ("1997-A") for the
purpose of securitizing their cash flow collections. As of December 31, 2003,
the Partnership, Series E, L.P. Six and Series D own 19.97%, 31.19%, 31.03% and
17.81% interests, respectively, in 1997-A.
Information as to the financial position and results of operations of
1997-A as of and for the years ended December 31, 2003 and 2002 is summarized
below:
December 31, 2003 December 31, 2002
Assets $ 810,802 $ 694,761
Liabilities $ 595,106 $ 390,389
Equity $ 215,696 $ 304,372
Partnership's share of equity $ 43,080 $ 60,784
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
Net (loss) income $ (88,676) $ 155,235
Partnership's share of net (loss) income $ (17,704) $ 31,001
ICON Receivables 1997-B LLC
In August 1997, the Partnership and affiliates, Series E and L.P. Six,
formed ICON Receivables 1997-B LLC ("1997-B") for the purpose of securitizing
their cash flow collections. The Partnership, Series E and L.P. Six each
contributed cash, equipment leases and residuals and received a 16.67%, 75.00%
and 8.33% interest, respectively, in 1997-B.
Information as to the financial position and results of operations of
1997-B as of and for the years ended December 31, 2003 and 2002 is summarized
below:
December 31, 2003 December 31, 2002
Assets $ 1,756,597 $ 3,241,761
Liabilities $ 1,681,931 $ 2,825,588
Equity $ 74,666 $ 416,173
Partnership's share of equity $ 12,448 $ 69,377
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
Net (loss) income $ (341,507) $ 223,402
Partnership's share of net (loss) income $ (56,929) $ 37,241
Distributions $ - $ 196,226
Partnership's share of distributions $ - $ 32,711
ICON/Boardman Facility LLC
In December 1998, the Partnership and three affiliates, ICON Cash Flow
Partners, L.P., Series C ("Series C"), L.P. Six and ICON Income Fund Eight A
L.P. ("Fund Eight A"), formed ICON Boardman /Facility LLC ("ICON BF"), for the
purpose of acquiring a coal handling facility on lease with Portland General
Electric, a utility company. The purchase price totaled $27,421,810 and was
funded with cash and the assumption of non-recourse debt. The Partnership,
Series C, L.P. Six, and Fund Eight A received a .5%, .5%, .5% and 98.5%
interest, respectively, in ICON BF.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
In 2001 the other joint venturers in ICON BF acquired Series C's interest
in accordance with their proportionate shares of ICON BF, at an aggregate cost
of $56,370, which represented Series C's carrying value of the investment. The
Partnership's share of the purchase price was $283. The remaining venturers'
shares in ICON BF were increased to .5025%, .5025%, and 98.995% for the
Partnership, L.P. Six, and Fund Eight A, respectively.
Information as to the financial position and results of operations of ICON
BF as of and for the years ended December 31, 2003 and 2002 is summarized below:
December 31, 2003 December 31, 2002
Assets $ 21,366,282 $ 23,193,438
Liabilities $ 7,314,376 $ 10,583,632
Equity $ 14,051,906 $ 12,609,806
Partnership's share of equity $ 70,611 $ 63,364
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
Net income $ 1,442,100 $ 1,343,365
Partnership's share of net income $ 7,247 $ 6,750
ICON/AIC Trust
In 1999, ICON/AIC Trust ("AIC Trust") was formed to own and manage a
portfolio of leases for equipment located in England. The Partnership, L.P. Six
and Fund Eight A own 30.76%, 25.51% and 43.73% interests in AIC Trust,
respectively.
On December 28, 2001, AIC Trust sold its remaining leases, subject to the
related debt in exchange for a note receivable of (Pound)2,575,000 ($3,744,822
converted at the exchange rate at December 28, 2001) which is payable in six
installments through June 2004. At December 31, 2003, the remaining amount
receivable is (Pound)750,000 ($1,330,633 converted at the exchange rate at
December 31, 2003).
Information as to the financial position and results of operations of AIC
Trust as of and for the years ended December 31, 2003 and 2002 is summarized
below:
December 31, 2003 December 31, 2002
Assets $ 1,330,632 $ 2,572,522
Liabilities $ - $ -
Equity $ 1,330,632 $ 2,572,522
Partnership's share of equity $ 409,303 $ 791,308
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
Net income $ 37,009 $ 212,349
Partnership's share of net income $ 11,384 $ 65,319
Distributions $ 1,396,948 $ 1,752,885
Partnership's share of distributions $ 429,701 $ 539,188
ICON Aircraft 24846 LLC
In 2000, the Partnership and two affiliates, Fund Eight A and ICON Income
Fund Eight B L.P. ("Fund Eight B"), formed ICON Aircraft 24846 LLC ("ICON
Aircraft 24846") for the purpose of acquiring an investment in a 767-300 ER
aircraft originally leased to Scandinavian Airline Systems ("SAS") for a
purchase price of $44,515,416. The purchase price was funded with cash of
$2,241,371 and the assumption of non-recourse debt in the amount of $42,274,045.
The lenders have a security interest in the aircraft and an assignment of the
rental payments under the lease. The lease with SAS expired in March 2003, at
which time the balance of the non-recourse debt outstanding was approximately
$34,500,000. The Partnership has been making contributions toward interest only
payments on the outstanding non-recourse debt, during the remarketing of the
aircraft by the General Partner. The Partnership, Fund Eight-A and Fund Eight-B
have ownership interests of 2.0%, 2.0% and 96.0%, respectively, in ICON Aircraft
24846.
Information as to the financial position and results of operations of ICON
Aircraft 24846 as of and for the years ended December 31, 2003 and 2002 is
summarized below:
December 31, 2003 December 31, 2002
Assets $ 36,430,187 $ 39,175,547
Liabilities $ 34,493,632 $ 35,419,214
Equity $ 1,938,555 $ 3,756,333
Partnership's share of equity $ 38,771 $ 75,126
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
Net (loss) income $ (3,467,329) $ 749,434
Partnership's share of net (loss) income $ (69,347) $ 14,988
Contributions $ 1,649,551 $ -
Partnership's share of contributions $ 32,992 $ -
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Cheyenne LLC
In December 2000, the Partnership and three affiliates, L.P. Six, Fund
Eight A and Fund Eight B formed ICON Cheyenne LLC ("ICON Cheyenne") for the
purpose of acquiring a portfolio of leases for an aggregate purchase price of
$29,705,716. The purchase price consisted of cash of $11,401,151 and the
assumption of non-recourse debt of $18,304,565. The non-recourse debt is
structured so as to be amortized with rentals due under the leases. The leases
expire on various dates through September 2006. The Partnership, L.P. Six, Fund
Eight A and Fund Eight B have ownership interests of 10.31%, 1.0%, 1.0% and
87.69%, respectively, in ICON Cheyenne.
Information as to the financial position and results of operations of ICON
Cheyenne as of and for the years ended December 31, 2003 and 2002 is summarized
below:
December 31, 2003 December 31, 2002
Assets $ 10,440,643 $ 14,765,333
Liabilities $ 3,204,090 $ 5,141,481
Equity $ 7,236,553 $ 9,623,852
Partnership's share of equity $ 746,088 $ 992,219
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
Net (loss) income $ (45,540) $ 1,445,607
Partnership's share of (loss) income $ (4,695) $ 149,042
Distributions $ 2,341,759 $ 4,545,920
Partnership's share
of distributions $ 241,436 $ 468,684
North Sea (Connecticut) Limited Partnership
In 2000, a joint venture, North Sea (Connecticut) Limited Partnership
("North Sea"), in which the Partnership is a 50% Class C limited partner,
exercised its option to acquire a drilling rig and simultaneously leased the
drilling rig to the operator. The lease was then financed on a non recourse
basis with a bank and the proceeds were used to pay for the exercise of the
option, with the excess loan proceeds of $20,002,567 distributed to the joint
venturers ($10,001,284 represented the Partnership's 50% share). The other joint
venturers are not affiliates of the Partnership or General Partner.
The Partnership has guaranteed an amount between the stipulated loss value
provided for in the financing and the loan balance. The maximum amount for which
the Partnership is potentially liable at December 31, 2003 under this guarantee
was approximately $103,000.
Information as to the financial position and results of operations of North
Sea as of and for the years ended December 31, 2003 and 2002 is summarized
below:
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
December 31, 2003 December 31, 2002
Assets $ 9,839,209 $ 10,504,336
Liabilities $ 19,574,474 $ 22,983,403
Partners' equity (deficit) $ (9,735,265) $ (12,479,067)
Partnership's share of equity (1) $ 2,679,868 $ 1,307,967
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
Net income $ 2,743,802 $ 2,298,551
Partnership's share of net income $ 1,371,901 $ 1,149,276
Distributions $ - $ 496,800
Partnership's share of distributions $ - $ 248,400
(1) The Partnership has a positive share of equity due to prior years'
distributions being allocated to the co-venturer.
4. Investments in Estimated Unguaranteed Residual Values
In July 1997, the Partnership entered into an option to acquire the
residual interests in three Boeing 737-300 aircraft currently on lease to
Continental Airlines. The Partnership subsequently exercised its options and
became the owner of the future estimated unguaranteed residual values. The
residual investments cost $20,811,758 and the leases for each aircraft were
scheduled to expire in the fourth quarter of 2003.
On August 29, 2003, the Partnership re-negotiated its investment in the
unguaranteed residual values with AAR Aircraft & Engine Sales Leasing, Inc.
which originally gave the Partnership the rights to purchase three Boeing
737-300 aircraft. The Partnership was originally obligated to repay its
investment cost which had consisted of three promissory notes aggregating
$3,612,091 accruing interest at 8.5% per annum through the maturity date of
November 27, 2003. The modified agreement converted these notes to a single
recourse promissory note of $5,751,009, accruing interest at 5% per annum. The
maturity date has been extended to November 27, 2006. As of December 31, 2003,
the outstanding principal was $5,751,009.
The modification agreement provides the Partnership with an investment in
the unguaranteed residual value of the three aircraft, which was recorded by the
Partnership at $4,686,758. If any or all of the aircraft are sold prior to the
maturity date of the recourse promissory note, then the Partnership may have all
or portion of its then outstanding balance of the recourse promissory note
forgiven. If the aircraft are sold after the maturity date of the recourse
promissory note, then the Partnership would be entitled to receive one-third of
the net proceeds in excess of the net book value of aircraft, as defined by the
modification agreement.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The Partnership also prepaid $500,000 of interest related to the recourse
promissory note during the quarter ended December 31, 2003. In addition, the
Partnership is required to repay a portion of the recourse promissory note with
50% of the sales proceeds from any of its assets which are not subject to senior
secured debt.
5. Net Investment in Leveraged Leases
In August 1996, the Partnership acquired an interest in an aircraft on
lease with Federal Express. The aircraft is a McDonnell Douglas DC-10-30F built
in 1996, and the lease expires in July 2004. The original purchase price was
$40,973,585.
In December 1996, the Partnership and Series E (see Note 3) acquired an
aircraft on lease with Continental Airlines, Inc. The lease was accounted for as
a leveraged lease. The aircraft is a McDonnell Douglas DC-10-30 built in 1976,
and the lease expired in March 2003. The original purchase price was
$11,429,751. On April 1, 2003 the aircraft was leased to World Airways, Inc.,
and the asset was reclassified as an investment in operating leases (see Note
6), at its remaining residual value of $2,565,000.
The net investment in the leveraged leases as of December 31, 2003 and 2002
consisted of the following:
2003 2002 2001
Non-cancelable minimum rents receivable (net of
principal and interest on non-recourse debt) $ 5,810,360 $ 10,002,727 $ 10,002,727
Estimated unguaranteed residual values 14,900,000 20,865,000 22,700,000
Initial direct costs, net 29,411 181,010 335,456
Unearned income (1,107,892) (3,171,029) (5,747,283)
$ 19,631,879 $ 27,877,708 $ 27,290,900
During 2003 and 2002, the Company reduced the estimated unguaranteed
residual value of one of the aircraft and recorded impairment provisions of
$3,400,000 and $1,835,000, respectively as a result of management's periodic
review of the Partnership's assets which indicated lower values at lease
termination than initially estimated. The impairment provisions have been
recorded as a reduction in income from leveraged leases. No impairment was
recognized in 2001.
Non-cancelable minimum rents receivable relating to the remaining leveraged
lease at December 31, 2003 are $5,810,360 which are all due through July 2004.
6. Investment in Operating Leases
On April 1, 2003 the Partnership re-leased the McDonnell Douglas DC-10-30
aircraft formerly on lease to Continental Airlines to World Airlines, Inc. on a
power-by-the-hour basis through December 2004.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The investment in operating leases at December 31, 2003 and 2002 consisted
of the following:
2003 2002 2001
Equipment at cost, beginning of the year $ 14,195,791 $ 9,678,415 $ -
Transfer of investment in leverage leases and equipment
held for sale or lease to operating leases 6,352,370 9,647,253 30,137,598
Transfer of operating lease equipment to equipment
held for sale or lease (14,195,791) (5,129,877) (20,459,183)
Equipment at cost, end of year 6,352,370 14,195,791 9,678,415
Accumulated depreciation, beginning of year (1,703,583) (895,169) -
Depreciation expense (5,795,265) (4,769,652) (2,584,622)
Accumulated depreciation transferred to equipment
held for sale or lease 5,884,624 3,961,238 1,689,453
Accumulated depreciation, end of year (1,614,224) (1,703,583) (895,169)
Investment in operating leases, end of year $ 4,738,146 $ 12,492,208 $ 8,783,246
7. Equipment held for sale or lease
The Partnership is the sole owner of two special purpose entities ("SPE's")
that own five marine vessels originally on charter to affiliates of Seacor Smit.
The financial position and results of operations each of the SPE's are
consolidated with the Partnership. These vessels are subject to outstanding
non-recourse debt with a lender. Under the original loan agreements with the
SPE's, all charter revenue was paid to the lender to amortize the outstanding
debt. At the end of the original charter term of each vessel, it was expected
that the individual vessels would either be re-chartered or sold with proceeds
paid to the lender until the debt was fully repaid. Several of the vessels had
been re-chartered during depressed periods of bareboat charter rates. As such,
the lender has not received the full payment and the non-recourse notes have
been declared in default. The total outstanding debt balance as of December 31,
2003 is approximately $7.25 million.
On September 4, 2003, the lender took control of the vessels and commenced
remarketing efforts. The General Partner also continues to look for potential
sale or re-charter opportunities on behalf of the SPE's. The SPE's remains the
titled owner of the vessels and as such are entitled to sale proceeds above the
outstanding debt balance regardless of whether it is the General Partner's or
the lender's remarketing activities that produces a sale. Both the General
Partner and the lender are seeking a sale in line with recent appraised values.
Based upon its recent remarketing efforts and appraisals received by the
Partnership, the General Partner determined that the net book value of the
vessels was in excess of their current market value, and, has recorded a
provision for impairment of $7,850,000 during the year ended December 31, 2003.
The Partnership did not record any impairment in the years 2002 and 2001 on its
investment in operating leases or equipment held for sale or lease.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
8. Receivables Due In Installments
Non-cancelable minimum rental amounts due on finance leases and financings
are all due during the year ending December 31, 2004 or are currently past due.
The allowance for doubtful accounts relating to finance lease receivables
and financings consists of the following:
Amount
Balance at January 1, 2001 $ 1,477,221
Reversal of provision for bad debts (500,000)
Writeoffs (61,236)
Balance at December 31, 2001 915,985
Writeoffs (626,684)
Balance at December 31, 2002 289,301
Write-offs (49,785)
Balance at December 31, 2003 $ 239,516
9. Notes Payable
Notes payable at December 31, 2003 consists of non-recourse obligations of
$23,790,254 and recourse obligations of $12,366,449. The recourse obligations
include (i) $5,751,009 associated with the investment in estimated unguaranteed
residual values (see Note 4), and (ii) $6,615,439 relating to the line of credit
agreement discussed below. The non-recourse notes are secured by the
Partnership's leased equipment, bear interest at rates ranging from 7.9% to 9.5%
per annum.
Notes payable at December 31, 2002 consisted of non-recourse obligations of
$27,186,863 and recourse obligations of $11,582,802.
Included in notes payable - non-recourse is $1,750,000 owed to ICON Cash
Flow Partners L.P., Series D an affiliate of the Partnership. In 1997, the
Partnership financed a portion of the free cash flow relating to a leveraged
lease it owned. The lease expires in July of 2004 at which time all unpaid
amounts will be due to the affiliate. During 2002, the Partnership prepaid
$250,000 of the financing.
Principal maturities of the Partnership's notes payable are as follows:
Year Ending Notes Payable - Note Payable -
December 31, Non-Recourse Recourse Total
2004 $ 13,790,226 $ 6,615,439 $ 20,405,665
2005 - - -
2006 10,000,028 5,751,009 15,751,037
$ 23,790,254 $ 12,366,449 $ 36,156,703
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
On May 30 2002, the Partnership entered into a $17,500,000 joint and
several line of credit agreement shared with Fund Eight A and Fund Eight B (the
"Initial Funds"), with Comerica Bank as lender. Under the terms of the
agreement, the Partnership may borrow at a rate equal to the Comerica Bank base
rate plus 1% (together, 5.00% at December 31, 2003) and all borrowings are to be
jointly and severally collateralized by the present values of rents receivable
and equipment owned by all of the Initial Funds sharing in the joint line of
credit. On December 12, 2002, the agreement was amended to admit Fund Nine,
collectively along with the Initial Funds (the "Funds"), as a borrower sharing
the $17,500,000 joint line of credit agreement. The Funds have entered into a
Contribution Agreement, dated as of May 30, 2002, as amended December 12, 2002,
pursuant to which the Funds have agreed to restrictions on the amount and the
terms of their respective borrowings under the line of credit in order to
minimize the risk that a Fund would not be able to repay its allocable portion
of the outstanding revolving loan obligation at any time, including restrictions
on any Fund borrowing in excess of the lesser of (A) an amount each Fund could
reasonably expect to repay in one year out of its projected free cash flow, or
(B) the greater of (i) the Borrowing Base (as defined in the line of credit
agreement) as applied to such Fund, and (ii) 50% of the net worth of such Fund.
The Contribution Agreement provides that, in the event a Fund pays an amount
under the agreement in excess of its allocable share of the obligation under the
agreement whether by reason of an Event of Default or otherwise, the other Funds
will immediately make a contribution payment to such Fund in such amount that
the aggregate amount paid by each Fund reflects its allocable share of the
aggregate obligations under the agreement.
The Funds' obligations to each other under the Contribution Agreement are
collateralized by a subordinate lien on the assets of each participating Fund.
The line of credit was extended for twelve additional months expiring May 31,
2004. As of December 31, 2003, the Partnership had $6,615,440 outstanding under
the line. Aggregate borrowing by all Funds under the line of credit agreement
aggregated $12,779,986 on December 31, 2003.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
10. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the years ended December 31, 2001, 2002 and 2003
were as follows:
Charged to
Operations
Management fees $ 1,958,755
Administrative expense reimbursements 661,519
Year ended December 31, 2001 $ 2,620,274
Management fees $ 975,642
Administrative expense reimbursements 419,784
Year ended December 31, 2002 $ 1,395,426
Management fees $ 595,157
Administrative expense reimbursements 242,909
Year ended December 31, 2003 $ 838,066
In accordance with the terms of the Management Agreement, the Partnership
pays the General Partner (i) management fees based on a percentage of rentals
received either directly by the Partnership or through joint ventures (ranging
from 1% to 7%) and (ii) acquisition fees based on the gross value of
transactions (3%). In addition, the General Partner is reimbursed for
administrative expenses incurred by it in connection with the Partnership's
operations.
The Partnership had a net receivable from affiliates of $317,549 and $5,916
at December 31, 2003 and 2002 respectively. At December 31, 2003 the Partnership
owes the General Partner a net amount of $14,172 for unpaid management fees.
This amount is non-interest bearing, and is scheduled to be paid during 2004.
The Partnership had investments in eight ventures with other partnerships
sponsored by the General Partner.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
11. Tax Information (Unaudited)
The following table reconciles net (loss) income for financial statement
reporting purposes to loss for federal income tax purposes for the years ended
December 31, 2003, 2002 and 2001:
2003 2002 2001
Net loss
per financial statements $ (17,300,236) $ (3,661,408) $ (1,477,016)
Differences due to:
Direct finance leases and financings 4,383,859 5,793,149 14,524,332
Depreciation and Impairment 4,822,532 (7,892,419) (23,242,100)
(Recovery of)provision for losses (2,140,232) - (500,000)
Loss (gain) on sale of equipment (122,887) 3,896,215 (2,088,097)
Other 996,942 (15,377) 141,840
Partnership loss for
federal income tax purposes $ (9,360,022) $ (1,879,840) $ (12,641,041)
As of December 31, 2003, the partners' capital accounts included in the
financial statements totaled $15,403,333 compared to the partners' capital
accounts for federal income tax purposes of $(1,025,024) (unaudited). The
difference arises primarily from commissions reported as a reduction in the
partners' capital accounts for financial reporting purposes but not for federal
income tax purposes, and temporary differences related to direct finance leases,
depreciation and provision for losses.
12. Selected Quarterly Financial Data (Unaudited)
The following table is a summary of selected financial data by quarter for
the years ended December 31, 2003 and 2002:
For the Quarter Ended
March 31, June 30, September 30, December 31,
2003
Revenues $ 985,495 $ 1,033,635 $ 657,964 $ (1,100,562)
Net (loss) allocable to
limited partners $ (2,181,095) $ (1,672,000) $ (5,737,694) $ (7,536,445)
Net (loss) per weighted
average limited partnership
unit $ (2.21) $ (1.69) $ (5.81) $ (7.63)
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
2002
Revenues $ 1,747,484 $ 1,520,917 $ 3,949,647 $ 1,107,977
Net (loss) income allocable to
limited partners $ (1,115,229) $ (741,593) $ 1,003,593 $ (2,771,565)
Net (loss) income per weighted
average limited partnership
unit $ (1.13) $ (.75) $ 1.01 $ (2.80)
13. Significant Concentration
The Partnership had leases which accounted for 10% or more of its total
revenue for the years ended December 31, 2003, 2002 and 2001. For the year ended
December 31, 2003, Federal Express, Seacor Offshore and Seacor Marine accounted
for 14%, 10% and 17%, respectively. For the year ended December 31, 2002,
Federal Express, Seacor Smit and Seacor Marine accounted for 31%, 16% and 14%,
respectively. The Partnership had four leases which accounted for 10% or more of
total revenue for the year ended December 31, 2001. The leases were with Federal
Express, Seacor Smit, Seacor Marine and Seacor Offshore generating 21%, 19%, 18%
and 13% of total revenue respectively.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
December 31, 2003
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The information required by Item 304 of Regulation S-K was previously filed
as part of the Partnership's Form 8-K filed on February 5, 2003.
Item 9a. Controls and Procedures
The Partnership carried out an evaluation, under the supervision and with
the participation of management of ICON Capital Corp., the Manager of the
Partnership, including the Principal Executive Officer and the Principal
Financial Officer, of the effectiveness of the design and operation of the
Partnership's disclosure controls and procedures as of the end of the period
covered by this report pursuant to the Securities Exchange Act of 1934. Based
upon the evaluation, the Principal Executive Officer and the Principal Financial
Officer concluded that the Partnership's disclosure controls and procedures were
effective.
There were no significant changes in the Partnership's internal control
over financial reporting during the Partnership's fourth fiscal quarter that
have materially affected, or are likely to materially affect, the Partnership's
internal control over financial reporting.
PART III
Item 10. Directors and Executive Officers of the Registrant's General Partner
The General Partner, a Connecticut corporation, was formed in 1985. The
General Partner's principal offices are located at 100 Fifth Avenue, 10th Floor,
New York, New York 10011, and its telephone number is (212) 418-4700. The
officers of the General Partner have extensive experience with transactions
involving the acquisition, leasing, financing and disposition of equipment,
including acquiring and disposing of equipment subject to leases and full
financing transactions.
The manager of the Partnership's business is the General Partner. The
General Partner is engaged in a broad range of equipment leasing and financing
activities. Through its sales representatives and through various broker
relationships throughout the United States, the General Partner offers a broad
range of equipment leasing services.
The General Partner performs certain functions relating to the management
of the equipment of the Partnership. Such services include the collection of
lease payments from the lessees of the equipment, re-leasing services in
connection with equipment which is off-lease, inspections of the equipment,
liaison with and general supervision of lessees to assure that the equipment is
being properly operated and maintained, monitoring performance by the lessees of
their obligations under the leases and the payment of operating expenses.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
December 31, 2003
The officers and directors of the General Partner are as follows:
Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Paul B. Weiss President and Director
Thomas W. Martin Executive Vice President and Director
Beaufort J. B. Clarke, age 57, has been Chairman, Chief Executive Officer
and Director of the General Partner since 1996. Prior to his present position,
Mr. Clarke was founder and the President and Chief Executive Officer of Griffin
Equity Partners, Inc. Mr. Clarke formerly was an attorney with Shearman and
Sterling and has over 20 years of senior management experience in the United
States leasing industry.
Paul B. Weiss, age 43, is President and Director of the General Partner.
Mr. Weiss has been exclusively engaged in lease acquisitions since 1988 from his
affiliations with the General Partner since 1996, Griffin Equity Partners (as
Executive Vice President from 1993-1996); Gemini Financial Holdings (as Senior
Vice President-Portfolio Acquisitions from 1991-1993) and Pegasus Capital
Corporation (as Vice President-Portfolio Acquisitions from 1988-1991). He was
previously an investment banker and a commercial banker.
Thomas W. Martin, age 50, has been Executive Vice President of the General
Partner since 1996. Prior to his present position, Mr. Martin was the Executive
Vice President and Chief Financial Officer of Griffin Equity Partners, Inc.
(1993-1996), Gemini Financial Holdings (as Senior Vice President from 1992-1993)
and Chancellor Corporation (as Vice President-Syndications from 1985-1992). Mr.
Martin has 17 years of senior management experience in the leasing business.
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner and its
affiliates were paid or accrued the following compensation and reimbursement for
costs and expenses for the years ended December 31, 2003, 2002 and 2001.
Entity Capacity Type of Compensation 2003 2002 2001
ICON Capital Corp. General Partner Management fees $ 595,157 975,642 1,958,755
ICON Capital Corp. General Partner Administrative expense
reimbursements 242,909 419,784 661,519
$ 838,066 $ 1,395,426 $ 2,620,274
The General Partner also has a 1% interest in the profits and distributions
of the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The Partnership is a limited partnership and therefore does not have
voting shares of stock. No person of record owns, or is known by the Partnership
to own beneficially, more than 5% of any class of securities of the Partnership.
ICON Cash Flow Partners L. P. Seven
(A Delaware Limited Partnership)
December 31, 2003
(b) As of March 30, 2004, Directors and Officers of the General Partner do
not own any equity securities of the Partnership.
(c) The General Partner owns the equity securities of the Partnership set
forth in the following table:
Title Amount Beneficially Percent
of Class Owned of Class
General Partner Represents initially a 1% and potentially a 100%
Interest 10% interest in the Partnership's income, gain
and loss deductions.
Item 13. Certain Relationships and Related Transactions
See Item 11 for a discussion of the Partnership's related party
transactions. See Note 4 to the consolidated financial statements for a
discussion of the Partnership's related party investments in joint ventures.
Item 14. Principal Accountant Fees and Services
2003 2002 Description
Audit fees $ 62,500 $ -
Audit related fees - -
Tax fees 769 - Tax compliance
All other fees - -
Total $ 63,269 $ -
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedule - None.
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the consolidated Financial Statements or Notes
thereto.
3. Exhibits - The following exhibits are incorporated herein by
reference:
(i) Form of Dealer-Manager Agreement (Incorporated by reference to
Exhibit 1.1 to Amendment No. 3 to Form S-1 Registration Statement
No. 33-94458 filed with the Securities and Exchange Commission on
November 9, 1995)
(ii) Form of Selling Dealer Agreement (Incorporated by reference to
Exhibit 1.2 to Amendment No. 3 to Form S-1 Registration Statement
No. 33-94458 filed with the Securities and Exchange Commission on
November 9, 1995)
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
(iii)Amended and Restated Agreement of Limited Partnership
(Incorporated herein by reference to Exhibit A to Amendment No. 3
to Form S-1 Registration Statement No. 33-94458 filed with the
Securities and Exchange Commission on November 9, 1995)
(iv) Loan and Security Agreement
(v) First Amendment to Loan and Security Agreement
(vi) Unconsolidated Joint Venture Financial Statements
ICON Receivables 1997-A LLC - as of and for the years ended
December 31, 2002 and 2001
ICON Receivables 1997-B LLC - as of and for the year ended
December 31, 2001
ICON/AIC Trust - as of and for the years ended December 31, 2002
and 2001
ICON Cheyenne LLC - as of and for the year ended December 31,
2002
(b) Reports on Form 8-K
None
(c) Exhibits
31.1Rule 13a-14(a)/15d-14(a) certifications
31.2Rule 13a-14(a)/15d-14(a) certifications
32.1 Certification of Chairman and Chief Executive Officer pursuant to
18 U.S.C. (Section) 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Executive Vice President and Principal
Financial and Accounting Officer pursuant to 18 U.S.C.
(Section) 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(d) Unconsolidated Joint Venture Financial Statements ICON North Sea
(Connecticut) Limited Partnership - as of and for the years ended December 31,
2003 and 2002
ICON Cash Flow Partners L.P. Seven
(A Delaware Limited Partnership)
December 31, 2003
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ICON CASH FLOW PARTNERS L.P. Seven
File No. 33-94458 (Registrant)
By its General Partner, ICON Capital Corp.
Date: March 30, 2004 /s/ Beaufort J.B. Clarke
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole General Partner of the Registrant
Date: March 30, 2004 /s/ Beaufort J.B. Clarke
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Date: March 30, 2004 /s/ Paul B. Weiss
Paul B. Weiss
President and Director
Date: March 30, 2004 /s/ Thomas W. Martin
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrant Which have not Registered Securities Pursuant to
Section 12 of the Act
No annual report or proxy material has been sent to security holders. An annual
report will be sent to the limited partners and a copy will be forwarded to the
Commission.
Exhibit 31.1
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-K
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Cash Flow Partners
L.P. Seven;
2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this annual report based on such
evaluation; and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the Corporate
Manager (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the Partnership ability to record, process, summarize and
report financial information and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting
Dated: March 30, 2004
/s/ Beaufort J.B. Clarke
- -----------------------------
Beaufort J. B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
sole General Partner of ICON Cash Flow Partners L.P. Seven
Exhibit 31.2
Principal Executive Officer Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-K
I, Thomas W. Martin, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Cash Flow Partners
L.P. Seven;
2. Based on my knowledge, this annual report does not contain any untrue
statements of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this annual report based on such
evaluation; and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the Corporate
Manager (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the Partnership ability to record, process, summarize and
report financial information and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting any corrective actions with regard
to significant deficiencies and material weaknesses.
Dated: March 30, 2004
/s/ Thomas W. Martin
- ----------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer
of the General Partner of the Registrant)
ICON Capital Corp.
sole General Partner of ICON Cash Flow Partners L.P. Seven
EXHIBIT 32.1
Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350)
I, Beaufort J.B. Clarke, Chairman and Chief Executive Officer of ICON
Capital Corp., the sole General Partner of ICON Cash Flow Partners L.P. Seven,
in connection with the Annual Report of ICON Cash Flow Partners L.P. Seven. (the
"Partnership") on Form 10-K for the year ended December 31, 2003, as filed with
the Securities and Exchange Commission on the date hereof (the "Annual Report")
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the
best of my knowledge and belief:
(1) the Annual Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) the information contained in the Annual Report fairly presents, in all
material respects, the financial condition and results of operations of the
Partnership
Dated: March 30, 2004
/s/ Beaufort J.B. Clarke
-------------------------------------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
sole General Partner of ICON Cash Flow Partners L.P. Seven
EXHIBIT 32.2
Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350)
I, Thomas W. Martin, Executive Vice President (Principal Financial and
Accounting Officer) of ICON Capital Corp., the sole General Partner of ICON Cash
Flow Partners L.P. Seven, in connection with the Annual Report of ICON Cash Flow
Partners L.P. Seven. (the "Partnership") on Form 10-K for the year ended
December 31, 2003, as filed with the Securities and Exchange Commission on the
date hereof (the "Annual Report") certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
(3) the Annual Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15
U.S.C. 78m); and
(4) the information contained in the Annual Report fairly
presents, in all material respects, the financial condition and
results of operations of the Partnership
Dated: March 30, 2004
/s/ Thomas W. Martin
-------------------------------------------------------
Thomas W. Martin
Executive Vice President (Principal
Financial and Accounting Officer)
ICON Capital Corp.
sole General Partner of ICON Cash Flow Partners L.P. Seven
North Sea (Connecticut) Limited Partnership
Financial Statements
For the Years Ended December 31, 2003 and 2002
(With Independent Auditor's Report Thereon)
INDEPENDENT AUDITOR'S REPORT
The Partners
North Sea (Connecticut) Limited Partnership
We have audited the accompanying balance sheet of North Sea (Connecticut)
Limited Partnership as of December 31, 2003 and the related statements of
operations, changes in partners' deficit and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of North Sea
(Connecticut) Limited Partnership as of December 31, 2002, were audited by other
auditors whose report dated March 18, 2003, expressed an unqualified opinion on
those statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the 2003 financial statements referred to above present fairly,
in all material respects, the financial position of North Sea (Connecticut)
Limited Partnership as of December 31, 2003, and the results of its operations
and its cash flows for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/Hays & Company LLP
March 19, 2004
New York, New York
North Sea (Connecticut) Limited Partnership
Balance Sheets
December 31, 2003 and 2002
Assets 2003 2002
Rents receivable $ 2,005,794 $ 2,119,597
Equipment subject to operating lease,
net of accumulated depreciation of $1,906,666
and $1,355,341 7,833,414 8,384,739
Total assets $ 9,839,208 $ 10,504,336
Liabilities and Partners' Deficit
Note payable, non-recourse $ 18,691,946 $ 21,862,343
Accrued interest payable 533,733 624,260
Deferred income 348,794 496,800
Total liabilities 19,574,473 22,983,403
Commitments and Contingencies
Partners' deficit
General Partner 17,746 (9,692)
Limited Partners (9,753,011) (12,469,375)
Total partners' deficit (9,735,265) (12,479,067)
Total liabilities and partners' deficit $ 9,839,208 $ 10,504,336
See accompanying notes to financial statements.
North Sea (Connecticut) Limited Partnership
Statements of Operations
For the Years Ended December 31, 2003 and 2002
2003 2002
Revenue
Rental income from operating lease $ 5,121,175 $ 5,121,175
Other income 148,006 -
Total revenue 5,269,181 5,121,175
Expenses
Interest expense 1,974,054 2,271,299
Depreciation expense 551,325 551,325
Total expenses 2,525,379 2,822,624
Net income $ 2,743,802 $ 2,298,551
See accompanying notes to financial statements.
North Sea (Connecticut) Limited Partnership
Statement of Changes in Partners' Deficit
For the Years Ended December 31, 2002 and 2003
Class A Class B Class C
General Limited Limited Limited
Partner Partners Partners Partner Total
Balance at January 1, 2002 $ (27,709) $ (8,963,917) $ (5,696,283) $ 407,091 $ (14,280,818)
Distribution to partners (4,968) - (243,432) (248,400) (496,800)
Net income 22,985 1,126,290 - 1,149,276 2,298,551
Balance at December 31, 2002 (9,692) (7,837,627) (5,939,715) 1,307,967 (12,479,067)
Net income 27,438 1,344,463 - 1,371,901 2,743,802
Balance at December 31, 2003 $ 17,746 $ (6,493,164) $ (5,939,715)$ 2,679,868 $ (9,735,265)
See accompanying notes to financial statements.
North Sea (Connecticut) Limited Partnership
Statements of Cash Flows
For the Years Ended December 31, 2003 and 2002
2003 2002
Cash flows from operating activities:
Net income $ 2,743,802 $ 2,298,551
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 551,325 551,325
Rental income paid directly to lender by lessee (5,234,978) (5,234,978)
Interest on non-recourse financing
paid directly to lender by lessee 2,064,581 2,353,574
Rents receivable 113,803 113,804
Accrued interest payable (90,527) (82,276)
Deferred income (148,006) 496,800
Total adjustments (2,743,802) (1,801,751)
Net cash provided by operating activities - 496,800
Cash flows from financing activities:
Distribution to partners - (496,800)
Net increase in cash - -
Cash at the beginning of the year - -
Cash at the end of the year $ - $ -
Supplemental Disclosures of Cash Flow Information
Interest expense of $1,974,054 and $2,271,299 for the years ended December
31, 2003 and 2002 respectively, consisted of interest expense on non-recourse
financing accrued or paid directly to the lender by the lessee.
For the years ended December 31, 2003 and 2002 non-cash investing and
financing activities included the following: 2003 2002
Rental income paid directly to lender by lessee $ 5,234,978 $5,234,978
Principal and interest on non-recourse financing
paid directly to lender by lessee (5,234,978) (5,234,978)
$ - $ -
See accompanying notes to financial statements.
North Sea (Connecticut) Limited Partnership
Notes to Financial Statements
For the Years Ended December 31, 2003 and 2002
1. Organization
North Sea (Connecticut) Limited Partnership (the "Partnership") was formed
in 1994 when the General Partner contributed cash of $27,750 and the Class A
limited partners contributed a total of $2,747,250 in cash. Subsequently, the
Partnership admitted Class B and Class C Limited Partners. In 1994, the
Partnership acquired an option for a cost of $2,905,000 to purchase a mobile
drilling rig and related property. In 2000 the Partnership exercised its option
to purchase the mobile oil rig and related property for $6,650,000; paid legal
fees of $185,000 and entered into an operating lease with the user of the rig.
2. Significant Accounting Policies
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the dates of the financial statements, and
revenues and expenses during the reporting periods. Significant estimates
include the allowance for bad debts and unguaranteed residual values. Management
believes that the estimates and assumptions utilized in preparing its financial
statements are reasonable and prudent. In addition, management is required to
disclose contingent assets and contingent liabilities. Actual results could
differ from those estimates.
Leases and Revenue Recognition - The Partnership accounts for owned
equipment leased to third parties as either finance leases or operating leases,
as appropriate. Initial direct costs are capitalized and amortized on the
straight-line method over the lease terms.
For finance leases, the Partnership records, at the inception of the lease,
the total minimum lease payments receivable, the estimated unguaranteed residual
values, the initial direct costs related to the leases and the related unearned
income. Unearned income represents the difference between the sum of the minimum
lease payments receivable plus the estimated unguaranteed residual minus the
cost of the leased equipment. Unearned income is recognized as finance income
over the terms of the related leases using the interest method.
For operating leases, equipment is recorded at cost and is depreciated on
the straight-line method over the lease term to its estimated fair market values
at lease terminations. Related lease rentals are recognized on the straight-line
method over the lease terms. Billed and uncollected operating lease receivables
are included in other assets.
Impairment - Residual values of the Partnership's asset portfolio are
periodically reviewed to determine whether events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. The events
or changes in circumstances which generally indicate that the residual value of
an asset may be impaired are (i) the estimated fair value of the underlying
equipment is less than the Partnership's carrying value or (ii) the lessee is
experiencing financial difficulties and it does not appear likely that the
estimated proceeds from disposition of the asset will be sufficient to satisfy
the remaining obligation to the non-recourse lender and the Partnership's
residual position. Generally in the latter situation, the residual position
relates to equipment subject to third party non-recourse notes payable where the
lessee remits their rental payments directly to the lender and the Partnership
does not recover its residual until the non-recourse note obligation is repaid
in full.
North Sea (Connecticut) Limited Partnership
Notes to Financial Statements
For the Years Ended December 31, 2003 and 2002
An impairment loss is measured and recognized only if the estimated
undiscounted future cash flows of the asset are less than their net book value.
The estimated undiscounted future cash flows are the sum of the estimated
residual value of the asset at the end of the asset's expected holding period
and estimates of undiscounted future rents. The residual value assumes, among
other things, that the asset is utilized normally in an open, unrestricted and
stable market. Short-term fluctuations in the market place are disregarded and
it is assumed that there is no necessity to dispose of the asset quickly.
Impairment is measured as the difference between the fair value of the assets
and its carrying value on the measurement date.
New Accounting Pronouncements - In April 2003, the FASB issued SFAS No.
149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. The Statement requires
that contracts with comparable characteristics be accounted for similarly and
clarifies when a derivative contains a financing component that warrants special
reporting in the statement of cash flows. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003, except in certain
circumstances, and for hedging relationships designated after June 30, 2003. The
adoption of this standard did not have a material effect on the Partnership's
financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how an issuer classifies and measures in its
statements of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This Statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. For
nonpublic entities, the effective date of the provisions of SFAS No. 150 that
relate to mandatorily redeemable financial instruments has been deferred until
fiscal years that begin after December 31, 2003. The adoption of this standard
is not expected to have a material effect on the Partnership's financial
position or results of operations.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51. In December 2003, the FASB issued a
revision to FIN 46, or Revised Interpretation, to clarify some of the provisions
of FIN 46. FIN 46 provides guidance on how to identify a variable interest
entity, or VIE, and determine when the assets, liabilities, non-controlling
interests, and results of operations of a VIE must be included in a
Partnership's consolidated financial statements. A Partnership that holds
variable interests in an entity is required to consolidate the entity if the
Partnership's interest in the VIE is such that the Partnership will absorb a
majority of the VIE's expected losses and/or receive a majority of the entity's
expected residual returns, if any. VIEs created after January 31, 2003, but
prior to January 1, 2004, may be accounted for either based on the original
interpretation or the Revised Interpretations. However, the Revised
Interpretations must be applied no later than the first quarter of fiscal year
2004. VIEs created after January 1, 2004 must be accounted for under the Revised
Interpretations. There has been no material impact to the Partnership's
financial statements and there is no expected impact from the adoption of the
deferred provisions in the first quarter of fiscal year 2004.
North Sea (Connecticut) Limited Partnership
Notes to Financial Statements
For the Years Ended December 31, 2003 and 2002
The Partnership does not believe that any other recently issued, but not
yet effective, accounting standards will have a material effect on the
Partnership's financial position or results of operations.
Income Taxes - No provision for income taxes has been made as the liability
for such taxes is that of each of the partners rather than the Partnership. The
Partnership's income tax returns are subject to examination by the federal and
state taxing authorities, and changes, if any, could adjust the individual
income taxes of the partners.
3. Operating Lease - Minimum Lease Rentals
The lessee is obligated to pay bi-annual lease payments of $2,617,489 until
March 15, 2008.
Non-cancelable minimum annual amounts due from the operating lease are as
follows:
Year ending
December 31,
2004 $ 5,234,978
2005 5,234,978
2006 5,234,978
2007 5,234,978
2008 2,617,489
$ 23,557,401
4. Note Payable
The note payable, non-recourse, accrues interest at an annual rate of 9.79
% and matures on March 15, 2008 as follows:
Year ending
December 31,
2004 $ 3,488,375
2005 3,838,245
2006 4,223,206
2007 4,646,778
2008 2,495,342
$ 18,691,946
The lessee pays semi-annual rent directly to the lender to repay the note
payable. The lender has a security interest in the lease, the mobile oil rig and
related property and the scheduled lease payments due under the lease.
5. Deferred Income
In December of 2002, the Partnership received a facilitation fee of
$496,800 from the assignment of the outstanding note payable (see note 4). The
note payable was assigned from the original lender to the new lender resulting
in no change to the existing structure or terms of the note. The Partnership
recorded the facilitation fee as deferred income and is recognizing the income
ratably over the remaining life of the note, as follows:
North Sea (Connecticut) Limited Partnership
Notes to Financial Statements
For the Years Ended December 31, 2003 and 2002
Year ending
December 31,
2004 $ 125,210
2005 100,129
2006 72,532
2007 42,167
2008 8,756
$ 348,794
6. Partners Equity and Distributions
Allocation of Net Income and Loss
(a) Net income is allocated among the Partners as follows:
(1) First, to the extent net loss had been allocated to the Class B
Limited Partners or the General Partner in any prior year, as defined;
net income equal to the aggregate amount of such unrecovered net loss
shall be allocated first to the General Partner and then to the Class
B Limited Partners; and
(2) Any remaining net income shall be allocated to the General Partner,
the Class A Limited Partners and the Class C Limited Partner in
proportion to their percentage interests of 1%, 49% and 50%,
respectively.
Therehave been no net losses allocated to Class B Limited Partners or
the General Partner prior to 2003.
(b) Net loss shall be allocated among the Partners as follows:
(1) Net loss for each year is allocated among the General Partner, the
Class A Limited Partners and the Class C Limited Partner in proportion
to their percentage interests of 1%, 49% and 50%, respectively, and
(2) The net loss allocated to any Partner with respect to any year shall
not exceed the maximum amount of net loss that can be so allocated
without causing such Partner to have a capital account deficit at the
end of such fiscal year. The net loss as defined is then allocated to
the Class B Limited Partners until their capital accounts have been
reduced to zero, and thereafter to the General Partner.
Distributions
The Partnership shall make distributions to the Partners, as follows:
(a) Distributions of available cash, as defined, shall be distributed to
the General Partner, the Class B Limited Partners and the Class C
Limited Partner, as and when determined by the General Partner, in
accordance with their percentage interests of 1%, 49% and 50%
respectively. Class A Partners are not entitled to distributions.
(b) Upon liquidation each of the aforementioned Partners are entitled to
their percentage distribution interest respectively.
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment")
is made as of April 9, 2003 by and between ICON Cash Flow Partners L.P.
Seven, a Delaware limited partnership ("Borrower 1"), ICON Income Fund
Eight A L.P., a Delaware limited partnership ("Borrower 2"), ICON Income
Fund Eight B L.P., a Delaware limited partnership ("Borrower 3"), and ICON
Income Fund Nine, LLC, a Delaware limited liability company ("Borrower 4"
and together with Borrower 1, Borrower 2 and Borrower 3, "Borrower"), on
the one hand, and Comerica Bank-California, a California banking
corporation ("Lender"), on the other hand, with respect to the Loan and
Security Agreement, dated as of May 30, 2002, and the First Amendment to
Loan and Security Agreement, dated as of December 1, 2002, entered into by
Borrower 1, Borrower 2, Borrower 3, Borrower 4 and Lender (as amended and
modified through but excluding the date hereof, the "Agreement")."
RECITALS
WHEREAS, Borrower and Lender entered into the Agreement;
WHEREAS, Borrower 1, Borrower 2 and Borrower 3 violated a covenant in
the Agreement by each failing to earn a net profit after taxes of at least
$1.00 for the fiscal year ending December 31, 2002, as required by Section
7.4 of the Agreement ("Section 7.4 Profitability Covenant");
WHEREAS, Borrower has requested that Lender waive the violation of the
Section 7.4 Profitability Covenant described in the preceding recital for
the fiscal year ending December 31, 2002 only;
WHEREAS, Borrower represent and warrant that, except for the violation
of the Section 7.4 Profitability Covenant for the fiscal year ending
December 31, 2002, described above, they each are in compliance with all
terms, covenants and conditions of the Agreement and all representations
and warranties in the Agreement are true and correct;
WHEREAS, Borrower represent and warrant that, upon execution of this
Amendment, they will each be in compliance with all terms, covenants
and conditions of the Agreement, as amended by this Amendment, and all
representations and warranties made by them in the Agreement, as
amended by this Amendment, are and will be true and correct;
WHEREAS, a deposit account in the name of Borrower 4 is maintained at
Lender, in the name of Borrower 4, and Lender has a perfected security
interest in that deposit account and the proceeds thereof pursuant to
the Agreement, which account has on deposit the sum of $9,000,000.00
or more;
WHEREAS, Lender is willing to agree to Borrower's request, on the
terms and conditions set forth below;
NOW, THEREFORE, IT IS AGREED THAT:
1. Definitions. Unless otherwise indicated, words and terms which are
defined in the Agreement shall have the same meaning where used herein.
2. Amendments. A new Section 5.12.3 is added to Agreement, to read as
follows:
5.12.3 Maintain on deposit with Lender in Deposit Account 1892187368,
or such other deposit account or accounts as Borrower and Lender may agree,
cash in an amount equal to or greater than the outstanding principal
balance of the Loans. Borrower agree that Lender may refuse to allow any
withdrawal from such deposit account or accounts if the effect of doing so
would be to reduce the cash balance to an amount less than the outstanding
principal balance of the Loans. In addition, Borrower may not obtain a
Revolving Loan if the effect of doing so would be to increase the
outstanding principal balance of the Loans to an amount greater than the
amount of cash in the above-described deposit account or accounts.
3. Continued Validity of Agreement. Except as amended by this
Amendment, the Agreement and all security agreements, guaranties, and other
documents executed by Borrower with or in favor of Lender (collectively
referred to as "Loan Documents"), shall continue in full force and effect
as originally constituted and are ratified and affirmed by the parties
hereto. Each reference in the Agreement or in the other Loan Documents to
the Agreement shall mean the Agreement as amended hereby unless the context
otherwise requires. This Amendment and the Agreement shall be read as one
document. Without limiting the generality of the foregoing, nothing in this
Amendment entitles Borrower to receive advances of any funds, or extends
the maturity date for repayment, beyond that expressly set forth in the
Agreement.
4. Compliance with Loan Documents. Borrower 1, Borrower 2, Borrower 3
and Borrower 4 each represents and warrants to Lender as follows: Except as
stated in the Recitals to this Amendment: (a) as of the date hereof, each
Borrower has complied, and is in compliance, with all of the terms,
covenants and conditions of the Loan Agreement and the other Loan Documents
applicable to it; (b) as of the date hereof, there exists no Event of
Default under the Loan Agreement or any of the other Loan Documents or an
event which would constitute an Event of Default upon the lapse of time or
upon the giving of notice and the lapse of time specified therein; and (c)
the representations and warranties of each Borrower in the Loan Agreement
and the other Loan Documents are true and with the same effect as though
such representations and warranties had been made by such Borrower as of
the date hereof Each Borrower further represents and warrants that, upon
this Amendment becoming effective, each Borrower will be in compliance with
all of the terms, covenants, and conditions of the Loan Agreement and
the other Loan Documents, and all representations and warranties will
be true.
5. Authorization Each party hereto represents to the other that the
individual executing this Amendment on its behalf is the duly
appointed signatory of such party and that such individual is
authorized to execute this Amendment by or on behalf of such party and
to take all action required by the terms of this Amendment.
6. When Amendment is Effective. This Amendment shall be deemed binding
and effective as of April 9, 2003 when this Amendment is executed by
Borrower 1, Borrower 2, Borrower 3, Borrower 4 and Lender.
7. Captions. Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire
Amendment.
8. No Novation. This Amendment 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 Agreement shall remain in
full force and effect.
9. Severability. Each provision of this Amendment shall be severable from
every other provision of this Amendment for the purpose of determining
the legal enforceability of any specific provision.
10. Entire Agreement. This Amendment constitutes the entire agreement by
and between Borrower and Banks with respect to the subject matter
hereof and supersedes all prior and contemporaneous negotiations,
communications, discussions and agreements concerning such subject
matter.
11. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
ICON CASH FLOW PARTNERS L.P.
SEVEN, a Delaware Limited Partnership
By ICON Capital Corp., its general partner
By:____________________________
Paul B. Weiss, President
ICON INCOME FUND EIGHT A L.P., a Delaware Limited Partnership By ICON
Capital Corp., its general partner
ICON INCOME FUND NINE, LLC, a Delaware Limited Liability Company
By: ICON Capital Corp., its manager
By:_______________________________
Paul B. Weiss, President
Address for Notices:
ICON INCOME FUND NINE, LLC
Attention: General Counsel
100 5thAvenue, 10th Floor
New York, New York 10011
Facsimile No.: (212) 418-4739
COMERICA BANK-CALIFORNIA, a California banking corporation
By:______________________________
John Esposito, Vice President
By:_________________________
Paul B. Weiss, President
ICON INCOME FUND EIGHT B L.P.,
a Delaware Limited Partnership;;
By ICON Capital corp., its general partner
By:__________________________
Paul B. Weiss, President
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is
made as of July 31, 2003 by and between ICON Cash Flow Partners L.P. Seven, a
Delaware limited partnership ("Borrower 1"), ICON Income Fund Eight A L.P., a
Delaware limited partnership ("Borrower 2"), ICON Income Fund Eight B L.P., a
Delaware limited partnership ("Borrower 3"), and ICON Income Fund Nine, LLC, a
Delaware limited liability company ("Borrower 4" and together with Borrower 1,
Borrower 2 and Borrower 3, "Borrower" or "Borrowers"), on the one hand, and
Comerica Bank, successor by merger to Comerica Bank-California ("Lender"), on
the other hand, with respect to the Loan and Security Agreement, dated as of May
30, 2002, the First Amendment to Loan and Security Agreement, dated as of
December 1, 2002, entered into by Borrower 1, Borrower 2, Borrower 3, and
Comerica Bank-California, the Second Amendment to Loan and Security Agreement,
dated as of April 9, 2003, entered into by Borrower 1, Borrower 2, Borrower 3,
Borrower 4 and Comerica Bank-California, and the letter agreement dated May 31,
2003 entered into by Borrower 1, Borrower 2, Borrower 3, Borrower 4 and Comerica
Bank-California (as amended and modified through but excluding the date hereof,
the "Agreement")."
RECITALS
WHEREAS, Borrower and Lender entered into the Agreement;
WHEREAS, the Revolving Loan Maturity Date under the Agreement is July 31,
2003;
WHEREAS, Borrower has requested that Lender extend the Revolving Loan
Maturity Date to May 31, 2004;
WHEREAS, Lender is willing to agree to Borrower's request, on the terms and
conditions set forth below;
NOW, THEREFORE, IT IS AGREED THAT:
1. Definitions. Unless otherwise indicated, words and terms which are
defined in the Agreement shall have the same meaning where used herein.
2. Amendments.
(a) The definition of "Borrowing Base" in the Agreement is amended to read
as follows:
Borrowing Base - means 80% of the Present Value of the Eligible Borrowing
Base Contracts, plus Pledged Cash.
(b) A new definition of "Cash Equivalents" is added to the Agreement, to
read as follows:
Cash Equivalents - the sum outstanding, at any one time, of (i) all cash
(in United States dollars) owned by Borrower at such time plus (ii) the fair
market value of all cash equivalents and short term investments (as those terms
are defined in GAAP) owned by Borrower at such time, in each case excluding
Pledged Cash.
(c) The definition of "Eligible Borrowing Base Contract" in the Agreement
is amended by adding the following subsections:
(l) At the time Borrower seeks to have Lender make a Revolving Loan based
on such contract, the Lessee or Debtor, as the case may be, must have a Standard
& Poor's bond rating of BBB or better or a Risk Rating of 3 or better on
Lender's internal risk rating system;
(m) Lender, in its sole and absolute discretion, determines that it is
willing to make a Revolving Loan based on such contract;
(n) Lender shall have received a written acknowledgment, in form and
substance satisfactory to Lender, from the Debtor or Lessee, as the case may be
(and from the lender or lessor if the contract is an Indirect Loan Contract or
an Indirect Lease) authenticating the contract, identifying the existing parties
to the contract, stating that the contract is in full force and effect, stating
that no default exists under the contract, stating that no prepayments on the
contract have been made (or identifying such prepayments if any have been made),
stating that the acknowledging party has not received any notice that the
lender's/lessor's interest in the contract has been assigned or pledged to any
other person, and providing such other information as Lender may request. As to
contracts based on which Lender made a Revolving Loan prior to July 31, 2003,
such written acknowledgment must be received by Lender within 45 days after
Lender's demand to Borrower for such an acknowledgment; and
(o) Payments made on contracts of the type described in Sections 2.11(a)
and 2.11(c) of this Agreement on or after October 1, 2003 are received in the
Lockbox; and payments paid to a Borrower with respect to contracts of the type
described in Section 2.11(b) of this Agreement on or after October 1, 2003 are
received in the Lockbox.
(d) A new definition is added to the Agreement, to read as follows:
Lockbox - has the meaning set forth in Section 2.11(a) hereof.
(e) A new definition is added to the Agreement, to read as follows:
Pledged Cash - Cash owned by Borrower maintained in a deposit account or
deposit accounts with Lender in the name of one or more Borrowers, in which
Lender has a perfected first priority security interest to secure payment and
performance of the Obligations, and which Borrower has agreed in writing may not
be withdrawn by Borrower.
(f) The definition of "Revolving Loan Maturity Date" in the Agreement is
amended to read as follows:
Revolving Loan Maturity Date - May 31, 2004.
(g) Section 1.3.1 of the Agreement is amended to read as follows:
1.31 Facility Fee. A Facility Fee in the amount of $87,500.00 per year,
payable in arrears in installments of $21,875.00 per quarter payable on June 30,
September 30, December 31, and March 31 of each year through the Revolving Loan
Maturity Date or, if an extension of time beyond the Revolving Loan Maturity
Date for advances and repayment is provided, through the end of the extension
period.
(h) A new Section 2.11 is added to the Agreement to read as follows:
2.11 Lockbox.
(a) On all Loan Contracts and Leases based on which Lender has made a Loan,
Borrower shall notify all Debtors and Lessees in writing, by means of a letter
in the form attached hereto as Exhibit 5, to remit all payments to a post office
box designated by Lender, to which only Lender shall have access ("Lockbox"),
and notify such Debtors and Lessees that such designation may not be changed
without the written consent of Comerica Bank.
(b) On all Indirect Loan Contracts and Indirect Leases based on which
Lender has made a Loan, when the lender or lessor is not an Affiliate of any
Borrower, Borrower shall notify the applicable lender or lessor in writing, by
means of a letter in the form attached hereto as Exhibit 6, to remit all
payments payable to such Borrower to the Lockbox, and notify such lender or
lessor that such designation may not be changed without the written consent of
Comerica Bank. (c) On all Indirect Loan Contracts and Indirect Leases based on
which Lender has made a Loan, when the lender or lessor is an Affiliate of any
Borrower, Borrower shall cause such lender or lessor to notify the Debtor and
Lessee in writing, by means of a letter in the form attached hereto as Exhibit
7, to remit all payments to the Lockbox, and notify such Debtors and Lessees
that such designation may not be changed without the written consent of Comerica
Bank. Borrower shall also cause such lender or lessor to execute a power of
attorney in form and substance satisfactory to Lender authorizing Lender to
endorse and negotiate all items received in the Lockbox and collect all proceeds
thereof, and shall obtain the written consent of all Persons that have a direct
or indirect interest in the lender's or lessor's interest in the contract to
this procedure. (d) Borrower shall provide the notices described in subsections
(a), (b) and (c) by a means requiring a written receipt and promptly deliver to
Lender copies of the notices and proof of receipt by each of the recipients. For
Loan Contracts and Leases based on which Lender has made a Loan prior to July
31, 2003, such notices must be sent by Borrower no later than three Business
Days after the execution of the Third Amendment to the Agreement. For Loan
Contracts and Leases based on which Lender makes a Loan on or after July 31,
2003, such notices must be sent within three Business Days after the Loan is
made. All invoices and other documents sent by Borrower to any person to whom
the notices described in subsections (a), (b) and (c) are to be sent, stating
where the recipient is to remit payment, shall identify the Lockbox as the place
to remit payment. (e) For the Loan Contracts and Leases described in subsections
(a) and (b), as long as no Event of Default has occurred, Lender shall deliver
the items received in the Lockbox to Borrower. For the Loan Contracts and Leases
described in subsections (a) and (b), effective upon the occurrence of an Event
of Default, Lender may retain items received in the Lockbox and apply them, and
the proceeds thereof, to the Obligations. (f) For the Loan Contracts and Leases
described in subsection (c), as long as no Event of Default has occurred, Lender
shall deliver the items received in the Lockbox to the applicable Affiliate
lender or lessor. For the Loan Contracts and Leases described in subsection (c),
effective upon the occurrence of an Event of Default, Lender may endorse and
negotiate all items received in the Lockbox and collect all proceeds thereof,
apply to the Obligations any portion thereof to which any Borrower is entitled,
and remit the excess to the applicable Affiliate lender or lessor on such Loan
Contract or Lease.
(i) Section 5.12.3 of the Agreement is deleted.
(j) Section 5.14 of the Agreement is amended to read as follows:
5.14 Audits. Permit Lender or representatives of Lender to conduct audits
of Borrower's books and records relating to the Accounts, Inventory, Leases,
Loan Contracts and other Collateral and make extracts therefrom no less
frequently than annually (or at any time and without notice required if an Event
of Default has occurred and is continuing) with results satisfactory to Lender,
provided that Lender shall use its best efforts to not interfere with the
conduct of Borrower's business, and arrange for verification of the Accounts
directly with the account debtors obligated thereon or otherwise, of the Leases
directly with the Lessees, and of the Loan Contracts directly with the Debtors,
all under reasonable procedures acceptable to Lender and at Borrower's sole
expense. Borrower shall pay all reasonable expenses incurred by Lender with
respect to such audits.
(k) Section 6.9 of the Agreement is amended by adding the following
sentence at the end: "Notwithstanding anything to the contrary indicated above,
Borrower shall not without Lender's prior written consent, after the end of a
particular Borrower's reinvestment period, pay distributions or dividends to
members, partners or shareholders of such particular Borrower, or redeem or
retire any interest of any partner, member or shareholder of such particular
Borrower if any amount of principal, interest or late charges remains
outstanding on Revolving Loans made to such particular Borrower. In addition, a
Borrower may not use proceeds received from the sale or other disposition of
assets after the end of its reinvestment period to purchase Leases, Loan
Contracts or other assets."
(l) Section 7.1 of the Agreement is amended to read as follows:
7.1 Aggregate Tangible Net Worth. All Borrowers, in the aggregate, shall
maintain, as of the last day of the specified quarter, a Tangible Net Worth of
not less than $155,000,000.
(m) Section 7.3 of the Agreement is deleted and replaced by the following:
7.3 Total Liabilities to Tangible Net Worth. All Borrowers, in the
aggregate, shall maintain, as of the last day of each quarter, a ratio of total
liabilities to Tangible Net Worth of not greater than 3.00 to 1.00.
(n) Section 7.4 of the Agreement is deleted and replaced by the following:
7.4 Minimum Cash Balance. Borrower shall ensure that at all times the sum
of (a) the fair market value of Cash Equivalents owned by Borrower plus (b)
Borrower's Unused Loan Capacity totals at least $7,500,000. For purposes of this
section, "Borrower's Unused Loan Capacity" at any point in time equals the
amount by which the lesser of (i) the Borrowing Base or (ii) the Maximum
Revolving Amount exceeds the Obligations, as reflected to Lender's reasonable
satisfaction in the monthly report described in the next sentence. Borrower
shall provide to Lender as part of its monthly Borrowing Base/Eligible Borrowing
Base Contract Aging Report within 15 days of each month end, information
sufficient to show the amount of Cash Equivalents owned by it and its Unused
Loan Capacity.
(o) A new Section 10.19 is added to the Agreement, to read as follows:
10.19 Waivers and Consents. Except as otherwise expressly provided in this
Agreement, each Borrower waives notice of any Loans, notice of the occurrence of
any default, Event of Default, or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by Lender under or
in respect of any of the Obligations, any requirement of diligence or to
mitigate damages and, generally, to the extent permitted by applicable law, all
demands, notices, and other formalities of every kind in connection with this
Agreement (except as otherwise provided in this Agreement). Each Borrower hereby
assents to, and waives notice of, any extension or postponement of the time for
the payment of any of the Obligations, the acceptance of any payment of any of
the Obligations, the acceptance of any partial payment thereon, any waiver,
consent or other action or acquiescence by Lender at any time or times in
respect of any default by any Borrower in the performance or satisfaction of any
term, covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Lender in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any Borrower. Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay
in acting or failure to act on the part of Lender with respect to the failure by
any Borrower to comply with any of its respective Obligations, including,
without limitation, any failure strictly or diligently to assert any right or to
pursue any remedy or to comply fully with applicable laws or regulations
thereunder, which might, but for the provisions of this section, afford grounds
for terminating, discharging or relieving any Borrower, in whole or in part,
from any of its Obligations, it being the intention of each Borrower that, so
long as any of the Obligations hereunder remain unsatisfied, the Obligations of
such Borrower shall not be discharged except by performance and then only to the
extent of such performance. The Obligations of each Borrower shall not be
diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with respect to
any Borrower or Lender. Each Borrower represents and warrants that it is
currently informed of the financial condition of all Borrowers and of all other
circumstances which a diligent inquiry would reveal and which bear upon the risk
of nonpayment of the Obligations, and will continue to keep so informed. Each
Borrower waives all rights and defenses arising out of an election of remedies
by Lender.
3. Continued Validity of Agreement. Except as amended by this Amendment,
the Agreement and all security agreements, guaranties, and other documents
executed by Borrower with or in favor of Lender (collectively referred to as
"Loan Documents"), shall continue in full force and effect as originally
constituted and are ratified and affirmed by the parties hereto. Each reference
in the Agreement or in the other Loan Documents to the Agreement shall mean the
Agreement as amended hereby unless the context otherwise requires. This
Amendment and the Agreement shall be read as one document. Without limiting the
generality of the foregoing, nothing in this Amendment entitles Borrower to
receive advances of any funds, or extends the maturity date for repayment,
beyond that expressly set forth in the Agreement.
4. Compliance with Loan Documents. Borrower 1, Borrower 2, Borrower 3 and
Borrower 4 each represents and warrants to Lender as follows: (a) as of the date
hereof, each Borrower has complied, and is in compliance, with all of the terms,
covenants and conditions of the Loan Agreement and the other Loan Documents
applicable to it; (b) as of the date hereof, there exists no Event of Default
under the Loan Agreement or any of the other Loan Documents or an event which
would constitute an Event of Default upon the lapse of time or upon the giving
of notice and the lapse of time specified therein; and (c) the representations
and warranties of each Borrower in the Loan Agreement and the other Loan
Documents are true and with the same effect as though such representations and
warranties had been made by such Borrower as of the date hereof. Each Borrower
further represents and warrants that, upon this Amendment becoming effective,
each Borrower will be in compliance with all of the terms, covenants, and
conditions of the Loan Agreement and the other Loan Documents, and all
representations and warranties will be true.
5. Authorization. Each party hereto represents to the other that the
individual executing this Amendment on its behalf is the duly appointed
signatory of such party and that such individual is authorized to execute this
Amendment by or on behalf of such party and to take all action required by the
terms of this Amendment.
6. When Amendment is Effective. This Amendment shall be deemed binding and
effective as of July 31, 2003 when this Amendment is executed by Borrower 1,
Borrower 2, Borrower 3, Borrower 4 and Lender.
7. Captions. Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Amendment.
8. No Novation. This Amendment 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 Agreement shall remain in full force and effect.
9. Severability. Each provision of this Amendment shall be severable from
every other provision of this Amendment for the purpose of determining the legal
enforceability of any specific provision.
10. Entire Agreement. This Amendment constitutes the entire agreement by
and between Borrower and Banks with respect to the subject matter hereof and
supersedes all prior and contemporaneous negotiations, communications,
discussions and agreements
concerning such subject matter.
11. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
ICON CASH FLOW PARTNERS L.P. ICON INCOME FUND NINE, LLC,
SEVEN, a Delaware Limited Partnership a Delaware Limited Liability Company
By ICON Capital Corp., its general partner By: ICON Capital Corp., its manager
By:___________________________ By:__________________________
Paul B. Weiss, President Paul B. Weiss, President
ICON INCOME FUND EIGHT A L.P., COMERICA BANK, SUCCESSOR BY MERGER
a Delaware Limited Partnership TO COMERICA BANK-CALIFORNIA
By ICON Capital Corp., its general partner
By: ___________________________
By:_____________________________
Paul B. Weiss, President
ICON INCOME FUND EIGHT B L.P.,
a Delaware Limited Partnership
By ICON Capital Corp., its general partner
By:______________________________
Paul B. Weiss, President
Exhibit 5
Notice to Debtor/Lessee
[Stationery of Borrower]
[Date]
[Name and Address
of Debtor/Lessee]
Re: [Identify Loan Contract/Lease]
Gentlemen:
The undersigned is the [lender/lessor] on the above contract. This letter
is to inform you that the undersigned has assigned to Comerica Bank the right to
receive payments hereafter made on that contract. Accordingly, all payments you
make to the undersigned on the above contract should hereafter be made payable
to [Name of applicable Borrower] and sent to Post Office Box
________________________[Address]. If you do not remit your payments in that
manner and send the payments to that address, the payments may not discharge
your obligation under that contract.
Thank you for your cooperation in this matter. This instruction is
irrevocable and may not be changed without the written consent of Comerica Bank.
This letter does not, however, change the identity of the persons to whom you
are otherwise obligated to give notices with respect to the above contract.
Yours truly,
[SIGNATURE BLOCK FOR
APPLICABLE BORROWER]
Cc: Comerica Bank
Exhibit 6
Notice to Non-Affiliate Lender/Lessor
on Indirect Loan Contracts and Indirect Leases
[Stationery of Borrower]
[Date]
[Name and Address
of Non-Affiliate
Lender/Lessee]
Re: [Identify Applicable Indirect Loan Contract/Indirect Lease]
Gentlemen:
The undersigned is one of the [partners/members/beneficiaries]of [name of
Addressee]. [Name of Addressee] is the [lender/lessor] under the above contract.
This letter is to notify you that the undersigned has assigned to Comerica Bank
the right to receive payments hereafter payable by you to the undersigned in
connection with that contract. Accordingly, all payments you make to the
undersigned in connection with that contract should hereafter be made payable to
[Name of applicable Borrower] and sent to Post Office Box ____________[Address].
If you do not remit your payments in that manner and send the payments to that
address, the payments may not discharge your obligation.
Thank you for your cooperation in this matter. This instruction is
irrevocable and may not be changed without the written consent of Comerica Bank.
This letter does not, however, change the identity of the persons to whom you
are otherwise obligated to give notices with respect to the above contract.
Yours truly,
[SIGNATURE BLOCK FOR
APPLICABLE BORROWER]
Cc: Comerica Bank
Exhibit 7
Notice from Affiliate Lender/Lessor on Indirect Loan Contracts and Indirect
Leases
[Stationery of Affiliate Lender/Lessor]
[Date]
[Name and Address
of Debtor/Lessee]
Re: [Identify Loan Contract/Lease]
Gentlemen:
The undersigned is the [lender/lessor] on the above contract. This letter
is to inform you that the undersigned has assigned to Comerica Bank the right to
receive payments hereafter made on that contract. Accordingly, all payments you
make to the undersigned on the above contract should hereafter be made to [Name
of Affiliate] and sent to Post Office Box ______________ [Address]. If you do
not remit your payment in that manner and send the payments to that address, the
payment may not discharge your obligation under that contract.
Thank you for your cooperation in this matter. This instruction is
irrevocable and may not be changed without the written consent of Comerica Bank.
This letter does not, however, change the identity of the persons to whom you
are otherwise obligated to give notices with respect to the above contract.
Yours truly,
[SIGNATURE BLOCK
FOR AFFILIATE]
Cc: Comerica Bank
FOURTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is
made as of November 3, 2003 by and between ICON Cash Flow Partners L.P. Seven, a
Delaware limited partnership ("Borrower 1"), ICON Income Fund Eight A L.P., a
Delaware limited partnership ("Borrower 2"), ICON Income Fund Eight B L.P., a
Delaware limited partnership ("Borrower 3"), and ICON Income Fund Nine, LLC, a
Delaware limited liability company ("Borrower 4" and together with Borrower 1,
Borrower 2 and Borrower 3, "Borrower" or "Borrowers"), on the one hand, and
Comerica Bank, successor by merger to Comerica Bank-California ("Lender"), on
the other hand, with respect to the Loan and Security Agreement, dated as of May
30, 2002, the First Amendment to Loan and Security Agreement, dated as of
December 1, 2002, entered into by Borrower 1, Borrower 2, Borrower 3, and
Comerica Bank-California, the Second Amendment to Loan and Security Agreement,
dated as of April 9, 2003, entered into by Borrower 1, Borrower 2, Borrower 3,
Borrower 4 and Comerica Bank-California, the letter agreement dated May 31, 2003
entered into by Borrower 1, Borrower 2, Borrower 3, Borrower 4 and Comerica
Bank-California, and the Third Amendment to Loan and Security Agreement dated as
of July 31, 2003, entered into by Borrower 1, Borrower 2, Borrower 3, Borrower 4
and Comerica Bank (as amended and modified through but excluding the date
hereof, the "Agreement")."
RECITALS
WHEREAS, Borrower and Lender entered into the Agreement;
WHEREAS, the Revolving Loan Maturity Date under the Agreement is May 31,
2004;
WHEREAS, Borrower has requested that Lender extend the Revolving Loan
Maturity Date to December 31, 2004 and make certain other changes in the
Agreement;
WHEREAS, Lender is willing to agree to Borrower's request, on the terms and
conditions set forth below;
NOW, THEREFORE, IT IS AGREED THAT:
1. Definitions. Unless otherwise indicated, words and terms which are
defined in the Agreement shall have the same meaning where used herein.
3. Amendments.
(a) The definition of "Revolving Loan Maturity Date" in the Agreement is
amended to read as follows:
Revolving Loan Maturity Date - December 31, 2004.
(b) Section 1.11 of the Agreement is deleted.
(c) Section 3.1.5 of the Agreement is amended to read as follows:
3.1.5 Insurance. Borrower shall have delivered to Lender satisfactory
evidence of insurance coverage required by Section 5.3 of this Agreement, to the
extent requested by Lender.
(d) Section 5.3 of the Agreement is amended to read as follows:
5.3 Insurance. Maintain, or cause the Lessee under each Lease and the
Debtor under each Loan Contract or Indirect Loan Contract to maintain, insurance
on the equipment subject thereto with responsible insurance carriers, insuring
against loss or damage by fire, theft, explosion, sprinklers and all other
hazards and risks ordinarily insured against by other owners who use such
equipment in similar businesses, for the full insurable value thereof; and
provide evidence of such insurance to Lender upon Lender's request. This Section
5.3 does not require Borrower to have Lender added as a loss payee or additional
insured on insurance policies for Revolving Loan Contracts, although Lender may
impose such a requirement if an Event of Default has occurred.
3. Continued Validity of Agreement. Except as amended by this Amendment,
the Agreement and all security agreements, guaranties, and other documents
executed by Borrower with or in favor of Lender (collectively referred to as
"Loan Documents"), shall continue in full force and effect as originally
constituted and are ratified and affirmed by the parties hereto. Each reference
in the Agreement or in the other Loan Documents to the Agreement shall mean the
Agreement as amended hereby unless the context otherwise requires. This
Amendment and the Agreement shall be read as one document. Without limiting the
generality of the foregoing, nothing in this Amendment entitles Borrower to
receive advances of any funds, or extends the maturity date for repayment,
beyond that expressly set forth in the Agreement.
4. Compliance with Loan Documents. Borrower 1, Borrower 2, Borrower 3 and
Borrower 4 each represents and warrants to Lender as follows: (a) as of the date
hereof, each Borrower has complied, and is in compliance, with all of the terms,
covenants and conditions of the Loan Agreement and the other Loan Documents
applicable to it; (b) as of the date hereof, there exists no Event of Default
under the Loan Agreement or any of the other Loan Documents or an event which
would constitute an Event of Default upon the lapse of time or upon the giving
of notice and the lapse of time specified therein; and (c) the representations
and warranties of each Borrower in the Loan Agreement and the other Loan
Documents are true and with the same effect as though such representations and
warranties had been made by such Borrower as of the date hereof. Each Borrower
further represents and warrants that, upon this Amendment becoming effective,
each Borrower will be in compliance with all of the terms, covenants, and
conditions of the Loan Agreement and the other Loan Documents, and all
representations and warranties will be true.
5. Authorization. Each party hereto represents to the other that the
individual executing this Amendment on its behalf is the duly appointed
signatory of such party and that such individual is authorized to execute this
Amendment by or on behalf of such party and to take all action required by the
terms of this Amendment.
6. When Amendment is Effective. This Amendment shall be deemed binding and
effective as of November 3, 2003 when this Amendment is executed by Borrower 1,
Borrower 2, Borrower 3, Borrower 4 and Lender.
7. Captions. Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Amendment.
8. No Novation. This Amendment 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 Agreement shall remain in full force and effect.
9. Severability. Each provision of this Amendment shall be severable from
every other provision of this Amendment for the purpose of determining the legal
enforceability of any specific provision.
10. Entire Agreement. This Amendment constitutes the entire agreement by
and between Borrower and Banks with respect to the subject matter hereof and
supersedes all prior and contemporaneous negotiations, communications,
discussions and agreements concerning such subject matter.
11. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
ICON CASH FLOW PARTNERS L.P. ICON INCOME FUND NINE, LLC,
SEVEN, a Delaware Limited Partnership a Delaware Limited Liability Company
By ICON Capital Corp., its general partner By: ICON Capital Corp., its manager
By:___________________________ By:__________________________
Paul B. Weiss, President Paul B. Weiss, President
ICON INCOME FUND EIGHT A L.P., COMERICA BANK, SUCCESSOR BY MERGER
a Delaware Limited Partnership TO COMERICA BANK-CALIFORNIA
By ICON Capital Corp., its general partner
By: ___________________________
By:_____________________________ Todd Robertson
Paul B. Weiss, President Corporate BankingOfficer-
Western Division
ICON INCOME FUND EIGHT B L.P.,
a Delaware Limited Partnership
By ICON Capital Corp., its general partner
By:______________________________
Paul B. Weiss, President