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, 2002
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File Number 333-37504
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ICON Income Fund Eight B L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-4101114
- -------------------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Fifth Avenue, 10th Floor, New York, New York 10011
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(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 Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
TABLE OF CONTENTS
Item Page
PART I
1. Business 3-4
2. Properties 5
3. Legal Proceedings 5
4. Submission of Matters to a Vote of Security Holders 5
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 5
6. Selected Financial and Operating Data 6
7. General Partner's Discussion and Analysis of Financial
Condition and Results of Operations 7-14
7A.Qualitative and Quantitative Disclosures About Market Risk 15
8. Consolidated Financial Statements and Supplementary Data 16-42
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 43
PART III
10.Directors and Executive Officers of the Registrant's
General Partner 43-44
11.Executive Compensation 44
12.Security Ownership of Certain Beneficial Owners
and Management 44
13.Certain Relationships and Related Transactions 44
14.Controls and Procedures 45
PART IV
15.Exhibits, Financial Statement Schedules and Reports on Form 8-K 45-46
SIGNATURES 47
Certifications 48-51
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
PART I
Item 1. Business
--------
General Development of Business
ICON Income Fund Eight B L.P. (the "Partnership"), was formed on February
7, 2000 as a Delaware limited partnership. The Partnership's maximum offering
was $75,000,000. The Partnership commenced business operations on its initial
closing date, June 14, 2000, with the admission of 15,815.51 limited partnership
units at $100 per unit representing $1,581,551 of capital contributions. Between
June 15, 2000 and October 17, 2001, 734,184.49 additional units were admitted
representing $73,418,449 of capital contributions. On October 17, 2001, the
Partnership had its final closing with a cumulative total of 750,000 units
admitted totaling $75,000,000 in capital contributions. The Partnership redeemed
1,554.15 units during 2002, leaving 748,445.85 limited partnership units
outstanding at December 31, 2002.
Segment Information
The Partnership has only one operating segment: the business of acquiring
and managing 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
objective of the Partnership is to obtain the maximum economic return from its
investments for the benefit of its limited partners. To achieve this objective,
the Partnership intends to: (1) acquire a diversified portfolio of low
obsolescence equipment having long economic useful lives and high residual
values; (2) make monthly cash distributions to its limited partners, commencing
with each limited partner's admission to the Partnership, continuing through the
Reinvestment Period, which period will end no later than the eighth anniversary
after the final closing date; (3) re-invest substantially all undistributed cash
from operations and cash from sales of equipment and financing transactions
during the Reinvestment Period; and (4) sell the Partnership's investments and
distribute the cash from sales of such investments to its limited partners after
the end of the Reinvestment Period.
The equipment leasing industry is highly competitive. When seeking its
leasing transactions for acquisition, the Partnership competes with leasing
companies, manufacturers that lease their products directly, equipment brokers
and dealers and financial institutions, including commercial banks and insurance
companies. Many competitors are larger than the Partnership and have greater
financial resources.
The Partnership had lessees who accounted for more than 10% of the
Partnership's total revenue during the years ended December 31, 2002 and 2001.
During 2002, equipment leased to Cathay Pacific and BAE Systems PLC generated
27% and 10% of total revenue, respectively. During 2001, equipment leased to BAE
Systems PLC generated 11% of total revenue.
The Partnership has no direct employees. The General Partner has full and
exclusive discretion in management and control of the Partnership.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
Lease and Finance Transactions
In early 2002, the Partnership formed ICON Aircraft 123 LLC as a wholly
owned subsidiary for the purpose of acquiring all of the outstanding shares of
Alpha Aircraft Leasing Limited ("A.A.L."), a Cayman Islands registered company,
which owns, through an Owner Trust, an Airbus A340-313X aircraft which is on
lease to Cathay Pacific through March 2006. The stock was acquired in the first
quarter of 2002 for $4,250,000 in cash. The aircraft owned by Alpha is subject
to non-recourse debt provided by unaffiliated lenders. The lenders have a
security interest in the aircraft and an assignment of the rentals under the
lease. The estimated fair value of the aircraft was $75,263,566 at the date of
acquisition and the principal balance of the debt was $70,495,058 at such date.
During the year ended December 31, 2001, the Partnership purchased
equipment subject to leases for purchase prices aggregating $41,666,367
(including initial direct costs).
The acquisitions were as follows:
(i) An aircraft simulator acquired in the first quarter of 2001, leased to an
unaffiliated third party for a term scheduled to expire in March 2006, for
a purchase price of $13,232,105, of which $10,830,109 was provided by the
assumption of non-recourse debt and the balance of $2,401,996 provided from
available cash;
(ii) Retail signage equipment purchased in the second quarter of 2001 for
$4,250,000, subject to a lease with an unaffiliated third party,
scheduled to expire in June 2005. The purchase was paid for with cash;
(iii) An engine module, purchased in the second quarter of 2001, subject to a
lease with an unaffiliated third party, scheduled to expire in May 2008,
for a purchase price of $5,950,000, of which $1,911,210 was provided by
the assumption of non recourse debt with the balance of $4,038,790 paid
for with cash; and
(iv) Retail photography development equipment, purchased throughout the year
with scheduled lease expirations ranging from May 2006 to January 2007,
for purchase prices aggregating $18,234,262, of which $17,552,542 was
provided by the assumption of non-recourse debt and the balance of
$681,720 paid for with cash.
Additionally, the Partnership invested $2,406,128 in an unguaranteed
residual and $2,100,000 ($400,000 of which was provided by a 8.5% recourse note)
for an option to purchase an aircraft. Finally, the Partnership had placed cash
totaling $13,723,196 in various escrow accounts for three transactions scheduled
to be completed in 2002. Two of the proposal transactions were cancelled and
$7,623,196 of the escrowed funds were returned to the Partnership.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
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 Company, 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 2002.
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
-----------------------------------------------------------------------
Matter
------
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 December 31,
-------------- ----------------------------------
2002 2001
---- ----
Limited Partners 2,814 2,825
General Partner 1 1
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
Item 6. Selected Consolidated Financial and Operating Data
--------------------------------------------------
Year Ended December 31,
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2002 2001 2000(1)
---- ---- ----
Total revenue $ 25,467,361 $ 20,231,996 $ 742,302
=============== =============== =============
Net income $ (136,897) $ 820,109 $ 291,236
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Net income allocable to limited partners $ (135,528) $ 811,908 $ 288,324
=============== =============== =============
Net income allocable to the General Partner $ (1,369) $ 8,201 $ 2,912
=============== =============== =============
Weighted average limited
partnership units outstanding 749,475 502,536 132,049
=============== =============== =============
Net income per weighted average
limited partnership unit $ (.18) $ 1.62 $ 2.18
=============== =============== =============
Distributions to limited partners $ 8,056,975 $ 4,932,964 $ 536,708
=============== =============== =============
Distributions to the General Partner $ 81,384 $ 49,845 $ 5,228
=============== =============== =============
December 31,
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2002 2001 2000 (1)
---- ---- ----
Total assets $ 189,408,747 $ 143,918,696 $ 88,108,178
=============== =============== =============
Partners' equity $ 52,820,395 $ 61,212,600 $ 18,764,181
=============== =============== =============
(1) No data is presented for the periods prior to 2000 since the Partnership
commenced operations on February 7, 2000, the initial closing date. The
Partnership had its first admission of limited partners in June 2000 and
commenced its acquisition efforts at that time. As a result, revenue and net
income for 2000 does not reflect a full year's operations.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
Item 7. General Partner's Discussion and Analysis of Financial Condition and
Results of Operations
----------------------------------------------------------------------
The Partnership was formed on February 7, 2000 as a Delaware limited
partnership. The Partnership's maximum offering was $75,000,000. The Partnership
commenced business operations on its initial closing date, June 14, 2000, with
the admission of 15,815.51 limited partnership units at $100 per unit
representing $1,581,551 of capital contributions. Between June 15, 2000 and
October 17, 2001, 734,184.49 additional units were admitted representing
$73,418,449 of capital contributions. On October 17, 2001, the Partnership had
its final closing with a cumulative total of 750,000 units admitted totaling
$75,000,000 in capital contributions. The Partnership redeemed 1,554.15 units
during 2002, leaving 748,445.85 limited partnership units outstanding at
December 31, 2002.
Forward-Looking Information - The following discussion and analysis should
be read in conjunction with the audited 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.
The Partnership's portfolio consists of net investments in operating
leases, investments in finance leases, equipment held for sale or lease,
investments in estimated unguaranteed residual values, investment in option,
cash held in escrow and equity investments in unconsolidated joint ventures,
representing 75%, 13%, 1%, 1%, 1%, 0% and 4% of total assets at December 31,
2002, respectively, and 58%, 21%, 0%, 2%, 1%, 10% and 0% of total portfolio
interests at December 31, 2001, respectively.
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 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
effects 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.
Basis of Accounting and Presentation - The Partnership's records are
maintained on the accrual basis. 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 doubtful assets 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.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
Leases and Revenue Recognition - The Partnership accounts for owned
equipment leased to third parties as either finance leases or operating leases,
as appropriate. 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 terms to their estimated fair market
values at lease terminations and subject to the Partnership's impairment policy
discussed below. 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. Initial direct costs of finance leases are
capitalized and are amortized over the terms of the related leases using the
interest method. Initial direct costs of operating leases are capitalized and
depreciated on the straight-line method over the lease terms.
Investments in 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 value, subject to the Partnership's
policy relating to impairments of residuals discussed below. Gains or losses
will be recognized upon the sale or disposition of the investments.
Investments in Options - The Partnership carries its investment in an
option to purchase equipment at cost, which is equal to or less than market
value, subject to the Partnership's policy relating to impairment discussed
below. Gain or loss will be recognized upon the sale or disposition of the
investment.
Impairment of Estimated Residual Values - The Partnership's policy with
respect to impairment of estimated residual values is to review, on a periodic
basis, the carrying value of its residuals on an individual asset basis to
determine whether events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable and, therefore, an impairment loss
should be recognized. The events or changes in circumstances which generally
indicate that the residual value of an asset has been 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.
The Partnership measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Partnership from re-lease or sale of the equipment. Generally,
third party appraisals, reviews of future cash flows and anticipated future cash
flows and detailed market analyses are used as the basis for measuring whether
an impairment loss should be recognized.
Allowance for Doubtful Accounts - The Partnership records a provision for
bad debts to provide for estimated credit losses in its portfolio. The allowance
for doubtful accounts is based on the ongoing analysis of delinquency trends,
loss experience and an assessment of overall credit risk. 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.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
Partnership Activities During 2002 - In early 2002, the Partnership formed
ICON Aircraft 123 LLC as a wholly owned subsidiary for the purpose of acquiring
all of the outstanding shares of Alpha Aircraft Leasing Limited ("A.A.L."), a
Cayman Islands registered company, which owns, through an Owner Trust, an Airbus
A340-313X aircraft which is on lease to Cathay Pacific through March 2006. The
stock was acquired in the first quarter of 2002 for $4,250,000 in cash. The
aircraft owned by Alpha is subject to non-recourse debt provided by unaffiliated
lenders. The lenders have a security interest in the aircraft and an assignment
of the rentals under the lease. The fair value of the aircraft was estimated to
be $75,263,566 at the date of acquisition and the principal balance of the
non-recourse debt was $70,495,058 at such date.
During 2002, the Partnership and an affiliate, ICON Income Fund Nine, LLC
("Fund Nine"), have formed several joint ventures for the purpose of acquiring
and managing various assets. The Partnership and Fund Nine 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 the affiliate desires to sell its interest in the equipment
or in the joint venture. In the instance where the Partnership is not the
majority owner, the investment is accounted for following the equity method.
Where the Partnership is the majority owner, the joint venture is consolidated,
with the other joint venturer's interest reflected on the Partnership's balance
sheet as "Minority interest in joint venture". The net investment in the
unconsolidated joint venture is recorded on the Partnership's balance sheet as
"Investment in unconsolidated joint venture", with the summarized financial data
of the unconsolidated joint venture presented in footnote 3 to the Partnership's
consolidated financial statements. The Partnership's share of equity, income and
distributions (if any) are also presented in the footnote. The Partnership's
share of income of the non-consolidated joint venture is reflected on the
statement of operations as income from investment in joint venture. Because the
Partnership's share of the joint venture is pari passu with the other joint
venturer, the impact on net income is the same as if the joint venture were
consolidated.
Partnership Activities During 2001 - During the year ended December 31,
2001, the Partnership purchased equipment subject to leases for purchase prices
aggregating $41,666,367 (including initial direct costs).
The acquisitions were as follows:
(i) An aircraft simulator acquired in the first quarter of 2001, leased to an
unaffiliated third party for a term scheduled to expire in March 2006, for
a purchase price of $13,232,105, of which $10,830,109 was provided by the
assumption of non-recourse debt and the balance of $2,401,996 provided from
available cash;
(ii) Retail signage equipment purchased in the second quarter of 2001 for
$4,250,000, subject to a lease with an unaffiliated third party, scheduled
to expire in June 2005. The purchase was paid for with cash;
(iii)An engine module, purchased in the second quarter of 2001, subject to a
lease with an unaffiliated third party, scheduled to expire in May 2008,
for a purchase price of $5,950,000, of which $1,911,210 was provided by the
assumption of non recourse debt with the balance of $4,038,790 paid for
with cash; and
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
(iv) Retail photography development equipment, purchased throughout the year
with scheduled lease expirations ranging from May 2006 to January 2007, for
purchase prices aggregating $18,234,262, of which $17,552,542 was provided
by the assumption of non-recourse debt and the balance of $681,720 paid for
with cash.
Additionally, the Partnership invested $2,406,128 in an unguaranteed
residual and $2,100,000 ($400,000 of which was provided by a 8.5% recourse note)
for an option to purchase an aircraft. Finally, the Partnership had placed cash
totaling $13,723,196 in various escrow accounts for three transactions scheduled
to be completed in 2002. Two of the proposal transactions were cancelled and
$7,623,196 of the escrowed funds were returned to the Partnership.
Results of Operations for the Period Ended December 31, 2002 and 2001
Revenues for the year ended December 31, 2002 (the "2002 Period") were
$25,467,361 representing an increase of $5,235,365 over the year ended December
31, 2001. The increase in revenue resulted from continued purchase of equipment
subject to lease. Increases in rental income of $4,803,096, finance income of
$410,134, income from investment in joint venture of $337,653, and gain on sale
of equipment of $182,794, were partially off-set by a decrease in interest
income and other of $170,971 and gain from sale of investment in joint venture
to an affiliate of $327,341. During the 2002 Period the Partnership sold
equipment from the Cheyenne portfolio for total proceeds of $2,341,096 which
resulted in a gain of $275,489.
Expenses for 2002 were $25,604,258 representing an increase of $6,192,371
over 2001. The increase in expenses resulted from the increase in the size of
the Partnership's lease portfolio, an increase in the Partnership's borrowing
levels and overall growth in size of the operations of the Partnership from one
year ago and is consistent with the Partnership's level of operations.
Depreciation expense increased by $2,490,519, due to the additional
investments in operating leases made subsequent to 2001. Interest expense
increased by $2,239,253 due to the additional debt used to acquire investments
in operating leases subsequent to 2001. Management fees - General Partner
increased by $793,042 and administrative expense reimbursements - General
Partner increased by $393,851 in 2002 as compared to 2001. The increase in
management fees was consistent with increases in rentals (including operating
leases, finances leases and through joint ventures) on which such fees are
dependant. The increase in administrative expense reimbursements - General
Partner was consistent with the increase in operating activities of the
Partnership. Minority interest expense increased by $19,754, amortization of
initial direct costs increased by $76,169 and general and administrative
expenses increased by $179,783 in 2002 period as compared to 2001.
Net (loss) income for the year ended 2002 and 2001 was ($136,897) and
$820,109, respectively. The net (loss) income per weighted average limited
partnership unit outstanding was ($.18) and $1.62 for 2002 and 2001,
respectively.
The increase in depreciation expense, interest expense, management
fees-General Partner and administrative expense reimbursements which reduced net
income in 2002 as compared to 2001 was the primary reason for the net loss for
the year ended December 31, 2002.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
As of December 31, 2002 there were no known trends or demands, commitments,
events or uncertainties, which are likely to have any material effect on net
revenues and the results of operations.
Results of Operations for the Period Ended December 31, 2001 and 2000
The Partnership was formed on February 7, 2000 and commenced operations
upon the first admission of limited partners on June 14, 2000. Because the
Partnership began operations in June 2000, was raising additional capital
through the issuance of units until the offering was completed in October 2001,
and invested such proceeds in additional leased equipment throughout the 2001
year, the 2001 and 2000 operating results are not comparable. The results of
operations for 2001 and 2000 are consistent with the level of acquisition of
lease equipment completed and the terms of the leases and related borrowings.
Rental income (from operating leases) increased by $17,035,827, from
$164,361 in 2000 to $17,200,188 in 2001, attributable primarily to receiving a
full year of rent in 2001 on equipment purchased in the second half of 2000 for
total purchase prices of $76,284,645 (including initial direct costs) as well as
equipment acquired in 2001 for purchase prices totaling $19,744,804 (including
initial direct costs) partially offset by the sale of equipment in 2001 which
was originally acquired for $872,881.
Finance lease income increased by $1,812,235 from $521,406 in 2000 to
$2,333,641 in 2001. This was primarily attributable to the full year effect of
finance leases acquired in the third and fourth quarters of 2000. Additionally
during 2001 the Partnership acquired equipment subject to finance leases
totaling $18,234,162, on lease to Kmart, Inc. ("Kmart") (see item 7A, Liquidity
and Capital Resources for a discussion of Kmart's bankruptcy and its effect on
the Partnership). The Kmart leases began generating finance lease income in
2001.
During 2001, the Partnership recognized a gain on a sale of an investment
in a joint venture to an affiliate of $327,341 and gains on the sales of
equipment of $92,695.
During 2001, the Partnership recognized income from an investment in a
joint venture with an affiliate of $43,953. The Partnership made its investment
in the joint venture in 2001 and sold the investment in the joint venture late
in 2001 for a gain (see above).
Interest income was $234,178 in 2001 as compared to $56,535 in 2000 due to
an increase (primarily from the proceeds of the offering) of amounts available
for investment, partially offset by a decline in interest rates.
Depreciation expense increased in 2001 by $11,568,595, from $111,940 in
2000 to $11,680,535 in 2001 due to the full year effect in 2001 of investments
in operating leases acquired in 2000 as well as the effect of investments in
operating leases completed in 2001.
Interest expense increased in 2001 by $4,886,339, from $123,815 in 2000 to
$5,010,154 in 2001 due principally to the increase in acquisition indebtedness.
During 2001, the Partnership incurred additional non-recourse indebtedness of
$30,293,861. This was partially offset by a reduction in the outstanding debt
under the variable rate line of credit from $7,000,000 at December 31, 2000 to
$2,500,000 at December 31, 2001, and a decline in interest rates under the line
of credit. Further the Partnership repaid non-recourse indebtedness by
$13,939,491 in 2001 in accordance with the related payment schedules.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
Management fees - General Partner increased by $1,252,497 from $92,140 in
2000 to $1,344,637 in 2001. This increase is consistent with the increase in
lease payments on which such fees are based.
Administrative expense reimbursements - General Partner increased by
$535,540, from $37,441 in 2000 to $572,981 in 2001 and is consistent with the
Partnership's increased level of operations.
Amortization of initial direct costs increased $179,238, from $33,510 in
2000 to $212,748 in 2001 due the full year effect of amortizing such costs on
acquisitions completed.
General and administrative expenses increased in 2001 by $348,747, from
$51,576 in 2000 to $400,323 in 2001 which was consistent with the Partnership's
increased level of operations. The Partnership acquired equipment throughout the
second half of 2000 and throughout 2001.
Net income for 2001 was $820,109 as compared to $291,236 in 2000 and net
income per weighted average limited partnership unit was $1.62 in 2001 compared
to $2.18 in 2000.
Liquidity and Capital Resources
The Partnership's primary source of liquidity for 2002 was access to debt
associated with the Partnerships investments in unconsolidated joint ventures in
the amount of $35,138,367 and consolidated subsidiaries of $70,495,058. In
addition, the Partnership had cash provided by operating activities of
$4,490,451, and the Partnership received funds from the return of $13,723,196
from cash held in escrow and proceeds from non-recourse borrowings of
$3,593,693.
During the quarter ended June 30, 2002, the Partnership entered into a
$17,500,000 joint and several line of credit agreement dated as of May 30, 2002
shared with ICON Income Fund Eight A L.P. and L. P. Seven (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,
5.25% at December 31, 2002) 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
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
Contribution Agreement are collateralized by a subordinate lien on the
assets of each participating Fund. The expiration date of this line of credit is
May 31, 2003. The Partnership violated a financial covenant at December 31, 2002
creating an Event of Default. The bank granted a waiver to the Partnership with
respect to this Event of Default. As of December 31, 2002, there were no
borrowings by the Partnership under the line. Aggregate borrowing by all Funds
under the line of credit agreement aggregated $9,731,310 on December 31, 2002.
Such funds were utilized for investments in leases and joint ventures, with
related costs aggregating $14,102,611, (including initial direct costs
(acquisition fees) of $3,498,611), repayment of amounts outstanding under a line
of credit of $2,500,000, and cash to make cash distributions to partners of
$8,138,359. As cash is realized from operations and with proceeds from
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.
During 2002, the Partnership and an affiliate, Fund Nine, have formed
several joint ventures for the purpose of acquiring and managing various assets.
The Partnership and Fund Nine 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 the affiliate
desires to sell its interest in the equipment or in the joint venture. In the
instance where the Partnership is not the majority owner, the investment is
accounted for following the equity method. Where the Partnership is the majority
owner, the joint venture is consolidated, with the other joint venturer's
interest reflected on the Partnership's balance sheet as "Minority interest in
joint venture". The net investment in the unconsolidated joint venture is
recorded on the Partnership's balance sheet as "Investment in unconsolidated
joint venture", with the summarized financial data of the unconsolidated joint
venture presented in footnote 3 to the Partnership's consolidated financial
statements. The Partnership's share of equity, income and distributions (if any)
are also presented in the footnote. The Partnership's share of income of the
non-consolidated joint venture is reflected on the statement of operations as
income from investment in joint venture. Because the Partnership's share of the
joint venture is pari passu with the other joint venturer, the impact on net
income is the same as if the joint venture were consolidated.
Cash distributions to limited partners for 2002 and 2001, which were paid
monthly, totaled $8,056,975 and $4,932,964, respectively.
As of December 31, 2002 there were no known trends or demands, commitments,
events or uncertainties, 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.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS No. 143") which is effective for fiscal
years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The Partnership
does not expect that the adoption of SFAS No. 143 will have a material impact on
its financial position, results of operations or cash flows.
Effective January 1, 2002, the Partnership adopted SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144"). This statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future net
cash flows expected to be generated by the asset. If the carrying amount of the
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. SFAS No. 144 requires companies to separately report
discontinued operations and extends that reporting to a component of an entity
that either has been disposed of (by sale, abandonment or in a distribution to
the owners) or classified as held for sale. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less the costs to
sell. The adoption of SFAS No. 144 did not have any effect on the Partnership's
financial position or results of operations as the provisions of SFAS No. 144
are similar to the Partnership's current policy for impairment review.
Effective January 1, 2002, the Partnership adopted SFAS No. 145, "Recession
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS No. 145"). SFAS No. 145 amends SFAS No. 13
Accounting for Leases to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. The provisions of the Statement related to
Statement No. 13 were effective for transactions occurring after May 15, 2002,
the adoption of which did not have a material effect on the Partnership's
financial statements.
On July 30, 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS No. 146"). The standard
replaced Emerging Issues Task Force (EITF) issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)" and requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. Examples of costs covered by the standard include lease termination costs
and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. SFAS
No. 146 is effective prospectively to exit or disposal activities initiated
after December 31, 2002. The impact on the Partnership's financial statement
from the application of this standard is dependent on any exit or disposal
activities in 2003.
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 Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
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. Except as discussed below, the Partnership believes its
exposure to other market risks is insignificant to both its financial position
and results of operations.
The Partnership manages its interest rate risk by obtaining fixed rate debt
for the majority of its borrowings. The fixed rate debt service obligation
streams are generally matched by fixed rate lease receivable streams generated
by the Partnership's lease investments.
The Partnership manages its exposure to equipment and residual risk by
monitoring the equipment leasing market and maximizing re-marketing proceeds
through either re-leasing or sale of equipment.
Kmart, Inc., ("Kmart") with whom the Partnership has five leases, filed for
Chapter 11 bankruptcy protection in January 2002. The Partnership's finance
leases with Kmart were acquired during 2001 for an aggregate of $18,234,262,
comprised of a total cash investment of $681,720 and the assumption of
$17,552,542 of non-recourse debt. The bankruptcy court has not ruled on the
affirmation of the leases as of the date of this report. Through March 1, 2003,
Kmart has made all scheduled rental payments.
Regus Business Center Corp. ("Regus"), with whom the Partnership has an
equipment lease, filed for Chapter 11 bankruptcy protection in the United States
of America on January 14, 2003. The Partnership's finance leases with Regus were
acquired in July 2000 at a cost of $5,303,089, and the total lease receivable is
$2,734,738 as of December 31, 2002. Regus has not paid January or February rents
for 2003, and management is currently negotiating an amended lease agreement
whereby Regus will commence making payments on March 15, 2003 continuing for
forty eight months at a new reduced rental rate.
As of December 31, 2002, both Kmart and Regus are current with their
scheduled lease payments, therefore management deems an allowance for doubtful
accounts unnecessary.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
Item 8. Consolidated Financial Statements and Supplementary Data
--------------------------------------------------------
Index to Financial Statements
Page Number
Independent Auditors' Reports 18-19
Consolidated Balance Sheets as of December 31, 2002 and 2001 20
Consolidated Statements of Operations for the Years Ended December 31, 2002, 2001
and for the Period February 7, 2000 (date of inception) to December 31, 2000 21
Consolidated Statements of Changes in Partners' Equity for the Years Ended
December 31, 2002, 2001 and for the Period February 7, 2000 (date of
inception) to December 31, 2000 22-23
Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001
and for the Period February 7, 2000 (date of inception) to December 31, 2000 24-26
Notes to Consolidated Financial Statements 27-42
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 2002
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITOR'S REPORT
The Partners
ICON Income Fund Eight B L.P.:
We have audited the accompanying consolidated balance sheet of ICON Income Fund
Eight B L.P. (a Delaware limited partnership) as of December 31, 2002 and the
related consolidated statements of operations, changes in partners' equity and
cash flows for the year then ended. 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 Unites 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 financial position of ICON Income Fund
Eight B L.P. as of December 31, 2002 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
------------------------
Hays & Company LLP
March 13, 2003
New York, New York
INDEPENDENT AUDITOR'S REPORT
The Partners
ICON Income Fund Eight B L.P.:
We have audited the accompanying consolidated balance sheet of ICON Income Fund
Eight B L.P. (a Delaware limited partnership) as of December 31, 2001, and the
related consolidated statements of operations, changes in partners' equity, and
cash flows for the year ended December 31, 2001 and for the period from February
7, 2000 (date of inception) to December 31, 2000. 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 Income Fund
Eight B L.P. as of December 31, 2001, and the results of its operations and its
cash flows for the year ended December 31, 2001 and for the period from February
7, 2000 (date of inception) to December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
-----------------
KPMG LLP
April 15, 2002
New York, New York
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
2002 2001
---- ----
Assets
Cash and cash equivalents $ 8,499,026 $ 5,684,652
---------------- ---------------
Investments in finance leases
Minimum rents receivable 24,504,820 32,769,190
Estimated unguaranteed residual values 2,711,893 2,711,893
Initial direct costs, net 457,189 746,106
Unearned income (3,824,928) (6,568,703)
---------------- ---------------
23,848,974 29,658,486
---------------- ---------------
Investments in operating leases
Equipment, at cost 166,325,943 95,156,568
Accumulated depreciation (23,591,192) (11,456,484)
---------------- ---------------
142,734,751 83,700,084
---------------- ----------------
Equipment held for sale or lease 1,211,669 -
---------------- ---------------
Cash held in escrow - 13,723,196
Investment in unguaranteed residual values 2,342,589 2,406,128
Investment in option 2,100,000 2,100,000
Investments in unconsolidated joint ventures 7,290,793 -
Due from affiliates 3,532 3,730,884
Other assets, net 1,377,413 2,915,266
---------------- ---------------
Total assets $ 189,408,747 $ 143,918,696
================ ===============
Liabilities and Partners' Equity
Notes payable - non-recourse $ 133,231,339 $ 76,852,204
Notes payable - recourse 400,000 2,900,000
Due to affiliates 224,167 -
Deferred rental income 534,840 -
Security deposits and other liabilities 863,059 1,269,603
Minority interest in joint ventures 1,334,947 1,684,289
---------------- ---------------
136,588,352 82,706,096
----------------- ---------------
Commitment and Contingencies
Partners' equity (deficiency)
General Partner (125,713) (42,960)
Limited Partners (748,445.85 and 750,000 units
outstanding, $100 per unit original issue price) 52,946,108 61,255,560
---------------- ---------------
Total partners' equity 52,820,395 61,212,600
---------------- ---------------
Total liabilities and partners' equity $ 189,408,747 $ 143,918,696
================ ===============
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31, 2002, 2001 and for the Period from
February 7, 2000 (date of inception) to December 31, 2000
2002 2001 2000
---- ---- ----
Revenues
Rental income $ 22,003,284 $ 17,200,188 $ 164,361
Finance income 2,743,775 2,333,641 521,406
Gain from sale of investment in
joint venture to an affiliate - 327,341 -
Interest income and other 63,207 234,178 56,535
Net gains on sales of equipment 275,489 92,695 -
Income from investment in
unconsolidated joint ventures 381,606 43,953 -
--------------- ---------------- ---------------
Total revenues 25,467,361 20,231,996 742,302
--------------- ---------------- ---------------
Expenses
Depreciation 14,171,054 11,680,535 111,940
Interest 7,249,407 5,010,154 123,815
Management fees - General Partner 2,137,679 1,344,637 92,140
Administrative expense
reimbursements - General Partner 966,832 572,981 37,441
General and administrative 580,106 400,323 51,576
Amortization of initial direct costs 288,917 212,748 33,510
Minority interest expense 210,263 190,509 644
--------------- ---------------- ---------------
Total expenses 25,604,258 19,411,887 451,066
--------------- ---------------- ---------------
Net (loss) income $ (136,897) $ 820,109 $ 291,236
=============== ================ ===============
Net (loss) income allocable to:
Limited partners $ (135,528) $ 811,908 $ 288,324
General partner (1,369) 8,201 2,912
--------------- ---------------- ---------------
$ (136,897) $ 820,109 $ 291,236
=============== ================ ===============
Weighted average number of limited
partnership units outstanding 749,475 502,536 132,049
=============== ================ ===============
Net (loss) income per weighted average
limited partnership unit $ (.18) $ 1.62 $ 2.18
=============== =============== ===============
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 2002, 2001 and for the Period from
February 7, 2000 (date of inception) to December 31, 2000
Limited Partner Distributions
-----------------------------
Return of Investment Limited General
Capital Income Partners Partner Total
------- ------ -------- ------- -----
(Per weighted average unit)
Initial partners'
capital contribution $ 1,000 $ 1,000 $ 2,000
Refund of initial
limited partners'
capital contribution (1,000) - (1,000)
Proceeds from issuance
of limited partnership
units (219,813.65 units) 21,981,365 - 21,981,365
Sales and offering expenses (2,967,484) - (2,967,484)
Cash distributions to partners $ 1.88 $ 2.18 (536,708) (5,228) (541,936)
Net income 288,324 2,912 291,236
--------------- ------------ --------------
Balance at
December 31, 2000 18,765,497 (1,316) 18,764,181
Proceeds from issuance
of limited partnership
units (530,186.35 units) 53,018,635 - 53,018,635
Sales and offering expenses (6,407,516) - (6,407,516)
Cash distributions to partners $ 8.20 $ 1.62 (4,932,964) (49,845) (4,982,809)
Net income 811,908 8,201 820,109
--------------- ------------ --------------
Balance at
December 31, 2001 61,255,560 (42,960) 61,212,600
(continued on next page)
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity (Continued)
For the Years Ended December 31, 2002, 2001 and for the Period from
February 7, 2000 (date of inception) to December 31, 2000
Limited Partner Distributions
-----------------------------
Return of Investment Limited General
Capital Income Partners Partner Total
------- ------ -------- ------- -----
(Per weighted average unit)
Limited partnership units
redeemed (1,554.15 units) (116,949) - (116,949)
Cash distributions to partners $ 10.75 $ - (8,056,975) (81,384) (8,138,359)
Net loss (135,528) (1,369) (136,897)
--------------- ------------ --------------
Balance at
December 31, 2002 $ 52,946,108 $ (125,713) $ 52,820,395
=============== ============ ==============
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2002, 2001 and for the Period from
February 7, 2000 (date of inception) to December 31, 2000
2002 2001 2000
---- ---- ----
Cash flows from operating activities:
Net (loss) income $ (136,897) $ 820,109 $ 291,236
--------------- --------------- ---------------
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Finance income paid directly to lenders by lessees (1,351,387) (732,737) -
Depreciation 14,171,054 11,680,535 111,940
Amortization of initial direct costs 288,917 212,748 33,510
Minority interest expense 210,263 190,509 644
Gain from sale of investment in joint venture - (327,341) -
Income from investment in joint venture to
an affiliate (381,606) (43,953) -
Net gains on sales of equipment (275,489) (92,695) -
Rental income paid directly to lender by lessees (19,268,406) (16,181,472) -
Interest expense on non-recourse financing
paid directly by lessees 6,822,451 4,620,569 -
Changes in operating assets and liabilities:
Collection of principal -
non-financed receivables 2,438,584 3,148,917 906,374
Other assets, net 1,537,853 (214,459) (463,781)
Due to affiliates 224,167 - -
Due from affiliates 82,651 (86,183) -
Deferred rental income 534,840 - -
Security deposits and other liabilities (406,544) 917,220 352,383
---------------- --------------- ---------------
Total adjustments 4,627,348 3,091,658 941,070
--------------- --------------- ---------------
Net cash provided by operating activities 4,490,451 3,911,767 1,232,306
--------------- --------------- ---------------
Cash flows used in investing activities:
Proceeds from sales of equipment 2,341,096 629,514 -
Distribution received from unconsolidated joint venture 1,252,443 - -
Receipt of cash held in escrow 13,723,196 (13,723,196) -
Equipment purchased (4,250,000) (11,372,506) (24,415,212)
Investment in option - (1,700,000) -
Proceeds from sale of unguaranteed residual 63,539 - -
Investment in joint venture (4,516,929) (3,273,407) -
Investment in unguaranteed residual values - (2,406,128) -
Initial direct costs paid (2,242,352) (1,239,802) (2,386,693)
Prepaid initial direct costs included in other assets - (2,237,025) -
Distribution to minority interest in joint venture (559,605) - -
--------------- --------------- ---------------
Net cash provided by (used in) investing activities 5,811,388 (35,322,550) (26,801,905)
--------------- --------------- ---------------
(continued on next page)
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31, 2002, 2001 and for the Period from
February 7, 2000 (date of inception) to December 31, 2000
2002 2001 2000
---- ---- ----
Cash flows from financing activities:
Proceeds from non-recourse borrowings 3,593,693 - -
Issuance of limited partnership units,
net of offering expenses - 46,611,119 19,013,881
Initial limited partners' capital contributions - - 2,000
Refund initial limited partners' contribution - - (1,000)
Proceeds from notes payable - recourse - 2,500,000 7,000,000
Payment of notes payable - recourse (2,500,000) (7,000,000) -
Payment of non-recourse borrowings (325,850) (1,348,581) (80,776)
Cash distributions to partners (8,138,359) (4,982,809) (541,936)
Redemption of limited partnership units (116,949) - -
Minority interests in consolidated joint ventures - - 1,493,136
--------------- --------------- ---------------
Net cash (used in) provided
by financing activities (7,487,465) 35,779,729 26,885,305
--------------- --------------- ---------------
Net increase in cash and cash equivalents 2,814,374 4,368,946 1,315,706
Cash and cash equivalents at beginning of the period 5,684,652 1,315,706 -
--------------- --------------- ---------------
Cash and cash equivalents at end of period $ 8,499,026 $ 5,684,652 $ 1,315,706
=============== =============== ===============
(continued on next page)
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Cash Flows (Continued)
Supplemental Disclosure of Cash Flow Information
For the years ended December 31, 2002, 2001 and the period from February 7,
2000 (date of inception) to December 31, 2000 non-cash activities included the
following:
2002 2001 2000
---- ---- ----
Value of equipment and receivables to
purchase equipment for debt $ 70,495,058 $ 30,693,861 $ 60,578,610
Non-recourse notes payable and promissory
note assumed in purchase prices (70,495,058) (30,693,861) (60,578,610)
---------------- --------------- ----------------
$ - $ - $ -
================ =============== ================
Principal and interest on direct finance receivables
paid directly to lenders by lessees $ 4,937,811 $ 1,030,007 $ -
Rental income on operating lease receivables paid 19,268,406 16,181,472 -
directly to lenders by lessees
Principal and interest paid directly to lenders by lessees
paid annually to lenders by lessees (24,206,217) (17,211,479) -
---------------- --------------- ----------------
$ - $ - $ -
================ =============== ================
Interest paid directly to lenders by lessees pursuant to
non-recourse financings $ 6,822,451 $ 4,620,569 -
Interest accrued - 66,710 -
Other interest paid 426,956 322,875 123,815
---------------- --------------- ----------------
Total interest expense $ 7,249,407 $ 5,010,154 $ 123,815
================ =============== ================
See accompanying notes to consolidated financial statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2002, 2001 and 2000
1. Organization
ICON Income Fund Eight B L.P. (the "Partnership") was formed on February 7,
2000 as a Delaware limited partnership with an initial capitalization of $2,000.
It was primarily formed to acquire various types of equipment subject to lease
with third parties. The Partnership's maximum offering was $75,000,000. The
Partnership commenced business operations on its initial closing date, June 14,
2000, with the admission of limited partners representing 15,815.51 limited
partnership units at the offering price of $100 per unit aggregating $1,581,551
of capital contributions. As of October 17, 2001 (the final closing date),
734,184.49 additional units had been admitted into the Partnership with
aggregate gross proceeds of $73,418,449 bringing the total admission to 750,000
units totaling $75,000,000 in capital contributions. The Partnership redeemed
1,554.15 units during 2002, leaving 748,445.85 limited partnership units
outstanding at December 31, 2002.
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's equipment, leases and financing
transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, received an
underwriting commission from the gross proceeds from sales of all units. The
General Partner received organization and offering expenses from the gross
proceeds of such sales The total underwriting compensation paid by the
Partnership, including underwriting commissions, sales commissions, incentive
fees, public offering expense reimbursements and due diligence activities was
limited to 13.5% of gross proceeds up to $25,000,000, 12.5% of gross proceeds
from $25,000,001 to $50,000,000 and 11.5% of gross proceeds from $50,000,001 to
$75,000,000. Such offering expenses aggregated $9,375,000, including $2,166,025
and $1,208,975 paid to the General Partner or its affiliates in 2001 and 2000,
respectively (see Note 9) and were charged directly to limited partners' equity.
Profits, losses, cash distributions and disposition proceeds will be
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 an
8% per annum cumulative return 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
Basis of Accounting and Presentation - The Partnership's records are
maintained on the accrual basis. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires the General Partner's 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 doubtful assets 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.
ICON Income Fund Eight B L.P. (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 thereafter.
Cash and Cash Equivalents - Cash and cash equivalents are defined as 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 or operating leases, as
appropriate. 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 following the interest
method. For operating leases, equipment is recorded at cost and is depreciated
on the straight-line method over the lease terms to their estimated fair market
values at lease terminations and 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. Initial direct costs of finance leases are capitalized and are amortized
over the terms of the related leases using the interest method. Initial direct
costs of operating leases are capitalized and amortized on the straight-line
method over the lease terms.
Equipment Held for Sale or Lease - This equipment is carried at cost, less
accumulated depreciation, subject to the Partnership's impairment policy
discussed below.
Investments in 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 value, subject to the Partnership's
policy relating to impairments of residuals. Gains or losses will be recognized
upon the sale or disposition of the investments.
Investments in Options - The Partnership carries its investment in an
option to purchase equipment at cost, which is equal to or less than market
value, subject to the Partnership's policy relating to impairment. Gain or loss
will be recognized upon the sale or disposition of the investment.
Impairment of Estimated Residual Values - The Partnership's policy with
respect to impairment of estimated residual values is to review, on a periodic
basis, the carrying value of its residuals on an individual asset basis to
determine whether events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable and, therefore, an impairment loss
should be recognized. The events or changes in circumstances which generally
indicate that the residual value of an asset has been 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.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The Partnership measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Partnership from re-lease or sale of the equipment. Generally,
third party appraisals, reviews of future cash flows and anticipated future cash
flows and detailed market analyses are used as the basis for measuring whether
an impairment loss should be recognized.
Allowance for Doubtful Accounts - The Partnership records a provision for
bad debts to provide for estimated credit losses in its portfolio. The allowance
for doubtful accounts is based on the ongoing analysis of delinquency trends,
loss experience and an assessment of overall credit risk. 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.
Fair Value of Financial Instruments - Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial
Instruments" requires disclosures about the fair value of financial instruments.
Separate disclosure of fair value information as of December 31, 2001 and 2000
with respect to the Partnership's assets and liabilities is not provided because
(i) SFAS No. 107 does not require disclosures about the fair value of lease
arrangements and (ii) the carrying value of financial assets, other than lease
related investments, and certain other payables approximates market value and
(iii) fair value information concerning certain non-recourse debt obligations is
not practicable to estimate without incurring excessive costs to obtain all the
information that would be necessary to derive a market interest rate.
Redemption of Limited Partnership Units - The General Partner consented to
the Partnership redeeming 1,554.15 units during 2002. 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 deduction 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 taxes of the partners.
Reclassification - Certain items from prior years have been reclassified to
conform to the presentation used in 2002.
New Accounting Pronouncements - In June 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143")
which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. The Partnership does not expect that the adoption of SFAS No. 143 will
have a material impact on its financial position, results of operations or cash
flows.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Effective January 1, 2002, the Partnership adopted the SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144"). This statement requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future net
cash flows expected to be generated by the asset. If the carrying amount of the
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. SFAS No. 144 requires companies to separately report
discontinued operations and extends that reporting to a component of an entity
that either has been disposed of (by sale, abandonment or in a distribution to
the owners) or classified as held for sale. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less the costs to
sell. The adoption of SFAS No. 144 did not have any effect on the Partnership's
financial position or results of operations as the provisions of SFAS No. 144
are similar to the Partnership's current policy for impairment review.
Effective January 1, 2002, the Partnership adopted SFAS No. 145, "Recession
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections" ("SFAS No. 145"). SFAS No. 145 amends SFAS No. 13
Accounting for Leases to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. The provisions of the Statement related to
Statement No. 13 were effective for transactions occurring after May 15, 2002,
the adoption of which did not have a material effect on the Partnership's
financial statements.
On July 30, 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS No. 146"). The standard
replaced Emerging Issues Task Force (EITF) issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)" and requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. Examples of costs covered by the standard include lease termination costs
and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. SFAS
No. 146 is effective prospectively to exit or disposal activities initiated
after December 31, 2002. The impact on the Partnership's financial statement
from the application of this standard is dependent on any exit or disposal
activities in 2003.
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. Consolidated Ventures and Investments in Unconsolidated Joint Ventures
The Partnership and its affiliates formed six joint 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 Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Consolidated Ventures
The two joint ventures described below are majority owned and are
consolidated with the Partnership.
ICON Cheyenne LLC
-----------------
In December 2000, the Partnership and three affiliates, ICON Cash Flow
Partners L.P. Six ("L.P. Six"), ICON Cash Flow Partners L.P. Seven ("L.P.
Seven") and ICON Income Fund Eight A L.P. ("Fund Eight A") formed ICON Cheyenne
LLC ("ICON Cheyenne") for the purpose of acquiring a portfolio of leases for an
aggregate purchase price of $29,705,716, which was paid with cash of $11,401,151
and the assumption of non-recourse debt with an unaffiliated third party lenders
of $18,304,565. The debt is structured to be amortized from the application to
the debt of rentals due under the various leases. The leases expire on various
dates through September 2006. The Partnership, L.P. Seven, L.P. Six and Fund
Eight A have ownership interests of 87.69%, 10.31%, 1.0% and 1.0%, respectively,
in ICON Cheyenne.
The Partnership's consolidated financed statements include 100% of the
assets and liabilities as well as 100% of the related revenues and expenses of
ICON Cheyenne. The interests of L.P. Seven, L.P. Six and Fund Eight A in ICON
Cheyenne have been reflected as minority interests in joint ventures on the
consolidated balance sheets and minority interest expense on the consolidated
statements of operations.
ICON Aircraft 24846, LLC
------------------------
In 2000, the Partnership and two affiliates, L.P. Seven and Fund Eight A
formed ICON Aircraft 24846 LLC ("ICON Aircraft 24846") for the purpose of
acquiring an investment in an aircraft leased to a commercial airline for a
purchase price of $44,515,416, which was funded with cash of $2,241,371 and
non-recourse debt of $42,274,045. The rents and the aircraft have been assigned
to the non-recourse lender. The lease is scheduled to expire in March 2003, at
which time the balance of the non-recourse debt outstanding is scheduled to be
approximately $34,500,000. The Partnership is currently negotiating a lease
agreement with another overseas based airline. Upon termination of the current
lease, the aircraft will first be upgraded before re-leasing. The Partnership,
L.P. Seven and Fund Eight A have ownership interests of 96.0%, 2.0% and 2.0%,
respectively, in ICON Aircraft 24846.
The Partnership's consolidated financial statements include 100% of the
assets and liabilities of ICON Aircraft 24846 as well as 100% of the related
revenues and expenses. L.P. Seven and Fund Eight A's interest in ICON Aircraft
24846 have been reflected as minority interests in joint ventures on the
consolidated balance sheets and minority interest expense on the consolidated
statements of operations.
Investments in Unconsolidated Joint Ventures
The Partnership and its affiliates formed four joint 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.
The four joint ventures described below are 50%, 49%, 5% and 15% owned by
the Partnership and are accounted for under the equity method.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Aircraft 126, LLC
----------------------
In early 2002, the Partnership and ICON Income Fund Nine LLC ("Fund Nine")
formed ICON Aircraft 126 LLC ("ICON 126") for the purpose of acquiring all of
the outstanding shares of Delta Aircraft Leasing Limited ("D.A.L."), a Cayman
Islands registered company, which owns, through an Owner Trust, an Airbus
A340-313X aircraft which is on lease to Cathay Pacific through March 2006. The
stock was acquired for $4,250,000 in cash. The aircraft owned by D.A.L. is
subject to non-recourse debt provided by unaffiliated lenders. As of December
31, 2002, there was $67,277,879 outstanding under the non-recourse debt.
The Partnership and Fund Nine each own a 50% interest in ICON 126. ICON 126
consolidates the financial position and results of operations of D.A.L. in its
financial statements.
The Partnership's original investment in ICON 126 was recorded at a cost of
$3,242,901, inclusive of related acquisition fees of $1,117,901.
Information as to the consolidated financial position and results of
operations of ICON 126 as of and for the year ended December 31, 2002 is
summarized below:
December 31, 2002
Assets $ 74,332,428
===============
Liabilities $ 67,598,170
===============
Equity $ 6,734,258
===============
Partnership's share of equity $ 3,367,129
===============
For the Year Ended
December 31, 2002
Net income $ 248,456
===============
Partnership's share of net income $ 124,228
===============
ICON SPK 2023-A, LLC
--------------------
In the quarter ended March 31, 2002, the Partnership and Fund Nine formed
ICON SPK 2023-A, LLC ("ICON SPK") for the purpose of acquiring a portfolio of
leases for an aggregate purchase price of $7,750,000 in cash. The leases expire
on various dates commencing April 2003 through April 2008.
The Partnership and Fund Nine have ownership interests of 49% and 51%,
respectively. The Partnership accounts for its investment following the equity
method. The Partnership's original investment was recorded at a cost of
$3,797,500 and is adjusted for its share of earnings, losses, and distributions
thereafter.
In June 2002, the Partnership paid ICON SPK $113,925 for its pro-rata share
of the acquisition fees.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Information as to the financial position and results of operations of ICON
SPK as of and for the year ended December 31, 2002 is summarized below:
December 31, 2002
-----------------
Assets $ 6,452,790
===============
Liabilities $ 522,168
===============
Equity $ 5,930,622
===============
Partnership's share of equity $ 2,906,004
===============
For the Year Ended
December 31, 2002
-----------------
Net income $ 504,129
===============
Partnership's share of net income $ 247,022
===============
Distributions $ 2,556,006
===============
Partnership's share of distributions $ 1,252,443
===============
ICON/Kenilworth LLC
-------------------
On September 30, 2002, the Partnership and Fund Nine formed ICON/Kenilworth
LLC for the purpose of acquiring a natural gas-fired 25MW co-generation facility
for a total purchase price of $8,630,000 in cash, with an assumed non-recourse
debt of $7,658,892, consisting of a senior debt of $7,420,156 and a junior debt
of $238,736. The facility is subject to a lease with Energy Factors Kenilworth,
Inc., and the lease expires in July 2004. In addition, there was a total of
$459,843 in acquisition fees paid to the General Partner.
Subsequent to the closing of the acquisition, the purchase price was
adjusted by the following amounts. The cash amount was reduced to $8,410,000 and
the non-recourse debt was reduced to $6,918,091, with an adjustment of $740,801
to the senior debt.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The Partnership and Fund Nine have ownership interests of 5% and 95%,
respectively. The Partnership accounts for the investment following the equity
method. The Partnership's original investment was recorded at a cost of
$443,492, inclusive of related acquisition fees of $22,992 and is adjusted for
its share of earnings, losses and distributions thereafter.
Information as to the financial position of ICON/Kenilworth LLC as of
December 31, 2002 is summarized below:
December 31, 2002
Assets $ 15,157,182
===============
Liabilities $ 6,109,365
===============
Equity $ 9,047,817
===============
Partnership's share of equity $ 452,391
===============
For the Year Ended
December 31, 2002
Net income $ 177,974
===============
Partnership's share of net income $ 8,899
===============
ICON Aircraft 46835, LLC
------------------------
In December 2002, the Partnership and Fund Nine formed ICON Aircraft 46835,
LLC ("ICON 46835") for the purpose of acquiring an investment in a McDonnell
Douglas DC-10-30F aircraft leased to a global provider of transportation for a
purchase price of $25,291,593, which was funded with cash of $3,000,000 and
non-recourse debt of $22,291,593. The rents and the aircraft have been assigned
to the non-recourse lender. The lease is scheduled to expire in March 2007, at
which time the balance of the non-recourse debt outstanding is scheduled to be
approximately $2,708,000. In addition, there was a total of $758,748 in
acquisition fees paid to the General Partner of which the Partnership's share
was $113,812.
The Partnership and Fund Nine have ownership interests of 15% and 85%
respectively. The Partnership accounts for the investment following the equity
method. The Partnership's original investment was recorded at a cost of $450,000
inclusive of related acquisition fees of $113,812 and is adjusted for its share
of earnings, losses, and distributions thereafter.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Financial Statements - Continued
Information as to the financial position and results of operations of ICON
46835 as of and for the year ended December 31, 2002 is summarized below:
December 31, 2002
Assets $ 26,071,518
===============
Liabilities $ 22,303,057
===============
Equity $ 3,768,461
===============
Partnership's share of equity $ 565,269
===============
For the Year Ended
December 31, 2002
Net income $ 9,715
===============
Partnership's share of net income $ 1,457
===============
Seacor Joint Ventures
---------------------
On July 13, 2001, the Partnership and L.P. Seven formed three joint
ventures known as "ICON/Janson Graham LLC," "ICON/Pearl Graham LLC" and "ICON
Amanda Graham LLC", the three of which are referred to collectively as the
"Seacor Joint Ventures". L.P. Seven contributed three offshore supply vessels
(one to each of the Seacor Joint Ventures) with a net book value and approximate
market value of $7,595,271, and the Partnership contributed $3,273,407 in cash
into the Seacor Joint Ventures. The Partnership and L.P. Seven received 30.12%
and 69.88% ownership interests, respectively, in each of the Seacor Joint
Ventures as a result of these contributions.
The Partnership had the right during the first year of the Seacor Joint
Ventures to sell any of its three joint venture interests to L.P. Seven at a
price equal to 110% of its outstanding investment balance for any vessel that
did not generate rental revenue for a three month period. All three vessels were
off-lease for part of the third quarter and the entire fourth quarter of 2001.
On December 31, 2001 the Partnership exercised its right and sold its interests
in the Seacor Joint Ventures back to L.P. Seven for $3,644,701 representing 110%
of its outstanding investment balance which amount is included in due from
affiliates on the balance sheet as of December 31, 2001. The Partnership
recognized a net gain of $327,341 on the sale of its joint venture investment
and $43,953 as its share of income from the joint venture during 2001.
4. Investments in Unguaranteed Residual Values
During the year ended December 31, 2001, the Partnership acquired residual
interests in a portfolio of technology and other equipment leases for
$2,406,128. Leases in this portfolio have expiration dates ranging from March
2003 through March 2005.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
5. Investment in Option
In the fourth quarter of 2001, the Partnership invested $2,100,000
(including $900,000 in acquisition fees paid to the General Partner) for an
option, which expires in 2012, to purchase a Boeing 737-524 aircraft on lease to
a United States based commercial airline. The purchase price of the option
includes an 8.5% $400,000 promissory note which matures in May 2012. The
exercise price of the option decreases periodically according to a predetermined
schedule over the term of the option from $30 million in 2001 to $9 million in
2012.
6. Finance Lease Receivables
Non-cancelable minimum annual amounts receivable on finance leases are as
follows:
Year Ending
December 31,
------------
2003 $ 8,773,388
2004 7,607,104
2005 4,737,432
2006 3,048,481
2007 338,415
----------------
$ 24,504,820
================
Included in the above table are scheduled payments of $16,090,450 and
$2,734,738 with respect to equipment on lease to Kmart, Inc. and Regus Business
Center Corp., respectively. (See Note 10)
7. Investments in Operating Leases
In the fourth quarter of 2000, the Partnership, through a consolidated
joint venture, ICON Aircraft 24846, acquired an aircraft leased to a commercial
airline for a purchase price of $44,515,416, which amount was funded with
$2,241,371 of cash and $42,274,045 in floating rate non-recourse notes payable.
The lease, which expires in March 2003, provides for rental payment amounts to
match the non-recourse floating rate debt obligation secured by the lease and
the aircraft (see Note 8) until March 2003, at which time the balance of the
related non-recourse debt outstanding is scheduled to be approximately
$34,500,000. The Partnership is currently negotiating a lease payment agreement
with another overseas based airline. Upon termination of current lease, the
aircraft will first be upgraded before re-leasing. The outstanding balance at
December 31, 2002 is $35,419,214. Also in the fourth quarter of 2000, the
Partnership acquired, through ICON Cheyenne, a portfolio of various types of
equipment leased to several lessees. The purchase price of this portfolio
totaled $29,705,716 of which $11,401,151 was provided in cash and $18,304,565
was provided in non-recourse debt.
In the first quarter of 2001, the Partnership acquired an aircraft
simulator leased to an unaffiliated third party for a purchase price of
$13,232,105, subject to a lease. Rental payment amounts under this lease are
paid directly to the lender who is secured by this lease and the related
equipment. In the second quarter of 2001, the Partnership acquired aircraft
engine modules, which are leased to a commercial airline, for a purchase price
$5,950,000, $1,911,210 of which was provided by a non-recourse note.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
In early 2002, the Partnership formed ICON Aircraft 123 LLC ("ICON 123") as
a wholly owned subsidiary for the purpose of acquiring all of the outstanding
shares of Alpha Aircraft Leasing Limited ("A.A.L."), a Cayman Islands registered
company, which owns, through an Owner Trust, an Airbus A340-313X aircraft which
is on lease to Cathay Pacific through March 2006. The stock was acquired in the
first quarter of 2002 for $4,250,000 in cash. The aircraft owned by Alpha is
subject to non-recourse debt provided by unaffiliated lenders. The lenders have
a security interest in the aircraft and an assignment of the rentals under the
lease. The fair value of the aircraft was $75,263,566 at the date of acquisition
and the principal balance of the debt was $70,495,058 at such date.
The investment in operating leases at December 31, 2002 and 2001 consisted
of the following:
2002 2001
---- ----
Equipment cost, beginning of year $ 95,156,568 $ 76,284,645
Equipment acquisitions 75,263,566 19,182,105
Initial direct costs 2,242,352 562,699
Equipment dispositions (6,336,543) (872,881)
-------------- --------------
Equipment cost, end of year 166,325,943 95,156,568
-------------- -------------
Accumulated depreciation, beginning of year (11,456,484) (111,940)
Accumulated depreciation on
equipment dispositions 2,036,346 335,991
Depreciation expense (14,171,054) (11,680,535)
-------------- --------------
Accumulated depreciation, end of year (23,591,192) (11,456,484)
-------------- --------------
Investments in operating leases, end of year $ 142,734,751 $ 83,700,084
============== ==============
Non-cancelable minimum annual amounts receivable on operating leases are as
follows:
Year Ending
December 31,
------------
2003 $ 17,179,114
2004 12,706,296
2005 12,004,533
2006 2,826,488
2007 727,224
Thereafter 177,766
----------------
$ 45,621,421
================
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
December 31, 2002
8. Notes Payable
Notes payable non-recourse consists of 67,419,745 attributable to ICON 123,
$35,419,214 attributable to ICON Aircraft 24846, $4,796,713 attributable to ICON
Cheyenne, $13,778,386 attributable to the Kmart leases (see Note 10) and
$11,817,281 attributable to other acquisitions. The ICON 123 note carries a
fixed interest rate of 5.35%; the ICON Aircraft 24846 note carries a floating
interest rate of Libor plus 2.25%; the related lease rate adjusts on a similar
basis. The ICON Cheyenne notes carry fixed interest rates ranging from 5.52% to
10.05% and the remaining notes carry fixed interest rates ranging from 6.27% to
10.00%. Of the $25,595,667 non-recourse debt discussed above, $1,911,210
requires payments of interest only to June 2004, followed by four years where
there are no interest payments due until maturity.
During the quarter ended June 30, 2002, the Partnership entered into a
$17,500,000 joint and several line of credit agreement dated as of May 30, 2002
shared with L.P. Seven and Fund Eight A (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, 5.25% at December
31, 2002) 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 ICON 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 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 expiration date of this line of credit is May 31, 2003. The
Partnership violated a financial covenant at December 31, 2002 creating an Event
of Default. The bank granted a waiver to the Partnership with respect to this
Event of Default. As of December 31, 2002, there were no borrowings by the
Partnership under the line. Aggregate borrowing by all Funds under the line of
credit agreement aggregated $9,731,310 on December 31, 2002.
Notes payable also includes a recourse promissory note. Upon investing in
the option to purchase an aircraft (see Note 6), the Partnership assumed
recourse debt of $400,000, which bears interest at the rate of 8.5% per annum
and matures in May 2012 (or earlier if the option is exercised earlier).
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
December 31, 2002
The notes payable mature as follows:
Notes Payable Notes Payable
Year Non-Recourse Recourse Total
---- -------------- -------------- -------------
2003 $ 49,815,511 $ - $ 49,815,511
2004 12,078,620 - 12,078,620
2005 11,609,062 - 11,609,062
2006 56,842,498 - 56,842,498
2007 680,581 - 680,581
Thereafter 2,205,067 400,000 2,605,067
---------------- -------------- --------------
$ 133,231,339 $ 400,000 $ 133,631,339
================ ============== ==============
9. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General
Partner or its affiliates for the period ended December 31, 2002 and 2001, were
as follows:
2002 2001 2000
---- ---- ----
Organization and
offering expenses $ - $ 1,105,652 $ 769,348 Charged to equity
Underwriting commissions - 1,060,373 439,627 Charged to equity
Acquisition fees 3,498,611 3,122,207 2,386,693 Capitalized
Management fees 2,137,679 1,344,637 92,140 Charged to operations
Administrative expense
reimbursements 966,832 572,981 37,441 Charged to operations
--------------- ------------- -------------
$ 6,603,122 $ 7,205,850 $ 3,725,249
============= ============= =============
In accordance with the terms of the Management Agreement, the Partnership
pays the General Partner acquisition fees of 3% of equipment value acquired, as
defined. Additionally the General Partner is entitled to management fees based
upon lease rentals (ranging from 1% to 7% depending upon the lease structure).
In addition, the General Partner is reimbursed for expenses incurred in
connection with the Partnership's operations (See Note 1 for information
relating to organization and offering expenses and underwriting commissions).
In December 2001 the Partnership entered into three agreements to purchase
lease investments directly or through joint ventures (see Note 4). Prepaid
acquisition fees totaling $2,237,825 were paid to General Partner in the fourth
quarter of 2001 with respect to the three proposed acquisitions, which amounts
were included in the caption Other assets on the December 31, 2001 consolidated
balance sheet. Two of the purchase agreements representing acquisition fees of
$2,123,100 were cancelled and the acquisition fees paid to the General Partner
were returned.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
10. Contingencies
(a) Unit repurchases
----------------
Limited partners who purchased units after June 7, 2001 and before August
18, 2001 have the right to require the Partnership to repurchase their units
within a one-year period following such purchase since certain information
contained in the Partnership's prospectus used during this period was not as
current as required by the rules of the Securities and Exchange Commission. The
repurchase price would be equal to the offering price per unit less any
distributions received with respect to such units. 142,049.4793 units were sold
during this period resulting in gross offering proceeds of $14,204,947.93 which
units comprise 18.94% of all units that the Partnership sold. If a substantial
number of these limited partners choose to have their units repurchased and the
Partnership's available cash were less than the amount needed to repurchase the
units, the Partnership would have to sell equipment or borrow in order to fund
these repurchases. If the Partnership was unable to sell the repurchased units,
the Partnership's cash available for investment and reinvestment in additional
equipment will be reduced which could impact the Partnership's ability to
purchase additional leased equipment.
(b) Kmart
-----
Kmart, Inc., ("Kmart") with whom the Partnership has five leases, filed for
Chapter 11 bankruptcy protection in January 2002. The Partnership's finance
leases with Kmart were acquired during 2001 for $18,234,262, comprised of a
total cash investment of $681,720 and the assumption of $17,552,542 of non
recourse debt. Through March 1, 2003, Kmart has made all scheduled rental
payments. The bankruptcy court has not ruled on the affirmation of the leases as
of the date of this report. Management has deemed an allowance for doubtful
accounts unnecessary at December 31, 2002.
(c) Regus
-----
Regus Business Center Corp. ("Regus"), with whom the Partnership has an
equipment lease, filed for Chapter 11 bankruptcy protection in the United States
of America on January 14, 2003. The Partnership's finance leases with Regus were
acquired in July 2000 at a cost of $5,303,089, and the total lease receivable is
$2,734,738 as of December 31, 2002. Regus has not paid January or February rents
for 2003, and management is currently negotiating an amended lease agreement
whereby Regus will commence making payments on March 15, 2003 continuing for
forty eight months at a new reduced rental rate. Management has deemed an
allowance for doubtful accounts unnecessary at December 31, 2002.
11. Subsequent Event
The Partnership has entered into a binding agreement to purchase an
aircraft through a joint venture with an affiliate in which the Partnership will
have a 90% ownership interest. The acquisition is expected to be completed in
the first quarter of 2003. The joint venture is expecting to invest
approximately $3.08 million and assume non-recourse debt of approximately $24.2
million, for a total purchase price of approximately $27.28 million.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
12. Tax Information (Unaudited)
The following table reconciles net income for financial statement reporting
purposes to income for federal income tax purposes for the years ended December
31, 2002 and 2001 and the period from February 7, 2000 (date of inception) to
December 31, 2000.
2002 2001 2000
---- ---- ----
Net income for financial statement
reporting purposes $ (136,897) $ 820,109 $ 291,236
Temporary differences due to:
Direct finance leases (1,203,869) 3,191,450 1,160,940
Depreciation (765,632) (5,717,920) (1,212,261)
Tax loss from joint venture 1,053,874 (3,652,921) -
Rent - consolidated joint venture (11,871,292) (6,052,762) -
Interest expense - consolidated joint venture 5,151,595 2,629,810 83,585
Other 267,647 (341,012) (337,779)
------------- ------------- -------------
Net loss for federal income
tax reporting purposes $ (7,504,574) $ (9,123,246) $ (14,279)
============= ============= =============
As of December 31, 2002, the partners' capital accounts included for
financial statements reporting purposes totaled $52,820,395 compared to the
partners' capital accounts for federal income tax reporting purposes of
$44,880,779 (unaudited). The difference arises primarily from temporary
differences between net income for financial statement reporting purposes and
net loss for federal income tax purposes, such as accelerated depreciation for
tax purposes and the difference in the tax and financial statements treatment of
finance leases, partially offset by commissions reported as a reduction in the
partners' capital accounts for financial statement reporting purposes but not
for federal income tax reporting purposes.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
13. Quarterly Financial Data (Unaudited)
The following table is a summary of financial data by quarter for the year
ended December 31, 2002 and 2001:
For the Quarter Ended
---------------------
March 31 June 30, September 30, December 31,
-------- ------- ------------ -----------
2002
Revenues $ 6,082,971 $ 6,725,602 $ 6,527,843 $ 6,130,945
============= ============== ============= ===============
Net income allocable to
limited partners $ 519,074 $ (307,185) $ (144,988) $ (202,429)
============= ============== ============= ===============
Net income per weighted
average limited partnership unit $ .69 $ (.41) $ (.19) $ (.27)
============= ============== ============= ================
2001
Revenues $ 4,557,329 $ 5,096,340 $ 5,294,812 $ 5,283,515
============= ============== ============== ===============
Net income allocable to
limited partners $ 12,880 $ 161,882 $ 5,692 $ 631,454(1)
============= ============== ============= ===============
Net income per weighted
average limited partnership unit $ 0.05 $ 0.45 $ 0.01 $ 1.11
============= ============= ============ ===============
(1) The fourth quarter of 2001 included approximately $327,000 of gain from the
sale of a joint venture interest to an affiliate (See Note 3).
14. Significant Lessees
The Partnership had two and one lessee who accounted for more than 10% of
the Partnership's total revenue during the years ended December 31, 2002 and
2001, respectively. During 2002, equipment leased to Cathay Pacific and BAE
Systems PLC generated 27% and 10% of total revenue, respectively. During 2001,
equipment leased to BAE Systems PLC generated 11% of total revenue.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
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 Current Reports on Form 8-K filed on February 5,
2003.
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, 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.
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 56, 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 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 42, 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.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
Thomas W. Martin, age 49, 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 period ended December, 31, 2002 and 2001.
Entity Capacity Type of Compensation 2002 2001
------ -------- ------- ------------ ---- ----
ICON Capital Corp. General Partner Organization and
offering expenses $ - $ 1,105,652
ICON Securities Corp. Dealer-Manager Underwriting commissions - 1,060,373
ICON Capital Corp. Manager Acquisition fees 3,498,611 3,122,207
ICON Capital Corp. General Partner Management fees 2,137,679 1,344,637
ICON Capital Corp. General Partner Administrative expense
reimbursements 966,832 572,981
------------- -------------
$ 6,603,122 $ 7,205,850
============= =============
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.
(b) As of March 31, 2003, 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
----------------------------------------------
None other than those disclosed in Item 11 herein and in Notes 3, 4 and 10
to the Consolidated Financial Statements.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
Item 14. Control and Procedures
----------------------
Beaufort J.B. Clarke and Thomas W. Martin, the Principal Executive and
Principal Financial Officers, respectively, of ICON Capital Corp. ("ICC"), the
General Partner of the Partnership, have evaluated the disclosure controls and
procedures of the Partnership within 90 days prior to the filing of this annual
report. As used herein, the term "disclosure controls and procedures" has the
meaning given to the term by Rule 13a-14 under the Securities Exchange Act of
1934, as amended ("Exchange Act"), and includes the controls and other
procedures of the Partnership that are designed to ensure that information
required to be disclosed by the Partnership in the reports that it files with
the SEC under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms. As part of their
evaluation, Messrs. Clarke and Martin conferred with the finance and accounting
staff of ICC and the finance and accounting staff of ICON Holdings Corp., the
parent of ICC. Based upon their evaluation, Messrs. Clarke and Martin have
concluded that the Partnership's disclosure controls and procedures provide
reasonable assurance that the information required to be disclosed by the
Partnership in this report is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms applicable to the
preparation of this report.
There have been no significant changes in the Partnership's internal
controls or in other factors that could significantly affect the Partnership's
internal controls subsequent to the evaluation described above conducted by
ICC's principal executive and financial officers.
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 Financial Statements or Notes
thereto.
3. Exhibits - The following exhibits are incorporated herein by reference:
(i) Amended and Restated Agreement of Limited Partnership
(Incorporated by reference to Exhibit 4.1 to Post-Effective
Amendment No. 6 to Form S-1 Registration Statement No. 333-54001
filed with the Securities and Exchange Commission on May 19,
2000).
(ii) Certificate of Limited Partnership of the Partnership
(Incorporated herein by reference to Exhibit 4.3 to
Post-Effective Amendment No. 6 Form S-1 Registration Statement
No. 333-54001 filed with the Securities and Exchange Commission
on May 19, 2000).
(iii) Loan and Security Agreement
(iv) First Amendment to Loan and Security Agreement
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
(b) Reports on Form 8-K
Form 8-K filed on February 5, 2003.
Item 4. Changes in Registrant's Certifying Accountant
(c) Exhibits
10.1 Loan and Security Agreement
10.2 First Amendment to Loan and Security Agreement
99.1 Certification of Chairman and Chief Executive Officer pursuant to
18 U.S.C.ss.1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of Executive Vice President and Principal Financial
and Accounting Officer pursuant to 18 U.S.C.ss.1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(d) Unconsolidated Joint Venture Financial Statements
ICON SPK 2023-A, LLC - as of and for the year ended December 31, 2002
ICON Aircraft 126, LLC - as of and for the year ended December 31,
2002
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
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 Income Fund Eight B L.P.
File No. 333-37504 (Registrant)
By its General Partner, ICON Capital Corp.
Date: March 31, 2003 /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 31, 2003 /s/ Beaufort J.B. Clarke
----------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Date: March 31, 2003 /s/ Paul B. Weiss
---------------------------------------------
Paul B. Weiss
President and Director
Date: March 31, 2003 /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.
Certifications - 10-K
---------------------
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Income Fund Eight B
L.P.;
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-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); 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, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; 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; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: March 31, 2003
/s/ Beaufort J.B. Clarke
- -----------------------------
Beaufort J. B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
sole General Partner of ICON Income Fund Eight B L.P.
Certifications - 10-K
---------------------
I, Thomas W. Martin, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Income Fund Eight B
L.P.;
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-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); 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, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; 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; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: March 31, 2003
/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 Income Fund Eight B L.P.
EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
dated May 30, 2002
between
ICON CASH FLOW PARTNERS L.P. SEVEN
ICON INCOME FUND EIGHT A L.P.
ICON INCOME FUND EIGHT B L.P.
and
COMERICA BANK-CALIFORNIA
TABLE OF CONTENTS
Page
1. AMOUNT AND TERMS OF CREDIT...............................................................................10
1.1 Revolving Line of Credit Commitment..................................................................10
1.1.1 Revolving Line of Credit..................................................................10
1.1.2 Revolving Loan Account; Use of Proceeds...................................................11
1.1.3 Requests for Revolving Loans/Approval by Lender...........................................11
1.1.4 Revolving Loan Interest...................................................................11
1.2 Interest Rates.......................................................................................12
1.2.1 Default Rate..............................................................................12
1.2.2 Computation of Interest...................................................................12
1.2.3 Maximum Interest Rate.....................................................................12
1.3 Loan Fees............................................................................................12
1.3.1 Facility Fee..............................................................................12
1.3.2 Documentation Fee, Costs and Expenses.....................................................12
1.4 Late Charges.........................................................................................13
1.5 Repayment............................................................................................13
1.5.1 Payment on Revolving Loan Maturity Date...................................................13
1.5.2 Optional Prepayment.......................................................................13
1.5.3 Repayment Procedure.......................................................................13
1.6 Borrowing and Prepayment Notices.....................................................................13
1.7 Note.................................................................................................14
1.8 Payments on Non-Business Day.........................................................................14
1.9 Collection of Payments...............................................................................14
1.9.1 Automatic Payments........................................................................14
1.9.2 Other Payments............................................................................15
1.10 Receipt of Payments by Lender.......................................................................15
1.11 Extension of Time for Advances and Repayment.......................................................15
2. CREATION OF SECURITY INTEREST............................................................................16
2.1 Grant of Security Interest...........................................................................16
2.2 Authorization to File Financing Statements...........................................................17
2.3 Chattel Paper........................................................................................17
2.4 Negotiable Collateral................................................................................17
2.5 Investment Property..................................................................................17
2.6 Delivery of Additional Documentation Required........................................................18
2.7 Right to Inspect.....................................................................................18
2.8 Bailees and Other Third Parties in Possession.......................................................18
2.9 Control Agreements..................................................................................18
2.10 Ownership of Collateral...........................................................................10
3. CONDITIONS PRECEDENT....................................................................................19
3.1 Conditions Precedent to Initial Loan................................................................19
3.1.1 Note.....................................................................................19
3.1.2 Financing Statements and Perfection of Security Interest.................................19
3.1.3 Search Results...........................................................................19
3.1.4 Due Diligence............................................................................19
3.1.5 Insurance................................................................................19
3.1.6 Organizational Documents.................................................................20
3.1.7 Authorizations...........................................................................20
3.1.8 Good Standing............................................................................20
3.1.9 Executed Agreement.......................................................................20
3.1.10 Certificates of Title...................................................................20
3.1.11 Collateral Access Agreements............................................................20
3.1.12 Control Agreements......................................................................20
3.1.13 Payment of Borrower 1 and Borrower 3 Indebtedness.......................................20
3.1.14 Payment of All Fees and Expenses........................................................20
3.1.15 Opinion of Counsel......................................................................20
3.1.16 Contribution Agreement..................................................................11
3.1.17 Material Adverse Change................................................................20
3.1.18 Additional Documents....................................................................21
3.2 Conditions Precedent to All Loans...................................................................21
3.2.1 Borrowing Request........................................................................21
3.2.2 Representations and Warranties...........................................................21
3.2.3 Defaults.................................................................................21
3.2.4 Additional Documents.....................................................................21
4. REPRESENTATIONS AND WARRANTIES OF BORROWER..............................................................21
4.1 Existence and Rights................................................................................21
4.2 Agreement Authorized................................................................................22
4.3 No Conflict.........................................................................................22
4.4 Litigation..........................................................................................22
4.5 Financial Condition.................................................................................22
4.6 Title to Assets.....................................................................................22
4.7 Name; State of Incorporation; Location of Chief Executive Office....................................22
4.8 General Partner.....................................................................................23
4.9 Subsidiaries........................................................................................23
4.10 Tax Status.........................................................................................23
4.11 Trademarks, Trade Names, Copyrights, Patents.......................................................23
4.12 Regulatory Compliance..............................................................................23
4.13 ERISA..............................................................................................24
4.14 Solvency, Payment of Debts.........................................................................24
4.15 Full Disclosure....................................................................................24
4.16 Enforceability; Priority of Security Interest......................................................24
4.17 Enforceability of Collateral.......................................................................24
4.18 Other Financing Statements.........................................................................25
4.19 Environmental Representations......................................................................25
4.19.1 Existing Conditions.....................................................................25
4.19.2 Existing Orders........................................................................25
4.19.3 Permits.................................................................................25
4.19.4 Leases and Loan Contracts Subject to Revolving Loans....................................25
4.20 Inventory Records..................................................................................26
4.21 Commissions Due to Brokers.........................................................................26
4.22 Benefit to All Borrowers...........................................................................18
4.23 Consultation with Counsel..........................................................................18
5. AFFIRMATIVE COVENANTS OF BORROWER.......................................................................26
5.1 Rights and Facilities...............................................................................27
5.2 Use of Proceeds.....................................................................................27
5.3 Insurance...........................................................................................27
5.4 Taxes and Other Liabilities.........................................................................27
5.5 Records and Reports.................................................................................27
5.5.1 Quarterly Financial Statement............................................................28
5.5.2 Annual Financial Statement...............................................................28
5.5.3 Borrowing Base/Eligible Borrowing Base Contract Aging Report.............................18
5.5.4 Audit Reports............................................................................28
5.5.5 Compliance Certificate...................................................................28
5.5.6 Other Information........................................................................28
5.6 ERISA...............................................................................................28
5.7 Laws ...............................................................................................28
5.8 Compliance with GAAP................................................................................29
5.9 Maintenance of Collateral...........................................................................29
5.10 Location of Inventory and Equipment................................................................29
5.11 Disposition of Proceeds of Collateral..............................................................29
5.12 Operating Accounts.................................................................................30
5.13 Notices............................................................................................30
5.14 Audits.............................................................................................30
5.15 Assignment of Accounts, Leases and Loan Contracts..................................................30
5.16 Collection of Accounts, Leases and Loan Contracts, Inventory Proceeds..............................31
5.17 Environmental Covenants............................................................................31
5.18 Contribution Agreement.............................................................................31
6. NEGATIVE COVENANTS OF BORROWER..........................................................................31
6.1 Type of Business; Management; Change of Control.....................................................31
6.2 Change of Name......................................................................................32
6.3 Change of State of Formation........................................................................32
6.4 Outside Indebtedness................................................................................32
6.5 Liens and Encumbrances..............................................................................32
6.6 Transactions Involving Collateral...................................................................32
6.7 Loans, Investments; Secondary Liabilities...........................................................32
6.8 Acquisition or Sale of Business; Merger or Consolidation............................................33
6.9 Distributions.......................................................................................33
6.10 Transactions with Subsidiaries and Affiliates......................................................33
6.11 Pension Plans......................................................................................33
6.12 No Further Negative Pledges........................................................................33
7. FINANCIAL COVENANTS.....................................................................................33
7.1 Aggregate Tangible Net Worth........................................................................33
7.2 Individual Borrower Tangible Net Worth..............................................................34
7.3 Debt to Tangible Net Worth..........................................................................34
7.4 Profitability.......................................................................................26
7.5 Other Collateral....................................................................................34
8. EVENTS OF DEFAULT.......................................................................................34
8.1 Failure to Pay......................................................................................34
8.2 Breach of Representations and Warranties, Affirmative, Negative or Financial Covenants..............34
8.3 Breach of Other Covenants...........................................................................34
8.4 Breach of Warranty..................................................................................34
8.5 Breach Under Any Other Loan Document................................................................34
8.6 Default Under Agreements with Other Persons.........................................................35
8.7 Judgments...........................................................................................35
8.8 Ownership...........................................................................................35
8.9 ERISA Compliance....................................................................................35
8.10 Insolvency; Receiver or Trustee....................................................................35
8.11 Bankruptcy.........................................................................................35
8.12 Security Interest..................................................................................35
8.13 Cessation of Business..............................................................................36
8.14 Material Adverse Change............................................................................36
8.15 Attachments........................................................................................36
8.16 Other Defaults.....................................................................................36
9. LENDER'S RIGHTS AND REMEDIES UPON EVENT OF DEFAULT......................................................36
9.1 Rights and Remedies.................................................................................36
9.2 Power of Attorney...................................................................................38
9.3. Payment of Expenses by Lender......................................................................39
9.4 No Obligation to Pursue Others......................................................................39
9.5 Compliance with Other Laws..........................................................................39
9.6 Warranties..........................................................................................39
9.7 Sales on Credit.....................................................................................39
9.8 No Marshaling.......................................................................................39
9.9 Government Consents.................................................................................39
9.10 Lender's Liability for Collateral..................................................................40
9.11 Waiver of Defaults.................................................................................40
9.12 Remedies Cumulative................................................................................40
9.13 Demand; Protest....................................................................................40
10. MISCELLANEOUS PROVISIONS................................................................................40
10.1 Failure or Indulgence Not Waiver...................................................................41
10.2 Amendments and Waivers.............................................................................41
10.3 Construction; Interpretation.......................................................................41
10.4 Cumulative Effect; Conflict of Terms...............................................................41
10.5 Counterparts; Entire Agreement.....................................................................41
10.6 Lender's Expenses and Attorney's Fees..............................................................42
10.7 Taxes and Fees.....................................................................................42
10.8 Successors and Assigns; Participations; Disclosure.................................................42
10.9 Applicable Law.....................................................................................43
10.10 Notices...........................................................................................43
10.11 Further Action....................................................................................43
10.12 Severability......................................................................................43
10.13 Reliance on and Survival of Various Provisions....................................................43
10.14 Effective Upon Execution..........................................................................44
10.15 Confidentiality...................................................................................44
10.16 Time of the Essence...............................................................................44
10.17 Joint and Several Liability......................................................................33
10.18 Waiver of Jury Trial..............................................................................44
APPENDIX A......................................................................................................A-1
GENERAL DEFINITIONS....................................................................................A-1
SCHEDULE 1......................................................................................................B-1
LEASES, LOAN CONTRACTS AND RELATED PROPERTY............................................................B-1
Exhibit 1.......................................................................................................B-5
Borrower's Report......................................................................................B-5
Exhibit 2.......................................................................................................B-8
Promissory Note........................................................................................B-8
Exhibit 3......................................................................................................B-10
Compliance Certificate................................................................................B-10
Exhibit 4......................................................................................................B-13
Borrowing Base/Eligible Borrowing Base Contract Aging Report...................................................B-13
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement is made and entered into as of May 30, 2002, 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"), on the one hand, and Comerica Bank-California, a California
banking corporation ("Lender"), on the other hand. Borrower 1, Borrower 2,
Borrower 3 and all other Persons who are or hereafter (with Lender's consent)
become borrowers under this Agreement are jointly and severally, individually
and collectively, referred to herein as "Borrower." Except as otherwise defined
herein, initially capitalized terms used in this Agreement have the meanings
assigned to them in Appendix A attached hereto.
Subject to the terms and conditions hereof, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender shall make the Loans to Borrower as set forth below.
In consideration of the mutual covenants and conditions hereof, the parties
agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1......Revolving Line of Credit Commitment.
1.1.1Revolving Line of Credit. Subject to the terms and conditions of this
Agreement, from time to time from the Closing Date to 4:00 p.m., California
time, on the Business Day immediately prior to the Revolving Loan Maturity
Date, Lender agrees, upon Borrower's request in accordance with this
Agreement, to make advances (each a "Revolving Loan," and collectively, the
"Revolving Loans") to Borrower in an aggregate amount outstanding not to
exceed at any one time the lesser of: (x) the Borrowing Base or (y) the
Maximum Revolving Amount.
If at any time or for any reason, the outstanding principal amount of the
Revolving Loans issued by Lender pursuant to this Agreement and outstanding
shall exceed the lesser of: (x) the Borrowing Base or (y) the Maximum Revolving
Amount, Borrower shall pay to Lender, in cash, the amount of such excess within
5 days of the date such excess occurs. Borrower shall not request any Revolving
Loan from Lender which, if made, issued or allowed, would exceed the limits set
forth in this Section 1.1.1.
Any commitment of Lender, pursuant to the terms of this Agreement, to make
Revolving Loans shall expire at 4:00 p.m., California time, on the Business Day
prior to the Revolving Loan Maturity Date, subject to Lender's right to renew
said commitment in its sole and absolute discretion at Borrower's request. Any
such renewal of said commitment shall not be binding upon Lender unless it is in
writing and signed by an officer of Lender. Provided that no Event of Default
has occurred and is continuing, all or any portion of the Revolving Loans
advanced by Lender which are repaid by Borrower shall be available for
reborrowing in accordance with the terms hereof.
1.1.2Revolving Loan Account; Use of Proceeds. The amount and date of each
Revolving Loan made by Lender to Borrower hereunder, the amount from time to
time outstanding, the applicable interest rate in respect of each Loan, the
amount and date of any repayment hereunder, and the amount allocable to each
Borrower based on Loans to that Borrower and repayments by that Borrower shall
be noted on Lender's books and records ("Revolving Loan Account"), which shall
be presumptive evidence thereof, absent manifest error; provided, however, that
any failure by Lender to make any such notation, or any error in any such
notation, shall not relieve Borrower of its obligations to pay to Lender all
amounts owing to Lender under or pursuant to this Agreement and each of the
other Loan Documents, in each case, when due in accordance with the terms hereof
or thereof. Borrower shall not use the proceeds of Revolving Loans for any
purpose other than (a) payment of the balance owing to Lender on loans made by
Lender to Borrower 1 and Borrower 3 existing on the date hereof; (b) payment of
the balance owing to Pullman Bank (not to exceed $2,600,000) on a line of credit
by Pullman Bank to Borrower 2 (provided that Pullman Bank prior to or
concurrently therewith terminates the line of credit and its security interest
in property of Borrower 2 and delivers to Lender the original lease documents it
obtained as collateral to secure such line of credit); (c) payment of Borrower's
periodic cash flow needs, including modifications and upgrades to equipment in
the process of being sold or released, reduction of non-recourse borrowings,
making scheduled distributions to limited partners, acquiring equipment subject
to lease or similar transactions intended for the investment account of
Borrower, and for general working capital needs of Borrower.
1.1.3 Requests for Revolving Loans/Approval by Lender.
Requests for Revolving Loans hereunder shall be in writing duly executed by each
Borrower, on a Borrower's Report in the form attached hereto as Exhibit 1, and
shall contain a certification: (a) demonstrating on a pro forma basis Borrower's
compliance with Section 1.1.1 and Section 1.1.2 after taking into account the
proposed borrowing and the proposed payment terms of the Eligible Borrowing Base
Contracts or Eligible Residual Values proposed to be financed by the borrowing,
(b) describing in detail satisfactory to Lender the Eligible Borrowing Base
Contracts, Eligible Residual Values, and related equipment based on which such
Revolving Loan has been requested, (c) certifying that the applicable contracts
are Eligible Borrowing Base Contracts, (d) certifying that Borrower is in
compliance with, and will continue to be in compliance with upon the making of
the Revolving Loan, the terms and conditions of the Agreement, and (e) providing
such additional information as is requested in the Borrower's Report. Borrower
shall also state in writing to which Borrower the Revolving Loan is being made.
Notwithstanding any other provision contained herein or in any
of the Loan Documents, Lender is under no obligation to make a Revolving Loan
with respect to any lease or loan contract in which Borrower is not the lessor
or lender, as the case may be. If Lender decides, in its sole and absolute
discretion, to make such a Revolving Loan, it shall be on such terms and
conditions as are acceptable to Lender.
1.1.4 Revolving Loan Interest. Borrower further promises to
pay to Lender, from the date of the advance of the initial Revolving Loan until
all Obligations are repaid in full and Lender has no further obligation to make
Revolving Loans, on or before the last day of each month, interest on the unpaid
balance of the Revolving Loans at a fluctuating rate of interest equal to the
Base Rate plus 1.0% per annum, which rate shall vary concurrently with any
change in the Base Rate.
1.2......Interest Rates.
1.2.1 Default Rate. Notwithstanding anything to the contrary
set forth herein, upon the occurrence and during the continuation of an Event of
Default, all Obligations shall bear interest at a rate equal to 3.00% per year
in excess of the rate applicable immediately prior to the occurrence of the
Event of Default, and such rate of interest shall fluctuate thereafter from time
to time at the same time and in the same amount as any fluctuation in the rate
applicable immediately prior to such occurrence. Such default interest shall be
payable on demand.
1.2.2 Computation of Interest. All computations of interest
shall be calculated on the basis of a year of three hundred sixty (360) days for
the actual days elapsed. In the event that the Base Rate announced is, from time
to time, changed, adjustment in the rate of interest payable hereunder shall be
made as of 12:01 a.m. (California time) on the effective date of the change in
the Base Rate. Interest shall accrue from the Closing Date to the date of
repayment of the Loans in accordance with the provisions of this Agreement;
provided, however, if a Loan is repaid on the same day on which it is made, then
one (1) day's interest shall be paid on that Loan. Any and all interest not paid
when due shall, at Lender's option, thereafter be deemed to be a Revolving Loan
made under Section 1.1.1 and shall bear interest thereafter as provided for in
Subsection 1.1.4.
1.2.3 Maximum Interest Rate. In no event shall the interest
rate and other charges hereunder exceed the highest rate permissible under any
law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. In the event that such a court determines that Lender
has received interest and other charges hereunder in excess of the highest rate
applicable hereto, such excess shall be deemed received on account of, and shall
automatically be applied to reduce, the Obligations, other than interest, in the
inverse order of maturity, and the provisions hereof shall be deemed amended to
provide for the highest permissible rate. If there are no Obligations
outstanding, Lender shall refund to Borrower such excess.
1.3......Loan Fees. In addition to any other amounts due or to become
due under this Agreement concurrent with the execution hereof, Borrower shall
pay to Lender, the following fees:
1.3.1 Facility Fee. A Facility Fee in the amount of $75,000.00
per year, payable in arrears in installments of $18,750.00 per quarter, with the
first installment in the amount of $18,750.00 to be paid on June 30, 2002, and
with subsequent installments to be paid on the last day of each three-month
period thereafter (September 30, 2002, December 31, 2002, etc.) through the
Revolving Loan Maturity Date of, if an extension of time beyond the Revolving
Loan Maturity Date for advances and repayment is provided pursuant to Section
1.11, through the end of the extension period.
1.3.2 Documentation Fee, Costs and Expenses. In addition to
any other amounts due, or to become due, concurrently with the execution hereof,
a documentation fee in the amount of $500.00 and all other costs and expenses
(including attorney's fees) incurred by Lender in the negotiation and
preparation of this Agreement and the other Loan Documents, incurred in the
perfection of any security interest granted to Lender by Borrower, or incurred
by Lender in the negotiation and preparation of any modification or restatement
of, or amendment to, this Agreement or any of the other Loan Documents.
1.4......Late Charges. If any installment payment, interest payment,
principal payment or principal balance due under any of the Loans is delinquent
10 or more days, in addition to and not in substitution of Lender's other rights
and remedies with respect to such late payment, Borrower agrees to pay Lender a
late charge in the amount of 5% of the payment so due and unpaid, in addition to
the payment. All payments, at Lender's sole discretion, shall be applied first
to any late charges owing, then to interest and the remainder, if any, to
principal.
1.5......Repayment.
1.5.1 Payment on Revolving Loan Maturity Date. Borrower
promises to pay to Lender the entire outstanding unpaid principal balance of the
Loans, together with all accrued unpaid interest thereon and unpaid fees, costs,
expenses, and charges owing to Lender pursuant to the Loan Documents, on the
earlier of the date otherwise due under this Agreement or the Revolving Loan
Maturity Date.
1.5.2 Optional Prepayment. Borrower may, at its option, prepay
the Loans, in whole or in part, at any time and from time to time without
penalty or premium.
1.5.3 Repayment Procedure. All repayments of Loans (including
prepayments and payments of interest and late charges with respect to Loans)
shall be made to Lender in immediately available funds. In the case of any
repayment, Borrower shall designate to Lender the identity of the Borrower to
whom the repayment is to be allocated and the amount(s) being repaid. If
Borrower fails to make such a designation, Lender may apply the repayment in any
manner it deems appropriate.
1.6......Borrowing and Prepayment Notices. Borrower shall give Lender
prior written notice of each request for the making of a Revolving Loan (each, a
"Borrowing Notice") or the prepayment of a Revolving Loan (each, a "Prepayment
Notice") as follows:
1.6.1 Each Borrowing Notice and Prepayment Notice shall be
effective only if actually received by Lender at the address set forth in
Section 10.10 of this Agreement not later than 11:00 a.m., Pacific time, on the
date of the proposed borrowing or prepayment, as the case may be.
1.6.2 Each such Borrowing Notice or Prepayment Notice shall
specify (i) the amount (subject to the limitations set forth in this Agreement)
to be borrowed or prepaid, as the case may be, (ii) the identity of the Borrower
who is obtaining the Revolving Loan or who is to be credited with the
prepayment, as the case may be, and (iii) the date of the borrowing or
prepayment, as the case may be. Any such date shall be a Business Day.
1.6.3 Lender shall not incur any liability to Borrower in
acting upon any telephonic notice which Lender believes in good faith to have
been given by a Responsible Officer of Borrower, or for otherwise acting in good
faith under this Section 1.6, and in making any Loans pursuant to telephonic
notice.
1.6.4 Lender may, in its sole and absolute discretion, either
require all Borrowers to join in any request for a Loan or in any other action
under the Loan Documents, or act on the basis of a request or action of any one
or more Borrower.
1.6.5 So long as all of the conditions for a borrowing of a
Revolving Loan set forth herein have been satisfied, Lender shall make the
proceeds of such Loan available to Borrower on the applicable borrowing date by
transferring same day funds, equal to the amount of such Loan, in accordance
with written disbursement instructions given by Borrower to Lender, in form and
substance satisfactory to Lender and otherwise consistent with Section 1.1.
1.7......Note. Borrower will execute and deliver to Lender a promissory
note substantially in the form of Exhibit 2, with appropriate insertions as to
payee, date and principal amount (each, as amended, supplemented, replaced or
otherwise modified from time to time, the "Note"), payable to the order of
Lender and in a principal amount equal to the Maximum Revolving Amount. The Note
shall (x) be dated the Closing Date, (y) be payable as provided herein and (z)
provide for the payment of interest in accordance with the terms of this
Agreement.
1.8......Payments on Non-Business Day. Whenever any payment to Lender
under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead
be due on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such extension.
1.9......Collection of Payments. All sums payable by Borrower to Lender
under or pursuant to this Agreement or any other Loan Document, whether
principal, interest, or otherwise, shall be paid, when due, directly to Lender
at the office of Lender identified in Section 10.10, in immediately available
United States funds, and without setoff, deduction or counterclaim. Borrower
hereby authorizes Lender to collect all principal, interest, late charges, fees,
costs, or expenses due under this Agreement or the other Loan Documents, as
follows:
1.9.1 Automatic Payments. Borrower authorizes Lender to
automatically deduct from deposit account number 1891551895 maintained by
Borrower 1 with Lender the portion of the amount of principal, interest and late
charges due allocable to Borrower 1 (which allocation shall be based on Loans to
Borrower 1 and payments by Borrower 1). Borrower authorizes Lender to
automatically deduct from deposit account number 1892184233 maintained by
Borrower 2 with Lender the portion of the amount of principal, interest and late
charges due allocable to Borrower 2 (which allocation shall be based on Loans to
Borrower 2 and payments by Borrower 2). Borrower authorizes Lender to
automatically deduct from deposit account number 1891552869 maintained by
Borrower 3 with Lender the portion of the amount of principal, interest and late
charges due allocable to Borrower 3 (which allocation shall be based on Loans to
Borrower 3 and payments by Borrower 3). Lender may automatically deduct from any
account maintained by any Borrower with Lender any other amounts owed by any
Borrower to Lender and, if there are insufficient funds in any of the
above-referenced accounts to satisfy the amount owed to Lender, Lender may
automatically deduct the deficiency from any account maintained by any Borrower
with Lender or an Affiliate of Lender.
Should there be insufficient funds in any such account to pay
all such sums when due, the full amount of such deficiency shall be immediately
due and payable by Borrower; provided, however, that Lender shall not be
obligated to advance funds to cover any such payment. In addition, Borrower
authorizes Lender, at its sole option, without prior notice to Borrower, to
advance a Revolving Loan for any payment due or past due hereunder, including
principal, interest or late charges owing of the Loans, and to pay the proceeds
of such Revolving Loan to Lender for application toward such due or past due
payment.
1.9.2 Other Payments. Any such amounts not collected in
accordance with the foregoing instructions may be paid in cash or deducted from
loan proceeds; provided, however, that Lender shall not be obligated to advance
funds to cover payment of any such amount.
1.10.....Receipt of Payments by Lender. Any payment by Borrower of any
of the Obligations made by mail will be deemed tendered and received by Lender
only upon actual receipt thereof by Lender at the address designated for such
payment, whether or not Lender has authorized payment by mail or in any other
manner, and such payment shall not be deemed to have been made in a timely
manner unless actually received by Lender on or before the date due for such
payment, time being of the essence. Borrower expressly assumes all risks of loss
or liability resulting from non-delivery or delay of delivery of any item of
payment transmitted by mail or in any other manner. Acceptance by Lender of any
payment in an amount less than the amount then due shall be deemed an acceptance
on account only, and any failure to pay the entire amount then due within the
grace period set forth in Section 8.1 of this Agreement shall constitute and
continue to be an Event of Default hereunder, and at any time thereafter, and
until the entire amount then due has been paid in full, Lender shall be entitled
to exercise any and all rights and remedies conferred upon and otherwise
available to Lender hereunder or under any of the other Loan Documents upon the
occurrence and during the continuance of any such Event of Default. Prior to the
occurrence of any Event of Default hereunder, Borrower shall have the right to
direct the application of any and all payments made to Lender by Borrower
hereunder to the respective Obligations. Borrower waives the right to direct
application of any and all payments received by Lender from and on behalf of
Borrower at any time or times after the occurrence and during the continuation
of any Event of Default hereunder. Borrower further agrees that after the
occurrence and during the continuation of any Event of Default hereunder, or
prior to the occurrence of any Event of Default hereunder if Borrower has failed
to direct such application, Lender shall have the continuing exclusive right to
apply and to reapply any and all payments received by Lender at any time or
times hereafter, whether as voluntary payments, proceeds from any Collateral,
offsets, or otherwise, against the Obligations in such order and in such manner
as Lender may, in its sole discretion, deem advisable, notwithstanding any entry
by Lender upon any of its books and records. Borrower hereby expressly agrees
that, to the extent that Lender receives any payment or benefit of or otherwise
upon any of the Obligations, and such payment or benefit, or any part thereof,
is subsequently invalidated, declared to be fraudulent or preferential, or set
aside, or required to be repaid to a trustee, receiver, or other party under any
provision of the Bankruptcy Code or under any other state or federal law, common
law, or equitable cause, then to the extent of such payment or benefit, the
Obligations, or part thereof, intended to be satisfied shall be revived and
continued in full force and effect as if such payment or benefit had not been
made by Borrower or received by Lender, and, further, any such repayment by
Lender shall be added to and be deemed to be part of the Obligations.
1.11 Extension of Time for Advances and Repayment.
1.11.1 If Lender fails to give Borrower written notice prior
to six months before the Revolving Loan Maturity Date of its intention not to
extend the Revolving Loan Maturity Date, then the date on which Lender's
obligation to make advances (subject to the terms and conditions of the Loan
Documents) shall be extended to the earlier of the following: (a) 4:00 p.m.,
California time, on the Business Day immediately prior to the date that is 6
months after Lender provides Borrower with written notice of its intention not
to extend the Revolving Loan Maturity Date; and (b) 4:00 p.m., California time,
on the Business Day immediately prior to the date that is 6 months after the
Revolving Loan Maturity Date.
1.11.2 If Lender fails to give Borrower written notice prior
to six months before the Revolving Loan Maturity Date of its intention not to
extend the Revolving Loan Maturity Date, then the date on which amounts are due
and payable by Borrower on the Revolving Loan Maturity Date shall be extended to
the earlier of the following: (a) 6 months after Lender provides Borrower with
written notice of its intention not to extend the Revolving Loan Maturity Date;
and (b) 6 months after the Revolving Loan Maturity Date. Notwithstanding the
foregoing, regardless of whether Lender has provided such notice, Borrower
remains obligated to pay when otherwise due all amounts payable prior to the
Revolving Loan Maturity Date (including but not limited to interest payments and
amounts payable as the result of an acceleration of the loan in accordance with
the Agreement).
1.11.3 Regardless of whether Lender has provided the notice
described in Sections 1.11.1 or 1.11.2, Lender retains all of the rights and
remedies available to it if an Event of Default or Unmatured Event of Default
occurs.
2. CREATION OF SECURITY INTEREST
2.1......Grant of Security Interest. Borrower hereby grants to Lender a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Lender's security interests in
the Collateral shall attach to all Collateral without further act on the part of
Lender or Borrower.
Borrower acknowledges that Lender may place a "hold" on any Deposit
Account pledged as Collateral to secure the Obligations. At any time until the
full and final payment of the Obligations and the termination of all obligations
of Lender hereunder, Lender may notify any Account debtor, Lessee or Debtor of
Lender's security interest, and verify with such Person information relating to
such Account, Lease, Loan Contract, Indirect Lease or Indirect Loan Contract.
Notwithstanding termination of this Agreement, the security interest of Lender
shall remain in effect for so long as any Obligations are outstanding or any
loan facility in favor of Lender is in place.
2.2......Authorization to File Financing Statements. Borrower hereby
irrevocably authorizes Lender at any time and from time to time to file in any
Uniform Commercial Code jurisdiction any initial financing statements and
amendments thereto that (a) indicate the Collateral (i) as to all assets of
Borrower or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the Uniform
Commercial Code of the state or such jurisdiction, or (ii) as being of an equal
or lesser scope or with greater detail, and (b) contain any other information
required or authorized by part 5 of Article 9 of the Uniform Commercial Code of
the state to be included in such financing statement or amendment. Borrower
agrees to furnish any information needed or appropriate for the filing of such a
document within three Business Days after request therefore by Lender. Lender
shall endeavor to provide Borrower with a copy of any financing statements and
amendments filed by it, but incurs no liability to Borrower, and such financing
statements and amendments shall be effective, even if Lender fails to do so.
2.3......Chattel Paper. Borrower agrees to deliver to Lender the
originals of all Leases and Loan Contracts identified in Schedule 1 hereto, as
well as any other Leases and Loan Contracts based upon which Lender makes a
Revolving Loan, as well as (when Borrower was not the original lessor under such
Lease or the original lender under such Loan Contract) the originals of
documents reflecting the transfer of the lessor's interest in the Lease or
lender's interest in the Loan Contract, and the related equipment, to Borrower.
Upon request of Lender, Borrower will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Borrower will note
Lender's interest upon any and all chattel paper if not delivered to Lender for
possession by Lender.
2.4......Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, promptly upon the request of Lender, shall (a) endorse or assign such
Negotiable Collateral to Lender, (b) deliver physical possession of such
Negotiable Collateral to Lender, and (c) mark conspicuously all of its records
pertaining to such Negotiable Collateral with a legend, in form and substance
satisfactory to Lender (and in the case of Negotiable Collateral consisting of
tangible Chattel Paper, immediately mark all such Chattel Paper with a
conspicuous legend in form and substance satisfactory to Lender), indicating
that the Negotiable Collateral is subject to the security interest granted
hereby.
2.5......Investment Property. If Borrower shall at any time hold or
acquire any certificated securities that constitutes Collateral, Borrower shall
forthwith endorse, assign and deliver the same to Lender, accompanied by such
instruments of transfer or assignment duly executed in blank as Lender may from
time to time specify. If any securities now or hereafter acquired by Borrower
are uncertificated and are issued to Borrower or its nominee directly by the
issuer thereof, Borrower shall promptly notify Lender thereof and, at Lender's
request and option, pursuant to an agreement in form and substance satisfactory
to Lender, either (a) cause the issuer to agree to comply with instructions from
Lender as to such securities, without further consent of Borrower or such
nominee, or (b) arrange for Lender to become the registered owner of such
securities. If any securities, whether certificated or uncertificated, or other
investment property now or hereafter acquired by Borrower are held by Borrower
or its nominee through a securities intermediary or commodity intermediary,
Borrower shall promptly notify Lender thereof and, at Lender's request and
option, pursuant to an agreement in form and substance satisfactory to Lender,
either (i) cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply with entitlement orders or other instruments
from Lender to such securities intermediary as to such securities or other
investment property, or (as the case may be) to apply any value distributed on
account of any commodity contract as directed by Lender to such commodities
intermediary, in each case without further consent of Borrower or its nominee,
or (ii) in the case of financial assets or other investment property held
through a securities intermediary, arrange for Lender to become the entitlement
holder with respect to such investment property, with Borrower being permitted,
only with consent of Lender, to exercise rights to withdraw or otherwise deal
with such investment property. Borrower shall also execute such additional
agreements or instruments, in form and substance satisfactory to Lender, with
respect to investment property, as Lender shall request.
2.6......Delivery of Additional Documentation Required. At any time at
the request of Lender, Borrower shall execute and deliver to Lender, all
financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, powers of attorney, and other documents that
Lender may reasonably request, in form satisfactory to Lender, to perfect and
continue perfected Lender's security interests in the Collateral, in order to
enable Lender to enforce its rights and remedies under the Loan Documents, and
in order to fully consummate all of the transactions contemplated under the Loan
Documents. Borrower hereby appoints Lender as its irrevocable attorney-in-fact
for the purpose of executing any documents, or taking any other action,
necessary or appropriate to perfect, or continue the perfection of, the security
interest granted in this Agreement, with Lender being authorized to act in its
own name or in the name of Borrower. Lender shall endeavor to provide Borrower
with notice and a copy of any documents executed and other actions taken
pursuant to the appointment of Lender as its attorney-in-fact made in the
preceding sentence, but incurs no liability to Borrower, and the execution of
such documents and such actions shall be effective, even if Lender fails to do
so.
2.7......Right to Inspect. Lender (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, no less frequently than
semi-annually (or at any time and without notice required if an Event of Default
has occurred and is continuing), to inspect and audit Borrower's Books and to
make copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral. Borrower shall pay all reasonable expenses
incurred by Lender with respect to such inspection and audit.
2.8......Bailees and Other Third Parties in Possession. In the event
that any Collateral is in the possession of a third party, Borrower shall join
with Lender in notifying such third party of Lender's security interest and
obtaining an acknowledgment from such third party that it is holding such
Collateral for the benefit of Lender.
2.9......Control Agreements. Borrower shall cooperate with Lender in
obtaining a control agreement in form and substance satisfactory to Lender with
respect to all Deposit Accounts, electronic Chattel Paper, Investment Property,
Letter of Credit Rights, or other property that constitutes Collateral for which
a control agreement is a necessary or appropriate means of perfecting a security
interest.
2.10.....Ownership of Collateral. Borrower shall, upon request by
Lender, promptly inform Lender which Borrower owns each item of Collateral that
has been pledged to Lender and provide such documents as Lender may reasonably
request to support such a statement.
3. CONDITIONS PRECEDENT
3.1......Conditions Precedent to Initial Loan. Lender's obligation to
make the initial Loan is subject, in addition to any other conditions specified
in this Agreement, to the fulfillment, to the satisfaction of Lender and its
counsel, of each of the following conditions:
3.1.1 Note. Lender shall have received an original, executed
Note from Borrower, pursuant to Section 1.7 of this Agreement, in the form of
Exhibit 2 hereto, and duly completed.
3.1.2 Financing Statements and Perfection of Security
Interest. Lender shall have received original UCC financing statements, in each
case in form and substance satisfactory to Lender, covering the Collateral (and
executed by Borrower and any grantor of a security interest in Collateral if so
requested by Lender), and such UCC financing statements have been filed with the
appropriate official of the state where the Borrower and each grantor of a
security interest is located and/or any other state or county in which Lender
has required the filing of a UCC financing statement, describing all personal
property which is collateral for the Loan; and all other actions have been
taken, and documents provided to Lender, as are necessary or appropriate to
perfect Lender's security interest in the Collateral.
3.1.3 Search Results. Lender shall have received Uniform
Commercial Code and other public record searches with respect to Borrower and
any grantor of a security interest, in each case in form and substance
satisfactory to Lender.
3.1.4 Due Diligence. Lender shall have completed its due
diligence requirements with respect to Borrower, including audits, financial and
legal survey, review of Borrower's formation and authorization documents.
3.1.5 Insurance. Borrower shall have delivered to Lender
satisfactory evidence of insurance coverage required by the Loan Documents,
covering risks and issued by companies satisfactory to Lender, in each case
including, where required by Lender, certified copies of the policies of
insurance therefor, together with endorsements thereto, and where required by
Lender, with a lender's loss payable endorsement form 438BFU or other form of
lender's loss payable endorsement satisfactory to Lender, in favor of Lender as
additional loss payee thereunder, in form, substance, amount and covering risks
satisfactory to Lender, and specifying that the insurer shall give Lender at
least 30 days prior written notice of the cancellation of any such policies of
insurance for any reason. This Section 3.1.5 does not require Borrower to have
Lender added as a loss payee or additional insured on insurance policies for
Revolving Loan Contracts.
3.1.6 Organizational Documents. Borrower and its general
partner shall have delivered to Lender certified copies of the certificates of
limited partnership, partnership agreements, articles of incorporation, bylaws
or similar document of Borrower and its general partner, in each case in form
and substance satisfactory to Lender.
3.1.7 Authorizations. Lender shall have received certified
copies of all action taken by Borrower to authorize the execution, delivery and
performance of the Loan Documents.
3.1.8 Good Standing. Lender shall have received good standing
certificates from the appropriate secretary of state of the state in which
Borrower and its general partner are organized and in each state in which
Borrower is required to be qualified to do business.
3.1.9 Executed Agreement. Lender shall have received an
original of this Agreement and all other Loan Documents to which Borrower is a
party, duly executed by Borrower.
3.1.10 Certificates of Title. Lender shall have received duly
executed certificates of title with respect to that portion of the Collateral
that is subject to certificates of title.
3.1.11 Collateral Access Agreements. Lender shall have
received such collateral access agreements from each lessor, warehouseman,
bailee, and other Person as Lender may require, in form and substance
satisfactory to Lender.
3.1.12 Control Agreements. Lender shall have received such
control agreements from each Person as Lender may require, in form and substance
satisfactory to Lender.
3.1.13 Payment of Borrower 1 and Borrower 3 Indebtedness. All
indebtedness owed by Borrower 1 and Borrower 3 to Lender as of the date hereof
and as of the date of the initial Loan hereunder shall have been paid in full,
either prior to or concurrently with, the making of the initial Loan hereunder.
3.1.14 Payment of All Fees and Expenses. Lender shall have
received payment of all fees payable on the Closing Date in accordance with the
provisions of this Agreement, including but not limited to the Commitment Fee,
together with all Lender expenses owing on the Closing Date.
3.1.15 Opinion of Counsel. Lender shall have received an
opinion letter from Borrower's counsel, in form and substance satisfactory to
Lender.
3.1.16 Contribution Agreement. The contribution agreement
referred to in Section 5.18 of this Agreement shall have been executed by each
Borrower and a copy thereof shall have been delivered to Lender.
3.1.17 Material Adverse Change. No event that has resulted or
could result in a Material Adverse Change shall have occurred, as determined by
Lender in its sole discretion.
3.1.18 Additional Documents. Lender shall have received all
such other agreements, instruments and documents as Lender may reasonably deem
necessary or desirable.
3.2......Conditions Precedent to All Loans. Lender's obligation to make
each Loan is subject, in addition to any other conditions specified in this
Agreement, to the fulfillment, to the satisfaction of Lender and its counsel, of
each of the following conditions:
3.2.1 Borrowing Request. With respect to each Loan or other
extension of credit hereunder, Lender shall have received a Borrower's Report,
executed and completed to Lender's satisfaction.
3.2.2 Representations and Warranties. Each of the
representations and warranties contained in this Agreement and the other Loan
Documents shall be true and correct in all respects on and as of the date of
such Loan or other extension of credit, as though made on and as of such date
(except to the extent that such representations and warranties relate solely to
an earlier date).
3.2.3 Defaults. No Event of Default or Unmatured Event of
Default shall occur, or shall have occurred and be continuing, on the date of
such extension of credit, nor shall either result from the making thereof.
3.2.4 Additional Documents. Lender shall have received such
other documents and information as Lender may reasonably deem necessary.
4. REPRESENTATIONS AND WARRANTIES OF BORROWER
In order to induce Lender to enter into this Agreement and to make Loans,
Borrower makes the following representations and warranties to Lender which
shall be true, correct, and complete in all respects as of the Closing Date and
at, and as of, the date of the making of each Loan made thereafter (except to
the extent that such representations and warranties relate solely to an earlier
date):
4.1......Existence and Rights. Borrower 1 is a limited partnership,
duly organized and existing and in good standing under the laws of the state of
Delaware, which shall survive at least two years beyond the maturity of any
Loans hereunder. Borrower 2 is a limited partnership, duly organized and
existing and in good standing under the laws of the state of Delaware, which
shall survive at least two years beyond the maturity of any Loans hereunder.
Borrower 3 is a limited partnership, duly organized and existing and in good
standing under the laws of the state of Delaware, which shall survive at least
two years beyond the maturity of any Loans hereunder. Each Borrower is
authorized and in good standing in the state of its formation. Each Borrower has
the appropriate powers and adequate authority, rights, licenses and franchises
to own its property and to carry on its business as now conducted, and is duly
qualified, in good standing and has all licenses necessary in California and in
each state in which the character of the properties owned by it therein or the
conduct of its business makes such qualification or licenses necessary. Each
Borrower has the power and adequate authority to execute, deliver and perform
this Agreement and the other Loan Documents.
4.2......Agreement Authorized. The execution, delivery and performance
of this Agreement and the Loan Documents are duly authorized and do not require
any registration with, consent or approval of, or notice to, or other action
with or by, any governmental body or other regulatory authority; are not in
contravention of or in conflict with any law or regulation or any term or
provision of Borrower 1's partnership agreement, Borrower 2's partnership
agreement, Borrower 3's partnership agreement, or similar document as the case
may be, and this Agreement and each of the other Loan Documents is a valid,
binding and legally enforceable obligation of each Borrower in accordance with
its terms, subject only to bankruptcy, insolvency or similar laws affecting
creditors' rights generally.
4.3......No Conflict. The execution, delivery and performance of this
Agreement and the Loan Documents are not in contravention of or in conflict
with, and do not result in a breach or constitute a default under any agreement,
contract, indenture, instrument or undertaking to which Borrower is a party or
by which it or any of its property may be bound or affected, and do not cause
any Lien, charge or other encumbrance to be created or imposed upon any such
property by reason thereof. Borrower is not in default under any agreement,
contract, indenture, instrument or undertaking to which Borrower is a party or
by which it may be bound, which default could result in a Material Adverse
Change.
4.4......Litigation. There is no litigation or other proceeding pending
or threatened against or affecting Borrower which if determined adversely to
Borrower or its interest could result in a Material Adverse Change, and Borrower
is not in default with respect to any order, writ, injunction, decree or demand
of any court or other governmental or regulatory authority.
4.5......Financial Condition. All financial statements, balance sheets
and profit and loss statements related to Borrower, that have been delivered by
Borrower to Lender fairly present in all material respects Borrower's financial
condition as of the date thereof and Borrower's results of operations, for the
period then ended. Said statements and all other statements and data submitted
in writing by Borrower to Lender in connection with this request for credit are
true and correct, and each said balance sheet and profit and loss statement
fairly presents the financial condition of Borrower as of the date thereof and
the results of the operations of Borrower for the period covered thereby,
consistently applied, and has been prepared in accordance with GAAP (subject to
year-end adjustments in the case of interim reports). Borrower has no knowledge
of any liabilities, contingent or otherwise, at such date not reflected in its
balance sheet, and Borrower has not entered into any special commitments or
substantial contracts that are not reflected in said balance sheet or that have
resulted or could result in a Material Adverse Change. There has not been a
Material Adverse Change in the financial condition of Borrower since the date of
the most recent of such financial statements submitted to Lender on or about the
date of this Agreement.
4.6......Title to Assets. Borrower has the power and authority to
transfer and pledge its assets (including the Collateral), and Borrower has good
and indefeasible title to its assets (including the Collateral), free and clear
of any Liens or restrictions, except for Permitted Liens.
4.7......Name; State of Formation; Location of Chief Executive Office.
Borrower has not done business under any name other than that specified on the
signature page hereof. Each Borrower is organized under the laws of the State of
Delaware. The chief executive office of Borrower 1 is located in New York City,
New York; Borrower 1's Organizational Identification Number is 2509766. Borrower
1's Tax Identification Number is 13-3835387. The chief executive office of
Borrower 2 is located in New York City, New York. Borrower 2's Organizational
Identification Number is 2755654. Borrower 2's Tax Identification Number is
13-4006824. The chief executive office of Borrower 3 is located in New York
City, New York. Borrower 3's Organizational Identification Number is 3172491.
Borrower 3's Tax Identification Number is 13-4101114. The chief executive office
of Borrower 3 is located in New York City, New York.
4.8......General Partner. ICON Capital Corp. is the sole general
partner of each Borrower. ICON Capital Corp. is a corporation duly organized and
existing and in good standing under the laws of the state of Connecticut. ICON
Capital Corp. has the appropriate powers and adequate authority, rights,
licenses and franchises to own its property and to carry on its business as now
conducted, and is duly qualified, in good standing and has all licenses
necessary in California and in each state in which the character of the
properties owned by it therein or the conduct of its business makes such
qualification or licenses necessary. ICON Capital Corp. has the power and
adequate authority to make and carry out this Agreement and the other Loan
Documents in its capacity as general partner of each Borrower.
4.9......Subsidiaries. Borrower does not own any Stock, partnership
interest or other equity securities of any Person that is a Subsidiary, except
as follows: (a) such ownership as has been disclosed by Borrower in a Form 10-Q
or a Form 10-K filed with the U.S. Securities and Exchange Commission; or (b)
such Subsidiary was formed and is operated in the ordinary course of Borrower's
business as heretofore conducted, or will be formed for such purposes; or (c)
such Subsidiary whose ownership has been disclosed by Borrower to Lender in
writing.
4.10.....Tax Status. Borrower has filed or caused to be filed all tax
returns required to be filed by Borrower, and has no liability for any
delinquent state, local or federal taxes, and, if Borrower has contracted with
any government agency, Borrower has no liability for renegotiation of profits.
4.11.....Trademarks, Trade Names, Copyrights, Patents. Borrower, as of
the date hereof, possesses all necessary trademarks, trade names, copyrights,
patents, patent rights, and licenses to conduct its business as now operated,
without any known conflict with the valid trademarks, trade names, copyrights,
patents and license rights of others.
4.12.....Regulatory Compliance. Borrower is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940. Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulations T, U
and X of the Board of Governors of the Federal Reserve System). Borrower has
complied with all the provisions of the Federal Fair Labor Standards Act.
Borrower has not violated any statutes, laws, ordinances or rules applicable to
it, violation of which could result in a Material Adverse Change. None of the
proceeds of any Revolving Loan shall be used to purchase or carry margin stock
(as defined in Regulation U of the Board of Governors of the Federal Reserve
System).
4.13.....ERISA. All defined benefit pension plans as defined in the
Employees Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA. No Reportable Event or Prohibited Transaction as defined in ERISA
has occurred with respect to any such plan, or any other failure by Borrower to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could result in a Material Adverse Change.
4.14.....Solvency, Payment of Debts. Borrower is solvent and able to
pay its debts (including trade debts) as they mature. No transfer of property is
being made by Borrower and no obligation is being incurred by Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrower.
4.15.....Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Lender contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
4.16.....Enforceability; Priority of Security Interest. (i) This
Agreement creates a security interest in favor of Lender which is enforceable
against all Collateral in which Borrower now has rights and will create a
security interest which is enforceable against all Collateral in which Borrower
hereafter acquires rights at the time Borrower acquires any such rights, with
such security interest being perfected to the extent perfection may be obtained
under the applicable state's Uniform Commercial Code (or if perfection may be
obtained by some other means, in accordance with those other means if so
requested by Lender); and (ii) Lender has a perfected first-priority security
interest (regardless of whether the appropriate method to perfect is under the
Uniform Commercial Code or by another means) in the Collateral described in
Schedule 1, and shall have a perfected, first-priority security interest
(regardless of whether the appropriate method to perfect is under the Uniform
Commercial Code or by another means) in any Collateral based upon which Lender
previously, concurrently herewith or hereafter makes a Revolving Loan (with such
perfected, first priority security interest commencing at or before the time
such Revolving Loan is made); in each case securing the payment and performance
of the Obligations. Except for Liens in favor of Lender and Permitted Liens,
there are no Liens against the Collateral described in Schedule 1 or in any
Collateral based upon which Lender makes a Revolving Loan, or the equipment
related thereto (except that Borrower shall have a perfected first-priority
security interest in the equipment subject to the applicable Loan Contracts).
4.17.....Enforceability of Collateral. To the extent the Collateral
consists of Accounts, Chattel Paper, Leases, Loan Contracts or General
Intangibles, Borrower, after conducting commercially reasonable due diligence at
the time of acquisition, is informed and believes that the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all Persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear on
the Collateral, and Borrower has no information that any Person contends
otherwise. Borrower, after conducting commercially reasonable due diligence at
the time of acquisition, is informed and believes that all Indirect Leases and
Indirect Loan Contracts are enforceable in accordance with their terms, are
genuine, and comply with applicable laws concerning form, content and manner of
preparation and execution, and all Persons appearing to be obligated on the
Collateral have authority and capacity to contract and are in fact obligated as
they appear thereon, and Borrower has no information that any Person contends
otherwise.
4.18.....Other Financing Statements. Other than financing statements,
pledge documents, deeds of trust and mortgages in favor of Lender and financing
statements, deeds of trust and mortgages filed or recorded in connection with
Permitted Liens, no effective financing statement, pledge document, deed of
trust or mortgage naming Borrower as debtor, assignor, grantor, mortgagor,
pledgor, trustor or the like and covering all or any part of the Collateral is
on file in any filing or recording office in any jurisdiction.
4.19.....Environmental Representations. Borrower has not received any
notice of any violation of any Environmental Law(s); and Borrower is not a party
to any litigation or administrative proceeding, nor, so far as is known by
Borrower, is any litigation or administrative proceeding threatened against
Borrower which, in any case, (i) asserts or alleges that Borrower violated any
Environmental Law(s), (ii) asserts or alleges that Borrower is required to clean
up, remove, or take any other remedial or response action due to the disposal,
depositing, discharge, leaking or other release of any hazardous materials, or
(iii) asserts or alleges that Borrower is required to pay all or a portion of
any past, present or future clean-up, removal or other remedial or response
action which arises out of or is related to the disposal, depositing, discharge,
leaking or other release of any hazardous materials by Borrower, and which,
either singularly or in the aggregate, could constitute a Material Adverse
Change.
4.19.1 Existing Conditions. To Borrower's knowledge, there are
no conditions existing currently which could subject Borrower to damages,
penalties, injunctive relief or clean-up costs under any applicable
Environmental Law(s), or which require,, or are likely to require, clean-up,
removal, remedial action or other response pursuant to any applicable
Environmental Law(s) by Borrower, and which, in any case, either singularly or
in aggregate, could constitute a Material Adverse Change.
4.19.2 Existing Orders. Borrower is not subject to any
judgment, decree, order, or citation related to or arising out of any
Environmental Law(s), which, either singularly or in the aggregate, could
constitute a Material Adverse Change; and, to Borrower's knowledge Borrower has
not been named or listed as a potentially responsible party by any governmental
body or agency in any matter arising under any applicable Environmental Law(s).
4.19.3 Permits.. Borrower has all material permits, licenses
and approvals required under applicable Environmental Laws, where the failure to
so obtain or maintain any such permits, licenses or approvals could constitute a
Material Adverse Change.
...................4.19.4 Leases and Loan Contracts Subject to Revolving Loans.
The Leases and Loan Contracts listed in Schedule 1, ---------- and any other
Leases and Loan Contracts based upon which Lender makes a Revolving Loan, and
the equipment subject thereto, never have been, and never will be so long as
this Agreement remains a Lien on the Collateral, used for the generation,
manufacture, storage, transportation, treatment, disposal, release or threatened
release of any hazardous waste or substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials -------- Transportation Act, 49 U.S.C. Section 1801 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety
Code, Section 25100, et seq., or other applicable state or Federal laws, rules,
or regulations adopted pursuant to any of the foregoing. This representation and
warranty does not apply, however, to equipment in the possession of a Lessee
pursuant to a Lease or a Debtor pursuant to a Loan Contract, but Borrower
represents and warrants that, in such case, it either (a) has no knowledge that
such equipment has been used in such manner and shall use reasonable efforts to
assure that the Lessee and Debtor does not use the equipment in such manner; or
(b) has obtained an indemnity agreement from such Lessee or Debtor from any loss
or damages that may arise if such equipment has been used in the manner
described above.
The terms "hazardous waste" and "hazardous substance" shall also
include, without limitation, petroleum and petroleum by-products or any fraction
thereof and asbestos. The representations and warranties contained herein are
based on Borrower's due diligence in investigating the Collateral for hazardous
wastes and substances. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from any Collateral being used by any Person other than Lender in the
manner identified in the first sentence of this subsection. This obligation to
indemnify shall survive the repayment of the Revolving Loans and the termination
of this Agreement.
4.20.....Inventory Records. Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality and quantity of the Inventory,
and Borrower's cost therefor.
4.21.....Commissions Due to Brokers. No broker has been engaged in this
transaction and no commission is due to a broker with respect to this
transaction.
4.22.....Benefit to All Borrowers. The co-borrowing arrangement as set
forth in the Loan Documents is of benefit to all Borrowers regardless of which
Borrower is the actual recipient of Loans made by Lender or the amount of Loans
received by each Borrower in that, among other reasons, the co-borrowing
arrangement enables each Borrower to enter into larger transactions than such
Borrower would be able to enter into if separate credit facilities were
established for each Borrower. Furthermore, the co-borrowing arrangement was
established at the request of each Borrower.
4.23.....Consultation with Counsel. Borrowers are represented by, and
have consulted with, an attorney or attorneys in connection with the Loan
Documents and the transactions contemplated thereby.
5. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that until the full and final payment of the Obligations and the
termination of all obligations Lender hereunder, and unless Lender shall
otherwise consent in writing, Borrower shall do each of the following:
5.1......Rights and Facilities. Maintain and preserve all rights,
franchises, qualifications, licenses, approvals and other authority adequate for
the conduct of its business; maintain its properties, equipment and facilities
in good order and repair; conduct its business in an orderly manner without
voluntary interruption and maintain and preserve its legal existence.
5.2......Use of Proceeds. Use the proceeds of the Loans only for
purposes authorized in Article 1 hereof. ---------
5.3......Insurance. Maintain insurance coverage on its physical assets
and against other business risks in such amounts and of such types as are
customarily carried by companies similar in size and nature (including, without
limitation, loss of rent and/or business interruption insurance), and in the
event of acquisition of additional property, real or personal, or of the
incurrence of additional risks of any nature, increase such insurance coverage
in such manner and to such extent as prudent business judgment and present
practice would dictate; and in the case of all policies covering Collateral or
property in which Lender shall have a security interest of any kind whatsoever,
other than those policies protecting against casualty liabilities to strangers,
all such insurance policies shall provide that the loss payable thereunder shall
be payable to Borrower (or other Person providing Collateral hereto) and Lender,
with mortgagee's clauses in favor of and satisfactory to Lender for all such
policies, and such policies shall also provide that they may not be canceled or
changed without 30 days' prior written notice to Lender. Upon the request of
Lender, all of said policies, or copies thereof, including all endorsements
thereon and those required hereunder, shall be deposited with Lender. 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.
5.4......Taxes and Other Liabilities. Pay and discharge, or cause to be
paid and discharged, before the same become delinquent and before penalties
accrue thereon, all taxes, assessments and governmental charges upon or against
it or any of its properties, and all its other liabilities at any time existing,
except to the extent and so long as: (a) the same are being contested in good
faith and by appropriate proceedings in such manner as not to cause any
materially adverse effect upon its financial condition or the loss of any right
of redemption from any sale thereunder; and (b) Borrower shall have set aside on
its books reserves (segregated to the extent required by GAAP) deemed by it to
be adequate with respect thereto. Notwithstanding the foregoing, if a Lessee has
defaulted on its obligation to pay taxes owed with respect to leased equipment,
this Section 5.4 does not require Borrower to pay and discharge, or cause to be
paid and discharged, those taxes.
5.5......Records and Reports. Maintain a standard and modern system of
accounting in accordance with GAAP; permit Lender's representatives to have
access to, and to examine its properties, books and records at all reasonable
times and upon reasonable notice during normal business hours, and furnish
Lender with copies thereof as often as Lender may reasonably request. Furnish
Lender:
5.5.1 Quarterly Financial Statement As soon as available, and
in any event within 45 days after the close of each quarter of each fiscal year
of Borrower (or within 75 days after the close of each quarter of each fiscal
year of Borrower if Borrower has obtained a corresponding extension of the
filing deadline from the U.S. Securities and Exchange Commission): a copy of
each Borrower's Form 10-Q filed with the U.S. Securities and Exchange Commission
or any governmental authority at any time substituted therefor, covering the
applicable quarter, which filing Borrower promises to make on a timely basis. If
Borrower obtains an extension of the filing deadline, it shall promptly notify
Lender thereof and provide Lender with a copy of a document reflecting the
extension.
5.5.2 Annual Financial Statement. As soon as available, and in
any event within 120 days after and as of the close of each fiscal year of
Borrower, a copy of each Borrower's Form 10-K report as filed with the U.S.
Securities and Exchange Commission or any governmental authority at any time
substituted therefor, covering the applicable fiscal year, which filing Borrower
promises to make on a timely basis.
5.5.3 Borrowing Base/Eligible Borrowing Base Contract Aging
Report. Within 15 days after each month-end, deliver to Lender a monthly
Borrowing Base/Eligible Borrowing Base Contract Aging Report, in the form of
Exhibit 4 attached hereto, providing information as of the last day of the
preceding month and certified by an authorized signer of Borrower. Borrower
shall provide in that report a statement of the Tangible Net Worth of each
Borrower as of the last day of the preceding month (if the exact amount is not
known, Borrower shall provide an estimate) and such other information as is
requested in Exhibit 4.
5.5.4 Audit Reports. Promptly after the receipt thereof by
Borrower, copies of any detailed audit reports submitted to Borrower by
independent accountants in connection with each annual or interim audit of the
accounts of Borrower performed by such accountants;
5.5.5 Compliance Certificate. At the earlier of the date a
Form 10-Q or Form 10-K required under Section 5.5.1 or Section 5.5.2 is due or
is provided by Borrower to Lender, a Compliance Certificate of the chief
financial officer of Borrower's general partner, in the form of Exhibit 3,
stating that Borrower has performed and observed each and every covenant
contained in this Agreement to be performed by it and that no event has occurred
and no condition then exists which constitutes an Event of Default or Unmatured
Event of Default hereunder or, if any such event has occurred or any such
condition exists, specifying the nature thereof.
5.5.6 Other Information. Such other information and documents
relating to the affairs of Borrower or the Collateral as Lender may reasonably
request from time to time.
5.6......ERISA. Cause all defined benefit pension plans, as defined in
ERISA, of Borrower to, at all times, meet the minimum funding standards of
Section 302 of ERISA, and ensure that no Reportable Event or Prohibited
Transaction, as defined in ERISA, shall occur with respect to any such plan.
5.7......Laws. At all times comply with, or cause to be complied, in
all material respects, with, all laws, statutes, rules, regulations, orders and
directions of any governmental authority having jurisdiction over Borrower,
Borrower's business, or the Collateral.
5.8......Compliance with GAAP. All information used in and the
calculation of Borrower's compliance with all financial covenants hereunder
shall be based on and in accordance with GAAP.
5.9......Maintenance of Collateral. Borrower shall maintain all
tangible Collateral in good condition and repair or, if Collateral consisting of
equipment is in the possession of a Lessee pursuant to a Lease or a Debtor
pursuant to a Loan Contract, shall use its reasonable efforts to assure that
such Lessee or Debtor complies with the provisions of the applicable Lease or
Loan Contract pertaining to maintenance of such equipment. Borrower will not
commit or fail to reasonably enforce provisions in Leases or Loan Contracts
governing damage to or destruction of the Collateral or any part of the
Collateral.
5.10.....Location of Inventory and Equipment. Insofar as the Collateral
consists of Inventory or Equipment, Borrower shall deliver to Lender, as often
as Lender shall require, such lists, descriptions, and designations of such
Collateral as Lender may require to identify the nature, extent and location of
such Collateral.
5.11.....Disposition of Proceeds of Collateral.
(a) (i) Inform Lender of any proposed sale or other
disposition of any Leases or Loan Contracts (or the equipment related thereto)
listed on Schedule 1 or based on which Lender makes a Revolving Loan, or
insurance proceeds received with respect to such Leases, Loan Contracts or
equipment; (ii) If an Event of Default or Unmatured Event of Default has
occurred and is continuing, immediately deliver all proceeds of such sale or
other disposition or such insurance proceeds (subject to the rights of Lessees)
to Lender and, until such delivery, hold such proceeds in trust for Lender and
not commingle such proceeds with any other funds; (iii) If an Event of Default
or Unmatured Event of Default has not then occurred and be continuing,
immediately deliver all proceeds of such sale or other disposition or such
insurance proceeds (subject to the rights of Lessees) to Lender as are necessary
to ensure that the aggregate amount outstanding does not exceed the Borrowing
Base, all covenants set forth in Article 7 of this Agreement are, as of the date
of such transaction, satisfied, and no Event of Default or Unmatured Event of
Default is created by such transaction and, until such delivery, hold such
proceeds in trust for Lender and not commingle such proceeds with any other
funds.
(b) (i) Inform Lender of any proposed sale or disposition of
any Indirect Leases or Indirect Loan Contracts (or the equipment related
thereto) listed on Schedule 1 or based on which Lender makes a Revolving Loan,
or insurance proceeds received with respect to such Indirect Leases, Indirect
Loan Contracts or equipment (or of any proposed sale or disposition of
Borrower's Beneficial Interest in the Person who is the lessor of such Indirect
Lease or lender/payee of such Indirect Loan Contract); (ii) If an Event of
Default or Unmatured Event of Default has occurred and is continuing,
immediately deliver Borrower's share of all proceeds of such sale or other
disposition or such insurance proceeds (subject to the rights of Lessees) to
Lender and, until such delivery, hold Borrower's share of such proceeds in trust
for Lender and not commingle Borrower's share of such proceeds with any other
funds; (iii) if an Event of Default or Unmatured Event of Default has not then
occurred and be continuing, immediately deliver Borrower's share of all proceeds
of such sale or other disposition or such insurance proceeds (subject to the
rights of Lessees) to Lender as are necessary to ensure that the aggregate
amount of Loans outstanding does not exceed the Borrowing Base, all covenants
set forth in Article 7 of this Agreement are, as of the date of such
transaction, satisfied, and no Event of Default or Unmatured Event of Default
created by such transaction, and, until such delivery, hold Borrower's share of
such proceeds in trust for Lender and not commingle Borrower's share of such
proceeds with any other funds.
5.12.....Operating Accounts.
5.12.1 Maintain Borrower's banking relationship with Lender.
5.12.2 Maintain on deposit with Lender or an Affiliate of
Lender an amount equal to a majority (by value) of all of Borrower's Cash and
Cash Equivalents and inform Lender of all of Lender's Affiliates at which
Borrower has on deposit Cash or Cash Equivalents.
5.13.....Notices. Promptly notify Lender in writing of (i) any case
involving the return, rejection, repossession, loss or material damage of or to
any the Leases, Loan Contracts, Indirect Leases and Indirect Loan Contracts
identified on Schedule 1 or any other Leases, Loan Contracts, Indirect Leases or
Indirect Loan Contracts based upon which Lender makes a Revolving Loan, or the
equipment related thereto, any request for credit or adjustment or of any other
dispute arising with respect to such Leases, Loan Contracts, Indirect Leases,
Indirect Loan Contracts or equipment, and generally of all material happenings
and events affecting such Leases, Loan Contracts, Indirect Leases, Indirect Loan
Contracts or equipment or the value or the amount of such Leases, Loan
Contracts, Indirect Leases, Indirect Loan Contracts or equipment, in each case
to the extent Borrower is aware of, or has been informed of; such event; (ii)
the occurrence of any Event of Default hereunder or any event that, upon notice
or upon notice and the lapse of time specified herein, would be an Event of
Default under this Agreement or under any other Loan Document; (iii) all
litigation affecting Borrower where the amount in controversy is $500,000 or
more; (iv) any substantial dispute which may exist between Borrower and any
governmental regulatory body or law enforcement authority; (v) any change in
Borrower's name or principal place of business; or (vi) any other matter which
has resulted or could result in a Material Adverse Change.
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 semi-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.
5.15.....Assignment of Accounts, Leases and Loan Contracts. In addition
to any covenant contained in any Loan Document relating to any Collateral,
Borrower shall execute and deliver to Lender such assignments covering
individual Accounts, Leases and Loan Contracts notices, financing statements,
and other documents and papers as Lender may reasonably require in order to
affirm, effectuate or further assure the assignment and grant of security
interest to Lender of the Collateral or to give any third party, including the
account debtors obligated on the Accounts, Lessees obligated on the Leases and
Debtors obligated on the Loan Contracts, notice of Lender's interest in the
Collateral.
5.16.....Collection of Accounts, Leases and Loan Contracts, Inventory
Proceeds. In addition to any covenant contained in any Loan Document relating to
any Collateral, Borrower shall, until Lender exercises its rights to collect the
Accounts, Leases, Loan Contracts and Inventory proceeds as the result of an
Event of Default, collect with diligence amounts owed to Borrower under or with
respect to the Accounts, Leases, Loan Contracts and Inventory.
5.17.....Environmental Covenants. Comply or take reasonable efforts to
cause Lessees and Debtors to comply in all material respects with all applicable
Environmental Laws, and maintain all material permits, licenses and approvals
required under applicable Environmental Laws, where the failure to do so could
constitute a Material Adverse Change. Promptly notify Lender, in writing, as
soon as Borrower becomes aware of any condition or circumstance which makes any
of the environmental representations or warranties set forth in this Agreement
incomplete, incorrect or inaccurate in any material respect as of any date; and
promptly provide to Lender, immediately upon receipt thereof, copies of any
material correspondence, notice, pleading, citation, indictment, complaint,
order, decree, or other document from any source asserting or alleging a
violation of any Environmental Laws by Borrower, or of any circumstance or
condition which requires or may require, a financial contribution by Borrower,
or a clean-up, removal, remedial action or other response by or on behalf of
Borrower, under applicable Environmental Law(s), or which seeks damages or
civil, criminal, or punitive penalties from Borrower, for any violation or
alleged violation of Environmental Law(s).
5.18 Contribution Agreement. Borrower must have entered into an
agreement, among themselves, providing that, to the extent that an individual
Borrower's property is used to repay Lender an amount greater than the amount
owed under Revolving Loans that such Borrower has obtained from Lender, then
such Borrower shall be entitled to reimbursement from the other Borrowers for
any excess so paid, such agreement shall remain in full force and effect, and a
copy executed by each Borrower shall have been delivered to Lender. Such
agreement shall not be amended, modified, or restated in any manner that would
change the substance of the requirements set forth in this section and, if it is
amended, modified or restated, a fully executed copy of such amendment,
modification or restatement shall be promptly delivered by Borrower to Lender.
6. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that until the full and final payment of the Obligations and the
termination of all obligations of Lender hereunder, and unless Lender shall
otherwise consent in writing, Borrower shall not do any of the following:
6.1......Type of Business; Management; Change of Control. Make any
substantial change in the character of its business or make any change in its
general partner or in the current president or chief executive officer of its
general partner, but Lender shall not unreasonably withhold its consent to a
change in such current president or chief executive officer.
6.2......Change of Name. Change its legal name, trade names, or trade
styles or add any new trade names or trade styles unless (i) Borrower gives
Lender 30 days' prior written notice thereof, and (ii) Borrower executes and
delivers such additional agreements, instruments and documents as Lender shall
reasonably require to maintain Lender's perfected security interests in the
Collateral.
6.3......Change of State of Formation. Change its state of formation.
6.4......Outside Indebtedness. Other than in the ordinary course of
business, create, incur, assume or permit to exist any recourse indebtedness for
borrowed moneys other than Revolving Loans from Lender, except obligations now
existing as shown in the financial statements of Borrowers 1, 2 and 3 dated
September 30, 2001, excluding those obligations being refinanced by Lender.
6.5......Liens and Encumbrances. Create, incur, permit to exist, or
assume any mortgage, pledge, encumbrance, Lien or charge of any kind upon any
asset now owned or hereafter acquired by it, other than Permitted Liens.
6.6......Transactions Involving Collateral. (a) Subject to any Lessee's
rights under any Lease relating to the Collateral, sell, transfer or dispose of
any Collateral for less than reasonably equivalent value; (b) sell, transfer or
dispose of Inventory, Equipment, Accounts, Leases or Loan Contracts except in
the ordinary course of Borrower's business (a sale in the ordinary course of
Borrower's business does not include a transfer in partial or total satisfaction
of a debtor or bulk sale; (c) sell, transfer or dispose of any Lease, Loan
Contract, or its interest in any Indirect Lease or Indirect Loan Contract
identified on Schedule 1 or based upon which Lender makes a Revolving Loan (or
the equipment related to the foregoing) unless Borrower has complied with the
requirements of Section 5.11; or (d) Create or permit any Lien to be placed upon
any Lease, Loan Contract, or its interest in any Indirect Lease or Indirect Loan
Contract identified on Schedule 1 or based upon which Lender makes a Revolving
Loan (or the equipment related to the foregoing) (except that Borrower may have
a Lien on equipment subject to a Loan Contract). Notwithstanding the foregoing,
Borrower may create or permit a first priority Lien or other Lien to be placed
on any property described in clause (d), thereby causing such property to cease
to be an Eligible Borrowing Base Contract, provided that no Event of Default or
Unmatured Event of Default then exists or would be created as a result thereof,
the aggregate amount outstanding immediately before such transaction and
immediately after such transaction does not exceed the Borrowing Base, and
Borrower provides written evidence to Lender within 5 Business Days prior to the
placement of such Lien reasonably satisfactory to Lender establishing that such
conditions are satisfied; in such event and if the property thereafter does not
constitute "Collateral," as that term is defined in this Agreement, Lender shall
take such actions as are reasonably requested by Borrower to evidence the
release of its security interest in such property.
6.7......Loans, Investments; Secondary Liabilities. Other than in the
ordinary course of business, (a) make any loans or advances to any Person; (ii)
make any investment in the securities of any Person other than the United States
Government; (iii) guarantee or otherwise become liable upon the obligation of
any Person which is not an Affiliate or Subsidiary of Borrower, except by
endorsement of negotiable instruments or deposit or collection in the ordinary
and normal course of its business.
6.8......Acquisition or Sale of Business; Merger or Consolidation. (a)
Purchase or otherwise acquire the assets or business of any Person except in the
ordinary course of business as now conducted by Borrower; (b) liquidate,
dissolve, merge or consolidate, or commence any proceedings therefor; (c) sell
any assets except in the ordinary course of its business as now conducted; (d)
sell, lease, assign, or transfer any substantial part of its business or fixed
assets, or any property or other assets necessary for the continuance of its
business as now conducted, including without limitation the selling of any
property or other asset accompanied by the leasing back of the same.
6.9......Distributions. (a) Declare or pay any distribution to any
partnership interest now outstanding or hereafter issued or purchased, redeem or
retire any such partnership interest except, as long as Borrower is in
compliance with all terms and conditions of this Agreement and would remain so
after taking such actions, Borrower may make distributions to its partners or
redeem or retire any outstanding partnership interests, as provided in the
Agreement of Limited Partnership of each Borrower, as amended from time to time;
(b) pay management fees or acquisition fees except that, as long as Borrower is
in compliance with all terms and conditions of this Agreement and would remain
so after taking such actions, Borrower may pay such fees if authorized under the
partnership agreement of such Borrower.
6.10.....Transactions with Subsidiaries and Affiliates. Directly or
indirectly enter into or permit to exist any material transaction with any
Subsidiary or Affiliate of Borrower except for transactions that are in the
ordinary course of Borrower's business, upon fair and reasonable terms that are
no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-affiliated Person.
6.11.....Pension Plans. Except in compliance with this Agreement, enter
into, maintain, or make contribution to, directly or indirectly, any pension
plan that is subject to ERISA.
6.12.....No Further Negative Pledges. Enter into or become subject to
any agreement (other than this Agreement or the Loan Documents) (a) prohibiting
the guaranteeing by Borrower of any obligations, or (b) requiring an obligation
to become secured (or further secured) if another obligation is secured or
further secured.
7. FINANCIAL COVENANTS
Borrower agrees that until the full and final payment of the Obligations and the
termination of all obligations of Lender hereunder, and unless Lender shall
otherwise consent in writing:
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 $125,000,000.
7.2......Individual Borrower Tangible Net Worth. Each Borrower shall
maintain, as of the last day of each month and at each time it obtains a
Revolving Loan, a Tangible Net Worth equal to at least twice the amount of the
outstanding balance on Revolving Loans made to that Borrower as of such date
(after taking into account the amount of any new Revolving Loan that such
Borrower is seeking).
7.3......Debt to Tangible Net Worth. All Borrowers, in the aggregate,
shall maintain, as of the last day of each quarter, a ratio of total recourse
liabilities to Tangible Net Worth of not greater than 1.00 to 1.00.
7.4......Profitability. Each Borrower shall individually earn a net
profit after taxes of at least $1.00 in each fiscal year, as reported in such
Borrower's Form 10-K.
7.5......Other Collateral. In addition to the Collateral consisting of
(a) the Revolving Loan Contracts and the related equipment, and (b) Borrower's
interest in any Person that is the lessor of an Indirect Lease or a lender on an
Indirect Loan if such Indirect Lease or Indirect Loan was the subject of a
Revolving Loan, and the related equipment, Borrower shall cause Lender to have a
perfected security interest in Collateral having a net equity after deducting
the Indebtedness secured by Liens senior to those held by Borrower (based on
Borrower's Books prepared in accordance with this Agreement) equal to the
Maximum Revolving Amount or a greater amount.
8. EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an event of default
("Event of Default") hereunder:
8.1......Failure to Pay. Failure to pay any principal, interest or
other sums due to Lender under this Agreement or any other Loan Document, within
five days of when due.
8.2......Breach of Representations and Warranties, Affirmative,
Negative or Financial Covenants. Failure of Borrower to observe or perform any
term or condition, or failure to comply with any representation or warranty, set
forth in Article 2, Article 4, Article 5, Article 6, or Article 7 hereof.
8.3......Breach of Other Covenants. Failure of Borrower to observe or
perform any term or condition of this Agreement (other than those terms and
conditions described in Sections 8.1 and 8.2 hereof), and such failure continues
for 30 days after the earlier of (a) Borrower's discovery or knowledge of such
failure and (b) Lender's dispatch of notice to Borrower of such failure.
8.4......Breach of Warranty. Any of Borrower's representations or
warranties made herein or in any statement or certificate at any time given in
writing pursuant hereto or in connection herewith (other than those described in
Section 8.2 hereof) shall be or become false or misleading in any material
respect, or if any such representation, warranty, statement or certification is
withdrawn.
8.5......Breach Under Any Other Loan Document. Any default or event of
default, as the case may be, in the observance or performance by Borrower or any
other Person (excluding Lender) of any term or condition of any other Loan
Document or any other document, instrument or agreement with or in favor of
Lender entered into by or binding upon Borrower or any such other Person, and
the continuation thereof beyond any applicable period of grace or cure provided
with respect thereto.
8.6......Default Under Agreements with Other Persons. Any default by
Borrower (a) in the payment of any recourse Indebtedness (other than
Indebtedness owing to Lender), or (b) in the observance or performance of any
conditions, covenants or agreements related or given with respect thereto or any
other agreement, the failure to observe or perform under which could constitute
a Material Adverse Change and, in each case, continuation thereof beyond any
applicable grace or cure period with respect thereto.
8.7......Judgments. Any uninsured money judgment in excess of $500,000,
writ or warrant of attachment, or similar process shall be entered or filed
against Borrower or any of its assets and shall remain unvacated, unbounded or
unstayed for a period of 20 days or in any event later than 5 days prior to the
date of any proposed sale thereunder.
8.8......Ownership. If there shall be any change in the management,
ownership or control of Borrower, whether by reason of incapacity, death,
resignation, termination or otherwise, which, in Lender's sole judgment, shall
constitute a Material Adverse Change.
8.9......ERISA Compliance. Failure by Borrower to meet the minimum
funding requirements under ERISA with respect to any pension plan established or
maintained by it; the occurrence of any "reportable event," as defined in ERISA,
which could constitute grounds for termination by the PBGC of any pension plan
or for the appointment by the appropriate United States District Court of a
trustee to administer such pension plan, and such reportable event is not
corrected and such determination is not revoked within 30 days after notice
thereof has been given to the plan administrator or Borrower, as the case may
be; or the institution of any proceedings by the PBGC to terminate any such
pension plan or to appoint a trustee by the appropriate United States District
Court to administer such pension plan.
8.10.....Insolvency; Receiver or Trustee. Borrower shall become
insolvent; or admit its inability to pay its debts as they mature; or make an
assignment for the benefit of creditors; or apply for, consent to or acquiesce
in the appointment of a trustee, receiver, liquidator, conservator or custodian
for it or for a substantial part of its property or business.
8.11.....Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against Borrower
and, if instituted against it, shall not be dismissed within 45 days thereafter.
8.12.....Security Interest. This Agreement or any other Loan Document
ceases to be in full force and effect (including the failure of this Agreement
or any other Loan Document to create a valid and perfected security interest or
lien on the Collateral) at any time and for any reason.
8.13.....Cessation of Business. Borrower shall voluntarily suspend its
business.
8.14.....Material Adverse Change. Any change which, in the reasonable
opinion of Lender, has resulted or could result in a Material Adverse Change.
8.15.....Attachments. If any material portion of Borrower's properties
or assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any third Person and such
attachment, seizure, writ or distress warrant or levy has not been removed,
discharged or rescinded within 10 days, or if Borrower is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs, or if a judgment or other claim becomes a
lien or encumbrance upon any material portion of Borrower's assets, or if a
notice of lien, levy, or assessment is filed of record with respect to
Borrower's assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within 10 days after Borrower receives notice
thereof, provided that none of the foregoing shall constitute an Event of
Default where such action or event is stayed or an adequate bond has been posted
pending a good faith contest by Borrower (provided that no credit extensions
will be required to be made during such stay period).
8.16.....Other Defaults. Borrower shall commit or do or fail to commit
or do any act or thing which would constitute an event of default under any of
the terms of any other recourse agreement, document or instrument executed or to
be executed by it concerning the obligation to pay money and the result of such
action or inaction is to cause the amounts immediately due under such obligation
(either by the terms of the obligation or by acceleration of the indebtedness)
to be an amount in excess of $1,000,000.
9. LENDER'S RIGHTS AND REMEDIES UPON EVENT OF DEFAULT
9.1......Rights and Remedies. Upon the occurrence of an Event of
Default, Lender may without notice of its election and without demand, do any
one or more of the following, all of which are authorized by Borrower:
9.1.1 Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable; provided, however, that upon the occurrence of an Event of Default
described in Section 8.11, all Obligations shall become immediately due and
payable without any action by Lender;
9.1.2 Terminate the commitment of Lender to lend and cease
advancing money or extending credit to or for the benefit of Borrower under this
Agreement, under any of the other Loan Documents, or under any other agreement
between Borrower and Lender; provided, however, that Lender shall have no duty
to make advances while any Event of Default or Unmatured Event of Default exists
notwithstanding any cure period provided for herein;
9.1.3 Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Lender, but without
affecting Lender's rights and security interests in the Collateral and without
affecting the Obligations;
9.1.4 Settle or adjust disputes and claims directly with
Account debtors, Lessees, or Debtors for amounts, upon terms and in whatever
order that Lender reasonably considers advisable;
9.1.5 Without notice or demand upon Borrower, collect the
Accounts, Leases, Loan Contracts and Inventory proceeds and give notice of
assignment to, and collect from, any and all Account debtors, Lessees and
Debtors;
9.1.6 Without notice to or demand upon Borrower, make such
payments and do such acts as Lender considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Lender so requires, and to deliver or make available to Lender all
or any portion of the Collateral and any and all certificates of title and other
documents relating thereto as Lender may designate. Borrower authorizes Lender
to enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Lender's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Lender a license to enter into possession of
such premises and to occupy the same, without charge, in order to exercise any
of Lender's rights or remedies provided herein, at law, in equity, or otherwise.
All of the foregoing are subject to the rights of any Lessees;
9.1.7 Without notice to or demand upon Borrower, set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by Lender, or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower held by Lender;
9.1.8 Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Lender is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Lender's exercise of its rights under this Section 9.1,
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender's benefit;
9.1.9 Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as Lender
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Lender deems appropriate; provided, however, that
Lender shall have no obligation to clean-up or otherwise prepare the Collateral
for sale;
9.1.10 Lender may credit bid and purchase at any public
sale, or at any private sale as permitted by law;
9.1.11 In addition to any other rights, relief or remedies
afforded Lender, to the extent permitted by applicable law without notice to or
consent and completely without regard to the adequacy of any security for the
Obligations, Lender may have a receiver appointed as a matter of right, who may
be an employee of Lender and may serve without bond, and all fees of such
receiver and his or her attorney shall become part of the Obligations secured by
this Agreement and payable from the disposition of the Collateral, payable upon
demand with interest at the rate applicable to Loans hereunder until repaid, and
such receiver, in addition to any other rights to which he shall be entitled,
shall be authorized to sell, foreclose or conduct a complete foreclosure on all
Collateral contemplated by this Agreement for the benefit of Lender, pursuant to
provisions of applicable law; and
9.1.12 Any deficiency that exists after disposition of the
Collateral as provided above shall be paid immediately by Borrower.
9.2......Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Lender (and any of Lender's designated officers,
employees or agents) as Borrower's true and lawful attorney to, upon the
occurrence and during the continuance of an Event of Default: (a) send requests
for verification of Accounts, Leases, Loan Contracts, Indirect Leases or
Indirect Loan Contracts or notify Account debtors, Lessees and Debtors of
Lender's security interest in the Accounts, Leases and Loan Contracts; (b)
endorse Borrower's name on any checks or other forms of payment or security that
may come into Lender's possession; (c) open mail addressed to Borrower; (d) sign
Borrower's name on any (i) invoice or bill of lading relating to any Account,
Lease, Loan Contract, Indirect Lease or Indirect Loan Contract, (ii) drafts
against Account debtors, Lessees, or Debtors, (iii) schedules and assignments of
Accounts, Leases, Loan Contracts, Indirect Leases and Indirect Loan Contracts,
(iv) verifications of Accounts, Leases, Loan Contracts, Indirect Leases and
Indirect Loan Contracts, and (v) notices to Account debtors, Lessees and
Debtors; (e) dispose of any Collateral; (f) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; (g) settle
and adjust disputes and claims respecting the Accounts directly with Account
debtors, Leases directly with the Lessees and Loan Contracts directly with the
Debtors, for amounts and upon terms which Lender determines to be reasonable;
(h) to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without the
signature of Borrower where permitted by law; and (i) transfer the Intellectual
Property Collateral into the name of Lender or a third party to the extent
permitted under the Code; provided, however, that Lender or any of its designees
or attorneys-in-fact may exercise such power of attorney to sign the name of
Borrower on any of the documents described in Section 2.6, and to do any and all
things necessary in the name and on behalf of Borrower in order to perfect, or
continue the perfection of, Lender's security interests in the Collateral,
regardless of whether an Event of Default has occurred or is continuing.
Borrower agrees that neither Lender, nor any of its designees or
attorneys-in-fact, will be liable for any act of commission or omission, or for
any error of judgment or mistake of fact or law with respect to the exercise of
the power of attorney granted under this Section 9.2, other than as a result of
its or their gross negligence or willful misconduct. The appointment of Lender
as Borrower's attorney in fact and each and every one of Lender's rights and
powers granted under this Section 9.2, being coupled with an interest, shall be
irrevocable until all of the Obligations have been indefeasibly paid in full,
Lender's obligation to provide advances hereunder has been terminated, and all
Borrower's duties hereunder have been performed in full.
9.3......Payment of Expenses by Lender. If Borrower fails to pay any
amounts or furnish any required proof of payment due to third persons or
entities, as required under the terms of this Agreement, then Lender may do any
or all of the following after reasonable notice to Borrower: (a) make payment of
the same or any part thereof; (b) set up such reserves as Lender deems necessary
to protect Lender from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 5.3 hereof, and
take any action with respect to such policies as Lender deems prudent. Any
amounts so paid or deposited by Lender shall be immediately due and payable, and
shall bear interest at the rate applicable to the Loans from time to time, and
shall be secured by the Collateral. Any payments made by Lender shall not
constitute an agreement by Lender to make similar payments in the future or a
waiver by Lender of any Event of Default under this Agreement.
9.4......No Obligation to Pursue Others. Lender shall have no
obligation to attempt to satisfy the Obligations by collecting them from any
third Person which may be liable for them or any portion thereof, and Lender may
release, modify or waive any collateral provided by any other Person as security
for the Obligations or any portion thereof, all without affecting Lender's
rights against Borrower. Borrower waives any right it may have to require Lender
to pursue any third Person for any of the Obligations.
9.5......Compliance with Other Laws. Lender may comply with any
applicable state or federal law requirements in connection with a disposition of
the Collateral, and Lender's compliance therewith will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral.
9.6......Warranties. Lender may sell the Collateral without giving any
warranties as to the Collateral. Lender may specifically disclaim any warranties
of title or the like. This procedure will not be considered to adversely affect
the commercial reasonableness of any sale of the Collateral.
9.7......Sales on Credit. If Lender sells any of the Collateral upon
credit, Borrower will be credited only with payments actually made by the
purchaser, received by Lender and applied to the indebtedness of the purchaser.
In the event that the purchaser fails to pay for the Collateral, Lender may
resell the Collateral and Borrower will be credited with the proceeds of such
sale.
9.8......No Marshaling. Lender shall be under no obligation to marshal
any assets in favor of Borrower, or against or in payment of the Obligations or
any other obligation owned to Lender by Borrower or any other Person.
Furthermore, Lender may, at its option, recover from any of the Collateral or
from any Borrower, regardless of which Borrower received the proceeds of the
Revolving Loans made.
9.9......Government Consents. Upon the exercise by Lender of any power,
right, privilege, or remedy pursuant to this Agreement which requires any
consent, approval, registration, qualification, or authorization of any federal,
state, local or other governmental authority, Borrower agrees to execute and
deliver, or will cause the execution and delivery of, all applications,
certificates, instruments, assignments, and other documents and papers that
Lender or any purchaser of the Collateral may be required to obtain for such
governmental consent, approval, registration, qualification, or authorization.
9.10.....Lender's Liability for Collateral. So long as Lender complies
with its obligations under the Code, Lender shall not in any way or manner be
liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss
or damage thereto occurring or arising in any manner or fashion from any cause;
(c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other person whomsoever.
All risk of loss, damage or destruction of the Collateral shall be borne by
Borrower.
9.11.....Waiver of Defaults. No Event of Default shall be waived by
Lender except in a written instrument specifying the scope and terms of such
waiver and signed by an authorized officer of Lender, and such waiver shall be
effective only for the specific time(s) and purpose(s) given. No single or
partial exercise of any right, power, or privilege hereunder, nor any delay in
the exercise thereof, shall preclude other or further exercise of Lender's
rights. No waiver of any Event of Default shall extend to any other or further
Event of Default. No forbearance on the part of Lender in enforcing any of its
rights or remedies hereunder or any of the other Loan Documents shall constitute
a waiver of any of its rights or remedies. Borrower expressly agrees that this
Section may not be waived or modified by Lender by course of performance,
estoppel or otherwise.
9.12.....Remedies Cumulative. Lender's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative and
not alternative. Lender shall have all other rights, powers and remedies not
inconsistent herewith as provided under the Code, by law, or in equity against
Borrower or any other person, including but not limited to Lender's rights of
setoff or banker's lien. No exercise by Lender of one right or remedy shall be
deemed an election, and no waiver by Lender of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Lender shall
constitute a waiver, election, or acquiescence by it. No waiver by Lender shall
be effective unless made in a written document signed on behalf of Lender and
then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.13.....Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Lender on which Borrower may in any way be
liable.
10. MISCELLANEOUS PROVISIONS
10.1.....Failure or Indulgence Not Waiver. No failure or delay on the
part of Lender or any holder of notes issued hereunder, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement or any note (s) issued in
connection with a Loan that Lender may make hereunder, are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
10.2.....Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any Loan Document, nor consent to any departure
by Borrower, therefrom, shall in any event be effective unless the same shall be
in writing and signed by Lender, and then such waiver or consent shall be
effective only in the specific instance(s) and for the specific time(s) and
purposes(s) for which given.
10.3.....Construction; Interpretation.
10.3.1 Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Lender or Borrower, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.
10.3.2 Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. An Event of Default shall "continue"
or be "continuing" until such Event of Default has been cured or waived in
writing by Lender. Section, subsection, clause, schedule, and exhibit references
are to this Agreement unless otherwise specified. Any reference in this
Agreement or in the Loan Documents to this Agreement or any of the Loan
Documents shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable. All accounting terms shall have the meanings applied
under GAAP unless otherwise specified. All section titles appear as a matter of
convenience only and shall not affect the interpretation of this Agreement.
10.3.3 Each covenant hereunder shall be given independent
effect so that if a particular action or condition is not permitted by such
covenant, the fact that it would be permitted by an exception to, or would be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default.
10.4.....Cumulative Effect; Conflict of Terms. The provisions of the
other Loan Documents are hereby made cumulative with the provisions of this
Agreement. Except as otherwise provided in any of the other Loan Documents by
specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
10.5.....Counterparts; Entire Agreement. This Agreement may be executed
by the parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall constitute together but one and the same
agreement. This Agreement, together with the other Loan Documents, constitute
the entire understanding among the parties hereto with respect to the subject
matter hereof and supersedes any prior agreements, written or oral, with respect
thereto.
10.6.....Lender's Expenses and Attorney's Fees. If, at any time or
times regardless of whether an Event of Default then exists, Lender pays or
incurs legal or accounting expenses or any other costs or expenses in connection
with (a) the negotiation and preparation of this Agreement or any of the other
Loan Documents, any amendment of or modification of this Agreement or any of the
other Loan Documents, (b) the perfection of, and continuation of perfection of,
any security interest in any of the Collateral; (c) the administration of this
Agreement or any of the other Loan Documents and the transactions or the
Collateral contemplated hereby and thereby, (d) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Lender, Borrower, or
any other person) in any way relating to the Collateral, this Agreement or any
of the other Loan Documents or Borrower's affairs, (e) any attempt to enforce
any rights of Lender against Borrower or any other person which may be obligated
to Lender by virtue of this Agreement or any of the other Loan Documents,
whether or not suit is filed, or (f) any attempt to inspect, verify, protect,
preserve, restore, collect, sell, liquidate or otherwise dispose of or realize
upon the Collateral, then all such legal and accounting expenses (including all
reasonable attorneys' fees) together with all other costs and expenses of Lender
shall be payable by Borrower without demand after notice, and Borrower shall
promptly pay all such amounts payable to Lender under this Section 10.6, and all
such amounts shall be secured by the Collateral and shall bear interest from the
date of such notice until paid in full at the rate applicable to the Loans from
time to time. If suit is brought to enforce any provision of this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
court costs in addition to any other remedy or recovery awarded by the court.
10.7.....Taxes and Fees. Should any tax (other than a tax based upon
the net income of Lender) or recording or filing fee become payable in respect
of this Agreement or any of the Loan Documents, any of the Collateral, or any
amendment, modification or supplement hereof or thereof, Borrower agrees to pay
such taxes (or reimburse Lender therefor), together with any interest or
penalties thereon, and agrees to hold Lender harmless with respect thereto.
10.8.....Successors and Assigns; Participations; Disclosure. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however, that Borrower
may not assign or transfer any of its rights or obligations under this Agreement
without Lender's prior written consent and any prohibited assignment or transfer
by Borrower shall be absolutely void. No consent to an assignment by Lender
shall release Borrower from its Obligations. Lender may assign this Agreement
and its rights and duties hereunder to any Person or Persons with assets of
$1,000,000,000 or more and no consent or approval by Borrower is required in
connection with any such assignment. Lender reserves the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of, or any
interest in Lender's rights and benefits hereunder. In connection with any such
actual or potential assignment or participation, Lender may disclose all
documents and information which Lender now or hereafter may have relating to
Borrower or its financial condition and business activities. To the extent that
Lender assigns its rights and obligations hereunder to a third Person, Lender
thereafter shall be released from such assigned obligations to Borrower and such
assignment shall effect a novation between Borrower and such third Person.
10.9.....Applicable Law. This Agreement, the other Loan Documents and
any and all other agreements and instruments required by Lender in connection
therewith shall be governed by and construed according to the internal laws of
the state of California, except to the extent that the Code provides for the
application of the laws of another state and except to the extent expressed to
the contrary in any of the Loan Documents. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.10....Notices. All notices, requests, reports and other
communications pursuant to this Agreement or the other Loan Documents shall be
in writing, and delivered by hand, by fax, by commercial overnight delivery or
by certified mail, return receipt requested, except for routine reports which
may be sent by any of those methods or by ordinary first class mail. In each
case, such notice, request, report or other communication shall be addressed to
the parties as set forth on the signature page of this Agreement, or to such
other address as a party shall have designated in writing in accordance with
this Section 10.10. Any notice, request or communication hereunder shall be
deemed to have been given on the day on which it is delivered by hand to such
party at the address specified herein or, if sent by mail, on the third Business
Day following the day it was deposited in the mail, postage prepaid, or if sent
by commercial overnight delivery service on the second Business Day following
deposit of the item with commercial overnight delivery service, or in the case
of fax notice, when transmitted as aforesaid, confirmation received, except that
Borrowing Notices and Borrower's Reports shall not be deemed to have been made
until actually received by Lender. A notice, request, report or other
communication sent to any one Borrower shall be deemed a notice to each
Borrower. The giving of at least 5 days' notice before Lender shall take any
action described in any notice shall conclusively be deemed reasonable for all
purposes; provided, however, that this shall not be deemed to require Lender to
give such 5 days' notice, or any notice, if not specifically required to do so
in this Agreement.
10.11....Further Action. Borrower shall, from time to time, upon
written request of Lender, promptly make, execute acknowledge and deliver, or
cause to be made, executed, acknowledged and delivered, all such further and
additional instruments, and promptly take all such further action as may be
required to carry out the intent and purpose of this Agreement and the other
Loan Documents, and to provide for the Loans under and payment of the Notes,
according to the intent and purpose herein and therein expressed.
10.12....Severability. In case any one or more of the obligations of
Borrower under this Agreement, any Note, or any of the other Loan Documents
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining obligations of Borrower shall not
in any way be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of Borrower under this Agreement, the Notes or
any of the other Loan Documents in any other jurisdiction.
10.13....Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of Borrower made herein or
in any of the Loan Documents, or in any certificate, report, financial statement
or other document furnished by or on behalf of Borrower in connection with this
Agreement or any of the Loan Documents, shall be deemed to have been relied upon
by Lender, notwithstanding any investigation heretofore or hereafter made by
Lender or on Lender's behalf, and those covenants and agreements of Borrower in
this Agreement (together with any other indemnities of Borrower contained
elsewhere in this Agreement or in any of the Loan Documents) shall survive the
termination of this Agreement and the repayment in full of the Indebtedness.
10.14....Effective Upon Execution. This Agreement shall become
effective upon the execution hereof by Lender and Borrower and shall remain
effective until the Indebtedness under this Agreement and each of the Notes
shall have been repaid and discharged in full and no commitment to extend any
credit hereunder (whether optional or obligatory) remains outstanding.
10.15....Confidentiality. In handling any confidential information,
Lender shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement, except that disclosures of such information may be
made: (a) to the subsidiaries or Affiliates of Lender in connection with their
present or prospective business relations with Borrower; (b) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower; (c) as required by law, regulations, rule or
order, subpoena, judicial order or similar order; (d) as may be required in
connection with the examination, audit or similar investigation of Lender; and
(e) as Lender may deem appropriate in connection with the exercise of any
remedies hereunder. Confidential information hereunder shall not include
information that either: (i) is in the public domain or in the knowledge or
possession of Lender when disclosed to Lender, or becomes part of the public
domain after disclosure to Lender through no fault of Lender; or (ii) is
disclosed to Lender by a third party, provided Lender does not have actual
knowledge that such third party is prohibited from disclosing such information.
10.16....Time of the Essence. Time is hereby declared to be of the
essence of this Agreement and every part hereof.
10.17....Joint and Several Liability. Notwithstanding how Loans and
repayments may be allocated among the Borrowers, the Borrowers
have joint and several liability to Lender for all Obligations of
any Borrower under the Loan Documents.
10.18....Waiver of Jury Trial.. EACH OF THE UNDERSIGNED BORROWER AND
EACH LENDER ACKNOWLEDGES THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR
MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE INTERPRETATION, PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE
INDEBTEDNESS. IN THE EVENT OF LITIGATION, A COPY OF THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
This Agreement is duly executed on behalf of each of the parties hereto
by duly authorized officers as of the date first above written.
COMERICA BANK-CALIFORNIA, ICON CASH FLOW PARTNERS L.P. SEVEN, a Delaware Limited
a California banking corporation Partnership
By: ICON Capital Corp., its general partner
By: By:
--------------------------------------------------
Name: Name:
------------------------------------------------
Title: Title:
-----------------------------------------------
Address for Notices: Address for Notices:
1331 North California Blvd. ICON Cash Flow Partners L.P. Seven
Suite 400 Attention: General Counsel
Walnut Creek, California 94596 100 5th Avenue, 10th Floor
Facsimile No.: (925) 941-1999 New York, New York 10011
Facsimile No.: (212) 418-4739
ICON INCOME FUND EIGHT A L.P.,
a Delaware limited partnership
By: ICON Capital Corp., its general partner
By:________________________________
Name:______________________________
Title:_______________________________
Address for Notices:
ICON INCOME FUND EIGHT A L.P.
Attention: General Counsel
100 5th Avenue, 10th Floor
New York, New York 10011
Facsimile No.: (212) 418-4739
ICON INCOME FUND EIGHT B L.P.,
a Delaware Limited Partnership
By: ICON Capital Corp., its general partner
By:________________________________
Name:______________________________
Title:_______________________________
Address for Notices:
ICON INCOME FUND EIGHT B L.P.
Attention: General Counsel
100 5th Avenue, 10th Floor
New York, New York 10011
Facsimile No.: (212) 418-4739
Lender shall endeavor
to send a copy of any
Notice sent to any
Borrower (except for
routine reports or
correspondence) to
the following
address, but Lender
shall incur no
liability to
Borrower, and such
notice shall be
effective, even if
Lender fails to do
so.
ICON CAPITAL CORP.
Attention: President
260 California Street
San Francisco, California 94111
Facsimile No.: (415) 981-4298
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of May 30, 2002 by and
between ICON Cash Flow Partners L.P. Seven, a Delaware limited partnership, ICON
Income Fund Eight A, a Delaware limited partnership, and ICON Income Fund Eight
B, a Delaware limited partnership, on the one hand, and Comerica
Bank-California, a California banking corporation, on the other hand, the
following terms shall have the following meanings (terms defined in the singular
to have the same meaning when used in the plural and vice versa):
Accounts - all presently existing and hereafter arising accounts,
accounts receivable, contract rights and other forms of monetary
obligations and receivables (including healthcare receivables) owing to
Borrower, and any credit insurance, guaranties, or security therefor,
irrespective of whether earned by performance.
Affiliate - shall mean, when used with respect to any Person, any other
Person which, directly or indirectly, controls or is controlled by or
is under common control with such Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), with respect to any
Person, shall mean possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract
or otherwise.
Agreement - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Schedules and Exhibits thereto, and
this Appendix A, together with all amendments, modifications and
supplements thereto, and restatements thereof.
Bankruptcy Code - the United States Bankruptcy Code (11 U.S.C.ss.101
et seq.), as amended, and any successor statute. ---------------
Base Rate - means that variable rate of interest so announced by Lender
at its headquarters office in San Jose, California as its "Base Rate"
from time to time, which serves as the basis upon which effective rates
of interest are calculated for those loans making reference thereto,
and which rate may not be the lowest rate of interest charged by Lender
to any of its customers.
Beneficial Interest - means a beneficial interest in a trust, a
partnership interest in a partnership, or a membership interest in a
limited liability company.
Borrower's Books - means all of Borrower's books and records including:
ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all
information relating to Borrower's business operations or financial
condition; and all computer programs, disk or tape files, printouts,
runs, or other computer prepared information.
Borrower's Report - an irrevocable notice from Borrower to Lender of
Borrower's request for a borrowing, pursuant to the terms of Section
1.1.3 and in the form of Exhibit 1 hereto.
Borrowing Base - means (a) 85% of the Present Value of the Eligible
Borrowing Base Contracts, with the limitation that no more than
$1,000,000.00 in Revolving Loans, in the aggregate, shall be based on a
contract or contracts involving the same Lessee or Debtor unless
otherwise approved in writing by Lender (to the extent that the
$1,000,000.00 limitation is exceeded in the Eligible Borrowing Base
Contracts identified on Schedule 1, Lender approves that excess); plus
(b) 15% of the Present Value of the Eligible Residual Values of the
Eligible Borrowing Base Contracts, with the limitation that no more
than $1,000,000.00 in Revolving Loans shall be based on this
subcategory.
Business Day - any day that is not a Saturday, Sunday, or other day on
which banks in the State of California are authorized or required to
close.
Cash - items designated as cash under GAAP.
Cash Equivalents - items designated as cash equivalents under GAAP.
Chattel Paper - all chattel paper (including tangible chattel paper and
electronic chattel paper) (as such terms are defined in the Code).
Closing Date - the date of execution of this Agreement.
Code - the California Uniform Commercial Code, as amended or
supplemented from time to time, including revised Division 9 of the
Uniform Commercial Code-Secured Transactions, effective July 1, 2001.
Any and all terms used in the Agreement which are defined in the Code
shall be construed and defined in accordance with the meaning and
definition ascribed to such terms under the Code, unless otherwise
defined herein.
Collateral - all of Borrower's right, title, and interest in and to
each of the following:
(a) the Accounts;
(b) Borrower's Books;
(c) the Chattel Paper;
(d) the Deposit Accounts;
(e) the Equipment;
(f) the General Intangibles;
(g) the Inventory;
(h) the Investment Property;
(i) the Leases;
(j) the Letter of Credit Rights;
(k) the Loan Contracts;
(l) the Negotiable Collateral;
(m) the Intellectual Property Collateral;
(n) the Joint Ventures;
(o) the Trusts;
(p) the Partnerships;
(q) any Person or entity in which Borrower owns a beneficial
interest;
(r) the Supporting Obligations;
(s) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of Lender:
(t) The leases, loan contracts and other property described in
Schedule 1 hereto;
(u) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any
or all of the Collateral, or other tangible or intangible property
received or receivable from the sale, exchange, collection, lease,
license, use or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
Notwithstanding the foregoing, the following property shall not be
Collateral during such time (and only during such time) as each of the
following conditions is satisfied: (i) the property is subject to a
senior Lien on behalf of a lender other than Lender (i.e., other than
Comerica Bank-California); (ii) the terms of the senior Lien prohibit a
subordinate Lien; (iii) such senior Lien remains in effect and the debt
secured by it has not been paid off; (iv) the lender holding such
senior Lien has no recourse to the assets of Borrower other than this
specific property (except for recourse arising from a breach by
Borrower of its representation or warranty that (A) Borrower has the
status and authority enabling it to properly enter into the
transaction, (B) entering into the transaction does not conflict with
any other agreement to which Borrower is a party, and (C) Borrower has
not committed fraud in connection with the transaction and the like);
and (v) the property is not subject to a current Revolving Loan by
Lender (i.e., by Comerica Bank-California). Without limiting the
foregoing, any property of Borrower which is excluded from the
definition of "Collateral" shall be included within such definition,
without further action or agreement of Borrower or Lender, if, and at
such time, as any legal or contractual prohibition on the granting of a
security interest in such property by Borrower to Lender ceases to be
in effect.
Copyrights - any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship
and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or
hereafter existing, created, acquired or held.
Debtor - means a borrower under a Loan Contract or Indirect Loan
Contract; ------
Deposit Account - any demand, time, savings, passbook or similar
account now or hereafter maintained by or for the benefit of Borrower
with an organization that is engaged in the business of banking
including a bank, savings bank, savings and loan association, credit
union and trust companies, and all funds and amounts therein, whether
or not restricted or designated for a particular purpose.
Discount Rate - means the rate of interest equal to one percent (1.00%)
per annum in excess of the Base Rate, which shall vary concurrently
with any change in the Base Rate.
Documents - any and all documents and documents of title, including
documents of title, bills of lading, dock warrants, dock receipts,
warehouse receipts and other documents of Borrower, whether or not
negotiable, and includes all other documents which purport to be issued
by a bailee or agent and purport to cover goods in any bailee's or
agent's possession which are either identified or are fungible portions
of an identified mass, including such documents of title made available
to Borrower for the purpose of ultimate sale or exchange of goods or
for the purpose of loading, unloading, storing, shipping,
transshipping, manufacturing, processing or otherwise dealing with
goods in an manner preliminary to their sale or exchange, in each case
whether now existing or hereafter acquired.
Eligible Borrowing Base Contract - means a Revolving Loan Contract
which satisfies each of the following conditions at the date of
determination:
(a) No event of default exists under such contract, and no
default under such contract has been waived, except that past due
payments that are deemed acceptable under paragraph (b), below, shall
not cause an otherwise Eligible Borrowing Base Contract to become
ineligible;
(b) Scheduled payments by the Lessee or the Debtor under such
contract are current or less than 60 days past the scheduled payment
date specified in the contract;
(c) The contract identifies Borrower as the lessor or lender,
or, if another Person is the original lessor or lender, the lessor's or
lender's interest in the contract and the underlying equipment has been
transferred in writing to Borrower (if the Revolving Loan Contract is
an Indirect Lease or Indirect Loan Contract, the term "Borrower" in
this clause is replaced by "Person in whom Borrower has a Beneficial
Interest";
(d) There is no indication on the contract that Borrower or
any predecessor-in-interest on the contract has transferred or pledged
any interest in the contract to any Person other than Lender or
Borrower (if the Revolving Loan Contract is an Indirect Lease or
Indirect Loan Contract, the term "Borrower" in this clause is replaced
by "Person in whom Borrower has a Beneficial Interest") or, if there is
such indication, such interest has been validity transferred by such
Person to Borrower or Lender;
(e) If the contract is a lease, the lease and the equipment
leased thereunder are owned by Borrower and are subject to no Lien
(other than Permitted Liens) in favor of anyone other than Lender or to
any rights other than the rights of the Lessee as lessee under such
lease; if a lease is deemed a security interest under the applicable
Uniform Commercial Code, Borrower has a perfected first-priority
security interest in the equipment covered thereby (if the Revolving
Loan Contract is an Indirect Lease or Indirect Loan Contract, the term
"Borrower" in this clause is replaced by "Person in whom Borrower has a
Beneficial Interest");
(f) Lender has a perfected first priority security interest in
the Revolving Loan Contract and, if the Revolving Loan Contract is a
lease, Lender has a perfected first-priority security interest in the
equipment subject to that lease (if the Revolving Loan Contract is an
Indirect Lease or Indirect Loan Contract, Lender has a first priority
security interest in Borrower's Beneficial Interest in the lessor or
lender);
(g) If the contract is a loan, the contract is owned by
Borrower and is subject to no Lien in favor of anyone other than
Lender, and Borrower has a perfected first priority security interest
in the equipment that secures the loan (if the Revolving Loan Contract
is an Indirect Loan Contract, the term "Borrower" in this clause is
replaced by "Person in whom Borrower has a Beneficial Interest");
(h) The equipment subject to the contract has been delivered
to a customer for business use and is located in the United States
(unless Lender agrees in writing to waive or modify this requirement as
to specified equipment);
(i) The contract is written; the contract has not been amended
or modified except by a written document delivered to Lender; the
contract was entered into or acquired in the ordinary course of
Borrower's business; the contract is in full force and effect and is
enforceable in accordance with its terms; to the best of Borrower's
knowledge, the equipment covered by the contract is in good working
order; the Lessee or Debtor has accepted the equipment delivered
pursuant to the contract as evidenced by a delivery and acceptance
certificate executed by the Lessee or Debtor; if a lease, the Lessee
has commenced making rent payments pursuant to the terms of the lease;
if a loan, the Debtor has commenced making loan payments pursuant to
the loan; and to the best of Borrower's knowledge, no defenses,
offsets, counterclaims or disputes exist under or with respect to such
contract or to the equipment covered by such contract; and
(j) All existing originals of the contract, including any and
all schedules, supplements and amendments thereto and modifications
thereof and together with any and all promissory notes and other
instruments as defined in the Uniform Commercial Code, evidencing any
monetary obligation owing to Borrower in connection therewith, have
been delivered to, and are in the possession of Lender (if the
Revolving Loan Contract is an Indirect Lease or Indirect Loan Contract,
the term "Borrower" in this clause is replaced by "Person in whom
Borrower has a Beneficial Interest");
(k) If the Revolving Loan Contract is an Indirect Lease or
Indirect Loan Contract, Borrower shall have, prior to the making of the
Revolving Loan, disclosed to Lender in writing the identity of the
lessor or lender, as the case may be, and the nature of Borrower's
Beneficial Interest in such Person.
Eligible Residual Value - means Borrower's interest in the estimated
value, at the lease termination date, of equipment subject to a lease
that is an Eligible Borrowing Base Contract, as calculated by Borrower
in its ordinary course of business and in accordance with generally
accepted industry standards for valuation of such equipment. If a lease
is an Indirect Lease, however, the Eligible Residual Value shall be
that percentage of the foregoing as corresponds to Borrower's
Beneficial Interest in the Person that is the lessor. If another Person
has an interest in a residual sharing agreement and/or a remarketing
agreement with respect to such equipment, the Eligible Residual Value
shall be net of that other Person's interest.
Environmental Law(s) - means all laws, codes, ordinances, rules,
regulations, orders, decrees and directives issued by any federal,
state, local, foreign or other governmental or quasi-governmental
authority or body (or any agency, instrumentality or political
subdivision thereof) pertaining to the environment or to any hazardous
materials or wastes, toxic substances, flammable, explosive or
radioactive materials, asbestos, and/or other similar materials.
Equipment - all of Borrower's machinery, machine tools, apparatus,
motors, equipment, fittings, furniture, furnishings, fixtures, vehicles
(including motor vehicles and trailers), tools, parts, goods (including
software imbedded in such goods) and other tangible personal property
(other than Inventory) of every kind and description used in Borrower's
operations or owned by Borrower or in which Borrower has an interest,
whether now owned or hereafter acquired by Borrower and wherever
located, and all parts, accessories, and special tools, and all
increases and accessions thereto and substitutions and replacements
therefor.
Event of Default - has the meaning set forth in Article 8 hereof.
Funded Debt - as of any date of determination, all liabilities of
Borrower of whatever nature or duration including indebtedness for
borrowed money, obligations under capital leases, and all other
indebtedness owed to other Persons (including obligations under capital
leases and letter of credit obligations), excluding trade debt incurred
in the ordinary course of business to suppliers.
GAAP - generally accepted accounting principles as in effect from time
to time in the United States, consistently applied.
General Intangibles - all of Borrower's present and future general
intangibles and other personal property (including payment intangibles,
electronic Chattel Paper, contract rights, rights arising under common
law, statutes, or regulations, choses or things in action, goodwill,
patents, trade names, trademarks, servicemarks, trade secrets,
inventions, copyrights, blueprints, drawings, plans, diagrams,
schematics, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims,
software, information contained on computer disks or tapes, literature,
reports, catalogs, deposit accounts, insurance premium rebates, tax
refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.
Governmental Authority - any federal, state, local or other
governmental instrumentality or authority or subdivision thereof,
domestic or foreign.
Indebtedness - all (a) obligations of Borrower for borrowed money, (b)
obligations of Borrower evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations of
Borrower in respect of letters of credit, bankers acceptances, interest
rate swaps, or other financial products, (c) obligations of Borrower
under capital leases, (d) obligations or liabilities of others secured
by a Lien on any property or asset of Borrower, irrespective of whether
such obligation or liability is assumed, and (e) any obligation of
Borrower guaranteeing or intended to guarantee (whether guaranteed,
endorsed, co-made, discounted, or sold with recourse to Borrower) any
indebtedness, lease, dividend, letter of credit, or other obligation of
any other Person.
Indirect Lease - a lease (including a schedule under a master lease) in
which a Person in whom Borrower has a Beneficial Interest is the lessor
or has been assigned the lessor's interest.
Indirect Loan Contract - a loan contract (including a schedule under a
master loan contract) or promissory note in which a Person in whom
Borrower has a Beneficial Interest is the lender or payee or has been
assigned the lender's or payee's interest.
Insolvency Proceeding - any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extension
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
Instruments - any and all negotiable instruments, and every other
writing which evidences a right to the payment of a monetary
obligation, in each case whether now existing or hereafter acquired.
Intellectual Property Collateral - all of Borrower's right, title, and
interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now
or hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, creating, acquired or held;
(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the
right, but not the obligation, to sue for and collect such damages for
said use or infringement of the intellectual property rights identified
above;
(e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from
such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
Inventory - all of Borrower's presently existing and hereafter acquired
goods (including software imbedded in such goods), merchandise and
other personal property which are held for sale or lease, including
those held for display or demonstration or out on lease or consignment,
or to be furnished under a contract of service or are raw materials,
work in process or materials used or consumed, or to be used or
consumed in Borrower's business, and shall include any returns or
repossessions thereof and all property rights, patents, copyrights,
trademarks, plans, drawings, diagrams, schematics, assembly and display
materials relating thereto.
Investment Property - any and all of Borrower's presently existing and
hereafter acquired investment property (as defined in the Code).
Joint Venture - a joint venture in which Borrower has a beneficial
interest, including but not limited to a joint venture that is the
lessor under a lease or the lender under a loan contract.
Lease - a lease (including a schedule under a master lease) under which
Borrower is the lessor or for which Borrower has been assigned the
lessor's interest.
Lending Office - Lender's office located at its address set forth on
the signature pages hereof, or such other office of Lender as it may
hereafter designate as its Lending Office by notice to Borrower.
Lessee - means a lessee under any Lease or Indirect Lease;
------
Letter of Credit Rights - any and all of Borrower's presently existing
and hereafter acquired letter of credit rights (as defined in the
Code).
Lien - any lien or security interest arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, security agreement, adverse claim or charge, conditional
sale, trust receipt, judgment, attachment or by operation of law, or
from a lease, consignment, or bailment for security purposes and any
agreement to grant any lien or security interest, and also including
reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases, and other title exceptions
and encumbrances affecting Real Property.
Loan Account - the Revolving Loan Account.
Loan Contract - a loan contract (including a schedule under a master
loan contract) or promissory note in which Borrower is the lender or
payee or which Borrower has been assigned the lender's or payee's
interest.
Loan Documents - the Agreement, all promissory notes executed by
Borrower in favor of Lender, any security agreements, guaranties,
mortgages, deeds of trust, environmental agreements, financing
statements, guaranties, subordination agreements or other documents
with or in favor of Lender that relate to this Agreement, and any other
instruments, documents, or agreements entered into or effective, now or
in the future, in connection therewith, including but not limited to
the (a) Agreement Regarding EKA Chemicals, Inc. Lease, dated March 20,
2002, by and between Wells Fargo Bank Northwest, N.A., formerly known
as First Security Bank, National Association, as Trustee of the
ICON/Nashville Ferry Trust, ICON/Nashville Ferry LLC, ICON Cash Flow
Partners L.P. Seven, ICON Cash Flow Partners L.P. Six and ICON Cash
Flow Partners L.P. Series E, on the one hand, and Comerica
Bank-California, on the other hand; and (b) Certificate Regarding EKA
Chemicals, Inc. Lease, dated March 20, 2002, executed by Wells Fargo
Bank Northwest, N.A., formerly known as First Security Bank, National
Association, as Trustee of the ICON/Nashville Ferry Trust, EKA
Chemicals, Inc. and Akzo Nobel, Inc. for the benefit of Comerica
Bank-California.
Loans - all loans and advances of any kind made by Lender to Borrower
pursuant to the Agreement.
Long Term Capital Leases - as of any date of determination, all lease
obligations of Borrower or renewals or extensions thereof whose
remaining term exceeds 1 year.
Long Term Debt - as of any date of determination, all debts and other
obligations of Borrower for borrowed money and all renewals or
extensions thereof whose remaining term exceeds 1 year.
Material Adverse Change - a material adverse effect on (a) the
business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower, (b) the
business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of ICON Capital
Corp., (c) the business, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole, (d) the ability of Borrower or any
Subsidiary or Affiliate of Borrower to perform its obligations under
the Loan Documents to which it is a party or of Lender to enforce the
Obligations or realize upon the Collateral, (e) the value of the
Collateral or the amount that Lender would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in
the liquidation of such Collateral, (f) the validity or enforceability
of this Agreement, the other Loan Documents, or the rights and remedies
of Lender hereunder or thereunder, or (g) the priority of Lender's
liens with respect to the Collateral.
Maximum Revolving Amount - Seventeen Million Five Hundred Thousand
Dollars ($17,500,000.00).
Negotiable Collateral - all of Borrower's present and future letters of
credit, advises of credit, certificates of deposit, notes, drafts,
money, Instruments, Documents, and tangible Chattel Paper.
Obligations - all Loans, advances, debt, principal, interest, fees,
expenses, costs and other amounts owed to Lender by Borrower pursuant
to this Agreement, any other agreement, or otherwise, together with all
guaranties, covenants and duties owing by Borrower to Lender of any
kind or description, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising,
including any interest, fees, expenses, costs and other amounts owed to
Lender that but for the provisions of the Bankruptcy Code would have
accrued after the commencement of any Insolvency Proceeding and
including any debt, liability, or obligation owing from Borrower to
others that Lender may have obtained by assignment or otherwise.
Notwithstanding the foregoing, "Obligations" shall not include any
agreement between Lender and a Borrower that is not a Loan Document in
which the obligations of Borrower are expressly designated by Lender in
writing as "non-recourse" or which Lender expressly states in writing
shall not be included within the definition of "Obligations" in this
Agreement.
Partnership - a partnership in which Borrower is a partner.
Patents - all patents, patent applications and like protections
including without limitation improvements, divisions, continuations,
renewals, reissues extensions and continuations-in-part of the same.
Permitted Liens - any: (a) Liens approved in writing by Lender or
arising under this Agreement or the other Loan Documents; (b) Liens for
taxes, fees, assessments or other governmental charges or levies,
either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Lender's
security interests; (c) Liens incurred in the ordinary course of
business of Borrower, except that (i) no Liens other than in favor of
Lender are permitted on any of the Leases, Loan Contracts and other
property identified in Schedule 1 or otherwise the subject of any
Revolving Loan, (ii) no Liens other than in favor of Lender are
permitted on Borrower's interest in any Person that is the lessor of an
Indirect Lease or lender on an Indirect Loan if such Indirect Lease or
Indirect Loan was the subject of any Revolving Loan, and (iii) no Lien
is permitted on any equipment related to clauses (i) or (ii) except in
favor of Lender and, in the case of equipment securing a Loan Contract,
a Lien in favor of Borrower; (d) Liens consisting of another Person's
interest in a residual sharing agreement or remarketing agreement with
respect to the sale of equipment upon the termination of a Lease
provided that the value of Borrower's interest in such equipment as
shown on its Books and in Borrower's calculation of Eligible Residual
Value is net of such other Person's interest; and (e) Liens on
equipment subject to a Lease that are expressly permitted by the terms
of the Lease.
Person - any individual, sole proprietorship, corporation, limited
liability company, partnership, joint venture, trust, association,
institution, public benefit corporation, firm, or unincorporated
organization, estate, joint stock company or other similar
organization, government agency or political subdivision thereof,
court, or other legal entity, whether acting in an individual,
fiduciary or other capacity.
Present Value - means any fixed unpaid payment obligation owed to
Borrower by a Lessee under a lease or a Debtor under a loan (including,
without limitation, unpaid regularly scheduled payments, puts and
balloon payments) (in each case excluding leases and loans that are not
Eligible Borrowing Base Contracts), such unpaid payments to be
discounted to their present value on the date of calculation at the
Discount Rate. If the contract is an Indirect Lease or Indirect Loan
Contract, the Present Value shall be that percentage of the foregoing
that corresponds to Borrower's interest in the Person that is the
lessor or lender, as the case may be. If a lessee under a lease has the
option to terminate the lease as of a date prior to its scheduled
termination date, the Present Value of that lease shall be the lower of
the following: (i) the Present Value based on the lease terminating at
such prior date plus the amount of any payment that the lessee would be
obligated to pay the lessor upon exercise of such option, discounted to
its present value on the date of calculation at the Discount Rate; or
(ii) the Present Value based on the lease terminating at its scheduled
termination date.
Real Property - means any estates or interests in real property now
owned or hereafter acquired by Borrower.
Regulation D - Regulation D of the Board of Governors of the Federal
Reserve System, as such regulation may be amended or supplemented from
time to time.
Responsible Officer - the chief executive officer, chief financial
officer or chief operating officer of a Person, or such other officer,
employee or agent of such Person designated by a Responsible Officer in
a writing delivered to Lender.
Revolving Loan Account - has the meaning as set forth in Section 1.1.2
hereof.
Revolving Loan Contract - means a Lease, Loan Contract, Indirect Lease
or Indirect Loan Contract based on which Lender makes a Revolving Loan
(including any and all schedules, supplements and amendments thereto
and modifications thereof and together with any and all promissory
notes and other instruments, as defined in the Uniform Commercial Code,
evidencing any monetary obligation owing to Borrower in connection
therewith) originated by Borrower or acquired by Borrower from the
lessor or lessor's assignee or from the lender or lender's assignee, as
the case may be.
Revolving Loan Maturity Date - May 31, 2003.
Stock - means all shares, options, warrants, interests, participations,
or other equivalents (regardless of how designated) of or in a
corporation or equivalent entity, whether voting or nonvoting,
including common stock, preferred stock, or any other "equity security"
(as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Securities Exchange Act of
1934).
Subordinated Debt - means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Lender on terms
reasonably acceptable to Lender (and identified as being such by
Borrower and Lender).
Subsidiary - of a Person means any corporation, partnership, limited
liability company, or other entity in which (i) any general partnership
interest or (ii) more than 50% of the Stock of which by the terms
thereof having ordinary voting power to elect the Board of Directors,
managers or trustees of the entity, at the time as of which any
determination is being made, is owned by Borrower, either directly or
through an Affiliate.
Supporting Obligations - any and all of Borrower's presently existing
and hereafter acquired supporting obligations (as defined in the Code).
Tangible Net Worth - partners' equity less any value for goodwill,
trademarks, patents, copyrights, leaseholds, organizational expense and
other similar intangible items, and any amounts due from partners,
officers and Affiliates.
Trademarks - any trademark and servicemark rights, whether registered
or not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower
connected with and symbolized by such trademarks.
Trust - a trust in which Borrower has a beneficial interest, including
but not limited to a trust that is the lessor under a lease or the
lender under a loan contract.
Unmatured Event of Default - any condition or event which with the
giving of notice or lapse of time, or both, would, unless cured or
waived become an Event of Default.
SCHEDULE 1
LEASES, LOAN CONTRACTS AND RELATED PROPERTY
1. Schedule No. 03, dated May 16, 1997 between Varilease Corporation as
lessor and AZ3 as lessee, subject to Master Lease Agreement, dated April 25,
1997 between Varilease Corporation as Lessor and AZ3 as Lessee. Lessor's
interest assigned to Borrower 1 by means of Assignment and Assumption Agreement,
dated January 22, 1998. Borrower represents that Borrower 1 currently holds the
lessor's interest therein.
2. Equipment Schedule No. 101 dated November 10, 1998 between First
Commercial Capital Corp. as lessor and Saberliner Corporation, as lessee,
subject to Master Lease Agreement No. 1008MLSC dated November 10, 1998 between
First Commercial Capital Corp. as lessor and Saberline Corporation as lessee.
Lessor's interest in lease and equipment assigned to Borrower 1 by means of an
Assignment dated November 24, 1998. Borrower represents that Borrower 1
currently holds the lessor's interest therein.
3. Equipment Schedule No. 1, dated January 19, 1999 between National
Leasing, Inc. as lessor and Travel Bound, Inc. as lessee, subject to Master
Lease Agreement, dated January 19, 1999 between National Leasing, Inc. as lessor
and Travel Bound, Inc., as lessee. Lessor's interest in lease assigned to
Borrower 1 by Assignment dated May 3, 1999. Borrower represents that Borrower 1
currently holds the lessor's interest therein.
4. Rental Schedule No. 1C, dated August 1, 1998 between Bridgeway
Capital Corporation as lessor and Headway Technologies, Inc. as lessee, subject
to Master Equipment Lease Agreement dated August 1, 1998 between Bridgeway
Capital Corporation as lessor and Headway Technologies, Inc. as lessee. Lessor's
interest assigned to ICON Funding Corp. by Notice and Acknowledgment of
Assignment dated August ___ 1998. Lessor's interest assigned by ICON Funding
Corp. to Borrower 1 by Assignment dated August 13, 1998. Borrower represents
that Borrower 1 currently holds the lessor's interest therein.
5. Lease No. 2749-98 dated August 19, 1998 between National Credit
Leasing Services, Inc. as lessor and LYF Meat & Produce Corp. dba C-Town
Supermarket and Rancho's Food Corp. dba Bravo Supermarket and FJF Columbus Food
Corp. dba C-Town Supermarket, as co-lessees. Lessor's interest assigned to ICON
Funding Corp. by Assignment dated October 30, 1998. Lessor's interest assigned
by ICON Funding Corp. to Borrower 1 by Assignment dated October 30, 1998.
Borrower represents that Borrower 1 currently holds the lessor's interest
therein.
6. Equipment Schedule No. I-3, dated September 30, 1998, between
Borrower 1, lessor, and Petsmart, Inc., lessee, to Master Lease Agreement dated
as of December 26, 1997. Borrower represents that Borrower 1 currently holds the
lessor's interest therein.
7. Equipment Schedule No. I-4, dated September 30, 1998, between
Borrower 1, lessor, and Petsmart, Inc., lessee, to Master Lease Agreement, dated
as of December 26, 1997. Borrower represents that Borrower 1 currently holds the
lessor's interest therein.
8. Aircraft Part(s) Lease Agreement, dated August 1, 1998, between AAR
Allen Aircraft, a division of AAR Airframe & Accessories Group, Inc. f/k/a AAR
Allen Group, Inc. as lessor and Sabena SA as lessee. Lessor's interest assigned
to Borrower 1 by Assignment and Consent dated August 31, 1998. Borrower
represents that Borrower 1 currently holds the lessor's interest therein.
9. Aircraft Part(s) Lease Agreement, dated September 1, 1998, between
AAR Allen Aircraft, a division of AAR Airframe Accessories Group, Inc., f/k/a
AAR Allen Group, Inc. as lessor and Sabena SA as lessee. Lessor's interest
assigned to Borrower 1 by Assignment and Consent dated September 30, 1998.
Borrower represents that Borrower 1 currently holds the lessor's interest
therein.
10. Equipment Schedule No. 1, dated October 20, 2000, to Master Lease
Agreement No. 6463, dated October 20, 2000. The lessor under the Master Lease
Agreement is Insight Investments Corp. and the lessee is Petsmart, Inc. The
lessor under Equipment Schedule No. 1 is Borrower 3 and the lessee is Petsmart,
Inc. Borrower represents that Borrower 3 currently holds the lessor's interest
under Equipment Schedule No. 1.
11. Equipment Schedule Nos. I-7, I-8, I-9 and I-10, each of which is
dated December 28, 1998, to Master Lease Agreement, dated December 28, 1998. The
lessor under the Master Lease Agreement is General Electric Capital Corporation
and the lessee is Regus Business Centre Corp. The lessor under the Equipment
Schedules is Borrower 3 and the lessee is Regus Business Centre Corp. Borrower
represents that Borrower 3 currently holds the lessor's interest under these
equipment schedules.
12. Computer Equipment Schedule No. 04, dated June 7, 2000, to Master
Lease Agreement, dated September 7, 1999. The lessor under the Master Lease
Agreement is General Electric Capital Corporation and the lessee is CSK Auto,
Inc. The lessor under Computer Equipment Schedule No. 04 is General Electric
Capital Corporation and the lessee is CSK Auto, Inc. The lessor's interest was
assigned to Borrower 3 by an Assignment dated June 27, 2000. Borrower represents
that Borrower 3 currently holds the lessor's interest under that equipment
schedule.
13. Borrower 1's interest in ICON/Nashville Ferry LLC. Borrower
represents that: (a) ICON/Nashville LLC is the beneficiary of ICON/Nashville
Ferry Trust; and (b) Wells Fargo Bank Northwest, N.A., as trustee of
ICON/Nashville Ferry Trust, is lessor under a lease under which EKA Chemicals,
Inc. is the current lessee, as reflected in that Lease dated December 4, 1984 by
and between Security Pacific Financial Leasing, Inc., lessor, and Kemanord,
Inc., lessee, as amended.
14. Equipment Schedule Nos. I-1, I-2, I-3, I-4, I-5 and I-6, each of
which is dated December 30, 1999, to Master Lease Agreement dated December 28,
1998. The lessor under the Master Lease Agreement is General Electric Capital
Corporation and the lessee is Regus Business Centre Corp. The lessor under each
of the Equipment Schedules is ICON Income Fund Eight A L.P. and the lessee is
Regus Business Centre Corp. Borrower represents that ICON Income Fund Eight A
L.P. currently holds the lessor's interest under these Equipment Schedules.
15. Equipment Schedule No. I-5, dated October 30, 1998, and No. I-6,
dated December 29, 1998, to Master Lease Agreement dated December 26, 1997. The
lessor under the Master Lease Agreement is General Electric Capital Corporation
and the lessee is Petsmart, Inc. The lessor under each of the Equipment
Schedules is ICON Income Fund Eight A L.P. and the lessee is Petsmart, Inc.
Borrower represents and warrants that ICON Income Fund Eight A L.P. currently
holds the lessor's interest under these Equipment Schedules.
Exhibit 1
Borrower's Report
(Use Separate Form for Each Borrower's Loan Request)
To: Comerica Bank-California
1331 North California Blvd., Suite 400
Walnut Creek, California 94596
This Borrower's Report is being delivered to you pursuant to Section
1.1.3 of the Loan and Security Agreement, dated as of May 30, 2002, 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"),
and ICON Income Fund Eight B L.P., a Delaware limited partnership ("Borrower 3,"
and together with Borrower 1 and Borrower 2, jointly and severally, individually
and collectively, "Borrower"), on the one hand, and Comerica-Bank-California
("Lender"), on the other hand (herein, as amended, modified, supplemented,
extended or restated from time to time, the "Loan Agreement"). Terms defined in
the Loan Agreement are, unless otherwise defined herein or the context otherwise
requires, used herein as defined in the Loan Agreement. Section references
herein are to the applicable sections of the Loan Agreement.
Each Borrower hereby certifies to Lender as follows:
A. ICON Capital Corp. is the sole general partner of each Borrower.
B. ___________________________ is the duly qualified and acting
_________________ [title of officer] of ICON Capital Corp. and is authorized to
execute this document on behalf of each Borrower.
C. 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. 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. 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 will continue to 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 continue to be true, if
the Loan being requested herein is made.
D. Borrower hereby requests a Revolving Loan in the amount of
$___________ pursuant to Section 1.1.3 of the Loan Agreement based on (i) the
Present Value of the contracts identified on Schedule 1 attached hereto, and
(ii) the Eligible Residual Values of equipment subject to the leases identified
on Schedule 2 attached hereto. Borrower hereby certifies that each of the
contracts identified on Schedule 1 is an Eligible Borrowing Base Contract, and
the Present Value shown for each such contract was calculated in accordance with
the terms of the Loan Agreement. Borrower also certifies that the equipment
identified on Schedule 1 is a true and correct description of the equipment
related to such contract. Borrower hereby certifies that each of the leases
identified on Schedule 2 is an Eligible Borrowing Base Contract. Borrower
further certifies that the equipment identified on Schedule 2 is a true and
correct description of the equipment whose Eligible Residual Value is the
subject of the requested Revolving Loan and that the Eligible Residual Value
shown for the equipment subject to each such lease was calculated in accordance
with the terms of the Loan Agreement. The Borrower to whom the Revolving Loan is
to be made is ________________________.
E. Attached hereto as Schedule 3 is a calculation, on a pro forma
basis, showing that, after the Requested Loan, Borrower shall be in compliance
with the Borrowing Base and each of the sublimits set forth in the Agreement.
F. Borrower requests that the Loan be made to it on the following date:
_______________________.
G. Borrower requests that the proceeds of the Loan be disbursed by
Lender in the following manner:
-----------------------------------------.
H. The following are true and correct computations as of
_________________ [date] of the items shown:
1. Maximum Loan Limitation a. Maximum Availability:
i. Maximum Revolving Amount $17,500,000
ii. Borrowing Base $___________
iii. Lesser of i. or ii., above: $___________ b.
Less: Principal Amount Outstanding
of All Revolving Loans, Prior to New
Revolving Loan $___________
c. Net Available: $___________
d. Amount of New Revolving Loan
(May Not Exceed 1.c., above) $___________
2. Individual Borrower Loan Limitation. a. Name of Borrower
to Whom New Revolving
Loan is Made ______________________________________________
b. Tangible Net Worth of Borrower to Whom New
Revolving Loan is Made $___________
c. One-half of 2.b., above: $___________
d. Principal Amount Outstanding of All Revolving Loans
to Individual Borrower to Whom New Revolving Loan
is Made, Including New Revolving Loan
(May Not Exceed 2.c., above) $___________
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Borrowing/Borrower's Report on ______________________ [date].
ICON CASH FLOW
PARTNERS L.P. SEVEN
By: ICON Capital
Corp., its general
partner
By:
Name:
Title:
ICON INCOME FUND
EIGHT A L.P.
By: ICON Capital
Corp., its general
partner
By:_________________________________
Name:____________________________
Title:_____________________________
ICON INCOME FUND
EIGHT B L.P.
By: ICON Capital
Corp., its general
partner
By:________________________________
Name:___________________________
Title:____________________________
Exhibit 2
Promissory Note
$17,500,000.00 Date: May 30, 2002
FOR VALUE RECEIVED, the undersigned, ICON Cash Flow Partners L.P. Seven, a
Delaware limited partnership, ICON Income Fund Eight A L.P., a Delaware limited
partnership, and ICON Income Fund Eight B L.P., a Delaware limited partnership,
jointly and severally promise to pay to Comerica Bank-California ("Bank") the
principal sum of Seventeen Million Five Hundred Thousand Dollars and No Cents
($17,500,000.00) or, if less, the unpaid principal amount owed pursuant to the
Loan made by Bank under the Loan and Security Agreement, dated May 30, 2002
between ICON Cash Flow Partners L.P. Seven, a Delaware limited partnership, ICON
Income Fund Eight A L.P., a Delaware limited partnership, and ICON Income Fund
Eight B L.P., a Delaware limited partnership, on the one hand, and Comerica
Bank-California, on the other hand ("Loan Agreement"), on the dates and in the
amounts set forth in the Loan Agreement. The undersigned further promises to pay
interest on the unpaid principal amount hereof on the dates and at the rates
calculated in accordance with the Loan Agreement.
The principal of and interest on this Note shall be payable in lawful money
of the United States of America, in immediately available funds without set-off
or counterclaim, without penalty or premium, free and clear of, and without
deduction for, any taxes, restrictions or conditions of any nature (except as
otherwise permitted by the Loan Agreement). All payments hereunder shall be made
to the Bank at 1331 North California Boulevard., Suite 400, Walnut Creek,
California 94596, or such other address as Bank may designate in writing.
This Note is one of the Notes referred to in the Loan Agreement. Reference
is made to the Loan Agreement for provisions relating to, among other things,
prepayment and acceleration of the maturity hereof. Borrower will promptly pay
all costs and expenses (including, without limitation, reasonable fees and
disbursements of counsel) suffered or incurred by Bank in connection with the
enforcement by Bank of its right to payment of any sum hereunder or any of its
rights hereunder.
Capitalized terms used but not otherwise defined herein are used as defined
in the Loan Agreement. This Note shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed as of
the date first written above.
ICON CASH FLOW PARTNERS L.P. SEVEN, a Delaware limited
partnership
By: ICON Capital Corp., its general partner
By:
Name:
Title:
ICON INCOME FUND EIGHT A, L.P.,
a Delaware limited partnership
By: ICON Capital Corp., its general partner
By:_______________________________
Name:___________________________
Title:____________________________
ICON INCOME FUND EIGHT B, L.P.,
a Delaware limited partnership,
By: ICON Capital Corp., its general partner
By:________________________________
Name:___________________________
Title:____________________________
Exhibit 3
Compliance Certificate
To: Comerica Bank-California
1331 North California Blvd., Suite 400
Walnut Creek, California 94596
This Compliance Certificate is given pursuant to Section 5.5.5 of that certain
Loan and Security Agreement, dated as of May 30, 2002 (the "Loan Agreement"), by
and between ICON Cash Flow Partners L.P. Seven, ICON Income Fund Eight A L.P.
and ICON Income Fund Eight B L.P. (collectively referred to as "Borrower"), on
the one hand, and Comerica Bank-California ("Lender"), on the other hand. All
initially capitalized terms used but not defined in this Compliance Certificate
shall have the meanings assigned to such terms in the Agreement. Section
references herein are to the applicable sections of the Loan Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
A. ICON Capital Corp. is the sole general partner of each Borrower.
B. ______________ (the person signing this certificate) is the duly
qualified and acting Chief Financial Officer of ICON Capital Corp. and is
authorized to execute this document on behalf of each Borrower.
C. Except as stated in Paragraph D, below: (i) As of the date hereof,
each Borrower has complied, and is compliance with, all of the terms, covenants
and conditions of the Loan Agreement and the other Loan Documents applicable to
it; (ii) As of the date hereof, therein exists no Event of Default under the
Loan Agreement or any of the other Loan Documents or an event which constitute
an Event of Default upon the lapse of time or upon the giving of notice and the
lapse of time specified therein; and (iii) As of the date hereof, 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.
D. Exceptions to Paragraph C (if none, so state):______________________________
- --------------------------------------------------------------------------------
The financial statement of Borrower attached hereto dated as of
___________________, and submitted to Lender pursuant to the Loan Agreement
shows compliance with all financial covenants specified therein, and Borrower is
in compliance with all such financial covenants (unless otherwise noted below),
as follows:
COVENANT: ACTUAL:
7.1 Minimum Aggregate Tangible Net Worth: $125,000,000 $_____________
7.2 Minimum Tangible Net Worth for Each Borrower:
a. ICON Cash Flow Partners L.P. Seven $____________
i. Outstanding Balance on Revolving
Loans Made to That Borrower $_____________
ii. Required Tangible Net Worth for
that Borrower
(Twice Amount in (i)) $_____________
b. ICON Income Fund Eight A L.P. $_____________
i. Outstanding Balance on Revolving
Loans Made to that Borrower $_____________
ii. Required Tangible Net Worth for
that Borrower
(Twice Amount in (i)) $______________
c. ICON Income Fund Eight B L.P. $______________
i. Outstanding Balance on Revolving
Loans Made to that Borrower $______________
ii. Required Tangible Net Worth for
that Borrower
(Twice Amount in (i)) $______________
7.3 Aggregate Maximum Debt to
Tangible Net Worth Ratio: 1.0 to 1.0 ________________
7.4 Profitability for Each Borrower
a. ICON Cash Flow Partners L.P. Seven $1.00 Annually ________________
b. ICON Income Fund Eight A, L.P. $1.00 Annually ________________
c. ICON Income Fund Eight B, L.P. $1.00 Annually ________________
ICON CASH FLOW PARTNERS L.P. SEVEN
By: ICON Capital Corp., its general partner
By:_________________________
Name:
Title: Chief Financial Officer
ICON INCOME FUND EIGHT A, L.P.
By: ICON Capital Corp., its general partner
By:_________________________
Name:
Title: Chief Financial Officer
ICON INCOME FUND EIGHT B, L.P.
By: ICON Capital Corp., its general partner
By:_________________________
Name:
Title: Chief Financial Officer
Exhibit 4
Borrowing Base / Eligible Borrowing Base Contract Aging Report
This Borrowing Base / Eligible Borrowing Base Contract Aging Report is being
delivered to you pursuant to Section 5.5.3 of the Loan and Security Agreement,
dated as of May 30, 2002, by and between ICON Cash Flow Partners L.P. Seven,
("Borrower 1" or "ICON 7"), ICON Income Fund Eight A L.P. ("Borrower 2" or ICON
8A"), ICON Income Fund Eight B L.P. ("Borrower 3" or "ICON 8B" and together with
Borrower 1 and Borrower 2, jointly and severally, individually and collectively,
"Borrower"), on the one hand, and Comerica Bank - California, on the other hand
("Lender") (herein, as amended, modified, supplemented or extended from time to
time called the "Loan Agreement". Terms defined in the Loan Agreement are,
unless otherwise defined herein or the context otherwise requires, used herein
as defined in the Loan Agreement. Section references herein are to the
applicable sections of the Loan Agreement
Each Borrower hereby certifies to Lender as follows:
1 Except as stated in Paragraph 2, below, each of the contracts described below
is an Eligible Borrowing Base Contract. 2 Exceptions to Paragraph 1 (if none, so
state):____________________________________ 3 Except as stated in Paragraph 4,
below, each of the contracts described below is an Eligible Residual Value of an
Eligible
Borrowing Base Contract.
4 Exceptions to Paragraph 3 (if none, so state):____________________________________
Present Value of Selected Eligible Borrowing Base Contracts and Eligible Residual Values
Projected as of ___________________ (Date) Calculated at a Present Value of __________ (Base Rate plus 1.0%).
Notes to Borrowing Base
A) Maximum Line Availability to be the lesser of the Borrowing Base or
$17,500,000
B) Borrowing Base to be based on Eligible Residual Values will be
capped at $1,000,000
C) Gross and discounted lease receivables and residual
values listed for the EKA Chemicals reflect ICON 7's 50% interest in this lease
investment.
- ------------------- --------------- ------------ --------------- ---------------- ----------------- ----------------
ICON 7 Lessee Equip. Type Gross PV of Lease Gross Residual PV of Residual
Lease Rec. Rec. Exp. Date
- ------------------- --------------- ------------ --------------- ---------------- ----------------- ----------------
EKA Chemicals
Petsmart
Petsmart
Sabena
Sabena
AZ 3
Sabreliner
Travel Bound
Headway Tech.
C-Town Sprmkt.
-------------- ------------ --------------- ---------------- ----------------- ----------------
Sub Totals $0 $0 $0 $0
ICON 7 PV of Leases $0 x 85% = $0
Borrowing PV of Residuals $0 x 15% = $0
Base
---------
---------
ICON 7 Total $0
Tangible Net Worth of ICON 7 as of last day of preceding month (provide exact
amount if known; otherwise, provide estimate):
$---------------
- ------------------- --------------- --------------- -------------- --------------- --------------- ---------------
ICON 8A Lessee Equip. Type Gross Lease PV of Lease Gross Residual PV of Residual
Rec. Rec Exp. Date
- ------------------- --------------- --------------- -------------- --------------- --------------- ---------------
Sub Totals $0 $0 $0 $0
ICON 8A PV of Leases $0 x 85% = $0
Borrowing PV of Residuals $0 x 15% = $0
--------
--------
Base ICON 8A Total $0
Tangible Net Worth of ICON 8A as of last day of preceding month (provide exact
amount if known; otherwise, provide estimate):
$---------------.
- ------------------- --------------- --------------- -------------- --------------- --------------- ---------------
ICON 8B Lessee Equip. Type Gross Lease PV of Lease Gross Residual PV of Residual
Rec. Rec Exp. Date
- ------------------- --------------- --------------- -------------- --------------- --------------- ---------------
CSK Auto
Regus
Petsmart
----------------- -------------- -------------- --------------- -------------- ---------
Sub Totals $0 $0 $0 $0
ICON 8B PV of Leases $0 x 85% = $0
Borrowing PV of Residuals $0 x 15% = $0
-----------
---------
Base ICON 8B Total $0
- --------------------------- ---------------------- ---------- ------------------------------- ----------
TOTALS
- --------------------------- ---------------------- ---------- ------------------------------- ----------
Total Borrowing PV of Leases $0 x 85% = $0
Base PV of Residuals $0 x 15% = $0
----------
----------
Total Borrowing Base $0
Tangible Net Worth of ICON 8B as of last day of preceding month (provide exact
amount if known; otherwise, provide estimate):
$--------------
IN WITNESS WHEREOF, the undersigned have executed and delivered this Report on
__________,____.
ICON CASH FLOW PARTNERS L.P. SEVEN
By: ICON Capital Corp., its general partner
By:_______________________________________
Name:____________________________________
Title:_____________________________________
ICON INCOME FUND EIGHT A L.P.
By: ICON Capital Corp., its general partner
By:_______________________________________
Name:____________________________________
Title:_____________________________________
ICON INCOME FUND EIGHT B L.P.
By: ICON Capital Corp., its general partner
By:_______________________________________
Name:____________________________________
Title:_____________________________________
EXHIBIT 10.2
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is
made as of December 12, 2002 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"), 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,
entered into by Borrower 1, Borrower 2, Borrower 3 and Lender (as amended and
modified through but excluding the date hereof, the "Agreement")."
RECITALS
WHEREAS, Borrower 1, Borrower 2, Borrower 3, and Lender entered into the
Agreement;
WHEREAS, Borrower 1, Borrower 2, Borrower 3 and Borrower 4 have requested
that Borrower 4 be added as a Borrower under 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.
2. Amendments.
(a) Borrower 4 is deemed a "Borrower," as that term is defined in the
Agreement.
(b) Section 1.9.1 of the Agreement is amended by inserting the
following sentence immediately after the third sentence in the
first paragraph:
Borrower authorizes Lender to automatically deduct from deposit account
number 1892187368 maintained by Borrower 4 with Lender the portion of the amount
of principal, interest and late charges due allocable to Borrower 4 (which
allocation shall be based on Loans to Borrower 4 and payments by Borrower 4).
(c) Section 4.1 of the Agreement is amended by inserting the
following sentence immediately after the third sentence:
Borrower 4 is a limited liability company, duly organized and existing and
in good standing under the laws of the state of Delaware, which shall survive at
least two years beyond the maturity of any Loans hereunder.
(d) Section 4.2 of the Agreement is amended to read as follows:
4.2 Agreement Authorized. The execution, delivery and performance of this
Agreement and the Loan Documents are duly authorized and do not require any
registration with, consent or approval of, or notice to, or other action with or
by, any governmental body or other regulatory authority; are not in
contravention of or in conflict with any law or regulation or any term or
provision of the formation, organizing or operating agreements or other
documents of any Borrower, and this Agreement and each of the other Loan
Documents is a valid, binding and legally enforceable obligation of each
Borrower in accordance with its terms, subject only to bankruptcy, insolvency or
similar laws affecting creditors' rights generally.
(e) Section 4.7 of the Agreement is amended by inserting the
following sentence at the end:
The chief executive office of Borrower 4 is located in New York City, New
York. Borrower 4's Organizational Identification Number is 3413575. Borrower 4's
Tax Identification Number is 13-4183234.
(f) Section 4.8 of the Agreement is amended to read as follows:
General Partner/Manager. ICON Capital Corp. is the sole general partner of
each Borrower that is a partnership. ICON Capital Corp. is the sole manager of
each Borrower that is a limited liability company. ICON Capital Corp. is a
corporation duly organized and existing and in good standing under the laws of
the State of Connecticut. ICON Capital Corp. has the appropriate powers and
adequate authority, rights, licenses and franchises to own its property and to
carry on its business as now conducted, and is duly qualified, in good standing
and has all licenses necessary in California and in each state in which the
character of the properties owned by it therein or the conduct of its business
makes such qualification or licenses necessary. ICON Capital Corp. has the power
and adequate authority to make and carry out this Agreement and the other Loan
Documents in its capacity as general partner of each Borrower that is a
partnership
(g) Section 5.5.5 of the Agreement is amended by deleting the phrase
"a Compliance Certificate of the chief financial officer of
Borrower's general partner" and replacing it with the phrase "a
Compliance Certificate of the chief financial officer of
Borrower's general partner (if the applicable Borrower is a
partnership) and of the chief financial officer of Borrower's
manager (if the applicable Borrower is a limited liability
company)."
(h) Section 7.1 of the Agreement is amended to read as follows:
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 $140,000,000.
(i) Exhibits 1, 3 and 4 to the Agreement are deleted and replaced by
Exhibits 1, 3 and 4 to this Amendment.
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. Borrower 4 is
bound by the Loan Documents, as amended by this Amendment, to the same extent as
if it had executed them. 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. Each Borrower represents and warrants to
Lender as follows: 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. 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. 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 will continue to 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 continue to be true, upon
this Amendment becoming effective.
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 December 12, 2002 when: ---------------------------
(a) This Amendment is executed by Borrower 1, Borrower 2, Borrower 3,
Borrower 4 and Lender;
(b) Lender shall have received an original, executed Amended and
Restated Note from Borrower, in the form of Exhibit 2 hereto,
duly completed;
(c) Lender shall have received and filed a UCC financing statement
with the appropriate official of the state where Borrower 4 is
located;
(d) Lender shall have received certified copies of the organizational
documents and operating agreements of Borrower 4 and its manager,
in form and substance satisfactory to Lender;
(e) Lender shall have received certified copies of all action taken
by Borrower 4 to authorize the execution, delivery and
performance of the Loan Documents;
(f) Lender shall have received good standing certificates from the
appropriate secretary of state of the state in which Borrower 4
and its manager are organized;
(g) Borrower 4 shall have become a party to the Contribution
Agreement referred to in Section 5.18 of the Agreement by means
of a document executed by all Borrowers, and Lender shall have
received a copy of such executed document.
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. 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
Address for Notices:
ICON INCOME FUND NINE, LLC
Attention: General Counsel
100 5th Avenue, 10th Floor
New York, New York 10011
Facsimile No.: (212) 418-4739
ICON INCOME FUND EIGHT A L.P., COMERICA BANK-CALIFORNIA,
a Delaware Limited Partnership a California banking corporation
By ICON Capital Corp., its general partner
By: ___________________________
By:_____________________________ John Esposito
Paul B. Weiss, President Vice President
ICON INCOME FUND EIGHT B L.P.,
a Delaware Limited Partnership;;
By ICON Capital Corp., its general partner
By:______________________________
Paul B. Weiss, President
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
EXHIBIT 99.1
I, Beaufort J.B. Clarke, Chairman and Chief Executive Officer of ICON
Capital Corp, the sole General Partner of ICON Income Fund Eight B L.P.,
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Annual Report on Form 10-K for the period ended December 31, 2002
(the "Annual Report") which this statement accompanies fully complies
with the requirements of Section 13(a) of the Securities Exchange Act
of 1934 (15 U.S.C. 78m) and
(2) information contained in the Annual Report fairly presents, in all
material respects, the financial condition and results of operations
of ICON Income Fund Eight B L.P..
Dated: March 31, 2003
/s/ Beaufort J.B. Clarke
-----------------------------------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
sole General Partner of ICON Income Fund Eight B L.P.
ICON Income Fund Eight B L.P.
(A Delaware Limited Partnership)
December 31, 2002
EXHIBIT 99.2
I, Thomas W. Martin, Executive Vice President (Principal Financial and
Accounting Officer) of ICON Capital Corp, the sole General Partner of ICON
Income Fund Eight B L.P., certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) the Annual Report on Form 10-K for the period ended December 31, 2002
(the "Annual Report") which this statement accompanies fully complies
with the requirements of Section 13(a) of the Securities Exchange Act
of 1934 (15 U.S.C. 78m) and
(2) information contained in the Annual Report fairly presents, in all
material respects, the financial condition and results of operations
of ICON Income Fund Eight B L.P..
Dated: March 31, 2003
/s/ Thomas W. Martin
-----------------------------------------------------
Thomas W. Martin
Executive Vice President (Principal
Financial and Accounting Officer)
ICON Capital Corp.
sole General Partner of ICON Income Fund Eight B L.P.
ICON SPK 2023-A LLC
Financial Statements
December 31, 2002
(With Independent Auditor's Report Thereon)
INDEPENDENT AUDITOR'S REPORT
The Members
ICON SPK 2023-A LLC
We have audited the accompanying balance sheet of ICON SPK 2023-A LLC (the
"Company") as of December 31, 2002, and the related statements of operations,
changes in members' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 financial statements referred to the above present fairly,
in all material respects, the financial position of ICON SPK 2023-A LLC as of
December 31 2002, 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
Hays & Company LLP
March 13, 2003
New York, New York
ICON SPK 2023-A LLC
Balance Sheet
December 31, 2002
Assets
------
Cash $ 183,108
----------------
Investment in operating leases
Equipment, at cost 7,982,500
Accumulated depreciation (2,176,604)
----------------
5,805,896
Other assets 463,786
----------------
Total assets $ 6,452,790
================
Liabilities and Members' Equity
-------------------------------
Security deposits and other liabilities $ 473,855
Due to affiliate 48,312
----------------
Total liabilities 522,167
----------------
Members' equity 5,930,623
----------------
Total liabilities and members' equity $ 6,452,790
================
See accompanying notes to financial statements.
ICON SPK 2023-A LLC
Statement of Operations
For the Year Ended December 31, 2002
Revenue
Rental income $ 2,681,822
----------------
Expenses
Depreciation and amortization expense 2,176,604
General and administrative 1,089
----------------
Total expenses 2,177,693
----------------
Net income $ 504,129
================
See accompanying notes to financial statements.
ICON SPK 2023-A LLC
Statement of Changes in Members' Equity
For the Year Ended December 31, 2002
Members' equity as of January 1, 2002 $ -
Members' initial capital contribution 7,750,000
Distributions to members (2,556,006)
Additional members' contributions 232,500
Net income 504,129
---------------
Members' equity as of December 31, 2002 $ 5,930,623
===============
See accompanying notes to financial statements.
ICON SPK 2023-A LLC
Statement of Cash Flows
For the Year Ended December 31, 2002
Cash flows from operating activities:
Net income $ 504,129
-----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization expense 2,176,604
Change in operating assets and liabilities:
Other assets (463,786)
Other liabilities 473,855
Due to affiliate 48,312
-----------
Total adjustments 2,234,985
-----------
Net cash provided by operating activities 2,739,114
-----------
Cash flows from investing activities:
Investment in operating leases (7,982,500)
-----------
Net cash used in investing activities (7,982,500)
-----------
Cash flows from financing activities:
Distributions to members (2,556,006)
Members' contributions 7,982,500
-----------
Net cash provided by financing activities 5,426,494
-----------
Net increase in cash 183,108
Cash at beginning of year -
-----------
Cash at end of year $ 183,108
===========
See accompanying notes to financial statements.
ICON SPK 2023-A LLC
Notes to Financial Statements
December 31, 2002
1. Organization
In December 2001 ICON SPK 2023-A LLC (the "Company" or the "LLC") was
formed as a joint venture between two affiliates; ICON Income Fund Eight B L.P.
("Fund Eight B"), and ICON Income Fund Nine, LLC ("Fund Nine"). The purpose of
the LLC was to acquire a portfolio of leases consisting of a broad range of
equipment from materials handling to manufacturing and technology equipment. The
Manager of the Company is ICON Capital Corp., the General Partner of each of the
Company's members. The total purchase price of the portfolio acquired was
$7,750,000 plus $232,500 of acquisition fees paid to the Manager, which was
financed with cash. The leases expire on various dates commencing April 2003
through April 2008. Fund Nine has a majority interest of 51% and Fund Eight B
has a 49% interest.
Profits, losses, cash distributions and disposition proceeds are allocated
to the members in accordance with their share of interest.
2. Significant Accounting Policies
Basis of Accounting and Presentation - The LLC's records are maintained on
the accrual basis. The preparation of financial statements in conformity with
generally accepted accounting principles 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
the reported amounts of revenues and expenses during the reporting period.
Significant estimates include the allowance for doubtful accounts 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 - All leases in the LLC's portfolio are
classified as operating leases. For operating leases, equipment is recorded at
cost and is depreciated on the straight-line method over the lease terms to
their estimated fair market values at lease terminations. Related lease rentals
are recognized following the straight-line method over the lease terms. Billed
and uncollected operating lease receivables are included in other assets.
Impairment of Assets - The LLC's policy with respect to impairment of
estimated salvage values of operating leases is to review, on a periodic basis,
the carrying value on an individual asset to determine whether events or changes
in circumstances indicate that the carrying value of an asset may not be
recoverable and, therefore, an impairment loss should be recognized. The events
or changes in circumstances which generally indicate that the residual value of
an asset has been impaired are (i) the estimated fair value of the underlying
equipment is less than the LLC'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 (if any) and the LLC's
carrying value. Generally in the latter situation, the carrying value relates to
equipment subject to third party non-recourse notes payable where the lessee
remits its rental payments directly to the lender and the LLC does not recover
its carrying value until the non-recourse note obligation is repaid in full.
ICON SPK 2023-A LLC
Notes to Financial Statements - Continued
December 31, 2002
The Partnership measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Partnership from re-lease or sale of the equipment. Generally,
third party appraisals, reviews of future cash flows and anticipated future cash
flows and detailed market analyses are used as the basis for measuring whether
an impairment loss should be recognized.
Income Taxes - No provision for income taxes has been made as liability for
such taxes is that of each member rather than the LLC. The LLC'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. Investment In Operating Leases
In December 2001, the LLC entered into a binding agreement to acquire a
portfolio of operating leases involving a broad range of equipment for a total
cost of $7,982,500, including $232,500 in acquisition fees paid to the Manager.
This was consummated in the first quarter 2002.
The investment in operating leases at December 31, 2002 consisted of the
following:
Equipment Acquisition $ 7,982,500
----------------
Equipment cost, end of year 7,982,500
----------------
Depreciation expense (2,176,604)
----------------
Accumulated depreciation, end of year (2,176,604)
----------------
Investment in operating leases, end of year $ 5,805,896
================
Non-cancelable rents from operating leases are due as follows:
Year Ending
December 31, Amount
2003 $ 2,241,505
2004 1,201,951
2005 731,818
2006 257,584
2007 94,205
Thereafter 31,011
--------------
$ 4,558,074
4. Related Party Transactions
The amount due to affiliate represents sales tax paid by Fund Nine on
behalf of the LLC.
ICON Aircraft 126 LLC
Financial Statements
December 31, 2002
(With Independent Auditor's Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Partners
ICON Aircraft 126 LLC
We have audited the accompanying balance sheet of ICON Aircraft 126 LLC (the
"Company") as of December 31, 2002, and the related statements of operations,
changes in members' equity, and cash flows for the period March 4, 2002 (date of
inception) to December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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 financial statements referred to above present fairly, in
all material respects, the financial position of ICON Aircraft 126 LLC as of
December 31 2002, and the results of its operations and its cash flows for the
period March 4, 2002 (date of inception) to December 31, 2002, in conformity
with accounting principles generally accepted in the United States of America.
/s/Hays & Company LLP
Hays & Company LLP
March 13, 2003
New York, New York
ICON Aircraft 126 LLC
Balance Sheet
December 31, 2002
Assets
Investment in operating leases
Equipment at cost $ 77,523,584
Accumulated depreciation (3,465,625)
---------------
74,057,959
Other assets 274,470
---------------
Total assets $ 74,332,429
===============
Liabilities and Members' Equity
Notes payable - non-recourse $ 67,277,879
Other liabilities 320,292
---------------
Total liabilities 67,598,171
---------------
Commitments and contingencies
Members' equity 6,734,258
---------------
Total liabilities and members' equity $ 74,332,429
===============
See accompanying notes to financial statements.
ICON Aircraft 126 LLC
Statement of Operations
For the Period March 4, 2002 (date of inception)
to December 31, 2002
Revenue
Rental income $ 6,882,744
-------------
Expenses
Depreciation expense 3,465,625
Interest expense 3,126,363
Amortization of loan origination fees 42,300
-------------
Total expenses 6,634,288
-------------
Net income $ 248,456
=============
See accompanying notes to financial statements.
ICON Aircraft 126 LLC
Statement of Changes in Members' Equity
For the Period March 4, 2002 (date of inception)
to December 31, 2002
Members' contributions $ 6,485,802
Net income 248,456
-------------
Balance at December 31, 2002 $ 6,734,258
=============
See accompanying notes to financial statements.
ICON Aircraft 126 LLC
Statement of Cash Flows
For the Period March 4, 2002 (date of inception)
to December 31, 2002
Cash flows from operating activities:
Net income $ 248,456
---------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Rental income paid directly to lenders by lessees (5,848,920)
Depreciation expense 3,465,625
Interest expense on non-recourse financing paid
directly to lenders by lessees 2,850,065
Amortization of loan origination fees 42,300
Changes in operating assets and liabilities:
Other assets (91,170)
Other liabilities (389,016)
Other (277,340)
---------------
Total adjustments (248,456)
---------------
Net cash provided by operating activities -
---------------
Cash flows from investing activities:
Investment in operating leases 6,485,802
---------------
Net cash used in investing activities (6,485,802)
---------------
Cash flows from financing archives:
Members' capital contributions 6,485,802
---------------
Net cash provided by financing activities 6,485,802
---------------
Net increase in cash -
Cash at the beginning of the period -
---------------
Cash at the end of the period $ -
===============
(continued on next page)
ICON Aircraft 126 LLC
Statements of Cash Flows (Continued)
Supplemental Disclosure of Cash Flow Information
For the period March 4, 2002 (date of inception) to December 31, 2002,
non-cash activities included the following:
Rental income paid directly to lenders by lessees $ 5,848,920
Principal and interest on non-recourse debt
paid directly to lenders by lessees (5,848,920)
---------------
$ -
===============
Interest expense for the period ended December 31, 2002 of $2,850,065,
consisted solely of interest expense on non-recourse financings paid or accrued
directly to lenders by lessees. Interest expense of $276,298 was accrued at
December 31, 2002 for the non-recourse debt financing.
See accompanying notes to financial statements.
ICON Aircraft 126 LLC
Notes to Financial Statements
December 31, 2002
1. Organization
ICON Aircraft 126 LLC (the "Company") was formed March 4, 2002 as a joint
venture between two affiliates; ICON Income Fund Eight B L.P. ("Fund Eight B"),
and ICON Income Fund Nine LLC ("Fund Nine"). The purpose of the Company was to
acquire all of the outstanding shares of Delta Aircraft Leasing Limited
("D.A.L."), a Cayman Islands registered company, which owns, through an Owner
Trust, an Airbus A340-313X aircraft which is on lease to Cathay Pacific through
March 2006. The stock was acquired as of March 4, 2002 for a total purchase
price of $4,250,000 in cash and non-recourse debt of $71,037,782. ICON Capital
Corp. (the "Manager"), a Connecticut Corporation, manages and controls the
business affairs of the Company's equipment, leases and financing transactions
under a management agreement with the Company. The Company paid the Manager
$2,235,802 in acquisition fees in connection with this transaction. D.A.L. owns
the Airbus A340-313X aircraft subject to non-recourse debt provided by
unaffiliated lenders. The lenders have a security interest in the aircraft and
an assignment of the rentals under the lease. Fund Eight B and Fund Nine each
own a 50% interest in the Company.
Profits and losses are allocated to the Partners in accordance to their
share of interest.
2. Significant Accounting Policies
Basis of Accounting and Presentation - The Company's records are maintained
on the accrual basis. 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
the reported amounts of revenues and expenses during the reporting period.
Significant estimates include the allowance for doubtful accounts 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 - All leases in the Company's portfolio are
classified as operating leases. For operating leases, equipment is recorded at
cost and is depreciated on the straight-line method over the lease terms to
their estimated fair market values at lease terminations. Related lease rentals
are recognized following the straight-line method over the lease terms. Billed
and uncollected operating lease receivables are included in other assets.
Impairment of Assets - The Company's policy with respect to impairment of
estimated salvage values of operating leases is to review, on a periodic basis,
the carrying value on an individual asset to determine whether events or changes
in circumstances indicate that the carrying value of an asset may not be
recoverable and, therefore, an impairment loss should be recognized. The events
or changes in circumstances which generally indicate that the residual value of
an asset has been impaired are (i) the estimated fair value of the underlying
equipment is less than the Company'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 Company's carrying
value. Generally in the latter situation, the carrying value relates to
equipment subject to third party non-recourse notes payable where the lessee
remits its rental payments directly to the lender and the Company does not
recover its carrying value until the non-recourse note obligation is repaid in
full.
ICON Aircraft 126 LLC
Notes to Financial Statements (Continued)
December 31, 2002
The Company measures its impairment loss as the amount by which the
carrying amount of the residual value exceeds the estimated proceeds to be
received by the Company from re-lease or sale of the equipment. Generally, third
party appraisals, reviews of future cash flows and anticipated future cash flows
and detailed market analyses are used as the basis for measuring whether an
impairment loss should be recognized.
Income Taxes - No provision for income taxes has been recorded since the
liability for such taxes is that of each member rather than the Company. 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. Investment In Operating Leases
In March 2002, the Company acquired an operating lease for a total cost of
$77,523,184, including fees paid to the Manager of $2,235,802.
The investment in operating leases at December 31, 2002 consisted of the
following:
Equipment cost, beginning of the period $ -
Equipment acquisition 75,287,782
Initial direct costs 2,235,802
----------------
Equipment cost, end of the period 77,523,184
----------------
Accumulated depreciation, beginning of the period -
Depreciation expense (3,465,625)
----------------
Accumulated depreciation, end of year (3,465,625)
----------------
Investment in operating leases, end of year $ 74,057,959
================
Non-cancellable rents from operating leases are due as follows:
Year Ending
December 31, Amount
2003 $ 8,340,000
2004 8,340,000
2005 8,340,000
2006 2,085,000
--------------
$ 27,105,000
==============
ICON Aircraft 126 LLC
Notes to Financial Statements (Continued)
December 31, 2002
4. Notes Payable
Notes payable consist of a non-recourse obligation, which accrues interest
at the rate of 5.39% per annum and is being paid directly to the lender by the
lessee.
Principal maturities of the notes are as follows:
Year Ending
December 31, Amount
2003 $ 4,236,507
2004 4,453,811
2005 4,713,407
2006 53,874,154
--------------
$ 67,277,879