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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2003
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
Commission File Number 333-67638
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ICON Income Fund Nine, LLC
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-4183234
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 Fifth Avenue, 10th floor, New York, New York 10011
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 418-4700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Liability
Company Shares
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 Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
TABLE OF CONTENTS
Item Page
- ---- ----
PART I
1. Business 3-4
2. Properties 4
3. Legal Proceedings 4
4. Submission of Matters to a Vote of Security Holders 4
PART II
5. Market for the Registrant's Securities and Related
Security Holder Matters 4
6. Selected Consolidated Financial Data 5
7. Manager's Discussion and Analysis of Financial
Condition and Results of Operations 5-12
7A.Qualitative and Quantitative Disclosures About Market Risk 12
8. Consolidated Financial Statements 13-36
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 37
9a. Controls and Procedures 37
PART III
10. Directors and Executive Officers of the Registrant's
Manager 37-38
11. Executive Compensation 38
12. Security Ownership of Certain Beneficial Owners
and Management 39
13. Certain Relationships and Related Transactions 39
14. Principal Accounting Fees and Services 39
PART IV
15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 39-40
SIGNATURES 41
Certifications 42-43
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
PART I
Item 1. Business
--------
General Development of Business
ICON Income Fund Nine, LLC (the "LLC") was formed on July 11, 2001,
pursuant to the Amended and Restated Operating Agreement of ICON Income Fund
Nine, LLC ("Operating Agreement"). The LLC is a Delaware limited liability
company with an initial capitalization of $1,000 by ICON Capital Corp. (the
"Manager") for one member share. It was formed to acquire various types of
equipment subject to leases with third parties and to make related investments
pursuant to the Operating Agreement. The LLC's maximum offering is $100,000,000.
The LLC commenced business operations on December 18, 2001, with the admission
of members representing 1,249.91 additional members' shares at $1,000 per share,
aggregating $1,249,910 of capital contributions. Since then through the LLC's
final offering closing on April 30, 2003, members shares representing 98,416.17
additional members shares were admitted into the LLC with aggregate gross
proceeds of $98,416,170. Since the LLC's initial admission of additional
members, 675.08 additional member shares have been redeemed, bringing the
additional members shares at December 31, 2003 to 98,991.000 shares aggregating
$98,991,003 in capital contributions (exclusive of the Manager's interest as a
member).
The Manager of the LLC is ICON Capital Corp. (the "Manager") a Connecticut
corporation. The Manager manages and controls the business affairs of the LLC's
equipment leases and financing transactions under a management agreement with
LLC.
Segment Information
The LLC intends has only one operating segment: the business of acquiring
equipment subject to leases with companies that the LLC believes to be
creditworthy, and making related investments.
Narrative Description of Business
The LLC is an equipment leasing income fund. The principal objective of the
LLC is to obtain the maximum economic return from its investments for the
benefit of its members. To achieve this objective, the LLC intends to: (i)
acquire a diversified portfolio of low obsolescence equipment having long lives
and high residual values; (ii) make monthly cash distributions to its members
commencing with each member's admission to the LLC, continuing through the
reinvestment period, which will end no later than the eighth anniversary after
the final closing date; (iii) re-invest substantially all undistributed cash
from operations and cash from sales of equipment and financing transactions
during the reinvestment period; and (iv) sell the LLC's investments and
distribute the cash from sales of such investments to its members after the end
of the reinvestment period.
The equipment leasing industry is highly competitive. When seeking leasing
transactions for acquisition, the LLC 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 LLC and have greater financial resources.
The LLC has no direct employees. Except as expressly limited by the
Operating Agreement, the Manager has full and exclusive discretion in the
management and control of the LLC.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
Lease Transactions
During 2003 the LLC invested in one joint venture, acquired equipment
subject to leases and invested in a unguaranteed residual value. During 2002 the
LLC invested in four joint ventures, with one affiliate, and acquired four
investments in subsidiaries. (See Notes to the consolidated financial statements
in Part II, Item 8).
Item 2. Properties
----------
The LLC neither owns nor leases office space or any other real property in
its business as the present time.
Item 3. Legal Proceedings
-----------------
The LLC, 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 fourth
quarter of 2003.
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters
The LLC's shares are not publicly traded nor is there currently a market
for the LLC's shares. It is unlikely that any such market will develop.
Number of Equity Security Holders
Title of Class as of February 29, 2004
- -------------- -----------------------
Manager (as a member) 1
Additional members 3,230
The LLC made cash distributions to the members for 2003 and 2002 on a
monthly basis, totaling $8,035,669 and $2,203,573 for the respective years. For
the year 2004, the LLC has made cash distributions of $2,248,886 to the
additional members.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
Item 6. Selected Financial Data
----------------------
Year ended Year ended
December 31, 2003 December 31, 2002
----------------- -----------------
Total revenue $ 35,487,952 $ 11,533,581
================= ===================
Net loss $ (883,208) $ (575,776)
================= ===================
Net loss allocable to additional members $ (874,376) $ (570,018)
================= ===================
Net loss allocable to the Manager $ (8,832) $ (5,758)
================= ===================
Weighted average additional member shares outstanding 90,813 29,023
================= ===================
Net loss per weighted average additional member share $ (9.73) $ (19.64)
================= ===================
Distributions to additional members $ 7,955,313 $ 2,181,537
================= ===================
Distributions per weighted additional member units $ 87.60 $ 75.17
================= ===================
Distributions to the Manager $ 80,356 $ 22,036
================= ===================
December 31, 2003 December 31, 2002
---------------- -----------------
Total assets $ 212,905,177 $ 209,646,396
================== ===================
Note Payable $ 134,463,196 $ 156,955,116
================== ===================
Members' equity $ 75,153,869 $ 47,738,810
================== ===================
The above selected financial data should be read in conjunction with the
consolidated financial statements and related notes appearing elsewhere in this
report.
Item 7. Manager's Discussion and Analysis of Financial Condition and Results of
Operations
Forward-Looking Information - The following discussion and analysis should
be read in conjunction with the audited consolidated financial statements
included herein. Certain statements within this document may constitute
forward-looking statements made pursuant to the safe harbor provision of the
Private Securities Litigation Reform Act of 1995. These statements are
identified by words such as "anticipate," "believe," "estimate," "expects,"
"intend," "predict" or "project" and similar expressions. This information may
involve risks and uncertainties that could cause actual results to differ
materially from the forward-looking statements. Although the LLC 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.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
Overview - The results of operations for the year ended December 31, 2003
reflect the risk factors outlined in the LLC's prospectus. Such risk factors
include, but are not limited to, the decline in the value of the LLC's
equipment, no guarantee of profitability, the potential of lessee default, and
economic factors such as prevailing interest rates. These risk factors affect
the LLC's ability to realize income, in that they increase the LLC's expenses by
way of additional depreciation, impairment loss, and provision for bad debts. In
addition, depending on the size of the portfolio and the amount of equipment
purchased by the LLC during the Reinvestment Period the risk factors outlined
above could negatively impact the cash flow.
During the year ended December 31, 2003, our attention was primarily
focused on identifying investments which met our investment criteria in order to
seize acquisition opportunities.
Management anticipates that substantially all revenues will be generated
from the rentals derived from the equipment on lease, re-financing of existing
transactions, and proceeds from the sale of equipment. Our most significant
challenges and risks in the future include our ability to continue to identify
leases involving business-essential equipment on lease to creditworthy lessees.
The U.S. economy appears to be recovering and the leasing industry's
outlook for 2004 is encouraging. Many experts foresee an increase in capital
spending by corporations through 2007 which should increase the pool of
available secondary market leases, and to that end, the LLC is seeing more
opportunities in this market. Nonetheless, a key obstacle still facing the
leasing industry is the continued low interest rate environment, which reduces
leasing volume inasmuch as customers are more prone to purchase than lease.
However, as economic growth may continue and interest rates may begin to rise
over time, more lessees are expected to return to the marketplace.
The LLC - The LLC was formed on July 11, 2001, pursuant to the Amended and
Restated Operating Agreement of ICON Income Fund Nine, LLC ("Operating
Agreement"). The LLC is a Delaware limited liability company with an initial
capitalization of $1,000 by ICON Capital Corp. (the "Manager") for one member
share. It was formed to acquire various types of equipment subject to leases
with third parties and to make related investments pursuant to the Operating
Agreement. The LLC's maximum offering is $100,000,000. The LLC commenced
business operations on December 18, 2001, with the admission of members
representing 1,249.91 additional members' shares at $1,000 per share,
aggregating $1,249,910 of capital contributions. Since then through the LLC's
final offering closing on April 30, 2003, members shares representing 98,416.17
additional members shares were admitted into the LLC with aggregate gross
proceeds of $98,416,170. Since the LLC's initial admission of additional
members, 675.08 additional member shares have been redeemed, bringing the
additional members shares at December 31, 2003 to 98,991.003 shares aggregating
$98,991,003 in capital contributions (exclusive of the Manager's interest as a
member).
The LLC's portfolio consisted of a net investment in finance leases,
operating leases, equity investment in unguaranteed residual values and joint
ventures, representing 8%, 88%, 2% and 2%, respectively of total investments at
December 31, 2003.
Results of Operations for the Years Ended December 31, 2003, 2002 and 2001
Revenues for the year ended December 31, 2003 (the "2003 Period") were
$35,487,952 representing an increase of $23,954,371 over the year ended December
31, 2002 (the "2002 Period"). The increase in revenue resulted primarily from
the additional investments in joint ventures, subsidiaries, and leases
subsequent to the 2002 Period.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
The expenses for the 2003 Period were $36,371,160. This represents an
increase of $24,261,803 over the 2002 Period. The increase resulted from the
additional expenses directly relating to the new acquisitions subsequent to the
2002 period. The lease transactions of the LLC's portfolio consisted mainly of
operating leases financed with cash and non-recourse debt.
Depreciation and amortization expense increased by $17,089,564. This
directly resulted from the additional investments in operating leases made
subsequent to the 2002 Period. Interest expenses increased by $5,185,686. This
is attributed to additional debt used to acquire investments in operating leases
subsequent to the 2002 Period. Management fees - Manager increased by $1,293,719
and administrative expense reimbursements - Manager increased by $517,492
compared to the 2002 Period. This increase in management fees is consistent with
the increase in rentals (including finance leases, operating leases and joint
ventures) on which such fees are dependent. The increase in administrative
expenses are consistent with the increase in operating activities of the LLC.
Minority interest in consolidated joint venture decreased by $115,073 for the
2003 Period as compared to the 2002 Period.
Net loss for the 2003 Period and 2002 Period was $883,208 and $575,776,
respectively. The net loss per weighted average additional member shares
outstanding for the 2003 Period and 2002 Period were $9.73 and $19.64,
respectively.
Since the LLC commenced operation on December 18, 2001, a comparison of the
results of operation is not practical. The results of operations for 2002 and
2001 are consistent with the level of operation.
Liquidity and Capital Resources
The LLC's primary source of liquidity for 2003 was cash provided by
financing activities of $28,291,654 which was mainly due to the issuance of
additional membership shares. There was cash distributions of $8,026,010, and
proceeds from the issuance of additional membership shares of $36,955,462 net of
offering expenses.
The LLC's largest reduction in liquidity was due to cash used in investing
activities of $25,002,239 which was mainly due to investments in finance leases
of $17,340,765. The LLC also invested in unguaranteed residual values of
$4,454,003 and in operating leases of $2,001,011.
The LLC's cash flow from operating activities may be less than the LLC's
current level of expenses. To the extent that cash flow is insufficient to pay
such expenses, the LLC may be required to sell assets prior to maturity or
borrow against future cash flows.
On May 30 2002, certain affiliated funds entered into a $17,500,000 joint
and several line of credit agreement dated as of May 30, 2002. They were ICON
Income Fund Eight A L.P., ICON Income Fund Eight B L.P. and ICON Cash Flow
Partners L.P. Seven (the "Initial Funds"), with Comerica Bank as lender. Under
the terms of the agreement, the Initial Funds may borrow at a rate equal to the
Comerica Bank base rate plus 1% (together, 5.00% at December 31, 2003) and all
borrowings are to be jointly and severally collateralized by the present values
of rents receivable and equipment owned by all of the Initial Funds sharing in
the joint line of credit. On December 12, 2002, the agreement was amended to
admit the 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,
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
2002, as amended December 12, 2002, pursuant to which the Funds have agreed to
restrictions on the amount and the terms of their respective borrowings under
the line of credit in order to minimize the risk that a Fund would not be able
to repay its allocable portion of the outstanding revolving loan obligation at
any time, including restrictions on any Fund borrowing in excess of the lesser
of (A) an amount each Fund could reasonably expect to repay in one year out of
its projected free cash flow, or (B) the greater of (i) the Borrowing Base (as
defined in the line of credit agreement) as applied to such Fund, and (ii) 50%
of the net worth of such Fund. The Contribution Agreement provides that, in the
event a Fund pays an amount under the agreement in excess of its allocable share
of the obligation under the agreement whether by reason of an Event of Default
or otherwise, the other Funds will immediately make a contribution payment to
such Fund in such amount that the aggregate amount paid by each Fund reflects
its allocable share of the aggregate obligations under the agreement.
The Funds' obligations to each other under the Contribution Agreement are
collateralized by a subordinate lien on the assets of each participating Fund.
The line of credit was extended for twelve additional months expiring May 31,
2004. As of December 31, 2003, the LLC had no borrowings under the line.
Aggregate borrowing by all Funds under the line of credit agreement aggregated
$12,779,986 on December 31, 2003.
The LLC has the following contractual obligations as of December 31, 2003.
This obligation arises mainly from the acquisition of equipment subject to
lease. Rental payments from the leases associated with this equipment are
assigned to paydown such obligation.
Payments Due By Period
----------------------
2004 2005 2006 2007 2008
---- ---- ---- ---- ----
Long-term obligation (Notes payable) 23,361,896 21,515,720 63,836,304 16,101,943 9,647,333
See Note 9 to the consolidated financial statements, as set forth in Part
II, Item 8, Consolidated Financial Statements, for information regarding
non-recourse debt.
Cash distributions to the additional members for the years ended December
31, 2003 and 2002, which were paid monthly, totaled $7,955,313 and $2,181,537,
respectively, which was a return of capital. The monthly annualized cash
distribution rate to additional members for the years ended December 31, 2003
and 2002 was 9% respectively, which was a return of capital.
As of December 31, 2003, there were no known trends or demands,
commitments, events or uncertainties except those stated above, which are likely
to have any material effect on liquidity. As cash is realized from operations
and additional borrowings, the LLC will continue to invest in equipment leases
and financings where it deems it to be prudent while retaining sufficient cash
to meet its reserve requirements and recurring obligations.
We do not consider the impact of inflation to be material in the analysis
of our overall operations.
Critical Accounting Policies and Management Estimates
The policies discussed below are considered by the Manager to be critical
to an understanding of the LLC's consolidated financial statements because their
application places the most significant demands on the General Partner's
judgments, with financial reporting results relying on estimation about the
effect of matters that are inherently uncertain. Specific risks for these
critical accounting policies are described in the following paragraphs. For all
of these policies, the Manager cautions that future events rarely develop
exactly as forecast, and the best estimates routinely require adjustment.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles in the United States of America
requires the LLC'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 consolidated financial statements are reasonable and prudent.
Actual results could differ from those estimates. In addition, management is
required to disclose contingent assets and contingent liabilities.
Leases and Revenue Recognition - The LLC accounts for owned equipment
leased to third parties as finance leases, leveraged leases, or operating
leases, as appropriate. Initial direct costs are capitalized and are amortized
over the terms of the related leases using the interest method.
For finance leases, the LLC 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 and depreciated on the
straight-line method over the lease term to its estimated residual value at
lease termination and is subject to the LLC'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.
Impairment - Residual values of the LLC's asset portfolio are periodically
reviewed to determine whether events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. The events or changes in
circumstances which generally indicate that the residual value of an asset may
be impaired are (i) the estimated fair value of the underlying equipment is less
than the 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 and the LLC'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 LLC does not recover its residual until the
non-recourse note obligation is repaid in full.
An impairment loss is measured and recognized only if the estimated
undiscounted future cash flows of the asset are less than their net book value.
The estimated undiscounted future cash flows are the sum of the estimated
residual value of the asset at the end of the asset's expected holding period
and estimates of undiscounted future rents. The residual value assumes, among
other things, that the asset is utilized normally in an open, unrestricted and
stable market. Short-term fluctuations in the market place disregarded and it is
assumed that there is no necessity either to dispose of a significant number of
the assets simultaneously, if held in quantity, or to dispose of the asset
quickly. Impairment is measured as the difference between the fair value of the
assets and its carrying value on the measurement date.
Investments in Estimated Unguaranteed Residual Values - The LLC carries its
investments in the future estimated unguaranteed residual values of assets at
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
cost, which is equal to or less than market value, subject to the LLC's policy
relating to impairment review. Proceeds received are recognized as a recovery of
cost due to uncertainty of ultimate realization. Proceeds received in excess of
costs are recognized as gains.
Credit Risk - Financial instruments that potentially subject the LLC to
concentrations of credit risk include cash and cash equivalents, direct finance
lease receivables and accounts receivables. The LLC places its cash deposits and
temporary cash investments with creditworthy, high quality financial
institutions. The concentration of such deposits and temporary cash investments
is not deemed to create a significant risk to the LLC. Accounts receivable
represent amounts due from lessees in various industries, related to equipment
on operating and direct financing leases.
The LLC records a provision for doubtful accounts to provide for estimated
credit losses in its portfolio. The allowance for doubtful accounts is based on
an analysis of delinquency, an assessment of overall risk and a review of
historical loss experience. The LLC's write-off policy is based on an analysis
of the aging of the LLC's portfolio, a review of the non-performing receivables
and leases, and prior collection experience. An account is fully reserved or
written off when the analysis indicates that the probability of collection of
the account is remote.
LLC Activities During 2003 and 2002
During the year ended December 31, 2003, the LLC invested $24,185,297 in
cash for its share of purchased equipment subject to lease.
During the first quarter 2003, the LLC through a Joint Venture ICON
Aircraft 47820 LLC with an affiliate, acquired a McDonnell Douglas DC-10-30F
aircraft subject to lease with Fedex Corporation. The LLC invested $307,655 in
the venture, and paid $81,863 in acquisition fees to the Manager. The aggregate
purchase price for the aircraft paid by ICON 47820 was $27,287,644. (See Note 4
to the consolidated financial statements.)
During the second quarter 2003, the LLC acquired various manufacturing
equipment for a purchase price of $2,411,555 and paid $72,347 in acquisition
fees to the Manager. This equipment is subject to lease with Metaldyne
Corporation through December 2009. Also in the second quarter 2003, the LLC
invested in a Double Kraft Paper Forming Tubing unit equipment subject to lease
with Wildwood Industries, Inc. through January 2007 for $1,350,000 and paid
acquisition fees of $40,500 to the Manager. In addition, equipment consisting of
microprocessor manufacturing devices were acquired for a purchase price of
$6,391,258 and paid the Manager acquisition fees of $191,738. This equipment is
subject to lease with Advance Micro Devices, Inc. through June 2007.
During the third quarter 2003, the LLC acquired various semiconductor
memory testing equipment for $4,560,881 and paid the Manager $136,826 in
acquisition fees. This equipment is subject to lease with Advance Micro Devices,
Inc. through June 2007. In addition, equipment subject to lease with Wildwood
Industries, Inc., were acquired for $2,122,000 and acquisition fees of $63,660
was paid to the Manager. The equipment consists of one High-End Paper Converting
Line, one Inline Trifold Finishing System, and other manufacturing equipment.
This equipment is on lease through September 2008. The LLC also acquired fifty
New Great Dane Trailers with Carrier Ultra Refrigeration Units for $1,942,729
and paid the manager $58,282 in acquisition fees. This equipment is subject to
lease with Conwell Corporation ("Conwell") a wholly-owned subsidiary of Frozen
Foods Express Industries, Inc. through April 2010.
ICON Income Fund Nine, LLC (A
Delaware Limited Liability Company)
December 31, 2003
During the fourth quarter 2003, the LLC entered into an agreement with
Summit Asset Management Limited to acquire a 90% interest in the unguaranteed
residual values of equipment on lease. The investment cost was $3,322,542 and an
acquisition fee of $1,131,461 was paid to the manager for the transaction. Debt
associated with the equipment portfolio was $34,390,025 at the time of the
investment (See Note 8 to the consolidated financial statements).
During 2002, the LLC acquired a number of investments that were classified as
operating leases.
The acquisitions were as follows:
(i) A portfolio of leases acquired through a joint venture (ICON SPK 2023-A
LLC), with an affiliate.
(ii) An Airbus A 340-313X through its 50% interest in ICON Aircraft 126 LLC.
(iii)An Airbus A340-300ER aircraft through its interest in ICON Aircraft 128
LLC.
(iv) A 25 MW co-generation facility acquired through a joint venture
(ICON/Kenilworth LLC) with an affiliate.
(v) Three car and truck carrying vessels were acquired in the third quarter of
2002 (ICON Trianon LLC, ICON Trinidad LLC and ICON Tancred LLC).
(vi) 434 railcars were acquired in November 2002 (ICON Railcar I LLC).
(vii)An aircraft was acquired through a joint venture (ICON Aircraft 46835 LLC)
with an affiliate.
Recent Accounting Pronouncement
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS No. 133. The
Statement requires that contracts with comparable characteristics be accounted
for similarly and clarifies when a derivative contains a financing component
that warrants special reporting in the statement of cash flows. SFAS No. 149 is
effective for contracts entered into or modified after June 30, 2003, except in
certain circumstances, and for hedging relationships designated after June 30,
2003. The adoption of this standard did not have a material effect on the LLC's
financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how an issuer classifies and measures in its
statements of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This Statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. For
ICON Income Fund Nine, LLC
(A Delaware Limited Liability LLC)
December 31, 2003
nonpublic entities, the effective date of the provisions of SFAS No. 150 that
relate to mandatorily redeemable financial instruments has been deferred until
fiscal years that begin after December 31, 2003. The adoption of this standard
is not expected to have a material effect on the LLC's financial position or
results of operations. In January 2003, the FASB issued FIN 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51. In December 2003,
the FASB issued a revision to FIN 46, or Revised Interpretation, to clarify some
of the provisions of FIN 46. FIN 46 provides guidance on how to identify a
variable interest entity, or VIE, and determine when the assets, liabilities,
non-controlling interests, and results of operations of a VIE must be included
in a LLC's consolidated financial statements. A LLC that holds variable
interests in an entity is required to consolidate the entity if the LLC's
interest in the VIE is such that the LLC will absorb a majority of the VIE's
expected losses and/or receive a majority of the entity's expected residual
returns, if any. VIEs created after January 31, 2003, but prior to January 1,
2004, may be accounted for either based on the original interpretation or the
Revised Interpretations. However, the Revised Interpretations must be applied no
later than the first quarter of fiscal year 2004. VIEs created after January 1,
2004 must be accounted for under the Revised Interpretations. There has been no
material impact to the LLC's financial statements and there is no expected
impact from the adoption of the deferred provisions in the first quarter of
fiscal year 2004.
The LLC does not believe that any other recently issued, but not yet
effective, accounting standards will have a material effect on the LLC's
financial position or results of operations.
Item 7A. Qualitative and Quantitative Disclosures About Market Risk
----------------------------------------------------------
The LLC is exposed to certain market risks, including changes in interest
rates and the demand for equipment (and the related residuals) owned by the LLC.
Except as discussed below, the LLC believes its exposure to other market risks
is significant to both its financial position and results of operations.
The LLC 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 LLC's
lease investments.
The LLC 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.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
Item 8. Consolidated Financial Statements
----------------------------------
Index to Financial Statements
Page Number
-----------
Independent Auditors' Reports 15-16
Consolidated Balance Sheets as of December 31, 2003 and 2002 17
Consolidated Statements of Operations for the Years Ended
December 31, 2003 and 2002, and for the Period from July 11, 2001
(date of inception) to December 31, 2001 18
Consolidated Statement of Changes in Members' Equity
for the Period from July 11, 2001 (date of inception)
to December 31, 2001 and the Year Ended December 31, 2003 and 2002 19
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2003 and 2002 and for the Period from July 11, 2001
(date of inception) to December 31, 2001 20-22
Notes to Consolidated Financial Statements 23-36
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Consolidated Financial Statements
December 31, 2003
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Members
ICON Income Fund Nine, LLC
We have audited the accompanying consolidated balance sheet of ICON Income Fund
Nine, LLC (a Delaware limited liability company) and subsidiaries as of December
31, 2003 and the related consolidated statements of operations, changes in
members' equity and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the LLC'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
Nine, LLC and subsidiaries as of December 31, 2003 and the results of their
operations and their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Hays & Company LLP
March 19, 2003
New York, New York
Independent Auditors' Report
----------------------------
The Partners
ICON Income Fund Nine, LLC:
We have audited the accompanying balance sheet of ICON Income Fund Nine, LLC (a
Delaware limited liability company) as of December 31, 2002 and the related
statements of operations, members' equity, and cash flows of for the year ended
December 31, 2002 and for the period from July 11, 2001 (date of inception) to
December 31, 2001. These consolidated financial statements are the
responsibility of the LLC'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 audits 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
Nine, LLC as of December 31, 2002, and the results of its operations and its
cash flows of for the year ended December 31, 2002 and for the period from July
11, 2001 (date of inception) to December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.
/s/KPMG LLP
March 26, 2003
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Consolidated Balance Sheets
December 31, 2003 and 2002
2003 2002
Assets ---- ----
-------
Cash and cash equivalents $ 14,651,555 $ 9,456,992
Investment in finance leases
Minimum rents receivable 16,958,283 -
Estimated unguaranteed residual values 1,693,570 -
Initial direct costs, net 410,719 -
Unearned income (3,462,258) -
------------------- --------------
Net investment in finance leases 15,600,314 -
------------------- --------------
Investment in operating leases
Equipment at cost 203,216,185 203,025,329
Accumulated depreciation (31,186,896) (7,651,465)
------------------- ----------------
172,029,289 195,373,864
------------------- ----------------
Investment in unguaranteed residual values 4,454,003 -
Investment in unconsolidated joint ventures 3,954,634 3,367,129
Due from affiliates 103,885 36,994
Due from Manager 289,422 -
Other assets, net 1,822,075 1,411,417
------------------- ----------------
Total assets $ 212,905,177 $ 209,646,396
=================== ================
Liabilities and Members' Equity
Notes payable - non-recourse $ 134,463,196 $ 156,955,116
Due to Manager - 32,687
Accounts payable and other liabilities 476,253 236,549
Deferred income - 759,569
Minority interest in consolidated joint ventures 2,811,859 3,923,665
------------------ ----------------
137,751,308 161,907,586
------------------ ----------------
Commitment and Contingencies
Members' equity
Manager (one share outstanding,
$1,000 per share original issue price) (115,985) (26,797)
Additional Members (98,991.003 and 57,929.604 shares
outstanding, $1,000 per share original issue price) 75,269,854 47,765,607
------------------ ----------------
Total members' equity 75,153,869 47,738,810
------------------ ----------------
Total liabilities and members' equity $ 212,905,177 $ 209,646,396
================== ================
See accompanying notes to consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Consolidated Statements of Operations
For the Years Ended December 31, 2003, 2002 and for the Period
from July 11, 2001 (date of inception) to December 31, 2001
2003 2002 2001
---- ---- ----
Revenues
Rental income $ 34,320,268 $ 11,362,566 $ -
Finance income 746,514 - -
Interest income and other 225,937 46,787 -
Net loss on sales of equipment (2,753) - -
Income from investment in
unconsolidated joint venture 197,986 124,228 -
-------------- --------------- ------------
Total revenues 35,487,952 11,533,581 -
-------------- --------------- ------------
Expenses
Depreciation 24,741,029 7,651,465 -
Interest expense 8,040,778 2,855,092 -
Management fees - Manager 1,897,722 604,003 -
Administrative expense reimbursements - Manager 759,089 241,597 -
General and administrative 699,436 503,375 324
Amortization of initial direct costs 94,354 - -
Minority interest in consolidated
joint venture 138,752 253,825 -
-------------- --------------- ------------
Total expenses 36,371,160 12,109,357 324
-------------- --------------- ------------
Net loss $ (883,208) $ (575,776) $ (324)
============== =============== =============
Net loss allocable to:
Managing member $ (8,832) $ (5,758) $ (3)
Additional members (874,376) (570,018) (321)
-------------- --------------- -------------
$ (883,208) $ (575,776) $ (324)
============== =============== =============
Weighted average number of additional
member shares outstanding 90,813 29,023 2,043
============== =============== =============
Net loss per weighted average
additional member shares $ (9.63) $ (19.64) $ (0.16)
============== =============== =============
See accompanying notes to consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Consolidated Statement of Changes in Members' Equity
For the Period from July 11, 2001 (date of inception) to December 31, 2001
and the Years Ended December 31, 2003 and 2002
Additional Members Distributions
-------------------------------
Return of Investment Additional Managing
Capital Income Members Member Total
------- ------ ------- ------ -----
(Per weighted average share)
Managing member's capital contribution $ - $ 1,000 $ 1,000
Proceeds from issuance of additional
Members' shares (2,834.024 shares) 2,834,024 - 2,834,024
Sales and offering expenses (382,593) - (382,593)
Net loss (321) (3) (324)
---------------- ------------ ------------
Balance at December 31, 2001 2,451,110 997 2,452,107
Proceeds from issuance of additional members'
shares (55,095.58 shares) 55,095,580 - 55,095,580
55,095,580
Sales and offering expenses (7,029,528) - (7,029,528)
(7,029,528)
Cash distributions
to members $ 75.17 $ - (2,181,537) (22,036) (2,203,573)
Net loss (570,018) (5,758) (575,776)
---------------- ------------- ------------
Balance at December 31, 2002 47,765,607 (26,797) 47,738,810
Proceeds from issuance of additional members'
shares (41,736.48 shares) 41,736,480 - 41,736,480
Sales and offering expenses (4,781,018) - (4,781,018)
Cash distributions to members $ 87.60 $ - (7,955,313) (80,356) (8,035,669)
Additional members' shares redeemed (621,526) (621,526)
Net loss (874,376) (8,832) (883,208)
---------------- ------------ ------------
Balance at December 31, 2003 $ 75,269,854 $ (115,985) $ 75,153,869
=============== ============ ==============
See accompanying notes to consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2003, 2002 and for the
Period from July 11, 2001 (date of inception) to December 31, 2001
2003 2002 2001
Cash flows from operating activities:
Net loss $ (883,208) $ (575,776) $ (324)
--------------- --------------- -----------------
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Interest expense on non-recourse financing
paid directly to lenders by lessees 7,926,897 2,855,092 -
Depreciation and amortization 24,835,383 7,651,465 -
Minority interest in consolidated joint ventures 138,752 253,825 -
Income from investment in
unconsolidated joint ventures (197,986) (124,228) -
Rental income paid directly to lenders by lessees (31,560,764) (8,670,203) -
Net loss on sale of equipment 2,753 - -
Changes in operating assets and liabilities:
Non-financed receivable 1,644,491 - -
Due from affiliates (66,891) (36,994) -
Due from Manager (322,109) 32,687 -
Other assets, net 254,065 (1,411,417) -
Accounts payable and other liabilities 239,704 236,549 -
Deferred income (105,939) 759,569 -
Other - (2,533) -
--------------- --------------- ---------------
Total adjustments 2,788,356 1,543,812 -
--------------- --------------- ---------------
Net cash provided by (used in) operating activities 1,905,148 968,036 (324)
--------------- --------------- ---------------
Cash flows from investing activities:
Investment in operating leases (2,001,011) (40,255,102) -
Investment in unconsolidated joint ventures (389,518) (3,242,901) -
Cash received from escrow - 1,650,000 (1,650,000)
Proceeds from sales of equipment 433,617 - -
Investment in finance leases (17,340,765) - -
Investment in unguaranteed residual values (4,454,003) - -
Distribution to minority interest in
consolidated joint ventures (1,250,559) - -
--------------- --------------- ---------------
Net cash used in investing activities (25,002,239) (41,848,003) (1,650,000)
--------------- --------------- ---------------
(continued on next page)
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Consolidated Statements of Cash Flows (continued)
For the Years Ended December 31, 2003, 2002 and for the
Period from July 11, 2001 (date of inception) to December 31, 2001
2003 2002 2001
---- ---- ----
Cash flows from financing activities:
Managing member's capital contribution - - 1,000
Issuance of additional membership shares
net of offering expenses 36,955,462 48,066,052 2,453,964
Minority interest contribution, net - 3,669,840 -
Cash distributions to members (8,026,010) (2,203,573) -
Repayment of notes payable - non-recourse debt (16,272) - -
Redemption of additional members' shares (621,526) - -
------------ ------------ ------------
Net cash used in financing activities 28,291,654 49,532,319 2,454,964
------------ ------------ ------------
Net increase in cash and cash equivalents 5,194,563 8,652,352 804,640
Cash and cash equivalents at beginning of period 9,456,992 804,640 -
------------ ------------ ------------
Cash and cash equivalents at the end of period $ 14,651,555 $ 9,456,992 $ 804,640
------------ ------------ ------------
(continued on next page)
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Consolidated Statements of Cash Flows (continued)
For the Years Ended December 31, 2003, 2002 and for the
Period from July 11, 2001 (date of inception) to December 31, 2001
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
For the years ended December 31, 2003 and 2002 and the period from July 11,
2001 (date of inception) to December 31, 2001, non-cash activities included the
following:
2003 2002 2001
---- ---- ----
Rental income assigned - operating lease receivables $ 31,560,764 $ 8,670,203 $ -
Deferred income paid directly to lenders by lessees (1,158,219) - -
Principal and interest on non-recourse notes paid
directly to lenders by lessees (30,402,545) (8,670,203) -
---------------- -------------- ------------
$ - $ - $ -
================ ============== ============
Fair value of equipment purchased for debt $ - $ 162,770,227 $ -
Non-recourse notes payable assumed in purchase price - (162,770,227) -
---------------- -------------- ------------
$ - $ - $ -
================ ============== ============
Interest paid directly to lenders by lessees
pursuant to non-recourse financing $ 7,926,897 $ 2,855,092 $ -
Other interest paid 113,881 - -
---------------- -------------- ------------
Total interest paid $ 8,040,778 $ 2,855,092 $ -
================ ============== ============
See accompanying notes to consolidated financial statements.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2003, 2002 and the Period From July 11, 2001
(inception of operations) to December 31, 2001
1. Organization
ICON Income Fund Nine, LLC (the "LLC") was organized on July 11, 2001, and
operates in accordance with the terms of its Amended and Restated Operating
Agreement ("Operating Agreement"). The LLC was formed as a Delaware limited
liability company with an initial capitalization of $1,000 by ICON Capital Corp.
(the "Manager") for one member share. The primary business purpose of the LLC is
to acquire various types of equipment subject to leases with third parties and
to make equipment related investments. The LLC's maximum offering through the
issuance of additional members shares is $100,000,000. The LLC commenced
business operations on December 18, 2001, with the admission of members
representing 1,249.91 additional members' shares at $1,000 per share,
aggregating $1,249,910 of capital contributions. For the year ended December 31,
2002, members shares representing 56,679.694 additional members' shares were
admitted into the LLC with aggregate gross proceeds of $56,679,694, bringing the
total admissions at December 31, 2002 to 57,929.604 shares aggregating
$57,929,604 in capital contributions. During the year ended December 31, 2003,
members shares representing 41,736.48 additional members shares were admitted
into the LLC with aggregate proceeds of $41,736,480 in capital contribution and
675.081 shares were redeemed bringing the total additional member shares at
December 31, 2003 to 98,991.003, shares aggregating $98,991,003 in capital
contributions (exclusive of the Manager's interest).
The Manager is a Connecticut corporation, and manages and controls the
business affairs of LLC's equipment, leases and financing transactions under a
management agreement with the LLC.
The LLC is an equipment leasing income fund. The principal objective of the
LLC is to obtain the maximum economic return from its investments for the
benefit of its members. To achieve this objective, the LLC intends to: (i)
acquire a diversified portfolio of low obsolescence equipment having long lives
and high residual values; (ii) make monthly cash distributions to its members
commencing with each member's admission to the LLC, continuing through the
reinvestment period, which will end no later than the eighth anniversary after
the final closing date; (iii) re-invest substantially all undistributed cash
from operations and cash from sales of equipment and financing transactions
during the reinvestment period; and (iv) sell the LLC's investments and
distribute the cash from sales of such investments to its members after the end
of the reinvestment period.
ICON Securities Corp., an affiliate of the Manager, receives or is entitled
to receive, a sales commission and underwriting fee from the gross proceeds from
sales of additional members shares. The Manager receives organization and
offering expenses from the gross proceeds of such sales. The total underwriting
compensation paid by the LLC, including underwriting commissions, sales
commissions, incentive fees, public offering expense reimbursements and due
diligence activities is limited to 13.5% of gross proceeds up to the first
$25,000,000 raised, 12.5% of gross offering proceeds from $25,000,001 to
$50,000,000 and 11.5% of gross offering proceeds from $50,000,001 to
$100,000,000. At December 31, 2003, such offering expenses aggregated
$12,202,234 paid to the Manager or its affiliates and were charged directly to
members' equity.
Profits, losses, cash distributions and disposition proceeds are allocated
99% to the members and 1% to the Manager until each member 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 members and 10% to the Manager.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
2. Significant Accounting Policies
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Significant estimates
primarily include the allowance for doubtful accounts and unguaranteed residual
values. In addition, management is required to disclose contingent assets and
contingent liabilities. Actual results could differ from those estimates.
Consolidation - The consolidated financial statements include the accounts
of the LLC and its majority owned subsidiaries. All inter-company accounts and
transactions have been eliminated in consolidation. The LLC accounts for its
interests in 50% or less owned joint ventures under the equity method of
accounting. In such cases, the LLC's original investments are recorded at cost
and adjusted for its share of earnings, losses and distributions.
Cash and cash equivalents include cash in banks and highly liquid
investments with original maturity dates of three months or less. The LLC's cash
and cash equivalents are held principally at one financial institution and at
times may exceed insured limits.
Leases and Revenue Recognition - Leases and Revenue Recognition - The LLC
accounts for owned equipment leased to third parties as finance leases, or
operating leases, as appropriate. Initial direct costs are capitalized and are
amortized over the terms of the related leases using either the interest or
straight-line methods.
For finance leases, the LLC 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 and depreciated on the
straight-line method over the lease term to its estimated residual value at
lease termination and is subject to the LLC'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.
Impairment - Residual values of the LLC's asset portfolio are periodically
reviewed to determine whether events or changes in circumstances indicate that
the carrying value of an asset may not be recoverable. The events or changes in
circumstances which generally indicate that the residual value of an asset may
be impaired are (i) the estimated fair value of the underlying equipment is less
than the 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 and the LLC'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 LLC does not recover its residual until the
non-recourse note obligation is repaid in full.
An impairment loss is measured and recognized only if the estimated
undiscounted future cash flows of the asset are less than their net book value.
The estimated undiscounted future cash flows are the sum of the estimated
residual value of the asset at the end of the asset's expected holding period
and estimates of undiscounted future rents. The residual value assumes, among
other things, that the asset is utilized normally in an open, unrestricted and
stable market. Short-term fluctuations in the market place
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
are disregarded and it is assumed that there is no necessity either to dispose
of a significant number of the assets simultaneously, if held in quantity, or to
dispose of the asset quickly. Impairment is measured as the difference between
the fair value of the assets and its carrying value on the measurement date.
Investments in Estimated Unguaranteed Residual Values - The LLC 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 LLC's policy
relating to impairment review. Proceeds received are recognized as a recovery of
cost due to the uncertainty of ultimate realization. Proceeds received in excess
of cost are recognized as gains.
Credit Risk - Financial instruments that potentially subject the LLC to
concentrations of credit risk include cash and cash equivalents, direct finance
lease receivables and accounts receivable. The LLC places its cash deposits and
temporary cash investments with creditworthy, high quality financial
institutions. The concentration of such deposits and temporary cash investments
is not deemed to create a significant risk to the LLC. Accounts receivable
represent amounts due from lessees in various industries, related to equipment
on operating and direct financing leases.
The LLC records a provision for doubtful accounts to provide for estimated
credit losses in its portfolio. The allowance for doubtful accounts is based on
an analysis of delinquency, an assessment of overall risk and a review of
historical loss experience. The LLC's write-off policy is based on an analysis
of the aging of the LLC's portfolio, a review of the non-performing receivables
and leases, and prior collection experience. An account is fully reserved or
written off when the analysis indicates that the probability of collection of
the account is remote.
Fair Value of Financial Instruments - Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures About Fair Values of Financial
Instruments," requires disclosures about the fair value of financial
instruments, except for lease related assets and liabilities. Separate
disclosure of fair value information as of December 31, 2003 and 2002 with
respect to the Partnership's assets and liabilities is not separately provided
since (i) SFAS No. 107 does not require fair value disclosures of lease
arrangements and (ii) the carrying value of financial assets, other than lease
related investments, and the recorded value of payables approximates market
value.
Income Taxes - No provision for income taxes has been made as the liability
for such taxes is that of each of the Members 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.
Recent Accounting Pronouncements - In April 2003, the FASB issued SFAS No.
149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. The Statement requires
that contracts with comparable characteristics be accounted for similarly and
clarifies when a derivative contains a financing component that warrants special
reporting in the statement of cash flows. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003, except in certain
circumstances, and for hedging relationships designated after June 30, 2003. The
adoption of this standard did not have a material effect on the Company's
financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
establishes standards for how an issuer classifies and measures in its
statements of financial position certain
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances) because that financial
instrument embodies an obligation of the issuer. This Statement is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatorily redeemable financial instruments of nonpublic
entities. For nonpublic entities, the effective date of the provisions of SFAS
No. 150 that relate to mandatorily redeemable financial instruments has been
deferred until fiscal years that begin after December 31, 2003. The adoption of
this standard is not expected to have a material effect on the Company's
financial position or results of operations.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51. In December 2003, the FASB issued a
revision to FIN 46, or Revised Interpretation, to clarify some of the provisions
of FIN 46. FIN 46 provides guidance on how to identify a variable interest
entity, or VIE, and determine when the assets, liabilities, non-controlling
interests, and results of operations of a VIE must be included in a company's
consolidated financial statements. A company that holds variable interests in an
entity is required to consolidate the entity if the company's interest in the
VIE is such that the company will absorb a majority of the VIE's expected losses
and/or receive a majority of the entity's expected residual returns, if any.
VIEs created after January 31, 2003, but prior to January 1, 2004, may be
accounted for either based on the original interpretation or the Revised
Interpretations. However, the Revised Interpretations must be applied no later
than the first quarter of fiscal year 2004. VIEs created after January 1, 2004
must be accounted for under the Revised Interpretations. There has been no
material impact to the Company's financial statements and there is no expected
impact from the adoption of the deferred provisions in the first quarter of
fiscal year 2004.
The Company does not believe that any other recently issued, but not yet
effective, accounting standards will have a material effect on the Company's
financial position or results of operations.
3. Related Party Transactions
Fees and expenses paid or accrued by the LLC to the Manager or its
affiliates directly or on behalf of joint ventures in which the LLC has an
interest were as follows for the years ended December 31, 2003, 2002 and the
period from July 11 (date of inception) to December 31,2001:
2003 2002 2001
---- ---- ----
Organization and offering expenses $ 626,083 $ 1,521,620 $ 325,913 Charged to equity
Underwriting commissions 834,777 1,101,912 56,680 Charged to equity
Acquisition fees 58,282 5,662,617 - Capitalized as part of
investment in operating leases
Acquisition fees 505,070 - - Capitalized as part of
investment in finance leases
Acquisition fees 81,863 1,117,901 - Capitalized as part of
investment in joint venture
Acquisition fees 1,131,461 - - Capitalized as part of
investment in
unguaranteed residual
Management fees 1,897,723 604,003 - Charged to operations
Administrative expense reimbursements 759,089 241,597 - Charged to operations
------------ -------------- -----------
$ 5,894,348 $ 10,249,650 $ 382,593
============ ============== ===========
In accordance with the terms of the Management Agreement, the LLC pays the
Manager (i) management fees based on a percentage of rentals received (ranging
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
from 1% to 7%) and (ii) acquisition fees based on the gross value of the
transactions (3%). In addition, the General Partner is reimbursed for
administrative expenses incurred by it in connection with the LLC's operations.
ICON Securities Corp., an affiliate of the Manager, receives or is entitled
to receive, a sales commission and underwriting fee from the gross proceeds from
sales of additional members shares. The Manager receives organization and
offering expenses from the gross proceeds of such sales. The total underwriting
compensation paid by the LLC, including underwriting commissions, sales
commissions, incentive fees, public offering expense reimbursements and due
diligence activities is limited to 13.5% of gross proceeds up to the first
$25,000,000 raised, 12.5% of gross offering proceeds from $25,000,001 to
$50,000,000 and 11.5% of gross offering proceeds from $50,000,001 to
$100,000,000. At December 31, 2003, such offering expenses aggregated
$12,202,234 paid to the Manager or its affiliates and were charged directly to
members' equity.
The LLC had a net receivable from the Manager of $289,422 at December 31,
2003 and had a payable to the Manager of $32,687 at December, 31 2002. The
receivable at December 31, 2003 was due to a decrease in the cost of an
investment in unguaranteed residuals, which the LLC had previously paid
acquisition fees to the Manager based on the original investment.
4. Joint Ventures
The LLC and affiliates formed five joint ventures discussed below for the
purpose of acquiring and managing various assets. The LLC and its affiliates,
entities in which ICON Capital Corp, is also the general partner formed the
ventures discussed below for the purpose of acquiring and managing various
assets. The LLC and its affiliates have identical investment objectives and
participate on the same terms and conditions. The LLC 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.
Consolidated Joint Ventures
The joint ventures described below are owned 95%, 85% and 51%,
respectively, and are consolidated in the financial statements of the LLC.
ICON/Kenilworth LLC
-------------------
On September 30, 2002, the LLC and ICON Income Fund Eight B, L.P. ("Fund
Eight B") formed ICON/Kenilworth LLC for the purpose of acquiring a natural
gas-fired 25 mw co-generation facility for a purchase price of $8,410,000 in
cash, with an assumed non-recourse debt of $6,918,091 consisting of a senior
debt of $6,679,355 and a junior debt of $238,736. The facility is on 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 Manager
as part of the acquisition cost. The outstanding non-recourse debt at December
31, 2003 was $2,882,521.
The LLC and Fund Eight B have ownership interests of 95% and 5%,
respectively. The LLC's consolidated financial statements include 100% of the
assets and liabilities of ICON Kenilworth LLC as well as 100% of the related
revenues and expenses. Fund Eight B's interest is accounted for as minority
interest in consolidated joint venture on the LLC's consolidated balance sheets
and statements of operations.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
ICON Aircraft 46835 LLC
-----------------------
In 2002, the LLC and Fund Eight B formed ICON Aircraft 46835 LLC for the
purpose of acquiring an investment in a McDonnell Douglas DC-10-30F aircraft on
lease to Fedex Corporation. The aircraft was acquired for a purchase price of
$25,291,593, which was funded with cash of $3,000,000 and the assumption of
non-recourse debt in the amount 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 will
be approximately $2,708,000. At December 31, 2003, the outstanding balance of
the non-recourse debt was $17,687,718. In addition, there was a total of
$758,748 in acquisition fees paid to the Manager as part of the acquisition
cost.
The LLC and Fund Eight B have ownership interests of 85% and 15%,
respectively. The LLC's consolidated financial statements include 100% of the
assets and liabilities of ICON 46835 as well as 100% of the related revenues and
expenses. Fund Eight B's interest is accounted for as minority interest in
consolidated joint ventures on the LLC's consolidated balance sheets and
statements of operations.
ICON SPK 2023-A LLC
-------------------
In 2002, the LLC and Fund Eight B formed ICON SPK 2023-A, LLC for the
purpose of acquiring a portfolio of leases for an aggregate purchase price of
$7,750,000 paid in cash. $232,500 in acquisition fees were paid to the Manager
as part of the acquisition cost. The leases expire on various dates through
April 2008. During the year ended December 31, 2003, the venture sold equipment
realizing a gain of $55,195.
The LLC and Fund Eight B have ownership interests of 51% and 49%,
respectively. Fund Eight B's interest is accounted for as minority interest in
consolidated joint venture on the LLC's consolidated balance sheets and
statements of operations.
Unconsolidated Joint Ventures
The joint ventures described below are 50% or less owned and are accounted
for following the equity method.
ICON Aircraft 126 LLC
- ---------------------
In 2002, the LLC and Fund Eight B 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 is subject to non-recourse debt provided by unaffiliated lenders. As of
December 31, 2003, there was $63,041,374 outstanding under the non-recourse
debt.
The LLC and Fund Eight B each own a 50% interest in ICON 126. ICON 126
consolidates the financial position and operations of D.A.L. in its financial
statements.
The LLC's original investment in ICON 126 was recorded at a cost of
$3,242,901, inclusive of related acquisition fees of $1,117,901 paid to the
Manager. Information as to the consolidated financial position and results of
operations of ICON 126 as of and for the year ended December 31, 2003 and 2002
are summarized below:
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
----------------- -----------------
Assets $ 70,492,181 $ 74,332,428
=============== ===============
Liabilities $ 63,351,443 $ 67,598,170
=============== ===============
Equity $ 7,140,738 $ 6,734,258
=============== ===============
LLC's share of equity $ 3,570,369 $ 3,367,129
=============== ===============
For the Year Ended For the Year Ended
December 31, 2003 December 31, 2002
----------------- -----------------
Net income $ 406,480 $ 248,456
=============== ===============
LLC's share of net income $ 203,240 $ 124,228
=============== ===============
ICON Aircraft 47820 LLC
-----------------------
In 2003, the LLC and Fund Eight B formed ICON Aircraft 47820 LLC ("ICON
47820") for the purpose of acquiring an investment in a McDonnell Douglas
DC-10-30F on lease to Federal Express Corporation. The aircraft was acquired for
a purchase price of $27,287,644, which was funded with cash of $3,076,564 and
the assumption of non-recourse debt in the amount of $24,211,080. 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 will be approximately $2,916,523. As of December 31, 2003,
there was $19,052,617 outstanding under the non-recourse debt.
The LLC and Fund Eight B have ownership interests of 10% and 90%,
respectively. Fund Eight B consolidates the financial position and results of
operations of ICON Aircraft 47820 in its consolidated financial statements.
The LLC's original investment in ICON 47820 was recorded at a cost of
$389,518, inclusive of related acquisition fees of $81,863 paid to the Manager.
Information as to the financial position and results of operations of ICON 47820
as of December 31, 2003 is summarized below:
December 31, 2003
-----------------
Assets $ 23,616,075
===============
Liabilities $ 19,773,426
===============
Equity $ 3,842,649
===============
LLC's share of equity $ 384,265
===============
For the Period Ended
December 31, 2003
-----------------
Net loss $ (52,544)
===============
LLC's share of net loss $ (5,254)
===============
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
5. Investment In Consolidated Subsidiaries
ICON Aircraft 128 LLC
---------------------
In 2002, the LLC formed ICON Aircraft 128, LLC ("ICON Aircraft 128") for
the purpose of acquiring 53% (with options to acquire the remaining 47%) of the
outstanding shares of HXO Aircraft Leasing Limited ("HXO"), a Cayman Islands
registered company, which owns, through an Owner Trust, an Airbus A340-300ER
aircraft on lease to Cathay Pacific through June 2006. The stock was acquired
for $2,250,000 in cash. The LLC also paid $2,041,243 in acquisition fees to the
Manager as a result of the acquisition.
Subsequent to the original acquisition, ICON Aircraft 128 exercised its
options and acquired the remaining 47% interest from HXO for $2,028,000 in cash
and paid additional acquisition fees of $30,840 to the Manager.
The aircraft owned by HXO is subject to non-recourse debt to unaffiliated
lenders. As of December 31, 2003, there was $57,617,477 outstanding under the
non-recourse debt. ICON Aircraft 128 consolidates the financial position and
results of operations of HXO in its consolidated financial statements.
ICON Railcar I LLC
- ------------------
In November 2002, the LLC formed ICON Railcar I LLC for the purpose of
acquiring a total of 434 coal gondola railcars for a total purchase price of
$5,667,220, which was funded with cash of $1,227,886 and the assumption of
non-recourse debt in the amount of $4,439,334 subject to two separate leases as
follows:
(i) 324 railcars were on lease to Texas Genco LP. The rents and railcars have
been assigned to the non-recourse lender. The lease is scheduled to expire
in 2007 at which time the balance of the non-recourse debt will be
approximately $1,603,000. In addition, there was a total of $132,727 in
acquisition fees paid to the Manager as part of the acquisition. As of
December 31, 2003, there was $2,981,560 outstanding under the non-recourse
debt. During the year ended December 31, 2003, the LLC sold eleven of the
railcars to the lessee based upon an early termination provision due to
damages. The LLC recognized a loss of $57,051 in connection with the sale.
(ii) 110 railcars were on lease to Trinity Rail Management, Inc. The rents and
railcars have been assigned to the non-recourse lender. The lease is
scheduled to expire in 2010 at which time the balance of the non-recourse
debt will be approximately $387,000. In addition, there was a total of
$37,290 in acquisition fees paid to the Manager as part of the acquisition.
As of December 31, 2003, there was $1,043,785 outstanding under the
non-recourse debt. Subsequent to the acquisition, the LLC was refunded
$14,630, which was recorded as a reduction to the acquisition cost of the
equipment purchased.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
ICON Trianon LLC, ICON Trinidad LLC, ICON Tancred LLC
-----------------------------------------------------
In 2002, the LLC formed ICON Trianon LLC, ICON Trinidad LLC and ICON
Tancred LLC (collectively known as "Wilhelmsen") for the purpose of acquiring
three car and truck carrying vessels for $9,690,060 in cash and the assumption
of non-recourse debt in the amount of $64,329,764. The vessels are subject to
lease with Wilhelmsen Lines Shipowning, a wholly-owned subsidiary of Wallenius
Wilhelmsen Lines ASA, and the leases expire in December 2008. In addition, the
LLC paid $2,220,595 in acquisition fees to the Manager as part of the
acquisition. As of December 31, 2003, there was $52,317,126 outstanding under
the non-recourse debt.
6. Finance Lease Receivables
During the second quarter 2003, the LLC invested $10,457,398 (inclusive of
acquisition fees) in equipment subject to leases with third parties. The
equipment consists of a Double Kraft Paper Forming Tubing Unit, semiconductor
testing devices and lathes, presses and robotic manufacturing equipment on lease
to Wildwood Industries Inc., Advance Micro Devices Inc., and Metaldyne
respectively. The leases are schedule to expire January 2007, June 2007, and
December 2009, respectively.
During the third quarter 2003, the LLC invested $6,883,367 in equipment
subject to lease with third parties. The equipment consists of a Double Kraft
Paper Forming Tubing, and a high End Paper Converting Line both on lease to
Wildwood Industries, Inc. for $2,185,660 in cash. In addition, the LLC acquired
additional semiconductor testing devices which are on lease to Advance Micro
Devices, Inc. for $4,697,707. These leases are schedule to expire September 2008
and June 2007, respectively. Acquisition fees paid to the Manager as a result of
these acquisitions amounted to $505,070.
Non-cancelable minimum annual rental amounts due from finance leases are as
follows:
Year Ending
December 31,
-----------
2004 4,633,147
2005 4,437,399
2006 4,437,399
2007 2,646,887
2008 803,451
----------
16,958,283
==========
7. Investment in Operating Leases
During 2003, the LLC invested $1,942,729 and paid $58,282 in acquisition
fees to the Manager for the acquisition of fifty Great Dane trailers with
Carrier Ultra Refrigeration units on lease with Frozen Foods Industries, Inc.
During 2002, the LLC acquired a number of investments that were classified
as operating leases.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
The acquisitions were as follows:
(i) A portfolio of leases acquired through a joint venture (ICON SPK 2023-A
LLC), with an affiliate.
(ii) An Airbus A 340-313X through its 50% interest in ICON Aircraft 126 LLC.
(iii)An Airbus A340-300ER aircraft through its interest in ICON Aircraft 128
LLC.
(iv) A 25 MW co-generation facility acquired through a joint venture
(ICON/Kenilworth LLC) with an affiliate.
(v) Three car and truck carrying vessels were acquired in the third quarter of
2002 (ICON Trianon LLC, ICON Trinidad LLC and ICON Tancred LLC).
(vi) 434 railcars were acquired in November 2002 (ICON Railcar I LLC).
(vii)An aircraft was acquired through a joint venture (ICON Aircraft 46835 LLC)
with an affiliate.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
The investment in operating leases at December 31, 2003 and 2002 consist of
the following:
2003 2002
---- ----
Equipment at cost, beginning of year $ 203,025,329 $ -
Acquisitions 1,942,729 197,111,544
Initial direct costs 58,282 5,913,785
Dispositions (1,810,155) -
------------------- -------------------
Equipment at cost, end of year 203,216,185 203,025,329
------------------- -------------------
Accumulated depreciation, beginning of year (7,651,465) -
Depreciation (24,741,029) (7,651,465)
Accumulated depreciation on dispositions 1,205,598 -
------------------- -------------------
Accumulated depreciation, end of year (31,186,896) (7,651,465)
------------------- -------------------
Investment in operating leases, end of year $ 172,029,289 $ 195,373,864
=================== ===================
Non-cancelable minimum annual rental amounts receivable from operating
leases are as follows:
Year
Ending December 31,
--------------------
2004 $ 31,534,464
2005 27,895,689
2006 23,251,456
2007 15,982,035
2008 9,711,100
----------------
$ 108,374,744
================
8. Investment in Unguaranteed Residual Values
On December 31, 2003, the LLC entered into an agreement with Summit Asset
Management (a United Kingdom based company) to acquire a 90% interest in the
unguaranteed residual values of certain equipment on lease to lessees located in
the United Kingdom. The equipment consists of manufacturing and technology
equipment. The LLC's investment return is contingent upon the residual value of
the equipment after repayment of associated debt. The LLC invested $4,454,003 in
cash, inclusive of $1,131,461 of acquisition fees paid to the Manager.
9. Notes Payable - Non-Recourse
Notes payable non-recourse at December 31, 2003 consists of $52,317,126
attributable to ICON Trianon LLC, ICON Trinidad LLC and ICON Tancred LLC,
$57,617,477 attributable to ICON 128, $17,687,718 attributable to ICON 46835 and
$6,840,875 attributable to other acquisitions. The notes carry fixed interest
rates ranging from 4.04% to 10.61%. Rental payments from leases associated with
the equipment that were acquired assuming such debts have been assigned to the
lender with the underlying equipment as collateral.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
Notes payable non-recourse at December 31, 2002 consists of $61,948,272
attributable to ICON Trianon LLC, ICON Trinidad LLC and ICON Tancred LLC,
$60,070,552 attributable to ICON 128, $22,301,599 attributable to ICON 46835 and
$10,634,693 attributable to other acquisitions. The notes carry fixed interest
rates ranging from 4.04% to 10.61%$
Principal maturities of the notes are as follows:
Year Ending Non-recourse
December 31, Debt
------------ ----
2004 $ 23,361,896
2005 21,515,720
2006 63,836,304
2007 16,101,943
2008 9,647,333
----------------
Total $ 134,463,196
================
On May 30 2002, certain affiliated funds entered into a $17,500,000 joint
and several line of credit agreement dated as of May 30, 2002. They were ICON
Income Fund Eight A L.P., ICON Income Fund Eight B L.P. and ICON Cash Flow
Partners L.P. Seven (the "Initial Funds"), with Comerica Bank as lender. Under
the terms of the agreement, the Initial Funds may borrow at a rate equal to the
Comerica Bank base rate plus 1% (together, 5.00% at December 31, 2003) and all
borrowings are to be jointly and severally collateralized by the present values
of rents receivable and equipment owned by all of the Initial Funds sharing in
the joint line of credit. On December 12, 2002, the agreement was amended to
admit the 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 line of credit was extended for twelve additional months expiring May 31,
2004. As of December 31, 2003, the LLC had nothing outstanding under the line.
Aggregate borrowing by all Funds under the line of credit agreement aggregated
$12,779,986 on December 31, 2003.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
10. Selected Quarterly Financial Data (Unaudited)
The following table is a summary of selected financial data by quarter for
the years ended December 31, 2003 and 2002:
For the Quarters Ended
----------------------
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
2003
Revenues $ 8,748,027 $ 8,746,486 $ 8,950,551 $ 9,042,888
============= ============ ============= ==============
Net income (loss) allocable to
additional members $ (594,184) $ (363,342) $ (152,471) $ 226,789
============== ============ ============= ==============
Net income (loss) per weighted
average additional member
share $ (8.76) $ (3.76) $ (1.54) $ 4.33
============= ============ ============= ==============
For the Quarters Ended
----------------------
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
2002
Revenues $ 652,023 $ 739,312 $ 2,878,634 $ 7,263,612
============= ============ ============= ==============
Net income (loss) allocable to
additional members $ 159,266 $ (93,271) $ (207,849) $ (428,164)
============= ============ ============= ==============
Net income (loss) per weighted
average additional member
share $ 16.40 $ (4.27) $ (6.00) $ (25.77)
============= ============ ============= ==============
11. Tax Information (Unaudited)
The following table reconciles net loss for financial statement reporting
purposes to loss for federal income tax reporting purposes for the years ended
December 31, 2003 and 2002:
2003 2002
---- ----
Net loss for financial statement reporting purposes $ (883,208) $ (575,776)
Difference due to:
Direct finance leases and financings 1,646,099 -
Depreciation expense 5,047,682 4,927,840
(Gain) loss on sale of equipment 27,121 -
Interest expense - consolidated joint venture 3,498,228 1,829,398
Rent - consolidated joint venture (8,316,900) (8,168,089)
Tax gain from joint venture (3,031,139) 184,747
Other 896,295 935,891
------------ -------------
Loss for federal income tax reporting purposes $ (1,115,822) $ (865,989)
============ =============
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
Notes to Consolidated Financial Statements - Continued
As of December 31, 2003, the total equity included in the financial
statements was $75,153,869 compared to the capital accounts for federal income
tax reporting purposes of $7,008,303. The difference arises primarily from sales
and offering expenses reported as a reduction in the additional members' capital
accounts for financial statement reporting purposes but not for federal income
tax reporting purposes as well as the temporary difference described above.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The information required by Item 304 of Regulation S-K was filed as part of
the LLC's 2002 Reports on Form 8-K filed on May 6, 2003.
Item 9a. Control and Procedures
----------------------
The LLC carried out an evaluation, under the supervision and with the
participation of management of ICON Capital Corp., the Manager of the LLC,
including the Principal Executive Officer and the Principal Financial Officer,
of the effectiveness of the design and operation of the LLC's disclosure
controls and procedures as of the end of the period covered by this report
pursuant to the Securities Exchange Act of 1934. Based upon the evaluation, the
Principal Executive Officer and the Principal Financial Officer concluded that
the LLC's disclosure controls and procedures were effective.
There were no significant changes in the LLC's internal control over
financial reporting during the LLC's fourth fiscal quarter that have materially
affected, or are likely to materially affect, the LLC's internal control over
financial reporting.
PART III
Item 10. Directors and Executive Officers of the Registrant's Manager
------------------------------------------------------------
The Manager, a Connecticut corporation, was formed in 1985. The Manager'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 Manager 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 LLC's business is the Manager. The Manager 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 Manager offers a broad range of equipment leasing services.
The Manager performs certain functions relating to the management of the
equipment of the LLC. Such services include the collection of lease payments
from the lessees of the equipment, re-leasing services in connection with
equipment which is off-lease, inspections of the equipment, liaison with and
general supervision of lessees to assure that the equipment is being properly
operated and maintained, monitoring performance by the lessees of their
obligations under the leases and the payment of operating expenses.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
The officers and directors of the Manager are as follows:
Beaufort J.B. Clarke Chairman, Chief Executive Officer and Director
Paul B. Weiss President and Director
Thomas W. Martin Executive Vice President and Director
Beaufort J.B. Clarke, age 57, has been Chairman, Chief Executive Officer
and Director of the Manager since 1996. Prior to his present position, Mr.
Clarke was founder and the President and Chief Executive Officer of Griffin
Equity Partners, Inc. Mr. Clarke formerly was an attorney with Shearman and
Sterling and has over 20 years of senior management experience in the United
States leasing industry.
Paul B. Weiss, age 43, is President and Director of the Manager. Mr. Weiss
has been exclusively engaged in lease acquisitions since 1988 from his
affiliations with the Manager since 1996, Griffin Equity Partners (as Executive
Vice President from 1993-1996); Gemini Financial Holdings (as Senior Vice
President-Portfolio Acquisitions from 1991-1993) and Pegasus Capital Corporation
(as Vice President-Portfolio Acquisitions from 1988-1991). He was previously an
investment banker and a commercial banker.
Thomas W. Martin, age 50, has been Executive Vice President and Director of
the Manager 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-Syndication's from
1985-1992). Mr. Martin has 18 years of senior management experience in the
leasing business.
Item 11. Executive Compensation
The LLC has no directors or officers. The Manager and its affiliates were
paid or accrued the following compensation and reimbursement for costs and
expenses for the years ended December 31, 2003 and 2002.
Entity Capacity Type of Compensation 2003 2002
------ -------- -------------------- ---- ----
ICON Capital Corp. Manager Organization and
offering expenses $ 626,083 $ 1,521,620
ICON Securities Corp. Dealer-Manager Underwriting commissions 834,777 1,101,912
ICON Capital Corp. Manager Acquisition fees 1,776,677 6,780,518
ICON Capital Corp. Manager Management fees 1,897,722 604,003
ICON Capital Corp. Manager Administrative expense
reimbursements 759,089 241,597
------------- -------------
$ 5,894,348 $ 10,249,650
============= =============
In accordance with the terms of the Management Agreement, the LLC pays the
Manager management fees based on a percentage of rentals received (ranging from
1% to 7%). In addition, the Manager is reimbursed for expenses incurred by it in
connection with the LLC's operations. The Manager also has a 1% interest in the
profits and distributions of the LLC.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) No person of record owns, or is known by the LLC to own beneficially, more
than 5% of any class of securities of the LLC.
(b) As of March 30, 2004, Directors and Officers of the Manager do not own any
equity securities of the LLC.
(c) The Manager owns the equity securities of the LLC as of December 31, 2003
set forth in the following table:
Title Amount Beneficially Percent
of Class Owned of Class
-------- ----- --------
Manager interest represents initially a 1% and potentially a 100%
10% interest in the LLC's income, gain
and loss deductions.
Member Share one member share .04%
Item 13. Certain Relationships and Related Transactions
---------------------------------------------
None other than those disclosed in Item 11 herein.
Item 14. Principal Accountant Fees and Services
---------------------------------------
2003 2002 Description
---------- ---------- -----------
Audit fees 19,500 - Audit
Audit related fees - -
Tax fees 2,525 - Tax compliance
All other fees - -
---------- ----------
Total 22,025 -
========== ==========
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedule - None.
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set
forth therein is included in the consolidated Financial Statements or
Notes thereto.
3. Exhibits - The following exhibits are incorporated herein by reference:
(i) Amended and Restated Operating Agreement of ICON Income Fund Nine, LLC
(Incorporated by reference to Exhibit A to pre-effective Amendment No. 1 to
Form S-1 Registration Statement filed with the Securities and Exchange
Commission dated October 12, 2001).
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
(ii) Certificate of Limited Liability Company (Incorporated herein by reference
to Exhibit 4.3 to pre-effective Form S-1 Registration Statement filed with
the Securities and Exchange Commission dated August 15, 2001).
(iii)Loan and Security Agreement
(iv) First Amendment to Loan and Security Agreement
(b) Reports on Form 8-K
None
(c) Exhibits
31.1 Rule 13a-14(a)/15d-14(a) certifications
31.2 Rule 13a-14(a)/15d-14(a) certifications
32.1 Certification of Chairman and Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Executive Vice President and Principal Financial and
Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
ICON Income Fund Nine, LLC
(A Delaware Limited Liability Company)
December 31, 2003
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, LLC has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ICON Income Fund Nine, LLC
File No. 333-67638 (Registrant)
By its Manager, ICON Capital Corp.
Date: March 30, 2004 /s/ Beaufort J.B. Clarke
---------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacity and on the dates indicated.
ICON Capital Corp.
sole Manager of the Registrant
Date: March 30, 2004 /s/ Beaufort J.B. Clarke
-------------------------------------------
Beaufort J.B. Clarke
Chairman, Chief Executive Officer and Director
Date: March 30, 2004 /s/ Paul B. Weiss
-------------------------------------------
Paul B. Weiss
President and Director
Date: March 30, 2004 /s/ Thomas W. Martin
-------------------------------------------
Thomas W. Martin
Executive Vice President and Director
(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 members and a copy will be forwarded to the
Commission.
Exhibit 31.1 Principal Executive Officer Certification Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-K
---------------------
I, Beaufort J.B. Clarke, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Income Fund Nine,
LLC (the "LLC");
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 consolidated financial statements and other
financial information included in this annual report, fairly present in all
material respects the consolidated financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this annual report based on such
evaluation; and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the Corporate
Manager (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the LLC's ability to record, process, summarize and report
financial information and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting
Dated: March 30, 2004
/s/ Beaufort J.B. Clarke
- -----------------------------
Beaufort J. B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
Manager of ICON Income Fund Nine, LLC
Exhibit 31.2 Principal Executive Officer Certification Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
Certifications - 10-K
---------------------
I, Thomas W. Martin, certify that:
1. I have reviewed this annual report on Form 10-K of ICON Income Fund Nine,
LLC (the "LLC");
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 consolidated financial statements and other
financial information included in this annual report, fairly present in all
material respects the consolidated financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this annual report based on such
evaluation; and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the board of directors of the Corporate
Manager (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control, are reasonably likely to materially
affect the LLC's ability to record, process, summarize and report
financial information and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls over financial reporting
Dated: March 30, 2004
/s/ Thomas W. Martin
- ----------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
ICON Capital Corp.
Manager of ICON Income Fund Nine, LLC
Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
EXHIBIT 32.1
I, Beaufort J.B. Clarke, Chairman and Chief Executive Officer of ICON
Capital Corp, the Manager of the LLC in connection with the Annual Report of
ICON Income Fund Nine, LLC (the "LLC") on Form 10-K for the year ended December
31, 2003, as filed with the Securities and Exchange Commission on the date
hereof (the "Annual Report") certify, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
(1) the Annual Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m);
and
(2) the information contained in the Annual Report fairly presents, in all
material respects, the financial condition and results of operations
of the LLC
Dated: March 30, 2003
/s/ Beaufort J.B. Clarke
------------------------------------------------------
Beaufort J.B. Clarke
Chairman and Chief Executive Officer
ICON Capital Corp.
Manager of ICON Income Fund Nine, LLC
Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
EXHIBIT 32.1
I, Thomas W. Martin, Executive Vice President (Principal Financial and
Accounting Officer) of ICON Capital Corp, the Manager of the LLC in connection
with the Annual Report of ICON Income Fund Nine, LLC (the "LLC") on Form 10-K
for the year ended December 31, 2003, as filed with the Securities and Exchange
Commission on the date hereof (the "Annual Report") certify, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and
belief:
(1) the Annual Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) the information contained in the Annual Report fairly presents, in all
material respects, the financial condition and results of operations of the
LLC
Dated: March 30, 2003
/s/ Thomas W. Martin
-------------------------------------------------------
Thomas W. Martin
Executive Vice President
(Principal Financial and Accounting Officer)
ICON Capital Corp.
Manager of ICON Income Fund Nine, LLC
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is
made as of April 9, 2003 by and between ICON Cash Flow Partners L.P. Seven, a
Delaware limited partnership ("Borrower 1"), ICON Income Fund Eight A L.P., a
Delaware limited partnership ("Borrower 2"), ICON Income Fund Eight B L.P., a
Delaware limited partnership ("Borrower 3"), and ICON Income Fund Nine, LLC, a
Delaware limited liability company ("Borrower 4" and together with Borrower 1,
Borrower 2 and Borrower 3, "Borrower"), on the one hand, and Comerica
Bank-California, a California banking corporation ("Lender"), on the other hand,
with respect to the Loan and Security Agreement, dated as of May 30, 2002, and
the First Amendment to Loan and Security Agreement, dated as of December 1,
2002, entered into by Borrower 1, Borrower 2, Borrower 3, Borrower 4 and Lender
(as amended and modified through but excluding the date hereof, the
"Agreement")."
RECITALS
WHEREAS, Borrower and Lender entered into the Agreement;
WHEREAS, Borrower 1, Borrower 2 and Borrower 3 violated a covenant in
the Agreement by each failing to earn a net profit after taxes of at least
$1.00 for the fiscal year ending December 31, 2002, as required by Section
7.4 of the Agreement ("Section 7.4 Profitability Covenant");
WHEREAS, Borrower has requested that Lender waive the violation of the
Section 7.4 Profitability Covenant described in the preceding recital for
the fiscal year ending December 31, 2002 only;
WHEREAS, Borrower represent and warrant that, except for the violation
of the Section 7.4 Profitability Covenant for the fiscal year ending
December 31, 2002, described above, they each are in compliance with all
terms, covenants and conditions of the Agreement and all representations
and warranties in the Agreement are true and correct;
WHEREAS, Borrower represent and warrant that, upon execution of this
Amendment, they will each be in compliance with all terms, covenants and
conditions of the Agreement, as amended by this Amendment, and all
representations and warranties made by them in the Agreement, as amended by
this Amendment, are and will be true and correct;
WHEREAS, a deposit account in the name of Borrower 4 is maintained at
Lender, in the name of Borrower 4, and Lender has a perfected security
interest in that deposit account and the proceeds thereof pursuant to the
Agreement, which account has on deposit the sum of $9,000,000.00 or more;
WHEREAS, Lender is willing to agree to Borrower's request, on the terms and
conditions set forth below;
NOW, THEREFORE, IT IS AGREED THAT:
1. Definitions. Unless otherwise indicated, words and terms which are
defined in the Agreement shall have the same meaning where used herein.
2. Amendments. A new Section 5.12.3 is added to Agreement, to read as
follows:
5.12.3 Maintain on deposit with Lender in Deposit Account 1892187368,
or such other deposit account or accounts as Borrower and Lender may
agree, cash in an amount equal to or greater than the outstanding
principal balance of the Loans. Borrower agree that Lender may refuse
to allow any withdrawal from such deposit account or accounts if the
effect of doing so would be to reduce the cash balance to an amount
less than the outstanding principal balance of the Loans. In addition,
Borrower may not obtain a Revolving Loan if the effect of doing so
would be to increase the outstanding principal balance of the Loans to
an amount greater than the amount of cash in the above-described
deposit account or accounts.
3. Continued Validity of Agreement. Except as amended by this Amendment,
the Agreement and all security agreements, guaranties, and other documents
executed by Borrower with or in favor of Lender (collectively referred to
as "Loan Documents"), shall continue in full force and effect as originally
constituted and are ratified and affirmed by the parties hereto. Each
reference in the Agreement or in the other Loan Documents to the Agreement
shall mean the Agreement as amended hereby unless the context otherwise
requires. This Amendment and the Agreement shall be read as one document.
Without limiting the generality of the foregoing, nothing in this Amendment
entitles Borrower to receive advances of any funds, or extends the maturity
date for repayment, beyond that expressly set forth in the Agreement.
4. Compliance with Loan Documents. Borrower 1, Borrower 2, Borrower 3 and
Borrower 4 each represents and warrants to Lender as follows: Except as
stated in the Recitals to this Amendment: (a) as of the date hereof, each
Borrower has complied, and is in compliance, with all of the terms,
covenants and conditions of the Loan Agreement and the other Loan Documents
applicable to it; (b) as of the date hereof, there exists no Event of
Default under the Loan Agreement or any of the other Loan Documents or an
event which would constitute an Event of Default upon the lapse of time or
upon the giving of notice and the lapse of time specified therein; and (c)
the representations and warranties of each Borrower in the Loan Agreement
and the other Loan Documents are true and with the same effect as though
such representations and warranties had been made by such Borrower as of
the date hereof Each Borrower further represents and warrants that, upon
effective, each Borrower will be in compliance with all of the terms,
covenants, and conditions of the Loan Agreement and the other Loan
Documents, and all representations and warranties will be true.
5. Authorization Each party hereto represents to the other that the
individual executing this Amendment on its behalf is the duly appointed
signatory of such party and that such individual is authorized to execute
this Amendment by or on behalf of such party and to take all action
required by the terms of this Amendment.
6. When Amendment is Effective. This Amendment shall be deemed binding and
effective as of April 9, 2003 when this Amendment is executed by Borrower
1, Borrower 2, Borrower 3, Borrower 4 and Lender.
7. Captions. Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire
Amendment.
8. No Novation. This Amendment is not intended to be, and shall not be
construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Agreement shall remain in full force and
effect.
9. Severability. Each provision of this Amendment shall be severable from
every other provision of this Amendment for the purpose of determining the
legal enforceability of any specific provision.
10. Entire Agreement. This Amendment constitutes the entire agreement by
and between Borrower and Banks with respect to the subject matter hereof
and supersedes all prior and contemporaneous negotiations, communications,
discussions and agreements concerning such subject matter.
11. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
ICON CASH FLOW PARTNERS L.P.
SEVEN, a Delaware Limited Partnership
By ICON Capital Corp., its general partner
By:____________________________
Paul B. Weiss, President
ICON INCOME FUND EIGHT A L.P., a Delaware Limited Partnership By ICON
Capital Corp., its general partner
ICON INCOME FUND NINE, LLC, a Delaware Limited Liability Company
By: ICON Capital Corp., its manager
By:_______________________________
Paul B. Weiss, President
Address for Notices:
ICON INCOME FUND NINE, LLC
Attention: General Counsel
100 5thAvenue, 10th Floor
New York, New York 10011
Facsimile No.: (212) 418-4739
COMERICA BANK-CALIFORNIA, a California banking corporation
By:______________________________
John Esposito, Vice President
By:_________________________
Paul B. Weiss, President
ICON INCOME FUND EIGHT B L.P.,
a Delaware Limited Partnership;;
By ICON Capital corp., its general partner
By:__________________________
Paul B. Weiss, President
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is
made as of July 31, 2003 by and between ICON Cash Flow Partners L.P. Seven, a
Delaware limited partnership ("Borrower 1"), ICON Income Fund Eight A L.P., a
Delaware limited partnership ("Borrower 2"), ICON Income Fund Eight B L.P., a
Delaware limited partnership ("Borrower 3"), and ICON Income Fund Nine, LLC, a
Delaware limited liability company ("Borrower 4" and together with Borrower 1,
Borrower 2 and Borrower 3, "Borrower" or "Borrowers"), on the one hand, and
Comerica Bank, successor by merger to Comerica Bank-California ("Lender"), on
the other hand, with respect to the Loan and Security Agreement, dated as of May
30, 2002, the First Amendment to Loan and Security Agreement, dated as of
December 1, 2002, entered into by Borrower 1, Borrower 2, Borrower 3, and
Comerica Bank-California, the Second Amendment to Loan and Security Agreement,
dated as of April 9, 2003, entered into by Borrower 1, Borrower 2, Borrower 3,
Borrower 4 and Comerica Bank-California, and the letter agreement dated May 31,
2003 entered into by Borrower 1, Borrower 2, Borrower 3, Borrower 4 and Comerica
Bank-California (as amended and modified through but excluding the date hereof,
the "Agreement")."
RECITALS
WHEREAS, Borrower and Lender entered into the Agreement;
WHEREAS, the Revolving Loan Maturity Date under the Agreement is July 31,
2003;
WHEREAS, Borrower has requested that Lender extend the Revolving Loan
Maturity Date to May 31, 2004;
WHEREAS, Lender is willing to agree to Borrower's request, on the terms and
conditions set forth below;
NOW, THEREFORE, IT IS AGREED THAT:
1. Definitions. Unless otherwise indicated, words and terms which are
defined in the Agreement shall have the same meaning where used herein.
2. Amendments.
(a) The definition of "Borrowing Base" in the Agreement is amended to read
as follows:
Borrowing Base - means 80% of the Present Value of the Eligible Borrowing
Base Contracts, plus Pledged Cash.
(b) A new definition of "Cash Equivalents" is added to the Agreement, to
read as follows:
Cash Equivalents - the sum outstanding, at any one time, of (i) all cash
(in United States dollars) owned by Borrower at such time plus (ii) the
fair market value of all cash equivalents and short term investments (as
those terms are defined in GAAP) owned by Borrower at such time, in each
case excluding Pledged Cash.
(c) The definition of "Eligible Borrowing Base Contract" in the Agreement
is amended by adding the following subsections:
(l) At the time Borrower seeks to have Lender make a Revolving Loan based
on such contract, the Lessee or Debtor, as the case may be, must have a Standard
& Poor's bond rating of BBB or better or a Risk Rating of 3 or better on
Lender's internal risk rating system;
(m) Lender, in its sole and absolute discretion, determines that it is
willing to make a Revolving Loan based on such contract;
(n) Lender shall have received a written acknowledgment, in form and
substance satisfactory to Lender, from the Debtor or Lessee, as the case may be
(and from the lender or lessor if the contract is an Indirect Loan Contract or
an Indirect Lease) authenticating the contract, identifying the existing parties
to the contract, stating that the contract is in full force and effect, stating
that no default exists under the contract, stating that no prepayments on the
contract have been made (or identifying such prepayments if any have been made),
stating that the acknowledging party has not received any notice that the
lender's/lessor's interest in the contract has been assigned or pledged to any
other person, and providing such other information as Lender may request. As to
contracts based on which Lender made a Revolving Loan prior to July 31, 2003,
such written acknowledgment must be received by Lender within 45 days after
Lender's demand to Borrower for such an acknowledgment; and
(o) Payments made on contracts of the type described in Sections 2.11(a)
and 2.11(c) of this Agreement on or after October 1, 2003 are received in the
Lockbox; and payments paid to a Borrower with respect to contracts of the type
described in Section 2.11(b) of this Agreement on or after October 1, 2003 are
received in the Lockbox.
(d) A new definition is added to the Agreement, to read as follows:
Lockbox - has the meaning set forth in Section 2.11(a) hereof.
(e) A new definition is added to the Agreement, to read as follows:
Pledged Cash - Cash owned by Borrower maintained in a deposit account or
deposit accounts with Lender in the name of one or more Borrowers, in which
Lender has a perfected first priority security interest to secure payment
and performance of the Obligations, and which Borrower has agreed in
writing may not be withdrawn by Borrower.
(f) The definition of "Revolving Loan Maturity Date" in the Agreement is
amended to read as follows:
Revolving Loan Maturity Date - May 31, 2004.
(g) Section 1.3.1 of the Agreement is amended to read as follows:
1.31 Facility Fee. A Facility Fee in the amount of $87,500.00 per year,
payable in arrears in installments of $21,875.00 per quarter payable
on June 30, September 30, December 31, and March 31 of each year
through the Revolving Loan Maturity Date or, if an extension of time
beyond the Revolving Loan Maturity Date for advances and repayment is
provided, through the end of the extension period.
(h) A new Section 2.11 is added to the Agreement to read as follows:
2.11 Lockbox.
(a) On all Loan Contracts and Leases based on which Lender has made a
Loan, Borrower shall notify all Debtors and Lessees in writing, by
means of a letter in the form attached hereto as Exhibit 5, to remit
all payments to a post office box designated by Lender, to which only
Lender shall have access ("Lockbox"), and notify such Debtors and
Lessees that such designation may not be changed without the written
consent of Comerica Bank. (b) On all Indirect Loan Contracts and
Indirect Leases based on which Lender has made a Loan, when the lender
or lessor is not an Affiliate of any Borrower, Borrower shall notify
the applicable lender or lessor in writing, by means of a letter in
the form attached hereto as Exhibit 6, to remit all payments payable
to such Borrower to the Lockbox, and notify such lender or lessor that
such designation may not be changed without the written consent of
Comerica Bank. (c) On all Indirect Loan Contracts and Indirect Leases
based on which Lender has made a Loan, when the lender or lessor is an
Affiliate of any Borrower, Borrower shall cause such lender or lessor
to notify the Debtor and Lessee in writing, by means of a letter in
the form attached hereto as Exhibit 7, to remit all payments to the
Lockbox, and notify such Debtors and Lessees that such designation may
not be changed without the written consent of Comerica Bank. Borrower
shall also cause such lender or lessor to execute a power of attorney
in form and substance satisfactory to Lender authorizing Lender to
endorse and negotiate all items received in the Lockbox and collect
all proceeds thereof, and shall obtain the written consent of all
Persons that have a direct or indirect interest in the lender's or
lessor's interest in the contract to this procedure. (d) Borrower
shall provide the notices described in subsections (a), (b) and (c) by
a means requiring a written receipt and promptly deliver to Lender
copies of the notices and proof of receipt by each of the recipients.
For Loan Contracts and Leases based on which Lender has made a Loan
prior to July 31, 2003, such notices must be sent by Borrower no later
than three Business Days after the execution of the Third Amendment to
the Agreement. For Loan Contracts and Leases based on which Lender
makes a Loan on or after July 31, 2003, such notices must be sent
within three Business Days after the Loan is made. All invoices and
other documents sent by Borrower to any person to whom the notices
described in subsections (a), (b) and (c) are to be sent, stating
where the recipient is to remit payment, shall identify the Lockbox as
the place to remit payment. (e) For the Loan Contracts and Leases
described in subsections (a) and (b), as long as no Event of Default
has occurred, Lender shall deliver the items received in the Lockbox
to Borrower. For the Loan Contracts and Leases described in
subsections (a) and (b), effective upon the occurrence of an Event of
Default, Lender may retain items received in the Lockbox and apply
them, and the proceeds thereof, to the Obligations. (f) For the Loan
Contracts and Leases described in subsection (c), as long as no Event
of Default has occurred, Lender shall deliver the items received in
the Lockbox to the applicable Affiliate lender or lessor. For the Loan
Contracts and Leases described in subsection (c), effective upon the
occurrence of an Event of Default, Lender may endorse and negotiate
all items received in the Lockbox and collect all proceeds thereof,
apply to the Obligations any portion thereof to which any Borrower is
entitled, and remit the excess to the applicable Affiliate lender or
lessor on such Loan Contract or Lease.
(i) Section 5.12.3 of the Agreement is deleted.
(j) Section 5.14 of the Agreement is amended to read as follows:
5.14 Audits. Permit Lender or representatives of Lender to conduct audits
of Borrower's books and records relating to the Accounts, Inventory,
Leases, Loan Contracts and other Collateral and make extracts
therefrom no less frequently than annually (or at any time and without
notice required if an Event of Default has occurred and is continuing)
with results satisfactory to Lender, provided that Lender shall use
its best efforts to not interfere with the conduct of Borrower's
business, and arrange for verification of the Accounts directly with
the account debtors obligated thereon or otherwise, of the Leases
directly with the Lessees, and of the Loan Contracts directly with the
Debtors, all under reasonable procedures acceptable to Lender and at
Borrower's sole expense. Borrower shall pay all reasonable expenses
incurred by Lender with respect to such audits.
(k) Section 6.9 of the Agreement is amended by adding the following
sentence at the end: "Notwithstanding anything to the contrary
indicated above, Borrower shall not without Lender's prior written
consent, after the end of a particular Borrower's reinvestment period,
pay distributions or dividends to members, partners or shareholders of
such particular Borrower, or redeem or retire any interest of any
partner, member or shareholder of such particular Borrower if any
amount of principal, interest or late charges remains outstanding on
Revolving Loans made to such particular Borrower. In addition, a
Borrower may not use proceeds received from the sale or other
disposition of assets after the end of its reinvestment period to
purchase Leases, Loan Contracts or other assets."
(l) Section 7.1 of the Agreement is amended to read as follows:
7.1 Aggregate Tangible Net Worth. All Borrowers, in the aggregate, shall
maintain, as of the last day of the specified quarter, a Tangible Net Worth
of not less than $155,000,000.
(m) Section 7.3 of the Agreement is deleted and replaced by the following:
7.3 Total Liabilities to Tangible Net Worth. All Borrowers, in the aggregate,
shall maintain, as of the last day of each quarter, a ratio of total
liabilities to Tangible Net Worth of not greater than 3.00 to 1.00.
(n) Section 7.4 of the Agreement is deleted and replaced by the following:
7.4 Minimum Cash Balance. Borrower shall ensure that at all times the sum of
(a) the fair market value of Cash Equivalents owned by Borrower plus (b)
Borrower's Unused Loan Capacity totals at least $7,500,000. For purposes of
this section, "Borrower's Unused Loan Capacity" at any point in time equals
the amount by which the lesser of (i) the Borrowing Base or (ii) the
Maximum Revolving Amount exceeds the Obligations, as reflected to Lender's
reasonable satisfaction in the monthly report described in the next
sentence. Borrower shall provide to Lender as part of its monthly Borrowing
Base/Eligible Borrowing Base Contract Aging Report within 15 days of each
month end, information sufficient to show the amount of Cash Equivalents
owned by it and its Unused Loan Capacity.
(o) A new Section 10.19 is added to the Agreement, to read as follows:
10.19 Waivers and Consents. Except as otherwise expressly provided in this
Agreement, each Borrower waives notice of any Loans, notice of the occurrence of
any default, Event of Default, or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by Lender under or
in respect of any of the Obligations, any requirement of diligence or to
mitigate damages and, generally, to the extent permitted by applicable law, all
demands, notices, and other formalities of every kind in connection with this
Agreement (except as otherwise provided in this Agreement). Each Borrower hereby
assents to, and waives notice of, any extension or postponement of the time for
the payment of any of the Obligations, the acceptance of any payment of any of
the Obligations, the acceptance of any partial payment thereon, any waiver,
consent or other action or acquiescence by Lender at any time or times in
respect of any default by any Borrower in the performance or satisfaction of any
term, covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Lender in respect of any of the Obligations, and the
taking, addition, substitution or release, in whole or in part, at any time or
times, of any security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any Borrower. Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay
in acting or failure to act on the part of Lender with respect to the failure by
any Borrower to comply with any of its respective Obligations, including,
without limitation, any failure strictly or diligently to assert any right or to
pursue any remedy or to comply fully with applicable laws or regulations
thereunder, which might, but for the provisions of this section, afford grounds
for terminating, discharging or relieving any Borrower, in whole or in part,
from any of its Obligations, it being the intention of each Borrower that, so
long as any of the Obligations hereunder remain unsatisfied, the Obligations of
such Borrower shall not be discharged except by performance and then only to the
extent of such performance. The Obligations of each Borrower shall not be
diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with respect to
any Borrower or Lender. Each Borrower represents and warrants that it is
currently informed of the financial condition of all Borrowers and of all other
circumstances which a diligent inquiry would reveal and which bear upon the risk
of nonpayment of the Obligations, and will continue to keep so informed. Each
Borrower waives all rights and defenses arising out of an election of remedies
by Lender.
3. Continued Validity of Agreement. Except as amended by this Amendment,
the Agreement and all security agreements, guaranties, and other documents
executed by Borrower with or in favor of Lender (collectively referred to as
"Loan Documents"), shall continue in full force and effect as originally
constituted and are ratified and affirmed by the parties hereto. Each reference
in the Agreement or in the other Loan Documents to the Agreement shall mean the
Agreement as amended hereby unless the context otherwise requires. This
Amendment and the Agreement shall be read as one document. Without limiting the
generality of the foregoing, nothing in this Amendment entitles Borrower to
receive advances of any funds, or extends the maturity date for repayment,
beyond that expressly set forth in the Agreement.
4. Compliance with Loan Documents. Borrower 1, Borrower 2, Borrower 3 and
Borrower 4 each represents and warrants to Lender as follows: (a) as of the date
hereof, each Borrower has complied, and is in compliance, with all of the terms,
covenants and conditions of the Loan Agreement and the other Loan Documents
applicable to it; (b) as of the date hereof, there exists no Event of Default
under the Loan Agreement or any of the other Loan Documents or an event which
would constitute an Event of Default upon the lapse of time or upon the giving
of notice and the lapse of time specified therein; and (c) the representations
and warranties of each Borrower in the Loan Agreement and the other Loan
Documents are true and with the same effect as though such representations and
warranties had been made by such Borrower as of the date hereof. Each Borrower
further represents and warrants that, upon this Amendment becoming effective,
each Borrower will be in compliance with all of the terms, covenants, and
conditions of the Loan Agreement and the other Loan Documents, and all
representations and warranties will be true.
5. Authorization. Each party hereto represents to the other that the
individual executing this Amendment on its behalf is the duly appointed
signatory of such party and that such individual is authorized to execute this
Amendment by or on behalf of such party and to take all action required by the
terms of this Amendment.
6. When Amendment is Effective. This Amendment shall be deemed binding and
effective as of July 31, 2003 when this Amendment is executed by Borrower 1,
Borrower 2, Borrower 3, Borrower 4 and Lender.
7. Captions. Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Amendment.
8. No Novation. This Amendment is not intended to be, and shall not be
construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Agreement shall remain in full force and effect.
9. Severability. Each provision of this Amendment shall be severable from
every other provision of this Amendment for the purpose of determining the legal
enforceability of any specific provision.
10. Entire Agreement. This Amendment constitutes the entire agreement by
and between Borrower and Banks with respect to the subject matter hereof and
supersedes all prior and contemporaneous negotiations, communications,
discussions and agreements concerning such subject matter.
11. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
[SIGNATURES ON NEXT PAGE]
8
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
ICON CASH FLOW PARTNERS L.P. ICON INCOME FUND NINE, LLC,
SEVEN, a Delaware Limited Partnership a Delaware Limited Liability Company
By ICON Capital Corp., its general partner By: ICON Capital Corp., its manager
By:___________________________ By:__________________________
Paul B. Weiss, President Paul B. Weiss, President
ICON INCOME FUND EIGHT A L.P., COMERICA BANK, SUCCESSOR BY MERGER
a Delaware Limited Partnership TO COMERICA BANK-CALIFORNIA
By ICON Capital Corp., its general partner
By: ___________________________
By:_____________________________
Paul B. Weiss, President
ICON INCOME FUND EIGHT B L.P.,
a Delaware Limited Partnership
By ICON Capital Corp., its general partner
By:______________________________
Paul B. Weiss, President
Exhibit 5
Notice to Debtor/Lessee
[Stationery of Borrower]
[Date]
[Name and Address
of Debtor/Lessee]
Re: [Identify Loan Contract/Lease]
Gentlemen:
The undersigned is the [lender/lessor] on the above contract. This letter
is to inform you that the undersigned has assigned to Comerica Bank the right to
receive payments hereafter made on that contract. Accordingly, all payments you
make to the undersigned on the above contract should hereafter be made payable
to [Name of applicable Borrower] and sent to Post Office Box
________________________[Address]. If you do not remit your payments in that
manner and send the payments to that address, the payments may not discharge
your obligation under that contract.
Thank you for your cooperation in this matter. This instruction is
irrevocable and may not be changed without the written consent of Comerica Bank.
This letter does not, however, change the identity of the persons to whom you
are otherwise obligated to give notices with respect to the above contract.
Yours truly,
[SIGNATURE BLOCK FOR
APPLICABLE BORROWER]
Cc: Comerica Bank
Exhibit 6
Notice to Non-Affiliate Lender/Lessor on Indirect Loan Contracts and
Indirect Leases
[Stationery of Borrower]
[Date]
[Name and Address
of Non-Affiliate
Lender/Lessee]
Re: [Identify Applicable Indirect Loan Contract/Indirect Lease]
Gentlemen:
The undersigned is one of the [partners/members/beneficiaries]of [name of
Addressee]. [Name of Addressee] is the [lender/lessor] under the above contract.
This letter is to notify you that the undersigned has assigned to Comerica Bank
the right to receive payments hereafter payable by you to the undersigned in
connection with that contract. Accordingly, all payments you make to the
undersigned in connection with that contract should hereafter be made payable to
[Name of applicable Borrower] and sent to Post Office Box ____________[Address].
If you do not remit your payments in that manner and send the payments to that
address, the payments may not discharge your obligation.
Thank you for your cooperation in this matter. This instruction is
irrevocable and may not be changed without the written consent of Comerica Bank.
This letter does not, however, change the identity of the persons to whom you
are otherwise obligated to give notices with respect to the above contract.
Yours truly,
[SIGNATURE BLOCK FOR
APPLICABLE BORROWER]
Cc: Comerica Bank
Exhibit 7
Notice from Affiliate Lender/Lessor on Indirect Loan Contracts and Indirect
Leases
[Stationery of Affiliate Lender/Lessor]
[Date]
[Name and Address
of Debtor/Lessee]
Re: [Identify Loan Contract/Lease]
Gentlemen:
The undersigned is the [lender/lessor] on the above contract. This letter
is to inform you that the undersigned has assigned to Comerica Bank the right to
receive payments hereafter made on that contract. Accordingly, all payments you
make to the undersigned on the above contract should hereafter be made to [Name
of Affiliate] and sent to Post Office Box ______________ [Address]. If you do
not remit your payment in that manner and send the payments to that address, the
payment may not discharge your obligation under that contract.
Thank you for your cooperation in this matter. This instruction is
irrevocable and may not be changed without the written consent of Comerica Bank.
This letter does not, however, change the identity of the persons to whom you
are otherwise obligated to give notices with respect to the above contract.
Yours truly,
[SIGNATURE BLOCK
FOR AFFILIATE]
Cc: Comerica Bank
FOURTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
This FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (the "Amendment") is
made as of November 3, 2003 by and between ICON Cash Flow Partners L.P. Seven, a
Delaware limited partnership ("Borrower 1"), ICON Income Fund Eight A L.P., a
Delaware limited partnership ("Borrower 2"), ICON Income Fund Eight B L.P., a
Delaware limited partnership ("Borrower 3"), and ICON Income Fund Nine, LLC, a
Delaware limited liability company ("Borrower 4" and together with Borrower 1,
Borrower 2 and Borrower 3, "Borrower" or "Borrowers"), on the one hand, and
Comerica Bank, successor by merger to Comerica Bank-California ("Lender"), on
the other hand, with respect to the Loan and Security Agreement, dated as of May
30, 2002, the First Amendment to Loan and Security Agreement, dated as of
December 1, 2002, entered into by Borrower 1, Borrower 2, Borrower 3, and
Comerica Bank-California, the Second Amendment to Loan and Security Agreement,
dated as of April 9, 2003, entered into by Borrower 1, Borrower 2, Borrower 3,
Borrower 4 and Comerica Bank-California, the letter agreement dated May 31, 2003
entered into by Borrower 1, Borrower 2, Borrower 3, Borrower 4 and Comerica
Bank-California, and the Third Amendment to Loan and Security Agreement dated as
of July 31, 2003, entered into by Borrower 1, Borrower 2, Borrower 3, Borrower 4
and Comerica Bank (as amended and modified through but excluding the date
hereof, the "Agreement").
RECITALS
WHEREAS, Borrower and Lender entered into the Agreement;
WHEREAS, the Revolving Loan Maturity Date under the Agreement is May 31,
2004;
WHEREAS, Borrower has requested that Lender extend the Revolving Loan
Maturity Date to December 31, 2004 and make certain other changes in the
Agreement;
WHEREAS, Lender is willing to agree to Borrower's request, on the terms and
conditions set forth below;
NOW, THEREFORE, IT IS AGREED THAT:
1. Definitions. Unless otherwise indicated, words and terms which are
defined in the Agreement shall have the same meaning where used herein.
3. Amendments.
(a) The definition of "Revolving Loan Maturity Date" in the Agreement is
amended to read as follows:
Revolving Loan Maturity Date - December 31, 2004.
(b) Section 1.11 of the Agreement is deleted.
(c) Section 3.1.5 of the Agreement is amended to read as follows:
3.1.5 Insurance. Borrower shall have delivered to Lender satisfactory
evidence of insurance coverage required by Section 5.3 of this Agreement, to the
extent requested by Lender.
(d) Section 5.3 of the Agreement is amended to read as follows:
5.3 Insurance. Maintain, or cause the Lessee under each Lease and the
Debtor under each Loan Contract or Indirect Loan Contract to maintain, insurance
on the equipment subject thereto with responsible insurance carriers, insuring
against loss or damage by fire, theft, explosion, sprinklers and all other
hazards and risks ordinarily insured against by other owners who use such
equipment in similar businesses, for the full insurable value thereof; and
provide evidence of such insurance to Lender upon Lender's request. This Section
5.3 does not require Borrower to have Lender added as a loss payee or additional
insured on insurance policies for Revolving Loan Contracts, although Lender may
impose such a requirement if an Event of Default has occurred.
3. Continued Validity of Agreement. Except as amended by this Amendment,
the Agreement and all security agreements, guaranties, and other documents
executed by Borrower with or in favor of Lender (collectively referred to as
"Loan Documents"), shall continue in full force and effect as originally
constituted and are ratified and affirmed by the parties hereto. Each reference
in the Agreement or in the other Loan Documents to the Agreement shall mean the
Agreement as amended hereby unless the context otherwise requires. This
Amendment and the Agreement shall be read as one document. Without limiting the
generality of the foregoing, nothing in this Amendment entitles Borrower to
receive advances of any funds, or extends the maturity date for repayment,
beyond that expressly set forth in the Agreement.
4. Compliance with Loan Documents. Borrower 1, Borrower 2, Borrower 3 and
Borrower 4 each represents and warrants to Lender as follows: (a) as of the date
hereof, each Borrower has complied, and is in compliance, with all of the terms,
covenants and conditions of the Loan Agreement and the other Loan Documents
applicable to it; (b) as of the date hereof, there exists no Event of Default
under the Loan Agreement or any of the other Loan Documents or an event which
would constitute an Event of Default upon the lapse of time or upon the giving
of notice and the lapse of time specified therein; and (c) the representations
and warranties of each Borrower in the Loan Agreement and the other Loan
Documents are true and with the same effect as though such representations and
warranties had been made by such Borrower as of the date hereof. Each Borrower
further represents and warrants that, upon this Amendment becoming effective,
each Borrower will be in compliance with all of the terms, covenants, and
conditions of the Loan Agreement and the other Loan Documents, and all
representations and warranties will be true.
5. Authorization. Each party hereto represents to the other that the
individual executing this Amendment on its behalf is the duly appointed
signatory of such party and that such individual is authorized to execute this
Amendment by or on behalf of such party and to take all action required by the
terms of this Amendment.
6. When Amendment is Effective. This Amendment shall be deemed binding and
effective as of November 3, 2003 when this Amendment is executed by Borrower 1,
Borrower 2, Borrower 3, Borrower 4 and Lender.
7. Captions. Section headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Amendment.
8. No Novation. This Amendment is not intended to be, and shall not be
construed to create, a novation or accord and satisfaction, and, except as
otherwise provided herein, the Agreement shall remain in full force and effect.
9. Severability. Each provision of this Amendment shall be severable from
every other provision of this Amendment for the purpose of determining the legal
enforceability of any specific provision.
10. Entire Agreement. This Amendment constitutes the entire agreement by
and between Borrower and Banks with respect to the subject matter hereof and
supersedes all prior and contemporaneous negotiations, communications,
discussions and agreements concerning such subject matter.
11. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
[SIGNATURES ON NEXT PAGE]
13
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first set forth above.
ICON CASH FLOW PARTNERS L.P. ICON INCOME FUND NINE, LLC,
SEVEN, a Delaware Limited Partnership a Delaware Limited Liability Company
By ICON Capital Corp., its general partner By: ICON Capital Corp., its manager
By:___________________________ By:__________________________
Paul B. Weiss, President Paul B. Weiss, President
ICON INCOME FUND EIGHT A L.P., COMERICA BANK, SUCCESSOR BY MERGER TO
a Delaware Limited Partnership COMERICA BANK-CALIFORNIA
By ICON Capital Corp., its general partner
By: ___________________________
By:_____________________________ Todd Robertson
Paul B. Weiss, President Corporate BankingOfficer-Western
Division
ICON INCOME FUND EIGHT B L.P.,
a Delaware Limited Partnership
By ICON Capital Corp., its general partner
By:______________________________
Paul B. Weiss, President