-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MPk/dXWYNJGjIqIvgcG1fzRPfBTXfRsY7e6paq2bjKIwYjovypYDLM4Uk9rin0ah k2CR33NZuQ52CgBB/5aXzQ== 0000950109-95-004049.txt : 19951004 0000950109-95-004049.hdr.sgml : 19951004 ACCESSION NUMBER: 0000950109-95-004049 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19951003 SROS: NONE GROUP MEMBERS: ATLANTIC ACQUISTION LIMITED PARTNERSHIP ET AL GROUP MEMBERS: GARY D. ENGLE GROUP MEMBERS: GEOFFREY A. MACDONALD GROUP MEMBERS: JAMES A. COYNE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INCOME 7 LTD PARTNERSHIP CENTRAL INDEX KEY: 0000780398 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 042932747 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-44379 FILM NUMBER: 95578428 BUSINESS ADDRESS: STREET 1: EXCHANGE PL STREET 2: 14TH FLR CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6175421200 MAIL ADDRESS: STREET 1: C/O AMERICAN FINANCE GROUP STREET 2: 53 STATE STREET, 14TH FLOOR CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN INCOME 7 LTD PARTNERSHIP AI-7 DATE OF NAME CHANGE: 19870423 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC ACQUISTION LIMITED PARTNERSHIP ET AL CENTRAL INDEX KEY: 0001001742 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 98 NORTH WASHINGTON ST CITY: BOSTON STATE: MA ZIP: 02114 BUSINESS PHONE: 6178545819 MAIL ADDRESS: STREET 1: 98 NORTH WASHINGTON STREET CITY: BOSTON STATE: MA ZIP: 02114 SC 14D1/A 1 SCHEDULE 14D-1/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- AMENDMENT NO. 2 TO SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- AMERICAN INCOME 7 LIMITED PARTNERSHIP (NAME OF SUBJECT COMPANY) ATLANTIC ACQUISITION LIMITED PARTNERSHIP (BIDDER) UNITS OF LIMITED PARTNERSHIP INTEREST (TITLE OF CLASS OF SECURITIES) NONE (CUSIP NUMBER OF CLASS OF SECURITIES) ---------------- COPY TO: GARY D. ENGLE, PRESIDENT THOMAS F. GLOSTER III, ESQ. AAL, INC. PEABODY & BROWN 98 NORTH WASHINGTON STREET 101 FEDERAL STREET BOSTON, MASSACHUSETTS 02114 BOSTON, MASSACHUSETTS 02110 (617) 854-5800 (617) 345-1141 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- D CUSIP No. None - -------------------------------------------------------------------------------- 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Gary D. Engle S.S. No. ###-##-#### - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a)[_] (b)[X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds PF - -------------------------------------------------------------------------------- 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item 2(e) or 2(f) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization U.S.A. - -------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Reporting Person None - -------------------------------------------------------------------------------- 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares [_] - -------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row (7) N/A - -------------------------------------------------------------------------------- 10. Type of Reporting Person IN 2 CUSIP No. None - -------------------------------------------------------------------------------- 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Geoffrey A. MacDonald S.S. No. ###-##-#### - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a)[_] (b)[X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds PF - -------------------------------------------------------------------------------- 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item 2(e) or 2(f) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization U.S.A. - -------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Reporting Person None - -------------------------------------------------------------------------------- 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares [_] - -------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row (7) N/A - -------------------------------------------------------------------------------- 10. Type of Reporting Person IN 3 CUSIP No. None - -------------------------------------------------------------------------------- 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person James A. Coyne S.S. No. ###-##-#### - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a)[_] (b)[X] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds PF - -------------------------------------------------------------------------------- 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item 2(e) or 2(f) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization U.S.A. - -------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Reporting Person None - -------------------------------------------------------------------------------- 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares [_] - -------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row (7) N/A - -------------------------------------------------------------------------------- 10. Type of Reporting Person IN 4 INTRODUCTION This Amendment No. 2 amends and supplements the Tender Offer Statement on Schedule 14D-1 filed by Atlantic Acquisition Limited Partnership, a Massachusetts limited partnership (the "Purchaser"), relating to an offer by the Purchaser to purchase up to 24,992 (as changed hereby) of the outstanding Units of limited partnership interest of American Income 7 Limited Partnership, a Massachusetts limited partnership, at a purchase price of $18.72 (as changed hereby) per Unit, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 18, 1995 (the "Offer to Purchase"), as amended by the supplementary Letter to Unitholders dated September 27, 1995 (the "Supplementary Letter"), and as further amended by the Supplement to Offer to Purchase dated October 3, 1995 (the "Supplement"), a copy of which is attached hereto as Exhibit (a)(5), and the related Letter of Transmittal (which together constitute the "Offer"). ITEM 1. SECURITY AND SUBJECT COMPANY. The response to Item 1(b) is amended by incorporating herein by reference the information as to the exact amount of the securities being sought and the consideration being offered therefor set forth on the Cover Page of the Supplement and in the portion of the Supplement which supplements the "INTRODUCTION" of the Offer to Purchase. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The response to Item 4(a)-(b) is amended by incorporating herein by reference the information set forth in the portions of the Supplement which supplement "THE TENDER OFFER--Item 10. Conflicts of Interest and Transactions with Affiliates and Related Parties" and "--Section 12. Source of Funds" of the Offer to Purchase. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. The response to Item 5(a), (b) and (d) is amended by incorporating herein by reference the information as to future plans set forth in the portions of the Supplement which supplement the "INTRODUCTION" and "THE TENDER OFFER--Section 10. Conflicts of Interest and Transactions with Affiliates and Related Parties" of the Offer to Purchase. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The response to Item 7 is amended by incorporating herein by reference the information set forth in the portion of the Supplement which supplements "THE TENDER OFFER--Section 12. Source of Funds" of the Offer to Purchase. ITEM 10. ADDITIONAL INFORMATION. The response to Item 10(e) is amended by incorporating herein by reference the information set forth in the portion of the Supplement which amends "THE TENDER OFFER--Section 15. Certain Legal Matters" of the Offer to Purchase. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(5) Supplement to Offer to Purchase dated October 3, 1995. (a)(6) Letter of Transmittal with respect to the Supplement. (a)(7) Form of Letter dated October 3, 1995 from Atlantic Acquisition Limited Partnership to Unitholders. (b)(2) Commitment Letter dated August 31, 1995 between NatWest Bank N.A. and Atlantic Acquisition Limited Partnership. 5 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: October 3, 1995 ATLANTIC ACQUISITION LIMITED PARTNERSHIP By: AAL, Inc., its general partner By: /s/ Gary D. Engle ------------------------------ Name: Gary D. Engle Title:President /s/ Gary D. Engle --------------------------------- Gary D. Engle /s/ Geoffrey A. MacDonald _________________________________ Geoffrey A. MacDonald /s/ James A. Coyne _________________________________ James A. Coyne 6 EXHIBIT INDEX
EXHIBIT SEQUENTIALLY NO. DESCRIPTION NUMBERED PAGE ------- ----------- ------------- (a)(5) Supplement to Offer to Purchase dated October 3, 1995. (a)(6) Letter of Transmittal with respect to the Supplement. (a)(7) Form of Letter dated October 3, 1995 from Atlantic Acquisition Limited Partnership to Unitholders. (b)(2) Commitment Letter dated August 31, 1995 between NatWest Bank N.A. and Atlantic Acquisition Limited Partnership.
7 EX-99.A.5 2 SUPPLEMENT TO OFFER SUPPLEMENT TO OFFER TO PURCHASE FOR CASH UP TO 24,992 UNITS OF LIMITED PARTNERSHIP INTEREST OF AMERICAN INCOME 7 LIMITED PARTNERSHIP AT $18.72 NET PER UNIT BY ATLANTIC ACQUISITION LIMITED PARTNERSHIP ------------------------------------------------------------------------- THE OFFER, WITHDRAWAL RIGHTS AND THE PRORATION PERIOD WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON OCTOBER 20, 1995, UNLESS EXTENDED. ------------------------------------------------------------------------- This Supplement to Offer to Purchase (this "Supplement") is being made in connection with the proposed settlement of class action litigation hereinafter described (the "Settlement"). The Purchaser hereby supplements and amends its offer to purchase outstanding units (the "Units") of limited partnership interest of American Income 7 Limited Partnership, a Massachusetts limited partnership (the "Partnership"), for the purchase price of $18.72 per Unit (the "Purchase Price"), net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 18, 1995, the Supplementary Letter dated September 27, 1995, this Supplement and the related Letter of Transmittal, as each may be supplemented or amended from time to time. Capitalized terms used in the Offer to Purchase and this Supplement and not otherwise defined herein have the meanings ascribed to them in the Offer to Purchase. In accordance with the Settlement, the Purchase Price has been increased from $17.56 per Unit, as specified in the Offer to Purchase, to $18.72 per Unit. Further, the number of Units sought pursuant to the Offer has been decreased to 24,992 Units, representing approximately 35% of the Units outstanding as of August 10, 1995. In addition, the Offer has been extended and will now expire at 5:00 p.m., Eastern time, on October 20, 1995 (the "Expiration Date") unless further extended. The Purchaser was recently organized by certain principals of American Finance Group, the sponsor of the Partnership, and is related to the General Partner. As principals of the Purchaser Messrs. Gary D. Engle, Geoffrey A. MacDonald and James A. Coyne may be deemed to be "co-bidders" with the Purchaser. (See "THE TENDER OFFER--Section 11. Certain Information Concerning the Purchaser.") Each Unitholder should consider carefully the following factors: . The Purchase Price was established by the Purchaser with the intention of making a profit. Therefore, the Purchaser was motivated to set the lowest price for Units to the extent consistent with its objective of acquiring a sufficient number of Units to justify the effort and expense of proceeding with the Offer. This conflicts with the desire of the Unitholders tendering Units to receive the highest price therefor. (Cover continued on following page.) ---------------- The Information Agent for the Offer is: D.F. King & Co., Inc. ---------------- The Depositary for the Offer is: STATE STREET BANK AND TRUST COMPANY ---------------- D . The Purchase Price of $18.72 per Unit is substantially less than the sum of the Net Finance Value of $15.40 per Unit (using a 15% discount rate) and the estimated residual value ("ERV") of $59.97 per Unit (for a total of $75.37 per Unit). (If the Net Finance Value were calculated using a 9% discount rate, the Net Finance Value would be $16.12 per Unit (for a total of $76.09 per Unit).) (See "Section 13. Background of the Offer" for a discussion of the Purchaser's determination of the Purchase Price, and the related assumptions and other factors relating to such determination.) . The Purchaser and the General Partner are related parties and, accordingly, have conflicts of interest with respect to the Offer. (See "Section 10. Conflicts of Interest and Transactions with Affiliates and Related Parties.") . As a result of the Offer, the Purchaser could be in a position to influence significantly all Partnership decisions on which Unitholders may vote. . Although the secondary market is limited, it may be possible for certain of the Unitholders to obtain a higher price for their Units by selling such Units in the secondary market. . Unitholders who tender Units will not be entitled to any future distributions from the Partnership, including, without limitation, any distributions to be made to Unitholders upon liquidation of the Partnership. (The distribution to tendering Unitholders of record as of September 30, 1995 will either be assigned to the Purchaser or will correspondingly reduce the Purchase Price.) The sum of such future distributions is expected by the General Partner to exceed the Purchase Price substantially. . In deciding whether or not to tender their Units, Unitholders should consider the relatively short time (presently anticipated to be December 31, 1997) until the Partnership's assets are liquidated, any liquidation proceeds are distributed to the Unitholders and the Partnership terminates. October 3, 1995 To the Holders of Units of Limited Partnership Interest of American Income 7 Limited Partnership This Supplement to Offer to Purchase (this "Supplement") amends and supplements the Offer to Purchase dated August 18, 1995 and is being made in connection with the proposed settlement of class action litigation hereinafter described (the "Settlement"). INTRODUCTION The following amends and supplements the Introduction to the Offer to Purchase. (Cross-references in this Supplement are to Sections of the Offer to Purchase, unless otherwise indicated. To the extent statements are made in this Supplement which are inconsistent with statements made in the Offer to Purchase, the statements herein shall control.) Atlantic Acquisition Limited Partnership, a newly-formed Massachusetts limited partnership (the "Purchaser"), hereby offers to purchase up to 24,992 of the outstanding Units (the "Units") of limited partnership interest of American Income 7 Limited Partnership, a Massachusetts limited partnership (the "Partnership"), at a purchase price of $18.72 per Unit (the "Purchase Price"), net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, as supplemented hereby, and in the related Letter of Transmittal, as each may be supplemented or amended from time to time (which together constitute the "Offer"). In accordance with the Settlement, the Purchase Price has been increased from $17.56 per Unit, as specified in the Offer to Purchase, to $18.72 per Unit. Further, the number of Units sought pursuant to the Offer has been decreased to 24,992 Units, representing approximately 35% of the Units outstanding as of August 10, 1995. In addition, the Offer has been extended and will now expire at 5:00 p.m., Eastern time, on October 20, 1995 (the "Expiration Date") unless further extended. All references in the Offer to Purchase to the Purchase Price shall mean $18.72 per Unit and all references to the Expiration Date shall mean October 20, 1995. The Purchaser was recently organized by certain principals of American Finance Group, the sponsor of the Partnership, and is related to the General Partner. It is expected that employees and other persons or entities related to or affiliated with American Finance Group may become additional limited partners of the Purchaser. (See "Section 10. Conflicts of Interest and Transactions with Affiliates and Related Parties" and "Section 11. Certain Information Concerning the Purchaser.") Each Unitholder should carefully consider the following factors: . The Purchase Price was established by the Purchaser with the intention of making a profit. Therefore, the Purchaser was motivated to set the lowest price for Units to the extent consistent with its objective of acquiring a sufficient number of Units to justify the effort and expense of proceeding with the Offer. This conflicts with the desire of the Unitholders tendering Units to receive the highest price therefor. . The Purchase Price of $18.72 per Unit is substantially less than the sum of the Net Finance Value of $15.40 per Unit (using a 15% discount rate) and the estimated residual value ("ERV") of $59.97 per Unit (for a total of $75.37 per Unit). (If the Net Finance Value were calculated using a 9% discount rate, the Net Finance Value would be $16.12 per Unit (for a total of $76.09 per Unit).) (See "Section 13. Background of the Offer" for a discussion of the Purchaser's determination of the Purchase Price, and the related assumptions and other factors relating to such determination.) . The Purchaser and the General Partner are related parties and, accordingly, have conflicts of interest with respect to the Offer. (See "Section 10. Conflicts of Interest and Transactions with Affiliates and Related Parties.") 1 . As a result of the Offer, the Purchaser could be in a position to influence significantly all Partnership decisions on which Unitholders may vote. . Although the secondary market is limited, it may be possible for certain of the Unitholders to obtain a higher price for their Units by selling such Units in the secondary market. . Unitholders who tender Units will not be entitled to any future distributions from the Partnership, including, without limitation, any distributions to be made to Unitholders upon liquidation of the Partnership. (The distribution to tendering Unitholders of record as of September 30, 1995 will either be assigned to the Purchaser or will correspondingly reduce the Purchase Price.) The sum of such future distributions is expected by the General Partner to exceed the Purchase Price substantially. . In deciding whether or not to tender their Units, Unitholders should consider the relatively short time (presently anticipated to be December 31, 1997) until Partnership's assets are liquidated, any liquidation proceeds are distributed to the Unitholders and the Partnership terminates. The Offer will provide Unitholders with an opportunity to liquidate their investment without the usual transaction costs associated with market sales. Unitholders may no longer wish to continue their investment in the Partnership for a number of reasons, including: . The absence of a formal trading market for Units, although there are some limited resale mechanisms which may be available to Unitholders wishing to sell their Units . General disenchantment with long-term investments in limited partnerships . The complexities and costs of preparing and filing personal federal, state and local income tax returns resulting from an investment in the Units, particularly for Unitholders with a small investment in the Partnership . For Unitholders which are IRAs or other qualified pension, profit-sharing or stock bonus plans (collectively, "Qualified Plans"), the further complexity and costs of preparing income tax returns, and the potential tax liability, resulting from the generation by the Partnership of "unrelated business taxable income" . The opportunity to transfer Units without the commissions and other costs normally associated with a transfer . More immediate use for the cash tied up in an investment in the Units As discussed in the Prospectus for the original offering of Units, the Partnership was to be terminated upon the sale of its last remaining item of equipment, which at present is expected to be by December 31, 1997. The General Partner has advised the Purchaser that it expects that the third quarter distributions from the Partnership to Unitholders of record on September 30, 1995 will be approximately $1.875 per Unit and distributed prior to October 31, 1995. As noted in the Offer to Purchase, such distributions with respect to tendered Units will either be made to the Purchaser or, to the extent such distributions are made to the tendering Unitholders, will correspondingly reduce the Purchase Price for such Units. Whether or not the Offer is consummated, the Partnership will continue to be managed by the General Partner in accordance with the investment objectives and policies set forth in the Prospectus (to the extent still relevant). (See "Section 9. Certain Information Concerning the Partnership--General Information.") The General Partner did not consider alternative transactions to the Offer because the General Partner believes it to be in the best interest of the Unitholders who do not tender their Units for the Partnership to continue to operate in the manner for which it was organized. Alternative transactions would, in the judgment of the General Partner, result in material changes in the original investment objectives and policies of the Partnership. 2 THE TENDER OFFER "SECTION 2. PRORATION: ACCEPTANCE FOR PAYMENT AND PAYMENT FOR UNITS" is hereby supplemented to include the following: In the event that proration is required because the number of Units validly tendered on or prior to the Expiration Date and not withdrawn exceeds 24,992 (which the Purchaser does not expect to be the case), the Purchaser will announce the results of prorations promptly after such results become available but in no event more than seven business days following the Expiration Date. "SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT" is hereby supplemented to include the following: The Purchaser intends to consummate the transactions contemplated by the Offer if the conditions for closing, in the reasonable judgment of the Purchaser, are satisfied. "SECTION 6. CERTAIN FEDERAL INCOME TAX CONSEQUENCES" is hereby supplemented as follows: Because of the increase in the Purchase Price to $18.72 per Unit, it is now estimated that a Unitholder who tenders Units that were acquired by such Unitholder at the time of the Partnership's original offering of Units will recognize ordinary income of $15.20 per Unit and capital loss of $28.15 per Unit for federal income tax purposes. "SECTION 9. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP" is hereby supplemented by including the following information which is in addition to that included in, and should be read in conjunction with, the Offer to Purchase (an additional copy of the Offer to Purchase may be obtained by each Unitholder upon request of the Information Agent): In the opinion of AFG, the $4,171,548 carrying value of the equipment owned by the Partnership at June 30, 1995 and summarized in Section 9 of the Offer to Purchase does not exceed its fair market value. AFG annually receives an estimated valuation of the Partnership's equipment from an independent valuation company solely for the purpose of determining whether or not the aggregate carrying value of the equipment for financial statement purposes should be adjusted. The valuation company does not inspect the equipment or consider the specific characteristics of the equipment, nor does it estimate the expected value of the equipment at the end of the related lease. These valuations generally are substantially higher than either the sum of NFV and ERV or the carrying value. The Purchaser did not consider such valuation in determining the Purchase Price. Instead, the Purchaser examined the estimated residual value of the equipment after the related leases expire. (See "Section 13. Background of the Offer--Establishment of Purchase Price.") Major individual lessees that accounted for 10% or more of the Partnership's $2,012,246 of lease revenue in 1994 are Northwest Airlines, Inc. ($999,133), United Technologies Corporation ($397,048) and Roundup Company ($203,174). Rents are payable to the Partnership monthly, quarterly or semi-annually and no significant amounts are calculated on factors other than the passage of time. The leases are accounted for as operating leases and are noncancelable. Rents received prior to their due dates are deferred. At June 30, 1995 future minimum rents of $1,709,010 were due as follows: For the year ending June 30, 1996............................. $ 1,504,807 1997............................. 191,839 1998............................. 12,364 ----------- Total............................ $ 1,709,010 ===========
3 On July 29, 1991, the Partnership executed an agreement with United Technologies Corporation whereby United Technologies agreed to re-lease, for a period of four years, two flight simulators purchased at an original equipment cost of $15,536,167, with an original lease term which expired on December 15, 1991. Beginning December 16, 1991, rents due under the renewal lease were set at $1,503,194 per year. The flight simulators are owned in a trust between the Partnership and other affiliated partnerships. The Partnership owns approximately 27% of these assets at an original equipment cost of approximately $4,136,167. During 1994, the renewal lease agreement was renegotiated whereby United Technologies agreed to extend the renewal period through December 15, 1996. Rents due under the renegotiated lease were set at $1,203,143 per year beginning December 16, 1994. At the end of the renewal period, the lessee has the option to purchase the equipment for the sum of $2,261,919, the Partnership's share of these proceeds being $602,187. At December 31, 1993 the aggregate amount reserved against potentially uncollectable rents was $26,000. At December 31, 1994, the General Partner determined a reserve of $10,000 was required. This caused an increase in lease revenue of $16,000 in 1994. It cannot be determined whether the Partnership will recover any past due rents in the future; however, the General Partner will pursue the collection of all such items. The Partnership supplied the Purchaser with the following information detailing the expiration dates of the Partnership's leases. The percentages are based upon the Partnership's original cost of equipment remaining: 1995................................................................ 1.3% 1996................................................................ 90.8% 1997................................................................ 7.9% ----- 100.0%
At the end of each such lease, equipment generally is either renewed by the current lessee, re-leased to a new lessee, or sold. The schedule of distributions to the Unitholders set forth on page 13 of the Offer to Purchase is based upon the assumption that the Units were purchased on or before December 30, 1986 and continue to be held by the original purchasers thereof. The minimum investment in the Partnership was 10 Units ($2,500) or 8 Units ($2,000) for IRAs and other Qualified Plans. The schedule of distributions on page 13 of the Offer to Purchase should be considered by each Unitholder in terms of the actual number of Units purchased by such Unitholder. Cash distributions do not represent and are not indicative of yield on investment. Actual yield on investment cannot be determined with any certainty until termination of the Partnership and will be dependent upon the collection of future contracted rents, the amount of renewal and/or re-lease rents and the residual values realized for each asset as of its disposal date. However, Unitholders tendering their Units (assuming such Units were purchased on or before December 30, 1986 and continue to be held by the original purchaser) will receive total distributions (including the Purchase Price) of approximately $231.77 per Unit, all of which will constitute a return of capital. "SECTION 10. CONFLICTS OF INTEREST AND TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES" is hereby supplemented to include the following: The Loan or the Alternate Loan (as defined below) is expected to be serviced by the Purchaser with cash distributions attributable to the Units it acquires. Because the Loan or the Alternate Loan will relate to all AFG Partnerships, the General Partner will have a conflict of interest in determining whether to sell equipment of a particular Partnership or Partnerships in order to service the Loan or the Alternate Loan. "SECTION 12. SOURCE OF FUNDS" is hereby supplemented to include the following: As described in the Offer to Purchase, the Purchaser has received the Commitment Letter from SunAmerica Life Insurance Company ("SunAmerica") to provide for the Loan in an amount of approximately $28,000,000 4 in connection with all the AFG Partnerships. (Because of the reduction in the percentage of Units tendered for from 45% to 35%, the loan will be in the maximum amount of approximately $21,778,000.) Further, the Purchaser now has an alternative source of funds that it may utilize in order to consummate the Offer. The balance of the funds not obtained by the Purchaser from capital contributions from its partners may be obtained from a term loan (the "Alternate Loan") to be provided by NatWest Bank N.A. ("NatWest") concurrently with the consummation of the Offer pursuant to the terms of a commitment letter (the "NatWest Commitment Letter") between NatWest and the Purchaser. The Purchaser has not yet determined whether to obtain the loan from NatWest or SunAmerica. The terms of the the NatWest Commitment Letter are as follows. As is the case with the proposed loan from SunAmerica, the Alternate Loan will be made to the Purchaser in order to enable the Purchaser to consummate the Offer as well as the Tender Offers for units of or representing limited partnership interests of 20 other AFG Partnerships. NatWest has agreed to provide funds of approximately $27,000,000 in connection with all the AFG Partnerships. (However, because of the reduction in the percentage of Units tendered for from 45% to 35%, the Alternate Loan is not expected to exceed $21,000,000.) The Purchaser expects that the amount of the Alternate Loan, on a per Unit basis, will approximate the amount that is available from the Loan. The remainder of such funds required to purchase Units and to pay related fees and expenses will be funded by the Purchaser from capital contributions from its partners. NatWest will have the right to sell-down a portion of its commitment to another lender or lenders or to sell participations to another lender or lenders. In the event of a sell-down, an agency administration fee (the "Agency Administration Fee") in the amount of $40,000 per annum, payable quarterly, is to be paid by the Purchaser. The proceeds of the Alternate Loan will be used by the Purchaser solely to fund the acquisition of the Tendered Units and to pay related costs and expenses ("Offering Expenses") of up to $680,000 and the Upfront Fee (as defined below). There will be a separate drawdown of Alternate Loan proceeds for each closing of a Tender Offer. Each drawdown shall be in a minimum amount of $500,000 and no drawdown shall be made later than 90 days after the initial drawdown. The Alternate Loan will bear interest at the LIBOR (reserve adjusted) rate plus 350 basis points (as of September 22, 1995, the rate on the Alternate Loan would have approximated 9.25%). Payment of interest on the principal amount outstanding under the Alternate Loan will be payable quarterly in arrears based on a 360 day year. Within 90 days from the final drawdown of the Alternate Loan, the Purchaser will hedge its interest rate risk through an interest rate swap or cap with a counterparty acceptable to NatWest. Each drawdown of the Alternate Loan will be payable in 16 consecutive quarterly installments of principal (the "Scheduled Principal Payments") to be calculated based on the projected amount of cash flow available from the related AFG Partnership's firm term lease payments and to be agreed to by NatWest and the other lenders, if any, prior to such drawdown. In addition, a mandatory prepayment of principal outstanding on each drawdown (the "Mandatory Prepayments") shall be made quarterly on the due date of each Scheduled Principal Payment in an amount equal to the Distributable Cash Amount (as defined below) for the immediately preceding calendar quarter. Such Mandatory Prepayments shall be applied pro rata to the remaining Scheduled Principal Payments with respect to each drawdown. "Distributable Cash Amount" means cash received from all sources less current and accrued interest and principal payments and less accounting, legal, printing and other third party expenses ("Operating Expenses") and any Agency Administration Fee. Operating Expenses may not exceed $200,000 per year. The final maturity of each drawdown will be four years from the closing of such drawdown. (See "Section 10. Conflicts of Interest and Transactions With Affiliates and Related Parties" for a discussion of certain conflicts of interest which will be created as a result of the Purchaser's obligation to prepay the Alternate Loan with Distributable Cash Amounts.) 5 The Purchaser shall also have the right to make optional prepayments of the Alternate Loan at the end of each interest period in minimum principal amounts of $250,000. As security for the Alternate Loan, NatWest will have a first priority security interest in the Tendered Units and all other assets of the Purchaser, the stock of AAL, Inc., the interests of the general and limited partners in the Purchaser and the collection account into which the Purchaser's distributions from the AFG Partnerships will be paid. The obligations under the Alternate Loan will be fully recourse to the Purchaser and to AAL, Inc. The initial limited partners of the Purchaser will severally guarantee repayment of that portion of the Alternate Loan drawn to cover Offering Expenses. Otherwise, the Alternate Loan will be non-recourse to the limited partners of the Purchaser. (The Loan from SunAmerica is non-recourse to the limited partners of the Purchaser, as described in the Offer to Purchase.) There will be various conditions precedent to the closing of the Alternate Loan, including that the Tender Offer documentation shall be in full force and effect; that all conditions under the Tender Offer materials precedent to the consummation of the Tender Offers shall have been satisfied, including that all necessary governmental, regulatory and other third party approvals shall have been obtained; that the Purchaser shall have received cash proceeds aggregating at least 10% of the aggregate Purchase Price of the Tendered Units representing equity contributions from its partners and shall have utilized such proceeds to purchase the Tendered Units and to pay any related fees and expenses not funded through drawdowns; and that no material adverse event in the judgment of NatWest and the other lenders, if any, shall have occurred with respect to any of the AFG Partnerships or the Purchaser which would, in turn, have a material adverse effect on the Purchaser's ability to service the Alternate Loan. Accordingly, there is no assurance that any drawdowns of the Alternate Loan will actually occur. The Purchaser anticipates that the loan agreement governing the Alternate Loan will contain certain customary representations and warranties, affirmative and negative covenants, events of default and other terms and conditions. The Purchaser will pay an upfront fee (the "Upfront Fee") equal to 2% on the amount of each drawdown to be paid at each drawdown. The maximum aggregate Upfront Fee will be $353,750 and the minimum Upfront Fee will be $100,000. In addition, an arrangement fee of $100,000 (the "Arrangement Fee") will be payable if the closing of the Alternate Loan does not occur by October 15, 1995 or if the closing does occur by such date but the Purchaser does not draw down any funds under the Alternate Loan by January 15, 1996, provided that (a) no Arrangement Fee will be payable if NatWest declines to close the Alternate Loan or to fund under the Alternate Loan because of a material adverse change or for a reason other than breach by the Purchaser of a representation, warranty or covenant or failure of a condition and (b) if NatWest or the Purchaser declines to close the Alternate Loan or declines to fund under the Alternate Loan because of litigation pending, threatened or commenced with respect to the Tender Offers, the AFG Partnerships or the Alternate Loan, the payment of the Arrangement Fee shall be postponed until the earliest of the date of the expiration or termination of the NatWest Commitment Letter, the date of termination of such litigation or January 15, 1996. If NatWest or the Purchaser declines to close the Alternate Loan or declines to fund under the Alternate Loan on or before January 15, 1996 because of such litigation, then the arrangement fee payable by the Purchaser to NatWest shall be $50,000. Further, the Purchaser will pay all legal fees and disbursements of NatWest and any other lenders in connection with the closing of the Alternate Loan. "SECTION 13. BACKGROUND OF THE OFFER" is hereby supplemented and amended as follows: In connection with the settlement of the class action litigation described herein, the Purchaser agreed to increase the Purchase Price to $18.72 per Unit. The Purchase Price continues to represent the price at which the Purchaser is willing to purchase Units and is in an amount which the Purchaser expects will enable it to realize a profit. 6 The Partnership's Net Finance Value or NFV was determined to be $1,099,643 or $15.40 per Unit. Certain financial information supplied to the SunAmerica and NatWest employed a discount rate of 9%. If the Purchaser in calculating NFV had applied a 9% discount rate to the NFV as opposed to 15%, the NFV would be $1,151,064 or $16.12 per Unit. The Purchaser believes the discount rates utilized are reasonable but other discount rates might also be deemed appropriate. Unitholders should be aware that the lower the discount rate used the higher the NFV. For purposes of NFV, the Purchaser determined the amount of Distributable Cash Flow ("DCF") based upon its estimates of contracted rents and other relevant factors as of July 1, 1995. The residual percentages that the Purchaser supplied to the SunAmerica and NatWest showing AFG's historical track record with respect to residual realization are shown in Schedule 1 to this Supplement (the "Percentages"). The Percentages were calculated by dividing residual proceeds (which include sale, re-lease and renewal proceeds) of equipment of varying age by the original cost of such equipment. In determining ERV, the Purchaser used a subset of the AFG historical track record information that incorporated the age data most closely related with the age of the Partnership's asset when the related lease expires and no residual value was assigned to equipment off- lease. Because the Percentages group assets of varying age, the Percentages may be different from the residual percentages used by the Purchaser in determining the ERV. The methodology described above was used in all cases except for aircraft. The residual percentage used in estimating the residual value of the Partnership's aircraft is shown below. The Purchaser believes that the historical residual percentages supplied to SunAmerica and NatWest with respect to aircraft are not appropriate as such percentages relate to (i) specific types of aircraft which may be different from the Partnership's, (ii) aircraft that were generally sold subject to lease (the Purchaser accounted for any value of Partnership lease receivables in determining the NFV), and (iii) aircraft generally sold in the 1980's when the market for used aircraft was different from that which exists at present. Following are the residual percentages applied to the Partnership's equipment (excluding equipment sold or awaiting sale) for purposes of calculating ERV: Aircraft (including Flight Simulators)................................. 45% Communications......................................................... 3% Computers & Peripherals................................................ 5% Manufacturing.......................................................... 39% Materials Handling Equipment........................................... 22% Motor Vehicles......................................................... 22% Tractors & Heavy Duty Trucks........................................... 13%
The Partnership's auditors evaluate the carrying value of the Partnership's commercial aircraft solely for financial statement purposes. As part of this evaluation, the auditors review an independent appraisal and perform their own appraisal of the estimated value of the subject aircraft at the end of the lease taking into consideration the specific characteristics of the aircraft. The Purchaser did not consider these appraisals in determining Purchase Price. If the Purchaser, in its calculation of ERV, had used the average of the independent appraisal and auditors appraisal (using the mid-point when a range was provided for as an appraised value) as provided for in conjunction with the Partnership's 1994 audit, the present value of the estimated residual value of the Partnership's equipment, based upon the same methodology used to determine ERV, would be $4,246,556 or $59.47 per Unit. (As noted in the Offer to Purchase, the Purchaser determined ERV to be $4,282,347 or $59.97 per Unit.) No liquidation value for the Partnership has been calculated by the Purchaser or the General Partner although the Purchaser believes, as indicated by NFV and ERV, that liquidation would result in distributions to the Unitholders in excess of the Purchase Price. The default rate factor of 1.5% used in calculating NFV is based upon an estimate of the historic default rate realized in general equipment transactions sponsored by AFG and is not based upon the actual default rate experienced by the Partnership. 7 For purposes of determining the present value of the Partnership's assets, a Unitholder may consider adding NFV per Unit and ERV per Unit and compare such total to the Purchase Price. The sum of NFV per Unit calculated using a discount rate of 15% and ERV per Unit is $75.37 per Unit. The sum of NFV per Unit calculated using a discount rate of 9% and ERV per Unit is $76.09 per Unit. It should be noted that the Purchaser believes that the realization of NFV is very predictable and that the realization of ERV is less predictable. The Purchaser primarily considered NFV in determining the Purchase Price as it believes that any lender to the Purchaser will determine the amount of its loan based primarily on the Partnership's NFV. "SECTION 14. CONDITIONS OF THE OFFER" is hereby amended as follows: The Purchaser will purchase the Units tendered in accordance with the Offer if, in the exercise of its reasonable judgment, it determines that the conditions to the Offer have been satisfied. "SECTION 15. CERTAIN LEGAL MATTERS" is hereby supplemented as follows: On September 6, 1995, City Partnerships Co. ("CPC"), commenced an action in the United States District Court for the District of Massachusetts against the Purchaser, the General Partner and various affiliates. The action alleges, among other things, that the Offer constitutes (1) a violation of the Williams Act Amendments to the Securities Exchange Act of 1934; (2) breach of provisions of the partnership agreements of the AFG Partnerships; and (3) breach of fiduciary duty owed to the Unitholders of the AFG Partnerships. The action, which has been brought as a class action on behalf of such Unitholders, seeks to enjoin the Offer and monetary damages in an unspecified amount. A proposed settlement of this litigation (the "Settlement") has been reached by the parties. The terms of the Settlement are set forth in a Notice of Class Action Determination, Proposed Settlement and Hearing Thereon (the "Notice"), a copy of which is being provided to the Unitholders as Schedule 2 to this Supplement, and a Stipulation of Settlement dated September 27, 1995 filed with the Court. On September 27, 1995, the Court entered an order preliminarily approving the Settlement and certifying the class for settlement purposes. A final settlement hearing is presently scheduled to be held on November 15, 1995, at 3:00 p.m., in the United States District Court for the District of Massachusetts. On September 7, 1995, Marcella Levy and Richard Hodgson, who represented that they are Unitholders of American Income Partners V-B Limited Partnership and American Income Partners III-C Limited Partnership, respectively, commenced an action in the Massachusetts Superior Court against the Purchaser, the General Partner and various affiliates and related parties. The action alleges, among other things, that the Offer constitutes a breach of fiduciary duty owed to the Unitholders of the AFG Partnerships. The action, which has been brought as a class action on behalf of such Unitholders, seeks to enjoin the Offer as well as monetary damages in an unspecified amount. No hearing dates are presently scheduled. In connection with this Supplement, the Purchaser has filed with the Commission an amended Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer, and may file further amendments thereto. The Schedule 14D-1 and any amendments thereto, including exhibits, may be inspected and copies may be obtained at the same places and in the same manner as set forth in Section 9 of the Offer to Purchase (except that they will not be available at the regional offices of the Commission). ATLANTIC ACQUISITION LIMITED PARTNERSHIP October 3, 1995 8 SCHEDULE 1 RESIDUAL PROCEEDS BY EQUIPMENT TYPE
RESIDUAL PROCEEDS AS EQUIPMENT TYPE A PERCENTAGE OF OEC (1)(2) - -------------- -------------------------- Aircraft............................................. 75.22% Commercial Printing.................................. 36.81% Communications....................................... 9.64% Computers & Peripherals.............................. 14.60% Construction & Mining................................ 45.63% Fitness.............................................. 20.12% Furniture & Fixtures................................. 11.29% General Purpose Plan/Warehouse....................... 35.38% Railroad............................................. 68.75% Manufacturing........................................ 44.42% Materials Handling Equipment......................... 23.89% Medical.............................................. 18.75% Motor Vehicles....................................... 22.95% Photocopying......................................... 12.16% Research & Test...................................... 33.03% Retail Store Fixtures................................ 18.65% Tractors & Heavy Duty Trucks......................... 35.28% Trailers/Intermodal Containers....................... 32.44% Miscellaneous........................................ 15.61%
- -------- (1) OEC = Original Equipment Cost (2) Residual Proceeds includes all amounts received after initial lease expiration. Such amounts are primarily re-lease, renewal and sale proceeds. The figures include residual proceeds for equipment of varying age. 9 SCHEDULE 2 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS - ------------------------------------------------ ) CITY PARTNERSHIPS CO., A New ) York General Partnership, on Behalf of ) Itself and All Others Similarly Situated, ) ) Plaintiff ) v. ) Civil Action No. ) 95-11990-PBS ATLANTIC ACQUISITION LIMITED ) PARTNERSHIP, A Massachusetts ) Limited Partnership; AFG PROGRAMS, ) INC.; AAL, Inc., a Massachusetts ) Corporation; AMERICAN FINANCE ) GROUP, INC., a Delaware Corporation; ) AFG LEASING CORPORATION IV, ) INC., a Massachusetts Corporation; ) GEOFFREY A. MACDONALD; ) GARY ENGLE; and JAMES COYNE, ) ) Defendants. ) ) - ------------------------------------------------ NOTICE OF CLASS ACTION DETERMINATION PROPOSED SETTLEMENT AND HEARING THEREON TO: ALL PERSONS AND ENTITIES WHO WERE UNITHOLDERS OF RECORD AS OF AUGUST 10, 1995 OF LIMITED PARTNERSHIP UNITS IN ANY OF THE FOLLOWING LIMITED PARTNERSHIPS: American Income 4 Limited Partnership; American Income 5 Limited Partnership; American Income 6 Limited Partnership; American Income 7 Limited Partnership; American Income 8 Limited Partnership; American Income Partners III-A Limited Partnership; American Income Partners III-B Limited Partnership; American Income Partners III-C Limited Partnership; American Income Partners III-D Limited Partnership; American Income Partners IV-A Limited Partnership; American Income Partners IV-B Limited Partnership; American Income Partners IV-C Limited Partnership; American Income Partners IV-D Limited Partnership; American Income Partners V-A Limited Partnership; American Income Partners V-B Limited Partnership; American Income Partners V-C Limited Partnership; American Income Partners V-D Limited Partnership; American Income Fund I-B, a Massachusetts Limited Partnership; American Income Fund I-C, a Massachusetts Limited Partnership; American Income Fund I-D, a Massachusetts Limited Partnership; and American Income Fund I-E, a Massachusetts Limited Partnership. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT OF THE LITIGATION REFERRED TO IN THE CAPTION. PLEASE READ THIS NOTICE CAREFULLY. YOUR RIGHTS WILL BE AFFECTED BY THE PROCEEDINGS IN THIS LITIGATION. THE PROPOSED SETTLEMENT, IN CONNECTION WITH A PENDING TENDER OFFER FOR REDEMPTION OF THE UNITS, CALLS FOR THE PAYMENT OF A PREMIUM OF UP TO $1,500,000 TO THE UNITHOLDERS WHO TENDER THEIR UNITS, AND ALSO PROVIDES THAT CERTAIN ADDITIONAL INFORMATION CONCERNING THE TENDER OFFER SHALL BE DISSEMINATED BY THE DEFENDANTS TO THE UNITHOLDERS. PLEASE BE ADVISED THAT: 1. This Notice is given pursuant to Rule 23 of the Federal Rules of Civil Procedure and a Preliminary Order of the United States District Court for the District of Massachusetts ("the Court") dated September 27, 1995 (the "Preliminary Order"), entered in the above class action ("the Action"), to notify you of the pendency of the litigation as a class action under Rule 23(b)(3), the proposed settlement of the litigation, the Court's certification of the class as defined below for the purposes of this settlement, and of a settlement hearing (the "Settlement Hearing") and your rights with respect thereto. 2. A proposed settlement of this litigation (the "Settlement") has been reached by the parties. The proposed Settlement, the terms of which are only summarized in this Notice, is embodied in an Amended Stipulation of Settlement dated September 27, 1995 (the "Stipulation") which has been filed with the Court. 3. The Settlement Hearing will be held on November 15, 1995, at 3:00 PM before the Honorable Patti B. Saris, United States District Court Judge, at the United States District Courthouse, Post Office Square, Boston, MA. The purpose of the hearing is to determine whether the Settlement should be approved by the Court as fair, reasonable and adequate and in the best interests of the Class (as defined below), whether the Court should approve the application of plaintiff's counsel for an award of attorneys' fees and reimbursement of expenses to plaintiff's counsel, and whether final judgment should be entered thereon. 4. Unless you properly request an exclusion from the Class (as defined below) as set forth in Section II below, you will be bound by the terms and conditions of the proposed Settlement described in more detail in this Notice. 5. The proposed Settlement will become effective only if the Court approves it. If the Court approves the proposed Settlement, and you have not requested exclusion as provided in Section II you may be forever barred from contesting the fairness, reasonableness or adequacy of it, or from pursuing the Settled Claims (as defined below) against the defendants. The term "Defendants" means each and all of the following persons and entities: Atlantic Acquisition Limited Partnership; AFG Programs, Inc.; AAL, Inc.; American Finance Group, Inc.; AFG Leasing Corporation IV, Inc.; Geoffrey A. MacDonald; Gary Engle; and James Coyne. The term "Individual Defendants" means Geoffrey A. MacDonald, Gary Engle, and James Coyne. I. DESCRIPTION OF THE LITIGATION A. History of the Litigation On or about August 18, 1995, defendant Atlantic Acquisition Limited Partnership ("Atlantic Limited"), a newly-formed Massachusetts limited partnership, commenced a tender offer for up to 45% of the outstanding units in the twenty-one partnerships listed herein (the "Subject Partnerships"). Defendant Atlantic Limited's tender offer prices differed with respect to each of the Subject Partnerships, but each of the individual tender offers, except for relevant partnership specific information, included essentially the same information and financial disclosure to each of the unitholders. On September 6, 1995 City Partnerships, Co. commenced a lawsuit in this jurisdiction against Atlantic Limited and related entities in connection with the Tender Offers for up to 45% of the outstanding units in said partnerships scheduled to close on September 29, 1995. The complaint included claims against Atlantic Limited and related entities for, inter alia, violation of Section 14(e) of the Securities and Exchange Act of 1934, breach of fiduciary duty by certain of the general partners of the Subject Partnerships, and breach of the partnership agreements. -2- B. Defendants' Denial of All Allegations Each Defendant has at all times denied the allegations of wrongdoing and the merits of any and all claims asserted in the Action. THE FACTUAL STATEMENTS HEREIN ARE BASED ON INFORMATION PROVIDED TO THE COURT BY COUNSEL FOR THE PARTIES AND DO NOT CONSTITUTE FINDINGS OF THE COURT. THIS NOTICE IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS, AN EXPRESSION OF ANY OPINION BY THE COURT WITH RESPECT TO THE TRUTH OF THE ALLEGATIONS IN THE LITIGATION OR THE MERITS OF THE CLAIMS OR DEFENSES ASSERTED. THE PURPOSE OF THIS NOTICE IS TO ADVISE YOU OF THE PROPOSED SETTLEMENT OF THE LITIGATION AND YOUR RIGHTS WITH REGARD TO IT. C. Class Action Determination For purposes of the proposed Settlement the Court has, by order dated September 27, 1995, certified the following class (the "Class") for settlement purposes: All persons and entities who were unitholders of record as of August 10, 1995 of limited partnership units in any of the following limited partnerships: American Income 4 Limited Partnership; American Income 5 Limited Partnership; American Income 6 Limited Partnership; American Income 7 Limited Partnership; American Income 8 Limited Partnership; American Income Partners III-A Limited Partnership; American Income Partners III-B Limited Partnership; American Income Partners III-C Limited Partnership; American Income Partners III-D Limited Partnership; American Income Partners IV-A Limited Partnership; American Income Partners IV-B Limited Partnership; American Income Partners IV-C Limited Partnership; American Income Partners IV-D Limited Partnership; American Income Partners V-A Limited Partnership; American Income Partners V-B Limited Partnership; American Income Partners V-C Limited Partnership; American Income Partners V-D Limited Partnership; American Income Fund I-B, a Massachusetts Limited Partnership; American Income Fund I-C, a Massachusetts Limited Partnership; American Income Fund I-D, a Massachusetts Limited Partnership; and American Income Fund I-E, a Massachusetts Limited Partnership. Excluded from the Class are the Defendants, members of the immediate families of each of the Individual Defendants, any entity in which any Defendant has a controlling interest, and the legal representatives, heirs, successors, predecessors in interest, or assigns of any of the Defendants. Also for purposes of the proposed Settlement the Court has certified plaintiff City Partnership Co. as the Class Representative. II. YOUR RIGHT TO BE EXCLUDED FROM THE CLASS If you are a unitholder of one or more of the limited partnerships as described above, and are not a Defendant herein, or other excluded person, you are a member of the Class. You may request exclusion from the Class in writing mailed by first class mail addressed to: Berman, DeValerio & Pease One Liberty Square Boston, MA 02109 Attn: Norman Berman, Esq. -3- Your request for exclusion must clearly indicate that you request to be excluded from the Class and must state: your name and address; and identify the limited partnerships and the units thereof that you held as of record on August 10, 1995. Also identify the record holder if you were the beneficial holder, but not the holder of record. The request for exclusion will not be effective unless all of the above information is provided and unless the request for exclusion is postmarked no later than November 3, 1995. If you request exclusion, you will not be bound by any judgment in this Action, and will be free to pursue your own remedy, if any, against the Defendants in this Action. If you request exclusion you may nevertheless accept or decline the Tender Offer for your units of the limited partnerships. Any Class Member who does not request exclusion may, if he or she desires, enter an appearance through his or her counsel by sending such entry of appearance to the above address. All members of the Class who do not request to be excluded will participate in and be bound by the proposed Settlement. If you wish to remain a member of the Class, you need do nothing and your rights will be represented by the following counsel for plaintiff and the Class ("Class Counsel"): BERMAN, DEVALERIO & PEASE LAW OFFICES OF HAROLD B. OBSTFELD, One Liberty Square 500 Fifth Avenue, 56th Floor Boston, MA 02109 New York, NY 10110 III. REASONS FOR THE SETTLEMENT Class Counsel obtained and analyzed thousands of pages of relevant documents in expedited discovery during the prosecution of the litigation, and had access to depositions of Defendants in this litigation. Class Counsel produced to Defendants relevant documents concerning the litigation on an expedited basis. Counsel also interviewed some of the Individual Defendants to obtain information relevant to all partnerships, the General Partners, the Individual Defendants and their affiliates, and Counsel relied upon certain representations made during those interviews in reaching the settlement described herein. Class Counsel and Counsel for Defendants have engaged in extensive arm's length negotiations with respect to the settlement of claims of the members of the Class. Class Counsel recognizes and acknowledges the expense and length of time for continued proceedings necessary to prosecute the litigation against the Defendants through trial and through potential appeals. Class Counsel also have taken into account the applicable law, the uncertain outcome and the risk of any litigation, especially in complex actions such as this litigation, as well as the difficulties and delays inherent in such litigation. Class Counsel have further taken into account the strengths and uncertainties of the claims asserted in the litigation, the possible defenses to the claims asserted and the substantial benefits of the Settlement for the Class. Class Counsel have therefore determined that the Settlement is fair, reasonable, adequate, and in the best interests of the Class. Defendants have maintained throughout the litigation of this Action that all allegations of wrongdoing and all claims asserted in the Action are without merit. Defendants, however, desire that the Action be settled in order to eliminate the cost and uncertainty of future litigation and to achieve the final resolution and complete settlement of any and all of the Settled Claims (as defined below). IV. SUMMARY OF THE PROPOSED SETTLEMENT The following description of the proposed Settlement of the Action is only a summary. Reference may be made to the text of the Stipulation, on file with the Court, for a full statement of its provisions. The major terms of the Settlement are as follows. (a) In full and final disposition, settlement, discharge, release, and satisfaction of any and all claims, individual, class or derivative in nature, including those claims asserted in the Action, that have been or could be asserted by or on behalf of any member of the Class against any Defendant or a general partner of the Subject Partnerships (as more fully defined in the term "Releasees" contained in the Stipulation) with respect to any transaction or occurrence constituting the subject matter of the Action ("Settled Claims," as defined more fully below), Defendants agree to provide the following consideration: -4- (b) The Defendants agree to disseminate a Supplement to the Offers, provided herewith, providing additional information to each of the unitholders in the Subject Partnerships, as defined in and attached to the Stipulation, and as filed with the Court. (c) Additionally, Defendants agree that the tender offer prices will be increased to reflect a premium. Defendants agree to pay unitholders a premium of $1,500,000 to be spread equally across all the tendering unitholders of the Subject Partnerships, resulting in an approximately 6.6% premium in the tender offer price for each limited partnership. (d) Defendants agree to purchase up to 35% of the outstanding units of the Subject Partnerships. The Amended Stipulation of Settlement is subject to the following conditions and, except by mutual consent of the parties' counsel as provided therein, shall be canceled and terminated unless: (a) The Court shall enter a Final Judgment approving the Settlement as fair and adequate to the Class; and (b) The Court's Final Judgment becomes final, binding and nonappealable, as set forth in the Amended Stipulation of Settlement. This Notice is not intended to be a complete description of the Stipulation. The Stipulation contains the full and complete terms of the Settlement. V. EFFECT OF APPROVAL OF THE PROPOSED SETTLEMENT If the Court approves the proposed Settlement, judgment will be entered: (a) Approving the Settlement as fair, reasonable, adequate and in the best interests of the Class; determining the reasonable amount of attorneys' fees and reimbursement of costs and disbursements to be awarded to Class Counsel, and retaining jurisdiction for the purposes of effectuating the terms and provisions of the Settlement; (b) Dismissing with prejudice, and releasing and discharging, any and all claims, demands, rights, liabilities, and causes of action of every nature and description whatsoever, including, without limitation, individual, class or derivative claims, known or unknown, asserted or that might have been asserted, including without limitation, claims for negligence, gross negligence, breach of duty of care and/or breach of duty of loyalty and/or breach of duty of candor, fraud, negligent misrepresentation, breach of fiduciary duty, or violations of any state or federal statutes, rules or regulations, whether directly, in a representative capacity or in any other capacity, by any Class Member against any of the Defendants or the Releasees arising out of, relating to, or in connection with (i) any of the Subject Partnerships and arising out of any of the Tender Offers; (ii) any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to or which could have been referred to in the complaint or in other pleadings filed in the litigation, including all claims which were or could have been asserted in the litigation; (iii) any filing with the Securities and Exchange Commission or other public filing or statement relating to the Tender Offers; and/or (iv) the terms, the fact, fairness, or adequacy of this Settlement. VI. TERMINATION OF PROPOSED SETTLEMENT If there is no final Court approval of the proposed Settlement in this case, or if for any reason there is a failure to satisfy any of the conditions of the Stipulation, the Stipulation will become null and void, and the parties will resume their former positions in this action. VII. APPROVAL OF APPLICATION FOR ATTORNEYS' FEES AND EXPENSES If this Settlement is approved by the Court, in conjunction with the Settlement Hearing, Class Counsel will request the Court to approve Class Counsel's application for attorneys' fees and expenses, not to exceed $250,000, in prosecuting this Action and securing a benefit for the members of the Class. Members of the Class will not incur -5- any obligation for such fees and expenses, and the fees and expenses will not be deducted from the premium to be paid to unitholders as a result of the Settlement VIII. THE SETTLEMENT HEARING IF YOU DO NOT WISH TO OBJECT TO THE PROPOSED SETTLEMENT OR REQUEST FOR ATTORNEYS' FEES AND EXPENSES YOU NEED NOT APPEAR AT THE HEARING. The Settlement Hearing will be held on November 15, 1995 at 3:00 PM before the Honorable Patti B. Saris, U.S. District Court Judge, at the United States District Courthouse, Post Office Square, Boston, MA: (a) to determine whether the Settlement of the Action as set forth in the Amended Stipulation of Settlement is fair, reasonable, adequate and in the best interests of plaintiff and members of the Class and should be approved by the Court; (b) to determine whether an order and final judgment dismissing the Action should be entered thereon; and (c) to determine whether to approve Class Counsel's application for attorneys' fees and expenses , incurred in this action, not to exceed $250,000. The Court may adjourn the Settlement Hearing, or any adjournment thereof, without further notice to members of the Class other than by announcement at the Settlement Hearing or any adjournment thereof. The Court reserves the right to approve the Settlement as it may be modified by the parties or the Court, according to its terms and conditions, with or without further notice to members of the Class. At the Settlement Hearing, any member of the Class, who has provided a notice of appearance which is served and filed as hereinafter provided, may object to or support the Settlement, or may object to or support the Court's allowance of reasonable fees and expenses to Class Counsel for their services and actual expenses incurred herein to be paid by the Defendants. However, unless the Court in its discretion otherwise directs, members of the Class, and all others (excluding the parties), shall not be heard or be entitled to oppose the approval of the terms and conditions of the Settlement or (if approved) the judgment to be entered thereon, or the allowance of fees and expenses to plaintiff's counsel, and no papers, briefs, pleadings or other documents submitted by any member of the Class, or any other person (excluding the parties) shall be received and considered, except by order of the Court for good cause shown, unless, no later than 10 days prior to the Settlement Hearing, such person has served and filed the following documents in the manner provided below: (a) A Notice of Intention to Appear; and (b) A detailed statement of such person's specific objections to any matter before the Court, the grounds for such objections and any reasons why such person desires to appear and to be heard, and enclosing all documents and writings that such person desires the Court to consider. Such documents shall be filed with the Court, at the address noted above and served by first class mail upon the following counsel: Norman Berman, Esq. Deborah L. Thaxter, Esq. BERMAN, DeVALERIO & PEASE PEABODY & BROWN One Liberty Square 101 Federal Street Boston, MA 02109 Boston, MA 02110 Representing Plaintiff and the Class Representing Defendants ANY CLASS MEMBER WHO DOES NOT OBJECT IN THE MANNER DESCRIBED HEREIN WILL BE DEEMED TO HAVE WAIVED ANY OBJECTION, AND SHALL FOREVER BE FORECLOSED FROM MAKING ANY OBJECTION TO THE PROPOSED SETTLEMENT. -6- IX. SPECIAL NOTICE TO BROKERS, BANKS AND OTHER NOMINEES Brokerage firms, banks or other persons or entities who are current holders for the benefit of others of limited partnership units in the Subject Partnerships are directed to send this Notice promptly to all such beneficial owners. In the alternative, record holders may forward the names and addresses of the members of the Class and beneficial owners to Berman, DeValerio & Pease at the above address, who in turn will cause copies of this Notice to be sent by Defendants to such persons or entities. X. FURTHER INFORMATION For a more detailed statement of the matters involved in this litigation, you are referred to the papers on file in this Action, including the Stipulation, which may be inspected during regular business hours at the Office of the Clerk of the United States District Court, Post Office Square, Boston, PLEASE DO NOT CALL OR WRITE THE COURT DIRECTLY. IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT THE FOLLOWING COUNSEL REPRESENTING PLAINTIFF AND THE CLASS: BERMAN, DEVALERIO & PEASE One Liberty Square Boston, MA 02109 (617) 542-8300 Dated: September 27, 1995 BY ORDER OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS -7- EX-99.A.6 3 LETTER OF TRANSMITTAL AMERICAN INCOME 7 LIMITED PARTNERSHIP LETTER OF TRANSMITTAL --------------------------------------------------------------------------- THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON THE EXPIRATION DATE, UNLESS EXTENDED. --------------------------------------------------------------------------- To Depositary: STATE STREET BANK AND TRUST COMPANY By First Class Mail: By Overnight Courier: By Hand: Corporate c/o Boston Financial Data Corporate Reorganization Reorganization Services 225 Franklin Street P.O. Box 9061 Corporate Reorganization Concourse Level Boston, MA 02205-8686 Two Heritage Drive Boston, MA 02110 North Quincy, MA 02171 or Corporate Reorganization By Facsimile: 61 Broadway Concourse Level (617) 774-4519 New York, NY 10006 Confirm Facsimile by Telephone: (617) 774-4511 To participate in the Offer, a duly executed copy of this Letter of Transmittal (or facsimile hereof) must be received by the Depositary on or prior to the Expiration Date. Delivery of this Letter of Transmittal or any other required documents to an address or facsimile number other than as set forth above does not constitute valid delivery. The method of delivery of all documents is at the election and risk of the tendering Unitholder. If the method of delivery is by First Class Mail, please use the pre-addressed, postage-paid envelope provided. This Letter of Transmittal is to be completed by Unitholders of record as of August 10, 1995, of American Income 7 Limited Partnership, a Massachusetts limited partnership (the "Partnership"), pursuant to the procedures set forth in the Offer to Purchase (as defined below). PLEASE CAREFULLY READ THE ACCOMPANYING INSTRUCTIONS Ladies and Gentlemen: The undersigned hereby tenders to Atlantic Acquisition Limited Partnership, a Massachusetts limited partnership (the "Purchaser"), the following-described Units at $18.72 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 18, 1995, as supplemented and amended (the "Offer to Purchase"), and this Letter of Transmittal (which together constitute the "Offer"). Receipt of the Offer to Purchase is hereby acknowledged. - ------------------------------------------------------------------------------- NUMBER OF UNITS TENDERED - ------------------------------------------------------------------------------- NUMBER NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) OF UNITS (PLEASE FILL IN, IF BLANK) TENDERED(1) - ------------------------------------------------------------------------------- (i) All [_] (Please check box if all Units tendered) OR (ii) Number Tendered: ____ - ------------------------------------------------------------------------------- - ------- (1) In order for the tender to be valid, a Unitholder must tender either (i) all Units owned by such Unitholder OR (ii) a portion of the Units but not fewer than 10 Units (8 Units for IRAs or other Qualified Plans) (the "Minimum Investment Amount"). If a Unitholder does not indicate the number of Units tendered, the Purchaser will assume that such Unitholder has tendered all Units owned of record by him. If a Unitholder who tenders only a portion of his Units indicates a number of Units tendered that is less than the Minimum Investment Amount, the Purchaser will assume that such Unitholder has tendered the Minimum Investment Amount. D Subject to and effective upon acceptance for payment of any of the Units tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to such Units tendered hereby. The undersigned hereby irrevocably (i) constitutes and appoints the Purchaser as the true and lawful agent and attorney-in-fact of the undersigned with respect to such Units, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to deliver such Units and transfer ownership of such Units on the books of the Partnership, together with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser and, upon payment of the purchase price in respect of such Units by the Purchaser, to receive all benefits and otherwise exercise all rights of beneficial ownership of such Units and (ii) assigns to the Purchaser all future distributions from the Partnership with respect to such Units for periods ending after June 30, 1995, to the extent such distributions are not paid to the undersigned (the undersigned recognizes that future distributions with respect to such Units for periods ending after June 30, 1995, that are paid to the undersigned will automatically reduce the purchase price for such Units by a like amount), all in accordance with the terms of the Offer. Subject to and effective upon acceptance for payment of any Units tendered hereby, the undersigned hereby requests that the Purchaser be admitted to the Partnership as a substitute limited partner under the terms of the Partnership Agreement of the Partnership. Upon the purchase of Units pursuant to the Offer, all prior proxies, assignments and consents given by the undersigned with respect to such Units will be revoked and no subsequent proxies, assignments or consents may be given (and if given will not be deemed effective). The undersigned recognizes that, if more than 24,992 Units are validly tendered prior to or on the Expiration Date and not properly withdrawn, the Purchaser will, upon the terms of the Offer, accept for payment from among those Units tendered prior to or on the Expiration Date 24,992 Units on a pro rata basis, with adjustments to avoid purchases of certain fractional Units, based upon the number of Units validly tendered prior to the Expiration Date and not withdrawn. The undersigned further recognizes that if no more than 24,992 Units are validly tendered prior to the Expiration Date and not withdrawn, the Purchaser will, upon the terms of the Offer, accept for payment all such Units. The undersigned hereby represents and warrants that the undersigned owns the Units tendered hereby within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and has full power and authority to validly tender, sell, assign and transfer the Units tendered hereby, and that when any such Units are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof, and such Units will not be subject to any adverse claim. Upon request, the undersigned will execute and deliver any additional documents deemed by the Purchaser to be necessary or desirable to complete the assignment, transfer and purchase of Units tendered hereby. The undersigned understands that a tender of Units to the Purchaser will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that in certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the Units tendered hereby. In such event, the undersigned understands that any Letter of Transmittal for Units not accepted for payment will be destroyed by the Depositary. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. THERE ARE NO CERTIFICATES TO BE INCLUDED WITH THIS LETTER OF TRANSMITTAL The Unitholder hereby tenders Units pursuant to the terms of the Offer. The Unitholder hereby certifies, under penalties of perjury, that the information and representations provided herein, including in Box A of this Letter of Transmittal, which has been duly completed by the Unitholder, are true, complete and correct as of the date hereof. --------------------------------------------------------- OWNERS SIGN HERE TO TENDER (ATTACH ADDITIONAL SHEETS, IF NECESSARY) If this Letter of Transmittal is not signed exactly as a name(s) appear(s) above, or if this Letter of Transmittal is signed by a general partner, corporate officer or other person acting in a fiduciary or representative capacity, please complete BOX B. (See Instruction 1) SIGN------ X ___________________________________________________ -----SIGN HERE------ X ___________________________________________________ -----HERE Taxpayer Identification Number: _____________________________________________________ Date: _____________________ , 1995 Bus. Tel.: ( )_____________________________________ --------------------------------------------------------- BOX A - -------------------------------------------------------------------------------- PART I--Please provide the Social Security Number TIN of the Unitholder or Employer submitting that Letter of Identification Number: SUBSTITUTE Transmittal in the box at FORM W-9 right or, if applicable, ---------------------- DEPARTMENT OF write "Applied For" in such THE TREASURY box. Individual, Sole INTERNAL Proprietor Corporation REVENUE Please check the Partnership SERVICE appropriate box describing the Unitholder: ---------------------- (SEE Other INSTRUCTION 3) ------------------------------------------------------- PART II--Certification--The Unitholder submitting (ATTACH this Letter of Transmittal hereby certifies the ADDITIONAL following: COPIES FOR (1) The TIN shown in Part 1 above is the correct TIN JOINT of the Unitholder who is submitting this Letter of UNITHOLDERS) Transmittal. If the box in Part 1 states the words "Applied For," a TIN has not been issued to the Unitholder, and either (a) the Unitholder has mailed or delivered an application to receive a TIN to the appropriate IRS Center or Social Security Adminis- tration Office, or (b) the Unitholder intends to PAYER'S REQUEST mail or deliver an application in the near future. FOR TAXPAYER The Unitholder understands that if such Unitholder IDENTIFICATION does not provide a TIN to the Purchaser within sixty NUMBER ("TIN") (60) days, 31% of all reportable payments made to the Unitholder thereafter will be withheld until a TIN is provided to the Purchaser; and (2) Unless this box [_] is checked, such Unitholder is not subject to backup withholding either because such Unitholder has not been notified by the IRS that such Unitholder is subject to backup withhold- ing as a result of a failure to report all interest or dividends, or because the IRS has notified such Unitholder that such Unitholder is no longer subject to backup withholding. (Note: You must place an "X" in the box in (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting of interest or dividends on your tax return.) - -------------------------------------------------------------------------------- BOX B - -------------------------------------------------------------------------------- NON-CONFORMING SIGNATURES AND FIDUCIARIES SIGN HERE (SEE INSTRUCTION 1) (ATTACH ADDITIONAL COPIES FOR JOINT UNITHOLDERS) The undersigned, if signing this Letter of Transmittal on behalf of the Unitholder, hereby declares that he, she or it has the authority to sign this document on behalf of such Unitholder. Fiduciary: X _______________________ Printed Name: ______________________ Address: ___________________________ Title: _____________________________ ____________________________________ Bus. Tel.: ( )____________________ NOTARIZATION OF SIGNATURE (IF REQUIRED. SEE INSTRUCTION 1) State of ) ) County of ) On this ___ day of ______, 1995, before me came personally ________________ ______________________ to me known to be the person who executed the foregoing Letter of Transmittal. ____________________________________ Notary Public OR GUARANTEE OF SIGNATURE (IF REQUIRED. SEE INSTRUCTION 1) Name of Firm: ______________________________________________________________ - -------------------------------------------------------------------------------- AMERICAN INCOME 7 LIMITED PARTNERSHIP LETTER OF TRANSMITTAL INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. TENDER, SIGNATURE REQUIREMENTS; DELIVERY. After carefully reading and duly completing this Letter of Transmittal, to tender Units a Unitholder must sign in the signature block on the front of this Letter of Transmittal. If this Letter of Transmittal is signed by the registered Unitholder(s) of the Units as printed on the front of this Letter of Transmittal without any change whatsoever, no notarization or signature guarantee on this Letter of Transmittal is required. Similarly, if Units are tendered for the account of a member firm of a registered national security exchange, a member firm of the National Association of Securities Dealers, Inc. or a commercial bank, savings bank, credit union, savings and loan association or trust company having an office, branch or agency in the United States (each, an "Eligible Institution"), no notarization or signature guarantee is required on this Letter of Transmittal. In all other cases, signatures on this Letter of Transmittal must either be notarized or guaranteed by an Eligible Institution, by completing the Notarization or Guarantee of Signature set forth in BOX B of this Letter of Transmittal. If any tendered Units are registered in the names of two or more joint holders, all such holders must sign this Letter of Transmittal. If this Letter of Transmittal is signed by trustees, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to the Purchaser of their authority to so act. For Units to be validly tendered, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required notarizations or signature guarantees in BOX B and any other documents required by this Letter of Transmittal must be received by the Depositary prior to or on the Expiration Date at its address or to its facsimile number set forth herein. No alternative, conditional or contingent tenders will be accepted. All tendering Unitholders by execution of this Letter of Transmittal waive any right to receive any notice of the acceptance of their tender. 2. TRANSFER TAXES. The Purchaser will pay or cause to be paid all transfer taxes, if any, payable on the transfer to it of Units pursuant to the Offer. 3. SUBSTITUTE FORM W-9. In order to avoid 31% federal income tax backup withholding on the payment of the purchase price for Units purchased, the tendering Unitholder must provide to the Purchaser the Unitholder's correct Taxpayer Identification Number ("TIN") and certify, under penalties of perjury, that such Unitholder is not subject to such backup withholding by completing the Substitute Form W-9 set forth in BOX A of this Letter of Transmittal. If a correct TIN is not provided, penalties may be imposed by the Internal Revenue Service ("IRS") in addition to the Unitholder being subject to backup withholding. Certain Unitholders (including, among others, all corporations) are not subject to backup withholding. Backup withholding is not an additional tax. If withholding results in an overpayment of taxes, a refund may be obtained from the IRS. The TIN that must be provided on the Substitute Form W-9 is that of the registered Unitholder(s) indicated on the front of this Letter of Transmittal. Write the words "Applied For" in the box in Part I of the Substitute Form W-9 if the tendering Unitholder has applied for but has not been issued a TIN or intends to apply for a TIN in the near future. If the words "Applied For" are written in the box in Part I of the Substitute Form W-9 and the Purchaser is not provided with the Unitholder's TIN within 60 days, the Purchaser will withhold 31% of all payments of the purchase price for the Units until such TIN is provided to the Purchaser. 4. ADDITIONAL COPIES OF OFFER TO PURCHASE AND LETTER OF TRANSMITTAL. Requests for assistance or additional copies of the Offer to Purchase and this Letter of Transmittal may be obtained from the Information Agent at the address or telephone number set forth below: The Information Agent is: D.F. King & Co., Inc. 77 WATER STREET NEW YORK, NY 10005 1-800-848-3051 IMPORTANT: IN ORDER TO PARTICIPATE IN THE OFFER, THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE. EX-99.A.7 4 UNITHOLDERS LETTER ATLANTIC ACQUISITION LIMITED PARTNERSHIP 98 North Washington Street Boston, Massachusetts 02114 October 3, 1995 Dear Unitholder: The enclosed Supplement dated October 3, 1995 supplements and amends the Offer to Purchase dated August 18, 1995 previously provided to you. As described in the Offer to Purchase and the Supplement, Atlantic Acquisition Limited Partnership (the "Purchaser") is offering to purchase Units you own of limited partnership interest of American Income 7 Limited Partnership. The Supplement is being provided to you in connection with the proposed settlement of class action litigation brought against the Purchaser and others in connection with the Offer. In accordance with the proposed settlement, the Purchase Price has been increased from $17.56 per Unit to $18.72 per Unit, and the number of Units sought pursuant to the Offer has been decreased to 24,992 Units. In order to permit all Unitholders adequate time to evaluate the additional information in the Supplement, the Purchaser has decided to extend the date for the expiration of the Offer until 5 p.m., Eastern time, on October 20, 1995. THE INCREASED PURCHASE PRICE WILL BE PAID FOR ALL UNITS ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER, WHETHER OR NOT THE UNITS WERE TENDERED PRIOR TO THE INCREASE. We suggest that you review the enclosed Supplement and the Offer to Purchase with your personal financial and tax advisor. After carefully reading the enclosed Supplement in conjunction with the Offer to Purchase, if you elect to tender your Units and have not already done so, deliver (using the enclosed pre-addressed, postage-paid envelope if delivery is by First Class Mail) or telecopy a duly completed and executed copy of the Letter of Transmittal, and any documents required by the Letter of Transmittal, to: State Street Bank and Trust Company By First Class Mail: By Facsimile: (617) 774-4519 Corporate Reorganization Confirm Facsimile by P.O. Box 9061 Telephone: Boston, MA 02205-8686 (617) 774-4511 IF YOU HAVE ALREADY TENDERED YOUR UNITS BY COMPLETING AND RETURNING THE BLUE LETTER OF TRANSMITTAL PREVIOUSLY PROVIDED TO YOU, YOU DO NOT NEED TO EXECUTE AN ADDITIONAL LETTER OF TRANSMITTAL. ALL UNITS ACCEPTED FOR PAYMENT WILL RECEIVE THE INCREASED PURCHASE PRICE. IF YOU HAVE ANY QUESTIONS, PLEASE CALL D.F. KING & CO., INC. AT 1-800-848- 3051. ATLANTIC ACQUISITION LIMITED PARTNERSHIP D EX-99.B.2 5 COMMITMENT LETTER NATWEST BANK N.A. 175 WATER STREET NEW YORK, NEW YORK 10038 August 31, 1995 Atlantic Acquisition Limited Partnership c/o American Finance Group 98 North Washington Street Boston, MA 02114 Gentlemen: Atlantic Acquisition Limited Partnership, a Massachusetts limited partnership (the "Borrower"), has requested that NatWest Bank N.A. ("NatWest") provide a term loan facility (the "Facility") in the principal amount not to exceed Twenty-Seven Million Dollars ($27,000,000.00) Dollars, the proceeds of which will be used by the Borrower to purchase (the "Acquisition") limited partnership interests (the "Units") in publicly-owned limited partnerships sponsored by American Finance Group (the "Public Programs"). Based on our discussions and on the projections, financial statements, both pro forma and historical, and other information furnished by the Borrower to NatWest, and subject to the conditions set forth below and in the Facility Outline (as defined below), this letter evidences the willingness of NatWest, on the terms and conditions set forth or referred to herein, to provide the Facility to the Borrower. Attached to and forming part of this letter as Schedule A is an outline of the principal terms and conditions of the Facility (the "Facility Outline"). Various terms essential to the Facility are not set forth in the Facility Outline, and must still be developed and agreed upon. Moreover, the Facility Outline does not purport to include all of the conditions, covenants, representations, warranties, defaults, and other terms customary to transactions of this nature or otherwise appropriate in the context of these transactions which would be contained in the definitive documents for the Facility, all of which must be satisfactory in form and substance to us and our counsel prior to our proceeding with the proposed Facility. We specifically reserve the right to propose additional terms, conditions, covenants, representations, warranties and defaults for the final documents that are not specified in the Facility Outline and which are not materially inconsistent with the terms in the Facility Outline. Furthermore, all documents and other matters relating to the transactions being financed with the Facility, including, without limitation, all underlying acquisition documents for the Units, must be in form and substance satisfactory to us and our counsel. In providing the Facility, we may sell participations and/or admit syndicate lenders (for which we will act as agent) who will assume a portion of our commitment to make loans under the Facility. You agree to provide NatWest, promptly upon request, with all information (such information to remain confidential by and among NatWest and any participants or syndicate lenders) which NatWest deems appropriate or advisable to provide potential purchasers of a participation or syndicate interest in the Facility. You further agree to use your reasonable efforts to make the appropriate officers and representatives of the Borrower and American Finance Group available to participate in information meetings for potential syndicate members and participants at such times and places as NatWest may reasonably request. You represent and warrant that (a) all information which has been or is hereafter made available to NatWest by you or any of your representatives in connection with the transactions contemplated hereby is and will be complete and correct in all material respects for the purposes prepared and does not and will not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made, and (b) all financial projections that have been or will hereafter be prepared by you and made available to NatWest or any other syndicate lenders or participants in the Facility have been or will be prepared in good faith based upon reasonable assumptions, which assumptions shall be disclosed as part of such projections. You agree at the request of NatWest to supplement the information and projections referred to in clauses (a) and (b) above from time to time so that the representation and warranty in the preceding sentence remains correct. Our willingness to provide the Facility is conditioned upon, among other things, (i) there being no material adverse change in our judgment in the business, assets, results of operations, financial condition or prospects of the Public Programs or the Borrower since the date of the last audited financial statements of the Public Programs furnished to us which would, in turn have a material adverse effect on the Borrower's ability to service the Facility, (ii) all information, including all financial information, which is furnished to us being true, accurate and complete in all material respects and (iii) all legal matters relating to the Acquisition being acceptable to us and our counsel, including, without limitation, receipt of an opinion of counsel in form and substance satisfactory to us that the offering and acquisition of the Units has been conducted in accordance with all applicable securities laws and other laws and regulations. If in the course of documenting the proposed transactions and our continued analysis of financial and other information relating to the Borrower and the transactions to be financed by the Facility, we discover that any of the foregoing conditions or any other conditions specified in the Facility Outline will in our judgment not be met, we reserve the right to terminate any commitment which we have to provide the Facility. The Borrower, by its acceptance of this letter, hereby agrees to the terms and provisions governing the Facility set forth herein and in the Facility Outline. Whether or not the Facility is provided or any loan documents are executed or the transactions contemplated hereby are consummated, the Borrower by its acceptance of this letter hereby agrees (i) to pay NatWest the arrangement fee referred to in the Facility Outline (but only on the terms and conditions referred to in the Facility Outline) (ii) to pay on demand all out- of-pocket costs and expenses incurred by us in connection with this letter and the preparation, negotiation, execution and delivery of the loan agreement, guaranties, security documents and all other agreements, documents and instruments executed in connection herewith and therewith, including, without limitation, our attorneys' fees and expenses (subject to a mutually agreed- upon limitation of $60,000 for fees (assuming the documents for each Public Partnership are substantially the same) plus disbursements and $2,000 to $2,500 for fees plus disbursements for each drawdown after the initial drawdown) and (iii) to indemnify, defend and hold harmless us and each participant and syndicate lender and our and their respective directors, officers, agents, employees and counsel from and against any and all losses, claims, judgments or expenses incurred by us or any of them in connection with, whether directly or indirectly, our commitment, the Facility, the loans made thereunder, the Acquisition and other transactions to which the Facility relates, or otherwise, including, without limitation, amounts paid in settlement, court costs and the fees and disbursements of counsel incurred in connection with any litigation, investigation, claim or proceeding, except where the proposed indemnitee has been finally determined by a court of competent jurisdiction to have committed willful misconduct or acted with gross negligence. The Borrower's obligations in this paragraph shall survive any termination of this letter or the transactions contemplated herein. If the foregoing is acceptable to you, kindly sign and return a copy of this letter to us by no later than August 31, 1995. In the event we do not receive from you an executed copy of this letter by our close of business on such date then this letter shall be deemed null and void in all respects and of no force and effect. If we are unable to agree to definitive terms and conditions and enter into definitive agreements by October 15, 1995 (provided that if we are unable to enter into definitive agreements by October 15, 1995 because of litigation pending, threatened or commenced with respect to the Acquisition, the Public Programs or this proposed Facility, then such date shall be extended to January 15, 1996), neither of us shall have any obligation with respect to the proposed Facility, except for the Borrower's obligations under the preceding paragraph of this letter, which shall continue in full force and effect. This letter shall not be assignable by the Borrower, except with our prior written consent, and any attempted or purported assignment without such consent shall be void. If this letter becomes the subject of a dispute, each of the parties hereto waives trial by jury in such dispute. This letter shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely therein. 2 Neither NatWest nor any participant or syndicate lender shall be liable under this letter or any loan documents or in respect of any act, omission or event relating to the Acquisition or financing transactions contemplated herein or therein, on any theory of liability, for any special, indirect, consequential or punitive damages. This letter is confidential, and is furnished solely for the Borrower's benefit and may not be relied upon by any other person or entity. The Borrower is not authorized to show or circulate this letter to any person or entity (other than its legal and financial advisors in connection with its evaluation hereof, who shall agree to maintain their confidentiality) until such time as the Borrower has accepted this letter as provided in the immediately preceding paragraph. If this letter is not accepted by the Borrower as provided above, the Borrower is directed to immediately return this letter (and any copies hereof) to the undersigned. Very truly yours, NatWest Bank N.A. By: /s/ Harris C. Mehos ---------------------------------- Title: Vice President The foregoing is hereby agreed to and accepted this 31st day of August, 1995 Atlantic Acquisition Limited Partnership By: AAL Inc., its general partner By: /s/ James A. Coyne _______________________________ Title: Clerk 3 TENDER OFFER ACQUISITION FACILITY SUMMARY OF TERMS SCHEDULE A Borrower: Atlantic Acquisition Limited Partnership, a special purpose Massachusetts limited partnership (the "Borrower") of which the General Partner is AAL, Inc. ("GP"). Facility: A multi-draw term loan (the "Term Loan") facility with all take downs required to be made not later than 90 days from initial drawdown. Use of Proceeds: The proceeds of the Term Loan will be used by the Borrower solely to fund the Acquisition (the "Acquisition") and related costs and expenses, initiated by the Borrower, of up to 45% of each of the limited partnership units ("the LP Units") of certain of the public partnerships currently managed by American Finance Group ("AFG") and in which affiliates of AFG are the sole general partners (the "Public Partnerships"). Lenders: NatWest Bank N.A. will propose to underwrite the entire commitment amount with the right to sell-down a portion of its commitment to another lender or lenders or to sell participations to another lender or lenders. In the event of a sell-down, an Agency Administration Fee is to be paid by the Borrower in the amount of $40,000 per annum payable quarterly. Agent: NatWest Bank N.A. (in such capacity, the "Agent"). Amount: All as set forth in Schedule B hereto, up to $27,000,000; provided, however, that in no event shall (i) with respect to the financing of the Acquisition by the Borrower of LP Units, aggregate drawdowns exceed the maximum Program Amount, and (ii) the aggregate of all drawdowns exceed the Maximum Loan Amount. As shown in Schedule B, the Maximum Loan Amount includes third party offering and organizational expenses (including, but, not limited to, legal, accounting, printing, mailing, financial institution fees and expenses, information agent and depositary costs and fees, and any and all other out of pocket costs, expenses and fees incurred by or on behalf of the Borrower of a similar nature) in an amount not to exceed $680,000 (the "Offering Expenses") and the Upfront Fee described below. All initial limited partners of the Borrower shall severally unconditionally guarantee (by way of additional capital contributions to be made to the Borrower) repayment of that portion of the Term Loan that was drawn to cover Offering Expenses, provided, however, that at all times that the Borrower shall be in compliance with the Maintenance Covenant described below, then the Bank's right to enforce such guarantee shall be suspended but further provided that any such suspension shall cease and the Bank shall have the right to enforce such guarantee in the event and at any time that the Borrower is not in compliance with the Maintenance Covenant. Final Maturity: Four years from closing of each drawdown. Interest: LIBOR (reserve adjusted) plus 350 basis points. Upfront Fee: 2% on the amount of each drawdown to be paid at each drawdown. Maximum aggregate fee will be $353,750 and minimum fee will be $100,000. 4 Arrangement Fee: An arrangement fee of $100,000 will be payable by the Borrower to NatWest Bank if the closing of the facility does not occur by October 15, 1995 or if the closing does occur by such date but the Borrower does not draw down any funds under the facility by January 15, 1996, provided that: (a) no arrangement fee will be payable if NatWest Bank declines to close the Facility or fund under the Facility because of (i) a material adverse change in any of the Public Programs or the Borrower which would have, in turn, a material adverse effect on the Borrower's ability to service the Term Loan or (ii) NatWest Bank declines to proceed for a reason other than breach by the Borrower of a representation, warranty or covenant or failure of a condition or other reason expressly set forth herein; and (b) if NatWest Bank or the Borrower declines to close the Facility or declines to fund under the Facility because of litigation pending, threatened or commenced with respect to the Acquisition, the Public Programs or this proposed Facility, then payment of the arrangement fee shall be postponed until the earliest of i) the date of the expiration or termination of this letter, or ii) the date of termination of such litigation, or iii) January 15, 1996. If NatWest Bank or the Borrower declines to close this Facility or declines to fund under the Facility on or before January 15, 1996 because of such litigation, then the arrangement fee payable by the Borrower to NatWest Bank, shall be $50,000. Drawdowns: Each drawdown shall be in a minimum amount of $500,000 and no drawdown shall be made later than 90 days after the initial drawdown. Initial drawdown to occur no later than October 15, 1995, provided that such date shall be extended to a date no later than January 15, 1996 in the event that initial drawdown does not occur by October 15, 1995 because of litigation pending, threatened or commenced with respect to the Acquisition, the Public Programs or this proposed Facility. In the event of such an extension, all drawdowns must be made by January 15, 1996. Interest Payments: Payments of interest on the principal amount outstanding under the Term Loan will be payable quarterly in arrears based on a 360 day year. Borrower shall hedge interest rate risk through interest rate swap or cap within 90 days from final drawdown with counterparty acceptable to NatWest Bank. Scheduled Principal Payments: Each drawdown of the Term Loan will be payable in sixteen (16) consecutive quarterly installments to be calculated based on the projected amount of cash flow available from the firm term lease payments and to be agreed to by Lenders prior to drawdown. Mandatory Pre-Payments: A mandatory prepayment of principal outstanding on the Term Loan shall be made quarterly on the Scheduled Principal Payment date in an amount equal to the Distributable Cash Amount (as defined below) for the immediately preceding calendar quarter. Mandatory prepayments of the Term Loan described in the preceding paragraph shall be applied pro rata to the remaining scheduled installments of principal with respect to each drawdown of the Term Loan. 5 "Distributable Cash Amount" shall mean cash received from all sources less current and accrued interest and principal payments and less accounting, legal, printing and other third party expenses ("Operating Expenses") and any Agency Administration Fee. Operating Expenses not to exceed $100,000 per year. Optional Pre-Payments: The Borrower shall have the right to make optional prepayments of the Term Loan at the end of each interest period in minimum principal amounts of $250,000. Collection Account: Until repayment in full of all outstanding principal of the Term Loan together with all interest, all distributions from Programs payable to the Borrower shall be paid directly by the Programs into a Collection Account maintained by the Agent from which all scheduled principal amounts together with accrued interest, when and as due, shall be deducted. The Borrower shall have the right to request the Agent to make withdrawals from the Collection Account for payments of any and all Operating Expenses and any Agency Administration Fee. Collateral: The Agent shall have a first priority perfected security interest subject to no other liens in: 1. All assets of the Borrower including without limitation the Purchased Units; 2. The stock of the GP; 3. All the Partners', including the GP's interest in the Borrower; and 4. The Collection Account; Recourse: The obligations under the Term Loan will be fully recourse to the Borrower and to the GP. Conditions Precedent: Customary and usual for transactions of this type by the Agent and others appropriate in the context of the proposed transaction, including but not limited to: 1. The Acquisition and the Tender Offer documentation shall be in full force and effect and shall have been provided to the Lenders and shall be in form and substance satisfactory to NatWest Bank and its counsel; 2. All conditions under the Tender Offer Materials precedent to the consummation of the Tender Offers with respect to the LP Units then being acquired shall have been satisfied. The Borrower shall have received all necessary governmental, regulatory and other third party approvals and the Tender Offer and the Acquisition shall have complied with all legal and regulatory requirements including securities laws and regulations, and the Lenders and the Agent shall have received an opinion of counsel satisfactory to them to the effect of all of the foregoing; 3. The Borrower shall have received cash proceeds aggregating 10% of the aggregate purchase price of the Purchased Units representing equity contributions from its partners and shall have utilized such proceeds in the manner set forth on Schedule B (use of proceeds) hereto to purchase the LP Units and to pay any related fees and expenses as contemplated above under "Use of Proceeds" not funded through drawdowns. 6 4. Each of the Programs and each of the general partners thereof shall be in legal existence and in good standing in each of the jurisdictions of their organization and in all other applicable jurisdictions; 5. Each of the documents relating to the structure and operation of the Borrower shall be satisfactory in form and substance to the Lenders; 6. The Lenders and the Agent shall have received evidence (including legal opinions and certified copies of applicable partnerships and operating documents) satisfactory in form and substance to the Lenders and the Agent that the documents to be furnished to the Lenders and the Agent in connection with this financing have been duly authorized, executed and delivered by all necessary parties and constitute the legal, valid and binding obligations of the parties thereto, enforceable in accordance with their terms, compliance with all applicable laws including the Securities Laws and Regulations G, U, T, X of the Federal Reserve System, and absence of any liens on the collateral except those in favor of the Agent; 7. A field examination of the servicer and of financial information provided to Lenders in connection with this transaction to include a review of asset collateral values shall occur prior to closing. 8. All documentation relating to the programs, including without limitation, provisions as to the transferability of LP Units and the rights of holders of L.P. units to participate in cash flows and distribution of programs shall be satisfactory in all respects to the Lenders and the Agent. 9. All legal matters shall be satisfactory in all respects to counsel for the Agent. 10. No material adverse event in the judgment of the Lenders occurring with respect to any of the Public Programs or the Borrower, which would, in turn, have a material adverse effect on the Borrower's ability to service the Term Loan. 11. No litigation with respect to the Acquisition or this financing transaction shall be pending, threatened or commenced. 12. The limited partners of the Borrower to be no one other than Geoffrey MacDonald, James Coyne, Gary Engle, and any entity affiliated with one or more of them (the "Initial Limited Partners.") 13. Most recent audited annual and unaudited quarterly financial statements for all partnerships shall have been delivered to the Lenders and the Agent and shall be acceptable to the Lenders and the Agent. Representations and Warranties: Customary and usual for transactions of this type by the Agent and others appropriate in the context of the proposed transaction, including, without limitation, that all financial information and other materials furnished to the Lenders and the Agent shall be true and complete and that the Maximum Program Amount on Schedule B shall not exceed 90% of the Net Present Value of the amount to be distributed to LP Unitholders from cash and the firm term lease payments allocable for each LP Unit purchased pursuant to the Tender Offer. 7 Covenants: Customary and usual for transactions of this type by the Agent and others appropriate in the context of the proposed transaction, to include without limitation the following: 1. A minimum net worth covenant on the Borrower (to be determined) not to exceed $1,000,000. 2. A maintenance covenant whereby outstanding advances less Upfront Fees and Offering Expenses under the Term Loan will never exceed 90% of the net present value of the lease payments and cash on hand (the "Maintenance Covenant"). For the purposes of the Maintenance Covenant only, Offering Expenses shall be reduced on a pro-rata basis with reductions in the overall outstanding principal advance. In the event that the Maintenance Covenant is violated, each of the General Partner and the Initial Limited Partners (collectively the "Partners") will cause the Borrower to take all action necessary to effect a cure of such violation. Further, the Partners will use their reasonable best efforts with respect to the Public Partnerships managed by AFG (but only to the extent consistent with any fiduciary duties they may have to investors in the Public Partnerships and any powers that they may have with respect to the Public Partnerships) to reduce aggregate lessee concentrations of the Public Partnerships so that the lessees with the three largest lease obligations to the Public Partnerships will not individually constitute more than 10% of the future minimum rents to be collected from all lessees in the Public Partnerships. For purposes of the preceding sentence, "reasonable best efforts" shall be satisfied if the Partners make good faith inquiries of not less than two third party independent institutional lenders seeking non-recourse financing and proceed in good faith to close any such financings committed to by such institutional lenders, on terms reasonable and customary in the equipment leasing industry, of the future minimum rents of the leases to which such lessees are parties. In no event shall the obligations of the Initial Limited Partners set forth above constitute a guarantee of payment or performance of the Borrower's obligations to the Lenders or constitute an obligation on the part of such Limited Partners to make additional capital contributions in any amount to the Borrower. Except for claims for breach of the limited obligations of the Initial Limited Partners as set forth above, there shall be no other recourse to such Initial Limited Partners for such obligations. 3. The Borrower shall not have any assets other than Purchased Units and the Collection Account and no liabilities other than the Term Loan and Operating Expenses and Agency Administration Fee. 4. No change in partners of the Borrower without Lenders' prior approval which shall not be unreasonably withheld. Events of Default: Customary and usual for transactions of this type by the Agent and others appropriate in the context of the proposed transaction (subject to customary and reasonable cure periods where applicable), including but not limited to: 1. Failure to pay principal or interest when due; 2. Failure to make required deposits into the Collection Account; 8 3. Failure to pay taxes or other impositions; 4. Any representation or warranty in the loan documents having been untrue in any material respect as of the date made or deemed made; 5. Bankruptcy or insolvency of the Borrower or the GP; 6. Direct or indirect change in control of the Borrower or control or management of the Borrower; 7. Dissolution or other termination of the Borrower or the GP; 8. Breach of other covenants in the loan documents; 9. Failure of any security for the Term Loan; 10. Material adverse change in any of the Public Programs or the Borrower which would, in turn have in the Lenders' judgment, causing a material adverse impact on the Borrower's ability to service the Term Loan. Other: Legal fees and expenses for the account of the Borrower. Legal fees of the Agent and the Lenders in connection with the closing of this financing not to exceed $60,000 (assuming that the documents for each of the Public Partnerships are substantially the same) plus disbursements with an additional $2,000 to $2,500 plus disbursements for each set of Public Partnership documents received after the first one. Out-of-pocket expenses associated with pre-closing field examination and third party appraisals to be for the account of the Borrower not to exceed $10,000. Documentation, including opinions of counsel, in satisfactory form and substance to the Agent, Lenders and the Agent's Counsel. 9 ATLANTIC ACQUISITION LIMITED PARTNERSHIP SCHEDULE B
OFFER NUMBER MAXIMUM PRICE OF UNITS ESTIMATED LOAN INDIVIDUAL PER TENDERED PURCHASE PER LOAN PROGRAM UNIT FOR PRICE UNIT AMOUNTS ------- ----- -------- --------- ------- ----------- American Income 4 Limited Partner- ship............................. 16.00 36,000 576,000 14.18 510,480 American Income 5 Limited Partner- ship............................. 17.00 32,083 545,411 15.23 488,624 American Income 6 Limited Partner- ship............................. 18.50 27,234 503,829 16.65 453,446 American Income 7 Limited Partner- ship............................. 17.56 32,133 564,255 15.80 507,701 American Income 8 Limited Partner- ship............................. 19.13 33,683 644,356 17.22 580,021 American Income Partners III-A Limited Partnership.............. 1.30 454,056 590,273 1.13 513,083 American Income Partners III-B Limited Partnership.............. 1.50 507,299 760,949 1.35 684,854 American Income Partners III-C Limited Partnership.............. 1.85 348,359 644,464 1.67 581,760 American Income Partners III-D Limited Partnership.............. 1.50 233,967 350,951 1.34 313,516 American Income Partners IV-A Lim- ited Partnership................. 2.60 422,820 1,099,332 2.33 985,171 American Income Partners IV-B Lim- ited Partnership................. 3.00 393,271 1,179,813 2.56 1,006,774 American Income Partners IV-C Lim- ited Partnership................. 5.00 571,780 2,858,900 4.51 2,578,728 American Income Partners IV-D Lim- ited Partnership................. 8.03 488,673 2,946,698 5.75 2,809,870 American Income Partners V-A Lim- ited Partnership................. 5.25 621,297 3,261,809 4.73 2,938,735 American Income Partners V-B Lim- ited Partnership................. 4.50 696,569 3,134,561 3.75 2,612,134 American Income Partners V-C Lim- ited Partnership................. 4.22 418,699 1,766,910 3.80 1,591,056 American Income Partners V-D Lim- ited Partnership................. 3.49 216,102 754,196 3.14 678,560 American Income Fund I-B, a Massachusetts Limited Partner- ship............................. 4.00 129,020 518,080 2.54 327,711 American Income Fund I-C, a Massachusetts Limited Partner- ship............................. 5.00 361,555 1,807,775 4.46 1,612,535 American Income Fund I-D, a Massachusetts Limited Partner- ship............................. 5.00 373,285 1,866,425 4.41 1,646,187 American Income Fund I-E, a Massachusetts Limited Partner- ship............................. 7.10 397,723 2,823,833 6.39 2,541,450 ----------- Maximum Program Amount.......... $25,962,395 Offering Expenses............. 680,000 Estimated Upfront Fee......... 353,750 "Maximum Loan Amount" $26,966,145
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