-----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, NA/Sk4P0DlFWvpYfFlWaUUJhyAJBvMLIuLIYhlm+tWgeGIKcBPgKUJSZaGclRmCr l5caPM/A/ISnr7pRItrPJQ== 0000912057-00-014795.txt : 20000331 0000912057-00-014795.hdr.sgml : 20000331 ACCESSION NUMBER: 0000912057-00-014795 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INCOME PARTNERS V D LTD PARTNERSHIP CENTRAL INDEX KEY: 0000847560 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 043090151 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-19135 FILM NUMBER: 585490 BUSINESS ADDRESS: STREET 1: 98 NORTH WASHINGTON ST. CITY: BOSTON STATE: MA ZIP: 02114 BUSINESS PHONE: 6175421200 MAIL ADDRESS: STREET 1: 98 N WASHINGTON STREET CITY: BOSTON STATE: MA ZIP: 02114 10-K 1 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 ------------------------------------------------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ______________________ to _______________________ Commission file number 0-19135 ---------------------------------------------------------- American Income Partners V-D Limited Partnership - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-3090151 - ------------------------------------ -------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 88 Broad St., Sixth Floor, Boston, MA 02110 - ----------------------------------------- -------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617) 854-5800 ------------------------------ Securities registered pursuant to Section 12(b) of the Act NONE ---------------------- Title of each class Name of each exchange on which registered - -------------------------------- -------------------------------------------- - -------------------------------- -------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: 480,227 Units Representing Limited Partnership Interest - -------------------------------------------------------------------------------- (Title of class) - -------------------------------------------------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| State the aggregate market value of the voting stock held by nonaffiliates of the registrant. Not applicable. Securities are nonvoting for this purpose. Refer to Item 12 for further information. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to security holders for the year ended December 31, 1999 (Part I and II) AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP FORM 10-K TABLE OF CONTENTS Page ---- PART I Item 1. Business 3 Item 2. Properties 4 Item 3. Legal Proceedings 5 Item 4. Submission of Matters to a Vote of Security Holders 5 PART II Item 5. Market for the Partnership's Securities and Related Security Holder Matters 6 Item 6. Selected Financial Data 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 8. Financial Statements and Supplementary Data 8 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 8 PART III Item 10. Directors and Executive Officers of the Partnership 9 Item 11. Executive Compensation 11 Item 12. Security Ownership of Certain Beneficial Owners and Management 11 Item 13. Certain Relationships and Related Transactions 12 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14-17 2 PART I Item 1. Business. (a) General Development of Business American Income Partners V-D Limited Partnership (the "Partnership") was organized as a limited partnership under the Massachusetts Uniform Limited Partnership Act (the "Uniform Act") on May 21, 1990 for the purpose of acquiring and leasing to third parties a diversified portfolio of capital equipment. Partners' capital initially consisted of contributions of $1,000 from the General Partner (AFG Leasing IV Incorporated) and $100 from the Initial Limited Partner (AFG Assignor Corporation). On September 27, 1990, the Partnership issued 480,227 units, representing assignments of limited partnership interests (the "Units"), to 806 investors. Unitholders and Limited Partners (other than the Initial Limited Partner) are collectively referred to as Recognized Owners. The Partnership has one General Partner, AFG Leasing IV Incorporated, a Massachusetts corporation and an affiliate of Equis Financial Group Limited Partnership (formerly known as American Finance Group), a Massachusetts limited partnership ("EFG"). The General Partner is not required to make any other capital contributions except as may be required under the Uniform Act and Section 6.1(b) of the Amended and Restated Agreement and Certificate of Limited Partnership (the "Restated Agreement, as amended"). (b) Financial Information About Industry Segments The Partnership is engaged in only one industry segment: the business of acquiring capital equipment and leasing the equipment to creditworthy lessees on a full payout or operating lease basis. (Full payout leases are those in which aggregate undiscounted, noncancellable rents exceed the acquisition cost of the leased equipment. Operating leases are those in which the aggregate undiscounted, noncancellable rental payments are less than the acquisition cost of the leased equipment.) Industry segment data is not applicable. (c) Narrative Description of Business The Partnership was organized to acquire a diversified portfolio of capital equipment subject to various full payout and operating leases and to lease the equipment to third parties as income-producing investments. More specifically, the Partnership's primary investment objectives were to acquire and lease equipment that would: 1. Generate quarterly cash distributions; 2. Preserve and protect invested capital; and 3. Maintain substantial residual value for ultimate sale. The Partnership has the additional objective of providing certain federal income tax benefits. The Closing Date of the Offering of Units of the Partnership was September 27, 1990. The initial purchase of equipment and the associated lease commitments occurred on September 28, 1990. The acquisition of the equipment and its associated leases is described in Note 3 to the financial statements included in Item 14, herein. The Restated Agreement, as amended, provides that the Partnership will terminate no later than December 31, 2000. However, the Partnership is a Nominal Defendant in a Class Action Lawsuit, the outcome of which could significantly alter the nature of the Partnership's organization and its future business operations. See Note 6 to the financial statements in the 1999 Annual Report. The Partnership has no employees; however, it is managed pursuant to a Management Agreement with EFG or one of its affiliates (the "Manager"). The Manager's role, among other things, is to (i) evaluate, select, negotiate, and consummate the acquisition of equipment, (ii) manage the leasing, re-leasing, financing, and refinancing of equipment, and (iii) arrange the resale of equipment. The Manager is compensated for such services as provided for in the Restated Agreement, as amended, described in Item 13 herein, and in Note 4 to the financial statements included in Item 14, herein. 3 The Partnership's investment in equipment is, and will continue to be, subject to various risks, including physical deterioration, technological obsolescence and defaults by lessees. A principal business risk of owning and leasing equipment is the possibility that aggregate lease revenues and equipment sale proceeds will be insufficient to provide an acceptable rate of return on invested capital after payment of all debt service costs and operating expenses. In addition, the leasing industry is very competitive. The Partnership is subject to considerable competition when equipment is re-leased or sold at the expiration of primary lease terms. The Partnership must compete with lease programs offered directly by manufacturers and other equipment leasing companies, including limited partnerships and trusts organized and managed similarly to the Partnership, and including other EFG sponsored partnerships and trusts, which may seek to re-lease or sell equipment within their own portfolios to the same customers as the Partnership. Many competitors have greater financial resources and more experience than the Partnership, the General Partner and the Manager. In addition, default by a lessee under a lease may cause equipment to be returned to the Partnership at a time when the General Partner or the Manager is unable to arrange for the re-lease or sale of such equipment. This could result in the loss of anticipated revenue. Revenue from individual lessees which accounted for 10% or more of lease revenue during the years ended December 31, 1999, 1998 and 1997 is incorporated herein by reference to Note 2 to the financial statements in the 1999 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with the Securities and Exchange Commission. EFG is a Massachusetts limited partnership formerly known as American Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general partnership and succeeded American Finance Group, Inc., a Massachusetts corporation organized in 1980. EFG and its subsidiaries (collectively, the "Company") are engaged in various aspects of the equipment leasing business, including EFG's role as Manager or Advisor to the Partnership and several other direct-participation equipment leasing programs sponsored or co-sponsored by EFG (the "Other Investment Programs"). The Company arranges to broker or originate equipment leases, acts as remarketing agent and asset manager, and provides leasing support services, such as billing, collecting, and asset tracking. The general partner of EFG, with a 1% controlling interest, is Equis Corporation, a Massachusetts corporation owned and controlled entirely by Gary D. Engle, its President, Chief Executive Officer and sole Director. Equis Corporation also owns a controlling 1% general partner interest in EFG's 99% limited partner, GDE Acquisition Limited Partnership ("GDE LP"). Mr. Engle established Equis Corporation and GDE LP in December 1994 for the sole purpose of acquiring the business of AFG. In January 1996, the Company sold certain assets of AFG relating primarily to the business of originating new leases, and the name "American Finance Group," and its acronym, to a third party. AFG changed its name to Equis Financial Group Limited Partnership after the sale was concluded. Pursuant to terms of the sale agreements, EFG specifically reserved the rights to continue using the name American Finance Group and its acronym in connection with the Partnership and the Other Investment Programs and to continue managing all assets owned by the Partnership and the Other Investment Programs. (d) Financial Information About Foreign and Domestic Operations and Export Sales Not applicable. Item 2. Properties. Incorporated herein by reference to Note 3 to the financial statements in the 1999 Annual Report. 4 Item 3. Legal Proceedings. Incorporated herein by reference to Note 6 to the financial statements in the 1999 Annual Report. Item 4. Submission of Matters to a Vote of Security Holders. None. 5 PART II Item 5. Market for the Partnership's Securities and Related Security Holder Matters. (a) Market Information There is no public market for the resale of the Units and it is not anticipated that a public market for resale of the Units will develop. (b) Approximate Number of Security Holders At December 31, 1999, there were 757 record holders of Units in the Partnership. (c) Dividend History and Restrictions Historically, the amount of cash distributions to be paid to the Partners has been determined on a quarterly basis. Each quarter's distribution may have varied in amount and was made 95% to the Limited Partners and 5% to the General Partner. Generally, cash distributions have been paid within 15 days after the completion of each calendar quarter. The Partnership is a Nominal Defendant in a Class Action Lawsuit described in Note 6 to the accompanying Annual Report. The proposed settlement to that lawsuit, if effected, will materially change the future organizational structure and business interests of the Partnership, as well as its cash distribution policies. In addition, commencing with the first quarter of 2000, the General Partner believes that it will be in the Partnership's best interests to suspend the payment of quarterly cash distributions pending final resolution of the Class Action Lawsuit. Accordingly, future cash distributions are not expected to be paid until the Class Action Lawsuit is adjudicated. Distributions in 1999 and 1998 were as follows:
General Recognized Total Partner Owners ----------- ----------- ----------- Total 1999 distributions $ 227,476 $ 11,374 $ 216,102 Total 1998 distributions 227,476 11,374 216,102 ----------- ----------- ----------- Total $ 454,952 $ 22,748 $ 432,204 =========== =========== ===========
Distributions payable were $56,869 at both December 31, 1999 and 1998. There are no formal restrictions under the Restated Agreement, as amended, that materially limit the Partnership's ability to pay cash distributions, except that the General Partner may suspend or limit cash distributions to ensure that the Partnership maintains sufficient working capital reserves to cover, among other things, operating costs and potential expenditures, such as refurbishment costs to remarket equipment upon lease expiration. Liquidity is especially important as the Partnership matures and sells equipment, because the remaining equipment base consists of fewer revenue-producing assets that are available to cover prospective cash disbursements. Insufficient liquidity could inhibit the Partnership's ability to sustain its operations or maximize the realization of proceeds from remarketing its remaining assets. Cash distributions consist of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings. "Distributable Cash From Operations" means the net cash provided by the Partnership's normal operations after general expenses and current liabilities of the Partnership are paid, reduced by any reserves for working 6 capital and contingent liabilities to be funded from such cash, to the extent deemed reasonable by the General Partner, and increased by any portion of such reserves deemed by the General Partner not to be required for Partnership operations and reduced by all accrued and unpaid Equipment Management Fees and, after Payout, further reduced by all accrued and unpaid Subordinated Remarketing Fees. Distributable Cash From Operations does not include any Distributable Cash From Sales or Refinancings. "Distributable Cash From Sales or Refinancings" means Cash From Sales or Refinancings as reduced by (i)(a) amounts realized from any loss or destruction of equipment which the General Partner determines shall be reinvested in similar equipment for the remainder of the original lease term of the lost or destroyed equipment, or in isolated instances, in other equipment, if the General Partner determines that investment of such proceeds will significantly improve the diversity of the Partnership's equipment portfolio, and subject in either case to satisfaction of all existing indebtedness secured by such equipment to the extent deemed necessary or appropriate by the General Partner, or (b) the proceeds from the sale of an interest in equipment pursuant to any agreement governing a joint venture which the General Partner determines will be invested in additional equipment or interests in equipment and which ultimately are so reinvested and (ii) any accrued and unpaid Equipment Management Fees and, after Payout, any accrued and unpaid Subordinated Remarketing Fees. "Cash From Sales or Refinancings" means cash received by the Partnership from sale or refinancing transactions, as reduced by (i)(a) all debts and liabilities of the Partnership required to be paid as a result of sale or refinancing transactions, whether or not then due and payable (including any liabilities on an item of equipment sold which are not assumed by the buyer and any remarketing fees required to be paid to persons not affiliated with the General Partner, but not including any Subordinated Remarketing Fees whether or not then due and payable) and (b) any reserves for working capital and contingent liabilities funded from such cash to the extent deemed reasonable by the General Partner and (ii) increased by any portion of such reserves deemed by the General Partner not to be required for Partnership operations. In the event the Partnership accepts a note in connection with any sale or refinancing transaction, all payments subsequently received in cash by the Partnership with respect to such note shall be included in Cash From Sales or Refinancings, regardless of the treatment of such payments by the Partnership for tax or accounting purposes. If the Partnership receives purchase money obligations in payment for equipment sold, which are secured by liens on such equipment, the amount of such obligations shall not be included in Cash From Sales or Refinancings until the obligations are fully satisfied. "Payout" is defined as the first time when the aggregate amount of all distributions to the Recognized Owners of Distributable Cash From Operations and Distributable Cash From Sales or Refinancings equals the aggregate amount of the Recognized Owners' original capital contributions plus a cumulative annual return of 11% (compounded quarterly and calculated beginning with the last day of the month of the Partnership's Closing Date) on their aggregate unreturned capital contributions. For purposes of this definition, capital contributions shall be deemed to have been returned only to the extent that distributions of cash to the Recognized Owners exceed the amount required to satisfy the cumulative annual return of 11% (compounded quarterly) on the Recognized Owners' aggregate unreturned capital contributions, such calculation to be based on the aggregate unreturned capital contributions outstanding on the first day of each fiscal quarter. Item 6. Selected Financial Data. Incorporated herein by reference to the section entitled "Selected Financial Data" in the 1999 Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Incorporated herein by reference to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 1999 Annual Report. 7 Item 8. Financial Statements and Supplementary Data. Incorporated herein by reference to the financial statements and supplementary data included in the 1999 Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. 8 PART III Item 10. Directors and Executive Officers of the Partnership. (a-b) Identification of Directors and Executive Officers The Partnership has no Directors or Officers. As indicated in Item 1 of this report, AFG Leasing IV Incorporated is the sole General Partner of the Partnership. Under the Restated Agreement, as amended, the General Partner is solely responsible for the operation of the Partnership's properties. The Recognized Owners have no right to participate in the control of the Partnership's operations, but they do have certain voting rights, as described in Item 12 herein. The names, titles and ages of the Directors and Executive Officers of the General Partner as of March 15, 2000 are as follows: DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER (See Item 13) Name Title Age Term - ---------------------- ---------------------------------- --- --------- Geoffrey A. MacDonald Chairman and a member of the Until a Executive Committee of EFG successor and President and a Director is duly of the General Partner 51 elected and Gary D. Engle President and Chief Executive qualified Officer and member of the Executive Committee of EFG and a Director of the General Partner 51 Gary M. Romano Executive Vice President and Chief Operating Officer of EFG and Clerk of the General Partner 40 James A. Coyne Executive Vice President of EFG 39 Michael J. Butterfield Senior Vice President, Finance and Treasurer of EFG and Treasurer of the General Partner 40 Sandra L. Simonsen Senior Vice President, Information Systems of EFG 49 Gail D. Ofgant Senior Vice President, Lease Operations of EFG 34 (c) Identification of Certain Significant Persons None. (d) Family Relationship No family relationship exists among any of the foregoing Partners, Directors or Executive Officers. 9 (e) Business Experience Mr. MacDonald, age 51, is a co-founder, Chairman and a member of the Executive Committee of EFG and President and a Director of the General Partner. Mr. MacDonald was also a co-founder, Director, and Senior Vice President of EFG's predecessor corporation from 1980 to 1988. Mr. MacDonald is President of American Finance Group Securities Corp. and a limited partner in Atlantic Acquisition Limited Partnership ("AALP") and Old North Capital Limited Partnership ("ONC"). Prior to co-founding EFG's predecessors, Mr. MacDonald held various executive and management positions in the leasing and pharmaceutical industries. Mr. MacDonald holds a M.B.A. from Boston College and a B.A. degree from the University of Massachusetts (Amherst). Mr. Engle, age 51, is President and Chief Executive Officer of EFG and sole shareholder and Director of its general partner, Equis Corporation and a member of the Executive Committee of EFG and President of AFG Realty Corporation. Mr. Engle joined EFG in 1990 as Executive Vice President and acquired control of EFG and its subsidiaries in December 1994. Mr. Engle is Vice President and a Director of certain of EFG's subsidiaries and affiliates, a limited partner in AALP and ONC and controls the general partners of AALP and ONC. Mr. Engle is also Chairman, Chief Executive Officer, and a member of the Board of Directors of Semele Group, Inc. ("Semele"). From 1987 to 1990, Mr. Engle was a principal and co-founder of Cobb Partners Development, Inc., a real estate and mortgage banking company. From 1980 to 1987, Mr. Engle was Senior Vice President and Chief Financial Officer of Arvida Disney Company, a large-scale community development company owned by Walt Disney Company. Prior to 1980, Mr. Engle served in various management consulting and institutional brokerage capacities. Mr. Engle has a MBA from Harvard University and a BS degree from the University of Massachusetts (Amherst). Mr. Romano, age 40, became Executive Vice President and Chief Operating Officer of EFG, and Secretary of Equis Corporation in 1996 and is Secretary or Clerk of several of EFG's subsidiaries and affiliates. Mr. Romano joined EFG in November 1989, became Vice President and Controller in April 1993 and Chief Financial Officer in April 1995. Mr. Romano assumed his current position in April 1996. Mr. Romano is also Vice President and Chief Financial Officer of Semele. Prior to joining EFG, Mr. Romano was Assistant Controller for a privately held real estate development and mortgage origination company that he joined in 1987. Previously, Mr. Romano was an Audit Manager at Ernst & Whinney (now Ernst & Young LLP), where he was employed from 1982 to 1986. Mr. Romano is a Certified Public Accountant and holds a B.S. degree from Boston College. Mr. Coyne, age 39, is Executive Vice President, Capital Markets of EFG and President, Chief Operating Officer and a member of the Board of Directors of Semele. Mr. Coyne joined EFG in 1989, remained until May 1993, and rejoined EFG in November 1994. In September 1997, Mr. Coyne was appointed Executive Vice President of EFG. Mr. Coyne is a limited partner in AALP and ONC. From May 1993 through November 1994, he was employed by the Raymond Company, a private investment firm, where he was responsible for financing corporate and real estate acquisitions. From 1985 through 1989, Mr. Coyne was affiliated with a real estate investment company and an equipment leasing company. Prior to 1985, he was with the accounting firm of Ernst & Whinney (now Ernst & Young LLP). He has a BS in Business Administration from John Carroll University, a Masters Degree in Accounting from Case Western Reserve University and is a Certified Public Accountant. Mr. Butterfield, age 40, is Senior Vice President, Finance and Treasurer of EFG and certain of its affiliates and is Treasurer of the General Partner and Semele. Mr. Butterfield joined EFG in June 1992, became Vice President, Finance and Treasurer of EFG and certain of its affiliates in April 1996 and was promoted to Senior Vice President, Finance and Treasurer of EFG and certain of its affiliates in July 1998. Prior to joining EFG, Mr. Butterfield was an Audit Manager with Ernst & Young LLP, which he joined in 1987. Mr. Butterfield was employed in public accounting and industry positions in New Zealand and London (UK) prior to coming to the United States in 1987. Mr. Butterfield attained his Associate Chartered Accountant (A.C.A.) professional qualification in New Zealand and has completed his CPA requirements in the United States. He holds a Bachelor of Commerce degree from the University of Otago, Dunedin, New Zealand. Ms. Simonsen, age 49, joined EFG in February 1990 and was promoted to Senior Vice President, Information Systems of EFG in April 1996. Prior to joining EFG, Ms. Simonsen was Vice President, Information Systems with Investors Mortgage Insurance Company, which she joined in 1973. Ms. Simonsen provided systems consulting 10 for a subsidiary of American International Group and authored a software program published by IBM. Ms. Simonsen holds a BA degree from Wilson College. Ms. Ofgant, age 34, is Senior Vice President, Lease Operations of EFG and certain of its affiliates. Ms. Ofgant joined EFG in July 1989, was promoted to Manager Lease Operations in April 1994, and became Vice President of Lease Operations in April 1996. In July 1998, Ms. Ofgant was promoted to Senior Vice President of Lease Operations. Prior to joining EFG, Ms. Ofgant was employed by Security Pacific National Trust Company. Ms. Ofgant holds a BS degree in Finance from Providence College. (f) Involvement in Certain Legal Proceedings None. (g) Promoters and Control Persons See Item 10 (a-b) above. Item 11. Executive Compensation. (a) Cash Compensation Currently, the Partnership has no employees. However, under the terms of the Restated Agreement, as amended, the Partnership is obligated to pay all costs of personnel employed full or part-time by the Partnership, including officers or employees of the General Partner or its Affiliates. There is no plan at the present time to make any officers or employees of the General Partner or its Affiliates employees of the Partnership. The Partnership has not paid and does not propose to pay any options, warrants or rights to the officers or employees of the General Partner or its Affiliates. (b) Compensation Pursuant to Plans None. (c) Other Compensation Although the Partnership has no employees, as discussed in Item 11(a), pursuant to section 10.4 of the Restated Agreement, as amended, the Partnership incurs a monthly charge for personnel costs of the Manager for persons engaged in providing administrative services to the Partnership. A description of the remuneration paid by the Partnership to the Manager for such services is included in Item 13, herein and in Note 4 to the financial statements included in Item 14, herein. (d) Compensation of Directors None. (e) Termination of Employment and Change of Control Arrangement There exists no remuneration plan or arrangement with the General Partner or its Affiliates which results or may result from their resignation, retirement or any other termination. Item 12. Security Ownership of Certain Beneficial Owners and Management. By virtue of its organization as a limited partnership, the Partnership has no outstanding securities possessing traditional voting rights. However, as provided in Section 11.2(a) of the Restated Agreement, as amended (subject to Sections 11.2(b) and 11.3), a majority interest of the Recognized Owners has voting rights with respect to: 11 1. Amendment of the Restated Agreement; 2. Termination of the Partnership; 3. Removal of the General Partner; and 4. Approval or disapproval of the sale of all, or substantially all, of the assets of the Partnership (except in the orderly liquidation of the Partnership upon its termination and dissolution). No person or group is known by the General Partner to own beneficially more than 5% of the Partnership's 480,227 outstanding Units as of March 1, 2000. The ownership and organization of EFG is described in Item 1 of this report. Item 13. Certain Relationships and Related Transactions. The General Partner of the Partnership is AFG Leasing IV Incorporated, an affiliate of EFG. (a) Transactions with Management and Others All operating expenses incurred by the Partnership are paid by EFG on behalf of the Partnership and EFG is reimbursed at its actual cost for such expenditures. Fees and other costs incurred during the years ended December 31, 1999, 1998 and 1997, which were paid or accrued by the Partnership to EFG or its Affiliates, are as follows:
1999 1998 1997 ----------- ----------- -------- Equipment management fees $ 9,848 $ 13,512 $ 30,066 Administrative charges 101,381 61,764 58,303 Reimbursable operating expenses due to third parties 158,780 390,029 84,399 ---------- ---------- ----------- Total $ 270,009 $ 465,305 $ 172,768 ========== ========== ===========
As provided under the terms of the Management Agreement, EFG is compensated for its services to the Partnership. Such services include acquisition and management of equipment. For acquisition services, EFG is compensated by an amount equal to 2.23% of Equipment Base Price paid by the Partnership. For management services, EFG is compensated by an amount equal to 5% of gross operating lease rental revenue and 2% of gross full payout lease rental revenue received by the Partnership. Both acquisition and management fees are subject to certain limitations defined in the Management Agreement. Administrative charges represent amounts owed to EFG, pursuant to Section 10.4 the Restated Agreement, as amended, for persons employed by EFG who are engaged in providing administrative services to the Partnership. Reimbursable operating expenses due to third parties represent costs paid by EFG on behalf of the Partnership which are reimbursed to EFG at actual cost. All equipment was acquired from EFG, one of its affiliates, including other equipment leasing programs sponsored by EFG, or from third-party sellers. The Partnership's acquisition cost was determined by the method described in Note 2 to the financial statements, included in Item 14, herein. All rents and proceeds from the sale of equipment are paid directly to either EFG or to a lender. EFG temporarily deposits collected funds in a separate interest-bearing escrow account prior to remittance to the Partnership. At December 31, 1999, the Partnership was owed $41,585 by EFG for such funds and the interest thereon. These funds were remitted to the Partnership in January 2000. 12 Certain affiliates of the General Partner own Units in the Partnership as follows: ---------------------------------------------------------------------- Number of Percent of Total Affiliate Units Owned Outstanding Units ---------------------------------------------------------------------- Atlantic Acquisition Limited Partnership 20,888 4.35% ---------------------------------------------------------------------- Old North Capital Limited Partnership 1,000 0.21% ---------------------------------------------------------------------- Atlantic Acquisition Limited Partnership ("AALP") and Old North Capital Limited Partnership ("ONC") are both Massachusetts limited partnerships formed in 1995 and affiliates of EFG. The general partners of AALP and ONC are controlled by Gary D. Engle. In addition, the limited partnership interests of ONC are owned by Semele Group, Inc. ("Semele"). Gary D. Engle is Chairman and CEO of Semele. (b) Certain Business Relationships None. (c) Indebtedness of Management to the Partnership None. (d) Transactions with Promoters See Item 13(a) above. 13 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) Documents filed as part of this report: (1) Financial Statements: Report of Independent Auditors........................................* Statement of Financial Position at December 31, 1999 and 1998.........................................* Statement of Operations for the years ended December 31, 1999, 1998 and 1997..................* Statement of Changes in Partners' Capital for the years ended December 31, 1999, 1998 and 1997..................* Statement of Cash Flows for the years ended December 31, 1999, 1998 and 1997..................* Notes to the Financial Statements.....................................* (2) Financial Statement Schedules: None required. (3) Exhibits: Except as set forth below, all Exhibits to Form 10-K, as set forth in Item 601 of Regulation S-K, are not applicable. A list of exhibits filed or incorporated by reference is as follows: Exhibit Number - ------ 2.1 Plaintiffs' and Defendants' Joint Motion to Modify Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing for Notice of, and Hearing on, the Proposed Settlement was filed in the Registrant's Annual Report on Form 10-K/A for the year ended December 31, 1998 as Exhibit 2.1 and is incorporated herein by reference. 2.2 Plaintiffs' and Defendants' Joint Memorandum in Support of Joint Motion to Modify Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing for Notice of, and Hearing on, the Proposed Settlement was filed in the Registrant's Annual Report on Form 10-K/A for the year ended December 31, 1998 as Exhibit 2.2 and is incorporated herein by reference. *Incorporated herein by reference to the appropriate portion of the 1999 Annual Report to security holders for the year ended December 31, 1999 (see Part II). 14 Exhibit Number - ------ 2.3 Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing for Notice of, and Hearing on, the Proposed Settlement (August 20, 1998) was filed in the Registrant's Annual Report on Form 10-K/A for the year ended December 31, 1998 as Exhibit 2.3 and is incorporated herein by reference. 2.4 Modified Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing for Notice of, and Hearing on, the Proposed Settlement (March 22, 1999) was filed in the Registrant's Annual Report on Form 10-K/A for the year ended December 31, 1998 as Exhibit 2.4 and is incorporated herein by reference. 2.5 Plaintiffs' and Defendants' Joint Memorandum in Support of Joint Motion to Further Modify Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing for Notice of, and Hearing on, the Proposed Settlement is filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 as Exhibit 2.5 and is included herein. 2.6 Second Modified Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing for Notice of, and Hearing on, the Proposed Settlement (March 5, 2000) is filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 as Exhibit 2.6 and is included herein. 4 Amended and Restated Agreement and Certificate of Limited Partnership included as Exhibit A to the Prospectus, which is included in Registration Statement on Form S-1 (No. 33-35148). 10.1 Promissory Note in the principal amount of $2,730,000 dated March 8, 2000 between the Registrant, as lender, and Echelon Residential Holdings LLC, as borrower, is filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 as Exhibit 10.1 and is included herein. 10.2 Pledge Agreement dated March 8, 2000 between Echelon Residential Holdings LLC (Pledgor) and American Income Partners V-A Limited Partnership, as Agent for itself and the Registrant, is filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 as Exhibit 10.2 and is included herein. 13 The 1999 Annual Report to security holders, a copy of which is furnished for the information of the Securities and Exchange Commission. Such Report, except for those portions thereof which are incorporated herein by reference, is not deemed "filed" with the Commission. 23 Consent of Independent Auditors. 99(a) Lease agreement with Awin Leasing Company, Inc. was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997 as Exhibit 99 (c) and is incorporated herein by reference. 99(b) Lease agreement with Ford Motor Company was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997 as Exhibit 99 (d) and is incorporated herein by reference. 99(c) Lease agreement with Transnet Limited was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997 as Exhibit 99 (e) and is incorporated herein by reference. 15 99(d) Lease agreement with Tenneco Packaging Company was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 as Exhibit 99 (f) and is incorporated herein by reference. 99(e) Lease agreement with Mobil Oil Corporation was filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 as Exhibit 99 (g) and is incorporated herein by reference. 99(f) Lease agreement with Continental Food Packaging, Inc. is filed in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 and is included herein. (b) Reports on Form 8-K: None. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on behalf of the registrant and in the capacity and on the date indicated. AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP By: AFG Leasing IV Incorporated, a Massachusetts corporation and the General Partner of the Registrant. By: /s/ Geoffrey A. MacDonald By: /s/ Gary D. Engle ------------------------------ ---------------------------------- Geoffrey A. MacDonald Gary D. Engle Chairman and a member of the President and Chief Executive Executive Committee of EFG and Officer and a member of the President and a Director of the Executive Committee of EFG and a General Partner Director of the General Partner (Principal Executive Officer) Date: March 30, 2000 Date: March 30, 2000 ---------------------------- -------------------------------- By: /s/ Gary M. Romano By: /s/ Michael J. Butterfield ------------------------------ ---------------------------------- Gary M. Romano Michael J. Butterfield Executive Vice President and Chief Senior Vice President, Finance and Operating Officer of EFG and Clerk Treasurer of EFG and Treasurer of the General Partner of the General Partner (Principal Financial Officer) (Principal Accounting Officer) Date: March 30, 2000 Date: March 30, 2000 ---------------------------- -------------------------------- 17 EXHIBIT INDEX 1999 Form 10-K Exhibit - ------- 2.5 Plaintiffs' and Defendants' Joint Memorandum in Support of Joint - Motion to Further Modify Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing for Notice of, and Hearing on, the Proposed Settlement 1- 2.6 Second Modified Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing for Notice of, and Hearing on, the Proposed Settlement (March 5, 2000) 10.1 Promissory Note in the principal amount of $2,730,000 dated March 8, 2000 between the Registrant, as lender, and Echelon Residential Holdings LLC, as borrower. 10.2 Pledge Agreement dated March 8, 2000 between Echelon Residential Holdings LLC (Pledgor) and American Income Partners V-A Limited Partnership, as Agent for itself and the Registrant. 99(f) Lease agreement with Continental Food Packaging, Inc. 18 EX-2.5 2 EXHIBIT 2.5 Exhibit 2.5 IN THE UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA CASE NO. 98-8030-CIV-HURLEY - -------------------------------------------------------------------------------- LEONARD ROSENBLUM, J/B INVESTMENT PARTNERS, SMALL AND REBECCA BARMACK, PARTNERS, BARBARA HALL, HENRY R. GRAHAM, ANNE R. GRAHAM, MARGO CORTELL, PATRICK M. RHODES, BERNICE M. HUELS, GARRETT N. VOIGHT, CLAIRE E. FULCHER, MARCELLA LEVY, RICHARD HODGSON, CITY PARTNERSHIPS, HELMAN PARSONS AND CLEVA PARSONS, on behalf of themselves and all others similarly situated and derivatively on behalf of the Nominal Defendants, Plaintiffs, vs. EQUIS FINANCIAL GROUP LIMITED PARTNERSHIP, a Massachusetts, Limited Partnership, EQUIS CORPORATION, a Massachusetts Corporation, GDE ACQUISITION LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AFG LEASING INCORPORATED, a Massachusetts Corporation, AFG LEASING IV INCORPORATED, a Massachusetts Corporation, AFG LEASING VI INCORPORATED, a Massachusetts Corporation, AFG AIRCRAFT MANAGEMENT CORPORATION, a Massachusetts Corporation, AFG ASIT CORPORATION, a Massachusetts Corporation, AF/AIP PROGRAMS LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, GARY D. ENGLE and GEOFFREY A. MACDONALD, Defendants, AIRFUND I INTERNATIONAL LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME 4 LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME 5 LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME 6 LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME 7 LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME 8 LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-A LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-B LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-A LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-C LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME FUND I-B, a Massachusetts Limited Partnership, AMERICAN INCOME FUND I-C, a Massachusetts Limited Partnership, AFG INVESTMENT TRUST A, a Delaware business trust, AFG INVESTMENT TRUST B, a Delaware business trust, AFG INVESTMENT TRUST C, a Delaware business trust, and AFG INVESTMENT TRUST D, a Delaware business trust, Nominal Defendants. - -------------------------------------------------------------------------------- 2 PLAINTIFFS' AND DEFENDANTS' JOINT MEMORANDUM IN SUPPORT OF JOINT MOTION TO FURTHER MODIFY ORDER PRELIMINARILY APPROVING SETTLEMENT, CONDITIONALLY CERTIFYING SETTLEMENT CLASS AND PROVIDING FOR NOTICE OF, AND HEARING ON, THE PROPOSED SETTLEMENT Plaintiffs ("Plaintiffs" or "Class Counsel") and Defendants submit this Joint Memorandum in support of their Joint Motion To Further Modify Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing For Notice of, And Hearing On, The Proposed Settlement. Background By Order dated August 20, 1998, this Court preliminarily approved the original Stipulation of Settlement dated July 16, 1998, conditionally certified the Settlement Class, and three sub-classes,(1) and provided for Notice of, and Hearing on, the proposed Settlement (the "Settlement"). A true and complete copy of the Court's August 20, 1998 Order (the "Preliminary Approval Order") is attached to the Motion as Exhibit 1. As part of the settlement of the claims brought by the Operating Partnership Sub-Class, the Settlement provides for Defendants to pursue and cause the consummation of an exchange transaction (the "Exchange"), pursuant to which eleven (11) of the limited partnerships named as Nominal Defendants (the "Operating Partnerships") would be restructured, and converted into a publicly-traded entity ("Newco") whose securities would be listed and traded on the NASDAQ National Market System or other national securities exchange. On or about August 24, 1998, four days after the Court's entry of the Preliminary Approval Order, Defendants filed a Consent Solicitation Statement (Form 14A) to be used in 3 connection with the solicitation of the Operating Partnership Sub-Class' consent to the Exchange for review with the U.S. Securities and Exchange Commission (the "SEC"). The parties had anticipated that the SEC would be able to complete the review within several months, and thereafter the Notice of the Settlement and fairness hearing would be sent to all Class members, with the Consent Solicitation Statement included only with the Notice sent to the Operating Partnership Sub-Class members. However, after encountering numerous unanticipated delays in the SEC review process, the parties entered into an Amended Stipulation of Settlement dated March 15, 1999 (the "Amended Stipulation"). On March 22, 1999, after a hearing, this Court entered an order modifying the preliminary approval order (the "Modified Preliminary Approval Order"). A true and complete copy of the Modified Preliminary Approval Order is attached the Motion as Exhibit 2. Pursuant to the Modified Preliminary Approval Order, the settlement process was bifurcated into two phases. In the first phase, the parties asked the Court to approve the settlement with respect to the claims brought by the so-called RSL and Trust Sub-Classes.(2) In the second phase, the parties will seek the Court's final approval of the settlement with respect to the claims brought by the Operating Partnership Sub-Class. Due to the delays caused by the SEC review process, certain financial information upon which the settlement was based has become outdated. Accordingly, the parties have agreed to further modifications to the Amended Stipulation to reflect updated valuations of - -------------------------------------------------------------------------------- (1) The three sub-classes are referred to as: (a) the "RSL Sub-Class"; (b) the "Operating Partnership Sub-Class'; and (c) the "Trust Sub-Class". (2) A hearing on the final approval of the settlement with respect to the RSL and Trust Sub-Classes was held on May 21, 1999. After that hearing, on May 26, 1999, the Court entered an order approving the settlement with respect to the RSL and Trust Sub-Classes. 4 the Operating Partnerships and Management Assets and revised allocations of Shares in Newco based on those valuations. The Proposed Amendments The following is a description of the proposed amendments to the Settlement that were negotiated on an arm's-length basis by Class Counsel and the Defendants. The vast majority of the original Stipulation and the Amended Stipulation have not been altered, and the sub-classes, which were conditionally certified by the Court in its August 20, 1998 Order, remain the same. The parties have agreed to the following amendments to the Amended Stipulation: (a) amend the $10 million cash distribution schedule (see Chart #1) in Section 2.2(a) to reflect the updated cash reserves held by each of the Operating Partnerships as of September 30, 1999; (b) amend the allocations of Newco Shares in Sections 2.2(c) and 2.2(d) (see Chart #2 and #3) to reflect updated valuations of the Operating Partnerships and Management Assets; (c) amend Section 2.2(d) to increase the payment by Equis of Newco Shares to the Operating Partnership Sub-Class members from $8 million to $9 million; (d) eliminate Section 2.2(g) which offered so-called "appraisal rights" for Participating Investors who did not wish to retain their Shares in Newco; (e) eliminate Section 2.2(i) which required that twenty-five percent (25%) of the Shares of Newco allocated to the Equis Owners be placed in an escrow account: and 5 (f) amend Section 4.1(i) to clarify that the Operating Partnerships may invest a total of $32 million in New Investments, to be increased only upon the further agreement of the parties, which amount corresponds to forty percent (40%) of the total aggregate net asset values of all the Operating Partnerships as of March 19, 1999. 1. Amendments Pertaining to Updated Financial Information, Including Valuations and Allocations The information which is fundamental to the terms of the original Stipulation and Amended Stipulation has become outdated. Specifically, the data supporting the valuation of the Operating Partnerships and the Management Assets was prepared as of September 1998 and now has changed. The Partnerships have sold various of their equipment assets and, in certain instances, they have entered into agreements to renew existing leases or otherwise to re-lease their equipment assets. In addition, information that was used to assess the potential market value of the common stock of Newco, and the value of the Management Assets to be contributed by the Defendants, such as price earnings ratios and other market multiples for companies comparable to Newco and the Management Assets, has changed due to the passage of time and resulting changes in the business environment and stock markets. Therefore, the parties believe that it is in the best interests of the limited partners of the Partnerships to update the valuation of the transaction using the same methodology employed before and to revise the Amended Stipulation to simplify and improve upon its terms. The Defendants have updated and revised the valuation information as of September 30, 1999 and based on this latest analysis and negotiations with Class Counsel, Equis has agreed to reduce its net allocation of Newco Shares for the Management Assets 6 to 14.72% from the prior 22.335%, representing a reduction of approximately 34%. Accordingly, the parties have amended Sections 2.2(c) and 2.2(d) of the Amended Stipulation to reflect the updated valuations of the Operating Partnerships and Management Assets. Set forth below is a schedule showing the revised valuations and allocations as of September 30, 1999 in comparison with the September 30, 1998 valuations and allocations (3): REVISED VALUATIONS AND ALLOCATIONS --------------------------------------------------------- September 30, 1999 September 30, 1998 --------------------------------------------------------- Value Percent Value Percent --------------------------------------------------------- Partnerships $64,686,726 85.28% $ 78,042,346 77.665% Management Assets 11,165,280 14.72% 22,443,000 22.335% --------------------------------------------------------- $75,852,006 100.00% $100,485,346 100.000% --------------------------------------------------------- 2. Amendments Pertaining To Increased Payment by Equis of Newco Shares from $8 Million to $9 Million and Elimination of Promissory Notes and Escrow Account Provisions Equis has also agreed to increase the reallocation of Newco Shares it would have received for the Management Assets to the Partnerships from $8 million to $9 million. By increasing the payment to $9 million, Equis will give up a much greater percentage of the estimated value of the Management Assets in favor of the limited partners (44.6% compared to the previous 26.3%). In exchange for the substantial benefits to the limited partners caused by the changes described above, the parties have agreed to eliminate the requirement that the Defendants defer retention of 25% of the Newco Shares allocated to them for the Management Assets in escrow pending attainment of future target net income - ---------- (3) The allocations above are net of the $10 million cash distribution and reflect the re-allocation of $9 million of value from Equis' Management Assets to the Partnerships. 7 levels. Under the prior settlement agreement, the Defendants would have received 16.75% of Newco's common stock in exchange for the Management Assets, assuming that none of the escrow shares were retained by the Defendants, and 22.335%, assuming that all of the escrow shares were retained by the Defendants. Under the revised settlement agreement, the Defendants will receive a smaller stock allocation of 14.72% for the Management Assets and the escrow concept will be eliminated. The elimination of the escrow shares concept will permit management to focus on Newco's long-term success while having the added benefit of accelerating finalization of the settlement to a date coincident to the date of Consolidation. In addition, the parties have agreed to eliminate the option for the limited partners to elect to receive promissory notes instead of common stock in order to simplify the capital structure of Newco and eliminate any form of "equity" debt service upon the Consolidation. This revision will cause all limited partners of the Operating Partnerships (and the general partners) to have uniform financial interests and will simplify the choices presented to the limited partners to either (a) object to their Partnership participating in the Consolidation, or (b) approve of its participation. 3. Amendments to Clarify Maximum Amount Which May be Reinvested In New Investments In its Modified Preliminary Approval Order, this Court approved amendments to the Settlement which permitted the Operating Partnerships, pending the completion of the SEC review process and ultimately the Exchange, to reinvest a certain portion of the money (40% of the total aggregate net asset value of the Partnerships) they have received from the sales of equipment. The parties now seek to clarify the Amended Stipulation to make clear that the Operating Partnerships may invest a total of $32 million in New 8 Investments, to be increased only upon the further agreement of the parties, which amount corresponds to forty percent (40%) of the total aggregate net asset values of all the Operating Partnerships as of March 19, 1999. Conclusion For the foregoing reasons, Plaintiffs and Defendants request that this Court grant the Joint Motion To Further Modify Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing For Notice of, And Hearing On, The Proposed Settlement. Respectfully submitted, this 24 day of February 2000, ATTORNEYS FOR DEFENDANTS: /s/ [ILLEGIBLE] -------------------------------------- RICHMAN GREER WEIL BRUMBAUGH MIRABITO & CHRISTENSEN, PA. Gerald F. Richman Joseph F. Hession Phillips Point - East Tower 777 South Flager Drive - Suite 1100 West Palm Beach, Florida 33401 (561) 803-3500 NIXON PEABODY LLP Deborah L. Thaxter, P.C. Gregory P. Deschenes 101 Federal Street Boston, MA 02110 - 1832 (617) 345-1000 9 ATTORNEYS FOR PLAINTIFFS: /s/ [ILLEGIBLE] /FOR/ -------------------------------------- LERNER & PEARCE, P.A. Allan M. Lerner 2888 East Oakland Park Boulevard Ft. Lauderdale, FL 33306 (954) 563-8111 /s/ [ILLEGIBLE] /FOR/ -------------------------------------- WINCHESTER HARWOOD HALEBIAN & FEFFER LLP Andrew D. Friedman 488 Madison Avenue, 8th Floor New York, NY 10022 (212) 935-7400 LAW OFFICES OF VINCENT T. GRESHAM Vincent T. Gresham 6065 Roswell Road, Ste. 1445 Atlanta, GA 30328 (770) 552-5270 GILMAN AND PASTOR Peter A. Lagorio One Boston Place Boston, MA 02108-4400 (617) 589-3750 BENJAMIN S. SCHWARTZ, CHARTERED Benjamin S. Schwartz 4600 Olympic Way Evergreen, CO 80439 (303) 670-5941 LAW OFFICES OF LIONEL Z. GLANCY Lionel Z. Glancy 1801 Avenue of the Stars, Suite 306 Los Angeles, CA 90067 (310) 201-9150 10 LAW OFFICES OF JAMES V. BASHIAN 500 Fifth Avenue, Ste. 2700 New York, NY 10110 (212) 921-4100 THOMAS A. HOADLEY, PA 310 Australian Avenue Palm Beach, FL 33480 (561) 792-9006 GOODKIND, LABATAN, RUDOFF & SUCHAROW, LLP Lynda J. Grant Robert N. Cappucci 100 Park Avenue New York, NY 10017 (212) 907-0700 LASKY & RIFKIND, LTD. Leigh Lasky 30 North LaSalle Street, Ste. 2140 Chicago, IL 60602 (312) 759-7670 HAROLD B. OBSTFELD, P.C. Harold B. Obstfeld 260 Madison Avenue New York, NY 10116 (212) 696-1212 11 EX-2.6 3 EXHIBIT 2.6 Exhibit 2.6 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA - -------------------------------------------------------------------------------- LEONARD ROSENBLUM, J/B INVESTMENT PARTNERS, SMALL and REBECCA BARMACK, PARTNERS, BARBARA HALL, HENRY R. GRAHAM, ANNE R. GRAHAM, MARGO CORTELL. PATRICK M RHODES, BERNICE M. HUELS, GARRETT N. VOIGHT, CLAIRE E. FULCHER, MARCELLA LEVY, RICHARD HODGSON, CITY PARTNERSHIPS, HELMAN PARSONS AND CLEVA PARSONS, on behalf of themselves and all others similarly situated and derivatively on behalf of the Nominal Defendants, Plaintiffs, v. Case No. 98-8030 EQUIS FINANCIAL GROUP LIMITED PARTNERSHIP, a Massachusetts Limited Partnership. EQUIS CORPORATION, a Massachusetts Corporation, GDE ACQUISITION LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AFG LEASING INCORPORATED, a Massachusetts Corporation, AFG LEASING IV INCORPORATED, a Massachusetts Corporation. AFG LEASING VI INCORPORATED, a Massachusetts Corporation, AFG AIRCRAFT MANAGEMENT CORPORATION, a Massachusetts Corporation, AFG ASIT CORPORATION. a Massachusetts Corporation, AF/AIP PROGRAMS LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, GARY D. ENGLE and GEOFFREY A. MACDONALD. Defendants, AIRFUND I INTERNATIONAL LIMITED PARTNERSHIP, a - -------------------------------------------------------------------------------- Massachusetts Limited Partnership, AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME 4 LIMITED PARTNERSHIP. a Massachusetts Limited partnership, AMERICAN INCOME 5 LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME 6 LIMITED PARTNERSHIP, a Massachusetts Limited partnership, AMERICAN INCOME 7 LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME 8 LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-A LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-B LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-C LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS III-D LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-A LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-B LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-C LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS IV-D LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS V-B LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS V-C LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP, a Massachusetts Limited Partnership, - -------------------------------------------------------------------------------- -2- 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, AMERICAN INCOME FUND I-E, a Massachusetts Limited Partnership, AFG INVESTMENT TRUST A, a Delaware business trust, AFG INVESTMENT TRUST B, a Delaware business trust, AFG INVESTMENT TRUST C, a Delaware business trust, and AFG INVESTMENT TRUST D, a Delaware business trust, Nominal Defendants. - -------------------------------------------------------------------------------- SECOND MODIFIED ORDER PRELIMINARILY APPROVING SETTLEMENT, CONDITIONALLY CERTIFYING SETTLEMENT CLASS AND PROVIDING FOR NOTICE OF, AND HEARING ON, THE PROPOSED SETTLEMENT WHEREAS, by Order dated August 20, 1998 (the "Preliminary Approval Order"), this Court issued an order in the above captioned action (the "Action") preliminarily approving the Settlement, conditionally certifying the settlement class and providing for notice of, and hearing on the proposed settlement, and by order dated March 22, 1999, this Court entered an order modifying the Preliminary Approval Order ("Modified Preliminary Approval Order"), and the parties to the Action have now agreed to further amend the Stipulation of Settlement ("Second Amended Stipulation"), this Court having read and considered the Second Amended Stipulation and the exhibits annexed thereto; -3- NOW, THEREFORE, IT IS HEREBY ORDERED THAT THE COURT FURTHER MODIFIES THE ORDER INSOFAR AS SET FORTH BELOW: 1. A hearing (the "Hearing") shall be held before this Court on Thursday, July 27, 2000, at 701 Clematis Street, West Palm Beach, Florida, 4:00 p.m., in Courtroom 5, to determine whether the proposed Settlement of the Action on the terms and conditions provided for in the Second Amended Stipulation, with respect to the Operating Partnership Sub-Class, including the issuance and exchange of the securities in the Exchange, is fair, reasonable and adequate and should be finally approved by the Court; whether a final judgment as provided in the Second Amended Stipulation should be entered herein with respect to the claims brought by the Operating Partnership Sub-Class: and whether Class Counsels application(s) for attorneys' fees, awards to the Class Plaintiffs and the reimbursement of out-of-pocket expenses should be granted. The Court may continue the Hearing without further notice to Class Members. 2. The Court approves, as to form and content, the Notices of Class Action Determination, Proposed Settlement and Fairness Hearing (the "Notices"), and finds that the mailing of the Notices substantially in the manner and form set forth in paragraph 3 of this Order meets the requirements of Rule 23 of the Federal Rules of Civil Procedure, the Constitution of the United States and any other applicable law, is the best notice practicable -4- under the circumstances, and constitutes due and sufficient notice to all persons entitled thereto. 3. (a) Within five (5) days following review by the SEC of the Consent Solicitation Statement (said 5th day being referred to hereafter as the "Notice Date), the Defendants shall cause a copy of the Notice and the Consent Solicitation Statement to be mailed to all Operating Partnership Sub-Class Members at their last known address as appearing in the records maintained by the Partnerships; (b) At or prior to the Hearing, Defendants' counsel shall serve and file with the Court proof, by affidavit or declaration, of such mailing to the Operating Partnership Sub-Class; and (c) All reasonable costs incurred in identifying and notifying Class Members shall be paid as set forth in the Second Amended Stipulation. In the event that the Settlement is not approved by the Court, or otherwise fails to become effective, Defendants shall not have any recourse against the Plaintiffs, Class Counsel or the Claims Administrator for such costs and expenses which have been incurred or advanced pursuant to the Second Amended Stipulation or Second Modified Court Order. -5- 4. Class Members may enter an appearance in the Action, at their own expense, individually or through counsel of their own choice. If they do not enter an appearance, they will be represented by Class Counsel. 5. Pending final determination of whether the Settlement should be approved, neither the Class Plaintiffs nor any Class Member, either directly, representatively, derivatively, or in any other capacity, shall commence or prosecute against any of the Defendants or the Released Parties, any action or proceeding in any court or tribunal asserting any of the Settled Claims. 6. Pending final determination of whether the Settlement should be approved, the Class Plaintiffs and all other Class Members are barred and permanently enjoined from (i) transferring, selling, assigning, giving, pledging, hypothesizing or otherwise disposing of any Units of the Operating Partnerships to any person other than a family member or in cases of divorce, incapacity or death of the Unitholder; (ii) granting a proxy to object to the Exchange; or (iii) commencing a tender offer for the Units. In addition, pending final determination of whether the Settlement should be approved, the General Partners of the Operating Partnerships are enjoined from (i) recording any transfers made in violation of the Order and (ii) providing the list -6- of investors in any Operating Partnership to any person for the purpose of conducting a tender offer. 7. In addition effective March 19, 1999, the Operating Partnerships may collectively invest up to forty percent (40%), to be Increased only upon agreement of the parties, of the total aggregate net asset values of all Operating Partnerships, in any investment, including, but not limited to additional equipment and other business activities, that the General Partner and the Manager reasonably believe to be consistent with the operating objectives and business interests of Newco after the Exchange (the New Investments"), subject to the following limitations: a. Under no circumstances may the Operating Partnership reduce its cash balance to an amount less than the amount required to pay the Operating Partnership's share of the $10 Million Cash Distribution provided for herein, plus such additional amount as the General Partner reasonably believes to be necessary to meet working capital and other cash reserve requirements of the Operating Partnership. b. To the extent that New Investments are made in additional equipment, the Manager will (i) defer, until the earlier of the effective date of the Exchange or December 31, 1999, any Acquisition Fees resulting therefrom and (ii) limit its Management Fee on all such assets to 2% of rental income. In the event the -7- Exchange is consummated, all such Acquisition and Management Fees related to the New Investments will be paid to Newco. c. To the extent that New Investments are not represented by equipment (ie: business acquisitions), the Manager will forego any Acquisition Fees and Management Fees related to such assets. d. Except for permitting New Investments, or as otherwise provided for herein, all other provisions of the Partnership Agreements governing the investment objectives and policies of the Partnership shall remain in full force and effect. e. In the event that an Operating Partnership has acquired New Investments pursuant to Section 4.1 (i)(a) through (d) of the Second Amended Stipulation, and is not a party to the Exchange, Newco shall acquire all such New Investments from such Operating Partnership for an amount equal to the Operating Partnership's net equity investment in such New Investments plus an annualized return thereon of 7.5%. f. In the event that an Operating Partnership has acquired New Investments pursuant to Section 4.1(i)(a) through (d) of the Second Amended Stipulation, and the Exchange is not consummated, the General Partner(s) shall (i) use its (their) best efforts to divest all such New Investments in an orderly and timely fashion, and (ii) cancel or return to each Operating Partnership any accumulated or deferred fees on such New Investments. g. The parties agree the Operating Partnerships may invest a total of $32 million in New Investments, to be increased only upon the further agreement of the -8- parties, which amount corresponds to forty percent (40%) of the total aggregate net asset values of all Operating Partnerships as of March 19, 1999. 8. Any Member of the Settlement Class may appear at the Settlement Hearings and object to (a) the approval of the proposed Settlement of the Action as fair, reasonable and adequate, (b) the entrance of a final judgment, and/or (c) the application(s) for attorneys' fees and expenses; provided, however, that no Class Member or any other person shall be heard or entitled to contest the approval of the terms and conditions of the proposed Settlement, or, if approved, the judgment to be entered thereto approving the same, or the attorneys' fees and expenses to Class Counsel, unless on or before fourteen (14) days prior to the Hearing, that person has served, by hand or by first-class mail, written objections and copies of any papers and briefs desired to be considered by the Court, together with proof of membership in the Settlement Class, upon both Plaintiffs' Lead Counsel: Andrew D. Friedman, Esq., Wechsler Harwood Halebian & Feffer, LLP, 488 Madison Avenue, New York, N.Y. 10022; and Defendants' Counsel: Deborah L. Thaxter, P.C., Nixon Peabody LLP, 101 Federal Street, Boston, Massachusetts 02110, and filed said objections, papers and briefs with the Clerk of the United States District Court for the Southern District of Florida. Any Member of the Settlement Class who does not make his or her objection in the manner provided herein shall be deemed to have waived such objection, including the right to appeal, and shall forever be foreclosed -9- from making any objection to the fairness or adequacy of the proposed Settlement as incorporated in the Second Amended Stipulation and the award of attorneys' fees and expenses to Class Counsel, unless otherwise ordered by the Court. 9. The Court reserves the right to continue the date of the Hearing and any continuation thereof without further notice to the members of the Settlement Class, and retains jurisdiction to consider all further applications arising out of or connected with the proposed Settlement. DONE and SIGNED in Chambers at West Palm Beach, Florida, this 5th day of March, 2000. /s/ Daniel T.K. Hurley ----------------------------------- Daniel T.K. Hurley United States District Judge Copies To All Counsel Of Record -10- EX-10.1 4 EXHIBIT 10.1 Exhibit 10.1 PROMISSORY NOTE --------------- $2,730,000 As of March 8, 2000 FOR VALUE RECEIVED, the undersigned, Echelon Residential Holdings LLC, a Delaware limited liability company with a principal address of 450 Carillon Parkway, Suite 200, St. Petersburg, FL 33716 (hereinafter "the Maker"), promises to pay to the order of American Income Partners V-D Limited Partnership, with a principal address of 88 Broad Street, Boston, MA 02110 (together with any other holder hereof, the "Payee") or at such address or at such other place as the Payee may from time to time designate in writing, the principal sum of TWO MILLION SEVEN HUNDRED THIRTY THOUSAND DOLLARS ($2,730,000), together with interest on the unpaid principal balance hereof from time to time at a fixed rate equal to fourteen percent (14.0%) per annum through that date which is twenty-four (24) months from the date hereof and eighteen percent (18%) per annum thereafter. Such interest shall accrue and compound on a monthly basis but shall not be due and payable until the Maturity Date. In the absence of demonstrable error, the books and records of the Payee shall constitute conclusive evidence of the unpaid principal balance hereof from time to time. This Note may be prepaid, in whole or from time to time in part, at any time, without premium or penalty. All payments shall be applied first to collection costs, then to accrued interest and any remainder in payment of principal. The principal amount prepaid, if any, may not at any time be reborrowed. If not sooner paid, all outstanding principal and accrued and unpaid interest thereon shall be due and payable on that date which is thirty (30) months from the date hereof (the "Maturity Date"). All payments hereunder shall be payable in lawful money of the United States which shall be legal tender for public and private debts at the time of payment. Interest shall be calculated on the basis of a year consisting of 360 days and payable for the actual number of days elapsed (including the first day but excluding the last day), including any time extended by reason of Saturdays, Sundays and holidays. It is expressly agreed that the occurrence of any one or more of the following shall constitute an "Event of Default" hereunder: (a) any failure to pay any amount or installment of interest or principal and interest whereon the same is payable as above expressed; (b) any representation or warranty made by the Maker in connection herewith be untrue when made or not be fulfilled; (c) failure to observe or perform any other covenant, agreement, condition, term or provision hereof; (d) the Borrower or any guarantor or any member or joint venturer in the Borrower shall be involved in financial difficulties as evidenced by: (1) its commencement of a voluntary case under Title 11 of the United States Code as from time to time in effect, or its authorizing, by appropriate proceedings, the commencement of such a voluntary case; (2) its filing an answer or other pleading admitting or failing to deny the material allegations of a petition filed against it commencing an involuntary case under said Title 11, or seeking, consenting to or acquiescing in the relief therein provided, or by its failing to controvert timely the material allegations of any such petition; (3) the entry of an order for relief in any involuntary case commenced under said Title 11; (4) its seeking relief as a debtor under any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or its consenting to or acquiescing in such relief; (5) the entry of an order by a court of competent jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or approving its liquidation, reorganization or any modification or alteration of the rights of creditors, or (iii) assuming custody of, or appointing a receiver or other custodian for, all or a substantial part of its property; or (6) its making an assignment for the benefit of, or entering into a composition with, its creditors, or appointing or consenting to the appointment of a receiver or other custodian for all or a substantial part of its property. If any such Event of Default hereunder shall occur, the Payee may declare to be immediately due and payable the then outstanding principal balance under this Note, together with all accrued and unpaid interest thereon, and all other amounts payable to the Payee hereunder, whereupon all such amounts shall become and be due and payable immediately. The failure of the Payee to exercise said option to accelerate shall not constitute a waiver of the right to exercise the same at any other time. The Maker will pay on demand all costs and expenses, including reasonable attorneys' fees, incurred or paid by the Payee in enforcing or collecting any of the obligations of the Maker hereunder. The Maker agrees that all such costs and expenses and all other expenditures by the Payees on account hereof which are not reimbursed by the Maker immediately upon demand, and all amounts due under this Note after maturity and any amounts due hereunder if an Event of Default shall occur hereunder shall bear interest at a rate equal to the lesser of eighteen percent (18.0%) per annum or the maximum rate permitted by law until such expenditures are repaid or this Note and such amounts are paid in full to the Payee. Notwithstanding any other provision hereof, the Maker shall not be required to pay any amount pursuant hereto which is in excess of the maximum amount permitted under applicable law. It is the intention of the parties hereto to conform strictly to any applicable usury law, and it is agreed that if any amount contracted for, chargeable or receivable under this Note shall exceed the maximum amount permitted under any such law, any such excess shall be deemed a mistake and cancelled automatically and, if theretofore paid, shall be refunded to the Maker or, at the Payee's sole option, shall be applied as set forth above. All notices required or permitted to be given hereunder shall be given in the writing and shall be effective when mailed, postage prepaid, by registered or certified mail, addressed in the case of the Maker to it at the address of the Maker set forth above and in the case of the Payee to it at the address of the Payee set forth above or to such other address as either the Maker or the Payee may from time to time specify by like notice. All of the provisions of this Note shall be binding upon and inure to the benefit of the Maker and the Payee and their respective successors and assigns. This Note shall be governed by and construed in accordance with the internal laws of The Commonwealth of Massachusetts. The Maker and every indorser and guarantor hereof hereby consents to any extension of time of payment hereof, release of all or any part of the security for the payment hereof, or release of any party liable for this obligation, and waives presentment for payment, demand, protest and notice of dishonor. Any such extension or release may be made without notice to the Maker and without discharging their liability. IN WITNESS WHEREOF, the Maker has executed and delivered this Note, under seal, on the day and year first written above. ECHELON RESIDENTIAL HOLDINGS LLC /s/ James A. Coyne ------------------ James A. Coyne, Manager BOS364119.1 EX-10.2 5 EXHIBIT 10.2 Exhibit 10.2 PLEDGE AGREEMENT (PARTNERSHIPS) FOR VALUE RECEIVED, the undersigned, Echelon Residential Holdings LLC, a Delaware limited liability company (the "Pledgor") and the sole member of Echelon Residential LLC, a Delaware limited liability company ("Residential"), hereby assigns and pledges to American Income Partners V-A Limited Partnership, a Massachusetts limited partnership, in its capacity as collateral agent (the "Agent") for itself and each of American Income Partners V-B Limited Partnership, a Massachusetts limited partnership, American Income Partners V-C Limited Partnership, a Massachusetts limited partnership, American Income Partners V-D Limited Partnership, a Massachusetts limited partnership, American Income Fund I-A Limited Partnership, a Massachusetts limited partnership, American Income Fund I-B Limited Partnership, a Massachusetts limited partnership, American Income Fund I-C Limited Partnership, a Massachusetts limited partnership, American Income Fund I-D Limited Partnership, a Massachusetts limited partnership, American Income Fund I-E Limited Partnership, a Massachusetts limited partnership, AIRFUND International Limited Partnership, a Massachusetts limited partnership and AIRFUND II International Limited Partnership, a Massachusetts limited partnership and their respective successors and assigns (collectively, the "Lenders"), and grants to the Agent a security interest in all of the Pledgor's right, title and interest in and to its membership interests in Residential, wherever located and whether now owned or hereafter acquired, together with (i) all payments and distributions, whether in cash, property or otherwise, at any time owing or payable to the Pledgor on account of its interest as a member of Residential, (ii) all of the Pledgor's rights and interests under the operating agreement of Residential (the "Operating Agreement"), including all voting and management rights and all rights to grant or withhold consents or approvals, (iii) all rights of access and inspection to and use of all books and records, including computer software and computer software programs, of Residential, (iv) all other rights, interests, property or claims to which the Pledgor may be entitled to in its capacity as a member of Residential, (v) any and all substitutions and replacements thereof, including any securities or other instruments into which any of the foregoing may at any time and from time to time be converted or exchanged, and (vi) any and all proceeds and products of the foregoing, cash and non-cash (collectively, the "Pledged Interest"). The Pledgor irrevocably waives any and all provisions of the Operating Agreement that (i) prohibit, restrict, condition or otherwise affect the grant hereunder of any lien, security interest or encumbrance on the Pledged Interest or any enforcement action which may be taken in respect of any such lien, security interest or encumbrance, or (ii) otherwise conflict with the terms of this Pledge Agreement. This Pledge Agreement is entered into in connection with and secures the payment of amounts due to the Lenders from the Pledgor pursuant to those certain Promissory Notes of even date herewith (each a "Note" and collectively, the "Notes") made by the Pledgor in favor of each of the Lenders, together with all covenants and agreements contained herein (collectively, the "Secured Liabilities"). The Pledgor and each of the Lenders hereby represent, warrant, covenant and agree as follows: 1. Pledgor hereby represents and warrants that (i) the Operating Agreement, a true, correct and complete copy of which is attached hereto as Exhibit A, is in full force and effect and has not been amended or modified in any respect, except for such amendments or modifications as are attached to the copy thereof delivered herewith; (ii) it is a duly constituted and is the sole member of Residential pursuant to the Operating Agreement, although such membership is not evidenced by any certificate issued by Residential; (iii) the Pledged Interest are validly issued, non-assessable and fully paid membership interests in Residential; (iv) Pledgor has full right, power and authority to make this Pledge Agreement (including the provisions enabling the Agent, upon the occurrence of an Event of Default, to exercise the voting or other rights provided for herein, under the Operating Agreement and under applicable law, without the consent, approval or authorization of, or notice to, any other person, including any regulatory authority or any person having any interest in Residential, except for such consents as have been duly received; and (v) this Pledge Agreement has been duly executed and delivered by the Pledgor and is the legal, valid and binding obligation of the Pledgor enforceable in accordance with its terms. 2. Pledgor shall protect and preserve the Pledged Interest. Pledgor will not permit or agree to any amendment or modification of the Operating Agreement, or waive any rights or benefits under the Operating Agreement, without the prior written consent of the Agent. Pledgor hereby represents and warrants that Pledgor has and will continue to have good and marketable title to the Pledged Interest, free and clear of all liens, encumbrances and security interests, except those created hereby, and agrees to preserve such unencumbered title and the Lenders' security interest in the Pledged Interest and to defend it against all parties. Risk of loss of, damage to, or destruction of, the Pledged Interest shall be the responsibility of Pledgor, although the Agent shall exercise reasonable care in the custody and preservation of the Pledged Interest in its possession to the extent applicable. The Agent shall be deemed to have exercised such reasonable care if it takes such action for that purpose as the Pledgor shall reasonably request in writing, but no omission to do any act not requested by the Pledgor shall be deemed a failure to exercise reasonable care, and no omission to comply with any request of the Pledgor shall of itself be deemed a failure to exercise reasonable care. The Pledgor shall execute and deliver to the Agent and the Lenders any financing statements, continuation statements, assignments, or other instruments, or take any other action deemed necessary by the Agent or the Lenders to perfect or continue the perfection of its security interest in the Pledged Interest. The Agent is hereby irrevocably appointed attorney-in-fact of the Pledgor to do all acts and things which the Agent may deem necessary or advisable to perfect and continue perfected their security interest in the Pledged Interest. The address of the Pledgor is listed below the Pledgor's signature hereto. 3. This Pledge Agreement has been entered into under and pursuant to the Massachusetts Uniform Commercial Code, except that perfection and the effect of perfection of Secured Party's security interest in collateral in another jurisdiction will be governed by the Uniform Commercial Code ("UCC") of such other jurisdiction, and the Agent has all the rights 2 and remedies of a secured party under the Uniform Commercial Code or applicable legislation of the applicable jurisdiction. If any one or more of the provisions hereof should for any reason be invalid, illegal or unenforceable in any respect, the remaining provisions contained herein shall not in any way be affected or impaired thereby, and such invalid, illegal, or unenforceable provision shall be deemed modified to the extent necessary to render it valid while most nearly preserving its original intent. The Pledgor has (i) caused Residential to duly register the security interest granted hereby on Residential's books and has furnished the Agent with evidence thereof in form and substance satisfactory to the Agent, (ii) has duly executed and caused any financing statements with respect to the Pledged Interest to be filed in such a manner and in such places as may be required by applicable law in order to fully protect the rights of the Agent and the Lenders hereunder and (iii) will cause any financing statements with respect to the Pledged Interest at all times to be kept recorded and filed at the Pledgor's sole cost and expense in such a manner and in such places as may be required by law in order to fully perfect the interests and protect the rights of the Agent and the Lenders hereunder. 4. Any one or more of the following events shall constitute an "Event of Default" hereunder: (i) the Pledgor shall fail to comply with, observe or perform any obligation hereunder or shall fail to make any payment when due under any Note; (ii) any representation or warranty made or furnished to the Agent or the Lenders by or on behalf of the Pledgor in connection with this Pledge Agreement or any document or instrument furnished, or to be furnished, in connection herewith or therewith, proves to have been untrue in any material respect when so made or furnished; (iii) the Pledgor shall commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), file a petition seeking to take advantage of any other laws relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts or the marshaling of assets ("Bankruptcy Laws"), consent to or fail to contest in a timely and appropriate manner, any petition filed against the Pledgor in any involuntary case under any Bankruptcy Laws or other laws, apply for, consent to, indicate its approval of, acquiesce to or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator for the Pledgor or of a substantial part of the Pledgor's property, admit in writing its inability to pay debts as they become due, make a general assignment for the benefit of creditors, make a conveyance fraudulent as to creditors under any state or federal law, or take any action for the purpose of effecting any of the foregoing; (iv) a case or other proceeding shall be commenced against the Pledgor in any court of competent jurisdiction seeking relief under any Bankruptcy Laws, (v) the appointment of a trustee, receiver, custodian, liquidator or the like for the Pledgor, or of all or any substantial part of its assets; or (vi) the Pledgor shall fail to perform any of its obligations under the Operating Agreement. 5. During the continuance of an Event of Default, the Agent shall have, in addition to the rights, powers and authorizations to collect the sums assigned hereunder, all rights and remedies of a secured party under the Uniform Commercial Code and under other applicable law with respect to the Pledged Interest, including, without limitation, the following rights and remedies: (i) the Agent may, in its sole discretion, exercise any management or voting rights relating to the Pledged Interest (whether or not the same shall have been transferred into its name 3 or the name of its nominee or nominees) for any lawful purpose, including for the amendment or modification of the Operating Agreement or other governing documents or the liquidation of the assets of Residential, give all consents, waivers, approvals, and ratifications in respect of such Pledged Interest, and otherwise act with respect thereto as though it were the outright owner thereof (the Pledgor hereby irrevocably constituting and appointing the Lenders the proxy and attorney-in-fact of the Pledgor, with full power and authority of substitution, to do so); (ii) the Agent may, in its sole discretion, demand, sue for, collect, compromise, or settle any rights or claims in respect of the Pledged Interest; (iii) the Agent may, in its sole discretion, sell, resell, assign, deliver, or otherwise dispose of any or all of the Pledged Interest, for cash or credit or both and upon such terms, in such manner, at such place or places, at such time or times, and to such persons or entities as the Agent think expedient, all without demand for performance by the Pledgor or any notice or advertisement whatsoever except as expressly provided herein or as may otherwise be required by applicable law; and (iv) the Agent may, in its sole discretion, cause all or any part of the Pledged Interest held by it to be transferred into its name or the name of its nominee or nominees. The proceeds of any collection, sale or other disposition of the Pledged Interest or any part thereof shall, after the Agent has made all deductions of expenses, including but not limited to attorneys' fees and other expenses incurred in connection with repossession, collection, sale, or disposition of the Pledged Interest or in connection with the enforcement of Agent's rights with respect to the Pledged Interest in any insolvency, bankruptcy or reorganization proceedings, be applied against any of the Secured Liabilities, whether or not all the same shall be then due and payable, in such manner as the Agent and the Lenders shall in their sole discretion determine. No single or partial exercise by the Agent of any right, power or remedy hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Each right, power and remedy herein specifically granted to the Agent or otherwise available to them shall be cumulative, and shall be in addition to every other right, power, and remedy herein specifically given or now or hereafter existing at law, in equity, or otherwise. Each such right, power and remedy, whether specifically granted herein or otherwise existing, may be exercised at any time and from time to time and as often and in such order as may be deemed expedient by the Agent in its sole discretion. Nothing contained in this Agreement shall be construed to require the Agent to take any action with respect to the Pledged Interest, whether by way of foreclosure or otherwise and except as required by any Operating Agreement, in order to permit the Agent to become a substitute member of Residential under the Operating Agreement. 6. If any notification of intended sale of any of the Pledged Interest is required by law, such notification shall be deemed reasonable if mailed at least ten (10) days before such sale, postage prepaid, (i) addressed to the Pledgor at its notice address herein, and (ii) to any other secured party from whom the Agent or the Lenders have received (prior to notification of the Pledgor or the Pledgor's renunciation of his rights after default) written notice of a claim of an interest in the Pledged Interest. 4 7. Any delay or omission by the Agent or the Lenders to exercise any rights or powers arising from any default or any partial exercise thereof shall not impair any such rights or powers, nor shall the same be construed to be a waiver thereof or any acquiescence therein, nor shall any action or non-action by the Agent or the Lenders in the event of any default alter or impair the rights of the Agent or the Lenders in respect of any subsequent default, or impair or affect any rights or powers resulting therefrom. This Pledge Agreement shall remain in full force and effect until such time as all amounts due under the Notes shall have been fully and irrevocably paid in full. 8. All notices, statements, requests, and demands given to or made upon the any party hereto shall be given or made to such party at the address of such party as set forth below its signature block herein. 9. The provisions of this Pledge Agreement shall be binding upon the Pledgor, the Agent and the Lenders, and their respective heirs, personal representatives, successors and assigns. 10. The Agent is hereby appointed by the Indemnities as their collateral agent and each of the Lenders irrevocably authorize the Agent to act as the collateral agent of such Lender. The Agent shall not have a fiduciary relationship in respect of any Lender by reason of this Pledge Agreement, and the nature of Agent's duties shall be mechanical and administrative in nature only. The Agent shall have and may exercise such powers hereunder as are specifically delegated to or required by at least two-thirds of the Lenders (the "Required Lenders") by the terms hereof or under any related document, together with such powers as are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders or any obligation to the Lenders to take any action hereunder except any action hereunder specifically provided hereunder or under any related document to be taken by the Lenders. Notwithstanding the foregoing, if the Agent shall receive a specific written instruction which shall be inconsistent in any way with the foregoing, or which contradicts or purportedly supersedes a previous instruction, the Agent agrees to honor and be bound by such written instruction. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to the Lenders for any action taken or omitted to be taken by it or them hereunder except for its or their own gross negligence or willful misconduct. The Lenders agree to keep the Agent informed on a prompt and timely basis of any information required by the Agent to perform its duties hereunder and under any related documents. If the Agent shall request instructions from the Lenders with respect to any act or action (including failure to act) in connection with this Pledge Agreement or any related documents, the Agent shall be entitled to refrain from such act or taking such action unless and until the Agent 5 shall have received instructions from the Required Lenders, and the Agent shall not incur liability to any person by reason of so refraining. The Agent may consult with legal counsel, independent public accountants and any other experts selected by it. Notwithstanding anything herein to the contrary, neither the Agent nor its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by any of them in good faith reliance upon the advice of such persons. The Lenders severally (on the basis of the pro rata principal amounts of each of the Notes) agree to reimburse and indemnify the Agent for and against any expenses incurred by the Agent on behalf of the Lenders in connection with the administration and enforcement of this Pledge Agreement and any related documents and any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in performing its duties hereunder or under any related documents or in any way relating to or arising out of this Pledge Agreement or any related documents; provided, however that the Lenders shall not be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Agent. This Agent may be removed by the Lenders at any time upon delivery of written notice to the Agent and the Pledgor. [Remainder of page left blank intentionally.] 6 IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have caused their authorized representatives to execute this Pledge Agreement under seal as of the 8th day of March, 2000. ECHELON RESIDENTIAL HOLDINGS LLC By: /s/ James A. Coyne ------------------ James A. Coyne, Member Address: 450 Carillon Parkway, Suite 200 St. Petersburg, FL 33716 AMERICAN INCOME PARTNERS V-A LIMITED PARTNERSHIP By: AFG Leasing IV Incorporation, their general partner By: /s/ Gail D. Ofgant ------------------ Gail Ofgant, Senior Vice President Address: 88 Broad Street Boston, MA 02110 The undersigned hereby acknowledges the foregoing Pledge Agreement and consents to the terms contained therein. ECHELON RESIDENTIAL LLC By: Equis/Echelon Management Corp., its Manager By: /s/ Michael J. Butterfield -------------------------- Michael J. Butterfield, Vice Pres. Address: 450 Carillon Parkway, Suite 200 St. Petersburg, FL 33716 7 EX-13 6 EXHIBIT 13 Exhibit 13 AMERICAN INCOME PARTNERS V American Income Partners V-D Limited Partnership Annual Report to the Partners, December 31, 1999 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP INDEX TO ANNUAL REPORT TO THE PARTNERS Page ---- SELECTED FINANCIAL DATA 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3-6 FINANCIAL STATEMENTS: Report of Independent Auditors 7 Statement of Financial Position at December 31, 1999 and 1998 8 Statement of Operations for the years ended December 31, 1999, 1998 and 1997 9 Statement of Changes in Partners' Capital for the years ended December 31, 1999, 1998 and 1997 10 Statement of Cash Flows for the years ended December 31, 1999, 1998 and 1997 11 Notes to the Financial Statements 12-21 ADDITIONAL FINANCIAL INFORMATION: Schedule of Excess (Deficiency) of Total Cash Generated to Cost of Equipment Disposed 22 Statement of Cash and Distributable Cash From Operations, Sales and Refinancings 23 Schedule of Costs Reimbursed to the General Partner and its Affiliates as Required by Section 10.4 of the Amended and Restated Agreement and Certificate of Limited Partnership 24 SELECTED FINANCIAL DATA The following data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the financial statements. For each of the five years in the period ended December 31, 1999:
Summary of Operations 1999 1998 1997 1996 1995 - -------------------- ---------- ---------- ---------- ---------- ------- Lease revenue $ 247,818 $ 321,107 $ 653,111 $1,816,273 $2,179,607 Net income $ 296,465 $ 575,168 $ 720,339 $1,656,646 $ 733,938 Per Unit: Net income $ 0.59 $ 1.14 $ 1.42 $ 3.28 $ 1.45 Cash distributions $ 0.45 $ 0.45 $ 0.56 $ 4.52 $ 2.00 Financial Position - -------------------- Total assets $4,069,905 $4,032,879 $3,443,037 $3,551,413 $4,132,437 Total long-term obligations $ -- $ -- $ -- $ 307,479 $ 86,802 Partners' capital $3,780,387 $3,711,398 $3,363,706 $2,927,711 $3,555,934
2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Year ended December 31, 1999 compared to the year ended December 31, 1998 and the year ended December 31, 1998 compared to the year ended December 31, 1997 Certain statements in this annual report of American Income Partners V-D Limited Partnership (the "Partnership") that are not historical fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to a variety of risks and uncertainties. There are a number of factors that could cause actual results to differ materially from those expressed in any forward-looking statements made herein. These factors include, but are not limited to, the outcome of the Class Action Lawsuit described in Note 6 to the accompanying financial statements and the remarketing of the Partnership's equipment. Overview The Partnership was organized in 1990 as a direct-participation equipment leasing program to acquire a diversified portfolio of capital equipment subject to lease agreements with third parties. Presently, the Partnership is a Nominal Defendant in a Class Action Lawsuit, the outcome of which could significantly alter the nature of the Partnership's organization and its future business operations. See Note 6 to the accompanying financial statements. Pursuant to the Restated Agreement, as amended, the Partnership is scheduled to be dissolved by December 31, 2001. Year 2000 Issue The Partnership uses information systems provided by Equis Financial Group Limited Partnership ("EFG") and has no information systems of its own. EFG completed all Year 2000 readiness work prior to December 31, 1999 and did not experience any significant problems. Additionally, EFG is not aware of any outside customer or vendor that experienced a Year 2000 issue that would have a material effect on the Partnership's results of operations, liquidity, or financial position. However, EFG has no means of ensuring that all customers, vendors and third-party servicers have conformed to Year 2000 standards. The effect of this risk to the Partnership is not determinable. Results of Operations For the year ended December 31, 1999, the Partnership recognized lease revenue of $247,818, compared to $321,107 and $653,111 for the years ended December 31, 1998 and 1997, respectively. The decrease in lease revenue from 1997 to 1999 resulted principally from lease term expirations and the sale of equipment. In the future, lease revenue will continue to decline due to lease term expirations and equipment sales. The Partnership also earns interest income from temporary investments of rental receipts and equipment sales proceeds in short-term instruments. The Partnership's equipment portfolio includes certain assets in which the Partnership holds a proportionate ownership interest. In such cases, the remaining interests are owned by an affiliated equipment leasing program sponsored by EFG. Proportionate equipment ownership enabled the Partnership to further diversify its equipment portfolio at inception by participating in the ownership of selected assets, thereby reducing the general levels of risk which could have resulted from a concentration in any single equipment type, industry or lessee. The Partnership and each affiliate individually report, in proportion to their respective ownership interests, their respective shares of assets, liabilities, revenues, and expenses associated with the equipment. In 1999, the Partnership sold fully depreciated equipment to existing lessees and third parties. These sales resulted in a net gain, for financial statement purposes, of $191,523 compared to a net gain $672,899 in 1998 on equipment having a net book value of $272,578 and a net gain of $389,295 in 1997 on equipment having a net book value of $709,387. 3 It cannot be determined whether future sales of equipment will result in a net gain or a net loss to the Partnership, as such transactions will be dependent upon the condition and type of equipment being sold and its marketability at the time of sale. In addition, the amount of gain or loss reported for financial statement purposes is partly a function of the amount of accumulated depreciation associated with the equipment being sold. The ultimate realization of residual value for any type of equipment is dependent upon many factors, including EFG's ability to sell and re-lease equipment. Changing market conditions, industry trends, technological advances, and many other events can converge to enhance or detract from asset values at any given time. EFG attempts to monitor these changes in order to identify opportunities which may be advantageous to the Partnership and which will maximize total cash returns for each asset. The total economic value realized for each asset is comprised of all primary lease term revenue generated from that asset, together with its residual value. The latter consists of cash proceeds realized upon the asset's sale in addition to all other cash receipts obtained from renting the asset on a re-lease, renewal or month-to-month basis. The Partnership classifies such residual rental payments as lease revenue. Consequently, the amount of gain or loss reported in the financial statements is not necessarily indicative of the total residual value the Partnership achieved from leasing the equipment. Depreciation expense was $64,562, $115,523, and $261,657 for the years ended December 31, 1999, 1998 and 1997, respectively. For financial reporting purposes, to the extent that an asset is held on primary lease term, the Partnership depreciates the difference between (i) the cost of the asset and (ii) the estimated residual value of the asset on a straight-line basis over such term. For purposes of this policy, estimated residual values represent estimates of equipment values at the date of primary lease expiration. To the extent that equipment is held beyond its primary lease term, the Partnership continues to depreciate the remaining net book value of the asset on a straight-line basis over the asset's remaining economic life. Interest expense was $18,835 or 2.9% of lease revenue in 1997. The Partnership's notes payable were fully amortized during the year ending December 31, 1997. Management fees were 4%, 4.2% and 4.6% of lease revenue during the years ended December 31, 1999, 1998 and 1997, respectively. Management fees are based on 5% of gross lease revenue generated by operating leases and 2% of gross lease revenue generated by full payout leases. Operating expenses were $260,161, $451,793, and $142,702 for the years ended December 31, 1999, 1998 and 1997, respectively. Operating expenses in 1999 include approximately $50,000 accrued for certain legal and Consolidation expenses related to the Class Action Lawsuit described in Note 6 to the financial statements. During 1998, the Partnership accrued approximately $297,000 for such costs related to the Class Action Lawsuit. Other operating expenses consist principally of professional service costs, such as audit and other legal fees, as well as printing, distribution and remarketing expenses. In certain cases, equipment storage or repairs and maintenance costs may be incurred in connection with equipment being remarketed. Liquidity and Capital Resources and Discussion of Cash Flows In connection with a preliminary settlement agreement for the Class Action Lawsuit described in Note 6 to the accompanying financial statements, the Partnership is permitted to invest in new equipment or other business activities, subject to certain limitations. On March 8, 2000, the Partnership invested $2,730,000 in a debt instrument that matures in September 2002. (See Notes 6 and 7 to the accompanying financial statements for additional information concerning this transaction.) The Partnership by its nature is a limited life entity. As an equipment leasing program, the Partnership's principal operating activities derive from asset rental transactions. Accordingly, the Partnership's principal source of cash from operations is generally provided by the collection of periodic rents. These cash inflows are used to pay management fees and operating costs and prior to 1998, also were used to satisfy debt service obligations associated with leveraged leases. Operating activities generated net cash inflows of $153,455, $270,559, and $611,077 in 1999, 1998 and 1997, respectively. Future renewal, re-lease and equipment sale activities will cause a decline in the Partnership's lease revenues and corresponding sources of operating cash. The amount of future interest income is expected to fluctuate as a result of changing interest rates and the level of cash available for 4 investment, among other factors. Overall, expenses associated with rental activities, such as management fees, and net cash flow from operating activities will also decline as the Partnership experiences a higher frequency of remarketing events. Cash realized from asset disposal transactions is reported under investing activities on the accompanying Statement of Cash Flows. During 1999, the Partnership realized $191,523 in equipment sale proceeds compared to $945,477 and $904,590 in 1998 and 1997, respectively. Future inflows of cash from asset disposals will vary in timing and amount and will be influenced by many factors including, but not limited to, the frequency and timing of lease expirations, the type of equipment being sold, its condition and age, and future market conditions. At December 31, 1999, the Partnership had aggregate future minimum lease payments of $143,262 from contractual lease agreements (see Note 2 to the financial statements). At the expiration of the individual lease terms underlying the Partnership's future minimum lease payments, the Partnership will sell the equipment or enter re-lease or renewal agreements when considered advantageous by the General Partner and EFG. Such future remarketing activities will result in the realization of additional cash inflows in the form of equipment sale proceeds or rents from renewals and re-leases, the timing and extent of which cannot be predicted with certainty. This is because the timing and extent of remarketing events often is dependent upon the needs and interests of the existing lessees. Some lessees may choose to renew their lease contracts, while others may elect to return the equipment. In the latter instances, the equipment could be re-leased to another lessee or sold to a third party. The Partnership obtained long-term financing in connection with certain equipment leases. The repayments of principal related to such indebtedness are reported as a component of financing activities. The Partnership's notes payable were fully amortized during 1997. There are no formal restrictions under the Restated Agreement, as amended, that materially limit the Partnership's ability to pay cash distributions, except that the General Partner may suspend or limit cash distributions to ensure that the Partnership maintains sufficient working capital reserves to cover, among other things, operating costs and potential expenditures, such as refurbishment costs to remarket equipment upon lease expiration. Liquidity is especially important as the Partnership matures and sells equipment, because the remaining equipment base consists of fewer revenue-producing assets that are available to cover prospective cash disbursements. Insufficient liquidity could inhibit the Partnership's ability to sustain its operations or maximize the realization of proceeds from remarketing its remaining assets. Cash distributions to the General Partner and Recognized Owners have been declared and generally paid within fifteen days following the end of each calendar quarter. The payment of such distributions is reported under financing activities on the accompanying Statement of Cash Flows. For the year ended December 31, 1999, the Partnership declared total cash distributions of Distributable Cash From Operations and Distributable Cash From Sales and Refinancings of $227,476. In accordance with the Restated Agreement, as amended, the Recognized Owners were allocated 95% of these distributions, or $216,102 and the General Partner was allocated 5%, or $11,374. The fourth quarter 1999 cash distribution was paid on January 14, 2000. Cash distributions paid to the Recognized Owners consist of both a return of and a return on capital. Cash distributions do not represent and are not indicative of yield on investment. Actual yield on investment cannot be determined with any certainty until conclusion of the Partnership and will be dependent upon the collection of all future contracted rents, the generation of renewal and/or re-lease rents, and the residual value realized for each asset at its disposal date. The Partnership's capital account balances for federal income tax and for financial reporting purposes are different primarily due to differing treatments of income and expense items for income tax purposes in comparison to financial reporting purposes (generally referred to as permanent or timing differences; see Note 5 to the accompanying financial statements). For instance, selling commissions and organization and offering costs pertaining to syndication of the Partnership's limited partnership units are not deductible for federal income tax purposes, but are recorded as a reduction of partners' capital for financial reporting purposes. Therefore, such differences are permanent differences between capital accounts for financial reporting and federal income tax purposes. Other differences between the bases of capital accounts for federal income tax and financial reporting purposes occur due to timing differences. Such items consist of the cumulative difference between income or loss for tax purposes and financial statement income or loss and the difference between distributions (declared vs. 5 paid) for income tax and financial reporting purposes. The principal component of the cumulative difference between financial statement income or loss and tax income or loss results from different depreciation policies for book and tax purposes. For financial reporting purposes, the General Partner has accumulated a capital deficit at December 31, 1999. This is the result of aggregate cash distributions to the General Partner being in excess of its capital contribution of $1,000 and its allocation of financial statement net income or loss. Ultimately, the existence of a capital deficit for the General Partner for financial reporting purposes is not indicative of any further capital obligations to the Partnership by the General Partner. The Restated Agreement, as amended, requires that upon the dissolution of the Partnership, the General Partner will be required to contribute to the Partnership an amount equal to any negative balance which may exist in the General Partner's tax capital account. At December 31, 1999, the General Partner had a positive tax capital account balance. The outcome of the Class Action Lawsuit described in Note 6 to the accompanying financial statements will be the principal factor in determining the future of the Partnership's operations. The proposed settlement to that lawsuit, if effected, will materially change the future organizational structure and business interests of the Partnership, as well as its cash distribution policies. In addition, commencing with the first quarter of 2000, the General Partner believes that it will be in the Partnership's best interests to suspend the payment of quarterly cash distributions pending final resolution of the Class Action Lawsuit. Accordingly, future cash distributions are not expected to be paid until the Class Action Lawsuit is adjudicated. 6 REPORT OF INDEPENDENT AUDITORS To the Partners of American Income Partners V-D Limited Partnership: We have audited the accompanying statements of financial position of American Income Partners V-D Limited Partnership, as of December 31, 1999 and 1998, and the related statements of operations, changes in partners' capital, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Income Partners V-D Limited Partnership at December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Additional Financial Information identified in the Index to Annual Report to the Partners is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. ERNST & YOUNG LLP Boston, Massachusetts March 10, 2000 7 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP STATEMENT OF FINANCIAL POSITION December 31, 1999 and 1998
1999 1998 ------------- ------------- ASSETS - ------ Cash and cash equivalents $ 3,878,824 $ 3,761,322 Rents receivable 6,821 38,480 Accounts receivable - affiliate 41,585 25,840 Equipment at cost, net of accumulated depreciation of $1,026,150 and $1,670,057 at December 31, 1999 and 1998, respectively 142,675 207,237 ------------- ------------- Total assets $ 4,069,905 $ 4,032,879 ============= ============= LIABILITIES AND PARTNERS' CAPITAL - --------------------------------- Accrued liabilities $ 224,936 $ 258,500 Accrued liabilities - affiliate 7,713 6,112 Cash distributions payable to partners 56,869 56,869 ------------- ------------- Total liabilities 289,518 321,481 ------------- ------------- Partners' capital (deficit): General Partner (343,034) (346,483) Limited Partnership Interests (480,227 Units; initial purchase price of $25 each) 4,123,421 4,057,881 ------------- ------------- Total partners' capital 3,780,387 3,711,398 ------------- ------------- Total liabilities and partners' capital $ 4,069,905 $ 4,032,879 ============= =============
The accompanying notes are an integral part of these financial statements 8 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP STATEMENT OF OPERATIONS for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997 ------------ ------------ -------- Income: Lease revenue $ 247,818 $ 321,107 $ 653,111 Interest income 191,695 161,990 131,193 Gain on sale of equipment 191,523 672,899 389,295 ------------ ------------ ------------ Total income 631,036 1,155,996 1,173,599 ------------ ------------ ------------ Expenses: Depreciation 64,562 115,523 261,657 Interest expense -- -- 18,835 Equipment management fees - affiliate 9,848 13,512 30,066 Operating expenses - affiliate 260,161 451,793 142,702 ------------ ------------ ------------ Total expenses 334,571 580,828 453,260 ------------ ------------ ------------ Net income $ 296,465 $ 575,168 $ 720,339 ============ ============ ============ Net income per limited partnership unit $ 0.59 $ 1.14 $ 1.42 ============ ============ ============ Cash distributions declared per limited partnership unit $ 0.45 $ 0.45 $ 0.56 ============ ============ ============
The accompanying notes are an integral part of these financial statements 9 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL for the years ended December 31, 1999, 1998 and 1997
General Recognized Owners Partner --------------------------- Amount Units Amount Total ----------- ----------- ----------- ----------- Balance at December 31, 1996 $ (385,667) 480,227 $ 3,313,378 $ 2,927,711 Net income - 1997 36,017 -- 684,322 720,339 Cash distributions declared (14,217) -- (270,127) (284,344) ----------- ----------- ----------- ----------- Balance at December 31, 1997 (363,867) 480,227 3,727,573 3,363,706 Net income - 1998 28,758 -- 546,410 575,168 Cash distributions declared (11,374) -- (216,102) (227,476) ----------- ----------- ----------- ----------- Balance at December 31, 1998 (346,483) 480,227 4,057,881 3,711,398 Net income - 1999 14,823 -- 281,642 296,465 Cash distributions declared (11,374) -- (216,102) (227,476) ----------- ----------- ----------- ----------- Balance at December 31, 1999 $ (343,034) 480,227 $ 4,123,421 $ 3,780,387 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements 10 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997 ----------- ----------- ----------- Cash flows from (used in)operating activities: Net income $ 296,465 $ 575,168 $ 720,339 Adjustments to reconcile net income to net cash from operating activities: Depreciation 64,562 115,523 261,657 Gain on sale of equipment (191,523) (672,899) (389,295) Changes in assets and liabilities: Decrease (increase) in: Rents receivable 31,659 225 (22,846) Accounts receivable - affiliate (15,745) 10,392 65,066 Increase (decrease) in: Accrued interest -- -- (1,336) Accrued liabilities (33,564) 249,300 (14,045) Accrued liabilities - affiliate 1,601 (6,710) (8,015) Deferred rental income -- (440) (448) ----------- ----------- ----------- Net cash from operating activities 153,455 270,559 611,077 ----------- ----------- ----------- Cash flows from investing activities: Proceeds from equipment sales 191,523 945,477 904,590 ----------- ----------- ----------- Net cash from investing activities 191,523 945,477 904,590 ----------- ----------- ----------- Cash flows used in financing activities: Principal payments - notes payable -- -- (307,479) Distributions paid (227,476) (227,476) (303,300) ----------- ----------- ----------- Net cash used in financing activities (227,476) (227,476) (610,779) ----------- ----------- ----------- Net increase in cash and cash equivalents 117,502 988,560 904,888 Cash and cash equivalents at beginning of year 3,761,322 2,772,762 1,867,874 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 3,878,824 $ 3,761,322 $ 2,772,762 =========== =========== =========== Supplemental disclosure of cash flow information: Cash paid during the year for interest $ -- $ -- $ 20,171 =========== =========== =========== Supplemental disclosure of non-cash investing and financing activity: At December 31, 1996, cash received of $194,092, representing an equipment purchase option, was classified as deferred rental income on the Statement of Financial Position. During the year ended December 31, 1997, the Partnership sold the equipment and such funds were recognized as sales proceeds.
The accompanying notes are an integral part of these financial statements 11 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP Notes to the Financial Statements December 31, 1999 NOTE 1 - ORGANIZATION AND PARTNERSHIP MATTERS American Income Partners V-D Limited Partnership (the "Partnership") was organized as a limited partnership under the Massachusetts Uniform Limited Partnership Act (the "Uniform Act") on May 21, 1990 for the purpose of acquiring and leasing to third parties a diversified portfolio of capital equipment. Partners' capital initially consisted of contributions of $1,000 from the General Partner (AFG Leasing IV Incorporated) and $100 from the Initial Limited Partner (AFG Assignor Corporation). On September 27, 1990, the Partnership issued 480,227 units, representing assignments of limited partnership interests (the "Units"), to 806 investors. Unitholders and Limited Partners (other than the Initial Limited Partner) are collectively referred to as Recognized Owners. The Partnership has one General Partner, AFG Leasing IV Incorporated, a Massachusetts corporation and an affiliate of Equis Financial Group Limited Partnership (formerly known as American Finance Group), a Massachusetts limited partnership ("EFG"). The common stock of the General Partner is owned by AF/AIP Programs Limited Partnership, of which AFG and a wholly-owned subsidiary are the 99% limited partners and AFG Programs, Inc., which is wholly-owned by Geoffrey A. MacDonald, is the 1% General Partner. The General Partner is not required to make any other capital contributions except as may be required under the Uniform Act and Section 6.1(b) of the Amended and Restated Agreement and Certificate of Limited Partnership (the "Restated Agreement, as amended"). Significant operations commenced September 28, 1990 when the Partnership made its initial equipment purchase. Pursuant to the Restated Agreement, as amended, Distributable Cash From Operations and Distributable Cash From Sales or Refinancings will be allocated 95% to the Recognized Owners and 5% to the General Partner. Under the terms of a management agreement between the Partnership and AF/AIP Programs Limited Partnership and the terms of an identical management agreement between AF/AIP Programs Limited Partnership and EFG (collectively, the "Management Agreement"), management services are provided by EFG to the Partnership at fees which the General Partner believes to be competitive for similar services (see Note 4). EFG is a Massachusetts limited partnership formerly known as American Finance Group ("AFG"). AFG was established in 1988 as a Massachusetts general partnership and succeeded American Finance Group, Inc., a Massachusetts corporation organized in 1980. EFG and its subsidiaries (collectively, the "Company") are engaged in various aspects of the equipment leasing business, including EFG's role as Manager or Advisor to the Partnership and several other direct-participation equipment leasing programs sponsored or co-sponsored by EFG (the "Other Investment Programs"). The Company arranges to broker or originate equipment leases, acts as remarketing agent and asset manager, and provides leasing support services, such as billing, collecting, and asset tracking. The general partner of EFG, with a 1% controlling interest, is Equis Corporation, a Massachusetts corporation owned and controlled entirely by Gary D. Engle, its President, Chief Executive Officer and sole Director. Equis Corporation also owns a controlling 1% general partner interest in EFG's 99% limited partner, GDE Acquisition Limited Partnership ("GDE LP"). Equis Corporation and GDE LP were established in December 1994 by Mr. Engle for the sole purpose of acquiring the business of AFG. In January 1996, the Company sold certain assets of AFG relating primarily to the business of originating new leases, and the name "American Finance Group", and its acronym, to a third party. AFG changed its name to Equis Financial Group Limited Partnership after the sale was concluded. Pursuant to terms of the sale agreements, EFG specifically reserved the rights to continue using the name American Finance Group and its acronym in connection with the Partnership and the Other Investment Programs and to continue managing all assets owned by the Partnership and the Other Investment Programs. 12 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of Cash Flows The Partnership considers liquid investment instruments purchased with a maturity of three months or less to be cash equivalents. From time to time, the Partnership invests excess cash with large institutional banks in federal agency discount notes and repurchase agreements with overnight maturities. Under the terms of the agreements, title to the underlying securities passes to the Partnership. The securities underlying the agreements are book entry securities. At December 31, 1999, the Partnership had $3,762,992 invested in federal agency discount notes, repurchase agreements secured by U.S. Treasury Bills or interests in U.S. Government securities, or other highly liquid overnight investments. Revenue Recognition Rents are payable to the Partnership monthly or quarterly and no significant amounts are calculated on factors other than the passage of time. The leases are accounted for as operating leases and are noncancellable. Rents received prior to their due dates are deferred. In certain instances, the Partnership may enter renewal or re-lease agreements which expire beyond the Partnership's anticipated dissolution date. This circumstance is not expected to prevent the orderly wind-up of the Partnership's business activities as the General Partner and EFG would seek to sell the then-remaining equipment assets either to the lessee or to a third party, taking into consideration the amount of future noncancellable rental payments associated with the attendant lease agreements. See also Note 6 regarding the Class Action Lawsuit. Future minimum rents of $143,262 are due as follows: For the year ending December 31, 2000 $ 93,608 2001 49,654 -------- Total $143,262 ======== Revenue from major individual lessees which accounted for 10% or more of lease revenue during the years ended December 31, 1999, 1998 and 1997 is as follows:
1999 1998 1997 ------------ ------------ ------------ Awin Leasing Company, Inc. $ 84,778 $ 84,778 $ 84,778 Ford Motor Company $ 32,915 $ 37,600 $ 90,897 Tenneco Packaging Company $ 32,153 $ 39,359 $ -- Mobil Oil Corporation $ 30,690 $ 34,425 $ -- Continental Food Packaging, Inc. $ 26,831 $ -- $ -- Transnet Limited $ -- $ -- $ 161,114
Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 13 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) Equipment on Lease All equipment was acquired from EFG, one of its Affiliates or from third-party sellers. Equipment Cost means the actual cost paid by the Partnership to acquire the equipment, including acquisition fees. Where equipment was acquired from EFG or an Affiliate, Equipment Cost reflects the actual price paid for the equipment by EFG or the Affiliate plus all actual costs incurred by EFG or the Affiliate while carrying the equipment, including all liens and encumbrances, less the amount of all primary term rents earned by EFG or the Affiliate prior to selling the equipment. Where the seller of the equipment was a third party, Equipment Cost reflects the seller's invoice price. Depreciation The Partnership's depreciation policy is intended to allocate the cost of equipment over the period during which it produces economic benefit. The principal period of economic benefit is considered to correspond to each asset's primary lease term, which term generally represents the period of greatest revenue potential for each asset. Accordingly, to the extent that an asset is held on primary lease term, the Partnership depreciates the difference between (i) the cost of the asset and (ii) the estimated residual value of the asset on a straight-line basis over such term. For purposes of this policy, estimated residual values represent estimates of equipment values at the date of primary lease expiration. To the extent that an asset is held beyond its primary lease term, the Partnership continues to depreciate the remaining net book value of the asset on a straight-line basis over the asset's remaining economic life. Periodically, the General Partner evaluates the net carrying value of equipment to determine whether it exceeds estimated net realizable value. Adjustments to reduce the net carrying value of equipment are recorded in those instances where estimated net realizable value is considered to be less than net carrying value. The ultimate realization of residual value for any type of equipment is dependent upon many factors, including EFG's ability to sell and re-lease equipment. Changing market conditions, industry trends, technological advances, and many other events can converge to enhance or detract from asset values at any given time. Accrued Liabilities - Affiliate Unpaid operating expenses paid by EFG on behalf of the Partnership and accrued but unpaid administrative charges and management fees are reported as Accrued Liabilities - Affiliate (see Note 4). Contingencies It is the Partnership's policy to recognize a liability for goods and services during the period when the goods or services are received. To the extent that the Partnership has a contingent liability, meaning generally a liability the payment of which is subject to the outcome of a future event, the Partnership recognizes a liability in accordance with Statement of Financial Accounting Standards No. 5 "Accounting for Contingencies" ("SFAS No. 5"). SFAS No. 5 requires the recognition of contingent liabilities when the amount of liability can be reasonably estimated and the liability is likely to be incurred. The Partnership is a Nominal Defendant in a Class Action Lawsuit. In 1998, a settlement proposal to resolve that litigation was negotiated and remains pending (See Note 7). The Partnership's estimated exposure for costs anticipated to be incurred in pursuing the settlement proposal is approximately $347,000 consisting principally of legal fees and other professional service costs. These costs are expected to be incurred regardless of whether the proposed settlement ultimately is effected and, therefore, the Partnership accrued approximately $297,000 for these costs in 1998 following the Court's approval of the settlement plan. The cost estimate is subject to change and is monitored by the General Partner based upon the progress of the settlement proposal and other pertinent information. As a result, the Partnership accrued and expensed an additional $50,000 for such costs in 1999. 14 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) Allocation of Profits and Losses For financial statement purposes, net income or loss is allocated to each Partner according to their respective ownership percentages (95% to the Recognized Owners and 5% to the General Partner). See Note 5 concerning allocation of income or loss for income tax purposes. Net Income and Cash Distributions Per Unit Net income and cash distributions per Unit are based on 480,227 Units outstanding during each of the three years in the period ended December 31, 1999 and computed after allocation of the General Partner's 5% share of net income and cash distributions. Provision for Income Taxes No provision or benefit from income taxes is included in the accompanying financial statements. The Partners are responsible for reporting their proportionate shares of the Partnership's taxable income or loss and other tax attributes on their tax returns. NOTE 3 - EQUIPMENT The following is a summary of equipment owned by the Partnership at December 31, 1999. Remaining Lease Term (Months), as used below, represents the number of months remaining from December 31, 1999 under contracted lease terms and is presented as a range when more than one lease agreement is contained in the stated equipment category. A Remaining Lease Term equal to zero reflects equipment either held for sale or re-lease or being leased on a month-to-month basis. In the opinion of EFG, the acquisition cost of the equipment did not exceed its fair market value.
Remaining Lease Term Equipment Equipment Type (Months) At Cost Location - ------------------------------- ---------- ----------- ----------------------- Materials handling 0-8 $ 385,895 CA/MI/MN/NE/NY/OH/WA/WI Trailers/intermodal containers 18-19 357,886 GA Research and test 0 105,805 CA Manufacturing 0 95,460 NJ Communications 0 80,063 CA Motor vehicles 0 64,367 NJ Tractors and heavy duty trucks 0 46,921 NJ Construction and mining 16 31,282 AL Computer and peripherals 0 1,146 TX ----------- Total equipment cost 1,168,825 Accumulated depreciation (1,026,150) ----------- Equipment, net of accumulated depreciation $ 142,675 ===========
In certain cases, the cost of the Partnership's equipment represents a proportionate ownership interest. The remaining interests are owned by EFG or an affiliated equipment leasing program sponsored by EFG. The 15 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) Partnership and each affiliate individually report, in proportion to their respective ownership interests, their respective shares of assets, liabilities, revenues, and expenses associated with the equipment. Proportionate equipment ownership enabled the Partnership to further diversify its equipment portfolio at inception by participating in the ownership of selected assets, thereby reducing the general levels of risk which could have resulted from a concentration in any single equipment type, industry or lessee. At December 31, 1999, the Partnership's equipment portfolio included equipment having a proportionate original cost of $171,719, representing approximately 15% of total equipment cost. Generally, the costs associated with maintaining, insuring and operating the Partnership's equipment are incurred by the respective lessees pursuant to terms specified in their individual lease agreements with the Partnership. As equipment is sold to third parties, or otherwise disposed of, the Partnership recognizes a gain or loss equal to the difference between the net book value of the equipment at the time of sale or disposition and the proceeds realized upon sale or disposition. The ultimate realization of estimated residual value in the equipment is dependent upon, among other things, EFG's ability to maximize proceeds from selling or re-leasing the equipment upon the expiration of the lease terms. The summary above includes fully depreciated equipment held for re-lease or sale with an original cost of approximately $106,000 at December 31, 1999. The General Partner is actively seeking the sale or re-lease of all equipment not on lease. NOTE 4 - RELATED PARTY TRANSACTIONS All operating expenses incurred by the Partnership are paid by EFG on behalf of the Partnership and EFG is reimbursed at its actual cost for such expenditures. Fees and other costs incurred during the years ended December 31, 1999, 1998 and 1997, which were paid or accrued by the Partnership to EFG or its Affiliates, are as follows:
1999 1998 1997 ------------ ------------ -------- Equipment management fees $ 9,848 $ 13,512 $ 30,066 Administrative charges 101,381 61,764 58,303 Reimbursable operating expenses due to third parties 158,780 390,029 84,399 ------------ ------------ ------------ Total $ 270,009 $ 465,305 $ 172,768 ============ ============ ============
As provided under the terms of the Management Agreement, EFG is compensated for its services to the Partnership. Such services include acquisition and management of equipment. For acquisition services, EFG was compensated by an amount equal to 2.23% of Equipment Base Price paid by the Partnership. For management services, EFG is compensated by an amount equal to 5% of gross operating lease rental revenue and 2% of gross full payout lease rental revenue received by the Partnership. Both acquisition and management fees are subject to certain limitations defined in the Management Agreement. Administrative charges represent amounts owed to EFG, pursuant to Section 10.4 of the Restated Agreement, as amended, for persons employed by EFG who are engaged in providing administrative services to the Partnership. All equipment was acquired from EFG, one of its Affiliates or from third-party sellers. The Partnership's Purchase Price was determined by the method described in Note 2, Equipment on Lease. 16 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) All rents and proceeds from the sale of equipment are paid directly to EFG. EFG temporarily deposits collected funds in a separate interest-bearing escrow account prior to remittance to the Partnership. At December 31, 1999, the Partnership was owed $41,585 by EFG for such funds and the interest thereon. These funds were remitted to the Partnership in January 2000. Certain affiliates of the General Partner own Units in the Partnership as follows: ------------------------------------------------------------------ Percent of Total Number of Outstanding Affiliate Units Owned Units ------------------------------------------------------------------ Atlantic Acquisition Limited Partnership 20,888 4.35% ------------------------------------------------------------------ Old North Capital Limited Partnership 1,000 0.21% ------------------------------------------------------------------ Atlantic Acquisition Limited Partnership ("AALP") and Old North Capital Limited Partnership ("ONC") are both Massachusetts limited partnerships formed in 1995 and affiliates of EFG. The general partners of AALP and ONC are controlled by Gary D. Engle. In addition, the limited partnership interests of ONC are owned by Semele Group, Inc. ("Semele"). Gary D. Engle is Chairman and CEO of Semele. NOTE 5 - INCOME TAXES The Partnership is not a taxable entity for federal income tax purposes. Accordingly, no provision for income taxes has been recorded in the accounts of the Partnership. For financial statement purposes, the Partnership allocates net income or loss to each class of partner according to their respective ownership percentages (95% to the Recognized Owners and 5% to the General Partner). This convention differs from the income or loss allocation requirements for income tax and Dissolution Event purposes as delineated in the Restated Agreement, as amended. For income tax purposes, the Partnership allocates net income or net loss in accordance with the provisions of such agreement. The Restated Agreement, as amended, requires that upon dissolution of the Partnership, the General Partner will be required to contribute to the Partnership an amount equal to any negative balance which may exist in the General Partner's tax capital account. At December 31, 1999, the General Partner had a positive tax capital account balance. The following is a reconciliation between net income reported for financial statement and federal income tax reporting purposes for the years ended December 31, 1999, 1998 and 1997:
1999 1998 1997 ----------- ----------- ----------- Net income $ 296,465 $ 575,168 $ 720,339 Financial statement depreciation in excess of (less than) tax depreciation 25,906 42,853 (24,133) Deferred rental income -- (440) (194,540) Other 46,380 201,840 639,021 ----------- ----------- ----------- Net income for federal income tax reporting purposes $ 368,751 $ 819,421 $ 1,140,687 =========== =========== ===========
17 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) The principal component of "Other" consists of the differences between the tax and financial statement gain or loss on equipment disposals. The following is a reconciliation between partners' capital reported for financial statement and federal income tax reporting purposes for the years ended December 31, 1999 and 1998:
1999 1998 ----------- ----------- Partners' capital $ 3,780,387 $ 3,711,398 Add back selling commissions and organization and offering costs 1,345,638 1,345,638 Financial statement distributions in excess of tax distributions -- 2,843 Cumulative difference between federal income tax and financial statement income (loss) (86,716) (159,002) ----------- ----------- Partners' capital for federal income tax reporting purposes $ 5,039,309 $ 4,900,877 =========== ===========
Financial statement distributions in excess of tax distributions and cumulative difference between federal income tax and financial statement income (loss) represent timing differences. NOTE 6 - LEGAL PROCEEDINGS In January 1998, certain plaintiffs (the "Plaintiffs") filed a class and derivative action, captioned Leonard Rosenblum, et al. v. Equis Financial Group Limited Partnership, et al., in the United States District Court for the Southern District of Florida (the "Court") on behalf of a proposed class of investors in 28 equipment leasing programs sponsored by EFG, including the Partnership (collectively, the "Nominal Defendants"), against EFG and a number of its affiliates, including the General Partner, as defendants (collectively, the "Defendants"). Certain of the Plaintiffs, on or about June 24, 1997, had filed an earlier derivative action, captioned Leonard Rosenblum, et al. v. Equis Financial Group Limited Partnership, et al., in the Superior Court of the Commonwealth of Massachusetts on behalf of the Nominal Defendants against the Defendants. Both actions are referred to herein collectively as the "Class Action Lawsuit". The Plaintiffs have asserted, among other things, claims against the Defendants on behalf of the Nominal Defendants for violations of the Securities Exchange Act of 1934, common law fraud, breach of contract, breach of fiduciary duty, and violations of the partnership or trust agreements that govern each of the Nominal Defendants. The Defendants have denied, and continue to deny, that any of them have committed or threatened to commit any violations of law or breached any fiduciary duties to the Plaintiffs or the Nominal Defendants. On July 16, 1998, counsel for the Defendants and the Plaintiffs executed a Stipulation of Settlement setting forth terms pursuant to which a settlement of the Class Action Lawsuit is intended to be achieved and which, among other things, is expected to reduce the burdens and expenses attendant to continuing litigation. The Stipulation of Settlement was preliminarily approved by the Court on August 20, 1998 when the Court issued its "Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing for Notice of, and Hearing on, the Proposed Settlement" (the "August 20 Order"). 18 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) On March 12, 1999, counsel for the Plaintiffs and the Defendants entered into an amended stipulation of settlement (the "Amended Stipulation") which was filed with the Court on March 12, 1999. The Amended Stipulation was preliminarily approved by the Court by its "Modified Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing For Notice of, and Hearing On, the Proposed Settlement" dated March 22, 1999 (the "March 22 Order"). The Amended Stipulation, among other things, divided the Class Action Lawsuit into two separate sub-classes that could be settled individually. On May 26, 1999, the Court issued an Order and Final Judgment approving settlement of one of the sub-classes. Settlement of the second sub-class, involving the Partnership and 10 affiliated partnerships (collectively referred to as the "Exchange Partnerships"), remains pending due, in part, to the complexity of the proposed settlement pertaining to this class. In February 2000, counsel for the Plaintiffs and the Defendants entered into a second amended stipulation of settlement (the "Second Amended Stipulation") which modified certain of the settlement terms contained in the Amended Stipulation. The Second Amended Stipulation was preliminarily approved by the Court by its "Second Modified Order Preliminarily Approving Settlement, Conditionally Certifying Settlement Class and Providing For Notice of, and Hearing On, the Proposed Settlement" dated March 6, 2000 (the "March 2000 Order"). Prior to issuing a final order approving the settlement of the second sub-class involving the Partnership, the Court will hold a fairness hearing that will be open to all interested parties and permit any party to object to the settlement. The investors of the Partnership and all other plaintiff sub-class members will receive a Notice of Settlement and other information pertinent to the settlement of their claims that will be mailed to them in advance of the fairness hearing. The settlement of the second sub-class is premised on the consolidation of the Exchange Partnerships' net assets (the "Consolidation"), subject to certain conditions, into a single successor company ("Newco"). Under the proposed Consolidation, the partners of the Exchange Partnerships would receive both common stock in Newco and a cash distribution; and thereupon the Exchange Partnerships would be dissolved. In addition, EFG would contribute certain management contracts, operations personnel, and business opportunities to Newco and cancel its current management contracts with all of the Exchange Partnerships. Newco would operate principally as a finance company and would use its best efforts to list its shares on the NASDAQ National Market or another national exchange or market as soon after the Consolidation as Newco deems that market conditions and its business operations are suitable for listing its shares and Newco has satisfied all necessary regulatory and listing requirements. The potential benefits and risks of the Consolidation will be presented in a Solicitation Statement that will be mailed to all of the partners of the Exchange Partnerships as soon as the associated regulatory review process is completed and at least 60 days prior to the fairness hearing. A preliminary Solicitation Statement was filed with the Securities and Exchange Commission on August 24, 1998 and remains pending. Class members will be notified of the actual fairness hearing date when it is confirmed. One of the principal objectives of the Consolidation is to create a company that would have the potential to generate more value for the benefit of existing limited partners than other alternatives, including continuing the Partnership's customary business operations until all of its assets are disposed in the ordinary course of business. To facilitate the realization of this objective, the Amended Stipulation provided, among other things, that commencing March 22, 1999, the Exchange Partnerships could collectively invest up to 40% of the total aggregate net asset values of all of the Exchange Partnerships in any investment, including additional equipment and other business activities that the general partners of the Exchange Partnerships and EFG reasonably believed to be consistent with the anticipated business interests and objectives of Newco, subject to certain limitations. The Second Amended Stipulation, among other things, quantified the 40% limitation using a whole dollar amount of $32 million in the aggregate. On March 8, 2000, the Exchange Partnerships collectively invested $32 million as permitted by the Second Amended Stipulation approved by the Court. The Partnership's portion of the aggregate investment is $2,730,000. The investment consists of a term loan to Echelon Residential Holdings LLC, a newly-formed real estate development company that will be owned by several investors, including James A. Coyne, Executive Vice 19 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) President of EFG. Mr. Coyne, in his individual capacity, is the only investor in Echelon Residential Holdings LLC who is related to EFG. The loan proceeds were used by Echelon Residential Holdings LLC in the formation of a subsidiary, Echelon Residential LLC, that in turn acquired various real estate assets from Echelon International Corporation, a Florida based real estate company. The loan has a term of 30 months maturing on September 7, 2002 and bears interest at the annual rate of 14% for the first 24 months and 18% for the final six months of the term. Interest accrues and compounds monthly but is not payable until maturity. Echelon Residential Holdings LLC has pledged a security interest in all of its right, title and interest in and to its membership interests in Echelon Residential LLC to the Exchange Partnerships as collateral. In the absence of the Court's authorization to enter into new investment activities, the Partnership's Restated Agreement, as amended, would not permit such activities without the approval of limited partners owning a majority of the Partnership's outstanding Units. Consistent with the Amended Stipulation, the Second Amended Stipulation provides terms for unwinding any new investment transactions in the event that the Consolidation is not effected or the Partnership objects to its participation in the Consolidation. The Second Amended Stipulation, as well as the Amended Stipulation and the original Stipulation of Settlement, prescribe certain conditions necessary to effect a final settlement, including providing the partners of the Exchange Partnerships with the opportunity to object to the participation of their partnership in the Consolidation. Assuming the proposed settlement is effected according to present terms, the Partnership's share of legal fees and expenses related to the Class Action Lawsuit and the Consolidation is estimated to be approximately $347,000, of which $297,000 was accrued and expensed by the Partnership in 1998 and $50,000 was accrued and expensed in 1999. While the Court's August 20 Order enjoined certain class members, including all of the partners of the Partnership, from transferring, selling, assigning, giving, pledging, hypothecating, or otherwise disposing of any Units pending the Court's final determination of whether the settlement should be approved, the March 22 Order permitted the partners to transfer Units to family members or as a result of the divorce, disability or death of the partner. No other transfers are permitted pending the Court's final determination of whether the settlement should be approved. The provision of the August 20 Order which enjoined the General Partners of the Exchange Partnerships from, among other things, recording any transfers not in accordance with the Court's order remains effective. There can be no assurance that settlement of the sub-class involving the Exchange Partnerships will receive final Court approval and be effected. There also can be no assurance that all or any of the Exchange Partnerships will participate in the Consolidation because if limited partners owning more than one-third of the outstanding Units of a partnership object to the Consolidation, then that partnership will be excluded from the Consolidation. Notwithstanding the extent of delays experienced thus far in achieving a final settlement of the Class Action Lawsuit with respect to the Exchange Partnerships, the General Partner and its affiliates, in consultation with counsel, continue to feel that there is a reasonable basis to believe that a final settlement of the sub-class involving the Exchange Partnerships ultimately will be achieved. However, in the absence of a final settlement approved by the Court, the Defendants intend to defend vigorously against the claims asserted in the Class Action Lawsuit. Neither the General Partner nor its affiliates can predict with any degree of certainty the cost of continuing litigation to the Partnership or the ultimate outcome. NOTE 7 - SUBSEQUENT EVENT On March 8, 2000, the Exchange Partnerships (see Note 6) collectively loaned $32 million to Echelon Residential Holdings LLC, a newly-formed real estate development company that will be owned by several 20 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP Notes to the Financial Statements (Continued) investors, including James A. Coyne, Executive Vice President of EFG. Mr. Coyne, in his individual capacity, is the only investor in Echelon Residential Holdings LLC who is related to EFG. The Partnership's participation in the loan is $2,730,000. Echelon Residential Holdings LLC, through a subsidiary (Echelon Residential LLC), used the loan proceeds to acquire various real estate assets from Echelon International Corporation, a Florida based real estate company. The loan has a term of 30 months maturing on September 7, 2002 and bears interest at the annual rate of 14% for the first 24 months and 18% for the final six months of the term. Interest accrues and compounds monthly but is not payable until maturity. In connection with the transaction, Echelon Residential Holdings LLC has pledged a security interest in all of its right, title and interest in and to its membership interests in Echelon Residential LLC to the Exchange Partnerships as collateral. 21 ADDITIONAL FINANCIAL INFORMATION AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP SCHEDULE OF EXCESS (DEFICIENCY) OF TOTAL CASH GENERATED TO COST OF EQUIPMENT DISPOSED for the years ended December 31, 1999, 1998 and 1997 The Partnership classifies all rents from leasing equipment as lease revenue. Upon expiration of the primary lease terms, equipment may be sold, rented on a month-to-month basis or re-leased for a defined period under a new or extended lease agreement. The proceeds generated from selling or re-leasing the equipment, in addition to any month-to-month revenue, represent the total residual value realized for each item of equipment. Therefore, the financial statement gain or loss, which reflects the difference between the net book value of the equipment at the time of sale or disposition and the proceeds realized upon sale or disposition, may not reflect the aggregate residual proceeds realized by the Partnership for such equipment. The following is a summary of cash excess associated with equipment dispositions occurring in the years ended December 31, 1999, 1998 and 1997:
1999 1998 1997 ---------- ---------- ---------- Rents earned prior to disposal of equipment, net of interest charges $1,485,102 $1,898,154 $2,680,821 Sale proceeds realized upon disposition of equipment 191,523 945,477 1,098,682 ---------- ---------- ---------- Total cash generated from rents and equipment sale proceeds 1,676,625 2,843,631 3,779,503 Original acquisition cost of equipment disposed 708,469 1,637,002 2,813,225 ---------- ---------- ---------- Excess of total cash generated to cost of equipment disposed $ 968,156 $1,206,629 $ 966,278 ========== ========== ==========
22 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP STATEMENT OF CASH AND DISTRIBUTABLE CASH FROM OPERATIONS, SALES AND REFINANCINGS for the year ended December 31, 1999
Sales and Operations Refinancings Total ------------ ------------ ----------- Net income $ 104,942 $ 191,523 $ 296,465 Add: Depreciation 64,562 -- 64,562 Management fees 9,848 -- 9,848 ----------- ----------- ----------- Cash from operations, sales and refinancings 179,352 191,523 370,875 Less: Management fees (9,848) -- (9,848) ----------- ----------- ----------- Distributable cash from operations, sales and refinancings 169,504 191,523 361,027 Other sources and uses of cash: Cash at beginning of year 3,043,321 718,001 3,761,322 Net change in receivables and accruals (16,049) -- (16,049) Less: Cash distributions paid -- (227,476) (227,476) ----------- ----------- ----------- Cash at end of year $ 3,196,776 $ 682,048 $ 3,878,824 =========== =========== ===========
23 AMERICAN INCOME PARTNERS V-D LIMITED PARTNERSHIP SCHEDULE OF COSTS REIMBURSED TO THE GENERAL PARTNER AND ITS AFFILIATES AS REQUIRED BY SECTION 10.4 OF THE AMENDED AND RESTATED AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP December 31, 1999 For the year ended December 31, 1999, the Partnership reimbursed the General Partner and its Affiliates for the following costs: Operating expenses $ 292,345 24 EX-23 7 EXHIBIT 23 Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of American Income Partners V-D Limited Partnership, of our report dated March 10, 2000, included in the 1999 Annual Report to the Partners of American Income Partners V-D Limited Partnership. ERNST & YOUNG LLP Boston, Massachusetts March 10, 2000 EX-27 8 EXHIBIT 27
5 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 3,878,824 0 48,406 0 0 3,927,230 1,168,825 (1,026,150) 4,069,905 289,518 0 0 0 0 3,780,387 4,069,905 0 631,036 0 0 334,571 0 0 296,465 0 296,465 0 0 0 296,465 0 0
EX-99.(F) 9 EXHIBIT 99(F) Exhibit 99(f) MASTER LEASE AGREEMENT MASTER LEASE AGREEMENT NO. 8910CTG389, dated as of November 10, 1989 between American Finance Group, a Massachusetts general partnership having a principal place of business and address for purposes of notice hereunder at Exchange Place, Boston, Massachusetts 02109, Attention: Manager, Lease Financing Group, as Lessor, and Continental Food Packaging, Inc., a Delaware corporation having a principal place of business and address for purposes of notice hereunder at 800 Continental Avenue, P.O. Box 5410, Norwalk, CT 06856, Attention: President, as Lessee. 1. MASTER LEASE. This Master Lease Agreement sets forth the terms and conditions that govern the lease by Lessor to Lessee of items of Equipment specified on Rental Schedules executed and delivered by the parties from time to time. Each Rental Schedule incorporates by reference this Master Lease Agreement and specifies the Lease Term, the amount of Basic Rent, the Payment Dates on which Basic Rent is due, and such other information and provisions as Lessor and Lessee may agree. Each Rental Schedule constitutes a separate and independent lease. 2. LEASE TERM. LESSEE'S RIGHT TO QUIET ENJOYMENT. Each Rental Schedule is for a non-cancellable Lease Term commencing on the date of acceptance of the Equipment for lease and ending on the Expiration Date specified on such Rental Schedule. Lessee cannot, except under the terms of this Master Lease Agreement, terminate the Rental Schedule or suspend payment or performance of any of its obligations thereunder. Subject to there being no Event of Default under the Rental Schedule, Lessee will have quiet possession and use of the Equipment throughout the Lease Term, and Lessor shall defend and protect such quiet possession and use against all persons claiming by, through or under Lessor. 3. BASIC RENT. NET LEASE. LESSEE'S INDEMNITY. NO WARRANTIES BY LESSOR. Basic Rent is payable in the amount specified on the Rental Schedule. All payments of Basic Rent shall be made to Lessor in good funds on the Payment Dates specified in the Rental Schedule. If payment is to be made by check, the Lessee will mall the check at least four (4) days before the Payment Date. Lessor will exercise its best efforts to invoice Lessee thirty (30) days prior to each Payment Date. Failure to provide timely invoices will not relieve Lessee of its obligation to pay Basic Rent on the Payment Date. Basic Rent is net of, and Lessee agrees to pay, and will indemnify and hold Lessor and any assignee of Lessor harmless from and against, all reasonable costs (including, without limitation, maintenance, repair and insurance costs), claims (including claims of product liability or strict liability in tort), losses or liabilities relating to the Equipment or its use that are incurred by or asserted against Lessee, any permitted sublessee of Lessee, Lessor or any assignee of Lessor and arise out of matters occurring prior to the return of the Equipment. Lessee agrees to defend all claims, provided, however, Lessee shall have the right to appoint legal counsel for Lessor, compromise the claim and otherwise control the prosecution or the defense of the claim as Lessee deems advisable. The Rental Schedule is a triple net lease. Lessee's obligations are not subject to defense, counterclaim, set-off, abatement or recoupment, and Lessee waives all rights to terminate or surrender the Rental Schedule, for any reason, including, without limitation, defect in the Equipment or nonperformance by Lessor, provided, however, that Lessee specifically retains the right to seek recourse against Lessor by way of separate action either at law or in equity in the event of nonperformance by Lessor under the Rental Schedule. LESSOR HEREBY DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE. Lessor will assign to Lessee all manufacturer or vendor warranties and will cooperate fully with Lessee in asserting any claims under such warranties or relating to product liability or strict liability in tort. Lessee acknowledges that this Master Lease Agreement has been entered into on the basis that Lessor shall be entitled for federal and state income tax purposes (i) to claim the deductions for depreciation on the total original cost of the Equipment pursuant to the Modified Accelerated Cost Recovery System under Section 168 of the Internal Revenue Code of 1986, as amended ("Code") or for state income tax purposes, any other depreciation deduction method that is permitted by certain state law; and (ii) to claim under Section 163 of the Code a tax deduction for the full amount of any interest paid by Lessor or accrued under Lessor's method of tax accounting on any indebtedness secured by the Equipment (hereinafter referred to collectively as the "Tax Benefits"). Lessee agrees to fully indemnify Lessor for any loss, disallowance, unavailability or recapture of the Tax Benefits as a result of any affirmative act, omission or misrepresentation by Lessee, any sublessee, or any other person authorized by the Lessee to use or maintain the Equipment. If Lessor shall lose, shall not have the right to claim, or if there shall be disallowed or recaptured, all or any portion of such Tax Benefits as a result of any such affirmative act, omission or misrepresentation, Lessee shall pay to Lessor as additional rent (a) an amount equal to the value, determined at Lessor's actual marginal tax rate on a present value basis discounted at the Lessor's then current cost of funds, of the Tax Benefits so disallowed or made unavailable plus (b) all interest, penalties, or additions to tax resulting from such loss, disallowance, unavailability or recapture of any of the foregoing, plus (c) all taxes required to be paid by the Lessor, its successors, assigns, or affiliates under any federal, state and local law upon receipt of any of the indemnifications set forth in this Section. Notwithstanding the foregoing, the tax indemnification set forth in this paragraph shall not apply in any circumstances in which Lessor is otherwise compensated under this Master Lease Agreement, including, without limitation, in the event of a Casualty under Section 5 hereof, in the event that Lessee elects to exercise its purchase option under Section 11 hereof, in connection with the payment of liquidated damages subsequent to an Event of Default under Section 11 hereof, or in the event of an Early Termination pursuant to Section 15 hereof, in which event Lessee shall have no obligations under this paragraph. 4. USE AND LOCATION OF EQUIPMENT. MAINTENANCE AND REPAIRS. NO LIENS. NO ASSIGNMENT BY LESSEE. LESSEE'S RIGHT TO SUBLEASE. The Equipment is to be used exclusively by Lessee in the conduct of its business, only for the purposes for which it was designed and in compliance with all applicable laws, rules and regulations. Lessee will obtain and maintain all necessary licenses, permits and approvals. The Equipment may be removed from the location specified on the Rental Schedule upon prior written notice to Lessor, but in no event may the Equipment be moved to a location outside the continental United States. Lessee will effect all maintenance and repairs necessary to keep the Equipment in good and efficient operating - 2 - condition and appearance, reasonable wear and tear excepted. All maintenance and repairs will be made in accordance with the manufacturer's recommendations and by authorized representatives of the manufacturer or by persons of equal skill and knowledge whose work will not adversely affect any applicable manufacturer's or vendor's warranty. Lessee will keep the Equipment and its interest therein free and clear of all liens and encumbrances other than those created by Lessor or arising out of claims against Lessor and not related to the lease of the Equipment to Lessee. The Rental Schedule may not be assigned by Lessee. Lessee may sublease the Equipment only upon prior written notice to Lessor, in which notice Lessee represents and warrants to Lessor that such sublease is for a term not longer than the related Lease Term, is not made to a tax-exempt entity or governmental agency, is specifically made subject to the prior rights of Lessor and its assignees under the Rental Schedule, does not create any obligation on the part of Lessor in favor of such sublessee and does not relieve Lessee of any of its obligations under the Rental Schedule including, without limitation, Lessee's obligations with respect to (a) the payment of Basic Rent and other sums due or to become due, (b) use and maintenance of the Equipment and (c) provisions for the return of the Equipment at the expiration of the Lease Term. 5. LOSS, DAMAGE OR DESTRUCTION OF EQUIPMENT. Lessee will bear all risk of loss with respect to the Equipment during the Lease Term and until the Equipment is returned to Lessor. Lessee will notify Lessor promptly in writing if any item of Equipment is lost, stolen, requisitioned by a governmental authority or damaged beyond repair (each a "Casualty"), describing the Casualty in reasonable detail, and will promptly file a claim under appropriate policies of insurance. Lessee may, with the prior written consent of Lessor, replace the Equipment suffering a Casualty with similar items of at least equal value and utility. If Lessee does not replace the Equipment, Lessee will pay to Lessor on the next Payment Date following the Casualty, in addition to Basic Rent and other sums due on that date, an amount equal to the greater of the Casualty Value specified on the Rental Schedule or the fair market value of such Equipment. The Rental Schedule, solely as it relates to the Equipment suffering the Casualty, will terminate and ownership of the Equipment suffering the Casualty, including all claims for insurance proceeds or condemnation awards, will pass to Lessee upon receipt of such payment by Lessor. The fair market value of the Equipment will be determined by agreement of Lessee and Lessor, or, if the parties cannot agree, by an independent equipment appraiser of nationally recognized standing, selected by agreement of Lessor and Lessee, which agreement shall not be unreasonably withheld. The cost of appraisal will be shared equally by Lessee and Lessor. 6. TAXES AND FEES. Lessee agrees to prepare and file all required returns or reports and to pay all sales, gross receipts, personal property and other taxes (including highway use and vehicle excise taxes, where applicable), fees, interest, fines or penalties imposed by any governmental authority relating in any way to the Equipment, including any documentary, stamp or recordation taxes assessed in connection with the financing of Lessor's purchase of the Equipment and excepting only taxes imposed upon the net Income of Lessor. Notwithstanding the foregoing, Lessor will report and pay all use taxes and Lessee will pay to Lessor, on each Basic Rent Payment Date, as additional rent, an amount equal to the use taxes attributable to that payment of Basic Rent. If any item of - 3 - Equipment is located in a taxing jurisdication that does not allow Lessee to report and pay personal property taxes directly, Lessee will prepare an appropriate tax return to be delivered, together with funds equal to the taxes Lessee claims are due on such return, to Lessor not less than ten (10) days prior to the date such taxes are due. 7. INSURANCE. Lessee agrees to maintain policies of insurance on the Equipment in amounts, against risks and on terms and conditions applicable to other equipment owned or leased by Lessee and similar to the Equipment. Such insurance will at a minimum include (i) physical damage and theft insurance in an amount at least equal to the greater of the Casualty Value set forth on the Rental Schedule or the fair market value of the Equipment and (ii) comprehensive liability insurance in the amount of at least $5,000,000 per occurrence. All policies (A) are to be maintained with insurers acceptable to Lessor; (B) are, to the extent of Lessee's indemnity obligation contained herein, to name Lessor and its assignees as additional insureds with respect to liability, as their interests may appear; and (C) are to provide that they may not be altered or cancelled except upon thirty days prior written notice to Lessor and each of Lessor's assignees named as additional insured. Lessee agrees to deliver to Lessor such certificates of insurance as Lessor may, from time to time, request. Notwithstanding the foregoing, Lessee's parent company, Peter Kiewit & Sons, Inc., may satisfy all or any part of the foregoing insurance requirements through self-insurance. 8. FINANCIAL STATEMENTS. INSPECTION. REPORTS. Lessee will provide to Lessor, promptly upon Lessor's request, copies of Lessee's most recent annual balance sheet and profit and loss statement and, for so long as Lessee is a subsidiary thereof, copies of Continental Can Company, Inc.'s audited balance sheet, profit and loss statement and statement of changes in financial condition, all prepared in accordance with generally accepted accounting principles, consistently applied. Lessor may from time to time, upon reasonable notice and during Lessee's normal business hours, inspect the Equipment and Lessee's records with respect thereto and discuss Lessee's financial condition with knowledgeable representatives of Lessee. Lessee will, if requested, provide a report on the condition of the Equipment, a record of its maintenance and repair, a summary of all items suffering a Casualty, a certificate of no default or such other information or evidence of compliance with Lessee's obligations under the Rental Schedule as Lessor may reasonably request. 9. AGREEMENT FOR LEASE ONLY. IDENTIFICATION MARKS. FINANCING STATEMENTS. FURTHER ASSURANCES. Each Rental Schedule is intended to be a true lease and not a lease in the nature of a security agreement. Lessee will affix to the Equipment all notices of Lessor's ownership of the Equipment furnished by Lessor. Lessee will upon Lessor's reasonable request execute and deliver and Lessor may file Uniform Commercial Code financing statements or other similar documents notifying the public of Lessor's ownership of the Equipment and Lessee hereby appoints Lessor as its agent and attorney-in-fact to execute and file the same on its behalf. Each party agrees to promptly execute and deliver to the other party such further documents or other assurances, and to take such further action, including obtaining landlord and mortgagee waivers, as the other party - 4 - may from time to time reasonably request in order to establish and protect the rights and remedies created by the Rental Schedule, including the transfer of title to the Equipment to Lessee if Lessee elects to purchase the Equipment pursuant to Section 11 hereof. 10. LATE PAYMENT CHARGES. LESSOR'S RIGHT TO PERFORM FOR LESSEE. A Late Payment Charge equal to (A) the greater of 2% per annum above the debt rate charged to Lessor in connection with the financing of its purchase of the Equipment or 2% per annum above the prime or base lending rate of The First National Bank of Boston, as announced from time to time, or (B) if less, the highest rate not prohibited by law, will accrue on any sum not paid when due for each day not paid. If Lessee fails to duly and promptly pay or perform any of its obligations hereunder continuing for more than 30 days after written notice thereof by Lessor, provided that Lessee shall be diligently proceeding to cure such nonperformance and such nonperformance does not subject the Equipment to forfeiture, Lessor may itself pay or perform such obligations for the account of Lessee without thereby waiving any default and Lessee will pay to Lessor, on demand and in addition to Basic Rent, an amount equal to all sums so paid or reasonable expenses so incurred, plus a Late Payment Charge accruing from the date such sums were paid or expenses incurred by Lessor. 11. LESSEE'S OPTIONS UPON LEASE EXPIRATION. Lessee has the option at the expiration of the Lease Term, exerciseable with respect to all, but not less than all, items of Equipment leased pursuant to Rental Schedules having the same Expiration Date, (i) to return the Equipment to Lessor, (ii) to renew the Rental Schedule at fair rental value for a Renewal Term the length of which shall be determined by agreement of Lessee and Lessor or (iii) to purchase the Equipment for cash at its then fair market value. Lessee agrees to provide Lessor written notice of its decision to return the Equipment or renew the Rental Schedule not less than 120 days prior to the Expiration Date. If Lessee fails to give Lessor 120 days written notice, the Lease Term may, at Lessor's option, be extended and continue until 120 days from the date Lessor receives written notice of Lessee's decision to return the Equipment or renew the Rental Schedule. Fair market value, fair rental value and useful life will be determined by agreement of Lessor and Lessee, or if the parties cannot agree, by an independent equipment appraiser of nationally recognized standing selected by agreement of Lessor and Lessee, which agreement shall not be unreasonably withheld. The cost of an appraisal will be shared equally by Lessor and Lessee. At the expiration of the Lease Term or any extension or renewal thereof, provided that Lessee has not elected to purchase the Equipment in accordance with the terms hereof, Lessee will, at its expense, assemble, pack, and crate the Equipment, all in accordance with manufacturer's recommendations, if any, and deliver it by common carrier, freight and insurance prepaid, to a place to be designated by Lessor. All packaging will include related maintenance logs, operating manuals, and other related materials and will be clearly marked so as to identify the contents thereof. The Equipment will be returned in good and efficient operating condition and appearance, reasonable wear and tear excepted, and eligible for manufacturer's maintenance, if available, free of all Lessee's markings and free of all liens and encumbrances other than those created by Lessor or arising out of claims against Lessor and not related to the lease of the Equipment to Lessee. Lessor may, but is not required to, inspect the Equipment prior to its return. If, upon inspection, Lessor reasonably - 5 - determines that the condition of any item of Equipment does not conform to the minimum requirements, Lessor will promptly notify Lessee of such determination, specifying the repairs or refurbishments reasonably needed to place the Equipment in the minimum acceptable condition. Lessee shall thereupon effect such repairs; if Lessee does not proceed to effect such repairs within a reasonable period of time, Lessor may, at its option, effect such repairs. Lessor may re-inspect the Equipment and require further repairs as often as necessary until the Equipment is placed in reasonably acceptable condition. In either case, all reasonable out-of-pocket costs will be paid by Lessee. The Rental Schedule shall continue in full force and effect and Lessee shall continue to pay Basic Rent through and including the date on which the Equipment is accepted for return by Lessor. 12. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee represents, warrants and certifies as of the date of execution and delivery of each Rental Schedule as follows: (a) Lessee is duly organized, validly existing and in good standing under the laws of the state of its incorporation, with full power to enter into and to pay and perform its obligations under the Rental Schedule and this Master Lease Agreement as incorporated therein by reference, and is duly qualified and in good standing in all other jurisdictions where its failure to so qualify would adversely affect the conduct of its business or the performance of its obligations under or the enforceablility of the Rental Schedule; (b) the Rental Schedule, this Master Lease Agreement and all related documents have been duly authorized, executed and delivered by Lessee, are enforceable against Lessee in accordance with their terms and do not and will not contravene any provisions of or constitute a default under Lessee's organizational documents or its By Laws, any agreement to which it is a party or by which it or its property is bound, or any law, regulation or order of any governmental authority; (c) Lessor's right, title and interest in and to the Rental Schedule, this Master Lease Agreement and the Equipment and the rentals therefrom will not be affected or impaired by the terms of any agreement or instrument by which Lessee or its property is bound; (d) no approval of, or filing with, any governmental authority or other person is required in connection with Lessee's entering into or the payment or performance of its obligations under the Rental Schedule or this Master Lease Agreement as incorporated therein by reference; (e) there are no suits or proceedings pending or threatened before any court or governmental agency against or affecting Lessee which, if decided adversely to Lessee, would materially adversely affect Lessee's business or financial condition or its ability to perform any of its obligations under the Rental Schedule or this Master Lease Agreement as incorporated therein by reference; and (f) there has been no material adverse change to Lessee's financial condition since the date of its most recent audited financial statement. - 6 - 13. EVENTS OF DEFAULT. LESSOR'S REMEDIES ON DEFAULT. Each of the following events constitutes an Event of Default: (a) default in the payment of any amount when due under the Rental Schedule continuing for a period of ten days; (b) default in the observance or performance of any other covenant, condition or agreement to be observed or performed by Lessee under the Rental Schedule and this Master Lease Agreement as incorporated therein by reference, continuing for more than 30 days after written notice thereof, unless Lessee shall be diligently proceeding to cure such default and such default does not subject the Equipment to forfeiture, in which event, Lessee shall have 60 days from the date of notice in which to cure such default; (c) any representation or warranty made by Lessee herein or in the Rental Schedule or this Master Lease Agreement as incorporated therein by reference or in any document or certificate furnished in connection herewith shall at any time prove to have been incorrect when made; (d) any attempt by Lessee, without Lessor's prior written consent, to assign the Rental Schedule, to make any unauthorized sublease of the Equipment or to transfer possession of the Equipment; (e) Lessee or, if Lessee's obligations are guaranteed by any other party, any Guarantor (A) ceases doing business as a going concern; (B) makes an assignment for the benefit of creditors, admits in writing its inability to pay its debts as they mature or generally fails to pay its debts as they become due; (C) initiates any voluntary bankruptcy or insolvency proceeding; (D) fails to obtain the discharge of any bankruptcy or insolvency proceeding initiated against it by others within 60 days of the date such proceedings were initiated; (E) requests or consents to the appointment of a trustee or receiver; or (F) a trustee or receiver is appointed for Lessee or any Guarantor or for a substantial part of Lessee's or any Guarantor's property; or (f) unless Lessee has elected to purchase the Equipment as provided elsewhere in this Master Lease Agreement, Lessee shall not return the Equipment or shall not return the Equipment in the required condition at the expiration of the Rental Schedule or any extension or renewal thereof Upon the occurrence of an Event of Default, Lessor may, without notice to Lessee, declare the applicable Rental Schedule in default and may exercise any of the following remedies: I. at Lessor's option, and in its sole discretion either: (a) declare all Basic Rent and other sums due or to become due under the Rental Schedule immediately due and payable, and sue to enforce the payment thereof (provided, however, that sums accelerated hereunder shall be discounted to present value at the Late Payment Rate); or - 7 - (b) receive from Lessee (and sue to enforce the payment thereof), as liquidated damages for loss of the bargain and not as a penalty, and in addition to all accrued and unpaid Basic Rent and other sums due under the Rental Schedule, an amount equal to the greater of (A) the Casualty Value set forth on the Rental Schedule calculated after the last payment of Basic Rent actually received by Lessor or (B) the fair market value of the Equipment as of the date of default determined by an independent equipment appraiser of nationally recognized standing selected by Lessor; plus, in either case, interest thereon at the Late Payment Charge rate from the date of default until the date of payment, and, after receipt in good funds of the sums described above, Lessor will, if it has not already done so, terminate the Rental Schedule and, at its option, either pay over to Lessee as, when and if received, any net proceeds (after all reasonable costs and expenses) from any disposition of the Equipment, or convey to Lessee all of its right, title and interest in and to the Equipment, as is, where is and with all faults, without recourse and without warranty; and II. without regard to whether Lessor has elected either option in subsection I. above, Lessor may (a) proceed by appropriate court action either at law or in equity to enforce performance by Lessee of the covenants and terms of the Rental Schedule and to recover damages for the breach thereof; and (b) terminate the Rental Schedule by written notice to Lessee, whereupon all right of Lessee to use the Equipment will immediately cease and Lessee will forthwith return the Equipment to Lessor in accordance with the provisions hereof; and (c) upon reasonable prior notice to Lessee, repossess the Equipment (and for this purpose Lessee hereby grants to Lessor and its agents the right to enter upon the premises where the Equipment is located and to remove the Equipment therefrom and Lessee agrees not to interfere with the peaceful repossession of the Equipment) and, without notice to Lessee, dispose of it by private or public, cash or credit sale or by lease to a different lessee, in all events free and clear of any rights of Lessee; and (d) recover from Lessee all reasonable costs and expenses arising out of Lessee's default, including, without limitation, expenses of repossession, storage, appraisal, repair, reconditioning and disposition of the Equipment and reasonable attorneys' fees and expenses. Lessor's remedies are, except as indicated herein, cumulative and not exclusive, and are in addition to all remedies at law or in equity. No failure by Lessor to declare a default shall constitute a waiver of such default or restrict Lessor's ability to declare a default at a later date. 14. ASSIGNMENT BY LESSOR. Lessor may at any time and from time to time sell, transfer or grant liens on the Equipment, and assign, as collateral security or otherwise, its rights in the Rental Schedule and this Master Lease Agreement as incorporated therein by reference, in each case subject and subordinate to Lessee's rights thereunder, without notice to or consent by Lessee. Lessee acknowledges that - 8 - Lessor may assign the Rental Schedule to a Lender in connection with the financing of its purchase of the Equipment and agrees, in the event of such assignment, to execute and deliver a Rent Assignment Letter acknowledging that the Lender has (and may exercise either in its own name or in the name of Lessor) all of the rights, privileges and remedies, but none of the obligations, of Lessor under the Rental Schedule; waiving for the benefit of the Lender (but not Lessor) any defense, counterclaim, set-off, abatement, reduction or recoupment that Lessee may have against Lessor; and agreeing to make all payments of Basic Rent and other sums due under the Rental Schedule to the Lender or as the Lender may direct. Lessee also agrees to deliver opinions of counsel, insurance certificates and such other documents as Lessor may reasonably request for the benefit of the Lender in connection with the collateral assignment of the Rental Schedule. 15. EARLY TERMINATION OPTION. Notwithstanding anything contained herein to the contrary, Lessee shall have the right, with respect to any Rental Schedule having an Early Termination Table appended thereto and made a part thereof, to terminate such Rental Schedule on any Rent Payment Date by giving Lessor at least thirty (30) days' prior written notice thereof and paying to Lessor on such Rent Payment Date in good funds the applicable Early Termination Payment and all other sums then due and payable under the Rental Schedule. Upon receipt of such Early Termination Payment and other sums, Lessor shall promptly deliver to Lessee a warranty bill of sale for the Equipment under such Rental Schedule, warranting Lessee's title to the Equipment but disclaiming any other warranties with respect thereto. 16. NOTICE. GOVERNING LAW. EXECUTION IN COUNTERPARTS. All notices required hereunder shall be effective upon receipt in writing delivered by hand or by other receipt-acknowledged method of delivery at the address first above written. This Master Lease Agreement and the Rental Schedule shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. This Master Lease Agreement and the Rental Schedule may be executed in multiple counterparts all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, Lessor and Lessee have caused this Master Lease Agreement to be executed and delivered by their duly authorized representatives as of the date first above written. AMERICAN FINANCE GROUP CONTINENTAL FOOD PACKAGING, INC. By:/s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE] -------------------- ------------------- Title: Vice President Title: President Date: 11/28/89 Date: DECEMBER 1, 1989 - 9 - RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NO. A-1 This RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE, dated as of February 1, 1990, between American Finance Group ("Lessor") and Continental Food Packaging, Inc. ("Lessee") incorporates by reference the terms and conditions of Master Lease Agreement No. 8910CTG389 dated as of November 10, 1989 (the "Master Lease"). Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the following described items of Equipment for the Lease Term and at the Basic Rent payable on the Payment Dates hereinafter set forth, on the terms and conditions set forth in the Master Lease. 1. EQUIPMENT Description (Manfacturer, Item Type, Model and Equipment Acceptance No. Serial Number) Cost Location Date - --- --------------- --------- -------- ---------- 7 Hyster Forklift See Attached Schedule A Trucks as more fully described on the attached Schedule A TOTAL EQUIPMENT COST: $138,065.00 Lessee Billing Locations (by state in which equipment is located): Nebraska: Continental Can Washington: 18340 Segal Park Dr. 4133 South 72nd St. P0 Box 58468 Omaha, NE 68117 Seattle, WA 98188 Attn: Norman Aldridge Attn: Mike Tierney California: Continental Can 1951 Fairway Dr. San Leandro, CA 94577 Attn: R. Denton 2. LEASE TERM The Lease Term is for an Interim Term commencing on the date of acceptance of the Equipment for lease, as set forth above, and continuing through and including January 31, 1990 and for a Primary Term of 60 months, commencing on February 1, 1990 and continuing through and including the Expiration Date of January 31, 1995. RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NO. A-1 PAGE TWO 3. BASIC RENT. PAYMENT DATES. Interim Term Basic Rent is due and payable in full on the first day of the Primary Term. Basic Rent for the Primary Term is due and payable in 60 payments of $2,500.91 each commencing on February 1, 1990 and continuing monthly in advance thereafter, through and including January 1, 1995. Interim Term Basic Rent is computed by multiplying the Total Equipment Cost by the Per Diem Lease Rate set forth below and multiplying the product by the number of days in the Interim Term. Primary Term Basic Rent is computed by multiplying the Total Equipment Cost by the Periodic Lease Rate set forth below. Per Diem Lease Rate: .000604 Periodic Lease Rate: .018114 4. SPECIAL RETURN CONDITIONS Notwithstanding anything contained in the Master Lease to the contrary, it is agreed that for purposes of returning the Equipment in accordance with Section 11 of the Master Lease, the standard "good and efficient operating condition and appearance, reasonable wear and tear excepted" shall be satisfied if the Equipment satisfies the following special return conditions: 1. When loaded to its rated capacity, each Unit shall: (a) Start under its own power and idle without water or fuel leaks. (b) Move through its normal speed ranges in both forward and reverse, in normal operating manner. (c) Steer normally right and left in both forward and reverse. (d) Be able to stop with its service brakes within a safe distance, in both forward and reverse. (e) Lift, lower, and tilt normally with and without a load a minimum of three (3) times. Carriage, lift chains and channel assembly shall be in working condition, normal wear and tear excepted. (f) Electric trucks, if purchased with batteries, must be returned with batteries that are capable of sustaining a charge that will permit use of the equipment for an eight (8) hour shift. (g) All motors shall operate without arcing and/or sparking. RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NO. A-1 PAGE THREE 2. Each Unit's attachment(s), if any, shall perform all of its required functions, and each Unit's horn, parking brake, and lights shall be operational. 3. The Units shall, on average, have tires with at least thirty-five percent (35%) remaining tread. 4. Each Unit shall be complete with all originally-installed parts and pieces which may be replacement, reconditioned or rehabilitated parts and pieces. 5. ACCEPTANCE CERTIFICATE Lessee hereby represents, warrants and certifies (a) that the Equipment described herein has been delivered to and inspected and found satisfactory by Lessee and is accepted for Lease by Lessee under this Rental Schedule and the Master Lease as incorporated herein by reference, as of the Acceptance Date set forth above; (b) all items of Equipment are new and unused as of the Acceptance Date, except as otherwise specified above, and (c) the representations and warranties of Lessee set forth in the Master Lease are true and correct as of the date hereof. 6. ENTIRE AGREEMENT. MODIFICATTON AND WAIVERS. EXECUTION IN COUNTERPARTS. This Rental Schedule and the Master Lease constitute the entire agreement between Lessee and Lessor with respect to the leasing of the Equipment. To the extent any of the terms and conditions set forth in this Rental Schedule conflict with or are inconsistent with the Master Lease, this Rental Schedule shall govern and control. No amendment, modification or waiver of this Rental Schedule or the Master Lease will be effective unless evidenced by a writing signed by the party to be charged. This Rental Schedule may be executed in counterparts, all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF the parties hereto have caused this Rental Schedule and Acceptance Certificate to be executed and delivered by their duly authorized representatives as of the date first above written. AMERICAN FINANCE GROUP CONTINENTAL FOOD PACKAGING, INC. Lessor Lessee By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE] ----------------------- ------------------------ Title: Vice President Title: ------------------- --------------------- CONTINENTAL FOOD PACKAGING, INC. EXHIBIT 1 TO RENTAL SCHEDULE A-1 CASUALTY VALUES (Stated as Percentage of Equipment Cost) AFTER AFTER PRIMARY PRIMARY TERM CASUALTY TERM CASUALTY PAYMENT NO. VALUE PAYMENT NO. VALUE - ----------- ---------- ----------- --------- Prior to 1 112.00 1 111.38 31 88.17 2 110.74 32 87.22 3 110.10 33 86.26 4 109.45 34 85.29 5 108.79 35 84.31 6 108.13 36 83.31 7 107.45 37 82.30 8 106.76 38 81.27 9 106.07 39 80.24 10 105.36 40 79.18 11 104.65 41 78.12 12 103.93 42 77.04 13 103.19 43 75.94 14 102.45 44 74.83 15 101.70 45 73.71 16 100.93 46 72.57 17 100.16 47 71.41 18 99.38 48 70.24 19 98.58 49 69.06 20 97.78 50 67.86 21 96.96 51 66.64 22 96.13 52 65.40 23 95.29 53 64.15 24 94.44 54 62.88 25 93.58 55 61.60 26 92.71 56 60.30 27 91.83 57 58.98 28 90.93 58 57.64 29 90.02 59 56.29 30 89.10 60 55.00 CONTINENTAL CAN COMPANY EXHIBIT 1 TO RENTAL SCHEDULE A-1 TERMIMATION BY SALE AND CASUALTY VALUES (State as Percentage of Equipment Cost) AFTER PRIMARY TERM TERMINATION CASUALTY PAYMENT NO. BY SALE VALUE - ----------- ----------- --------- Prior to 1 112.00 1 114.38 111.38 2 113.74 110.74 3 113.10 110.10 4 112.45 109.45 5 111.79 108.79 6 111.13 108.13 7 110.45 107.45 8 109.76 106.76 9 109.07 106.07 10 108.37 105.37 11 107.65 104.65 12 106.93 103.93 13 106.20 103.20 14 105.45 102.45 15 104.70 101.70 16 103.94 100.94 17 103.16 100.16 18 102.38 99.38 19 101.58 98.58 20 100.78 97.78 21 99.96 96.96 22 99.14 96.14 23 98.30 95.30 24 97.45 94.45 25 96.59 93.59 26 95.71 92.71 27 94.83 91.83 28 93.93 90.93 29 93.02 90.02 30 92.10 89.10 CONTINENTAL CAN COMPANY EXHIBIT 1 TO RENTAL SCHEDULE A-1 TERMINATION BY SALE AND CASUALTY VALUES (Stated as Percentage of Equipment Cost) AFTER PRIMARY TERM TERMINATION CASUALTY PAYMENT NO. BY SALE VALUE - ----------- ----------- --------- 31 91.17 88.17 32 90.23 87.23 33 89.27 86.27 34 88.30 85.30 35 87.31 84.31 36 86.32 83.32 37 85.30 82.30 38 84.28 81.28 39 83.24 80.24 40 82.19 79.19 41 81.12 78.12 42 80.04 77.04 43 78.95 75.95 44 77.84 74.84 45 76.72 73.72 46 75.58 72.58 47 74.42 71.42 48 73.25 70.25 49 72.07 69.07 50 70.86 67.86 51 69.65 66.65 52 68.41 65.41 53 67.16 64.16 54 65.89 62.89 55 64.61 61.61 56 63.31 60.31 57 61.99 58.99 58 60.65 57.65 59 59.30 56.30 60 58.00 55.00 1/30/90 Continental Food Packaging, Inc. Page 1 Rental Schedule A-1 Schedule A
Acceptance Date Vendor name Invoice no. Unit cost Serial Number Zip Code State City - --------------- ----------- ----------- --------- ------------- -------- ----- ------------ 1/30/90 Hyster Company 0033477 15,660.00 B010306630K 68117 NE Omaha 12/24/89 Hyster Company 0033516 16,115.00 A187V15527K 98188 WA Seattle 12/27/89 Hyster Company 0033517 16,115.00 A187V15528K 98188 WA Seattle 12/27/89 Hyster Company 0033518 16,115.00 A187V15529K 98188 WA Seattle 1/19/90 Hyster Company 0035294 32,050.00 D004V03437K 68117 NE Omaha 1/5/90 Hyster Company 0035630 26,470.00 D004V03432K 94577 CA San Leandro 1/19/90 Hyster Company 0035631 15,540.00 A187V1578SL 68117 NE Omaha ========== Total Equipment Cost: 138,065.00 Acceptance Date Vendor name Invoice no. Street Address Eqpt. Manf. Eqpt. Model Eqpt. Type - --------------- -------------- ----------- ---------------------- ----------- ----------- ---------- 1/30/90 Hyster Company 0033477 4133 South 72nd Street Hyster S35IL FORKLIFT 12/24/89 Hyster Company 0033516 8810 Northrup Street Hyster S50IL FORKLIFT 12/27/89 Hyster Company 0033517 8810 Northrup Street Hyster S50IL FORKLIFT 12/27/89 Hyster Company 0033518 8810 Northrup Street Hyster S50IL FORKLIFT 1/19/90 Hyster Company 0035294 4133 South 72nd Street Hyster S120ILB FORKLIFT 1/5/90 Hyster Company 0035630 1951 Fairway Street Hyster S70IL FORKLIFT 1/19/90 Hyster Company 0035631 4133 South 72nd Street Hyster S55IL FORKLIFT
RENEWAL RENTAL SCHEDULE NO. A-1RN1 (the "Renewal Rental Schedule") DATED AS OF MAY 13,1998 TO MASTER LEASE AGREEMENT NO. 891OCTG389 (the "Master Lease") DATED AS OF NOVEMBER 10,1989 LESSOR LESSEE AMERICAN INCOME PARTNERS V-D CROWN, CORK & SEAL COMPANY, INC. LIMITED PARTNERSHIP BY ASSIGNMENT FROM CONTINENTAL C/O EQUIS FINANCIAL GROUP FOOD PACKAGING, INC. 88 BROAD STREET 8300 ASHTON ROAD BOSTON, MA 02110 PHILADELPHIA, PA 19138 1. LEASE TERM. PAYMENT DATES. This Renewal Rental Schedule, between American Income Partners V-D, as lessor, lessor's interest therein having been previously sold and assigned by American Finance Group and Lessee incorporates by reference the terms and conditions of the Master Lease. Lessor hereby leases to Lessee and Lessee hereby leases from Lessor those items of Equipment described on the attached Schedule B, for the Renewal Lease Term and at the Renewal Term Basic Rent payable on the Payment Dates hereinafter set forth on the attached Schedule A, on the terms and conditions set forth in the Master Lease. 2. BASIC RENT Renewal Term Basic Rent is computed by multiplying the Total Equipment Cost by the Renewal Lease Rate set forth on the attached Schedule A. 3. SPECIAL RETURN CONDITIONS. STIPULATED LOSS VALUE. In furtherance, and not in limitation of, the use, maintenance and return conditions for the Equipment set forth in Sections 4, 8 and 11 of the Master Lease, Lessee hereby agrees to return the Equipment to Lessor in accordance with all of the terms and conditions of the Master Lease and in compliance with the following special return conditions: 1. When loaded to its rated capacity, each Unit shall: (a) Start under its own power and idle without water, hydraulic or fuel leaks. (b) Move through its normal speed ranges in both forward and reverse, in normal operating manner, with and without full load. (c) Steer right and left in both forward and reverse at manufacturer's designed turning radius (180 degrees). RENEWAL RENTAL SCHEDULE NO. A-1RN1 PAGE TWO (d) Be able to stop with its service brakes within a safe distance, in both forward and reverse. (e) Lift, lower, and tilt normally with and without a load a minimum of three (3) times. Uprights, rollers, carriage, lift chains and channel assemble shall be in working condition, not twisted, cracked, bent or welded, normal wear and tear expected. (f) Electric trucks, if purchased with batteries, must be returned with batteries that are capable of sustaining a charge that will permit use of the equipment for an eight (8) hour shift with no leaks. (g) All motors shall operate without arcing and/or sparking. 2. Each Unit's attachment(s), if any, shall perform all of its required functions, and each Unit's horn, parking brake, and lights shall be operational. In addition, each Unit shall have no torn seats. 3. The Units shall have tires with at least fifty percent (50%) remaining tread each. 4. Each Unit shall be complete with all originally-installed parts and pieces or same manufacturers new parts and pieces. 5. All decals, numbers and customer identification shall be removed from Equipment. If removal is by Lessor or Lessor's agent, Lessee shall pay any reasonable costs associated therewith. 6. Each Unit shall be cleaned, washed and without rust before being returned. Notwithstanding the provision of the Master Lease, the Stipulated Loss Value for the Equipment during the Renewal Lease Term shall be equal to $11,900.00. 4. ENTIRE AGREEMENT. MODIFICATION AND WAIVERS. EXECUTION IN COUNTERPARTS. This Renewal Rental Schedule and the Master Lease constitute the entire agreement between Lessee and Lessor with respect to the leasing of the Equipment. Lessee hereby represents, warrants and certifies that the representations and warranties of Lessee set forth in the Master Lease are true and correct as of the date hereof. Capitalized terms not defined herein shall have the meanings assigned to them in the Master Lease. To the extent any of the terms and conditions set forth in this Renewal Rental Schedule conflict with or are inconsistent with the Master Lease, this Renewal Rental Schedule shall govern and control. No amendment, modification or waiver of this Renewal Rental Schedule or the Master Lease will be effective unless evidenced by a writing signed by the parry to be charged. This Renewal Rental Schedule may be executed in counterparts, all of which together shall constitute one and the same instrument. RENEWAL RENTAL SCHEDULE NO. A-1RN1 PAGE THREE The undersigned, being the duly authorized representative of the Lessee, hereby certifies that the items of Equipment described on the attached Schedule B have been duly delivered to the Lessee in good order and duly inspected and accepted by the Lessee as conforming in all respects with the requirements and provisions of the Master Lease, as of the Renewal Term Commencement Date stated on the attached Schedule A. LESSOR LESSEE AMERICAN INCOME PARTNERS V-D CROWN, CORK & SEAL COMPANY INC., LIMITED PARTNERSHIP AS ASSIGNED BY CONTINENTAL FOOD By: AFG LEASING IV INCORPORATED FOOD PACKAGING, INC. Title: GENERAL PARTNER By: /s/ Gail D. Ofgant By: /s/ [ILLEGIBLE] ----------------------- ------------------------ Title: Vice President Title: Plant Manager COUNTERPART NO. 1 OF 2 SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE EXTENT IF ANY THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1. [ILLEGIBLE] EQUIS FINANCIAL GROUP 5/13/98 11:14:30 PAGE 1 Schedule A - Rental Schedule Economics LESSEE: CONTINENTAL FOOD PACKAGING, INC. LESSOR: EQUIS FINANCIAL GROUP RENTAL SCHEDULE: 1-1RN1 LEASE TERM: 24 PRIMARY START DATE: 6/01/1998 LEASE EXPIRATION DATE: 5/31/2000 PAYMENT FREQUENCY: MONTHLY ADVANCE/ARREARS: ADVANCE LEASE RATE: .011713370 PER ITEM LEASE RATE: .000390379 PERIODIC RENT: $310.00 NUMBER OF PAYMENTS: 24 TOTAL INTERIM RENT: $.00 PAYMENT COMMENCEMENT DATE: 6/01/1998 TOTAL EQUIPMENT COST: $26,470.00 DOCUMENT FEE: ______________ /s/ [ILLEGIBLE] LESSEE INITIALS - --------------- /s/ [ILLEGIBLE] LESSOR INITIALS - --------------- [ILLEGIBLE] EQUIS FINANCIAL GROUP 5/13/98 11:14:35 PAGE 1 Schedule B Equipment Description LESSEE: CONTINENTAL FOOD PACKAGING, INC. RENTAL SCHEDULE AND ACCEPTANCE CERTIFICATE NUMBER A-[ILLEGIBLE] LESSOR: EQUIS FINANCIAL GROUP
Equipment Cost Serial Number Year Manufacturer Model Type Date - -------------- ------------- ----------------- ----- -------- --------- 26,870.00 D064V03432K HYSTER S70KL FORKLIFT 6/01/1998 --------- 26,870.00 Total for Location 41099 ROICE MD FREMONT CA 94538 ========= 26,870.00 Total Equipment Cost
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