NATWEST BANK N.A.
000 XXXXX XXXXXX
XXX XXXX, XXX XXXX 00000
August 31, 1995
Atlantic Acquisition Limited Partnership
c/o American Finance Group
00 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Gentlemen:
Atlantic Acquisition Limited Partnership, a Massachusetts limited
partnership (the "Borrower"), has requested that NatWest Bank N.A. ("NatWest")
provide a term loan facility (the "Facility") in the principal amount not to
exceed Twenty-Seven Million Dollars ($27,000,000.00) Dollars, the proceeds of
which will be used by the Borrower to purchase (the "Acquisition") limited
partnership interests (the "Units") in publicly-owned limited partnerships
sponsored by American Finance Group (the "Public Programs").
Based on our discussions and on the projections, financial statements, both
pro forma and historical, and other information furnished by the Borrower to
NatWest, and subject to the conditions set forth below and in the Facility
Outline (as defined below), this letter evidences the willingness of NatWest,
on the terms and conditions set forth or referred to herein, to provide the
Facility to the Borrower.
Attached to and forming part of this letter as Schedule A is an outline of
the principal terms and conditions of the Facility (the "Facility Outline").
Various terms essential to the Facility are not set forth in the Facility
Outline, and must still be developed and agreed upon. Moreover, the Facility
Outline does not purport to include all of the conditions, covenants,
representations, warranties, defaults, and other terms customary to
transactions of this nature or otherwise appropriate in the context of these
transactions which would be contained in the definitive documents for the
Facility, all of which must be satisfactory in form and substance to us and
our counsel prior to our proceeding with the proposed Facility. We
specifically reserve the right to propose additional terms, conditions,
covenants, representations, warranties and defaults for the final documents
that are not specified in the Facility Outline and which are not materially
inconsistent with the terms in the Facility Outline. Furthermore, all
documents and other matters relating to the transactions being financed with
the Facility, including, without limitation, all underlying acquisition
documents for the Units, must be in form and substance satisfactory to us and
our counsel.
In providing the Facility, we may sell participations and/or admit syndicate
lenders (for which we will act as agent) who will assume a portion of our
commitment to make loans under the Facility. You agree to provide NatWest,
promptly upon request, with all information (such information to remain
confidential by and among NatWest and any participants or syndicate lenders)
which NatWest deems appropriate or advisable to provide potential purchasers
of a participation or syndicate interest in the Facility. You further agree to
use your reasonable efforts to make the appropriate officers and
representatives of the Borrower and American Finance Group available to
participate in information meetings for potential syndicate members and
participants at such times and places as NatWest may reasonably request.
You represent and warrant that (a) all information which has been or is
hereafter made available to NatWest by you or any of your representatives in
connection with the transactions contemplated hereby is and will be complete
and correct in all material respects for the purposes prepared and does not
and will not contain any untrue statement of material fact or omit to state a
material fact necessary in order to make the statements contained therein not
materially misleading in light of the circumstances under which such
statements are made, and (b) all financial projections that have been or will
hereafter be prepared by you and made available to NatWest or any other
syndicate lenders or participants in the Facility have been or will be
prepared in good faith based upon reasonable assumptions, which assumptions
shall be disclosed as part of such projections. You agree
at the request of NatWest to supplement the information and projections
referred to in clauses (a) and (b) above from time to time so that the
representation and warranty in the preceding sentence remains correct.
Our willingness to provide the Facility is conditioned upon, among other
things, (i) there being no material adverse change in our judgment in the
business, assets, results of operations, financial condition or prospects of
the Public Programs or the Borrower since the date of the last audited
financial statements of the Public Programs furnished to us which would, in
turn have a material adverse effect on the Borrower's ability to service the
Facility, (ii) all information, including all financial information, which is
furnished to us being true, accurate and complete in all material respects and
(iii) all legal matters relating to the Acquisition being acceptable to us and
our counsel, including, without limitation, receipt of an opinion of counsel
in form and substance satisfactory to us that the offering and acquisition of
the Units has been conducted in accordance with all applicable securities laws
and other laws and regulations. If in the course of documenting the proposed
transactions and our continued analysis of financial and other information
relating to the Borrower and the transactions to be financed by the Facility,
we discover that any of the foregoing conditions or any other conditions
specified in the Facility Outline will in our judgment not be met, we reserve
the right to terminate any commitment which we have to provide the Facility.
The Borrower, by its acceptance of this letter, hereby agrees to the terms
and provisions governing the Facility set forth herein and in the Facility
Outline. Whether or not the Facility is provided or any loan documents are
executed or the transactions contemplated hereby are consummated, the Borrower
by its acceptance of this letter hereby agrees (i) to pay NatWest the
arrangement fee referred to in the Facility Outline (but only on the terms and
conditions referred to in the Facility Outline) (ii) to pay on demand all out-
of-pocket costs and expenses incurred by us in connection with this letter and
the preparation, negotiation, execution and delivery of the loan agreement,
guaranties, security documents and all other agreements, documents and
instruments executed in connection herewith and therewith, including, without
limitation, our attorneys' fees and expenses (subject to a mutually agreed-
upon limitation of $60,000 for fees (assuming the documents for each Public
Partnership are substantially the same) plus disbursements and $2,000 to
$2,500 for fees plus disbursements for each drawdown after the initial
drawdown) and (iii) to indemnify, defend and hold harmless us and each
participant and syndicate lender and our and their respective directors,
officers, agents, employees and counsel from and against any and all losses,
claims, judgments or expenses incurred by us or any of them in connection
with, whether directly or indirectly, our commitment, the Facility, the loans
made thereunder, the Acquisition and other transactions to which the Facility
relates, or otherwise, including, without limitation, amounts paid in
settlement, court costs and the fees and disbursements of counsel incurred in
connection with any litigation, investigation, claim or proceeding, except
where the proposed indemnitee has been finally determined by a court of
competent jurisdiction to have committed willful misconduct or acted with
gross negligence. The Borrower's obligations in this paragraph shall survive
any termination of this letter or the transactions contemplated herein.
If the foregoing is acceptable to you, kindly sign and return a copy of this
letter to us by no later than August 31, 1995. In the event we do not receive
from you an executed copy of this letter by our close of business on such date
then this letter shall be deemed null and void in all respects and of no force
and effect. If we are unable to agree to definitive terms and conditions and
enter into definitive agreements by October 15, 1995 (provided that if we are
unable to enter into definitive agreements by October 15, 1995 because of
litigation pending, threatened or commenced with respect to the Acquisition,
the Public Programs or this proposed Facility, then such date shall be
extended to January 15, 1996), neither of us shall have any obligation with
respect to the proposed Facility, except for the Borrower's obligations under
the preceding paragraph of this letter, which shall continue in full force and
effect.
This letter shall not be assignable by the Borrower, except with our prior
written consent, and any attempted or purported assignment without such
consent shall be void. If this letter becomes the subject of a dispute, each
of the parties hereto waives trial by jury in such dispute. This letter shall
be governed by and construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely therein.
2
Neither NatWest nor any participant or syndicate lender shall be liable
under this letter or any loan documents or in respect of any act, omission or
event relating to the Acquisition or financing transactions contemplated
herein or therein, on any theory of liability, for any special, indirect,
consequential or punitive damages.
This letter is confidential, and is furnished solely for the Borrower's
benefit and may not be relied upon by any other person or entity. The Borrower
is not authorized to show or circulate this letter to any person or entity
(other than its legal and financial advisors in connection with its evaluation
hereof, who shall agree to maintain their confidentiality) until such time as
the Borrower has accepted this letter as provided in the immediately preceding
paragraph. If this letter is not accepted by the Borrower as provided above,
the Borrower is directed to immediately return this letter (and any copies
hereof) to the undersigned.
Very truly yours,
NatWest Bank N.A.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Title: Vice President
The foregoing is hereby
agreed to and accepted
this 31st day of August, 1995
Atlantic Acquisition Limited Partnership
By: AAL Inc., its general partner
By: /s/ Xxxxx X. Xxxxx
_______________________________
Title: Clerk
3
TENDER OFFER ACQUISITION FACILITY
SUMMARY OF TERMS
SCHEDULE A
Borrower: Atlantic Acquisition Limited Partnership, a special
purpose Massachusetts limited partnership (the
"Borrower") of which the General Partner is AAL, Inc.
("GP").
Facility: A multi-draw term loan (the "Term Loan") facility
with all take downs required to be made not later
than 90 days from initial drawdown.
Use of Proceeds: The proceeds of the Term Loan will be used by the
Borrower solely to fund the Acquisition (the
"Acquisition") and related costs and expenses,
initiated by the Borrower, of up to 45% of each of
the limited partnership units ("the LP Units") of
certain of the public partnerships currently managed
by American Finance Group ("AFG") and in which
affiliates of AFG are the sole general partners (the
"Public Partnerships").
Lenders: NatWest Bank N.A. will propose to underwrite the
entire commitment amount with the right to sell-down
a portion of its commitment to another lender or
lenders or to sell participations to another lender
or lenders. In the event of a sell-down, an Agency
Administration Fee is to be paid by the Borrower in
the amount of $40,000 per annum payable quarterly.
Agent: NatWest Bank N.A. (in such capacity, the "Agent").
Amount: All as set forth in Schedule B hereto, up to
$27,000,000; provided, however, that in no event
shall (i) with respect to the financing of the
Acquisition by the Borrower of LP Units, aggregate
drawdowns exceed the maximum Program Amount, and (ii)
the aggregate of all drawdowns exceed the Maximum
Loan Amount. As shown in Schedule B, the Maximum Loan
Amount includes third party offering and
organizational expenses (including, but, not limited
to, legal, accounting, printing, mailing, financial
institution fees and expenses, information agent and
depositary costs and fees, and any and all other out
of pocket costs, expenses and fees incurred by or on
behalf of the Borrower of a similar nature) in an
amount not to exceed $680,000 (the "Offering
Expenses") and the Upfront Fee described below.
All initial limited partners of the Borrower shall
severally unconditionally guarantee (by way of
additional capital contributions to be made to the
Borrower) repayment of that portion of the Term Loan
that was drawn to cover Offering Expenses, provided,
however, that at all times that the Borrower shall be
in compliance with the Maintenance Covenant described
below, then the Bank's right to enforce such
guarantee shall be suspended but further provided
that any such suspension shall cease and the Bank
shall have the right to enforce such guarantee in the
event and at any time that the Borrower is not in
compliance with the Maintenance Covenant.
Final Maturity: Four years from closing of each drawdown.
Interest: LIBOR (reserve adjusted) plus 350 basis points.
Upfront Fee: 2% on the amount of each drawdown to be paid at each
drawdown. Maximum aggregate fee will be $353,750 and
minimum fee will be $100,000.
4
Arrangement Fee: An arrangement fee of $100,000 will be payable by the
Borrower to NatWest Bank if the closing of the
facility does not occur by October 15, 1995 or if the
closing does occur by such date but the Borrower does
not draw down any funds under the facility by January
15, 1996, provided that:
(a) no arrangement fee will be payable if NatWest
Bank declines to close the Facility or fund under
the Facility because of (i) a material adverse
change in any of the Public Programs or the
Borrower which would have, in turn, a material
adverse effect on the Borrower's ability to
service the Term Loan or (ii) NatWest Bank
declines to proceed for a reason other than
breach by the Borrower of a representation,
warranty or covenant or failure of a condition or
other reason expressly set forth herein; and
(b) if NatWest Bank or the Borrower declines to close
the Facility or declines to fund under the
Facility because of litigation pending,
threatened or commenced with respect to the
Acquisition, the Public Programs or this proposed
Facility, then payment of the arrangement fee
shall be postponed until the earliest of i) the
date of the expiration or termination of this
letter, or ii) the date of termination of such
litigation, or iii) January 15, 1996. If NatWest
Bank or the Borrower declines to close this
Facility or declines to fund under the Facility
on or before January 15, 1996 because of such
litigation, then the arrangement fee payable by
the Borrower to NatWest Bank, shall be $50,000.
Drawdowns: Each drawdown shall be in a minimum amount of
$500,000 and no drawdown shall be made later than 90
days after the initial drawdown. Initial drawdown to
occur no later than October 15, 1995, provided that
such date shall be extended to a date no later than
January 15, 1996 in the event that initial drawdown
does not occur by October 15, 1995 because of
litigation pending, threatened or commenced with
respect to the Acquisition, the Public Programs or
this proposed Facility. In the event of such an
extension, all drawdowns must be made by January 15,
1996.
Interest Payments: Payments of interest on the principal amount
outstanding under the Term Loan will be payable
quarterly in arrears based on a 360 day year.
Borrower shall hedge interest rate risk through
interest rate swap or cap within 90 days from final
drawdown with counterparty acceptable to NatWest
Bank.
Scheduled Principal
Payments: Each drawdown of the Term Loan will be payable in
sixteen (16) consecutive quarterly installments to be
calculated based on the projected amount of cash flow
available from the firm term lease payments and to be
agreed to by Lenders prior to drawdown.
Mandatory Pre-Payments: A mandatory prepayment of principal outstanding on
the Term Loan shall be made quarterly on the
Scheduled Principal Payment date in an amount equal
to the Distributable Cash Amount (as defined below)
for the immediately preceding calendar quarter.
Mandatory prepayments of the Term Loan described in
the preceding paragraph shall be applied pro rata to
the remaining scheduled installments of principal
with respect to each drawdown of the Term Loan.
5
"Distributable Cash Amount" shall mean cash received
from all sources less current and accrued interest
and principal payments and less accounting, legal,
printing and other third party expenses ("Operating
Expenses") and any Agency Administration Fee.
Operating Expenses not to exceed $100,000 per year.
Optional Pre-Payments: The Borrower shall have the right to make optional
prepayments of the Term Loan at the end of each
interest period in minimum principal amounts of
$250,000.
Collection Account: Until repayment in full of all outstanding principal
of the Term Loan together with all interest, all
distributions from Programs payable to the Borrower
shall be paid directly by the Programs into a
Collection Account maintained by the Agent from which
all scheduled principal amounts together with accrued
interest, when and as due, shall be deducted. The
Borrower shall have the right to request the Agent to
make withdrawals from the Collection Account for
payments of any and all Operating Expenses and any
Agency Administration Fee.
Collateral: The Agent shall have a first priority perfected
security interest subject to no other liens in:
1. All assets of the Borrower including without
limitation the Purchased Units;
2. The stock of the GP;
3. All the Partners', including the GP's interest in
the Borrower; and
4. The Collection Account;
Recourse: The obligations under the Term Loan will be fully
recourse to the Borrower and to the GP.
Conditions Precedent: Customary and usual for transactions of this type by
the Agent and others appropriate in the context of
the proposed transaction, including but not limited
to:
1. The Acquisition and the Tender Offer documentation
shall be in full force and effect and shall have
been provided to the Lenders and shall be in form
and substance satisfactory to NatWest Bank and its
counsel;
2. All conditions under the Tender Offer Materials
precedent to the consummation of the Tender Offers
with respect to the LP Units then being acquired
shall have been satisfied. The Borrower shall have
received all necessary governmental, regulatory
and other third party approvals and the Tender
Offer and the Acquisition shall have complied with
all legal and regulatory requirements including
securities laws and regulations, and the Lenders
and the Agent shall have received an opinion of
counsel satisfactory to them to the effect of all
of the foregoing;
3. The Borrower shall have received cash proceeds
aggregating 10% of the aggregate purchase price of
the Purchased Units representing equity
contributions from its partners and shall have
utilized such proceeds in the manner set forth on
Schedule B (use of proceeds) hereto to purchase
the LP Units and to pay any related fees and
expenses as contemplated above under "Use of
Proceeds" not funded through drawdowns.
6
4. Each of the Programs and each of the general
partners thereof shall be in legal existence and
in good standing in each of the jurisdictions of
their organization and in all other applicable
jurisdictions;
5. Each of the documents relating to the structure
and operation of the Borrower shall be
satisfactory in form and substance to the Lenders;
6. The Lenders and the Agent shall have received
evidence (including legal opinions and certified
copies of applicable partnerships and operating
documents) satisfactory in form and substance to
the Lenders and the Agent that the documents to be
furnished to the Lenders and the Agent in
connection with this financing have been duly
authorized, executed and delivered by all
necessary parties and constitute the legal, valid
and binding obligations of the parties thereto,
enforceable in accordance with their terms,
compliance with all applicable laws including the
Securities Laws and Regulations G, U, T, X of the
Federal Reserve System, and absence of any liens
on the collateral except those in favor of the
Agent;
7. A field examination of the servicer and of
financial information provided to Lenders in
connection with this transaction to include a
review of asset collateral values shall occur
prior to closing.
8. All documentation relating to the programs,
including without limitation, provisions as to the
transferability of LP Units and the rights of
holders of L.P. units to participate in cash flows
and distribution of programs shall be satisfactory
in all respects to the Lenders and the Agent.
9. All legal matters shall be satisfactory in all
respects to counsel for the Agent.
10. No material adverse event in the judgment of the
Lenders occurring with respect to any of the
Public Programs or the Borrower, which would, in
turn, have a material adverse effect on the
Borrower's ability to service the Term Loan.
11. No litigation with respect to the Acquisition or
this financing transaction shall be pending,
threatened or commenced.
12. The limited partners of the Borrower to be no one
other than Xxxxxxxx XxxXxxxxx, Xxxxx Xxxxx, Xxxx
Xxxxx, and any entity affiliated with one or more
of them (the "Initial Limited Partners.")
13. Most recent audited annual and unaudited
quarterly financial statements for all
partnerships shall have been delivered to the
Lenders and the Agent and shall be acceptable to
the Lenders and the Agent.
Representations and
Warranties: Customary and usual for transactions of this type by
the Agent and others appropriate in the context of
the proposed transaction, including, without
limitation, that all financial information and other
materials furnished to the Lenders and the Agent
shall be true and complete and that the Maximum
Program Amount on Schedule B shall not exceed 90% of
the Net Present Value of the amount to be distributed
to LP Unitholders from cash and the firm term lease
payments allocable for each LP Unit purchased
pursuant to the Tender Offer.
7
Covenants: Customary and usual for transactions of this type by
the Agent and others appropriate in the context of
the proposed transaction, to include without
limitation the following:
1. A minimum net worth covenant on the Borrower (to
be determined) not to exceed $1,000,000.
2. A maintenance covenant whereby outstanding
advances less Upfront Fees and Offering Expenses
under the Term Loan will never exceed 90% of the
net present value of the lease payments and cash
on hand (the "Maintenance Covenant"). For the
purposes of the Maintenance Covenant only,
Offering Expenses shall be reduced on a pro-rata
basis with reductions in the overall outstanding
principal advance.
In the event that the Maintenance Covenant is
violated, each of the General Partner and the
Initial Limited Partners (collectively the
"Partners") will cause the Borrower to take all
action necessary to effect a cure of such
violation. Further, the Partners will use their
reasonable best efforts with respect to the Public
Partnerships managed by AFG (but only to the
extent consistent with any fiduciary duties they
may have to investors in the Public Partnerships
and any powers that they may have with respect to
the Public Partnerships) to reduce aggregate
lessee concentrations of the Public Partnerships
so that the lessees with the three largest lease
obligations to the Public Partnerships will not
individually constitute more than 10% of the
future minimum rents to be collected from all
lessees in the Public Partnerships. For purposes
of the preceding sentence, "reasonable best
efforts" shall be satisfied if the Partners make
good faith inquiries of not less than two third
party independent institutional lenders seeking
non-recourse financing and proceed in good faith
to close any such financings committed to by such
institutional lenders, on terms reasonable and
customary in the equipment leasing industry, of
the future minimum rents of the leases to which
such lessees are parties.
In no event shall the obligations of the Initial
Limited Partners set forth above constitute a
guarantee of payment or performance of the
Borrower's obligations to the Lenders or
constitute an obligation on the part of such
Limited Partners to make additional capital
contributions in any amount to the Borrower.
Except for claims for breach of the limited
obligations of the Initial Limited Partners as set
forth above, there shall be no other recourse to
such Initial Limited Partners for such
obligations.
3. The Borrower shall not have any assets other than
Purchased Units and the Collection Account and no
liabilities other than the Term Loan and Operating
Expenses and Agency Administration Fee.
4. No change in partners of the Borrower without
Lenders' prior approval which shall not be
unreasonably withheld.
Events of Default: Customary and usual for transactions of this type
by the Agent and others appropriate in the context
of the proposed transaction (subject to customary
and reasonable cure periods where applicable),
including but not limited to:
1. Failure to pay principal or interest when due;
2. Failure to make required deposits into the
Collection Account;
8
3. Failure to pay taxes or other impositions;
4. Any representation or warranty in the loan
documents having been untrue in any material
respect as of the date made or deemed made;
5. Bankruptcy or insolvency of the Borrower or the
GP;
6. Direct or indirect change in control of the
Borrower or control or management of the Borrower;
7. Dissolution or other termination of the Borrower
or the GP;
8. Breach of other covenants in the loan documents;
9. Failure of any security for the Term Loan;
10. Material adverse change in any of the Public
Programs or the Borrower which would, in turn
have in the Lenders' judgment, causing a material
adverse impact on the Borrower's ability to
service the Term Loan.
Other: Legal fees and expenses for the account of the
Borrower. Legal fees of the Agent and the Lenders in
connection with the closing of this financing not to
exceed $60,000 (assuming that the documents for each
of the Public Partnerships are substantially the
same) plus disbursements with an additional $2,000 to
$2,500 plus disbursements for each set of Public
Partnership documents received after the first one.
Out-of-pocket expenses associated with pre-closing
field examination and third party appraisals to be
for the account of the Borrower not to exceed
$10,000.
Documentation, including opinions of counsel, in
satisfactory form and substance to the Agent, Xxxxxxx
and the Agent's Counsel.
9
ATLANTIC ACQUISITION LIMITED PARTNERSHIP
SCHEDULE B
OFFER NUMBER MAXIMUM
PRICE OF UNITS ESTIMATED LOAN INDIVIDUAL
PER TENDERED PURCHASE PER LOAN
PROGRAM UNIT FOR PRICE UNIT AMOUNTS
------- ----- -------- --------- ------- -----------
American Income 4 Limited Partner-
ship............................. 16.00 36,000 576,000 14.18 510,480
American Income 5 Limited Partner-
ship............................. 17.00 32,083 545,411 15.23 488,624
American Income 6 Limited Partner-
ship............................. 18.50 27,234 503,829 16.65 453,446
American Income 7 Limited Partner-
ship............................. 17.56 32,133 564,255 15.80 507,701
American Income 8 Limited Partner-
ship............................. 19.13 33,683 644,356 17.22 580,021
American Income Partners III-A
Limited Partnership.............. 1.30 454,056 590,273 1.13 513,083
American Income Partners III-B
Limited Partnership.............. 1.50 507,299 760,949 1.35 684,854
American Income Partners III-C
Limited Partnership.............. 1.85 348,359 644,464 1.67 581,760
American Income Partners III-D
Limited Partnership.............. 1.50 233,967 350,951 1.34 313,516
American Income Partners IV-A Lim-
ited Partnership................. 2.60 422,820 1,099,332 2.33 985,171
American Income Partners IV-B Lim-
ited Partnership................. 3.00 393,271 1,179,813 2.56 1,006,774
American Income Partners IV-C Lim-
ited Partnership................. 5.00 571,780 2,858,900 4.51 2,578,728
American Income Partners IV-D Lim-
ited Partnership................. 8.03 488,673 2,946,698 5.75 2,809,870
American Income Partners V-A Lim-
ited Partnership................. 5.25 621,297 3,261,809 4.73 2,938,735
American Income Partners X-X Xxx-
ited Partnership................. 4.50 696,569 3,134,561 3.75 2,612,134
American Income Partners X-X Xxx-
ited Partnership................. 4.22 418,699 1,766,910 3.80 1,591,056
American Income Partners X-X Xxx-
ited Partnership................. 3.49 216,102 754,196 3.14 678,560
American Income Fund I-B,
a Massachusetts Limited Partner-
ship............................. 4.00 129,020 518,080 2.54 327,711
American Income Fund I-C,
a Massachusetts Limited Partner-
ship............................. 5.00 361,555 1,807,775 4.46 1,612,535
American Income Fund I-D,
a Massachusetts Limited Partner-
ship............................. 5.00 373,285 1,866,425 4.41 1,646,187
American Income Fund I-E,
a Massachusetts Limited Partner-
ship............................. 7.10 397,723 2,823,833 6.39 2,541,450
-----------
Maximum Program Amount.......... $25,962,395
Offering Expenses............. 680,000
Estimated Upfront Fee......... 353,750
"Maximum Loan Amount" $26,966,145
10
