ATEL CAPITAL EQUIPMENT FUND XI, LLC - S-1 - 20041108 - MORE_INFORMATION
ADDITIONAL INFORMATION
The Fund has filed with the Securities and Exchange Commission, Washington,
D.C., a registration statement under the Securities Act of 1933, as amended,
with respect to the Units offered pursuant to this Prospectus. For further
information, reference is made to the registration statement and the exhibits
thereto which are available for inspection at no fee in the principal office of
the Commission at 450 Fifth Street, Northwest, Washington, D.C. 20549. The Fund
is subject to the informational requirements of the Securities Exchange Act of
1934 and in accordance therewith files reports and other information with the
Securities and Exchange Commission. Such reports, the registration statement and
other information are available for inspection and copying at the above address,
and are also available to be viewed and retrieved without charge on the
Commission's electronic data gathering and retrieval (EDGAR) system, at its
internet web site at www.sec.gov. In addition, photostatic copies of the
material containing this information may be obtained from the Commission upon
paying of the fees prescribed by the rules and regulations of the Commission.
This Prospectus contains a fair summary of the material provisions of the
exhibits filed with the Commission. This Prospectus does not knowingly contain
any untrue statement of a material fact or omit to state any material fact
required to be stated herein or necessary to make the statements herein not
misleading.
GLOSSARY
The following terms used in this Prospectus shall (unless otherwise
expressly provided herein or unless the context otherwise requires) have the
following respective meanings:
"Acquisition Expenses" shall mean expenses including, but not limited to,
legal fees and expenses, travel and communication expenses, costs of appraisals,
accounting fees and expenses, and miscellaneous expenses relating to selection
and acquisition of Equipment, whether or not acquired.
"Acquisition Fees" shall mean the total of all fees and commissions paid by
any party in connection with the initial purchase or manufacture of Equipment.
Included in the computation of such fees or commissions shall be any commission,
selection fee, financing fee, nonrecurring management fee, or any fee of a
similar nature, however designated.
"Adjusted Invested Capital" shall mean, as of any date, the Original
Invested Capital attributable to the Units held by any Person on or before such
date, as decreased (but not below zero) by the amount by which (i) all
Distributions with respect to such Units on or before the date of determination
pursuant to any provision of the Operating Agreement exceed (ii) the Priority
Distribution attributable to such Units for such period.
"Affiliate" of a Person shall mean
-- any Person directly or indirectly controlling, controlled by or under
common control with such Person;
-- any Person owning or controlling 10% or more of the outstanding voting
securities or beneficial interests of such Person;
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-- any officer, director, trustee or partner of such Person; and
-- if such Person is an officer, director, trustee, partner or holder of
10% or more of the voting securities or beneficial interests of such
Person, any other company for which such Person acts in such capacity.
However, such term shall not include a Person who is a partner in a
partnership or joint venture with the Fund if such Person is not
otherwise an Affiliate.
"Asset Management Fee" shall mean the fee payable to the Manager and its
Affiliates under the provisions of Section 8.2 of the Operating Agreement.
"Asset Management Fee Limit" means the limit on fees calculated pursuant to
Section 8.3 of the Operating Agreement.
"Assignee" shall mean a Person who has acquired a beneficial interest in
one or more Units from a third party but who is neither a substituted Holder nor
an Assignee of Record.
"Assignee of Record" shall mean an Assignee who has acquired a beneficial
interest in one or more Units whose ownership has been recorded on the books of
the Fund and which ownership is the subject of a written instrument of
assignment, the effective date of which assignment has passed.
"ATEL" shall mean ATEL Financial Services, LLC, a California limited
liability company.
"California Act" shall mean the Beverly-Killea Limited Liability Company
Act, Title 2.5, Chapters 1-15, of the California Corporations Code, as it may be
amended from time to time.
"Capital Account" shall mean, with respect to any Member, such Member's
Capital Account determined in accordance with Section 6.7 of the Operating
Agreement.
"Carried Interest" shall mean the allocable share of Fund Distributions of
Cash from Operations and Cash from Sales or Refinancing payable to the Manager,
as a Member, pursuant to Sections 10.4 and 10.5 of the Agreement, for which cash
consideration has neither been paid nor is to be paid.
"Cash from Operations" shall mean the excess of Gross Revenues (which
excludes revenues from equipment sales or refinancing) over cash disbursements
(including the Equipment Management Fee and amounts reinvested by the Fund in
Equipment) without reduction for depreciation and amortization of intangibles
such as organization and underwriting costs but after a reasonable allowance for
cash for repairs, replacements, contingencies and anticipated obligations, as
determined by the Manager.
"Cash from Reserve Account" shall mean that portion of the Net Proceeds not
utilized in the acquisition of equipment, including cash maintained according to
the provisions of Section 9.4 of the Operating Agreement.
"Cash from Sales or Refinancing" shall mean the net cash realized by the
Fund from the sale, refinancing or other disposition of any equipment after
payment of all expenses related to the transaction.
"Closing Date" shall mean such date designated by the Manager for the
termination of the offering of Units, but not later than _____, 200_ (a date two
years from the date of this Prospectus). Extension of the offering beyond one
year from the date of the Prospectus shall be subject to the qualification of
the offering for any such extension in those jurisdictions which may limit the
offering period to one year. "Initial Closing Date" shall mean the date on which
subscribers for Units, other than the initial Holder, are first admitted to the
Fund as Holders. "Final Closing Date" shall mean the last date on which
subscribers for Units are admitted to the Fund as Holders.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent federal revenue laws.
"Distributions" shall mean any cash distributed to Holders and the Manager
arising from their respective interests in the Fund.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Equipment Management" shall mean personnel and services necessary to the
leasing activities of the program, including but not limited to leasing and
releasing of program equipment, arranging for necessary maintenance and repair
of the equipment, collecting revenues, paying operating expenses, determining
that the equipment is used in accordance with all operative contractual
arrangements and providing clerical and bookkeeping services necessary to the
operation of the program equipment.
"Front-End Fees" shall mean fees and expenses paid by any party for any
services rendered during the Fund's organization and acquisition phase including
Organization and Offering Expenses, Leasing Fees, Acquisition Fees, Acquisition
Expenses, and any other similar fees, however designated. Notwithstanding the
foregoing, Front-End Fees shall not include any Acquisition Fees or Acquisition
Expenses paid by a manufacturer of Equipment to any of its employees unless such
Persons are Affiliates of the Manager.
"Full Payout Lease" shall mean a lease under which the non-cancellable
rental payments due during the initial term of the lease are at least sufficient
to cover the purchase price of the Equipment leased.
"Fund" shall mean ATEL CAPITAL EQUIPMENT FUND XI, LLC, the California
limited liability company created under the Operating Agreement.
"Fund Manager" or "Manager" shall mean ATEL Financial Services, LLC
("ATEL"), a California limited liability company, or any other Person or Persons
which succeed it in such capacity. The Manager is referred to throughout the
Prospectus as "ATEL" or the "Manager."
"Fund Minimum Gain" shall have the meaning set forth in Regulations Section
1.704-2(d)(1).
"Gross Proceeds" shall mean the aggregate total of the Original Invested
Capital of the initial and all of the additional Holders.
"Gross Lease Revenues" shall mean all revenues attributable to the
equipment other than from security deposits paid by lessees thereof. The term
"Gross Revenues" shall not include revenues from the sale, refinancing or other
disposition of equipment.
"High Payout Lease" shall mean a lease under which the noncancellable
rental payments and other payment obligations of the lessee due through the
initial term of the lease are equal to at least 90% of the original purchase
price paid by the Fund for the equipment.
"Holders" shall mean owners of Units who are either Members or Assignees of
Record, and reference to a "Holder" shall be to any one of them. The Manager
shall not be considered to be a Holder except to the extent it also owns Units.
"IRA" shall mean an individual retirement account qualifying under Section
408 of the Code.
"Investment in Equipment" shall mean the amount of Gross Proceeds actually
paid or allocated to the purchase of Equipment acquired by the Fund, any amount
of Gross Proceeds reserved pursuant to Section 9.4 of the Operating Agreement up
to a maximum of 3% of Gross Proceeds and other cash payments such as interest
and taxes, but excluding Front-End Fees.
"Members" shall mean the initial Members and any other Persons who are
admitted to the Fund as additional or substituted Members. Reference to a
"Member" shall refer to any one of them.
"Net Income" or "Net Loss" shall mean the taxable income or taxable loss of
the Fund as determined for federal income tax purposes, computed by taking into
account each item of Fund income, gain, loss, deduction or credit not already
included in the computation of taxable income and taxable loss, but does not
mean Distributions.
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"Net Lease Provisions" shall mean contractual arrangements under which the
lessee assumes responsibility for, and bears the cost of, insurance, taxes,
maintenance, repair and operation of the leased asset and where non-cancellable
rental payments under the lease are absolutely net to the lessor,
notwithstanding that some minor costs or responsibilities remain with the Fund
as lessor or that the Fund retains the option to require and pay for a higher
standard of care or greater level of maintenance or insurance than would be
imposed on the lessee under the terms of the lease.
"Net Proceeds" shall mean the total Gross Proceeds less Organization and
Offering Expenses.
"Operating Lease" shall mean a lease under which the aggregate rental
payments due during the initial term of the lease are less than the purchase
price of the equipment leased.
"Operating Revenues" means the total for any period of all Gross Lease
Revenues plus all Cash from Sales or Refinancing.
"Organization and Offering Expenses" shall mean those expenses incurred in
connection with preparing the Fund for registration and subsequently offering
and distributing Units to the public, including selling commissions and all
advertising expenses except advertising expenses related to the leasing of
equipment.
"Original Invested Capital" shall mean the original gross purchase price of
the Units contributed by each Member to the capital of the Fund for his interest
in the Fund, which amount shall be attributed to Units in the hands of a
subsequent Holder.
"Operating Agreement" or "Agreement" shall mean the Limited Liability
Company Operating Agreement of ATEL CAPITAL EQUIPMENT FUND XI, LLC, as it may be
amended from time to time.
"Person" shall mean any natural person, partnership, corporation,
association or other legal entity.
"Prospectus" shall mean the final prospectus filed in connection with the
registration of the Units with the Securities and Exchange Commission on Form
S-1, as amended, together with any supplement thereto which may be subsequently
filed with such Commission.
"Purchase Price of Equipment" shall mean the price paid upon the purchase
or sale of a particular item of equipment including all liens and mortgages on
the equipment, but excluding points and prepaid interest.
"Qualified Plan" shall mean employee trusts (or employer individual
retirement accounts), Keogh Plans and corporate retirement plans qualifying
under Section 401(a) of the Code.
"Regulations" or "Treasury Regulations" shall mean the income tax
regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Reinvestment Period" shall mean the period commencing with the Initial
Closing Date and ending six calendar years after the Final Closing Date occurs.
"Reimbursable Administrative Expenses" shall mean the ordinary and annually
recurring administration expenses incurred by the Manager and reimbursed by the
Fund. Such expenses shall not include interest, depreciation, equipment
maintenance or repair, third party services or other non-administrative
expenses.
"Resident Alien" shall mean a resident alien as defined within the Federal
Aviation Act of 1958, as amended from time to time, or any successor statute, or
any regulations adopted pursuant to such Act or any successor statute.
"Roll-Up" shall mean a transaction involving the acquisition, merger,
conversion or consolidation, either directly or indirectly, of the Fund and the
issuance of securities of a Roll-Up Entity. Such term does not include:
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(a) any transaction if the securities of the Fund have been for at
least twelve months traded through the National Association of Securities
Dealers, Inc. Automated Quotation National Market System; or
(b) a transaction involving the conversion to corporate, trust or
association form of only the Fund, if, as a consequence of the transaction,
there will be no significant adverse change in any of the following
(i) the Members' voting rights;
(ii) the term of existence of the Fund;
(iii) the terms of compensation of the Manager and its Affiliates; or
(iv) the Fund's investment objectives.
"Service" shall mean the United States Internal Revenue Service or its
successor.
"Substantially All of the Assets" shall mean, unless the context otherwise
dictates, equipment representing 66 2/3% or more of the net book value of all
equipment as of the end of the most recently completed fiscal quarter.
"Unit" shall mean the interest in the Fund representing Original Invested
Capital in the amount of $10 and shall entitle the Holder thereof to the rights
herein provided.
"United States Citizen" shall mean a "citizen of the United States" as
defined within the Federal Aviation Act of 1958, as amended from time to time,
or any successor statute, or any regulations adopted pursuant to such Act or any
successor statute.
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FINANCIAL STATEMENTS
Set forth below are the following financial statements:
ATEL Capital Equipment Fund XI, LLC
Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . . . .F - 2
Balance Sheet, October 15, 2004 . . . . . . . . . . . . . . . . . . . . . .F - 3
Statement of Changes in Members' Capital for the period from
June 25, 2004 (inception) to October 15, 2004 . . . . . . . . . . . . . F - 3
Statement of Cash Flows for the period from June 25,
2004 (inception) to October 15, 2004 . . . . . . . . . . . . . . . . . F - 3
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . F - 4
ATEL Financial Services, LLC
Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . . . .F - 5
Consolidated Balance Sheet, July 31, 2004 . . . . . . . . . . . . . . . . .F.-.6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . F - 7
F - 1
REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Members
ATEL Capital Equipment Fund XI, LLC
We have audited the accompanying balance sheet of ATEL Capital Equipment Fund
XI, LLC (a development stage enterprise) (the Fund) as of October 15, 2004, and
the related statements of changes in members' capital and cash flows for the
period from June 25, 2004 (inception) through October 15, 2004. These financial
statements are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards of the Public
Companies Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ATEL Capital Equipment Fund XI,
LLC (a development stage enterprise) at October 15, 2004, and its cash flows for
the period from June 25, 2004 (inception) through October 15, 2004, in
conformity with U. S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
October 22, 2004
San Francisco, California
F - 2
ATEL CAPITAL EQUIPMENT FUND XI, LLC
(A Development Stage Enterprise)
BALANCE SHEET
OCTOBER 15, 2004
ASSETS
Cash $600
MEMBERS' CAPITAL
Members' capital:
Managing Member $100
Initial Member 500
-------
Total members' capital $600
=======
STATEMENT OF CHANGES IN MEMBERS' CAPITAL
FOR THE PERIOD FROM JUNE 25, 2004 (INCEPTION)
THROUGH OCTOBER 15, 2004
Initial Member Managing
Units Amount Member Total
Members' Capital as of June 25, 2004
(inception) - $ - $ - $ -
Capital contributions 50 500 100 600
----------------- ----------------- ------------------ -----------------
Members' capital as of October 25, 2004 50 $500 $100 $600
================= ================= ================== =================
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JUNE 25, 2004 (INCEPTION)
THROUGH OCTOBER 15, 2004
Financing activities:
Capital contributions received $600
-------
Net increase in cash 600
Cash at inception -
-------
Cash at end of period $600
=======
See accompanying notes.
F - 3
ATEL CAPITAL EQUIPMENT FUND XI, LLC
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 15, 2004
1. Organization and Limited Liability Company matters:
ATEL Capital Equipment Fund XI, LLC (a development stage enterprise) (the
"Fund") was formed under the laws of the state of California on June 25, 2004
for the purpose of acquiring equipment to engage in equipment leasing and sales
activities. The Fund shall continue until December 31, 2025. Contributions in
the amount of $600 were received as of October 15, 2004, $100 of which
represented the Managing Member's (ATEL Financial Services, LLC's) continuing
interest, and $500 of which represented the Initial Member's capital investment.
As a limited liability company, the liability of any individual member for the
obligations of the Fund is limited to the extent of capital contributions to the
Fund by the individual member.
As of October 15, 2004, the Fund had not commenced operations other than those
relating to organizational matters. The Fund, or the Managing Member on behalf
of the Fund, will incur costs in connection with the organization, registration
and issuance of the Limited Liability Company Units (Units). The amount of such
costs to be borne by the Fund is limited by certain provisions of the ATEL
Capital Equipment Fund XI, LLC limited liability company operating agreement
dated October 24, 2004 (the "Operating Agreement").
Cash:
Cash is maintained in a standard non-interest bearing checking account.
Use of estimates:
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated balance sheet. Actual results could differ from those
estimates. The significant estimates were made in relation to the useful lives
of property and equipment and leasehold improvements and goodwill impairment.
2. Income taxes:
The Fund does not provide for income taxes since all income and losses are the
liability of the individual members and are allocated to the members for
inclusion in their individual tax returns.
3. Members' capital:
As of October 31, 2004, 50 Units ($500) were issued and outstanding. The Fund is
authorized to issue up to 15,000,000 additional Units.
The Fund Net Income, Net Losses, and Distributions are to be allocated 92.5% to
the Members and 7.5% to the Managing Member.
4. Commitments and management:
The terms of the Operating Agreement provide that the Managing Member and/or
affiliates are entitled to receive certain fees, in addition to the allocations
described above, which are more fully described in Section 8 of the Operating
Agreement. The additional fees to management include fees for equipment
management and resale.
F - 4
REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Members
ATEL Financial Services LLC
We have audited the accompanying consolidated balance sheet of ATEL Financial
Services LLC (the "Company") and subsidiary as of July 31, 2004. This balance
sheet is the responsibility of the Company's management. Our responsibility is
to express an opinion on this balance sheet based on our audit.
We conducted our audit 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 balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of ATEL
Financial Services LLC at July 31, 2004, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
October 15, 2004
San Francisco, California
F - 5
ATEL FINANCIAL SERVICES LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JULY 31, 2004
ASSETS
Cash and cash equivalents $ 1,856,352
Amounts due from affiliated programs 6,156,692
Property and equipment, net of accumulated depreciation of $425,558 908,998
Leasehold improvements, net of accumulated amortization of $172,794 1,179,005
Goodwill, net of accumulated amortization of $879,520 23,286,883
Other assets 150,284
--------------
Total Assets $ 33,538,214
==============
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Term loan $ 2,809,091
Subordinated convertible promissory note, due to related party 1,000,000
Other long-term debt 850,000
Amounts due to affiliated companies 18,196,405
Accounts payable and accrued liabilities 1,463,442
Derivative - interest rate swap 150,177
--------------
Total liabilities 24,469,115
Members' equity:
Accumulated other comprehensive income (60,670)
Members' equity 9,129,769
--------------
Total Members' equity 9,069,099
--------------
Total liabilities and Members' equity $ 33,538,214
==============
See accompanying notes.
F - 6
ATEL FINANCIAL SERVICES LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 2004
1. Organization and summary of significant accounting policies:
Organization and principles of consolidation:
The consolidated balance sheet includes the accounts of ATEL Financial Services
LLC ("ATEL") and its wholly owned subsidiary, ATEL Securities Corporation
("ASC"). ATEL is an indirect wholly owned subsidiary of ATEL Capital Group
("ACG") and the financial position of ATEL would be significantly different if
ATEL was autonomous.
ATEL is a California limited liability company that was formed in March 2001 to
carry on the business activities that had been previously performed through that
date by ATEL Financial Corporation ("AFC"), an affiliated wholly owned
subsidiary of ACG. Accordingly, all the assets and liabilities of AFC were
contributed by the parent, ACG, into ATEL at book value in exchange for an
indirect wholly owned interest in ATEL's members' equity. The assets and
liabilities contributed by ACG into ATEL included deferred tax assets and
liabilities of AFC. Pursuant to Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income Taxes these deferred tax assets and
liabilities of ATEL were then transferred to ACG to reflect ATEL's non-taxable
status as a limited liability company.
In April 2001, ATEL acquired a 71% interest in ACG (734.938 shares of common
stock) from the then controlling shareholder of ACG. In exchange for the common
stock of ACG, ATEL paid $18,020,000 in cash with the balance of the
consideration consisting primarily of lease receivables transferred to the
seller. ATEL financed a portion of the purchase price utilizing a term loan and
a convertible note (discussed in Note 4). This transaction has been accounted
for as a change in control leveraged buyout transaction utilizing the purchase
method of accounting. All of the purchase price was allocated to goodwill. ATEL
recorded goodwill of $24,166,403 related to this transaction and amortized
$879,520 of this amount through July 31, 2001, at which time amortization ceased
as a result of the adoption of SFAS No 142 "Goodwill and Other Intangible
Assets".
On April 16, 2004, ATEL entered into a stock redemption agreement with the
former controlling shareholder of ACG to acquire the remaining five percent
interest in the Company. A cash consideration of $610,000 was paid for the
transaction. After the transaction ATEL immediately retired such shares. This
transaction was accounted for under the treasury stock method.
ATEL organizes and sponsors limited partnerships and limited liability companies
(the "affiliated programs" or the "programs") engaged in equipment leasing and
sales activities. It also acts as the corporate general partner or managing
member in these affiliated programs. Through these programs, ACG derives various
fees and also receives reimbursements for expenses incurred on behalf of these
entities, of which certain fees and expense reimbursements are allocated to
ATEL, with the balance allocated to various other affiliates. The basis for
determination of the types and amounts of these fees and reimbursements are
provided in agreements with the various programs.
F - 7
ATEL FINANCIAL SERVICES LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 2004
1. Organization and summary of significant accounting policies (continued):
A portion of the fees mentioned above are subordinated to the limited partners'
and other members' full recovery of their initial invested capital contributions
plus a specified return on their investments. No earnings or equity interests
from such subordinated interests have been recognized through July 31, 2004.
ATEL will continue in full force and effect until such time as the member elects
to dissolve ATEL or ATEL is otherwise dissolved. As a limited liability company,
the liability of any individual member for the obligations of ATEL is limited to
the extent of capital contributions to the company by the individual member.
Cash and cash equivalents:
Cash and cash equivalents include cash in banks and cash equivalent investments
with original maturities of ninety days or less.
Property and equipment:
Property and equipment is stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the respective assets,
which range from three to seven years.
Leasehold improvements:
Leasehold improvements are stated at cost. Amortization is calculated using the
straight-line method over the lives of the related leases or estimated lives,
whichever is shorter.
Fair value of financial instruments:
ATEL considers amounts presented for financial instruments on the consolidated
balance sheet to approximate fair value.
Credit risk:
Financial instruments that potentially subject ATEL to concentrations of credit
risk include cash and cash equivalents. ATEL places its cash deposits and
temporary cash investments with creditworthy, high quality financial
institutions. The concentration of such deposits and temporary cash investments
is not deemed to create a significant risk to ATEL.
Use of estimates:
The preparation of the consolidated balance sheet in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated balance sheet. Actual results could differ from those
estimates. The significant estimates were made in relation to the useful lives
of property and equipment and leasehold improvements and goodwill impairment.
F - 8
ATEL FINANCIAL SERVICES LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 2004
1. Organization and summary of significant accounting policies (continued):
Investments in affiliated programs:
ATEL accounts for its interest as a corporate general partner (or as the
managing member) in the affiliated programs at cost, or under the equity method
of accounting, based on the terms of the individual affiliated partnership or
operating agreements.
Investments in affiliated programs accounted for at cost do not provide for
general partner distributions in the partnership agreements. Certain investments
in affiliated programs accounted for at cost do not require ATEL to make
additional capital contributions, and, hence, ATEL records all distributions
received from these programs as income based on the cost method of accounting.
The partnership/operating agreements for investments in affiliated programs
accounted for under the equity method of accounting provide for general partner
(or managing member) distributions, subject to limitations in the respective
partnership agreements (or operating agreement). Upon dissolution of these
programs, if the general partner (or managing member) has a deficiency in its
capital account at the program level, a special allocation of income may be made
to the general partner from the limited partners in an amount sufficient to
bring the capital accounts to zero, based on the provisions of the partnership
agreement (or operating agreement).
If the general partner (or managing member) has a positive capital account
balance at the program level upon the dissolution of the program, a special
allocation of income is made from the general partner (or managing member) to
the limited partners in an amount sufficient to bring the capital accounts to
zero, based on the terms of the partnership agreements (or operating
agreements).
Income taxes:
ATEL does not provide for income taxes since all income and losses are allocated
to the members for inclusion in their respective tax returns.
Amounts due to affiliated companies:
Amounts due to affiliated companies represent net amounts advanced to or
received from affiliated companies for operations on behalf of ACG and its
subsidiaries.
F - 9
ATEL FINANCIAL SERVICES LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 2004
1. Organization and summary of significant accounting policies (continued):
Derivative financial instruments:
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities as amended ("SFAS 133")
established new accounting and reporting standards for derivative instruments.
SFAS No. 133, as amended, requires ATEL to recognize all derivatives as either
assets or liabilities on the balance sheet and measure those instruments at fair
value. It further provides criteria for derivative instruments to be designated
as fair value, cash flow, or foreign currency hedges, and establishes accounting
standards for reporting changes in the fair value of the derivative instruments.
In accordance with SFAS No. 133, ATEL records derivative hedging instruments at
fair value on the balance sheet and recognizes the offsetting gains or losses as
adjustments to be reported in net income or other comprehensive income, as
appropriate.
ATEL utilizes a cash flow hedge comprised of an interest rate swap. The interest
rate swap is linked to and adjusts effectively the interest rate sensitivity of
specific long-term debt. The effective portion of the change in fair value of
the hedging derivative is recorded as the only item in Accumulated Other
Comprehensive Income (AOCI) and the ineffective portion (if any) directly in
earnings. Amounts in AOCI are reclassified into earnings in a manner consistent
with the earnings pattern of the underlying hedged item (generally reflected in
interest expense). If a hedged item is dedesignated prior to maturity, previous
adjustments to AOCI are recognized in earnings to match the earnings recognition
pattern of the hedged item (e.g., level yield amortization if hedging interest
bearing instruments). Interest income or expense on the hedging derivative used
to manage interest rate exposure is recorded on an accrual basis, as an
adjustment to the yield of the hedged item over the periods covered by the
contract.
Credit exposure from derivative financial instruments arises from the risk of a
counterparty default on the derivative contract. The amount of the loss created
by the default is the replacement cost or current positive fair value of the
defaulted contract.
2. Goodwill:
Goodwill of $24,166,403 was recorded in connection with the leveraged buyout of
the principal shareholder of ACG in April 2001 (see Note 1). At July 31, 2004,
accumulated amortization of goodwill was $879,520. In accordance with SFAS No.
142, Goodwill and Other Intangible Assets, no amortization of goodwill was
recorded during the period ended July 31, 2004. On an annual basis, management
reviews goodwill and other amortizable assets and evaluates events or changes in
circumstances that may indicate impairment in the carrying amount of such
assets. In such instances, impairment, if any, is measured on a discounted
future cash flow basis. As a result of management's review, no impairment of
goodwill existed during the period ended July 31, 2004.
F - 10
ATEL FINANCIAL SERVICES LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 2004
3. Property, equipment and leasehold improvements, net:
The following is a summary by category of the
depreciable assets at July 31, 2004:
Category
Leasehold improvements $ 1,351,799
Accumulated amortization (172,794)
--------------
Leasehold improvements, net $ 1,179,005
=============
Other equipment 417,660
Furniture and fixture 790,368
Computer equipment 126,528
Accumulated depreciation (425,558)
--------------
Furniture, fixture and equipment, net $ 908,998
=============
4. Long-term debt:
Term loan
ATEL assumed two separate notes in association with the leveraged buyout (see
Note 1). The first is a $12,000,000 term loan with a financial institution
maturing in October 2006, the balance of which was $2,809,091 as of July 31,
2004. The effective fixed interest rate on this note is 7.88%. Principal and
interest are to be paid quarterly over twenty-two consecutive quarters. A
financial covenant exists whereby an amount equal to 40% of excess cash flow, as
defined, is payable within 10 days after the due date of the year-end financial
statements and is applied as a reduction of principal. Excess cash flow is
defined as the consolidated net profit of ACG and its consolidated subsidiaries
less certain distributions. ATEL was in compliance with this financial covenant
as of July 31, 2004.
ATEL has entered into an interest rate swap with a financial institution to
manage the interest rate exposure associated with the variable rate term loan by
effectively converting the variable rate to a fixed rate. During the term of the
interest rate swap ATEL receives or pays interest on a notional principal
(generally equal to the outstanding principal of the term note) based on the
difference between the nominal payment rate of 5.380% and the variable receive
rate indexed to a three month libor of 2.25% in July 2004. No actual borrowing
or lending is involved. The termination of the swap coincides with the maturity
of the debt, which is October 2, 2006. As a result of the excess cash flow
principal payment made as of July 31, 2004, the notional amount of the swap of
$5,454,545 exceeded the principal amount of the hedged debt of $2,809,091 by
$2,645,454 as of July 31, 2004. During the year, AOCI decreased by approximately
$266,000 of which approximately $250,000 was related to the decrease in the fair
value of the interest rate swap and approximately $16,000 was related to the
reclassification of AOCI to earnings due to hedge ineffectiveness.
Future minimum payments on long-term debt are as follows at July 31, 2004:
Principal Interest Total
Year ending July 31, Payments Payments Payments
2005 $ 2,181,818 $ 138,437 $ 2,320,255
2006 627,273 13,969 641,242
------------- ----------- -------------
$ 2,809,091 $ 152,406 $ 2,961,497
============= =========== =============
F - 11
ATEL FINANCIAL SERVICES LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 2004
4. Long-term debt (continued):
Subordinated convertible promissory note
The second note assumed in association with the leveraged buyout is a
subordinated convertible promissory note (subordinate to the $12,000,000 term
loan) for $4,000,000 from a related party. Interest is accrued at a rate of 8%
per annum paid quarterly, with an additional interest of the greater of 2% of
the principal amount payable at year-end or 15% of excess cashflows as defined.
In July 2004, a principal paydown of $3,000,000 was made. All outstanding
principal and interest is due on December 31, 2006. Upon maturity of the term
loan, the holder will have the option for a period of thirty days, to convert
the outstanding principal amount of this note into 53.1538 shares of either
Series A preferred stock of ACG or, if ATEL elects prior to the maturity date of
the term loan to be treated as common stock of ACG. In addition, thirty-one days
after the repayment date of the term loan, ATEL has the option for a period of
thirty days, to convert the principal amount of this note into the conversion
shares.
Future minimum payments on the convertible subordinated promissory note are as
follows at July 31, 2004:
Principal Interest Total
Year ending July 31, Payments Payments Payments
2005 $ - $ 137,500 $ 137,500
2006 - 100,000 100,000
2007 1,000,000 41,667 1,041,667
-------------- ----------- -------------
$ 1,000,000 $ 279,167 $ 1,279,167
============== =========== =============
5. Line of credit:
ATEL participates with ACG, certain other subsidiaries of ACG, and with certain
affiliated programs in a $67,190,909 revolving credit agreement with a group of
financial institutions which expires June 28, 2005. The agreement includes an
acquisition facility, a lease warehouse facility and a venture lease facility,
which are used to provide bridge financing for assets on leases. Draws on the
acquisition facility by any individual borrower are secured only by that
borrower's assets, including equipment and related leases. Borrowings on the
warehouse facility are recourse jointly to certain of the affiliated programs,
ACG and ATEL. As of July 31, 2004, no draws were outstanding on the warehouse
facility. Borrowings available on the warehouse facility at July 31, 2004 total
$48,890,909. Also included in this line of credit facility is $1,000,000
available for operations and working capital. There were no draws under this
facility during the year ended July 31, 2004.
These facilities, when used, are collateralized by (i) leases and equipment
owned by the specific borrower and financed by the lines and (ii) all other
assets owned by the specific borrower except equipment, lease receipts and
residual values specifically pledged to other equipment funding sources. ATEL's
borrowings under the facility are guaranteed by ACG and/or its shareholders.
The credit agreement includes certain financial covenants applicable to each
borrower. ATEL and ACG were in compliance with such covenants as of July 31,
2004.
F - 12
ATEL FINANCIAL SERVICES LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 2004
6. Other long-term debt:
ATEL entered into a loan and security agreement with a lender on July 30, 2003.
Under the loan and security agreement ATEL may borrow up to $1,000,000 for
equipment purchases, which was borrowed in September 2004. The loan will be paid
in 60 equal monthly installments of principal and interest payments that
commenced on November 29, 2003 and will cease upon termination of the loan on
October 31, 2008. The interest rate is 5.01% and is fixed.
Future minimum payments on other long term debt are as follows:
Certain investments in affiliated programs are accounted for under the equity
method of accounting. Summarized information about these affiliates as of
December 31, 2003 and for the year then ended are included in the following
table:
ATEL Cash ATEL Capital ATEL Capital ATEL Capital ATEL Capital
Distribution Equipment Equipment Equipment Equipment
Fund VI, L.P. Fund VII, L.P. Fund VIII, LLC Fund IX, LLC Fund X, LLC
------------------ -------------- --------------- --------------- --------------
Total Assets $ 25,410,604 $ 74,812,214 $ 110,222,744 $ 87,530,487 $ 37,815,563
Total Liabilities $ 1,627,341 $ 33,406,191 $ 62,325,626 $ 624,472 $ 704,900
Net Income (Loss) $ 1,585,834 $ (4,311,400) $ (7,521,261) $ 591,015 $ (183,013)
ATEL has a 1% carried interest in ATEL Cash Distribution Fund VI, L.P. and a
7.5% carried interest in ATEL Capital Equipment Fund VII, L.P., ATEL Capital
Equipment Fund VIII, LLC., ATEL Capital Equipment Fund IX, LLC, and ATEL Capital
Equipment Fund X, LLC.
8. Commitments and contingencies:
Office lease:
ACG occupies office space under an operating lease expiring January 2013. Future
minimum lease payments to be allocated to ATEL are, $644,259 in years 2005
through 2012, and $322,130 in 2013.
F - 13
ATEL FINANCIAL SERVICES LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED BALANCE SHEET
JULY 31, 2004
9. Reimbursements of operating costs:
The Limited Partnership Agreements and Operating Agreements of the affiliated
programs allow for the reimbursement of costs incurred by ACG and its
subsidiaries in providing administrative services to the programs, of which a
portion of such amounts is allocated to ATEL. Administrative services provided
include program accounting, investor relations, legal counsel and lease and
equipment documentation. ACG and its subsidiaries are not reimbursed for
services whereby they are entitled to receive a separate fee as compensation for
such services, such as acquiring and overseeing the management of equipment.
Reimbursable operating costs incurred by ACG and its subsidiaries are allocated
to the programs based upon actual time incurred by employees working on program
business and an allocation of rent and other costs based on utilization studies.
As of July 31, 2004, $6,156,692 remained outstanding from affiliated programs
for reimbursable operating and syndication costs and management fees.
10. Financial information of affiliated programs (unaudited):
ATEL serves as the general partner or managing member of a series of ten
publicly held limited partnerships and limited liability companies, as well as
two privately held limited liability companies (the "Funds") which report their
results on a calendar year basis. As of December 31, 2001, the first three of
those Funds had ceased operations. As of July 31, 2004, ATEL is the general
partner or managing member of the nine remaining Funds. During the year ended
December 31, 2003, ATEL received management and other fees from the nine Funds
for services provided. These Funds own and lease equipment to third parties. The
Funds' equipment is not available to creditors or the members of ATEL. The
following financial data is presented for purposes of additional analysis to
provide information about the portfolio under management. Presented below is the
unaudited combined, capsulated balance sheet for the nine Funds existing as of
December 31, 2003:
Financial position:
Cash $ 59,440,697
Accounts receivable, net and other assets 12,081,292
Investments in equipment and leases 286,020,540
---------------
Total assets $ 357,542,529
===============
Long-term and non-recourse debt $ 88,187,429
Accounts payable and other liabilities 11,627,331
Partners' capital 257,727,769
---------------
Total liabilities and partners' capital $ 357,542,529
===============
Presented below is unaudited combined aggregate amounts of future minimum lease
payments from the programs' lease portfolios for each year ending December 31:
ATEL Financial Services LLC ("ATEL"), the Manager of the Fund, and its
affiliates have extensive experience in the equipment leasing industry,
including: (i) originating and financing leveraged and single investor lease
transactions for corporate investors, (ii) acting as a broker/packager by
arranging equity and debt participants for equipment leasing transactions
originated by other companies, (iii) consulting on the pricing and structuring
of equipment lease transactions for banks, leasing companies and corporations,
(iv) organizing and offering individual ownership and limited partnership
investment leasing programs and (v) supervising and arranging for the
supervision of equipment management and marketing on leasing transactions
involving total equipment costs in excess of $1 billion.
In addition to the Fund, ATEL has sponsored ten prior public and three private
equipment leasing programs. See "Prior Performance Summary" for a summary of
information regarding the prior public programs.
The first prior public program, ATEL Cash Distribution Fund ("ACDF"), commenced
a public offering of up to $10,000,000 of its limited partnership interests on
March 1, 1986. ACDF terminated its offering on December 18, 1987 after raising a
total of $10,000,000 in offering proceeds from a total of approximately 1,000
investors, all of which proceeds were committed to equipment acquisitions,
organization and offering expenses and capital reserves. ACDF acquired a variety
of types of equipment with a total purchase cost of $11,133,679. All such
equipment had been sold as of December 31, 1997.
Through December 31, 1997, ACDF had made cash distributions to its investors in
the aggregate amount of $1,121.03 per $1,000 invested. Of this amount a total of
$244.89 represents investment income and $876.14 represents return of capital.
The second prior public program, ATEL Cash Distribution Fund II ("ACDF II"),
commenced a public offering of up to $25,000,000 (with an option to increase the
offering to $35,000,000) of its limited partnership interests on January 4,
1988. ACDF II terminated its offering on January 3, 1990 after raising a total
of $35,000,000 in offering proceeds from a total of approximately 3,100
investors, all of which proceeds were committed to equipment acquisitions,
organization and offering expenses and capital reserves. ACDF II acquired a
variety of types of equipment with a total purchase cost of $52,270,536. All
such equipment had been sold as of December 31, 1998.
Through December 31, 1998, ACDF II had made cash distributions to its investors
in the aggregate amount of $1,222.63 per $1,000 invested. Of this amount a total
of $335.43 represents investment income and $887.20 represents return of
capital.
The third prior public program, ATEL Cash Distribution Fund III ("ACDF III"),
commenced a public offering of up to $50,000,000 (with an option to increase the
offering to $75,000,000) of its limited partnership interests on January 4,
1990. ACDF III terminated its offering on January 3, 1992 after raising a total
of $73,855,840 in offering proceeds from a total of approximately 4,822
investors, all of which proceeds were committed to equipment acquisitions,
organization and offering expenses and capital reserves. ACDF III acquired a
variety of types of equipment with a total purchase cost of $99,629,942. All
such equipment had been sold as of December 31, 2000.
Through December 31, 2000, ACDF III had made cash distributions to its investors
in the aggregate amount of $1,329.76 per $1,000 invested. Of this amount a total
of $379.10 represents investment income and $950.66 represents return of
capital.
The fourth prior public program, ATEL Cash Distribution Fund IV ("ACDF IV"),
commenced a public offering of up to $75,000,000 of its limited partnership
interests on February 4, 1992. ACDF IV terminated its offering on February 3,
1993 after raising a total of $75,000,000 in offering proceeds from a total of
approximately 4,873 investors, all of which proceeds were committed to equipment
acquisitions, organization and offering expenses and capital reserves. ACDF IV
acquired a variety of types of equipment with a total purchase cost of
$108,734,880. Of such equipment, items representing an original purchase cost of
$102,836,597 had been sold as of December 31, 2003.
Through June 30, 2004, ACDF IV had made cash distributions to its investors in
the aggregate amount of $1,216.49 per $1,000 invested. Of this amount a total of
$319.26 represents investment income and $897.23 represents return of capital.
The fifth prior public program, ATEL Cash Distribution Fund V ("ACDF V"),
commenced a public offering of up to $125,000,000 of its limited partnership
interests on February 22, 1993. ACDF V terminated its offering on November 15,
1994. As of that date, $125,000,000 of offering proceeds had been received from
approximately 7,217 investors. All of the proceeds were committed to equipment
acquisitions, organization and offering expenses and capital reserves. ACDF V
acquired a variety of types of equipment with a total purchase cost of
$186,995,157 as of December 31, 2003. Of such equipment, items representing an
original purchase cost of $141,513,114 had been sold as of December 31, 2003.
Through June 30, 2004, ACDF V had made cash distributions to its investors in
the aggregate amount of $977.38 per $1,000 invested. Of this amount a total of
$188.55 represents investment income and $788.83 represents return of capital.
Past performance is not necessarily indicative of future performance.
A - 1
The sixth prior public program, ATEL Cash Distribution Fund VI ("ACDF VI"),
commenced a public offering of up to $125,000,000 of its limited partnership
interests on November 23, 1994. ACDF VI terminated its offering on November 22,
1996. As of that date, $125,000,000 of offering proceeds had been received from
approximately 6,401 investors. All of the proceeds were committed to equipment
acquisitions, organization and offering expenses and capital reserves. ACDF VI
acquired a variety of types of equipment with a total purchase cost of
$208,275,158. Of such equipment, items representing an original purchase cost of
$134,286,942 had been sold as of December 31, 2003.
Through June 30, 2004, ACDF VI had made cash distributions to its investors in
the aggregate amount of $807.10 per $1,000 invested. Of this amount a total of
$109.03 represents investment income and $698.07 represents return of capital.
The seventh prior public program, ATEL Capital Equipment Fund VII ("ACEF VII"),
commenced a public offering of up to $150,000,000 of its limited partnership
interests on November 29, 1996. ACEF VII terminated its offering on November 29,
1998. As of that date, $150,000,000 of offering proceeds had been received from
approximately 5,386 investors. All of the proceeds were committed to equipment
acquisitions, organization and offering expenses and capital reserves. ACEF VII
had acquired a variety of types of equipment with a total purchase cost of
$302,698,648. Of such equipment, items representing an original purchase cost of
$89,994,695 had been sold as of December 31, 2003.
Through June 30, 2004, ACEF VII had made cash distributions to its investors in
the aggregate amount of $701.37 per $1,000 invested. Of this amount a total of
$99.39 represents investment income and $601.98 represents return of capital.
See Table III - "Operating Results of Prior Programs" in this Exhibit A for
further information concerning such distributions. See Table V - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACEF VII. See Table VI - "Sales or Disposals of
Equipment" in Exhibit A for further information concerning the equipment
disposed of by ACEF VII.
The eighth prior public program, ATEL Capital Equipment Fund VIII ("ACEF VIII"),
commenced a public offering of up to $150,000,000 of its limited partnership
interests on December 7, 1998. ACEF VIII terminated its offering on November 30,
2000. As of that date, $135,701,380 of offering proceeds had been received from
approximately 3,625 investors. All of the proceeds were committed to equipment
acquisitions, organization and offering expenses and capital reserves. ACEF VIII
had acquired a variety of types of equipment with a total purchase cost of
$249,040,775 as of December 31, 2003. Of such equipment, items representing an
original purchase cost of approximately $38,008,147 had been sold as of December
31, 2003.
Through June 30, 2004, ACEF VIII had made cash distributions to its investors in
the aggregate amount of $472.10 per $1,000 invested. Of this amount a total of
$14.07 represents investment income and $458.03 represents return of capital.
See Table III - "Operating Results of Prior Programs" in this Exhibit A for
further information concerning such distributions. See Table V - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACEF VII. See Table VI - "Sales or Disposals of
Equipment" in Exhibit A for further information concerning the equipment
disposed of by ACEF VIII.
The ninth prior public program, ATEL Capital Equipment Fund IX ("ACEF IX"),
commenced a public offering of up to $150,000,000 of its limited partnership
interests on January 16, 2001. ACEF IX terminated its offering as of January 15,
2003. As of that date, $120,652,160 of offering proceeds had been received from
approximately 3,238 investors. All of the proceeds were committed to equipment
acquisitions, organization and offering expenses and capital reserves. ACEF IX
had acquired a variety of types of equipment with a total purchase cost of
$69,800,513 as of December 31, 2003. Of such equipment, items representing an
original purchase cost of approximately $7,351,475 had been sold as of December
31, 2003.
Through June 30 2004, ACEF IX had made cash distributions to its investors in
the aggregate amount of $271.96 per $1,000 invested. Of this amount a total of
$24.01 represents investment income and $247.95 represents return of capital.
See Table III - "Operating Results of Prior Programs" in this Exhibit A for
further information concerning such distributions. See Table V - "Acquisition of
Equipment by Prior Programs" in Exhibit A for further information concerning the
types of equipment acquired by ACEF IX. See Table VI - "Sales or Disposals of
Equipment" in Exhibit A for further information concerning the equipment
disposed of by ACEF IX.
Past performance is not necessarily indicative of future performance.
A - 2
The tenth prior public program, ATEL Capital Equipment Fund X ("ACEF X"),
commenced a public offering of up to $150,000,000 of its limited partnership
interests on March 12, 2003. As of June 30, 2004, the offering was still in
progress. As of that date, $78,483,620 of offering proceeds had been received.
All of the proceeds were committed to equipment acquisitions, organization and
offering expenses, working capital and capital reserves. ACEF X had acquired a
variety of types of equipment and invested in notes receivable with a total
purchase cost of $26,506,782 as of August 31, 2004. Sales of such equipment were
not significant as of August 31, 2004.
Through June 30 2004, ACEF X had made cash distributions to its investors in the
aggregate amount of $77.14 per $1,000 invested. All of this amount represents
return of capital. See Table III - "Operating Results of Prior Programs" in this
Exhibit A for further information concerning such distributions. See Table V -
"Acquisition of Equipment by Prior Programs" in Exhibit A for further
information concerning the types of equipment acquired by ACEF IX. See Table VI
- "Sales or Disposals of Equipment" in Exhibit A for further information
concerning the equipment disposed of by ACEF IX.
As discussed elsewhere in this Prospectus, fluctuations in demand for equipment
may affect the ability of a leasing program to invest its capital in a timely
manner. ACEF IX is in the process of leveraging its gross offering proceeds for
the purchase of its initial equipment portfolio. ACEF X is in the process of
committing the balance of its gross offering proceeds to its initial equipment
portfolio. Equipment lessors have experienced a more difficult market in which
to make suitable investments during the past three years of reduced growth and
recession in the U.S. economy as a result of the softening demand for capital
equipment during this period. Delays in investment may have a negative impact on
ACEF IX and ACEF X. The Manager believes that it has identified industry
segments, lease markets and potential transaction structures that will permit
ACEF IX and ACEF X to fully pursue their investment objectives.
Each of the Prior Programs has had, as an investment objective, the reinvestment
of cash flow after payment of debt service and certain minimum distributions.
Reinvestment is intended to increase the size, diversification and return on
their equipment portfolios. Adverse economic conditions during the past three
years have affected the timing and terms of remarketing and re-leasing efforts
by these Prior Programs. An extended remarketing cycle and lower lease rates
have limited the ability of ACDF V, ACDF VI, ACEF VII and ACEF VIII to generate
sufficient cash flow to permit significant reinvestment. In the future, adverse
conditions in the general economy and equipment demand may also result in delays
in leasing, re-leasing and disposition of equipment, and in reduced returns on
invested capital. In any event, there can be no assurance as to what future
developments may occur in the economy in general or in the demand for equipment
and lease financing in particular.
As of June 30, 2004, the Prior Programs have acquired equipment with a total
purchase cost of approximately $1.33 billion during a period of over 18 years
since the date the first Prior Program commenced operations. Aggregate losses
from material lessee defaults on these transactions have been approximately $7
million, or approximately 0.53% of the assets acquired, substantially less than
the amount assumed by the Manager and its Affiliates in structuring these
portfolios as the losses to be anticipated in the ordinary course of leasing
business. There is no identifiable trend in the frequency or amount of lessee
defaults experienced by prior programs.
Past performance is not necessarily indicative of future performance.
A-3
Although certain of the Prior Programs have experienced lessee defaults in the
ordinary course of business, none of the Prior Programs has experienced an
unanticipated rate of default or major adverse business developments which the
Fund Manager believes will impair its ability to meet its investment objectives.
All of the prior public programs (the "Prior Public Programs") have investment
objectives that are similar to those of the Fund. The prior private programs,
ATEL Lease Income Fund 1985-A (ALIF), ATEL Venture Fund, LLC ("AVF") and ATEL
Growth Capital Fund, LLC ("AGCF") have substantially different investment
objectives than those of the Fund, so tabular information concerning these prior
private programs has been omitted from this presentation. ALIF invested in
equipment without the use of any debt financing; AVF and ACGF invested in
portfolios with different transaction structures, including significant emphasis
on finance leases, different credit criteria, targeting development stage
lessees, and different investment goals, including more accelerated recovery of
initial capital. The Fund and the Prior Public Programs invest in equipment with
moderate amounts of leverage, acquire operating leases with equipment leased
primarily to investment grade and equivalent credits, and have more emphasis on
low technology, longer-lived equipment. Accordingly, only the Prior Public
Programs are deemed to have investment objectives similar to those of the Fund.
The factors considered by the Manager in determining that the investment
objectives of the Prior Public Programs were similar to those of the Fund
include the types of equipment to be acquired, the structure of the leases to
such equipment, the credit criteria for lessees, the intended investment cycles,
the reinvestment policies and the investment goals of each program. Therefore
all of the information set forth in Tables included in this Exhibit A - "Prior
Performance Information" may be deemed to relate to programs with investment
objectives similar to those of the Fund.
In Tables I through III, information is presented with respect to all Prior
Programs sponsored by the Manager and its Affiliates that completed their
offerings of interests within the five-year period ended December 31, 2003. It
should be noted that the tabular information concerning ACDF IX does not reflect
results of an operating period after completion of its funding. Table IV
includes information concerning the three Prior Programs that had completed
their respective operations as of June 30, 2004. Table V includes information
regarding all acquisitions of equipment by Prior Programs through December 21,
2003, except that ACEF X includes acquisitions through August 31, 2004. Table VI
includes information regarding all dispositions of equipment by Prior Programs
through December 31, 2003.
The following is a list of the tables set forth in Exhibit A:
TABLE I Experience in Raising and Investing Funds
TABLE II Compensation to the General Partner/Managing Member
TABLE III Operating Results of Prior Programs
TABLE IV Results of Completed Programs
TABLE V Acquisition of Equipment by Prior Programs
TABLE VI Sales or Disposals of Equipment by Prior Programs
ATEL will provide to any investor, upon written request and without charge,
copies of the most recent Annual Reports on Form 10-K filed with the Securities
and Exchange Commission by each Prior Public Program and will provide to any
investor, for a reasonable fee, copies of the exhibits to such reports.
INVESTORS IN THE PARTNERSHIP WILL HAVE NO INTEREST IN THE INVESTMENTS DESCRIBED
IN THE FOLLOWING TABLES. PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE INCLUSION
OF THIS INFORMATION AS INDICATIVE OF THE POSSIBLE OPERATIONS OF THE PARTNERSHIP.
Past performance is not necessarily indicative of future performance.
A - 4
TABLE I
EXPERIENCE IN RAISING AND INVESTING FUNDS
(on a percentage basis)
June 30, 2004
(Unaudited)
The following Table sets forth certain information concerning the experience of
the General Partner/Managing Member in raising and investing funds. A percentage
analysis of the application of the proceeds raised is presented.
ATEL Capital ATEL Capital ATEL Capital
Equipment Equipment Equipment
Fund VIII Fund IX Fund X
EQUITY PROCEEDS
Dollar amount of equity offered $ 150,000,000 $150,000,000 $150,000,000
Dollar amount of equity raised $ 135,701,380 $120,652,160 $ 78,493,620 (6)
----------------- ----------------- -----------------
Less: Offering expenses:
Selling commissions 9.50% 9.50% 9.00%
Organization and program expenses (1) 4.68% 3.93% 4.93%
Reserves 0.50% 0.50% 0.50%
----------------- ----------------- -----------------
Percent available for investment 85.32% 86.07% 85.57%
Acquisition costs:
Purchase price (2) 85.32% 86.07% 85.57%
Acquisition fees - - -
----------------- ----------------- -----------------
85.32% 86.07% 85.57%
----------------- ----------------- -----------------
Percent leverage (3) 53.84% 0.00% 0.00%
================= ================= =================
Date offering commenced: Dec. 7, 1998 Jan. 16, 2001 Mar. 12, 2003
Length of offering 24 Months 24 Months N/A (6)
Months to invest 90% of amount available for
investment (measured from beginning of offering) 24 Months (4) 30 Months (5) N/A (6)
FOOTNOTES: (1) Includes organization, legal, accounting, printing, binding,
delivery and other costs incurred by the General Partner/Managing Member.
(2) Represents amounts paid to unrelated third parties for purchase of equipment
under leases.
(3) The percentage leverage is calculated by dividing the initial principal
amount of debt incurred by the program through the date of this table by the
aggregate original cost of all equipment purchased by the program through such
date. It should be noted, however, that each program has acquired assets, has
made or will make principal amortizing debt service payments and/or has disposed
or will dispose of assets over a period of time extending from its first
investment in equipment. As a result, for each program the total cost of the
assets in its portfolio and the total principal amount of debt outstanding have
fluctuated from time to time. The percentage figure, therefore, does not reflect
the current leverage ratio or the debt ratio at any one point in time, but
constitutes an aggregate ratio for the life of the program through the date of
the table.
(4) As of November 30, 2000, the Fund's offering of Limited Liability Company
Units was completed. As of that date, the proceeds of the offering had been
fully committed.
(5) As of January 15, 2003, the Fund's offering of Limited Liability Company
Units was completed. As of September 30, 2003, the proceeds of the offering had
been fully committed.
(6) As of June 30, 2004, the offering had not been completed.
Past performance is not necessarily indicative of future performance.
A - 5
TABLE II
COMPENSATION TO THE SPONSOR
June 30, 2004
(Unaudited)
The following Table sets forth certain information concerning the compensation
derived by the General Partner/Managing Member. Amounts paid are from two
sources: proceeds of the offering and gross revenues.
ATEL Capital ATEL Capital ATEL Capital
Equipment Equipment Equipment
Fund VIII Fund IX Fund X
Date offering commenced Dec. 7, 1998 Jan. 16, 2001 Mar. 12, 2003
Date offering closed Nov. 30, 2000 Jan. 15, 2003 N/A
Dollar amount raised $ 135,701,380 $120,652,160 $ 78,493,620
Amounts paid to General Partner/Managing
Member from proceeds of offering:
Acquisition fees None None None
Selling commissions $ 1,837,737 $ 1,809,782 $ 1,177,254
Organization and program costs $ 6,356,562 $ 4,745,221 $ 3,866,423
Dollar amount of cumulative cash generated
from operations before deducting payments
to the General Partner/Managing Member $ 105,256,548 $ 20,725,925 $ 3,100,041
Cumulative amount paid to the General
Partner/Managing
Member from operations:
Management fees $ 7,337,148 $ 1,292,570 $ 121,964
Other operating expenses $ 5,472,736 $ 1,659,729 $ 162,597
Aggregate payments to General
Partner/Managing Member:(1)
1999 $ 13,056,922
2000 11,872,250
2001 2,921,431 $ 7,131,876
2002 2,351,555 10,270,778
2003 2,337,830 4,115,416 $ 7,715,713
2004 1,298,811 1,190,071 5,245,676
----------------- ----------------- -----------------
$ 33,838,799 $ 22,708,141 $ 12,961,389
================= ================= =================
FOOTNOTES:
(1) As of June 30, 2004. Includes payments of management fees, reimbursements of
syndication costs to General Partner/Managing Member (and affiliates),
acquisition fees, initial direct costs on leases and reimbursements of
administrative costs.
Past performance is not necessarily indicative of future performance.
A - 6
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
June 30, 2004
(Unaudited)
The following Table summarizes the operating results of Prior Programs (ACEF
VIII, ACEF IX and ACEF X). The Prior Programs' records are maintained in
accordance with generally accepted accounting principles for financial statement
purposes.
ATEL Capital Equipment Fund VIII
Period Ended
December 31,
1999 2000 2001
Months of operations 12 12 12
Gross revenue - lease and other $ 8,657,636 $ 31,046,332 $ 41,992,805
- gain (loss) on sales of assets 3,017 1,453 1,801,292
--------------- -------------- ---------------
8,660,653 31,047,785 43,794,097
Less Operating Expenses: (1)
Depreciation and amortization expense 5,392,504 22,588,276 31,243,646
Provision for losses and doubtful accounts - - 82,615
Interest expense 1,340,804 7,365,041 9,058,622
Administrative costs and reimbursements 767,386 1,408,523 924,375
Legal/Professional fees 155,743 127,345 215,450
Other 121,438 398,365 287,382
Management fee 443,943 1,465,566 1,849,335
--------------- -------------- ---------------
8,221,818 33,353,116 43,661,425
--------------- -------------- ---------------
Net income (loss) - GAAP basis $ 438,835 $ (2,305,331) $ 132,672
=============== ============== ===============
Taxable income (loss) from operations $ (13,620,427) $ (29,018,361) $ (15,498,538)
=============== ============== ===============
Cash generated by (used in) operations (2) $ 5,743,245 $ 18,412,107 $ 30,662,797
Cash generated from sales 38,178 7,761 7,348,063
Cash generated from refinancing -
Cash generated from other (2) 951,549 2,154,474 2,806,236
--------------- -------------- ---------------
6,732,972 20,574,342 40,817,096
Less cash distributions to investors:
From operating cash flow 2,460,684 9,795,386 12,403,683
From sales - - -
From refinancing - - -
From other - - -
--------------- -------------- ---------------
Total distributions 2,460,684 9,795,386 12,403,683
--------------- -------------- ---------------
Cash generated (deficiency) after cash distributions $ 4,272,288 $ 10,778,956 $ 28,413,413
=============== ============== ===============
Tax and distribution data per $1,000
limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $(312.53) $(252.40) $(105.64)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $ 5.95 $ - $ -
- Return of capital 55.18 92.11 91.40
--------------- -------------- ---------------
$ 61.13 $ 92.11 $ 91.40
=============== ============== ===============
Sources (on a cash basis)
Sales
Refinancing
Operations $ 61.13 $ 92.11 $ 91.40
Other - - -
--------------- -------------- ---------------
Total $ 61.13 $ 92.11 $ 91.40
=============== ============== ===============
Amount invested in program equipment (cost, excluding
acquisition fees) $142,755,301 $ 218,029,699 $ 237,646,671
Amount invested in program equipment (book value) $139,420,208 $ 190,893,298 $ 178,999,739
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (3) 58.09% 88.73% 96.71%
Past performance is not necessarily indicative of future performance.
A - 7
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
June 30, 2004
(Unaudited)
ATEL Capital Equipment Fund VIII
Period Ended
December 31, June 30,
2002 2003 2004
Months of operations 12 12 6
Gross revenue - lease and other $ 32,658,224 $ 27,953,972 $ 11,796,612
- gain (loss) on sales of assets 271,751 595,299 2,177,912
--------------- -------------- ---------------
32,929,975 28,549,271 13,974,524
Less Operating Expenses: (1)
Depreciation and amortization expense 23,162,548 20,694,362 9,155,566
Provision for losses and doubtful accounts 3,087,500 5,499,271 (135,000)
Interest expense 6,148,759 5,270,675 1,651,396
Administrative costs and reimbursements 832,539 820,571 719,342
Legal/Professional fees 179,562 506,698 168,469
Other 843,035 1,761,696 733,551
Management fee 1,481,576 1,517,259 579,469
--------------- -------------- ---------------
35,735,519 36,070,532 12,872,793
--------------- -------------- ---------------
Net income (loss) - GAAP basis $ (2,805,544) $ (7,521,261) $ 1,101,731
=============== ============== ===============
Taxable income (loss) from operations $ (12,212,767) $ (9,525,065) $ (1,500,000) (4)
=============== ============== ===============
Cash generated by (used in) operations (2) $ 23,805,426 $ 18,993,036 $ 7,639,937
Cash generated from sales 2,403,934 13,964,820 10,319,679
Cash generated from refinancing - 2,563,149
Cash generated from other (2) 2,134,026 1,793,351 327,461
--------------- -------------- ---------------
28,343,386 37,314,356 18,287,077
Less cash distributions to investors:
From operating cash flow 12,347,756 12,345,603 6,173,634
From sales - - -
From refinancing - - -
From other - - -
--------------- -------------- ---------------
Total distributions 12,347,756 12,345,603 6,173,634
--------------- -------------- ---------------
Cash generated (deficiency) after cash distributions $ 15,995,630 $ 24,968,753 $ 12,113,443
=============== ============== ===============
Tax and distribution data per $1,000
limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $(83.25) $(64.93) $(10.22)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $ - $ - $ 8.12
- Return of capital 90.99 90.98 37.37
--------------- -------------- ---------------
$ 90.99 $ 90.98 $ 45.49
=============== ============== ===============
Sources (on a cash basis)
Sales
Refinancing
Operations $ 90.99 $ 90.98 $ 45.49
Other - - -
--------------- -------------- ---------------
Total $ 90.99 $ 90.98 $ 45.49
=============== ============== ===============
Amount invested in program equipment (cost, excluding
acquisition fees) $232,355,732 $ 210,621,824 $ 192,025,692
Amount invested in program equipment (book value) $149,100,763 $ 107,564,258 $ 89,939,464
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (3) 94.55% 85.71% 78.14%
Past performance is not necessarily indicative of future performance.
A - 8
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
June 30, 2004
(Unaudited)
ATEL Capital Equipment Fund IX
Period Ended
December 31, June 30,
2001 2002 2003 2004
Months of operations 12 12 12 6
Gross revenue - lease and other $ 3,393,685 $ 6,966,142 $ 10,872,695 $ 5,542,061
- gain (loss) on sales of assets - 107,353 658,865 10,069
-------------- --------------- -------------- ---------------
3,393,685 7,073,495 11,531,560 5,552,130
Less Operating Expenses: (1)
Depreciation and amortization expense 2,078,895 5,178,087 8,289,708 4,472,389
Provision for losses and doubtful accounts - - 496,347 287,158
Interest expense 199,230 336,696 349,319 250,343
Administrative costs and reimbursements 374,507 343,120 627,320 314,782
Legal/Professional fees 39,384 99,730 106,167 169,946
Other 34,152 248,390 385,671 222,952
Management fee 83,341 264,322 686,013 258,894
-------------- --------------- -------------- ---------------
2,809,509 6,470,345 10,940,545 5,976,464
-------------- --------------- -------------- ---------------
Net income (loss) - GAAP basis $ 584,176 $ 603,150 $ 591,015 $ (424,334)
============== =============== ============== ===============
Taxable income (loss) from operations $ 107,619 $ (3,947,950) $ (4,526,988) $ (4,000,000) (4)
============== =============== ============== ===============
Cash generated by (used in) operations (2) $ 1,744,270 $ 5,521,904 $ 8,661,683 $ 4,798,068
Cash generated from sales - 749,408 5,370,886 40,597
Cash generated from refinancing - - - -
Cash generated from other (2) 673,907 1,178,949 1,436,942 1,144,008
-------------- --------------- -------------- ---------------
2,418,177 7,450,261 15,469,511 5,982,673
Less cash distributions to investors:
From operating cash flow 1,213,341 5,521,904 8,661,683 4,798,068
From sales - - - -
From refinancing - - - -
From other - 493,723 1,971,403 629,250
-------------- --------------- -------------- ---------------
Total distributions 1,213,341 6,015,627 10,633,086 5,427,318
-------------- --------------- -------------- ---------------
Cash generated (deficiency) after cash
distributions $ 1,204,836 $ 1,434,634 $ 4,836,425 $ 555,355
============== =============== ============== ===============
Tax and distribution data per $1,000
limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $ 4.59 $ (50.16) $ (34.79) $ (30.67)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $ 22.42 $ 1.58 $ 0.00 $ 0.00
- Return of capital 33.57 81.05 88.35 44.99
-------------- --------------- -------------- ---------------
$ 55.99 $ 82.63 $ 88.35 $ 44.99
============== =============== ============== ===============
Sources (on a cash basis)
Sales
Refinancing - -
Operations $ 55.99 $ 75.85 71.97 39.77
Other - 6.78 16.38 5.22
-------------- --------------- -------------- ---------------
Total $ 55.99 $ 82.63 $ 88.35 $ 44.99
============== =============== ============== ===============
Amount invested in program equipment (cost,
excluding acquisition fees) $22,844,529 $ 49,667,555 $ 64,762,921 $ 73,843,017
Amount invested in program equipment (book value) $21,091,372 $ 46,798,202 $ 52,057,199 $ 52,942,274
Amount remaining invested in program equipment
(Cost of equipment owned at end of period as
a percentage of cost of all equipment
purchased by the program) (3) 29.06% 63.18% 93.20% 93.93%
Past performance is not necessarily indicative of future performance.
A - 9
TABLE III
OPERATING RESULTS OF PRIOR PROGRAMS
June 30, 2004
(Unaudited)
ATEL Capital Equipment Fund X
Period Ended
December 31, June 30,
2003 2004
Months of operations 12 6
Gross revenue - lease and other $ 896,923 $ 1,816,870
- gain (loss) on sales of assets 10,991 -
-------------- ---------------
907,914 1,816,870
Less Operating Expenses: (1)
Depreciation and amortization expense 863,703 1,541,525
Provision for losses and doubtful accounts - -
Interest expense 8,045 615
Administrative costs and reimbursements 48,235 114,362
Legal/Professional fees 33,563 74,741
Other 88,831 93,345
Management fee 48,550 73,414
-------------- ---------------
1,090,927 1,898,002
-------------- ---------------
Net income (loss) - GAAP basis $ (183,013) $ (81,132)
============== ===============
Taxable income (loss) from operations $ (831,185) $ (2,000,000) (4)
============== ===============
Cash generated by (used in) operations (2) $ 1,214,796 $ 1,882,245
Cash generated from sales 257,206 -
Cash generated from refinancing - -
Cash generated from other (2) 98,028 173,875
-------------- ---------------
1,570,030 2,056,120
Less cash distributions to investors:
From operating cash flow 937,496 1,882,245
From sales - -
From refinancing - -
From other - 256,820
-------------- ---------------
Total distributions 937,496 2,139,065
-------------- ---------------
Cash generated (deficiency) after cash distributions $ 632,534 $ (82,945)
============== ===============
Tax and distribution data per $1,000
limited partner investment:
Federal Income Tax Results:
Ordinary income (loss):
Operations $ (34.48) $ (30.36)
Recapture
Capital gain (loss)
Cash distributions to investors on a GAAP basis:
- Investment income $ - $ -
- Return of capital 42.04 35.10
-------------- ---------------
$ 42.04 $ 35.10
============== ===============
Sources (on a cash basis)
Sales $0.00 $0.00
Refinancing - -
Operations 42.04 30.89
Other 0.00 4.21
-------------- ---------------
Total $ 42.04 $ 35.10
============== ===============
Amount invested in program equipment (cost, excluding
acquisition fees) $ 14,602,123 $ 25,451,603
Amount invested in program equipment (book value) $ 14,726,680 $ 21,152,674
Amount remaining invested in program equipment (Cost
of equipment owned at end of period as a percentage of
cost of all equipment purchased by the program) (3) 98.38% 99.06%
Past performance is not necessarily indicative of future performance.
A - 10
FOOTNOTES:
(1) Operating expenses include reimbursements to the General Partner/Managing
Member as follows:
ATEL Capital ATEL Capital ATEL Capital
Equipment Equipment Equipment
Fund VIII Fund IX Fund X
Year ended December 31, 1999 $ 767,386
2000 1,408,523
2001 924,375 $ 374,507
2002 832,539 343,120
2003 820,571 627,320 $ 48,235
2004 719,342 314,782 114,362
-------------------- -------------------- ---------------
$ 5,472,736 $ 1,659,729 $ 162,597
==================== ==================== ===============
(2) Cash generated by (used in) operations does not include the principal
portion of lease rentals received under direct financing leases or principal
payments received on notes receivable. In the Funds' statements of cash flows
(under generally accepted accounting principles), these amounts are included in
the investing activities section.
(3) The percentage is calculated as a fraction, the numerator of which is the
amount invested in program equipment (at cost) as of the end of the indicated
period and the denominator of which is the cumulative total of the cost of all
equipment acquired by the program through the end of the latest period shown.
(4) Estimated as of June 30, 2004.
Past performance is not necessarily indicative of future performance.
A - 11
TABLE IV
RESULTS OF COMPLETED PROGRAMS
June 30, 2004
(Unaudited)
Program name:
ATEL Cash ATEL Cash ATEL Cash
Distribution Fund Distribution Fund II Distribution Fund III
Dollar amount of equity raised $ 10,000,000 $ 35,000,000 $ 73,855,840
Assets purchased $ 11,133,679 $ 52,270,536 $ 99,629,942
Date of Closing of Offering December 18, 1987 January 3, 1990 January 3, 1992
Date of first sale of property May 1, 1989 July 1, 1994 December 1, 1992
Date of final sale of property December 31, 1997 December 31, 1998 December 31, 2000
Tax and distribution data per
$1,000 limited partner investment
through December 31, 2000:
Federal Income Tax Results:
Ordinary income (loss):
Operations $ 192.40 $ 154.95 $ (12.08)
Recapture
Capital gain (loss)
Cash distributions to investors
on a GAAP basis:
- Investment income $ 244.89 $ 335.43 $ 379.10
- Return of capital 876.14 887.20 950.66
----------------------- ------------------------- ------------------------
1,121.03 1,222.63 1,329.76
Cash available for distribution, reinvested
for investors' accounts 89.05 48.75 -
----------------------- ------------------------- ------------------------
Total $ 1,210.08 $ 1,271.38 $ 1,329.76
======================= ========================= ========================
Sources (on a cash basis):
Sales $ 136.03 $ 159.92 $ 169.34
Refinancing
Operations 969.59 987.33 975.75
Other 104.46 124.13 184.67
----------------------- ------------------------- ------------------------
Total $ 1,210.08 $ 1,271.38 $ 1,329.76
======================= ========================= ========================
Past performance is not necessarily indicative of future performance.
A - 12
TABLE V
ACQUISITION OF EQUIPMENT
BY PRIOR PROGRAMS
The following is a summary of Equipment acquisitions and Lessees by the three
most recent prior publicly-registered programs sponsored by ATEL Financial
Services, LLC and its affiliates. Information concerning the prior programs'
Equipment acquisition is current through December 31, 2003.
Lease
Commence Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Leverage (3) Term (4) (5)
------ ----- -------------- ----------- -------- ------------ -------- ---
ATEL Capital Equipment Fund VIII
American Oncologic MRI Scanner Jul-00 $ 1,871,181 60 OL
Hospital, Inc.
ANC Rental Corporation 23 Mini Buses Jan-01 1,860,020 36 FP
ANC Rental Corporation 23 City Buses Jan-01 1,506,459 60 FP
ANC Rental Corporation 23 City Buses Jan-01 1,168,509 60 FP
ANC Rental Corporation 23 Mini Buses Jan-01 576,820 36 OL
BJ's Wholesale Club, Inc. 6 Forklifts Apr-99 594,748 60 HP
Burlington Northern and Locomotives Dec-99 11,750,000 19 OL
Santa Fe Railroad Company
Burlington Northern and Tri-Level Auto Racks Sep-99 1,741,739 40 OL
Santa Fe Railroad Company
Celestica Corporation Chip Placers, Jan-01 2,955,623 33 OL
Stencil Printers
Consolidated Diesel Company Siemens Telephone Feb-99 406,030 55 HP
System
Consolidated Rail Corporation Railroad Gondolas Jan-00 12,922,864 23.79% 36 OL
and Ballast Cars
CSX Transportation, Inc. Rail Boxcars Sep-99 6,782,075 15 OL
CVS Corporation Material Handling Apr-00 1,977,438 60 HP / FP
Equipment
CVS Corporation Material Handling Apr-01 1,356,483 60 HP / FP
Equipment
CVS Corporation Material Handling Jan-01 1,274,563 60 HP / FP
Equipment
CVS Corporation Telecommunications Jan-00 to Apr-00 1,065,848 60 HP
Equipment
CVS Corporation Telecommunications Jul-00 to Oct-00 780,243 60 HP
Equipment
CVS Corporation Handheld Radio Units Apr-01 636,065 36 HP
CVS Corporation Handheld Inventory Oct-00 323,473 60 HP
Control Units
CVS Corporation Phone Equipment Apr-01 130,968 60 HP
CVS Corporation Telecommunications Oct-99 102,961 60 HP
Equipment
E.I.duPont de Nemours Okuma Lathe Jul-00 324,805 72 FP
& Company
Emery Worldwide Airlines, Inc. MD Cargo Aircraft Nov-99 5,725,300 1 OL
Emery Worldwide Airlines, Inc. Used McDonnell Jul-00 14,123,602 54 OL
Douglas DC8-71F
Cargo Aircraft
Finnair OYJ 7 McDonnell Douglas Dec-99 15,448,037 26.54% 50 OL
Passenger Aircraft
General Electric Company 8 Lathes, Machining Oct-00 4,843,887 84 FP
Centers
General Electric Company 8 Turning Lathes Jul-00 2,747,940 84 FP
General Electric Company 8 Milling Machine Dec-99 to Feb-00 1,140,264 84 FP
General Electric Company 8 Grinding Machine Dec-99 to Mar-00 1,060,293 84 FP
General Electric Company 8 Turbolisk Dec-00 999,775 84 FP
General Electric Company 8 Vertical Machining Apr-00 788,675 84 FP
Centers
Past performance is not necessarily indicative of future performance.
A - 13
Lease
Commence Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Leverage (3) Term (4) (5)
------ ----- -------------- ----------- -------- ------------ -------- ---
General Electric Company 8 Machining Center Feb-01 733,600 84 FP
General Electric Company 8 Vertical Machining Mar-01 709,545 84 OL
Center
General Electric Company 8 Grinding Machines Aug-00 660,444 84 FP
General Electric Company 8 Monarch Machining Sep-00 644,886 84 FP
Center
General Electric Company 8 Machine Tools Jun-01 643,106 84 FP
General Electric Company 8 VTX Machining Oct-99 to Dec-99 626,699 84 HP/FP
Centers
General Electric Company 8 Rebuilt Producto Dec-00 593,500 84 FP
Drilling Machine
General Electric Company 8 Rebuilt Omni-Mill Jun-01 563,939 84 FP
General Electric Company 8 Deckel Maho DMU May-99 546,500 84 OL
Machine
General Electric Company 8 Grinding Machine Jan-00 510,756 84 FP
General Electric Company 8 Fadal Machining Jun-00 483,900 84 FP
Centers
General Electric Company 8 Rebuilt CNC Lathe Aug-00 476,458 84 OL
General Electric Company 8 CNC Grinding Machine Oct-00 363,400 84 FP
General Electric Company 8 LeBlond Lathe Jan-00 352,350 84 HP
General Electric Company 8 Machine Center Mar-99 352,000 84 OL
General Electric Company 8 Grit Blast System Jul-00 351,536 84 FP
General Electric Company 8 Grinding Machine Jun-00 330,222 84 FP
General Electric Company 8 Rebuilt Bullard VTL Feb-01 299,706 84 FP
General Electric Company 8 Radio Graphic Sep-99 219,377 84 FP
Inspection
Facility
General Electric Company 8 Rebuilt Vacuum Mar-00 to Apr-00 213,820 84 FP
Blazing Machine
General Electric Company 8 Used Forging Machine Jan-00 177,410 84 FP
General Electric Company 8 Forklifts Aug-00 128,976 36 - 60 OL/FP
General Electric Company 8 VTX Machining Centers May-99 124,172 84 OL
General Electric Company 8 Data Visualization May-00 101,374 84 FP
System
General Electric Company 8 Laser Engraving May-00 80,159 84 FP
System
General Electric Company 8 Air Flow Tester Nov-99 61,960 60 FP
General Electric Company 8 Power Trak Jan-00 39,975 60 OL
General Electric Company 8 Pinstamp Marking May-00 39,115 84 FP
System
General Electric Company 8 Film Processor Oct-99 35,000 84 FP
General Electric Company 8 Equipment Add-On Aug-00 23,530 69 - 81 FP
General Electric Company 8 Add-on Equipment Oct-00 18,000 80 FP
General Electric Company 8 Radio Graphic Jan-00 6,500 80 FP
Inspection
Facility Upgrade
General Electric Company 8 Add-on Equipment Sep-01 7,660 60 FP
General Electric Company 9 Injection Molding Oct-00 1,305,371 36 OL
Machine
General Electric Company 9 Prism Extruders Nov-00 to Jul-01 668,252 60 FP
General Electric Company 9 Extruder Systems May-99 281,595 60 OL
Georgia Gulf Corporation Quad Hopper Cars Sep-99 1,416,678 58 OL
Great American Management Rail Boxcars Oct-99 3,627,223 30 OL
Services, Inc.
IMC-Agrico Company 10 Storage Facility Jun-00 6,712,090 78 OL
Ingersoll International, Inc. Vertical Machine Oct-00 540,794 84 FP
Centers
Ispat Inland Inc. Coil Carriers May-00 867,000 60 OL
Lafarge Gypsum, a division 24 Forklifts Oct-00 766,805 36 HP
of Lafarge Corporation
Lafarge Gypsum, a division 24 Forklift Trucks Feb-01 702,312 36 OL
of Lafarge Corporation
Lafarge Gypsum, a division 24 Wheel Loader Jan-01 317,111 60 OL
of Lafarge Corporation
Minteq International, Inc. Laser Profiling Nov-99 303,211 36 HP
System
National Gypsum Company CAT Loaders / Dozers Oct-00 1,147,259 36 OL
National Gypsum Company CAT Loader Jan-01 437,732 60 OL
National Steel Corporation CAT Loaders Jan-00 1,135,900 36 OL
NVR, INC. Home Manufacturing Aug-99 193,414 84 FP
Equipment
Omnicom Group, Inc. 11 Office Automation Oct-98 1,749,913 36 HP
Omnicom Group, Inc. 11 Office Furniture Oct-98 321,976 60 FP
Overnite Transportation Conventional Jan-00 7,061,889 48 OL
Company Tractors
Overnite Transportation Conventional Jul-00 3,103,308 48 OL
Company Tractors
Overnite Transportation Tractors and Trailers Oct-00 2,921,394 48 OL
Company
Overnite Transportation Conventional Tractors Apr-99 2,080,400 48 OL
Company
Overnite Transportation Trailers Jul-00 2,054,380 96 FP
Company
Overnite Transportation Conventional Tractors Oct-99 1,104,976 48 OL
Company
Seamex International Ltd. 12, 13 Anchor Handler Tug Dec-98 3,952,500 44 OL
Supply Vessel
Sebastiani Vineyards, Inc. Bottle Filler Jan-00 365,913 84 FP
Sematech, Inc. Manufacturing Apr-00 1,230,000 36 OL
Equipment
Past performance is not necessarily indicative of future performance.
A - 14
Lease
Commence Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Leverage (3) Term (4) (5)
------ ----- -------------- ----------- -------- ------------ -------- ---
Seven Hills Paperboard, LLC Neles Control Jan-01 1,178,588 60 OL
Systems
Signature Flight Support Refueler Truck Jan-00 290,000 60 FP
Corporation
Solectron Corporation Chip Placers Dec-99 15,366,268 48 OL
Solectron Corporation Chip Placers Sep-99 1,496,388 48 OL
Solectron Corporation Fuji QP Module Jun-00 92,228 45 OL
Southwest Airlines Company 14 Boeing 737 Aircraft Mar-99 3,238,500 50 OL
Staples, Inc. Point of Sale Jan-99 2,410,939 60 FP
Equipment
Staples, Inc. Point of Sale Apr-99 681,910 60 FP
Equipment
Staples, Inc. Point of Sale Sep-99 511,079 60 OL
Equipment
Staples, Inc. Point of Sale May-99 204,571 60 FP
Equipment
Staples, Inc. Forklifts May-99 101,480 48 OL
Staples, Inc. Material Handling Oct-99 68,030 48 OL
Equipment
Stewart & Stevenson Gas Compressors Jul-99 6,272,782 78 HP
Services, Inc.
Stewart & Stevenson Gas Compressors Oct-99 4,508,796 84 HP
Services, Inc.
Sysco Food Services Albany Tractors Sep-00 965,311 84 FP
Sysco Food Services Albany Refrigerated Trailers Jun-00 760,188 96 FP
Sysco Food Services Albany Refrigerated Trailers Sep-99 519,620 96 FP
Sysco Food Services Albany Refrigerated Trailers Feb-00 220,012 96 FP
TASC, Inc. Office Automation Oct-99 675,132 36 FP
TASC, Inc. Office Automation Jul-99 494,787 36 FP
Transamerica Leasing Inc. 15 Intermodal Containers Dec-98 21,250,000 120 FP
Union Pacific Railroad Covered Hopper Cars Feb-00 16,523,854 24 OL
Company
Union Pacific Railroad Fixed-end Gondola Dec-99 5,021,142 72 OL
Company Railcars
Universal City Development Point of Sale Apr-99 668,474 60 FP
Partners Equipment
Universal City Florida Hotel Hotel Laundry Sep-99 3,882,463 84 FP
Venture Equipment
Universal City Florida Hotel Laundry Equipment Mar-01 174,207 66 FP
Venture
Universal City Florida Hotel Laundry Equipment Aug-02 293,570 67 FP
Venture
Universal City Florida Office Automation Jul-99 487,909 36 HP
Partners Equipment
Universal City Florida Office Automation Jul-00 282,109 36 HP
Partners Equipment
Universal City Florida Office Automation Oct-99 248,838 36 HP
Partners Equipment
Universal City Florida Office Automation Apr-00 134,872 36 HP
Partners Equipment
Universal City Florida Office Automation Jan-00 117,555 36 HP
Partners Equipment
Whirlpool Corporation Hydraulic Traveling Jan-99 72,763 60 OL
Gantry Crane
Williams Distributed Power 16 Micro Turbine Systems Oct-00 1,230,020 60 OL
Services, Inc.
Williams Distributed Power 16 Micro Turbine Systems Jan-00 1,056,690 60 OL
Services, Inc.
Williams Distributed Power 16 Micro Turbine Systems Apr-00 865,522 60 OL
Services, Inc.
Williams Distributed Power 16 Micro Turbine Systems Apr-01 215,895 60 OL
Services, Inc.
Xerox Corporation Material Handling Dec-98 to Mar-99 378,964 44 OL
Equipment
Xerox Corporation Material Handling Dec-99 108,572 44 OL
Equipment
Xerox Corporation Material Handling Sep-99 47,858 44 OL
Equipment
Xerox Corporation Material Handling Nov-99 47,232 44 OL
Equipment
-------------
ATEL Capital Equipment Fund VIII total: 249,040,775
=============
ATEL Capital Equipment Fund IX
Arbinet-Thexchange, Inc. Storage Array System Jul-03 $ 495,474 36 FP
ARYx Therapeutics Testing & Lab Mar-03 174,668 24 HP
Equipment
Ball Corporation Bulk Boxes & Pallets Aug-03 1,049,039 71 FP
Basin Electric Power 17 Walking Drag Line Jul-00 6,786,284 72 OL
Cooperative
Basin Electric Power 17 Walking Drag Line Jan-01 4,529,113 66 OL
Cooperative
Colowyo Coal Company L.P. 1985 Walking Apr-03 3,791,357 32 OL
Electric Dragline
CVS Pharmacy, Inc. 18 Phone System Jan-02 326,231 60 FP
CVS Pharmacy, Inc. 18 Material Handling Jul-01 207,486 60 FP
CVS Pharmacy, Inc. 18 Printing / Graphic Jan-02 196,345 60 OL
Arts
CVS Pharmacy, Inc. 18 Phone System Oct-01 72,808 60 FP
Past performance is not necessarily indicative of future performance.
A - 15
Lease
Commence Acquisition Percent Lease Type
Lessee Notes Equipment Type Date(s) (1) Cost (2) Leverage (3) Term (4) (5)
------ ----- -------------- ----------- -------- ------------ -------- ---
Ford Motor Company Batteries and Fork Oct-03 120,901 34 - 60 OL, HP, FP
Lifts
Ford Motor Company Material Handling
Equipment Aug-03 2,878,521 30 - 58 OL, HP, FP
General Electric Company 8 Lathes Apr-02 2,240,326 84 OL
General Electric Company 8 Grinders and Apr-02 2,033,697 84 OL
Sputtering Machine
General Electric Company 8 Toshulin Powerturn Aug-02 1,705,500 84 OL
Machine
General Electric Company 8 Remfg Bullard Vt Dec-02 to Aug-03 1,127,926 84 FP
Lathe
General Electric Company 8 CNC Grinding Machine May-02 960,432 84 OL
General Electric Company 8 Mazak Horizontal Dec-02 746,775 84 FP
NC Lathe
General Electric Company 8 Rosler Vertical Sep-03 678,164 84 FP
Spindle
General Electric Company 8 Blohm Cnc Grinding Aug-03 599,000 84 FP
Machine
General Electric Company 8 Grinder Mar-01 561,697 84 FP
General Electric Company 8 Remfg Sundstrand Mar-03 461,179 84 FP
Omnimill
General Electric Company 8 Sundstrand Omnimill Jul-02 461,179 84 OL
General Electric Company 8 Remfg Bullard Mill Sep-03 386,000 84 FP
Machine
General Electric Company 8 Tube Benders Feb-03 343,738 84 FP
General Electric Company 8 Projection Welder Oct-02 251,100 84 FP
General Electric Company 8 Argon Atomsphere Sep-03 250,308 84 FP
Furnaces
General Electric Company 8 Toshulin Powerturn Aug-02 189,500 84 FP
Cat 50
General Electric Company 8 Wire EDM Jul-02 172,392 84 OL
General Electric Company 8 Electrolytic Cutoff Nov-02 119,935 84 FP
Machine
General Electric Company 8 Newall Cnc Grinding Jan-03 106,715 84 FP
Machine
General Electric Company 8 Indel Small Sep-02 101,374 84 FP
Sputtering Machine
General Electric Company 8 Fryer Mb-15 Bed Oct-02 43,950 84 FP
Milling Machine
General Electric Company 9 Crane Feb-02 282,050 60 OL
General Electric Company 9 Molding Machine Dec-00 260,000 36 OL
General Electric Company 9 Molding Machine Apr-01 168,012 60 FP
General Electric Company 19 Drilling Machine Jul-02 234,000 60 FP
General Motors Corporation Material Handling Mar-02 2,910,436 26 - 70 FP
Graham Offshore, Inc. 20 Crew and Supply Boats Jan-02 9,500,000 60 OL
Johnson Technology, Inc. 21 EDM Speed Drillers Apr-02 1,221,500 84 FP
Johnson Technology, Inc. 21 EDM Speed Drillers May-02 716,000 84 FP
Johnson Technology, Inc. 21 EDM Machines Sep-02 261,710 84 FP
Johnson Technology, Inc. 21 Material Handling Feb-02 14,700 84 FP
Johnson Technology, Inc. Edm Speed Driller Oct-02 358,000 84 FP
Mastec North America, Inc. Various Construction Jan-03 2,392,924 60 HP
Equipment
Mastec North America, Inc. Kubota Excavators Apr-03 238,320 36 OL
W/Bucket
Mastec North America, Inc. 2001 Manitowoc Apr-03 125,000 36 OL
28-Ton Boom Truck
Memgen Corporation Computer, Software Sep-03 350,000 24 FP
& Lab Equip
National Gypsum Company CAT Equipment Jul-02 1,382,558 60 HP
National Gypsum Company Roll Crusher Jul-02 884,757 60 HP
National Gypsum Company CAT Equipment Jul-01 853,074 60 OL
National Gypsum Company Tractor Apr-01 662,273 60 OL
National Gypsum Company Wheel loader and Jan-02 383,208 48 - 60 OL
tractor
National Gypsum Company CAT Equipment Oct-01 207,266 60 OL
National Gypsum Company Dump trailer Sep-02 24,959 60 HP
National Gypsum Company CAT Equipment Aug-02 8,375 47 OL
New NGC, Inc. Caterpillar Wheel Jul-03 827,415 60 HP
Loader
New NGC, Inc. 2004 Freightliner Jul-03 229,438 60 - 72 FP
Tractors
Nortel Networks, Inc. Office Furniture Mar-01 1,065,692 83 FP
Peabody Holding Company Joy Mining Equipment Oct-02 5,083,396 60 FP
Peabody Holding Company, Inc. Joy Continuous Miner Oct-02 28,039 60 FP
& Haulers
Proficient Networks, Inc. 22 Computer Equipment Apr-03 to Aug-03 121,141 24 FP
Quick Study Radiology, Inc. Computer Related Apr-03 20,920 26 FO
Equipment
Rubicon Technology, Inc. Lapping & Polishing Sep-03 300,000 18 FP
Machine
Rubicon Technology, Inc. Surface Analyzer Dec-03 200,000 24 FP
SEACOR Marine, LLC 20 Supply boat Jan-02 1,700,000 60 OL
Seven Hills Paperboard, Llc Wheel Loader & Oct-03 136,355 36 HP
Forklifts
Sony Pictures Entertainment, Digital recorders Nov-01 762,524 36 FP
Inc.
U.S. Telepacific Corp. Titan System Sep-03 345,944 18 FP
Materials
U.S. Telepacific Corp. Networking Equipment Oct-03 599,272 18 FP
U.S. Telepacific Corp. Networking Equipment
and Office Furniture Oct-03 54,784 18 FP
Williams Distributed Power 16 Micro Turbine Systems Apr-01 717,356 60 OL
Services, Inc.
-------------
ATEL Capital Equipment Fund IX total: $ 69,800,513
=============
Past performance is not necessarily indicative of future performance.
A - 16
ATEL Capital Equipment Fund X
Arbinet-thexchange, Inc. Telecom Switch Aug-03 $ 654,526 36 FP
Arsenal Digital Solutions Software Licenses Jan-04 42,943 24 FP
Worldwide, Inc.
Arsenal Digital Solutions Computer Software Sep-04 44,138 24 FP
Worldwide, Inc.
Arsenal Digital Solutions Computer Hardware Jun-04 171,041 36 FP
Worldwide, Inc.
Arsenal Digital Solutions Computer Hardware and Jul-04 73,396 36 FP
Worldwide, Inc. Phone System
Arsenal Digital Solutions Office Furniture Aug-04 74,243 36 FP
Worldwide, Inc.
ARYx Therapeutics Testing equipment Apr-03 182,125 30 FP
ARYx Therapeutics Computer Equipment Jul-04 115,279 24 FP
Ball Corporation Bulk boxes, Pallets Sep-03 2,793,225 59 FP
& Tiers
Ball Corporation Bulk boxes, Pallets Oct-03 631,118 60 FP
& Tiers
Ball Corporation Bulk boxes, Pallets Nov-03 408,800 60 FP
& Tiers
Boingo Wireless, Inc. Computer Equipment Sep-04 102,518 30 FP
Cedar Point Communications, Inc. Computer Equipment Aug-04 185,618 36 FP
Cedar Point Communications, Inc. Computer Equipment and Sep-04 73,112 36 FP
Office Furniture
Colowyo Coal Company L.P. Walking Drag Line Apr-03 2,000,000 32 OL
Daimler Chrysler Corporation Materials Handling Oct-04 1,491,667 60 FP
Dorado Network Systems Office Furniture Jun-04 87,430 18 FP
Corporation
Dorado Network Systems Computer Equipment Jul-04 89,066 18 FP
Corporation
Dorado Network Systems Computer Equipment Aug-04 48,084 18 FP
Corporation
General Electric Company / Machine Tools Dec-03 6,088,818 62 - 75 OL, HP
GE Aircraft Engines
Helijet International, Inc. Helicopters Apr-04 2,680,000 60 OL
International Paper Company Dozer Apr-04 593,560 60 OL
International Paper Company Lift Trucks, Loader Jun-04 to Aug-04 267,750 36 - 60 HP
International Paper Company Loader, Carrier Jun-04 233,840 60 HP
Kaiser Foundation Hospitals Information Storage Oct-03 538,742 36 HP
Equipment
Kaiser Foundation Hospitals Information Storage Dec-03 110,814 34 HP
Equipment
Kaiser Foundation Hospitals Information Storage Jan-04 105,488 34 HP
Equipment
Kaiser Foundation Hospitals Information Storage Nov-03 291,390 36 HP
Equipment
Kaiser Foundation Hospitals Information Stroage Jun-04 33,288 29 HP
Upgrade
Lafarge North America, Inc. Forklifts Apr-04 836,266 36 OL
Lafarge North America, Inc. Forklifts Jul-04 1,091,782 36 OL
Lightship Holding, Inc. & Telecommuni- cations Jul-04 375,000 24 FP
Lightship Telecom, LLC & Office Furniture
New NGC, Inc. dba National Cat Tractor & Shovel Apr-04 1,371,097 42 - 66 OL
Gypsum Company
On24, Inc. Computer Equipment Sep-04 53,317 36 FP
Overnite Transportation Company Over-the-road Tractors Apr-04 848,881 60 OL
Overnite Transportation Company Over-the-road Tractors May-04 1,543,420 60 OL
Starcite, Inc. Working Capital Loan Jul-04 175,000 24 NR
---------------
ATEL Capital Equipment Fund X total: $ 26,506,782
===============
TOTAL OF ALL FUNDS: $ 345,348,070
===============
Past performance is not necessarily indicative of future performance.
A - 17
TABLE V ACQUISITION OF EQUIPMENT FOOTNOTES
(1) In many cases, a Lease transaction is funded over a period of time
according to the Lessee's equirements. herefore Commencement Date(s)"
expressed as a range represents multiple commencement dates occurring or
anticipated under the same Lease line.
(2) "Acquisition Cost" includes either amounts committed to Lessees for funding
by the program, or the actual Equipment acquisition cost, less any
Acquisition Fees. All figures are rounded.
(3) "Percent Leverage" represents the percent ratio of the original principal
amount of the debt acquired or assumed by the program, to the Acquisition
Cost of the Equipment. The Equipment may be "leveraged" (where a portion of
the Equipment Acquisition Cost is financed using non-recourse debt
financing) at the time of, or subsequent to, the acquisition of the
Equipment by the program. Therefore, actual leverage ratios may be more or
less than indicated due to the timing of the acquisition of the Equipment
in relation to the amortization of the principal amounts of the debt.
(4) "Lease Term" is expressed in terms of months, although the actual Lease Term
may be expressed as monthly, quarterly, semiannual or annual.
(5) A designation of "FP" indicates that the aggregate rents to be received
during the Lease Term exceed or are equal to the Acquisition Cost of
the Equipment. A designation of "OL" indicates that the aggregate rentals
to be received during the Lease Term are less than the Acquisition Cost. A
designation of "HP" indicates that the aggregate rents to be received
during the Lease Term exceed or are equal to 90% of the Acquisition Cost of
the Equipment.
(6) A division of Waban, Inc.
(7) Aircraft is based out of the Republic of Finland.
(8) Lessee is General Electric Company, by its division GE Aircraft Engines.
(9) Lessee is General Electric Company, by its division GE Plastics.
(10) Asset is held in a trust. A 20% beneficial interest in the trust is held by
Fund 7, with the remaining 80% beneficial interest in the trust held by
Fund 8.
(11) Guaranteed by Omnicom Group, Inc. Actual lessees are various subsidiaries
of Omnicom Group Inc.: The DDB Needham Worldwide Communications Group Inc.;
Griffin Bacal Inc.; DDB Needham Chicago, Inc.; DDB Needham Dallas, Inc.;
PGC Advertising, Inc.; The Focus Agency, LP.; Elgin DDB Inc.; Group
Management Services and TLP, Inc.
(12) Asset is held by a special purpose entity. Acquisition cost represents 51%
of the total cost. The remaining 49% is owned by an unaffiliated
program but continues to be managed by an affiliate.
(13) Guaranteed 40% by Seacor Smit, Inc. and 60% by Transportacion Maritima
Mexicana.
(14) Asset is held in a trust. A majority beneficial interest in the trust is
held by the program, with the remaining beneficial interest in the trust
held by an unaffiliated program managed by an affiliate.
(15) Assets are on short-term sub-leases with various sub-lessees.
(16) Guaranteed by Williams Companies, Inc.
(17) Asset held in a trust with Bank of New York as Trustee. Two distinct
beneficial interests in the trust estate, representing an aggregate 42.5%
interest of the total trust estate, purchased in two separate transactions.
The remaining 57.5% of the trust estate is owned by an unaffiliated
institutional investor. Trustee may only act upon unanimous instructions
of all beneficial owners in the trust estate.
(18) Guaranteed by CVS Corporation.
(19) Lessee is acting through its division, GE Engine Services, Inc.
(20) Guaranteed by SEACOR Smit Inc. Graham Offshore LLC changed from Graham
Offshore, Inc on December 31, 2003. Seacor Marine LLC changed from
Seacor Marine, Inc. on December 31, 2003.
(21) Guaranteed by General Electric Company acting through its division GE
Aircraft Engines operating division.
(22) Merged with and now named Infiniroute Networks as of April 2004.
(23) Lessee filed for protection under Chapter 11 of the U.S. Bankruptcy Act.
All original lease payments were made. The lease was assumed by
Vanguard Car Rental on November 11, 2003.
(24) Name changed to LaFarge North America, Inc.
Past performance is not necessarily indicative of future performance.
A - 18
TABLE VI
SALES OR DISPOSALS OF EQUIPMENT
ATEL Capital Equipment Fund VII, ATEL Capital Equipment Fund VIII and ATEL
Capital Equipment Fund IX have disposed of equipment in their portfolios as of
December 31, 2003. Set forth below is a summary of equipment sales and
dispositions as of such date. Sales were for consideration unless otherwise
noted. Interim rent (rent paid prior to formal commencement of a lease),
hold-over rent (rent received after termination of the initial lease term, but
before formal extension or disposition) and extension rent (rent paid after
formal extension of a lease) are included in the "Excess of Rents Over Expenses"
column. "Equipment Acquisition Price" includes acquisition fees. Dispositions
are shown on a per asset basis.
Excess
of
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4)
------ ----------------- -------- --------- --------- --------- ---
ATEL CAPITAL EQUIPMENT FUND VII
A.P.Moller (Maersk) Containers Dec-97 $ 22,801 Feb-03 $ 20,400 $ 12,593
Allian Techsystems, Inc. Manufacturing Dec-97 138,505 Jan to May-02 1,408 286,130
Anchor Glass Container Glass Packaging Apr-98 45,598 Jun-98 60,611 10,086
Corporation Equipment
Anchor Glass Container Various Computer Dec-97 404,995 Jul-99 19,021 456,356
Corporation Equipment
Anchor Glass Container Glass Packaging Dec-97 325,684 Nov-98 357,890 116,336
Corporation Equipment
Applied Magnetics Manufacturing Dec-97 7,975,841 May-00 to Jun-00 1,661,217 2,652,847
Corporation
Applied Magnetics Manufacturing Jun-97 4,152,810 Jan-01 - 2,218,334
Corporation
Avon Products, Inc. DEC Mira 11/83 System Dec-97 29,415 Aug-99 14,800 44,147
Blue Star Line Ltd. Containers Dec-97 17,432 Dec-02 383 11,662
Burlington Northern & Santa Fe Containers Jun-98 9,280 Sep-03 7,016 5,556
Burlington Northern & Santa Fe Containers Jun-98 to Sep 98 111,360 Feb-03 to Jun-03 88,565 61,019
Burlington Northern & Santa Fe Locomotives Jan-98 2,025,000 Aug-00 1,500,000 1,118,018
Burlington Northern & Santa Fe Locomotives Jan-98 4,050,000 Oct to Nov-01 2,148,551 3,209,719
Burlington Northern Santa Fe 48'Aluminium Domestic Jun-98 to Sep-98 64,960 Jul-99 to May-00 68,992 9,320
Container
Burlington Northern Santa Fe 48'Aluminium Domestic Jun-98 to Sep-98 27,840 Oct-01 25,805 11,112
Container
Burlington Northern Santa Fe 48'Aluminium Domestic Aug-98 to Sep-98 27,840 Jan-99 30,081 1,224
Container
Canandaigua Wine Company, Inc. Wine Barrels Jun-98 152,734 May to Aug-01 22,714 427,074
Canandaigua Wine Company, Inc. Wine Barrels Jun-98 48,736 Oct to Dec-01 7,695 152,165
Canandaigua Wine Company, Inc. Wine Barrels Dec-97 192,372 Dec-00 33,702 178,147
Canandaigua Wine Company, Inc. Barrels Dec-97 376,364 May-03 30,000 413,208
Canandaigua Wine Company, Inc. Wine Barrels Feb-97 303,325 Feb-02 25,200 317,755
Cargill, Inc. Railcars Jan-97 99,000 Oct-97 96,747 9,415
Cargill, Inc. Covered Hopper Jan-97 to Sep 98 122,539 Jan-03 to Jul-03 24,747 131,820
Railcars
Cargill, Inc. Covered Hopper Sep-98 12,103 Aug-99 18,000 5,253
Railcars
Cargill, Inc. Covered Hopper Sep-98 67,154 Jul-01 58,062 47,880
Car
Cargill, Inc. Jumbo Covered Hopper Jan-97 66,000 Jul-99 to Jun-00 57,867 33,427
Railcar
Cargill, Inc. Jumbo Covered Hopper Jan-97 33,000 Oct-01 25,683 28,828
Railcar
Cargill, Inc. Jumbo Covered Hopper Jan-97 66,000 Mar-02 51,655 25,438
Railcar
Cargill, Inc. Jumbo Covered Hopper Jan-97 1,184,229 May to Jun-02 158,832 1,156,298
Railcar
Celestica Corporation Manufacturing Dec-97 73,121 Oct-02 5,133 75,588
Celestica Corporation Computers Dec-97 33,721 Oct-02 2,367 34,859
Consolidated Diesel Company Minolta Copiers Dec-97 15,697 Nov-98 to Mar-99 2,249 16,690
Consolidated Diesel Company Manufacturing Dec-97 15,161 May-02 5,000 37,927
Consolidated Rail Corporation Domestic Container Aug-97 10,255 Jan-98 10,752 9,646
Consolidated Rail Corporation Containers Aug-97 to Oct 97 20,510 Oct-02 13,202 13,725
Consolidated Rail Corporation Gooseneck Container Oct-97 6,315 Oct-99 5,896 1,714
Chassis
Consolidated Rail Corporation Container Oct-97 10,255 Jul-01 7,681 5,153
Costain Coal, Inc. Vme/Euclid 339Sd Rear Apr-98 805,181 Jun-98 886,985 161,683
Dump Truck
Past performance is not necessarily indicative of future performance.
A - 19
Excess
of
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4)
------ ----------------- -------- --------- --------- --------- ---
CVS Pharmacy, Inc. Telecommunications Jul-99 77,935 Oct-02 2,700 44,389
DaimlerChrysler Corporation Materials Handling Sep-98 244,362 Feb-02 36,145 212,460
Danskin, Inc. Textile Manufacturing Dec-97 255,717 Aug-98 to Dec-98 248,350 110,500
Equipment
DDB Needham Dallas Inc. Furniture & Fixtures Dec-97 to Jun-98 897,829 Feb-03 to Jul-03 134,674 939,333
DDB Needham Worldwide Company Office Furniture Jun-97 20,292 Aug-02 3,545 21,484
Dole Fresh Fruit Company 40'Hi-Cube Dec-97 68,403 Aug-99 73,440 55,435
Refrigerated
Container
Emmpak Foods, Inc. Materials Handling Dec-97 91,850 Mar-01 7,500 135,496
Empire Blue Cross And Blue Office Furniture Dec-97 696,766 May-00 1 911,434
Shield
Exel Logistics, Inc. 1993 International Apr-98 88,610 May-98 89,307 16,341
8200 Tractor
Exel Logistics, Inc. 1993 Monon Semi- Apr-98 45,337 May-98 45,693 8,360
Trailer
Exxon Mobil Bell 206L-1 Long Nov-96 1,650,000 Mar-00 1,699,276 900,000
Ranger Helicopter
Exxonmobil Construction Nov-97 92,773 Nov-03 45,000 122,052
ExxonMobil Helicopter Oct-97 1,160,000 Sep-00 1,324,610 557,603
Firstunion-Pioneer Chlor Alkali Railroad Dec-97 31,443 Dec-03 - 30,510
Firstunion-Riceland Foods, Inc. Tank Cars Dec-97 17,594 Nov-01 15,815 19,040
Firstunion-Riceland Foods, Inc. Tank Cars Dec-97 17,594 Apr-03 15,895 25,276
Firstunion-Seaboard Transport Tank Cars Dec-97 45,989 Nov-00 to Mar-01 22,113 74,389
FirstUn-Riceland Foods, Inc. Tank Cars Jan-98 24,467 Nov-02 15,427
GATX Rail Corporation Railroad Dec-98 33,455 Dec-03 13,904 27,858
GATX Rail Corporation Tank Car Dec-98 40,601 Jul-01 25,422 12,249
General Electric Company- Manufacturing Jun-98 to Dec-00 5,148,931 Mar-03 3,663,768 2,859,065
Aircraft Engines
General Electric Company- Computers Aug-98 86,366 Sep-02 900 110,761
Aircraft Engines
General Electric Company- Manufacturing Aug-98 221,977 Jan to May-02 7,383 259,772
Aircraft Engines
General Electric Company- Trackmobile Rail Car Feb-97 166,602 Jul-02 72,000 141,716
Plastics Mover
General Electric Company- Injection Molding Dec-96 906,370 Mar-01 275,000 875,736
Plastics Machine
General Motors Corporation Material Handling Oct-01 to Dec-01 9,963,511 Mar-03 7,992,804 3,596,609
General Motors Corporation Construction Dec-01 149,993 Mar-03 124,437 52,887
General Motors Corporation Containers Dec-01 5,003 Mar-03 4,150 1,432
General Motors Corporation Trucks And Trailers Oct-01 738,786 Mar-03 577,632 287,753
General Motors Corp-Powertrain Material Handling Apr-98 221,719 Nov-02 20,989
General Motors Corp-Powertrain Material Handling Dec-97 72,837 Nov-02 10,248 61,111
General Motors Corp-Powertrain Forklift Dec-97 57,964 Jun-03 to Dec-03 201 84,981
Grand Trunk Western Railroad 86'6" 100-Ton High Dec-97 3,342,139 Jan-00 1,672,856 2,241,057
Cube Box Car
Group Management Services Furniture & Fixtures Jun-98 10,209 Jul-03 1,531 10,632
Group Management Services Office Furniture / Dec-97 170,867 Dec-99 143,378 72,544
Fixtures
Hambros Vendor Leasing Limited Various Transporta- Nov-97 222,022 Sep-02 37,680 155,473
tion Equipment
Hambros Vendor Leasing Limited Various Equipment Nov-97 43,181 Sep-02 13,201 17,843
Hambros Vendor Leasing Limited Applied 414 S2 Diesel Sep-97 16,864 Oct-99 4,349 21,038
Sweeper
Hambros Vendor Leasing Limited Vehicles Sep-97 531,929 Oct-01 139,121 1,016,561
Hambros Vendor Leasing Limited Trucks And Trailers Sep-97 2,324,021 Mar-03 to Nov-03 172,053 2,246,077
Hambros Vendor Leasing Limited Vehicles Sep-97 97,043 Mar-03 to Nov-03 15,326 100,033
Hartz Foods, Inc. Thermo Kings Dec-97 18,422 Oct-98 1 22,671
Refrigeration Unit
Hastings Leasing Limited Medical Oct-97 1,563,722 Feb-03 to Sep-03 77,957 2,694,765
Hastings Leasing Limited Various Transporta- Oct-97 7,260 Oct-99 to Feb-00 11,471 16,675
tion Equipment
Hastings Leasing Limited Various Transporta- Oct-97 1,513,626 Feb & Jul-00 54,990 2,403,737
tion Equipment
Hastings Leasing Limited Various Transporta- Oct-97 15,875 Dec-01 1,183 9,087
tion Equipment
Hastings Leasing Limited Various Oct-97 1,199,142 Apr to Jul-01 176,152 992,148
Hastings Leasing Limited Various Equipment Oct-97 824,700 Jul to Dec 02 147,271 665,247
Hastings Leasing Limited Computers Oct-97 315,503 May-02 11,087 225,468
Hastings Leasing Limited Medical Equipment Oct-97 474,066 Nov-02 48,367 396,155
Hastings Leasing Limited Helicopter Oct-97 944,018 Dec-02 624,650 762,074
Hastings Leasing Limited Vehicles Oct-97 877,626 Mar to Dec 02 181,224 669,675
Hastings Leasing Limited Various Transporta- Oct-97 3,902,880 Jun-02 287,640 2,840,763
tion Equipment
Hastings Leasing Limited Office Automation Oct-97 115,113 Jan-03 to Dec-03 14,750 195,398
Equip.
Hastings Leasing Limited Trucks And Trailers Oct-97 1,090,030 Feb-03 to Dec-03 110,723 1,821,569
Hastings Leasing Limited Vehicles Oct-97 830,932 Jan-03 to Dec-03 88,912 1,370,080
Hastings Leasing Limited Miscellaneous Oct-97 521,701 Jan-03 to Dec-03 68,684 829,266
Past performance is not necessarily indicative of future performance.
A - 20
Excess
of
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4)
------ ----------------- -------- --------- --------- --------- ---
Helm Financial Corporation Railroad Jul-99 to Aug-99 1,252,740 Oct-03 85,000 724,760
Helm Financial Corporation Locomotives Aug-99 1,252,740 Oct-00 to Jul-01 288,500 329,801
Helm Financial Corporation Locomotives Aug-99 417,580 Sep-01 106,000 93,563
Henry General Hospital Medical Dec-97 185,700 Jun-01 20,700 194,979
Hughes Network Systems, Inc. Telecommunications Dec-97 71,860 Dec-99 - 266,154
Equipment
Hughes Network Systems, Inc. Communications Dec-97 25,377 Dec-00 - 66,043
Hyplains Beef, L.C. Food Processing Dec-97 1,235,019 Jan-99 1,145,190 684,040
Equipment
IBM Corporation Stereolithography Dec-97 30,026 Dec-98 50,000 36,010
Illinois Central Railroad Plate "C" Cushioned Jan-97 23,000 Nov-99 26,981 12,308
Boxcar
International Paper Company Materials Handling Dec-96 to Jan-97 588,300 Mar to Apr-02 169,184 619,290
International Paper Company Materials Handling Jul-97 73,595 Sep-02 23,000
International Paper Company Material Handling Jul-97 289,302 Aug-03 to Oct-03 46,500 331,296
International Rectifier Corp. VSLI Critical Dim. Apr-98 12,056 May-98 16,805 1,139
Measure System
International Rectifier Corp. Optical Assoc.Handler Apr-98 13,336 May-98 12,000 4,480
Assy W/Kit
International Rectifier Corp. Wafer Cleaning System Apr-98 86,791 Jun-98 95,000 26,672
International Rectifier Corp. Itc5511D Energy Apr-98 9,027 Jun-98 6,000 3,518
Testing System
International Rectifier Corp. Furnace/Heat Base Apr-98 153,515 Jun-98 154,782 71,669
International Rectifier Corp. Bdf-41 Furnace Apr-98 124,193 Jun-98 125,218 57,233
W/Attachments
International Rectifier Corp. Two Zone Thermal Dec-97 190,911 Aug-98 to Oct-98 148,000 76,091
Shock Chamber
ITO Corporation Materials Handling Apr-98 41,543 Jul-00 - 46,015
ITO Corporation Taylor Stacker W/Fork Dec-97 104,878 Apr-99 - 119,136
Shifter
ITO Corporation Ottawa Commando 30 Dec-97 15,678 Aug-99 - 115,010
Yard Hustler
Kraft Foods North America,Inc. Furniture & Fixtures Oct-97 to Nov-98 2,360,032 Mar-03 1,430,116 1,856,959
Kraft Foods North America,Inc. Telecommunications Jul-98 to Aug-98 561,826 Mar-03 215,925 548,937
Louisiana Workers Printer Dec-97 2,200 Jun-99 - 11,393
Compensation Corp.
Maxtor Corporation Computer & Testing Dec-97 241,310 Aug-99 11,734 265,919
Equipment
Maxtor Corporation Office Automation Aug-97 533,698 Aug-00 185,894 508,526
Mcdonnell Douglas Material Handling Apr-98 96,510 May-03 34,000 84,954
Helicopter Corporation
Mintec International, Inc. Laser Measuring Dec-96 to Dec-97 1,378,705 Oct-01 17,000 1,875,380
Systems
Mrxx-Illinois Central Railroad Boxcars Jan-97 23,000 Jul-03 20,706 20,625
Nippon Yusen Kaisha Containers Dec-97 17,432 Feb-03 12,750 36,710
(N.Y.K.Line)
Nippon Yusen Kaisha Refrigerated Container Dec-97 17,432 Jun-01 13,600 8,484
(N.Y.K.Line)
Nippon Yusen Kaisha 20'Aluminum Dec-97 17,432 Feb-99 20,995 3,059
(N.Y.K.Line) Refrigerated
Container
North American Chemical Co. Mini Magnetic Flow Dec-97 18,809 Dec-98 - 22,771
Meters
North American Salt Company Insulated Tank Car Dec-97 19,088 Jul-02 22,921 15,262
NVR, Inc. Home Manufacturing Oct-97 45,880 Nov-99 42,000 14,479
Equipment
PGC Advertising, Inc. Furniture & Fixtures Dec-97 to Mar-98 75,514 Feb-03 to Apr-03 11,327 78,886
Plasmaquest, Inc. Tatung Sparcstations Dec-97 6,406 Aug-98 5,445 7,104
Ralphs Grocery Company Materials Handling Dec-97 95,598 Mar-00 - 153,606
Ralphs Grocery Company Office Automation Dec-97 179,787 May to Jun-01 - 63,731
Riceland Foods, Inc 23,700 Gal Uni-Temp Jan-98 17,594 Apr-98 17,594 1,981
Tank Car
Rose Acres Farms, Inc. Automatic Case Packer Dec-97 185,461 Sep-99 64,700 155,180
Sarif, Inc. ECR Enhanced CVD Dec-97 224,702 Apr-99 89,826 225,348
System
Sematech, Inc. Manufacturing Jun-98 2,400,000 Sep-00 1,290,000 1,575,742
Sematech, Inc. Concept Two-Sequel-S Sep-97 1,303,600 Jun-00 762,236 1,225,058
Cvd (90%)
Smitty's Super Valu, Inc. Furniture, Fixtures & Apr-98 451,861 Jun-98 601,960 139,202
Equipment
Sony Pictures Entertainment, Office Automation Dec-98 78,820 Dec-01 37,400 79,580
Inc.
Sony Pictures Entertainment, Office Automation Mar-98 1,278,900 Apr-01 264,600 1,249,979
Inc.
Sony Pictures Entertainment, Recreation Equipment Dec-98 83,642 Jan-03 25,000 74,089
Inc.
Southern Pacific Transportation EMD SD45-T2 Locomotive Dec-97 397,658 Mar-99 520,000 391,486
Company
Southwest Health Center, Inc. Siemens Mammographic Apr-98 13,000 May-98 18,500 1,331
X-Ray
Stater Brothers Markets Grocery Store Apr-98 13,643 Jun-98 - 16,315
Equipment
Tarmac America, Inc. Tractors Mar-97 35,000 Aug-97 33,666 6,119
Tarmac America, Inc. Construction Mar-97 315,000 Oct-00 1 310,156
Equipment
TASC, Inc. Office Equipment Oct-97 to Jul-98 27,247 Dec-98 to Jun-99 21,441 26,974
TASC, Inc. Computers Sep-98 to Apr-99 124,117 Sep-02 to Oct-02 21,595 122,878
TASC, Inc. Office Automation Jul-98 to Apr-99 1,702,185 Jan to Jul-02 128,617 1,752,934
TASC, Inc. Office Automation Feb to Sep-98 1,291,004 Oct to Dec-01 77,685 1,499,721
TASC, Inc. Office Automation Jan-99 2,380,289 Oct-00 to Aug-01 239,939 2,587,792
The Burlington Northern & Santa General Electric Dec-96 208,790 Jun-99 125,000 143,520
Fe Railroad Company C30-7 Locomotive
The DDB Needham Worldwide Furniture & Fixtures Mar-98 to Jun-98 37,688 Apr-03 to Jul-03 5,653 39,235
Company
The Pittston Company Mining Dec-98 232,827 Dec-03 75,000 233,940
The Pittston Company Construction Sep-98 to Dec-98 2,246,938 Aug-03 472,277 2,215,213
The Pittston Company Mining Dec-98 369,793 Mar-03 105,266 924,494
Thompson Pipe & Steel Company Office Furniture & Apr-98 31,918 May-98 25,000 6,012
Fixtures
Thomson Saginaw Ball Screw Co. Machine Tools Dec-97 488,917 Aug-98 382,771 242,618
Transamerica Leasing Inc. Containers Dec-97 57,664 May & Nov-03 47,675 8,271
Triad Intl Maintenance Aircraft Access and Dec-97 954,124 Jul-98 to Aug-98 1,306,184 367,159
Corporation Ground Support
Equipment
Ultrabeam Lithography, Inc Manufacturing Nov-97 783,854 Jul-00 572,983 414,380
Ultrabeam Lithography, Inc. Manufacturing Dec-98 830,770 Feb-03 249,231 838,973
Unified Western Grocers, Inc. Material Handling Apr-98 810,790 Oct-03 26,368 994,265
Union Tank Exterior-Coiled Jan-98 16,606 May-00 1,500 4,584
Insulated Tank Car
Union Tank Car Company Exterior-Coiled Dec-97 33,212 Dec-99 to May-00 5,500 20,437
Insulated Tank Car
United States Steel Corporation Construction Jun-97 75,309 Oct-03 25,000 80,102
Universal City Florida Partner Computers Feb-99 226,123 Oct 02 to Dec 02 9,686 579,709
Universal City Florida Partners Office Automation Sep-98 to Mar-99 1,438,997 Jan to Aug-02 51,507 1,534,657
US Surgical Corporation Manufacturing Jun-98 195,987 Oct-03 132,605 112,522
US Surgical Corporation Vascular Laser Stent Jun-98 372,196 May-00 360,397 91,203
Cutting Syst
US Surgical Corporation Manufacturing Jun-98 60,971 Sep-02 14,704 38,986
Wagner College Various Desktop Dec-97 91,951 Aug-98 to Oct-98 34,289 77,503
Computers
Wayne Farms Materials Handling Dec-97 64,686 Feb-01 30,000 103,436
-------------- ------------- -------------
$101,298,756 $ 41,064,424 $ 77,833,388
============== ============= =============
Past performance is not necessarily indicative of future performance.
A - 21
Excess
of
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4)
------ ----------------- -------- --------- --------- --------- ---
ATEL CAPITAL EQUIPMENT FUND VIII
Burlington Northern & Santa Fe Locomotives Nov-99 $ 587,500 Mar-03 $ 483,653 $ 221,406
Burlington Northern & Santa Fe Railroad Sep-99 to Nov-99 1,634,002 Nov-03 to Dec-03 154,700 1,346,436
Celestica Corporation Manufacturing Dec-00 1,573,285 Jul-03 491,000 1,224,300
CSX Transportation, Inc. Box Cars Sep-99 6,782,075 Jan-01 7,112,100 1,749,525
CVS Pharmacy, Inc. Office Automation Dec-99 106,156 Feb-02 23,850 103,907
CVS Pharmacy, Inc. Material Handling Feb-01 20,250 Jul-03 20,250 10,137
CVS Pharmacy, Inc. Computers Aug-00 to Feb-01 959,538 May-03 166,999 982,759
CVS Pharmacy, Inc. Office Automation Jul-99 to Mar-00 150,925 Oct-01 23,700 64,466
DDB Needham Chicago Inc. Electronics Sep-98 43,589 Oct-02 13,462 40,829
DDB Needham Chicago Inc. Office Automation Sep-98 41,294 Feb-03 445 54,150
Equipuipment
Emery Worldwide Airlines Cargo Plane Jun-00 14,123,602 Apr-03 3,980,000 9,419,761
Firstunion-Archer Daniels Railroad Dec-99 20,151 Dec-03 20,725 8,419
Midland
GE Aircraft Engines Tilt Axis Table Mar-00 31,130 Apr-01 31,130 5,054
GE Aircraft Engines Manufacturing Jul-00 to Jan-01 1,085,135 Jun-03 904,522 470,714
Great American Management Boxcars Oct-99 203,250 Apr-03 106,877 69,854
Services
Great American Management Pullman Box Car Oct-99 15,635 Nov-99 15,780 -
Services
Hallsmith-Sysco Food Services Trucks And Aug-99 64,906 Jul-03 46,141 64,906
Trailers
Hallsmith-Sysco Food Services Trucks And Trailers Sep-00 70,914 Nov-03 54,033 35,342
Kansas City Southern Railway Covered Hopper Dec-99 40,302 Jul-03 42,322 20,719
Railcars
Overnite Transportation Trucks And Aug-00 135,378 Feb-03 95,920 78,648
Company Trailers
Solectron Corporation Manufacturing Aug-99 1,467,047 Oct-03 to Nov-03 544,500 1,166,009
Staples. Inc. Office Automation Dec-98 2,410,939 May to Aug-02 1,356,830 1,711,188
TASC, Inc. Office Automation Jun-99 5,412 Nov-01 1,082 4,276
TASC, Inc. Office Automation Sep-99 9,652 Mar-00 9,520 1,601
TASC, Inc. Electronics Jun-99 to Sep-99 80,982 Sep-02 to Dec-02 8,480 80,500
TASC, Inc. Computers Mar-99 to Sep-99 1,031,896 Sep-02 to Mar-03 50,747 1,034,637
TASC, Inc. Office Automation May to Jun-99 41,977 Jul-02 8,622 43,797
The DDB Needham Worldwide Office Automation Sep-98 884,900 Jan to Jul-02 81,819 897,546
Companies
The DDB Needham Worldwide Office Automation Sep-98 780,130 Nov-01 157,667 795,275
Companies
The DDB Needham Worldwide Furniture & Fixtures Sep-98 5,754 Oct-03 863 5,816
Companies
Tracy Locke Partnership Furniture & Fixtures Sep-98 316,222 Nov-03 47,433 319,596
Transamerica Leasing Inc. Standard 20' Imo1 Dec-98 21,250 Nov-99 22,398 2,490
Tank Container
Transamerica Leasing Inc. Containers Dec-98 42,500 Nov-03 30,770 26,767
Union Pacific Railroad Company Covered Hopper Dec-99 503,776 Apr-03 634,135 239,147
Railcars
Union Pacific Railroad Company Gondola Cars Dec-99 367,935 Nov-02 to Jun-03 140,335 588,332
Union Pacific Railroad Company Covered Hopper Dec-99 261,964 Nov-02 301,980 106,590
Railcars
Union Pacific Railroad Company Railroad Dec-99 43,662 Dec-03 13,289 22,980
Universal City Florida Partner Computers May-99 to Mar-00 989,174 Nov-02 to Aug-03 52,937 1,231,602
Universal City Florida Partners Computers Jun-00 156,442 Oct-03 to Dec-03 15,114 165,353
Watco Companies,Inc. Covered Hopper Dec-99 60,453 Apr-03 77,901 1,117
Railcars
Watco Companies,Inc. Covered Hopper Dec-99 60,453 Dec-03 60,296 3,750
Railcars
Whirlpool Corporation Manufacturing Dec-98 72,763 Jan to Apr-02 17,752 56,523
Williams Distributed Power Electrical Dec-99 to Sep-00 374,152 Jun-03 293,145 288,612
Serices Generation
Xerox Corporation Material Handling Dec-98 to Feb-99 276,815 Oct-02 to Jan-03 50,950 221,663
Xerox Corporation Material Handling Feb-99 52,880 Oct-03 2 62,435
-------------- -------------- ------------
$ 38,008,147 $ 17,766,177 $25,048,933
============== ============== ============
Past performance is not necessarily indicative of future performance.
A - 22
Excess
of
Equipment Rents Over
Acquisition Acquisition Sale Expenses
Lessee Type of Equipment Date (1) Price (2) Sale Date Price (3) (4)
------ ----------------- -------- --------- --------- --------- ---
ATEL CAPITAL EQUIPMENT FUND IX
GE Aircraft Engines Mazak Horizontal Dec-02 $ 997,875 Jun-03 $ 1,021,939 $ 84,857
NC Lathe
Sony Pictures Entertainment, Office Automation Jan-02 762,524 May-02 749,408 121,255
Inc.
Williams Distributed Power Capstone Micro Turbine Feb-01 74,943 Jun-03 65,725 35,451
Services System
-------------- ------------- -------------
$ 1,835,342 $ 1,837,072 $ 241,563
-------------- ------------- -------------
TOTALS OF ALL FUNDS: $ 146,658,375 $ 64,904,659 $105,676,593
============== ============== =============
Past performance is not necessarily indicative of future performance.
A - 23
TABLE VI SALES OR DISPOSALS OF EQUIPMENT FOOTNOTES
(1) "Acquisition Date" is the date the Equipment was acquired by the prior
program.
(2) "Equipment Acquisition Price" is the actual cost of the item of Equipment,
including Acquisition Fees, and any other expenditures incurred by the prior
program in the acquisition of the Equipment.
(3) "Sale Price" is the actual cash received for the purchase, early termination
or casualty of the Equipment upon Lease termination, net of any direct
out-of-pocket closing costs incurred by the prior program as a result of such
termination.
(4) "Excess of Rents Over Expenses" is a total amount of Lease rents, less any
applicable direct out-of-pocket costs incurred by the prior program during the
term of the Lease for the particular Lease transaction.
Past performance is not necessarily indicative of future performance.
A - 24
EXHIBIT B
ATEL CAPITAL EQUIPMENT FUND XI, LLC
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
October 14, 2004
ATEL CAPITAL EQUIPMENT FUND XI, LLC
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
TABLE OF CONTENTS
Page
1. NAME AND PRINCIPAL PLACE OF BUSINESS....................................1
6. INITIAL AND ADDITIONAL MEMBERS..........................................7
Section 6.1 Initial Members..........................................7
Section 6.2 Additional Members.......................................7
Section 6.3 Conditions to Admission..................................7
Section 6.4 Admission as a Member....................................7
Section 6.5 Limitation on Additional Issuance........................7
Section 6.6 Escrow...................................................8
Section 6.7 Capital Account..........................................8
7. LIABILITY AND STATUS OF MEMBERS.........................................8
8. COMPENSATION TO THE MANAGER AND/OR AFFILIATES...........................8
Section 8.1 General Limitation.......................................8
Section 8.2 Asset Management Fee.....................................9
Section 8.3 Asset Management Fee Limit ..............................9
Section 8.4 Other Services...........................................9
Section 8.5 Payment of Fees on Removal...............................9
Section 8.6 Employment of Broker-Dealers..............................9
9. FUND EXPENSES AND RESERVES..............................................9
Section 9.1 Reimbursement of Manager.................................9
Section 9.2 Limitation on Reimbursement.............................10
Section 9.3 Fund Expenses...........................................10
Section 9.4 Reserves................................................11
10. ALLOCATION OF INCOME, LOSS AND
DISTRIBUTIONS........................................................11
Section 10.1 Allocation of Net Income and Net
Loss Prior to Initial Closing Date...................11
Section 10.2 Allocation of Net Income and Net
Loss After Initial Closing Date......................11
Section 10.3 Special Allocations....................................11
Section 10.4 Distribution of Cash From Operations..................13
B-ii
Section 10.5 Distribution of Cash From Sales or Refinancing........13
Section 10.6 Distributions of Cash From Reserve Account............13
Section 10.7 Determination of Amounts to be Distributed............13
Section 10.8 Consent to Allocations................................13
Section 10.9 Limitation on Distributions...........................14
Section 10.10 Allocation to Manager.................................14
Section 10.11 Return of Unused Capital..............................14
Section 10.12 Distributions in Kind.................................14
Section 10.13 Withholding Taxes.....................................14
11. ASSIGNMENT OF FUND INTERESTS...........................................15
Section 11.1 Limitations on Transfer................................15
Section 11.2 Distributions and Effective Date of Transfer...........15
Section 11.3 Governmental Restrictions..............................16
Section 11.4 Non-Complying Transfers................................16
Section 11.5 Misrepresentations and Forfeit.........................16
12. SUBSTITUTED MEMBERS....................................................16
Section 12.1 Limitations on Substitution............................16
Section 12.2 Consent to Admission...................................17
Section 12.3 Amendment of Agreement.................................17
13. REPURCHASE OF FUND INTERESTS...........................................17
14. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS................................17
Section 14.1 Books of Account and Records...........................17
Section 14.2 Audited Annual Financial Statements....................19
Section 14.3 Other Annual Reporting.................................19
Section 14.4 Quarterly Reports......................................19
Section 14.5 Unaudited Quarterly Financial Statements...............20
Section 14.6 Other Quarterly Reports................................20
Section 14.7 Tax Returns............................................20
Section 14.8 Governmental Reports...................................20
Section 14.9 Maintenance of Suitability Records.....................20
15. RIGHTS, AUTHORITY, POWERS AND RESPONSIBILITIES
OF THE MANAGER...................................................20
Section 15.1 Services of the Manager................................20
Section 15.2 Authority of the Manager...............................21
Section 15.3 General Powers and Fiduciary Duty......................23
Section 15.4 Limitations on Manager's Authority.....................23
Section 15.5 Limitation on Manager's Liability......................26
Section 15.6 Tax Matters Member.....................................26
Section 15.7 Minimum Investment in Equipment /Maximum Front-End Fees
.......................................................27
Section 15.8 Reliance on Manager's Authority........................27
16. RIGHTS, POWERS AND VOTING RIGHTS OF THE MEMBERS........................28
Section 16.1 Limitation on Member Authority.........................28
Section 16.2 Voting Rights..........................................28
Section 16.3 Voting Procedures......................................28
Section 16.4 Limitations on Member Rights...........................29
B-iii
Section 16.5 Limitations on Power to Amend Agreement................30
Section 16.6 Member List............................................30
Section 16.7 Dissenters' Rights and Limitations on Mergers and
Roll-ups...............................................30
17. TERMINATION OF A MANAGER AND TRANSFER OF THE
MANAGER'S INTEREST...................................................31
Section 17.1 Removal or Withdrawal..................................31
Section 17.2 Other Terminating Events...............................31
Section 17.3 Election of Successor Manager; Continuation of
Fund Business..........................................31
Section 17.4 Admission of Successor or Additional Manager...........32
Section 17.5 Effect of a Terminating Event..........................32
Section 17.6 Election of Additional Manager.........................33
Section 17.7 Assignment of Manager's Interest.......................33
Section 17.8 Members' Participation in Manager's Bankruptcy.........33
18. CERTAIN TRANSACTIONS...................................................33
19. TERMINATION AND DISSOLUTION OF THE FUND................................33
Section 19.1 Termination and Dissolution............................33
Section 19.2 Accounting and Liquidation.............................34
20. SPECIAL POWER OF ATTORNEY..............................................34
Section 20.1 Execution of Power of Attorney.........................34
Section 20.2 Special Power of Attorney..............................35
21. INDEMNIFICATION........................................................35
Section 21.1 Indemnification of the Manager.........................35
Section 21.2 Limitations on Indemnification.........................36
Section 21.3 Insurance..............................................36
22. MISCELLANEOUS..........................................................36
Section 22.1 Counterparts...........................................36
Section 22.2 Successors and Assigns.................................36
Section 22.3 Severability...........................................36
Section 22.4 Notices................................................36
Section 22.5 Captions...............................................37
Section 22.6 Number and Pronouns....................................37
Section 22.7 Manager Address........................................37
Section 22.8 Member Address.........................................37
Section 22.9 Construction...........................................37
Section 22.10 Qualification to Do Business...........................38
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF ATEL CAPITAL EQUIPMENT FUND XI, LLC
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (the "Agreement") is entered
into as of the 14th day of October, 2004, by and between ATEL Financial
Services, LLC ("ATEL"), a California limited liability company, as the Managing
Member (the "Manager"), and ATEL Capital Group as the initial Member, whereby
the parties together agreed to form a limited liability company pursuant to the
California Limited Liability Company Act on the terms set forth herein.
1. NAME AND PRINCIPAL PLACE OF BUSINESS
The name of the Fund shall be ATEL CAPITAL EQUIPMENT FUND XI, LLC or
such other name as the Manager shall hereafter designate in writing to the
Members. The Fund's principal place of business shall be 600 California Street,
6th Floor, San Francisco, California 94108, or such other place or places in the
State of California as the Manager may hereafter determine.
2. DEFINITIONS
The following terms used in this Agreement shall (unless otherwise
expressly provided herein or unless the context otherwise requires) have the
following respective meanings:
"Acquisition Expenses" shall mean expenses including, but not limited
to, legal fees and expenses, travel and communication expenses, costs of
appraisals, accounting fees and expenses, and miscellaneous expenses relating to
selection and acquisition of Equipment, whether or not acquired.
"Acquisition Fees" shall mean the total of all fees and commissions
paid by any party in connection with the initial purchase or manufacture of
Equipment. Included in the computation of such fees or commissions shall be any
commission, selection fee, financing fee, nonrecurring management fee, or any
fee of a similar nature, however designated.
"Adjusted Capital Account Deficit" shall mean, with respect to any
Member, the deficit balance if any, in such Member's Capital Account as of the
end of the Fund taxable year, after giving effect to the following adjustments:
(a) Crediting to such Capital Account any amounts which such Member is obligated
to restore or is deemed to be obligated to restore pursuant to Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (b) Debiting from such Capital
Account the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4),(5)
and (6). This definition is intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.
"Adjusted Invested Capital" shall mean, as of any date, the Original
Invested Capital attributable to the Units held by any Person on or before such
date, as decreased (but not below zero) by the amount which (i) all
Distributions from Cash from Operations and Cash from Sales and Refinancing with
respect to such Units on or before the date of determination pursuant to any
provision of this Agreement exceed (ii) the Priority Distribution attributable
to such Units for such period.
"Affiliate" of a Person shall mean (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling 10% or more of the outstanding voting
securities or beneficial interests of such Person, (iii) any officer, director,
trustee or partner of such Person and (iv) if such Person is an officer,
director, trustee, partner or holder of 10% or more of the voting securities or
B-1
beneficial interests of such Person, any other company for which such Person
acts in such capacity. However, such term shall not include a Person who is a
partner in a partnership or joint venture with the Fund if such Person is not
otherwise an Affiliate.
"Asset Management Fee" shall mean the fee payable to the Manager and
its Affiliates under the provisions of Section 8.2 of this Agreement.
"Asset Management Fee Limit" means the limit on the Asset Management
Fee calculated pursuant to Section 8.3 of this Agreement.
"Assignee" shall mean a Person who has acquired a beneficial interest
in one or more Units from a third party but who is neither a substituted Holder
nor an Assignee of Record.
"Assignee of Record" shall mean an Assignee who has acquired a
beneficial interest in one or more Units whose ownership has been recorded on
the books of the Fund and which ownership is the subject of a written instrument
of assignment, the effective date of which assignment has passed.
"ATEL" shall mean ATEL Financial Services, LLC, a California limited
liability company.
"California Act" or "California Limited Liability Company Act" shall
mean the Beverly-Killea Limited Liability Company Act, Title 2.5, Chapters 1-15,
of the California Corporations Code, as it may be amended from time to time.
"Capital Account" shall mean, with respect to any Member, such Member's
Capital Account determined in accordance with Section 6.7.
"Carried Interest" shall mean the allocable share of Fund Distributions
of Cash from Operations and Cash from Sales or Refinancing payable to the
Manager, as Manager, pursuant to Sections 10.4 and 10.5 of this Agreement, for
which cash consideration has neither been paid nor is to be paid.
"Cash from Operations" shall mean the excess of Gross Revenues over
cash disbursements (including the Asset Management Fee and amounts reinvested by
the Fund in Equipment in compliance with Section 15.4.18) without reduction for
depreciation and amortization of intangibles such as organization and
underwriting costs but after a reasonable allowance for cash for repairs,
replacements, contingencies and anticipated obligations, as determined by the
Manager. Cash from Operations shall not include Cash from Sales or Refinancing
or Cash from Reserve Account.
"Cash from Reserve Account" shall mean that portion of the Net Proceeds
not utilized in the acquisition of Equipment, including cash maintained
according to the provisions of Section 9.4.
"Cash from Sales or Refinancing" shall mean the net cash realized by
the Fund from the sale, refinancing or other disposition of any Equipment
(including insurance proceeds or lessee indemnity payments arising from the loss
or destruction of any Equipment through casualty) after payment of all expenses
related to the transaction; provided, however that Cash from Sales or
Refinancing shall not include Cash from Reserve Account or Cash from Operations.
"Closing Date" shall mean such date designated by the Manager for the
termination of the offering of Units, but not later than __________, 200_ (a
date two years from the date of the Prospectus). Extension of the offering
beyond one year from the date of the Prospectus shall be subject to the
qualification of the offering for any such extension in those jurisdictions
which may limit the offering period to one year. "Initial Closing Date" shall
B-2
mean the date on which subscribers for Units, other than the initial Holders,
are first admitted to the Fund as Holders. "Final Closing Date" shall mean the
last date on which subscribers for Units are admitted to the Fund as Holders.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent federal revenue laws.
"Distributions" shall mean any cash, tax credits or other property
allocated to or distributed to Holders and the Manager arising from their
respective interests in the Fund, but shall not include any compensation payable
to the Manager under the provisions of Article 8 or Article 9, except as
otherwise provided herein.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Equipment" shall mean the equipment acquired and owned by the Fund to
be leased by the Fund to others as well as any Fund interest in equipment,
including without limitation its rights, whether direct or indirect, in all
trusts, joint ventures, leases, chattel paper, options and other contract rights
with respect to equipment.
"Equipment Management" shall mean personnel and services necessary to
the leasing activities of the program, including but not limited to leasing and
releasing of program equipment, arranging for necessary maintenance and repair
of the equipment, collecting revenues, paying operating expenses, determining
that the equipment is used in accordance with all operative contractual
arrangements and providing clerical and bookkeeping services necessary to the
operation of the program equipment.
"Front-End Fees" shall mean fees and expenses paid by any party for
any services rendered during the Fund's organization and acquisition phase
including Organization and Offering Expenses, Leasing Fees, Acquisition Fees,
Acquisition Expenses, and any other similar fees, however designated.
Notwithstanding the foregoing, Front-End Fees shall not include any Acquisition
Fees or Acquisition Expenses paid by a manufacturer of Equipment to any of its
employees unless such Persons are Affiliates of the Manager.
"Full Payout Lease" shall mean a lease under which the non-cancellable
rental payments due during the initial term of the lease are at least sufficient
to cover the purchase price of the Equipment leased.
"Fund" shall mean the limited liability company created under this
Agreement.
"Fund Minimum Gain" shall have the meaning ascribed to the term
"partnership minimum gain" in Regulations Section 1.704-2(d)(1).
"Gross Income" shall mean the gross income of the Fund within the
meaning of section 61(a) of the Code.
"Gross Proceeds" shall mean the aggregate total of the Original
Invested Capital of the initial and all of the additional Holders.
"Gross Lease Revenues" shall mean all revenues attributable to the
Equipment other than from security deposits paid by lessees thereof. The term
"Gross Lease Revenues" shall not include revenues from the sale, refinancing or
other disposition of Equipment.
B-3
"High Payout Lease" shall mean a lease under which the noncancellable
rental payments and other payment obligations of the lessee due through the
initial term of the lease are equal to at least 90% of the original purchase
price paid by the Fund for the Equipment.
"Holders" shall mean owners of Units who are either Members or
Assignees of Record, and reference to a "Holder" shall be to any one of them.
The Manager shall not be considered to be a Holder except to the extent it also
owns Units.
"Independent Expert" shall mean a person with no current material or
prior business or personal relationship with the Manager or any of its
Affiliates who is engaged to a substantial extent in the business of rendering
opinions regarding the value of assets of the type held by the Fund, and who is
qualified to perform such work.
"IRA" shall mean an individual retirement account qualifying under
Section 408 of the Code.
"Investment in Equipment" shall mean the amount of Gross Proceeds
actually paid or allocated to the purchase of Equipment acquired by the Fund,
any amount of Gross Proceeds reserved pursuant to Section 9.4 hereof up to a
maximum of 3% of Gross Proceeds and other cash payments such as interest and
taxes, but excluding Front-End Fees.
"Leasing Fees" shall mean the total of all fees and commissions paid by
any party in connection with the initial lease of equipment acquired by the
Fund.
"Manager" or "Managing Member" shall mean ATEL Financial Services, LLC
("ATEL"), a California limited liability company, or any other Person or Persons
which succeed it in such capacity.
"Members" shall mean the Manager, the initial Members and any other
Persons who are admitted to the Fund as additional or substituted Members.
Reference to a "Member" shall refer to any one of them.
"Member Nonrecourse Debt" has the meaning ascribed to the term "partner
nonrecourse debt" in Regulations Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" shall have the meaning ascribed
to the term "partner nonrecourse debt minimum gain" in Regulations Sections
1.704-2(i)(2).
"Net Income" or "Net Loss" shall mean the taxable income or taxable
loss of the Fund (including the Fund's share of income or loss of any
partnership, venture or other entity which owns a particular item of Equipment),
as determined for federal income tax purposes, computed by taking into account
each item of Fund income, gain, loss, deduction or credit not already included
in the computation of taxable income and taxable loss.
"Net Lease Provisions" shall mean contractual arrangements under which
the lessee assumes responsibility for, and bears the cost of, insurance, taxes,
maintenance, repair and operation of the leased asset and where non-cancellable
rental payments under the lease are absolutely net to the lessor,
notwithstanding that some minor costs or responsibilities remain with the Fund
as lessor or that the Fund retains the option to require and pay for a higher
standard of care or greater level of maintenance or insurance than would be
imposed on the lessee under the terms of the lease.
"Net Proceeds" shall mean the total Gross Proceeds less Organization
and Offering Expenses.
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"Nonrecourse Deductions" shall mean items of Fund loss, deductions or
Code Section 705(a)(2)(B) expenditures which are attributable to Nonrecourse
Liabilities.
"Nonrecourse Liability" means a Fund liability with respect to which no
Member or Related Person bears the economic risk of loss.
"Operating Agreement" or "Agreement" shall mean this Limited Liability
Company Operating Agreement of ATEL CAPITAL EQUIPMENT FUND XI, LLC, as it may be
amended from time to time.
"Operating Lease" shall mean a lease under which the aggregate rental
payments due during the initial term of the lease are less than the purchase
price of the Equipment leased.
"Operating Revenues" means the total for any period of all Gross Lease
Revenues plus all Cash from Sales or Refinancing.
"Organization and Offering Expenses" shall mean those expenses incurred
in connection with preparing the Fund for registration and subsequently offering
and distributing Units to the public, including selling commissions and all
advertising expenses except advertising expenses related to the leasing of
Equipment.
"Original Invested Capital" shall mean the original gross purchase
price of the Units contributed by each Member to the capital of the Fund for his
interest in the Fund, which amount shall be attributed to Units in the hands of
a subsequent Holder.
"Person" shall mean any natural person, partnership, corporation,
association or other legal entity.
"Prospectus" shall mean the final prospectus filed in connection with
the registration of the Units with the Securities and Exchange Commission on
Form S-1, as amended, together with any supplement thereto which may be
subsequently filed with such Commission.
"Purchase Price of Equipment" shall mean the price paid upon the
purchase or sale of a particular item of equipment, including the amount of
Acquisition Fees and all liens and mortgages on the equipment, but excluding
points and prepaid interest.
"Qualified Plan" shall mean employee trusts (or employer individual
retirement accounts), Keogh Plans and corporate retirement plans qualifying
under Section 401(a) of the Code.
"Regulations" shall mean the income tax regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Reimbursable Administrative Expenses" shall mean the ordinary and
annually recurring administration expenses incurred by the Manager and
reimbursed by the Fund. Such expenses shall not include interest, depreciation,
equipment maintenance or repair, third party services or other
non-administrative expenses.
"Reinvestment Period" shall mean the period commencing with the Initial
Closing Date and ending on a date six calendar years after the Final Closing
Date occurs.
"Related Person" means a Person having a relationship with a Member
that is described in Regulations Section 1.752-4(b).
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"Resident Alien" shall mean a resident alien as defined within the
Federal Aviation Act of 1958, as amended from time to time, or any successor
statute, or any regulations adopted pursuant to such Act or any successor
statute.
"Roll-Up" shall mean a transaction involving the acquisition, merger,
conversion or consolidation, either directly or indirectly, of the Fund and the
issuance of securities of a Roll-Up Entity. Such term does not include:
(a) any transaction if the securities of the Fund have been for at
least twelve months traded through the National Association of Securities
Dealers, Inc. Automated Quotation National Market System; or
(b) a transaction involving the conversion to corporate, trust or
association form of only the Fund, if, as a consequence of the transaction,
there will be no significant adverse change in any of the following:
(i) the Members voting rights;
(ii) the term of existence of the Fund;
(iii) the terms of compensation of the Manager
and its Affiliates; or
(iv) the Fund's investment objectives.
"Roll-Up Entity" means the partnership, trust, corporation or other
entity that would be created or would survive after the successful completion of
a proposed Roll-Up transaction.
"Service" shall mean the United States Internal Revenue Service or its
successor.
"Sponsor" shall mean any Person directly or indirectly instrumental in
organizing, wholly or in part, a Program or any Person who will manage or
participate in the management of a Program, and any Affiliate of any such
Person. Sponsor does not include the Program itself or a Person whose only
relation with the Program is that of an independent equipment manager and whose
only compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants and underwriters whose only compensation
is for professional services rendered in connection with the offering of Program
interests.
"Substantially All of the Assets" shall mean, unless the context
otherwise dictates, Equipment representing 66 2/3% or more of the net book value
of all Equipment as of the end of the most recently completed fiscal quarter.
"Unit" shall mean the interest in the Fund representing Original
Invested Capital in the amount of $10 and shall entitle the Holder thereof to
the rights herein provided.
"United States Citizen" shall mean a "citizen of the United States" as
defined within the Federal Aviation Act of 1958, as amended from time to time,
or any successor statute, or any regulations adopted pursuant to such Act or any
successor statue.
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3. BUSINESS AND PURPOSE
The primary purpose of the Fund is to purchase, own, lease and sell
various types of Equipment pursuant to such arrangements as the Manager in its
discretion may enter into on behalf of the Fund. The Fund may enter into
ventures, partnerships and other business arrangements with respect to Equipment
to the extent deemed prudent by the Manager in order to achieve successful
operations for the Fund, subject to the provisions of Section 15.4.8. The Fund
may also engage in such other lawful activities as may be deemed by the Manager
to be incident to its primary purpose or prudent and in the Fund's best
interest. The Fund's investment objectives shall be those set forth in the
Prospectus, and the Manager may not make any material change to such investment
objectives without first obtaining the written consent or approval of Members
owning more than 50% of the total outstanding Units entitled to vote.
4. TERM
The Fund commenced as of the 25th day of June, 2004 and shall continue
until the 31st day of December, 2025, unless previously terminated in accordance
with the provisions of this Agreement.
5. MANAGER
The Manager has contributed $100 in cash to the Fund and at all times
during the existence of the Fund the Manager shall have a present and continuing
interest in Net Income, Net Losses and Distributions according to the provisions
of Article 10.
6. INITIAL AND ADDITIONAL MEMBERS
6.1 Initial Members. ATEL Capital Group, as the initial Member, has
contributed the sum of $500 to the capital of the Fund and has received 50 Units
in return therefor.
6.2 Additional Members. The Fund intends to sell and issue to Holders
not less than 120,000 nor more than 15,000,000 additional Units and to admit as
additional Members the Persons who contribute cash to the capital of the Fund
for such Units.
6.3 Conditions to Admission. Subject to the provisions of Section 6.6,
each Person who acquires any such additional Units shall become a Member in the
Fund at such time as he has: (i) purchased 500 or more Units, (ii) contributed
the sum of $10 in cash for each Unit purchased (or such lesser net amount as may
be provided in accordance with the terms described in the Prospectus under "Plan
of Distribution"), (iii) executed and filed with the Fund a written instrument
which sets forth an intention to become a Member and requests admission to the
Fund in that capacity, together with such other instruments as the Manager may
deem necessary or desirable to effect such admission, including the written
acceptance and adoption by such Person of the provisions of this Agreement, and
the execution, acknowledgment and delivery to the Manager of a special power of
attorney, the form, style and content of which are more fully described herein,
and (iv) the Manager accepts such Person as a Member in the Fund.
6.4 Admission as a Member. Each Person who subscribes for Units under
Section 6.2 shall be admitted to the Fund promptly after the Manager's
acceptance of such subscription, but, except as provided in Section 6.6, in no
event later than 30 days after the receipt by the Fund of such subscription.
6.5 Limitation on Additional Issuance. The Fund shall not issue any
additional Units after the Final Closing Date.
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6.6 Escrow. All Original Invested Capital of Holders shall be received
by the Fund in trust, and shall be deposited in an escrow account with a banking
institution designated by the Manager as escrow holder for the Original Invested
Capital, until such time as subscriptions for a total of 120,000 Units, in
addition to the Unit purchased by the initial Holder, representing Original
Invested Capital of $1,200,000 have been deposited therein. Not less than 15
days after receipt of a minimum of $1,200,000 of such additional Original
Invested Capital, the Fund will admit subscribers into the Fund as additional
Holders. At the time a subscriber is admitted as a Holder, the escrow holder
shall transfer the subscriber's Original Invested Capital to the Fund. If the
$1,200,000 minimum is not obtained on or before a date one year from the date of
the Prospectus, all Original Invested Capital will be promptly refunded to the
investors. In any event, any interest earned on Original Invested Capital while
in escrow shall be paid to investors.
6.7 Capital Account. An individual Capital Account shall be maintained
for each Member. The Capital Account of a Member shall consist of the Original
Invested Capital of such Member, increased by (i) any additional contributions
to capital and (ii) such Member's share of Fund Net Income, and decreased by (i)
Distributions to such Member and (ii) such Member's share of Fund Net Loss. In
the event a Member transfers all or a portion of his Units, the Assignee shall
succeed to the Capital Account of the transferor (as adjusted for all events
preceding the date the transferee is deemed admitted to the Fund under Section
10.3.1) according to the number of Units, and the allocable portion of the
transferor's Capital Account, so transferred. No Holder shall have the
obligation to restore any deficit in his Capital Account upon termination or
dissolution of the Fund. The foregoing provisions of this Section 6.7 are
intended to comply with Regulation Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations.
7. LIABILITY AND STATUS OF MEMBERS
Holders shall not be bound by, or be personally liable for, the
expenses, liabilities or obligations of the Fund, except to the extent, but only
to the extent, a Holder would be required to return any Distribution from the
Fund pursuant to Section 17254(e) of the California Act.
8. COMPENSATION TO THE MANAGER AND/OR AFFILIATES
8.1 General Limitation. The Manager and its Affiliates shall receive
compensation only as specified by this Agreement. In addition to the
compensation provided herein, the Manager will hold the Carried Interest and be
entitled to receive Distributions as provided in Article 10, and receive
reimbursement of costs and expenses advanced as provided in Article 9. The
Manager may delegate to its Affiliates all or a portion of its management duties
hereunder, and may assign all or a portion of its compensation hereunder to one
or more such Affiliates or other parties in its discretion.
8.2 Asset Management Fee. The Fund will pay the Manager an Asset
Management Fee in an amount equal to 4% of Operating Revenues as compensation
for the Manager's services in supervising management of the Fund's portfolio of
Equipment and its operations. The Asset Management Fee will be paid on a monthly
basis. The amount of the Asset Management Fee payable in any year will be
reduced for that year to the extent it would otherwise exceed the Asset
Management Fee Limit.
8.3 Asset Management Fee Limit. The Asset Management Fee Limit will be
calculated each year during the Fund's term by calculating the maximum amount of
fees that would be payable to the Manager for the year in question under Article
IV, Sections C through G of the North American Securities Administrators
Association, Inc. Statement of Policy on Equipment Programs in effect as of the
initial effective date of the Fund's public offering of its Units (the "NASAA
Guidelines"). To the extent that the total amount paid to the Manager for the
year as the Asset Management Fee and the Carried Interest would cause the total
compensation to exceed the aggregate amount of fees that would have been payable
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as calculated under the NASAA Guidelines for that year, the Asset Management Fee
and/or Carried Interest for that year will be reduced to equal the maximum
aggregate fees under the NASAA Guidelines. The limitations set forth in this
Section 8.3 will be subject to adjustment pursuant to the limitations imposed
under Section 15.7 relating to the Minimum Investment in Equipment. Under
Section 15.7, a separate calculation will be performed upon completion of the
offering of Units, final commitment of Net Proceeds to acquisition of Equipment
and establishment of final levels of permanent portfolio debt encumbering such
Equipment, and then annually thereafter. To the extent required under the
provisions of Section 15.7, the maximum amount of fees payable under the NASAA
Guidelines will be adjusted as provided therein.
8.4 Other Services. Except as set forth in this Article 8 and Article 9
hereof, no other services may be performed by the Manager or its Affiliates for
the Fund except in extraordinary circumstances (which shall be defined as an
emergency situation requiring immediate action by the Manager or its Affiliate
and the service is not immediately available from an unaffiliated party). Any
such other services must meet the following criteria: (i) the compensation,
price or fee therefor must be comparable and competitive with the compensation,
price or fee of any other Person who is rendering comparable services or selling
or leasing comparable goods which could reasonably be made available to the Fund
and shall be on competitive terms, (ii) the fees and other terms of the contract
shall be fully disclosed to Holders, (iii) the Manager or its Affiliates must be
previously engaged in the business of rendering such services or selling or
leasing such goods, independently of the Fund and as an ordinary and ongoing
business and at least 75% of such Person's gross revenues from such activity
must be derived from other than Affiliates of the Manager, and (iv) all services
for which the Manager or its Affiliates are to receive compensation shall be
embodied in a written contract which precisely describes the services to be
rendered and all compensation to be paid, which contract may only be modified by
a vote of the majority of the Holders. Said contract shall contain a clause
allowing termination without penalty on 60 days notice.
8.5 Payment of Fees on Removal. Should the Manager be removed from the
Fund according to provisions of Article 17, any portion of any fee payable to
the Manager according to the provisions of this Article 8 which is then accrued
and due, but not yet paid, shall be paid by the Fund to the Manager in cash
within 30 days of the date of expulsion as stated in the written notice of
expulsion.
8.6 Employment of Broker-Dealers. The Fund may employ underwriters and
selected broker-dealers, including Affiliates of the Manager as set forth in the
Prospectus, for the sale of Units.
9. FUND EXPENSES AND RESERVES
9.1 Reimbursement of Manager. Except as set forth in this Article 9,
all of the Fund's expenses shall be billed directly to and paid by the Fund. The
Manager and its Affiliates may be reimbursed for the following Fund expenses:
(i) Organization and Offering Expenses not in excess of 15% of Gross Proceeds up
to $25,000,000 plus 14% of all Gross Proceeds in excess of $25,000,000 (or an
amount equal to 12% of the Gross Proceeds if, upon termination of the offering
of Units, the total Gross Proceeds are in an amount less than $2,000,000); (ii)
the actual cost of goods and materials used for and by the Fund and obtained
from entities unaffiliated with the Manager; and (iii) administrative services
necessary to the prudent operation of the Fund, provided that such reimbursement
for administrative services will be at the lower of (A) the actual cost of such
services, or (B) the amount which the Fund would be required to pay independent
parties for comparable administrative services in the same geographic location;
provided further that, beginning with the first full calendar year after the
termination of the offering of Units, the total amount of Reimbursable
Administrative Expenses payable by the Fund for the remainder of its term may
not exceed a cumulative limit. This cumulative limit on such Reimbursable
Administrative Expenses will equal, as of any date, a maximum of 1% per annum of
the total Gross Proceeds from the first day of the first full calendar year
following the termination of the offering of Units.
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9.2 Limitation on Reimbursement. The Manager and its Affiliates will
not be reimbursed by the Fund for the following expenses:
9.2.1 Services for which the Manager or its Affiliates are
entitled to compensation in the form of a separate fee pursuant to Article 8
hereof;
9.2.2 Rent or depreciation, utilities or capital equipment and
other administrative items of the Sponsor;
9.2.3 Salaries, fringe benefits, travel expenses or
administrative items incurred by or allocated to any Controlling Person of the
Manager or its Affiliates. For purposes of this subparagraph, "Controlling
Person" shall mean any person, regardless of title, who performs executive or
senior management functions for the Manager or its Affiliates similar to those
of executive management or senior management, and directors, or those holding 5%
or more equity interest in the Manager or its Affiliates; or persons having the
power to direct or cause the direction of the Manager or Affiliates through
ownership of voting securities, by contract or otherwise. It is not intended
that every person who carries a title such as vice president, senior vice
president, secretary, controller or treasurer be considered a Controlling
Person;
9.2.4 Organization and Offering Expenses of the Fund to the
extent such Organization and Offering Expenses exceed 15% of the Gross Proceeds
up to $25,000,000 plus 14% of all Gross Proceeds in excess of $25,000,000 (or an
amount equal to 12% of the Gross Proceeds if, upon termination of the offering
of Units, the total Gross Proceeds are in an amount less than $2,000,000), and
the Manager guarantees payment of any such excess expenses, which guarantee is
without recourse to, or reimbursement by, the Fund; and
9.2.5 All other expenses which are unrelated to the business
of the Fund.
9.3 Fund Expenses. Subject to Sections 9.1 and 9.2, the Fund shall pay
all expenses of the Fund which may include, but are not limited to: (i) all
costs of personnel employed by the Fund and involved in the business of the Fund
(which may include personnel who are employed by a Manager or one or more
Affiliates), (ii) all taxes and assessments on Equipment and other taxes
applicable to the Fund, (iii) legal, appraisal, audit, accounting, brokerage and
other fees, (iv) printing, engraving and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, registration and recording
of documents evidencing ownership of an interest in the Fund or in connection
with the business of the Fund, (v) Front End Fees, subject to the limitation set
forth in Section 15.7 requiring a minimum Investment in Equipment, and other
fees and expenses paid to independent contractors, brokers and servicers,
leasing agents, consultants, equipment lease brokers, insurance brokers and
other agents, (vi) expenses in connection with the ownership and operation of
the Equipment, (vii) the cost of insurance as required in connection with the
business of the Fund, (viii) expenses of organizing, revising, amending,
converting, modifying or terminating the Fund, (ix) the cost of preparation and
dissemination of the informational material and documentation relating to
potential sale or other disposition of Equipment, (x) costs incurred in
connection with any litigation in which the Fund is involved, as well as the
examination, investigation or other proceedings conducted by any regulatory
agency, including legal and accounting fees incurred in connection therewith,
(xi) costs of any computer equipment or services used for or by the Fund, (xii)
costs of any accounting, or statistical bookkeeping equipment necessary for the
maintenance of the books and records of the Fund, and (xiii) the costs of
supervision and expenses of professionals employed by the Fund in connection
with any of the foregoing, including attorneys, accountants and appraisers.
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9.4 Reserves. The Fund shall initially establish a cash reserve for
general working capital purposes in an amount equal to at least one-half of 1%
of the Gross Proceeds. Upon the disposition of each item of Equipment, any cash
reserve which was specifically allocated to that Equipment need not be
maintained thereafter, but may be applied as reserves for other Equipment. Any
cash reserve used as aforesaid need not be restored and if restored, may be
restored out of Gross Lease Revenues.
10. ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS
10.1 Allocation of Net Income and Net Loss Prior to Initial Closing
Date. From the commencement of the Fund until the Initial Closing Date Net
Income and Net Loss shall be allocated 99% to the Manager and 1% to the initial
Holders.
10.2 Allocation of Net Income and Net Loss After Initial Closing Date.
10.2.1 Commencing with the Initial Closing Date, Net Income
and Net Loss shall be allocated 92.5% to the Holders and 7.5% to the Manager.
10.2.2 Notwithstanding Section 10.2.1 of this Agreement, items
of Net Loss arising out of the Fund's payment of expenditures classified as
syndication expenses pursuant to Regulations section 1.709-2(b) with respect to
each Unit shall be specially allocated to the Holder who acquires such Unit.
10.3 Special Allocations
10.3.1 Except as provided in section 10.3.2, Net Income, Net
Loss and Distributions allocable to the Holders shall be determined on a
quarterly basis and shall be allocated among the Holders in the ratio in which
the number of Units held by each of them bears to the total number of Units held
by all Holders as of the last day of the fiscal quarter with respect to which
such Net Income, Net Loss and Distributions are attributable; provided, however,
that, with respect to Net Income, Net Loss and Distributions attributable to the
offering period of the Units (including the full quarter in which the offering
terminates), such Net Income, Net Loss and Distributions shall be apportioned
among the Holders in the ratio in which (i) the number of Units held by each
Holder multiplied by the number of days during such period that such Holder was
the owner of such Units bears to (ii) the amount obtained by totaling the number
of Units outstanding on each day during such period. No Net Income, Net Loss or
Distributions with respect to any quarter shall be allocated to Units
repurchased by the Fund during such quarter, and such Units shall not be deemed
to have been outstanding during such quarter for purposes of the foregoing
allocations.
10.3.2 Notwithstanding anything in this Agreement to the
contrary, the following items of Fund income and loss shall be specially
allocated to the Members in the manner described below:
(i) Gain characterized as recapture income under Sections 1245
or 1250 of the Code shall be allocated to those Members who
claimed the deductions giving rise to such recapture income.
(ii) Except as provided in Section 10.3.2(iii) and 10.3.2(iv),
in the event any Member unexpectedly receives any adjustments,
allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations or any
other event creates an Adjusted Capital Account Deficit for
such Member, items of Fund gross income and gain (consisting
of a pro rata portion of each item of the Fund's income,
including gross income, and gain for such year) shall be
allocated to such Member in an amount and manner sufficient to
eliminate, to the extent required by Regulations, the Adjusted
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Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible. This
Section 10.3.2(ii) is intended to comply with the qualified
income offset requirement in Section 1.704-1(b)(2)(ii)(d) of
the Regulations and shall be interpreted consistently
therewith.
(iii) If there is a net decrease in Member Nonrecourse Debt
Minimum Gain, each Member with a share of the Member
Nonrecourse Debt Minimum Gain (as determined in accordance
with Regulations Section 1.704-2(i)(5)) shall be specially
allocated items of Fund income and gain for such year (and, if
necessary, subsequent years) in proportion to, and to the
extent of, an amount equal to the portion of such Member's
share of the net decrease in Member Nonrecourse Debt Minimum
Gain during such year. The items to be so allocated shall be
determined in accordance with Regulations Section
1.704-2(i)(4). This Section 10.3.2(iii) is intended to comply
with the minimum gain chargeback requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted
consistently therewith.
(iv) If there is a net decrease in Fund Minimum Gain during
any Fund taxable year, each Member shall be specially
allocated items of Fund income and gain for such year (and, if
necessary, subsequent years) in proportion to, and to the
extent of, an amount equal to the portion of such Member's
share of the net decrease in Fund Minimum Gain during such
year (within the meaning of Section 1.704-2(g)(2) of the
Regulations). The items to be so allocated shall be determined
in accordance with Section 1.704-2(f) of the Regulations. This
Section 10.3.2(iv) is intended to comply with the minimum gain
chargeback requirement contained in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
(v) After giving effect to the allocations set forth in
Sections 10.3.2(ii), (iii) and (iv), in the event any Member
receives any actual or deemed distribution (i.e., under
section 752 of the Code) during a taxable year which exceeds
the adjusted tax basis of such Member's Units at the end of
such taxable year (determined immediately before giving effect
to such distribution), such Member shall be allocated an
amount of gross income or gain equal to such excess.
(vi) In the event any fee to which the Manager or an Affiliate
thereof is entitled is treated as a Fund distribution by the
Service, a special allocation of Fund gross income shall be
made annually to the Manager or an Affiliate thereof in an
amount equal to any such recharacterized fee for that taxable
year.
(vii) The Manager will specifically allocate items of gain
from the sale or other disposition of items of Equipment for
any year in which the sale or disposition of any item of
Equipment occurs (and, if necessary, subsequent years) to any
Holder in such amounts and in such manner so as to equalize
the Capital Account balances of the Holders; provided,
however, that such allocations are reasonably consistent with,
and reasonably supportable under, the Code.
(viii) Net Loss shall not be allocated to any Holder if such
allocation would cause or increase an Adjusted Capital Account
Deficit for such Holder at the end of any Fund taxable year,
and any such Net Loss shall instead be allocated to the
Manager. This limitation shall be applied on a Holder by
Holder basis so as to allocate the maximum permissible Net
Loss to each Holder under Section 1.704-1(b)(2)(ii)(d) of the
Regulations.
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(ix) To the extent an adjustment is made to the adjusted tax
basis of any Fund asset pursuant to Code Section 734(b) or
Code Section 743(b), the Members' Capital Accounts shall be
adjusted as provided in Regulations Section
1.704-1(b)(2)(iv)(m).
(x) Except as otherwise provided herein, Nonrecourse
Deductions shall be allocated 92.5% to the Holders and 7.5% to
the Manager.
(xi) Any deduction attributable to Member Nonrecourse Debt
shall be allocated to the Members that bear the economic risk
of loss for the Member Nonrecourse Debt.
10.4 Distribution of Cash From Operations. Cash from Operations shall
be distributed 92.5% to the Holders and 7.5% to the Manager.
10.5 Distribution of Cash From Sales or Refinancing. Cash from Sales
or Refinancing shall be distributed 92.5% to the Holders and 7.5% to the
Manager.
Notwithstanding anything to the contrary herein, however, no cash
Distribution shall be made to a Holder to the extent that, after giving effect
to all allocations under sections 10.1, 10.2 and 10.3 which would accompany such
Distribution (including allocations of gross income and gain under section
10.3.2(iv)), such Distribution would exceed the tax basis of the Holder to whom
such Distribution is otherwise payable.
10.6 Distributions of Cash from Reserve Account. Distributions of Cash
from Reserve Account, if any, shall be distributed in the same manner as Cash
from Sales or Refinancing.
10.7 Determination of Amounts to be Distributed. The Manager shall have
sole discretion in determining the amount of any Distributions. Subject to
provisions of Section 15.4.18 of this Agreement, the Manager may use any funds
of the Fund not distributed to Holders to purchase additional Equipment during
the Reinvestment Period or otherwise as permitted by this Agreement; provided,
however, that the Manager will not reinvest in Equipment, but will distribute,
subject to payment of any obligations of the Fund, such available Cash from
Operations and Cash from Sales or Refinancing as may be necessary to cause total
Distributions to Holders to equal the following amounts for the specified
periods:
10.7.1 Through the first full fiscal quarter ending at least
six months after termination of the offering of Units, an amount equal to the
lesser of
(a) the greater of (1) 8% per annum on their original capital
contribution, (2) a rate of return on their original capital contribution equal
to 3.5% over the average yield on five-year United States Treasury Bonds for the
fiscal quarter immediately preceding the date of distribution, as published in a
national financial newspaper from time to time, or
(b) 90% of the total amount of cash available for distributions; and
10.7.2 For each quarter during the balance of the Reinvestment
Period, an amount equal to 8% per annum on their original capital contribution.
10.7.3 Such amounts with respect to each year which are
sufficient to allow a Holder in a 31% federal income tax bracket (but not a
higher bracket) to pay the federal income taxes and state income taxes due with
respect to Net Income derived by him from the Fund for such year.
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10.8 Consent to Allocations. The methods hereinabove set forth by which
Distributions and allocations of Net Income and Net Loss are made and
apportioned are hereby expressly consented to by each Member as an express
condition to becoming a Member.
10.9 Limitation on Distributions. All Distributions are subject to the
payment of Fund expenses and to maintenance and repair of Equipment.
10.10 Allocation to Manager. To the extent that the Fund shall be
entitled to any deduction for federal income tax purposes as a result of any
interest in Net Income or Net Loss granted to a Manager, such deduction shall be
allocated for federal income tax purposes to such Manager.
10.11 Return of Unused Capital. In the event that any portion of the
Net Proceeds received by the Fund during the first twelve months after the date
of the Prospectus is not invested or committed for investment within eighteen
months of the date of the Prospectus, or in the event any portion of the Net
Proceeds received by the Fund thereafter is not invested or committed for
investment within six months from the Final Closing Date (except for any amounts
used to pay Fund operating expenses, including amounts set aside for reserves as
set forth in Section 9.4), such portion of the Net Proceeds shall be distributed
to the Holders pro rata by the Fund as a return of capital. In addition, the
Manager shall contribute to the Fund, and the Fund shall distribute pro rata to
the Holders, the amount by which (x) the amount of unused capital distributed
pursuant to the foregoing sentence, divided by (y) the percentage of the Gross
Proceeds which remain after payment of all Front End Fees, exceeds the unused
capital so distributed. For the purposes of this Section 10.11, funds will be
deemed to have been committed to investment and will not be returned to the
Holders to the extent written agreements in principle or letters of
understanding were executed at any time prior to the end of said period,
regardless of whether any such investment is actually consummated, and to the
extent any funds have been reserved to make contingent payments in connection
with any Equipment, regardless of whether any such payment is actually made.
10.12 Distributions in Kind. Distributions in kind shall not be
permitted except upon dissolution and liquidation, and then only to a
liquidating trust which has been established for the purpose of the liquidation
of the assets of the Fund, and the distribution of cash in accordance with the
terms of the Agreement.
10.13 Withholding Taxes.
10.13.1 In the event the Fund pays to any federal, state or
local government authority any amount of tax, penalty, interest, fee or other
expenditure which is attributable to the particular status of one or more
Holders including, without limitation, the status of a Holder as a nonresident
of California or any other state imposing such a charge, the Manager shall treat
such tax, penalty, interest or fee, and in its discretion may treat other
related Fund expenditures, as a distribution of Cash from Operations or Cash
from Sales or Refinancing as appropriate, to such Holders. Such a distribution
shall reduce the amount of Cash from Operations or Cash from Sales or
Refinancing otherwise payable by the Fund to such Holders. Such Holders shall be
distributed any refund of any such tax, penalty, interest or other amounts
received by the Fund; provided, however, that the distribution due such Holders
shall be reduced by any Fund expenses (and such expenses shall be specially
allocated to such Holders) incurred in connection with the payment or obtaining
of the refund of such taxes, penalties, interest or other amounts and the Fund
shall have no duty or obligation to seek to obtain or collect any such refund or
expend any amount to reduce the amount of any withholding, penalty, interest or
other amount otherwise payable to any government authority. The Manager may
require from a Holder the appropriate documentation with respect to any
distribution hereunder.
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10.13.2 As security for any withholding tax or other amount
referred to in section 10.14.1 or other liability or obligation to which the
Fund may be subject as a result of any act or status of any Holder, the Fund
shall have (and each Holder hereby grants to the Fund) a security interest in
all Cash from Operations or Cash from Sales or Refinancing distributable to such
Holder to the extent of the amount of such withholding tax or other liability or
obligation. The Fund shall have a right of set-off against any such
distributions of Cash from Operations or Cash from Sales or Refinancing in the
amount of such withholding tax or other liability or obligation.
11. ASSIGNMENT OF FUND INTERESTS
11.1 Limitations on Transfer. A Holder may not transfer all or part of
his legal and equitable interest in his Units except in compliance with the
provisions of this Agreement. The Fund may charge a reasonable transfer fee for
processing requests for transfer of Units, and may condition any proposed
transfer on receipt by the Fund of such representations and warranties of the
transferor and the assignee, opinions of counsel for the Fund and other
assurances as it may deem necessary and appropriate to ensure that:
11.1.1 such assignments or transfers do not result, in the
opinion of counsel for the Fund, in the Fund being considered to have terminated
within the meaning of Section 708 of the Code;
11.1.2 the assignee is not a minor or an incompetent;
11.1.3 the transfer or assignment does not violate federal or
state securities laws;
11.1.4 the transferor or the assignee does not hold Units
representing Original Invested Capital of less than $2,500 ($2,000 in the case
of IRAs and Keogh Plans);
11.1.5 such assignee is a Citizen of the United States;
11.1.6 such assignment or transfer does not cause the assets
of the Fund to be deemed "plan assets" for ERISA
purposes;
11.1.7 such assignment or transfer does not constitute a
transfer "on a secondary market (or the substantial equivalent thereof)" within
the meaning of Section 7704 of the Code or otherwise adversely affecting the tax
status of the Fund; and
11.1.8 the transferor files with the Fund a duly executed and
acknowledged counterpart of the instrument effecting such assignment or
transfer, which instrument evidences the written acceptance by the assignee or
transferee of all of the terms and provisions of this Agreement, contains a
representation that such assignment or transfer was made in accordance with all
applicable laws and regulations (including any investor suitability
requirements) and in all other respects being satisfactory in form and substance
to the Manager.
11.2 Distributions and Effective Date of Transfer. An Assignee of
Record shall be entitled to receive Distributions from the Fund attributable to
the Units acquired by reason of such assignment from and after the effective
date of the assignment of such Units; provided, however, that notwithstanding
anything herein to the contrary, the Fund and the Manager shall be entitled to
treat the assignor of such Units as the absolute owner thereof in all respects,
and shall incur no liability for allocations of Net Income, Net Loss or
Distributions, or transmittal of reports and notices required to be given to
Holders hereunder, which are made in good faith to such assignor until such time
as the written instrument of assignment has been received by the Fund and
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recorded on its books and the effective date of the assignment has passed. The
effective date of such assignment on which the Assignee shall be deemed an
Assignee of Record shall be the last day of the first full calendar month
following the later of (i) the date set forth on the written instrument of
assignment or (ii) the date on which the Fund has actual notice of the
assignment of Units and has received complete documentation of the assignment.
Notwithstanding anything to the contrary contained herein, no Distributions
shall be made in any calendar quarter with respect to Units repurchased by the
Fund during such calendar quarter.
11.3 Governmental Restrictions. No assignment, sale, transfer, exchange
or other disposition of Units may be made except in compliance with the then
applicable rules of any other applicable governmental authority. All Units
originally issued pursuant to qualification under the California Corporate
Securities Law of 1968 shall be subject to, and all documents of assignment and
transfer evidencing such securities shall bear, the following legend condition:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
No transfer of any such Unit shall be made unless the transferor shall have
obtained, if necessary, the written consent of the California Commissioner of
Corporations to such transfer.
11.4 Non-Complying Transfers. Any assignment, sale, exchange or other
transfer in contravention of any of the provisions of this Article 11 shall be
void and shall not bind or be recognized by the Fund.
11.5 Misrepresentation and Forfeit. Subject to the discretion of the
Manager, in the event a Holder who originally obtained Units in the Fund's
offering misrepresented that he was a Citizen of the United States, or that it
was not an IRA or Qualified Plan or purchasing on behalf of an IRA or Qualified
Plan, such person fails to remain a Citizen of the United States, or a
subsequent transferee of Units is not or fails to remain a Citizen of the United
States, such Person may, in the Manager's discretion if it deems that the Fund
will fail certain citizenship requirements with respect to its Equipment, be
required to forfeit such Units to the Fund and no longer be entitled to cash
Distributions or allocations of the Fund, receipt of Fund reports and voting
privileges, although he may realize proceeds upon the transfer of his Units to a
Citizen of the United States, which subsequent transferee would be entitled to
the full economic benefits and other privileges attributable to such Units.
12. SUBSTITUTED MEMBERS
12.1 Limitations on Substitution. No Assignee shall have the right to
become a substituted Member of the Fund in place of his assignor unless all of
the following conditions are first satisfied:
12.1.1 A duly executed and acknowledged written instrument of
assignment covering no less than 250 Units (200 in the case of an IRA or Keogh
Plan) shall have been filed with the Fund, which instrument shall specify the
number of Units being assigned and set forth the intention of the assignor that
the Assignee succeed to the assignor's interest as a substituted Member.
12.1.2 The assignor and Assignee shall have executed and
acknowledged such other instruments as the Manager may deem necessary or
desirable to effect such substitution, including the written acceptance and
adoption by the Assignee of the provisions of this Agreement, as the same may be
amended and his execution, acknowledgment and delivery to the Manager of a
special power of attorney, the form and content of which are described herein;
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12.1.3 The written consent of the Manager to such substitution
shall have been obtained, the granting of which may be withheld by the Manager
in its sole discretion, and any exercise of such discretion intended to preserve
the tax consequences of Unit ownership shall presumptively be deemed reasonable;
12.1.4 A transfer fee not to exceed $100 shall have been paid
to the Fund to cover all reasonable expenses connected with such substitution;
and
12.1.5 The provisions of Section 11.1 and 11.3 of this
Agreement are complied with.
12.2 Consent to Admission. By executing or adopting this Agreement,
each Holder hereby consents to the admission of additional or substituted
Holders by the Manager and to any Assignee becoming a substituted Holder, in
accordance with the provisions herein.
12.3 Amendment of Agreement. The Manager shall cause this Agreement to
be amended to reflect the admission and/or substitution of Members at least once
in each fiscal quarter.
13. REPURCHASE OF FUND INTERESTS
13.1 In the event a Holder ceases to be a United States Citizen or
Resident Alien for any reason whatsoever, he may be required, in the Manager's
discretion, to tender his Units to the Fund for repurchase as of the date of
such event. The Fund will have the absolute right to purchase such Units at a
price equal to 100% of the Holder's Capital Account as of such date, in all
cases determined as of the last day of the quarter prior to the fiscal quarter
during which such Units are repurchased. IT SHOULD BE NOTED THAT THE FUND WILL
NOT BE OBLIGATED TO PURCHASE UNITS FROM HOLDERS WHO CEASE TO BE UNITED STATES
CITIZENS OR RESIDENT ALIENS.
13.2 The Manager may otherwise use available Reserves to repurchase
Units, in its discretion and on terms it determines to be appropriate under
given circumstances, in the event the Fund Manager deems such repurchase to be
in the best interest of the Fund; provided, the Fund shall never be required to
repurchase any Units. Upon the repurchase of any Units by the Fund, the tendered
Units shall be canceled and shall no longer be deemed to represent an interest
in the Fund; and, provided further, that any such repurchase shall not impair
the capital of the Fund, or cause the Fund or any of its remaining Members to
incur an adverse tax consequence as a result of such repurchase.
13.3 The Manager shall cause this Agreement to be amended to reflect
the change in the interests of the Holders (including the person whose Units
were repurchased) in the Net Income, Net Loss and Distributions of the Fund at
least once in each fiscal quarter.
13.4 Neither the Manager nor its Affiliates may request the Fund to
repurchase any Units owned by them.
14. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS
14.1 Books of Account and Records. The Manager shall, for income tax
purposes, keep on an accrual basis adequate books of account and records of the
Fund wherein shall be recorded and reflected all of the contributions to the
capital of the Fund and all of the expenses and transactions of the Fund.
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14.1.1 Such books of account and records shall include the
following:
(i) A current list of the full name and last known
business or residence address and business telephone
number of each Member set forth in alphabetical order
together with the Original Invested Capital, the
Units held and the share in Net Income and Net Loss
of each Member, which list shall be updated at least
quarterly to reflect changes in the information
contained therein;
(ii) A copy of the Articles of Organization and all
amendments, together with executed copies of any
powers of attorney pursuant to which any certificate
has been executed;
(iii) Copies of the Fund's federal, state and local
income tax or information returns and reports, if
any, for the six most recent taxable years;
(iv) Copies of the original of this Agreement and all
amendments;
(v) Financial statements of the Fund for the six most
recent fiscal years; and
(vi) The Fund's books and records for at least the
current and past three fiscal years.
14.1.2 Such books of account and records shall be kept at the
principal place of business of the Fund in the State of California, and each
Member and his authorized representatives shall have, at all times during normal
business hours and at any other reasonable time, free access to and the right to
inspect and copy at their expense such books of account and all records of the
Fund.
14.1.3 Upon the request of a Member, the Manager shall mail to
such Member within ten days of the request a copy of the information described
in Section 14.1.1(i), (ii) and (iv). The information described in Section
14.1.1(i) shall be printed in alphabetical order, on white paper, and in a
readily readable type size (in no event smaller than ten-point type). The Fund
may require payment of a reasonable charge for copy work.
14.1.4 If the Manager neglects or refuses to exhibit, produce
or mail a copy of the information in Section 14.1.1(i) above as requested and
required under this Agreement, the Manager shall be liable to the Member
requesting the information for the costs, including attorneys' fees, incurred by
the Member for compelling production of the information and for actual damages
suffered by the Member by reason of such refusal or neglect. It shall be a
defense that the actual purpose and reason for the requests for inspection or
for a copy of the information is to secure the list of Members or other
information for the purpose of selling such list or copies thereof, or of using
the same for a commercial purpose other than in the interest of the requesting
person as a Member relative to the affairs of the Fund. The Manager may require
that a Member requesting the information in Section 14.1.1(i) above represent
that the list is not requested for a commercial purpose unrelated to the
Member's interest in the Fund. The remedies provided hereunder to Members
requesting copies of the information in Section 14.1.1(i) above are in addition
to, and shall not in any way limit, other remedies available to Members under
federal law or the laws of any state.
14.1.5 Subject to any change pursuant to Section 15.2.8, all
books and records of the Fund shall be kept on the basis of an annual accounting
period ending December 31, except for the final accounting period which shall
end on the dissolution or termination of the Fund. All references herein to a
"year of the Fund" are to such an annual accounting period, and all references
to a Fund "quarter" shall refer to a calendar quarter unless and until such
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periods are changed by an amendment hereto. Accelerated methods of depreciation
with respect to Fund assets and other elections available to the Fund may be
used by the Fund for purposes of reporting federal or state income taxes.
14.2 Audited Annual Financial Statements. The Manager shall have
prepared and distributed to the Holders at least annually, at Fund expense,
financial statements (each of which shall include a balance sheet, statement of
income or loss, statement of Members' equity, and statement of cash flow)
prepared in accordance with generally accepted accounting principles and
accompanied by a report thereon containing an opinion of an independent
certified public accounting firm. Such opinion shall also state that reported
"Cash from Operations" is consistent with the definition of Cash from Operations
herein. Copies of such statements and report shall be distributed to each Holder
within 120 days after the close of each taxable year of the Fund.
14.3 Other Annual Reporting. The Manager shall have prepared and
distributed to the Holders at least annually, at Fund expense: (i) a statement
of cash flow, (ii) Fund information necessary in the preparation of the Holders'
and Assignees' federal income tax returns; (iii) a report of the business of the
Fund, which shall include for each piece of Equipment which individually
represents at least 10% of the Fund's total investment in Equipment, a status
report to indicate: (a) the condition of the Equipment, (b) how the Equipment is
being used as of the end of the year (leased, operated, held for lease, repair,
or sale), (c) the remaining term of the Equipment leases, (d) the projected use
of Equipment for the next year (renewal of lease, re-lease, retirement, or
sale), and (e) such other information relevant to the value or use of the
Equipment as the Manager deems appropriate, including the method used as basis
for valuation; (iv) a statement as to the compensation received by the Manager
and its Affiliates from the Fund during the year, which statement shall set
forth the services rendered or to be rendered by the Manager and its Affiliates
and the amount of fees received; (v) a report identifying Distributions from:
(a) Cash from Operations for that year, (b) Gross Revenues of prior years held
in reserves, (c) Cash from Sales or Refinancing, and (d) Cash from Reserve
Account and other sources; and (vi) a special report prepared in accordance with
the American Institute of Certified Public Accountants United States Auditing
Standards relating to special reports, containing an opinion of an independent
certified public accounting firm, to report the breakdown of the costs
reimbursed by the Fund to the Manager or its Affiliates. Such special report
shall at a minimum provide: (a) a review of the time records of individual
employees, the costs of whose services were reimbursed, and (b) a review of the
specific nature of the work performed by each such employee. The additional
costs of such special report shall be itemized by the auditors among all
programs sponsored by the Manager and its Affiliates on a program-by-program
basis and may be reimbursed to the Manager or its Affiliates to the extent that
such reimbursement, when added to the cost for administrative services rendered,
does not exceed the competitive rate for comparable services performed by
independent parties in the same geographic location. Copies of the reports
hereunder shall be distributed to each Holder within 120 days after the close of
each taxable year of the Fund; provided, however, that all Fund information
necessary in the preparation of the Holders' and Assignees' federal income tax
returns shall be distributed to each Holder and Assignee not later than 75 days
after the close of each taxable year of the Fund. In addition to the foregoing,
the Manager will disclose in each annual report distributed to investors
pursuant to Section 13(a) of the Securities Exchange Act of 1934 an estimated
value per Unit as of the end of the year that is the subject of the report, the
method by which the value has been estimated, and the date of the data used to
develop the estimated value.
14.4 Quarterly Reports. The Manager shall have prepared quarterly, at
Fund expense, commencing with the first full quarter after the Closing Date: (i)
a statement as to the compensation received by the Manager during such quarter
from the Fund which statement shall set forth the services rendered or to be
rendered by the Manager during such quarter from the Fund and the amount of fees
received, and (ii) other relevant information. Copies of such statements shall
be distributed to each Holder within 60 days after the end of each quarterly
period.
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14.5 Unaudited Quarterly Financial Statements. The Manager shall have
prepared, at Fund expense, a quarterly report covering each of the first three
quarters of Fund operations in each calendar year, unaudited financial
statements (each of which shall include a balance sheet, statement of income or
loss for said quarterly period and statement of Cash from Operations and Cash
from Sales or Refinancing for said quarterly period) and a statement of other
pertinent information regarding the Fund and its activities during the quarterly
period covered by the report. Copies of such statements and other pertinent
information shall be distributed to each Holder within 60 days after the close
of the quarterly period covered by the report of the Fund.
14.6 Other Quarterly Reports. The Manager shall have prepared, at Fund
expense, after the end of each quarter in which Equipment is acquired and until
the Net Proceeds are fully invested or returned to investors, a notice which
shall describe therein: (i) a statement of the actual purchase price of the
Equipment, including the terms of the purchase, (ii) a statement of the total
amount of cash expended by the Fund to acquire such items of Equipment
(including and itemizing all commissions, fees, expenses and the name of each
payee), and (iii) a statement of the amount of proceeds in the Fund which remain
unexpended or uncommitted. Copies of such notice shall be distributed to each
Holder within 60 days after the end of such quarter. If deemed appropriate by
the Manager such notice may be prepared and distributed to each Holder more
frequently than quarterly.
14.7 Tax Returns. The Manager, at Fund expense, shall cause income tax
returns for the Fund to be prepared and timely filed with appropriat
authorities.
14.8 Governmental Reports. The Manager, at Fund expense, shall cause to
be prepared and timely filed with appropriate federal and state regulatory and
administrative bodies, all reports required to be filed with such entities under
then current applicable laws, rules and regulations. Such reports shall be
prepared on the accounting or reporting basis required by such regulatory
bodies. Any Holder shall be provided with a copy of any such report upon request
without expense to him.
14.9 Maintenance of Suitability Records. The Manager, at Fund expense,
shall maintain for a period of at least six years, a record of the information
obtained to indicate that a Holder meets the suitability standards set forth in
the Prospectus.
15. RIGHTS, AUTHORITY, POWERS AND RESPONSIBILITIES OF THE MANAGER.
15.1 Services of the Manager. The Manager shall be responsible for
providing the following services to the Fund:
15.1.1 Supervising the organization of the Fund and the
offering and sale of Units;
15.1.2 Supervising Fund management, which includes (i)
establishing policies for the operation of the Fund; (ii) causing the Fund's
agents or employees to arrange for the provision of services necessary to the
operation of the Fund (including Equipment management and investor, accounting
and legal services, and services relating to Distributions by the Fund); (iii)
approving actions to be taken by the Fund; (iv) providing advice, consultation,
analysis and supervision with respect to the functions of the Fund as an owner
of the Equipment (including, without limitation, decisions regarding adjustments
to rental schedules, the sale or disposition of Equipment and compliance with
federal, state and local regulatory requirements and procedures); (v) executing
documents on behalf of the Fund; (vi) having a fiduciary responsibility for the
safekeeping and use of all funds of the Fund, whether or not in the Manager's
immediate possession or control; and (vii) making all decisions as to accounting
matters; and
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15.1.3 Approval of the terms of the sale or other disposition
of Equipment, including establishing the terms for and arranging any such
transaction.
15.2 Authority of the Manager. The conduct of the Fund's business shall
be controlled solely by the Manager in accordance with this Agreement. The
Manager shall have fiduciary responsibility for the safekeeping and use of all
funds and assets of the Fund, whether or not in its immediate possession or
control, and shall have all authority, rights and powers conferred by law and
those required or appropriate to the management of the Fund business which, by
way of illustration but not by way of limitation, shall, subject only to the
provisions of Section 15.4, include the right, authority and power:
15.2.1 To acquire, lease, sell, hold and dispose of Equipment,
interests therein or appurtenances thereto, as well as personal or mixed
property connected therewith, including the purchase, lease, improvement,
maintenance, exchange, trade or sale of such Equipment, at such price, rental or
amount, for cash, securities (in compliance with appropriate securities
regulations) or other property, and upon such terms, as the Manager deems in its
sole discretion, to be in the best interest of the Fund; provided that, as of
the date of the final investment of Net Proceeds and completion of the permanent
financing of the Equipment portfolio, at least 50% of the Fund's Equipment, by
aggregate purchase cost, shall be subject to initial leases which are High
Payout Leases.
15.2.2 To place record title to, or the right to use Fund
assets in, the name or names of a nominee or nominees, trustee or trustees for
any purpose convenient or beneficial to the Fund;
15.2.3 To acquire and enter into any contract of insurance
which the Manager deems necessary or appropriate for the protection of the Fund
and the Manager, for the conservation of Fund assets, or for any purpose
convenient or beneficial to the Fund;
15.2.4 To employ Persons in the operation and management of
the business of the Fund including, but not limited to, supervisory managing
agents, insurance brokers and equipment lease brokers and Persons to perform, on
behalf of the Fund, the activities enumerated in Section 15.2.1, on such terms
and for such compensation as the Manager shall determine, subject, however, to
the limitations with respect thereto as set forth in Article 8; provided that no
Person is employed to provide duplicative services; and provided further that
agreements with the Manager or its Affiliates for the services set forth in
Article 8 shall contain the terms and limitations as to fees and expenses as set
forth in said Article 8 and any of such agreements shall be terminable
immediately upon dissolution of the Fund under Section 19.1;
15.2.5 To prepare or cause to be prepared reports, statements
and other relevant information for distribution to Holders, as provided in
Article 14 and as they otherwise deem appropriate;
15.2.6 To open accounts and deposit and maintain funds in the
name of the Fund in banks or savings and loan associations; provided, however,
that the Fund funds shall not be commingled with the funds of any other Person;
15.2.7 To cause the Fund to make or revoke any of the
elections referred to in the Code;
15.2.8 To select as the Fund's accounting year a calendar
year or such fiscal year as approved by the Service;
15.2.9 To determine the appropriate accounting method or
methods to be used by the Fund;
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15.2.10 To offer and sell Units in the Fund directly or
through any licensed Affiliate of the Manager or nonaffiliate and to employ
personnel, agents and dealers for such purpose;
15.2.11 To amend this Agreement to reflect the addition or
substitution of Holders, the reduction of capital accounts upon the return of
capital to Members or the change in the interests of the Holders in the Net
Income, Net Loss and Distributions of the Fund after the repurchase of Units;
15.2.12 To require in all Fund obligations that the Manager
shall not have any personal liability thereon but that the Person contracting
with the Fund is to look solely to the Fund and its assets for satisfaction of
such obligations; and in the event that the Manager has personal liability with
respect to any such obligation, the Manager may require its satisfaction prior
to obligations with respect to which the Manager has no personal liability;
provided, however, that the inclusion of the aforesaid provisions shall not
materially affect the cost of the service or material being supplied and all
Fund obligations are satisfied in accordance with prudent business practices as
to the time and manner of payment;
15.2.13 To execute and file certificates of amendment and
cancellation of the articles of organization, and certificates of dissolution of
the Fund;
15.2.14 Subject to the provisions of Article 10, to determine
the amount of Cash from Operations and Cash from Sales or Refinancing used to
purchase additional Equipment and to make Distributions;
15.2.15 To purchase Equipment in its own name, the name of an
Affiliate or in the name of a nominee, a trust or a corporation or otherwise and
hold title thereto on a temporary or interim basis (generally not in excess of
six months) for the purpose of facilitating the acquisition of such Equipment or
completion of manufacture of the Equipment, or any other purpose related to the
business of the Fund; provided, however that: (i) the transaction is in the best
interest of the Fund; (ii) such Equipment is purchased by the Fund for a
purchase price no greater than the cost of such Equipment to the Manager or
Affiliate (including any out-of-pocket carrying costs), except for compensation
permitted by this Agreement; (iii) there is no difference in interest terms of
the loans secured by the Equipment at the time acquired by the Manager or
Affiliate and the time acquired by the Fund; (iv) there is no benefit arising
out of such transaction to the Manager or its Affiliate apart from the
compensation otherwise permitted by this Agreement; and (v) all income generated
by, and all expenses associated with, Equipment so acquired shall be treated as
belonging to the Fund; and, in order to effect an orderly liquidation of the
Fund's assets in its liquidation stage, to cause the Fund to sell Equipment to a
liquidating trust, or to the Manager or an Affiliate (other than another
investor program), either in its own name, or as a trustee of a liquidating
trust, provided that, in any sale to the Manager or an Affiliate, all of the
following conditions have been met: (vi) the Fund has obtained, at its cost, two
independent appraisals of the fair market value of the item or items of
Equipment to be sold; (vii) the sales price of the Equipment is at least equal
to the average of the two appraised values; (viii) the original cost of the
Equipment sold pursuant to this provision does not represent in excess of 10% of
the original cost of all Equipment acquired by the Fund during the term of the
Fund; (ix) such sale is effected in the best interests of the Fund and its
Members for purposes of facilitating liquidation; and (x) the Equipment so sold
is not resold to another investor program sponsored by the Manager or its
Affiliates.
15.2.16 Subject to Sections 15.4.21 and 15.4.22, to borrow
money and, if security is required therefor, to mortgage or subject any
Equipment to any other security device, to obtain replacements of any mortgage
or other security device, and to prepay, in whole or in part, refinance,
increase, modify, consolidate or extend any mortgage or other security device,
all of the foregoing at such terms and in such amounts as the Manager, in its
sole discretion, deems to be in the best interests of the Fund;
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15.2.17 To invest (i) the Gross Proceeds or Net Proceeds
temporarily prior to investment in Equipment, (ii) other funds of the Fund prior
to the investment in Equipment or the distribution to Holders and (iii) the
Fund's capital reserves, in short-term, highly liquid investments where there is
appropriate safety of principal;
15.2.18 In addition to any amendments otherwise authorized
herein, this Agreement may be amended from time to time by the Manager, without
the consent of any of the Holders
(i) to add to the representations, duties or obligations of
the Manager or its Affiliates or surrender any right or power
granted to the Manager or its Affiliates herein, for the
benefit of the Holders;
(ii) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect
to matters or questions arising under this Agreement which
will not be inconsistent with the provisions of this Agreement
provided that no amendment hereunder will change the voting
rights of Holders;
(iii) to delete or add any provision of this Agreement
required to be so deleted or added by the staff of the
Securities and Exchange Commission or by a state "Blue Sky"
administrator or similar such official, which addition or
deletion is deemed by such staff or official to be for the
benefit or protection of the Holders; or
(iv) to amend the provisions of Article 10 of this Agreement
relating to the allocations of Net Income, Net Loss and
Distributions among Members or any other provisions hereof if
the Fund is advised at any time by the Fund's accountants or
legal counsel that the allocations or such other provisions
set forth in this Agreement are unlikely to be respected,
either because of promulgation of Regulations under Sections
704 or 706 of the Code or other developments in the law, but
only to the minimum extent necessary in accordance with such
advice of accountants and/or counsel to cause such provisions
of this Agreement to be respected. Such amendment or
amendments made by the Manager in reliance upon the advice of
the accountants or counsel described above shall be deemed to
be made pursuant to the fiduciary obligation of the Manager to
the Fund and the Holders, and no such amendment or amendments
shall give rise to any claim or cause of action by any Holder.
15.2.19 To execute, acknowledge and deliver any and all
instruments to effectuate the foregoing, and to take all such action in
connection therewith as the Manager shall deem necessary or appropriate.
15.3 General Powers and Fiduciary Duty. The Manager shall, except as
otherwise provided in this Agreement, have all the rights and powers and shall
be subject to all the restrictions and liabilities provided for the manager of a
limited liability company under the California Act. Notwithstanding any other
provision of this Agreement, in no event may the Manager modify or compromise,
by contract or otherwise, its fiduciary duty to the Fund or the Holders, whether
such duty is imposed under the common law or by statute.
15.4 Limitations on Manager's Authority. Neither the Manager nor any
Affiliate shall have the authority to:
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15.4.1 Enter into contracts with the Fund which would bind the
Fund after the expulsion, adjudication of bankruptcy or insolvency of a Manager,
or continue the business of the Fund with Fund assets after the occurrence of
such an event;
15.4.2 Grant to the Manager or any Affiliate an exclusive
listing for the sale of Fund assets, including Equipment;
15.4.3 Sell Substantially All of the Assets in a single sale,
or in multiple sales in the same twelve-month period, except in the orderly
liquidation and winding up of the business of the Fund upon its termination and
dissolution;
15.4.4 Pledge or encumber Substantially All of the Assets in a
single transaction or in multiple transactions in the same twelve-month period
other than in connection with the acquisition or improvement of assets or the
refinancing of existing obligations;
15.4.5 Alter the primary purpose of the Fund as set forth in
Article 3;
15.4.6 Receive from the Fund a rebate or give-up or
participate in any reciprocal business arrangements which would circumvent the
provisions of this Agreement, nor shall any such person permit any reciprocal
business arrangement which would circumvent the restrictions herein against
dealing with the Manager and its Affiliates;
15.4.7 Sell or lease any Equipment to any entity in which a
Manager or any Affiliate has an interest, other than a joint venture or similar
program which complies with the conditions set forth in Section 15.4.8 hereof or
in a transaction that complies with the conditions set forth in Section 15.2.15;
15.4.8 Cause the Fund to invest in any program, partnership or
other venture unless: (i) the other Member or joint owner is not a Manager (but
it may be an Affiliate of a Manager, provided the Affiliate is formed and
operated for the primary purpose of investment in and operation of or gain from
an interest in equipment, and has substantially identical investment objectives
to those of the Fund); (ii) such joint venture owns and operates particular
Equipment and the Fund or the Fund and Affiliate, as the case may be, acquire
the controlling interest in such partnership, or joint venture; (iii) the
agreement of joint venture does not authorize the Fund to do anything as a
Member or joint venturer with respect to the Equipment which the Fund, or a
Manager, could not do directly because of the provisions of this Agreement; (iv)
the Fund's investment is on substantially the same terms and conditions as the
investment of any Affiliate; (v) no compensation (other than as provided for by
this Agreement) is received in connection therewith by the Manager or any of its
Affiliates, there are no duplicate equipment management or any other duplicate
fees and such investment shall not result in the impairment, abrogation or
circumvention of any of the terms or provisions of this Agreement; (vi) the
joint venture is in the best interest of both co-venturers; and (vii) in joint
venture arrangements with an Affiliate of a Manager, if all of the following
additional conditions are met: the compensation of the Manager is substantially
identical to that received by the sponsor of such Affiliate, the Fund has a
right of first refusal to buy, if such Affiliate wishes to sell, equipment held
in the joint venture, and the joint venture is established either for the
purpose of effecting appropriate diversification of the Fund's investment
portfolio or for the purpose of relieving the Manager or its Affiliates or
nominees from a commitment entered into pursuant to Section 15.2.15 of this
Agreement; for the purposes of this Section, a controlling interest shall
include: (1) ownership of more than 50% of the venture's capital or profits; or
(2) provisions in the venture agreement giving the Fund effective control;
15.4.9 Except as provided in the Sections 15.2.15, 15.4.7 and
15.4.8, purchase or lease Equipment from the Fund or sell or lease Equipment to
the Fund;
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15.4.10 Cause the Fund to loan any funds or property to any
Manager or Affiliate of a Manager;
15.4.11 Cause the Fund to borrow from any of the Manager or
its Affiliates on terms which provide for interest, financing charges or fees in
excess of the amounts charged by unrelated lending institutions on comparable
loans for the same purpose, or in excess of the ledger's cost of funds, or, in
any event, to cause the Fund to obtain "permanent financing" (defined as
financing with a term in excess of 12 months) from any such Person;
15.4.12 Cause the Fund to exchange Units for property other
than cash;
15.4.13 Do any action in contravention of this Agreement or
which would make it impossible to carry on the ordinary business of the Fund;
15.4.14 Confess a judgment against the Fund in connection
with any threatened or pending legal action;
15.4.15 Possess any Equipment or assign the rights of the
Fund in specific Equipment for other than a Fund purpose;
15.4.16 Admit a Person as a Manager except with the consent
of the Holders as provided in Article 17 hereof;
15.4.17 Perform any act (other than an act required by this
Agreement or any act taken in good faith reliance upon counsel's opinion) which
would, at the time such act occurred, subject any Holder to liability as a
Manager in any jurisdiction;
15.4.18 Reinvest any funds of the Fund after the end of the
Reinvestment Period other than to invest in Equipment pursuant to commitments
entered into prior to the expiration of the Reinvestment Period or in Equipment
to be used in connection with Equipment under an existing lease, or reinvest any
funds of the Fund during the Reinvestment Period unless such reinvestment is
effected for all Holders on the same terms and is otherwise in compliance with
Section 10.7 hereof;
15.4.19 Invest any of the Gross Proceeds in Equipment which
is non-income producing;
15.4.20 Employ, or permit any Person to employ, the funds or
assets of the Fund in any manner except for the exclusive benefit of the Fund;
this provision shall not prohibit the Manager from causing Fund funds to be
deposited in a separate Fund account with a bank or other financial institution
which aggregates all funds held on behalf of the Manager and its Affiliates in
calculating qualifying balances for purposes of discounts on service charges or
other account benefits, provided that the Fund benefits on a pro rata basis from
any such discounts or other favorable terms, and, provided further, that no
creditor of any party other than the Fund shall have any recourse to funds held
in the Fund's separate account;
15.4.21 Incur any indebtedness wherein the lender will have or
acquire, at any time as a result of making the loan, any direct or indirect
interest in the profit, capital or property of the Fund other than as a secured
creditor; or incur any indebtedness specifically for the purpose of funding
operating distributions, provided however that the Fund may enter into
refinancing transactions with respect to its Equipment and distribute net
proceeds from any such refinancing to the extent consistent with its investment
objectives;
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15.4.22 Incur aggregate Fund borrowings which, as of the date
of the final investment of the Net Proceeds and, thereafter, on the date any
subsequent indebtedness is incurred, are in excess of 50% of the purchase price
of all Equipment on a combined basis. "Purchase price" for purposes of this
Section 15.4.22 shall mean the sum of the cash downpayment and any indebtedness
incurred in connection with the acquisition of an item of Equipment by the Fund,
or to which the Equipment is taken subject, plus any Acquisition Fees paid, but
does not include loan points, prepaid interest, or other prepaid expenses;
15.4.23 Commingle Fund funds with those of any other Person;
15.4.24 Except as otherwise provided herein, cause the Fund to
enter into any transaction with any other partnership in which a Manager or any
of its Affiliates have an interest, including, but not limited to, any
transaction involving the sale, lease or purchase of any Equipment to or from
the Fund, the rendering of services to or from the Fund, or the lending of any
monies or other property to or from the Fund;
15.4.25 Directly or indirectly pay or award any finder's fees,
commissions or other compensation to any Person engaged by a potential investor
for investment advice as an inducement to such advisor to advise the purchaser
regarding the purchase of Units; provided, however, that the Manager shall not
be prohibited from paying the normal sales commissions payable to a registered
broker-dealer or other properly-licensed Person for selling Units;
15.4.26 Operate the Fund in such a manner as to have the Fund
classified as an "investment company" for purposes of the Investment Company Act
of 1940;
15.4.27 Except as provided herein, invest any of the Gross
Proceeds in units of limited partnership interest, junior mortgages, deeds of
trust or other similar instruments or obligations;
15.4.28 Cause the Fund to enter into any agreements with a
Manager or any Affiliate of a Manager which are not subject to termination
without penalty by either party upon not more than 60 days' written notice,
except for agreements which comply with the provisions of Section 15.2.15 or
those which comply with the provisions of Section 15.4.8 and relate to the
purchase of Equipment by the Fund and an Affiliate as joint venturers;
15.4.29 Cause the Fund to acquire any single item of Equipment
that has a contract purchase price in excess of $1,000,000 unless prior to final
funding of the acquisition it obtains a future value appraisal of the Equipment
from a qualified independent third party appraiser;
15.4.30 Cause the Fund to invest cash in an aggregate amount
in excess of $30,000,000 in Equipment leased to a single lessee.
15.5 Limitation on Manager's Liability. The Manager shall have no
personal liability for the repayment of the Original Invested Capital of any
Holder or to repay the Fund any portion or all of any negative balance in its
Capital Account.
15.6 Tax Matters Member. ATEL is hereby designated as the "Tax Matters
Member" in accordance with Section 6231(a)(7) of the Code and, in connection
therewith and in addition to all other powers given therein, shall have all
other powers needed to perform fully hereunder including, without limitation,
the power to retain all attorneys and accountants of its choice and the right to
settle any audits without the consent of Members. The designation made in this
paragraph is hereby consented to by each Member as an express condition to
becoming a Member. The Fund hereby indemnifies ATEL from and against any damages
B-26
or losses (including attorney's fees) arising out of or incurred in connection
with any action taken or omitted to be taken by it in carrying out its
responsibilities as tax matters Member, subject to the same conditions under
which indemnification is provided the Manager in Article 21 hereof.
15.7 Minimum Investment in Equipment / Maximum Front-End Fees. The
Manager must commit not less than 85.875% of the Gross Proceeds to Investment in
Equipment, with the balance thereof available to pay Organization and Offering
Expenses and Front End Fees, however designated. Under the North American
Securities Administrators Association, Inc. ("NASAA") Statement of Policy
concerning Equipment Programs, as amended through October 24, 1991 (referred to
herein as the "NASAA Guidelines"), the Fund is required to commit a minimum
percentage of the Gross Proceeds to Investment in Equipment, calculated as the
greater of: (i) 80% of the Gross Proceeds reduced by 0.0625% for each 1% of
indebtedness encumbering the Fund's Equipment; or (ii) 75% of such Gross
Proceeds. Based on the formula in the NASAA Guidelines, with 50% portfolio
leverage the Fund's minimum Investment in Equipment would equal 76.875% of Gross
Proceeds (80% - [50% x .0625%] = 76.875%), and the Fund's minimum Investment in
Equipment would therefore exceed the NASAA Guideline minimum by 9%. The NASAA
Guidelines permit the Manager and its Affiliates to receive compensation in the
form of a carried interest in Fund Net Income, Net Loss and Distributions equal
to 1% for the first 2.5% of excess Investment in Equipment over the NASAA
Guidelines minimum, 1% for the next 2% of such excess, and 1% for each
additional 1% of excess Investment in Equipment. With a minimum Investment in
Equipment of 85.875% and 50% leverage, the Manager and its Affiliates may
receive an additional carried interest equal to 6.5% of Net Profit, Net Loss and
Distributions under the foregoing formula (2.5% + 2% + 4.5% = 9%; 1% + 1% + 4.5%
= 6.5%]. At the lowest permitted level of minimum Investment in Equipment, the
NASAA Guidelines would permit the Manager and its Affiliates to receive a
promotional interest equal to 5% of Distributions of Cash from Operations and 1%
of Distributions of Sale or Refinancing Proceeds until Members have received
total Distributions equal to their Original Invested Capital plus an 8% per
annum cumulative return on their Adjusted Invested Capital, and, thereafter, the
promotional interest could increase to 15% of all Distributions. With the
additional carried interest calculated as described above, the maximum aggregate
fees payable to the Manager and Affiliates under the NASAA Guidelines as carried
interest and promotional interest would equal 11.5% of Distributions of Cash
from Operations (6.5% + 5% = 11.5%), and 7.5% of Distributions of Sale or
Refinancing Proceeds (6.5% + 1% = 7.5%), before the subordination level was
reached, and 21.5% of all Distributions thereafter. The maximum amounts to be
paid under the terms of this Agreement are subject to the application of the
Asset Management Fee Limit provided in Section 8.3, which limits the annual
amount payable to the Manager and its Affiliates as the Asset Management Fee and
the Carried Interest to an aggregate not to exceed the maximum amount of fees
that would be payable to the Manager under specified provisions of the NASAA
Guidelines. Upon completion of the offering of Units, final commitment of Net
Proceeds to acquisition of Equipment and establishment of final levels of
permanent portfolio debt encumbering such Equipment, the Manager shall calculate
the maximum carried interest and promotional interest payable to the Manager and
its Affiliates under the NASAA Guidelines and compare such total permitted fees
to the total of the Asset Management Fee and Carried Interest. If and to the
extent that the fees exceed the Asset Management Fee Limit provided in Section
8.3, the fees payable to the Manager and its Affiliates shall be reduced as
described herein. In such event, Section 8.3 of this Agreement shall be amended
immediately to reduce the amounts calculated as the Carried Interest by an
amount sufficient to cause the total of such compensation to comply with the
limitations in the NASAA Guidelines on the aggregate of promotional interests
and carried interests. A comparison of the Front End Fees actually paid by the
Fund and the NASAA Guideline maximums shall be repeated, and any required
adjustments shall be made, at least annually thereafter.
15.8 Reliance on Manager's Authority. The Manager shall conduct the
business of the Fund, devoting such time thereto as it, in its sole discretion,
shall determine to be necessary to manage the Fund business and affairs in an
efficient manner. Any Person dealing with the Fund or the Manager may rely upon
B-27
a certificate signed by the Manager as authority with respect to: (i) the
identity of the Manager or any Holder hereof; (ii) the existence or
non-existence of any fact or facts which constitute a condition precedent to
acts by the Manager or are in any other manner germane to the affairs of the
Fund; (iii) the Persons who are authorized to execute and deliver any instrument
or document on behalf of the Fund; or (iv) any act or failure to act by the Fund
as to any other matter whatsoever involving the Fund or any Members.
16. RIGHTS, POWERS AND VOTING RIGHTS OF THE MEMBERS
16.1 Limitation on Member Authority. Members shall take no part in the
control, conduct or operation of the Fund and shall have no right or authority
to act for or bind the Fund except as expressly provided herein.
16.2 Voting Rights. Members shall have the right, by the vote of
Members who own more than 50% of the total outstanding Units entitled to vote (a
"majority-in-interest"), to approve the following matters affecting the basic
structure of the Fund:
16.2.1 Removal or withdrawal of a Manager;
16.2.2 Subject to the further requirements of Article 17,
continuation of the Fund and election of a successor Manager upon the
termination of a Manager;
16.2.3 Termination and dissolution of the Fund;
16.2.4 Amendment of this Agreement, provided such amendment is
not for any of the purposes set forth in Sections 16.4 or 16.5, and provided,
further, that the Members shall have the right to approve or disapprove by
separate vote each proposed amendment to this Agreement;
16.2.5 The pledge or granting of a security interest in, or
sale of, Substantially All of the Assets in a single transaction, or in multiple
transactions in the same twelve-month period, except in the liquidation and
winding up of the business of the Fund upon its termination and dissolution; and
16.2.6 The extension of the term of the Fund.
16.3 Voting Procedures. In any vote of the Members, each Member shall
be entitled to cast one vote for each Unit which he owns as of the designated
record date. Notwithstanding any other provision of this Agreement, any Units
held by a Manager or an Affiliate of a Manager will not be entitled to vote, and
will not be considered to be "outstanding" Units for purposes of any vote, upon
matters which involve a conflict between the interests of such Manager and the
Fund, including, but not limited to, any vote on the proposed removal or
withdrawal of such Manager or on any proposed amendment to this Agreement which
would expand or extend the rights, authorities or powers of such Manager.
16.3.1 Meetings of the Members to vote upon any matters as to
which the Members are authorized to take action under this Agreement, as the
same may be amended from time to time, may be called at any time by the Manager
or by one or more Members holding more than 10% of the outstanding Units by
delivering written notice, either in person or by registered mail, of such
meeting to the Manager. Promptly, but in any event within 10 days following
receipt of such request, the Manager shall cause a written notice, either in
person or by certified mail, to be given to the Members entitled to vote at such
meeting, which notice shall state that a meeting will be held at a time and
place fixed by the Manager, which is to be convenient to the Members as a group,
and which is not less than 15 days nor more than 60 days after the mailing of
B-28
the notice of the meeting; provided, however, that such maximum period for the
giving of notice and the holding of meetings may be extended for an additional
60 days if such extension is necessary to obtain the qualification with the
California Commissioner of Corporations of the matters to be acted upon at such
meeting, the clearance by the Securities and Exchange Commission or other
appropriate governing agency of the solicitation materials to be forwarded to
Members in connection with such meeting or any other administrative
authorizations which may be required. Included with the notice of a meeting
shall be a detailed statement of the action proposed, including a verbatim
statement of the wording of any resolution proposed for adoption by the Members
and of any proposed amendment to this Agreement. All expenses of the meeting and
notification shall be borne by the Fund.
16.3.2 In order to establish the Members of record entitled to
act upon matters by vote or written consent, the Manager or Members holding more
than 10% of the Units may fix in advance a record date (the "Record Date") which
is not more than 60 nor less than 10 days prior to the date of the meeting or
the date upon which written consents are to be delivered. If no Record Date is
fixed in the notice of meeting or action by written consent, the Record Date
shall be deemed to be at the close of business on the business day next
preceding the date on which notice is given. A new Record Date shall be fixed if
a meeting is adjourned for more than 45 days from the date set for the original
meeting.
16.3.3 Upon adjournment of a meeting to another time or place,
notice of the new time or place shall be announced at the meeting at which
adjournment is taken. If the adjournment is for more than 45 days or if, after
the adjournment, a new Record Date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each Member of record entitled to
vote at the meeting.
16.3.4 Personal presence of the Members at a meeting shall not
be required, provided that sufficient Units are represented at the meeting, by
Members appearing in person and/or by duly executed proxies, to take any action
proposed for a vote at such meeting. Attendance by a Member at any meeting and
voting in person shall revoke any proxies of such Member submitted with respect
to action proposed to be taken at such meeting. Submission of a later proxy with
respect to any action shall revoke an earlier one as to such action. Only the
votes, whether in person or by proxy, of Members holding Units as of the Record
Date established for such meeting shall be counted.
16.3.5 Any matter as to which the Members are authorized to
take action under this Agreement or under law may be taken by the Members
without a meeting and shall be as valid and effective as action taken by the
Members at a meeting duly assembled, if written consents to such action by the
Members are (i) signed by the Members entitled to vote upon such action at a
meeting who held, as of the Record Date for such actions, the number of Units
required to authorize such action and (ii) delivered to the Manager as of the
date set for such action. Any action taken without a meeting shall be effective
15 days after the required minimum number of Members have signed the consent and
shall be effective immediately if the Manager and Limited Members holding at
least 90% of the outstanding Units as of the Record Date have signed the
consent.
16.3.6 In the event that there shall be no Manager, the
Members may take action without a meeting by the written consent of Members
having the requisite voting power of the Members entitled to vote.
16.4 Limitations on Member Rights. No Holder shall have the right or
power to: (i) withdraw or reduce his contribution to the capital of the Fund
except as a result of the repurchase of the Units as provided in Article 13, the
dissolution of the Fund or as otherwise provided by law, (ii) bring an action
for partition against the Fund, (iii) cause the termination and dissolution of
the Fund by court decree or otherwise, except as set forth in this Agreement, or
(iv) demand or receive property other than cash in return for his contribution.
No Holder shall have priority over any other Holder either as to the return of
contributions of capital or as to Net Income, Net Loss or Distributions. Other
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than upon the termination and dissolution of the Fund as provided by this
Agreement there has been no time agreed upon when the contribution of each
Holder may be returned.
16.5 Limitations on Power to Amend Agreement. Except as provided in
Section 15.2.18, and notwithstanding anything to the contrary contained in this
Agreement, this Agreement may not, without the consent of each of the Members
who would be adversely affected thereby, be amended to:
16.5.1 Convert a Holder into a Manager;
16.5.2 Modify the limited liability of a Holder;
16.5.3 Alter the interest of any Member in Net Income, Net
Loss or Distributions; or
16.5.4 Affect the status of the Fund as a partnership for
federal income tax purposes.
16.6 Member List. Upon the written request of a Member and for any
non-commercial purpose reasonably related to the exercise of rights under this
Agreement, the Manager will furnish to such Member or his representative, at his
expense, a list containing the name and address of, and the Units held of record
by, each Member, as provided in Section 14.1.3.
16.7 Dissenters' Rights and Limitations on Mergers and Roll-ups.
16.7.1 Any proposal that the Fund enter into a Roll-Up will
require approval by Members of not less than 90% of the outstanding Units.
Members who dissent with respect to a Roll-Up proposal will have the rights of a
dissenting Member as provided under Sections 15679.1 through 15679.14 of the
California Act. The Fund shall not reimburse the sponsor of a proposed Roll-Up
for the costs of its proxy contest or any other costs of the transaction in the
event the Roll-Up is not approved by the Members as provided herein.
16.7.2 In connection with a proposed Roll-Up, an appraisal of
all Fund assets shall be obtained from a competent, independent expert (defined
as a Person with no current material or prior business or personal relationship
with the Manager or its Affiliates who is engaged to a substantial extent in the
business of rendering opinions regarding the value of assets of the type held by
the Fund, and who is qualified to perform such work). If the appraisal will be
included in a Prospectus used to offer the securities of a Roll-Up Entity, the
appraisal shall be filed with the SEC and the states as an Exhibit to the
Registration Statement for the offering. Accordingly, an issuer using the
appraisal shall be subject to liability for violation of Section 11 of the
Securities Act of 1933 and comparable provisions under state laws for any
material misrepresentations or material omissions in the appraisal. Fund assets
shall be appraised on a consistent basis. The appraisal shall be based on an
evaluation of all relevant information, and shall indicate the value of the
Fund's assets as of a date immediately prior to the announcement of the proposed
Roll-Up transaction. The appraisal shall assume an orderly liquidation of Fund
assets over a 12-month period. The terms of the engagement of the Independent
Expert shall clearly state that the engagement is for the benefit of the Fund
and its Holders. A summary of the independent appraisal, indicating all material
assumptions underlying the appraisal, shall be included in a report to the
Holders in connection with a proposed Roll-Up transaction.
16.7.3 In connection with a proposed Roll-Up, the Person
sponsoring the Roll-Up transaction shall offer to Holders who vote "no" on the
proposal the choice of:
(a) accepting the securities offered in the proposed Roll-Up
transaction; or
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(b) one of the following:
(i) remaining as Holders in the Fund, and preserving
their interests therein on the same terms and
conditions as existed previously; or
(ii) receiving cash in an amount equal to the
Holders' pro-rata share of the appraised value of the net
assets of the Fund.
16.7.4 The Fund shall not participate in any proposed Roll-Up
transaction which would result in Holders having democracy rights which are less
than those provided for under this Agreement. If the resulting entity is a
corporation, the voting rights of Holders shall correspond to the voting rights
provided for in this Agreement to the greatest extent possible.
16.7.5 The Fund shall not participate in any proposed Roll-Up
transaction which includes provisions which would operate to materially impede
or frustrate the accumulation of shares by any purchaser of the securities of
the Roll-Up Entity (except to the minimum extent necessary to preserve the tax
status of the entity). The Fund shall not participate in any proposed Roll-Up
transaction which would limit the ability of a Holder to exercise the voting
rights of the securities of the Roll-Up Entity on the basis of the number of
Units held by that Holder.
16.7.6 The Fund shall not participate in any proposed Roll-Up
Transaction in which Holders' rights of access to the records of the Roll-Up
Entity will be less than those provided for under this Agreement.
17. TERMINATION OF A MANAGER AND TRANSFER OF THE MANAGER'S INTEREST
17.1 Removal or Withdrawal. The following conditions shall govern the
voluntary withdrawal or removal of the Manager:
17.1.1 The Manager may not voluntarily withdraw from the Fund
without the approval of Members holding more than 50% of the total outstanding
Units entitled to vote.
17.1.2 The Manager may be removed upon a vote of Holders
owning more than 50% of the total outstanding Units entitled to vote. Written
notice of removal of the Manager shall be served either by certified or by
registered mail, return receipt requested, or by personal service. Such notice
shall set forth the date upon which the removal is to become effective.
17.2 Other Terminating Events. In the event of the adjudication of
bankruptcy, filing of a certificate of dissolution, death or adjudication of
insanity or incompetency of the Manager (each of such events, as well as
removal, resignation and withdrawal of a Manager, being herein referred to as a
"Terminating Event"), the Fund shall be dissolved and shall be liquidated under
the provisions of Article 19, subject to the provisions of Section 17.3.
17.3 Election of Successor Manager; Continuation of Fund Business. The
following provisions shall govern the election of a successor Manager and
continuation of the business of the Fund upon the occurrence of a Terminating
Event with respect to a Manager (the "Retiring Manager"):
17.3.1 If at the time of a Terminating Event the Fund has one
or more Managers other than the Retiring Manager, any remaining Manager or a
majority-in-interest of the Limited Members may elect, within 90 days
thereafter, to continue the Fund business, in which case the Fund shall not
dissolve. So long as there is at least one remaining Manager which so elects, or
if a majority-in-interest of the Members so elect and a remaining Manager does
B-31
not so elect, any remaining Manager which is not willing to elect to continue
the Fund business will be deemed to have been removed from the Fund by vote of
the Members.
17.3.2 If at the time of a Terminating Event the Retiring
Manager is the sole remaining Manager, the Fund shall be dissolved unless a
majority-in-interest of the Members elect to continue the Fund business. In the
event of such election, the Fund business may be continued if the Members making
such election, within 90 days after the occurrence of the Terminating Event,
elect a successor Manager and continue the Fund's business on the same terms and
conditions as are contained herein, but with a name which does not include or in
any way refer to the name of any Retiring Manager.
17.4 Admission of Successor or Additional Manager. The following
conditions shall be satisfied before any Person shall become a successor Manager
or an additional Manager:
17.4.1 Such Person shall have been elected in accordance with
Section 17.3 or 17.6;
17.4.2 Such Person shall have accepted and agreed to be bound
by all the terms and provisions of this Agreement;
17.4.3 If such Person is a corporation, it shall have provided
the Fund with evidence satisfactory to counsel for the Fund of its authority to
become a Manager and to be bound by this Agreement; and
17.4.4 Any amendments and filings required or appropriate
under the California Act shall have been made.
17.5 Effect of a Terminating Event. Upon the occurrence of a
Terminating Event, the following provisions shall be applicable:
17.5.1 The Retiring Manager shall immediately cease to be a
Manager and shall not have any right to participate in the management of the
affairs of the Fund or to receive any fees under this Agreement not already paid
or earned; provided, however, that the Retiring Manager shall receive all
amounts then accrued and payable by the Fund and shall be, and shall remain,
liable as a Manager for all obligations and liabilities incurred by the Fund
prior to the effective date of the Terminating Event, but shall be free from any
obligation or liability incurred on account of the activities of the Fund from
and after such time.
17.5.2 If the business of the Fund is continued, as aforesaid,
the Retiring Manager shall be entitled to receive from the Fund the then present
fair market value of its interest in the Fund, determined by agreement of the
Retiring Manager and the remaining or new Managers, or, if they cannot agree, by
arbitration in accordance with the then current rules of the American
Arbitration Association. The expense of such arbitration shall be borne equally
by the Fund and the Retiring Manager, and such arbitration shall be conducted in
San Francisco, California unless otherwise agreed by both parties. The Fund
shall forthwith pay to the Retiring Manager an amount equal to the then present
fair market value of the interest so determined. If the Retiring Manager has
voluntarily withdrawn from the Fund, payment shall be in the form of a
non-interest bearing unsecured promissory note with principal payable, if at
all, out of Distributions the Retiring Manager would otherwise have received
under this Agreement had such Manager not been terminated. If the Retiring
Manager has been terminated involuntarily, the payment shall be in the form of
an interest bearing promissory note payable in equal annual installments over a
term of not less than five years. Such payment when made shall constitute
complete and full discharge of all amounts to which the Retiring Manager is
entitled in respect to such interest.
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17.5.3 All executory contracts between the Fund and the
Retiring Manager or any Affiliate thereof (unless such Affiliate is also an
Affiliate of the remaining or new Manager or Members) may be terminated by the
Fund effective upon written notice to the party so terminated. The Retiring
Manager or any Affiliate thereof (unless such Affiliate is also an Affiliate of
the remaining or new Manager or Members) may also terminate and cancel any such
executory contract effective upon 60 days' prior written notice of such
termination and cancellation given to the remaining or new Manager or Members,
if any, or to the Fund.
17.6 Election of Additional Manager. Members owning in excess of 50% of
the outstanding Units may at any time and from time to time elect an additional
Manager, and, upon satisfaction of the conditions set forth in Section 17.4, the
Person so elected shall be admitted as an additional Manager. Admission of an
additional Manager shall not cause dissolution of the Fund.
17.7 Assignment of Manager's Interest. The Manager may not transfer its
Membership in the Fund without the consent of Members owning in excess of 50% of
the total outstanding Units, unless such an assignment is to an entity which
succeeds to all of the assets of the assigning Manager and of which at least 80%
of the voting and beneficial interest is controlled by Persons controlling 80%
or more of the voting and beneficial interest of the assigning Manager. Any
entity to which the entire interest of a Manager in the Fund is assigned in
compliance with this Section 17.7 shall be substituted as a Manager by the
filing of appropriate amendments to this Agreement. Notwithstanding the
foregoing, the Manager may delegate to any of its subsidiaries or other
Affiliates responsibility for specific services to be performed for the Fund and
may assign all or a portion of the compensation due the Manager to such
subsidiaries or other Affiliates.
17.8 Members' Participation in Manager's Bankruptcy. In the event the
Manager is subject to a voluntary or involuntary petition for reorganization or
liquidation under the federal Bankruptcy Act, the Manager will cause separate
counsel to be retained on behalf of the Fund, at Fund expense, to represent the
Members' interests in the bankruptcy action. In such event, the Fund will also
bear any reasonable and necessary expenses of a duly appointed committee of
Members incurred while acting on behalf of all of the Members as a group in
connection with such bankruptcy action.
18. CERTAIN TRANSACTIONS
18.1 The Manager and its Affiliates, the Holders, any shareholder,
officer, director, Member or employee thereof, or any Person owning a legal or
beneficial interest therein, may engage in or possess an interest in any other
business or venture of every nature and description, independently or with
others, including, but not limited to, the ownership, financing, leasing,
operation, management and brokerage of equipment. Except as described in the
Prospectus, and subject to their fiduciary duties to the Fund, neither the
Manager nor its Affiliates shall be obligated to present to the Fund any
particular investment opportunity, regardless of whether such opportunity is of
such character that the Fund could take advantage thereof if it were presented
to the Fund, and the Manager and its Affiliates shall have the right to take for
their own accounts (individually or otherwise) or to recommend to others any
such investment opportunity.
19. TERMINATION AND DISSOLUTION OF THE FUND
19.1 Termination and Dissolution. The Fund shall be terminated and
dissolved upon the earliest to occur of the following:
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19.1.1 The withdrawal, removal, adjudication of bankruptcy,
insolvency, insanity or incompetency, death or dissolution of a Manager unless a
remaining Manager or a majority-in-interest of the Members, within 90 days of
the date of such event, elects to continue the business of the Fund, and, if
necessary, elects a replacement Manager, in the manner provided in Article 17;
provided that expenses incurred on behalf of the Manager and/or Members in the
continuation or reformation, or attempted continuation or reformation, of the
Fund hereunder shall be deemed expenses of the Fund;
19.1.2 The Members owning more than 50% of the total
outstanding Units vote in favor of dissolution and termination of the Fund;
19.1.3 The term of the Fund expires; or
19.1.4 The Fund disposes of all interests in Equipment and its
other assets and receives final payment in cash of the proceeds of such
dispositions.
19.2 Accounting and Liquidation. Upon the dissolution and termination
of the Fund for any reason, the Manager shall take full account of the Fund
assets and liabilities, shall liquidate the assets as promptly as is consistent
with obtaining the fair value thereof, and shall apply and distribute the
proceeds therefrom in the following order:
19.2.1 To the payment of creditors of the Fund but excluding
secured creditors whose obligations will be assumed or otherwise transferred on
the liquidation of Fund assets;
19.2.2 To the repayment of any outstanding loans made by the
Manager to the Fund; and
19.2.3 To the Manager and Holders in accordance with their
respective Capital Account balances, after giving effect to all allocations
described in Article 10 of this Agreement; provided, however, that prior to any
allocation under Section 10 of this Agreement, Gross Income shall be specially
allocated to the Manager to the extent, if any, necessary to cause its Capital
Account balance to be zero as of the close of such final taxable year (after
crediting the Manager's Capital Account with the Manager's share of Fund Minimum
Gain). For purposes of making the foregoing allocation, Net Income and Net Loss
for the final taxable year of the Fund shall first tentatively be computed by
including all Gross Income as an element thereof; then, to the extent, if any,
that the Capital Account balance of the Manager is negative as of the close of
such final taxable year (after giving effect to all Fund distributions), Gross
Income shall be separately stated and allocated away from the Holders and to the
Manager pursuant to this Section 19.2.3.
19.2.4 Distributions in liquidation shall be made by the end
of the taxable year in which the liquidation occurs or, if later, within 90 days
of the liquidating event and shall otherwise comply with Regulations Section
1.704-1(b).
20. SPECIAL POWER OF ATTORNEY
20.1 Execution of Power of Attorney. By executing this Agreement, each
Holder is hereby granting to the Manager a special power of attorney irrevocably
making, constituting and appointing ATEL, its duly appointed officers, and any
one of them, as the attorney-in-fact for such Holder, with power and authority
to act alone in his name and on his behalf to execute, acknowledge and swear to
the execution, acknowledgement and filing of the following documents:
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20.1.1 This Agreement, the Articles of Organization, any
separate certificates, as well as any amendments to the foregoing which, under
the laws of the State of California or the laws of any other state, are required
to be filed or which the Manager deems advisable to file;
20.1.2 Any other instrument or document which may be required
to be filed by the Fund under the laws of any state or by any governmental
agency, or which the Manager deems advisable to file; and
20.1.3 Any instrument or document which may be required to
effect the continuation of the Fund, the admission of an additional or
substituted Holder, or the dissolution and termination of the Fund (provided
such continuation, admission or dissolution and termination are in accordance
with the terms of this Agreement), or to reflect any reductions in amount of
contributions of Members.
20.2 Special Power of Attorney. The special power of attorney being
granted hereby:
20.2.1 Is a special power of attorney coupled with an
interest, is irrevocable, shall survive the death or legal incapacity of the
granting Holder, and is limited to those matters herein set forth;
20.2.2 May be exercised by the Manager acting alone for each
Holder by a facsimile signature of such Manager or by one of its officers, or by
listing all of the Holders executing any instrument with a single signature of a
Manager, or of one of the Manager's officers, acting as attorney-in-fact; and
20.2.3 Shall survive an assignment by a Holder of all or any
portion of his Units except that, where the Assignee of the Units owned by a
Holder has been approved by the Manager for admission to the Fund as a
substituted Holder, the special power of attorney shall survive such assignment
for the sole purpose of enabling the Manager to execute, acknowledge and file
any instrument or document necessary to effect such substitution.
21. INDEMNIFICATION
21.1 Indemnification of the Manager. The Fund, its receiver or its
trustee, shall indemnify, save harmless and pay all judgments and claims against
the Manager and any of its Affiliates who perform services for the Fund from any
liability, loss or damage incurred by them or the Fund by reason of any act
performed or omitted to be performed by them when acting in connection with the
business of the Fund, including costs and attorneys' fees and any amounts
expended in the settlement of any claims or liability, loss or damage; provided,
however, that, if such liability, loss or claim arises out of any action or
inaction of the Manager or Affiliates who perform services for the Fund, the
Manager or Affiliates who perform services for the Fund must have determined, in
good faith, that such course of conduct was in the best interest of the Fund and
did not constitute fraud, negligence, breach of fiduciary duty or misconduct by
the Manager or Affiliates who perform services for the Fund; and provided
further, that any such indemnification shall be recoverable only from the assets
of the Fund and not from the assets of the Holders. All judgments against the
Fund and the Manager, wherein a Manager is entitled to indemnification, must
first be satisfied from Fund assets before such Manager may be held responsible.
Persons entitled to indemnification hereunder shall be entitled to receive
advances for attorney's fees and other legal costs and expenses arising out of
claims made against them, provided that (i) no such advances may be made for
such fees, costs or expenses resulting from claims made by Holders; and (ii)
advances for such fees and expenses relating to claims made by parties other
than Holders may only be made if the action relates to the performance of duties
or services by the indemnified party on behalf of the Fund, the indemnified
party obtains an opinion of independent counsel that such party will be entitled
B-35
to indemnification pursuant to this Agreement under the specific circumstances
of the claim in question, and the indemnified party undertakes in writing prior
to receipt of such advances that such party will repay in full any such advanced
funds together with interest thereon in the event that, upon the ultimate
disposition of the claim, the party would not be entitled to indemnification
hereunder. Nothing contained herein shall constitute a waiver by a Holder of any
right which he may have against any party under federal or state securities
laws.
21.2 Limitations on Indemnification. Notwithstanding anything to the
contrary contained in the foregoing Section 21.1, neither the Manager nor any of
its Affiliates performing services for the Fund nor any party acting as a
broker-dealer shall be indemnified from any liability, loss or damage incurred
by them in connection with (i) any claim or settlement involving violations of
state or federal securities laws by the Manager or by any Affiliate performing
services for the Fund; or (ii) any liability imposed by law, such as liability
for fraud, bad faith or negligence; provided, however, that indemnification will
be allowed for settlements and related expenses of lawsuits alleging securities
law violations, and for expenses incurred in successfully defending such
lawsuits, provided that a court either (x) approves the settlement and finds
that indemnification of any payment in settlement and related costs should be
made; or (y) approves indemnification of litigation costs if a successful
defense is made, or a dismissal with prejudice is obtained, as to the indemnitee
on the merits of each count involving alleged securities law violations; and (z)
the parties seeking indemnification apprise the court of the positions of the
securities law administrators of any state in which the Units were offered or
sold, including the Massachusetts Securities Division, and the Securities and
Exchange Commission with respect to indemnification for securities laws
violations before seeking court approval for indemnification. Furthermore, the
Manager shall indemnify the Fund against any loss or liability which it may
incur as a result of the violation by the Manager or any of its Affiliates
performing services for the Fund of any state or federal securities laws.
21.3 Insurance. The Fund shall not pay for any insurance covering
liability of the Manager or any of its Affiliates for actions or omissions for
which indemnification is not permitted hereunder; provided, however, that
nothing contained herein shall preclude the Fund from purchasing and paying for
such types of insurance, including extended coverage liability and casualty and
worker's compensation, as would be customary for any Person owning comparable
Equipment and engaged in a similar business or from naming the Manager and any
of its Affiliates as additional insured parties thereunder, provided that such
addition does not add to the premiums payable by the Fund.
22. MISCELLANEOUS
22.1 Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on all
parties hereto, notwithstanding that all of the parties are not signatory to the
original or the same counterpart.
22.2 Successors and Assigns. The terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the successors and
assigns of the respective Members.
22.3 Severability. In the event any sentence or paragraph of this
Agreement is declared by a court of competent jurisdiction to be void, such
sentence or paragraph shall be deemed severed from the remainder of this
Agreement and the balance of this Agreement shall remain in effect.
22.4 Notices. All notices under this Agreement shall be in writing and
shall be given to the Person entitled thereto, by personal service or by mail,
posted to the address maintained by the Fund for such Person or at such other
address as he may specify in writing.
B-36
22.5 Captions. Article and section titles or captions contained in this
Agreement are inserted only as a matter of convenience and for reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement nor the intent of any provision hereof.
22.6 Number and Pronouns. Whenever required by the context hereof, the
singular shall include the plural, and vice-versa; the masculine gender shall
include the feminine and neuter genders, and vice-versa.
22.7 Manager Address. The address of the Manager is:
ATEL Financial Services, LLC
600 California Street, 6th Floor
San Francisco, California 94108
22.8 Member Addresses. The names, addresses and capital contributions
of the Members are set forth on Exhibit I attached hereto, which exhibit shall
be maintained at the principal place of business of the Fund.
22.9 Construction. Notwithstanding the place where this Agreement may
be executed by any of the parties hereto, the parties expressly agree that all
the terms and provisions hereof shall be construed under the laws of the State
of California and that the Fund shall be governed by the California Act, as
amended, governing limited liability companies formed under California law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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22.10 Qualification to Do Business. In the event the business of the
Fund is carried on or conducted in states in addition to the State of
California, then the parties agree that this Fund shall exist under the laws of
each state in which business is actually conducted by the Fund, and they
severally agree to execute such other and further documents as may be required
or requested in order that the Manager may qualify the Fund to conduct business
in such states. The power of attorney granted to the Manager by each Holder in
Article 20 shall constitute authority for the Manager to perform the ministerial
duty of qualifying the Fund under the laws of any state in which it is necessary
to file documents or instruments of qualification. A Fund office or principal
place of business in a state may be designated from time to time by the Manager.
INITIAL MEMBERS:
ATEL FINANCIAL SERVICES, LLC, Manager
By ATEL LEASING CORPORATION, Manager
By: _______________________________
Dean L. Cash, President
ATEL CAPITAL GROUP, Initial Member
By: _______________________________________
Dean L. Cash, President
B-38
EXHIBIT I
Schedule of Members
Capital
Name Address Contribution
ATEL Capital Group $500/50 Units
600 California Street
6th Floor
San Francisco, CA 94108
ATEL Financial Services, LLC $100
600 California Street
6th Floor
San Francisco, CA 94108
B-39
EXHIBIT C
HOW TO INVEST
TO THE INVESTOR:
Prior to the satisfaction of the escrow condition (sale of 120,000 Units), make
your check payable to "U.S. Bank - ACEF XI Escrow." Thereafter, make your check
payable to"ATEL Capital Equipment Fund XI". Investments must be made in
increments of $10, with a minimum of $5,000 in most states. See the discussion
under Plan of Distribution-State Requirements in the Prospectus for exceptions.
IMPORTANT INSTRUCTIONS:
Fully complete sections 1, 2, and 3 of the Subscription Agreement.
All subscribers must:
1) sign each appropriate section where indicated,
2) initial each appropriate section (sections 3A - 3D) where indicated on
the bottom of the subscription agreement.
If you would like your distributions sent to an address other than your own
(mutual fund, bank, etc.), please fill in the optional check address section
(section 6).
ADD-ON INVESTMENTS
The Subscription Agreement accompanying additional investments in Fund XI must
have an authorized signature of a Registered Principal or Branch Manager of the
Broker/Dealer, but does not require the signature of the investor. Add-on
investments must bear the exact name in which the previous investment was
registered, or a new signed Subscription Agreement will be required.
FOREIGN INVESTOR OPTION
As described in the Prospectus, the Manager has elected to permit limited
investment in Units by nonresident alien investors. In section 1 of the
Subscription Agreement there are three boxes, one of which must be checked to
indicate whether an investor is a resident alien, nonresident alien or U.S.
citizen residing outside the United States. If none of the three boxes is
checked, the executed Subscription Agreement will constitute the investor's
representation that he or she is a U.S. citizen residing in the United States.
TO THE SELLING REPRESENTATIVE:
Please complete the Broker/Dealer Information section (Box 7) using your office
address rather than the home office address. This section must be completed for
all investments, including add-on investments by previous subscribers. Please
make sure that the exact same name is used for the registered owner if the
investment is an additional subscription. Also please make sure that the
investor satisfies any other special investment standards imposed by the state
in which he or she resides, as set forth in the Prospectus under the caption
"Plan of Distribution - State Requirements."
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Please have the Subscription Agreement signed by your branch manager or other
authorized signatory.
Retain the blue copy for the Broker/Dealer and the green copy for the investor
unless otherwise specified by your Broker/Dealer. All IRA investments must be
submitted directly to the Custodian for completion - the Custodian will forward
the Subscription Agreement to ATEL. Mail the original white copy and pink and
yellow copies to ATEL at:
ATEL SECURITIES CORPORATION
SUBSCRIPTION PROCESSING DESK
600 CALIFORNIA STREET, Suite 600
SAN FRANCISCO, CA 94108
(415) 989-8800
(800) 543-ATEL
E-mail: securities@atel.com
The investor whose signature appears in Section 2 on the reverse side hereof
(the "Investor") hereby subscribes for the number of Units of ATEL Capital
Equipment Fund XI, LLC (the "Fund") set forth in Section I of this Subscription
Agreement in the manner described in the Prospectus to which this agreement is
an exhibit (the "Prospectus"). Prior to the satisfaction of the escrow condition
(sale of 120,000 Units), there is transmitted herewith as the subscription price
a check payable to "U.S. Bank - ACEF X Escrow" in the amount required to
purchase such Units ($10 per Unit). Such funds will be promptly transmitted (as
defined in Rule 15c2-4 under the Securities Exchange Act of 1934 and NASD Notice
to members 84-64). No subscription funds will be released to the Fund unless and
until subscriptions for a minimum of 120,000 units have been received and
collected by the escrow agent prior to a date 12 months after the date of the
Prospectus. After the escrow condition of 120,000 Units sold has been satisfied,
checks should be made payable to "ATEL Capital Equipment Fund XI". Minimum
initial investment is 500 Units.
The Investor agrees that if this subscription is accepted it will be held,
together with the accompanying payment, on the terms described in the Prospectus
and that, if accepted as a holder of the Units ("Holder"), the Investor shall be
bound by the terms and conditions of the Operating Agreement set forth as
Exhibit B to the Prospectus, including the special power of attorney set forth
therein. The subscription may be canceled by the subscriber at any time during a
period of five days after the subscriber has submitted this executed
Subscription Agreement to the Fund. The Fund will advise the subscriber of the
acceptance or rejection of the subscription as soon as practicable after receipt
of the subscription, but in no event more than 30 days following receipt.
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The assignability and transferability of the Units will be governed by the
Agreement and all applicable laws, and the Investor must have adequate means of
providing for his current needs and personal contingencies and must have no need
for liquidity in this investment.
The Investor may not be able to consummate a sale or transfer of the Units, or
any interest therein, or receive any consideration therefor, without the prior
written consent of the Commissioner of Corporations of the State of California,
except as permitted in the Commissioner's Rules, and the Units, or any document
of assignment or transfer evidencing the Units, will bear a legend reflecting
the substance of the foregoing understanding if such Units have been issued
pursuant to qualification under the California Corporate Securities Law of 1968.
The undersigned acknowledges that U.S. Bank Trust National Association is acting
only as an escrow agent in connection with the offering of the Units, and has
not endorsed, recommended or guaranteed the purchase, value or repayment of such
Units.
INSTRUCTIONS FOR COMPLETING THE SUBSCRIPTION AGREEMENT
Note- Please type or print legibly when completing the Subscription Agreement.
Section 1: Units Purchased.
o Fill in the total dollar amount and the number of Units to be acquired.
Please note there are no fractional Units. All purchases must be in
increments of $10.
o Indicate whether this is an original investment in the Fund or an
additional investment to an existing Fund account with the exact same
registration by checking the appropriate box. Please note the minimum
requirements. Only the dollar amount, subscriber name and broker/dealer
information sections of the subscription forms need be completed for
additional subscriptions by the same investor.
Section 2: Registered Owner.
o Fill in the name(s) and addresses for the investment as they should
appear in the registration.
o Check the applicable citizenship status boxes.
o Enter the appropriate taxpayer identification number for this
investment, depending on the type of ownership. For IRAs and Keoghs
please include both the custodian's taxpayer identification and
investor's social security number.
o Check whether monthly or quarterly distributions are desired.
o Please read the Subscription Agreement, then sign and date the form.
o Single Ownership - one signature required o Joint Tenants - all parties
must sign
o Community Property - one signature required
o Tenants in Common - all parties must sign
o Tenants in Entirety - one signature required
o In all other cases, the custodian, trustee, general partner or
C-3
authorized corporate officer must sign. Where the documents
establishing such representative capacity require more than one
signature for execution of instruments on behalf of the represented
entity, then all signatures required by such documents are required
here.
Section 3: Subscriber Information
o Each item must be initialed.
Section 4: Legal Form of Ownership.
o Mark only one box. Fill in any information requested and note whose
signature(s) is (are) required in Section 2.
Section 5: Investor Mailing Address.
o Fill in name and address if different from Section 1, as with IRAs and Keoghs.
Section 6: Optional Check Addresses.
o Complete this section only if you want your distribution checks mailed
to an address other than that shown in Section 2.
Section 7: Broker/Dealer Information.
o Fill in the name of the licensed Broker/Dealer firm, the name of the
Account Executive, and the telephone number and mailing address of the
Account Executive. The name, address and phone number of the Account
Executive are required so he/she can receive copies of all investor
communications.
o An authorized Branch Manager or Registered Principal of the
Broker/Dealer firm must sign the form. Orders cannot be accepted
without Broker/Dealer authorization.
Mailing Address.
o Mail the completed form with a check payable as indicated in Section
1 to:
ATEL Securities Corporation
Attention: Subscription Processing Desk
600 California Street, Suite 600
San Francisco, CA 94108
If you have any additional questions about completing this Subscription
Agreement, please call ATEL Securities Corporation Subscription Processing Desk
at (800) 543-ATEL.
C-4
ATEL CAPITAL EQUIPMENT FUND XI, LLC - SUBSCRIPTION AGREEMENT
Please type or print the following information:
1.UNITS PURCHASED
Make checks payable to "ATEL Capital Equipment Fund XI"
$_________ is for the purchase, as a Holder, of _______ Units and should be
registered as indicated in the Registered Owner section below.
2. REGISTERED OWNER.
Name(s) and addresses will be recorded exactly as printed below. (Include
custodial address if applicable.) ___Mr. ___Ms. ___Mr. and Mrs. ___Mrs.
Investor(s) Name and/or
Custodian/Nominee_________________________________________________________
Investor Name(s)__________________________________________________________
Address___________________________________________________________________
City______________________________________State_____ZipCode_______________
Investor Phone Number (____)______________E-mail__________________________
Investor Account # (if any)_______________________________________________
X______________________________________________Date_______________________
Subscriber/Custodian/Nominee or Authorized Signature
___ INITIAL INVESTMENT $10 per unit ($5,000/500 Unit Minimum, unless a higher
minimum is required in the investor's state - see the Prospectus)
___ ADDITIONAL INVESTMENT ($500/50 Units, unless a higher minimum is required in
the investor's state - see the Prospectus)
___ Check if you are a resident alien.
___ Check if you are a nonresident alien (please include W-8 form).
___ Check if you are a U.S. citizen residing outside the U.S.
TAXPAYER IDENTIFICATION NUMBER
Note: If the account is in more than one name, the number should be that of the
first person listed.
Include BOTH numbers for IRAs and Keoghs.
SOCIAL SECURITY NUMBER
HAVE YOU INVESTED IN ANY PRIOR ATEL FUND?
___YES ___NO
C-5
DISTRIBUTION OPTION (check one)
___ Quarterly ___Monthly
PRIVACY ELECTION (check if desired)
____ By checking this box the undersigned directs the Manager to treat all
information concerning the undersigned as confidential, and not to disseminate
any such information to any party, without the undersigned's consent, except as
may be required under an applicable statute or regulation or by the order of a
court or governmental agency.
No representations should be relied upon other than those contained in the
Prospectus, as amended and/or supplemented. The subscriber represents, warrants
and agrees as set forth on the reverse side of this signature page; further, the
undersigned declares under penalty of perjury that to the best of his knowledge
the information supplied above is true and correct and may be relied upon by the
Manager and the Fund in connection with his investment as a Holder in the Fund.
The subscriber hereby subscribe(s) for the purchase of fully-paid and
nonassessable Units of the Fund as indicated.
3. SUBSCRIBER INFORMATION (EACH ITEM MUST BE INITIALED):
In order to induce the Manager to accept this subscription, the Investor hereby
represents to you as follows (initial in the space provided):
A. The Investor has (a) a net worth of at least $150,000 in excess of his
investment in Units, or (b) has a net worth of at least $45,000 in excess of his
investment in Units and had during the last tax year or estimates that he will
have during the current tax year a minimum of $45,000 annual gross income. In
all cases net worth is exclusive of home, home furnishings and automobiles. The
Investor further represents that he/she satisfies any other minimum income and
/or net worth standards imposed by the jurisdiction in which he/she resides, if
any different standards are set forth in the Prospectus or any supplement
thereto.
INITIAL HERE________
B. If the undersigned is acting in a representative capacity for a corporation,
partnership, trust or other entity, or as agent for any person or entity, he
hereby represents and warrants that he has full authority to enter into this
agreement in such capacity.
INITIAL HERE________
C-6
C. If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the representations and warranties herein shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing.
INITIAL HERE________
D. Under the penalties of perjury, the undersigned certifies that (l) the number
provided herein is his correct Taxpayer Identification Number; and (2) he is not
subject to backup withholding either because he has not been notified that he is
subject to backup withholding as a result of a failure to report all interest or
dividends, or the Internal Revenue Service has notified him that he is no longer
subject to backup withholding. (If the undersigned is currently subject to
backup withholding, he has stricken the language under clause (2) above before
signing).
INITIAL HERE________
4. LEGAL FORM OF OWNERSHIP (Check Only One)
___ Single Ownership
___ Joint Tenants With Rights of Survivorship
___ Husband and Wife as Community Property
___ Tenants in Common
___ Tenants in Entirety
___ Sep IRA
___ IRA __regular __rollover
___ Trust - Trust Date (Month/Day/Year) ___/___/___
___ Custodian
___ Custodian for___________________________________
___ UGMA / UTMA - State of:_______
___ Pension Plan
___ Profit Sharing Plan
___ Corporation
___ Partnership
___ Non-Profit Organization
___ Other__________________
5. INVESTOR MAILING ADDRESS
(if different from above, as with IRAs and Keoghs)
Name________________________________________________________________________
Name________________________________________________________________________
Address_____________________________________________________________________
City__________________________________________State_____Zip Code____________
Investor Phone Number (_____)_______________________________________________
C-7
6. OPTIONAL CHECK ADDRESS
___ Please deposit directly into the following account: __ Checking __ Savings
___ Please direct distributions to a party other than the registered owner per
instructions below:
Receiving Entity____________________________________________________________
Address_____________________________________________________________________
City__________________________________________State_____Zip Code____________
Fund Name______________________________Account Number_______________________
7. BROKER/DEALER INFORMATION The Broker/Dealer must sign below to complete
order. Broker/Dealer hereby warrants that it is a duly licensed Broker/Dealer
and may lawfully offer Units in the state designated as the Investor's residence
and, further, that it has reasonable grounds to believe, based on information
obtained from the Subscriber concerning his investment objectives, other
investments, financial situation and needs and any other information known by
the Broker/Dealer, that investment in the Fund is suitable for the Subscriber in
light of his/her financial position, net worth and other suitability
characteristics, and that the Broker/Dealer has informed the Subscriber as to
the limited liquidity and marketability of the Units. The undersigned
Broker/Dealer warrants that a current Prospectus was delivered to the
Subscriber.
X_____________________________________________________Date__________________
Authorized signature (Branch Manager or Registered Principal).
Order cannot be accepted without signature.
This transaction, for Blue Sky purposes, took place in the State of ______.
ACCEPTANCE BY MANAGER
FOR MANAGER'S USE ONLY
Received and Subscription Accepted
ATEL Financial Services, LLC, Manager
By ATEL Leasing Corporation, Manager
By ____________________________________
Amount___________________________ Date______________ B/D Rep #______________
RETURN TOP 3 COPIES: WHITE - ATEL COPY, YELLOW - BROKER/DEALER COPY,
PINK - INVESTOR COPY
RETAIN: BLUE - BROKER/DEALER COPY, GREEN - INVESTOR COPY
ATEL SECURITIES CORPORATION
600 CALIFORNIA STREET - 6th FLOOR - SAN FRANCISCO, CA 94108
(800) 543-2835 - E-Mail: securities@atel.com
C-8
[Outside Back Cover]
The Fund has not authorized anyone to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer of its Units, and unauthorized information or representations must not
be relied upon. This Prospectus is not an offer or solicitation by anyone in any
state or other jurisdiction in which the offer or solicitation is not authorized
or in which the person making an offer is not qualified to do so or to any
person to whom it is unlawful to make an offer or solicitation. Neither the
delivery of this Prospectus or any Supplement nor any sale made hereunder shall,
under any circumstances, create an implication that there has been no change in
the facts set forth herein since the date hereof; however, if any material
change not contemplated hereby occurs while this Prospectus is required to be
delivered, this Prospectus will be amended or supplemented accordingly.
Until a date 90 days after the effective date of this Prospectus, all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution may be required to deliver a Prospectus. This
is in addition to the obligation of dealers to deliver a Prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
ATEL CAPITAL EQUIPMENT FUND XI, LLC is not a mutual fund or any other type
of investment company within the meaning of the Investment Company Act of 1940
and is not regulated by that Act.
ATEL SECURITIES CORPORATION
600 CALIFORNIA STREET, 6th FLOOR
SAN FRANCISCO, CA 94108
1.800.543.ATEL - FAX 415.989.2536
EMAIL ASC@ATEL.COM - www.atel.com
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Assuming the offer and sale of the maximum offering of Units, estimated expenses
in connection with the issuance and distribution of the Units, other than Sales
Commissions, in the aggregate are as follows:
Registration fee ............................$ 19,000
Printing costs............................... 650,000
Advertising expenses......................... 485,000
Legal fees and expenses ..................... 200,000
Accounting fees.............................. 200,000
Blue Sky fees and expenses................... 300,000
NASD fees and expenses....................... 15,500
Travel and telephone expenses................ 795,000
Mailing and shipping expenses................ 450,000
Broker-Dealer due
diligence reimbursements.................. 750,000
Broker-Dealer and Investor
seminars.................................. 435,000
Other wholesaling fees and expense
reimbursements............................ 315,000
Organization costs........................... 35,000
Escrow and Bank fees......................... 35,000
Administrative expenses...................... 346,000
Total............................... $5,030,500
---------------------------------------
ITEM 14. Indemnification of Directors and Officers.
(a) The directors and officers of ATEL Leasing Corporation,
Manager of ATEL Financial Services, LLC, the Registrant's Manager, may be
indemnified by such corporation for certain liabilities, including liabilities
under the Securities Act of 1933 and the Securities Exchange Act of 1934,
pursuant to its Articles of Incorporation and Bylaws and Section 317 of the
California Corporations Code.
Generally, directors and officers of ATEL Leasing Corporation
may seek indemnification from the corporation for liabilities, damages, costs,
attorney's fees and other charges assessed or otherwise payable by them arising
in connection with the discharge of their duties as directors or officers
(unless such liabilities arise as the result of willful or deliberate
misconduct) under one or more of the governing instruments referenced above.
(b) The Registrant has agreed, pursuant to the Limited
Liability Company Operating Agreement included as Exhibit B to the Prospectus,
to indemnify the Manager and its Affiliates against certain liabilities,
excluding liabilities under the Securities Act of 1933.
II-1
ITEM 15. Recent Sales of Unregistered Securities.
The Registrant has recently been formed but has not issued any
securities other than (i) the Manager's interest to ATEL Financial Services,
LLC, for a capital contribution of $100, and (ii) 50 units of limited liability
company interest issued to ATEL Capital Group as the original Member of the
Registrant, for a price of $10 per Unit. These sales occurred in October 2004 in
reliance upon the exemption from registration contained in Section 4(2) of the
Securities Act of 1933, as amended. These sales were for the purpose of
organizing the Registrant as a limited liability company and for investment
purposes and not with a view to the distribution of such securities.
ITEM 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
Number Exhibits
1.1 Form of Dealer Manager Agreement
1.2 Form of Selected Dealer Agreement
3.1 Limited Liability Company Operating Agreement (incorporated
by reference to Exhibit B to Prospectus)
5.1 Opinion regarding legality
8.1 Opinion regarding tax matters [To be filed by amendment.]
10.1 Form of Escrow Agreement
23.1 Consent of Ernst & Young
23.2 Consent of Derenthal & Dannhauser LLP (included in Exhibit
5.1 to this Registration Statement)
24.1 Powers of Attorney are set forth in this Part II of the
Registration Statement on Form S-1
(b) Financial Statements Included in the Prospectus.
ATEL Capital Equipment Fund XI, LLC
See Index to Financial Statements at page F-1 of the
prospectus included in Part I of this Registration Statement
ATEL Financial Corporation
See Index to Financial Statements at page F-1 of the
prospectus included in Part I of this Registration Statement
ITEM 17. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
II-2
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of this Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
this Registration Statement or any material change to such
information in this Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That all post-effective amendments will comply
with the applicable forms, rules and regulations of the commission in effect at
the time such post-effective amendments are filed.
(5) To send to each Member at least on an annual basis a
detailed statement of any transactions with the Manager or its affiliates, and
of fees, commissions, compensation and other benefits paid, or accrued to the
Manager or its affiliates for the fiscal year completed, showing the amount paid
or accrued to each recipient and the services performed.
(6) To send to the Members, within 45 days after the close
of each quarterly fiscal period, the information specified by the Form 10-Q, if
such report is required to be filed with the Commission.
(7) To send to the Members the financial statements
required by Form 10-K for the first full fiscal year of operations of the Fund.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to the Manager of the Registrant (or
controlling persons of the Manager or of the Registrant) pursuant to the
provisions described under Item 14 above or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by the Manager or controlling person of
the Registrant in the successful defense of any action suit or proceeding) is
asserted by any such Manager or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The registrant further undertakes (i) to file a sticker supplement
pursuant to Rule 424(c) under the Act describing each lease transaction not
described in the prospectus or a prior supplement promptly after there arises a
reasonable probability that such transaction will be acquired if the transaction
would require commitment by the registrant of an amount of offering proceeds in
excess of 10% of the offering proceeds received as of that date by the
registrant; and (ii) to consolidate all such sticker supplements into a
post-effective amendment filed at least once every three months during the
offering period.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, State of
California, on the 5th day of November, 2004.
ATEL CAPITAL EQUIPMENT FUND XI, LLC
By: ATEL Financial Services, LLC
a California limited liability company,
Manager
By: ATEL Leasing Corporation, Manager
By: /s/ DEAN L. CASH
----------------
Dean L. Cash
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS that the undersigned each hereby
constitutes and appoints Dean L. Cash and Paritosh Choksi, jointly and
severally, their true and lawful attorneys-in-fact, each with power of
substitution, for them in any and all capacities, to do any and all acts or
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable ATEL Capital Equipment Fund XI,
LLC (the "Fund"), to comply with the Securities Act of 1933, as amended (the
"Act"), and any rules and regulations thereunder, in connection with the
registration under the Act of up to 15,000,000 Units of limited liability
company interest in the Fund (the "Units"), including, but not limited to, the
power and authority to sign the name of the undersigned, in any and all
capacities, to a Registration Statement on Form S-1 relating to the Units to be
filed with the Securities and Exchange Commission, to any and all amendments
thereto, and to any and all documents or instruments filed in connection
therewith; and the undersigned each hereby ratifies and confirms all that each
of said attorneys, or his substitute or substitutes, shall do or cause to be
done by virtue hereof.
Signature Capacity Date
/s/ DEAN L. CASH Principal executive November 5, 2004
---------------- officer of Registrant; chief
Dean L. Cash executive officer and
director of ATEL Leasing
Corporation, Manager of
ATEL Financial Services, LLC,
Manager of Registrant
/s/ PARITOSH CHOKSI Principal financial November 5, 2004
------------------- officer and principal
Paritosh Choksi accounting officer of
Registrant; principal
financial officer and
principal accounting
officer, Director and
Executive Vice President of
ATEL Leasing Corporation,
Manager of ATEL Financial
Services, LLC, Manager of
Registrant
II-4
INDEX TO EXHIBITS
Exhibit Sequentially
Number Exhibit Numbered Page
---------- ---------- -------------
1.1 Form of Dealer Manager Agreement
1.2 Form of Selected Dealer Agreement
3.1 Limited Liability Company Operating
Agreement (incorporated by reference to
Exhibit B to Prospectus)
5.1 Opinion regarding legality
8.1 Opinion regarding tax matters [To be filed by amendment.]
10.1 Form of Escrow Agreement
23.1 Consent of Ernst & Young
23.2 Consent of Derenthal & Dannhauser LLP (included
in Exhibit 5.1 to this Registration
Statement)
24.1 Powers of Attorney are set forth
in Part II of the Registration
Statement on Form S-1
---------------------
$150,000,000
ATEL CAPITAL EQUIPMENT FUND XI, LLC
15,000,000 Limited Liability Company Member Units at $10 per Unit
Best Efforts
SELLING AGREEMENT
__________, 200_
ATEL Securities Corporation
600 California Street, 6th Floor
San Francisco, California 94108
as Dealer-Manager for the
above-described Units
Gentlemen:
ATEL Financial Services, LLC ("ATEL" or the "Manager") as Manager and on behalf
of ATEL Capital Equipment Fund XI, LLC, a California limited liability company
(the "Fund") pursuant to the Limited Liability Company Operating Agreement (the
"Operating Agreement") set forth as Exhibit B to the Prospectus (as hereinafter
defined), hereby confirms its agreement with you as follows:
1. Description of Units. Subject to the terms hereof the Fund proposes to issue
and to offer for sale an aggregate of 15,000,000 of its limited liability
company member units (the "Units"), at a price of $10 per Unit through you and
those licensed brokers, if any, designated by you.
2. Representations, Warranties and Agreements of the Fund and the Manager. The
Fund and the Manager, jointly and severally, represent and warrant to, and agree
with, you as follows:
(a) The Fund has prepared and filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement and amendments thereto, on Form S-l
(File No. 333-__________) covering the registration of the Units under the
Securities Act of 1933 (the "Securities Act"), including the related preliminary
prospectus. Such preliminary prospectus bears, and any amended prospectus will
bear, the legend required by the rules and regulations of the Commission under
the Securities Act (the "Rules and Regulations"). Such Registration Statement,
1
as amended, at the time it becomes effective, and the final prospectus included
therein, are herein respectively called the "Registration Statement" and the
"Prospectus."
(b) The Registration Statement and the Prospectus, and all amendments or
supplements thereto, will contain all statements which are required to be stated
therein in accordance with the Securities Act and the Rules and Regulations, and
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will contain any untrue statement of a material fact or omit
any material fact required to be stated therein or necessary to make the
statements therein not misleading. In this connection, it is understood by the
Fund and the Manager that Rule 2810(b)(3) of the Conduct Rules of the National
Association of Securities Dealers, Inc. requires that you determine that all
material facts relating to the subject offering are adequately and accurately
disclosed to prospective subscribers and provide a basis for evaluating the
offering, and the Fund and the Manager therefore specifically represent and
warrant that:
(i) all items of compensation payable to them and their affiliates are and will
be set forth in the Prospectus under the caption "Management Compensation";
(ii) all types of equipment to be acquired by the Fund are and will be described
in the Prospectus under the caption "Investment Objectives and Policies - Types
of Equipment" or in a supplement to be included inside the back cover of the
Prospectus;
(iii) all material tax aspects are and will be set forth in the Prospectus under
the captions "Income Tax Consequences" and "Risk Factors";
(iv) the financial position and business experience of the Manager and of those
affiliates of the Manager who are of relevance to the subject offering are and
will be accurately and adequately reflected in the Prospectus under the captions
"Management" and "Prior Performance Summary";
(v) all material conflicts of interest and risk factors are and will be set
forth in the Prospectus under the captions "Conflicts of Interest" and "Risk
Factors"; and
(vi) all pertinent facts relating to the liquidity and marketability of the
Units are and will be set forth in the Prospectus under the captions "Risk
Factors - Limited Transferability of Units" and "Summary of the Operating
Agreement - Transferability of Units."
(c) The accountants who have certified or shall certify the audited financial
statements filed and to be filed with the Commission as parts of the
Registration Statement and the Prospectus are independent accountants as
required by the Act and the Rules and Regulations.
2
(d) The financial statements filed with and as part of the Registration
Statement present fairly the respective financial positions of the Fund and ATEL
as of the date of such financial statements, in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
period involved.
(e) Except as set forth in or contemplated by the Registration Statement and the
Prospectus, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any material
adverse change in the condition, financial or otherwise, of the Manager or the
Fund; and except as set forth in or contemplated by the Registration Statement
and the Prospectus, neither the Manager nor the Fund have incurred any liability
or obligation or entered into any transaction since the date as of which
information is given in the Registration Statement and the Prospectus, otherwise
than in the ordinary course of business, which is material to the financial
condition of the Manager or the Fund.
(f) The Units conform to the description thereof contained in the Prospectus in
all material respects.
(g) Neither the issuance nor the sale of the Units, nor the consummation of any
other of the transactions herein contemplated, nor the fulfillment of the terms
hereof, will conflict with, result in a breach of or constitute a default under
the terms of any indenture, or other material agreement or instrument to which
the Manager or the Fund are, or will be, a party or are, or will be, bound, or,
to the best of the knowledge of the Manager, any order or regulation applicable
to the Manager or the Fund of any court, regulatory body, administrative agency
or governmental body having jurisdiction over the Manager or the Fund or any of
their respective assets or operations.
(h) The Units, when issued, will be duly authorized, validly issued, fully paid
and nonassessable.
(i) The Fund has been duly formed pursuant to the California Act (as defined in
the Operating Agreement) and is validly existing as a limited liability company
in good standing under the laws of the State of California with full power and
authority to own properties (or interests therein) and conduct its business as
described in the Prospectus. The Fund is qualified to do business as a limited
liability company or similar entity offering limited liability in those
jurisdictions where such qualification is necessary to assure limited liability
for the members. The Manager has been duly incorporated, is validly existing and
in good standing, under the laws of the State of California with full power and
authority to act as Manager of the Fund and conduct its business as described in
the Prospectus.
(j) The person or persons who have signed this Selling Agreement on behalf of
the Fund and the Manager are duly authorized so to sign, and this Selling
3
Agreement has been duly executed and delivered by, and is the valid, legal and
binding agreement of, the Fund and the Manager, enforceable in accordance with
its terms.
3. Representations and Warranties of the Dealer Manager. You represent and
warrant to and agree with the Fund as follows:
(a) You are a member in good standing of the National Association of Securities
Dealers, Inc., and will maintain such membership throughout the term of this
Agreement.
(b) You will comply with all federal laws pertaining to the sale of securities,
the laws of the jurisdictions in which you sell the Units, the Rules and
Regulations of the Commission and the Constitution, By-Laws and Rules of the
National Association of Securities Dealers, Inc., specifically including and
Rule 15c2-4 under the Securities Exchange Act of 1934, as interpreted in NASD
Notice to Members 84-64 (which requires that during the escrow period checks be
transmitted by you to the escrow agent as soon as practicable, but in any event
by noon of the second business day following receipt by you).
(c) You will make no sale of the Units unless such sale is preceded or
accompanied by the Prospectus.
(d) You will assist the Fund in qualifying the Units for sale under the laws of
the State of California and such other jurisdictions as the Dealer Manager and
the Manager shall mutually agree.
(e) You will (i) diligently make inquiries as required by law of all prospective
investors in order to ascertain whether a purchase of Units is suitable for the
investors and (ii) inform each prospective investor of all pertinent facts
relating to the liquidity and marketability of the Units during the term of the
investment. In recommending a purchase, sale or exchange of the Units you shall:
(1) have reasonable grounds to believe, on the basis of information obtained
from the participant concerning his investment objectives, other instruments,
financial situation and needs, and any other information known by you, that:
(i) the participant is or will be in a financial position appropriate to enable
him to realize to a significant extent the benefits described in the Prospectus;
(ii) the participant has a fair market net worth sufficient to sustain the risks
inherent in the program, including loss of investment and lack of liquidity; and
4
(iii) the program is otherwise suitable for the participant; and
(2) maintain in your files for at least six years documents disclosing the basis
upon which the determination of suitability was reached as to each participant.
(f) All Subscription Agreements shall be promptly transmitted to the Fund in
accordance with instructions set forth in the Subscription Agreements, and all
funds received by you with respect to any Subscription Agreement shall be
promptly transmitted to the Fund , provided, however, that pending sale of a
minimum of 120,000 Units, all subscription checks shall be made payable to, and
all Subscription Agreements and funds shall be promptly transmitted by you to,
such bank as may be selected to act as escrow agent for the Fund . As used
herein, the term "promptly transmitted" shall have the meaning set forth in Rule
15c2-4 under the Securities Exchange Act of 1934.
(g) You will maintain copies of all Subscription Agreements in your records for
the longer of the periods prescribed by either (i) Rule 17a-4 of the Securities
Exchange Act of 1934 or (ii) applicable state blue sky laws.
(h) You will execute no transaction in a discretionary account without prior
written approval of the transaction by the investor.
4. Sale of Units. On the basis of the representations and warranties herein
contained, but subject to the terms and conditions herein set forth, you agree
to sell the Units on a "best efforts" basis, as agent for the Fund. You are
authorized to enlist other members of the National Association of Securities
Dealers, Inc. ("Soliciting Dealers"), acceptable to the Fund, to sell the Units.
As compensation for these services, the Fund agrees that it will pay you a
selling commission in an amount equal to 9% of the offering price of the Units
sold pursuant to the terms of this Agreement, from which you may reallow a
dealer commission of up to 7.5% of such offering price. You will pay wholesaling
compensation to your personnel out of the selling commissions you will receive
hereunder. Aggregate selling compensation paid in connection with the offering,
will not exceed a total equal to 10% of the Gross Proceeds, plus an additional
one-half of 1% as provided in the following sentence. The Fund may reimburse the
Soliciting Dealers for their bona fide and accountable expenses for due
diligence purposes, in an amount not to exceed one-half of l% of the offering
price of the Units sold pursuant to this Agreement. In addition to the selling
compensation described above, the Fund may establish a non-cash sales incentive
program as described in the Prospectus, subject to the prior review and approval
of the NASD and compliance with all applicable NASD rules and procedures.
Notwithstanding the foregoing, however, it is understood and agreed that the
Manager has reserved the right to accept or reject any subscriptions for Units
5
as set forth in the Prospectus and no selling commission will be payable to you
or any of the Soliciting Dealers with respect to the tender of any Subscription
Agreement which is rejected by you or the Manager as aforesaid. Furthermore, no
subscription will be deemed binding until at least five days following delivery
of a Prospectus.
The Fund further agrees that it will pay the foregoing selling commission with
respect to the purchase price of each of the Units upon the Manager's acceptance
of the order for such Units; provided, however, that none of such commissions
will be payable or paid until release to the Fund from the escrow account in
which they are to be deposited of proceeds from subscriptions for a minimum of
120,000 Units.
It is understood and agreed that you may, in your discretion, permit you, the
Manager, a Soliciting Dealer or any Affiliate or employee of any of the
foregoing or certain clients of registered investment advisors to purchase Units
net of the 7.5% retail selling commissions at a per Unit price of $9.25, as more
specifically described in the Prospectus under "Plan of Distribution -
Investments by Certain Persons." Any such sale of Units net of retail
commissions to you, the Manager, a Soliciting Dealer or any Affiliate or
employee of such person will only be made if and to the extent that any
Soliciting Dealer which would otherwise be entitled to a selling commission on
any such transaction agrees to such rebate.
5. Certain Covenants of the Fund and the Manager. The Fund and the Manager
covenant and agree with you as follows:
(a) The Fund will not at any time file or make any amendment or supplement to
the Registration Statement or Prospectus of which you shall not have previously
been advised and furnished a copy, or to which you or any Soliciting Dealer
shall object in writing.
(b) The Fund will advise you and each Soliciting Dealer immediately, and confirm
the advice in writing, (i) when the Registration Statement shall have become
effective with the Commission, (ii) when any post-effective amendment to the
Registration Statement shall have become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (iii) of any request
of the Commission for amendment or supplementation of the Registration Statement
or Prospectus or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Units for offering
or sale in any jurisdiction, or of the institution of any proceedings for any
such purposes. The Fund will use its best efforts to prevent the issuance of any
such stop order or of any order preventing or suspending such use and to obtain
as soon as possible the lifting thereof, if issued.
6
(c) The Fund will deliver to you and each Soliciting Dealer without charge, and
when requested, such number of copies of the preliminary and amended preliminary
prospectus, and the Prospectus (as supplemented or amended, if the Fund shall
have made any supplements or amendments to the Prospectus) as you and each
Soliciting Dealer may reasonably request.
(d) The Fund will comply to the best of its ability with the Securities Act and
the Rules and Regulations so as to permit the continuance of sales of and
dealings in the Units under the Securities Act. If at any time when a prospectus
is required to be delivered under the Securities Act, an event shall have
occurred as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein not untrue or misleading or
to make the Prospectus comply with the Securities Act, the Fund will notify you
and each Soliciting Dealer promptly thereof and will furnish to you an amendment
or supplement which will correct such statement in accordance with the
requirements of Section l0 of the Securities Act.
(e) The Fund will use its best efforts to qualify the Units for sale under the
laws of the State of California and such other jurisdictions as the Manager and
you shall mutually agree and will comply to the best of its ability with such
laws so as to permit the continuance of sales of and dealings in the Units
thereunder.
(f) The Fund will furnish to you and each Soliciting Dealer with copies of all
such documents, reports and information as shall be of general interest and are
furnished by the Fund to investors in the Units generally.
(g) The Fund and the Manager will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement, preliminary and amended preliminary prospectus and Prospectus and
amendments or supplements thereto, including fees of legal counsel for the Fund
, the qualifying of the Units under the laws of certain jurisdictions as
aforesaid, including filing fees and fees and disbursements of counsel in
connection therewith, and the cost of furnishing to you and the Soliciting
Dealers copies of the Registration Statement, preliminary and amended
preliminary prospectus and Prospectus as herein provided.
6. Conditions to Dealer Manager's Obligations. Within a period of five days
after the effective date of the Prospectus (the "Effective Date"), there shall
be furnished to you the following:
(a) The favorable opinion of Derenthal & Dannhauser, counsel for the Fund and
the Manager, dated the Effective Date, in form and substance satisfactory to
your legal counsel, to the effect that:
(i) The Registration Statement has become effective under the Securities Act
and, to the best of the knowledge of such counsel, no stop order suspending the
7
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or are contemplated under
the Securities Act.
(ii) The Registration Statement, the Prospectus, and each amendment or
supplement thereto (except for the financial statements, as to which such
counsel need express no opinion) comply as to form in all material respects with
the requirements of the Securities Act and the Rules and Regulations.
(iii) Such counsel have participated in the preparation of the Registration
Statement and Prospectus and no facts have come to the attention of such counsel
to lead them to believe that either the Registration Statement or the Prospectus
or any such amendment or supplement (except for the financial statements, as to
which such counsel need express no opinion) contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(iv) The description in the Registration Statement and Prospectus of the
contracts and other documents therein described are accurate and fairly
represent the information required to be shown.
(v) Such counsel do not know of any statutes or regulations or legal or
governmental proceedings required to be described in the Prospectus which are
not described as required, nor of any contract or documents of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement which are not described and
filed as required.
(vi) This Agreement has been duly executed and delivered by the Manager; and
(upon the assumption that the Registration Statement complies with the
Securities Act) this Agreement is a valid and binding agreement of the Manager
in accordance with its terms.
(b) A certificate, dated the Effective Date, signed by the Manager, to the
effect that: (i) the representations and warranties of the Fund and the Manager
contained in this Agreement are correct; and (ii) the signers of said
certificate have carefully examined the Registration Statement and the
Prospectus, and in their opinion (A) neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto contains any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (B)
there are no material legal or governmental proceedings to which the Fund or
Manager are a party or of which the business or assets of the Fund or Manager
are the subject which are not disclosed in the Registration Statement and the
Prospectus.
8
(c) A letter addressed to you from Ernst & Young dated not earlier than the
business day immediately preceding the Effective Date, stating that:
(i) With respect to the Fund , they are "independent public accountants" as such
term is defined in the Securities Act and the Rules and Regulations, and they
were not employed by the Fund on a contingent basis and they (and their partners
and associates individually) do not, either at the time of the preparation of
financial statements reported upon by them or at any time thereafter, have
substantial interest in the Fund or any of its parents (as such term is defined
in Rule 405(n) of the Commission) or have any connection with the Fund as a
promoter, underwriter, voting trustee, director, officer, partner or employee.
(ii) In their opinion, the balance sheets of the Fund and ATEL reported upon by
them and included in the Registration Statement comply in all material respects
with all of the accounting requirements contained in the Securities Act and the
Rules and Regulations with respect to Registration Statements on Form S-1.
(iii) On the basis of a reading of the audited balance sheets of the Fund and
ATEL included in the Registration Statement and upon inquiries of officers of
the Fund responsible for financial and accounting matters and other specified
procedures, nothing has come to their attention which caused them to believe
that (a) said balance sheets: (x) do not comply as to form in all material
respects with the applicable requirements of the Securities Act and the Rules
and Regulations with respect to Registration Statements on Form S-1 and (y) are
not fairly presented in conformity with generally accepted accounting principles
applied on a consistent basis; or (b) as of the date of the latest available
unaudited interim balance sheets prepared by the Fund or ATEL, there was any
material change from the amounts shown in the balance sheets included in the
Prospectus, except in all instances for changes or decreases which the
Prospectus discloses have occurred or may occur.
(iv) On the basis of inquiries of officers of the Fund responsible for financial
and accounting matters and such other procedures as they have deemed adequate in
connection with said opinion, nothing has come to their attention which caused
them to believe that at a specific date within five days of the date of such
letter there was any material change from amounts shown on the balance sheet
included in the Prospectus except in all instances for changes or decreases
which the Prospectus discloses have occurred or may occur.
7. Indemnification.
(a) The Manager shall indemnify and hold you and any Soliciting Dealers harmless
against any losses, claims, damages or liabilities, joint or several:
9
(i) to which you or any Soliciting Dealer may become subject under the
Securities Act, the various State securities laws or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus or any
amendment or supplement thereto or in any sales literature furnished by us, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; or
(ii) to which you or any Soliciting Dealer may become subject due to the
misrepresentation by the Fund or the Manager or its agents (other than you or
any Soliciting Dealer) of material facts in connection with the sale of the
Units, unless the misrepresentation of such material facts was the direct result
of misleading information provided to the Fund or the Manager or its agents by
you; or
(iii) to which you or any Soliciting Dealer may become subject as a result of
any breach by the Fund or the Manager of the representations, warranties, and
covenants contained herein.
The Manager will reimburse you and any Soliciting Dealers for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such loss, claim, damage or liability (or actions in respect thereof); provided,
however, that the Manager shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, the Prospectus, or such amendment or
supplement or in any sales literature, in reliance upon and in conformity with
written information furnished to the Fund or the Manager by you specifically for
use in the preparation thereof. This indemnity agreement shall be in addition to
any liabilities which the Fund or the Manager may otherwise have in connection
with this offering.
The foregoing indemnity agreement shall extend upon the same terms and
conditions to, and shall inure to the benefit of, each person, if any, who
controls you or any Soliciting Dealer within the meaning of the Securities Act.
(b) You agree and each Soliciting Dealer will agree to indemnify and hold
harmless the Fund and the Manager against any losses, claims, damages or
liabilities, joint or several, to which the Fund or the Manager may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or
supplement thereto or in any sales literature, or arise out of or are based upon
the omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
10
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, the Prospectus, or such amendment or supplement or in
any sales literature, in reliance upon and in conformity with written
information furnished to the Fund or the Managers by you specifically for use in
the preparation thereof; and will reimburse the Fund and the Manager for any
legal or other expenses reasonably incurred in connection with investigating or
defending any such loss, claim, damage or liability (or action in respect
thereof). This indemnity agreement shall be in addition to any liabilities which
you or any Soliciting Dealer may otherwise have in connection with this
offering.
The foregoing indemnity agreement shall extend upon the same terms and
conditions to, and shall inure to the benefit of, each person, if any, who
controls the Fund or the Manager within the meaning of the Securities Act.
(c) Promptly after receipt by an indemnified party of notice of the commencement
of any action, such indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under subparagraphs (a) and (b) of this
Paragraph 7, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subparagraph. In case any such action shall be brought against such
indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, jointly with any other indemnifying
party, similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnifying and indemnified parties, and after the
indemnified party shall have received notice from the agreed upon counsel that
the defense has been so assumed, in the event that the indemnified party
nonetheless elects to participate in the defense of any such action for any
reason other than the presence of a conflict of interest, the indemnifying party
shall not be responsible for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof.
8. Non-Circumvention. Neither the Manager, the Fund , nor any affiliates
thereof, will (a) notify or actively solicit any Soliciting Dealer's clients
with respect to any further transactions, or (b) release the name and/or account
information for any of any Soliciting Dealer's clients to any other party unless
required by court order, an authorized governmental or self-regulatory entity,
or by the Operating Agreement to do so. For purposes of this paragraph "notify
or solicit" shall not be deemed to include any direct and unassisted contact by
a broker-dealer other than the Manager, the Dealer Manager or the Fund . The
provisions of this section shall survive any termination of this Selling
Agreement.
11
9. Termination. This Agreement shall automatically be terminated, and the Fund
shall have no liability for the payment of any commissions or fees hereunder, in
the event of the failure of you and the Soliciting Dealers to sell at least
120,000 of the Units prior to the termination of the offering by the Manager.
10. Applicable Law. This Agreement shall be construed in accordance with the
laws of the State of California.
11. Notices. Except as otherwise provided in this Agreement, (a) whenever notice
is required by the provisions of this Agreement to be given to the Fund or the
Manager, such notice shall be in writing addressed to the Fund or the Manager,
or both, as the case may be, at 600 California Street, 6th Floor, San Francisco,
California 94108 and (b) whenever notice is required by the provisions of this
Agreement to be given to the Dealer Manager or the Soliciting Dealers, such
notice shall be in writing addressed to you at 600 California Street, 6th Floor,
San Francisco, California 94108.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
12. Benefit. This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties hereto.
If the foregoing correctly sets forth your understanding, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.
Very truly yours,
ATEL CAPITAL EQUIPMENT FUND XI, LLC,
a California limited liability company
By: ATEL Financial Services, LLC,
a California corporation, Manager
By: ATEL Leasing Corporation, Manager
By: ___________________________
Dean L. Cash, President
Accepted this __ day of ______, 200_:
ATEL SECURITIES CORPORATION,
a California corporation, Dealer Manager
By: __________________________
13
ATEL CAPITAL EQUIPMENT FUND XI, LLC
SELECTED DEALERS AGREEMENT
San Francisco, California
___________, 200_
Gentlemen:
The undersigned, ATEL Securities Corporation (the "Dealer Manager"),
has entered into an agreement (the "Selling Agreement") with ATEL CAPITAL
EQUIPMENT FUND XI, LLC, a California limited liability company (the "Fund") and
the Manager, ATEL Financial Services, LLC (the "Manager") pursuant to which the
undersigned has agreed to use its best efforts to form and manage, as Dealer
Manager, a group of securities dealers (the "Soliciting Dealers") for the
purpose of soliciting offers for the purchase of units of limited liability
company interest ("Units") in the Fund. The terms of the offering are set forth
in the Fund's Registration Statement No. 333-__________, on Form S-1 which was
filed with the Securities and Exchange Commission (the "Commission") pursuant to
the Securities Act of 1933, as amended (the "1933 Act"). Such registration
statement in the form in which it became effective is referred to herein as the
"Registration Statement" and the prospectus included therein, in the form in
which it became effective and in the form as first filed with the Commission
pursuant to its Rule 424, is referred to herein as the "Prospectus." The terms
used but not otherwise defined in this Agreement have the same meanings as in
the Prospectus.
You are invited to become one of the Soliciting Dealers and by your
confirmation hereof you agree to act in such capacity and to use your best
efforts, in accordance with the following terms and conditions, to find
purchasers for the Units. You hereby confirm that you are a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD").
l. You hereby agree to solicit, as an independent contractor and not as
our agent or as an agent of the Fund or the Manager, persons acceptable to the
Manager to enter into the Subscription Agreement in the form attached to the
Prospectus. Until such time as subscription proceeds for a total of not less
than 120,000 Units are received, accepted and deposited with the escrow agent,
all subscription checks shall be payable to "U. S. Bank - ACEF XI Escrow." All
Subscription Agreements solicited by you shall be transmitted promptly to the
Dealer Manager in accordance with the instructions set forth in the Subscription
Agreements, and all funds received by you with respect to any Subscription
Agreement shall be promptly transmitted to the Dealer Manager. As used herein
the term "promptly transmitted" shall have the meaning set forth in Rule 15c2-4
under the Securities Exchange Act of 1934 (the "1934 Act"), as interpreted in
NASD Notice to Members 84-64. You hereby agree to comply in full with such NASD
Notice to Members 84-64, as it may be amended from time to time. We in turn will
transmit subscriptions and funds received during the escrow period to the escrow
agent not later than noon of the second business day following receipt of same
by us. After subscriptions for a minimum of 120,000 Units have been received,
accepted and deposited with the escrow agent, and subscription proceeds are
thereafter released to the Fund pursuant to the terms of the escrow agreement,
all further subscription checks shall be payable directly to the Fund. No
Subscription Agreement shall be effective unless and until accepted by the
Manager, and in no event will a subscription be effective until five days after
the investor has received a Prospectus.
You agree that you will:
(a) (i) diligently make inquiries as required by law of all
prospective investors in order to ascertain whether a purchase
of Units is suitable for the investors and (ii) inform each
prospective investor of all pertinent facts relating to the
liquidity and marketability of the Units during the term of
the investment;
1
(b) have reasonable grounds to believe, on the basis of
information obtained from the participant concerning his
investment objectives, other investments, financial situation
and needs, and any other information known by you, that:
(i) the participant is or will be in a
financial position appropriate to enable him to
realize to a significant extent the benefits
described in the Prospectus;
(ii) the participant has a fair market net
worth sufficient to sustain the risks inherent in the
program, including loss of investment and lack of
liquidity; and
(iii) the program is otherwise suitable for
the participant;
(c) maintain copies of all Subscription Agreements and
information relating to suitability determinations in your
records for the longer of (i) six years from the date of
investment, (ii) the period prescribed by Rule 17a-4 under the
1934 Act, or (iii) the period required by applicable state
blue sky laws;
(d) execute no transaction in a discretionary account without
prior written approval of the transaction by the investor; and
(e) comply in all respects with the Conduct Rules of the NASD
in the conduct of the offering of Units.
Furthermore, you expressly agree to be bound by the escrow agreement
executed by the Fund for the deposit of subscription proceeds pending receipt
and acceptance of subscriptions for a minimum of 120,000 Units.
All subscriptions solicited by you will be strictly subject to
confirmation by us and acceptance thereof by the Fund and we, the Fund and the
Manager, reserve the right in our and its uncontrolled discretion to reject any
such subscription and to accept or reject subscriptions in the order of their
receipt by the Fund or otherwise. A sale of a Unit shall be deemed to be
completed only after (i) the Fund receives a properly completed subscription
agreement from the Soliciting Dealer, together with payment of the full purchase
price of each purchased Unit from a buyer who satisfies each of the terms and
conditions of the Registration Statement and Prospectus; (ii) a period of five
days has passed following the receipt by the investor of a Prospectus; and (iii)
such subscription agreement has been accepted in writing by the Manager. Neither
you nor any other person is authorized to give any information or make any
representation other than those contained in the Prospectus or in any
supplemental sales literature furnished by the Dealer Manager or the Fund for
use in making solicitations in connection with the offer and sale of the Units.
Upon release by us, you may offer the Units at the public offering
price, subject to the terms and conditions hereof.
2. We understand that the Fund will provide you with such number of
copies of the enclosed Prospectus and such number of copies of amendments and
supplements thereto as you may reasonably request. In this connection, the Fund
and the Manager have represented and warranted to us that the Registration
Statement and the Prospectus, and all amendments or supplements thereto, will
contain all statements which are required to be stated therein in accordance
with the 1933 Act and the Rules and Regulations thereunder, and neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will contain any untrue statement of a material fact or omit any
material fact required to be stated therein or necessary to make the statements
therein not misleading. It is understood by the Fund and the Manager that
Section (b)(3) of Rule 2810 of the Conduct Rules of the NASD requires that you
determine that all material facts relating to the subject offering are
2
adequately and accurately disclosed to prospective subscribers and provide a
basis for evaluating the offering, and the Fund and the Manager therefore have
specifically represented and warranted to us that:
(a) all items of compensation payable to them and their affiliates are
and will be set forth in the Prospectus under the caption "Management
Compensation";
(b) all types of Equipment to be acquired by the Fund are and will be
described in the Prospectus under the caption "Investment Objectives
and Policies - Types of Equipment" or in a supplement to be included
inside the back cover of the Prospectus;
(c) all material tax aspects are and will be set forth in the
Prospectus under the captions "Income Tax Consequences" and "Risk
Factors";
(d) the financial position and business experience of the Manager and
of those affiliates of the Manager who are of relevance to the subject
offering are and will be accurately and adequately reflected in the
Prospectus under the captions "Management" and "Prior Performance
Summary";
(e) all material conflicts of interest and risk factors are and will be
set forth in the Prospectus under the captions "Conflicts of Interest"
and "Risk Factors"; and
(f) all pertinent facts relating to the liquidity and marketability of
the Units are and will be set forth in the Prospectus under the
captions "Risk Factors - Limited Transferability of Units" and "Summary
of the Limited Liability Company Operating Agreement - Transferability
of Units."
We also understand that the Fund may provide you with certain
supplemental sales material to be used by you in connection with the
solicitation of Units in the Fund. We will comply with the filing requirements
of Section 2210(c)(2) of the NASD Conduct rules with respect to any
advertisements or sales literature to be used as supplemental sales material in
connection with the solicitation of Units. You agree not to use any
advertisement or sales literature, as those terms are defined in Section 2210(a)
of the NASD Conduct Rules, as supplemental sales literature in the solicitation
of Units except to the extent such materials are provided by us or we have given
our prior written approval for use of such materials. In the event you elect to
use supplemental sales material, you agree that such material shall not be used
in connection with the solicitations of Units unless accompanied or preceded by
the Prospectus as then currently in effect and as it may be amended or
supplemented in the future, unless you are notified by us that such material has
been prepared and cleared for use in compliance with the SEC's Rule 134. Upon
your request, we will furnish to you information necessary to confirm the
continued fairness, accuracy, and completeness of the Prospectus in all material
respects during the offering period.
We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the offering. We shall be
under no liability to you except for lack of good faith and for obligations
expressly assumed by us in this Agreement. Nothing contained in this paragraph
is intended to operate as, and the provisions of this paragraph shall not
constitute, a waiver by you of compliance with any provision of the 1933 Act, or
of the rules and regulations thereunder.
You confirm that you are familiar with Securities Act Release No. 4968
and Rule l5c2-8 under the 1934 Act, relating to the distribution of preliminary
and final prospectuses, and confirm that you have complied and will comply
therewith. We will make available to you, to the extent they are made available
to us by the Fund, such number of copies of the Prospectus as you may reasonably
request for the purposes contemplated by the 1933 Act and the applicable rules
and regulations thereunder.
You agree that you will exercise due diligence in determining that all
material facts are adequately and accurately disclosed in the Prospectus. For
purposes of compliance with Sections (b)(3)(A) and (B) of Rule 2810 of the
Conduct Rules of the NASD regarding due diligence, it is understood and agreed
that you may rely upon the results of an inquiry conducted by another member or
members of the NASD, provided that:
3
(i) you have reasonable grounds to believe that such inquiry
was conducted with due care;
(ii) the results of the inquiry were provided to you with the
consent of the member or members conducting or directing the inquiry;
and
(iii) no member that participated in the inquiry is a sponsor
of the Fund or an Affiliate of such sponsor.
3. We will be entitled to receive from the Fund a selling commission
equal to 9% of the Gross Proceeds. For your services hereunder, subject to the
condition that Subscription Agreements for a minimum of 120,000 Units have been
received and accepted by the Manager by the termination date of the offering,
you will receive from us a selling commission equal to 7.5% of the proceeds from
all Subscription Agreements solicited by you and accepted by the Manager. It is
understood and agreed that no reimbursement will be made for any due diligence
expenses unless they represent bona fide due diligence expenses incurred by you,
such expenses are documented by itemized invoice and such invoice is delivered
to us by the earlier of a date 90 days after notice of termination of the
offering of Units or a date two years from the date the offering commences.
In the event that a sale of Units for which you have solicited a
Subscription Agreement shall not occur, whether by reason of the failure of any
condition specified herein or in the Subscription Agreement or the Selling
Agreement, rejection of the subscription by the Fund or otherwise, no payment
with respect to such Unit shall be made to you. Further, it is understood and
agreed that we shall be under no obligation to make payment to you, and you
expressly waive payment, of any commission hereunder except to the extent that
we shall have first received from the Fund the selling commission to which we
are entitled in connection with the subject transaction. Any payment to you will
be payable only with respect to transactions lawful in the jurisdictions where
they occur.
We as Dealer Manager may, in our discretion, permit the Manager, a
Soliciting Dealer or any Affiliate or employee of any of the foregoing or
certain clients of registered investment advisors to purchase Units net of the
7.5% retail selling commissions at a per Unit price of $9.25, as more
specifically described in the Prospectus under "Plan of Distribution -
Investments by Certain Persons." Any such sale of Units net of retail
commissions will only be permitted if and to the extent that the Soliciting
Dealer which would otherwise be entitled to a selling commission on any such
transaction agrees to such terms. Therefore, we will by separate letter
agreement establish the amount of selling commission, if any, on transactions
for which you would otherwise be entitled to the full selling commission, but
which are eligible for the reduction. It shall be your responsibility to notify
your Affiliates and employees as to the amount, if any, by which you agree to
reduce compensation otherwise payable to you.
As described in the Prospectus, we may from time to time during the
offering establish a non-cash sales incentive bonus program, subject to prior
NASD approval and compliance with all applicable NASD rules and procedures.
4. This Agreement may be terminated by us or by you at any time upon
five days' written notice.
5. In soliciting persons to acquire the Units, you agree to comply with
any applicable requirements of the 1933 Act, the 1934 Act, the published rules
and regulations thereunder and the Conduct Rules of the NASD and, in particular,
you agree that you will not give any information or make any representation
other than those contained in the Prospectus and in any supplemental sales
literature furnished to you by the Fund or us for use in making such
solicitations. You further confirm and agree that, in connection with any
4
assistance you may provide in the sale or transfer of Units, you will fulfill
your obligations pursuant to Sections (b)(2)(B) and (b)(3)(D) of Rule 2810 of
the Conduct Rules of the NASD.
6. We assume no obligation or responsibility in respect of the
qualification of the Units under the laws of any jurisdiction, except to the
extent that we have affirmatively represented to you the effectiveness of any
such qualification. The Blue Sky Memorandum enclosed, or to be promptly
furnished to you, indicates the states in which it is believed by the Fund that
the Units are exempt from, or have been qualified under, the applicable state
securities or "blue sky" laws and the restrictions, if any, on the rights of
dealers to solicit sales thereof. It is understood that under no circumstances
will you engage in any activities hereunder in any state which is not listed in
said Blue Sky Memorandum as a state in which the Units are exempt from, or
qualified under, the state securities or "blue sky" laws. Solicitations are to
be made only by Soliciting Dealers qualified to act as such for such purpose
within the states in which they make such solicitations.
7. Nothing contained herein shall constitute the Soliciting Dealers and
us, or any of them, an association, partnership, unincorporated business, or
other separate entity. We shall be under no liability to make any payment to you
except out of funds received by us from the Fund as hereinabove provided, and we
shall not be under any liability for or in respect of the value or validity of
the Subscription Agreements, the Units, or the performance by anyone of any
agreement on its part, or for, or in respect of any matters connected with this
Agreement. Notwithstanding the previous sentence, we shall be fully liable to
you for any damages or harm suffered by you as a direct result of our lack of
good faith, or for obligations expressly assumed by us in this Agreement.
8. It is expressly understood that the Dealer Manager may cooperate
with other broker dealers who are licensed members of the NASD, registered as
broker dealers with the SEC and duly licensed by the appropriate regulatory
agency of each state in which they will offer and sell the Units of the Fund.
Such other NASD members may be employed by the Dealer Manager as Soliciting
Dealers on terms and conditions identical or similar to this Agreement and shall
receive such rates of commission as are agreed to between the Dealer Manager and
the respective other Soliciting Dealers and as are in accordance with the terms
of the Registration Statement, and to that extent such other Soliciting Dealers
shall compete with you in the sale of the Units.
9. Under the Selling Agreement, the Manager has agreed to indemnify us,
the Soliciting Dealers and each person, if any, who controls us or any
Soliciting Dealer within the meaning of the 1933 Act against certain liabilities
under such Act. Each Soliciting Dealer agrees to indemnify the Manager and the
Fund as provided in Paragraph 7 of the Selling Agreement and to indemnify us and
each other Soliciting Dealer to the same extent and in the same manner as such
Soliciting Dealer agrees to indemnify the Manager and the Fund. In the execution
of the Selling Agreement, we shall be deemed to have acted as a representative
of each of the Soliciting Dealers, and the Soliciting Dealers shall be deemed to
be in privity of contract with the Manager and the Fund.
10. Neither the Dealer Manager, the Fund or the Manager, nor any
affiliates thereof, will (a) notify or actively solicit your clients with
respect to any further transactions, or (b) release the name and/or account
information or any of your clients to any other party unless required by court
order, an authorized governmental or self-regulatory entity, or by the Limited
Liability Company Operating Agreement to do so. For purposes of this paragraph
"notify or solicit" shall not be deemed to include any direct and unassisted
contact by a broker-dealer other than the sponsor, the Dealer Manager or the
Fund. The provisions of this section shall survive any termination of the
Selling Agreement or this Agreement.
11. You understand and acknowledge that in the process of conducting
your due diligence investigation of the Dealer Manager, the Fund or its Manager,
or any affiliates thereof (each, and "ATEL Party"), you may be granted access
to, and take possession and control, and otherwise shall have information deemed
5
confidential in nature by such ATEL Party. The term "Confidential Materials"
means any materials with respect to, whether or not such materials are
proprietary to, any ATEL Party, whether or not owned or developed by such ATEL
Party, which are not generally known other than by such ATEL Party, and which
you may obtain from an ATEL Party through any direct or indirect contact with an
ATEL party or through your due diligence investigation, whether performed by you
directly or by your agent or nominee. Confidential Materials include, without
limitation, reports, economic models, ideas, plans, programs and concepts with
us or any other ATEL Party, whether or not such information meets the legal
definition of a "trade secret". You understand and acknowledge that the
Confidential Materials are a unique asset of the respective ATEL Party, which
provide such ATEL Party with a significant competitive advantage and would be
harmful to the ATEL Party if the Confidential Materials were improperly
disclosed. Therefore, you agree to hold in confidence and to not disclose the
Confidential Materials to any person or entity without our prior written
consent, and will not copy or modify any Confidential Materials without our
prior written consent. You hereby also agree to use the Confidential Materials
strictly for your due diligence evaluation of the ATEL Party. Further, you agree
to not disclose any Confidential Materials to any third person, or to any of
your associates, except those associates who are required to have the
Confidential Materials in order to perform their job duties in connection with
the limited purposes of due diligence evaluation and work related to the
Relationship ("Permitted Use"). You shall assure that each permitted associate
to whom Confidential Materials is disclosed pursuant to a Permitted Use shall be
bound by the terms of this Paragraph 11, and you shall advised such associate of
the existence and contents of the terms of this confidentiality provision.
Nothing will prevent you from producing Confidential Materials pursuant to any
subpoena, but, in such event, you will provide us with notice so that the
respective ATEL Party may seek a protective order. The obligation to maintain
the confidentiality and non-use will not apply to Confidential Materials, which
is in, or hereinafter becomes part of, the public domain without breach hereof.
You shall further refrain from, directly or indirectly, using for competitive
purposes, disclosing, disseminating or publishing the Confidential Materials,
except as approved in writing by us, and shall take such steps as are necessary
to keep the Confidential Materials confidential. This provision shall continue
to bind you regardless of the outcome of any sale of Units or receipt of
Commissions. It is agreed and stipulated by you that the disclosure or use of
the Confidential Materials in violation of this provision by you will cause
certain damages to the respective ATEL Party, and that the amount of such
damages is difficult to calculate. Accordingly, in the event that you cause or
permit the disclosure of the Confidential Materials to a third party and/or use
the Confidential Materials for any reason other than the Permitted Use, the
respective ATEL Party will have recourse to injunctive relief. The ATEL Party
shall not be prohibited by this provision from pursuing other remedies,
including a claim for losses and damages. Furthermore, if a dispute regarding
this Paragraph 11 arises and you are not the successful party in the resolution
of the dispute, you agree to pay reasonable attorney's fees and all court costs
and other expenses. Upon the written request of ATEL, you shall return to ATEL
all written materials containing the Confidential Materials, except for those
Confidential Materials which you are required, by law, self regulatory
organization rule and/or regulation, to keep. In such case, you shall also
deliver to us written statements signed by you certifying that all Confidential
Materials required to be returned have been returned, within five (5) days of
receipt of the request.
12. We acknowledge that you may form opinions regarding the Dealer
Manager, the Fund, or the Manager, regarding the Units including but not limited
to evaluations of the Dealer Manager's, the Fund's or the Manager's personnel,
track record, financial statements, and terms of the offering. This evaluation
may differ from the Dealer Manager's, the Fund's or the Manager's assessment and
may be negative in nature. The Dealer Manager, the Fund and the Manager
acknowledge that said evaluation shall not prohibit you from satisfying your
"best efforts" obligation under the sales agreement. We hereby grant you the
right to communicate to others your evaluations so long as such evaluations are
made in good faith and the communication concerning the evaluations are
consistent with such evaluations and are limited in scope to the extent
6
reasonably deemed necessary by you to serve your customers and otherwise to
conduct your securities business. We waive any rights of action which may arise
from the circumstances described in this paragraph.
13. Any controversy or claim arising out of this agreement shall be
settled by arbitration in California in accordance with the then current rules
of the NASD, if appropriate, and otherwise with the then current rules of the
American Arbitration Association. Judgment upon the arbitration award may be
entered in any court having jurisdiction. Reasonable expenses, attorney's fees,
and costs incurred therein shall be paid in accordance with the award of the
arbitrators. The prevailing party shall be reimbursed for the reasonable costs
of the investigation, attorney's fees and court costs.
14. Any notice from us to you as Soliciting Dealer shall be deemed to
have been duly given if mailed or telegraphed to you at your address set forth
below.
15. To protect Customer Information (as defined below) and to comply as
may be necessary with the requirements of the Gramm-Leach-Bliley Act, the
relevant state and federal regulations pursuant thereto and state privacy laws,
the parties wish to include the confidentiality and non-disclosure obligations
set forth herein.
(a) "Customer Information" means any information contained on a customer's
subscription documents or other form and all nonpublic personal
information about a customer that a party receives from the other
party. "Customer Information" shall include, but not be limited to,
name, address, telephone number, social security number, health
information and personal financial information (which may include
consumer account number).
(b) The parties understand and acknowledge that they may be deemed to be
financial institutions subject to applicable federal and state
customer and consumer privacy laws and regulations, including Title V
of the Gramm-Leach-Bliley Act (15 U.S.C. 6801, et seq.) and
regulations promulgated thereunder (collectively, the "Privacy
Laws"), and any Customer Information that one party receives from the
other party is received with limitations on its use and
disclosure. The parties agree that they are prohibited from
using the Customer Information received from the other party other
than (i) as required by law, regulation or rule, or (ii) to carry
out the purposes for which one party discloses Customer Information
to the other party pursuant to the Agreement, as permitted under
the use in the ordinary course of business exception to the Privacy
Laws.
(c) The parties understand and acknowledge that they may be financial
institutions subject to applicable federal and state customer and
consumer privacy laws and regulations, including Title V of the
Gramm-Leach-Bliley Act (15 U.S.C. 6801, et seq.) and regulations
promulgated thereunder (collectively, the "Privacy Laws"), and that
any Customer Information that one party receives from the other party
is received with limitations on its use and disclosure. The parties
agree that they are prohibited from using the Customer Information
received from the other party other than (i) as required by law,
regulation or rule, or (ii) to carry out the purposes for which one
party discloses Customer Information to the other party pursuant to
this Agreement, or as permitted under the use in the ordinary course
of business exception to the Privacy Laws.
(d) The parties shall establish and maintain safeguards against the
unauthorized access, destruction, loss, or alteration of Customer
Information in their control which are no less rigorous than those
maintained by a party for its own information of a similar nature. In
the event of any improper disclosure of any Customer Information, the
party responsible for the disclosure will immediately notify the other
party.
7
(e) The parties agree to discontinue the use of and destroy, where
applicable and as permissible, under law and regulation, all
information, ideas, techniques, and materials supplied by the other
party upon termination of this Agreement. Each agrees to cooperate with
the party and provide reasonable assistance in ensuring compliance with
such Privacy Laws to the extent applicable to either party.
(f) The provisions of this paragraph shall survive the termination of the
Agreement.
16. Each party to this Agreement represents and warrants that it has
established and implemented anti-money laundering compliance programs, in
accordance with NASD Rule 3011 and Section 352 of the Money Laundering Abatement
Act, which are reasonably expected to detect and cause reporting of suspicious
transactions in connection with the sale of Units and Interests. In addition,
each party to this Agreement will comply with all applicable laws and
regulations aimed at preventing, detecting, and reporting money laundering and
suspicious transactions, including, without limitation, applicable provisions of
the Bank Secrecy Act and the USA Patriot Act of 2001, as well as regulations
administered by the U.S. Department of the Treasury's Office of Foreign Assets
Control. In addition, each party agrees to take all necessary and appropriate
steps, consistent with applicable laws and regulations, to obtain, verify, and
retain information with regard to client and/or account owner identification and
source of funds for its customers. Each party agrees to notify immediately the
other parties in the event that it has reason to believe that any of its
customers for the Interests, or persons related to the issuance of the
Interests, are engaged in money laundering activities or are associated with any
terrorist or other individuals, entities or organizations sanctioned by the
United States or the jurisdictions in which any party does business.
Please confirm this agreement to solicit persons to acquire Units on
the foregoing terms and conditions by signing and returning the form enclosed
herewith.
Very truly yours,
ATEL SECURITIES CORPORATION
By: ______________________________
8
ATEL Securities Corporation
600 California Street, 6th Floor
San Francisco, California 94108
RE: ATEL Capital Equipment FUND XI, LLC
Gentlemen:
The undersigned confirms its agreement to act as a Soliciting Dealer as
referred to in the foregoing Soliciting Dealers Agreement, subject to the terms
and conditions of such Agreement. The undersigned confirms that it is a member
in good standing of the National Association of Securities Dealers, Inc.
PLEASE NOTE: The undersigned further confirms that its registered
representatives (check one):
__ are authorized
__ are not authorized
to subscribe for Units for their own account on terms which include a rebate of
commissions otherwise payable on their investment, as described in the
Prospectus under "Plan of Distribution."
Dated: ________, 200_. __________________________________
(Print Name of Firm)
By: ______________________________
(Authorized Representative)
__________________________________
(Print Name of Authorized Representative)
Address___________________________
__________________________________
Phone Number (___)________________
Send Due Diligence Information To: Send Marketing Information To:
--------------------------------- -----------------------------
__________________________________ __________________________________
__________________________________ __________________________________
Send Commission Checks To:
__________________________________
9
LAW OFFICES OF
DERENTHAL & DANNHAUSER LLP
ONE POST STREET, SUITE 575
SAN FRANCISCO, CALIFORNIA 94104
(415) 981-4844
FACSIMILE: (415) 981-4840
November 5, 2004
ATEL Capital Equipment Fund XI, LLC
600 California Street, 6th Floor
San Francisco, California 94108
RE: Registration Statement on Form S-1
Gentlemen:
We have examined the above-referenced Registration Statement to be
filed with the Securities and Exchange Commission on or about the date hereof,
in connection with the registration under the Securities Act of 1933, as
amended, of 15,000,000 of your limited liability company member units (the
"Securities"). The Securities are to be offered and sold by and through the
broker-dealers described in said Registration Statement on a "best-efforts"
basis.
As your counsel in connection with this transaction, we have examined
the proceedings taken and are familiar with the proceedings proposed to be taken
by you in connection with said sale and issuance of the Securities.
It is our opinion that when the Securities are issued and sold in the
manner contemplated by the Registration Statement, including the Operating
Agreement included as an exhibit to the Prospectus filed in Part I of the
Registration Statement, the Securities will be validly authorized and legally
issued. When all capital contributions in respect of each of the Securities thus
issued have been made in accordance with the terms of the Operating Agreement
and as described in the Registration Statement, such Securities will be fully
paid and non-assessable.
We hereby consent to the reference to our firm under "Legal Opinions"
in the prospectus which is a part of said Registration Statement, and to the use
of this opinion as an exhibit thereto.
U. S. Bank Trust National Association
San Francisco, California
Gentlemen:
ATEL Capital Equipment Fund XI, LLC, a California limited liability
company (the "Fund"), proposes to make a public offering through ATEL Securities
Corporation (the "Dealer Manager") and other registered broker-dealers (the
"Selected Dealers") of not to exceed 15,000,000 of its units of limited
liability company member interest (the "Units") at $10 per Unit. The offering
shall be conducted on a best-efforts all-or-none basis for the first 120,000
Units and thereafter on a best-efforts basis for the remaining Units. The
offering shall commence at such time as the Fund's registration statement on
Form S-1 with respect thereto (the "Registration Statement") is declared
effective by the Securities and Exchange Commission ("SEC") which is currently
expected to occur on or about _____________, 200_. We are requesting that you
consent to act as Depository in connection with the offering.
As Depository, you shall receive, hold in escrow and disburse
subscription funds in accordance with the terms and conditions set forth in this
letter and in the "Plan of Distribution" section of the prospectus included in
the Registration Statement, as amended or supplemented (such prospectus in the
form first filed with the SEC pursuant to Rule 424 under the Securities Act of
1933, as amended, and any supplement or amendment to such prospectus thereafter
so filed pursuant to such Rule 424 are hereinafter collectively called the
"Prospectus").
Upon request of ATEL Financial Services, LLC (the "Manager") or the
Dealer Manager, you shall provide reports to the Fund and the Dealer Manager as
to the number and amount of subscriptions received by you.
The terms and conditions of your engagement as Depository shall be as
follows:
1. On or before the date of commencement of the offering you shall
establish an interest-bearing escrow account which shall be entitled "ACEF XI
Escrow Account" (the "Escrow Account"). The Dealer Manager and Selected Dealers
shall instruct subscribers to make checks payable to the order of the
Depository. You shall return any checks received that are made payable to a
party other than the Depository to the Dealer Manager or Selected Dealer who
submitted the check.
2. The Dealer Manager and the Selected Dealers shall promptly deliver
all monies received for the payment of Units to the Depository for deposit in
the Escrow Account. You shall receive and hold deposits of subscription funds in
the amount of $10 per Unit. The minimum subscription shall be 500 Units
($5,000), subject, however, to such higher minimum subscriptions as are
described in the Prospectus as being applicable in certain circumstances. Each
deposit shall be accompanied by a Subscription Agreement in the form of that
attached as Exhibit C to the Prospectus identifying by name and address the
subscriber whose funds are deposited and the amount of the funds deposited by
such subscriber.
3. Deposits in the form of checks which fail to clear the bank upon
which they are drawn shall be returned by the Depository to the subscriber,
together with the copy of the Subscription Agreement. You shall concurrently
furnish to the Manager and the Dealer Manager a copy of any such Subscription
Agreement and check so returned. The Depository shall have no further liability
therefor.
If the Fund rejects any subscription for which the Depository has
already collected funds, the Depository shall promptly issue a refund check to
the rejected subscriber. If the Fund rejects any subscription for which the
Depository has not yet collected funds but has submitted the subscriber's check
for collection, the Depository shall promptly issue a check in the amount of the
subscriber's check to the rejected subscriber after the Depository has cleared
such funds. If the Depository has not yet submitted a rejected subscriber's
check for collection, the Depository shall promptly remit the subscriber's check
directly to the subscriber.
4. You shall place funds from the Escrow Account only in the following
interest-bearing accounts and short-term obligations as the Fund shall direct:
short-term United States government securities, including Treasury bills,
securities issued or guaranteed by United States government agencies,
certificates of deposit and time or demand deposits in banks and savings and
loan associations which are insured by United States government agencies or
deposits in members of the Federal Home Loan Bank System; provided, however,
that you shall not be required to place any such funds in a manner which is
inconsistent with the Prospectus. In the absence of express instructions, you
will invest such funds, to the extent reasonably practicable, in a U. S. Bank
Money Market Account insured by the FDIC. As Depository you shall not be liable
for any loss of interest in the event funds are withdrawn prior to maturity.
Interest accrued on subscription funds held in the Escrow Account shall not be
an asset of the Fund, but shall either (i) be paid to the respective subscribers
upon return of subscription proceeds to subscribers pursuant to paragraph 5 of
this Agreement in the event the Minimum Subscriptions (as defined in paragraph
5) are not received prior to termination of the offering); or (ii) be paid to
the Fund upon release of subscription proceeds to the Fund for disbursement by
the Fund to subscribers, in either case to be divided among the subscribers on a
pro rata basis according to the respective numbers of days between the time of
2
deposit of their payments into the Escrow Account and the release of such
payments to the Fund or the return thereof to the subscribers, and in either
case with the amounts of interest allocated among subscribers to be calculated
by the Manager.
5. If and at such time as amounts in collected funds representing
subscriptions for not less than 120,000 Units shall have been deposited with you
under this Agreement (the "Minimum Subscriptions"), you shall so notify the
Manager and the Dealer Manager and upon receipt of written instructions from
each of the Fund and the Dealer Manager, you shall disburse to the Fund all
subscription funds held by you. If the offering is terminated prior to receipt
of collected funds representing the Minimum Subscriptions, or if collected funds
representing the Minimum Subscriptions have not been received on or before the
date which is one year from the date that the Registration Statement is declared
effective by the SEC, you shall promptly disburse all subscription funds to the
subscribers who transmitted them without deduction, penalty or expense to the
subscriber, and you shall advise the Fund and the Dealer Manager that you have
done so. The subscription funds returned to each subscriber shall be free and
clear of any and all claims of the Fund or any of its creditors. In any case,
all interest earned on subscription proceeds held by you shall be disbursed to
subscribers as provided in paragraph 4, with the Manager providing the
Depository with the calculation of interest payable to each subscriber. After
all disbursements under this Agreement have been completed, the escrow shall be
terminated; provided, however, that an agreement with a branch of Depository
will be effective upon escrow holder notifying the branch that the Minimum
Subscriptions have been reached and escrow is closed. The branch will agree to
facilitate transfers of subscription funds to the Fund in the event subscribers
make checks payable to the Depository after the date Minimum Subscriptions have
been received. The branch's sole function in such event shall be to endorse any
such subscription checks to the account of the Fund.
For purposes of the foregoing, the term "collected funds" shall mean
all funds received by the Depository which have cleared normal banking channels
and are in the form of cash.
Notwithstanding the foregoing, any and all subscription proceeds from
Pennsylvania investors deposited with the Depositary will be maintained in a
separate escrow account entitled "ACEF XI Pennsylvania Escrow Account." The
terms of the escrow for Pennsylvania subscriptions will be the same as provided
for all subscription proceeds under this Agreement, except as expressly stated
in the following paragraphs.
The amount of subscription proceeds held in the Pennsylvania Escrow
Account will not be counted in determining the Minimum Subscriptions defined
above in this Section 5, unless the Pennsylvania Minimum (as defined below) is
reached prior to the date that the amount of the Minimum Subscriptions is
received from non-Pennsylvania subscribers. The funds in the Pennsylvania Escrow
Account will be retained in such account, and will not be released to the Fund
upon the release of other escrowed funds at the time the Minimum Subscriptions
are reached under the Agreement unless the conditions for release of
Pennsylvania subscriptions set forth in this paragraph are first satisfied. If
and at such time as the Fund and the Dealer Manager deliver to the Depositary a
certificate, together with any other documentation that the Depositary may
reasonably require, which demonstrates that the Fund has received a total amount
3
in collected funds which, when added to the total amount held in the
Pennsylvania Escrow Account, represent aggregate subscriptions for not less than
750,000 Units (the "Pennsylvania Minimum"), and upon receipt of written
instructions from each of the Fund and the Dealer Manager, the Depositary shall
disburse to the Fund all subscription funds held in the Pennsylvania Escrow
Account.
If the offering is terminated prior to receipt of collected funds
representing the Pennsylvania Minimum, or if collected funds representing the
Pennsylvania Minimum have not been received on or before the date which is 120
days after the date hereof, the Fund and the Dealer Manager will notify each
Pennsylvania investor whose subscription proceeds are held in the Pennsylvania
Escrow Account within 10 calendar days following the end of such period that
such investor has the right to have the escrowed subscription proceeds returned
to the investor by notifying the Depositary that such return is desired within
10 calendar days after receipt of such notification of the right to such return.
The subscription proceeds held for investors so requesting a return, together
with any interest accrued thereon, will be promptly forwarded to such investors,
but in no event later than 15 calendar days following receipt by the Depositary
of the notice requesting such return.
Any subscription proceeds from Pennsylvania investors which remain in
the escrow after the expiration of the periods described in the foregoing
paragraph will be held until the earlier of the satisfaction of the Pennsylvania
Minimum condition or the termination of the offering; provided that at the end
of each subsequent 120-day period of the escrow, the investors whose
subscription proceeds remain in the escrow will be offered the return rights
described in the foregoing paragraph; and provided further that, if the
Pennsylvania Minimum is not satisfied within one year from the date that the
Registration Statement is declared effective by the SEC, the Depositary shall
promptly disburse all subscription funds in the Pennsylvania Escrow Account to
the subscribers who transmitted them without deduction, penalty or expense to
the subscriber, and the Depositary shall advise the Fund and the Dealer Manager
that the Depositary has done so. Any such disbursements to Pennsylvania
investors will be on the same terms as all disbursements under this Agreement.
6. All fees, costs, and charges of the Depository shall be paid by the
Fund. Escrow fees shall be as set forth in Exhibit A hereto. No fees, costs,
charges, indemnification for damages suffered by the Depository or any monies
whatsoever shall be paid out of or chargeable to the
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