SECOND AMENDED AND RESTATED
DECLARATION OF TRUST
Second Amended and Restated
Declaration of Trust
RECITALS.....................................................................1
DECLARATION..................................................................1
ARTICLE I -THE TRUST.........................................................1
1.1 NAME.....................................................................1
1.2 LOCATION.................................................................2
1.3 NATURE OF TRUST..........................................................2
1.4 PURPOSES.................................................................2
1.6 TERM AND DISSOLUTION.....................................................2
ARTICLE II - DEFINITIONS.....................................................3
ARTICLE III - CAPITAL.......................................................14
3.1 CAPITAL CONTRIBUTION OF THE SPECIAL BENEFICIARY AND MANAGING TRUSTEE....14
3.2 CLASS A BENEFICIARIES; OFFERING OF CLASS B INTERESTS; BENEFICIARY
INTERESTS...............................................................14
3.3 CAPITAL ACCOUNTS........................................................15
3.4 ADDITIONAL CAPITAL CONTRIBUTIONS........................................16
ARTICLE IV - TRUSTEES.......................................................16
4.1 THE TRUSTEES; LIABILITY FOR TRUST OBLIGATIONS...........................16
4.2 EXTENT OF MANAGING TRUSTEE POWERS AND DUTIES............................16
4.3 DELEGATION OF POWERS....................................................22
4.4 RELIANCE BY THIRD PARTIES...............................................22
4.5 LIMITATIONS ON THE EXERCISE OF POWERS OF MANAGING TRUSTEE...............22
4.6 LIABILITY FOR ACTS OR OMISSIONS AND INDEMNIFICATION.....................23
4.7 COMPENSATION OF TRUSTEES................................................24
4.8 RESIGNATION OF TRUSTEES.................................................25
4.9 REMOVAL OF TRUSTEES.....................................................26
4.10 CONSEQUENCES OF RESIGNATION OR REMOVAL.................................26
4.11 LIABILITY OF RESIGNED OR REMOVED TRUSTEE...............................27
4.12 CONTINUATION OF TRUST BUSINESS.........................................27
4.13 POWERS AND LIMITATIONS OF DELAWARE TRUSTEE.............................27
ARTICLE V - ADVISOR SERVICES AND COMPENSATION...............................28
5.1 COMPENSATION TO ADVISOR AND CERTAIN AFFILIATES..........................28
5.2 OTHER INTERESTS OF THE ADVISOR AND ITS AFFILIATES.......................30
5.3 OTHER TRANSACTIONS INVOLVING THE ADVISOR AND ITS AFFILIATES.............31
ARTICLE VI - TRUST BENEFICIARIES............................................31
6.1 ABSENCE OF CONTROL OVER TRUST BUSINESS..................................31
6.2 LIMITED LIABILITY.......................................................31
6.3 FIDUCIARY DUTY OF MANAGING TRUSTEE TO TRUST BENEFICIARIES...............32
ARTICLE VII - INVESTMENT OBJECTIVES AND POLICIES............................32
7.1 INVESTMENT OBJECTIVES AND POLICIES......................................32
7.2 ASSETS AND LESSEES......................................................32
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7.3 SALES AND LEASES OF ASSETS FROM OR TO THE MANAGING TRUSTEE AND ITS
AFFILIATES..............................................................32
7.4 LOANS TO OR FROM THE MANAGING TRUSTEE AND ITS AFFILIATES................33
7.5 JOINT INVESTMENTS.......................................................33
7.6 RESALES.................................................................35
7.7 IN-KIND DISTRIBUTIONS...................................................35
7.8 ROLL-UPS................................................................35
7.9 CHANGE IN INVESTMENT OBJECTIVE AND POLICIES.............................36
ARTICLE VIII - DISTRIBUTIONS AND ALLOCATIONS................................36
8.1 DISTRIBUTION OF DISTRIBUTABLE CASH......................................36
8.2 ALLOCATION OF PROFITS AND LOSSES........................................37
8.3 RECOURSE TO TRUST ASSETS ONLY...........................................38
8.5 SPECIAL PROVISIONS......................................................38
ARTICLE IX - TRANSFER OF INTERESTS..........................................42
9.1 WITHDRAWAL OF A BENEFICIARY.............................................42
9.2 ASSIGNMENT..............................................................42
9.3 SUBSTITUTION............................................................42
9.4 PROHIBITED ASSIGNMENT...................................................43
9.5 CHANGE OF STATUS OF BENEFICIARY.........................................44
9.6 RIGHT TO TENDER INTERESTS FOR REDEMPTION................................44
9.7 STATUS OF AN ASSIGNING BENEFICIARY......................................45
9.8 WITHDRAWAL OF SPECIAL BENEFICIARY; SUBSTITUTION.........................45
ARTICLE X - FISCAL MATTERS..................................................46
10.1 TITLE TO PROPERTY AND BANK ACCOUNTS....................................46
10.2 MAINTENANCE OF, AND ACCESS TO, BASIC TRUST DOCUMENTS...................46
10.3 FINANCIAL BOOKS AND ACCOUNTING.........................................47
10.4 TRUST EXPENSES.........................................................47
10.5 FISCAL YEAR............................................................49
10.6 REPORTS AND ACCOUNTING DECISIONS.......................................49
10.7 PARTNERSHIP CLASSIFICATION; FEDERAL TAX ELECTIONS......................51
ARTICLE XI - MEETINGS AND VOTING RIGHTS OF BENEFICIARIES....................51
11.1 MEETINGS...............................................................51
11.2 VOTING PROCEDURES; VOTING RIGHTS OF BENEFICIARIES......................52
11.3 VALUATION OF INTERESTS OF THE MANAGING TRUSTEE.........................53
ARTICLE XII - AMENDMENTS....................................................53
12.1 CERTAIN AMENDMENTS REQUIRING MAJORITY CONSENT..........................53
12.2 OTHER AMENDMENTS.......................................................53
ARTICLE XIII - POWER OF ATTORNEY............................................54
13.1 APPOINTMENT............................................................54
13.2 AMENDMENTS TO AGREEMENT................................................55
13.3 POWER COUPLED WITH AN INTEREST.........................................55
13.4 POWER OF ATTORNEY BY SUBSTITUTE BENEFICIARIES..........................55
ARTICLE XIV - GENERAL PROVISIONS............................................56
14.1 NOTICES, APPROVALS AND CONSENTS........................................56
14.2 FURTHER ASSURANCES.....................................................56
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14.3 CAPTIONS...............................................................56
14.4 BINDING EFFECT.........................................................56
14.5 SEPARABILITY...........................................................56
14.6 INTEGRATION............................................................56
14.7 APPLICABLE LAW.........................................................57
14.8 COUNTERPARTS...........................................................57
14.9 CREDITORS..............................................................57
14.10 INTERPRETATION........................................................57
14.11 ARBITRATION; VENUE....................................................57
SCHEDULE A..................................................................59
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SECOND AMENDED AND RESTATED
DECLARATION OF TRUST
AFG INVESTMENT TRUST C
THE AMENDED AND RESTATED DECLARATION OF TRUST OF AFG INVESTMENT TRUST C
made and agreed to by the Trustees and the Trust Beneficiaries as of August 31,
1992, as amended through the date hereof, is hereby amended and restated
pursuant to this Second Amended and Restated Declaration of Trust dated as of
July 15, 1997 to read in its entirety as follows (certain capitalized terms used
and not otherwise defined herein shall have the respective meanings specified in
Article II):
RECITALS
A. A Certificate of Trust for the Trust has been filed in the Filing
Office in accordance with the Business Trust Act. The Trust has been created as
a Delaware business trust to acquire a diversified portfolio of new and used
capital equipment (the "Assets"). The business of the Trust will be controlled
by the Managing Trustee for the benefit of the Trust Beneficiaries.
B. The Managing Trustee may acquire, hold, invest and dispose of Trust
Assets on behalf of the Trust in the manner provided in this Agreement.
C. The beneficial interest in the Trust Assets shall be divided into units
of beneficial interest (the "Interests"), as provided in this Agreement.
DECLARATION
NOW, THEREFORE, the Trustees hereby declare that they will hold all
property of every type and description which they may acquire as trustees,
together with the proceeds thereof, in trust, and carry on the business of the
Trust for the benefit of the Trust Beneficiaries, in the manner and subject to
the provisions of this Agreement.
ARTICLE I - THE TRUST
1.1 Name.
The name of the Trust shall be "AFG INVESTMENT TRUST C" and so far as may
be practicable, the Managing Trustee shall conduct the Trust's activities,
execute all documents and sue or be sued under that name, which name (and the
word "Trust" whenever used in this Agreement, except where the context otherwise
requires) shall refer to the Trustees in their capacity as Trustees, and not
individually or personally, and shall not refer to the Trust Beneficiaries or to
the agents or employees of the Trust or of such Trustees. Should the Managing
Trustee determine that the use of such name is not practicable, legal, or
convenient in any jurisdiction, the Managing Trustee may use such other
designation or adopt such other name for the Trust in such jurisdiction as the
Managing Trustee deems proper and the Trust may hold property and conduct its
activities under such designation or name, subject, however, to the limitations
contained in Section 1.3.
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1.2 Location.
The Trust shall maintain an office 98 North Washington Street, Boston,
Massachusetts 02114, and may have such other offices or places of business as
the Managing Trustee may from time to time determine as necessary or expedient.
1.3 Nature of Trust.
The Trust shall be of the type commonly termed a Delaware business trust.
The Trust is not intended to be, shall not be deemed to be, and shall not be
treated as, a general partnership, limited partnership, joint venture,
corporation or joint stock company (provided, however, that the Trust shall be
classified as a partnership for tax purposes, as provided in Section 10.7(a)).
The Trust Beneficiaries shall be beneficiaries and their relationship to the
Trustees shall be solely in that capacity in accordance with the rights
conferred upon them hereunder.
1.4 Purposes.
The purposes of the Trust are to acquire, invest in, maintain, operate,
lease, re-lease, finance, refinance, hold, encumber, manage, sell, exchange and
otherwise in any manner deal with the Assets and to engage in the business
contemplated by this Agreement. The Trust shall not engage in any other business
or activity.
1.5 Powers.
In furtherance of its purposes, the Trust shall have the power:
(a) to acquire, invest in, maintain, operate, lease, re-lease, finance,
refinance, hold, encumber, sell, manage, exchange and otherwise deal in Assets
situated in any location and to enter into Joint Ventures, and to make any
Permitted Investments, in each case as deemed appropriate by the Managing
Trustee;
(b) subject to any applicable statutes and regulations, to borrow money
from any lender to further the purposes of the Trust, to issue evidences of
indebtedness in respect thereof and to secure the same by mortgage, pledge,
grant of lien on, or other security interest in any Assets; and
(c) to do all other things, carry on any activities and enter into,
perform, modify, supplement or terminate any contracts necessary to, in
connection with, or incidental to the furtherance of the purposes of the Trust,
all so long as such things, activities and contracts may be lawfully done,
carried on or entered into by the Trust under the laws of the State and the
United States of America and any other jurisdictions whose laws may apply and
under the terms of this Agreement.
1.6 Term and Dissolution.
The Trust shall continue in full force and effect until December 31, 2004,
except that the Trust shall be dissolved, its affairs wound up, and its assets
liquidated prior to such date upon:
(a) the sale or other disposition of all or substantially all Assets
unless the Managing Trustee elects to continue the Trust business for the
purpose of the receipt and collection of any consideration to be received in
exchange for Assets (which activities shall be deemed to be a part of such sale
or other disposition and the winding-up of the affairs of the Trust);
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(b) the occurrence of any event as a result of which no Managing Trustee
remains if the Trust is not reconstituted pursuant to Section 4.12;
(c) the election to dissolve the Trust made in writing by the Managing
Trustee with Majority Consent or, subject to compliance with Article XI, made by
a Majority in Interest of the Beneficiaries without any action by the Managing
Trustee;
(d) the entry of a final decree of dissolution of the Trust by a court of
competent jurisdiction; or
(e) any other event which causes the dissolution or winding-up of the
Trust under the Business Trust Act to the extent not otherwise provided for
herein.
In such event, the Managing Trustee shall liquidate the Assets and apply
and distribute the proceeds thereof in accordance with Section 8.1(b).
Notwithstanding the foregoing, if during liquidation the Managing Trustee shall
determine that an immediate sale of all of the Assets would be impermissible,
impractical or would cause undue loss to the Participants, the Managing Trustee
may defer liquidation of, and withhold from distribution for a reasonable time,
any Assets except those necessary to satisfy Trust debts and obligations. Upon
completion of the winding-up of the Trust, the Managing Trustee (or its
trustees, receivers or successors) shall cause the cancellation of the
Certificate of Trust.
During the period of dissolution and winding-up of the Trust, the Managing
Trustee, or any other Person performing such actions, may exercise all of the
powers granted to the Managing Trustee herein, and may adopt such plan, method
or procedure as may be deemed reasonable in order to effectuate an orderly
winding-up. If such functions shall be performed by a Person other than the
Managing Trustee or an Affiliate, such Person shall be entitled to reasonable
compensation from the Trust for his services.
The Managing Trustee shall use its best efforts to cause the Trust to sell
all of the Assets not later than the end of the tenth year following Final
Closing, provided that market conditions existing at the time permit sale of the
Assets on terms deemed reasonable by the Managing Trustee.
ARTICLE II - DEFINITIONS
Whenever used in this Agreement, unless the context otherwise requires,
the terms defined in this Article II shall have the following respective
meanings:
"Accountants" mean Ernst & Young, LLP, Boston, Massachusetts, or another
nationally recognized firm of independent accountants selected for the Trust by
the Managing Trustee.
"Acquisition Expenses" means expenses (other than Acquisition Fees)
incurred by any party attributable to selection and acquisition of Assets,
whether or not acquired, including but not limited to legal fees and expenses,
travel and communication expenses, costs of credit reports and appraisals,
non-refundable option payments and accounting fees and expenses; provided,
however, that Acquisition Expenses will not include any expenses described in
Section 10.4 that relate to the operation of the Trust rather than the selection
and acquisition of Assets; and provided, further, that Acquisition Expenses will
not include any expenses paid by an Affiliate of the Managing Trustee for which
such Affiliate does not receive any reimbursement from the Trust.
"Acquisition Fee" means any fee or commission paid by any party in
connection with the selection, purchase, evaluation, construction, acquisition,
initial leasing or operation, and initial arrangement for leasing or placing in
service of any Asset by the Trust, however designated and however treated for
tax or accounting purposes, but not including any Acquisition Expenses.
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"Adjusted Class A Investment" means, on an aggregate basis for all Class A
Interests, an amount equal to (a) the sum of (i) $25 per Class A Interest owned
by all Class A Beneficiaries and (ii) the amount by which all Distributions made
to the Class A Beneficiaries in the aggregate until Class A Payout are less than
the Cumulative Class A Annual Distribution minus (b) the sum of (i) the amount
by which all Distributions made to the Class A Beneficiaries in the aggregate
until Class A Payout exceed the Cumulative Annual Distribution and (ii) all
uninvested Capital Contributions which have been returned to the Class A
Beneficiaries pursuant to this Agreement.
"Advisor" means EFG, together with its successor and assigns as advisor
under the Advisory Agreement.
"Advisory Agreement" means the agreement between the Advisor and the Trust
pursuant to which the Advisor will provide certain management and advisory
services for the Trust.
"Affiliate" means, when used with reference to a specific Person, (i) any
Person that directly or indirectly through one or more intermediaries controls
or is controlled by or is under common control with the specified Person, (ii)
any Person that is an officer, director or partner in, the specified Person or
of which the specified Person is an officer, director or partner, or (iii) any
Person that is the beneficial owner of, or controls, 10% or more of any class of
voting securities of the specified Person.
"AFG Investment Trusts" means, collectively, AFG Investment Trust A, AFG
Investment Trust B, AFG Investment Trust C and AFG Investment Trust D.
"Agreement" means this Second Amended and Restated Declaration of Trust,
as amended from time to time.
"Asset" means, collectively, any real or personal property, including
equipment and related tangible property, acquired by the Trust and any interest
of the Trust therein, whether directly or indirectly through a nominee, Joint
Venture or otherwise.
"Asset Base Price" means the amount paid by the Trust to the seller of an
Asset for such Asset, which shall be (i) the manufacturer's invoice cost to the
Trust if the Asset is acquired directly from the manufacturer, (ii) if the Asset
is acquired from a seller who is not the manufacturer and not the Managing
Trustee or an Affiliate thereof, the lower of (a) the price invoiced by such
seller or (b) fair market value as determined by the Managing Trustee in its
best judgment, or (iii) if acquired from the Managing Trustee or an Affiliate
thereof, the lower of (a) the price paid by such seller plus all reasonable,
necessary and actual costs accrued in maintaining the Asset (including, without
limitation, the cost of storage, carrying, warehousing, interest cost, repair,
marketing, financing and taxes from the date of acquisition thereof) less the
amount of primary term lease rentals accrued from the date of acquisition
thereof and retained by the Managing Trustee or an Affiliate thereof from
leasing the Asset or (b) fair market value as determined by the Managing Trustee
in its best judgment, including in each case described in (i), (ii) and (iii)
the amounts of all liens and encumbrances on the Asset and all reasonable,
necessary and actual expenses of the seller incurred in connection with
acquiring and transferring the Asset to the Trust (including but not limited to
all financing expenses, sales taxes, delivery charges and attorneys' fees paid
to or on behalf of third parties) but not including any Acquisition Fees or
Acquisition Expenses. In no event, however, shall any of the expense items
described herein be included in the Asset Base Price for any Asset (i) which
cannot be included consistent with generally accepted accounting principles or
(ii) which is not actually acquired by the Trust.
"Asset Management" means personnel and services necessary to the leasing
activities of the Trust,
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including but not limited to, leasing and re-leasing of Assets, collecting
revenues, paying operating expenses, determining that the Assets are used in
accordance with all operative contractual arrangements and providing clerical
and bookkeeping services necessary to the operation of the Assets.
"Asset Management Fee" means the fee payable to the Advisor for managing
the leasing, financing and re-financing of Assets pursuant to Section 5.1(c).
"Assign" means, with respect to any Interest or any part thereof, to sell,
assign, transfer, give or otherwise dispose of, whether voluntarily or by
operation of law, except that in the case of a bona fide pledge or other
hypothecation; no Assignment shall be deemed to have occurred unless and until
the secured party has exercised his right of foreclosure with respect thereto.
"Assignment" means any transaction in which an Interest or any part
thereof is Assigned.
"B" and "Baa" mean bond ratings assigned by Moody's Investors Service,
Inc. to the senior debt obligations of prospective initial Lessees which are in
the middle of the Moody's rating scale of "Aaa" (highly unlikely to default) to
"D" (in default). Specifically, according to Moody's, bonds rated "Baa" are
considered as medium grade obligations, i.e., they are neither highly protected
nor poorly secured; interest payments and principal security appear to be
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time; and such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well. Also, according to Moody's, bonds rated "B" generally
lack characteristics of a desirable investment and assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small.
"Beneficiary" means the owner of a Beneficiary Interest and shall include
each Class A Beneficiary and Class B Beneficiary. The term "Beneficiary" does
not include the Special Beneficiary.
"Beneficiary Interest" means the beneficial interest of a Beneficiary in
this Trust created pursuant to this Agreement and shall include each Class A
Interest and Class B Interest.
"Business Trust Act" means the Delaware Business Trust Act, 12 Del. C.
ss.3801, et. seq., as amended from time to time.
"Capital Account" means the capital account of the Managing Trustee, the
Special Beneficiary and each Beneficiary established and maintained in
accordance with Section 3.3.
"Capital Contribution" means the total amount of money actually
contributed to the Trust by each Participant (or any prior Participant) prior to
the deduction of any organization and offering expenses or selling commissions.
"Cash from Operations" means the cash provided by the Trust's normal
operations (including Lease renewals and without deduction for depreciation or
other non-cash charges) after the general expenses and current liabilities of
the Trust (other than any portion of the Asset Management Fee which is required
to be accrued and the Subordinated Resale Fee) are paid and discharged, as
reduced by any reserves funded from such cash for working capital and contingent
liabilities to the extent deemed reasonable by the Managing Trustee and as
increased by any portion of such reserves deemed by the Managing Trustee not to
be required for Trust operations. Cash from Operations does not include any Cash
from Sales or Refinancings.
"Cash From Sales or Refinancings" means the cash received by the Trust as
a result of Sale or Refinancing transactions (including insurance proceeds or
Lessee indemnity payments arising from the loss
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or destruction of Assets), as (i) reduced by (a) all debts and liabilities of
the Trust required to be paid as a result of Sale or Refinancing transactions,
whether or not then payable, (including without limitation, any liabilities on
an Asset sold which are not assumed by the buyer and any remarketing fees
required to be paid to Persons not affiliated with the Managing Trustee but not
including any Subordinated Resale Fee whether or not then due and payable) and
(b) general expenses and current liabilities of the Trust (other than any
portion of the Asset Management Fee which is required to be accrued and the
Subordinated Resale Fee) and (c) any reserves for working capital and contingent
liabilities funded from such cash to the extent deemed reasonable by the
Managing Trustee, and (ii) increased by any portion of such reserves then deemed
by the Managing Trustee not to be required for Trust operations. In the event
the Trust takes back a note in connection with any Sale or Refinancing
transaction, all payments subsequently received in cash by the Trust with
respect to such note shall be included in Cash From Sales or Refinancings,
irrespective of the treatment of such payments by the Trust for tax or
accounting purposes. If, in payment for Assets sold, the Trust receives purchase
money obligations secured by liens on such Assets, the amount of such
obligations shall not be included in Cash From Sales or Refinancings until and
to the extent the obligations are realized in cash, sold, or otherwise disposed
of.
"Certificate of Trust" means the certificate of trust filed with the
Filing Office for the Trust in accordance with the Business Trust Act, as
amended or restated from time to time.
"Class A Beneficiary" means any Beneficiary who owns a Class A Interest.
"Class A Closings" means the dates designated by the Managing Trustee on,
or as of which, subscribers acquired Class A Interests and became Class A
Beneficiaries of the Trust.
"Class A Interests" means the interests owned by Class A Beneficiaries in
the Trust created pursuant to this Agreement.
"Class A Offering" means the offering of Class A Interests pursuant to the
Class A Prospectus.
"Class A Payout" means the first time where the aggregate amount of
Distributions actually made to the Class A Beneficiaries equals $25 per Class A
Interest, minus all uninvested Capital Contributions which have been returned to
the Class A Beneficiaries, plus the Cumulative Class A Annual Distribution.
"Class A Prospectus" means the prospectus contained in the registration
statement filed with the Securities and Exchange Commission for the registration
of the Class A Interests under the Securities Act of 1933, as amended, in the
final form in which said prospectus was filed with said Commission and as
thereafter amended or supplemented pursuant to Rule 424 under said Act.
"Class B Beneficiary" means any Beneficiary who owns a Class B
Subordinated Interest.
"Class B Capital Distributions" means the aggregate amount of any cash
payments to the Class B Beneficiaries made by the Trust as a return of their
Capital Contributions from excess Class B Offering proceeds.
"Class B Closing" means the date designated by the Managing Trustee on, or
as of which, subscribers acquire Class B Subordinated Interests and become Class
B Beneficiaries.
"Class B Distribution Reduction Factor" means the percentage determined as
the fraction, the numerator which is the Class B Capital Distributions (on a per
Class B Subordinated Interest basis), discounted at 8% annum from the
Distribution Commencement Date, and the denominator of which is
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$5.00.
"Class B Offering" means the offering of Class B Subordinated Interests by
the Trust pursuant to the Class B Prospectus.
"Class B Payout" means the first time that the Class B Beneficiaries have
received cash from the Trust in an aggregate amount of $5 per Class B
Subordinated Interest, together with a return from the Distribution Commencement
Date of 8% per annum, compounded quarterly, with respect to the portion of their
capital contributions returned to them as Class B Capital Distributions and of
10% per annum, compounded quarterly, with respect to the balance of their
capital contributions.
"Class B Prospectus" means the prospectus contained in the registration
statement filed with the Securities and Exchange Commission for the registration
of Class B Subordinated Interests under the Securities Act of 1933, as amended,
in the final form in which said prospectus is filed with said Commission and as
thereafter amended or supplemented pursuant to Rule 424 under said Act.
"Class B Subordinated Interests" or "Class B Interests" means the
beneficial interests created pursuant to this Agreement owned by Class B
Beneficiaries.
"Closings" means, collectively, the Class A Closings and the Class B
Closing.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or corresponding provisions of subsequent laws.
"Competitive Asset Sale Commission" means that brokerage fee paid for
services rendered in connection with the purchase and sale of equipment which is
reasonable, customary and competitive in light of the size, type and location of
equipment.
"Consent" means either the consent given by vote at a meeting called and
held in accordance with Section 11.1 or the written consent of a Person to do
the act or thing for which the consent is solicited, or the act of granting such
consent, as the context may require.
"Controlling Person" means, with respect to the Managing Trustee or any
Affiliate, any of its chairman, directors, president, secretary or clerk,
treasurer, vice presidents, and holders of a 5% or larger equity interest in the
Managing Trustee or Affiliate, or any Person having the power to direct or cause
the direction of the Managing Trustee or Affiliate, whether through the
ownership of voting securities, by contract or otherwise.
"Cumulative Class A Annual Distribution" means an aggregate annual
Distribution to the Class A Beneficiaries of 10% per annum, compounded
quarterly, on Adjusted Class A Investment commencing from the last day of the
month of the initial Class A Closing until Class A Payout.
"Dealer-Manager" means American Finance Group Securities Corp., a
Massachusetts corporation which is an Affiliate of the Managing Trustee and the
Advisor.
"Dealer-Manager Agreement" means the agreement of the Dealer-Manager
and the Managing Trustee, on their own behalf and on behalf of the Trust,
designating American Finance Group Securities Corp. as Dealer-Manager.
"Delaware Trustee" means the Trustee designated as such in accordance with
Section 4.1(a) which
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maintains its principal place of business in the State.
"Dissolution Event" means a sale, condemnation, eminent domain taking,
casualty, or other disposition affecting all or substantially all of the Trust's
then remaining Assets which results in the dissolution of the Trust pursuant to
Section 1.6.
"Distributable Cash From Operations" means Cash from Operations, as
reduced by (i) any accrued and unpaid Asset Management Fee and (ii) after
Payout, any accrued and unpaid Subordinated Resale Fee.
"Distributable Cash From Sales or Refinancings" means Cash From Sales or
Refinancings, as reduced by (i)(a) any amounts reinvested in additional Assets
in accordance with Sections 4.2(b)(v) and 4.2(b)(vi), or (b) the proceeds of the
sale of an interest in a Joint Venture which are reinvested in additional
Assets, (ii) any accrued and unpaid Asset Management Fee and Acquisition Fees
and Acquisition Expenses paid with respect to additional Assets acquired through
reinvestment of Cash From Sales or Refinancings in accordance with Section
4.2(b)(v) and (iii) after Payout, any accrued and unpaid Subordinated Resale
Fee.
"Distribution Commencement Date" means the first day of the month
following Class B Closing.
"Distributions" means Distributable Cash From Operations and
Distributable Cash From Sales or Refinancings.
"D-M Commission" means the commission payable to the Dealer-Manager of 7%
of Gross Class A Proceeds.
"EFG" means Equis Financial Group, a Massachusetts partnership.
"Eligible Citizen" means (i) an individual who is a citizen of the United
States or one of its possessions (a "U.S. Citizen") or a citizen of a foreign
country lawfully admitted for permanent residence in the United States as an
immigrant in conformity with the regulations of the Immigration and
Naturalization Service of the Department of Justice (a "Resident Alien"); (ii) a
partnership of which each member is a U.S. Citizen (a "U.S. Partnership"); (iii)
a corporation created or organized under the laws of the United States or of any
state, territory, or possession of the United States of which the president and
two-thirds or more of the board of directors and other managing officers thereof
are U.S. Citizens and of which at least 75% of the voting interests are owned or
controlled by U.S. Citizens (a "U.S. Corporation"); (iv) an association of which
each member is a U.S. Citizen; or (v) a trust of which each trustee is a U.S.
Citizen, a Resident Alien, a U.S. Partnership, a U.S. Corporation or a U.S.
Association, but only if each beneficiary under the related trust is a U.S.
Citizen, a Resident Alien, a U.S. Partnership, a U.S. Corporation or a U.S.
Association.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Account" means the interest-bearing escrow account (in which
subscriptions of up to $100,000 per subscriber are insured by the Federal
Deposit Insurance Corporation ("FDIC")), including any savings account, bank
money market account, or account investing in short-term securities issued or
guaranteed by the United States government, which complies with Rule 15c-4 under
the Securities Exchange Act of 1934, held by the Escrow Agent into which
subscription payments from subscribers for Class B Interests are to be deposited
prior to the Class B Closing.
"Escrow Agent" means the escrow agent selected by the Managing Trustee to
administer the Escrow Account, initially Trust Company of America.
"Escrow Interest" means the interest actually earned on monies paid by
each subscriber into the
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Escrow Account during the period that such monies are held in the Escrow Account
prior to the Class B Closing (net of certain fees and expenses of the Escrow
Agent).
"FAA" means the Federal Aviation Administration.
"Filing Office" means the Office of the Secretary of State of the State.
"Final Closing" means the last date, or as of which, subscribers acquired
Class A Interests and became Class A Beneficiaries of the Trust.
"Foreign Beneficiary" means any Person who is a "non-resident alien
individual" or "foreign partnership" within the meaning of Section 1441 of the
Code, a "foreign corporation" within the meaning of Section 1442 of the Code or
any Person "who is not a United States person" within the meaning of Section
1446 of the Code.
"Foreign Investor" means any Person who is not an Eligible Citizen.
"Front-End Fees and Expenses" means fees and expenses, however designated,
paid by any Person for any services rendered during the Trust's organizational
or acquisition phase, including without limitation Sales and Distribution
Expenses borne by the Trust, Acquisition Fees and Acquisition Expenses and
similar fees and expenses, but not including: (i) Organizational and Offering
Expenses paid by the Managing Trustee for which the Managing Trustee may not be
reimbursed by the Trust pursuant to Section 10.4; (ii) reserves for working
capital and contingent liabilities included in Investment in Assets; and (iii)
any Acquisition Fees or Acquisition Expenses paid by a manufacturer of an Asset
to any of its employees unless such Persons are Affiliates of a Sponsor. Any
Acquisition Fees and Acquisition Expenses from the reinvestment of Cash From
Sales or Refinancings permitted under this Agreement are considered Front-End
Fees and Expenses. If the Trust's Leverage Level is equal to the Minimum
Leverage Level, total Front-End Fees and Expenses will not exceed 10% of Gross
Proceeds. However, if the Trust's Leverage Level is greater than the Minimum
Leverage Level, the maximum amount of Front-End Fees and Expenses which a Trust
may incur will increase .0625% for each 1% that the Leverage Level is greater
than the Minimum Leverage Level. In no event, however, will total Front-End Fees
and Expenses paid by the Trust exceed 13% of Gross Proceeds.
"Full Payout Lease" means a lease under which the aggregate rental
payments during the original term are at least sufficient to permit the Trust to
recover the Purchase Price of the Assets leased thereby.
"Gross Class A Proceeds" means the aggregate Capital Contributions of
all Class A Beneficiaries.
"Gross Class B Proceeds" means the aggregate Capital Contributions of all
Class B Beneficiaries.
"Gross Proceeds" means, collectively, Gross Class A Proceeds and Gross
Class B Proceeds.
"Immediate Family Member" means, with respect to any Person, his spouse,
parent, parent-in-law, issue, brother, sister, brother-in-law, sister-in-law or
child-in-law.
"Independent Expert" means a Person with no current material or prior
business or personal relationship with the Sponsor who is engaged to a
substantial extent in the business of rendering opinions regarding the value of
assets of the type held by the Trust and who is qualified to perform such work.
"Initial Redemption Period" is the period of time commencing with the
Class B Closing through 24 months thereafter during which the Class A Interests
may be redeemed by the Trust with the proceeds
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of the Class B Offering, as provided in the Class B Prospectus.
"Interest" means any Class A Interest or Class B Interest in the Trust.
"Investment in Assets" means the aggregate amount of Capital Contributions
of the Class A Beneficiaries actually paid for or allocated to the purchase and
refurbishment of Assets acquired by the Trust, including the Trust's equity
investment in Assets and reserves for working capital and contingent liabilities
(but excluding any such reserves in excess of 3% of the aggregate Capital
Contributions of the Class A Beneficiaries) and other capitalizable cash
payments such as interest and taxes, but excluding all Front-End Fees and
Expenses.
"IRA" means an Individual Retirement Account.
"Joint Venture" has the meaning given it in Section 7.5.
"Lease" means a Full Payout Lease or Operating Lease.
"Lease Commitment" means either (i) an executed binding lease agreement
under which either the Trust or an Affiliate of the Managing Trustee is the
lessor, which agreement is assignable by such Affiliate to the Trust, or (ii)
such other agreement or commitment to lease equipment which constitutes an
enforceable obligation against the Lessee.
"Lessee" means any lessee under any Lease.
"Leverage Level" means the amount of indebtedness encumbering the Assets
acquired from the Gross Proceeds.
"Losses" has the meaning given it in Section 8.2(d).
"Majority Consent" means the Consent of Beneficiaries representing a
Majority in Interest of the Beneficiaries.
"Majority Vote" means the vote of a majority in interest of the Trust
Beneficiaries.
"Majority in Interest of the Beneficiaries" means the Class A
Beneficiaries and the Class B Beneficiaries holding more than 50% in the
aggregate of the Beneficiary Interests held by all Beneficiaries; provided,
however, that in cases where a Beneficiary who is also a Managing Trustee or
Affiliate thereof is not entitled to participate in the Consents or votes of the
Beneficiaries, the calculation of "Majority in Interest of the Beneficiaries"
shall exclude the Class A Interests owned by such Beneficiary.
"Managing Trustee" has the meaning given it in Section 4.1.
"Maximum Class B Offering" means the sale of all 826,072 Class B
Subordinated Interests in the Trust which are being offered pursuant to the
Class B Offering.
"Managing Trustee Interest" means the interest of the Managing Trustee in
the Trust pursuant to this Agreement.
"Minimum Investment Amount" means the minimum number of Interests which a
Beneficiary was or is required to purchase in the Class A Offering or Class B
Offering, or, if the Beneficiary does not acquire
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his Interests in either such Offering, the minimum number of Class A Interests
or Class B Interests which a Beneficiary is required to acquire from his
transferor in accordance with this Agreement.
"Minimum Class B Investment Amount" means the minimum number of Interests
which a Class B Beneficiary is required to purchase in the Offering.
"Minimum Class B Offering" means the sale of at least 413,036 Class B
Subordinated Interests in the Trust (included for this purpose any Class B
Subordinated Interests which are purchased by the Managing Trustee and any
Affiliate, including the Special Beneficiary).
"Minimum Leverage Level" means at least 12% of the Total Purchase Price of
the Assets acquired from Gross Class A Proceeds.
"NASAA Guidelines" means the Statement of Policy for Equipment Programs,
as amended April 22, 1988 and October 24, 1991, by the North American Securities
Administrators Association, Inc., as in effect on the date of the Class A
Prospectus.
"Net Class A Proceeds" means Gross Class A Proceeds minus all sales
commissions (including the D-M Commissions) and Organizational and Offering
Expenses of the Trust relating to the Class A Offering reimbursable pursuant to
Section 10.4.
"Net Class B Proceeds" means Gross Class B Proceeds minus all offering
expenses of the Trust relating to the Class B Offering payable or reimbursable
pursuant to this Agreement.
"Non-Eligible Beneficiary" means a Beneficiary who (i) has represented to
the Trust that he is an Eligible Citizen but is no longer an Eligible Citizen,
or (ii) fails at the time he acquires his Interests to certify his citizenship
to the Managing Trustee pursuant to Section 9.5.
"Operating Lease" means a lease under which the aggregate rental payments
during the original term are not sufficient to permit the Trust to recover the
Purchase Price of the Assets leased thereby.
"Organizational and Offering Expenses" shall have the meaning set forth
in Section 10.4(a).
"Over-Subscription Privilege" means the right of exercising rights holders
to subscribe for all or a portion of the Class B Subordinated Interests that
were not otherwise subscribed for by other rights holders.
"Participant" means the Managing Trustee, the Special Beneficiary or
any Beneficiary.
"Permitted Investments" means securities issued or guaranteed by the
United States government or any agency or instrumentality thereof, certificates
of deposit of United States banks having a net worth of at least $50,000,000,
bankers' acceptances, bank repurchase agreements covering securities issued or
guaranteed by the United States government or any agency or instrumentality
thereof, money market funds having a net worth of at least $100,000,000 or
similar highly liquid investments (other than tax exempt securities or
obligations). No funds of the Trust will be invested in any money market fund,
savings and loan, bank or other financial institution which is affiliated with
any Managing Trustee or its Affiliates.
"Person" means any individual, partnership, corporation, trust,
association, governmental official, body or agency, or other legal entity of any
type.
"Profits" has the meaning given it in Section 8.2(d).
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"Prospectuses" means, collectively, the Class A Prospectus and the
Class B Prospectus.
"Purchase Price" means the price paid by the Trust, whether directly or
indirectly through a Joint Venture, for an Asset, including the amount of
Acquisition Fees and Acquisition Expenses and the amounts of all liens and
mortgages on such Asset, but excluding points and prepaid interest.
"Qualified Income Offset Item" means (1) an allocation of loss or
deduction that, as of the end of each year, reasonably is expected to be made
(a) pursuant to Section 704(e)(2) of the Code to a donee of an interest in the
Trust, (b) pursuant to Section 706(d) of the Code as the result of a change in a
Participant's interest in the Trust, and (c) pursuant to Treasury Regulation
Section 1.751-1(b)(2)(ii) as the result of a distribution by the Trust of
unrealized receivables or inventory items, and (2) a distribution that, as of
the end of such year, reasonably is expected to be made to a Participant to the
extent it exceeds offsetting increases to the Participant's Capital Account
which reasonably are expected to occur during or prior to the Trust taxable year
in which such distribution reasonably is expected to occur.
"Qualified Plan" means any qualified pension, profit-sharing, or stock
bonus plan (including a Keogh Plan) and an IRA.
"Record Date" has the meaning given it in Section 11.1(c).
"Record Date Holders" means holders of record as of the close of business
on April 1, 1997, of Class A Interests and Special Beneficiary Interests.
"Recording Date" has the meaning given it in Section 9.3.
"Redemption Date" means the date selected by the Managing Trustee, in its
sole discretion, on which Interests tendered for redemption will be redeemed by
the Trust in accordance with Section 9.6.
"Removal" has the meaning specified in Section 4.9.
"Removed Trustee" means a Trustee whose tenure as Trustee has been
terminated by a Removal.
"Reserve Account" means the account maintained by the Trust as reserves
for working capital and contingent liabilities, including repairs, replacements,
contingencies, accruals required by lenders for insurance, compensating balances
required by lenders to the Trust and other appropriate items.
"Resignation" means the resignation of a Trustee or the voluntary
Assignment of all of the Managing Trustee's Interest pursuant to Section 4.8.
"Resigned Trustee" means a Trustee whose tenure as Trustee has been
terminated by a Resignation.
"Right" means non-transferable subscription rights to Record Date Holders
to acquire Class B Subordinated Interests.
"Roll-Up" means a transaction involving the acquisition, merger,
conversion or consolidation either directly or indirectly of the Trust and the
issuance of securities of a Roll-Up Entity. Such term does not include: (a) a
transaction involving the securities of the Trust that have been for at least 12
months listed on a national securities exchange or traded through the National
Association of Securities Dealers Automated Quotation National Market System; or
(b) a transaction involving the conversion to corporate, trust, partnership or
association form of only the Trust if, as a consequence of the transaction,
there will be no
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significant adverse change in any of the following: (i) Beneficiary's voting
rights; (ii) the term of existence of the Trust; (iii) Sponsor compensation; and
(iv) the investment objectives of the Trust.
"Roll-Up Entity" means a partnership, corporation, trust or other entity
that would be created or would survive after the successful completion of a
proposed Roll-Up transaction.
"Sale or Refinancing" means the sale, refinancing, exchange, condemnation,
eminent domain taking, casualty or other disposition of any Asset or any
interest in any Joint Venture.
"Sales and Distribution Expenses" means expenses incurred in connection
with preparing the Trust for registration and subsequently offering and
distributing the Interests to the public, including sales commissions paid to
the Dealer-Manager in connection with the distribution of the Interests and all
advertising expenses relating to the leasing of the Assets.
"Schedule A" means Schedule A to this Agreement, as amended from time to
time.
"S-D Commissions" means the commissions of 7% of Gross Proceeds payable to
the Soliciting Dealers by the Dealer-Manager or such other amount to be paid to
the Soliciting Dealers as the S-D Commission as specified in Section 5.1(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Service" means the Internal Revenue Service.
"Soliciting Dealers" means those member firms of the National
Association of Securities Dealers, Inc. (including the Dealer-Manager) that
offer Interests.
"Special Beneficiary" means Equis Financial Group in its capacity as
Special Beneficiary pursuant to this Agreement, together with its successors and
assigns in such capacity.
"Special Beneficiary Interest" means the interest of the Special
Beneficiary in the Trust created pursuant to this Agreement and representing the
capital contribution set forth in Schedule A to this Agreement.
"Sponsor" means any person directly or indirectly instrumental in
organizing, wholly or in part, the Trust, or any Person who will manage or
participate in the management of the Trust and any Affiliate of any such Person.
Sponsor does not include the Delaware Trustee or a Person whose only relation
with the Trust is that of an independent equipment manager or 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 Class A Offering or
Class B Offering.
"State" means the State of Delaware.
"Subordinated Resale Fee" means the fee to be paid by the Trust to the
Advisor for services rendered by the Advisor in connection with the sale or
other disposition of the Assets, as described in Section 5.1(e).
"Subscription Agent" means Gemisys Corporation.
"Subscription Agreement" means the Subscription Agreement, the form of
which was attached as
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Exhibit B to the Class A Prospectus, containing, among other things,
representations made by each Class A Beneficiary.
"Subscription Certificates" means the subscription certificate evidencing
the Rights and set forth as Appendix A to the Class B Prospectus.
"Substitute Trustee" means an assignee of the Trustee's Interest who is
admitted to the Trust as a Trustee pursuant to Section 4.12 or 11.2.
"Substitute Beneficiary" means an assignee of a Beneficiary Interest who
becomes a Beneficiary pursuant to Section 9.3.
"Substitute Special Beneficiary" means an assignee of the Special
Beneficiary Interest who becomes a Special Beneficiary pursuant to Section 9.8.
"Trust" means AFG Investment Trust C, a Delaware business trust, as the
same may be constituted from time to time.
"Trust Beneficiaries" means the Beneficiaries and the Special
Beneficiary.
"Trust Beneficiary Interests" means the Beneficiary Interests and the
Special Beneficiary Interest.
"Trust Counsel" means Peabody & Brown, Boston, Massachusetts, or other
counsel for the Trust selected by the Managing Trustee.
"Trustees" means the Managing Trustee, the Delaware Trustee and any Person
or Persons who subsequently become additional or substitute Trustees as provided
in Section 4.1(a), in each such Person's capacity as a Trustee of the Trust. At
all times when there is only one Trustee so acting, the terms "Trustees" and
"Managing Trustee" shall refer to such Trustee.
"UBTI" means unrelated business taxable income determined in accordance
with Sections 511-514 of the Code.
ARTICLE III - CAPITAL
3.1 Capital Contribution of the Special Beneficiary and Managing Trustee.
The Managing Trustee and the Special Beneficiary have each contributed as
its Capital Contribution in its capacity as Managing Trustee and Special
Beneficiary cash in the amount set forth opposite its name in Schedule A. No
other Trustee shall have the right or obligation to make any Capital
Contribution to the Trust.
3.2 Class A Beneficiaries; Offering of Class B Interests; Beneficiary
Interests.
(a) The Trust has accepted Class A Beneficiaries who own 2,011,014 Class A
Interests for a Purchase Price of $25 per Interest. Such Purchase Price
constituted the Capital Contributions of the Class A Beneficiaries for all
purposes of this Agreement. Each Class A Beneficiary acquired not less than the
Minimum Class A Investment Amount and no Class A Beneficiary acquired or shall
thereafter own a fractional Class A Interest.
(b) A subscriber for Class B Interests shall become a Class B Beneficiary
in accordance with
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his Subscription Certificate and the subscription procedures described in the
Class B Prospectus. All subscriptions for Class B Interests shall be received by
the Escrow Agent in trust and deposited in the Escrow Account. Any Escrow
Interest shall be paid to the subscribers who become Class B Beneficiaries by
the Escrow Agent within fifteen (15) days after the Class B Closing; provided,
however, that no Escrow Interest shall be paid with respect to subscription
payments received fewer than three days prior to such Closing. If the Escrow
Agent does not receive subscriptions for at least Class B Interests on or before
December 31, 1997 (or such earlier date as of which the Managing Trustee shall
have terminated the Offering), the subscribers shall not acquire any Class B
Interests and the Escrow Agent shall return all monies deposited by subscribers
for Class B Interests to such subscribers, together with any Escrow Interest,
within fifteen (15) business days after such date. All subscriptions shall be
accepted or rejected by the Managing Trustee within thirty (30) days of their
receipt. Subscription payments which are rejected shall be promptly returned to
the subscriber without Escrow Interest. Upon receipt of subscriptions for not
less than the Minimum Offering acceptable to the Managing Trustee and the
determination of the Managing Trustee to proceed to the Class B Closing, the
Escrow Agent shall release the proceeds of such subscriptions to the Trust.
(c) The Managing Trustee is hereby authorized to do all things necessary
and desirable to allow subscribers to subscribe for Class B Interests and become
Class B Beneficiaries in accordance with this Agreement and the Class B
Prospectus, including registering the Class B Interests under the Securities Act
of 1933, as amended, pursuant to the rules and regulations of the Securities and
Exchange Commission and qualifying the Class B Interests for sale with state
securities regulatory authorities or perfecting exemptions from qualification.
3.3 Capital Accounts.
A Capital Account shall be established and maintained for each
Participant. Subject to such other adjustments as may be required under the
Code, the Capital Account of each Participant shall consist of (i) the sum of
(a) the amount of cash actually contributed to the Trust by such Participant,
(b) the fair market value of any property contributed to the Trust by or on
behalf of such Participant net of any liabilities assumed by the Trust or to
which such property is subject, and (c) the amount of Profits or gain or
tax-exempt income of the Trust allocated to such Participant, minus (ii) the sum
of (a) the amount of Losses and deductions of the Trust allocated to such
Participant, (b) the amount of Distributions made by the Trust to such
Participant, (c) any amount distributed by the Trust to such Participant
pursuant to Section 8.4, and (d) the fair market value of any property
distributed by the Trust to such Participant net of any liabilities assumed by
such Participant or to which such property is subject. Any special basis
adjustments resulting from Section 743 of the Code shall not be taken into
account for any purpose in establishing and maintaining Capital Accounts for
such Participant pursuant to this Section 3.3. The Capital Account of each
Beneficiary shall be reduced by the actual sales commissions and other
non-deductible, non-capitalizable expenses paid by the Trust with respect to
Interests acquired by such Beneficiary.
Except where this Agreement otherwise requires, a Substitute Beneficiary
or Substitute Special Beneficiary shall be deemed to have received the Capital
Account and made the Capital Contributions to the Trust which were made by the
Beneficiary or Special Beneficiary whom such Substitute Beneficiary or
Substitute Special Beneficiary succeeds, and to have received from the Trust the
Distributions and allocations received from the Trust by such former Beneficiary
or Special Beneficiary.
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3.4 Additional Capital Contributions.
No Participant shall be required to make any Capital Contribution or be
entitled to bring an action for partition against the Trust, or to demand or
receive any distribution of or with respect to his Capital Contribution, except
as specifically provided under this Agreement. No loan made by a Participant to
the Trust as permitted by this Agreement shall constitute a Capital Contribution
for any purpose.
ARTICLE IV - TRUSTEES
4.1 The Trustees; Liability for Trust Obligations.
(a) The number of Trustees shall not be less than two nor more than four
and shall be fixed from time to time by the Managing Trustee. One Trustee shall
be designated as the Managing Trustee and one Trustee shall be designated as the
Delaware Trustee. The Managing Trustee is AFG ASIT Corporation and the Delaware
Trustee is Wilmington Trust Company. Each Person designated as a Trustee shall
serve as Trustee hereunder until such Trustee's Removal or Resignation, as
provided in this Article IV. In the event of the Removal or Resignation of the
Delaware Trustee, the Managing Trustee shall designate a Substitute Delaware
Trustee.
(b) The Managing Trustee shall have complete exclusive discretion in the
management and control of the affairs and business of the Trust, as more
particularly provided in Section 4.2. Any action required or permitted to be
taken by a corporate Managing Trustee hereunder may be taken by such of its
officers or agents as it shall validly designate for such purposes. The Managing
Trustee shall devote so much of its time as may be necessary to carry out the
purposes and conduct the business of the Trust in accordance with this Agreement
and to carry out its duties as Managing Trustee hereunder. The Delaware Trustee
shall have only the rights and obligations of the Delaware Trustee specifically
provided in this Agreement and shall have no Interest, make no Capital
Contribution and have no right to Consent to any matters affecting the Trust
except as otherwise specifically provided herein. In the event that the Managing
Trustee shall designate additional Trustees pursuant to Section 4.1(a), such
Trustees shall have such rights and obligations as shall be delegated to them by
the Managing Trustee but any such delegation shall not relieve the Managing
Trustee of its primary responsibility for the affairs of the Trust hereunder.
(c) If any Managing Trustee shall become unable to serve in such capacity
or shall Resign or be Removed as Trustee and the Beneficiaries shall not have
designated a successor Managing Trustee pursuant to Section 4.12, the Persons
acting as Trustees may from time to time designate from among themselves by
mutual consent a successor Managing Trustee. If for any reason no designation is
in effect, the powers of the Managing Trustee shall be exercised by majority
consent of the remaining Persons acting as Trustees (including, without
limitation, the Delaware Trustee).
(d) The Managing Trustee, when acting in such capacity, shall be
personally liable for the acts, omissions or obligations of the Trust, except as
may be provided to the contrary in any contractual agreement of the Trust.
Neither the Delaware Trustee nor any other Trustee, other than the Managing
Trustee, shall have any personal liability to any other Person for any act,
omission or obligation of the Trust or any other Trustee.
4.2 Extent of Managing Trustee Powers and Duties.
Except as expressly limited by this Agreement, the Managing Trustee shall
have complete and exclusive discretion in the management and control of the
affairs and business of the Trust and all power necessary, convenient or
appropriate to carry out the purposes, conduct the business and exercise the
powers of the Trust.
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(a) General Powers and Duties. The Managing Trustee shall use its best
efforts during so much of its time as may be necessary to carry out its duties
in accordance with this Agreement and in the best interest of the Trust and so
as to protect the interests of the Trust Beneficiaries as a group. The Managing
Trustee shall be accountable as a fiduciary for the safekeeping and use of all
funds and Assets of the Trust and shall not employ or permit another Person to
employ such funds or Assets in any manner except for the benefit of the Trust.
In particular, the Managing Trustee, solely, shall be responsible for and shall
use its best efforts and exercise discretion to the best of its ability:
(i) to cause Assets to be acquired, held, leased, re-leased,
financed and refinanced, sold, exchanged or otherwise disposed of (except
as limited by Section 1.6 and Article VII);
(ii) to lease, maintain and operate the Assets so as to comply with
the provisions of any indebtedness relating thereto;
(iii) to select and supervise the activities of the Advisor (which
may be an Affiliate);
(iv) to ensure the proper application of revenues of the Trust;
(v) to maintain proper books of account for the Trust and to prepare
all reports of operations and tax returns which are to be furnished to the
Trust Beneficiaries pursuant to this Agreement or which are required by
taxing bodies or other governmental agencies;
(vi) in general to supervise the redemption of Class A Interests
pursuant to Section 9.6;
(vii) in particular to cause the Trust to purchase and redeem Class
A Interests pursuant to the last paragraph of Section 9.6.
(viii) to maintain or cause to be maintained, to the extent it deems
necessary or appropriate, adequate insurance with respect to all insurable
Assets of the Trust pursuant to policies of insurance in form and coverage
customary to property similar to the Assets;
(ix) to supervise the offer and sale of Class A Interests and Class
B Interests;
(x) to establish reasonable procedures for the transfer of Interests
(including actions which may impose restrictions on the transferability of
Interests as set forth in Section 9.2, provided such restrictions on
transfers do not cause the assets of the Trust to be deemed to be plan
assets with respect to Beneficiaries which are Qualified Plans) and to
take such other actions with respect to the manner in which Interests are
transferred as it, in its sole discretion, deems necessary or appropriate
in order to preserve the status of the Trust as an entity taxable as a
partnership for federal income tax purposes, to prevent the Trust from
being deemed a publicly traded partnership under the Code, to prevent the
Trust from being terminated for federal income tax purposes, to prevent
the deregistration of any FAA-registered aircraft or vessels documented
under the laws of the United States and to assure that the Beneficiaries
will be treated as owners of the Interests for federal income tax purposes
under the Code (and to amend this Agreement without the Consent of any
Beneficiary in order to effect the foregoing); provided, however, that any
transfer restrictions imposed without the Majority Consent to prevent
adverse tax consequences to the Beneficiaries will only be imposed to the
extent necessary to prevent such adverse tax consequences and will be
modified or eliminated to the extent that such restrictions become
unnecessary in the future;
(xi) to execute and file with any state tax authority, if necessary
or appropriate to
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comply with or minimize withholding obligations under the laws of that
state, a statement on behalf of the Trust Beneficiaries acknowledging and
confirming their obligations to file tax returns with such state;
(xii) in the event that either (y) the Assets would constitute plan
assets for purposes of ERISA or (z) the transactions contemplated under
this Agreement would constitute prohibited transactions under ERISA or the
Code and an exemption for such transactions is not obtainable or not
sought by the Managing Trustee from the Department of Labor, to
restructure the Trust's activities to the extent necessary to comply with
any exemption in any final plan asset regulation adopted by the Department
of Labor or any condition which the Department of Labor might impose as a
condition to granting a prohibited transaction exemption, including, but
not limited to, establishing a fixed percentage of Interests permitted to
be held by Qualified Plans or other tax-exempt Beneficiaries and/or
discontinuing sales to such Entities after a given date. The Managing
Trustee is empowered to amend this Section 4.2(a)(x) to the extent it
deems necessary or appropriate in order to comply with any applicable
federal or state legislation, rules or regulations enacted or promulgated
or administrative pronouncements or interpretations and/or judicial
interpretations thereof after the date of this Agreement; provided,
however, that any amendments imposed without Majority Consent to prevent
adverse consequences to the Trust Beneficiaries under ERISA or the Code
shall only be imposed to the extent necessary to prevent such adverse tax
consequences and will be modified or eliminated to the extent that such
restrictions become unnecessary in the future. Any amendments made by the
Managing Trustee under the circumstances described above shall be deemed
to be made pursuant to the fiduciary duty of the Managing Trustee to the
Trust and the Trust Beneficiaries;
(xii) to determine whether any Foreign Investors may be admitted as
Beneficiaries and establish requirements for the admission of Foreign
Investors;
(xiii) to establish a fixed percentage of Interests permitted to be
held by or discontinue sales to Foreign Investors after a given date and
take any additional actions as the Managing Trustee deems necessary or
appropriate in order to maintain the registration with the FAA of any
FAA-registered aircraft and the documentation of any vessels documented
under the laws of the United States;
(xiv) to take such actions as the Managing Trustee deems necessary
or appropriate, including, without limitation, borrowing funds on behalf
of the Trust, to comply with the requirements of Sections 1441, 1442 and
1446 of the Code or setting aside Distributions otherwise payable to
Foreign Beneficiaries in an escrow account to meet future requirements
under Sections 1441, 1442 and 1446 of the Code; and
(xv) to do all things and to execute all documents the Managing
Trustee shall deem necessary or advisable in connection with the
supervision of the affairs, business and assets of the Trust.
In establishing criteria for the resolution of conflicts of interest among
the Trust and the Managing Trustee and its Affiliates, the Managing Trustee will
act in conformity with its fiduciary duty to the Trust and the Beneficiaries.
(b) Amplification of Powers and Duties. As amplification of, and not by
way of limitation on, the powers expressed herein, the Managing Trustee shall
have, subject to the express provisions of this Agreement, full power and
authority on behalf of the Trust, in order to carry out and accomplish its
purposes and functions:
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(i) to expend Trust capital and income;
(ii) to purchase, lease, sell, exchange, improve, repair, refurbish,
upgrade, divide, combine and otherwise transact business with respect to
interests in real and personal property, in each case on terms that the
Managing Trustee deems to be in the best interests of the Trust, and in
that connection to employ engineers, contractors, attorneys, accountants,
brokers, appraisers and such other consultants, advisors, artisans and
workmen as may be necessary or advisable for such purpose;
(iii) to borrow money or otherwise to procure extensions of credit
for the Trust in accordance with the borrowing policies set forth in the
Prospectus (as such policies may be altered in accordance with the Class A
Prospectus and Section 7.1), and in connection therewith to execute, seal,
acknowledge and deliver agreements, promissory notes, guarantees and other
written documents constituting obligations or evidences of indebtedness,
and as security therefor to pledge, hypothecate, mortgage, assign,
transfer or convey mortgages or security interests in the Assets;
(iv) for a period of four years from Final Class A Closing, to
reinvest Cash from Sales and Refinancings in additional Assets; provided,
however, that the Lease of any Asset so acquired shall have a term which
shall expire not later than ten years after Final Closing; and provided,
further, that sufficient Distributions are made to enable the
Beneficiaries to pay any state and federal income taxes arising from the
Sale or Refinancing transaction (assuming the Beneficiaries are in a
combined federal and state marginal tax bracket of 33%) or the rate
effective at the time of the Sale or Refinancing transaction;
(v) to invest any Sale or Refinancing proceeds resulting from the
loss or destruction of any Asset in replacement assets;
(vi) to execute, deliver, amend, modify and cancel documents and
instruments relating to real and personal property of whatever kind and
description, including, but not limited to, mortgages, leases, and other
documents of title or conveyance, assumption agreements pertaining to such
agreements, powers of attorney and other contracts, instruments and
agreements of all kinds;
(vii) to hold all or any portion of the Assets in the name of one or
more trustees (including trustees which are Affiliates of the Managing
Trustee or the Advisor), nominees, or other agents of or for the Trust
(including the Managing Trustee) for the purpose of facilitating
transactions involving said Assets;
(viii) to establish reserves for normal repairs, replacements, and
contingencies and, in its discretion, for any other proper Trust purpose;
(ix) to amend this Agreement to reflect the addition or substitution
of Trustees or Trust Beneficiaries or the reduction of Capital Accounts
upon the return of Capital Contributions to Participants;
(x) to determine the time and amount of Distributions, if any, to
the Participants;
(xi) to designate depositories of the Trust's funds and the terms
and conditions of such deposits and drawings thereon;
(xii) to invest in one or more Joint Ventures in accordance with
Section 7.5;
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(xiii) to utilize Cash from Operations and Cash From Sales or
Refinancings to redeem Class A Interests in accordance with the terms of
Section 9.6; and
(xiv) in general to do all things and execute all documents it shall
deem necessary or convenient to accomplish the purposes of the Trust or to
protect and preserve the Assets to the same extent as if it owned such
Assets individually.
(c) Right to Acquire Interests. The Managing Trustee shall have the right
in its sole discretion, without the Consent of any Beneficiary, the Special
Beneficiary or other Trustee:
(i) to acquire Interests to the extent required to prevent the
Assets of the Trust from being deemed plan assets with respect to
Beneficiaries which are Qualified Plans and to prevent a prohibited
transaction from occurring under ERISA; provided that such Interests shall
be acquired at fair market value (as determined by an independent
appraiser retained by the Managing Trustee); and
(ii) to become a Substitute Beneficiary with respect to Interests
held by a Non-Eligible Beneficiary in accordance with Section 9.5.
(d) Authority to Enter into Dealer-Manager Agreement. The Managing Trustee
shall cause the Trust to enter into the Dealer-Manager Agreement pursuant to
which the Dealer-Manager shall act as dealer-manager for the Class A Offering.
(e) Authority to Enter into Advisory Agreement. The Managing Trustee shall
cause the Trust to enter into the Advisory Agreement with the Advisor. The
Managing Trustee may not amend the Advisory Agreement in any manner which would
adversely affect the Beneficiaries without Majority Consent. The Advisory
Agreement shall provide that the Trust shall have the right to terminate the
Advisory Agreement effective immediately and without penalty in the event of the
Removal of the Managing Trustee.
(f) Reserves. The Managing Trustee shall endeavor to maintain an adequate
Reserve Account at all times. Such amount may be increased if necessary to
comply with the conditions of lenders requiring compensating balances or other
reserves. If used, cash reserves need not be restored, but, if restored, will be
restored from revenues derived from Trust operations including the proceeds from
the sale of Assets or from borrowings. Funds in the Reserve Account may be
distributed in accordance with Section 8.1(a) if and when deemed advisable by
the Managing Trustee. The Trust's reserves will not be reduced below a level
which the Managing Trustee deems necessary for Trust operations.
(g) Designation, Duties, and Expenses of Tax Matters Participant. The
Managing Trustee shall from time to time (but at least as frequently as required
by law) designate a Tax Matters Participant pursuant to Section 6231 of the Code
and hereby designates itself as the initial Tax Matters Participant. The Tax
Matters Participant shall have the following duties:
(i) to the extent and in the manner required by applicable law and
regulations, to furnish the name, address, profits, interest, and taxpayer
identification number of each Trust Beneficiary to the Secretary of the
Treasury or his delegate (the "Secretary"); and
(ii) to the extent and in the manner required by applicable law and
regulations, to keep each Trust Beneficiary informed of administrative and
judicial proceedings for the adjustment at the Trust level of any item
required to be taken into account by a Trust Beneficiary for federal
income tax purposes (such administrative and judicial proceedings referred
to hereinafter as judicial
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review).
The Trust shall indemnify and reimburse the Tax Matters Participant for
any and all expenses, including legal and accounting fees, claims, liabilities,
losses and damages incurred in connection with any judicial or administrative
review with respect to the tax liability of the Trust Beneficiaries, subject to
the provisions of Section 4.6. The payment of all such expenses shall be made
before any Distributions are made. Neither the Managing Trustee nor any
Affiliate nor any other Person shall have any obligation to provide funds for
such purpose. The taking of any action and the incurring of any expense by the
Tax Matters Participant in connection with any such proceeding, except to the
extent required by law, is a matter in the sole discretion of the Tax Matters
Participant; and the provisions on limitations of liability of the Managing
Trustee and indemnification set forth in Section 4.6 shall be fully applicable
to the Tax Matters Participant in its capacity as such.
The Tax Matters Participant is hereby authorized, but not required:
(i) to enter into any settlement agreement with the Service with
respect to any tax audit or judicial review, in which agreement the Tax
Matters Participant may expressly state that such agreement shall bind the
Trustees and the Trust Beneficiaries, except that such settlement
agreement shall not bind any Person who is entitled to file and who
(within the time prescribed pursuant to the Code and regulations
thereunder) files a statement with the Service stating that the Tax
Matters Participant shall not have the authority to enter into a
settlement agreement on the behalf of such Person;
(ii) in the event that a notice of a final administrative adjustment
at the Trust level of any item required to be taken into account by a
Trustee or Trust Beneficiary for tax purposes (a final adjustment) is
mailed to the Tax Matters Participant, to seek judicial review of such
final adjustment, including the filing of a petition for readjustment with
the Tax Court, the District Court of the United States for the district in
which the Trust's principal place of business is located or the United
States Claims Court;
(iii) to intervene in any action brought by a Trustee or Trust
Beneficiary for judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with the
Service at any time and, if any part of such request is not allowed by the
Service, to file a petition for judicial review with respect to such
request;
(v) to enter into an agreement with the Service to extend the period
for assessing any tax which is attributable to any item required to be
taken into account by a Trustee or Trust Beneficiary for tax purposes, or
an item affected by such item; and
(vi) to take any other action on behalf of any other Trustee or
Trust Beneficiary in connection with any administrative or judicial tax
proceeding to the extent permitted by applicable law or regulations.
(h) Insurance Policies. The Managing Trustee shall cause the Trust to
purchase and maintain such insurance policies as the Managing Trustee deems
reasonably necessary to protect the interests of the Trust (to the extent that
such policies are not maintained by the Lessees or other parties for the benefit
of the Trust). The Trust shall not pay for any insurance covering liability of
the Managing Trustee, its Affiliates, agents or employees for actions or
omissions to act for which indemnification is not permitted hereunder. The Trust
may purchase and pay for such types of insurance, including extended coverage
liability and
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casualty and workmen's compensation, as would be customary for any person owning
comparable property and engaged in a similar business and may name the Trustees
and their Affiliates as additional insured parties thereunder, provided that
such addition does not add to the cost of premiums payable by the Trust. The
Trust may not incur the cost of any insurance which would insure the Trustees or
their Affiliates against liabilities to which they are prohibited from being
indemnified under Section 4.6; provided, however, that this prohibition shall
not preclude the addition of such parties as additional insureds on any public
liability insurance to the extent that such added parties do not increase the
cost of such insurance to the Trust or to the extent that any additional cost is
not borne by the Trust. Notwithstanding the foregoing, the Delaware Trustee
shall be named as an additional insured on any public liability insurance policy
at the expense of the Trust.
(i) Determination of Adjusted Basis in Connection with Section 754
Election. The Managing Trustee is authorized to make the election under Section
754 of the Code, but is not obligated and does not expect to make the Section
754 election. If a Section 754 election is made, in determining the adjustment
to any Beneficiary's proportionate share of the adjusted basis of Assets in
connection with the Section 754 election, the Managing Trustee, for purposes of
accounting simplicity, shall treat each Beneficiary who acquires one or more
Interests at any time during a calendar month as having acquired the same at a
price equal to the weighted average of the price paid for all Interests
transferred during such month, irrespective of the date on or price at which
such Interests actually were acquired by such Beneficiary during such month. The
Managing Trustee shall be authorized to alter these accounting conventions and
to conform such conventions with any regulations issued by the Treasury
Department or rulings or advice of the Service, as the Managing Trustee shall
determine necessary or appropriate, without Consent of any Beneficiary or the
Special Beneficiary. To the extent the Managing Trustee is required to determine
the adjusted basis of any Assets with respect to which the Code requires that
records of such adjusted basis be kept and maintained by the Trust
Beneficiaries, the Managing Trustee may request information regarding such
adjusted basis from such Trust Beneficiary, in writing, and such Trust
Beneficiary shall furnish such information to the Managing Trustee within 30
calendar days after such request is mailed by the Managing Trustee.
4.3 Delegation of Powers.
Except as otherwise provided under this Agreement or by law and subject to
the provisions of Section 5.3 and 10.4, the Managing Trustee may delegate all or
any of its duties under this Agreement to any of its officers, employees and
agents and in furtherance of such delegation may elect, employ, contract or deal
with any Person (including any Affiliate of the Managing Trustee).
4.4 Reliance by Third Parties.
No Person dealing with the Trust, or its assets, whether as mortgagee,
assignee, purchaser, lessee, grantee or otherwise, shall be required to
investigate the authority of the Managing Trustee in selling, assigning,
leasing, mortgaging, conveying or otherwise dealing with any Assets or any part
thereof, nor shall any such assignee, lessee, purchaser, mortgagee, grantee or
other Person entering into a contract with the Trust be required to inquire as
to whether the approval of the Trust Beneficiaries for any such sale,
assignment, lease, mortgage, transfer or other transaction has been first
obtained. Any such Person shall be conclusively protected in relying upon a
certificate of authority or any other material fact signed by the Managing
Trustee, or in accepting any instrument signed by the Managing Trustee in the
name and on behalf of the Trust or the Managing Trustee.
4.5 Limitations on the Exercise of Powers of Managing Trustee.
The Managing Trustee shall not:
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(i) do any act in contravention of this Agreement or any applicable
law or regulation;
(ii) possess Trust property or assign the Trust's rights in specific
Trust property for other than a Trust purpose;
(iii) permit any Person to become a Trust Beneficiary, except as
provided in or contemplated by this Agreement;
(iv) knowingly commit any act that would subject any Trust
Beneficiary to unlimited liability in any jurisdiction;
(v) change the Trust's purposes from those set forth in Section 1.4;
(vi) acquire any Assets in exchange for interests in the Trust;
(vii) invest in junior chattel mortgages or deeds of trust, except
that the Trust may acquire chattel mortgages or deeds of trust in
connection with the sale of Assets;
(viii) invest in or underwrite the securities of other issuers,
except as provided in Sections 7.1 and 7.5;
(ix) do any act required to be approved or ratified in writing by
some or all Trust Beneficiaries under the Business Trust Act without such
approval or ratification unless the right to do so is expressly otherwise
given in this Agreement;
(x) reinvest Distributable Cash From Operations in Assets; or
(xi) cause the Trust to engage in any purchase or redemption of
Interests if, and to the extent that, such purchase or redemption would
result in the Trust being treated as a publicly traded partnership for
purposes of Section 7704 of the Code.
4.6 Liability for Acts or Omissions and Indemnification.
Neither any Trustee nor its Affiliates shall have any liability to the
Trust or to any other Trustee or any Trust Beneficiary for any loss suffered by
the Trust which arises out of any action or inaction of the Trustee or its
Affiliates while acting on behalf of, or in the course of performing services
for, the Trust, if the Trustee, in good faith, determined that such course of
conduct was in the best interest of the Trust and such course of conduct did not
constitute negligence or misconduct of the Trustee or its Affiliates. Each
Trustee and its Affiliates shall be indemnified by the Trust against any losses,
judgments, liabilities, expenses and amounts paid in settlement of any claims
sustained by them in connection with the Trust, provided that the same were not
the result of negligence or misconduct on the part of the Trustee or its
Affiliates and the Trustee determined in good faith that the course of conduct
that caused the loss, judgment, liability or claim was in the best interest of
the Trust. Notwithstanding the above, the Managing Trustee and its Affiliates
shall not be indemnified for any losses, liabilities or expenses arising from or
out of any alleged violation of any obligations any such Person might have as
ERISA fiduciaries unless (i) there has been a successful adjudication on the
merits of each count involving alleged violations of such obligations as to the
particular indemnitee and such court approves the indemnification of litigation
costs, (ii) such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular indemnitee and such court
approves the indemnification of litigation costs, or (iii) a court of competent
jurisdiction approves the settlement of the claims against a particular
indemnitee and finds that indemnification of the settlement and related costs
should be made. Further, notwithstanding the above, the
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Managing Trustee and its Affiliates and any Person acting as a broker-dealer
shall not be indemnified for any losses, liabilities, or expenses arising from
or out of any alleged violation of federal or state securities laws unless (i)
there has been a successful adjudication on the merits of each count involving
alleged securities law violations as to the particular indemnitee and a court of
competent jurisdiction approves the indemnification of litigation costs, (ii)
such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee and a court of competent
jurisdiction approves the indemnification of litigation costs, or (iii) a court
of competent jurisdiction approves a settlement of the claims against a
particular indemnitee and finds that indemnification of the settlement and
related costs should be made. In any claim for indemnification for federal or
state securities law violations, the party seeking indemnification shall place
before the court the position of the Securities and Exchange Commission, the
Massachusetts Securities Division, the Michigan Corporations & Securities
Bureau, the Pennsylvania Securities Commission, the Tennessee Securities
Commission and the Commissioner of Corporations of the State of California with
respect to the issue of indemnification for securities law violations. The Trust
shall not incur the cost of a portion of any insurance which insures any party
against any liability the indemnification of which is herein prohibited;
provided, however, that this prohibition shall not preclude the addition of such
parties as additional insureds on any public liability insurance to the extent
that such added parties do not increase the cost of such insurance to the Trust
or to the extent that any additional cost is not borne by the Trust.
Furthermore, any amount recoverable under this Section shall be recoverable only
out of the assets of the Trust and not from the assets of any Trust Beneficiary.
The Trust may make advances from Trust funds for legal expenses and other
costs incurred as a result of any legal action to any Person permitted
indemnification hereby (the "Indemnitee") provided (i) such suit, action or
proceeding relates to or arises out of, or is alleged to relate to or arise out
of, any action or inaction on the part of the Indemnitee in the performance of
its duties or provision of its services by the Managing Trustee or its
Affiliates on behalf of the Trust; (ii) the Indemnitee undertakes to repay any
funds advanced pursuant to this Section 4.6 in cases in which the indemnitee
would not be entitled to indemnification hereunder; and (iii) such suit, action
or proceeding is initiated by a third party who is not a holder of the
Interests; and (iv) such suit, action or proceeding is not initiated against the
Managing Trustee or its Affiliates. If advances are permissible under this
Section 4.6, the Indemnitee shall furnish the Trust with an undertaking as set
forth in the preceding sentence and shall thereafter bill the Trust from time to
time for such amounts as the indemnitee is obligated to make payment therefor.
The Trust shall pay any and all such bills and shall honor any and all such
requests for payment for which the Trust is liable hereunder. In the event that
a final determination is made that the Trust is not obligated hereunder for all
or any portion of the amounts advanced to the Indemnitee, such Indemnitee shall
refund such amount, plus interest thereon at the prevailing market rate of
interest, within 45 days of such final determination, and in the event that a
final determination is made that the Trust is so obligated in respect of any
amount not paid by the Trust to a particular Indemnitee, the Trust shall pay
such amount to such Indemnitee within 45 days of such determination.
For purposes of this Section 4.6 only, the term "Affiliate" shall mean any
person performing services on behalf of the Trust and acting on behalf of the
Managing Trustee who (i) directly or indirectly controls, is controlled by, or
is under common control with the Managing Trustee; (ii) owns or controls 10% or
more of the outstanding voting securities of the Managing Trustee; (iii) is an
officer, director, partner or trustee of the Managing Trustee; or (iv) if the
Managing Trustee is an officer, director, partner or trustee, in any company for
which the Managing Trustee acts in any such capacity.
4.7 Compensation of Trustees.
(a) Managing Trustee. The Managing Trustee shall not, in its capacity as
Managing Trustee, receive any salary, fees, profits or Distributions except:
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(i) the Managing Trustee shall be entitled to receive the
allocations and Distributions which are provided under Article VIII in
respect of its Managing Trustee Interest; and
(ii) the Managing Trustee and its Affiliates shall be entitled to
receive reimbursement for expenses incurred by them in connection with the
operation of the Trust, subject to the limitations set forth in Section
10.4.
(b) Delaware Trustee. The Delaware Trustee shall receive an annual fee of
$1,000, payable quarterly in advance, commencing with the first quarter
following Closing. The Delaware Trustee shall also receive an initial fee of
$1,000 payable at Closing. The Delaware Trustee shall also be entitled to
reimbursement for any expenses incurred by it in the performance of its
obligations hereunder. The Delaware Trustee, as such, shall not receive any
other salary, fees, allocations of Profits or Losses or any Distributions. The
fee of the Delaware Trustee may be modified from time to time as determined by
the Managing Trustee in its sole discretion to compensate the Delaware Trustee
appropriately for the performance of its duties hereunder.
(c) Specific Fees. Notwithstanding the foregoing, the Managing Trustee and
its Affiliates have the right to receive all fees and compensation specifically
provided for in this Agreement. If the Managing Trustee or an Affiliate
purchases Interests, it shall be entitled to the same benefits to which each
Beneficiary is entitled with respect to his Interests, except as otherwise
provided in Section 11.2(b).
(d) Liability of Managing Trustee. The Managing Trustee, when acting in
such capacity, shall be personally liable for the acts, omissions or obligations
of the Trust, except as may be expressly provided to the contrary in any
contractual agreement of the Trust. No other Trustee shall have any personal
liability to any other Person for any act, omission or obligation of the Trust
or any other Trustee.
4.8 Resignation of Trustees.
(a) No Managing Trustee may Resign unless (i) the Trust Beneficiaries have
received 60 days' advance written notice of the Managing Trustee's intention to
Resign, (ii) the Trust shall have received the opinion of Trust Counsel to the
effect that such Resignation will not constitute a termination of the Trust or
otherwise materially adversely affect the status of the Trust as an entity
taxable as a partnership for federal income tax purposes, and (iii) a new
Managing Trustee shall have been selected who, or which, (x) shall have
expressed a willingness to become (and shall in fact duly become) the Substitute
Managing Trustee, (y) shall satisfy the then applicable provisions of the Code
and any applicable procedures, regulations, rules and rulings (including
published private rulings) thereunder, including applicable net worth
requirements, so that the Trust shall be classified as an entity taxable as a
partnership for federal income tax purposes, and (z) shall have received the
specific written Consent to such admission of a Majority in Interest of the
Beneficiaries. In the event of the Resignation of a Managing Trustee, such
Resigned Managing Trustee shall be liable for any costs or expenses incurred by
the Trust as a result of such Resignation.
(b) No Delaware Trustee may Resign unless (i) the Managing Trustee has
received 60 days' advance written notice of the Delaware Trustee's intention to
Resign, (ii) the Trust shall have received the opinion of Trust Counsel to the
effect that such Resignation will not constitute a termination of the Trust or
otherwise materially adversely affect the status of the Trust as an entity
taxable as a partnership for federal income tax purposes, and (iii) a new
Delaware Trustee shall have been admitted who, or which, shall satisfy the then
applicable provisions of the Business Trust Act. In the event of the Resignation
of a Delaware Trustee, such Resigned Delaware Trustee shall be liable for any
costs or expenses incurred by the Trust as a result of such Resignation unless
such resignation is at the request of the Managing Trustee.
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4.9 Removal of Trustees.
A Trustee shall be deemed to have been removed (a "Removal") as a Trustee
from the Trust upon the occurrence of any of the following events: (a) the
Removal of the Trustee pursuant to a vote of the Beneficiaries made in
accordance with Article XI, (b) the making of an assignment for the benefit of
creditors, the filing of a voluntary petition in bankruptcy, or an adjudication
of bankruptcy, (c) the termination of the Trustee, or (d) any other involuntary
event which constitutes an event of removal under the Business Trust Act.
4.10 Consequences of Resignation or Removal.
(a) Any Resigned or Removed Trustee or its legal representatives shall be
entitled to receive from the Trust (i) (in the case of a Managing Trustee), any
positive balance in its Capital Account (as adjusted to the date of such
Resignation or Removal), provided, however, that in no event shall such amount
exceed the fair market value of the Resigned or Removed Trustee's Interest, (ii)
any amounts due and owing to it by the Trust less any amounts due and owing by
it to the Trust, and (iii) the remaining balance, if any, of fees payable as and
when due pursuant to this Agreement or any other written agreements between the
Trust and such Trustee in its capacity as Trustee; provided, however, that the
Resigned or Removed Trustee shall not be entitled to any such fees which had not
yet been earned by it prior to its Resignation or Removal. The right of the
Resigned or Removed Trustee or its legal representatives to payment of said
amounts and fees shall be subject to any claim for damages which the Trust or
any other Trustee or Trust Beneficiary may have against such Trustee or its
legal representatives if such Resignation or Removal is in contravention of this
Agreement.
(b) The Managing Trustee hereby covenants and agrees, in the event of its
Resignation or Removal, to transfer to a Substitute Managing Trustee selected as
provided in Section 4.8 or Section 4.12 or to the Trust, such portion, if any,
of its Managing Trustee's Interest as the Substitute Managing Trustee or the
Trust shall elect to purchase. Any such transfer will be made in consideration
of the payment by the Substitute Managing Trustee to the Resigned or Removed
Managing Trustee or its legal representatives, of 86.5% of the fair market value
of such Interest less any amounts payable pursuant to Section 4.10(a) by the
Trust. The fair market value of the Trustee's Interest shall be as determined by
the parties to the transfer, or otherwise in accordance with Section 11.3. The
method of payment to the Resigned or Removed Managing Trustee must be fair and
must protect the solvency and liquidity of the Trust. In the event of the
Resignation of the Managing Trustee, payment may be made by means of a
non-interest-bearing unsecured promissory note with principal payable, if at
all, from Distributions which the Resigned Managing Trustee would have received
but for its Resignation. In the event of the Removal of the Managing Trustee,
the Substitute Managing Trustee or the Trust shall make such payment by means of
a promissory note bearing interest at a floating annual rate equal to the prime
rate of interest announced by Fleet Bank of Massachusetts, N.A., maturing in not
less than five years with equal installments of principal and interest payable
each year. Any portion of such Removed Managing Trustee's Interest which is not
required to be transferred as aforesaid may be retained by such Removed Managing
Trustee or its estate or legal representatives as appropriate. The Managing
Trustee acknowledges and agrees that the payment of 86.5% of the fair market
value of any portion of its Trustee's Interest which has been transferred shall
be full payment for such Trustee's Interest. To the extent of such retained
Trustee's Interest, if any, such Resigned or Removed Managing Trustee or its
estate or legal representatives shall be treated as Trust Beneficiaries.
(c) The Delaware Trustee hereby covenants and agrees, in the event of its
Resignation or Removal, to transfer to a Substitute Delaware Trustee selected as
provided in Sections 4.1 and 4.8, or to the Trust, such portion, if any, of its
Trustee's Interest as the Substitute Delaware Trustee or the Trust shall elect
to purchase. Any such transfer will be made in consideration of the payment by
the Trust of one dollar, plus any amounts payable pursuant to Section 4.10(a) by
the Trust.
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(d) If the Removal of the Managing Trustee shall occur as part of a
removal and replacement of such Managing Trustee effected in accordance with
Article XI, the provisions of Article XI shall govern to the extent (if any)
that the provisions of said Article XI are inconsistent with the provisions of
this Section 4.10.
4.11 Liability of Resigned or Removed Trustee.
If the business of the Trust is continued after Resignation or Removal of
the Trustee, the Resigned or Removed Trustee or its legal representatives shall
remain liable for all obligations and liabilities incurred by it while a Trustee
and for which it was liable as a Trustee, but shall be free of any obligation or
liability incurred on account of or arising from the activities of the Trust
from and after the time such Resignation or Removal shall have become effective.
4.12 Continuation of Trust Business.
Upon any Removal of the sole Managing Trustee, such Removed Managing
Trustee or its representatives shall promptly notify the Trust Beneficiaries. In
the event of a failure to give such notice, any Trust Beneficiary may notify the
other Trust Beneficiaries of such circumstances. Any Trust Beneficiary may then
propose for admission a Substitute Managing Trustee, unless a Substitute
Managing Trustee shall have already been proposed by the Trust Beneficiaries
pursuant to Article XI. If any remaining Managing Trustee is a sole Managing
Trustee at the time of its Removal, then that subsequent Removal will be
governed by the provisions of this Agreement relating to the Removal of a sole
Managing Trustee. Any Substitute Managing Trustee proposed pursuant to this
Section 4.12 or Section 11.2 shall, with Majority Vote, become a Substitute
Managing Trustee upon his or its execution of this Agreement and may thereupon
elect to continue the Trust business. If no Substitute Managing Trustee has
received such Majority Vote and executed this Agreement within one hundred
eighty (180) days from the date of the Managing Trustee's Removal, then the
Trust shall dissolve and its affairs shall be wound up.
4.13 Powers and Limitations of Delaware Trustee.
(a) Notwithstanding any other provision of this Agreement, unless
specifically authorized in writing by the Managing Trustee and consented to by
the Delaware Trustee, the Delaware Trustee shall not participate in any
decisions or possess any authority or approval right with respect to the
operation of any business of the Trust, the investment of Trust property or the
payment of Distributions to the Beneficiaries. No amendment to this Agreement
shall require the approval or signature of the Delaware Trustee. The Delaware
Trustee shall have the power and authority to execute, deliver, acknowledge and
file all necessary documents and to maintain all necessary records of the Trust
as required by the Business Trust Act. The Delaware Trustee shall provide prompt
notice to the Managing Trustee of its performance of the foregoing acts.
(b) The Delaware Trustee shall not be liable for acts or omissions of the
Managing Trustee and shall owe no other fiduciary duties to the Beneficiaries
other than as expressly provided for in this Section 4.13.
(c) The Delaware Trustee accepts the Trust hereby created and agrees to
perform its duties hereunder with respect to the same but only upon the terms of
this Agreement. The Delaware Trustee shall not be personally liable under any
circumstances except (x) for its own misconduct or negligence or (y) for taxes,
fees or other charges on, based on or measured by any fees, commissions or
compensation received by the Delaware Trustee in connection with the provision
of its services hereunder. In particular, but not by way of limitation:
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(i) No provision of this Agreement shall require the Delaware
Trustee to expend or risk its personal funds, or otherwise incur any
financial liability in the performance of its rights or powers hereunder,
if the Delaware Trustee shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured or provided to it;
(ii) Under no circumstances shall the Delaware Trustee be personally
liable for any indebtedness or obligation of the Trust;
(iii) In the exercise or administration of its duties hereunder, the
Delaware Trustee may, at the expense of the Trust, consult with counsel
and it shall not be liable for anything done, suffered or omitted in good
faith by it in accordance with the advice or opinion of such counsel; and
(iv) The Delaware Trustee shall not be liable for the default or
misconduct of the Managing Trustee and shall not be liable for any act or
omission taken at the discretion of the Managing Trustee.
(d) Notwithstanding anything in this Section 4.13, the Delaware Trustee
shall be subject to the indemnification provisions contained in Section 4.6 of
this Agreement.
ARTICLE V - ADVISOR SERVICES AND COMPENSATION
5.1 Compensation to Advisor and Certain Affiliates.
The Advisor and other Affiliates of the Managing Trustee shall receive
fees and compensation as follows:
(a) For services rendered in connection with the sale of Class A
Interests, the Trust will pay the Dealer-Manager a D-M Commission of 7% of
the Gross Proceeds. The Dealer-Manager will reallow to each Soliciting
Dealer a commission of 7% of the Gross Class A Proceeds per Class A
Interest sold by such Soliciting Dealer. In addition, the Dealer-Manager,
in its sole discretion, may reallow to a Soliciting Dealer all or a
portion of the non-accountable expense allowance of 1.5% of Gross Class A
Proceeds per Class A Interest and the accountable due diligence expense
allowance of 0.5% of Gross Proceeds per Class A Interest under the
Dealer-Manager Agreement payable with respect to the Interests sold by
such Soliciting Dealer. The Dealer-Manager may retain the entire D-M
Commission earned with respect to sales of Interests to the Managing
Trustee or its Affiliates. Total payments, including commissions, expense
allowances, any sales incentives, wholesaling fees and any and all other
underwriting compensation made to the Dealer-Manager and the Soliciting
Dealers in connection with the Class A Offering from all sources,
including the Trust and the Dealer-Manager, will never exceed ten percent
(10%) of Gross Class A Proceeds, except that up to an additional one-half
of one percent (0.5%) of Gross Class A Proceeds may be paid for
reimbursement of bona fide due diligence expenses.
(b) For rendering services in connection with the initial
acquisition of Assets by the Trust, the Trust shall pay to the Advisor
Acquisition Fees and Acquisition Expenses equal to the lesser of (A) 0.28%
of the Asset Base Price paid by the Trust for each Asset acquired or (B) a
fee, which in conjunction with all other fees paid by or on behalf of the
Trust to all Persons in connection with the acquisition of an Asset, the
Managing Trustee believes to be competitive with that charged by
non-Affiliated Persons for rendering comparable services. For rendering
services in
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connection with the acquisition of additional Assets by the Trust through
the reinvestment of Cash From Sales or Refinancings, the Trust shall pay
to the Advisor Acquisition Fees and Acquisition Expenses equal to the
lesser of (A) 3% of the Asset Base Price paid by the Trust for each Asset
acquired or (B) a fee, which in conjunction with all other fees paid by or
on behalf of the Trust to all Persons in connection with the acquisition
of an Asset, the Managing Trustee believes to be competitive with that
charged by non-Affiliated Persons for rendering comparable services.
Notwithstanding the foregoing, the Trust's Investment in Assets shall not
be less than the greater of (A) 80% of the Gross Proceeds, reduced by
.0625% for each 1% of leverage encumbering Trust Assets, or (B) 75% of
Gross Class A Proceeds. In no event, however, will the Trust's Investment
in Assets be less than 90% of the Gross Class A Proceeds (including 1% of
Gross Class A Proceeds for working capital reserves). To the extent that
such limitation is not otherwise satisfied, Acquisition Fees and
Acquisition Expenses payable or paid by the Trust to the Advisor will be
reduced or refunded to the extent necessary to comply with such
limitation. In addition, if Acquisition Fees or Acquisition Expenses are
paid to the Advisor or an Affiliate thereof in connection with the
reinvestment of Cash From Sales or Refinancings, such fees and expenses
shall be limited so that the Trust's Investment in Assets, after taking
into account the Front-End Fees and Expenses incurred in connection with
the initial acquisition of the Trust's Assets, shall be equal to at least
90% of Gross Class A Proceeds (including up to 3% of Gross Class A
Proceeds for working capital reserves) reduced by .0625% for each 1% of
leverage encumbering the Trust's Assets, but not less than 85% of Gross
Class A Proceeds (including up to 3% of Gross Class A Proceeds for working
capital reserves). The total of all fees paid to all Persons in connection
with the acquisition of Assets, when aggregated with all travel,
communication and overhead reimbursements paid to the Managing Trustee or
its Affiliates, shall not exceed a fee competitive with that charged by
non-Affiliated Persons for rendering comparable services. No Acquisition
Fees and Acquisition Expenses are payable with respect to Assets acquired
with insurance proceeds or other indemnity payments to be leased under the
original leases of lost or destroyed Assets except to the extent that
insurance proceeds or indemnity payments are sufficient to pay such
Acquisition Fees and Acquisition Expenses after deducting the Asset Base
Price of the replacement Asset and payment of all existing indebtedness
secured by the lost or destroyed Asset.
(c) For Asset Management, the Trust shall pay the Advisor an Asset
Management Fee, payable monthly, equal to the lesser of (A) the fees which
the Managing Trustee reasonably believes to be competitive for similar
services for similar assets or (B) 5% of gross lease rental revenues of
the Trust from Operating Leases and 2% of gross lease rental revenues of
the Trust from Full Payout Leases for the month for which such payment is
being made. To the extent that the Trust does not have sufficient cash to
pay the Asset Management Fee in full when due, any unpaid amount will be
accrued and paid in the next succeeding month or months. No interest shall
accrue on unpaid amounts of Asset Management Fee. The Advisory Agreement
shall provide that it may be terminated by the Trust without penalty on no
more than sixty (60) days' written notice to the Advisor. The Advisory
Agreement shall also provide that it may be terminated by the Trust
effective immediately and without penalty in the event of the Removal of
the Managing Trustee.
(d) For rendering services in connection with the sale of any
Assets, the Trust shall pay to the Advisor a Subordinated Resale Fee in an
amount equal to the lesser of (A) 3% of the gross sales proceeds of the
Asset, or (B) one-half of a Competitive Asset Sale Commission; provided
that in no event shall any such Subordinated Resale Fee be paid prior to
Payout; and provided, further, that the Advisor shall not be entitled to
receive any amount of Subordinated Resale Fee to the extent that such
amount would cause the total compensation paid to all Persons, in
connection with the sale of such Asset, to exceed a Competitive Asset Sale
Commission. No interest shall accrue on unpaid amounts of the Subordinated
Resale Fee. After Payout any and all Subordinated Resale Fees previously
earned by the Advisor shall be paid by the Trust prior to any
Distributions to the
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Participants.
(e) The Trust shall pay the Managing Trustee and its Affiliates an
amount equal to 1% of the Gross Class B Proceeds as a non-accountable
expense allowance in connection with the Class B Offering.
5.2 Other Interests of the Advisor and its Affiliates.
The Advisor, the Managing Trustee and any other Affiliate of the Advisor
may engage in or possess an interest in other business ventures (unconnected
with the Trust) of every kind and description, independently or with others,
including, but not limited to, serving as general partner of partnerships or
trustees of trusts and participating in the equipment leasing business in all of
its phases, which shall include, without limitation, ownership, operation,
leasing, re-leasing, financing, refinancing, management and syndication of
equipment and which may involve equipment competitive with any Asset. The
officers and directors of the Managing Trustee and the Advisor will devote only
such time to the affairs of the Trust as they, in their sole discretion,
determine in good faith to be necessary for the business and operations of the
Trust. Neither the Trust nor the Trust Beneficiaries shall have any rights in
and to such independent ventures or the income or profits therefrom by reason of
the Advisor's or Managing Trustee's position with the Trust. Notwithstanding the
foregoing, the Managing Trustee will act at all times in a manner consistent
with its fiduciary duties to the Trust.
In the event the Managing Trustee is presented by the Advisor with a
potential investment which might be made by the Managing Trustee, EFG or its
Affiliates, including investment entities advised, managed, controlled or to be
formed by the Managing Trustee, the Advisor and/or its Affiliates (collectively,
the "Investment Entities"), the Managing Trustee will analyze the assets already
purchased and investment objectives of each Investment Entity involved and will
make the decision as to which Investment Entity will purchase the assets based
upon such factors, among others, as (i) the amount of cash available in each
Investment Entity for such acquisition and the length of time such funds have
been available, (ii) the current and long-term liabilities of each Investment
Entity, (iii) the effect of such acquisition on the diversification of each
Investment Entity's equipment portfolio by type of equipment, (iv) the credit
diversification (geographically and/or by industry) of each Investment Entity's
equipment portfolio, (v) the estimated income tax consequences from such
acquisition to the investors in each Investment Entity, (vi) the cash
distribution objectives of each Investment Entity, (vii) the policy of each
Investment Entity relating to leverage, and (viii) any specialized investment
purpose of an Investment Entity (which may, in the discretion of the Advisor,
entitle such entity to priority as to certain types of assets). If, after
analyzing the foregoing and any other appropriate factors, the Managing Trustee
determines that an acquisition would be equally suitable for more than one
Investment Entity, then the Managing Trustee will purchase assets for the
Investment Entities based on the length of time such funds have been available.
In the event that two or more of AFG Investment Trust C, AFG Investment Trust B,
AFG Investment Trust C and AFG Investment Trust D have a substantial portion of
their uninvested Net Proceeds available at the same time for purchase of Assets,
the Managing Trustee will allocate available Assets among them on a pro-rata
basis, determined by the cash balances in each in excess of funds designated for
its Reserve Account and for distribution to its Participants.
In the event of a conflict between two or more Investment Entities advised
or managed or controlled (or in the process of being formed) by the Managing
Trustee, EFG or its Affiliates, for the financing of the acquisition of Assets
contemporaneously, the Managing Trustee and EFG will seek to cause the available
financing to be obtained by the Investment Entity that has been seeking
financing the longest.
In the event of a conflict between two or more Investment Entities,
advised, managed or controlled by the Managing Trustee, EFG or an Affiliate, to
re-lease or sell similar assets contemporaneously, the first
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opportunity to re-lease or sell equipment will generally be allocated to the
Investment Entity attempting to re-lease or sell equipment which has been
subject to the lease which expired first, or, if the leases expire
simultaneously, the lease which was first to take effect. However, the Managing
Trustee and EFG, in their discretion, may make exceptions to this general policy
where Assets are subject to remarketing commitments or where there are other
circumstances which, in their judgment, make the application of such policy
inequitable for a particular Entity. In addition, exceptions to this general
policy will be made when a buyer or new lessee indicates a preference for a
specific item or items of equipment.
5.3 Other Transactions Involving the Advisor and its Affiliates.
Except as specifically permitted by this Agreement, the Managing Trustee
is prohibited from entering into any agreements, contracts or arrangements on
behalf of the Trust with the Advisor or any Affiliate (including the Managing
Trustee itself). Such prohibition shall include, without limitation, that
neither the Advisor nor any such Affiliate shall receive directly or indirectly
a commission or fee in connection with the reinvestment of the proceeds of the
sale or refinancing of any Equipment or in connection with any insurance
obtained by the Trust except as provided in Section 5.1. In addition, in
connection with any agreement entered into by the Trust with the Advisor or any
Affiliate, no rebates or give-ups may be received by the Advisor or any such
Affiliate, nor may the Advisor or any such Affiliate participate in any
reciprocal business arrangements which would have the effect of circumventing
any of the provisions of this Agreement.
The Advisor and its Affiliates shall not receive any fees or compensation
other than as provided for in Sections 4.7, 5.1, 7.4, 10.4(a) and 10.4(b). If
the Advisor or an Affiliate purchases Interests, it shall be entitled to the
same benefits to which each other Beneficiary is entitled, except as otherwise
provided in Section 11.2(b).
ARTICLE VI - TRUST BENEFICIARIES
6.1 Absence of Control over Trust Business.
The Trust Beneficiaries hereby consent to the exercise by the Managing
Trustee of the power conferred on the Managing Trustee by this Agreement. No
Trust Beneficiary (except one who is also the Managing Trustee and then only in
its capacity as the Managing Trustee) shall participate in or have any control
over the Trust's business or have any right or authority to act for or to bind
the Trust. No Trust Beneficiary shall have the right to have the Trust dissolved
and liquidated or have his Capital Contributions returned except as provided in
this Agreement.
6.2 Limited Liability.
Except as set forth below, each Trust Beneficiary in his capacity as a
Trust Beneficiary shall be entitled, pursuant to ss. 3803 (a) of the Business
Trust Act, to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware. Except (i) as may otherwise be required by law, (ii)
to the extent that a Trust Beneficiary may be liable to the Trust for an amount
equal to any Distributions made to him if, after such Distribution is made, the
then fair market value of the remaining Assets of the Trust is not sufficient to
pay its then outstanding liabilities and (iii) as set forth below with respect
to Foreign Beneficiaries, the liability of each Trust Beneficiary in his
capacity as a Trust Beneficiary shall be limited to the amount of his Capital
Contribution as described in Sections 3.2 and 3.4 and no Trust Beneficiary
shall, in his capacity as Trust Beneficiary, have any further obligations to the
Trust or be required to contribute any additional capital or loan any funds to
the Trust.
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Notwithstanding the foregoing, each Foreign Beneficiary shall indemnify
the Trust and the Trustees for any costs or expenses incurred by the Trust or
the Trustees in connection with the withholding requirements applicable to
Foreign Beneficiaries under the Code, including, without limitation, Sections
1441, 1442 and 1446.
Upon issuance of the Class B Interests as provided in this Agreement, the
Class B Interests so issued shall be deemed to be validly issued, fully paid and
non-assessable.
6.3 Fiduciary Duty of Managing Trustee to Trust Beneficiaries.
No Trust Beneficiary shall forgo by means of contract the fiduciary duty
owed to the Trust Beneficiary by the Managing Trustee under the Business Trust
Act or the common law of the State.
ARTICLE VII - INVESTMENT OBJECTIVES AND POLICIES
7.1 Investment Objectives and Policies.
The Managing Trustee shall use its best efforts to cause the Trust to
follow the investment objectives and policies set forth in the Class A
Prospectus. The Managing Trustee may not make substantial or material
modifications in such investment objectives without Majority Consent. However,
the Managing Trustee, in its sole discretion and as permitted by this Agreement
but subject to any and all limitations on its exercise of such discretion
contained in this Article VII, may alter the investment, borrowing or other
policies of the Trust as set forth in the Class A Prospectus without the consent
of any Trust Beneficiary to the extent the Managing Trustee deems such
alterations to be necessary or appropriate to enable the Trust better to meet
its investment objectives; provided, however, that in no event may the Managing
Trustee alter the investment, borrowing or other policies of the Trust as set
forth in the Class A Prospectus if such alteration would cause the investment,
borrowing or other policies of the Trust to violate the NASAA Guidelines. In
addition, the Managing Trustee may not alter the investment policies of the
Trust to increase the amount of leverage which may be incurred by the Trust or
to decrease the standards for determining a Creditworthy Lease Portfolio. All
funds held by the Trust which are not invested in Assets (including subscription
payments upon their release to the Trust) may be invested by the Trust in
Permitted Investments. The Trust shall not make loans except in connection with
the purchase, sale or other disposition of Assets. The Trust shall not redeem or
repurchase Interests except to the extent that such Interests are forfeited in
order to (a) prevent the assets of the Trust from being deemed plan assets or
(b) prevent Foreign Beneficiaries from remaining Trust Beneficiaries under
certain circumstances provided herein or (c) as permitted by Section 9.6. The
Managing Trustee shall use its best efforts to ensure that the Trust shall not
be deemed an investment company, as such term is defined in the Investment
Company Act of 1940.
7.2 Assets and Lessees.
The Trust shall acquire various types of Assets as provided in the Class A
Prospectus.
7.3 Sales and Leases of Assets from or to the Managing Trustee and its
Affiliates.
The Trust may not purchase Assets in which the Managing Trustee or any of
its Affiliates (the "Interested Parties") has an interest except for Assets
acquired on an interim basis (generally not in excess of six months) by one of
the Interested Parties for the purpose of facilitating the acquisition by the
Trust of the Asset or obtaining financing for the Trust or in connection with a
Joint Venture. The Trust may not purchase Assets from any program in which the
Managing Trustee or any of its Affiliates has an interest; provided that such
restriction shall not prohibit the Trust from being a participant in a Joint
Venture. The
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Trust may acquire any such Assets from the Interested Parties only if: (i) such
acquisition is in the best interests of the Trust; (ii) such Asset is purchased
by the Trust for a price no greater than the Asset Base Price; (iii) there is no
difference in interest terms of the loans secured by such Asset at the time
acquired by one of the Interested Parties and the time acquired by the Trust,
unless any such difference is favorable to the Trust; and (iv) no other benefit
arises out of such transaction to the Interested Parties apart from compensation
otherwise permitted by this Agreement. Assets shall not be acquired from an
Interested Party if such transaction would involve the payment of duplicative
Asset Management Fees or other fees or would have the effect of circumventing
any of the restrictions on and prohibitions of transactions involving conflicts
of interest contained herein. The aggregate primary term rental payments
received or accrued to the Interested Parties with respect to Assets prior to
the time that the Trust purchases the Asset from the Interested Parties shall
reduce the purchase price paid by the Trust for such Asset by such amounts
unless such primary term rental payments are assigned to the Trust.
If one of the Interested Parties purchases an Asset in its own name in
order to facilitate the ultimate purchase by the Trust, the Trust may purchase
such Asset and such Interested Party will be entitled to receive interest on the
funds expended for such purchase on behalf of the Trust. Interest on such
temporary purchases will be charged at a floating rate equal to the rate of
interest charged by third party financing institutions on comparable loans for
the same purpose (but not in excess of 2% per annum over the base rate from time
to time announced by Fleet Bank of Massachusetts, N.A. Interest shall accrue and
be payable at the above-determined rate from the date of the Managing Trustee's
or Affiliate's acquisition of the Asset until such Asset is sold to the Trust.
The Trust shall not lease Assets from or to the Interested Parties. The
Trust shall not sell Assets to the Interested Parties, except as provided in
this Section.
7.4 Loans to or from the Managing Trustee and its Affiliates.
No loans may be made by the Trust to the Managing Trustee or its
Affiliates. The Managing Trustee or its Affiliates may loan funds on a
short-term basis to the Trust but only with interest rates equal to the amounts
that are charged (without reference to the Managing Trustee's or any Affiliate's
financial abilities or guarantees) by unrelated banks on comparable loans for
the same purpose (but not in excess of 2% per annum over the base rate from time
to time announced by Fleet Bank of Massachusetts, N.A.). Interest on such loans
will begin to accrue on the date the loan is funded. Neither the Managing
Trustee nor any Affiliate shall provide permanent financing for the Trust, and
all payments of principal and interest on any financing provided by the Managing
Trustee or any of its Affiliates shall be due and payable within 12 months after
the date of the loan. Neither the Managing Trustee nor any Affiliate may receive
points or other financial charges or fees (excluding interest charges) in
respect of any loans to the Trust, although the Managing Trustee's or an
Affiliate's compensation (specifically, Acquisition Fees and Asset Management
Fees) may be increased as an indirect result of such loans.
Any borrowings from the Managing Trustee or its Affiliates incurred for
organization and offering expenses will be non-interest-bearing and will be
repaid out of offering proceeds (subject to the limitations of Section 10.4).
The Trust shall not enter into any borrowing arrangement with the Managing
Trustee or its Affiliates which calls for a prepayment charge or penalty to be
paid to the Managing Trustee or its Affiliates.
7.5 Joint Investments.
The Trust shall not make investments in the limited partnership interests
or other equity interests of any other program. The Trust may enter into a
general partnership, joint venture, trust or other business arrangement (other
than a corporation) (collectively, a "Joint Venture") with an Unaffiliated
Person if all of
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the following conditions are satisfied. First, the Trust shall acquire a
controlling interest in any such Joint Venture. For purposes hereof, the Trust
shall be deemed to have a controlling interest in such Joint Venture if (i) the
Trust holds or is contractually entitled to acquire an interest of not less than
50% in the capital and profits of the Joint Venture and the Joint Venture
agreement or related documents grant to the Trust and its Affiliates the joint
right to make basic management decisions concerning the leasing, financing,
refinancing, sale or other disposition of the Assets or (ii) the Trust holds a
less than 50% interest in the capital and profits of the Joint Venture, but the
Joint Venture Agreement or related documents grant to the Trust and its
Affiliates the exclusive right to make all basic management decisions concerning
the leasing, financing, refinancing, sale or other disposition of the Asset.
Second, no such Joint Venture shall be entered into by the Trust which involves
the payment of duplicative equipment management or other fees or which would
have the effect of circumventing any of the restrictions on and prohibitions
against transactions involving conflicts of interest contained in this
Agreement. Third, such Joint Venture must either own specific Assets or be in
the process of acquiring specific Assets (i.e., a commitment for the purchase of
the specific Asset has been executed, but the Joint Venture has not yet acquired
title to or paid for the Asset). The Trust may enter into Joint Ventures which
satisfy the preceding requirements with respect to any Asset at any time during
the life of the Trust; provided, however, that Offering Proceeds received
directly by the Trust from Beneficiaries are invested within 24 months after
commencement of the Offering. In no event may a Trust enter into a Joint Venture
if by means of the Joint Venture the Trust will acquire Assets from a program in
which the Managing Trustee or any of its Affiliates has an interest in
contravention of the provisions of Section 7.3 of this Agreement.
The Trust may enter into Joint Ventures with Affiliates of the Managing
Trustee or EFG or programs sponsored by the Managing Trustee or its Affiliates
(including Joint Ventures organized after the Closing) (collectively,
"Affiliated Venturers") but only if (i) such Affiliated Venturers are limited or
general partnerships, trusts, joint ventures, unincorporated associations or
similar organizations other than a corporation formed for the primary purpose of
investment in and operation of or gain from an interest in equipment, (ii) such
Affiliated Venturers have substantially identical investment objectives and
management compensation provisions to those of the Trust, (iii) no such Joint
Venture shall be entered into by the Trust which involves the payment of
duplicative equipment management or other fees or which would have the effect of
circumventing any of the restrictions on and prohibitions of transactions
involving conflicts of interest contained in this Agreement, (iv) the
compensation to the Managing Trustee and its Affiliates with respect to such
Joint Ventures shall be substantially identical to the compensation described in
this Agreement, (v) in the event of a proposed sale of the Asset or interest
therein initiated by another Joint Venture partner, the Trust must have a right
of first refusal, pro rata with the other remaining parties, to purchase the
other party's or parties' interest, (vi) the Joint Venture is done either for
the purpose of effecting appropriate diversification for such programs or for
the purpose of relieving the Managing Trustee from a commitment entered into in
connection with the acquisition of an Asset which was acquired for subsequent
transfer to the Trust, and (vii) the investment by each party must be on
substantially the same terms and conditions except as a result from varying
percentage interests in the Joint Venture. The Trust will not acquire any Asset
through a Joint Venture with EFG or any non-corporate Affiliate unless it is
intended that such Joint Venture will be temporary in nature and will not last
more than six months. Further, no lender to a Joint Venturer may have a security
or other interest in the Trust's interest in the Joint Venture except to the
extent of funds loaned directly to or for the benefit of the Trust. The Trust
may cease to be a party to a Joint Venture by sale of its interest to another
Joint Venturer or to a third-party purchaser. The Trust will not acquire Assets
through a Joint Venture with the Managing Trustee or any other corporate
Affiliate of EFG.
The Trust may also enter into a Joint Venture with one or more
unaffiliated Persons and one or more Affiliated Venturers provided that (i) the
Trust and its Affiliated Venturers acquire collectively a controlling interest
(as such term is described above) in such Joint Venture; (ii) the conditions set
forth in subsections (i)-(iii) and (vi) above are satisfied; (iii) the Joint
Venture Agreement or related documents grant to the Trust and its Affiliated
Venturers the joint right to make basic management decisions concerning the
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leasing, financing, refinancing, sale or other disposition of the Asset; and
(iv) in the event of a proposed sale of the Asset or interest therein initiated
by another Affiliated Joint Venture partner, the Trust has a right of first
refusal, pro rata with the other Affiliated Venturers only, to purchase all
other Affiliated Venturers' interests therein. Notwithstanding anything
contained in this Section 7.5 to the contrary, the Trust may enter into Joint
Ventures only where such investments will further the investment objectives of
the Trust and where such Joint Ventures do not involve the payment to the
Managing Trustee, the Advisor or any Affiliate of the foregoing, equipment
management or other fees that would not be permitted under this Agreement.
7.6 Resales.
No exclusive listing for the sale of Assets shall be granted to the
Managing Trustee or any of its Affiliates.
7.7 In-Kind Distributions.
The Trust shall not make in-kind distributions to the Participants.
7.8 Roll-Ups.
The Trust shall not participate in any proposed Roll-Up if any of the
following conditions are present:
(i) the proposed Roll-Up would result in the Beneficiaries having
voting rights in the Roll-Up Entity which are less than those contained in
this Agreement. If the Roll-Up Entity is a corporation, the voting rights
of the Beneficiaries shall correspond to the voting rights provided for in
this Agreement to the greatest extent possible;
(ii) the proposed Roll-Up includes provisions which would operate to
materially impede or frustrate the accumulation of shares by any purchaser
of the securities in the Roll-Up Entity (except to the minimum extent
necessary to preserve the tax status of the Roll-Up Entity);
(iii) the proposed Roll-Up would limit the ability of a Beneficiary
to exercise the voting rights of his securities of the Roll-Up Entity on
the basis of the number of Interests held by the Beneficiary;
(iv) the Beneficiaries' rights of access to the records of the
Roll-Up Entity will be less than those provided in this Agreement;
(v) any of the costs of the proposed Roll-Up would be borne by the
Trust if the Roll-Up is not approved by the Beneficiaries; or
(vi) the Person sponsoring the Roll-Up fails to offer the
Beneficiaries who vote on the proposal the choice of (a) accepting the
securities of the Roll-Up Entity offered in the proposed Roll-Up; or (b)
one of the following: (i) remaining as Beneficiaries in the Trust and
preserving their interests therein on the same terms and conditions as
existed previously; or (ii) receiving cash in an amount equal to the
Beneficiaries' pro-rata share of the appraised value of the net assets of
the Trust.
(b) If the Trust may participate in a Roll-Up pursuant to this Section, an
appraisal of all assets of the Trust shall be obtained from a competent,
Independent Expert. The assets of the Trust shall be appraised on a consistent
basis. The appraisal shall be based upon an evaluation of all relevant
information
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and shall indicate the value of the Trust's assets as of a date no earlier than
30 days prior to the announcement of the proposed Roll-Up. The appraisal shall
assume an orderly liquidation of the Trust's assets over a 12 month period. If
the appraisal will be included in a Prospectus used to offer the securities of
the Roll-Up Entity, the appraisal shall be filed with the Securities and
Exchange Commission and the states as an exhibit to the registration statement
for the offering. The terms of the engagement of the Independent Expert shall
clearly state that the engagement is for the benefit of the Trust and the
Beneficiaries. A summary of the independent appraisal, indicating all material
assumptions underlying the appraisal, shall be included in a report to the
Beneficiaries in connection with the proposed Roll-Up.
7.9 Change in Investment Objective and Policies.
The Managing Trustee shall be subject to the limitations provided in this
Article VII in its administration of the Trust unless Majority Consent is
obtained.
ARTICLE VIII - DISTRIBUTIONS AND ALLOCATIONS
8.1 Distribution of Distributable Cash.
(a) In General. Distributions prior to dissolution shall be made to the
Participants within 45 days after completion of each month of each fiscal year.
However, a Beneficiary may elect to have such Distributions made to him on a
quarterly basis. Such election must accompany the Beneficiary's Subscription
Agreement or be delivered to the Managing Trustee in writing on the anniversary
of the Trust's Closing. Notwithstanding the foregoing, the Managing Trustee may,
in its sole discretion, restrict or suspend Distributions if it believes such
action to be in the best interests of the Trust. Commencing as of the
Distribution Commencement Date, each Distribution shall be made (i) 90.75% to
the Beneficiaries, (ii) 8.25% to the Special Beneficiary and (iii) 1% to the
Managing Trustee.
Distributions so to be made to the Class A Beneficiaries and the Class B
Beneficiaries will be allocated as follows, on a quarterly non-cumulative basis
(pro rated for fractional quarters):
Prior to Class B Payout:
first, 100% to the Class A Beneficiaries up to $0.41 per Class A
Interest;
second, 100% to the Class B Beneficiaries up to $0.164 per
Class B Subordinated Interest, reduced by the Class B Distribution
Reduction Factor;
third, 100% to the Class A Beneficiaries up to an additional
$0.215 per Class A Interest; and
fourth, until Class B Payout has been attained, 80% to the Class B
Beneficiaries and 20% to the Class A Beneficiaries.
After Class B Payout:
all further Distributions will be made to the Class A Beneficiaries
and the Class B Beneficiaries in amounts so that each Class A Beneficiary
receives with respect to each Class A Interest an amount equal to 450%,
divided by the difference between 100% and the Class B Capital Reduction
Factor, of the amount so distributed with respect to each Class B
Interest.
(b) Liquidation Distributions. Upon dissolution and termination of the
Trust, after payment of,
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or adequate provision for, the debts and obligations of the Trust, the remaining
assets of the Trust (or the proceeds of sales or other dispositions in
liquidation of Trust assets, as may be determined by the remaining or surviving
Trustees) shall be distributed to the Participants in accordance with the
positive balances in their Capital Accounts after taking into account all
Capital Account adjustments for the Trust's taxable year, including adjustments
to Capital Accounts pursuant to Section 8.2(a). In the event that the Managing
Trustee has a deficit balance in its Capital Account following the liquidation
of the Trust or its interest in the Trust as determined after taking into
account all Capital Account adjustments for the Trust taxable year in which such
liquidation occurs, the Managing Trustee shall pay to the Trust in cash an
amount equal to the deficit balance in its Capital Account by the end of such
taxable year (or, if later, within ninety (90) days after the date of such
liquidation) which amount shall, upon liquidation of the Trust, be paid to
recourse creditors of the Trust or distributed to the Trust Beneficiaries in
accordance with their positive Capital Account balances.
(c) Notwithstanding the provisions of Sections 8.1(a) and 8.1(b), the
Managing Trustee shall have the right to withhold funds from Distributions to be
made to Beneficiaries who are Foreign Beneficiaries or deduct certain amounts
from such Distributions under the circumstances set forth in Section 8.4(h). Any
such withholdings or repayments or deductions shall be deemed to have been
Distributions made to such Foreign Beneficiaries for all purposes of this
Agreement.
(d) Promptly after the Class B Closing, the Trust will make the Special
Class A Distribution to the Class A Beneficiaries.
(e) The Trust will make Class B Capital Distributions not later than the
expiration of the Initial Redemption Period provided that there are proceeds
remaining from the Class B Offering after paying Class B Offering expenses
making the Special Class A Distribution and redeeming Class A Interests pursuant
to the last paragraph of Section 9.6.
8.2 Allocation of Profits and Losses.
(a) Profits from the normal operations of the Trust or from Sales or
Refinancings or a Dissolution Event for each fiscal year or portion thereof will
be allocated:
First, to the extent that the Managing Trustee or any Trust
Beneficiary has a negative balance in its or his Capital Account (after
taking into account the reduction in Capital Accounts resulting from
Distributions during such fiscal year), to such Person(s) until such
Capital Account balance(s) are increased to zero; and if profits are
insufficient to bring all such Capital Accounts up to zero, then pro rata
according to the negative balances in their respective Capital Accounts;
and
Second, any remaining Profit shall be allocated among the Managing
Trustee, the Beneficiaries and the Special Beneficiary in such a manner
that, as of the end of such fiscal year the Capital Account of each shall
be equal (after taking into account the reduction in such Capital Account
resulting from any Distributions made during the fiscal year) to the
respective net amounts which would be distributed to each under this
Agreement if the Trust were to (i) sell its remaining assets for an amount
equal to their adjusted basis determined under Regulation Section
1.704-1(b)(2)(iv)(g) and (ii) distribute all such proceeds and any other
Trust cash not previously distributed pursuant to Section 8.1(a).
Notwithstanding the foregoing, no Profit shall be allocated under
Section 8.2(a) Clause Second to the extent that an allocation of Profit
has been made under Section 8.2(a) Clause First to offset a reduction in
Capital Account(s) resulting from a Distribution made to the Managing
Trustee or a Trust Beneficiary during such fiscal year.
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Losses from the normal operations of the Trust or from Sales or
Refinancings or a Dissolution Event for each fiscal year or portion thereof will
be allocated:
First, to the extent that the Managing Trustee or any Class B
Beneficiary has a positive balance in his Capital Account, to such
Person(s) until such Capital Account balance(s) are decreased to zero, and
if Losses are insufficient to reduce all such Capital Accounts to zero,
then pro rata according to the positive balances in each Capital Account;
and
Second, to the extent that any Class A Beneficiary has a positive
balance in his Capital Account, to such Class A Beneficiary(ies) until
such Capital Account balance(s) are decreased to zero, and if Losses are
insufficient to reduce all such Capital Accounts to zero, then pro rata
according to the positive balances in each Capital Account; and
Third, the remainder to the Managing Trustee.
(b) Notwithstanding Section 8.2(a), in no event shall there be allocated
to the Managing Trustee less than 1% of the Profits or Losses of the Trust
unless such allocation is mandated by Section 704(b) or Section 704(c) of the
Code. In the event that the amount of Profits and Losses allocable to the
Managing Trustee under Section 8.2(a) is less than 1% of the aggregate amount,
then the amounts otherwise allocable first to the Special Beneficiary and then
to the Beneficiaries shall be reduced in order to provide the Managing Trustee
with its 1% share.
(c) All Profits, Losses and Distributions made or allocated to the
Participants shall be credited or charged, as the case may be, to their
respective Capital Accounts.
(d) The terms "Profits" and "Losses" used in this Agreement shall mean
income and losses, and each item of income, gain, loss, deduction or credit
entering into the computation thereof, as determined in accordance with the
accounting methods followed by the Trust and consistent with Treasury Regulation
Section 1.704-(1)(b)(2)(iv). Profits and losses for federal income tax purposes
shall be determined in the same manner as Profits and Losses except as otherwise
provided in Section 8.4(a).
8.3 Recourse to Trust Assets Only.
The Participants shall look solely to the assets of the Trust for the
return of their respective Capital Contributions or any other Distributions with
respect to their Interests. If the assets remaining after payment or discharge,
or provision for payment or discharge, of Trust debts and liabilities are
insufficient to return the Capital Contributions or to make any other
Distribution to the Participants, no such person shall have any recourse against
personal assets of any other Participant for that purpose, except to the limited
extent set forth in Sections 4.6 and 8.1(b).
8.4 Special Provisions.
Notwithstanding anything contained in this Article VIII to the contrary:
(a) Income, gain, loss, and deduction with respect to Trust property which
has a variation between its basis computed in accordance with Treasury
Regulation Section 1.704(1)(b) and its basis computed for federal income tax
purposes shall be shared among the Participants for federal income tax purposes
so as to take account of such variation in a manner consistent with the
principles of Section 704(c) of the Code and Treasury Regulation Section
1.704-3.
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(b) (i) All Distributions or allocations to the Class A Beneficiaries,
other than those based on the Capital Account balances, shall be shared by
the Class A Beneficiaries in the ratio of the aggregate number of Class A
Interests held by each of them to the total number of Class A Interests
held by all of them.
(ii) Except as otherwise provided pursuant to this Agreement, for
each taxable year (i) Profits and Losses from normal operations and any
special allocations of items thereof shall be allocated by determining the
Profits and Losses from normal operations and any special allocations of
items thereof attributable to each fiscal quarter on the basis of interim
closings of the books of the Trust as of the close of business on the last
day of each such fiscal quarter and by allocating the amount of such
Profits and Losses from normal operations and special allocations of items
thereof, among the Persons that are Beneficiaries as of the close of
business on the last day of each month during such fiscal quarter in
proportion to the aggregate number of Interests owned by each such Person
as of the close of business on the last day of each such month, and (ii)
Profits and Losses from Sales or Refinancings and any special allocations
of items thereof allocable with respect to the Interests that have been
transferred shall be allocated to the Persons that are Beneficiaries as of
the close of business on the last day of the month that includes the date
of the Sale or Refinancing to which such Profit or Loss from Sales or
Refinancings is attributable, except that any such Profit from Sales or
Refinancings that is recognized by the Trust upon the receipt of a
deferred payment after the close of the month that includes the date of
the Sale or Refinancing relating to such deferred payment shall be
allocated to the Persons that are Beneficiaries as of the close of
business on the last day of the month in which the Trust receives such
deferred payment; provided, however, that notwithstanding anything to the
contrary contained herein, the Managing Trustee may, after sixty days'
prior notice to the Beneficiaries, allocate Profits and Losses from normal
operations and from Sales or Refinancings and special allocations among
the Beneficiaries during the taxable year in any other manner that the
Managing Trustee, in its sole discretion, determines will satisfy Sections
704 and 706 of the Code and the taking of any such action by the Managing
Trustee shall be deemed to effect an amendment to this Agreement and shall
not require the Consent of any Beneficiary.
(iii) Distributable Cash from Operations distributable to the
Beneficiaries with respect to each month shall be distributed among the
Persons that are Beneficiaries as of the close of business on the last day
of the month with respect to which such Distribution is made and
Distributable Cash from Sales or Refinancings distributable to the
Beneficiaries shall be distributed to the Persons that are Beneficiaries
as of the close of business on the last day of the month that includes the
date of the Sale or Refinancing to which any such Distributable Cash from
Sales or Refinancings is attributable; provided, however, Distributable
Cash from Sales or Refinancings that is attributable to deferred payments
and interest thereon received by the Trust after the close of the month
that includes the date of the Sale or Refinancing relating to any such
deferred payment shall be distributed to the Persons that are
Beneficiaries as of the close of business on the last day of the month
that includes the date such Distributable Cash from Sales or Refinancings
is paid to the Trust; and provided, further, that, notwithstanding
anything contained herein to the contrary, the Managing Trustee may, after
giving sixty days' prior notice to the Beneficiaries, adopt any other
method for determining the distributions of Distributable Cash from
Operations or Distributable Cash from Sales or Refinancings to which the
Beneficiaries are entitled, that the Managing Trustee, in its sole
discretion, determines is reasonable, and the taking of any such action by
the Managing Trustee shall be deemed to effect an amendment to this
Agreement and shall not require the Consent of any Beneficiary.
(iv) All Distributions or allocations to the Class B Beneficiaries,
other than those based on the Capital Account balances, shall be shared by
the Class B Beneficiaries in the ratio of the
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aggregate number of Class B Interests held by each of them to the total
number of Class B Interests held by all of them.
(c) To the extent that interest on loans made by the Managing Trustee or
its Affiliates is determined to be deductible by the Trust in excess of the
amount of interest actually payable, such additional interest deduction shall be
allocated solely to the Managing Trustee.
(d) If any Trust expenditure treated as a deduction on its federal income
tax return is disallowed as a deduction and treated as a distribution to the
Managing Trustee or the Special Beneficiary pursuant to Section 731(a) of the
Code, there shall be a special allocation of gross income to the Managing
Trustee or the Special Beneficiary equal to the amount of such distribution.
(e) If a Trust Beneficiary unexpectedly receives (1) an allocation of loss
or deduction made (a) pursuant to Section 704(e)(2) of the Code to a donee of an
interest in the Trust, (b) pursuant to Section 706(d) of the Code as the result
of a change in any Trust Beneficiary's interest in the Trust, or (c) pursuant to
Treasury Regulation Section 1.751-1(b)(2)(ii) as the result of a distribution by
the Trust of unrealized receivables or inventory items or (2) a Distribution,
and such allocation and/or Distribution would cause a deficit in a Trust
Beneficiary's Capital Account, then such Trust Beneficiary shall be allocated
items of income and gain in an amount and manner sufficient to eliminate such
deficit balance as quickly as possible. For purposes of this Article, a Trust
Beneficiary's Capital Account shall be treated as reduced by Qualified Income
Offset Items.
(f) Except as otherwise provided herein, each Beneficiary shall be
allocated Profits and Losses in accordance with this Section 8.4 from the first
day of the calendar month in which he becomes a Beneficiary.
(g) The Trustees shall have the right, from time to time and at such times
as they shall determine, to request each Beneficiary to certify to the Trust, in
form acceptable to the Trustees, that such Beneficiary is not a nonresident
alien individual or foreign partnership within the meaning of Section 1441 of
the Code, a foreign corporation within the meaning of Section 1442 of the Code
or a Person who is not a United States person within the meaning of Section 1446
of the Code. Any Beneficiary who fails to deliver this certification shall be
treated for all purposes of this Agreement as a Foreign Beneficiary until such
time as such Beneficiary delivers an acceptable certification to the Trust.
(h) The Trustees shall have the right, with respect to any Beneficiary who
is determined to be a Foreign Beneficiary, to (i) pay over to the Service on
behalf of such Foreign Beneficiary such amounts as they may determine may be
required to comply with the Code, including without limitation Sections 1441,
1442 and 1446 and (ii) to deduct and maintain in a non-interest bearing escrow
account for the benefit of such Foreign Beneficiary all or a portion of
Distributions to be made to such Foreign Beneficiary to the extent that the
Managing Trustee determines that such distributions may be needed by the Trust
to comply at a later date with the Code, including without limitation Sections
1441, 1442 and 1446, or to repay principal, interest and other borrowing costs
on any borrowings made by the Trust to comply with the requirements of the Code,
including without limitation Sections 1441, 1442 or 1446. To the extent that the
Managing Trustee determines that any amounts deducted from the Distributions of
any Foreign Beneficiaries under clause (ii) above are not needed to enable the
Trust to comply with the Code, including without limitation Sections 1441, 1442
and 1446, or (iii) to pay principal, interest or other borrowing costs on any
borrowings made by the Trust in connection therewith, such amounts shall be paid
over to the Foreign Beneficiaries with respect to whom the amounts were
deducted. Any Foreign Beneficiary shall on demand reimburse the Trust for any
amounts received by such Foreign Beneficiary as Distributions which are
necessary to satisfy the Trust's obligations under the Code, including, without
limitation, Sections 1441, 1442 and 1446. Each Foreign Beneficiary hereby grants
to the Trust a first lien and security interest in and
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to the Interests of such Foreign Beneficiary and all proceeds thereof to secure
the obligations of such Foreign Beneficiary under this Section 8.4(h) and the
indemnification by each Foreign Beneficiary described in Section 6.2.
(i) To the extent that the Trust incurs any costs or expenses in
connection with the withholding obligation described in Section 8.4(h), such
costs or expenses shall be allocated solely to the Foreign Beneficiaries (and
shall not enter into the computation of Profits and Losses allocated under
Section 8.2) and shall reduce their Capital Accounts accordingly.
(j) If the Managing Trustee determines, after consultation with tax
counsel, that the allocation of any item of Trust income, gain, loss, deduction
or credit will not be recognized for federal income tax purposes, the Managing
Trustee is authorized to amend this Agreement to cure such defect without the
consent of Trust Beneficiaries.
(k) If any profit arises from the disposition of any Trust asset which
shall be treated as ordinary income under the depreciation recapture provisions
of the Code, then the full amount of such gain shall be allocated among the
Managing Trustee and Trust Beneficiaries in the proportions that the Trust
deductions from the depreciation giving rise to such recapture were actually
allocated. In the event that subsequently enacted provisions of the Code result
in other recapture income, no allocation of such recapture income shall be made
to any Managing Trustee or Trust Beneficiary who has not received the benefit of
those items giving rise to such other recapture income.
(l) With respect to assets distributed in kind to the Managing Trustee and
Trust Beneficiaries in liquidation or otherwise, (i) any unrealized appreciation
or unrealized depreciation in the values of such assets shall be deemed to be
profits and losses realized by the Trust immediately prior to the liquidation or
other distribution event; and (ii) such profits and losses shall be allocated to
the Managing Trustee and Trust Beneficiaries in accordance with Section 8.2(a),
and any property so distributed shall be treated as a distribution of an amount
in cash equal to the excess of such fair market value over the outstanding
principal balance of and accrued interest on any debt by which the property is
encumbered. For the purposes of this Section 8.4(l), "unrealized appreciation"
or "unrealized depreciation" shall mean the difference between the fair market
value of such assets, taking into account the fair market value of the
associated financing (but subject to Section 7701(g) of the Code) and the
Trust's adjusted basis for such assets as determined under Section 1.704-1(b).
This Section 8.4(l) is merely intended to provide a rule for allocating
unrealized gains and losses upon liquidation or other distribution event, and
nothing contained in this Section 8.4(l) or elsewhere herein is intended to
treat or cause such distributions to be treated as sales for value. The fair
market value of such assets shall be determined by an appraiser to be selected
by the Managing Trustee.
(m) If the Managing Trustee determines that it is in the best interests of
the Trust and it is permitted under Treasury Regulation Section
1.704-1(b)(2)(iv)(f), the Managing Trustee may re-value the assets of the Trust
to reflect their fair market value and adjust the Capital Accounts of the
Managing Trustee and the Trust Beneficiaries to reflect the difference between
such fair market value (referred to herein as the "Book Value") and the Trust's
tax basis in such assets (or, in the case of a prior revaluation, the Trust's
prior Book Value). The Managing Trustee is authorized to take whatever actions
it deems necessary or appropriate to effect this revaluation of assets and the
equitable adjustment of Capital Accounts on behalf of the Trust. In the event of
a revaluation of Trust assets pursuant to this Section 8.4(m), subsequent
allocations of gain, income, loss and deduction (including, without limitation,
cost recovery and amortization deductions) with respect to such assets for the
purpose of computing Profits or Losses shall be determined based on the Book
Value of such assets and shall be computed consistent with Treasury Regulation
Section 1.704-1(b)(2)(iv)(g). Allocations of gain, income, loss and deduction
(including, without limitation, cost recovery and amortization deductions) with
respect to such assets for the purpose of computing profits, losses and gains
for tax purposes shall be allocated among the Managing Trustee and the
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Trust Beneficiaries in accordance with the principles of Section 704(c) of the
Code and Treasury Regulation Section 1.704-3.
(n) Section 704 of the Code and the Regulations issued thereunder,
including but not limited to the provisions of such regulations addressing
minimum gain chargeback requirements and allocations of deductions attributable
to nonrecourse debt and partner nonrecourse debt, are hereby incorporated by
reference.
ARTICLE IX - TRANSFER OF INTERESTS
9.1 Withdrawal of a Beneficiary.
Subject to compliance with this Agreement, a Beneficiary may withdraw from
the Trust only by assigning or otherwise transferring his Beneficiary Interest
specified in this Article IX. The withdrawal of Beneficiaries shall not dissolve
or terminate the Trust. In the event of the withdrawal of a Beneficiary because
of death, legal incompetence, dissolution or other termination, the estate,
legal representative or successor of such withdrawn Beneficiary shall be deemed
to be the assignee of such withdrawn Beneficiary's Interest and may become a
Substitute Beneficiary upon compliance with the provisions of Section 9.3.
9.2 Assignment.
Subject to Section 4.2(a)(viii) and Section 9.4, each Beneficiary may
Assign all or a portion of his Beneficiary Interest (but not less than the
Minimum Investment Amount) to another Person (the "Transferee") without the
Consent of any Beneficiary, provided that the following conditions are met: (i)
the Transferee delivers to the Managing Trustee a duly executed and completed
assignment form in form satisfactory to the Managing Trustee (which is available
upon request from the Managing Trustee) not less than 30 days in advance of such
Assignment in which the Transferee agrees to be bound by the Agreement and which
will contain various representations, including whether or not he is an Eligible
Citizen; (ii) the Transferee satisfies the investor suitability standards
applicable to the original Offering; (iii) the Assignment complies with all
applicable laws and regulations, including, without limitation, such minimum
investment and investor suitability requirements as may then be applicable under
state or foreign securities laws; (iv) the Transferee executes a power of
attorney which provides the Managing Trustee with authority to execute certain
documents on his behalf; (v) the Transferee (or the Beneficiary) pays a transfer
fee, not to exceed $100 per Assignment, to cover the expenses incurred in
connection therewith; and (vi) the Managing Trustee consents to the Assignment
(which consent may be withheld if the conditions to such Assignment are not met
or if such Assignment would constitute a prohibited assignment described in
paragraphs (a) through (g) of Section 9.4). A Transferee who desires to make a
further Assignment of his Beneficiary Interest shall be subject to the
provisions of this Section 9.2 to the same extent and in the same manner as the
prior assignor. No Assignment shall be deemed to constitute an Assignment of a
Beneficiary's entire Beneficiary Interest unless the provisions of Section 9.3
are satisfied in full. The rights of a Transferee who does not become a
Substitute Beneficiary shall be limited to the receipt of his share of Profits,
Losses and Distributions, as determined under Article VIII. Transferees shall be
recognized as Assignees monthly, as of the first day of the calendar month in
which the notice of assignment and other required documentation are received and
accepted by the Managing Trustee; provided, however, that if an Assignee makes a
subsequent Assignment of his Beneficiary Interest in the same calendar month, he
shall not be recognized as an Assignee with respect to such Beneficiary Interest
for any purpose.
9.3 Substitution.
No Person shall have the right to become a Substitute Beneficiary in place
of his assignor unless all
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of the following conditions are met:
(a) the Beneficiary Interest was assigned in accordance with Sections 9.1
and 9.2;
(b) the Managing Trustee shall consent in writing to such substitution
(which consent may be withheld for any reason in the sole discretion of the
Managing Trustee);
(c) such Transferee executes an instrument reasonably satisfactory to the
Managing Trustee accepting and adopting the terms and provisions of this
Agreement; and
(d) in the case of Assignments other than by operation of law, the
assignor states his intention in writing to have his Transferee become a
Substitute Beneficiary.
If all of the conditions of Sections 9.2 and 9.3 shall have been met, the
Transferee shall become a Substitute Beneficiary within 30 days after the
Managing Trustee consents to the admission of the Substitute Beneficiary (the
"Recording Date"). The records of the Trust and this Agreement shall be amended
to reflect any such substitution on or prior to the Recording Date; provided,
however, that the records of the Trust and this Agreement shall be amended at
least once each calendar quarter to reflect the admission of Substitute
Beneficiaries. Failure or refusal of the Managing Trustee to admit a Transferee
as a Substitute Beneficiary shall in no way affect the right of such Transferee
to receive Distributions and allocations of Profits or Losses to which his
predecessor in interest would have been entitled in accordance with Article
VIII.
9.4 Prohibited Assignment.
No Trust Beneficiary Interests may be assigned or otherwise transferred
under the following circumstances unless the Managing Trustee shall give its
express written consent:
(a) to a minor or incompetent (unless a guardian, custodian, or
conservator has been appointed to handle the affairs of such Person);
(b) to any Person not permitted to be a transferee under applicable law,
including, in particular but without limitation, applicable federal, state or
foreign securities laws, which generally provide that, except in the case of a
transfer by gift, inheritance, intrafamily transfer or family dissolution, each
transferee of a Beneficiary Interest must acquire no fewer than the Minimum
Investment Amount and must satisfy investor suitability standards similar to
those which were applicable to the original Offering, and that each transferor
must transfer the number of Interests equal to the Minimum Investment Amount;
(c) to any assignee if such assignee would hold after such Assignment a
fraction of an Interest;
(d) to any Person if, in the opinion of Trust Counsel, such transfer would
result in the termination under the Code of the Trust's taxable year or of its
status as an entity taxable as a partnership;
(e) to a Person who is a Foreign Beneficiary if, in the Managing Trustee's
best judgment, such assignment or transfer would adversely affect the
registration of any aircraft registered with the FAA or the documentation of any
vessel documented under the laws of the United States;
(f) to any Person if such transfer would cause the assets of the Trust to
be considered plan assets under ERISA and the regulations thereunder; or
(g) to any Person, if such Assignment, would cause the Trust to be treated
as a publicly traded partnership for purposes of Section 7704 of the Code.
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Any such attempted Assignment without the express written consent of the
Managing Trustee shall be void and shall not bind the Trust. In the case of a
proposed Assignment which is prohibited solely under clause (d) above, however,
the Trust shall be obligated to permit such Assignment to become effective if
and when, in the opinion of Trust Counsel, such Assignment would no longer have
either of the adverse consequences under the Code which are specified in that
clause.
9.5 Change of Status of Beneficiary.
In the event that (i) the Managing Trustee determines that a Beneficiary
or a Person for whom a Beneficiary is acting as nominee who has previously
represented to the Trust that he is an Eligible Citizen is no longer an Eligible
Citizen or (ii) the Beneficiary fails to certify his citizenship to the Managing
Trustee at the time that he acquires his Interests, the Managing Trustee may
require that the status of the Beneficiary be changed to that of a Non-Eligible
Beneficiary. In the event that the number of Non-Eligible Beneficiaries exceeds
80% of the maximum number of non-eligible Persons permitted to be Trust
Beneficiaries pursuant to applicable laws or regulations governing the
registration of any Asset owned by the Trust, the Managing Trustee may, in its
sole discretion, expend Trust assets to redeem the Interests of Non-Eligible
Beneficiaries. Any such Interests redeemed shall be redeemed by the Trust at a
price equal to (i) 80% of the Non-Eligible Beneficiary's original Capital
Contribution as reduced by any amounts returned to the Non-Eligible Beneficiary
as uninvested Capital Contributions pursuant to Section 8.4, minus (ii) all
Distributions made to the Non-Eligible Beneficiary.
9.6 Right to Tender Interests for Redemption.
A Beneficiary shall have the right to tender Class A Interests for
redemption by the Trust subject to all of the following conditions:
(a) no Interests may be tendered within 24 months of Closing;
(b) Interests may be tendered by Beneficiaries for redemption by the Trust
only on a date selected by the Managing Trustee, in its sole discretion, on
which Interests tendered for redemption may be redeemed (the "Redemption Date"),
which shall be declared not more than once in each calendar year of the Trust;
(c) the Beneficiary must tender all Interests owned if he tenders any
Interests owned;
(d) at least 120 days' prior written notice of the Redemption Date shall
be provided to the Beneficiaries;
(e) a redemption agreement fully executed by the Beneficiary on a form
provided by the Trust and a redemption fee payable to the Trust, not to exceed
$100, to cover the expenses incurred in connection therewith, must be received
by the Trust at least 60 calendar days prior to the Redemption Date;
(f) not more than 10% of the total interests in Trust capital or Profits,
when aggregated with all other Trust Beneficiary Interests sold or otherwise
disposed of (other than the Permitted Transfers defined in clauses (i) through
(vi) of Section 9.4(g)), may be redeemed pursuant to Section 9.5 and Section 9.6
or otherwise sold or disposed of in any taxable year of the Trust;
(g) the Trust must have sufficient cash, as determined in the sole
discretion of the Managing Trustee, to redeem the Interests tendered; provided
that the Trust may not redeem Interests in any fiscal quarter in which the
Distribution paid in that quarter is less than 2.5% of Adjusted Investment;
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(h) Interests tendered shall be redeemed in the order in which completed
redemption agreements and redemption fees, are received by the Trust;
(i) the price at which Interests shall be redeemed by the Trust shall
equal (i) 90% of a Beneficiary's original Capital Contribution as reduced by any
amounts returned to the Beneficiary as uninvested Capital Contributions pursuant
to Section 8.4, minus (ii) all Distributions made to the Beneficiary; and
(j) redemption of the Interests shall not be in violation of any
applicable legal requirements, shall not cause the Trust to be deemed an
investment company pursuant to the provisions of the Investment Company Act of
1940, shall not cause the Assets of the Trust to be considered plan assets under
ERISA and the regulations thereunder, and shall not subject the Trust to
taxation as an association taxable as a corporation.
In addition to the foregoing, the Trust shall have the right to purchase
and redeem Interests at such times, in such amounts, in such manner and at such
prices as the Managing Trustee may determine from time to time in its sole
discretion; provided, however, that any such purchase and redemption shall not
be in violation of any applicable legal requirements, shall not result in the
termination under the Code of the Trust or of its status as an entity taxable as
a partnership, shall not result in the Trust being treated as a publicly traded
partnership, shall not cause the Trust to be deemed an "investment company"
pursuant to the provisions of the Investment Company Act of 1940 and shall not
cause the Assets of the Trust to be considered "plan assets" under ERISA and the
regulations thereunder.
9.7 Status of an Assigning Beneficiary.
Any Beneficiary who shall assign all of his Interests shall cease to be a
Beneficiary and shall no longer have any of the rights or privileges of a
Beneficiary, except that unless and until a Substitute Beneficiary is admitted
in his place such assigning Beneficiary shall retain any statutory rights of an
assignor of a Beneficiary Interest under the Business Trust Act. Any Beneficiary
who shall have his Interests redeemed by the Trust shall cease to be a
Beneficiary, and no Person shall have any of the rights or privileges of a
Beneficiary with respect to the Interests which were redeemed.
9.8 Withdrawal of Special Beneficiary; Substitution.
Subject to compliance with this Agreement, the Special Beneficiary may
withdraw from the Trust by assigning or otherwise transferring its Special
Beneficiary Interest upon the express written consent of the Managing Trustee.
Once the Special Beneficiary shall assign all of its Special Beneficiary
Interest, the Special Beneficiary shall cease to be a Trust Beneficiary and
shall no longer have any of the rights or privileges of a Trust Beneficiary,
except that unless and until a Substitute Special Beneficiary is admitted in its
place such assigning Special Beneficiary shall retain any statutory rights of an
assignor of a Special Beneficiary Interest under the Business Trust Act.
The Special Beneficiary hereby covenants and agrees, in the event of the
Resignation or Removal of the Managing Trustee pursuant to Section 4.8 or 11.3,
to transfer to a Substitute Managing Trustee selected as provided in Section 4.8
or Section 4.12 or to the Trust, such portion, if any, of its Special
Beneficiary Interest as the Substitute Managing Trustee or the Trust shall elect
to purchase. The Substitute Managing Trustee shall become a substitute Special
Beneficiary. Any such transfer will be made in consideration of the payment by
the Substitute Managing Trustee or the Trust to the Special Beneficiary or its
legal representatives, of 86.5% of the fair market value of such Interest. The
fair market value of the Special Beneficiary's Interest shall be as determined
by the parties to the transfer, or otherwise in accordance with
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Section 11.3. The method of payment to the Special Beneficiary must be fair and
must protect the solvency and liquidity of the Trust. In the event of the
Resignation of the Managing Trustee, payment to the Special Beneficiary, if any,
may be made by means of a non-interest-bearing unsecured promissory note with
principal payable, if at all, from Distributions which the Special Beneficiary
would have received but for its resignation. In the event of the Removal of the
Managing Trustee, the Substitute Managing Trustee or the Trust shall make such
payment to the Special Beneficiary by means of a promissory note bearing
interest at a floating annual rate equal to the prime rate of interest announced
by Fleet Bank of Massachusetts, N.A., maturing in not less than five years with
equal installments of principal and interest payable each year. Any portion of
such Special Beneficiary's Interest which is not required to be transferred as
aforesaid may be retained by such Special Beneficiary or its estate or legal
representatives as appropriate. The Special Beneficiary acknowledges and agrees
that the payment of 86.5% of the fair market value of any portion of its Special
Beneficiary Interest which has been transferred shall be full payment for such
Special Beneficiary Interest. To the extent of such retained Special Beneficiary
Interest, if any, such Special Beneficiary or its estate or legal
representatives shall be treated as a Trust Beneficiary.
Notwithstanding the foregoing, the resigned Special Beneficiary or its
legal representatives shall be entitled to receive from the Trust (i) any
positive balance in its Capital Account (as adjusted to the date of such
resignation), provided, however, that in no event shall such amount exceed the
fair market value of the Special Beneficiary's Interest, (ii) any amounts due
and owing to it by the Trust less any amounts due and owing by it to the Trust.
The right of the Special Beneficiary or its legal representatives to payment of
said amounts shall be subject to any claim for damages which the Trust or any
Trustee or any other Trust Beneficiary may have against such Special Beneficiary
or its legal representatives if such resignation is in contravention of this
Agreement.
ARTICLE X - FISCAL MATTERS
10.1 Title to Property and Bank Accounts.
Except to the extent that trustees, nominees or other agents are used as
specified in Section 4.2(b)(viii), the Assets shall be held in the name of the
Trust. The funds of the Trust shall be deposited in the name of the Trust in
such bank account or accounts as shall be designated by the Managing Trustee,
and withdrawals therefrom shall be made upon the signature of the Managing
Trustee or such Person or Persons as shall be designated in writing by the
Managing Trustee. The funds of the Trust shall not be commingled with those of
any other Person or entity except that the use of a zero balance or clearing
account shall not constitute a commingling of Trust funds; and the funds of the
Trust and funds of other entities sponsored by the Advisor or its Affiliates may
be held in an account or accounts established and maintained for the purpose of
making computerized disbursements and/or short-term investments provided the
Trust's funds are protected from claims of such other entities and creditors of
such other entities.
10.2 Maintenance of, and Access to, Basic Trust Documents.
The Managing Trustee shall maintain at the Trust's principal office the
following documents: (i) an alphabetical list of the names, addresses, and
business telephone numbers of the Trust Beneficiaries along with the number of
Interests held by each of them (the "Trust Beneficiary List"); (ii) a copy of
the Certificate of Trust and all amendments thereto; (iii) copies of the Trust's
federal, state and local income tax returns and reports, if any, for the three
most recent years; and (iv) copies of this Agreement as then in effect and of
any financial statements of the Trust for the three most recent years. Such
documents and all other Trust records are subject to inspection and copying by
any Trust Beneficiary or his designated representatives at the reasonable
request, and at the expense of such Trust Beneficiary during ordinary business
hours. The Trust Beneficiary List shall be updated at least quarterly to reflect
changes in the information contained therein. A copy of the Trust Beneficiary
List shall be mailed to any Beneficiary
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requesting the Trust Beneficiary List within ten days of the request. The copy
of the Trust Beneficiary List shall be printed in alphabetical order, on white
paper, and in readily readable type (in no event smaller than 10-point type). A
reasonable charge for copy work may be charged by the Trust. The purposes for
which a Beneficiary may request a copy of the Trust Beneficiary List include,
without limitation, matters relating to Beneficiaries' voting rights under this
Agreement and the exercise of Beneficiaries' rights under federal proxy laws. If
the Sponsor neglects or refuses to exhibit, produce or mail a copy of the Trust
Beneficiary List as requested, the Sponsor shall be liable to any Beneficiary
requesting the List for costs, including attorney's fees, incurred by that
Beneficiary for compelling the production of the Trust Beneficiary List, and for
actual damages suffered by any Beneficiary 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 Trust Beneficiary List is to secure such list of
Beneficiaries 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 applicant as a Beneficiary relative to the affairs of the Trust.
The Sponsor may require the Beneficiary requesting the Trust Beneficiary List to
represent that the list is not requested for a commercial purpose unrelated to
the Beneficiary's interest in the Trust. The remedies provided hereunder to
Beneficiaries requesting copies of the Trust Beneficiary List are in addition
to, and shall not in any way limit, other remedies available to Beneficiaries
under federal law, or the laws of any state. Except to the extent requested by
any Trust Beneficiary, the Managing Trustee shall have no obligation to deliver
or mail a copy of the Certificate of Trust or any amendment thereto to the Trust
Beneficiaries. Each Trust Beneficiary shall also have the right to obtain from
the Managing Trustee from time to time upon reasonable demand: (i) true and full
information regarding the status of the business and financial condition of the
Trust; (ii) promptly after becoming available, a copy of the Trust's federal,
state and local income tax returns for each year; and (iii) such other
information regarding the affairs of the Trust as may reasonably be produced by
the Trust.
10.3 Financial Books and Accounting.
The Managing Trustee shall keep or cause to be kept complete and accurate
financial books with respect to the Trust's business. Except to the extent
otherwise required by the accounting methods adopted by the Trust for federal
income tax purposes, such books shall be kept on an accrual basis. Profits and
Losses shall be determined for each fiscal year in accordance with Article VIII.
Except as otherwise provided herein, whenever a proportionate part of Profits or
Losses is credited or charged to a Trust Beneficiary's Capital Account, every
item of income, gain, loss or deduction entering into the computation of such
Profits or Losses shall be considered either credited or charged, as the case
may be, and every item of credit or tax preference related to such Profits or
Losses and applicable to the period during which such Profits or Losses were
realized shall be allocated to such Capital Account in the same proportion.
10.4 Trust Expenses.
No reimbursement shall be permitted to the Managing Trustee or any of its
Affiliates for services for which the Managing Trustee or any such Affiliate is
entitled to compensation by way of a separate fee.
(a) Organizational and Offering Expenses. The Trust shall reimburse the
Managing Trustee and any Affiliate thereof for Organizational and Offering
Expenses incurred by the Managing Trustee and its Affiliates with respect to the
Class A Offering provided that in no event shall the amount of Organizational
and Offering Expenses paid directly or indirectly by the four AFG Investment
Trusts exceed 2.5% of Gross Class A Proceeds in all four AFG Investment Trusts.
Such expenses shall be allocated among the six AFG Investment Trusts based on
the number of Interests sold in each such Trust as compared to the total
Interests sold in all four AFG Investment Trusts, without regard to the actual
expenses incurred by each Trust. However, the Trust shall not pay Organizational
and Offering Expenses in an amount in excess of 2.5% of the Gross Class A
Proceeds. For purposes hereof, "Organizational and Offering Expenses" shall mean
(i) those expenses (including the non-accountable expense allowance payable to
the Dealer-Manager)
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incurred in connection with, and in preparing the Trust for, qualification under
federal and state securities laws and subsequently offering and distributing the
Interests to the public, except for sales commissions paid by the Trust in
connection with the offering of Interests, (ii) expenses for salaries and direct
expenses of officers, directors and members of the executive committee of any
Affiliate of the Managing Trustee while engaged in registering and marketing the
Interests, and (iii) any due diligence expenses attributable to the Offering.
The Managing Trustee or its Affiliates will bear all Sales and Distribution
Expenses in excess of nine and one-half percent (9.5%) of Gross Proceeds without
recourse to or reimbursement from the Trust.
(b) Other Reimbursable Costs. Except for Organizational and Offering
Expenses for the Class A Offering and with respect to organizational and
offering expenses with respect to the Class B Offering provided for in Section
5.1(e) and Section 8.2(e), the Trust shall not reimburse the Managing Trustee or
its Affiliates except for (i) the actual cost to the Managing Trustee or its
Affiliates of goods and materials used for or by the Trust and obtained from
Persons unaffiliated with the Managing Trustee and its Affiliates provided that
such goods or materials are necessary to the prudent operation of the Trust and
that the actual cost thereof includes only the price of goods and materials paid
to independent third parties and direct costs incurred by the Managing Trustee
or Affiliates in the transaction excluding general or administrative overhead
and costs of personnel who are Controlling Persons of the Managing Trustee or
its Affiliates and (ii) Acquisition Expenses, including but not limited to
expenses related to the purchase, operation and financing of Assets. In no
event, however, shall the Trust reimburse the Managing Trustee or its Affiliates
for rent, depreciation, utilities, capital equipment and other administrative
items. The Trust's annual report to the Beneficiaries will include a schedule
itemizing costs reimbursed to the Managing Trustee and its Affiliates.
(c) Other Trust Expenses. Subject to the provisions of Sections 10.4(a)
and (b), the Trust shall pay all expenses of the Trust (which expenses shall be
billed directly to the Trust) which are necessary or appropriate for the prudent
operation of the Trust and which may include but are not limited to: (i) all
costs of personnel providing administrative services (excluding rent or
depreciation, utilities, capital equipment, and other administrative items)
employed full or part-time by the Trust and involved in the business of the
Trust and allocated pro rata to their services performed on behalf of the Trust,
and such personnel may include Persons who may also be officers or employees of
the Managing Trustee or its Affiliates (other than Controlling Persons of the
Managing Trustee or its Affiliates); (ii) all costs of borrowed money, taxes and
assessments on Assets and other taxes applicable to the Trust; (iii) legal,
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 Trust or in connection with the business of the Trust; (v) fees
and expenses paid to bankers, brokers, and services, consultants and other
equipment management personnel, insurance brokers and other agents; (vi)
expenses in connection with the disposition, replacement, alteration, repair,
leasing, re-leasing, financing, and operation of Assets (including the costs and
expenses of insurance premiums and of maintenance of such Assets); (vii)
expenses of organizing, revising, amending, converting, modifying or terminating
the Trust; (viii) expenses in connection with distributions made by the Trust
to, and communications and bookkeeping and clerical work necessary in
maintaining relations with, its Beneficiaries, including the costs of printing
and mailing to such Persons evidences of ownership of Interests and reports of
meetings of the Trust, and of preparation of proxy statements and solicitations
of proxies in connection therewith; (ix) expenses in connection with preparing
and mailing reports required to be furnished to Beneficiaries for investor tax
reporting or other purposes, and reports which the Managing Trustee deems to be
in the best interests of the Trust to furnish to the Beneficiaries; (x) any
accounting, computer, statistical or bookkeeping costs necessary for the
maintenance of the books and records of the Trust; and (xi) the cost of
preparation and dissemination of informational material and documentation
relating to potential sale, refinancing or other disposition of Assets.
Reimbursement to the Managing Trustee or its Affiliates of the cost of services
rendered to the Trust shall be limited to the lesser of the costs of those
services or a rate equivalent to ninety percent (90%) of the rate which would be
charged by an unaffiliated party to perform such services. As part
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of their annual audit of the Managing Trustee and its Affiliates, the Managing
Trustee shall cause the Accountants to verify the allocation of costs of the
Managing Trustee and its Affiliates to the Trust. The additional cost of the
Accountants' verification of this reimbursement for services shall not be paid
by the Trust unless the aggregate sum of the cost of the services and the cost
of the Accountants' verification do not exceed ninety percent (90%) of the rate
which would be charged by an unaffiliated party to perform the services
performed by the Managing Trustee and its Affiliates.
(d) Other Limitations. Other than as specifically described above in this
Section 10.4 and in Section 4.6 and Article V, the Trust shall not pay the
Managing Trustee for any other items, including rent, travel expenses or
salaries of the Managing Trustee or its Affiliates or Controlling Persons of the
Managing Trustee or its Affiliates, generally considered to be the Managing
Trustee's overhead and expenses. The Managing Trustee and its Affiliates will
not be compensated for services provided to the Trust unless such parties or
their predecessors were engaged in rendering those services as an ongoing
business for Persons other than the Trust. The Managing Trustee shall not
provide services to the Trust other than as provided in, or permitted by, this
Agreement.
10.5 Fiscal Year.
Except as may otherwise be determined from time to time by the Managing
Trustee, the Trust's fiscal year for federal income tax and financial reporting
purposes shall end on December 31 of each year.
10.6 Reports and Accounting Decisions.
(a) Reports to Beneficiaries.
(i) Quarterly Reports. Within 60 days after the end of each of the
first three quarters of each fiscal year, the Managing Trustee shall send
to each Person who was a Beneficiary on the last day of the quarter then
ended (1) a condensed balance sheet, (2) statements of cash flows and
operations including a description of any material events with respect to
the Trust's revenues, assets, liabilities, expenses, contractual
obligations or contingent liabilities, (3) a statement describing (A) any
new agreement, contract or arrangement required to be reported by any
section hereof and (B) the amount of all fees and other compensation and
distributions paid by the Trust for such quarter to the Managing Trustee
or any Affiliate of the Managing Trustee and a description of the services
rendered or to be rendered by the Managing Trustee or such Affiliate for
such fees and compensation (which requirement may not be circumvented by
lump-sum payments to entities which disburse funds to others), (4) until
the Capital Contributions derived from the Offering shall be fully
invested except for reserves, a special report of Asset acquisitions
including (A) a general description of Asset purchased, (B) a description
of the Lease arrangements made with respect thereto and identification of
the Lessee, (C) the actual purchase price, (D) the amount of cash expended
from Capital Contributions to acquire such Asset, and (E) the amount of
Capital Contributions which then remains unexpended, if any, stated in
terms of both dollar amounts and percentage of the total amount of Capital
Contributions, and (5) other pertinent material regarding the activities
of the Trust during such fiscal quarter. Distribution to the Beneficiaries
of the financial information contained in the Trust's quarterly report on
Form 10-Q under the Securities Exchange Act of 1934 will satisfy the
financial statement distribution requirements contained herein. No such
statement or reports need be audited.
(ii) Annual Reports. Within 120 days after the end of each fiscal
year, the Managing Trustee shall send to each Person who was a Beneficiary
on the last day of the fiscal year then ended a report in narrative form
summarizing the status of the Trust's investments and containing (1) a
balance sheet as of the end of such fiscal year and statements of
operations, Beneficiaries'
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equity and cash flows for such fiscal year, all of which shall be prepared
in accordance with generally accepted accounting principles and
accompanied by an auditor's report (containing an opinion of the
Accountants), (2) a report (which need not be audited) summarizing the
fees and other remuneration paid by the Trust for such fiscal year to the
Managing Trustee or any Affiliate of the Managing Trustee or to the
Delaware Trustee and a statement describing any new agreement, contract or
arrangement required to be reported by any section hereof, and (3) a
statement (which need not be audited) showing the Distributable Cash From
Operations and Distributable Cash From Sales or Refinancings distributed
per Interest to the Beneficiaries during such fiscal year. Such report
shall separately identify (to the extent then applicable) Distributions
from (a) Cash From Operations during the period, (b) Cash From Operations
during a prior period which had been held in the Reserve Account, (c) Cash
From Sales or Refinancings during the period, (d) Cash From Sales or
Refinancings during a prior period which had been held in the Reserve
Account, and (e) Reserve Account amounts from Gross Proceeds. Until the
Capital Contributions of the Trust derived from the Offering shall be
fully invested except for reserves, the annual report shall also contain a
special report of Asset acquisitions containing the information specified
above for quarterly reports. If any Asset acquired by the Trust
individually represents at least 10% of the Trust's total Investment in
Assets, the Managing Trustee shall include a status report as part of the
annual report, which status report shall indicate: (1) the condition of
the Asset, (2) how the Asset is being utilized as of the end of the year,
(3) the remaining term of the Lease, (4) the projected use of the Asset
for the next year, and (5) such other information relevant to the value or
utilization of the Asset as the Managing Trustee deems appropriate.
Distribution to the Beneficiaries of the financial information contained
in the Trust's annual report on Form 10-K under the Securities Exchange
Act of 1934 will satisfy the financial statement distribution requirements
contained herein.
The Managing Trustee shall cause the Accountants, as part of their annual
audit of the Managing Trustee and its Affiliates, to issue to the Trust a
special report prepared in accordance with the standards of the American
Institute of Certified Public Accountants on the allocation of costs incurred by
the Managing Trustee and its Affiliates and reimbursed to them by the Trust. In
preparing this special report, the Accountants shall, at a minimum, review (1)
the time records of individual employees, the costs of whose services were
reimbursed by the Trust, and (2) the specific nature of the work performed by
such employees.
Each annual report will also include the fair market value of the
Interests at the end of the preceding fiscal year. For each of the first two
years after Closing, the Managing Trustee will value the Interests at the public
offering price. Thereafter, the Managing Trustee will secure each year an
independent appraisal of the fair market value of the Trust's assets as of the
next annual valuation date and will prepare a per Interest valuation. The
Managing Trustee will seek to provide such annual valuation to trustees and
custodians of IRAs no later than January 15 of each year, based on valuation
information as of the preceding October 31, updated for any material changes
occurring between October 31 and December 31 of the preceding year. Qualified
Plans will be furnished such annual valuation within 75 days after the close of
the Trust's fiscal year. The Managing Trustee will revise the valuation
procedures described above to conform to any relevant guidelines issued by the
Department of Labor or the Service.
(b) Tax Returns and Tax Information.
The Managing Trustee shall:
(i) prepare or cause the Accountants to prepare the tax returns
(federal, state and local, if any) of the Trust for each fiscal year
within 75 days after the end of each calendar year in which such fiscal
year was completed; and
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(ii) deliver to each Person who was a Beneficiary during a calendar
year within 75 days after the end of such calendar year the information
necessary to prepare his federal income tax return for the calendar year
during which such fiscal year was completed, including information
regarding unrelated business taxable income for the use of tax-exempt
Beneficiaries.
(c) Accounting Decisions. All decisions as to accounting matters, except
as specifically provided to the contrary herein, shall be made by the Managing
Trustee in accordance with the accounting methods adopted by the Trust for
federal income tax purposes or otherwise in accordance with generally accepted
accounting principles and procedures applied in a consistent manner. The
Managing Trustee may rely upon the advice of the Accountants as to whether such
decisions are in accordance with the methods adopted by the Trust for federal
income tax purposes or generally accepted accounting principles.
(d) Reports to Appropriate State Authorities. The Managing Trustee shall
prepare and file with appropriate state authorities all reports required to be
so filed by state securities or Blue Sky authorities.
(e) General. No cause of action shall accrue to any Beneficiary if the
Managing Trustee shall have acted in good faith in attempting to satisfy the
requirements of this Section 10.6, and the Managing Trustee's actions or
inactions did not constitute negligence, misconduct or material breach of
fiduciary duty so as to subject the Managing Trustee to liability under Section
4.6.
10.7 Partnership Classification; Federal Tax Elections.
(a) Partnership Classification. The Trust is intended to be classified as
a partnership under the Code and the regulations thereunder and in accordance
with the tax laws of the State and other jurisdictions in a manner consistent
with such objective.
(b) Federal Tax Elections. The Trust, in the sole discretion of the
Managing Trustee, may make elections for federal tax purposes as follows:
(i) in case of transfer of all or part of the Interest of the
Managing Trustee, the Special Beneficiary or any Beneficiary, the Trust,
in the absolute discretion of the Managing Trustee, may elect pursuant to
Section 754 of the Code (or corresponding provisions of future law) and
pursuant to similar provisions of applicable state or local income tax
laws, to adjust the basis of the assets of the Trust and in such event,
any basis adjustment attributable to such election shall be allocated
solely to the transferee; and
(ii) all other elections, including but not limited to the adoption
of accelerated or straight-line depreciation cost recovery methods,
required or permitted to be made by the Trust under the Code shall be made
by the Managing Trustee in such manner as will, in the opinion of the
Managing Trustee, be in the best interest of the Trust. (In reaching such
opinion the Managing Trustee shall not be required to poll or survey the
Beneficiaries.) The Trust shall, to the extent permitted by applicable law
and regulations, elect to treat as an expense for federal income tax
purposes all amounts incurred by it for state and local taxes, interest
and other charges which may, in accordance with applicable law and
regulations, be considered as expenses.
ARTICLE XI - MEETINGS AND VOTING RIGHTS OF BENEFICIARIES
11.1 Meetings.
(a) Meetings of the Beneficiaries for any purpose may be called by the
Managing Trustee and shall be called by the Managing Trustee upon receipt of a
request in writing signed by Beneficiaries owning
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10% or more of the Interests in the aggregate held by all Beneficiaries as of
the date of such written request. Notice of any such meeting shall be sent in
accordance with the requirements of Section 11.1(b) within ten days after
receipt of such request. Such request shall state the purpose of the proposed
meeting and the matters proposed to be acted upon at the meeting. Such meeting
shall be held at the principal office of the Trust or at such other place as may
be designated by the Managing Trustee or, if called upon the request of
Beneficiaries, as designated by such Beneficiaries. In addition, the Managing
Trustee may submit, and upon request in writing signed by 10% or more in
interest of the Beneficiaries, shall submit, any matter upon which the
Beneficiaries are entitled to act to the Beneficiaries for a vote by written
Consent without a meeting.
(b) The Managing Trustee shall provide, within 10 days of receipt of such
request, written notice personally or by certified mail of such meeting to be
held not less than 15 days nor more than 60 days after the distribution of such
notice, to each Beneficiary at his record address, or at such other address
which he may have furnished in writing to the Managing Trustee; provided,
however, that any notice of any meeting at which a vote will be taken to (i)
amend this Agreement, (ii) dissolve the Trust, (iii) remove any Managing Trustee
and elect a new Managing Trustee, or (iv) approve or disapprove the sale of all
or substantially all the assets of the Trust, or any notice of any meeting to be
held pursuant to a written request signed by 10% or more in interest of the
Beneficiaries, shall be given by certified mail. Such notice shall be in
writing, and shall state the place, date, and hour of the meeting, and shall
indicate that it is being issued at or by the direction of the Managing Trustee
or Beneficiary calling the meeting. The notice shall state the purpose of the
meeting. If a meeting is adjourned to another time or place, and if any
announcement of the adjournment of time or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting. The presence in
person or by proxy of a Majority in Interest of the Beneficiaries shall
constitute a quorum at all meetings of the Beneficiaries; provided, however,
that if there be no such quorum, holders of a Majority in Interest of such
Beneficiary Interests so present or so represented may adjourn the meeting from
time to time without further notice, until a quorum shall have been obtained. No
notice of the time, place or purpose of any meeting of Beneficiaries need be
given to any Beneficiary who attends in person or is represented by proxy
(except when a Beneficiary attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business on
the ground that the meeting is not lawfully called or convened), or to any
Beneficiary otherwise entitled to such notice who, in writing, has executed and
filed with the records of the meeting, either before or after the time thereof,
waiver of such notice.
(c) For the purpose of determining the Beneficiaries entitled to vote on
any matter on which a vote is to be taken or to vote at any meeting of the Trust
or any adjournment thereof pursuant to this Article XI, the Trustees or the
Beneficiaries requesting such meeting may fix, in advance, a date as the record
date (the "Record Date") for any such determination. Such date shall not be more
than 50 days nor less than 20 days before any such meeting.
(d) Each Beneficiary may authorize any Person or Persons to act for him by
proxy in all matters in which a Beneficiary is entitled to participate, whether
by waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Beneficiary or his attorney-in-fact. No proxy shall
be valid after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the Beneficiary executing it.
(e) At each meeting of Beneficiaries, the Beneficiaries present or
represented by proxy may adopt such rules for the conduct of such meeting as
they shall deem appropriate, provided that such rules shall not be inconsistent
with the provisions of this Agreement.
11.2 Voting Procedures; Voting Rights of Beneficiaries.
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(a) A Majority in Interest of the Beneficiaries, without the concurrence
of the Trustees, may (i) amend this Agreement, subject to the provisions of
Article XII and to the conditions that such amendment (A) may not cause the
Beneficiaries to lose the limited liability accorded them by the Business Trust
Act and (B) may not, without the specific written consent of the Managing
Trustee (which may not be unreasonably withheld), add to the duties or diminish
the rights of the Managing Trustee or its Affiliates as set forth herein or
reduce the compensation to which the Managing Trustee and its Affiliates are
entitled for services to be provided hereunder, (ii) terminate the Trust, (iii)
remove the Managing Trustee and elect a replacement therefor, (iv) approve or
disapprove the sale of all or substantially all of the Assets of the Trust in a
single sale or in multiple sales in the same 12-month period, except in the
orderly liquidation and winding up of the business of the Trust upon its
termination and dissolution.
(b) A Beneficiary shall be entitled to cast one vote for each Interest
that he owns. Only the votes of Beneficiaries of record on the Record Date,
whether at a meeting or otherwise, shall be counted. The Managing Trustee and
its Affiliates shall be entitled to vote with respect to any Interests which
they own; provided that the Managing Trustee and its Affiliates may not vote
their Interests with respect to the compensation or the withdrawal or removal of
the Managing Trustee pursuant to this Agreement or regarding any transaction
between the Trust and the Managing Trustee or its Affiliates.
11.3 Valuation of Interests of the Managing Trustee.
In the event of removal of the Managing Trustee pursuant to Section 11.2,
its Interest shall be appraised by two independent appraisers, one selected by
the removed Managing Trustee and one by the Beneficiaries. In the event that
such two appraisers are unable to agree on the value of the removed Managing
Trustee's Interest within 90 days, they shall within 20 days thereafter jointly
appoint a third independent appraiser whose determination shall be final and
binding; provided, however, that if the two appraisers are unable to agree
within such 20 days on a third appraiser, the third appraiser shall be selected
by the American Arbitration Association. If either the removed Managing Trustee
or the Beneficiaries fails to appoint an appraiser, the value of the removed
Managing Trustee's Interest shall be determined by arbitration in accordance
with the then applicable rules of the American Arbitration Association. The
costs of appraisal shall be borne equally between the Trust and the removed
Managing Trustee. The Trust may elect to pay the removed Managing Trustee for
the value of its Interest as so determined by delivery of a promissory note
bearing interest at a floating annual rate equal to the prime rate of interest
announced by Fleet Bank of Massachusetts, N.A., maturing in not less than five
years with equal installments of interest and principal payable annually.
ARTICLE XII - AMENDMENTS
12.1 Certain Amendments Requiring Majority Consent.
The Managing Trustee shall not amend this Agreement without Majority
Consent in order to (i) Resign as Managing Trustee, (ii) appoint a new Managing
Trustee, (iii) sell all or substantially all of the Assets of the Trust in a
single sale or multiple sales in the same 12-month period, except in the
ordinary liquidation and winding up of the Trust upon its termination and
dissolution or (iv) permit the taking of any of the actions described in Section
7.8. The Managing Trustee may not amend this Agreement to change the voting
rights of the Beneficiaries without Majority Consent, unless the Business Trust
Act requires the change or such a change is necessary to preserve the status of
the Trust as an entity taxable as a partnership for federal tax purposes or to
conform to any operative legal precedent providing that trust beneficiaries will
be entitled to limited liability for the purposes of the Business Trust Act. A
written consent may not be withdrawn or voided once it is filed with the
Managing Trustee.
12.2 Other Amendments.
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In addition to any amendments otherwise authorized herein, this Agreement
may be amended from time to time by the Managing Trustee without the Consent of
any Trust Beneficiary: (i) to add to the representations, duties or obligations
of the Managing Trustee or surrender any right or power granted to the Managing
Trustee herein, for the benefit of the Trust Beneficiaries; (ii) to correct any
mistake, omission or inconsistency or 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 for the benefit of the Trust
Beneficiaries with respect to matters or questions arising under this Agreement
which will not be inconsistent with the provisions of this Agreement; (iii) to
preserve the status of the Trust as an entity taxable as a partnership for
federal income tax purposes, including amendments to prevent the Trust from
being treated as a publicly traded partnership; (iv) 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 other federal agency, the National
Association of Securities Dealers, Inc., or by a state Blue Sky commission or
other state agency or any judicial authority or similar such official, (v) to
permit the Interests to fall within any exemption from the definition of plan
assets contained in Section 2510.3-101 of Title 29 of the Code of Federal
Regulations; (vi) to effect an amendment to this Agreement as (a) contemplated
under Section 4.2(a)(viii), Section 4.2(a)(x) or 8.5(b) or (b) necessary in
order to effect the provisions of Section 9.5; (vii) to make any other
amendments which do not adversely affect the rights of the Trust Beneficiaries;
and (viii) to authorize the Trust to issue an additional class of Interests (or
other securities), with any designations, preferences and relative,
participating, optional and other special rights, including special voting
rights, as shall be fixed by the Managing Trustee.
ARTICLE XIII - POWER OF ATTORNEY
13.1 Appointment.
Each of the Beneficiaries (through acceptance of their Interests) agrees
to be bound by this Agreement and hereby makes, constitutes and appoints the
Managing Trustee, the president and each vice president of the Managing Trustee,
and each Person who shall thereafter become an additional or Substitute Managing
Trustee during the term of the Trust and any continuation of the Trust pursuant
to Section 4.12 and Article XI, with full power of substitution, the true and
lawful attorney-in-fact of, to act in the name, place and stead of such
Beneficiary, with the power from time to time to execute, acknowledge, make,
verify, swear to, certify, deliver, record, file and/or publish:
(a) this Agreement under the laws of the State or any other jurisdiction,
any subsequent amendment to this Agreement, the Certificate of Trust and any
amendments thereto or restatement thereof;
(b) any other document required to reflect any action of the Managing
Trustee or Beneficiaries duly taken in the manner provided for in this
Agreement, whether or not the Beneficiary voted in favor of or otherwise
Consented to such action;
(c) any other application, certificate, affidavit, instrument and document
as may be required or appropriate in connection with documentation and
registration of Assets with the FAA and any other governmental authority having
jurisdiction;
(d) any other instrument, certificate or document which may be required by
any regulatory agency, laws of the United States, any state or any other
jurisdiction in which the Trust is doing or intends to do business or which the
Managing Trustee deems advisable to file or record, provided such instrument,
certificate or document is not inconsistent with the terms of this Agreement as
then in effect;
(e) any certificate of dissolution or cancellation of the Certificate of
Trust that may be
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necessary upon the termination of the Trust;
(f) any instrument or papers required to continue or terminate the
business of the Trust pursuant to Sections 4.12 and 1.6;
(g) any amendment to this Agreement permitted hereunder; and
(h) any and all instruments which the Managing Trustee deems appropriate
to reflect a change or modification of the Trust in accordance with the terms of
this Agreement.
13.2 Amendments to Agreement.
The terms of this Agreement permit certain amendments of this Agreement to
be effected and certain other actions to be taken or omitted by, or with respect
to, the Trust, in each case with the approval of less than all the Beneficiaries
if a specified percentage of the Beneficiaries shall have voted in favor of, or
otherwise Consented to, such action. This power of attorney shall permit the
Managing Trustee and the Trust to act on behalf of the Beneficiary, in
accordance with the terms of this Agreement, whether or not the Beneficiary
shall have Consented to such action, in order to effect the orderly
administration of the Trust's affairs.
13.3 Power Coupled With an Interest.
The foregoing grant of authority:
(a) is a special power of attorney coupled with an interest in favor of
such attorneys-in-fact and as such shall be irrevocable and shall survive the
death, incapacity, insolvency, dissolution or termination of each Beneficiary;
(b) may be exercised for each Beneficiary by a signature of any one of
such attorneys-in-fact or by listing the names of all of the Beneficiaries,
including such Beneficiary, and executing any instrument with a single signature
of any one of such attorneys-in-fact acting as attorney-in-fact for all of them;
and
(c) shall survive the Assignment by any Beneficiary of the whole or any
portion of his Beneficiary Interest, as applicable, except that, where the
assignee of the whole thereof has furnished a power of attorney and has been
approved by the Managing Trustee for admission to the Trust as a Substitute
Beneficiary this power of attorney shall survive such Assignment with respect to
the assignor for the sole purpose of enabling such attorneys-in-fact to execute,
acknowledge and file any instrument necessary to effect such substitution and
shall thereafter terminate with respect to any Beneficiary who assigns all of
his Beneficiary Interest.
13.4 Power of Attorney by Substitute Beneficiaries.
A similar power of attorney shall be one of the instruments which the
Managing Trustee shall require an assignee of a Beneficiary to execute as a
condition to the admission of such assignee as a Substitute Beneficiary.
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ARTICLE XIV - GENERAL PROVISIONS
14.1 Notices, Approvals and Consents.
All notices, approvals, Consents or other communications hereunder shall
be in writing and signed by the party giving the same, and shall be deemed to
have been given when the same are (a) deposited in the United States mail and
sent by first class mail (or certified if so required under Section 11.1(b)),
postage prepaid, or (b) delivered in hand. In each case, said mailing or
delivering shall be made to the parties at the addresses set forth below or at
such other addresses as such parties may designate by notice to the Trust:
(a) If to the Trust or the Managing Trustee, at the principal office of
the Trust;
(b) If to the Delaware Trustee at its principal office in the State as set
forth in the records of the Trust and in Schedule A;
(c) If to any other Trustee at its principal office as set forth in the
records of the Trust;
(d) If to the Special Beneficiary, at its principal office as set forth in
the records of the Trust; and
(e) If to a Beneficiary, at the address set forth in the records of the
Trust (as provided to the Trust by such Beneficiary), or to such other address
as may be designated by notice from such Beneficiary given in the manner hereby
specified.
14.2 Further Assurances.
The Trustees and Trust Beneficiaries will execute, acknowledge and deliver
such further instruments and do such further acts and things as may be required
to carry out the intent and purpose of this Agreement.
14.3 Captions.
Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any of the provisions thereof.
14.4 Binding Effect.
Except to the extent required under the Business Trust Act, as provided in
Section 4.1(d) with respect to the Managing Trustee, and for fees, rights to
reimbursement, and other compensation provided as such, none of the provisions
of this Agreement shall be for the benefit of or be enforceable by any creditor
of the Trust.
14.5 Separability.
If one or more of the provisions of this Agreement or any application
thereof shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and any
other application thereof shall not in any way be affected or impaired thereby,
and such remaining provisions shall be interpreted consistently with the
omission of such invalid, illegal or unenforceable provisions.
14.6 Integration.
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This Agreement constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings of the parties in connection
therewith which conflict with the express terms of this Agreement. No covenant,
representation or condition not expressed in this Agreement shall affect or be
effective to interpret, change or restrict the express provisions of this
Agreement.
14.7 Applicable Law.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State.
14.8 Counterparts.
This Agreement may be signed by each party hereto upon a separate copy,
and all counterparts so executed shall constitute one agreement binding on all
parties hereto, notwithstanding that all parties are not signatory to the
original or same counterpart.
14.9 Creditors.
No creditor who makes a non-recourse loan to the Trust shall have or
acquire at any time, as a result of making such loan, any direct or indirect
interest in the profits, capital or property of the Trust other than as a
secured creditor.
14.10 Interpretation.
Unless the context in which words are used in this Agreement otherwise
indicates that such is the intent, words in the singular shall include the
plural and in the masculine shall include the feminine and neuter and vice
versa.
14.11 Arbitration; Venue.
This Agreement does not impose mandatory arbitration or venue in
connection with the settlement of disputes involving any Beneficiary; provided,
however, that this provision shall not affect or supersede any other agreement
which does provide for mandatory arbitration or venue, including any agreement
between any Beneficiary and any Soliciting Dealer.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Second Amended and Restated Declaration of Trust as of July 15, 1997.
MANAGING TRUSTEE BENEFICIARIES
- ---------------- -------------
AFG ASIT CORPORATION Each Person named as a Beneficiary on
Schedule A attached hereto
By: AFG ASIT Corporation
Attorney-in-Fact for each such
Person
By:__________________________________ By:_______________________________
Authorized Officer Authorized Officer
DELAWARE TRUSTEE
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WILMINGTON TRUST COMPANY
By:___________________________________
Authorized Officer
SPECIAL BENEFICIARY
- -------------------
EQUIS FINANCIAL GROUP
By:____________________________________
Authorized Officer
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SCHEDULE A
NAMES, BUSINESS ADDRESSES AND CAPITAL CONTRIBUTIONS OF TRUSTEES AND
BENEFICIARIES
I. Managing Trustee
AFG ASIT Corporation $1,000
98 North Washington Street
Boston, MA 02114
II. Delaware Trustee
Wilmington Trust Company N/A
Rodney Square North
Wilmington, DE 19890
III. Special Beneficiary
Equis Financial Group $1,000
98 North Washington Street
Boston, MA 02114
Class A and Class B
IV. Class A and B Beneficiaries
(attached hereto
as Exhibit A)
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