0 Equipment Leasing

1 Options to Acquire Equipment Cash LoanLease Client owns equipment Appeals to cash-rich firms Not viable for small, new entities You buy it, you own it! Client owns equipment Principal plus interest Client focus on rates to minimize interest paid You buy it, you own it! Purchase, renew and equipment return options Flexible rates & payments Focus on equipment access Accounting & tax advantages

Types of Equipment Leased Financing a variety of assets - plus software, taxes, installation & training costs Telecommunications 9% Air 11% Computers 9% Construction & Agri 6% Machine Tools/ Manufacturing 16% \ Marine/Power 5% Misc. 7% \ Material Handling 2% / Medical 2% Rail 10% / Office Equipment 2% Printing/Plastics Equipment % Rolling Stock 16%

Leasing Products  Tax-oriented lease products  Non-tax (finance) leases  TRAC leases  Sale leaseback  Operating leases  Municipal leases  Small ticket leases

4 Lease Structures / Benefits  Tax Leases – For businesses that can’t use more depreciation –Shift tax depreciation to lessor –Manage AMT risk and utilize expiring tax credits –Lower financing rates compared to loans and non-tax leases –Flexibility to return or own equipment at end of lease, depending on business needs –Manage Obsolescence issues associated with equipment –Write entire lease payment off taxes as business expense  Non-tax (finance) Leases – For businesses in need of tax offsets –Retain tax depreciation to shelter taxable income –Often ownership of equipment is automatic at end of lease –Write equipment depreciation and interest off taxes –Retain ability for owner-driven tax incentives such as Section 179 accelerated equipment cost write-off –Improves EBITDA *Always consult your financial advisor

5 Lease Structures / Benefits  TRAC Lease – For commercial vehicle needs –Predictable total cost of ownership combined with benefits of a tax lease –Very attractive cash flows compared to conventional financing  Operating Leases – Improve balance sheet and return ratios in keeping with GAAP requirements –Lower on-balance sheet assets and long-term debt –Supports covenant compliance associated with revolvers, industrial development bonds and other long-term financing arrangements –Treat entire payment as an operating expense on Income Statement  Sale Lease Back –Monetize already-purchased equipment or improve tax and balance sheet management by selling equipment to Lessor and leasing it back using a Tax Lease *Always consult your financial advisor

Client chooses equipment and vendor Client negotiates best price for equipment; freight and installation costs may be included in total costs Client and Lessor determine appropriate structure The Leasing Process

Client’s acceptance of formal leasing proposal Formal credit approval Lessor completes documentation and pays vendor. Lease commences

Leasing Solution – A Solution Lessor offers operating lease structure which allows client to acquire equipment while preserving IDB covenants. Situation ABC Company needs to acquire $5MM of new equipment to meet production demands. Ownership will cause them to exceed their capital expenditure ceiling on Industrial Development Bonds.

Leasing Solution – B Solution Lessor provides a five year tax lease with a stated purchase option. Lease rentals are lower during first two years and step up for the remainder of term. Since Lessee is not a full tax payer, they trade tax benefits to KEF for lower effective rate financing Situation XYZ Company needs capital to acquire $2MM of manufacturing equipment relating to a new contract which will ramp up over a two year period. They want to own equipment at end of lease

10 Leasing Solution – C Situation ABC Company is acquiring $250M of technology equipment. Plans to use the equipment for three years after which they plan to upgrade. Solution Lessor structures a three year tax lease with FMV purchase option allowing Lessee to return the equipment, renew the lease, or purchase equipment. This structure also shifts risk of obsolescence away from Lessee allowing them to return equipment if they so choose.

11 Leasing Solution – D Situation XYZ Transportation Co. requires additional $1MM of new rolling stock. Solution Lessor structures a 5 year TRAC lease for the new equipment. Benefits include very attractive cash flows as well as attractive rate with a stated purchase option at lease maturity