Exhibit 10.47(b)
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
CAPITAL PREFERRED YIELD FUND - III, L.P.
TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO
CONTINUATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM. . . . 16
SECTION 2.1 Continuation of Partnership. . . . . . . . 16
SECTION 2.2 Name, Principal Office and Name and Address
of Registered Agent for Service of Process 17
SECTION 2.3 Purpose. . . . . . . . . . . . . . . . . . 17
SECTION 2.4 Term . . . . . . . . . . . . . . . . . . . 17
ARTICLE THREE
PARTNERS AND CAPITAL . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.1 General Partner. . . . . . . . . . . . . . 17
SECTION 3.2 Original Limited Partner . . . . . . . . . 17
SECTION 3.3 Class B Limited Partner. . . . . . . . . . 18
SECTION 3.4 Class A Limited Partners . . . . . . . . . 18
SECTION 3.5 Partnership Capital. . . . . . . . . . . . 20
SECTION 3.6 Capital Accounts . . . . . . . . . . . . . 20
SECTION 3.7 Loans By Partners. . . . . . . . . . . . . 22
SECTION 3.8 Return of Capital. . . . . . . . . . . . . 22
SECTION 3.9 Liability of Limited Partners. . . . . . . 22
SECTION 3.10 Investment in Equipment. . . . . . . . . . 23
ARTICLE FOUR
DISTRIBUTIONS AND ALLOCATIONS. . . . . . . . . . . . . . . . . 23
SECTION 4.1 Distributions. . . . . . . . . . . . . . . 23
SECTION 4.2 Allocations of Profits and Losses. . . . . 27
SECTION 4.3 Special Allocations. . . . . . . . . . . . 30
SECTION 4.4 Tax Allocations. . . . . . . . . . . . . . 32
SECTION 4.5 Curative Allocations; Uniformity of
Units. . . . . . . . . . . . . . . . . . . 33
SECTION 4.6 Changes in Units or Partnership
Interests. . . . . . . . . . . . . . . . . 33
ARTICLE FIVE
RIGHTS, OBLIGATIONS AND POWERS OF GENERAL PARTNER. . . . . . . 34
SECTION 5.1 Multiple General Partners. . . . . . . . . 34
SECTION 5.2 Management of Partnership. . . . . . . . . 34
SECTION 5.3 Authority of General Partner . . . . . . . 37
SECTION 5.4 Authority of General Partner and Its
Affiliates to Deal With Partnership. . . . 41
SECTION 5.5 Limitations and Restrictions on Exercise
of Powers of General Partner . . . . . . . 44
SECTION 5.6 Duties and Obligations of General
Partner. . . . . . . . . . . . . . . . . . 47
SECTION 5.7 Other Activities . . . . . . . . . . . . . 49
SECTION 5.8 Limitation on Liability of General
Partner and Affiliates; Indemnification. . 49
SECTION 5.9 Tax Status of Partnership. . . . . . . . . 51
ARTICLE SIX
CHANGES IN GENERAL PARTNER . . . . . . . . . . . . . . . . . . 52
SECTION 6.1 Certain Withdrawals of General Partner . . 52
SECTION 6.2 Admission of Additional or Successor
General Partner. . . . . . . . . . . . . . 53
SECTION 6.3 Consent of Class A Limited Partners to
Admission of Additional or Successor
General Partner. . . . . . . . . . . . . . 53
SECTION 6.4 Effect of Voluntary Withdrawal of
General Partner or Removal of General
Partner by Class A Limited Partners. . . . 54
ARTICLE SEVEN
ASSIGNMENT OF PARTNERSHIP INTERESTS OF LIMITED PARTNERS. . . . 56
SECTION 7.1 Assignment . . . . . . . . . . . . . . . . 56
SECTION 7.2 Withdrawal of Limited Partners . . . . . . 56
SECTION 7.3 Assignment of Partnership Interests. . . . 56
SECTION 7.4 Distributions. . . . . . . . . . . . . . . 57
SECTION 7.5 Restrictions on Assignment . . . . . . . . 57
SECTION 7.6 Redemption of Partnership Units. . . . . . 58
ARTICLE EIGHT
ADMISSION OF LIMITED PARTNERS AND SUBSTITUTED
LIMITED PARTNERS. . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.1 Admission of Limited Partners. . . . . . . 60
SECTION 8.2 Admission of Substituted Limited
Partners . . . . . . . . . . . . . . . . . 60
ARTICLE NINE
DISSOLUTION AND LIQUIDATION OF PARTNERSHIP . . . . . . . . . . 61
SECTION 9.1 Events Causing Dissolution . . . . . . . . 61
SECTION 9.2 Continuation of Business of Partnership
After Dissolution. . . . . . . . . . . . . 62
SECTION 9.3 Liquidation. . . . . . . . . . . . . . . . 63
SECTION 9.4 Cancellation of Certificate of Limited
Partnership. . . . . . . . . . . . . . . . 65
SECTION 9.5 Reasonable Time for Winding Up . . . . . . 65
SECTION 9.6 Return of Capital. . . . . . . . . . . . . 66
SECTION 9.7 No Capital Account Restoration . . . . . . 66
ARTICLE TEN
BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS. . . . . 66
SECTION 10.1 Books and Records. . . . . . . . . . . . . 66
SECTION 10.2 Accounting Method. . . . . . . . . . . . . 67
SECTION 10.3 Bank Accounts. . . . . . . . . . . . . . . 67
SECTION 10.4 Reports. . . . . . . . . . . . . . . . . . 68
SECTION 10.5 Designation, Duties and Expenses of Tax
Matters Partner. . . . . . . . . . . . . . 70
SECTION 10.6 Authority of Tax Matters Partner . . . . . 71
ARTICLE ELEVEN
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS. . . . 72
SECTION 11.1 Meetings . . . . . . . . . . . . . . . . . 72
SECTION 11.2 Voting Rights of Limited Partners. . . . . 73
SECTION 11.3 Management of the Partnership. . . . . . . 74
SECTION 11.4 Other Activities . . . . . . . . . . . . . 75
ARTICLE TWELVE
NON-FOREIGN STATUS . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 12.1 Certification of Non-Foreign Status. . . . 75
SECTION 12.2 Withholding on Certain Amounts
Attributable to Interests of Non-
Resident Alien Partners. . . . . . . . . . 75
ARTICLE THIRTEEN
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 76
SECTION 13.1 Appointment of General Partner As
Attorney-In-Fact . . . . . . . . . . . . . 76
SECTION 13.2 Signatures; Amendments . . . . . . . . . . 77
SECTION 13.3 Ownership By Limited Partners of General
Partner or Its Affiliates. . . . . . . . . 79
SECTION 13.4 Notices. . . . . . . . . . . . . . . . . . 79
SECTION 13.5 Binding Provisions . . . . . . . . . . . . 79
SECTION 13.6 Applicable Law . . . . . . . . . . . . . . 79
SECTION 13.7 Counterparts . . . . . . . . . . . . . . . 79
SECTION 13.8 Separability of Provisions . . . . . . . . 80
SECTION 13.9 Captions . . . . . . . . . . . . . . . . . 80
SECTION 13.10 Partnership Property; No Partition . . . . 80
SECTION 13.11 No Benefit to Third Parties. . . . . . . . 80
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CAPITAL PREFERRED YIELD FUND - III, L.P.
This Amended and Restated Agreement of Limited Partnership of
Capital Preferred Yield Fund - III, L.P. (the "Partnership") is made as of
June 14, 1994 by and among CAI Equipment Leasing IV Corp., a Colorado
corporation (the "General Partner"), as the General Partner, Capital
Associates International, Inc., a Colorado corporation (the "Class B Limited
Partner"), as the Class B Limited Partner, John F. Olmstead (the "Original
Limited Partner"), as the original Limited Partner, and those Persons
admitted to the Partnership from time to time as Class A Limited Partners
(the "Class A Limited Partners").
Recitals
A. The General Partner executed a Certificate of Limited Partnership,
dated as of November 2, 1993, establishing the Partnership pursuant to the
Delaware Act (as defined below) and the General Partner and the Original
Limited Partner entered into an Agreement of Limited Partnership, dated as of
November 2, 1993, setting forth certain of the terms and conditions of their
agreements and understandings regarding the Partnership.
B. The parties hereto desire to enter into this Amended and Restated
Agreement of Limited Partnership to provide for the: (i) continuation of the
Partnership; (ii) admission of Class A Limited Partners and the Class B
Limited Partner; (iii) withdrawal of John F. Olmstead as the Original Limited
Partner; and (iv) terms and conditions for the operation of the Partnership.
Agreement
In consideration of the premises and mutual covenants and
agreements set forth below, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE ONE
DEFINITIONS
Defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified below. Certain additional
defined terms are set forth elsewhere in this Agreement. Unless the context
requires otherwise, the singular includes the plural and the masculine gender
includes the feminine and neuter, and vice versa, and "Article" and "Section"
references are references to the Articles and Sections of this Agreement.
"Accountants" means KPMG Peat Marwick, or such other nationally
recognized firm of independent public accountants as may be engaged from time
to time by the General Partner on behalf of the Partnership.
"Acquisition Expenses" means expenses including but not limited to
legal fees and expenses, travel and communications expenses, costs of
appraisals, accounting fees and expenses and miscellaneous expenses relating
to selection and acquisition of Equipment for the Partnership, whether or not
acquired.
"Acquisition Fees" means the total of all fees and commissions paid
by any party in connection with the initial purchase or manufacture of
Equipment acquired by the Partnership, including without limitation the
Origination Fee and the Evaluation Fee, any commission, selection fee,
construction supervision fee, financing fee, non-recurring management fee or
any fee of a similar nature, however designated.
"Adjusted Capital Account Deficit" means, with respect to any
Capital Account as of the end of any Year, the amount by which the balance in
such Capital Account is less than zero. For this purpose, a Partner's
Capital Account balance shall be: (i) reduced for any items described in
Treas. Reg. 1.704-1(b)(2)(ii)(d)(4), (5) and (6) (as adjusted by Temp. Reg.
1.704-1T(b)(4)(iv)-(e)(3)); (ii) increased for any amount such Partner is
unconditionally obligated to contribute to the Partnership no later than the
earlier of (A) the end of the Year in which his Units, Class B Interest or
General Partner Partnership Interest are liquidated (as defined in Treas.
Reg. 1.704-1(b)(2)(ii)(g)) or (B) 90 days after such liquidation; and (iii)
increased for any amount such Partner is treated as being obligated to
contribute to the Partnership pursuant to Treas. Reg. 1.704-1(b)(2)(ii)(c)
(relating to partner liabilities to a partnership) or Temp. Reg.
1.704-1T(b)(4)(iv) (relating to Minimum Gain).
"Adjusted Capital Contribution" mean, as of the date of
determination, a Partner's Capital Contribution, reduced to not less than
zero by: (i) any return of Capital Contributions pursuant to Section 3.8;
and (ii) cash distributions from Cash From Operations and Cash From Sales
received by the Partnership during the period subsequent to the Termination
Date and actually paid to Partners after the Termination Date in excess of
the Preferred Return. A Partner's Adjusted Capital Contribution for the
purpose of computing Payout shall not be reduced by any cash distributions
made between the Closing Date and the Termination Date.
"Affiliate" means, when used with reference to a specified Person:
(i) any Person that directly or indirectly controls, is controlled by or is
under common control with the specified Person; (ii) any Person that is an
officer, director or trustee of or partner in, or serves in a similar
capacity with respect to, the specified Person or with respect to which the
specified Person serves in a similar capacity; and (iii) any Person that
directly or indirectly is the beneficial owner of or controls 10.0% or more
of any class of equity securities of, or otherwise has a substantial
beneficial interest in, the specified Person or of which the specified Person
is directly or indirectly the owner of or controls 10.0% or more of any class
of equity securities or in which the specified Person otherwise has a
substantial beneficial interest.
"Agreement" means this Agreement of Limited Partnership, as it may
be amended, supplemented or restated from time to time.
"Assign" or "Assignment" means, with respect to any Partnership
Interest or any part thereof, to offer, 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.
"Assignee" means a Person to whom an interest in any Partnership
Interest has been Assigned in a manner permitted under this Agreement.
"Bankruptcy" or "Bankrupt" as to any Person means the: (i) filing
of a petition for relief as to such Person as debtor or bankrupt under the
Bankruptcy Code of 1978 or like provision of law (except if such petition is
contested by such Person and has been finally dismissed within 120 days);
(ii) insolvency of such Person as finally determined by a court proceeding;
(iii) filing by such Person of a petition or application for a determination
of insolvency or for the appointment of a receiver or a trustee for such
Person or a substantial part of his assets; or (iv) commencement of any
proceedings relating to such Person under any other reorganization,
arrangement, insolvency, adjustment-of-debt or liquidation law of any
jurisdiction, whether now in existence or hereinafter in effect, either by
such Person or by another, provided that if such proceeding is commenced by
another, such Person indicates his approval of such proceeding, consents
thereto or acquiesces therein or such proceeding is contested by such Person
and has not been finally dismissed within 120 days.
"Book Value" means, with respect to any Partnership property, the
Partnership's adjusted basis for federal income tax purposes, adjusted from
time to time to reflect the adjustments required or permitted by Treas. Reg.
1.704-1(b)(2)(iv)(d)-(g).
"CAI" means Capital Associates, Inc., the parent corporation of the
General Partner and the Class B Limited Partner.
"Capital Account" means the capital account maintained for each
Partner pursuant to Section 3.6.
"Capital Contribution" means the amount of investment in the
Partnership whether in cash, cash equivalents or other property that a
Partner contributes to the Partnership, minus any amounts returned pursuant
to Section 3.8. In the case of Units, the term "Capital Contribution" shall
always mean $100 per Unit, minus any amounts returned pursuant to Section
3.8.
"Cash From Operations" means the cash funds provided from the
Partnership's operations, without deduction for depreciation, but after
deducting cash funds used to pay all other expenses, debt payments, amounts
placed in Reserves (net of any amounts released from Reserves because the
need for such Reserves has ceased), capital improvements, replacements and
liabilities (other than cash funds withdrawn from Reserves), including
without limitation all fees, reimbursements and other expenses paid to the
General Partner, its Affiliates or any other Person. "Cash From Operations"
does not include Cash From Sales.
"Cash From Sales" means the cash received by the Partnership as a
result of a Sale or refinancing, reduced by: (i) all debts and liabilities
of the Partnership required to be paid as a result of the Sale, whether or
not then payable (including any liabilities on an item of Equipment sold that
are not assumed by the buyer and any remarketing fees required to be paid to
Persons who are not Affiliates of the General Partner) and (ii) any amounts
set aside as Reserves to the extent deemed reasonable by the General Partner.
If the Partnership takes back a promissory note or other evidence of
indebtedness in connection with any Sale, the amount of such obligations
shall not be included in Cash From Sales and all payments subsequently
received in cash by the Partnership with respect to such note or other
evidence of indebtedness shall be included in Cash From Sales only upon
receipt, irrespective of the treatment of such payments by the Partnership
for tax or accounting purposes. If the Partnership has the right to retain
insurance proceeds in connection with the damage or loss of Equipment, such
proceeds shall be treated as Cash From Sales.
"Certificate" means the certificate of limited partnership for the
Partnership, as amended, restated or otherwise modified from time to time.
"Class A Limited Partners" means those Limited Partners designated
as Class A Limited Partners from time to time on the books and records of the
Partnership (in their capacities as Limited Partners).
"Class B Interest" means the Partnership Interest received by the
Class B Limited Partner in exchange for its Capital Contribution.
"Class B Limited Partner(s)" means initially Capital Associates
International, Inc. and any successor Class B Limited Partner(s) designated
as such on the books and records of the Partnership.
"Class B Majority" means Class B Limited Partners who (in their
capacities as Class B Limited Partners), at any time, have aggregate Adjusted
Capital Contributions representing more than 50.0% of the total aggregate
Adjusted Capital Contributions of all Class B Limited Partners (in their
capacities as Class B Limited Partners) at such time.
"Class B Subordinated Distributions" means cash distributions
payable to the Class B Limited Partner(s) out of Distributable Cash in an
annualized, subordinated amount equal to 10.5% for the two-year period
beginning with the date of the Prospectus, provided that after the
termination of such period the General Partner, at its sole discretion, may
reset such percentage to 11.0% for the succeeding two-year period, and/or may
reset such percentage to 12.0% for the remaining term of the Partnership
after the date four years from the date of the Prospectus of the Class B
Limited Partner's Capital Contributions.
"Closing" means the sale of Units in an amount equal to at least
the Minimum Offering and the delivery of subscribed funds held in escrow by
the Escrow Agent to the Partnership.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, and any successor law.
"Commission" means the Securities and Exchange Commission.
"Consent" means, as the context may require, the: (i) consent
given by a vote at a meeting called and held in accordance with the
provisions of Section 11.1; (ii) prior written consent of a Person to do the
act or thing for which the consent is solicited; or (iii) act of granting
such consent.
"Controlling Person" means any person, regardless of title, who:
(i) performs executive or senior management functions for the General Partner
or its Affiliates similar to those of executive management or senior
management; (ii) is a director of the General Partner or its Affiliates;
(iii) holds a 5.0% or more equity interest in the General Partner or its
Affiliates; or (iv) has the power to direct or cause the direction of a
General Partner or Affiliates through ownership of voting securities, by
contract or otherwise.
"Cost" means the reasonable, necessary and actual expenses incurred
by the General Partner or its Affiliates, as determined in accordance with
generally accepted accounting principles, in holding title to Equipment on a
temporary or interim basis.
"Dealer-Manager" means CAI Securities Corporation, a California
corporation, and any successor entity.
"Dealer-Manager Agreement" means the Dealer-Manager Agreement among
the Partnership, the General Partner and the Dealer-Manager.
"Dealer-Manager Fee" means the fee payable to the Dealer-Manager by
the Partnership pursuant to Section 5.4(a)(i)(B).
"Delaware Act" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C. 17-101, et seq., as amended and in effect from
time to time, and any successor to such Act.
"Distributable Cash" means Cash From Operations and Cash From Sales
available to the Partnership during the Period for which distributions to
Partners by the Partnership are to be made.
"Due Diligence Reimbursement" means the bona fide due diligence
fees and expenses payable by the Partnership to Selling Dealers, in an amount
equal to the lesser of: (i) 0.5% of Gross Offering Proceeds; (ii) the
maximum amount allowable under the NASD Rules of Fair Practice.
"Equipment" means any new, used or reconditioned equipment and
related tangible property acquired by the Partnership and any equity interest
of the Partnership therein, whether directly or indirectly through a nominee,
joint venture or otherwise.
"Equipment Purchase Price" means the price paid upon the purchase
or sale of a particular item of Equipment, including the amount of
Acquisition Fees and all liens and mortgages on the Equipment, but excluding
points and prepaid interest.
"Equipment Sale Commission" means the brokerage fee paid for
services rendered in connection with the purchase or sale of Equipment which
is reasonable, customary and competitive in light of the size, type and
location of the Equipment.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Escrow Agent" means Bank One, Denver, N.A., a national banking
association (or another banking institution named by the General Partner in
the event Bank One, Denver, N.A. is unable to serve as escrow agent).
"Evaluation Fee" means the fee paid by the Partnership to the
General Partner pursuant to Section 5.4(a)(iii)(B).
"Fees" means all amounts payable by the Partnership to the General
Partner or its Affiliates in connection with the operations of the
Partnership, including the Evaluation Fee, the Origination Fee, O&O Expenses
Reimbursement, Sales Commissions and Management Fee.
"First Basic Rent Date" means, with respect to any Lease, the date
upon which the first periodic rent payment is due, following installation of
all of the Equipment under the Lease.
"First Cash Distributions" means cash distributions, payable to the
Class A Limited Partners out of Distributable Cash in an annualized,
cumulative preferred amount equal to 10.5% for the two-year period beginning
with the date of the Prospectus, provided that after the termination of such
period the General Partner, at its sole discretion, may reset such percentage
to 11.0% for the succeeding two-year period, and/or may reset such percentage
to 12.0% for the remaining term of the Partnership after the date four years
from the date of the Prospectus (based upon a year of 360 days with 12 months
of 30 days each), of the Class A Limited Partners' Capital Contributions.
"Front-End Fees" means the fees and expenses paid by any party for
any services rendered during the Partnership's organizational or acquisition
phases, including without limitation Leasing Fees, Acquisition Expenses,
Acquisition Fees and Organizational and Offering Expenses, including Sales
Commissions, Dealer-Manager Fees, O&O Expenses Reimbursement, Due Diligence
Reimbursement and any other similar fees, however designated (including fees
paid with respect to Equipment purchased with Reinvested Proceeds).
Front-End Fees shall not include any Acquisition Fees or Acquisition Expenses
paid by a manufacturer or vendor of Equipment to any of its employees or
contractors unless such Persons are Affiliates of the Sponsor.
"Full Payout Lease" means a Lease under which the non-cancelable
rental payments due during the initial term of the Lease are sufficient to
permit the Partnership to recover the Equipment Purchase Price of the
Equipment leased thereby.
"General Partner" means CAI Equipment Leasing IV Corp. and any
additional or successor general partner admitted to the Partnership pursuant
to Article Six.
"Gross Offering Proceeds" means the aggregate Capital Contributions
of all Class A Limited Partners admitted to the Partnership.
"Gross Rentals" means the gross dollar amount received by the
Partnership as rental payments for the use of any Equipment subject to a
Lease.
"Health Emergency" means a situation in which a Class A Limited
Partner or his or her spouse or child dies or is confined to a hospital for a
period of 90 or more consecutive days, or to a nursing home or other
long-term care facility for a period of 30 or more consecutive days.
"Initial Lease" means the first Lease to which an item of Equipment
is subject immediately following the acquisition of such Equipment by the
Partnership, including Equipment purchased with Net Offering Proceeds as well
as Reinvested Proceeds. The term "Initial Lease" includes the Lease to which
an item of Equipment is subject on the date the Partnership acquires such
item of Equipment.
"Investment in Equipment" means the amount of Gross Offering
Proceeds actually paid or allocated to the purchase, manufacture or
renovation of Equipment acquired by the Partnership, including the purchase
of Equipment, Reserves allocable thereto (except that Reserves in excess of
3.0% shall not be included) and other cash payments such as interest and
taxes but excluding Front-End Fees.
"IRA" means an Individual Retirement Account.
"IRS" means the Internal Revenue Service.
"Lease" means a Full Payout Lease or an Operating Lease, and
includes all Initial Leases and Subsequent Leases, as well as an executed
binding lease agreement pursuant to which either the Partnership or the
General Partner or any of its Affiliates is the lessor, regardless of whether
the lease term has commenced as of the subject date or is to commence in the
future, which agreement is assignable by the General Partner or such
Affiliate to the Partnership, provided, however, that such agreement shall be
held by the General Partner or Affiliate on a temporary or interim basis,
generally not longer than six months after the acquisition of the Equipment
subject to the agreement by the General Partner or Affiliate.
"Leasing Fee" means the total of all fees and commissions paid by
any party in connection with the initial lease of Equipment acquired by the
Partnership.
"Lessee" means the lessee under a Lease.
"Limited Partner" means any Class A Limited Partner or the Class B
Limited Partner.
"Liquidation Period" means the period beginning on the first day
after the end of the Reinvestment Period, and ending on the date on which the
Partnership is finally liquidated.
"Liquidation Proceeds" means all cash (from whatever source)
available for distribution to the Partners upon liquidation of the
Partnership.
"Majority Interest" means the holders of more than 50.0% of the
aggregate outstanding Units; provided, however, that, in the case of any
matter to be voted on in which the General Partner or its Affiliates has an
interest, the Units held by the General Partner and its Affiliates shall not
be treated as outstanding for this purpose.
"Management of Equipment" means providing the personnel and
services necessary to the leasing activities of the Partnership, including
but not limited to, leasing and re-leasing of Partnership Equipment,
arranging for necessary maintenance and repair of the Equipment, collecting
revenues, paying operating expenses, determining that the Equipment is used
in accordance with all operative contractual arrangements and providing
clerical and bookkeeping services necessary to the operation of the
Partnership Equipment pursuant to Section 5.2.
"Management Fee" means the fee payable to the General Partner
pursuant to Section 5.4(a)(iv).
"Maximum Offering" means the sale of 500,000 Units by the
Partnership.
"Minimum Gain" means the Partnership minimum gain determined
pursuant to Temp. Reg. 1.704-1T(b)(4)(iv).
"Minimum Offering" means the sale of 12,000 Units by the
Partnership.
"NASAA Guidelines" means the Statement of Policy Regarding
Equipment Programs adopted on November 20, 1986, effective January 1, 1987,
as amended on April 22, 1988 and October 24, 1991, by the North American
Securities Administrators Association, Inc.
"Net Capital Contributions" means the Capital Contributions of the
Class A Limited Partners, reduced by the Sales Commissions, Dealer-Manager
Fee and O&O Expenses Reimbursement allocated to the Limited Partners under
Section 4.3(f) (excluding any of these items that are amortizable under Code
Section 709).
"Net Offering Proceeds" means the Gross Offering Proceeds minus
Sales Commissions, Dealer-Manager Fee, O&O Expenses Reimbursement and initial
Reserves in the amount of 1.0% of Gross Offering Proceeds.
"Notice" means a writing containing the information required by
this Agreement to be communicated to any Person, personally delivered to such
Person, sent by courier service and receipted for or sent by registered or
certified mail, postage prepaid, to such Person at the last known address of
such Person.
"170% Recovery" means the time at which the cumulative amount of
Distributable Cash distributed to the Limited Partners (as a class) (taking
into account all prior and concurrent distributions of Distributable Cash to
the Limited Partners (as a class) under Section 4.1(a)(i) and (ii)) equals
170% of the Capital Contributions of the Limited Partners (as a class).
"O&O Expenses Reimbursement" means a non-accountable payment by the
Partnership to the General Partner pursuant to Section 5.4(a)(ii).
"Offering" means the offering of Units contemplated by this
Agreement.
"Operating Lease" means a Lease under which the non-cancelable
rental payments due during the initial term of the Lease are not sufficient
to permit the Partnership to recover the Equipment Purchase Price of the
Equipment leased thereby.
"Opinion of Counsel" means a written opinion of counsel (who may be
regular counsel to the Partnership) acceptable to the General Partner.
"Organizational and Offering Expenses" means expenses incurred in
connection with preparing the Partnership for registration and subsequently
offering and distributing it to the public, including sales commissions paid
to broker-dealers in connection with the distribution of Units and all
advertising expenses except advertising expenses related to the leasing of
the Partnership's Equipment.
"Origination Fee" means the fee paid by the Partnership to the
General Partner pursuant to Section 5.4(a)(iii)(A).
"Partner" means a General Partner or a Limited Partner.
"Partnership Interest" means the interest of a Partner in the
Partnership, whether held by such Partner or an immediate or subsequent
Assignee thereof, including without limitation such Partner's right to: (i)
receive a distributive share of the Profits or Losses and distributions of
cash and/or other Partnership property; (ii) receive a distributive share of
the Partnership's assets; and (iii) if a General Partner, participate in the
management of the business and affairs of the Partnership.
"Payout" means the time(s) when the aggregate amount of
distributions actually paid to the Limited Partners (as a class) from
Distributable Cash and Liquidation Proceeds, if any, during the period
subsequent to the Termination Date (taking into account all prior and
concurrent distributions of Distributable Cash to the Limited Partners (as a
class) under Section 4.1(a)(i) and (ii) received from the Partnership during
the period subsequent to the Termination Date and excluding allocations for
bookkeeping purposes not actually paid) equals the amount of the Limited
Partners' aggregate Capital Contributions plus their Preferred Return as of
the date of determination.
"Period" means a time period less than or equal to a Quarter.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other legal entity.
"Preferred Return" means a 10.0% annual, cumulative return,
compounded daily (from whatever sources), on the Limited Partners' Adjusted
Capital Contributions, calculated from the Termination Date.
"Profits" or "Losses" means profits or losses, as the case may be,
of the Partnership as determined for federal income tax purposes, and items
of income, gain, loss, deduction or credit entering into the computation
thereof; provided that if, in keeping with the provisions of Treas. Reg.
1.704-1(b) and Temp. Reg. 1.704-1T(b)(4)(iv), any asset of the Partnership is
accounted for on the Partnership books and in the Capital Accounts of the
Partners at an amount other than its adjusted basis for tax purposes, then,
for purposes of accounting for such items on the Partnership books and in the
Capital Accounts of the Partners, items of income, gain, loss, deduction or
credit shall be calculated based upon the carrying value of the asset on the
Partnership books; and provided further that, in determining Profits or
Losses for any Year, any items of income, gain, loss or deduction specially
allocated under any of the provisions of Sections 4.4 and 4.6 for such Year
shall not be taken into account.
"Program" means a limited or general partnership, joint venture,
unincorporated association or similar organization, other than a corporation,
formed and operated for the primary purpose of investment in and the
operation of or gain from an interest in equipment.
"Prospectus" means the prospectus on file with the Commission at
the time the registration statement on Form S-1 (File No. 33-71646) becomes
effective (including alternative versions of the prospectus prepared for and
disseminated in different jurisdictions in order to accommodate state
securities considerations). If the prospectus filed on behalf of the
Partnership pursuant to Rule 424 of the rules and regulations of the
Commission under the Securities Act differs from the prospectus on file at
the time the registration statement becomes effective, or if the prospectus
is thereafter amended or supplemented pursuant to such Rule 424, the term
"Prospectus" shall refer to the Prospectus filed pursuant to such Rule 424
from and after the date on which it shall have been so filed or mailed to the
Commission for filing.
"Qualified Plan" means any qualified pension, profit-sharing or
stock bonus plan.
"Quarter" means the three-calendar-month period commencing on the
first day of each Year (or such shorter period ending on the last day of the
Year), and each additional three-calendar-month period included within each
Year (or such shorter period ending on the last day of a Year).
"Record Date" means the date established by the General Partner for
determining the identity of: (i) Class A Limited Partners entitled to
receive notice of or vote at any meeting of Class A Limited Partners or
entitled to vote by ballot or give approval of Partnership action in writing
without a meeting; or (ii) Partners entitled to receive any notice, report or
distribution of Liquidation Proceeds or, with respect to distributions of
Distributable Cash, the first business day in New York, New York after the
end of the Period with respect to which such distributions shall be made.
"Record Holder" means the Limited Partner or Assignee in whose name
a Unit or the Class B Interest, as the case may be, or interest therein is
registered on the books of the Partnership, as of the close of business on a
Record Date.
"Reimbursable Organizational and Offering Expenses" means those
expenses incurred in connection with or related to the formation and
qualification of the Partnership or a nominee thereof, the registration and
qualification of the Units under applicable federal and state laws and the
marketing, distribution, sale and processing of the Units, including without
limitation the following: (i) legal fees and disbursements and accounting
costs for the Partnership, the General Partner and the Dealer-Manager,
printing costs and the costs of delivering, mailing or shipping Prospectuses
(including any amendments or supplements thereto) and related sales material;
(ii) the costs of preparing, printing, filing and delivering a registration
statement with respect to the Units (including any amendments or supplements
thereto), a "Blue Sky Survey" and all underwriting and sales agreements;
(iii) the cost of preparing and printing this Agreement, other solicitation
material and related documents and the cost of filing and recording such
certificates or other documents as are necessary to comply with the laws of
the State of Delaware for the formation of a limited partnership and
thereafter for the continued good standing of a limited partnership; (iv) the
cost of any escrow arrangements, including any compensation to the Escrow
Agent; and (v) filing fees payable to the Commission, to state securities
commissions and to the National Association of Securities Dealers, Inc., but
excluding Front-End Fees.
"Reinvested Proceeds" means any Distributable Cash remaining after
First Cash Distributions and Class B Subordinated Distributions and required
distributions to the General Partner, pursuant to Section 4.1, and used to
purchase Equipment during the Reinvestment Period.
"Reinvested Profits" means Profits, if any, for each Year (or
Period) in excess of the aggregate Profits described in Section 4.2(a)(i) and
(ii).
"Reinvestment Period" means the period from the Closing Date until
the end of the Quarter during which the date that is six years from the
Closing Date occurs.
"Removal Effective Date" means the effective date of removal of a
General Partner as provided herein or as otherwise agreed between the removed
General Partner and any successor General Partner(s).
"Reserves" means amounts allocated to reserves maintained for
working capital of the Partnership and contingencies, as provided in Section
5.2(d).
"Residual Value" means the net amount realized upon the Sale of
Equipment.
"Roll-Up" means a transaction involving the acquisition, merger,
conversion, or consolidation either directly or indirectly of the Partnership
and the issuance of securities of a Roll-Up Entity. Such term does not
include:
(a) a transaction involving Partnership securities
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 or association form of only the Partnership
if, as a consequence of the transaction, there will be no
significant adverse change in any of the following:
(i) Limited Partner voting rights;
(ii) the term of existence of the Partnership;
(iii) General Partner compensation; or
(iv) the Partnership's investment objectives.
"Roll-Up Entity" means the partnership, corporation, trust, or
other entity that would be created or would survive after the successful
completion of a proposed Roll-Up transaction.
"Sale" means the sale, exchange, involuntary conversion, casualty
(other than a casualty followed by refurbishing or replacement), condemnation
or other disposition of assets by the Partnership.
"Sales Commission" means the fee payable to the unaffiliated
broker-dealers selling the Units by the Partnership pursuant to Section
5.4(a)(i)(A).
"Schedule A" means the schedule of the General and Class B Limited
Partners' names and addresses.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Sponsor" means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership or any Person who shall manage
or participate in the management of the Partnership, and any Affiliate of any
such Person. Sponsor does not include a Person whose only relation with the
Partnership is that of an independent equipment manager and whose only
compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants and broker-dealers whose only
compensation is for professional services rendered in connection with the
offering of Partnership interests.
"Subscription Agreement" means the Subscription Agreement included
as Exhibit C to the Prospectus.
"Subsequent Lease" means any Lease that commences after the
termination, or constitutes an extension, renewal or re-lease, of an Initial
Lease.
"Tax Counsel" means Ballard Spahr Andrews & Ingersoll, or other
recognized tax counsel engaged by the General Partner.
"Tax Distributions" means amounts distributed to the Partners to
provide Partners with amounts to pay federal income taxes (assuming such
Partners are taxed in the 31.0% bracket) with respect to gains from Sales,
but only to the extent that such taxes exceed the amounts distributed
pursuant to Section 4.1(a)(i)(A) and (B).
"Temp. Reg." means temporary regulations issued by the U.S.
Treasury Department pursuant to the Code, including any subsequent amendments
thereto, or any regulations subsequently issued in lieu thereof.
"Termination Date" means the earliest of: (i) the date on which
the Maximum Offering has been sold; (ii) the date 12 months from the date of
the Prospectus if the Minimum Offering has not been sold; (iii) the date 24
months from the date of the Prospectus; and (iv) the date of the termination
of the Offering by the General Partner.
"Treas. Reg." means final regulations issued by the U.S. Treasury
Department pursuant to the Code, including any subsequent amendments thereto,
or any regulations subsequently issued in lieu thereof.
"Triple Net Lease" means a Lease under which the Lessee assumes
responsibility for, and bears the cost of, insurance, taxes, maintenance,
repair and operation of the leased asset and under which the non-cancelable
rental payments pursuant to such Lease are net to the Partnership.
"Unit" means a unit of limited partnership interest in the
Partnership held by a Class A Limited Partner, representing an initial
Capital Contribution of $100.
"Unrecovered Capital Contribution" means, with respect to a Unit,
the excess of (i) the Net Capital Contribution allocable to the Unit over
(ii) the distributions from any source paid by the Partnership with respect
to such Unit.
"Upgrade" means Equipment that is designed to be added or connected
to existing Equipment in order to enhance the function and performance of
such Equipment.
"Voluntary Withdrawal" means the withdrawal of the General Partner
pursuant to subsections (1), (6), (7), (8), (9) or (10) of Section 17-402 of
the Delaware Act.
"Withdrawal" means those events of withdrawal provided for by
Section 17-402 of the Delaware Act, except for subsections (4) and (5) of
Section 17-402 of the Delaware Act.
"Year" means the Partnership's annual accounting period for
financial accounting and federal income tax purposes, which ends on December
31.
ARTICLE TWO
CONTINUATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM
SECTION 2.1 Continuation of Partnership.
The parties hereto hereby enter into and continue the Partnership
pursuant to the provisions of the Delaware Act, and such other provisions of
applicable law as shall pertain to limited partnerships organized pursuant to
the Delaware Act.
SECTION 2.2 Name, Principal Office and Name and Address of
Registered Agent for Service of Process.
The Partnership shall continue to be conducted under the name
"Capital Preferred Yield Fund - III, L.P." The principal place of business
and office of the Partnership shall be 7175 West Jefferson Avenue, Suite
3000, Lakewood, Colorado 80235. The registered office of the Partnership in
the State of Delaware shall be 1209 Orange Street, Corporation Trust Center,
Wilmington, Delaware 19801. The registered agent of the Partnership for
service of process at such address shall be The Corporation Trust Company.
SECTION 2.3 Purpose.
The Partnership is organized for the object and purpose of: (i)
acquiring, upgrading, purchasing, exchanging, leasing, assigning, owning,
modifying, financing, borrowing, maintaining, operating, improving, selling,
creating security interests in, pledging, reinvesting in, transferring or
otherwise disposing of Equipment and other personal property of all kinds, in
any part of the world; and (ii) establishing, acquiring, conducting and
carrying on any business or businesses suitable, necessary, useful or
convenient in connection therewith.
SECTION 2.4 Term.
The Partnership shall continue in full force and effect until
December 31, 2005, unless dissolved prior thereto pursuant to this Agreement
or by law.
ARTICLE THREE
PARTNERS AND CAPITAL
SECTION 3.1 General Partner.
The address of the General Partner is 7175 West Jefferson Avenue,
Suite 3000, Lakewood, Colorado 80235. Its Capital Contribution from time to
time shall be the amount reflected in the books and records of the
Partnership. The General Partner shall not be required to make any
additional Capital Contributions to the Partnership, other than as provided
in Section 9.3.
SECTION 3.2 Original Limited Partner.
By his execution hereof, the Original Limited Partner hereby
withdraws as the Original Limited Partner and the parties hereto agree to the
return to him of his Capital Contribution.
SECTION 3.3 Class B Limited Partner.
The address of the Class B Limited Partner is 7175 West Jefferson
Avenue, Suite 3000, Lakewood, Colorado 80235. The Class B Limited Partner
agrees to contribute, from time to time on or immediately after each date on
which the Partnership acquires Equipment, cash as its Capital Contributions
to the Partnership in an aggregate amount equal to $10,000 for every
$1,000,000 in Gross Offering Proceeds received by the Partnership as of that
date; provided that, as of the Termination Date, the aggregate amount of the
cash shall equal 1.0% of Gross Offering Proceeds as of the Termination Date.
The Class B Limited Partner's Capital Contribution from time to time shall be
the amount reflected in the books and records of the Partnership. The Class
B Limited Partner shall not be required to make any other Capital
Contributions to the Partnership. The Class B Limited Partner shall not
purchase any Units.
SECTION 3.4 Class A Limited Partners.
(a) The General Partner is authorized to admit Class A Limited
Partners to the Partnership from time to time by selling not more than the
Maximum Offering, provided that no Class A Limited Partners shall be admitted
to the Partnership until acceptable subscriptions for the Minimum Offering
have been received.
(b) The minimum investment of each Class A Limited Partner shall
be 25 Units (10 Units for IRAs and Qualified Plans) representing a Capital
Contribution of $2,500 ($1,000 for IRAs and Qualified Plans). Such Capital
Contribution shall be made in full in cash. Aggregate purchases of Units by
the General Partner, the Dealer-Manager, their respective Affiliates and
employees of any of them must be less than 5.0% of total Units sold.
(c) The names and addresses of the Class A Limited
Partners admitted as provided herein, and their Capital Contributions from
time to time, shall be as reflected in the books and records of the
Partnership. The Partnership shall not be required to recognize any Class A
Limited Partner as a nominee, agent or representative of any beneficial
owner, but shall treat all Class A Limited Partners as the beneficial owners
of their respective Units.
(d) The offering of Units for sale shall terminate on the
Termination Date.
(e) All funds in respect of Units for which subscriptions have
been received prior to the Closing Date shall be deposited in an
interest-bearing escrow account with the Escrow Agent. Subscriptions for
Units shall be accepted or rejected by the General Partner within 30 days
after their receipt. The General Partner retains the unconditional right to
refuse to accept any subscriber as a Class A Limited Partner, in which event
the funds delivered by such subscriber shall be promptly returned to the
subscriber without deduction. Upon receipt of subscriptions acceptable to
the General Partner for not less than the Minimum Offering prior to the
Termination Date and the determination of the General Partner to proceed to
Closing, the Closing Date shall be set by the General Partner, and the Escrow
Agent shall release such subscription funds to the Partnership at the
Closing. Before commencing business, the Partnership shall have received
gross proceeds from the offering of not less than $1,000,000 after payment of
all Organizational and Offering Expenses. Any interest earned on monies paid
by each subscriber during the period that such monies are held in escrow
prior to the Closing shall be paid to each such subscriber following release
of subscription funds. If the Escrow Agent does not receive acceptable
subscriptions for at least the Minimum Offering on or before the Termination
Date, the Escrow Agent shall return all monies deposited by subscribers,
together with any interest earned thereon. Subject to Section 3.4(b), the
General Partner and its Affiliates shall have the right to subscribe for
Units for their own accounts, but any such subscriptions shall not be
included for purposes of determining whether the Minimum Offering has been
achieved.
After the Closing Date, additional subscribers whose subscriptions
are acceptable to the General Partner shall be admitted to the Partnership as
Class A Limited Partners at such times as the General Partner shall
determine.
(f) To accomplish the purpose of this Section 3.4, the General
Partner is hereby authorized to do all things necessary to admit such Class A
Limited Partners, including without limitation registering the Units under
the Securities Act, qualifying the Units for sale with state securities
regulatory authorities or perfecting exemptions from qualification and
entering into underwriting or selling arrangements with the Dealer-Manager
for the solicitation of the Units, upon such terms and conditions as the
General Partner may deem advisable.
(g) Each subscriber whose subscription is acceptable to the
General Partner as contemplated by Section 3.4(e) shall become a Class A
Limited Partner as of the Closing Date or, in the case of subscriptions
accepted after the Closing Date, such later date as the General Partner shall
determine. Any subscriber shall be admitted to the Partnership within 15
days after release of his funds from escrow to the Partnership. Any Partner
whose subscription is accepted by the General Partner after the Closing Date
shall be admitted to the Partnership not later than the last day of the
calendar month following the date their subscription was accepted by the
General Partner.
SECTION 3.5 Partnership Capital.
(a) No Partner shall be paid interest on any Capital
Contribution.
(b) Except as otherwise provided in this Agreement, the
Partnership shall not redeem or repurchase any Unit, no Partner shall have
the right to withdraw, or receive any return of, his Capital Contribution and
no Capital Contribution may be returned in the form of property other than
cash.
(c) No Class A Limited Partner shall have priority over any other
Class A Limited Partner, either as to the return of his Capital Contribution
or as to Profits or Losses or distributions, except as otherwise specifically
provided herein.
(d) The General Partner shall have no personal liability for the
repayment of the Capital Contribution of any Limited Partner.
(e) A creditor who makes a nonrecourse loan to the Partnership
shall not have or acquire at any time, solely as a result of making the loan,
any direct or indirect interest in the profits, capital or property of the
Partnership, other than as a creditor or secured creditor, as the case may
be.
SECTION 3.6 Capital Accounts.
(a) The Partnership shall maintain a separate Capital Account for
each Partner according to the rules of Treas. Reg. 1.704-1(b)(2)(iv). For
this purpose, the Partnership shall, upon the occurrence of the events
specified in Treas. Reg. 1.704-1(b)(2)(iv)(d) and (f), increase or decrease
the Capital Accounts in accordance with the rules of such regulation and
Treas. Reg. 1.704-1(b)(2)(iv)(g) to reflect a revaluation of Partnership
property; provided, however, that the admission of an additional subscriber
to the Partnership as a Class A Limited Partner in accordance with Section
3.4(e) shall not be treated, for purposes of this Agreement, as an event
specified in Treas. Reg. 1.704-1(b)(2)(iv)(d) or (f).
(b) For purposes of computing the amount of any item of
Partnership income, gain, loss or deduction to be allocated pursuant to
Article Four, the determination, recognition and classification of any such
item shall be the same as its determination, recognition and classification
for federal income tax purposes (including any method of depreciation, cost
recovery or amortization used for this purpose); provided that:
(i) the computation of all items of income, gain,
loss and deduction shall include those items described in
Code 705(a)(1)(B) or Treas. Reg. 1.704-1(b)(2)(iv)(i),
without regard to the fact that such items are not
includable in gross income or are not deductible for federal
income tax purposes;
(ii) if the Book Value of any Partnership property
is adjusted pursuant to Treas. Reg. 1.704-1(b)(2)(iv)(d),
(e) or (f), the amount of such adjustment shall be taken
into account as gain or loss from the disposition of such
property;
(iii) items of income, gain, loss or deduction
attributable to the disposition of Partnership property
having a Book Value that differs from its adjusted basis for
tax purposes shall be computed by reference to the
property's Book Value in accordance with Treas. Reg. 1.704-
1(b)(2)(iv)(g);
(iv) items of depreciation, amortization and other
cost recovery deductions with respect to Partnership
property having a Book Value that differs from its adjusted
basis for federal income tax purposes shall be computed by
reference to the property's Book Value in accordance with
Treas. Reg. 1.704-1(b)(2)(iv)(g); and
(v) to the extent an adjustment to the adjusted
tax basis of any Partnership asset pursuant to Code
732(d), 734(b) or 743(b) is required, pursuant to Treas.
Reg. 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment
to the Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss
(if the adjustment decreases such basis).
(c) Profit or Loss shall be charged or credited to the Capital
Accounts in accordance with the manner in which such items are allocated
pursuant to Article Four, taking into account the special allocations of
Sections 4.4 and 4.6.
(d) Upon the transfer of all or any portion of a Unit, Class B
Interest or a General Partner Partnership Interest, the portion of the
Capital Account of the transferor that is attributable to the transferred
Unit, Class B Interest or General Partner Partnership Interest shall carry
over to the transferee. However, if the transfer causes a termination of the
Partnership under Code 708(b)(1)(B), the Capital Account that carries over to
the transferee shall be adjusted in accordance with the constructive
liquidation and reconstitution rules under Treas. Reg. 1.708-1.
SECTION 3.7 Loans By Partners.
Loans by Partners to the Partnership shall not be considered
Capital Contributions. If any Partner advances funds to the Partnership in
excess of his Capital Contribution, such advances shall not increase the
Capital Account balance of such Partner. The amount of any such advances
shall be a debt of the Partnership to such Partner and shall be payable or
collectible only out of Partnership assets in accordance with the terms and
conditions upon which such advances are made.
SECTION 3.8 Return of Capital.
Without any deductions for sales commissions and other Front-End
Fees payable to any Person, any portion of the Class A Limited Partners'
Capital Contributions received by the Partnership within 12 months after the
date of the Prospectus (except for any amounts set aside for Reserves) and
not invested in or committed to the purchase of Equipment within 24 months
after the date of the Prospectus, and any portion of the Class A Limited
Partners' Capital Contributions received by the Partnership after 12 months
after the date of the Prospectus and not invested in or committed to the
purchase of Equipment within 12 months after the Termination Date, shall be
distributed pro rata to all Class A Limited Partners (in proportion to their
Capital Contributions) as a return of capital. Any funds with respect to
which the Partnership has executed, within the applicable period described in
the preceding sentence, a written agreement in principle, commitment letter,
letter of intent or understanding, option agreement or other similar
understanding or contract contemplating the acquisition by the Partnership of
Equipment, shall be deemed committed to investment on that date for purposes
hereof but shall subsequently be required to be returned to the Class A
Limited Partners if the investment of such funds is not consummated or the
contingent payments are not made.
SECTION 3.9 Liability of Limited Partners.
The liability of each Limited Partner for the losses, debts,
liabilities and obligations of the Partnership shall, so long as such Limited
Partner complies with the provisions of Section 11.3, be limited to his
Capital Contribution and his share of the assets and any undistributed
Profits of the Partnership. No Limited Partner shall be required to lend
funds to the Partnership or, after his Capital Contribution has been
paid, make any further capital or other contribution to the Partnership. It
is the intent of the Partners that no distribution (or any part of any
distribution) made to any Limited Partner pursuant to Article Four shall be
deemed, for the purposes of the Delaware Act only, a return or withdrawal of
capital, even if such distribution represents, in full or in part, an
allocation of depreciation or any other non-cash item accounted for as a loss
or deduction from or offset to the Partnership's income, and that no Limited
Partner shall be obligated to pay any such amount to or for the account of
the Partnership or any creditor of the Partnership. If any court of
competent jurisdiction holds, however, that, notwithstanding the provisions
of this Agreement, any Limited Partner is obligated to make any such payment,
such obligation shall be the obligation of such Limited Partner and not of
the General Partner.
SECTION 3.10 Investment in Equipment.
The General Partner shall cause Investment in Equipment to be at
least an amount that is the greater of (a) 80.0% of Gross Offering Proceeds
reduced by .0625% for each 1.0% of indebtedness encumbering Partnership
Equipment, or (b) 75.0% of Gross Offering Proceeds. The percentage of
indebtedness encumbering Partnership Equipment shall be calculated by
dividing the amount of indebtedness by the aggregate Equipment Purchase Price
of Partnership Equipment, excluding any Front-End Fees. The amount of
indebtedness encumbering Partnership Equipment shall be calculated as of the
date on which the level of Investment in Equipment is being tested, after
giving effect to any transaction occurring on such date that would affect the
level of Investment in Equipment. To the extent that such limitation is not
otherwise satisfied, any Acquisition Fees payable or paid to the General
Partner by the Partnership shall be reduced or refunded by the General
Partner to the Partnership to the extent necessary to comply with such
limitation. Any such refund shall bear interest calculated at a rate of 1.0%
per month if such refund is not made within 30 days after the end of any
calendar quarter in which the Partnership's Investment in Equipment fails to
satisfy such minimum investment.
ARTICLE FOUR
DISTRIBUTIONS AND ALLOCATIONS
SECTION 4.1 Distributions.
(a) Distributable Cash. Distributable Cash for each Period shall
be distributed to the Partners on the Payment Date (see Section 4.1(f) below)
in the order and priority set forth in Section 4.1(a)(i), (ii) and (iii).
(i) During the Reinvestment Period. During the
Reinvestment Period, Distributable Cash shall be distributed
or reinvested (as the case may be) in the following order
and priority:
(A) First, 1.0% to the General Partner and
99.0% to the Class A Limited Partners (as a class), on
a pari passu basis, until such time as the Class A
Limited Partners (as a class) receive an amount of
Distributable Cash equal to the First Cash
Distributions;
(B) Second, any remaining Distributable Cash
(after taking into account distributions described in
Section 4.1(a)(i)(A)) 1.0% to the General Partner and
99.0% to the Class B Limited Partners (as a class), on
a pari passu basis, until such time as the Class B
Limited Partners (as a class) receive an amount of
Distributable Cash equal to the Class B Subordinated
Distributions; and
(C) Third, all remaining Distributable Cash
(after taking into account distributions described in
Section 4.1(a)(i)(A) and (B)) shall be treated as
Reinvested Proceeds reinvested according to the
reinvestment guidelines set forth in Section 5.2(h).
Notwithstanding the foregoing, during the
Reinvestment Period, Distributable Cash, in excess of
amounts distributed pursuant to Section 4.1(a)(i)(A) and
(B), shall be distributed to the Partners as Tax
Distributions, if necessary to provide funds for payment of
income taxes on the sale of Equipment. Tax Distributions
shall be distributed 1.0% to the General Partner and 99.0%
to the Limited Partners (as a class), on a pari passu basis.
(ii) After the Reinvestment Period and Prior to
Achievement of Payout and 170% Recovery. After the
Reinvestment Period and until achievement by the Limited
Partners of Payout and 170% Recovery, Distributable Cash for
each Period shall be distributed in the following order and
priority:
(A) First, 1.0% to the General Partner and
99.0% to the Class A Limited Partners (as a class), on
a pari passu basis, until such time as the Class A
Limited Partners (as a class) receive an amount of
Distributable Cash equal to the First Cash
Distributions;
(B) Second, any remaining Distributable Cash
(after taking into account distributions described in
Section 4.1 (a)(ii)(A)) 1.0% to the General Partner and
99.0% to the Class B Limited Partners (as a class), on
a pari passu basis, until such time as the Class B
Limited Partners (as a class) receive an amount of
Distributable Cash equal to the Class B Subordinated
Distributions;
(C) Third, any remaining Distributable Cash
(after taking into account distributions described in
Section 4.1(a)(ii)(A) and (B)) 1.0% to the General
Partner and 99.0% to the Class A Limited Partners (as a
class), on a pari passu basis, until such time as the
Class A Limited Partners (as a class) achieve Payout;
(D) Fourth, any remaining Distributable Cash
(after taking into account distributions described in
Section 4.1(a)(ii)(A)-(C)) 1.0% to the General Partner
and 99.0% to the Class B Limited Partners (as a class),
on a pari passu basis, until such time as the Class B
Limited Partners (as a class) achieve Payout; and
(E) Fifth, any remaining Distributable Cash
(after taking into account distributions described in
Section 4.1(a)(ii)(A)-(D)) 1.0% to the General Partner
and 99.0% to the Limited Partners (as a class), on a
pari passu basis, until such time as the Limited
Partners (as a class) achieve 170% Recovery.
(iii) After the Reinvestment Period and After
Achievement of Payout and 170% Recovery. After the
Reinvestment Period and after achievement by the Limited
Partners of Payout and 170% Recovery, Distributable Cash for
each Period shall be distributed 10.0% to the General
Partners (as a class) and 90.0% to the Limited Partners (as
a class), on a pari passu basis.
Notwithstanding anything in Section 4.1(a)(ii) or
(iii) to the contrary, after the Reinvestment Period,
Distributable Cash available for distribution to the
Partners (after taking into account distributions described
in Section 4.1(a)(ii)(A) and (B)), shall be distributed to
the Partners, on a pari passu basis, to the extent of and in
proportion to the aggregate amount of Reinvested Profits
previously allocated to the General Partner and the Limited
Partners (as a class) pursuant to Section 4.2(a). All
distributions under this paragraph shall be applied toward
the distributions of Distributable Cash under Section
4.1(a)(ii)(C)-(E) and 4.1(a)(iii).
(b) Liquidation Proceeds. Liquidation Proceeds shall be
distributed to the Partners, on a pari passu basis, in proportion to the
positive balances in their Capital Accounts at the time of such distribution
as provided in Section 9.3(b).
(c) Sharing of Distributions to Partners.
(i) General Partners. All distributions of
Distributable Cash to the General Partners (as a class)
shall be shared by the General Partners, on a pari passu
basis, in proportion to their respective percentage General
Partner Partnership Interests as of the Record Date for the
distribution.
(ii) Class A Limited Partners. All distributions
of Distributable Cash to the Class A Limited Partners (as a
class) shall be shared by the Class A Limited Partners, on a
pari passu basis, in proportion to their respective holdings
of Units as of the Record Date for the distribution;
however, notwithstanding the foregoing, Distributable Cash
relating to Periods during which one or more Class A Limited
Partners are admitted to the Partnership shall be shared by
the Limited Partners pro rata based on the number of days
during such Period that each Class A Limited Partner is a
Partner of the Partnership and on the number of Units that
each Class A Limited Partner holds during such Period.
(iii) Class B Limited Partners. All distributions
of Distributable Cash to the Class B Limited Partners (as a
class) shall be shared by the Class B Limited Partners, on a
pari passu basis, in proportion to their respective
percentage Class B Interests as of the Record Date for the
distribution.
(iv) Limited Partners. All distributions of
Distributable Cash to the Limited Partners (as a class)
shall be shared 99.0% by the Class A Limited Partners (as a
class) and 1.0% by Class B Limited Partners (as a class), on
a pari passu basis.
(d) Determination of Distributees. All distributions pursuant to
Section 4.1 shall be made to the Persons shown on the Partnership's books and
records as Partners as of the Record Date for the distribution.
(e) Withholding. The General Partner may withhold from
distributions to any Partner any amount required to be withheld pursuant to
the Code or any other law, rule or regulation. Any amount so withheld shall
be treated as a distribution to the affected Partner.
(f) Payment Dates. Distributable Cash for each Period shall be
distributed not later than 30 days after the end of each such Period.
SECTION 4.2 Allocations of Profits and Losses.
(a) Profits. After first giving effect to the allocations, if
any, pursuant to Sections 4.3, 4.4 and 4.5, Profits for any Year shall be
allocated in the following order and priority:
(i) First, Profit shall be allocated to the
Partners in proportion to, and to the extent of, Losses
allocated to the Partners pursuant to Section 4.2(b) for all
prior Years, in reverse chronological order and priority (as
set forth in Section 4.2(b)). To the extent any allocations
of Losses are offset pursuant to this Section 4.2(a)(i),
such Losses shall be disregarded for purposes of computing
subsequent allocations as described in this Section
4.2(a)(i);
(ii) Second, any remaining Profit (after taking
into account allocations described in Section 4.2(a)(i))
1.0% to the General Partner and 99.0% to the Class A Limited
Partners (as a class), on a pari passu basis, until such
time as the General Partner and the Class A Limited Partners
(as a class) are allocated an amount of Profit for the Year
equal (when added to the Profit allocated to the General
Partner and the Class A Limited Partners (as a class) under
this Section 4.2(a)(ii) for all prior Years) to the
aggregate distributions of Distributable Cash made to them
under Section 4.1(a)(i)(A) and (a)(ii)(A) for the Year and
all prior Years;
(iii) Third, any remaining Profit (after taking
into account allocations described in Section 4.2(a)(i) and
(ii)) 1.0% to the General Partner and 99.0% to the Class B
Limited Partners (as a class), on a pari passu basis, until
such time as the General Partner and the Class B Limited
Partners (as a class) are allocated an amount of Profit for
the Year equal (when added to the Profit allocated to the
General Partner and Class B Limited Partners (as a class)
under this Section 4.2(a)(iii) for all prior Years) to the
aggregate distributions of Distributable Cash made to them
under Section 4.1(a)(i)(B) and (a)(ii)(B) for the Year and
all prior Years;
(iv) Fourth, any remaining Profit (after taking
into account allocations described in Section 4.2(a)(i)-
(iii)) 1.0% to the General Partner and 99.0% to the Class A
Limited Partners (as a class), on a pari passu basis, until
such time as the General Partner and the Class A Limited
Partners (as a class) are allocated an amount of Profit for
the Year equal (when added to the Profit allocated to the
General Partner and the Class A Limited Partners (as a
class) under this Section 4.2(a)(iv) for all prior Years) to
the aggregate distributions of Distributable Cash made to
them under Section 4.1(a)(ii)(C) for the Year and all prior
Years;
(v) Fifth, any remaining Profit (after taking
into account allocations described in Section 4.2(a)(i)-
(iv)) 1.0% to the General Partner and 99.0% to the Class B
Limited Partners (as a class), on a pari passu basis, until
such time as the General Partner and the Class B Limited
Partners (as a class) are allocated an amount of Profit for
the Year equal (when added to the Profit allocated to the
General Partner and the Class B Limited Partners (as a
class) under this Section 4.2(a)(v) for all prior Years) to
the aggregate distributions of Distributable Cash made to
them under Section 4.1(a)(ii)(D) for the Year and all prior
Years;
(vi) Sixth, any remaining Profit (after taking into
account allocations described in Section 4.2(a)(i)-(v)) 1.0%
to the General Partner and 99.0% to the Limited Partners (as
a class), on a pari passu basis, until such time as the
General Partner and the Limited Partners (as a class) are
allocated an amount of Profit for the Year equal (when added
to the Profit allocated to the General Partner and the
Limited Partners (as a class) under this Section 4.2(a)(vi)
for all prior Years) to the aggregate distributions of
Distributable Cash made to them under Section 4.1(a)(ii)(E)
for the Year and all prior Years; and
(vii) Seventh, any remaining Profit (after taking
into account allocations described in Section 4.2(a)(i)-
(vi)) 10.0% to the General Partner and 90.0% to the Limited
Partners (as a class).
Reinvested Profits shall be allocated in the same manner
described in Section 4.2(a)(iv)-(vii) as if the Reinvested Proceeds to which
such Reinvested Profits relate had actually been distributed to the Partners,
in such Year, as Distributable Cash in accordance with Section
4.1(a)(ii)(C)-(E) and Section 4.1(a)(iii). All allocations under this
paragraph shall be applied toward the allocations of Profit under Section
4.2(a)(iv)-(vii).
All allocations of Profit for each Year shall be made after
giving effect to all distributions of Distributable Cash made on or before
the date of such allocations.
All Profits relating to transactions resulting in Liquidation
Proceeds shall be allocated in the manner set forth in this Section 4.2(a) as
if the Liquidation Proceeds relating thereto constituted Distributable Cash
and had been previously distributed in the same manner described in Section
4.1(a)(ii) and (iii) as Distributable Cash.
(b) Losses. After giving effect to the allocations, if any,
described in Sections 4.3, 4.4 and 4.5, Losses for any Year shall be
allocated in the following order and priority:
(i) First, to the Partners in proportion to, and
to the extent of, any Profits allocated as described in
Section 4.2(a)(ii) for the Year and all prior Years, in
reverse chronological order and priority (as set forth in
Section 4.2(a)(ii)-(vii)). To the extent any allocations of
Profits are offset as described in this Section 4.2(b)(i),
such Profits shall be disregarded for purposes of computing
subsequent allocations as described in this Section
4.2(b)(i); and
(ii) Second, 1.0% to the General Partner and 99.0%
to the Limited Partners (as a class), on a pari passu basis.
(c) Sharing of Allocations to Partners.
(i) General Partners. All allocations of Profit
and Loss (including allocations under Sections 4.3, 4.4, 4.5
and 4.6) to the General Partners (as a class) shall be
shared by the General Partners, on a pari passu basis, in
proportion to their respective percentage General Partner
Partnership Interests as of the date of such allocations.
(ii) Class A Limited Partners. All allocations of
Profit and Loss (including allocations under Sections 4.3,
4.4, 4.5 and 4.6) to the Class A Limited Partners (as a
class) shall be shared by the Class A Limited Partners, on a
pari passu basis, in proportion to their respective holdings
of Units as of the date of such allocations; however,
notwithstanding the foregoing, Profit or Loss relating to
Periods during which one or more Class A Limited Partners
are admitted to the Partnership shall be shared by the
Limited Partners pro rata based on the number of days during
such Period that each Class A Limited Partner is a Partner
of the Partnership and on the number of Units that each
Class A Limited Partner holds during such Period.
(iii) Class B Limited Partners. All allocations of
Profit and Loss (including allocations under Sections 4.3,
4.4, 4.5 and 4.6) to the Class B Limited Partners (as a
class) shall be shared by the Class B Limited Partners, on a
pari passu basis, in proportion to their respective
percentage Class B Interests as of the date of such
allocations.
(iv) Limited Partners. All allocations of Profit
and Loss (including allocations under Sections 4.3, 4.4, 4.5
and 4.6) to the Limited Partners (as a class) shall be
shared 99.0% by the Class A Limited Partners (as a class)
and 1.0% by the Class B Limited Partners (as a class), on a
pari passu basis.
SECTION 4.3 Special Allocations.
(a) The interest of the General Partner in each material item of
Partnership income, gain, loss, deduction or credit shall in the aggregate be
equal to at least 1.0% of each such item at all times during the existence of
the Partnership. In determining the General Partner's interest in such
items, any Units owned by the General Partner or its Affiliates shall not be
taken into account.
(b) Losses allocated pursuant to Section 4.2(b) to any Partner for
any Year shall not exceed the maximum amount of Losses that can be so
allocated without causing or increasing an Adjusted Capital Account Deficit
with respect to such Partner as of the end of such Year. To the extent that
Losses allocated to a Limited Partner pursuant to Section 4.2(b) would, but
for this Section 4.3(b), exceed the limitation of the preceding sentence,
such Losses shall be allocated first to other Partners in proportion to, and
to the extent of, their positive Capital Account balances (computed with the
adjustments taken into account in determining a Partner's Adjusted Capital
Account Deficit, but disregarding the General Partner's obligation to make
contributions to the Partnership upon liquidation), and then to the General
Partner. The General Partner shall have the authority to allocate items of
income and gain for subsequent Years so as to offset, as quickly as possible,
any allocation of Losses under this Section 4.3(b).
(c) If there is a net decrease in the Partnership's Minimum Gain
for a Year, each Partner shall be allocated, before any other allocation of
Partnership items is made pursuant to this Agreement, items of Partnership
income and gain for the Year (and, if necessary, subsequent Years) in
proportion to, and to the extent of, an amount equal to the greater of:
(i) The portion of such Partner's share (as
determined under Temp. Reg. 1.704-1T(b)(4)(iv)(f)) of
the net decrease in Minimum Gain during such Year that
is allocable to the disposition of Partnership property
subject to one or more nonrecourse liabilities of the
Partnership; or
(ii) The Adjusted Capital Account Deficit of such
Partner at the end of such Year (determined before any
allocation of Partnership income, gain, loss, deduction
or Code 705(a)(2)(B) expenditure for such Year).
The character of any items of Partnership income and gain allocated
pursuant to this Section 4.3(c) shall be determined by Temp. Reg.
1.704-1T(b)(4)(iv)(e). This Section 4.3(c) is intended to comply with the
Minimum Gain chargeback rules of Temp. Reg. 1.704-1T(b)(4)(iv)(e) and shall
be interpreted consistently therewith.
(d) If, despite the limitation set forth in Section 4.3(b), any
Partner has an Adjusted Capital Account Deficit as of the end of any Year,
computed after the application of Section 4.3(c) but before the application
of any other provision of this Article Four, then items of Partnership income
and gain for such Year shall be allocated to all such Partners in proportion
to, and to the extent of, such Adjusted Capital Account Deficits. This
provision is intended to comply with the "qualified income offset" rules of
Treas. Reg. 1.704-1(b)(2)(ii)(d). The General Partner shall have the
authority to allocate items of deduction and loss for subsequent Years so as
to offset, as quickly as possible, any prior allocation of income and/or gain
under this Section 4.3(d).
(e) If, and to the extent that, any Partner is deemed to recognize
any item of income, gain, loss or deduction as a result of any transaction
between such Partner and the Partnership pursuant to Code 1272-1274, 7872,
483, 482 or any similar provision now or hereafter in effect, any
corresponding item of income, gain, loss or deduction recognized by the
Partnership shall be allocated to the Partner who was charged with such item.
(f) The Dealer-Manager Fees, Sales Commissions and O&O Expenses
Reimbursement (except to the extent amortizable under Code 709) shall,
immediately upon their payment by the Partnership, be allocated 1.0% to the
General Partner and 99.0% to the Class A Limited Partners (as a class), on a
pari passu basis. Items of income and gain for subsequent Years shall be
allocated to the General Partner equal to the aggregate allocations to it
under this Section 4.3(f), so as to offset, as quickly as possible, the
allocations to the General Partner under this Section 4.3(f). Reimbursable
Organizational and Offering Expenses in excess of the O&O Expenses
Reimbursement shall, as such costs are amortized or deducted by the
Partnership in accordance with the Code (or, if not amortizable or
deductible, then immediately upon their payment on behalf of the
Partnership), be allocated 100.0% to the General Partner.
(g) All items of cost recovery or depreciation deduction with
respect to the Equipment ("Depreciation") and all items of loss resulting
from Sales ("Loss On Sale") shall be allocated, on a pari passu basis, 1.0%
to the General Partner, and 99.0% to the Limited Partners (as a class), until
such time as the cumulative amount of Depreciation and Loss On Sale allocated
under this Section 4.3(g) to the Limited Partners equals their aggregate Net
Capital Contributions. Items of gain from Sales for subsequent Years shall
be allocated to the General Partner in an amount equal to the Depreciation
and Loss On Sale allocated to the General Partner pursuant to this Section
4.3(g), so as to offset, as quickly as possible, the allocations to the
General Partner under this Section 4.3(g).
(h) Notwithstanding anything in this Agreement to the contrary,
and before any other allocation is made under Section 4.2, this Section 4.3,
or Sections 4.4 and 4.5, items of income and gain for the current Year (or
Period) shall be allocated, as quickly as possible, to the General Partner to
the extent of any deficit balance existing in the General Partner's Capital
Account as of the closing of the immediately preceding Year, in order to
restore the balance in the General Partner's Capital Account to zero.
SECTION 4.4 Tax Allocations.
(a) Except as otherwise provided in this Section 4.4, items of
Partnership taxable income, gain, loss and deduction shall be determined in
accordance with Code 703, and the Partners' distributive shares of such items
for purposes of Code 702 shall be determined according to their respective
shares of profits or Losses to which such items relate in accordance with
Code 704 and the Treasury Regulations thereunder.
(b) Items of Partnership taxable income, gain, loss and deduction
with respect to any property contributed to the capital of the Partnership
shall be allocated among the Partners in accordance with Code 704(c), so as
to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its Book Value.
(c) If the Book Value of any Partnership asset is adjusted
pursuant to Section 3.6, subsequent allocations of items of taxable income,
gain, loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Book Value in the same manner as under Code 704(c).
(d) Allocations of tax credits, tax credit recapture and any items
related thereto shall be allocated to the Partners according to their
interests in such items as determined by the General Partner taking into
account the principles of Treas. Reg. 1.704-1(b)(4)(ii).
(e) Allocations pursuant to this Section 4.4 are solely for
purposes of federal, state and local taxes and shall not affect, or in any
way be taken into account in computing, any Partner's Capital Account or
share of Profits, Losses, distributions or other Partnership items pursuant
to any provision of this Agreement.
(f) For purposes of determining the Partners' shares of
nonrecourse liabilities of the Partnership, the interest of the General
Partner in Profits and the interest of the Limited Partners (as a class) in
Profits shall be determined by the application of their respective fractional
shares of Distributable Cash distributed to them during the Year.
SECTION 4.5 Curative Allocations; Uniformity of Units.
If the General Partner determines, after consultation with Tax
Counsel, that the allocation of any item of Partnership income, gain, loss,
deduction or credit is not specified in this Article Four (an "unallocated
item"), or that the allocation of any item of Partnership income, gain, loss,
deduction or credit hereunder is clearly inconsistent with the Partners'
economic interests in the Partnership (determined by reference to the
general principles of Temp. Reg. 1.704-1T(b)(4)(iv), Treas. Reg. 1.704-1(b)
and the factors set forth in Treas. Reg. 1.704-1(b)(3)(ii)) (a "misallocated
item"), then the General Partner may allocate such unallocated items, or
reallocate such misallocated items, to reflect such economic interests. In
addition, the General Partner is authorized to allocate specially items of
income or gain to the extent necessary to achieve and maintain the financial
uniformity of the Units for purposes of determining Payout for the Class A
Limited Partners.
SECTION 4.6 Changes in Units or Partnership Interests.
(a) Except as otherwise provided in Section 4.6(b), the
Partnership shall use a semi-monthly convention to determine the Class A
Limited Partners' respective interests in Profits, Losses, other specially
allocated items and distributions of Distributable Cash hereunder in any Year
in which additional Class A Limited Partners are admitted to the Partnership.
Under the convention, a Class A Limited Partner entering the Partnership on
or before the 15th day of the month shall be treated as having entered on the
first day of the month, and a Class A Limited Partner entering the
Partnership after the 15th, and on or before the last day of the month, shall
be treated as having entered on the first day of the next month.
(b) Class A Limited Partners who acquire Units during any month,
other than from the Partnership, shall be treated as entering the Partnership
on the first day of the next month for purposes of determining the interest
of such Class A Limited Partners in Profits, Losses and other specially
allocated items hereunder, and distributions of Distributable Cash.
(c) A Class A Limited Partner whose Units are repurchased by the
Partnership pursuant to Section 7.6 shall, for purposes of the foregoing
allocation provisions, be treated as having reduced or eliminated his Units
as of the first day of the month immediately following the effective date of
the repurchase.
(d) Notwithstanding the provisions of paragraphs (a) and (b)
above, the General Partner may choose to treat Class A Limited Partners as
being admitted to the Partnership on the day they acquire Units for purposes
of determining the interest of such Class A Limited Partners in Profits,
Losses and other specifically allocated items hereunder and in distributions
of Distributable Cash hereunder.
ARTICLE FIVE
RIGHTS, OBLIGATIONS AND POWERS OF GENERAL PARTNER
SECTION 5.1 Multiple General Partners. If, at any time during the term of
the Partnership, there is more than one General Partner, all rights,
obligations and powers of the General Partner under this Agreement shall be
shared among the then-existing General Partners as they may agree.
SECTION 5.2 Management of Partnership.
(a) The General Partner, within the authority granted to it under
this Agreement, shall have full, complete and exclusive right, power,
authority and discretion to manage and control the business of the
Partnership. In so doing, the General Partner shall take all actions and do
all things necessary or appropriate to effectuate the purposes of the
Partnership and to protect the interests of the Limited Partners. The
General Partner shall devote such time as is necessary to the affairs of the
Partnership and shall receive no compensation from the Partnership, other
than as expressly provided in this Agreement. The General Partner shall,
except as otherwise provided in this Agreement, have all the rights and
powers and shall be subject to all the restrictions and liabilities of a
partner in a partnership without limited partners.
(b) All decisions made by the General Partner on behalf of the
Partnership, pursuant to the authority granted in this Agreement and in the
Delaware Act, shall be binding upon the Partnership.
(c) No Limited Partner (except one who may also be a General
Partner, and then only in his capacity as General Partner) shall participate
in or have any control over Partnership business or shall have any authority
or right to act for or bind the Partnership.
(d) The General Partner shall, after the release of subscriptions
for Units pursuant to Section 3.4(e), establish initial Reserves out of
Capital Contributions in an amount equal to 1.0% of the Gross Offering
Proceeds. Reserves shall be varied from time to time by the General Partner
to such levels as the General Partner deems necessary and appropriate to
serve the best interests of the Partnership, but in no case less than 1.0% of
the Gross Offering Proceeds. The General Partner shall have the authority to
pay Partnership operating expenses from such Reserves.
(e) All of the Partnership's expenses shall be billed directly to
and paid by the Partnership; provided that the General Partner hereby agrees
to pay any and all Reimbursable Organizational and Offering Expenses,
including any amounts in excess of the O&O Expenses Reimbursement. The
General Partner and its Affiliates shall be reimbursed for the actual cost to
the General Partner and its Affiliates of services, goods and materials used
for and by the Partnership and obtained from entities unaffiliated with the
General Partner for use by the Partnership. The General Partner and its
Affiliates shall be reimbursed for the administrative services provided by
them necessary to the prudent operation of the Partnership; provided that
such reimbursement shall be at the lower of the General Partner's and
Affiliates' actual cost or the amount the Partnership would be required to
pay to independent parties for comparable administrative services in the same
geographic location.
(f) The General Partner and its Affiliates shall not be reimbursed
by the Partnership for the following expenses:
(i) Services for which the General Partner or its
Affiliates are entitled to compensation in the form of a separate fee;
(ii) Rent or depreciation, utilities, capital
equipment, other administrative items and salaries, fringe
benefits, travel expenses or other administrative items
incurred by or allocated to any Controlling Person of the
General Partner or its Affiliates;
(iii) Reimbursable Organizational and Offering
Expenses in excess of the O&O Expenses Reimbursement; and
(iv) Any expenses that are unrelated to the
business of the Partnership.
(g) Subject to Section 5.2(e) and (f), the Partnership shall pay
all expenses of the Partnership and all expenses of the General Partner and
its Affiliates relating to the Partnership (none of which shall be deducted
from compensation and fees to which the General Partner or its Affiliates are
entitled as set forth in Section 5.4(a)), including without limitation: (i)
all costs of borrowed money, taxes and assessments on Partnership property
and other taxes applicable to the Partnership; (ii) legal, appraisal, audit,
accounting, brokerage and other third party fees, including permitted
Acquisition Expenses; (iii) printing and other expenses and taxes incurred in
connection with the issuance, distribution, transfer and recording of
documents evidencing ownership of an interest in the Partnership or in
connection with the business of the Partnership; (iv) fees and expenses paid
to independent contractors, bankers, brokers, servicers, leasing agents and
consultants; (v) expenses payable to unaffiliated third parties in connection
with the disposition, replacement, alteration, repair, re-leasing,
refinancing and operation of Equipment (including the costs and expenses of
insurance premiums, brokerage and leasing commissions and maintenance of such
property); (vi) costs of insurance as required in connection with the
business of the Partnership; (vii) expenses of revising or amending this
Agreement or converting, modifying or terminating the Partnership; (viii)
expenses in connection with distributions made by the Partnership to, and
communications and bookkeeping and clerical work necessary in maintaining
relations with, Limited Partners, including the costs of printing and mailing
to such persons certificates for Units and reports of meetings of the
Partnership, and expenses of preparation of proxy statements and
solicitations of proxies in connection therewith; (ix) expenses in connection
with preparing and mailing reports necessary or appropriate to be furnished
to Limited Partners for tax reporting or other purposes; (x) costs in
connection with reports on the operations and activities of the Partnership;
(xi) costs of preparation and dissemination of informational material
relating to potential sale, refinancing, leasing or disposition of Equipment;
(xii) costs and expenses incurred in qualifying the Partnership to do
business in any jurisdiction, including fees and expenses of any resident
agent appointed by the Partnership; and (xiii) costs incurred in connection
with any litigation or regulatory proceedings in which the Partnership is
involved.
(h) During the Reinvestment Period, the General Partner shall
reinvest all Distributable Cash available, after the distributions provided
for in Section 4.1(a)(i), in Equipment, unless it determines that such
reinvestment is not in the best interests of the Partnership. After the
Reinvestment Period, the General Partner may reinvest such amount of
Distributable Cash that is available, after the distributions provided for in
Section 4.1(a)(ii)(A) and (B) and before any distributions described in
Section 4.1(a)(iii), as it determines to be reasonable in Equipment that it
made commitments to purchase on behalf of the Partnership during the
Reinvestment Period.
SECTION 5.3 Authority of General Partner.
(a) The General Partner, in the name and on behalf of the
Partnership, is hereby specifically authorized, without limitation, to:
(i) acquire, hold, re-lease, finance and
refinance, upgrade, sell, exchange or otherwise dispose of
Equipment (except as limited by Section 5.5), provided that
the General Partner and its Affiliates shall give the
Partnership a right of first refusal with respect to all
Upgrades leased by any of them with respect to Equipment
owned by the Partnership and, provided, further, that
Equipment that is used by a Lessee outside of the United
States of America, Canada or Mexico shall, in the aggregate,
have a total Equipment Purchase Price of less than 10.0% of
the aggregate Equipment Purchase Price of all of the
Partnership's Equipment at the time of the purchase of any
Equipment to be used by the Lessee outside of said three
countries;
(ii) maintain and operate the Equipment so as to
comply with the provisions of any Lease or any indebtedness
secured by the Equipment or by any receivable;
(iii) ensure the proper application of revenues of
the Partnership;
(iv) maintain proper books of account for the
Partnership and prepare all reports of operations and tax
returns that are to be furnished to the Partners and
Assignees pursuant to this Agreement or that are required by
taxing bodies or other governmental agencies;
(v) maintain or cause to be maintained, to the
extent deemed necessary by the General Partner, adequate
insurance with respect to general liability of the
Partnership and with respect to the Equipment and any other
insurable assets of the Partnership pursuant to policies of
insurance in form and coverage customary to property similar
to the Equipment and such other insurable assets;
(vi) supervise the offer and sale of Units;
(vii) designate depositories of the Partnership's
funds, and the terms and conditions of such deposits and
drawings thereon;
(viii) invest Net Offering Proceeds and, during the
Reinvestment Period, reinvest Cash From Operations and Cash
From Sales, pursuant to the policies and objectives set
forth in the Prospectus;
(ix) hold all or any portion of the Equipment and
other assets of the Partnership in the name of one or more
trustees, nominees or other agents of or for the Partnership
for the purpose of facilitating transactions involving those
assets or permitting those assets or the owner of those
assets to be registered as required by any applicable law,
statute or regulation;
(x) establish and maintain sufficient Reserves
for such purposes and in such amounts as the General Partner
deems appropriate from time to time and to increase, reduce
or eliminate Reserves as it deems appropriate from time to
time, subject to the minimum Reserve requirements set forth
in Section 5.2(d);
(xi) determine the appropriate accounting method
or methods to be used by the Partnership;
(xii) execute and file with any state tax
authority, if necessary or appropriate to comply with or
minimize withholding obligations under the law of any state,
a statement on behalf of the Partners acknowledging and
confirming their obligations to file tax returns with such
state;
(xiii) determine the timing and amount of
distributions to the Partners;
(xiv) amend this Agreement to reflect the addition
or substitution of Partners or the reduction of Capital
Contributions or Adjusted Capital Contributions without
action by the Limited Partners;
(xv) make any expenditures, borrow money as
provided in Section 5.3(a)(xxv), guarantee or assume or
contract for indebtedness and other liabilities, issue
evidences of indebtedness and secure the same by mortgage,
deed of trust or other lien or encumbrance, and incur any
obligations it deems necessary for the conduct of the
activities of the Partnership;
(xvi) subject to Section 5.5(a)(vi) and (a)(xxii),
acquire, dispose of (including through an installment sale
or other owner-financed sale), mortgage, pledge, encumber,
hypothecate or exchange any or all of the assets of the
Partnership and merge the Partnership with or into another
entity in accordance with the requirements of the Delaware
Act and any other applicable law;
(xvii) use the assets of the Partnership (including
without limitation cash on hand) for any purpose and on any
terms that are consistent with the investment objectives and
policies of the Partnership, including without limitation to
repay obligations of the Partnership incurred by borrowing
as provided in Section 5.3(a)(xxv);
(xviii) negotiate, execute and perform any contracts,
conveyances or other instruments (e.g., notes, evidences of
indebtedness, agreements, assignments, deeds, Leases, loan
agreements, mortgages, security instruments, etc.) that are
useful or necessary to the conduct of Partnership operations
and that are consistent with the investment objectives and
policies of the Partnership;
(xix) select and dismiss employees, appraisers,
attorneys, accountants, consultants and contractors, appoint
agents to provide administrative and reporting services to
the Partnership and determine their compensation and other
terms of employment or hiring;
(xx) control any matters affecting the rights and
obligations of the Partnership, including the conduct of
litigation and the incurring of legal fees and expenses and
the settlement of claims and litigation;
(xxi) bring and defend actions at law or in equity
and indemnify any Person against liabilities and
contingencies to the extent permitted by law and by this
Agreement;
(xxii) make or revoke tax elections on behalf of the
Partnership, including without limitation the elections
provided by Code 754;
(xxiii) engage in any kind of activity and perform
and carry out contracts of any kind necessary to carry out
the activities authorized in the preceding clauses of this
subsection;
(xxiv) prepare and file "group" or "composite" state
income tax returns on behalf of non-resident investors in
states where the Partnership conducts business; and
(xxv) borrow cash as it deems appropriate for the
business of the Partnership, including, but not limited to,
nonrecourse loans secured by items of Equipment and the
refinancing of Equipment, whether or not such Equipment
secures prior borrowings, provided that such borrowings
shall not, in the aggregate, exceed 50.0% of the aggregate
Equipment Purchase Price (excluding the amount of any
Acquisition Fees included therein) of Equipment purchased by
the Partnership as of the date of the borrowing.
(b) Any Person dealing with the Partnership may rely
upon a certificate signed by the General Partner as to:
(i) the identity of any Partner;
(ii) the existence or non-existence of any fact or
facts that constitute a condition precedent to acts by the
General Partner or are in any other manner germane to the
affairs of the Partnership;
(iii) the Persons who are authorized to execute and
deliver any instrument or document of or on behalf of the
Partnership; or
(iv) any act or failure to act by the Partnership
or as to any other matter whatsoever involving the
Partnership or any Partner.
(c) Except as otherwise provided under this Agreement or by law,
the General Partner may delegate all or any of its duties under this
Agreement to any of its own officers, employees and agents and in furtherance
of such delegation may elect, employ, contract or deal with any Person
(including any Affiliate of the General Partner), provided that any fees
payable in connection with any such delegation shall be paid by the General
Partner.
(d) Subject to the restriction provided in Section 5.5(a)(xxii),
if, as a result of either existing or subsequently enacted federal tax
legislation, Treasury Regulations or other IRS pronouncements, the
Partnership is or would become taxable as a corporation, or if the General
Partner determines that there is a material risk of such a result, the
General Partner, with the Consent of a Majority Interest, may take any and
all such actions it deems necessary or appropriate to prevent such result.
Such actions may include without limitation amending this Agreement or
reorganizing the Partnership into some other form of association such as a
corporation or a business trust. The General Partner shall effectuate any
such amendment or reorganization so that, to the extent possible and legally
permissible under the circumstances, the respective interests of the Partners
in the assets and income of the Partnership (or successor entity) immediately
following such qualification, amendment or reorganization are substantially
equivalent to such interests immediately prior thereto.
SECTION 5.4 Authority of General Partner and Its
Affiliates to Deal With Partnership.
(a) Without limiting the other powers set forth herein, the
General Partner, in the name and on behalf of the Partnership, is expressly
authorized to:
(i) pay to the Dealer-Manager (A) Sales
Commissions in an amount equal to 8.0% of the Gross Offering
Proceeds, which shall be reallowed to broker-dealers who
make sales of Units to Class A Limited Partners, as set
forth in the Dealer-Manager Agreement, and (B) the Dealer-
Manager Fee in an amount equal to 2.0% of the Gross Offering
Proceeds, as set forth in the Dealer-Manager Agreement;
(ii) pay to itself the O&O Expenses Reimbursement
in an amount equal to 4.0% of Gross Offering Proceeds;
(iii) subject to the limitations of Section 3.10
hereof, pay to itself (A) the Origination Fee for arranging
the acquisition of the Equipment and the negotiation of the
Lease, if originated by the General Partner or its
Affiliates, or the review and any necessary modification of
the Lease if the Lease is originated by an unaffiliated
party in an amount equal to 1.5% of the Equipment Purchase
Price (excluding the amount of any Acquisition Fees included
therein); and (B) the Evaluation Fee for services rendered
in connection with evaluating the suitability of the
Equipment and the credit worthiness of the Lessee and
negotiation of nonrecourse loans, or the assignment of
existing nonrecourse loans, secured by the Equipment in an
amount equal to 2.0% of the Equipment Purchase Price
(excluding the amount of any Acquisition Fees included
therein); provided, however, that if the Partnership, or the
General Partner or its Affiliates, in connection with the
purchase of any Equipment pays any fees or reimburses any
fees to unaffiliated finders and brokers, such fees shall be
deducted from the Origination Fee otherwise payable to the
General Partner in connection with the Equipment acquired
through the efforts of such finders and brokers until such
Origination Fee is reduced to zero, but the Partnership must
bear the cost of the third-party Acquisition Fee to the
extent that it exceeds the Origination Fee otherwise payable
to the General Partner; provided, further, however that in
no case shall any Acquisition Fees of any type be paid by
the Partnership with respect to the purchase of Equipment by
the Partnership, directly, with the funds contributed to the
Partnership by the Class B Limited Partner;
(iv) pay to itself the Management Fee, monthly in
arrears, equal to 2.0% of monthly Gross Rentals paid
pursuant to all Leases, as compensation for services
actually rendered in connection with the management of the
Partnership's Equipment; provided if for any month the
Class A Limited Partners do not receive the First Cash
Distributions in full, then the General Partner shall
subordinate and defer its receipt of Management Fees for
such month, without any interest, until the receipt by the
Class A Limited Partners of all accrued but previously
unpaid and current installments of First Cash Distributions,
provided, further, that any fees paid by the Partnership to
third parties for equipment management shall be deducted
from the General Partner's Management Fee;
(v) reimburse itself, as provided in Section
5.2(e) and (g);
(vi) pay interest on funds borrowed from the
General Partner or any of its Affiliates, on terms
consistent with Section 5.5(d); and
(vii) pay the Equipment Purchase Price on any item
of Equipment to an Affiliate of the General Partner.
(b) Other than as specifically authorized in this Article Five,
the General Partner is prohibited from entering into any agreements,
contracts or arrangements on behalf of the Partnership with itself or any
Affiliate. In addition, any agreements, contracts or arrangements
specifically authorized in this Article Five shall be subject to the
following prohibitions:
(i) neither the General Partner nor any Affiliate
shall be given an exclusive right to sell or exclusive
employment to sell any Equipment for the Partnership;
(ii) the Sponsor shall not be paid, directly or
indirectly, a commission or fee (except as permitted under
Section IV of the NASAA Guidelines or the provisions of this
Agreement) in connection with the distribution or
reinvestment of Cash From Operations and Cash From Sales or
the proceeds of the resale, exchange or refinancing of the
Program Equipment; and
(iii) neither the General Partner nor any Affiliate
shall receive any rebates or give-ups or, nor by the making
of any reciprocal business arrangements, circumvent the
restrictions contained in this Agreement the NASAA
Guidelines or in applicable state securities laws and
regulations relating to transactions between the Partnership
and the General Partner and its Affiliates.
(c) Any agreements, contracts and arrangements with the General
Partner or its Affiliates permitted by this Agreement shall be subject to the
following conditions (except that Section 5.4(c)(iii), (iv) and (v) shall not
apply to the fees and reimbursements set forth in Sections 5.2 and 5.4(a),
provided, however, that Section 5.4(c)(iii) shall apply to any such
agreements, contracts and arrangements for goods and services including those
provided for in Section 5.2(e));
(i) any such agreements, contracts or
arrangements shall be embodied in a written contract (which
may be this Agreement) that precisely describes the services
to be rendered and all compensation to be paid;
(ii) any such agreements, contracts or
arrangements shall be fully disclosed in the Prospectus,
dated April 16, 1994, unless the goods and services are
provided in extraordinary circumstances. (Where the
services are available elsewhere from unaffiliated parties,
there would be a presumption that there are no extraordinary
circumstances. Extraordinary circumstances would only be
presumed where there is an emergency situation requiring
immediate action by the Sponsor, and the service is not
immediately available from unaffiliated parties.
Extraordinary circumstances shall, in no event, include
general and administrative expenses, expect as otherwise
provided herein.);
(iii) any such agreements, contracts or
arrangements shall be terminable by either party, without
penalty, upon 60 days prior written notice and may be
modified only by vote of a Majority Interest of the Class A
Limited Partners;
(iv) the compensation, price or fee charged for
providing such services may not exceed the lesser of cost of
such services to the General Partner or Affiliate of any
General Partner or 90.0% of the competitive compensation,
price or fee of any other Person who is rendering comparable
services or selling or leasing comparable goods and
materials in the same or comparable geographic location that
could reasonably be made available to the Partnership; and
(v) the Person providing such services must be
independently engaged in the business of rendering such
services to Persons other than the Partnership or its
Affiliates and at least 75.0% of such Person's gross revenue
from providing such services must be derived from sources
other than the General Partner or its Affiliates.
SECTION 5.5 Limitations and Restrictions on Exercise of Powers
of General Partner.
(a) Notwithstanding anything in this Agreement to the contrary,
the General Partner shall not:
(i) do any act in contravention of this Agreement
or the Delaware Act;
(ii) invest Partnership funds in limited
partnership interests or capital stock of other limited
partnerships, corporations or other entities or
associations, except as permitted under Sections 5.3(a)(ix)
and 10.3;
(iii) admit a Person as a General or Limited
Partner, except as permitted hereby;
(iv) underwrite or cause the Partnership to
underwrite the securities of other issuers;
(v) perform any act required to be approved or
ratified in writing by all or part of the Limited Partners
under the Delaware Act, unless the right to do so is
expressly granted in this Agreement;
(vi) without the Consent of a Majority Interest,
sell, pursuant to a single transaction or a series of
related transactions, all or substantially all of the assets
of the Partnership other than in the ordinary course of its
business as set forth in the Prospectus, except for sales in
connection with the liquidation and winding up of
Partnership business upon its dissolution;
(vii) borrow or allow an Affiliate to borrow from
the Partnership;
(viii) without the Consent of a Majority Interest
(or such greater number of Limited Partners as may then be
required under the Delaware Act), elect to dissolve the
Partnership;
(ix) perform any act that would make it impossible
to carry on the ordinary business of the Partnership;
(x) confess a judgment against the Partnership;
(xi) possess Partnership property, or assign the
Partnership's right in specific Partnership property, for
other than a Partnership purpose;
(xii) knowingly perform any act that the General
Partner is aware would subject any Limited Partner to
liability as a general partner in any jurisdiction;
(xiii) cause the Partnership to reinvest Cash From
Operations or Cash From Sales, other than as permitted in
this Agreement;
(xiv) change the Partnership's purposes from those
set forth in Section 2.3;
(xv) without the Consent of a Majority Interest,
amend this Agreement, except as provided in Sections
5.3(a)(xiv), 13.1 and 13.2;
(xvi) commingle the funds of the Partnership with
those of any other Person;
(xvii) cause the Partnership to distribute any
Partnership assets in kind;
(xviii) permit any payment or award or commissions or
other compensation to be paid directly or indirectly to any
person engaged by a potential investor for investment advice
as an inducement to such advisor to advise such prospective
purchaser to invest in the Partnership except as described
in the Prospectus;
(xix) pay, or cause the Partnership to pay, any
Acquisition Fee other than the Origination Fee, the
Evaluation Fee and any additional fee described in Section
5.4(a)(iii);
(xx) cause the Partnership to enter into any
contract or agreement with the General Partner or any
Affiliate, except as provided in this Agreement;
(xxi) cause the Partnership to distribute
Distributable Cash over the term of the Partnership to the
General Partner pursuant to Section 4.1 of this Agreement in
an aggregate amount in excess of the aggregate amount of
such distributions that would be permitted under Section
IV.D(1) of the NASAA Guideline;
(xxii) cause or permit the Partnership to engage in
any transaction that is a Roll-Up; or
(xxiii) cause the Partnership to borrow funds solely
for the purpose of making cash distributions to the Partners
and use such funds to make distributions to the Partners.
(b) The General Partner shall cause the Partnership to follow the
criteria under "Equipment Investment Criteria" set forth in the Prospectus.
All funds held by the Partnership that are not invested in Equipment shall be
invested by the General Partner as provided in Section 10.3.
(c) The Partnership may not acquire Equipment in which the Sponsor
either has, or in the past has had, an interest, except for Equipment
acquired on a temporary or interim basis (generally not longer than six
months) by the Sponsor for the purpose of facilitating the acquisition by the
Partnership of the Equipment or obtaining financing for the Partnership or
any other purpose related to the business of the Partnership. The
Partnership may acquire any such Equipment only if the Sponsor determines
that: (i) such acquisition is in the best interests of the Partnership; (ii)
such Equipment is to be purchased by the Partnership for a price no greater
than the Cost of such Equipment to the Sponsor minus any rents or other
proceeds that are received by the Sponsor in connection with the leasing of,
or other arrangement with respect to, the Equipment, except compensation in
accordance with Section IV of the NASAA Guidelines, unless the current value
of Equipment to be acquired from it or an Affiliate is less than the price so
calculated, in which case such Equipment shall be acquired at the lesser of
(A) such price so calculated or (B) the then fair market value of such
Equipment, as determined by an independent nationally-recognized equipment
appraiser selected by the Sponsor; (iii) there is no difference in interest
terms of the loans secured by the Equipment at the time acquired by the
Sponsor and the time acquired by the Partnership; and (iv) no other benefit
arises out of such transaction to the Sponsor apart from compensation
otherwise permitted by this Agreement. The Sponsor shall not purchase
Equipment from an affiliated Program for sale to the Partnership under the
preceding sentence. The Partnership shall neither purchase nor lease
Equipment from, nor lease or sell Equipment to, the Sponsor, except as
provided above and in accordance with Section V of the NASAA Guidelines. Any
profits earned on Equipment temporarily held by the Sponsor will be paid to
the Partnership.
(d) No loans may be made by the Partnership to the General Partner
or any Affiliate. The General Partner or any Affiliate may lend funds on a
short-term basis to the Partnership, but only with interest rates: (i) not
in excess of the General Partner's or Affiliate's own cost of borrowing; (ii)
in any event, not in excess of the interest rate charged (without reference
to the General Partner's or any Affiliate's financial abilities or
guaranties) by unrelated lenders on a comparable loan for the same purpose in
the same geographic area; and (iii) that shall not exceed by more than 3.0%
per annum the "prime rate" from time to time announced by The Chase Manhattan
Bank, N.A. Neither the General Partner nor any Affiliate shall provide
Permanent Financing for the Partnership. For this purpose "Permanent
Financing" means that some portion of principal and interest on the financing
provided by the General Partner or any Affiliates is due and payable more
than 12 months after the date of the loan. Neither the General Partner nor
any Affiliates may receive points or other financial charges or fees in any
amount in respect of any loans to the Partnership, although the General
Partner's compensation (such as the Evaluation Fees and the Management Fee)
may be increased as an indirect result of such loans.
(e) If the Sponsor purchases Equipment in its own name and with
its own funds in order to facilitate the ultimate purchase of such Equipment
by the Partnership, the Sponsor shall be entitled to receive interest from
the Partnership on the funds expended for such purpose on behalf of the
Partnership as provided in the definition of "Cost," but interest shall not
be paid for any period in excess of the six-month period permitted by Section
5.5(c) with respect to any item of Equipment. Interest on any such temporary
purchases shall be at a rate not to exceed the Sponsor's own cost of
borrowing and in any event shall not be in excess of the amounts that are
charged (without reference to the Sponsor's financial abilities or
guaranties) by unrelated banks on comparable loans for the same purpose in
the same geographic area, and the annual interest charged on any such loan
shall not exceed by more than 3.0% the "prime rate" from time to time
announced by The Chase Manhattan Bank, N.A. until the purchase of the
Equipment by the Partnership.
(f) The Partnership shall not acquire any Equipment in exchange
for Units.
(g) The Partnership shall not acquire Equipment from a Program in
which the General Partner or an Affiliate has an interest.
SECTION 5.6 Duties and Obligations of General Partner.
(a) The General Partner shall devote to the affairs of the
Partnership such time as may be necessary for the proper performance of its
duties hereunder, but neither the General Partner nor the officers, directors
or shareholders of the General Partner shall be expected to devote their full
time to the performance of such duties. The General Partner shall provide
both equipment management and additional services relating to the continued
and active operation of the Equipment, such as on-going marketing and
re-leasing of equipment and maintenance, repair and storage services.
(b) The General Partner shall take such action as may be necessary
or appropriate for the continuation of the Partnership's valid existence
under the laws of the State of Delaware and in order to form or qualify the
Partnership under the laws of any jurisdiction in which the Partnership is
doing business or in which such formation or qualification is necessary to
protect the limited liability of the Limited Partners or in order to continue
in effect such formation or qualification. The General Partner shall file or
cause to be filed for recordation in the office of the appropriate
authorities of the State of Delaware, and in the proper office or offices in
each other jurisdiction in which the Partnership is formed or qualified, such
certificates, including limited partnership and fictitious name certificates
and other documents as are required by the applicable statutes, rules or
regulations of any such jurisdiction.
(c) The General Partner shall prepare or cause to be prepared and
shall file on or before the due date (or any extension thereof) any federal,
state or local tax returns required to be filed by the Partnership. The
General Partner shall cause the Partnership to pay any taxes payable by the
Partnership.
(d) The General Partner shall have fiduciary responsibility for
the safekeeping and use of all funds and assets of the Partnership, whether
or not in its immediate possession or control. The General Partner shall not
employ, or permit another to employ, such funds or assets in any manner
except for the exclusive benefit of the Partnership and Partnership funds
shall not be deposited with affiliated financial institutions or be used in
compensating balance arrangements for the benefit of any entity other than
the Partnership. The General Partner shall not delegate to any party the
fiduciary duty owed by it to any Partner. In addition, no Partner shall be
permitted to contract away the fiduciary duty owed to such Partner by the
General Partner under the common law.
(e) Subject to Section 5.8(c), the General Partner is authorized,
in its sole discretion, to cause the Partnership to acquire policies of
limited partnership liability insurance, insuring the General Partner, its
officers, directors, employees, shareholders and certain of its Affiliates
against certain liabilities in connection with the business of the
Partnership and insuring the Partnership against certain liabilities with
respect to any indemnification that it is legally required or permitted to
provide under this Agreement to such General Partner, its officers,
directors, employees, shareholders and such Affiliates.
(f) Subject to the provisions of this Article Five, the General
Partner may delegate any or all of the powers, rights and obligations
hereunder, and may appoint, employ, contract or otherwise deal with any
Person for the transaction of the business of the Partnership, which Person
may, under supervision of the General Partner, perform any acts or services
for the Partnership as the General Partner may approve.
SECTION 5.7 Other Activities.
The General Partner and its Affiliates may engage independently or
with others in other business ventures of every nature and description,
including without limitation the rendering of advice or services of any kind
to other investors and the making or management of other investments,
including investments in equipment. Neither the Partnership nor any Partner
shall have any right, by virtue of this Agreement or the partnership
relationship created hereby, in or to such other ventures or activities, or
to the income or proceeds derived therefrom, and the pursuit of such
ventures, even if competitive with the business of the Partnership, shall not
be deemed wrongful or improper. Neither the General Partner nor any of its
Affiliates shall be obligated to present any particular investment
opportunity to the Partnership even if such opportunity is of a character
that, if presented to the Partnership, could be taken by the Partnership and
each of such Persons shall have the right to take for its own account
(individually or as a trustee) or to recommend to others any such particular
investment opportunity. Whenever a conflict of interest arises between
another investment entity sponsored by a General Partner or its Affiliates,
and the Partnership or any Limited Partner, the General Partner shall, in
resolving such conflict, consider the relative interests of the parties
involved in such conflict or affected by such action, any customary or
accepted industry practices and any applicable generally accepted accounting
practices or principles.
SECTION 5.8 Limitation on Liability of General Partner and
Affiliates; Indemnification.
(a) Neither the General Partner nor its Affiliates, performing
services for, or acting on behalf of, the Partnership and acting within the
scope of the General Partner's authority as set forth in this Agreement (the
"Indemnitees"), shall have any liability, responsibility or accountability in
damages or otherwise to any Partners or the Partnership for any loss or
liability suffered by the Partnership that arises out of any act or omission
performed or omitted by such Indemnitee where such Indemnitee has determined,
in good faith, that the course of conduct which caused the loss or liability
was in the best interests of the Partnership, and the Indemnitee was acting
on behalf of or performing services for the Partnership, and such liability
or loss was not the result of negligence or misconduct by such Indemnitee.
Each Indemnitee shall be indemnified by the Partnership and the Partnership
hereby agrees to indemnify and hold harmless each Indemnitee from and against
any and all liabilities, losses, damages, judgments, costs, and expenses
("Liabilities") provided that the same were not the result of negligence or
misconduct on the part of the Indemnitee and the Indemnitee has determined,
in good faith, that the course of conduct which caused the Liability was in
the best interests of the Partnership, including without limitation all
reasonable legal fees. Notwithstanding the foregoing, each Indemnitee shall
be liable, responsible and accountable, and the Partnership shall not be
liable to any such Indemnitee, for any portion of such Liabilities that
resulted from such Indemnitee's own fraud, negligence, misconduct or, if
applicable, breach of fiduciary duty to the Partnership or any Partner.
Subject to Section 5.8(d), such Indemnitee shall have the right to employ
separate counsel of its choice in such legal action and the reasonable legal
expenses of such counsel and other costs incurred as a result of such legal
action shall constitute disbursements for the purposes of advances from the
Partnership pursuant to Section 5.8(d). Such indemnification or agreement to
hold harmless is recoverable only out of the assets of the Partnership and
not from the Limited Partners. The payment of all such obligations shall be
made before any distributions are made from Cash from Operations or Cash from
Sales.
(b) Notwithstanding anything to the contrary contained in Section
5.8(a), the Partnership shall not furnish indemnification to an Indemnitee or
to any person acting as a broker-dealer for any Liabilities imposed by
judgment, and costs associated therewith, including attorney's fees, arising
from or out of a violation of federal or state securities laws unless: a
court either (i) approves the settlement and finds that indemnification of
the settlement and related costs should be made, or (ii) approves
indemnification of litigation costs if a successful defense is made; and in
either case, (iii) the court shall have been apprised by the Indemnitee
seeking indemnification hereunder as to the current positions of the
Commission, the Massachusetts Securities Division, and any state securities
regulatory authority which is specifically set forth in this Agreement and in
which plaintiffs claim they were offered or sold Units with respect to the
issue of indemnification for securities laws violations.
(c) The Partnership shall not incur the cost of that portion of
any liability insurance which insures any Indemnitee for any Liability as to
which such Indemnitee is prohibited from being indemnified under this Section
5.8.
(d) Advances from Partnership funds to an Indemnitee, for legal
expenses and other costs incurred as a result of any legal action initiated
against the Indemnitee by a Limited Partner of the Partnership in his
capacity as such, are prohibited. Except as provided in the foregoing
sentence, advances from Partnership funds to an Indemnitee for legal expenses
and other costs incurred as a result of any initiated legal action, are
permissible if the following conditions are satisfied: (i) such legal action
relates to any action or inaction on the part of the Indemnitee in the
performance of its duties or provision of its services on behalf of the
Partnership; (ii) such legal action is initiated by a third party who is not
a Limited Partner; and (iii) such Indemnitee undertakes to repay any funds
advanced in cases in which such Indemnitee would not be entitled to
indemnification pursuant to Section 5.8(a). If advances are permissible
under Sections 5.8(a) and 5.8(d), the Indemnitee shall furnish the
Partnership with an undertaking as set forth in subsection (iii) of the
foregoing sentence and shall thereafter have the right to bill the
Partnership for, or otherwise request that the Partnership pay, at any time
and from time to time after such Indemnitee has become obligated to make
payment therefor, any and all amounts for which such Indemnitee has
determined in good faith that such Indemnitee is entitled to indemnification
under Section 5.8(a). The Partnership shall pay any and all such bills and
honor any and all such requests for payment for which the Partnership is
liable as determined in Section 5.8(a). In any case wherein the General
Partner disputes such Indemnitee's entitlement to indemnification, the
General Partner shall seek a final determination from the applicable court as
to whether the Partnership is obligated to a particular Indemnitee. If a
final determination is made by the applicable court that the Partnership is
not so obligated in respect to any amount paid by it, such Indemnitee shall
refund such amount, plus interest thereon at the then prevailing market rate
of interest, within 60 days of such final determination and, if a final
determination is made by the applicable court that the Partnership is so
obligated in respect to any amount not paid by the Partnership to a
particular Indemnitee, the Partnership shall pay such amount to such
Indemnitee.
SECTION 5.9 Tax Status of Partnership.
(a) The General Partner shall use its best efforts to meet such
requirements of the Code, as interpreted from time to time by the IRS, as
necessary to assure that the Partnership shall be classified as a partnership
for federal income tax purposes.
(b) The General Partner shall use its best efforts to maintain its
net worth at such levels as Tax Counsel to the Partnership requires in order
to provide Tax Counsel's favorable opinion as to the status of the
Partnership as a partnership for federal tax purposes. The General Partner's
net worth (computed in accordance with generally accepted accounting
principles, except that stockholders' equity shall not be reduced by notes
receivable from stockholders) shall not be less than the greater of (i)
$1,000,000 or (ii) 2.5% of the Gross Offering Proceeds at any time during the
term of the Partnership. To support its net worth at or above this level,
the General Partner specifically agrees not to distribute or otherwise
dispose of that certain Non-negotiable Demand Note, dated November 5, 1993,
contributed to the capital of the General Partner by its sole shareholder,
Capital Associates, Inc.
ARTICLE SIX
CHANGES IN GENERAL PARTNER
SECTION 6.1 Certain Withdrawals of General Partner.
(a) The Voluntary Withdrawal of the General Partner pursuant to
Section 17-602 of the Delaware Act is not permitted without the Consent of a
Majority Interest. The designation of an Assignee to be a successor or
additional General Partner, whose Partnership Interest in the Partnership
shall be such as is agreed upon by the General Partner and such a successor
or additional General Partner, is permitted, provided that the conditions
contained in Section 6.2 have been met.
(b) If there is a Voluntary Withdrawal of the General Partner from
the Partnership or such General Partner Assigns its entire Partnership
Interest, such General Partner shall be and shall remain liable for all
obligations and liabilities incurred by the Partnership before such Voluntary
Withdrawal or Assignment becomes effective but, so long as such Voluntary
Withdrawal or Assignment was effected in accordance with the terms of this
Agreement, such General Partner shall be free of any obligation or liability
for wrongful withdrawal or incurred on account of the activities of the
Partnership from and after such Voluntary Withdrawal or Assignment becomes
effective.
(c) There shall be no Voluntary Withdrawal of the General Partner
from the Partnership pursuant to Section 17-602 of the Delaware Act unless at
least 60 days notice is given to each Limited Partner at his record address,
or at such other address that he may have furnished in writing to the General
Partner.
(d) The General Partner may be removed by the vote of the Class A
Limited Partners as provided in Section 11.2(a)(iv).
SECTION 6.2 Admission of Additional or Successor General
Partner.
A Person shall be admitted as an additional or successor General
Partner of the Partnership only if each of the following conditions is
satisfied:
(a) the admission of such Person shall have been Consented to, or
ratified, in accordance with the terms of Section 11.2, by a Majority
Interest, in accordance with the terms of Section 11.2 and a Class B
Majority, taking into account only those Class B Limited Partners that are
not Affiliates of the General Partner;
(b) such Person shall have accepted and agreed to be bound by the
terms and provisions of this Agreement, by executing a counterpart hereof,
and such other documents or instruments as may be required or appropriate in
order to effect the admission of such Person as a General Partner shall have
been filed for recording, and all other actions required by law in connection
with such admission shall have been performed;
(c) if such Person is a corporation, it shall have provided the
Partnership with evidence satisfactory to counsel for the Partnership of its
authority to become a General Partner and to be bound by the terms and
provisions of this Agreement; and
(d) counsel for the Partnership shall have rendered an opinion to
the Partnership that the admission of such Person as a General Partner is in
conformity with the Delaware Act and that none of the actions taken in
connection with the admission of such Person is in violation of the Delaware
Act, shall impair the limited liability of the Limited Partners, shall cause
the termination or dissolution of the Partnership for tax purposes or
otherwise, shall cause the Partnership to be classified other than as a
partnership, (including as a publicly-traded partnership) for federal income
tax purposes or shall violate federal or state securities laws.
SECTION 6.3 Consent of Class A Limited Partners to
Admission of Additional or Successor General
Partner.
Unless otherwise prohibited by the Delaware Act at the time that
such Consent is necessary, each of the Class A Limited Partners, by the
execution of this Agreement, Consents to the admission of any Person as a
successor or additional General Partner upon which there has been given the
express Consent of a Majority Interest. Upon receipt of such Consent, such
admission shall, without any further Consent or approval of the Class A
Limited Partners, be the act of all the Class A Limited Partners.
SECTION 6.4 Effect of Voluntary Withdrawal of General Partner
or Removal of General Partner by Class A Limited
Partners.
(a) Upon the Voluntary Withdrawal of the General Partner or the
removal of the General Partner by the Class A Limited Partners (other than
removal for cause, as defined in Section 6.4(b)), the following shall apply:
(i) The Partnership shall pay the departing
General Partner the then present fair market value of its
General Partner Partnership Interest ("Fair Value"). The
Fair Value of the departing General Partner's Partnership
Interest shall be determined by agreement between the
departing General Partner and the Partnership. If the
departing General Partner and the Partnership cannot agree
on such Fair Value within 30 days of the date of a Voluntary
Withdrawal, or the date of the Notice referred to in
Section 11.2(a)(iv), in the case of a removal, the Fair
Value thereof shall be determined by arbitration in
accordance with the then current rules of the American
Arbitration Association, i.e., the departing General Partner
to choose one arbitrator, the Partnership to choose one
arbitrator and the two arbitrators so chosen to choose a
third arbitrator. The decision of a majority of such
arbitrators as to the Fair Value shall be final and binding
and may be enforced by legal proceedings. The departing
General Partner and the Partnership shall each compensate
the arbitrator appointed by it. The compensation of the
third arbitrator shall be borne equally by such parties.
Upon the Voluntary Withdrawal of the General Partner or the
removal of the General Partner by the Class A Limited
Partners (other than removal for cause), the Class B Limited
Partner shall retain the Class B Interest on the same terms
and conditions as if the General Partner had not withdrawn.
(ii) Where the departing General Partner is
removed by the Class A Limited Partners, payment of the Fair
Value shall be in the form of an interest bearing promissory
note maturing in no less than five years, which may be paid,
unless the Partnership's capital would be impaired, in five
equal annual installments, the first of which shall be paid
on the first business day after the date one year after the
date of such removal. The unpaid portion of such amount
shall bear interest at the publicly announced "prime rate,"
from time to time, of The Chase Manhattan Bank, N.A. from
the date such first installment is to be paid, such interest
to accrue and be paid annually in addition to each such
annual installment. Where the departing General Partner
effects a Voluntary Withdrawal, payment of the Fair Value
shall be in the form of a non-interest bearing unsecured
promissory note with principal payable, if at all, from
distributions that the departing General Partner otherwise
would have received under this Agreement had the General
Partner not voluntarily withdrawn. All loans and advances
from the departing General Partner shall be repaid in the
ordinary course according to their terms.
(iii) Subject to this Section 6.4, the departing
General Partner shall, as of the effective date of a
Voluntary Withdrawal or removal by the Class A Limited
Partners, cease to share in any Partnership allocations or
distributions with respect to its Partnership Interest as a
General Partner.
(b) Upon the removal for cause of the General Partner by the Class
A Limited Partners, the provisions of Section 6.4(a) shall apply, except that
"Fair Value" of the removed General Partner's Partnership Interest for
purposes of this Section 6.4(b) shall be zero. The Class B Limited Partner
shall retain the Class B Interest on the same terms and conditions as if the
removal of the General Partner had not occurred. As used in this Section
6.4(b), the term "cause" shall mean the commission of any act or the failure
to take any action that, as determined by a court of competent jurisdiction
in a final judgment subject to no further appeals, constitutes gross
negligence, willful misconduct or fraud and has a material adverse effect on
the Partnership.
(c) Following the Withdrawal of the General Partner, the remaining
General Partners (including a successor General Partner, if any) shall
receive and have transferred to one or more of them, and the departing
General Partner shall transfer to one or more remaining General Partners
(including a successor General Partner, if any), without cost, such
Partnership Interest as the remaining General Partners (including a successor
General Partner, if any) deem necessary to assure that the remaining General
Partners (including a successor General Partner, if any) retain, in the
aggregate, a Partnership Interest representing at least 1.0% interest in all
items of Partnership Profit or Loss and cash distributions.
(d) If, at the time of Withdrawal of the General Partner, the
departing General Partner was not the sole General Partner of the
Partnership, the remaining General Partner or Partners shall immediately:
(i) give Notice to the Limited Partners of such Withdrawal; and (ii) prepare
such amendments to this Agreement and execute and file for recording such
amendments or documents or other instruments necessary to reflect the
assignment, transfer or termination (as the case may be) of the Partnership
Interest of the departing General Partner.
(e) All parties hereto hereby agree to take all actions and to
execute all documents necessary or appropriate to effect the foregoing
provisions of this Section 6.4.
ARTICLE SEVEN
ASSIGNMENT OF PARTNERSHIP INTERESTS
OF LIMITED PARTNERS
SECTION 7.1 Assignment.
There shall be no Assignment of a Limited Partner's Partnership
Interest, in whole or in part, except in accordance with the terms and
conditions set forth in this Article Seven. Any Assignment or purported
Assignment of any such Partnership Interest not made in accordance with this
Article Seven shall be null and void.
SECTION 7.2 Withdrawal of Limited Partners.
No Limited Partner shall have any right to withdraw from the
Partnership; provided that when an Assignee of a Limited Partner's Units or
Class B Interest, as the case may be, becomes a Record Holder, the rights of
the assignor Limited Partner shall cease with respect to such rights or
interests in the Units or Class B Interest so Assigned, but until such
Assignee becomes a substituted Limited Partner such assignor Limited Partner
shall continue to be the Limited Partner on the books and records of the
Partnership and shall continue to have the rights provided in Article Eleven,
which rights shall not be assignable.
SECTION 7.3 Assignment of Partnership Interests.
Except for Assignments by operation of law, a Limited Partner may
not Assign all or any part of his Units or Class B Interest and, in
addition, no such Assignment may be effected unless such Limited Partner
shall file with the Partnership, in form and substance satisfactory to the
General Partner, a duly executed counterpart of the instrument making such
Assignment, and such instrument: (i) evidences the written acceptance by the
Assignee of all of the terms and provisions of this Agreement; (ii)
represents that such Assignee has authority to enter into, and agrees to
comply with and be bound by, all the provisions of this Agreement; (iii)
gives the Consents, approvals, and waivers set forth herein; (iv) grants the
Power of Attorney in Section 13.1; (v) represents that such Assignee is not
an entity exempt from federal income tax, and is not controlled by any such
entity, unless written notice thereof has been received by the Partnership;
(vi) represents that such Assignment was made in accordance with all
applicable laws and regulations (including without limitation such minimum
investment and investor suitability requirements as may then be applicable
under state securities laws); and (vii) is accompanied by a fee set by the
General Partner from time to time, in partial reimbursement of the
Partnership's costs respecting the Assignment. All Assignments shall be
effective for record purposes as of the first day of the month following the
date upon which all of the conditions of this Section 7.3 shall have been
satisfied.
SECTION 7.4 Distributions.
The Partnership shall be required to make each distribution in
respect of Units or the Class B Interest only to the Record Holders thereof
as of the Record Date set for the distribution. Such payment shall
constitute full payment and satisfaction of the Partnership's liability in
respect of such payment, regardless of any claim of any Person who may have
an interest in such payment, by reason of an Assignment or otherwise.
SECTION 7.5 Restrictions on Assignment.
(a) Unless in each of the following instances the General Partner
shall give its express written approval, no Units or Class B Interests may
be Assigned or otherwise
transferred:
(i) to a minor or incompetent (unless a guardian,
custodian or conservator has been appointed to handle the
affairs of such Person);
(ii) to any Person not permitted to be an Assignee
under applicable law, including without limitation
applicable federal and state securities laws;
(iii) to any Assignee of Units if such Assignee
would hold after such Assignment an interest in fewer than
20 Units (8 Units in the case of an IRA or Qualified Plan)
or if, following an Assignment of an interest in fewer than
all his Units, an assignor would retain an interest in fewer
Units than would have satisfied the minimum investment
standards applicable to his initial purchase of Units;
(iv) to any Person if, in the opinion of Tax
Counsel, such Assignment would result in the termination
under the Code of the Partnership's Year or its status as a
partnership for federal income tax purposes; or
(v) to any Person if such Assignment would affect
the Partnership's existence or qualification as a limited
partnership under the Delaware Act or the applicable laws of
any other jurisdiction in which the Partnership is then
conducting business.
In the case of a proposed Assignment that is prohibited solely
under Section 7.5(a)(iv), however, the Partnership shall be obligated to
permit such Assignment to become effective if and when, in the opinion of Tax
Counsel, such Assignment would no longer have either of the adverse
consequences under the Code that are specified in Section 7.5(a)(iv).
(b) The General Partner is expressly authorized to suspend
transfers of Units if and when any such transfer would result in the transfer
of 50.0% or more of the Units within a 12-month period.
So long as there are adverse federal income tax consequences from
being treated as a "publicly traded partnership" for federal income tax
purposes, the General Partner shall not permit any interest in a Unit to be
Assigned on a secondary public market (or a substantial equivalent thereof)
as defined under the Code and any regulations promulgated thereunder (a
"Secondary Market") and, if the General Partner determines, in its sole
discretion, that a proposed Assignment was effected on a Secondary Market,
the Partnership and the General Partner have the right to refuse to recognize
any such proposed Assignment and to take any action deemed necessary or
appropriate in the General Partner's reasonable discretion so that such
Assignment is not in fact recognized. For purposes of this Section 7.5(b),
an Assignment that results in a failure to meet one or more of the "safe
harbor" provisions of Notice 88-75 (July 5, 1988) issued by the IRS, or any
substitute safe-harbor provisions subsequently established by Treasury
Regulation, shall be treated as causing the Units to be traded on a Secondary
Market. The Class A Limited Partners agree to provide all information
respecting Assignments that the General Partner deems necessary in order to
determine whether a proposed transfer occurred on a Secondary Market. The
General Partner shall incur no liability to any investor or prospective
investor for any action or inaction by it in connection with the foregoing,
provided that it acted in good faith.
SECTION 7.6 Redemption of Partnership Units.
(a) A Class A Limited Partner shall have the right, at any time
after the expiration of 36 months from the Closing Date, to request that the
Partnership repurchase all or any number of Units by submitting a written
request to the General Partner. A Class A Limited Partner who has a Health
Emergency (or his representative) may request a repurchase of Units prior to
the expiration of the 36-month period described in the preceding sentence.
To the extent permitted by applicable laws and regulations and, if in the
sole and absolute discretion of the General Partner, such repurchase shall
not (i) cause the Partnership to be taxed as a corporation under Code 7704,
(ii) impair the capital or operations of the Partnership or (iii) result in
payment of an excessive price for the Units redeemed, the Partnership shall
repurchase Units from one or more Class A Limited Partners (or assignees) who
so request, up to a maximum of 2.0% of total outstanding Units per year. The
Partnership may redeem Units in excess of this 2.0% amount if, in the General
Partner's sole discretion, the standards set forth in the preceding sentence
shall remain satisfied.
(b) Within 60 days after receipt of a written request for
redemption, the General Partner shall accept or deny the request. The
General Partner shall, in its sole and absolute discretion, decide whether a
repurchase is in the best interest of the Partnership and shall not be
required to provide any reason for the denial of a repurchase request.
(c) The repurchase price for repurchased Units shall be determined
by the General Partner as of the last day of the Quarter prior to the Quarter
during which such request was received. The repurchase price per Unit shall
equal 110.0% of the Unrecovered Capital Contribution of such Unit as of such
day, reduced by all distributions after the date of determination of the
Unrecovered Capital Contribution made with respect to the tendered Units.
(d) The Class A Limited Partner shall tender the repurchased Units
upon the acceptance of the repurchase request by the General Partner, and the
Partnership shall pay the repurchase price for the tendered Units in cash
within 30 days after the end of the Quarter during which the request was
received.
(e) Upon the repurchase of any Units by the Partnership, the
tendered Units shall be cancelled and shall no longer be deemed to represent
an interest in the Partnership.
(f) The General Partner shall, if necessary or appropriate, cause
this Agreement or the Certificate to be amended to reflect the change in the
interests of the Class A Limited Partners (including the person whose Units
were repurchased) in the Partnership.
(g) Neither the General Partner nor its Affiliates may request the
Partnership to repurchase any Units owned by them.
ARTICLE EIGHT
ADMISSION OF LIMITED PARTNERS
AND SUBSTITUTED LIMITED PARTNERS
SECTION 8.1 Admission of Limited Partners.
On the Closing Date or the date provided in Section 3.4(g), the
General Partner shall admit the Class A and Class B Limited Partners to the
Partnership. Each such party shall either execute a counterpart of this
Agreement (either individually or through the General Partner that is granted
a power-of-attorney by such party in the Subscription Agreement and in
Section 13.1 hereof) and thereby agree to be bound by the terms hereof, or,
without such execution, take the actions required by Section 17-101(10) of
the Delaware Act to become bound by the terms hereof.
SECTION 8.2 Admission of Substituted Limited Partners.
An Assignee of Units or the Class B Interest shall be admitted to
the Partnership if all of the following conditions are satisfied:
(a) the instrument of Assignment provided for in
Section 7.3 sets forth the intentions of the assignor that
the Assignee succeed to the assignor's interest as a Limited
Partner in his place, and such assignor is a Limited
Partner;
(b) the Assignee shall have fulfilled the
requirements of Section 7.3 and Section 13.2;
(c) the Assignee shall have paid all actual,
necessary and reasonable administrative and filing expenses
incurred by the Partnership in connection with his
substitution as a Limited Partner;
(d) the General Partner shall have consented in
writing to such substitution, which Consent may be withheld
or given in the sole discretion of the General Partner; and
(e) if requested by the General Partner, the
Partnership shall have received an Opinion of Counsel (at
the cost and expense of the General Partner) to the effect
that such substitution shall not cause the Partnership to
cease to be treated as a partnership that is not a
publicly-traded partnership for federal income tax purposes
or cause a termination of the Partnership pursuant to Code
708 or applicable state law.
If all of the conditions of Section 7.3 and this Section 8.2 shall
have been met, the Assignee of Units or the Class B Interest shall become a
substituted Limited Partner on the date as of which the General Partner
consents in writing to his admission to the Partnership as a substituted
Limited Partner, which consent shall be evidenced by the filing, if required
by law, of an amendment to the Certificate listing the name of such
substituted Limited Partner, and the entry of the name of the Assignee on the
books and records of the Partnership. Such an amendment, if any, shall be
filed no later than the first day of the month following the completion of
any Quarter of the Partnership during which all of the conditions of this
Section 8.2 shall have been satisfied. All substitutions shall be effective
for record purposes, and for purposes of Article Four, upon the filing of
such amendment or, if not required, on the date of admission to the
Partnership as a substituted Limited Partner.
An Assignee of Units or Class B Interest who does not become a
substituted Limited Partner in accordance with this Section 8.2 and who
desires to make a further Assignment of his Units or the Class B Interest
shall be subject to all of the provisions of Sections 7.3, 7.5(c) and this
Section 8.2 to the same extent and in the same manner as any Limited Partner
desiring to make an Assignment of his Units or Class B Interest. Failure or
refusal of the General Partner to admit an Assignee as a substituted Limited
Partner shall in no way affect the right of such Assignee to receive
distributions of Cash From Operations, Cash From Sales or Liquidation
Proceeds and the share of the Profits or Losses for tax purposes to which his
predecessor in interest would have been entitled in accordance with
Articles Four and Nine or to receive Partnership reports to which his
predecessor would have been entitled in accordance with Section 10.4.
The admission of an Assignee as a substituted Limited Partner shall
be effected without the Consent of any of the Partners, other than the
General Partner.
ARTICLE NINE
DISSOLUTION AND LIQUIDATION OF PARTNERSHIP
SECTION 9.1 Events Causing Dissolution.
(a) The Partnership shall dissolve upon the happening of any of
the following events:
(i) the Withdrawal of the General Partner from
the Partnership, unless the remaining General Partner or
General Partners agree in writing to continue the business
of the Partnership within 90 days after the occurrence of
such an event, but the Partnership is not dissolved and is
not required to be wound up by reason of any Withdrawal if,
within 90 days after the Withdrawal, all Partners agree in
writing to continue the business of the Partnership and to
the appointment, effective as of the date of Withdrawal, of
one or more additional General Partners if necessary or
desired;
(ii) the Sale or other disposition of all or
substantially all the assets of the Partnership;
(iii) the election by the General Partner, with the
Consent of a Majority Interest or the vote by the Limited
Partners pursuant to Section 11.2(a)(iii), to dissolve the
Partnership;
(iv) the expiration of the term of the Partnership
specified in Section 2.4; or
(v) any other event causing the dissolution of
the Partnership under the Delaware Act.
(b) Dissolution of the Partnership shall be effective on the day
on which the event occurs giving rise to the dissolution, but the Partnership
shall not terminate until after its affairs are wound up pursuant to the
Delaware Act, the assets of the Partnership are distributed as provided in
Section 9.3 and a certificate of cancellation is filed with the Secretary of
State of the State of Delaware. Notwithstanding the dissolution of the
Partnership, prior to the termination of the Partnership the business of the
Partnership and the affairs of the Partners shall continue to be governed by
this Agreement.
SECTION 9.2 Continuation of Business of Partnership After
Dissolution.
Upon dissolution of the Partnership in accordance with Section 9.1
and, in the case of Section 9.1(a)(i), a failure of all Partners to agree to
continue the business of the Partnership and appoint a successor General
Partner 90 days after such event, then within 90 days thereafter, a Majority
Interest and a Class B Majority may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those
set forth in this Agreement and having as a general partner a Person elected
by a Majority Interest and a Class B Majority. Upon any such election by a
Majority Interest and a Class B Majority, all Partners shall be bound thereby
and shall be deemed to have consented thereto and to have requested that the
records of the new limited partnership reflect their admission thereto as
partners. In determining a Class B Majority for purposes of this Section
9.2, the Partnership Interest of a Class B Limited Partner that is an
Affiliate of a General Partner or a withdrawing General Partner shall not be
considered. If all Class B Limited Partners are Affiliates of a General
Partner or a withdrawing General Partner, a Class B Majority shall not be
necessary for purposes of this Section 9.2. Unless such an election is made
within 180 days after dissolution, the Partnership shall conduct only
activities necessary to wind up its affairs. If such an election is made
within 180 days after dissolution, then:
(a) the reconstituted limited partnership shall
continue until the end of the term set forth in Section 2.4
unless earlier dissolved in accordance with this Article
Nine; and
(b) all necessary steps shall be taken to cancel
the Certificate and file a new Certificate, and the
successor general partner may for this purpose exercise the
powers of attorney granted the General Partner pursuant to
Section 13.1, provided that the right of a Majority Interest
to select a successor General Partner and to reconstitute
and to continue the business of the Partnership shall not
exist and may not be exercised unless the Partnership has
received an Opinion of Counsel that: (i) the exercise of
the right would not result in the loss of limited liability
of any Limited Partner or any materially adverse federal
income tax consequences to the Limited Partners; and
(ii) neither the Partnership nor the reconstituted limited
partnership would cease to be treated as a partnership that
is not a publicly traded partnership, for federal income tax
purposes upon the exercise of such right to continue.
SECTION 9.3 Liquidation.
(a) Upon dissolution of the Partnership, unless the Partnership is
continued under an election to reconstitute and continue the Partnership
pursuant to Section 9.2, the General Partner or, if all General Partners have
withdrawn from the Partnership, then a liquidator or liquidating committee
approved by a Majority Interest, shall be the liquidating trustee (the
"Liquidating Trustee").
(b) The Liquidating Trustee (if other than a General Partner)
shall be entitled to receive such compensation for its services as may be
approved by a Majority Interest. The Liquidating Trustee shall agree not to
resign at any time without 15 days' prior written notice and may be removed
at any time, with or without cause, by notice of removal approved by a
Majority Interest. Upon dissolution, removal or resignation of the
Liquidating Trustee, a successor and substitute Liquidating Trustee (who
shall have and succeed to all rights, powers and duties of the original
Liquidating Trustee) shall within 30 days thereafter be approved by a
Majority Interest. The right to approve a successor or substitute
Liquidating Trustee in the manner provided herein shall be recurring and
continuing for so long as the functions and services of the Liquidating
Trustee are authorized to continue under the provisions hereof, and every
reference herein to the Liquidating Trustee shall be deemed to refer also to
any such successor or substitute Liquidating Trustee approved in the manner
herein provided. Except as expressly provided in this Article Nine, the
Liquidating Trustee approved in the manner provided herein shall have and may
exercise, without further authorization or approval of any of the parties
hereto, all of the powers conferred upon the General Partner under the terms
of this Agreement to the extent reasonable and necessary to carry out the
duties and functions of the Liquidating Trustee hereunder for and during such
period of time as shall be reasonably required to complete the winding up and
liquidation of the Partnership as provided for herein and only for such
purposes. The Liquidating Trustee shall liquidate the assets of the
Partnership, and apply and distribute the proceeds of such liquidation, in
the following order or priority (provided that no such distributions shall be
made in kind), unless otherwise required by mandatory provisions of
applicable law:
(i) First, to the payment to creditors of the
Partnership, including Partners and Assignees who are
creditors, in order of priority provided by law, and to the
creation of a reserve of cash or other assets of the
Partnership for contingent or unforeseen liabilities in an
amount, if any, determined by the Liquidating Trustee to be
appropriate for such purposes (which reserve shall be
distributed as provided in Section 9.3(b)(ii) at such times
as the Liquidating Trustee determines that it is no longer
necessary); and
(ii) to the Partners, on a pari passu basis, in
proportion to the positive balances in the Partners'
respective Capital Accounts on the Record Date of the
distribution, as determined after giving effect to all
adjustments to Capital Accounts, including without
limitation adjustments for allocations of Profits or Losses
relating to the Liquidation Proceeds. Distributions of
Liquidation Proceeds to Partners shall be made by the end of
the Year of the Partnership in which the final liquidation
occurs or, if later, within 90 days after the date of the
final liquidation.
In connection with distributions in winding up the affairs of the
Partnership on dissolution, the General Partner shall be required to account
to the Partnership for any deficit that may exist in their Capital Accounts
by contributing to the capital of the Partnership an amount equal to the
lesser of:
(A) the deficit that may exist in its
Capital Account at such time; or
(B) an amount equal to 1.01% of the Capital
Contributions to the Partnership by the Limited Partners,
reduced by the Capital Contributions to the Partnership by
the General Partner.
(c) Notwithstanding the foregoing, if the Liquidating Trustee
determines that an immediate sale of part or all of the Partnership's assets
would cause undue loss to the Partners, the Liquidating Trustee may, after
giving Notice to all the Limited Partners, to the extent not then prohibited
by an applicable law of any jurisdiction in which the Partnership is then
formed or qualified, defer liquidation of and withhold from distribution
for a reasonable time any assets of the Partnership except those necessary to
satisfy the Partnership's debts and obligations.
(d) Each holder of Limited Partner Partnership Interests shall
look solely to the assets of the Partnership for all distributions with
respect to the Partnership and his Capital Contribution thereto and shall
have no recourse therefor, upon dissolution or otherwise, against the General
Partner or any other Limited Partner. No Partner shall have any right to
demand or receive property other than cash upon dissolution and termination
of the Partnership.
SECTION 9.4 Cancellation of Certificate of Limited
Partnership.
Upon the completion of the distribution of Partnership assets as
provided in Section 9.3, the Partnership shall be terminated, and the
Certificate and all qualifications of the Partnership as a foreign limited
partnership in jurisdictions other than the State of Delaware shall be
cancelled and such other actions as may be necessary to terminate the
Partnership shall be taken.
SECTION 9.5 Reasonable Time for Winding Up.
A reasonable time shall be allowed for the orderly winding up of
the business and affairs of the Partnership and the liquidation of its
assets pursuant to Section 9.3 in order to minimize any losses otherwise
attendant upon such winding up.
SECTION 9.6 Return of Capital.
The General Partner shall not be personally liable for the return
of the Capital Contributions of the Limited Partners, or any portion
thereof, it being expressly understood that any such return shall be made
solely from Partnership assets.
SECTION 9.7 No Capital Account Restoration.
No Limited Partner or Assignee shall have any obligation to restore
any negative balance in its Capital Account upon liquidation of the
Partnership.
ARTICLE TEN
BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS
SECTION 10.1 Books and Records.
(a) The books and records of the Partnership shall be maintained
at the office of the General Partner, at 7175 West Jefferson Avenue, Suite
3000, Lakewood, Colorado 80235 and shall there be available for examination
by any Partner or his duly authorized representatives at all reasonable
times. Any Partner or his duly authorized representatives shall be permitted
access to all records of the Partnership at all reasonable times for
inspection or copying.
(b) An alphabetical list of the names, addresses, and business
telephone numbers of the Class A Limited Partners along with the number of
Units held by each of them (the "Participant List") shall be maintained as a
part of the books and records of the Partnership and shall be available for
inspection by any Class A Limited Partner or its designated agent at the home
office of the Program upon the request of the Class A Limited Partner.
(c) The Participant List shall be updated at least quarterly to
reflect changes in the information contained therein.
(d) A copy of the Participant List shall be mailed to any Class A
Limited Partner requesting the Participant List within ten days of the
request. The copy of the Participant List shall be printed in alphabetical
order, on white paper, and in a readily readable type size (in no event
smaller than 10-point type). A reasonable charge for copy work may be
charged by the Partnership.
(e) The purposes for which a Class A Limited Partner may request a
copy of the Participant List include, without limitation, matters relating to
Class A Limited Partners' voting rights under this Agreement and the exercise
of their rights under federal proxy laws.
(f) If the General Partner of the Partnership neglects or refuses
to exhibit, produce, or mail a copy of the Participant List as requested, the
General Partner shall be liable to any Class A Limited Partner requesting the
list for the costs, including attorneys' fees, incurred by that Class A
Limited Partner for compelling the production of the Participant List, and
for actual damages suffered by any Class A Limited Partner 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 Participant List is to
secure such list 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 Class A Limited Partner relative to the
affairs of the Partnership. The General Partner may require the Class A
Limited Partner requesting the Participant List to represent that the list is
not requested for a commercial purpose unrelated to the Class A Limited
Partner's interest in the Partnership. The remedies provided hereunder to
Class A Limited Partners requesting copies of the Participant List are in
addition to, and shall not in any way limit, other remedies available to
Class A Limited Partners under federal law, or the laws of any state.
(g) The General Partner, at the Partnership's expense, shall
retain for five years any appraisal obtained with respect to the value of the
Equipment.
(h) The General Partner or the Dealer-Manager, at the
Partnership's expense, shall retain for the term of the Partnership all
subscription agreements received from Class A Limited Partners and any
additional written information utilized by the General Partner in determining
that all subscribers who have been admitted as Class A Limited Partners have
satisfied the suitability standards as set forth in the Prospectus.
SECTION 10.2 Accounting Method.
The books of the Partnership initially shall be kept on the accrual
basis.
SECTION 10.3 Bank Accounts.
Except as otherwise provided in this Agreement, the bank accounts
of the Partnership shall be maintained in such banking institutions as the
General Partner shall determine. All deposits and other funds not needed in
the operation of the Partnership's business may be invested in United States
government securities, securities issued or guaranteed by United States
government agencies, certificates of deposit and time or demand deposits in
state or national banks having capital (including subordinated capital
notes), surplus and undivided profits aggregating more than $100,000,000,
securities issued or guaranteed by states or municipalities, bank repurchase
agreements, banker's acceptances, commercial paper having investment grade
ratings, securities of mutual funds that invest either in government
securities or tax-exempt securities, and other similar investments. The
funds of the Partnership shall not be commingled with the funds of any other
Person.
SECTION 10.4 Reports.
(a) Within 60 days after the end of each of the first 3 Quarters
of each Year, the Partnership shall send to each Person who was a Record
Holder during such Quarter: (i) a balance sheet; (ii) a statement of income
for the Quarter then ended; (iii) a statement of Cash From Operations and
Cash From Sales for the Quarter then ended (none of which need be audited);
(iv) if the Partnership is registered or required to file reports under
Section 12 or Section 15(d) of the Securities Exchange Act, any other
financial information contained or required to be contained in the
Partnership's Quarterly Report on Form 10-Q for such Quarter, pursuant to
such Exchange Act; and (v) other pertinent information regarding the
Partnership and its activities during such Quarter, including a detailed
statement concerning fees received in such Quarter by the General Partner
or its Affiliates for services rendered to the Partnership. Within 60 days
following the end of each Quarter, until the proceeds of the offering
pursuant to the Prospectus are fully invested or returned to the Partners,
each Partner shall be furnished a report detailing Equipment purchases, which
shall include a statement of the Equipment Purchase Price, the terms of the
purchase, a statement of the total amount of cash expended by the Partnership
to acquire such Equipment (including and itemizing all commissions, fees,
expenses and the name of each payee), and a statement of the amount of
Offering Proceeds that remain unexpended or uncommitted.
(b) The Partnership shall send to each Person who was a Record
Holder at any time during the Year then ended such tax information as shall
be necessary for inclusion by such Record Holder in his federal income tax
return and required state income tax return and other tax information with
regard to jurisdictions in which the Partnership is formed or qualified or
owns investments. The Partnership shall send this information within 75 days
after the end of each calendar Year.
(c) Within 120 days after the end of each Year, the General
Partner shall send to each person who was a Record Holder at any time during
the Year then ended an annual report, including: (i) the balance sheet of
the Partnership as of the end of such Year and statements of operations,
changes in Partners' capital, cash flow, Cash From Operations and Cash From
Sales, all of which, except the statements of Cash From Operations and Cash
From Sales, shall be prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by a report of the
Accountants containing an opinion of the Accountants; (ii) a report of the
activities of the Partnership during the period covered by the report; (iii)
a breakdown of distributions to Partners for the period covered, showing
separately (A) Cash From Operations, (B) Cash From Operations of previous
periods that had been held as Reserves, (C) proceeds from disposition of
Equipment and investments, and (D) Reserves attributable to the Gross
Proceeds of the Offering; (iv) a detailed statement of any transactions with
the General Partner or its Affiliates, and of fees, commissions, compensation
and other benefits paid, or accrued to the General Partner or its Affiliates
for the Year completed, showing the amount paid or accrued to each recipient
and the services performed; and (v) a breakdown of the goods, material and
services provided by, and the amounts actually reimbursed to, the General
Partner. Within the scope of the annual audit of the General Partner's
financial statements, the Accountants shall issue a special report on the
allocation of reimbursed costs to the Partnership in accordance with the
Partnership Agreement. The special report shall at a minimum provide:
(i) a review of the time records of individual
employees, the costs of whose services were reimbursed; and
(ii) a review of the specific nature of the work
performed by each such employee.
The special report shall be in accordance with the American Institute of
Certified Public Accountants United States Auditing standards relating to
special reports. The additional costs of such special report shall be
itemized on a Partnership by Partnership basis and may be reimbursed to the
General Partner by the Partnership only to the extent that such
reimbursement, when added to the cost for administrative services rendered
does not exceed the competitive rate for such services as determined above.
For each piece of Equipment acquired by the Partnership which
individually represents at least 10.0% of the Partnership's total investment
in Equipment, the General Partner shall include a status report as part of
the annual report, which status report shall indicate: (i) condition of
Equipment, (ii) how equipment is being utilized as of the end of year
(leased, operated, held for lease, repair, or sale), (iii) remaining term of
leases, (iv) projected use of Equipment for next year (renew lease, lease,
retire, or sell), and (v) such other information relevant to the value or
utilization of the Equipment as the General Partner deems appropriate. The
status report shall describe the method used or basis for valuation.
(d) A copy of each report referred to in this Section 10.4 shall
be filed with all securities commissions requiring such filing at the time
required by such commissions.
SECTION 10.5 Designation, Duties and Expenses of Tax Matters
Partner.
(a) The General Partner shall be the Tax Matters Partner pursuant
to Code 6231.
(b) The Tax Matters Partner 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 Partner 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 Partner
informed of administrative and judicial proceedings for the
adjustment at the Partnership level of any item required to
be taken into account by a Partner for income tax purposes
("Judicial Review").
(c) Subject to Section 5.8, the Partnership shall indemnify and
reimburse the Tax Matters Partner for all expenses, including legal and
accounting fees, claims, liabilities, losses and damages, incurred in
connection with any administrative or judicial proceeding with respect to the
tax liability of the Partners. The payment of all such expenses shall be
made before any distributions are made from Cash From Operations or Cash From
Sales. Neither the General Partner 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 Partner in
connection with any such proceeding, except to the extent required by law, is
a matter in the sole discretion of the Tax Matters Partner; and the
provisions on limitations of liability of the General Partner and
indemnification set forth in Section 5.8 shall be fully applicable to the Tax
Matters Partner in its capacity as such.
SECTION 10.6 Authority of Tax Matters Partner.
The Tax Matters Partner is hereby authorized, but not required:
(a) to enter into any settlement with the IRS or the Secretary
with respect to any tax audit or Judicial Review, in which agreement the Tax
Matters Partner may expressly state that such agreement shall bind the other
Partners, except that such settlement agreement shall not bind any Partner
who (within the time prescribed pursuant to the Code and regulations
thereunder) files a statement with the Secretary providing that the Tax
Matters Partner shall not have the authority to enter into a settlement
agreement on the behalf of such Partner;
(b) if a notice of a final administrative adjustment at the
Partnership level of any item required to be taken into account by a Partner
for tax purposes (a "final adjustment") is mailed to the Tax Matters Partner,
to seek further Judicial Review of such final adjustment, including the
filing of a petition for determination with the Tax Court, the District Court
of the United States for the district in which the Partnership's principal
place of business is located or the United States Claims Court;
(c) to intervene in any action brought by any other Partner for
Judicial Review of a final adjustment;
(d) to file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed by the
Secretary, to file a petition for further Judicial Review with respect to
such request;
(e) to enter into an agreement with the IRS to extend the period
for assessing any tax that is attributable to any item required to be taken
into account by a Partner for tax purposes, or an item affected by such item;
and
(f) to take any other action on behalf of the Partners or the
Partnership in connection with any administrative or judicial tax proceeding
to the extent permitted by applicable law or regulations.
ARTICLE ELEVEN
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS
SECTION 11.1 Meetings.
(a) Meetings of the Limited Partners for any purpose may be called
by the General Partner at any time and shall be called by the General
Partner following receipt of a written request for such a meeting signed by
the holders of 10.0% or more of the Units (a "Written Request"). A Written
Request shall state the purpose of the proposed meeting and the matters
proposed to be acted upon at such meeting. Meetings called by Written
Request shall be held at such reasonable time and place specified by the
General Partner. All other meetings shall be held at the principal office of
the Partnership or at such other place as may be designated by the General
Partner. In addition, the General Partner may, and upon written request of
Class A Limited Partners holding 10.0% or more of the Units shall, submit
any matter upon which the Limited Partners are entitled to act to the Limited
Partners for a vote by written Consent without a meeting.
(b) Notice of any meeting to be held pursuant to Section 11.1(a)
shall be given to each Limited Partner at his record address, or at such
other address that he may have furnished in writing to the General Partner.
Notice shall be given within 10 days following receipt of a Written Request.
Such Notice shall state the place, date and hour of the meeting (which shall
be held on a date not less than 15 days nor more than 60 days after
distribution of such Notice, at the time and place specified in a Written
Request, or if none, at a time and place convenient to the Class A Limited
Partners) and shall indicate that the Notice is being issued at or by the
direction of the Partner or Partners calling the meeting. The Notice shall
state the purpose or purposes 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 Interest
shall constitute a quorum at all meetings of the Limited Partners;
provided that if there be no such quorum, holders of a majority of Units so
present or represented may adjourn the meeting from time to time without
further Notice, until a quorum is obtained. No Notice of the time, place or
purpose of any meeting of Limited Partners need be given to any Limited
Partner who attends in person or is represented by proxy, except for a
Limited Partner attending 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 Limited
Partner entitled to such Notice, who, in writing, executed and filed with the
records of the meeting, either before or after the time thereof, waives such
Notice.
(c) For the purpose of determining the Limited Partners entitled
to vote at any meeting of the Limited Partners, or any adjournment thereof,
or to vote by written Consent without a meeting, the General Partner or the
Limited Partners requesting such meeting or vote may fix, in advance, a date
as the Record Date of any such determination of Limited Partners. Such date
shall not be more than 50 days nor less than 10 days before any such meeting
or submission of a matter to the Limited Partners for a vote by written
Consent.
(d) At each meeting of Limited Partners, the Limited Partners
present or represented by proxy shall elect such officers and adopt such
rules for the conduct of such meeting as they shall deem appropriate.
SECTION 11.2 Voting Rights of Limited Partners.
(a) Without the concurrence of the General Partner and any
Affiliates, Class A Limited Partners may, by the vote of a Majority Interest:
(i) amend this Agreement, subject to the
conditions that such amendment may not (A) in any manner
allow the Limited Partners to take part in the management or
control of the Partnership's business or otherwise modify
their limited liability, (B) without the Consent of the
General Partner affected, alter any of the rights, powers
and duties of such General Partner as set forth in Article
Five, the percentage interest of such General Partner in
Profits or Losses or distributions as set forth in this
Agreement, or (C) without the Consent of a Class B Majority,
adversely affect the percentage interest of the Class B
Limited Partner in Profits or Losses or distributions as set
forth in this Agreement;
(ii) approve or disapprove the sale of all or
substantially all of the assets of the Partnership;
(iii) dissolve the Partnership; or
(iv) remove any General Partner and elect a
replacement therefor, which replacement shall become a
General Partner only in accordance with Section 6.2. If the
Limited Partners vote to remove a General Partner pursuant
to this Section 11.2, they shall provide the removed General
Partner with notice thereof, which notice shall set forth
the Removal Effective Date, which under this Article Eleven,
shall be the date of the vote of a Majority Interest to
remove any General Partner. Any General Partner removed
pursuant to this Article Eleven shall remain liable for all
obligations and liabilities incurred by it as a General
Partner arising out of events occurring before the Removal
Effective Date, but shall be free of any obligation or
liability as a General Partner incurred on account of the
activities of the Partnership from and after the Removal
Effective Date.
(b) A Class A Limited Partner shall be entitled to cast one vote
for each Unit that he owns: (i) at a meeting, in person, by written proxy or
other signed writing directing the manner in which he desires that the vote
be cast ("Proxy"), which writing must be received by the General Partner
prior to such meeting; or (ii) without a meeting, by a Proxy, which must be
received by the General Partner prior to the date upon which the votes of
Limited Partners are to be counted. Every Proxy must be signed by the Class
A Limited Partner or his attorney-in-fact. A Proxy shall not be valid after
the expiration of 12 months from the date thereof, unless otherwise provided
in the Proxy, and shall be revocable at any time at the pleasure of the Class
A Limited Partner executing it. Only the votes of Limited Partners of record
on the Record Date, whether at a meeting or otherwise, shall be counted. The
General Partner shall not be entitled to vote in its capacity as General
Partner. In matters submitted to Limited Partners regarding the removal of a
General Partner or any transaction between the Partnership and a General
Partner, units beneficially owned by a General Partner (or its Affiliates)
which (i) is proposed to be removed by the vote of a Majority Interest, or
(ii) has an interest in the transaction which is the subject of the vote,
shall not be voted on any such question and shall not be counted as
outstanding in calculating whether the vote of a Majority Interest has been
obtained. The laws of the State of Delaware pertaining to the validity and
use of corporate proxies shall govern the validity and use of proxies given
by the Limited Partners.
(c) The Class B Limited Partner shall not be permitted a vote on
any matter except as provided in Sections 6.2(a), 9.2 and 11.2(a)(i). To the
extent the Class B Limited Partner is not permitted a vote on any matter
pursuant to this Section 11.2(c), the General Partner may execute any
amendment hereto or other required document on its behalf pursuant to the
power-of-attorney granted in Section 13.1.
SECTION 11.3 Management of the Partnership.
No Limited Partner in his capacity as such shall take part in the
management or control of the business of the Partnership or transact any
business in the name of the Partnership. No Limited Partner shall have the
power or authority to bind the Partnership or to sign any agreement or
document in the name of the Partnership. No Limited Partner shall have any
power or authority with respect to the Partnership except insofar as the
Consent of the Limited Partners shall be expressly required by this
Agreement. The exercise by the Limited Partners of any of their voting or
other rights pursuant to and in accordance with this Agreement shall not
constitute participating in or management or control over Partnership
business.
SECTION 11.4 Other Activities.
The Limited Partners may engage in or possess interests in other
business ventures of any kind and description for their own accounts.
Neither the Partnership nor any of the Partners shall have any rights by
virtue of this Agreement in or to such business ventures or to the income or
profits derived therefrom.
ARTICLE TWELVE
NON-FOREIGN STATUS
SECTION 12.1 Certification of Non-Foreign Status.
(a) Each Limited Partner shall, upon subscribing for a Unit,
certify whether he is a "United States Person" within the meaning of Code
7701(a)(30) on forms to be provided by the General Partner at the time of
subscription. If at any time a Unit is transferred or Assigned, the
transferee shall certify as to whether he is a United States Person.
(b) Each Partner shall notify the General Partner if he is no
longer a United States Person within 30 days of such change.
(c) Prior to a distribution by the Partnership (or other event
that may create an obligation on the Partnership to withhold tax under
Chapter 3 of the Code), each Partner may be required by the General Partner
to certify as to whether he is a United States Person.
(d) All certifications under this Section 12.1 shall be made on a
form to be provided by the General Partner.
SECTION 12.2 Withholding on Certain Amounts Attributable
to Interests of Non-Resident Alien Partners.
Any tax required to be withheld under Chapter 3 of the Code shall
be charged to that non-resident alien Partner's Capital Account as if the
amount of such tax had been distributed to such Partner. For purposes of
this Section 12.2, any person who fails to provide a certification that he is
a United States Person when requested to do so by the General Partner shall
be treated as a non-resident alien.
ARTICLE THIRTEEN
MISCELLANEOUS PROVISIONS
SECTION 13.1 Appointment of General Partner As Attorney-
In-Fact.
(a) Each Limited Partner, by the execution of this Agreement,
irrevocably constitutes and appoints, with full power of substitution, the
General Partner, the President and any Vice-President or Director of any
corporate General Partner, the general partner of any partnership General
Partner and each of them acting singly, his true and lawful attorney-in-fact
with full power and authority in his name, place and stead, to execute,
certify, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents as may be necessary or appropriate to carry out
the provisions of this Agreement, including without limitation the following:
(i) execution and filing of all certificates and
other instruments (including counterparts of this Agreement
and the Certificate, and any amendment thereof, that any
such Person deems appropriate to form, qualify or continue
the Partnership as a limited partnership (or a partnership
in which the Limited Partners shall have limited liability
comparable to that provided by the Delaware Act on the date
hereof) in any jurisdiction in which the Partnership may
conduct business or in which such formation, qualification
or continuation is, in the opinion of any such Person,
necessary to protect the limited liability of the Limited
Partners;
(ii) execution and filing of any other instrument
or document that may be required to be filed by the
Partnership under the laws of any state or that any such
Person deems advisable to file;
(iii) execution and filing of all amendments to
this Agreement and the Certificate adopted in accordance
with the terms hereof and all instruments that any such
Person deems appropriate to reflect a change or modification
of the Partnership in accordance with the terms of this
Agreement; and
(iv) execution and filing of any instrument or
document, including amendments to this Agreement and the
Certificate, that may be required to effect the continuation
of the Partnership, the admission of a Limited Partner or
substituted Limited Partner or an additional or successor
General Partner, or the dissolution and termination of the
Partnership (provided such continuation, admission or
dissolution and termination are in accordance with the terms
of this Agreement), or to reflect any reductions in the
amount of Capital Contributions.
(b) The appointment by each Limited Partner of each such Person as
his attorney-in-fact is irrevocable and shall be deemed to be a power coupled
with an interest, in recognition of the fact that each of the Partners under
this Agreement shall be relying upon the power of such Person to act as
contemplated by this Agreement in any filing and other action by such Person
on behalf of the Partnership, and shall survive the Bankruptcy, death,
incompetence or dissolution of any Person hereby giving such power and the
transfer or assignment of all or any part of the Partnership Interests of
such Person; provided that, in the event of the transfer by a Limited Partner
of all or any part of his Partnership Interests, the foregoing power of
attorney of a transferor Limited Partner shall survive such transfer only
until such time, if any, as the transferee shall have been admitted to the
Partnership as a substituted Limited Partner and all required documents and
instruments shall have been duly executed to effect such substitution.
SECTION 13.2 Signatures; Amendments.
(a) Each Limited Partner, General Partner, additional General
Partner and successor General Partner shall become a signatory hereto by
signing, directly or by an attorney-in-fact, this Agreement and such other
instrument or instruments, and in such manner and at such time, as the
General Partner shall determine. By so signing, each such Limited Partner,
General Partner, or additional or successor General Partner shall be deemed
to have adopted, and to have agreed to be bound by, all the provisions of
this Agreement, as amended from time to time; provided that no such
counterpart shall be binding until it shall have been accepted by the General
Partner.
(b) In addition to any amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the General
Partner, without the Consent of the Limited Partners, to: (i) add to the
representations, duties or obligations of the General Partner or surrender
any right or power granted to the General Partner herein; (ii) cure any
ambiguity, correct or supplement any provision herein that may be
inconsistent with any other provision herein or make any other provision with
respect to matters or questions arising under this Agreement that shall not
be inconsistent with the provisions of this Agreement; (iii) change the name
of the Partnership; and (iv) delete or add any provision of this Agreement
required to be deleted or added by the staff of the Commission or other
federal agency or by a state securities commissioner or other governmental
official, which deletion or addition is deemed by such Commission, agency or
official to be for the benefit or protection of, or not adverse to, the
Limited Partners; provided that no amendment shall be adopted pursuant to
this Section 13.2(b) unless the adoption thereof (A) is for the benefit of or
not adverse to the interests of the Limited Partners, (B) is consistent with
Section 11.3, (C) does not affect the distribution of Cash From Operations,
Cash From Sales, Liquidation Proceeds or the allocation of Profits and Losses
for tax purposes among the Limited Partners, and (D) does not affect the
limited liability of the Limited Partners or the status of the Partnership as
a partnership for federal income tax purposes.
(c) If this Agreement shall be amended as a result of adding or
substituting a Limited Partner, the amendment to this Agreement need only be
signed by one General Partner. If this Agreement or the Certificate shall be
amended to reflect the designation of an additional General Partner, such
amendment shall be signed by at least one General Partner and by such
additional General Partner. If this Agreement or the Certificate shall be
amended to reflect the Withdrawal of a General Partner when the business of
the Partnership is being continued, such amendment shall be signed by at
least one General Partner other than the withdrawing General Partner;
provided that, in each such case, such signature shall have been authorized
by all General Partners other than the withdrawing General Partner.
(d) In making any amendments, there shall be prepared and filed by
the General Partner for recording such documents and certificates as shall be
required to be prepared and filed under the Delaware Act and under the laws
of any other jurisdictions under which the Partnership is then formed or
qualified.
(e) Any provision to the contrary herein notwithstanding, the
General Partner may, without the consent of a Majority Interest, make any
technical changes to the provisions of this Agreement to conform the
allocations set forth in Article Four to the requirements of regulations
under Code 704(b) and 704(c). Any amendment made by the General Partner in
accordance with this Section 13.2(e) shall be made pursuant to appropriate
advice of counsel, and shall be deemed to have been made pursuant to the
fiduciary obligations of the General Partner to the Partnership and the
Limited Partners.
SECTION 13.3 Ownership By Limited Partners of General Partner
or Its Affiliates.
Except as to the holding of any Class A Units by the General
Partner and its Affiliates for their own accounts, as permitted by Section
3.4, no Limited Partner shall at any time, either directly or indirectly, own
any stock or other interest in any General Partner or in any Affiliate of any
General Partner if such ownership by itself or in conjunction with the stock
or other interest owned by other Limited Partners would, in the Opinion of
Counsel, jeopardize the classification of the Partnership as a partnership
for federal income tax purposes. Each Limited Partner shall promptly supply
any information requested by the General Partner in order to establish
compliance by the Limited Partner with the provisions of this Section 13.3.
SECTION 13.4 Notices.
All Notices under this Agreement shall be in writing and shall be
given to the Partners entitled thereto by personal service or by certified
or registered mail, return receipt requested, to the Limited Partners, at
their respective addresses on file with the General Partner and, to the
General Partner, at the principal place of business of the Partnership as set
forth in this Agreement or as changed by Notice given pursuant hereto. The
date of personal delivery or the date of mailing thereof, as the case may be,
shall be deemed the date of receipt of Notice.
SECTION 13.5 Binding Provisions.
The covenants and agreements contained herein shall be binding
upon, and inure to the benefit of, the heirs, executors, administrators,
personal representatives, successors and permitted assigns of the respective
parties hereto.
SECTION 13.6 Applicable Law.
This Agreement shall be governed and construed and enforced in
accordance with the laws of the State of Delaware without regard to
principles of conflict of laws; provided, however, that causes of action for
violations of federal or state securities laws shall not be governed by this
Section 13.6.
SECTION 13.7 Counterparts.
This Agreement may be executed in several counterparts, all of
which together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not executed the same counterpart,
except that no counterpart shall be binding unless executed by the General
Partner.
SECTION 13.8 Separability of Provisions.
Each provision of this Agreement shall be considered separable and
if, for any reason, any provision or provisions hereof are determined to be
invalid and contrary to any existing or future law, such invalidity shall not
impair the operation of or affect those portions of this Agreement that are
valid.
SECTION 13.9 Captions.
Article and Section titles and any table of contents are for
convenience of reference only and shall not control or alter the meaning of
this Agreement as set forth in the text.
SECTION 13.10 Partnership Property; No Partition.
No Partner or successor in interest to any Partner may have any
property of the Partnership partitioned or, except as provided by applicable
law, file a complaint or institute any proceeding at law or in equity to have
the property partitioned, and each Partner, for itself, its successors,
representatives and permitted assigns, hereby waives any right to proceed
under any applicable law or otherwise to partition any Partnership property.
Any creditor of a Partner shall have recourse only against such Partner's
interest in the Partnership, but such creditor shall not have any recourse
against the property of the Partnership.
SECTION 13.11 No Benefit to Third Parties.
The provisions of this Agreement shall not be construed for the
benefit of or enforceable by a Person not a party hereto, including without
limitation limited to any creditor of any Partner or any of their Affiliates.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
GENERAL PARTNER:
CAI Equipment Leasing IV Corp.
By: /s/John F. Olmstead
----------------------------------
John F. Olmstead, President
CLASS B LIMITED PARTNER:
Capital Associates International, Inc.
By: /s/John F. Olmstead
----------------------------------
Title: Vice President
WITHDRAWING ORIGINAL LIMITED PARTNER:
/s/John F. Olmstead
----------------------------------
John F. Olmstead
CLASS A LIMITED PARTNERS:
By: CAI Equipment Leasing IV Corp.
By: /s/John F. Olmstead
----------------------------------
John F. Olmstead, President
As Attorney-in-Fact for such Class A
Limited Partners