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EXHIBIT 3.3
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LIMITED PARTNERSHIP AGREEMENT
OF
CRONOS GLOBAL INCOME FUND XVI, LP.
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This Limited Partnership Agreement ("Agreement"), originally made and
entered into on August 31, 1995, and hereby amended and restated as of December
28, 1995, is by and among Cronos Capital Corp., a California corporation, as
General Partner, Dennis J. Tietz as the initial Limited Partner, and each Person
who shall become a party to this Agreement as an Additional Limited Partner in
accordance with the California Revised Limited Partnership Act.
In consideration of the mutual promises made herein, the parties, intending
to be legally bound, hereby agree as follows:
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ARTICLE I
DEFINED TERMS
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The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article I. The singular
shall include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, as the context requires.
"Acquisition Expenses" refers to 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
the selection and acquisition of equipment, whether or not acquired by the
Partnership.
"Acquisition Fees" refers to the fees and commissions paid by any party in
connection with the initial purchase of Equipment acquired by the Partnership,
including in the computation of such fees or commissions any commission,
selection fee, construction supervision fee, financing fee, non-recurring
management fee, or any fee of a similar nature, however designated.
"Additional Limited Partners" means those Persons admitted to the
Partnership pursuant to Section 3.3 hereof.
"Adjusted Capital Account Deficit" refers, with respect to any Partner, to
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
(i) Crediting such Capital Account with any amounts which such Partner
is obligated to restore or is deemed to be obligated to restore thereto
pursuant to the penultimate sentence of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Treasury Regulations; and
(ii) Debiting such Capital Account with the items described in
Sections 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations, and shall be interpreted consistently therewith.
"Adjusted Capital Contributions" refers to the Limited Partners' Capital
Contributions as reduced by Distributions of Sale Proceeds and Distributable
Cash From Operations made to the Limited Partners to the extent that such
Distributions exceed an 8% cumulative, compounded (daily) annual return on their
Adjusted Capital Contributions.
"Adjusted Payout" refers to the point in time at which the Limited Partners
have received Distributions in an amount equal to their Capital Contributions
plus an 8% cumulative, compounded (daily), annual return on their Adjusted
Capital Contributions, commencing upon acceptance by the Partnership of the
Limited Partners' subscriptions pursuant to Section 3.3(d) hereof.
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"Affiliate" means, when used with reference to a specified Person, (i) any
Person that directly or indirectly through one or more intermediaries controls
or is controlled by or is under common control with the specified Person, (ii)
any Person owning or controlling 10% or more of the outstanding voting
securities of the specified Person, (iii) any Person that is an executive
officer or director of, general partner in, or serves in a similar capacity to,
the specified Person or of which the specified Person is an executive officer,
director, or general partner or with respect to which the specified Person
serves in a similar capacity.
"Bankruptcy" as used in Article XIII of this Agreement refers, and only
refers, to the following events: (i) an order for relief entered against the
General Partner under Chapter 7 of the Federal bankruptcy law, or (ii) the
General Partner (A) making a general assignment for the benefit of creditors;
(B) filing a voluntary petition under the Federal bankruptcy law; (C) filing a
petition or answer seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any statute,
law, or regulation; (D) filing an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against it in any
proceeding of said nature; or (E) seeking, consenting to, or acquiescing in the
appointment of a trustee, receiver, or liquidator of all or any substantial part
of its assets and properties.
"Capital Account" refers to the capital account maintained by the
Partnership for each Partner pursuant to Section 14.1(d) hereof in accordance
with Section 1.704-1(b)(2)(iv) of the Treasury Regulations.
"Capital Contributions" refers to the total amount of money contributed to
the Partnership (prior to the deduction of any underwriting or sales commissions
or expenses) by all the Partners or a class of Partners or any one Partner, as
the case may be (or the predecessor of such Partner or Partners), reduced by the
return, if any, of capital contributions to said Partners or Partner pursuant to
Section 3.4(c) hereof.
"Cash From Operations" for any fiscal period refers to the sum of (i) cash
receipts from operations, including, but not limited to, per diem and other
rental charges arising from the leasing of Equipment and interest, if any,
earned on funds on deposit for the Partnership, but shall not include any Sale
Proceeds, minus (ii) all cash funds used to pay expenses and costs incurred in
connection with the ownership, management, use and/or operation of the
Equipment, including, but not limited to, agent fees and expenses; depot
expenses for inspection, handling and storage; the Management Fee; expenses of
the General Partner or its Affiliates reimbursable to the General Partner or its
Affiliates pursuant to Section 4.4 hereof; Debt Service; maintenance; repair
costs not assumed and paid by lessees; insurance premiums; accounting and legal
fees and expenses; data processing; bad debt expenses; charges, assessments or
levies imposed upon or against the Equipment; ad valorem, gross receipts and
other property taxes levied against the Equipment; but shall not include cost
recovery deductions or amortization of capital expenditures.
"Closing Date" shall mean the date, as designated by the General Partner
and the Underwriter, as of which the Units shall cease being offered to the
public by the Partnership, and in no event later than December 27, 1997.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consent" means either the consent given by vote at a meeting called and
held in accordance with the provisions of Section 8.1 hereof or written consent
given in accordance with Section 8.2 hereof, as the case may be, of a Person to
do the act or thing for which the consent is solicited, or the act of granting
such consent, as the context may require.
"Debt Service" refers to all payments required to be made in connection
with any loan to the Partnership.
"Delivery Charges" means the costs incurred in transporting Equipment from
the manufacturer's production facility to the point of origin of the initial
lease.
"Distributable Cash From Operations" means, for any fiscal period, Cash
From Operations as adjusted to conform the Partnership's cash balances to any
reserve requirement established by the General Partner for the
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proper operation of the business of the Partnership.
"Distributions" refers to any cash distributions to the Partners of
Distributable Cash From Operations or Sale Proceeds.
"Equipment" refers to the marine dry cargo and special purpose containers
acquired by the Partnership for lease to third parties.
"Equipment Management" refers to the personnel and services necessary to
the leasing activities of the Partnership, including, but not limited to,
leasing and re-leasing of the Partnership's Equipment, arranging for necessary
maintenance and repair of the Equipment, collecting rental revenues, paying
operating expenses of the Equipment, determining that the Equipment is used in
accordance with the operative contractual arrangements, and providing clerical
and bookkeeping services necessary to the leasing of the Partnership's
Equipment.
"Escrow Agent" refers to Bank of America, San Francisco, California.
"Front-End Fees" refers to the fees and expenses paid by any Person for any
services rendered during the Partnership's organizational or acquisition phase,
including Offering and Organizational Expenses, all underwriting and sales
commissions paid in connection with the offering of Units in the Partnership,
Leasing Fees, Acquisition Fees, Acquisition Expenses, and any other similar fees
and expenses, however designated by the General Partner. Front-End Fees do not
include any Acquisition Fees or Acquisition Expenses paid by a manufacturer of
equipment to any of its employees, unless such Persons are Affiliates of the
General Partner.
"Full Payout Lease" refers to a lease pursuant to which the noncancellable
rental payments due during the initial term of the lease equal or exceed the
Purchase Price of the underlying Equipment plus all interest costs and related
financing charges payable on any debt incurred to acquire such Equipment.
"General Partner" refers to Cronos Capital Corp., a California corporation,
or any Person or Persons who, at the time of reference thereto, has been
admitted to the Partnership as a successor general partner to it or as an
additional general partner.
"Gross Lease Revenues" refers to the gross revenues received by the
Partnership from the leasing of the Equipment (prior to the deduction of any
expenses incurred in connection therewith), but shall not include Sale Proceeds.
"Gross Proceeds" means the total amount of money contributed to the
Partnership (prior to the deduction of any underwriting or sales commissions or
expenses) by all Additional Limited Partners, unreduced by any return of capital
contributions pursuant to Section 3.4(c) hereof.
"Independent Expert" refers to a Person with no current material or prior
material business or personal relationship with a Sponsor of the Partnership,
who is engaged to a substantial extent in the business of rendering opinions
regarding the value of assets of the type held by the Partnership, and who is
qualified to perform such work.
"Investment in Equipment" refers to the amount of Capital Contributions
actually paid or allocated to the purchase of Equipment by the Partnership,
including the purchase of Equipment, working capital reserves allocable thereto
not in excess of 3% of Capital Contributions, and other cash payments such as
interest and taxes but excluding Front-End Fees.
"IRA" refers to an Individual Retirement Account established under Section
408 of the Code.
"Leasing Company" refers to Cronos Containers Limited, a U.K. corporation,
or any Person or Persons who, at the time of reference thereto, has succeeded to
the duties and responsibilities of Cronos Containers Limited.
"Leasing Fees" refers to the total of all fees and commissions paid by any
party in connection with the initial lease of Equipment acquired by the
Partnership.
"Letter of Credit Commissions" refers to the commissions customarily
charged by banks for the issuance and/or negotiation of letters of credit.
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"Limited Partner" refers to the initial Limited Partner and to a purchaser
of Units in the Partnership who is admitted thereto as a limited partner.
"Management Fee" refers to the fee payable to the Leasing Company pursuant
to Section 4.3 hereof for providing Equipment Management.
"Minimum Gain" refers to the amount determined by computing, with respect
to each non-recourse liability of the Partnership, the amount of gain (of
whatever character), if any, that would be realized by the Partnership if it
disposed (in a taxable transaction) of the Equipment subject to such liability
in full satisfaction thereof, and by then aggregating the amounts so computed.
"Net Proceeds" equals Gross Proceeds minus (i) all underwriting and sales
commissions payable thereon, and (ii) all Offering and Organizational Expenses
payable therefrom pursuant to Section 5.2 hereof.
"Nonrecourse Liability" refers to the term of the same name as defined in
Section 1.752-1(a)(2) of the Treasury Regulations.
"Offering and Organizational Expenses" means the expenses incurred in
connection with the organization of the Partnership and the offer and sale to
the public of Units therein, including all expenses and fees for qualifying such
Units under Federal and state securities laws; all legal and accounting fees;
all printing and mailing expenses; all escrow fees and charges; reimbursement of
the Selected Dealers for bona fide accountable expenses incurred by them in
performing due diligence investigations of the Partnership; and all other
expenses, fees, and charges incurred or related to the offer and sale of such
Units, but excluding all underwriting and sales commissions paid in connection
with the offering.
"Operating Lease" refers to a lease of Equipment pursuant to which the
aggregate, non-cancellable rental payments due during the initial term of the
lease are less than the Purchase Price of the Equipment subject to the lease.
"Other Acquisition Costs" of Equipment refer to the costs of any
independent inspection thereof procured by the General Partner; independent
consultants' fees in connection with the development and/or review of design
specifications; and legal fees and expenses, travel and communication expenses,
costs of appraisals, accounting fees and expenses, and miscellaneous expenses
relating to the selection and acquisition of equipment, whether or not acquired
by the Partnership.
"Partner Nonrecourse Debt" refers to the term of the same name as defined
in Section 1.704-2(b)(4) of the Treasury Regulations.
"Partner Nonrecourse Debt Minimum Gain" refers to the amount, with respect
to Partner Nonrecourse Debt, equal to the Minimum Gain of the Partnership that
would result if the Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the Treasury
Regulations.
"Partner Nonrecourse Deductions" refers to those deductions as defined in
Sections 1.704-2(i)(1) and 1.704(i)(2) of the Treasury Regulations.
"Partners" refers to both the General Partner and to the Limited Partners,
and reference to a "Partner" refers to any one of the Partners.
"Partnership" refers to the limited partnership created under this
Agreement.
"Person" means an individual, partnership, corporation, trust, or other
entity.
"Prospectus" means the prospectus contained in the registration statement
filed with the Securities and Exchange Commission for the registration of the
Units under the Securities Act of 1933, in the final form in which said
prospectus is filed pursuant to Rule 424(b) thereunder with said Commission and
as it may thereafter be supplemented or amended pursuant to said Act.
"Purchase Price" of an item of new Equipment equals the manufacturer's
invoice cost thereof plus the Delivery Charges and any letter of credit
commissions, cable charges, and letter of credit fees associated therewith; the
"Purchase Price" of an item of used Equipment equals the price paid by the
Partnership to the seller of such Equipment plus any delivery charges, remarking
and other related costs, if any, associated therewith. With respect to any item
of Equipment purchased from the General
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Partner, the Purchase Price shall equal, if the Equipment is acquired by the
Partnership within six months of its acquisition by the General Partner, the
manufacturer's invoice cost incurred by the General Partner, plus any delivery
charges and letter of credit commissions, cable charges, and letter of credit
fees associated therewith or, if acquired after six months after the Equipment's
acquisition by the General Partner, the Purchase Price shall equal the lesser of
the foregoing amount or the fair market value of the Equipment. The Purchase
Price of Equipment acquired from the General Partner shall be further adjusted
in accordance with the provisions of Section 7.2(g) hereof.
"Qualified Plans" refers to qualified retirement plans as defined in
Section 401(a) of the Code.
"Roll-Up" refers to the acquisition, merger, conversion, or consolidation,
either directly or indirectly, of the Partnership and the issuance of securities
by a Roll-Up Entity. The term does not include:
(i) A transaction involving securities of a Person that has 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;
(ii) 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:
(A) The Limited Partners' voting rights;
(B) The term of existence of the Partnership;
(C) The compensation payable to the General Partner or its
Affiliates; or
(D) The Partnership's investment objectives.
"Roll-Up Entity" refers to the partnership, corporation, trust, or other
entity that would be created or would survive after the successful completion of
a proposed Roll-Up.
"Sale" means any sale, exchange or other disposition of Equipment, any
recovery of damage awards or insurance proceeds (other than business or rental
interruption proceeds), or any debt refinancing. A Sale shall not include any
return of capital contributions to the Limited Partners pursuant to Section
3.4(c) hereof.
"Sale Proceeds" refers to all proceeds from a Sale less the following:
(i) The amount of cash paid or to be paid in connection with such Sale
(which shall include, with regard to damage recoveries or insurance
proceeds, cash paid or to be paid in connection with repairs, as determined
in the discretion of the General Partner, of damage of the affected
Equipment);
(ii) The amount necessary for the payment of all debts and obligations
of the Partnership related to the affected Equipment; and
(iii) The amount considered appropriate by the General Partner to
provide reserves to pay taxes, insurance, repairs or other costs and
expenses of the Partnership, whether or not related to the affected
Equipment.
"Sales Period" refers to the period of time commencing with the date of the
Prospectus and terminating on the Closing Date.
"Selected Dealers" refers to those members of the National Association of
Securities Dealers, Inc. that are selected by the Underwriter to participate in
the offer and sale of the Units to the public.
"Sponsor" refers to the General Partner and to any other Person directly or
indirectly instrumental in organizing, wholly or in part, the Partnership or to
any other Person who will manage or participate in the management of the
Partnership, and any Affiliate of any such Person. The term 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, and the term does not
include wholly independent third parties such as attorneys, accountants, and
underwriters whose only compensation is for professional services rendered in
connection with the offering
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of the Partnership Units or the business of the Partnership.
"Subscription Proceeds" means the monies tendered to the Partnership by
subscribers for the Units.
"Substituted Limited Partner" means any Person admitted to the Partnership
as a Limited Partner pursuant to the provisions of Section 10.2 hereof.
"Underwriter" refers to Cronos Securities Corp., a California corporation
and an affiliate of Cronos Capital Corp.
"Unit" means a limited partnership interest in the Partnership representing
an investment therein of $20 ($18.40 for employees of the General Partner or any
Affiliate of the General Partner, employees of any Selected Dealer or of any
investment advisor affiliated with a Selected Dealer).
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ARTICLE II
FORMATION, NAME, PLACE OF BUSINESS,
PURPOSE AND TERM
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2.1 FORMATION
The parties hereto have formed on September 1, 1995 a limited partnership
pursuant to the provisions of the California Revised Limited Partnership Act.
2.2 NAME, PLACE OF BUSINESS
The Partnership shall be conducted under the name of CRONOS GLOBAL INCOME
FUND XVI, L.P. The place of business and principal office of the Partnership,
unless changed by the General Partner, shall be 444 Market Street, San
Francisco, California 94111. Notification of any change of the Partnership's
place of business and principal office shall be given to the Limited Partners.
2.3 PURPOSE
The purpose and character of the business of the Partnership is to
purchase, own, manage, operate, lease, and sell marine dry cargo containers,
special purpose containers (including, without limitation, refrigerated
containers, open top containers, tank containers, bulk containers, and flat rack
containers), and to engage in any activities related or incidental thereto.
2.4 TERM
The Partnership commenced on September 1, 1995 and shall continue in full
force and effect until December 31, 2015, or until dissolution prior thereto
pursuant to the provisions hereof.
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ARTICLE III
PARTNERS AND CAPITAL;
INVESTMENT IN EQUIPMENT
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3.1 GENERAL PARTNER
The name and address of the General Partner of the Partnership are set
forth in Schedule A attached hereto and incorporated by reference herein. At
such time as Additional Limited Partners are first admitted to the Partnership
pursuant to the provisions of Section 3.3(e) hereof, the General Partner shall
contribute, as its Capital Contribution to the Partnership, $1,000. Except as
set forth in Section 13.2 hereof, the General Partner, as such, shall not be
required to make any additional Capital Contributions to the Partnership.
3.2 INITIAL LIMITED PARTNER
The name, address and Capital Contribution of the initial Limited Partner
of the Partnership are set forth in Schedule A attached hereto and incorporated
by reference herein. The initial Limited Partner shall not be required to make
any
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additional Capital Contribution to the Partnership, and shall not voluntarily
withdraw or retire as a Limited Partner from the Partnership.
3.3 ADDITIONAL LIMITED PARTNERS
(a) The General Partner is authorized to admit to the Partnership
Additional Limited Partners if, (i) after the admission of such Additional
Limited Partners, Gross Proceeds are not less than $2,000,000, and not more than
such maximum amount (not to exceed $150,000,000) as the General Partner shall
determine, and (ii) the Additional Limited Partners number more than 100
(excluding therefrom Pennsylvania residents, the General Partner and any
Affiliate of the General Partner as to any Units purchased by them).
(b) The subscription (unreduced by any return thereof pursuant to Section
3.4(c) hereof) of each Additional Limited Partner shall be for not less than 125
Units (50 Units for IRAs and Qualified Plans) and may be in such greater
integral multiples of one Unit as such Additional Limited Partner and the
General Partner shall agree upon. All subscriptions shall be paid in cash.
(c) Each Additional Limited Partner shall, as a condition to being admitted
to the Partnership, satisfy the conditions of Section 15.2 hereof.
(d) All subscriptions for Units shall be accepted or rejected by the
Partnership within 30 days of receipt by the Partnership, and if rejected the
Subscription Proceeds of the subscriber will be returned to him forthwith,
without interest or deduction. If not rejected within 30 days of receipt by the
Partnership, any subscription shall be deemed to be accepted. Subject to the
provisions of subsection (e) below, the General Partner shall admit Additional
Limited Partners not later than the last day of the calendar month following the
date of acceptance by the Partnership of their subscriptions until the Closing
Date. The Partnership shall not admit Additional Limited Partners whose
subscriptions are dated after the Closing Date.
(e) All Subscription Proceeds shall be received by the Partnership in trust
and shall be deposited in an interest-bearing escrow account with the Escrow
Agent. On receipt and acceptance of a minimum of $2,000,000 in Subscription
Proceeds from more than 100 subscribers (not counting Pennsylvania residents,
the General Partner or any Affiliate of the General Partner as to any Units
purchased by them), the Partnership will admit subscribers into the Partnership
as Additional Limited Partners not later than 15 days after the receipt of such
minimum. From time to time thereafter as subscribers for Units are admitted to
the Partnership as Additional Limited Partners, there shall be transferred to
the Partnership from the escrow account such subscriber's Subscription Proceeds.
The interest earned on Subscription Proceeds will not become part of the
Partnership's capital. Instead, within 60 days after the subscribers are
admitted as Limited Partners to the Partnership, the General Partner will pay to
such Limited Partners all interest earned on their subscriptions proceeds
pending admission to the Partnership. If $2,000,000 in Subscription Proceeds
from 100 subscribers (as aforesaid) for the Units are not obtained by the
Partnership by the date that is twelve months from the effective date of the
Prospectus, then all Subscription Proceeds will be promptly refunded to the
subscribers together with any interest earned thereon but without deduction of
any kind.
3.4 CAPITAL OF THE PARTNERSHIP
(a) Other than as provided in Section 3.3(e) hereof, no Partner shall be
paid interest on any Capital Contribution.
(b) No Partner shall have the right to withdraw or receive any return of
his Capital Contribution, except to the extent and as is specifically provided
in subsection (c) below.
(c) In the event that any portion of Net Proceeds is not invested or
committed for investment in Equipment within twenty-four (24) months after the
date of the Prospectus (except for any amounts set aside, in the discretion of
the General Partner, for reserves), such portion of Net Proceeds shall be
distributed to the Limited Partners pro rata to their Capital Contributions (as
calculated before any such distribution) by the Partnership as a return of
capital, together with a pro rata portion thereon of all Offering and
Organizational Expenses and
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sales commissions. For the purpose of this provision, Net Proceeds will be
deemed to have been committed to investment in Equipment and will not be
returned to the Limited Partners to the extent written agreements in principle,
commitment letters, letters of intent or understanding, production orders,
option agreements or any similar contracts or understandings were at any time
executed or agreed to by the Partnership, and to the extent any Net Proceeds
have been reserved to make contingent payments in connection with any Equipment.
In addition, for the purpose of this provision, the "date of the Prospectus"
shall refer to the date of any supplement or amendment thereof as to Net
Proceeds derived from the sale of Units occurring after the date of any such
supplement or amendment provided, however, that, in all events, any portion of
the Net Proceeds that is not invested or committed for investment in Equipment
within six (6) months after the Closing Date (except for amounts set aside, in
the discretion of the General Partner for reserves), shall be distributed to the
Limited Partners pro rata to their Capital Contributions (as calculated before
any such distribution) by the Partnership as a return of capital, together with
a pro rata portion thereon of Offering and Organizational Expenses and sales
commissions.
3.5 INVESTMENT OF LIMITED PARTNERS' CAPITAL CONTRIBUTIONS IN EQUIPMENT
(a) The Partnership shall allocate at least 80% of the Limited Partners'
Capital Contributions to Investment in Equipment.
(b) Notwithstanding the provisions of sub-section (a) hereof, if the
Partnership incurs any indebtedness encumbering the Equipment of the
Partnership, then and in such event the Partnership shall commit a percentage of
the Limited Partners' Capital Contributions to Investment in Equipment which is
equal to the greater of:
(i) 80% of the Limited Partners' Capital Contributions reduced by
.0625% for each 1% of indebtedness encumbering the Equipment of the
Partnership; or
(ii) 75% of the Limited Partners' Capital Contributions.
To calculate the percent of indebtedness encumbering the Equipment of the
Partnership under paragraph (i) above, divide the amount of indebtedness by the
Purchase Price of the Equipment, excluding Front-End Fees. The quotient is
multiplied by 0.0625% to determine the percentage to be deducted from 80%. The
following are examples of the application of the formula set forth in this
subsection (b):
(iii) No indebtedness--80% of the Limited Partners' Capital
Contributions shall be committed to Investment in Equipment;
(iv) 50% indebtedness--
50% X .0625% = 3.125%
80%-3.125% = 76.875% of the Limited Partners' Capital Contributions shall
be committed to Investment in Equipment; and
(v) 80% indebtedness--
80% X .0625% = 5%
80%-5% = 75% of the Limited Partners' Capital Contributions shall be
committed to Investment in Equipment.
(c) The foregoing provisions of this Section 3.5 requiring the Partnership
to invest a certain minimum amount of the Limited Partners' Capital
Contributions in Equipment shall not be effective during the period of time that
the Partnership is acquiring Equipment from the Net Proceeds, but shall apply,
and be effective, at such time as the Net Proceeds have been fully invested in
Equipment (or returned, in part, to the Limited Partners pursuant to Section
3.4(c) hereof), and thereafter during the period of time the Partnership may
purchase Equipment. If Net Proceeds are returned to the Limited Partners
pursuant to the provisions of Section 3.4(c) hereof and, as a result of such
return, the amount of the Limited Partners' Capital Contributions invested or
available for Investment in Equipment is less than the minimum required
percentage, then and in such event the General Partner shall promptly return to
the Partnership sufficient monies from the fees, sales commissions, and cost
reimbursements paid by the Partnership to it and its Affiliates to enable the
Partnership to achieve the minimum required percentage.
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3.6 LIABILITY OF LIMITED PARTNERS
No Limited Partner shall be personally liable for any of the debts of the
Partnership or for any losses thereof beyond the amount of his Capital
Contribution to the Partnership plus the amount equal to his share of the
undistributed profits of the Partnership, if any. When a Limited Partner has
received a Distribution from the Partnership, he shall be obligated to return
the Distribution to the Partnership to the extent that at the time of the
Distribution, the Limited Partner knew that immediately after giving effect to
the Distribution, all liabilities of the Partnership, other than liabilities to
Partners on account of their interest in the Partnership and other than
liabilities as to which recourse of creditors is limited to specified assets of
the Partnership, exceeded the fair value of the assets of the Partnership other
than those assets which are subject to liabilities (to the extent of the
liabilities) as to which recourse of creditors is so limited. The General
Partner shall not have any personal liability for the repayment of the Capital
Contribution of any Limited Partner.
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ARTICLE IV
COMPENSATION TO GENERAL PARTNER AND AFFILIATES
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4.1 UNDERWRITING COMMISSION
In consideration of the Underwriter's services rendered in connection with
the offer and sale of the Units to the public, the Partnership shall pay an
underwriting commission to the Underwriter, an Affiliate of the General Partner,
equal to the difference between 10% of Gross Proceeds and all sales and
wholesale commissions paid by the Partnership to the Selected Dealers. The
aggregate of all commissions payable by the Partnership to the Underwriter and
to the Selected Dealers shall not exceed 10% of Gross Proceeds. The Partnership
may also, as a component of Offering and Organizational Expenses, reimburse the
Selected Dealers for expenses incurred by them in performing due diligence
investigations of the Partnership or the General Partner, but such
reimbursements shall not exceed 0.5% of Gross Proceeds. The underwriting
commission shall be paid by the Partnership to the Underwriter from time to time
during the Sales Period as subscribers for the Units are admitted as Additional
Limited Partners to the Partnership.
4.2 ACQUISITION FEE
In consideration of the General Partner's services rendered in connection
with the Partnership's purchases of Equipment, which shall include the payment
by the General Partner of all Other Acquisition Costs thereof, the Partnership
shall pay to the General Partner an Acquisition Fee equal to 5% of the Purchase
Price of the Equipment purchased by the Partnership. The Acquisition Fee shall
be payable to the General Partner with respect to Equipment acquired from Net
Proceeds, and shall be paid at such time as the Equipment is delivered to the
Partnership; provided, however, that with respect to Equipment purchased by the
Partnership with short-term borrowings incurred in anticipation of the sale of
Units by the Partnership, no Acquisition Fee shall be paid with respect to such
Equipment until such time as sufficient Net Proceeds are raised by the
Partnership to repay the monies borrowed to purchase such Equipment. No
Acquisition Fee shall be paid with respect to any Equipment purchased with the
proceeds of any term loan obtained by the Partnership. The amount of the
Acquisition Fee payable to the General Partner over the life of the Partnership
shall be limited to an amount that, when added to all other Front-End Fees
(other than those paid by the General Partner) does not exceed 20% of Gross
Proceeds.
4.3 MANAGEMENT FEE
In consideration of the Leasing Company's services in performing Equipment
Management for the Partnership, the Partnership shall pay to the Leasing
Company, an Affiliate of the General Partner, a Management Fee equal to 7% of
Gross Lease Revenues attributable to Operating Leases plus 2% of Gross Lease
Revenues attributable to Full Payout Leases. The Manage-
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ment Fee shall be payable to the Leasing Company monthly, based upon Gross Lease
Revenues for the prior month. The services to be rendered by the Leasing Company
to the Partnership, and the compensation payable therefor, shall be set forth in
a written agreement between the Leasing Company and the Partnership. Other than
any amendment or modification thereto that reduces the Leasing Company's
compensation or increases its duties and responsibilities, all modifications and
amendments to such Agreement shall require the consent of the holders of a
majority of the outstanding Units. The agreement shall provide that the
Partnership may cancel the agreement, without penalty, upon 60 days' notice,
with or without cause. The Management Fee payable to the Leasing Company shall
be reduced by the amount of any monies paid by any Person (other than the
Partnership) to the General Partner, to the Leasing Company, or to any Affiliate
of the General Partner for services rendered by them in managing the leasing
operations of the Partnership.
4.4 REIMBURSEMENT FOR CERTAIN SERVICES
(a) The Partnership shall reimburse the General Partner and its Affiliates,
including the Leasing Company, for (i) salaries and related salary expenses for
services which could be performed directly for the Partnership by independent
parties, such as legal, accounting, transfer agent, data processing, operations,
communications, duplicating, and other such services; (ii) preparing Partnership
reports and communications to the Limited Partners; and (iii) performing
administrative services necessary to the prudent operation of the Partnership.
No reimbursement under clauses (i) through (iii) of this Section 4.4 shall be
permitted for specific services for which the General Partner or its Affiliates
or the Leasing Company receive a separate fee or for which they are separately
reimbursed (such as for Offering and Organizational Expenses). No reimbursement
under clauses (i) through (iii) of this Section 4.4 shall be permitted for the
salaries, fringe benefits, travel expenses, and other administrative items
incurred by or allocated to any "Controlling Person," or for any direct or
indirect expenses in performing services for the Partnership, such as rent or
depreciation, utilities, capital equipment, or other administrative items.
"Controlling Person" for purposes of this Section 4.4 shall mean any individual,
regardless of title, who performs executive or senior management functions for
the General Partner similar to those of directors, executive management and
senior management, or any Person who either holds a 5% or more equity interest
in the General Partner or has the power to direct or cause the direction of the
General Partner, whether through the ownership of voting securities, by
contract, or otherwise, or, in the absence of a specific role or title, any
Person having the power to direct or cause the direction of the management level
employees and policies of the General Partner.
(b) In no event shall any amount charged by the General Partner or by any
Affiliate to the Partnership as a reimbursable expense pursuant to the
provisions of subsection (a) above exceed the lesser of (i) the actual cost of
such services, or (ii) the amount which the Partnership would be required to pay
to independent parties for comparable services in the same geographic location.
In the Partnership's annual report to the Limited Partners, there shall be
provided an itemized breakdown of reimbursements made to the General Partner and
its Affiliates for the services provided to the Partnership and reimbursed to
the General Partner and its Affiliates pursuant to the foregoing provisions of
this Section 4.4. The reimbursement for expenses provided by this Section 4.4
shall be made to the General Partner and its Affiliates regardless of whether
any Distributions are made to the Limited Partners pursuant to Section 6.1
hereof.
4.5 SHARE OF DISTRIBUTIONS
The General Partner shall be entitled to a share of the Distributions of
the Partnership, as set forth in Section 6.1 hereof. Payments to the General
Partner of its share of Partnership Distributions shall be made concurrently
with the payment of such Distributions to the Limited Partners pursuant to
Section 6.1 hereof.
4.6 INTEREST IN THE PARTNERSHIP
The General Partner shall be allocated the Partnership's taxable items of
income, gain,
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loss, deduction, and credit as set forth in Section 6.2 hereof.
4.7 EXCLUSIVITY
The General Partner will receive compensation from the Partnership as
general partner only as specified in the foregoing Sections of this Article IV
and in Section 13.3 hereof.
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ARTICLE V
PAYMENT OF EXPENSES
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5.1 GENERAL
All of the Partnership's expenses shall be billed directly to and paid by
the Partnership. Reimbursement to the General Partner or any of its Affiliates
shall not be allowed, except as provided herein and in Section 4.4 hereof and
except for reimbursement of the actual cost to the General Partner or its
Affiliates of goods, materials and services used for or by the Partnership and
obtained from Persons which are not affiliated with the General Partner.
5.2 OFFERING AND ORGANIZATIONAL EXPENSES
The Partnership shall pay all Offering and Organizational Expenses;
provided, however, that the General Partner will directly pay (without recourse
to, or right of reimbursement by, the Partnership) such Expenses to the extent
they exceed 5% of Gross Proceeds.
5.3 EXPENSES OF THE PARTNERSHIP
In addition to the payment of those expenses and fees enumerated in Article
IV and in Sections 5.1 and 5.2 hereof, the expenses of the Partnership that
shall be paid by the Partnership may include, but are not limited to: (i) all
costs of Persons employed by the Partnership and involved in the business of the
Partnership, not including Persons who may also be employees of the General
Partner or any of its Affiliates; (ii) agent fees and expenses; (iii) depot
expenses of inspection, handling and storage; (iv) maintenance and repair costs
not paid for by Equipment lessees; (v) Debt Service; (vi) bad debt expenses;
(vii) insurance premiums; (viii) the deductible under any insurance policy
covering the Equipment and any costs of uninsured or excluded risks; (ix)
charges, assessments, or levies imposed upon or against the Equipment of
whatever kind or nature; (x) ad valorem, gross receipts, and other property
taxes which are levied against the Equipment or the gross rentals therefrom;
(xi) legal, audit, and accounting fees and expenses; (xii) the recording and
filing expenses of amending the Certificate of Limited Partnership of the
Partnership and of terminating the Partnership; (xiii) the costs of preparation
and dissemination of informational material and documentation relating to a Sale
of Equipment; (xiv) costs incurred in connection with any litigation in which
the Partnership is involved, including any sums paid in settlement thereof; (xv)
the costs of any examination, investigation or other proceedings conducted by
any regulatory body of the Partnership; (xvi) the cost of any computer services
used for or by the Partnership; and (xvii) the costs of any accounting,
statistical or bookkeeping services utilized for the maintenance of the books
and records of the Partnership. The Partnership shall not pay any of the
enumerated foregoing expenses that are included as a component of Offering and
Organizational Expenses payable by the General Partner pursuant to Section 5.2
hereof or that are a component of Other Acquisition Costs, which are payable by
the General Partner.
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ARTICLE VI
DISTRIBUTIONS;
ALLOCATION OF INCOME AND LOSS
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6.1 DETERMINATION AND ALLOCATION OF DISTRIBUTIONS BETWEEN THE GENERAL PARTNER
AND THE LIMITED PARTNERS
(a) All Distributions of the Partnership, whether from Distributable Cash
From Operations or Sale Proceeds, shall be determined monthly. Distributions so
determined shall be distributed to the Partners within 60 days after the end of
the month. Notwithstanding the foregoing, if the General Partner determines, in
its sole discretion, that the administrative cost of making monthly
Distributions is excessive in relation to the amount of such Distributions, then
and in such event, after notice thereof to the Limited Partners, Distributions
shall be determined quarterly and distributed within 60 days after the close of
the calendar quarter.
(b) All Distributions of the Partnership shall be allocated and distributed
between the General Partner and the Limited Partners as follows:
(i) First, 95% of Distributions attributable to Distributable Cash
From Operations and 99% of Distributions attributable to Sale Proceeds
shall be allocated and distributed to the Limited Partners and the
remainder shall be allocated and distributed to the General Partner until
Adjusted Payout; and
(ii) Thereafter, 85% of all Distributions shall be allocated and
distributed to the Limited Partners and 15% of all Distributions shall be
allocated and distributed to the General Partner.
(c) All Distributions of Distributable Cash From Operations and Sale
Proceeds, other than Distributions in liquidation of the Partnership, shall be
paid in cash, not in kind. Liquidating distributions made to the Limited
Partners pursuant to the provisions of Section 13.3 hereof shall be paid in
cash, not in kind, unless the Limited Partners, by vote pursuant to Section
8.3(a)(iv) hereof, approve of some other form of liquidating distributions. In
all events, liquidating distributions in kind may only be made to a liquidating
trust which has been established for the purpose of the liquidation of the
assets of the Partnership, from which distributions shall be made to the
Partners as if made directly by the Partnership pursuant to this Agreement.
6.2 ALLOCATIONS FOR TAX PURPOSES: GENERAL RULES
(a) The income, gains, losses, deductions, and credits of the Partnership
shall be determined and allocated among the Partners in a manner that the
General Partner determines, upon advice of the Partnership's independent
accountants and counsel, is required by Section 704(b)(2) of the Code and the
Treasury Regulations promulgated thereunder. If as to one or more classes of tax
items, the General Partner determines that more than one method is permitted or
that the correct method is uncertain, then the General Partner may adopt such
method that it deems to be in the best interests of the Partnership, taking into
account ease of administration, the desire to match taxable income and
deductions with economic income and deductions, the economic interest of the
Partners in the Partnership, and the risk of proposed adjustments by the Service
and the consequences thereof. Without limiting the generality or scope of the
foregoing grant of authority, there follow specific rules to be followed by the
General Partner in allocating tax items among the Partners. The rule or rules
stated in each subsection below are subject and subordinate to the rule or rules
stated in each subsequent subsection of this Section.
(b) For each fiscal year, the Partnership's income, gains, losses,
deductions, and credits, and each item thereof, shall be allocated 1% to the
General Partner and 99% to the Limited Partners. No allocation of losses,
deductions, or any item thereof shall be made to any Partner (Limited or
General) if the allocation would create an Adjusted Capital Account Deficit for
that Partner; in such event, the loss, deduction, or item thereof that would
create such a Deficit shall be reallocated to those Partners (including the
General Partner) to whom the reallocation would not create an Adjusted Capital
Account Deficit, pro rata to their Adjusted Capital Account Deficits.
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(c) For each fiscal year, the Partnership shall allocate to the General
Partner gross income of the Partnership for such fiscal year in an amount equal
to that portion of the Distributions allocable to the General Partner in excess
of 1% of the Distributions allocable to all Partners (General and Limited) by
the Partnership for such fiscal year.
(d) If the General Partner is required to recognize as income for any
fiscal year its share of Distributions of the Partnership prior to the fiscal
year in which the income giving rise to such Distributions is realized, then and
in such event any resulting deduction available to the Partnership with respect
to such income for the earlier fiscal year shall be allocated to the General
Partner.
(e) Partner Nonrecourse Deductions for any fiscal year shall be allocated
to the Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable,
in accordance with Section 1.704-2(i)(1) of the Treasury Regulations.
(f) Any gain recognized by the Partnership on any sale or other taxable
disposition of its Equipment shall be allocated among the Partners in the
following order of priority:
(i) First, to the Partners with Capital Account deficit balances in an
amount sufficient to eliminate such deficit balances or, if the gain to be
allocated under this clause (i) is less than the aggregate Capital Account
deficit balances of the Partners, then to each Partner with a Capital
Account deficit balance pro rata to such Partner's share of the Partners'
aggregate Capital Account deficit balances; and
(ii) Thereafter, among the Partners in accordance with their share
(determined without regard to the provisions of Section 13.3 hereof) of
Sale Proceeds distributable with respect to such Equipment pursuant to
Section 6.1 hereof.
(g) In the event that any Partner unexpectedly receives any adjustment,
allocation, or distribution described in Sections 1.704-1(b)(2) (ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations, then and in such event,
items of Partnership income and gain shall be specially allocated to each such
Partner in an amount and manner sufficient to eliminate, to the extent required
by such Regulations, the Adjusted Capital Account Deficit of such Partner as
quickly as possible. This subsection is intended to comply with the qualified
income offset requirement of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations, and shall be interpreted consistently therewith.
(h) If there is a net decrease in the Partnership Minimum Gain during any
fiscal year, each Partner who would otherwise have an Adjusted Capital Account
Deficit at the end of such year shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount and manner sufficient to eliminate such Adjusted Capital Account
Deficit as quickly as possible. The items to be so allocated shall be determined
in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury
Regulations. This subsection is intended to comply with the minimum gain
charge-back requirement of Section 1.704-2(f) of the Treasury Regulations, and
shall be interpreted consistently therewith.
6.3 ALLOCATIONS AMONG THE LIMITED PARTNERS
The rule or rules stated in each subsection below are subject and
subordinate to the rule or rules stated in each subsequent subsection of this
Section.
(a) All Distributions to the Limited Partners and all income or loss
allocable to the Limited Partners shall be distributed or allocated, as the case
may be, to each Limited Partner in the ratio in which the number of Units held
of record by such Limited Partner bears to the total number of Units held of
record by all Limited Partners entitled to such allocation or Distribution.
(b) All Distributions to the Limited Partners in liquidation of the
Partnership shall be distributed to each Limited Partner in the ratio in which
the credit balance of the Limited Partner's Capital Account bears to the
aggregate credit balance of the Capital Accounts of all Limited Partners, with
such balances determined after taking into account all Capital Account
adjustments (other than the Distributions made hereunder) for the Partnership's
taxable year during
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or for which such Distributions in liquidation of the Partnership are made.
(c) All income or loss allocable to a Limited Partner shall be allocated,
and all Distributions to a Limited Partner shall be distributed, as the case may
be, to the Person recognized by the Partnership as the holder of Units as of the
last day of the fiscal period for which such allocation or Distribution is to be
made.
(d) All income or loss for a calendar year allocable to any Units which
have been transferred during such year shall be allocated between the transferor
and the transferee based upon the number of months that each was recognized, in
accordance with Section 10.2(d) hereof, as the holder of the Units for purposes
of this Section, without regard to whether Distributions were made to the
transferor or transferee for the particular month of such calendar year.
(e) From and after the date Additional Limited Partners are first admitted
to the Partnership pursuant to Section 3.3(e) hereof and continuing through the
end of the month in which the Sales Period ends, all Distributions and all items
of income, gain, loss, deduction, and credit allocable to the Limited Partners
shall be determined monthly, and allocated solely to those Limited Partners
admitted as such on or prior to the first day of the month for which the
Distribution is made, pro rata to their Unit ownership in the Partnership.
(f) All expenses of the Partnership classified as syndication expenses
under Section 1.709-2(b) of the Treasury Regulations for any fiscal year and
allocable to the Limited Partners shall be allocated among the Limited Partners
pro rata to their Unit ownership in the Partnership. If Additional Limited
Partners are admitted to the Partnership on different dates, then all such
syndication expenditures shall be allocated among the Limited Partners so that,
to the extent possible, the cumulative syndication expenses allocated with
respect to each Unit at any time is the same amount. In equalizing the
allocation of syndication expenditures as aforesaid, the General Partner may
allocate a portion of the income or loss or items thereof of the Partnership so
as to achieve the same effect. Notwithstanding the foregoing, no underwriting
or sales commission shall be allocated to any Limited Partner with respect to
whom the payment of such sales or underwriting commissions has been waived.
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ARTICLE VII
RIGHTS, POWERS, AND DUTIES OF GENERAL PARTNER
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7.1 MANAGEMENT AND CONTROL OF THE
PARTNERSHIP
(a) The General Partner, within the authority granted to it by this
Agreement, shall have the exclusive right to manage the business of the
Partnership and is hereby authorized to take any action of any kind and to do
anything and everything that may be necessary in accordance with the provisions
of this Agreement. Without limiting the generality of the foregoing, the General
Partner shall manage or provide for the management of the Equipment acquired by
the Partnership and shall operate or provide for the operation of such
Equipment, including providing on-going marketing and re-leasing services to the
Partnership.
(b) No Limited Partner (except one who may also be an officer or employee
of the General Partner, and then only in his capacity as such officer or
employee of the General Partner within the scope of its authority hereunder)
shall participate in or have any control over, the Partnership's business or
shall have any authority or right to act for or on behalf of the Partnership.
The Limited Partners hereby consent to the exercise by the General Partner of
the powers conferred on it by this Agreement.
7.2 AUTHORITY OF THE GENERAL PARTNER
Except to the extent otherwise provided herein, the General Partner, for
and in the name and on behalf of the Partnership, is hereby authorized:
(a) to acquire, hold, manage, lease, sell, and dispose of marine dry cargo
containers and
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special purpose containers (including, without limitation, refrigerated
containers, open top containers, tank containers, bulk containers and flat rack
containers), and interests therein, as well as personal or mixed property
connected therewith, including the purchase, lease, maintenance, repair,
exchange, trade or sale of such equipment, at such purchase prices, lease or
rental rates, costs and sale prices, and upon such terms, as the General Partner
deems, in its sole discretion, to be in the best interests of the Partnership;
(b) to execute any and all agreements, purchase orders, letters of credit,
leases, contracts, documents, certificates, and other instruments, as are
necessary or convenient in connection with the purchase, lease, management,
maintenance, repair, operation, or sale of the Equipment;
(c) to borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of the
Partnership and in accordance with the Partnership's borrowing policy as set
forth in the Prospectus, and to secure the same by mortgage, pledge, or other
lien on any or all of the Equipment or assets of the Partnership; provided,
however, that the Partnership shall not borrow additional money or issue new
evidences of indebtedness for the purpose of purchasing Equipment after the
expiration of 60 months from the Closing Date; provided further, however, that
the aggregate amount of indebtedness which may be incurred in connection with
the purchase of Equipment shall not, measured as of the date which is 30 days
after the Closing Date, exceed 20% of the Purchase Price of all of the Equipment
determined on a combined basis; provided further, however, that the General
Partner agrees to purchase from the Partnership a sufficient number of
containers to enable the Partnership to repay any indebtedness owed to a third
party incurred for the purpose of acquiring Equipment (other than a manufacturer
of Equipment offering delayed payment terms to the Partnership) to an amount so
that the outstanding principal balance of such indebtedness, measured as of the
date which is 30 days after the Closing Date, does not exceed 20% of the
aggregate Purchase Price of the Partnership's Equipment; provided further,
however, that the General Partner agrees to purchase containers as required
aforesaid within 30 days after the Closing date; provided further, however, that
the containers to be sold to the General Partner as aforesaid shall be sold by
the Partnership to the General Partner at a sales price equal to the greater of
the cost of the Equipment to the Partnership or its fair market value, as
reduced by the "net revenues" realized by the Partnership from the leasing and
ownership of the Equipment prior to its sale to the General Partner hereunder,
with "net revenues" determined as provided by subsection (h) of this Section
7.2; provided further, however, that the Partnership shall not borrow monies for
the purpose of making Distributions to the Limited Partners;
(d) To prepay, in whole or in part, refinance, increase, modify, or extend
any loans or mortgages affecting the Equipment and in connection therewith to
execute any extensions or renewals of loans or mortgages on any of the
Equipment;
(e) to acquire or enter into any contract of insurance which the General
Partner deems necessary or appropriate for the protection of the Partnership
and/or the conservation of the Partnership's assets, or for any purpose
convenient or beneficial to the Partnership;
(f) to employ or retain Persons in the operation and management of the
business of the Partnership, including, but not limited to, depot agents,
interchange agents, insurance brokers, attorneys and accountants, on such terms
and for such compensation as the General Partner shall determine;
(g) to open accounts and deposit and maintain funds in the name of the
Partnership in banks or savings and loan associations; provided, however, that
the monies of the Partnership shall not, other than as permitted by the
provisions of Section 14.2 hereof, be commingled with the funds of any other
Person;
(h) to purchase Equipment in its own name or otherwise temporarily (i.e.,
generally not in excess of six months and in no event in excess of 12 months)
hold title thereto for the purpose of facilitating the acquisition of such
Equipment by the Partnership; provided, however, that (i) such Equipment, if
purchased by the Part-
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nership within six months of its acquisition by the General Partner, shall be
purchased for a purchase price no greater than the reasonable, necessary, and
actual cost and expense of such Equipment to the General Partner, except for the
addition thereto of the Acquisition Fee payable thereon to the General Partner
in accordance with Section 4.2 hereof; (ii) such Equipment, if purchased by the
Partnership between six and twelve months after its acquisition by the General
Partner, shall be purchased for a purchase price no greater than the lesser of
the reasonable, necessary, and actual cost and expense of such Equipment to the
General Partner or its fair market value, except for the addition thereto of the
Acquisition Fee payable thereon to the General Partner in accordance with
Section 4.2 hereof; (iii) the General Partner shall reduce the purchase price of
the Equipment sold to the Partnership by the amount of the "net revenues"
realized by the General Partner from the leasing and ownership of such
Equipment, with "net revenues" defined for the purposes of this provision as all
revenues realized by the General Partner from the leasing or ownership of such
Equipment minus all expenses of such leasing and ownership including interest
expense related to the financing of the containers while owned by the General
Partner (but excluding depreciation), and minus the management fee and expense
reimbursements that would be payable to the General Partner by the Partnership
under Sections 4.3 and 4.4 hereof were such Equipment owned by the Partnership
and not by the General Partner; (iv) there is no benefit arising out of such
transaction to the General Partner or its Affiliates apart from the compensation
otherwise permitted by this Agreement; and (v) the Partnership shall not, in any
event, purchase Equipment from any partnership sponsored, organized, or managed
by the General Partner or by any Affiliate of the General Partner;
(i) to execute an underwriting agreement with the Underwriter, an Affiliate
of the General Partner, and to enter into agreements with dealers and
wholesaling agreements with such member firms of the National Association of
Securities Dealers, Inc. selected by Underwriter, pursuant to which said firms
shall assist the Partnership in the offer and sale of Units to the public; and
(j) to engage in any activity and to perform and carry out contracts of any
kind necessary to, or in connection with, or incidental to, the accomplishment
of the purposes of the Partnership, as may be lawfully carried on or performed
by a limited partnership formed under the laws of the State of California.
7.3 TAX MATTERS PARTNER
The General Partner is hereby designated as the "tax matters partner"
within the meaning of Section 6231(a)(7) of the Code. In addition to all other
powers conferred on the General Partner as tax matters partner under said
Section, the General Partner shall have the power and authority to retain, at
Partnership expense, counsel and accountants in connection with any audit or
related proceeding involving the Partnership. The designation hereby made of the
General Partner as tax matters partner is hereby consented to by each Limited
Partner.
7.4 OBLIGATIONS OF THE GENERAL PARTNER
(a) The General Partner shall take all action which may be necessary or
appropriate to continue the Partnership as a limited partnership under the laws
of the State of California (and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Limited Partners
or to enable the Partnership to conduct the business in which it is engaged).
(b) The General Partner shall devote to the Partnership such time as may be
necessary for the proper performance of its duties hereunder, but neither the
officers nor directors of the General Partner shall be expected to devote their
full time to the performance of such duties.
(c) The General Partner shall at all times use its best efforts to maintain
its net worth at a sufficient level to meet all requirements of the Code, under
currently applicable regulations of the Internal Revenue Service, to ensure that
the Partnership is classified for Federal income tax purposes as a partnership
and not as an association taxable as a corporation, and shall, irrespective of
such requirements, maintain its net worth in an amount at least equal to the
mini-
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mum net worth required under the applicable securities laws of the states in
which the Units are or shall be qualified for sale and are sold.
(d) 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.
(e) The General Partner shall use its best efforts to ensure that the
Partnership shall not be deemed an investment company as such term is defined in
the Investment Company Act of 1940.
(f) The General Partner shall be under a fiduciary duty to conduct the
affairs of the Partnership in the best interests of the Partnership and of the
Limited Partners, including the safekeeping and use of all monies and assets of
the Partnership, whether or not under the General Partner's possession or
control, and the General Partner shall not employ or permit another to employ
such monies or assets in any manner except for the exclusive benefit of the
Partnership. Other than as contemplated by Section 7.6 hereof, the Partnership
shall not permit the Limited Partners to contract away the fiduciary duty owed
to the Limited Partners by the General Partner under the common law.
(g) With respect to any proposed Roll-Up involving the Partnership, the
General Partner and the Partnership shall follow and observe the following
guidelines:
(i) An appraisal of the assets of the Partnership shall be obtained
from an Independent Expert. If the appraisal will be included in the
prospectus used to offer the securities of the Roll-Up Entity, the
appraisal shall be filed with the Securities and Exchange Commission and
the states in which the securities are proposed to be offered as an exhibit
to the registration statement containing said prospectus.
(ii) The appraisal shall be based on an evaluation of all material and
relevant information, and shall indicate the value of the Partnership's
assets as of a date immediately prior to the announcement of the proposed
Roll-Up. The appraisal shall assume an orderly liquidation of the assets of
the Partnership over a 12-month period. The terms of the engagement of the
Independent Expert shall clearly state that the engagement is for the
benefit of the Partnership and its Limited Partners. A summary of the
independent appraisal, indicating all material assumptions underlying the
appraisal, shall be included in the prospectus and/or report distributed to
the Limited Partners in connection with the Roll-Up.
(iii) In connection with the Roll-Up, the General Partner or other
Person sponsoring the Roll-Up shall offer to the Limited Partners who vote
"no" on the proposal the choice of:
(A) Accepting the securities of the Roll-Up Entity offered in the
proposed Roll-Up; or
(B) One of the following:
(1) Remaining as Limited Partners in the Partnership, and
preserving their interests therein on the same terms and
conditions as existed previously; or
(2) Receiving cash in an amount equal to the Limited
Partners' pro rata share of the appraised value of the net assets
of the Partnership.
(C) The General Partner or Person sponsoring the Roll-Up need
only offer one of the alternatives set forth in this paragraph (B) to
dissenting Limited Partners who do not wish to accept the securities
of the Roll-Up Entity.
(iv) The Partnership shall not participate in any proposed Roll-Up
which would result in the Limited Partners having democracy rights in the
Roll-Up Entity which are less than those provided for by Sections 8.1 and
8.3 hereof. If the Roll-Up Entity is a corporation, the voting rights of
the Limited Partners shall correspond to the voting rights provided for in
Sections 8.1 and 8.3 hereof to the greatest extent possible.
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(v) The Partnership shall not participate in any proposed Roll-Up
which includes provisions which would operate to materially impede or
frustrate the accumulation of shares by any purchaser of the securities of
the Roll-Up Entity (except to the minimum extent necessary to preserve the
tax status of the Roll-Up Entity). The Partnership shall not participate in
any proposed Roll-Up which would limit the ability of a Limited Partner to
exercise the voting rights of his or her securities of the Roll-Up Entity
on the basis of the number of shares held by that Limited Partner.
(vi) The Partnership shall not participate in any proposed Roll-Up in
which Limited Partners' right of access to the records of the Roll-Up
Entity shall be less than those provided for under Article XIV hereof.
(vii) The Partnership shall not participate in any proposed Roll-Up in
which any of the costs of the transaction would be borne by the Partnership
if the Roll-Up is not approved by the Limited Partners.
7.5 RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNER
(a) Without the Consent of all of the Limited Partners, neither the General
Partner nor any affiliate of the General Partner shall have authority to:
(i) Do any act in contravention of this Agreement;
(ii) Do any act which would make it impossible to carry on the
ordinary business of the Partnership;
(iii) Confess a judgment against the Partnership;
(iv) Admit a Person as a General Partner, except as provided in this
Agreement;
(v) Admit a Person as an Additional or Substituted Limited Partner,
except as provided in this Agreement;
(vi) Knowingly perform any act that would subject any Limited Partner
to liability as a general partner in any jurisdiction.
(b) Without the Consent of the holders of at least two-thirds ( 2/3) of the
then outstanding Units, the General Partner shall not have the authority to
merge or consolidate the Partnership with the General Partner or with any
Affiliate of the General Partner, or to amend this Agreement to modify the
provisions of this subsection.
(c) Without the Consent of the holders of a majority of the then
outstanding Units, neither the General Partner nor any affiliate of the General
Partner shall have authority to:
(i) At any time prior to the expiration of 10 years from the Closing
Date, sell all or substantially all of the Equipment in a single sale, or
in multiple sales in the same 12 month period, except in the orderly
liquidation and winding-up of the business of the Partnership upon its
dissolution;
(ii) Amend this Agreement; or
(iii) Materially change or modify the investment objectives and
policies of the Partnership, as said investment objectives and policies are
set forth in the Prospectus.
(d) Neither the General Partner nor any Affiliate of the General Partner
shall have authority to:
(i) Except as otherwise permitted by the provisions of Section 7.2(c),
7.2(h), and 7.5(b) hereof, sell or lease Equipment to or lease or purchase
Equipment from the Partnership;
(ii) Cause the Partnership to acquire Equipment from a limited or
general partnership, joint venture, or unincorporated association in which
the General Partner or any of its Affiliates has an interest;
(iii) Other than as specifically contemplated by Section 7.7(e)
hereof, obtain any loan from the Partnership;
(iv) Make any loan to the Partnership for a term in excess of 12
months, or receive on any such loan to the Partnership interest and other
financing charges or fees in excess of the lesser of its costs or the
amounts which would be charged the Partnership by unrelated banks on
comparable loans for the same purpose (and in no
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event in excess of applicable usury limitations);
(v) Cause the Partnership to invest in a limited or general
partnership, joint venture, or other unincorporated association engaged in
the ownership or operation of equipment;
(vi) Receive from the Partnership any rebate or give-up or participate
in any reciprocal business arrangement which would circumvent the
restrictions of this Agreement or enable the General Partner or any of its
Affiliates to do so;
(vii) Pay or award directly or indirectly any commission or other
compensation to any Person engaged by a potential investor for investment
advice as an inducement to such advisor to advise the purchase of Units,
provided, however, that the foregoing shall not prohibit the payment of
underwriting and sales commissions as contemplated by the Prospectus;
(viii) Enter into an exclusive right to sell or an exclusive
employment to sell the Equipment for the Partnership;
(ix) Other than as permitted by Section 14.2 hereof, commingle the
funds of the Partnership with those of any other Person;
(x) Cause the Partnership to exchange Units for Equipment; or
(xi) Receive any salary, fees, profits or Distributions except as
provided in Articles IV, VI, or XIII hereof, or except with respect to
Units they may purchase as to Distributions made generally to the Limited
Partners on the Units; provided, however, that, subject to compliance with
Section 7.5(b) hereof, nothing contained in this Section 7.5 shall be
deemed to inhibit the Partnership's ability to consolidate or merge in the
future with other entities into a master limited partnership or
corporation.
7.6 OTHER BUSINESS OF THE PARTNERS
Any Partner 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. Nothing in this Agreement shall be deemed to
prohibit the General Partner or any Affiliate of the General Partner from
dealing in or otherwise engaging in business with Persons transacting business
with the Partnership or from providing services relating to the purchase,
leasing, sale, management, and operation of marine containers, or other
equipment or property and receiving compensation therefor (which transactions do
not involve any rebate or reciprocal arrangement which would have the effect of
circumventing any restrictions set forth herein upon dealing with Affiliates of
the General Partner). 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.
7.7 LIMITATION ON LIABILITY OF GENERAL PARTNER; INDEMNIFICATION
(a) The General Partner and its Affiliates performing services on behalf of
the Partnership, and within the scope of the General Partner's and its
Affiliates' capacity, shall have no liability to the Partnership or to any
Partner for any loss suffered by the Partnership which arises out of any action
or inaction of the General Partner or its Affiliates if the General Partner or
its Affiliates in good faith determined that such course of conduct was in the
best interest of the Partnership and such course of conduct did not constitute
negligence or misconduct of the General Partner or its Affiliates. The General
Partner and its Affiliates performing services on behalf of the Partnership
shall be indemnified by the Partnership against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims sustained by
them in connection with the business of the Partnership, provided that the
General Partner or its Affiliates in good faith determined that their course of
conduct was in the best interest of the Partnership and provided further that
such course of conduct did not constitute negligence or misconduct by the
General Partner or its Affiliates.
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(b) Notwithstanding anything to the contrary contained in subsection (a),
the General Partner and its Affiliates performing services on behalf of the
Partnership and any Person acting as a broker-dealer shall not be indemnified
for any losses, liabilities or expenses, including attorneys' fees, arising from
or out of an alleged violation of Federal or state securities laws or rules
unless (i) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee and
the court approves litigation costs, or (ii) a court of competent jurisdiction
approves a settlement of the claims against a particular indemnitee and the
court finds that indemnification of the settlement and related costs should be
made.
(c) In any claim for indemnification for Federal or state securities law
violations under subsection (b)(ii) above, the party seeking indemnification
shall place before the court the position of the Securities and Exchange
Commission, the Massachusetts Securities Division, the Missouri Commissioner of
Securities, the Tennessee Securities Division and any other applicable state
securities authority with respect to the issue of indemnification for securities
law violations.
(d) Any amounts payable to the General Partner or its Affiliates performing
services on behalf of the Partnership pursuant to this Section shall be
recoverable only out of the assets of the Partnership and not from the
individual assets of the Limited Partners. The Partnership shall not incur the
cost of that portion of any insurance which insures the General Partner, its
Affiliates, or any other party for any liability as to which the General Partner
or its Affiliates are herein prohibited from being indemnified hereunder.
(e) (1) The Partnership shall not advance any monies to the General Partner
or to any Affiliate of the General Partner for legal expenses and other costs
incurred by the General Partner or such Affiliate as a result of legal action
initiated against the General Partner or such Affiliate by a Limited Partner of
the Partnership alleging a breach of duty by the General Partner or such
Affiliate to the Limited Partner.
(2) Other than as provided in paragraph (1) above, the Partnership
shall advance from Partnership funds monies to the General Partner or to any
Affiliate of the General Partner for legal expenses and other costs incurred as
a result of legal action initiated against the General Partner or any such
Affiliate, but only if each of the following conditions is satisfied:
(i) The Partnership has adequate funds available to make the advance;
(ii) The legal action relates to the performance of duties or services
by the General Partner or its Affiliate on behalf of the Partnership;
(iii) Legal action is initiated by a third party who is not a Limited
Partner alleging a breach of duty by the General Partner or such Affiliate
to the Limited Partner;
(iv) The General Partner or its Affiliate, as the case may be,
undertakes to repay the advanced funds, with interest at the rate specified
in Section 9.2 hereof, to the Partnership in the event that the General
Partner or such Affiliate is not entitled to indemnification under the
provisions of Section 7.7(a) hereof.
7.8 RESTORATION OF CAPITAL ACCOUNT DEFICIT
The General Partner shall be required to restore any deficit in its Capital
Account balance upon the Partnership's liquidation, as called for by and subject
to the provisions of Section 13.2 hereof.
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ARTICLE VIII
MEETINGS, ACTIONS WITHOUT A MEETING,
AND VOTING RIGHTS OF LIMITED PARTNERS
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8.1 MEETINGS
(a) Meetings of Limited Partners may be called by the General Partner or by
Limited Partners holding more than 10% of the then outstanding Units. Meetings
may be called to vote on any of the matters subject to the vote of Limited
Partners as set forth in this Agreement. Meetings of the Limited Partners shall
be held at the time and place specified in the request or, if none, at a time
and place convenient to the Limited Partners. A call for a meeting shall be
deemed to have been made upon receipt by the General Partner of a written
request from Limited Partners holding the requisite percentage of Units and
stating the purpose of the meeting. The General Partner shall notify all Limited
Partners, within 10 days after receipt of such a request from the Limited
Partners, of the receipt of the request and the general nature of the business
to be transacted at the meeting. Such notice shall be transmitted to all Limited
Partners by personal delivery (with no later than two-day delivery) or by
certified mail. Subject to compliance by the Limited Partners requesting the
meeting with any applicable laws and regulations pertaining to the solicitation
of proxies, the meeting shall be held on a date not less than 15 nor more 60
days after the date of the receipt by the General Partner of the Limited
Partners' notice requesting the meeting. No business may be transacted at such
meeting other than as set forth in such notice. All costs and expenses of the
notification and conduct of meetings shall be paid by the Partnership.
(b) The presence in person or by proxy of the holders of a majority of the
then outstanding Units shall constitute a quorum for all meetings of the Limited
Partners; provided, however, that if there be no such quorum, holders of a
majority of the Units of such Limited Partners so present or so represented may
adjourn the meeting from time to time without further notice, until a quorum
shall have been obtained. No notice of the time, place or purpose of any meeting
of Limited Partners need be given to any Limited Partner who attends in person
or is represented by proxy (except when the Limited Partner attends a meeting
for the express purpose of objecting at the beginning of the meeting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened) or to any 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 Partnership or any adjournment thereof, the General Partner
or the Limited Partners requesting such meeting may fix, in advance, a date as
the record date for any such determination of the Limited Partners. Such date
shall not be more than 60 days nor less than 10 days before any such meeting.
(d) Each Limited Partner may authorize any Person or Persons to act for him
by proxy in all matters in which the Limited Partner is entitled to participate,
whether by waiving notice of any meeting, or voting or participating at a
meeting. Each proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven months
from the date thereof unless otherwise provided in the proxy. Each proxy shall
be revocable at the pleasure of the Limited Partner executing it.
(e) At each such 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.
8.2 ACTION WITHOUT A MEETING
Any action which may be taken at any meeting of the Limited Partners may be
taken without a meeting if a consent or consents in writing, setting forth the
action so taken, shall (i) be signed by the Limited Partners owning not less
than the minimum number of Units that would be necessary to authorize or take
such action at a
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meeting at which the Limited Partners entitled to vote thereon were present and
voted, and (ii) be signed by the required number of Limited Partners within 60
days after the submission of the consent or consents for approval to the Limited
Partners. In the event that the General Partner or Limited Partners holding more
than 10% of the then outstanding Units request a meeting for the purpose of
discussing or voting on the matter requested by written consent, a notice of
such meeting shall be given in accordance with subsection (a) of Section 8.1
hereof. Unless delayed in accordance with the provisions of the preceding
sentence, any action taken without a meeting shall be effective 15 days after
the required minimum number of Limited Partners have signed the consent or
consents; provided, however, that the action shall be effective immediately,
subject to the provisions of Section 8.3 hereof, if the General Partner and
Limited Partners holding 90% or more of the then outstanding Units sign the
consent or consents. Any solicitation of consent to action without a meeting
pursuant to this Section 8.2 shall be subject to compliance with any applicable
securities laws and regulations pertaining to the solicitation of consents.
8.3 VOTING RIGHTS OF THE LIMITED PARTNERS
(a) Subject to the provisions of Sections 12.4 and 7.5(b) hereof, upon the
affirmative vote of the holders of a majority of the then outstanding Units, the
Limited Partners may, without the necessity of concurrence by the General
Partner, (i) amend this Agreement, (ii) dissolve the Partnership, (iii) remove
the General Partner, (iv) approve or disapprove a sale of all or substantially
all of the Equipment, and (v) elect a successor General Partner to continue the
Partnership upon the occurrence of any of the events set forth in Section
13.1(a)(i) or 13.1(a)(iii) herein.
(b) The voting rights specifically granted to the Limited Partners by this
Agreement are intended to be, and shall be, exclusive: other than as explicitly
set forth in this Agreement, the Limited Partners shall have no voting rights
with respect to the management or operation of the Partnership. Other than as
restricted by the voting rights specifically set forth in this Agreement, the
General Partner shall exercise its rights and powers as general partner of the
Partnership, within the authority granted to it hereby, without the necessity of
obtaining any consent or approval of the Limited Partners therefor.
8.4 VOTING OF UNITS BY THE GENERAL PARTNER
With respect to any Units owned by the General Partner or any Affiliate of
the General Partner, neither the General Partner nor any such Affiliate shall
vote such Units on or consent with respect to such Units to proposals submitted
to the Limited Partners regarding the removal of the General Partner or
regarding any transaction between the Partnership and the General Partner or any
Affiliate of the General Partner. For purposes of this Agreement, in determining
the requisite percentage of Units necessary to approve a matter on which the
General Partner and its Affiliates may not vote or consent pursuant to this
Section 8.4, any Units owned by the General Partner or such Affiliate shall not
be included.
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ARTICLE IX
SUCCESSION OF GENERAL PARTNER
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9.1 ADMISSION OF SUCCESSOR OR ADDITIONAL GENERAL PARTNERS
(a) With the Consent of the holders of a majority of the then outstanding
Units, the General Partner may at any time designate one or more Persons to be
successors to the General Partner or to be an additional General Partner, in
each case with the participation in the General Partner's interest in the
Partnership as the General Partner and such successor or additional General
Partner may agree upon. Each such designee shall become a successor or
additional General Partner upon satisfying the provisions of Section 15.2
hereof.
(b) Except in connection with a transfer to a successor or additional
General Partner pur-
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suant to Section 9.1(a) hereof, the General Partner shall have no right to
retire or withdraw voluntarily from the Partnership or to sell, transfer or
assign its interest therein, except that (i) it may substitute in its stead as
General Partner any entity which has, by merger, consolidation or otherwise,
acquired substantially all of the assets or stock of the General Partner and
continued its business, or (ii) it may cause to be admitted to the Partnership
an additional General Partner or Partners to enable the aggregate net worth of
the General Partner to comply with the provisions of Section 7.4(c) hereof. Each
such successor or additional General Partner shall be admitted as such to the
Partnership upon satisfying the conditions of Section 15.2 hereof. Each Limited
Partner hereby consents to the admission of any additional or successor General
Partner pursuant to the provisions of this Section 9.1(b), and no further
consent or approval shall be required.
(c) Any withdrawal by the General Partner from the Partnership, or any
sale, transfer or assignment by the General Partner of its interest, shall be
effective only upon the admission in accordance with Section 9.1(a) or Section
9.1(b) hereof of a successor or additional General Partner, as the case may be.
9.2 VALUATION OF INTEREST OF THE GENERAL PARTNER
(a) In the event of the removal of the General Partner, pursuant to the
provisions of Section 8.3(a)(iii) hereof, and the continuation of the
Partnership by the election by the Limited Partners of a successor General
Partner pursuant to Section 13.1(b) hereof, the then present fair market value
of the removed General Partner's interest as General Partner in the Partnership
shall be determined by agreement between the removed General Partner and the
successor General Partner (which agreement shall require the consent of the
holders of a majority of the then outstanding Units). The then present fair
market value of the removed General Partner's interest as General Partner in the
Partnership shall include any accrued but unpaid reimbursements for services
rendered by the General Partner pursuant to Section 4.4 hereof; any advance or
loan then outstanding from the General Partner to the Partnership, plus accrued
but unpaid interest; any expenses paid by the General Partner for and on behalf
of the Partnership but not reimbursed to the General Partner pursuant to Section
5.3 hereof; and the then present fair market value of the General Partner's
share in Distributions of the Partnership pursuant to Section 6.1 hereof (using,
as a discount rate, a rate equal to the interest rate on the note specified
below to be issued to the removed General Partner in payment of its interest in
the Partnership). If the removed General Partner and the successor General
Partner cannot agree on the then present fair market value of the removed
General Partner's interest in the Partnership, or their agreement is not
approved by the Limited Partners as aforesaid, then the then present fair market
value thereof shall be determined in accordance with the rules of the American
Arbitration Association. The fees charged by the American Arbitration
Association shall be borne equally by the removed General Partner and the
Partnership. The interest of the removed General Partner shall be paid to such
General Partner in the form of a note bearing interest at the lower of the then
prime rate or the rate that would apply on a similar note negotiated by
unaffiliated parties under similar circumstances (but in no event in excess of
applicable usury limitations). The note shall provide for equal annual payments
sufficient to pay in not less than five years all interest and principal owed to
the removed General Partner. The note shall contain such provisions as would be
usual and customary in a commercial promissory note, and shall require mandatory
prepayments in an amount equal to the distribution that would have been paid to
the General Partner had it not been removed from any Sale Proceeds realized by
the Partnership when in the process of liquidation.
(b) In the event of the Bankruptcy or voluntary dissolution of the General
Partner, and the continuation of the Partnership by the election by the Limited
Partners of a successor General Partner pursuant to Section 13.1(b) hereof, the
fair market value of the Bankrupt or voluntarily dissolved General Partner's
interest as General Partner in the Partnership shall be determined as provided
in subsection (a) of this Section 9.2. The interest of the Bankrupt or
voluntarily dissolved General Partner shall be paid,
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however, to such General Partner in the form of an unsecured note, not bearing
interest, with the principal payable from distributions which the Bankrupt or
voluntarily dissolved General Partner would otherwise have received under this
Agreement had the General Partner not gone Bankrupt or voluntarily dissolved.
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ARTICLE X
ASSIGNMENT OF UNITS
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10.1 RESTRICTIONS ON TRANSFER OF UNITS
(a) No sale or assignment of any Units may be made if the Units sought to
be sold or assigned would, in the good faith discretion of the General Partner,
constitute the Partnership a "publicly traded partnership" within the meaning of
Section 7704 of the Code. Each Limited Partner agrees to provide to the General
Partner such information as the General Partner may request with respect to any
proposed transfer or assignment of Units to enable the General Partner to
determine whether the proposed transfer or assignment would constitute the
Partnership a publicly traded partnership. Each Limited Partner hereby consents
and agrees to any decision made by the General Partner, in good faith, to deny a
proposed transfer or assignment of Units hereunder.
(b) No sale or assignment of any Units may be made if the Units sought to
be sold or assigned, when added to the total of all other Units sold or assigned
within the twelve consecutive months prior thereto, would, in the opinion of
counsel for the Partnership, result in the Partnership being considered to have
been terminated within the meaning of Section 708 of the Code.
(c) No transfer or assignment of any Units may be made if counsel for the
Partnership shall be of the opinion that such transfer or assignment would be in
violation of any state securities or "blue sky" laws (including any investment
suitability standards) applicable to the transaction.
(d) No partial sale, assignment, or transfer by a Limited Partner of his
Units, after which the transferor or the transferee would hold less than 125
Units, will be permitted or recognized (except for transfers by gift,
inheritance, or family dissolution or transfers to Affiliates or intrafamily
transfers).
(e) Any sale, assignment, or transfer of Units made in violation of the
foregoing provisions of this Section 10.1 shall be null and void and shall not
be recognized for any purpose whatsoever by the Partnership.
10.2 ASSIGNEES AND SUBSTITUTED LIMITED PARTNERS
(a) If a Limited Partner dies, his executor, administrator, or trustee or,
if he is adjudicated incompetent or insane, his committee, guardian, or
conservator, or, if he becomes bankrupt, the receiver or trustee of his estate,
shall have all the rights of a Limited Partner for the purpose of settling or
managing his estate and such power as the decedent, incompetent, or bankrupt
Limited Partner possessed to assign all or any part of his Units and to join
with the assignee thereof in satisfying the conditions precedent to such
assignee becoming a Substituted Limited Partner. The death, dissolution,
adjudication of incompetence or bankruptcy of a Limited Partner shall not
dissolve the Partnership.
(b) Upon any permitted assignment by a Limited Partner of his Units, such
Limited Partner shall promptly notify the Partnership in writing of such
assignment, setting forth in such notice the name and address of the Limited
Partner, the name, address, and taxpayer identification number of the proposed
assignee of his Units, and such other information as the General Partner may
reasonably request. The Partnership need not recognize for any purpose any
assignment of all or any fraction of a Limited Partner's Units unless there
shall have been filed with the Partnership a duly executed instrument making
such assignment and such instrument evidences the written acceptance by the
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assignee of all of the terms and provisions of this Agreement.
(c) Until a Substituted Limited Partner is admitted in the place and stead
of an assigning Limited Partner, such assigning Limited Partner shall retain
only the statutory rights of an assignor of a limited partnership interest under
the California Revised Limited Partnership Act. If an assignee is recognized as
a Limited Partner pursuant to the provisions of subsection (d) below, but is not
recognized as Substituted Limited Partner of the Partnership, from and after the
effective date of the Partnership's recognition of the assignee, the statutory
rights of the assignor Limited Partner shall cease and terminate.
(d) Any Person who is an assignee of all or any fraction of the Units of a
Limited Partner shall become a Substituted Limited Partner when such Person
shall have satisfied the conditions of Section 15.2 hereof and shall have paid
to the Partnership all actual, necessary, and reasonable fees and costs in
connection with his substitution as a Limited Partner; provided, however, that
the substitution of any assignee of Units as a Substituted Limited Partner shall
be subject to satisfaction of the conditions of Section 10.1 hereof and to the
consent of the General Partner, which consent may be granted or arbitrarily
withheld in its sole and absolute discretion. Notwithstanding the time at which
the conditions of subsection (b) above or this subsection (d) shall have been
satisfied and notwithstanding whether any assignee of Units shall have become a
Substituted Limited Partner, any assignee of Units shall, for the purposes of
Section 6.3 hereof, be recognized as a Limited Partner or an assignee, as the
case may be, as of the first day of the month next succeeding the month in which
the Partnership is properly notified of such assignment, provided that the
assignee shall have paid to the Partnership all actual, necessary, and
reasonable fees and costs incurred by the General Partner in connection with the
assignment. The rights of an assignee of Units who does not become a Substituted
Limited Partner by reason of non-consent thereto by the General Partner shall be
limited to the receipt of his share of Distributions and income or loss as
determined under Article VI hereof.
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ARTICLE XI
LIMITED RIGHT OF PRESENTMENT
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11.1 PROCEDURE FOR EXERCISE
Following the third full calendar year after the Net Proceeds have been
invested in Equipment or returned to the Limited Partners pursuant to Section
3.4(c) hereof, the General Partner shall notify the Limited Partners on or
before March 31 of each such year, of their right pursuant to this Article XI to
present their Units for redemption by the Partnership. Any Limited Partner
electing to present his Units for redemption must present all of the Units then
owned by him for redemption by written notice to the General Partner no later
than 30 days following the date of transmittal of the notification. Units held
by the General Partner or its Affiliates will not be eligible for redemption
pursuant to the provisions of this Article XI. No more than one redemption of
Units in any one year shall be made by the Partnership or by the General Partner
pursuant to the provisions of this Article XI, or otherwise.
11.2 VALUATION OF UNITS
The price payable for the Units presented by a Limited Partner for
redemption pursuant to Section 11.1 hereof shall be equal to the book value of a
Unit as of the end of the most recent calendar year, minus the Distributions
payable per Unit and not reflected in the book value of a Unit as aforesaid,
multiplied by the number of Units presented by the Limited Partner. The book
value of a Unit shall be determined by the General Partner, in accordance with
generally accepted accounting principles. In the notification transmitted to the
Limited Partners, the General Partner shall set forth the redemption price of a
Unit, and a brief description of the calculation of the redemption price.
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11.3 REDEMPTION OF UNITS
(a) Any redemption of Units pursuant to this Article XI shall be
conditional upon compliance by the Partnership with any applicable laws and
regulations governing issuer tender offers.
(b) Subject to the provisions of subsection (a) above, the Partnership may
accept or reject any presentment of Units made pursuant to Section 11.1 hereof
in the General Partner's sole and absolute discretion. Without limiting the
generality of the foregoing, the Partnership may decline to redeem any Units
presented under this Article XI if the General Partner concludes that redeeming
the Units would jeopardize the status of the Partnership as not a "publicly
traded partnership" within the meaning of Section 7704 of the Code, or if the
General Partner concludes that redeeming the Units would impair the capital or
operations of the Partnership. Any Units not redeemed by the Partnership
pursuant hereto may be purchased by the General Partner, acting in its sole
discretion, on the same terms and conditions applicable to a redemption of the
Units by the Partnership.
(c) Within 30 days after proper presentment of Units by the Limited
Partners to the Partnership, the General Partner shall notify such Limited
Partners as to whether the Units presented will be redeemed. Units accepted for
redemption will be paid for in cash not less than 30 days and not more than 45
days thereafter, upon the due endorsement of the instrument of assignment for
such Units to the Partnership. In no event shall payment for any Units accepted
for redemption be made until at least 60 days have passed since the date the
Partnership received written notice by the Limited Partner of his or her
election to present his or her Units for redemption. If the Partnership elects
to redeem Units, and the aggregate of the Units tendered for redemption exceeds
the available funds therefor, the Units to be redeemed will be selected by
random drawing.
(d) The effective date of any redemption of Units made hereunder shall be
the first day of the month next succeeding the month in which the General
Partner's notification was mailed. As to any Units redeemed by the Partnership,
such Units shall, from and after the effective date of the redemption, no longer
be deemed issued and outstanding Units of the Partnership. As to any Units
purchased by the General Partner, the General Partner shall, with respect
thereto, from and after the effective date of such purchase, become a
Substituted Limited Partner for all purposes of this Agreement (subject to the
limitation on the voting of such Units imposed by Section 8.4 hereof).
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ARTICLE XII
AMENDMENT OF AGREEMENT
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12.1 AMENDMENTS PROPOSED BY THE GENERAL PARTNER
Amendments to this Agreement may be proposed by the General Partner.
Following such proposal, the General Partner shall submit to the Limited
Partners a statement of the proposed amendment. The General Partner may but is
not required to call a meeting pursuant to Section 8.1 hereof for the purpose of
voting on the amendment. Such amendment shall become effective upon approval
pursuant to the applicable provisions of Article VIII hereof. With respect to
each proposal to amend this Agreement requiring the approval of the Limited
Partners, the Limited Partners shall be entitled to vote separately on each
proposed amendment to this Agreement.
12.2 AMENDMENTS PROPOSED BY THE LIMITED PARTNERS
Amendments to this Agreement may be proposed by one or more Limited
Partners owning in the aggregate more than 10 percent of the then outstanding
Units, by submission in writing to the General Partner of a notice stating the
proposed amendment and the number of Units held by the proponents thereof.
Subject to compliance by the Limited Partners proposing the amendment with any
applicable laws and regulations pertaining to the solicitation of proxies, the
General Partner shall thereupon submit to the Limited Partners a verbatim
statement of the proposed amendment. The General Partner shall include in such
submission its recommendation as to the adoption of the proposed amendment. Such
proposed amendment shall be adopted if approved pursuant to the applicable
provisions of Article VIII hereof.
12.3 AMENDMENTS PERMITTED WITHOUT
APPROVAL OF THE LIMITED PARTNERS
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 any of the Limited Partners: (i) to add to the representations,
duties or obligations of the General Partner or surrender any right or power
granted to the General Partner herein, for the benefit of the Limited Partners;
(ii) to cure any ambiguity or correct or supplement any provision herein which
may be inconsistent with any other provision herein, or to make any other
provision with respect to matters or questions arising out of this Agreement
which will not be inconsistent with the provisions of this Agreement; (iii) to
modify the provisions of Section 6.2 and 6.3 of this Agreement governing the
allocation of items of income, gain, loss, deduction, and credit among the
Partners of the Partnership if, as a result of developments in the law, counsel
or accountants to the Partnership advise the Partnership that the provisions of
said Sections are unlikely to be respected for Federal income tax purposes,
provided that no such modification shall be permitted which would materially
modify the allocation of Distributions between the Limited Partners and the
General Partner; and (iv) to delete or add any provision of this Agreement
required to be so deleted or added by the Staff of the Securities and Exchange
Commission or by any state "blue sky" commissioner, which addition or deletion
is deemed by the Staff or any such commissioner to be for the benefit or
protection of the Limited Partners.
12.4 PROHIBITED AMENDMENTS
Notwithstanding Sections 12.1-12.3 hereof (except as specifically provided
in Section 12.3(iii) hereof), this Agreement shall not be amended without
unanimous Consent of the Limited Partners and the General Partner if such
amendment would reduce their relative shares in the Distributions of the
Partnership; nor shall this Agreement be amended without the consent of the
General Partner if the effect thereof would be to change the rights and
obligations of the General Partner.
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ARTICLE XILL
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
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13.1 EVENTS CAUSING DISSOLUTION
(a) Subject to the right of the Limited Partners to continue the
Partnership by electing a successor General Partner as hereinafter set forth in
this Section 13.1, the Partnership shall continue to exist for the term provided
in Section 2.4 hereof, unless sooner dissolved by the happening of any of the
following events:
(i) the Bankruptcy or voluntary dissolution of the General Partner;
(ii) the vote to dissolve by the holders of a majority of the then
outstanding Units;
(iii) the vote to remove the General Partner by the holders of a
majority of the then outstanding Units;
(iv) the continued conduct of the business of the Partnership becoming
illegal; or
(v) the sale of all or substantially all of the Equipment.
(b) Upon the occurrence of either of the events set forth in paragraph
(a)(i) above, the Partnership may be continued by the election by the Limited
Partners of a successor General Partner within 90 days of the effective date of
such event pursuant to Section 8.3 hereof. The Partnership may be continued upon
the occurrence of the event set forth in paragraph (a)(iii) above by the
election by the Limited Partners of a successor General Partner pursuant to
Section 8.3 hereof on or prior to the effective date of such event.
(c) 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 the Partnership's Certificate of Limited Partnership shall have
been cancelled and the assets of the Partnership shall have been distributed as
provided in Section 13.3 below. Notwithstanding the dissolution of the
Partnership, prior to the termination of the Partnership, as aforesaid, the
business of the Partnership and the relationship of the Partners, as such, shall
continue to be governed by this Agreement.
(d) Each Limited Partner hereby expressly waives his right to dissolve the
Partnership or obtain dissolution in any way other than as specified in
Section 13.1(a) hereof. Without limiting the generality of the foregoing, the
occurrence of any of the following events specified in Section 15642(d) of the
California Revised Limited Partnership Act shall not effect a dissolution of the
Partnership and, notwithstanding the occurrence of any of the following events,
the General Partner shall continue as General Partner of the Partnership: (i)
the commencement of any proceeding against the General Partner seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any statute, law, or regulation; or (ii)
the appointment without the General Partner's consent or acquiescence of a
trustee, receiver, or liquidator of the General Partner or of all or any
substantial part of the General Partner's properties and assets.
13.2 CAPITAL CONTRIBUTION BY THE GENERAL
PARTNER UPON DISSOLUTION
Upon dissolution of the Partnership, the General Partner shall contribute
to the Partnership an amount equal to (and shall in no event be obligated to
contribute more than) the lesser of (i) the deficit balance in its Capital
Account at such dissolution (after giving effect thereto to the allocation of
all items of Partnership income, gain, loss, or deduction arising from the
liquidation of the Partnership's Equipment and assets pursuant to Section 13.3
below), or (ii) 1.01% of the excess of the Limited Partners' Capital
Contributions to the Partnership over the Capital Contributions previously made
to the Partnership by the General Partner. For the purposes of this Section
13.2, any payments made by the General Partner pursuant to any guaranty of
indebtedness made to the Partnership, and the amounts due and unpaid to the
General Partner on any loan made by it to the Partnership, shall be deemed to be
a Capital Contribution made by the General Partner to the Partnership.
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13.3 ALLOCATION OF LIQUIDATION PROCEEDS UPON DISSOLUTION
(a) In the event of dissolution, the assets of the Partnership shall be
sold and the cash proceeds thereof distributed as follows:
(i) All of the Partnership's debts and liabilities to Persons other
than Partners shall be paid and discharged;
(ii) All of the Partnership's debts and liabilities to the Partners
shall be paid and discharged; and
(iii) The balance of such proceeds shall be distributed to the
Partners pro rata to their positive Capital Account balances, as said
Capital Account balances are determined after taking into account all
adjustments (other than Distributions made hereunder) for the taxable year
in which such proceeds are realized.
(b) In the event that the Partnership exchanges its Equipment and its
assets for the securities of a corporation or other entity, and the securities
are distributed in liquidation of the Partnership to the Partners, then and in
such event, the securities, for purposes of determining the Partners' share
thereof under clause (iii) of subsection (a) above, shall be valued at the
agreed-upon net value of the Equipment and the other assets transferred in the
exchange, as set forth in the agreement of sale or exchange, or at their
appraised net value if their value is not set forth in the agreement of sale or
exchange.
13.4 WINDING-UP OF THE PARTNERSHIP
Upon dissolution, each Limited Partner shall look solely to the assets of
the Partnership for the return of his Capital Contribution, and if the
Partnership's assets remaining after the payment or discharge of the debts and
liabilities of the Partnership are insufficient to return the Capital
Contribution of a Limited Partner, the Limited Partner shall have no recourse
against the General Partner or any other Limited Partner (except to the extent
that the General Partner is obligated to make contributions to the Partnership
pursuant to Section 13.2 hereof). The winding-up of the business of the
Partnership and the distribution of its assets shall be conducted by the General
Partner, which is hereby authorized to do any and all acts and things authorized
by law for these purposes. In the event of the Bankruptcy or voluntary
dissolution of the General Partner or the removal of the General Partner by the
Limited Partners without the election by the Limited Partners in either instance
of a successor thereto, the winding-up of the business of the Partnership and
the distribution of its assets shall be conducted by such Person as may be
selected by a vote of the holders of a majority of the then outstanding Units,
which is hereby authorized to do any and all acts and things authorized by law
for such purposes.
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ARTICLE XIV
BOOKS AND RECORDS, BANK ACCOUNTS,
REPORTS, AND TAX ELECTIONS
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14.1 BOOKS AND RECORDS
(a) The books and records of the Partnership shall be maintained at the
principal office of the Partnership. The books and records to be maintained by
the Partnership shall include the following:
(i) A list, updated at least quarterly, of the full name and last
known business or residence address of each Limited Partner, set forth in
alphabetical order, together with the telephone number of the Limited
Partner (if provided to the Partnership by the Limited Partner), the Unit
ownership of such Limited Partner, and the percentage of all outstanding
Units held by such Limited Partner;
(ii) A copy of the Partnership's Certificate of Limited Partnership
and all amendments thereto;
(iii) Copies of the Partnership's Federal, state and local income tax
or informa-
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tion returns and reports for the six most recent taxable years;
(iv) The original of this Agreement and all amendments thereto;
(v) The reports and financial statements of the Partnership required
by Section 14.3 hereof for the six most recent fiscal years; and
(vi) All other Partnership books and records as they relate to the
internal affairs of the Partnership for at least the current and past three
fiscal years.
(b) (1) Upon the request of a Limited Partner, the General Partner shall,
within ten days of the request, mail to the Limited Partner a list of the
Limited Partners of the Partnership as maintained by the Partnership pursuant to
subsection (a)(i) above. The 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). The Partnership may charge the Limited Partner a reasonable amount
for the cost of copying the list. If the General Partner neglects or refuses to
exhibit, produce, or mail a copy of the list, the General Partner shall be
liable to the Limited Partner requesting the list for the costs, including
reasonable attorneys' fees, incurred by the Limited Partner to compel the
production of the list, and for actual damages suffered by the Limited Partner
by reason of such refusal or neglect. It shall be a defense to the production or
mailing of the list that the purpose for the request for inspection of or for a
copy of the list is to secure the list or other information for the purpose of
selling the same or copies thereof, or of using the same for a commercial
purpose other than in the interest of the Limited Partner as a Limited Partner
relative to the business of the Partnership. The General Partner may require the
Limited Partner requesting the list to represent that the list is not being
requested for a commercial purpose unrelated to the Limited Partner's interest
in the Partnership. A request for the list for the purpose of enabling the
Limited Partner to exercise any of the voting rights of the Limited Partner
granted by Section 8.3 hereof, or to exercise the Limited Partner's rights under
Federal proxy laws, shall be deemed, without limitation, to be a proper request
hereunder. The remedies provided hereunder to Limited Partners requesting a list
of the Limited Partners of the Partnership are in addition to, and shall not in
any way limit, any other remedies that may be available to the Limited Partner
under Federal law or under the laws of any state.
(2) Upon the written request of a Limited Partner, the General Partner
shall promptly deliver to such Limited Partner, at the location specified by
such Limited Partner, at the expense of the Partnership, a copy of the books and
records required to be maintained by the Partnership pursuant to the provisions
of paragraphs (ii) or (iv) of subsection (a) above.
(c) The books and records of the Partnership, including those books and
records required to be maintained by the Partnership pursuant to subsections (a)
and (b) above, shall be available for examination and copying (at the Limited
Partner's expense) at the principal office of the Partnership by any Limited
Partner or his duly authorized representative during business hours.
(d) Throughout the term of the Partnership, the Partnership shall maintain
for each Partner a capital account. A Partner's capital account shall be
credited with the cash contributed by such Partner to the Partnership and such
Partner's distributive share of Partnership income (including tax-exempt income)
and gain, and shall be debited with the cash distributed to such Partner and
such Partner's distributive share of Partnership losses and deductions
(including non-tax deductible items) and expenditures of the Partnership
described in Section 705(a)(2)(B) of the Code. Upon the transfer of Units, the
capital account of the transferor Partner attributable to such Units will carry
over to his transferee. In maintaining the capital accounts of the Partners, the
General Partner shall follow the principles enunciated in Section 6.2(a) hereof.
14.2 BANK ACCOUNTS
The bank accounts of the Partnership shall be maintained in such banking
institutions, not affiliated with the General Partner, as the General Partner
shall determine, and withdrawal shall be made only in the regular course of the
Partnership's business on such signature or sig-
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natures as the General Partner may determine. All deposits and other funds not
needed in the operation of the business of the Partnership may be invested in
U.S. government securities, securities issued or guaranteed by U.S. government
agencies, securities issued or guaranteed by U.S. states or municipalities,
certificates of deposit and time or demand deposits in commercial banks, prime
commercial paper, money market mutual funds, bankers' acceptances, or savings
and loan association deposits. The funds of the Partnership shall not be
commingled with the funds of any other Person; provided, however, that the funds
of the Partnership and of other limited partnerships sponsored by the General
Partner or an Affiliate of the General Partner may be held together in a master
fiduciary account pursuant to which separate subtrust accounts are established
for the benefit of the Partnership and such other limited partnerships; and
provided further, that the funds of the Partnership are protected from claims of
such other limited partnership(s) and/or their creditors.
14.3 REPORTS
(a) Within 60 days after the end of each of the first three calendar
quarters of a year, commencing for the first calendar quarter in which
Additional Limited Partners are first admitted to the Partnership pursuant to
Section 3.3(e) hereof, the General Partner shall send to each Limited Partner
(i) a balance sheet, as of the end of such quarter, statements of earnings,
Partners' equity and cash flows for such quarter, each prepared in accordance
with generally accepted accounting principles (but none of which need be
audited), and a statement of distributable cash for such quarter, (ii)
disclosure of the amount of all fees, compensation, and Distributions paid by
the Partnership for such quarter to the General Partner or any Affiliate of the
General Partner, (iii) until the Net Proceeds shall be fully invested, a report
of Equipment acquisitions, including the cost thereof, a description of the
initial leases therefor, and the amount which then remains unexpended, and (iv)
a report of the activities of the Partnership during such calendar quarter.
(b) Within 75 days after the end of each calendar year, the General Partner
shall send to each Person who was a Limited Partner at any time during the
calendar year then ended such tax information with respect to the Partnership's
operations as shall be necessary for the preparation by such Limited Partner of
his Federal income tax return.
(c) Within 120 days after the end of each calendar year, the General
Partner shall send to each Person who was a Limited Partner at any time during
the calendar year then ended (i) a balance sheet as of the end of such calendar
year and statements of earnings, Partners' equity, and cash flows for such
calendar year, all of which shall be prepared in accordance with generally
accepted accounting principles and accompanied by an auditor's report containing
an opinion of an independent certified public accountant, (ii) a statement of
distributable cash (which need not be audited), (iii) a report summarizing the
fees, compensation, and Distributions paid by the Partnership for such calendar
year to the General Partner or any Affiliate of the General Partner, and (iv) a
statement (which need not be audited) showing the Distributions to the Limited
Partners for such year. Said statement shall separately identify for said year
Distributions of Distributable Cash From Operations, Distributions of Sale
Proceeds, Distributions from reserves, and Distributions from reserves from the
Gross Proceeds from the offering of Units.
(d) The General Partner shall prepare and file with appropriate state
authorities and the Securities and Exchange Commission all reports required to
be filed by the Partnership by the respective state's securities or "blue sky"
laws or said Commission, as the case may be.
14.4 TAX ELECTIONS
(a) The Partnership may elect to use and to change from time to time,
insofar as permitted by the applicable provisions of the Code, such costrecovery
methods with respect to its Equipment as are deemed, in the sole and absolute
discretion of the General Partner, to be in the best interests of the
Partnership.
(b) The General Partner may, in its sole and absolute discretion, make any
and all other elections on behalf of the Partnership and the Limited Partners
for Federal, state or local tax purposes.
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ARTICLE XV
MISCELLANEOUS PROVISIONS
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15.1 POWER OF ATTORNEY
(a) Each Limited Partner, including each Additional and Substituted Limited
Partner, by the execution or adoption of this Agreement, hereby irrevocably
constitutes and appoints the General Partner his true and lawful attorney-in-
fact, with full power of substitution, in his name, place and stead, to execute,
acknowledge, deliver, swear to, file, and record such documents as may be
necessary or appropriate to carry out the provisions of this Agreement,
including, but not limited to:
(i) All certificates and instruments and any amendments thereof which
the General Partner deems appropriate to form, qualify or continue the
Partnership as a limited partnership in such jurisdictions in which the
Partnership is formed and may conduct business or in which such formation,
qualification, or continuation is, in the opinion of the General Partner,
necessary to protect the limited liability of the Limited Partners;
(ii) All amendments of this Agreement adopted in accordance with the
terms hereof and all instruments which the General Partner deems
appropriate to reflect a change or modification of the Partnership in
accordance with the terms of this Agreement;
(iii) A group return of income for electing non-resident Limited
Partners of the Partnership pursuant to the provisions of Section 18535 of
the California Revenue and Taxation Code, and the regulations promulgated
thereunder by the Franchise Tax Board, and a similar group return of income
for electing non-resident Limited Partners in any other state in which the
Partnership does business and in which it derives income;
(iv) All certificates and other instruments which the General Partner
deems appropriate to reflect the dissolution and termination of the
Partnership.
(b) The appointment by each Limited Partner of the General Partner as
attorney-in-fact shall be deemed to be a power coupled with an interest and
irrevocable, and shall survive the bankruptcy, death, incompetence or
dissolution of any Person hereby giving such power and a transfer or assignment
of the Units of such Person; provided, however, that in the event of a transfer
by a Partner of all of his Units, the foregoing power of attorney of a
transferor Limited Partner shall survive such transfer only until such time 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 and delivered to effect such substitution; provided further, however,
that the foregoing power of attorney of a transferor Limited Partner shall
survive such transfer with respect to any period prior to the transfer with
respect to which the Limited Partner has elected to authorize the Partnership to
file on such Limited Partner's behalf a group return of income for
non-residents. Any Person dealing with the Partnership may conclusively presume
and rely upon the fact that any instrument referred to above, executed by the
General Partner as attorney-in-fact, is authorized, regular and binding, without
further inquiry. If required, each Limited Partner shall execute and deliver to
the General Partner within five days after the receipt of a request therefor,
such further designations, powers of attorney, or other instruments as the
General Partner shall deem necessary for the purposes of this provision.
15.2 ADOPTION OF AGREEMENT
Each Additional Limited Partner, Substituted Limited Partner, additional
General Partner, and successor General Partner shall become a signatory hereof
by signing such number of counterpart signature pages to this Agreement or such
other instrument or instruments, and in such manner and at such time, as the
General Partner shall determine. By so signing, each Additional Limited Partner,
Substituted Limited Partner, additional General Partner, or succes-
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sor General Partner, as the case may be, 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 in accordance with the provisions of this Agreement.
15.3 NOTICES
Any notice, payment, demand or communication required or permitted to be
given by any provision of this Agreement shall be deemed properly given if
either delivered personally to the party or to an officer of the party to whom
the same is directed or sent by registered or certified mail, postage and
charges prepaid, to the address maintained by the Partnership for such person or
at such other address as he may specify in writing to the Partnership.
15.4 WAIVER OF ACTION FOR PARTITION
Each of the Partners hereby irrevocably waives during the term of the
Partnership any right he may have to maintain any action for partition with
respect to the property of the Partnership.
15.5 BINDING PROVISIONS
Subject to the provisions of Article X hereof, the covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
executors, administrators, personal representatives, successors and assigns of
the respective parties hereto.
15.6 APPLICABLE LAW
This Agreement, and the application and interpretation thereof, shall be
governed, construed, and enforced exclusively by its terms and by the law of the
State of California.
15.7 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 parties have not signed the same counterpart.
15.8 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 or
contrary to any existing or future law, such invalidity shall not impair the
operation of or affect those portions of this Agreement which are valid.
15.9 SECTION TITLES
Section titles herein are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text.
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IN WITNESS WHEREOF, the undersigned have executed this amendment and
restatement of the Agreement as of the day and year second above written.
GENERAL PARTNER:
CRONOS CAPITAL CORP.
By /s/ DENNIS J. TIETZ
--------------------------------------
President
INITIAL LIMITED PARTNER:
/s/ DENNIS J. TIETZ
---------------------------------------
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SCHEDULE A
CAPITAL
CONTRIBUTION
------------
GENERAL PARTNER:
Cronos Capital Corp........................................................... $-0-
444 Market Street
San Francisco, California 94111
INITIAL LIMITED PARTNER:
Dennis J. Tietz............................................................... $100
----
444 Market Street
San Francisco, California 94111
TOTAL.................................................................... $100
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