EXHIBIT 3.5
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
DATED AS OF OCTOBER-10, 1986
AMENDED DECEMBER 12, 1988
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
of
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
TABLE OF CONTENTS
PAGE
ARTICLE 1-DEFINITIONS 1
ARTICLE 2-THE LIMITED PARTNERSHIP 8
2.1 Formation of the Partnership 8
2.2 Partnership Name 8
2.3 Business and Purposes of the Partnership 8
2.4 Principal Place of Business 8
2.5 Term of the Partnership 8
2.6 Execution of Documents 8
2.7 Organizational Limited Partner 9
2.8 Agent for Service of Process 9
ARTICLE 3-GENERAL OPERATING PROVISIONS 9
3.1 General 9
3.2 Borrowing Limitations 9
3.3 Reinvestment of Cash Available From Operations and Cash
Available From Sale or Refinancing 9
3.4 Joint Ventures 10
3.5 Participation in Aircraft Investment with Affiliates 10
3.6 Partnership Expenses 10
ARTICLE 4-THE GENERAL PARTNER 11
4.1 Management Power 11
4.2 Restrictions on Authority of the General Partner 14
4.3 Compensation Plan 14
4.4 Liability of the General Partner 14
4.5 Similar Activities of the General Partner and Presentation of
Opportunities to the Partnership 14
4.6 Activities of Officers and Directors 15
4.7 Indemnification of the General Partner and its Affiliates 15
4.8 Other Matters Concerning the General Partner 16
4.9 Agreements with the General Partner or a Related Person 17
4.10 Subcontracting by General Partner 18
4.11 Conveyances 18
4.12 Election to Be Governed by Successor or Different Limited
Partnership Law 18
4.13 Minimum Net Worth of the General Partner 18
ARTICLE 5-COMPENSATION AND REIMBURSEMENT OF EXPENSES TO THE
GENERAL PARTNER AND ITS AFFILIATES 18
5.1 Acquisition Fee 18
5.2 Management Fee 19
5.3 Distributions and Allocations 19
5.4 Disposition or Remarketing Fee 19
5.5 Fees Paid to Third Parties 19
5.6 Expenses of the General Partner 19
5.7 Reimbursement for Sums Advanced to the Partnership 19
5.8 Additional Services to the Partnership 20
5.9 Fees Payable on Cessation as the General Partner 20
TABLE OF CONTENTS
PAGE
ARTICLE 6-THE LIMITED PARTNERS AND ASSIGNEES 20
6.1 Limited Liability 20
6.2 Restrictions on Limited Partners and Assignees 20
6.3 Outside Activities 20
6.4 No Withdrawal of Contributions 20
6.5 Return of Capital 20
6.6 Death, Incompetency, or Bankruptcy of a Limited Partner or
Assignee 20
ARTICLE 7-MEETINGS AND VOTING 21
7.1 Meetings 21
7.2 Notice of Meeting 21
7.3 Record Date 21
7.4 Adjournment 21
7.5 Waiver of Notice; Consent to Meeting; Approval of Minutes 22
7.6 Quorum 22
7.7 Conduct of Meeting 22
7.8 Action Without a Meeting 22
7.9 Voting Rights 23
7.10 Voting Rights Conditional 23
ARTICLE 8-CAPITAL CONTRIBUTIONS, TRANSFER TO UNDERWRITERS, AND CAPITAL
ACCOUNTS 24
8.1 Capital Contribution of the General Partner 24
8.2 Capital Contribution of the Organizational Limited Partner 24
8.3 Sale of Units to Underwriters 24
8.4 Purchase of Units or Securities by the General Partner or
its Affiliates 24
8.5 Purchase of Units by Affiliate of PSA 25
8.6 Units Not Assessable 25
8.7 No Interest on Capital Contribution 25
8.8 Creditors' Interest in the Partnership 25
8.9 Nature of Interests 25
8.10 Sale of Additional Interests 25
8.11 No Preemptive Rights 26
8.12 Capital Accounts 26
8.13 Purchase or Sale of Units 28
8.14 Registration Rights of the General Partner 28
8.15 Changes in Outstanding Units 29
ARTICLE 9-TAX ALLOCATION OF INCOME AND LOSSES 29
9.1 Apportionment of Net Income, Net Loss, and Distributions 29
9.2 Allocations for Capital Account Purposes 29
9.3 Allocations for Tax Purposes 30
9.4 Tax Elections 31
ARTICLE 10-DISTRIBUTIONS 32
10.1 Distributions for 1986 32
10.2 Distributions of Cash Available From Operations 32
10.3 Distributions of Cash Available From Sale or Refinancing 32
10.4 Distributions of Cash From Other Sources 32
10.5 Distributions of Partnership Assets 32
10.6 Liquidating Distributions 33
10.7 Tax Withholding 33
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PAGE
ARTICLE 11-BOOKS, RECORDS, ACCOUNTS, AND REPORTS 33
11.1 Books and Records 33
11.2 Limited Partners' Rights Regarding Books, Records, and Tax
Information 34
11.3 Accounting Basis and Fiscal Year 35 34
11.4 Reports 34
11.5 Tax Matters Partner 35
11.6 Bank Accounts 35
11.7 Confidentiality 35
ARTICLE 12-ISSUANCE OF CERTIFICATES 35
12.1 Issuance of Certificates 35
12.2 Lost, Stolen, or Destroyed Certificates 36
12.3 Maintenance of Transfer Records 36
12.4 Record Unit Holder 36
12.5 Withdrawal of Certificates 36
12.6 Legends 37
ARTICLE 13-TRANSFER OF INTERESTS 37
13.1 Transfer in General 37
13.2 Transfer of Interests of the General Partner 37
13.3 Transfer of Units 37
13.4 Transfer of Depositary Units 37
13.5 Depositary Arrangements 39
13.6 Restrictions on Transfer, Non-United States Citizens 39
13.7 General Partner's Right to Purchase Units 40
ARTICLE 14-ADMISSION OF SUBSTITUTED AND ADDITIONAL LIMITED
PARTNERS 41
14.1 Admission of Substituted Limited Partners 41
14.2 Admission of Additional Limited Partners 42
14.3 No Action Necessary by Unitholders 42
ARTICLE 15-CHANGES IN THE GENERAL PARTNER 42
15.1 General Partner Ceasing to be the General Partner 42
15.2 Withdrawal or Removal of the General Partner 43
15.4 Rights on Removal or Withdrawal 43
15.5 Liability on Removal or Withdrawal 44
15.6 Successor and Predecessor General Partner 44
15.7 Interest of Departing General Partner and Successor 44
ARTICLE 16-DISSOLUTION, WINDING UP, AND LIQUIDATION 45
16.1 Dissolution 45
16.2 Continuation of the Business of the Partnership 45
16.3 Authority to Wind Up 45
16.4 Accounting 46
16.5 Winding Up and Liquidation 46
16.6 No Recourse Against the General Partner 46
16.7 Claim of Limited Partners and Assignees 46
16.8 General Partner's Obligation to Make Up Negative Capital
Account 46
ARTICLE 17-POWER OF ATTORNEY 47
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PAGE
ARTICLE 18-AMENDMENTS TO PARTNERSHIP DOCUMENTS 48
18.1 Amendments by the General Partner 48
18.2 Amendment Procedures 49
18.3 Restricted Amendments 49
18.4 Amendments Needing Consent.of the General Partner 50
18.5 Amendments to Certificate of Limited Partnership 50
18.6 Amendment Regarding New General Partner 50
ARTICLE 19-MISCELLANEOUS PROVISIONS 50
19.1 Notices 50
19.2 Choice of Venue and Law 51
19.3 Article and Section Headings 51
19.4 Sole Agreement 51
19.5 Force Majeure 51
19.6 Remedies Cumulative 51
19.7 Waiver 51
19.8 Waiver of Action for Partition 51
19.9 Assignability 51
19.10 Gender and Number 51
19.11 Further Action 52
19.12 Creditors 52
19.13 Construction 52
19.14 Severability 52
19.15 Survival 52
19.16 Execution in Counterparts 52
Exhibit 1-Certificate for Limited Partnership Units
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
This Amended and Restated Agreement of Limited Partnership dated as of
October 10, 1986 is made and entered into by and among Airlease Management
Services, Inc., a Delaware corporation, as general partner, United States
Airlease Holding, Inc., as the Organizational Limited Partner, and all other
parties who shall become partners of this limited partnership as provided
herein.
WHEREAS, the Partners heretofore have entered into an Agreement of Limited
Partnership dated July 8, 1986; and
WHEREAS, the Partners desire to amend and restate such Agreement of Limited
Partnership in its entirety as hereinafter set forth;
NOW, THEREFORE, for and in consideration of the foregoing, and of the
covenants and agreements hereinafter set forth, it is hereby agreed as follows:
ARTICLE 1
DEFINITIONS
Unless the context otherwise specifies or requires, the terms defined in
this Article 1 shall, for the purposes of this Agreement, have the meanings
herein specified. These terms shall supersede and replace any other definitions
contained in the California Act. Unless otherwise specified, all references in
this Agreement to Articles or Sections are to Articles or Sections of this
Agreement.
ACQUISITION FEE: The fee paid by or on behalf of the Partnership to the
General Partner or its Affiliates as set forth in Section 5.1.
ADDITIONAL LIMITED PARTNER: A Person admitted to the Partnership pursuant
to Section 14.2 as a Limited Partner.
ADJUSTED PROPERTY: Any property the Carrying Value of which has been
adjusted pursuant to Section 8.12(D) (i).
AFFILIATE: Any Person that directly or indirectly controls, is controlled
by, or is under common control with the Person in question. As used in this
definition of Affiliate, the term control means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
AGREED VALUE: The fair market value of any Contributed Property as
determined by the General Partner using such reasonable method of valuation as
may be adopted by the General Partner. The General Partner shall, in its
discretion, use such method as it deems reasonable and appropriate to allocate
the aggregate Agreed Value of the Contributed Properties transferred to the
Partnership in a single or integrated transaction among each separate property.
The Agreed Value of any Contributed Property shall reflect any adjustments made
pursuant to Sections 8.12 (B) (iii) and 8.12(C).
AGREEMENT This Amended and Restated Agreement of Limited Partnership as the
same may be amended from time to time.
AIRCRAFT: Commercial aircraft, spare or separate engines, and related
Rotable Parts. "Aircraft" includes any beneficial interest in an Aircraft.
AIRCRAFT COST: The total consideration (which, for purposes of calculating
the Acquisition Fee, shall exclude the Acquisition Fee) paid directly or
indirectly in connection with the purchase of an Aircraft, whether paid to
sellers or other persons, either in cash, by way of Units or promissory notes or
by way of assuming or taking subject to any liens or mortgages encumbering such
Aircraft.
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AIRLEASE: United States Airlease, Inc., a California corporation and an
Affiliate of the General Partner and any successor to United States Airlease,
Inc. by merger or consolidation or by sale or transfer of all or substantially
all of the assets of United States Airlease, Inc.
AIRLEASE MANAGEMENT SERVICES, INC.: Airlease Management Services, Inc., a
Delaware corporation, and any successor to Airlease Management Services, Inc. by
merger or consolidation or by sale or transfer of all or substantially all of
the assets of Airlease Management Services, Inc.
ASSIGNEE: A Person to whom one or more Units or Depositary Units have been
transferred, by assignment of a Depositary Receipt or otherwise, in a manner
permitted under this Agreement, but who has not been admitted to the Partnership
as a Substituted Limited Partner with respect to 'such Units. The rights of any
such Person in the Partnership with respect to Units for which such Person has
not been admitted to the Partnership as a Substituted Limited Partner shall be
(i) limited to the rights and obligations appurtenant to such Units to share in
the allocations and distributions of the Partnership, including liquidating
distributions of the Partnership, and (ii) except as expressly provided herein,
otherwise subject to the limitations under the California Act on the rights of
an assignee who has not become a substituted limited partner.
BOOK-TAX DISPARITIES: The differences between a Partner's Capital Account
balance, as maintained pursuant to Section 8.12, and such balance had the'
Capital Account been maintained strictly in accordance with tax accounting
principles (such disparities reflecting the differences between the Carrying
Value of either Contributed Properties or Adjusted Properties, as adjusted from
time to time, and the adjusted basis thereof for Federal income tax purposes).
CALIFORNIA ACT: The California Revised Limited Partnership Act, as amended
and in effect from time to time, and any successor statute thereto.
CAPITAL ACCOUNT: The capital account maintained for each Partner and
Assignee pursuant to Section 8.11.
CAPITAL CONTRIBUTION: Any cash or Contributed Property which a Partner
contributes or is deemed to have contributed to the Partnership pursuant to
Article 8. .
CAPITAL EXPENDITURES: Expenditures for the acquisition of assets having a
useful life to the Partnership of more than one year.
CARRYING VALUE: (a) With respect to a Contributed Property, the Agreed
Value of such property reduced (but not below zero) by all depreciation and cost
recovery deductions charged to the Partners' Capital Accounts pursuant to
Section 8.12(A) with respect to such property, and (b) with respect to any OTHER
PROPERTY, THE adjusted basis of such property for Federal income tax purposes,
as of the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Sections 8.12(C) and 8.12(D), and
to reflect changes, additions, or other adjustments to the Carrying Value for
dispositions, acquisitions, or improvements of Partnership assets, as deemed
necessary, or appropriate by the General Partner.
CASH AVAILABLE FROM OPERATIONS: Net Revenues of the Partnership, less (i)
principal and interest on Partnership liabilities, (ii) funds used for capital
improvements or replacements, (iii) funds and reserves for working capital, debt
refinancing, contingencies, and other purposes deemed reasonably necessary by
the General Partner, and (iv) Casualty Proceeds used, in the discretion of the
General Partner, to acquire additional Aircraft.
CASH AVAILABLE FROM SALE OR REFINANCING: The proceeds, including Sales
Proceeds, received by the Partnership in connection with a sale, refinancing, or
casualty of Aircraft, after (a) the payment of all costs and expenses of any
kind or nature incurred by the Partnership in connection with such sale.
refinancing, or casualty, (b) the utilization of any such proceeds in connection
with the discharge of debts and other obligations of the Partnership deemed by
the General Partner to be advisable to be discharged with the proceeds of such
sale, refinancing, or casualty, and (c) the retention of such proceeds or a
portion thereof in connection with the creation of or addition to any reserves
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established by the General Partner, in its sole discretion. "Cash Available From
Sale or Refinancing" does not include any interest payable on installment
obligations received by the Partnership upon such a sale, refinancing, or
casualty.
CASUALTY PROCEEDS: Recoveries under insurance policies and other net
receipts representing a recovery for loss or destruction of Aircraft.
CERTIFICATE: A non-negotiable certificate issued by the Partnership
evidencing ownership of one or more Units substantially in the form of Exhibit
1.
CERTIFICATE OF LIMITED PARTNERSHIP: The certificate of limited partnership
for the Partnership filed pursuant to the California Act, as the certificate may
be amended from time to time.
CLOSING DATE: The date or dates on which the Units in the Initial Offering
(including any Units sold pursuant to the Underwriters' over-allotment option)
are issued and sold.
CODE: The Internal Revenue Code of 1954, as amended and in effect from time
to time. References in this Agreement to the Code or to sections of the Code
shall include any successor statutes or sections.
CONTRIBUTED PROPERTY: Each Contributing Partner's interest in each property
or other consideration, but excluding cash and cash equivalents, contributed to
the Partnership by such Contributing Partner (or deemed contributed to the
Partnership upon termination thereof pursuant to Section 708 of the Code). Once
the Carrying Value of a Contributed Property is adjusted pursuant to Section
8.12(D) (i), such property shall no longer constitute a Contributed Property for
purposes of Section 9.2(B) but shall be deemed an Adjusted Property for such
purposes.
CONTRIBUTING PARTNER: Each Partner or Assignee contributing (or deemed to
have contributed upon termination of the Partnership pursuant to Section 708 of
the Code) Contributed Property to the Partnership.
DEPARTING GENERAL PARTNER: A General Partner, as of the effective date of
any withdrawal or removal of such General Partner pursuant to Section 15.2, or a
General Partner who has otherwise ceased to be a General Partner.
DEPOSITARY: Manufacturers Hanover Trust Company, or any successor to it as
depositary under the Depositay Agreement or any other Person appointed to serve
as depositary.
DEPOSITARY AGREEMENT: That agreement so designated, among the Partnership,
the Depositary, the General Partner, and the holders of Depositary Receipts as
it may be amended or supplemented from time to time.
DEPOSITARY RECEIPT: A depositary receipt, executed and delivered by or on
behalf of the Depositary in accordance with the Depositary Agreement, evidencing
ownership of one or more Depositary Units.
DEPOSITARY UNIT: A depositary unit representing a Unit on deposit with the
Depositary pursuant to the Depositary Agreement.
DISPOSITION OR REMARKETING FEE: A fee payable by the Partnership to the
General Partner or an Affiliate thereof on the disposition or remarketing for
lease of an Aircraft, payable as set forth in Section 5.4.
FAA Federal Aviation Administration.
FAA ACT: The Federal Aviation Act of 1958, as amended.
FAIR MARKET VALUE: The fair market value of an asset or group of assets as
determined by an independent third party appraiser chosen by the General
Partner.
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FINAL DETERMINATION: A final adjudication regarding subject Federal income
tax issues or a final administrative determination of such issues agreed to by
the General Partner.
GENERAL PARTNER: Airlease Management Services, Inc., in its capacity as
general partner of the Partnership, and any successor or additional general
partner of the Partnership.
GENERAL PARTNER CAPITAL ACCOUNT: That Capital Account maintained for the
General Partner with respect to the interest of the General Partner as a general
partner of the Partnership pursuant to Section 8.11.
INITIAL UNIT ISSUE PRICE: That price specified in the Underwriting
Agreement as the price at which a Unit WILL be purchased by the Underwriters in
the Initial Offering.
INITIAL UNIT OFFERING PRICE: That price specified in the Underwriting
Agreement as the price at. which a Unit will be offered by the Underwriters to
the public in the Initial Offering.
INITIAL LIMITED PARTNERS: The Underwriters.
INITIAL OFFERING. The initial public offering of the Depositary Units. as
more fully described in the Registration Statement, including the sale of any
Units pursuant to the exercise of any over-allotment option. .
ISSUE PRICE: The price at which a Unit is purchased from the Partnership.
LIMITED PARTNER CAPITAL ACCOUNT: That Capital Account maintained for each
Limited Partner or Assignee with respect to such Limited Partner's or Assignee's
Units pursuant to Section 8.12.
LIMITED PARTNERS: The Organizational Limited Partner, the Initial Limited
Partners, and the holders of Units who have been admitted to the Partnership as
Substituted Limited Partners or as Additional Limited Partners. "Limited
Partner" means one of the Limited Partners.
MAJORITY INTEREST: The interest of Limited Partners of record who are
Limited Partners (rather than Assignees) with respect to more than 50% of the
total number of all outstanding Units and Depositary Units held by Limited
Partners (as Limited Partners rather than as Assignees), including the General
Partner and its Affiliates to the extent they own Units or Depositary Units.
MANAGEMENT FEE: The fee paid to the General Partner pursuant to Section
5.2.
NASDAQ: The National Association of Securities Dealers Automated Quotations
System.
NATIONAL SECURITIES EXCHANGE: AN exchange registered with the Securities
and Exchange Commission under Section 6(a) of the Securities Exchange Act of
1934.
NET AGREED VALUE: (a) In the case of any Contributed Property, the Agreed
Value of such property or other consideration reduced by any indebtedness or
liabilities either assumed by the Partnership upon such contribution or to which
such property is subject when contributed, and (b) in the case of any property
currently distributed to a Partner or distributed in liquidation of the
Partnership pursuant to Section 16.5, the Partnership's Carrying Value of such
property at the time such property is distributed reduced by any indebtedness
either assumed by such Partner upon such distribution or to which such property
is subject at the time of distribution.
NET INCOME and NET LOSS: The net income and net loss, respectively, of the
Partnership calculated in accordance with accounting methods followed for
Federal income tax purposes.
NET REVENUES: The funds provided from Partnership operations (excluding
cash from sales or refinancing of Aircraft but including that portion of
Casualty Proceeds representing the present value, calculated at the rate used by
the Partnership to recognize income in accordance with generally accepted
accounting principles, of the remaining rent due under the lease), interest on
the Partnership's cash and any short-term investments as well as interest on any
carryback financing held in connection with the sale of Partnership assets,
without deduction for payment of interest or principal on Partnership
liabilities and without deduction for non-cash expenses (such as depreciation or
4
amortization), but after deducting funds used to pay Partnership operating
expenses, any Management Fees, and the fee payable to the General Partner or its
Affiliates for remarketing for lease an Aircraft as provided in Section 5.4. Net
Revenues do not include loan proceeds, Sales Proceeds, or Capital Contributions
to the Partnership.
NAAF: North American Aircraft Finance Corporation, an Affiliate of PSA.
ORGANIZATIONAL LIMITED PARTNER: U.S. Holding.
PARTNER: A General Partner or a Limited Partner; and "Partners" means the
General Partner and all Limited Partners.
PARTNERSHIP: The limited partnership created by this Agreement and any
successor partnership continuing the business of the Partnership which is a
reformation or reconstitution of a partnership governed by this Agreement.
PARTNERSHIP INTEREST: The interest of a Person in the Partnership.
PARTNERSHIP ASSET: Any and all assets, real or personal, now or hereafter
owned by the Partnership or in or to which the Partnership has any interest,
right, or claim.
PERSON: An individual, partnership, joint venture, estate, association,
corporation, trust company, trust, or other entity.
PRESCRIBED ASSET VALUE: As of any date of determination, that amount
determined by dividing (a) an amount equal to the product of (i) the total
number of outstanding Units (immediately prior to an issuance of Units pursuant
to Section 8.10, if such issuance triggered an asset valuation pursuant to
Section 8.12(D) (i)) times (ii) (1) in the case of a valuation occasioned by an
issuance of Units pursuant to Section 8.10, the Issue Price as of the date of
issuance or (2) in the case of a valuation occasioned by a current distribution
or a deemed distribution resulting from a constructive termination of the
Partnership pursuant to Section 708 of the Code, the Unit Price as of the date
of such actual or deemed distribution, by (b) 99%.
PSA TRANSACTION: The transaction whereby the Partnership through a trust,
has purchased Aircraft from and leased them back to, Pacific Southwest Airlines,
a California corporation, as more particularly described in the Registration
Statement.
PURCHASE AGENT: The purchase agent - designated by the General Partner, or any
successor specified by the General
Partner.
PURCHASE DATE: The date determined by the General Partner as the date for
purchase of all outstanding Units (except Units of the General Partner or its
Affiliates) -pursuant to Section 13.7, as specified in the notice that is
furnished to holders of Units pursuant to Section 13.7(B).
PURCHASE FUNDS: An amount in cash equal to the aggregate purchase price
(determined in accordance with Section 13.7) of all Units subject to purchase by
the General Partner or its Affiliate on the Purchase Date in accordance with
Section 13.7.
RECAPTURE INCOME: Any income or gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or Section
743 of the Code) treated as ordinary income for Federal income tax purposes
pursuant to any provision of the Code converting capital gain to ordinary income
as a result of prior deductions.
RECORD DATE: The date established by the General Partner, in its
discretion, for determining (a) the identity of Persons entitled to notice of or
to vote at any meeting of the Partnership or entitled to vote by ballot or give
consent to Partnership action in writing without a meeting or entitled to
exercise rights in respect of any other lawful action, or (b) the identity of
Persons. entitled to receive any report or distribution from the Partnership as
a Partner or Assignee.
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RECORD UNITHOLDER. As applied to the Limited Partners, the Persons shown as
Limited Partners on the records of the Partnership as of the close of business
on a particular day; as applied to a Depositary Receipt, the Person in whose
name the Depositary Receipt is registered on the books of the Depositary as of
the close of business on a particular business day; and as applied to the holder
of a Unit not deposited with the Depositary, the record holder of such Units as
reflected on the records of the Partnership.
REGISTRATION STATEMENT: The Registration Statement on Form S-1 (NO.
33-7985) filed by the Partnership with the Securities and Exchange Commission
under the Securities Act of 1933 to register the offering and sale of the
Depositary Units in the Initial Offering, as it may be amended from time to
time.
RELATED ENTITY: U.S. Leasing and any Person (i) as to which U.S. Leasing,
directly or indirectly, has the power to exercise in excess of 50`0 of the
voting power with respect to acquisitions or dispositions of assets
(notwithstanding the fact that any such acquisition or disposition is subject to
the approval of more than 50% of the voting power) or owns in excess of SO%o of
the equity interest and (II) which is organized and has its principal place of
business in the United States.
RELATED PERSON: A General Partner, any partner, officer, director, or
Affiliate of a General Partner, or any Person in which any of the foregoing has
a material financial interest.
RESIDENT ALIEN: A "resident alien" as now or hereafter defined in the FAA
Act, or any successor statute, or in regulations adopted pursuant to said Act,
or pursuant to any successor statute.
RESIDUAL GAIN or RESIDUAL LOSS: Any net gain or net loss, as the case may
be, of the Partnership recognized for Federal income tax purposes resulting from
a sale, exchange, or other disposition of a Contributed Property or Adjusted
Property, to the extent such net gain or net loss is not allocated pursuant to
Section 9.3(B) to eliminate Book-Tax Disparities.
ROTABLE PARTS: An item that can be economically restored to a serviceable
condition and in the normal course of operation is repeatedly rehabilitated to
its fully serviceable condition over a period approximating the life of the
flight equipment to which it is related.
SALE OR DISPOSITION: The sale or other disposition of Aircraft.
SALES PROCEEDS: The total consideration paid directly or indirectly to the
Partnership in connection with the sale of Aircraft, whether paid in cash or by
way of assuming or taking subject to any liens or mortgages encumbering such
Aircraft; and, as received, principal payments in respect of any carryback
financing held in connection with such sale. "Sales Proceeds" shall also include
that portion of Casualty Proceeds not representing the present value of prepaid
rent.
SERVICE: The Internal Revenue Service.
SUBSTITUTED LIMITED PARTNER: A Person who is admitted to the Partnership as
a Limited Partner pursuant to this Agreement in place of and with all the rights
of a Limited Partner pursuant to Section 14.1.
TOTAL AIRCRAFT COST: The cost of acquiring all the Aircraft owned by the
Partnership at the tire such calculation is made, including commissions,
expenses, legal and accounting fees, Acquisition Fees. all other expenses in
connection with the acquisitions, and the cost of the Aircraft.
TRANSFER AGENT: The Depositary or any bank, trust company, or other Person
appointed by the General Partner to act as transfer agent for Depositary
Receipts.
TRANSFER APPLICATION: An application and agreement for transfer of
Depositary Units in the form set forth on the back of the Depositary Receipt or
in a form substantially to the same effect in a separate instrument by which an
Assignee (or his broker, dealer, or nominee holder acting on his behalf)
requests admission to the Partnership as a Substituted Limited Partner, agrees
to be bound by the terms and conditions of this Agreement and the Depositary
Agreement, grants a power of attorney
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to the General Partner pursuant to Article 17, and represents and warrants to
the Partnership that he is a United States Citizen or Resident Alien.
US. HOLDING: United States Airlease Holding, Inc., a California corporation
and an Affiliate of the General Partner.
US. LEASING: United States Leasing International, Inc., a California
corporation and an Affiliate of the General Partner.
UNDERWRITERS: Those underwriting firms listed in the Underwriting Agreement
or an exhibit or schedule thereto which agree to purchase Units from the
Partnership.
UNDERWRITING AGREEMENT: The agreement to be entered into prior to the
Closing Date among the General Partner, U.S. Leasing, Airlease, the Partnership,
and the Underwriters with respect to the purchase of Units by the Underwriters
in the Initial Offering.
UNITED STATES CITIZEN: A "citizen of the United States" as now or hereafter
defined in the FAA Act, or any successor statute, or in regulations adopted
pursuant to said Act, or pursuant to any such successor statute.
UNITS: Those units of limited partners' interest in the Partnership
acquired or issued pursuant to this Agreement.
Unitholden Each owner of Units who is either a Limited Partner (including the
Organizational Limited Partner) or an Assignee.
UNIT PRICE OF A UNIT OR A DEPOSITARY UNIT: As of any date of determination,
(a) if such Unit or Depositary Unit is one of a class of Depositary Units listed
or admitted to trading on a National Securities Exchange, the average of the
last reported sale prices per Depositary Unit regular way or, in case no such
reported sale takes place regular way, the average of the arithmetic mean of the
last reported bid and asked prices per Depositary Unit, in either case on the
principal National Securities Exchange on which such Depositary Units are listed
or admitted to trading, for the five trading days immediately preceding the date
of determination; (b)' if such Unit or Depositary Unit is not of a class of
Depositary Units listed or admitted to trading on a National Securities Exchange
but is of a class quoted by NASDAQ, the average of the last reported sale prices
per Depositary Unit quoted by NASDAQ or, in case no such reported sale takes
place on any such day or in case last reported sale prices are not quoted by
NASDAQ, the average of the arithmetic mean of the closing bid and asked prices
per Depositary Unit, for the five trading days immediately preceding such date
of determination, as furnished by the National Quotation Bureau Incorporated, or
such other nationally recognized quotation service as may be selected by the
General Partner for such purpose, if said Bureau is not at the time furnishing
quotations; or (c) if such Unit or Depositary Unit is not of a class of
Depositary Units listed for trading on a National Securities Exchange or quoted
by NASDAQ, an amount equal to the fair market value of such Unit as of such date
of determination, as determined by the General Partner using any reasonable
method of valuation it may select. For purposes of this definition, a Unit WILL
be deemed to be one of a class of Depositary Units if the holder of such Unit
may obtain a Depositary Unit by depositing such Unit with the Depositary
pursuant to the Depositary Agreement.
UNREALIZED GAIN: As of any date of determination, the excess, if any, of
the fair market value of any Partnership Asset (as determined under Section
8.12(D)) as of such date of determination over the Carrying Value of such asset
as of such date of determination (prior to any adjustment to be made pursuant to
Section 8.12(D) as of such date).
UNREALIZED LOSS: As of any date of determination, the excess, if any, of
the Carrying Value of any Partnership Asset as of such date of determination
(prior to any adjustment to be made pursuant to Section 8.12(D) as of such date)
over the fair market value of such property (as determined under Section
8.12(D)) as of such date of determination.
7
ARTICLE 2
THE LIMITED PARTNERSHIP
2.1 FORMATION OF THE PARTNERSHIP. The General Partner and the
Organizational Limited Partner have formed the Partnership as a limited
partnership organized under the California Act.
2.2 PARTNERSHIP NAME. The name of the Partnership is "Airlease Ltd., A
California Limited Partnership." The Partnership may conduct business under such
other name or names as the General Partner may from time to time deem necessary,
appropriate, or advisable, including the name of the General Partner. The
General Partner in its sole discretion may change the name of the Partnership at
any time and from time to time. The General Partner and the Limited Partners
hereto shall promptly execute, and the General Partner shall file and record
with proper offices in each jurisdiction in which the Partnership does, or
elects to do, business, such certificates or other statements or instruments as
are required by the limited partnership statute, fictitious name statute,
assumed name statute, or any other similar statute in effect in such
jurisdiction in order to conduct the Partnership business therein as a
partnership in which the limited partners have limited liability.
2.3 BUSINESS AND PURPOSES OF THE PARTNERSHIP. The. primary purpose of the
Partnership is to acquire, own, operate, manage, finance, lease, and sell
Aircraft and interests therein, either directly or by way of joint ventures or
partnerships, 'either in its own name or in the name or names of one or more
nominees of the Partnership or one or more trustees of a trust of which the
Partnership is a beneficiary. In addition, the Partnership may engage in any
other business or do any and all acts and things which may be necessary,
incidental, or convenient to carry on the Partnership business and purposes as
specified in this paragraph. For purposes of this Agreement, any Aircraft
acquired and held by one or more nominees or trustees for the benefit of the
Partnership shall be deemed to have been acquired by and to be owned by the
Partnership itself. The Partnership shall be empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to, or
convenient for the business and purposes described herein and for the protection
or benefit of the Partnership.
2.4 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Partnership shall be at 2988 Campus Drive, San Mateo, California 94403, but the
General Partner may substitute or establish such other place or places of
business of the Partnership (within or without the State of California) as it
may, from time to time, deem necessary or appropriate; provided, however, that
the General Partner shall give the Unitholders notice in writing of any change
of address of the principal place of business of the Partnership and, in
connection therewith, shall amend the Certificate of Limited Partnership in
accordance with applicable requirements of law.
2.5 TERM OF THE PARTNERSHIP. The Partnership commenced on June 18, 1986,
the date that the Certificate of Limited Partnership was filed in accordance
with the provisions of the California Act, and shall continue until December 31,
2036, or until the earlier termination of the Partnership in accordance with
Article 16.
2.6 EXECUTION OF DOCUMENTS. The General Partner, on its own behalf and as
attorney-in-fact for the other Partners and Assignees pursuant to the power of
attorney granted in Article 17, shall execute, acknowledge, and file or deliver
all certificates of limited partnership, amended or restated certificates,
instruments, or other documents and counterparts thereof and make all filings
and recordings and perform all other acts as shall be necessary to comply with
the laws of the State of California for the formation, continuation, or
reformation of the Partnership, for the continued good standing of the
Partnership, and, when appropriate, for the termination of the Partnership. The
General Partner shall also execute such certificates, amended or restated
certificates, and other documents conforming hereto and do such filing,
recording, publishing, and other acts as may be appropriate to comply with the
requirements of law for the formation, continuation, reformation, qualification,
and/or operation of a limited partnership (or as a partnership in which the
limited partners have limited liability) in all jurisdictions where the
Partnership may wish to do business, which shall be accomplished prior to
8
doing business in any such jurisdiction if deemed necessary by the General
Partner for the maintenance of such limited liability.
2.7 ORGANIZATIONAL LIMITED PARTNER. In order to create the Partnership
under the California Act, the Partnership has heretofore accepted a capital
contribution in the amount of $10 from the Organizational Limited Partner for an
interest as a Limited Partner. Any allocations, interest, or other profit which
may have resulted from the investment or other use of such amount paid by the
Organizational Limited Partner to the Partnership prior to admittance of the
Initial Limited Partners shall be allocated 99% to the General Partner and 1% to
the Organizational Limited Partner. The interest acquired by the Organizational
Limited Partner pursuant to this Section 2.7 is not transferable except by
operation of law.
2.8 AGENT FOR SERVICE OF PROCESS. The General Partner shall select one or
more Persons to act as the registered agent for service of process on the
Partnership. The initial agent for service of process is Peter Mezey, 615
Battery Street, San Francisco, California 94111.
ARTICLE 3
GENERAL OPERATING PROVISIONS
3.1 GENERAL. The Partnership shall adhere to the operating provisions
contained in this Article 3, unless otherwise approved by a Majority Interest.
3.2 BORROWING LIMITATIONS.
(A) The Partnership shall not borrow funds or assume financing unless one
of the following applies:
(1) Immediately after giving effect to the borrowing or assumption of
financing and the purchase of the related assets, the total Partnership
indebtedness as reflected in its accounting records at the date of such
proposed borrowing or assumption of financing is less than 50% of the
higher of (i) Total Aircraft Cost or (ii) Fair Market Value of the
Partnership's Aircraft; however, borrowings and assumption of financings
may exceed such 50% limitation for a period of up to 120 days so long as
the General Partner uses its best efforts to reduce the indebtedness to
comply with said 50% limitation within such 120-day period; or
(2) The borrowed funds are necessary to prevent foreclosure on any
Partnership Asset.
(B) The Partnership may borrow funds from the General Partner or its
Affiliates, subject to the limitations contained in Section 4.1(t).
3.3 REINVESTMENT OF CASH AVAILABLE FROM OPERATIONS AND CASH AVAILABLE FROM
SALE OR REFINANCING.
(A) (1) During the year ended December 31, 1986, Cash Available From
Operations in excess of the amount required to be distributed pursuant to
Section 10.1 shall be retained by the Partnership and used to establish a fund
for the purchase of additional Aircraft or other purposes determined by the
General Partner.
(2) During the year ended December 31, 1987, Cash Available From
Operations in excess of the amount distributed pursuant to Section 10.2(A)
shall be retained by the Partnership and used to establish a fund for the
purchase of additional Aircraft or other purposes determined by the General
Partner.
(3) After December 31, 1987, all Cash Available From Operations shall
be distributed pursuant to Section 10.2(B).
(B) (1) Through December 31, 2004, the Partnership may retain for use in
its business, any Cash Available From Sale or Refinancing remaining after making
the distribution required by Section 10.3(A).
9
(2) After December 31, 2004, all Cash Available From Sale or Refinancing
shall be distributed pursuant to Section 10.3(C) provided that if the General
Partner determines that it would be in the Partnership's best interest, Cash
Available From Sale or Refinancing may be used to repay indebtedness.
3.4 JOINT VENTURES. The Partnership may invest in partnerships or joint
ventures which own or are organized to acquire Aircraft with any Person,
including any Person which is an Affiliate of the General Partner, on terms and
conditions determined in the sole discretion of the General Partner.
3.5 PARTICIPATION IN AIRCRAFT INVESTMENT WITH AFFILIATES.
(A) So long as Airlease Management Services, Inc. or another Related Entity
is the General Partner, the Partnership may only make Aircraft leasing
investments offered to it in accordance with this Section.
(B) Until September 30, 1991, the General Partner and Airlease hereby agree
to offer the Partnership the right to acquire a 50% participation interest in
all Aircraft leasing investments to be made by any Related Entity where the
aggregate Aircraft Cost in such investment is greater than S10 million. The
Partnership shall acquire such interest subject to. the determination by the
General Partner that the investment is suitable for the Partnership. If, after
allocating an investment in accordance with the first two sentences above, the
total investment made by Related Entities (including through their interest in
the Partnership either as a General Partner or a Limited Partner) would exceed
U.S. Leasing's then-existing credit policy regarding maximum permissible
investment for a single lessee, the General Partner and Airlease shall offer
and, subject to a determination of suitability, the Partnership shall accept an
additional participation interest in an amount necessary to reduce the total
investment by Related Entities to an amount in compliance with US. Leasing's
credit policy. Any offer required to be made by this subsection (i) is only
required to be made at the time of the commitment (but may be made at a later
time in the sole discretion of the General Partner or Airlease) to enter into
the transaction and (ii) must be accepted by the Partnership at the time. that
the offer is made. Notwithstanding anything in this paragraph (B) to the
contrary, if the Aircraft leasing investment to be made by Airlease or any
Related Entity is a leveraged lease, as defined in Statement of Financial
Accounting Standards No. 13, then Airlease may, in its discretion, decline to
offer the Partnership a participation interest in such investment.
(C) After September 30, 1991, neither the General Partner nor Airlease
shall be under any obligation to offer the Partnership any investment
opportunities. However, the General Partner and Airlease may continue to offer
investment opportunities to the Partnership, and the Partnership shall accept
opportunities deemed suitable by the General Partner, provided one or more
Related Entities makes at least 20% (including the interest in the Partnership
then owned by the General Partner and all Related Entities) of the total
investment made by Related Entities and the Partnership in such transactions.
(D) Notwithstanding anything in paragraphs (A), (B) or (C) of this Section
3.5 to the contrary, the Partnership may make Aircraft leasing investments in
which Related Entities do not participate (i) where the investment committee of
the board of directors of U.S. Leasing determines that such investment would
cause US. Leasing or the affiliated group with which it files consolidated
federal income tax returns to forego current utilization of foreign tax credits
or would increase their foreign assets, or (ii) where the investment is in an
Aircraft which is subject to a tax benefit transfer lease under the safe harbor
lease rules enacted under the Economic Recovery Tax Act of 1981, or (iii) where
the Aircraft investment is made by the Partnership after or in anticipation of
the disposition of the Partnership's interest in another Aircraft in which a
Related Entity does not or did not have an interest, and the board of directors
of the General Partner determines that such new Aircraft investment is for the
purpose of replacing the Partnership's interest in such other Aircraft.
10
(E) For purposes of this Section 35, a 5090 participation interest in an
Aircraft leasing investment by the Partnership and a Related Entity shall
include, in the case of two Similar Aircraft, the acquisition of one Similar
Aircraft by the Partnership and one Similar Aircraft by a Related Entity. As
used herein, a Similar Aircraft shall mean substantially similar aircraft leased
to the same lessee pursuant to substantially similar leases and acquired by the
Partnership or a Related Entity at a substantially Similar Aircraft Cost (the
difference not to exceed 59'0 of the lesser Aircraft Cost), all as determined by
the General Partner at the time of acquisition. .
3.6 PARTNERSHIP ERPENSES.
(A) The General Partner shall be responsible and shall pay for only its
expenses incurred (i) in connection with certain services it performs as
described in Sections 5.1. 5.2, and 5.4 for which it receives fees described
therein, other than reimbursements for which it may be entitled to under said
sections, and (ii) for overhead and salary expenses of employees in connection
with the Initial Offering.
(B) Except as set forth in Section 3.6(A), the Partnership shall be
responsible and shall pay for all fees, costs, and expenses arising out of or in
connection With (i) the organization of the Partnership (ii) the PSA
Transaction; (iii) the qualification of the Partnership to do business in any
state determined by the General Partner, (iv) the registration or qualification
of the Depositary Units fog sale by the Partnership under applicable Federal and
state securities laws in connection with the Initial Offering or future
offerings; (v) the offering, sale, and distribution of the Depositary Unit:
pursuant to the Initial Offering or any future offerings; (vi) the listing of
the Depositary Receipts on a National Securities Exchange; (vii) the planning,
preparation, management, and operation of the Partnership, including but not
limited to fees, costs, and expenses in connection with the purchase holding,
operation, financing, refinancing, and sale of Aircraft or joint venture or
partnership interest therein; (viii) fees and reimbursements to which the
General Partner and its Affiliates are entitled
10-A
under this Agreement; and (ix) any and all other items arising out of or in
connection with the business or activities of the Partnership.
ARTICLE 4
THE GENERAL PARTNER
4.1 MANAGEMENT POWER. Subject to Sections 7.9 and 18.2, the General Partner
shall have full, exclusive and complete discretion, power and authority in the
management and control of the business of the Partnership, shall make all
decisions affecting the business of the Partnership, and may do or cause to be
done any and all acts it deems necessary or appropriate to accomplish the
purposes of the Partnership. Any Person dealing with the General Partner shall
not be required to determine or inquire into the authority and power of the
General Partner to bind the Partnership and to execute, acknowledge, deliver,
and perform obligations under any and all documents. By way of illustration, but
not by way of limitation, such matters shall include the right, power, and
authority of the General Partner, in its sole discretion, without any approval
from Unitholders, and at the expense of the Partnership:
(a) To cause the Partnership to enter into and perform the PSA Transaction:
(b) To cause the Partnership to acquire, own, operate, lease (as lessee or
lessor or both), develop, improve, maintain, finance, hold, control, exchange,
trade, sell, pledge, convey in trust or otherwise hypothecate or dispose of
Aircraft, appurtenances thereof and personal or mixed property connected
therewith, upon such terms and for such consideration (including cash,
securities, Units, Partnership Interests, and other property) as the General
Partner deems necessary or appropriate;
(c) Subject to Section 3.2, to borrow money, to obtain credit, or to assume
debt in such amounts, on such terms and conditions and at such rates of interest
as the General Partner deems appropriate, from banks, other lending
institutions, or any other Person, including the Partners and Assignees (subject
to Section 4.1(t)), for any purpose of the Partnership, including, without
limitation, any loan incurred for the purpose of making one or more
distributions to any or all Partners and Assignees, including any distributions
which are, in whole or in part, a return of Capital Contributions; and, in
connection with such loans to mortgage, pledge, assign, or otherwise encumber or
alienate any or all of the Partnership Assets, including any income therefrom,
to secure or provide for the repayment thereof. As between any lender and the
Partnership, it shall be conclusively presumed that the proceeds of such loans
are to be and WILL be used for the purposes authorized herein and that the
General Partner has the full power and authority to borrow such money and to
obtain such credit;
(d) To place record title to, or the right to use, Partnership Assets in
the name or names of one or more nominees or trustees for any purpose convenient
or beneficial to the Partnership;
(e) To cause the Partnership to employ employees, agents, independent
contractors,.brokers, attorneys, accountants and other Persons, including the
general Partner and its Affiliates, and employees thereof, to perform such
services for the Partnership as the General Partner may designate, on such terms
and for such compensation as the General Partner shall determine, and to dismiss
such persons from employment, provided that compensation of the General Partner
and its Affiliates for the services set forth in Article 5 shall be limited to
the amounts set forth in said Article 5; , .
(f) To prepare or cause to be prepared reports, statements, and other
relevant information for distribution to Unitholders;
(g) To select the Partnership's accounting year;
11
(h) To determine the appropriate accounting method or methods to be used by
the Partnership;
(i) To cause the Partnership to offer and sell Units and other Partnership
Interests (whether or not senior to the Units) to the public through
underwriters or broker-dealers and to employ personnel, agents, and dealers for
such purpose;
(j) Subject to Article 18, to amend this Agreement;
(k) To require in any or all Partnership contracts that the General Partner
shall not have any personal liability thereon and that the Person contracting
with the Partnership is to look solely to the Partnership or its assets for
satisfaction;
(1) To execute, acknowledge, and deliver any and all instruments, on behalf
of the Partnership or otherwise, which it shall deem necessary or appropriate to
effectuate the right, power, and authority of the General Partner, and to take
all such action in connection therewith as it shall in its discretion deem
necessary or appropriate;
(m) Subject to Section 3.3, to cause the Partnership to reinvest or make a
commitment to reinvest all or any portion of Cash Available From Operations and
Cash Available From Sale or Refinancing in additional Aircraft;
(n) To purchase Aircraft and delivery positions in its own name or in the
name of a nominee, a trust, or otherwise (and assume loans in connection
therewith) and temporarily hold title thereto, for the purpose of facilitating
the acquisition of such Aircraft, the borrowing of money, or the obtaining of
financing by the. Partnership, or the completion of manufacture of the Aircraft
or for any other purpose related to the business of the Partnership;
(o) To cause the Partnership to purchase Aircraft from the General Partner
or its Affiliates, so long as the price payable by the Partnership to the
General Partner or any of its Affiliates for an Aircraft does not exceed the
Fair Market Value of the Aircraft, provided that if such purchase occurs within
three months of the acquisition of the Aircraft by the General Partner or its
Affiliate, the price to the Partnership shall be the price paid by the General
Partner or its Affiliates plus any related costs and holding expenses;
(p) To cause the Partnership to sell Aircraft to the General Partner or its
Affiliates on terms and conditions determined by the General Partner, so long as
the price payable for such Aircraft is at least equal to the Fair Market Value
of such Aircraft;
(q) To prepare, file, and publish any and all instruments or documents
necessary to enable the Partnership to transact business or otherwise to exist,
operate, and be recognized as a limited partnership in jurisdictions outside
California;
(r) To cause the Partnership to endeavor to maintain a cash reserve for
working capital, debt financing, normal repairs, replacements, contingencies,
and other purposes deemed reasonably necessary by the General Partner,
(s) To cause the Partnership to invest in partnerships or joint ventures;
(t) To make, and to permit its Affiliates to make, loans to the Partnership
on terms which do not exceed the points, charges, and interest which would be
charged by unrelated lenders on comparable loans for the same purpose in the
same locality, provided that, in no event will the Partnership be required to
pay interest on any such loan at an annual rate greater than that permitted by
law;
(u) To apply proceeds of any Sale or Disposition of any Partnership Asset
to payment of liabilities of the Partnership and to pay, collect, compromise,
arbitrate, or otherwise adjust any and all other claims or demands of or against
the Partnership or to hold such proceeds against the payment of contingent
liabilities, known or unknown;
12 -
(v) To purchase and maintain liability, indemnity, and any other insurance
(including, without limitation, errors and omissions insurance and insurance to
cover the obligations of the Partnership under Section 4.7), sufficient to
protect the Partnership, the General Partner, its officers, directors,
employees, agents, and Affiliates from those liabilities and hazards which may
be insured against in the conduct of the business and in the management of the
business and affairs of the Partnership;
(w) To invest funds of the Partnership in interest-bearing accounts and
short-term investments including, without limitation, obligations of the
Federal, state, and local governments and their agencies, mutual funds
(including money market funds), time deposits, commercial paper, and
certificates of deposit of commercial banks, savings banks, or savings and loan
associations; provided that the General Partner shall use its best efforts not
to invest Partnership funds in such a manner that the Partnership will be
considered to be holding itself out as being engaged primarily in the business
of investing, reinvesting, or trading in securities or be deemed thereby to be
an investment company under the Investment Company Act of 1940;
(x) To make or revoke any election on behalf of the Partnership as is or
may be permitted under the Code (including, but not limited to, elections under
Section 754 of the Code and elections relating to tax benefit transfer leases)
or under the taxing statute or rule of any state, local, foreign, or other
jurisdiction, and to supervise the preparation and filing of all tax and
information returns which the Partnership may be required to file;
(y) To collect all rents and other charges from lessees of the Partnership
Assets in which case the General Partner shall have full power and authority to
request, demand, collect, receive, and receipt for all such rents and other
charges, to institute legal proceedings in the name of the Partnership for the
collection thereof and for the dispossession of any Person from Partnership
Assets, to settle or compromise all such legal proceedings and any other
disputes with respect to such rents and other charges, and to incur such
expenses in connection therewith as the General Partner shall determine to be
necessary or appropriate, which expenses may include, but not be limited to, the
costs of counsel for any such matter;
(z) To cause to be disbursed the amount required to be paid pursuant to any
indebtedness of the Partnership;
(aa) To pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend, or compromise, upon such terms as it may determine and upon
such evidence as it may deem sufficient, any obligation, suit, liability, cause
of action, or claim, including taxes, either in favor of or against the
Partnership;
(bb) To register, qualify, list, or report, or cause to be registered,
qualified, listed, or reported, this Agreement or Units issued hereunder
pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934, any
other securities laws of the United States, the securities laws of any state of
the United States, the laws of any other jurisdiction, with any securities
exchange, or pursuant to an automated quotation system of a registered
securities association, as the General Partner deems appropriate;
(cc) To distribute money or Partnership Assets to Partners and Assignees in
accordance with Article 10, regardless of the source of such money or
Partnership Assets, including, without limitation, money borrowed by the
Partnership or by the General Partner on behalf of the Partnership;
(dd) To cause the Partnership to issue Units and other Partnership
Interests in exchange for Aircraft or for joint venture or partnership
interests;
(ee) To form operating partnerships wherein the Partnership is a partner;
(ff) To sell any and all Partnership Assets. on terms and conditions
determined by the General Partner, unless such sale is of all or substantially
all of the Partnership Assets and is made
13
with a view to the dissolution, discontinuation, or material alteration of the
business of the Partnership (which sale requires the approval of a Majority
Interest pursuant to Section 7.9 (A) (2) );
(gg) To possess and exercise any additional rights and powers of a general
partner under the partnership laws of California (including, without limitation,
the California Act) and any other applicable laws, to the extent not
inconsistent with this Agreement; and
(hh) In general, to exercise in full all of the powers of the Partnership
and to do any and all acts and conduct all proceedings and execute all rights
and privileges, contracts, and agreements of any kind whatsoever, although not
specifically mentioned in this Agreement, that the General Partner in its sole
and absolute discretion may deem necessary or appropriate to the conduct of the
business and affairs of the Partnership or to carry out the purposes of the
Partnership. The expression of any power or authority of the General Partner in
this Agreement shall not in any way limit or exclude any other power or
authority which is not specifically or expressly set forth in this Agreement.
4.2 RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNER. Anything in this
Agreement
to the contrary notwithstanding, the General Partner shall have no authority to:
(A) Take any action on any matter with respect to which approval of a
Majority Interest (or any applicable greater percentage) is specifically
required under this Agreement without such approval having occurred;
(B) Cause the Partnership to commit those acts prohibited by Article 3; or
(C) Cause the Partnership to make loans to the General Partner or its
Affiliates.
4.3 COMPENSATION PLAN. The General Partner may establish and carry out
pension, profitsharing, bonus, purchase, option, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions for employees of
the General Partner or the Partnership, and any director or officer of the
General Partner and any such plans, trusts, and provisions which provide for the
issuance of Units or any other securities of the Partnership need not require
the approval of any Unitholder. The General Partner may, to the fullest extent
permitted by law, indemnify and purchase and maintain insurance on behalf of any
fiduciary of such plans, trusts, or provisions, including without limitation
health insurance, medical and dental reimbursement, life insurance, accident
insurance, and disability insurance and, as provided in Section 4.7, liability
insurance. Any costs and expenses of plans, trusts, or provisions shall be
allocated to the General Partner or the Partnership to the extent of the
benefits to employees of the General Partner or the Partnership, respectively.
4.4 LIABILITY OF THE GENERAL PARTNER. The General Partner shall only be
liable to the Partnership and the Unitholders for actual fraud, gross
negligence, or willful or wanton misconduct, but neither the General Partner,
nor its Affiliates, nor any of the directors, offcers, employees, or agents of
the General Partner or its Affiliates shall be liable to either the Partnership
or any Limited Partner or to Persons who have acquired a Partnership Interest,
whether as Assignees or otherwise, for errors in judgment or for any acts or
omissions that do not constitute actual fraud, gross negligence, or willful or
wanton misconduct. In all transactions for or with the Partnership, the General
Partner shall act in good faith and in a manner which the General Partner
believes to be in, or not opposed to, the best interests of the Partnership.
4.5 SIMILAR ACTIVITIES OF THE GENERAL PARTNER ARID PRESENTATION OF
OPPORTUNITIES TO THE PARTNERSHIP.
(A) Except as provided in Section 3.5, any Affiliate of the General
Partner, and any director, officer, employee, and agent of the General Partner
and its Affiliates shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Partnership,
may engage in the acquisition, ownership, management, operation, development,
leasing, and disposition of Aircraft and other equipment and any other business
and activities, including business interests and activities in direct
competition with the Partnership, for their own account and for the account of
14
others, without having or incurring any obligation to offer any interest in such
assets, business or activities to the Partnership, or any Unitholder, and no
other provision of this Agreement shall be deemed to prohibit any such Person
from conducting such other business and activities. Neither the Partnership nor
any of the Unitholders shall have any rights by virtue of this Agreement or the
relationship created hereby in any business ventures of any Affiliate of the
General Partner or any director, officer, employee, or agent of the General
Partner or an Affiliate of the General Partner.,
(B) So long as Airlease Management Services, Inc. remains the General
Partner, it shall not engage in any business activity other than those relating
to its interest in or position as General Partner of the Partnership.
(C) Except as may be provided in Section 3.5, the General Partner and its
Affiliates and the directors, officers, employees, agents, and Affiliates of the
General Partner and its Affiliates shall not have any obligation to the
Partnership or the Unitholders to make investment opportunities available to the
Partnership or to any other parties whether or not such opportunities would be
suitable for investment by the Partnership.
4.6 ACTIVITIES OF OFFICERS AND DIRECTORS. Any officers and directors of the
General Partner shall have the right to be otherwise employed by an entity or
entities other than the Partnership on a part-time or full-time basis, except as
determined by the General Partner. Nothing herein shall prevent any officer or
director of the General Partner from becoming a Limited Partner or Assignee,
whereupon such Person shall be entitled to all rights and shall be subject to
all obligations relating to the Units and shall as to such Units be deemed a
Limited Partner or Assignee, as applicable.
4.7 INDEMNIFICATION OF THE GENERAL FARMER AND ITS AFFILIATES.
(A) The Partnership shall indemnify and hold harmless the General Partner,
its Affiliates, and all Officers, directors, employees, and agents of the
General Partner and its Affiliates (individually, an "Indemnitee") from and
against any and all losses, claims, demands, costs, damages, liabilities, joint
and several, expenses of any nature (including attorneys' fees and
disbursements), judgments, fines, settlements, and other amounts arising from
any and all claims, demands, actions, suits, or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, arising out of or incidental
to the Initial Offering, any other offering of Units or interests of the
Partnership, or the business of the Partnership, including, without limitation,
liabilities under the Federal and state securities laws, regardless of whether
the Indemnitee continues to be a General Partner, an Affiliate, or an officer,
director, employee, or agent of a General Partner or of an Affiliate at the time
any such liability or expense is paid or incurred, if (i) the Indemnitee acted
in good faith and in a manner he or it believed to be in, or not opposed to, the
interests of the Partnership, and, with respect to any criminal proceeding, had
no reasonable cause to believe his or its conduct was unlawful, and (ii) the
Indemnitee's conduct did not constitute actual fraud, gross negligence, or
willful or wanton misconduct. The termination of any action, suit, or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendre, or
its equivalent, shall not, in and of itself, create a presumption or otherwise
constitute evidence that the Indemnitee acted in a manner contrary to that
specified in (i) or (ii) above.
(B) Expenses incurred by an Indemnitee in defending any claim, demand,
action, suit, o: proceeding subject to this Section 4.7 shall, from time to
time, be advanced by the Partnership prior to the final disposition of such
claim, demand, action, suit, or proceeding upon receipt by the Partnership of an
undertaking by or on behalf of the Indemnitee to repay such amount if it shall
be determined that such Person is not entitled to be indemnified as authorized
in this Section 4.7.
(C) The indemnification provided by this Section 4.7 shall be in addition
to any other rights to which those indemnified may be entitled under any
agreement, vote of the Partners, as a matter of law or equity, or otherwise,
both as to an action in the Indemnitee's capacity as the General Partner, an
Affiliate thereof, or as an officer, director, employee, or agent of the General
Partner or an Affiliate thereof, and as to an action in another capacity, and
shall continue as to an Indemnitee who has ceased
15
to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns, and administrators of the Indemnitee.
(D) The Partnership may purchase and maintain insurance on behalf of the
General Partner and such other Persons as the General Partner shall determine
against any liability that may be asserted against or expense that may be
incurred by such Person in connection with the Initial Offering, any other
offering of Units or interests of the Partnership, and the business of the
Partnership, regardless of whether the Partnership would have the power to
indemnify such Person against such liability under the provisions of this
Agreement.
(E) For purposes of this Section 4.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall be deemed "fines"
within the meaning of paragraph (A) of this Section 4.7; and action taken or
omitted by the Indemnitee with respect to an employee benefit plan in the
performance of the Indemnitee's duties for a purpose reasonably believed by the
Indemnitee to be in the interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is in, or not, opposed to, the
best interests of the Partnership.
(F) Except as set forth in the next sentence below, any indemnification
hereunder shall be satisfied solely out of the assets of the Partnership. The
Unitholders shall not be subject to personal liability by reason of these
indemnification provisions; provided, however, that to the extent that any
Unitholder or former Unitholder shall recover from any Indemnitee any amount
that is subject to indemnification hereunder, such Unitholder or former
Unitholder shall have personal liability to the Partnership and the. Indemnitee
under this Section 4.7 for reimbursement to the extent of such amount.
(G) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 4.7 by reason of the fact that the Indemnitee had an interest
in the transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(H) The provisions of this Section 4.7 are for the benefit of the
Indemnitees and shall not be deemed to create any rights for the benefit of
other Persons.
4.8 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
(A) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
(B) The General Partner may execute any of its powers or perform any of its
duties either directly or by or through agents, including, without limitation,
any Related Person. The General Partner may consult with counsel, accountants,
appraisers, management consultants, investment bankers, and other consultants
and advisers selected by it (who may serve as such for the Partnership or any
Related Person) and any opinion of such Person as to matters which the General
Partner believes to be within its professional or expert competence (including,
without limitation, any opinion of legal counsel that the Partnership would
likely prevail with respect to any matter) shall be full and complete
authorization and protection in respect to any action taken or suffered or
omitted by the General Partner hereunder in good faith and in accordance with
that opinion. The General Partner shall not be responsible for the misconduct,
negligence, acts, or omissions of any such Person and shall assume no
obligations in connection therewith other than the obligation to use due care in
the selection of such Persons.
(C) Any and all fees, commissions, compensation, and other consideration
received by the General Partner or a partner, director, officer, agent,
employee, or Affiliate of the General Partner
16
permitted hereunder shall be the exclusive property of the recipient, in which
the Partnership shall have no right or claim.
4.9 AGREEMENTS WITH THE GENERAL PARTNER OR A RELATED PERSON.
(A) Subject to the provisions of this Section 4.9 and Section 5.8, the
General Partner and any Related Person may deal with the Partnership in
connection with carrying out the business of the Partnership or otherwise, as an
independent contractor or as an agent for others, and may receive from such
others or from the Partnership profits, compensation, commissions, or other
amounts which the General Partner in good faith believes to be reasonable
without having to account to the Partnership therefore.
(B) The satisfaction of any one of the following conditions shall be a
complete and absolute defense to any claim of invalidity or for damages or other
relief with respect to any agreement, act, matter, or transaction between the
Partnership and the General Partner or a Related Person based upon the fact that
the General Partner or Related Person is a party thereto and shall constitute a
determination that the agreement, act, matter, or transaction was fair and
reasonable to and in the best interests of the Partnership:
(1) The material facts as to the agreement, act, matter, or
transaction and as to the, relationship or interest of the General Partner
or Related Person are fully disclosed or known to (a) any directors (or
Persons in a similar role with respect to an entity other than a
corporation) of the General Partner who are not interested in the agreement
or transaction (other than by virtue of their ownership of capital stock of
an Affiliate of the General Partner), including any directors who are
members of a committee organized to evaluate transactions in which any
party has an actual or potential conflict of interest (the "Audit
Committee") and a majority of such directors of the General Partner
affirmatively vote in good faith to authorize, approve, or ratify the
agreement, act, matter, or transaction or (b) the Audit Committee and a
majority of the directors who are members of the Audit Committee
affirmatively vote in good faith to authorize, approve, or ratify the
agreement, act, matter, or transaction; or
(2) The material facts as to the agreement, act, matter, or
transaction and as to the relationship or interest of the General Partner
or Related Person are fully disclosed or known to the Limited Partners and
such agreement, act, matter, or transaction is specifically authorized,
approved, or ratified by a Majority Interest (excluding for purposes of
computing the outstanding Units and the Units eligible to vote all Units
held by the General Partner or Related Persons); or
(3) The agreement, act, matter, or transaction is fair and reasonable
to the Partnership at the time it is authorized, approved, or ratified by
the General Partner.
The Audit Committee will be composed on and after the Closing Date of
individuals who are directors but not officers or employees of the General
Partner or any Affiliate of the General Partner.
(C) The failure of the Partnership to submit any agreement, act, matter,
or transaction under Section 4.9 (B) (1) or Section 4.9 (B) (2) shall not create
any presumption or inference or otherwise be considered evidence that the
agreement, act, matter, or transaction was not fair and reasonable to and in the
best interests of the Partnership.
(D) Each of the Unitholders by acceptance of the Units hereby approves,
ratifies, and confirms the execution, delivery, and performance of all
agreements, acts, matters, or transactions described in the prospectus contained
in the Registration Statement and authorizes, ratifies, and confirms such
execution, delivery, and performance by the General Partner on behalf of the
Partnership, without any further act, approval, or vote of the Unitholders or
the Partnership. Any action taken by the General Partner pursuant to the terms
of any such agreement or with respect to any such matter or transaction shall
not constitute a breach by the General Partner of any duty that the General
Partner may owe the Partnership or the Unitholders under this Agreement or under
applicable law.
17
4.10 SUBCONTRACTING BY GENERAL PARTNER. The General Partner may subcontract
to third parties (including Affiliates) a portion or all of the services to be
rendered by it with respect to any particular Aircraft or the administration of
the Partnership; provided, however, that (i) the General Partner shall at all
times remain responsible for the overall management of the Aircraft and the
Partnership and (ii) the Partnership shall not be required to pay for
duplicative services, except as may be provided in Section 5.5.
4.11 CONVEYANCES. The General Partner has the express authority to convey
title to any Partnership Asset by a conveyance executed by the General Partner
alone on behalf of the Partnership.
4.12 ELECTION TO BE GOVERNED BY SUCCESSOR OR DIFFERENT LIMITED PARTNERSHIP
LAW. The General Partner may, in its sole discretion and without any vote or
concurrence of any Persons, elect for the Partnership to be governed by any
statutes adopted to succeed or replace the California Act on or after the date
any part of such successor or replacement statute takes effect and to procure
any permits, orders, or approvals of any governmental authority in connection
with such an election. In addition, the General Partner may, in its sole
discretion, and without the vote or consent of any Persons, elect for the
Partnership to be reorganized as a limited partnership governed by and under the
laws of a jurisdiction other than California so long as it has received an
opinion of counsel that such transaction will not result in a termination of the
Partnership for tax purposes so as to adversely affect Unitholders.
4.13 MINIMUM NET WORTH OF THE GENERAL PARTNER. The General Partner shall
use its best efforts to have at all times a net worth at least equal to (a) the
amounts sufficient to meet all net worth requirements of (i) the Code and (ii)
the Service for issuing advance rulings regarding the status of a partnership as
such for Federal income tax purposes, as currently in effect and as hereafter
amended to assure that the Partnership will be classified for Federal income tax
purposes as a partnership and not as .an association taxable as a corporation or
(b) an amount determined by counsel to the General Partner sufficient for such
counsel to render an opinion that the Partnership will be taxed as a partnership
and not as an association taxable as a corporation for Federal income tax
purposes. Such net worth requirement may be satisfied, in whole or in part, by
the provision to the General Partner by its parent corporation of non-interest
bearing demand notes of such parent corporation. The General Partner will not
distribute dividends to its stockholders during any period in which the
Partnership is, or is expected to be, in material financial difficulty. The
General Partner will hold its interest in the Partnership for its own account,
and will not agree to act as a nominee or agent for Limited Partners in a manner
that would adversely affect the federal income tax treatment of the Partnership.
ARTICLE 5
COMPENSATION AND REIMBURSEMENT OF EXPENSES
TO THE GENERAL PARTNER AND ITS AFFILIATES
5.1 ACQUISITION FEE. The Partnership shall pay to the General Partner or an
Affiliate thereof an Acquisition Fee for each Aircraft acquired by the
Partnership, including but not limited to the Aircraft involved in the PSA
Transaction, payable upon its acquisition by the Partnership, as follows: 11h%
of the Aircraft Cost for the first $50 million of each transaction, and 1% of
the Aircraft Cost for the balance over $50 million. However, in the event the
Partnership purchases for cash (but not Units) an Aircraft from the General
Partner or its Affiliates, the Acquisition Fee shall be based on the cost of the
Aircraft to the General Partner or Affiliate, and not the Aircraft Cost to the
Partnership. The Acquisition Fee shall compensate the General Partner for
seeking out and evaluating investment opportunities, negotiating the initial
lease, and performing functions otherwise necessary to consummate the purchase
and initial lease of Aircraft. In addition, the Partnership shall reimburse the
General Partner for direct out-of-pocket expenses in connection with such
activities.
18
5.2 MANAGEMENT FEE.
(A) The Partnership shall pay a Management Fee to the General Partner,
payable monthly, equal to '/, of 1% per annum of the Partnership's net worth
(total assets less total liabilities calculated in accordance with generally
accepted accounting principles) as of the beginning of each month, plus 1% of
Net Revenues for such month. Said Management Fee shall be for certain Aircraft
management services as follows: lease management; collection of lease income;
leasing-related services; payment of operating expenses; periodic physical
inspections; servicing indebtedness secured by Aircraft; general supervision of
lessees to assure that they are properly utilizing and operating Aircraft;
arranging maintenance and related services with respect to Aircraft; and
supervising, monitoring; and reviewing services performed by others in respect
of Aircraft. In addition, the Partnership shall reimburse the General Partner
for direct out-of-pocket expenses in connection with such activities.
(B) At the time of each monthly payment of the Management Fee, if in the
judgment of the General Partner and assuming that all contracts of the
Partnership are fully performed, Cash Available From Operations will not be
sufficient during calendar year 1986 or 1987 to make an annualized distribution
of $2.16 per Unit, up to an aggregate of $375,000 of the Management Fee for
calendar years 1986 and 1987 shall not be payable to the General Partner and
shall be deferred until such year as the General Partner believes, assuming that
all contracts are fully performed, that there will be sufficient Cash Available
From Operations to make a $2.16 per Unit distribution after payment of such
deferred Management Fee. If it is later determined during any such year that
Cash Available From Operations, assuming that all contracts had been fully
performed, would not have been sufficient to make a $2.16 per Unit distribution,
the General Partner shall return that portion of the deferred Management Fee
which has been paid. The Management Fee for each calendar year after 1987 shall
be payable regardless of the amount of Cash Available From Operations.
5.3 DISTRIBUTIONS AND ALLOCATIONS. The General Partner shall be entitled to
the distributions and allocations allocated to the General Partner in Articles 9
and 10.
5.4 DISPOSITION OR REMARKETING FEE. The Partnership shall pay a Disposition
or Remarketing Fee to the General Partner or an Affiliate thereof as the case
may be, of (i) 5% of the Sales Proceeds of the Aircraft payable upon receipt by
the Partnership of proceeds of the sale or a casualty loss, (ii) 4% of the
rental payments when received of an Aircraft re-leased (except rentals pursuant
to fixed-price lease renewals agreed to at the time the original lease is
executed), payable upon receipt of each rental payment. The Disposition or
Remarketing Fee shall compensate the General Partner for seeking out and
evaluating sale or re-lease opportunities, negotiating such sale or re-lease,
and performing functions otherwise necessary in connection with the sale or
re-lease of Aircraft. In addition, the Partnership will reimburse the General
Partner for direct out-of-pocket expenses in connection with such activities.
5.5 FEES PAID TO THIRD PARTIES. The fees payable to the General Partner or
its Affiliates pursuant to Sections 5.1 and 5.4 shall not be reduced by any fees
or expenses paid by the Partnership to parties not affiliated with the General
Partner in connection with the transactions enumerated in such Sections.
5.6 EXPENSES OF THE GENERAL PARTNER. The Partnership shall pay all
expenses, disbursements, advances, salaries, general and administrative
expenses, and other costs, incurred by the General Partner or its Affiliates and
arising out of or in connection with the conduct of Partnership business, other
than as set forth in Section 3.6(A), as determined in good faith by the General
Partner. The Partnership shall also reimburse the General Partner director fees
paid to directors of the General Partner who are not otherwise affiliated with
the General Partner or its Affiliates. The General Partner and its Affiliates
shall be promptly reimbursed by the Partnership for any such items.
5.7 REIMBURSEMENT FOR SUMS ADVANCED TO THE PARTNERSHIP. To the extent that
the General Partner or its Affiliates have advanced funds to the Partnership for
direct out-of-pocket expenses in connection with the Partnership's organization
and the Initial Offering, the General Partner or its Affiliates shall be
19
entitled to reimbursement of such funds, without interest, payable upon
consummation of the Initial Offering. To the extent that the General Partner or
its Affiliates otherwise advances or loans money to the Partnership, interest
and charges thereon shall be payable pursuant to Section 4.1(t).
5.8 ADDITIONAL SERVICES TO THE PARTNERSHIP. The General Partner and its
Affiliates shall have the right to render any other services to the Partnership
deemed necessary or appropriate by the General Partner, and to receive payments
and fees from the Partnership in connection therewith not to exceed that
customarily received by third parties for similar services.
5.9 FEES PAYABLE ON CESSATION AS THE GENERAL PARTNER. If the General
Partner ceases to be a general partner of the Partnership, any fee, commission,
or reimbursement of expenses payable according to the provisions of this
Agreement which is then accrued, but not yet paid, shall be paid by the
Partnership to the General Partner or, if appropriate, an Affiliate thereof, in
cash, within 60 days after the date of its cessation as the General Partner.
ARTICLE 6
THE LIMITED PARTNERS AND ASSIGNEES
6.1 LIMITED LIABILITY. Except to the extent required by California law, the
liability of each Unitholder (in the capacity as a Unitholder) for the losses,
debts, and obligations of the Partnership shall be limited to the Unitholder's
Capital Contribution and the Unitholder's share of any undistributed assets of
the Partnership. Any obligation to return distributions and to pay interest
shall be the sole obligation of the Unitholders and not of the General Partner.
6.2 RESTRICTIONS ON LIMITED PARTNERS ARID ASSIGNEES.
(A) No Unitholder shall participate as such in the management and control
of the business of the Partnership or transact any business for the Partnership,
unless such Unitholder is also a General Partner or other Person employed or
engaged to transact any such business by or on behalf of a General Partner or
the Partnership. The transaction of any such business by any such Person
employed or engaged to do so by or on behalf of the General Partner or the
Partnership shall not affect, impair, or eliminate the limitations on the
liability of the Unitholder under this Agreement or applicable law.
(B) No Unitholder shall have the power to represent, sign for, or bind the
General Partner or the Partnership, unless such Unitholder is also a general
partner of the Partnership or other Person given such power in a capacity other
than as a Unitholder by the General Partner.
6.3 OUTSIDE ACTIVITIES. A Unitholder shall be entitled to and may have
business interests. and engage in business activities in addition to those
relating to the Partnership, including business interests and activities in
direct competition with the Partnership. Neither the Partnership nor any of the
Unitholders shall have any rights by virtue of this Agreement in any independent
business ventures of any other Unitholder.
6.4 NO WITHDRAWAL OF CONTRIBUTIONS. No Unitholder shall have the right to
withdraw the Unitholder's Capital Contribution to the Partnership.
6.5 RETURN OF CAPITAL. There is no agreement for, nor time set for, return
of any contribution of any Unitholder. To the extent funds are available
therefore, the General Partner may return said contributions out of Cash
Available From Operations or out of Cash Available From Sale or Refinancing, and
to the extent of available funds, the General Partner shall return said capital
at ' termination of the Partnership, as hereinafter set forth.
6.6 DEATH, INCOMPETENCY, OR BANKRUPTCY OF A LIMITED PARTNER OR ASSIGNEE.
The death, adjudication of incompetency, or bankruptcy of a Unitholder shall not
dissolve the Partnership. If a Unitholder who is an individual dies or a court
of competent jurisdiction adjudges the Unitholder to be incompetent to manage
the Unitholder's property, the Unitholder's executor, administrator, guardian,
conservator, or other legal representative may exercise all the Unitholder's
rights for the purposes of
20
settling the Unitholder's estate or administering the Unitholder's property. The
executor, administrator, guardian, conservator, or other legal representative,
as applicable, of the deceased, incompetent or bankrupt Unitholder shall
nevertheless continue to be liable for all of the Unitholder' s obligations as a
Unitholder.
ARTICLE 7
MEETINGS AND VOTING
7.1 MEETINGS. Meetings of the Limited Partners may be called by the General
Partner or by Limited Partners owning (as Limited Partners and not as Assignees)
at least 10% of the Units and Depositary Units. Any Limited Partner calling a
meeting shall specify the number of Units and Depositary Units as to which the
Limited Partner is exercising the right to call a meeting, and only those
specified Units and Depositary Units shall be counted for the purpose of
determining whether the required 10% standard of the preceding sentence has been
met. Limited Partners may call a meeting only as to matters on which they have
the right to vote. Limited Partners shall call a meeting by delivering to the
General Partner one or more calls in writing stating that the signing Persons
wish to call a meeting and indicating the purposes for which the meeting is to
be called. Action at the meeting shall be limited to those matters specified in
the call of the meeting. Within 60 days after receipt of such call, or within
such a greater time as may be reasonably necessary for the Partnership to comply
with any statutes, rules, regulations, listing agreements, or similar
requirements governing the holding of a meeting or the solicitation of proxies
for use at such a meeting, the General Partner shall send a notice of the
meeting to the Limited Partners either directly or indirectly through the
Depositary. A meeting shall be held at a time and place determined by the
General Partner on the date not less than 10 nor more than 60 days after the
mailing of notice of the meeting. Partners may vote either in person or by proxy
at any meeting. Each Limited Partner shall have one vote for each Unit or
Depositary Unit as to which he has been admitted to the Partnership as a Limited
Partner. No matter shall be voted upon by Limited Partners at any meeting of the
Limited Partners or consented to by the Limited Partners unless the requirements
of Section 7.10 shall be satisfied as to such matter.
7.2 NOTICE OF MEETING. Notice of a meeting called pursuant to Section 7.1
and any report shall be given either personally or by mail or other means of
written communication, addressed to the Partner at the address of the Partner
appearing on the books of the Partnership or Depositary. The notice or report
shall be deemed to have been given at the time when delivered personally or
deposited in the mail or sent by other means of written communication. An
affidavit or certificate of mailing of any notice or report in accordance with
the provisions of this Article 7, executed by the General Partner, transfer
agent, registrar of Depositary Units, or mailing organization shall be prima
facie evidence of the giving of notice. If any notice or report addressed to the
Partner at the address of the .Partner appearing on the books of the Partnership
is returned to the Partnership by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver it, said
notice or report and any subsequent notices or reports shall be deemed to have
been duly given without further mailing if they are available for the Partner at
the principal executive office of the Partnership for a period of one year from
the date of the giving of the notice or report to all other Partners.
7.3 RECORD DATE. For purposes of determining the Limited Partners entitled
to notice or to vote at a meeting of the Limited Partners or to give consents
without a meeting as provided in Section 7.8, the General Partner may set a
Record Date which shall be not less than 10 days nor more than 60 days before
the date of the meeting (unless such requirement conflicts with any rule,
regulation, guideline, or requirement of any securities exchange or market
system on which the Depositary Units are listed for trading, in which case the
rule, regulation, guideline, or requirement of such securities exchange. or
market system shall govern).
7.4 ADJOURNMENT. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting, and a new Record Date need
not be fixed, if the time and place thereof are announced at the meeting at
which the adjournment is taken unless such adjournment
21
shall be for more than 45 days. At the adjourned meeting the Partnership may
transact any business which might have been permitted to be transacted at the
original meeting. If the adjournment is for more than 45 days, or if a new
Record Date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given in accordance with this Article 7.
7.5 WAIVER OF NOTICE; CONSENT TO MEETING; APPROVAL OF MINUTES. The
transactions of any meeting of Limited Partners, however called and noticed, and
wherever held, are as valid as though had at a meeting duly held after regular
call and notice, if a quorum is present either in person or by proxy, and if,
either before or after the meeting, each of the Limited Partners entitled to
vote, not present in person or by proxy, signs a written waiver of notice or a
consent to the holding of the meeting or an approval of the minutes thereof. All
waivers, consents, and approvals shall be filed with the Partnership records or
made a part of the minutes of the meeting. Attendance of a Limited Partner at a
meeting shall constitute a waiver of notice of the meeting, except when the
Limited Partner objects, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened; and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters required to be included in the notice of the meeting,
but not so included, if the objection is expressly made at the meeting.
7.6 QUORUM. A Majority Interest represented in person or by proxy shall
constitute a quorum at a meeting of Limited Partners. At any meeting of the
limited Partners duly called and held in accordance with this Agreement at which
a quorum is present, the act of a Majority. Interest shall be deemed to
constitute the act of all Limited Partners unless a higher percentage is
required with respect to such action under the provisions of this Agreement. The
Limited Partners present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment notwithstanding the
withdrawal of enough Limited Partners to leave less than a quorum, if any action
taken (other than adjournment) is approved by the requisite percentage of
interests of limited Partners specified in this Agreement. In the absence of a
quorum, any meeting of limited Partners may be adjourned from time to time by
the vote of a majority of the Units and Depositary Units represented either in
person or by proxy, but no other business may be transacted, except as provided
in Section 7.1.
7.7 CONDUCT OF MEETING. The General Partner shall have full power and
authority concerning the manner of conducting any meeting of limited Partners or
the solicitation of written consents, including without limitation the
determination of Persons entitled to vote, the existence of a quorum, the
satisfaction of the requirements of Section 7.10, the conduct of voting, the
validity and effect of any proxies, the appointment of proxies and inspectors of
votes, the revocation of written consents and the determination of any
controversies, votes, or challenges arising in connection with or during the
meeting or written consents. The General Partner shall designate a Person to
serve as chairman of the meeting and shall further designate a Person to take
the minutes of the meeting, in either case including, without limitation, a
partner, director, or officer of a General Partner. All minutes shall be kept
with the records of the Partnership maintained by the General Partner.
Depositary Units evidenced by Depositary Receipts held in nominee or street name
accounts will be voted by the broker (or other nominee) pursuant to instructions
from the Limited Partner.
7.8 Action Without a Meeting. Any action that may be taken at a meeting of
the Limited Partners may be taken without a meeting if a consent in writing
setting forth the action so taken is proposed by the General Partner and signed
by Limited Partners owning not less than the minimum percentage of interests
that would be necessary to authorize or take such action at a meeting at which
all the Limited Partners were present and voted. Prompt notice of the taking of
action without a meeting shall be given to the limited Partners who have not
consented in writing. The General Partner may specify that any written ballot
submitted to limited Partners for the purpose of taking any action without a
meeting shall be returned to the Partnership within the time, not less than 20
days. specified by the General Partner. If a ballot returned to the Partnership
does not vote all of the Units or Depositary Units held by the Limited Partner,
the Partnership shall be deemed to have failed to
22
receive a ballot for the Units or Depositary Units which were not voted. The
procedures for action without a meeting set forth in this Section 7.8 shall be
in lieu of those contained in the California Act.
7.9 VOTING RIGHTS.
(A) Subject to Section 7.10, the Limited Partners shall have the right to
take the following actions upon the approval of at least a Majority Interest:
(1) Amendment of this Agreement, subject to Article 18;
(2) Dissolution, discontinuation, or material alteration of the
business, or sale of substantially all of the assets of the
Partnership with a view to the foregoing, if elected by the General
Partner pursuant to Section 16.1(B);
(3) Approval or disapproval of any merger, consolidation, or
combination of the business operations of the Partnership with those
of any other Person (except any merger, consolidation, or combination
affected solely to reorganize the Partnership as a limited partnership
governed by and under the laws of a jurisdiction other than California
pursuant to the discretion of the General Partner contained in Section
4.12);
(4) When the Partnership would otherwise dissolve and its
business would not otherwise be continued pursuant to the terms of
this Agreement, the election to continue the Partnership or election
of a new General Partner to continue the business of the Partnership,
unless a unanimous vote is required pursuant to Section 7.9(C);
(5) Approval or disapproval of any matter submitted to the
Limited Partners pursuant to Section 4.9;
(6) Except as provided in Article 15, election of a General
Partner; and
(7) As expressly provided in Sections 3.1, 8.4(A), 13.2(A),
15.1(C), 16.2 and 16.3.
(B) The General Partner may be removed as a general partner of the
Partnership upon the approval of Limited Partners holding (as Limited Partners
and not as Assignees) 6635% of the outstanding Units and Depositary Units upon
the terms set forth in Section 15.2(B).
(C) Approval of all Limited Partners shall be required for the admission of
a General Partner or the election to continue the business of the Partnership
after the General Partner ceases to be a General Partner (other than by
removal)-where there is no remaining General Partner.
(D) Limited Partners shall have no other voting rights, notwithstanding the
provisions of the California Act.
(E) The General Partner and its Affiliates shall have the right to vote any
Units and Depositary Units held by them with respect to any matter submitted to
the Partners.
7.10 VOTING RIGHTS CONDITIONAL. The voting rights set forth in Section 7.9
shall not be exercised unless the Partnership shall have received the favorable
written opinion of counsel acceptable to the General Partner to the effect that
the exercise of such right and the action proposed to be taken with respect to
any particular matter (1) shall not cause the Limited Partners to be deemed to
be taking part in the management and control of the business and affairs of the
Partnership so as to subject the Limited Partners to unlimited liability
therefor, (2) will not cause the Partnership to be treated as an association
taxable as a corporation for Federal income tax purposes (except upon approval
pursuant to Section 18.3(B)), and (3) is otherwise permissible under the
California Act.
23
ARTICLE 8
CAPITAL CONTRIBUTIONS, TRANSFER TO UNDERWRITERS,
AND CAPITAL ACCOUNTS
8.1 CAPITAL CONTRIBUTION OF THE GENERAL PARTNER. Concurrently with the
execution of the original limited partnership agreement of the Partnership, the
General Partner made a capital contribution in ,the amount of Nine Hundred and
Ninety Dollars ($990) in cash. Upon a closing of the Initial Offering on the
Closing Date, the General Partner shall further contribute in cash or cash
equivalents a sum so that its total capital contribution equals 1% of all
contributions to the Partnership (including contributions as a result of the
exercise of the over-allotment option set forth in Section 8.3(B) and
contributions by U.S. Holding pursuant to Section 8.4(A)). The General Partner
shall not be required to contribute any additional sums to the Partnership,
except pursuant to Section 16.8.
8.2 CAPITAL CONTRIBUTION OF THE ORGANIZATIONAL LIMITED PARTNER.
Concurrently with the execution of the original limited partnership agreement of
the Partnership, the Organizational Limited Partner made a Capital Contribution
in the amount of Ten Dollars ($10) in cash and received one Unit.
8.3 SALE OF UNITS TO UNDERWRITERS.
(A) INITIAL PUBLIC OFFERING. Pursuant to the Underwriting Agreement, the
Underwriters shall purchase Units from the Partnership at the Initial Unit Issue
Price in connection with the Initial Offering, as more fully described in the
Registration Statement. Concurrently with the closing of the Initial Offering,
each Underwriter, as an Initial Limited Partner, shall contribute to the
Partnership, in exchange for that number of Units designated in the Underwriting
Agreement to be purchased by each such Underwriter, cash in an amount designated
in the Underwriting Agreement.
(B) OVER-ALLOTMENT OPTION. In the event that the Underwriters exercise the
option granted to them in the Underwriting Agreement to acquire certain
additional Units, in addition to Units purchased pursuant to Section 8.3(A), to
cover over-allotments, the Underwriters shall contribute to the Partnership, in
exchange for that number of Units to be purchased by such Underwriters pursuant
to the exercise of such option, cash in an amount designated in the Underwriting
Agreement pursuant to the exercise of such option. For purposes of this
Agreement all Units issued pursuant to this Section 8.3(B) or Section 8.4(A)
shall be deemed issued concurrently on the Closing Date irrespective of whether
or not the issuance actually occurs on the Closing Date.
8.4 PURCHASE OF UNITS OR SECURITIES BY THE GENERAL PARTNER OR ITS
AFFILIATES.
(A) Simultaneously with a closing of the Initial Offering, U.S. Holding
shall purchase from the Partnership 1,025,000 Units, at an amount per Unit
acquired equal to the Initial Unit Issue Price. Without the prior approval of at
least a Majority Interest, U.S. Holding may not sell (except to Related
Entities) Units representing 20% of the total Units outstanding immediately
after completion of the Initial Offering (including the Units sold to NAAF and
U.S. Holding) for at least five years, and so long as Airlease Management
Services, Inc. or a Related Entity is a general partner of the Partnership, U.S.
Holding (or Related Entities) must retain at least 25% of such Units.
Notwithstanding the foregoing, the Units may be transferred to Related Entities
of the General Partner.
(B) The General Partner and any Affiliate of the General Partner may acquire
Partnership Interests in addition to those acquired by any of those Persons on
the Closing Date, in the Initial Offering or at any time subsequent thereto, and
shall be entitled to exercise all rights of a Limited Partner or Assignee, as
applicable, relating to such interests.
(C) The General Partner or an Affiliate thereof shall be treated the same
as all other Limited Partners or Assignees with respect to any Units purchased
by them. The Capital Contribution of each Unit purchased pursuant to Section
8.4(A) shall be deemed to be the Initial Unit Issue Price.
(D) The General Partner or its Affiliates may contribute property to the
Partnership, from time to time, in exchange for Units or Partnership Interests
provided the Units or Partnership Interests
24
received in such exchange have a market value not greater than the then Fair
Market Value of the contributed property.
8.5 PURCHASE OF UNITS BY AFFILIATE OF PSA.
(A) Simultaneously with the first closing of the Initial Offering, NAAF
shall contribute to the Partnership, in exchange for 600,000 Units, an amount
per Unit acquired equal to the Initial Unit Issue Price.
(B) NAAF shall be treated the same as all other Limited Partners or
Assignees with respect to Units purchased by it. The Capital Contribution of
each Unit purchased pursuant to Section 8.5(A) shall be deemed to be the Initial
Unit Issue Price.
(C) The other terms of the purchase by NAAF, including but not limited to
registration rights granted to NAAF, shall be set forth in an agreement between
the Partnership and NAAF, containing such terms, conditions, representations,
and warranties as determined in the sole discretion of the General Partner.
8.6 UNITS NOT ASSESSABLE. Units shall not be assessable, and the
Unitholders shall not be required to make any additional Capital Contribution. '
8.7 NO INTEREST ON CAPITAL CONTRIBUTION. Unitholders shall not receive
interest on or with respect to all or any part of their Capital Contribution or
on the balances in their Capital Accounts.
8.8 CREDITORS' INTEREST IN THE PARTNERSHIP. No creditor who makes a loan to
the Partnership shall have or acquire at any time as a result of making the loan
any direct or indirect interest in the profits, capital, or property of the
Partnership other than as a creditor, unless otherwise specifically provided for
in the loan documentation. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the Partnership.
8.9 NATURE OF INTERESTS. All property owned by the Partnership, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and none of the Unitholders shall have any direct
ownership of such property.
8.10 SALE OF ADDITIONAL INTERESTS.
(A) In order to raise additional capital, to acquire additional Aircraft or
other assets, to redeem or retire Partnership debt, or for any other Partnership
purpose, the General Partner is authorized to cause to be issued additional
Units or Partnership Interests from time to time to the General Partner, Limited
Partners, or to other Persons and to admit such Persons as Additional Limited
Partners or security holders in the Partnership. Subject to Section 8.4(D), the
General Partner shall have sole and complete discretion in determining the
consideration and terms and conditions with respect to any future issuance of
Units or any other interests of the Partnership. The General Partner shall have
the power, in its sole discretion, without any further consent or approval of
any Persons, to amend this Agreement to cause the Partnership to issue Units or
Partnership Interests from time to time in one or more classes, or one or more
series of such classes for such consideration and on such terms and conditions
as the General Partner in good faith determines to be in the best interests of
the Partnership, which classes or series shall have such rights, preferences,
privileges, and restrictions as shall be fixed by the General Partner in the
exercise of its sole discretion, including, without limitation, matters relating
to (i) the allocation of items of Partnership income, gain, loss, deduction, and
credit to each such class or series of Units or interests; (ii) the right of
each such class or series of Units or interests to share in Partnership
distributions; (iii) the rights of each such class or series of Units or
interests upon dissolution and liquidation of the Partnership; (iv) the price at
which and the terms and conditions, if any, upon which each such class or series
of Units or interests may be redeemed by the Partnership; (v) the rate at which
and the terms and conditions upon which each such class or series of Units or
interests may be converted into another class or series of Units or interests of
the Partnership, if any such class or series is convertible into other
securities of the Partnership; (vi) the terms and conditions upon which each
such class or series of Units or interests may be issued, deposited with the
25
Depositary, evidenced by Depositary Receipts, and assigned or transferred; and
(vii) the right of each such class or series of Units or interests to vote on
Partnership matters, including matters relating to the relative rights,
preferences, privileges, and restrictions of each such class or series. The
General Partner is also authorized to cause the issuance of any other type of
security (including, without limitation, secured and unsecured debt obligations
of the Partnership, debt obligations of the Partnership convertible into any
class or series of Units or interests that may be issued by the Partnership, or
options, rights, warrants, or appreciation rights relating to any class or
series of Units or interests, any such debt obligations, or any combination of
any of the foregoing) from time to time to Partners or other Persons on terms
and conditions established in the sole discretion of the General Partner.
(B) The General Partner shall do all things necessary to comply with the
California Act, the Code or other applicable law, statute, rule, regulation, or
guideline of any Federal, state or other governmental agency or any securities
exchange on which the Depositary Units or other securities of the Partnership
are listed for trading, and is authorized to do all things it deems necessary or
advisable in connection with any such future issuance.
8.11 NO PREEMPTIVE RIGHTS. No Partner or Assignee, except pursuant to any
future Units or securities issued by the Partnership pursuant to Section 8.10
that specifically provide therefore, shall have any preemptive, preferential, or
other right - including, without limitation, with respect to (i) additional
Capital Contributions to the Partnership, (ii) the issuance or sale of Units or
other Partnership Interests, (iii) the issuance of any obligation, evidence of
indebtedness, or other interest of or in the Partnership convertible into or
exchangeable for, or carrying or accompanied by any rights to receive, purchase,
or subscribe to, any Units, (iv) the issuance of any right of subscription to,
or right to receive, any warrant or option for the purchase of any Units, or (v)
the issuance or, sale of any other securities that may be issued or sold by the
Partnership.
8.12 CAPITAL ACCOUNTS.
(A) The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Treasury Regulation Section 1.704-1(b)
(2) (iv). Such Capital Account shall be increased by (i) the cash amount or Net
Agreed Value of all Capital Contributions made by such Partner to the
Partnership pursuant to this Agreement and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section 8.12(B) and allocated to such Partner pursuant to Section 9.2 and
decreased by (iii) the cash amount or Net Agreed Value of all actual and deemed
distributions of cash or property made to such Partner pursuant to this
Agreement and (iv) all items of Partnership deduction and loss computed in
accordance with Section 8.12(B) and allocated to such Partner pursuant to
Section 9.2.
(B) For purposes of computing the amount of any item of income, gain,
deduction, or loss to be reflected in the Partners' Capital Accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for Federal income tax
purposes (including any method of depreciation, cost recovery, or amortization
used for this purpose); provided that:
(i) In accordance with the requirements of Section 704(c) of the Code,
any deductions for depreciation, cost recovery, or amortization
attributable to a Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the
Partnership was equal to the Agreed Value of such property. Upon an
adjustment pursuant to Section 8.12(D) (i) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery, or
amortization, any further deductions for such depreciation, cost recovery,
or amortization attributable to such property shall be determined as if the
adjusted basis of such property was equal to the Carrying Value of such
property immediately following such adjustment.
26
(ii) Any income, gain or loss attributable to the taxable disposition
of any property shall be determined by the Partnership as if the adjusted
basis of such property as of such date of disposition was equal in amount
to the Partnership's Carrying Value with respect to such property as of
such date.
(iii) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for Federal income tax purposes pursuant to
Section 48 (q) (1) or 48 (q) (3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed
in service and shall be allocated among the Partners pursuant to Section
9.2. Any restoration of such basis pursuant to Section 48 (q) (2) of the
Code shall be allocated in the same manner to the Partners to whom such
deemed deduction was allocated (or their successors in interest).
(iv) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code shall, for purposes of
Capital Account maintenance, be treated as an item of deduction and shall
be allocated among the Partners pursuant to Section 9.2.
(v) The computation of all items of income, gain, loss, and deduction
shall be made without regard to any election under Section 754 of the Code
which may be made by the Partnership and, as to those items described in
Section 705 (a) (1) (B) or Section 705 (a) (2) (B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalizable for Federal income tax
purposes.
(C) Generally, a transferee of a Partnership Interest will succeed to the
Capital Account relating to the Partnership Interest transferred. However, if
the transfer causes a termination of the Partnership under Section 708 (b) (1)
(B) of the Code, the Partnership properties shall be deemed to have been
distributed in liquidation of the Partnership to the Partners (including the
transferee of a Partnership Interest) and deemed recontributed by such Partners
and transferees in reconstitution of the Partnership. In such event, the
Carrying Values of the Partnership properties shall be adjusted immediately
prior to such deemed distribution pursuant to Section 8.12 (D) (ii) (and such
adjusted Carrying Values shall constitute the Agreed Values of such properties
upon this deemed contribution to the reconstituted Partnership). The Capital
Accounts of such reconstituted Partnership shall be maintained in accordance
with the principles of this Section 8.12.
(D) (i) Consistent with Treasury Regulation Section 1.704-1(b) (2) (iv)
(f), upon an issuance of additional Units for cash or Contributed Property
pursuant to Section 8.10, the Capital Accounts of all Partners and the Carrying
Values of all Partnership properties shall, immediately prior to such issuance,
be adjusted (consistent with the provisions hereof) upward or downward to
reflect any Unrealized Gain or Unrealized Loss attributable to each Partnership
property (as if such Unrealized Gain or Unrealized Loss had been recognized upon
an actual sale of each such property, immediately prior to such issuance, and
had been allocated to the Partners, at such rime, pursuant to Section 9.2). In
determining such Unrealized Gain or Unrealized Loss, the aggregate fair market
value of Partnership properties as of any date of determination shall be equal
to the sum of (1) the Prescribed Asset Value as of such date and (2) the amount
of any outstanding Partnership indebtedness, as of such date of determination,
as determined in the discretion of the General Partner. The Carrying Values of
the respective Partnership properties shall be adjusted according to their
relative fair market values as determined by the General Partner using such
method as it deems appropriate.
(ii) In addition, in accordance with Treasury Regulation Section
1.704-1(b) (2) (iv) (e), immediately prior to the actual or deemed
distribution of any Partnership property, the Capital Accounts of all
Partners and the Carrying Values of all Partnership properties shall,
immediately prior to any such distribution, be adjusted (consistent with
the provisions hereof) upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to each Partnership property (as if such
Unrealized Gain or Unrealized Loss had been recognized upon an actual sale
of each property, immediately prior to such distribution, and had been
allocated to the Partners, at such time, pursuant to Section 9.2). In
27
determining such Unrealized Gain or Unrealized Loss, the aggregate fair
market value of Partnership properties as of any date of determination
shall (1) in the case of a current distribution or a deemed distribution
occurring as a result of a termination of the Partnership pursuant to
Section 708 of the Code, be determined in the same manner provided in
Section 8.12 (D) (i), or (2) in the case of a liquidating distribution
pursuant to Section 16.5, be determined by the General Partner using such
reasonable methods of valuation as it may adopt.
8.13 PURCHASE OR SALE OF UNITS. The General Partner may, on behalf of and
for the account of the Partnership, purchase or otherwise acquire Units or
Depositary Units and, following any such purchase or acquisition, may sell or
otherwise dispose of such Units and Depositary Units. So long as such Units or
Depositary Units shall be held by or on behalf of the Partnership, such Units or
Depositary Units shall not be considered outstanding for any purpose.
8.14 REGISTRATION RIGHTS OF THE GENERAL PARTNER.
(A) DEMAND RIGHTS. In the event that (i) the General Partner or an
Affiliate thereof holds Units or securities of the Partnership which it desires
to sell and (ii) Rule 144 of the Securities Act of 1933 (or any successor rule
or regulation to Rule 144) is not available to enable such General Partner or
Affiliate to dispose of the number of Units or securities it desires to sell at
the time and in the manner that it desires to do so, then upon the request of
the General Partner or Affiliate at any time between September 30, 1991 and
September 30, 1996, the Partnership shall file with the Securities and Exchange
Commission as promptly as practicable after receiving such request, and shall
use its best efforts to cause to become effective, a registration statement
under the Securities Act of 1933 on the appropriate form registering the
offering and sale of the number of Units or securities specified by the
requesting General Partner or Affiliate. In connection with any such
registration pursuant to the preceding sentence, the Partnership promptly shall
prepare and file such documents as may be necessary to register or qualify the
Units or securities subject to such registration and under the securities laws
of such states as the General Partner or Affiliate shall request, and shall do
any and all other acts and things that may reasonably be necessary or advisable
to enable the General Partner or Affiliate to consummate a public sale of such
Units or securities in such states. Notwithstanding the foregoing, in no event
shall the Partnership be required to effect a registration relating to the Units
or securities pursuant to this Section 8.14 (A) more frequently than twice in
any calendar year. Any registration statement filed pursuant hereto shall be
continued in effect for a period of not less than 90 days following its
effective date. All costs, fees; and expenses of such registration and offering
shall be borne by the seller. U.S. Holding or its transferee shall have an
additional demand registration right, at any time after October 10, 1987, to
cause the Partnership to register and offer an amount of Units equal to (i) the
number of Units purchased pursuant to Section 8.4 (A) less (ii) an amount equal
to 20% of the total Units outstanding immediately after completion of the
Initial Offering (including the Units sold to NAAF and U.S. Holding). All costs,
expenses, and fees of such registration and offering shall be borne by the
seller. Alternatively, U.S. Holding or its transferee may at any time after
October 10, 1987 piggyback the number of Units computed under the preceding
sentence on to a registration statement and offering by the Partnership, in
which case U.S. Holding or its transferee shall only be liable for its directly
incremental portion of the registration fee, blue sky fees, and underwriting
discounts and commissions attributable to its Units.
(B) PIGGYBACK RIGHTS. If at any time between September 30, 1991 and
September 30, 1996 the Partnership shall register any of its securities for sale
under the Securities Act of 1933, the Partnership, at the request of the General
Partner or its Affiliates, shall include in such registration (and any related
qualification under state securities laws) all or any portion of the Units or
securities of the Partnership held by the General Partner or its Affiliates.
However, if the managing underwriter of the offering reasonably determines that
marketing factors require a limitation or exclusion of the number of Units or
securities to be sold, the managing underwriter may reasonably limit or exclude
the Units or securities of the General Partner or its Affiliates to be included
in such registration. All costs, fees, and expenses of such registration and
offering shall be borne by the Partnership, except that the seller of the Units
shall be liable for its directly allocable incremental portion of the
registration fee, blue sky
28
fees, and underwriting discounts and commissions with respect to the Units or
securities piggybacked on to the Partnership's registration.
(C) INDEMNIFICATION. In the event of any registration under the Securities
Act of 1933 of any Units or securities pursuant to this Section 8.14, then, in
addition to and not in limitation of the Partnership's obligation under Section
4.7, the Partnership shall indemnify and hold harmless the General Partner and
its Affiliates and any underwriter engaged in connection with any registration
referred to in this Section 8.14, and each other person, if any, who controls
any such underwriter within the meaning of the Securities Act of 1933, against
any losses, claims, demands, actions, causes of action, assessments, damages,
liabilities (joint or several), costs, and expenses (including, without
limitation, interest, penalties, and reasonable attorneys' fees and
disbursements), resulting to, imposed upon, or incurred by any indemnified
person, directly or indirectly, under the Securities Act of 1933 or otherwise
(hereinafter referred to in this Section 8.14(C) as a "claim" and in the plural
as "claims"), based upon, arising out of, or resulting from any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which any Units or securities were registered under the
Securities Act of 1933 or any state securities laws, in any preliminary
prospectus (if used prior to the effective date of such registration statement),
or in any summary or final prospectus or in any amendment or supplement thereto
(if used during the period the Partnership is required to keep the registration
statement in effect), or arising out of, based upon, or resulting from the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements made therein in light of the
circumstances under which they were made not misleading; provided, however, that
the Partnership shall not be liable to the extent that any such claim arises out
of, is based upon, or results from an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
such preliminary, summary, or final prospectus, or such amendment or supplement
in reliance upon and in conformity with written information with respect to the
indemnified Person furnished to the Partnership by or on behalf of such
indemnified Person specifically for use in the preparation thereof.
(D) SURVIVAL. The rights provided in this Section 8.14 shall survive any
cessation of the General Partner as a general partner of the Partnership.
(E) TRANSFER. The rights in this Section 8.14 are fully transferable by the
General Partner or its Affiliates to any assignee of Units or securities so long
as at least 250,000 Units are assigned to such assignee.
8.15 CHANGES IN OUTSTANDING UNITS. The General Partner is authorized to
effect any Unit split or recombination or declare and pay pro rata distributions
of Units to the Unitholders.
ARTICLE 9
TAX ALLOCATION OF INCOME AND LOSSES
9.1 APPORTIONMENT OF NET INCOME, NET LOSS, AND DISTRIBUTIONS. Except as
otherwise provided in this Article 9, Net Income, Net Loss, and cash
distributions shall be allocated at the close of each month and the portion of
Net Income, Net Loss, and cash distributions allocated to Unitholders for such
month shall be apportioned among the Unitholders in accordance with their
respective Partnership Interests on the first day of such month, without regard
to Capital Accounts or the number of days during such month a Person was a
Unitholder.
9.2 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES.
(A) For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, except as otherwise provided in this
Section 9.2, each item of income, gain and loss and deduction (computed in
accordance with Section 8.12(B)) shall be allocated 99% to the Unitholders and
1% to the General Partner.
29
(B) If any Partner unexpectedly receives any adjustments, allocations, or
distributions described in Treasury Regulations Sections 1.704-1(b) (2) (ii) (d)
(4), 1.704-1(b) (2) (ii) (d) (5), or 1.7041(b) (2) (ii) (d) (6), items of
Partnership income and gain shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate a deficit in its Capital Account
created by such adjustments, allocations or distributions as quickly as
possible. This Section 9.2(B) is intended to constitute a "qualified income
offset" within the meaning of Treasury Regulation Section 1.7041(d)(3).
(C) If, and to the extent that, any Partner is deemed to recognize income
as a result of any transaction between such Partner and the Partnership pursuant
to Sections 482, 483, 1272-1274, or 7872 of the Code, or any similar provision
now or hereafter in effect, any corresponding resulting loss or deduction of the
Partnership shall be allocated to the Partner who was charged with such income.
(D) If there is a net decrease in partnership minimum gain during a
partnership taxable year, all Partners with a deficit Capital Account balance at
the end of such year (determined as provided in Treasury Regulation Section
1.704-1(b) (4) (iv) (e)) will be allocated, before any other allocation under
this Section 9.2, items of income and gain for such year in the amount and in
the proportions needed to eliminate such deficits as quickly as possible. For
purposes of this Section 9.2(D), "partnership minimum gain" has the meaning
ascribed . to it in Treasury Regulation Section 1.7041(b) (iv) (c), i.e., the
amount of gain (of whatever character), if any, that would be realized by the
Partnership if it disposed of (in a taxable transaction) each Partnership asset
subject to a nonrecourse liability in full satisfaction thereof. This Section
9.2(D) is intended to comply with Treasury Regulation Section 1.704-1(b) (4)
(iv) and is to be interpreted to comply with the requirements of such
regulation.
(E) To preserve uniformity of Units, the General Partner shall have sole
discretion in conjunction with Section 9.3(E) (y) to make special allocations of
income or deduction. The General Partner may make such allocations only if they
would not have a material adverse effect on the limited Partners and if they are
reasonably consistent with, and reasonably supportable under, the Code.
9.3 ALLOCATIONS FOR TAX PURPOSES.
(A) For Federal income tax purposes, except as otherwise provided in this
Section 9.3, each item of income, gain, loss, deduction, and credit of the
Partnership shall be allocated among the Partners in the same manner as such
items are allocated for capital account purposes under Section 9.2.
(B) In the case of a Contributed Property or an Adjusted Property, items of
income, gain, loss, depreciation, and cost recovery deductions attributable
thereto shall be allocated for Federal income tax purposes among the Partners as
follows:
(i) In the case of a Contributed Property, such items shall be
allocated among the Partners in a manner that takes into account the
variation between the Agreed Value of such property and its adjusted basis
at the time of contribution in attempting to eliminate Book-Tax
Disparities. Except as otherwise provided in Section 9.2(B) and 9.2(D)
above, any item of Residual Gain or Residual Loss attributable to a
Contributed Property shall be allocated among the Partners in accordance
with Section 9.2(A).
(ii) In the case of an Adjusted Property, such items shall (a) first,
be allocated among the Partners in a manner consistent with the principles
of Section 704(c) of the Code to take into account the Unrealized Gain or
Unrealized Loss attributable to such property and the allocations thereof
pursuant to Section 8.12(D) (i) in attempting to eliminate Book-Tax
Disparities, and (b) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a manner
consistent with the first sentence of paragraph (B) (i) above. Except as
otherwise provided in Sections 9.2(B) and 9.2(D) above, any items of
Residual Gain or Residual Loss attributable to an Adjusted Property shall
be allocated among the Partners in accordance with Section 9.2(A).
(C) To the extent of any Recapture Income resulting from the sale or other
taxable disposition of a Partnership Asset, the amount of any gain from such
disposition allocated to (or recognized by) a
30
Partner (or its successor in interest) for Federal income tax purposes pursuant
to the above provisions shall be deemed to be Recapture Income to the extent
such Partner has been allocated or has claimed any deduction directly or
indirectly giving rise to the treatment of such gain as Recapture Income.
(D) All items of income, gain, loss, deduction, credit, and basis
allocation recognized by the Partnership for Federal income tax purposes and
allocated to the Partners in accordance with the provisions hereof shall be
determined without regard to any election under Section 754 of the Code which
may be made by the Partnership; provided, however, such allocations, once made,
shall be adjusted as necessary or appropriate to take into account those
adjustments permitted by Sections 734 and 743 of the Code and, where
appropriate, to provide only Partners recognizing gain on Partnership
distributions covered by Section 734 of the Code with the Federal income tax
benefits attributable to the increased basis in Partnership Assets resulting
from any election under Section 754 of the Code.
(E) It is intended that the allocations prescribed in Sections 9.3(B) (i)
and (ii) constitute. allocations for Federal income tax purposes that are
consistent with Section 704 of the Code and comply with any limitations or
restrictions therein, to the extent reasonably possible without causing Units to
lack uniform characteristics for Federal income tax purposes. To preserve
uniformity of Units, the General Partner shall have sole discretion to (x) adopt
such conventions as it deems appropriate in determining the amount of
depreciation and cost recovery deductions; (y) make special allocations of
income or deduction and (z) amend the provisions of this-.Agreement as
appropriate (a) to reflect the proposal or promulgation of Treasury Regulations
under Section 704(c) of the Code, or (b) otherwise to preserve the uniformity of
Units issued or sold from time to time. The General Partner may adopt such
conventions, make such allocations and amend this Agreement as provided in this
Section 9.3(E) only if they would not have a material adverse effect on the
Limited Partners and if such allocations are reasonably consistent with, and
reasonably supportable under, the Code.
(F) Each item of Partnership income, gain, loss, deduction, and credit
attributable to a transferred Partnership Interest shall, for Federal income tax
purposes, be determined on a monthly basis (or other basis, as required or
permitted by Section 706 of the Code) and shall be allocated to the Partners and
Assignees as of the close of business on the day preceding the first day of the
month in which the transfer is recognized by the Partnership; provided, however,
that gain or loss on a sale or other disposition of all or a substantial portion
of the assets of the Partnership shall be allocated to the holder of the
Partnership Interest on the date of sale. The General Partner may revise, alter,
or otherwise modify such methods of determination and allocation as it
determines necessary, to the extent permitted by Section 706 of the Code and
regulations or rulings promulgated thereunder.
(G) PROVISIONAL ALLOCATION. In the event that any amount claimed by the
Partnership to constitute a deductible expense, an amount chargeable to capital
or a reduction in an amount realized is treated as a payment made to a Partner
in his capacity as a member of the Partnership for income tax purposes, gross
income (as defined in Section 61 of the Code) of the Partnership shall first be
allocated to such payment and no deductions shall be allocated thereto.
9.4 TAX ELECTIONS.
(A) Except as otherwise provided herein, the General Partner shall, in its
sole discretion, determine whether to make any available election under the
Code. The General Partner shall, in the Partnership's 1988 tax year, make the
election under Section 754 of the Code in accordance with applicable regulations
thereunder to cause the basis of Partnership Assets to be adjusted for Federal
income tax purposes as provided by Sections 734 and 743 of the Code. In making
Section 754 elections, the General Partner is authorized to make simplifying
assumptions for computational purposes, in its sole discretion. Such election
may also be made, in the General Partner's discretion, for the reconstituted
Partnership upon any termination of the Partnership pursuant to Section 708 of
the Code. The General Partner shall elect %,to deduct expenses incurred in
organizing the Partnership ratably over a 60-month period as provided in Section
709 of the Code.
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(B) The General Partner, the Underwriters, and any Limited Partner and
Assignees. by agreeing to the terms of this Agreement hereby elect to be
governed by the provisions of Section 732(d) of the Code upon a termination of
the Partnership pursuant to Section 708 of the Code if the General Partner, in
its absolute discretion, deems such election to be advisable at any time (it
being understood by all such parties that the General Partner has deemed such
election to be advisable in the event a termination of the Partnership occurs as
a result of the Initial Offering). All such parties hereby further agree to
execute and file all documents and to take any other steps necessary to effect
such election and appoint the General Partner as their authorized agent to take
such steps on their behalf.
ARTICLE 10
DISTRIBUTIONS
10.1 DISTRIBUTIONS FOR 1986.
On February 15, 1987, the Partnership shall make a distribution, 99% to the
Unitholders and 1% to the General Partner, in order that Unitholders shall
receive 3.54 (less 3.006 per Unit for each day commencing October 1, 1986 and
ending the day prior :to the initial Closing Date, inclusive). Such distribution
shall be made to Unitholders of record on December 31, 1986. The distribution
shall be made first from Cash Available From Operations for the period from the
initial Closing Date through December 31, 1986 and, to the extent Cash Available
From Operations is not sufficient to make a distribution, from any other source.
10.2 DISTRIBUTIONS OF CASH AVAILABLE FROM OPERATIONS.
(A) During the year ended December 31, 1987, all Cash Available From
Operations shall be distributed, 99% to the Unitholders and 1% to the General
Partner, up to a maximum of S2.16 per Unit.
(B) After December 31,1987, all Cash Available From Operations shall be
distributed 99% to the Unitholders and 1% to the General Partner.
(C) The Record Date for such distributions shall be the last business day
of each calendar quarter, unless otherwise determined by the General Partner.
10.3 DISTRIBUTIONS OF CASH AVAILABLE FROM SALE OR REFINANCING.
(A) Deleted.
(B) Through December 31, 2004, any Cash Available From Sale or Refinancing
may, at the discretion of the Ceneral Partner, be retained for use in the
Partnership's business.
(C) After December 31, 2004, subject to Section 3.3(B)(2), any Cash
Available From Sale or Refinancing shall be distributed 99% of the Unitholders
and 1%o to the Ceneral Partner.
(D) Cash Available From Sale or Refinancing shall be distributed at such
time as the General Partner in its discretion may determine to the holders of
record on the first business day in the month during which such sale or
refinancing occurs, unless a different Record Date is determined by the General
Partner.
10.4 DISTRIBUTIONS OF CASH FROM OTHER SOURCES. In its sole discretion, the
General Partner may distribute, 99% to the Unitholders and 1% to the General
Partner, cash from any other source. including borrowings and reserves.
10.5 DISTRIBUTIONS OF PARTNERSHIP ASSETS. In its sole discretion, the
General Partner may distribute, 99% to the Unitholders and 1% to the General
Partner, Partnership property other than cash.
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combinations of cash and property, and additional Units, Depositary Units, or
other securities of the Partnership which have been authorized and issued
pursuant to the terms of this Agreement.
10.6 LIQUIDATING DISTRIBUTIONS. NOTWITHSTANDING SECTION 10.3, A
DISTRIBUTION THAT IS ALSO A LIQUIDATING DIStribution (after payment of or
provision for Partnership liabilities) shall be made first to Partners in
accordance with the positive balances in their Capital Accounts and thereafter
99% to the Unitholders and 1% to the General Partner. For this purpose, a
distribution (other than a distribution pursuant to Section 10.2) shall be
treated as a liquidating distribution if, after such distribution, the
Partnership's remaining assets, if sold and the proceeds (after payment of
liabilities) were distributed to Partners at that time, would be insufficient to
reduce to zero the positive Capital Accounts of all Partners having positive
Capital Accounts (taking into account all adjustments under Section 8.11 that
would be made as a result of such sale).
10.7 TAX WITHHOLDING. The Partnership may withhold from any distribution
the amount so required by applicable Federal or state income tax laws with
respect to such distribution (or which the General Partner reasonably determines
may in the future be required to be withheld from a constructive distribution
arid which is attributable to such actual distribution). Any amount so withheld
shall, for purposes of this Agreement, be treated as a distribution from the
Partnership to the Person otherwise entitled thereto. Any amount so w ithheld
and not at that time treated as held in trust for the benefit, of the United
States or a state shall be held in trust for the benefit of the Person otherwise
entitled thereto until such time as (i) such amount is paid to the United States
or a state pursuant to law or (ii) the General Partner determines that the
aggregate of the amounts so withheld are in excess of any present or future
withholding tax liability in respect of the Person otherwise entitled to such
distribution, in which event the Partnership shall pay such excess to the Person
entitled thereto. Any funds so withheld and held in trust (other than for the
benefit of the United States or a state) may be invested in interest-bearing
accounts with such financial institutions (other than an Affiliate of the
General Partner) as may be selected by the General Partner, but in no event
shall the Partnership or the General Partner be held responsible for the loss of
any funds so deposited or for obtaining a rate of interest lower than that which
might have been obtained elsewhere. The General Partner, in its sole and
absolute discretion, may make such elections in respect of withholding as are
permitted by applicable Federal or state income tax laws. The General Partner
may require appropriate documentation with respect to any distribution that the
distributee may receive such distribution free of withholding under Federal or
state income tax laws. Any amount deposited in respect of a withholding tax
requirement in advance of the time such amount would otherwise have been
distributed (or which would not otherwise have been distributed) shall be
treated as distributed at the time of such' deposit. Nothing in this section
shall be construed as in any way limiting the right of the Partnership or the
General Partner to obtain reimbursement, whether from a distributee or
otherwise, for any taxes the Partnership or the General Partner may be required
to pay in respect of any actual or constructive distribution or for any excess
distribution resulting from withholding tax requirements. The Units and
Depositary Units whose status gives rise to such withholding obligation are
pledged as security for such reimbursement.
ARTICLE 11
BOOKS, RECORDS, ACCOUNTS, AND REPORTS
11.1 BOOKS AND RECORDS.
(A) The Partnership shall continuously maintain an offce in the State of
California, at which the following books, and records shall be kept:
(1) A current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order together
with the contribution and the share in profits and losses of each Partner;
33
(2) A copy of the Certificate of Limited Partnership and all
certificates of amendments thereto, together with executed copies of any
powers of attorney pursuant to which any such certificate has been
executed;
(3) Copies of the Partnership's Federal, state, and local income tax
or information returns and reports, if any, for the six most recent taxable
years;
(4) Copies of this Agreement and all amendments thereto;
(5) Financial statements of the Partnership for the six most recent
fiscal years; and
(6) The Partnership's books and records for at least the current and
past three fiscal years.
(B) The Partnership shall also maintain at its principal offce such
additional books and records as are necessary for the operation of the
Partnership.
(C) Any records maintained by the Partnership in the regular course of its
business, including the record of the Unitholders, books of account, and records
of Partnership proceedings may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, micrographics, or any other information storage
device, provided that the records so kept can be converted into clearly legible
written form within a reasonable period of time.
11.2 LIMITED PARTNERS' RIGHTS REGARDING BOOKS, RECORDS, AND TAX
INFORMATION.
(A) Subject to Section 11.7, to the extent not previously supplied to a
Limited Partner, upon the request of a Limited Partner, the General Partner
shall promptly deliver to the limited Partner, at the expense of the
Partnership, a copy of the items set forth in Sections 11.1 (A)(1), (2), and
(4).
(B) Each Limited Partner has the right upon reasonable request:
(1) To inspect and copy during normal business hours, at the Limited
Partner's expense, any of the Partnership's records required to be kept of
the Partnership, subject to Section 11.7.
(2) To obtain from the General Partner promptly after becoming
available, at the Limited Partner's expense, a copy of the
Partnership's Federal, state, and local income tax or information
returns for each year.
(C) The General Partner shall send to each Partner within 90 days after the
end of each taxable year such information as is necessary to complete Federal
and state income tax or information returns.
(D) The Partner and the Partner's representatives shall not divulge to any
other Person any confidential or proprietary data, information or property or
any trade secrets of the Partnership discovered in any inspection of the
Partnership's books and records.
11.3 ACCOUNTING BASIS AND FISCAL YEAR. The Partnership's books and records
(i) shall be kept on a basis chosen by the General Partner in accordance with
the accounting methods followed by the Partnership for Federal income tax
purposes and according to generally accepted accounting principles, (ii) shall
reflect all Partnership transactions, (iii) shall be appropriate and adequate
for the Partnership's business and for the carrying out of all provisions of
this Agreement, and (iv) shall be closed and balanced at the end of each
Partnership fiscal year. The fiscal year of the Partnership shall be the
calendar year, unless otherwise determined by the General Partner.
11.4 REPORTS.
(A) The General Partner shall cause an audited annual report to be sent to
each of the Unitholders no later than 90 days after the close of the fiscal
year. That report shall contain a balance sheet as of the end of the fiscal year
and an income statement and statements of partners' equity and of changes in
financial position for the fiscal year. Such statements shall be prepared in
accordance with generally accepted accounting principles and audited and
certified by a nationally recognized firm of independent public accountants
selected by the General Partner.
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(B) The General Partner shall cause quarterly unaudited reports of the
Partnership's operations to be sent to each of the Unitholders as soon as
practical after the end of each quarter, commencing with the fiscal quarter
ending March 31, 1987, but in no event more than 60 days after the close of each
fiscal quarter, other than the last quarter of the Partnership's fiscal year.
(C) The financial statements referred to in Section 11.4(B) shall be
accompanied by the report thereon, of the independent accountants engaged by the
Partnership or, if there is no such report, the certificate of the General
Partner that such financial statements were prepared without audit from the
books and records of the Partnership.
11.5 TAX MATTERS PARTNER. The General Partner is hereby designated as the
"Tax Matters Partner" of the Partnership in accordance with Section 6231 (a) (7)
of the Code and is authorized, at the Partnership's sole cost and expense, to
represent the Partnership and each Unitholder in connection with all
examinations of the Partnership affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Partnership funds for
professional services and costs connected therewith. Each Unitholder agrees to
cooperate with the General Partner and to do or refrain from doing any and all
things reasonably required by the General Partner to conduct such proceeding.
The General Partner shall have the right to settle any audits without the
consent of the Unitholders and to take any and all other action on behalf of the
Unitholders or the Partnership in connection with any tax audit or judicial
review proceeding to the extent permitted by applicable law and regulations.
11.6 BANK ACCOUNTS. The Partnership shall establish and maintain accounts in
financial institutions (including, without limitation, national or state banks,
trust companies, or savings and loan institutions) in such amounts as the
General Partner may deem necessary from time to time. The funds of the
Partnership shall be deposited in such accounts and shall not be commingled with
the funds of the General Partner or any Affiliate thereof; provided, however,
that nothing shall prohibit the Partnership from investing in joint ventures or
partnerships with the General Partner or its Affiliates; and provided further
that nothing herein shall preclude any investment of Partnership funds in a
mutual fund or similar entity for which a separate account is maintained on
behalf of each participant. Checks shall be drawn on and withdrawals of funds
shall be made from any such accounts for Partnership purposes and shall be
signed by the Person or Persons designated by the General Partner. Temporary
surplus funds of the Partnership may be invested pursuant to the power contained
in Section 4.1(w).
11.7 CONFIDENTIALITY. The General Partner may keep confidential from the
Unitholders for such period of time as the General Partner deems reasonable, any
information which the General Partner reasonably believes to be in the nature of
trade secrets or other information disclosure of which the General Partner in
good faith believes could damage the Partnership or its business or which the
Partnership is required by agreements with third parties to keep confidential.
ARTICLE 12
ISSUANCE OF CERTIFICATES
12.1 ISSUANCE OF CERTIFICATES. Upon the issuance of Units, the General
Partner shall cause the Partnership to issue one or more Certificates
substantially in the form of the Certificate attached hereto as Exhibit 1 in the
name of each Limited Partner certifying that the Limited Partner named therein
is a Limited Partner in the Partnership as provided in the Partnership's books
and records, stating the number of Units into which his Partnership Interest is
divided, and including as a part thereof a form of assignment, subject to this
Article 12, sufficient to convey the partnership interest of a limited partner
to an assignee under the California Act. Upon the transfer of a Unit in
accordance with the terms of this Agreement, the General Partner shall cause the
Partnership to issue replacement Certificates, according to such procedures as
the General Partner may establish in its sole and absolute discretion.
35
new Certificate or cause to be issued a new Depositary Receipt in place of any
Certificate or Depositary Receipt previously issued if the registered owner of
the Certificate or Depositary Receipt:
(i) makes proof by affidavit, in form and substance satisfactory to
the General Partner and the Depositary, that a previously issued
Certificate or Depositary Receipt has been mutilated, lost, destroyed or
stolen;
(ii) requests the issuance of a new Certificate or Depositary Receipt
before the Partnership or the Depositary has notice that the Certificate
has been acquired by a purchaser for value in good faith and without notice
of an adverse claim;
(iii) if requested by the General Partner or the Depositary, delivers
to the Partnership and/or the Depositary a bond, in form and substance
satisfactory to the General Partner and/or the Depositary, with such surety
or sureties and with fixed or open penalty, as the General Partner and/or
Depositary may direct, in its or their discretion, to indemnify the
Partnership and the Depositary against any claim that may be made on
account of the alleged mutilation, loss, destruction, or theft of the
Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
General Partner and/or the Depositary.
If a Unitholder fails to notify the Partnership within a reasonable time
after he has notice of the mutilation, loss, destruction, or theft of a
Certificate or Depositary Receipt, and a transfer of the Units represented by
the Certificate or Depositary Receipt is registered before receiving such
notification, the Unitholder shall be precluded from making any claim against
the Partnership, the Depositary, or any Transfer Agent for such transfer or for
a new Certificate or Depositary Receipt.
12.3 MAINTENANCE OF TRANSFER RECORDS. The Partnership's Depositary,
registrar, and transfer agent (who may be the same Person) will maintain records
reflecting the Depositary Receipts registered in the name of each Unitholder,
and any subsequent transfers of Depositary Receipts to Assignees and Substituted
Limited Partners.
12.4 RECORD UNITHOLDER. The Partnership shall be entitled to treat the
Record Unitholder as the Limited Partner or Assignee in fact of the Units or
Depositary Units, as the case may be, represented thereby and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such Units or Depositary Units on the part of any other Person, whether or not
the Partnership shall have actual or other notice thereof, except as otherwise
provided by law or any applicable rule, regulation, guideline, or requirement of
any securities exchange on which the Units or Depositary Units are listed for
trading. Without limiting the foregoing, when a Person (such as a broker,
dealer, bank, trust company, or clearing corporation, or an agent of any of the
foregoing) is acting as a nominee, agent, or in some other representative
capacity for another Person in acquiring and/or holding Depositary Receipts or
Certificates, as between the Partnership on the one hand and such Persons on the
other hand, such representative Person (a) shall be the Limited Partner or
Assignee (as the case may be) beneficially and of record, (b) must execute and
deliver a T: ansfer Application, and (c) will be bound by this Agreement and
will have the obligations of a Limited Partner or Assignee (as the case may be)
hereunder and as provided for herein.
12.5 WITHDRAWAL OF CERTIFICATEs. A Record Unitholder of Depositary Receipts
may not withdraw Depositary Units evidenced thereby from deposit unless he is a
Limited Partner. Upon the written request of any limited Partner accompanied by
a surrendered Depositary Receipt held by a Limited Partner, the Partnership will
cause to be issued to such Limited Partner a Certificate or Certificates in the
name of such Limited Partner evidencing the same number of Units. A Limited
Partner may redeposit any such Certificate with the Depositary which shall then
reissue Depositary Receipts in the name of the Limited Partner thereof upon 60
days' prior written notice.
36
12.6 LEGENDS. The Partnership may cause to be imposed, imprinted, or
stamped on any Certificate or Depositary Receipt one or more legends or
restrictions on transfer which the General Partner in its sole discretion
believes may be necessary or advisable to comply with Federal or state
securities laws or other applicable laws, rules, regulations, or agreements.
ARTICLE 13
TRANSFER OF INTERESTS
13.1 TRANSFER IN GENERAL.
(A) The term "transfer," when used in this Article 13 with respect to a
Partnership Interest, Units, or Depositary Units shall include any sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange, or
other disposition.
(B) No Partnership Interest, Unit, or Depositary Unit shall be transferred,
in whole or in part, except in accordance with the terms and conditions set
forth in Section 8.4, Article 13, and Article 14. Any transfer or purported
transfer of any Partnership Interest, Depositary Unit, or Unit not made in
accordance with Section 8.4, Article 13, and Article 14, shall be null and void.
13.2 TRANSFER OF INTERESTS OF THE GENERAL PARTNER.
(A) Until 10 years after the Closing Date, the General Partner may not
transfer all or any part of its General Partner Partnership Interest unless (i)
a Majority Interest consents to such transfer and (ii) the Partnership receives
an opinion of counsel that such transfer would not result in the loss of limited
liability of any Unitholder or cause the Partnership to be treated as an
association taxable as a corporation for Federal income tax purposes. The
General Partner shall have the absolute and unrestricted right, power, and
authority to transfer any or all of its Partnership Interest after the date 10
years from the Closing Date.
(B) No provision of this Agreement shall be construed to prevent (and all
Partners and Assignees hereby expressly consent to) (i) the transfer by the
General Partner of its Partnership Interest to a Related Entity or the transfer
by the General Partner of its Partnership Interest upon its merger or
consolidation into any other corporation or the transfer by it of all or
substantially all of its assets to another corporation, and the assumption of
the rights and duties of the General Partner by such Related Entity or the
transferee corporation, provided such Related Entity or such corporation
furnishes to the Partnership an opinion of counsel that such merger,
consolidation, transfer, or assumption will not result in a loss of limited
liability of any Unitholder or result in the Partnership being treated as an
association taxable as a corporation for Federal income tax purposes, (ii) the
transfer by the General Partner of or the mortgage, pledge, hypothecation, or
granting a security interest in all or any part of its interest in items of
Partnership income, gains, losses, deductions, credits, distributions, or
surplus, (iii) the sale or assignment of any Units held by the General Partner
or its Affiliates, subject to Section 8.4(A), or (iv) the transfer, mortgage,
pledge, hypothecation, or grant of a security interest by the General Partner in
any Units owned by the General Partner as collateral for a loan or loans.
13.3 TRANSFER OF UNITS. Units that have never been deposited with the
Depositary or that have been withdrawn from the Depositary and not redeposited
are not transferable except by bequest, inheritance, or operation of law or upon
transfer to the General Partner or the Partnership; provided, however, that the
General Partner or its Related Entities may, without restriction, transfer
between or among themselves, Units that have never been deposited with the
Depositary and Units that have been withdrawn from the Depositary and not
redeposited.
13.4 TRANSFER OF DEPOSITARY UNITS.
(A) Except as provided in Section 13.3, the Partnership shall not recognize
any transfer of Units or interests therein except by a transfer of Depositary
Receipts representing Depositary Units.
37
Depositary Units may be transferred only in the manner provided in this
Agreement and in the Depositary Agreement. No transfer of Depositary Receipts
evidencing Depositary Units will be recorded or otherwise recognized by the
Partnership unless and until the transferee has delivered a properly executed
Transfer Application to the Depositary.
(B) A transferee who has completed and delivered a Transfer Application
shall be deemed (i) to have agreed to be bound by the terms and conditions of
the Depositary Agreement and the Depositary Receipt, (ii) to have requested
admission as a Substituted Limited Partner with respect to the Units
transferred, (iii) to have agreed to comply with and be bound by this Agreement,
whether or not such transferree is admitted as a Substituted Limited Partner and
to execute any document that the General Partner may reasonably require to be
executed in connection with the transfer or with the admission of such
transferee as a Substituted Limited Partner pursuant to Article 14 with respect
to the Depositary Units transferred; (iv) to have represented and warranted that
such transferee is a United States Citizen or Resident Alien and has authority
to enter into the Depositary Agreement and this Agreement, (v) to have appointed
the General Partner his attorney-in-fact to execute any document that the
General Partner may deem necessary or appropriate to be executed in connection
with the transfer and/or his admission as a Substituted Limited Partner with
respect to the Depositary Units transferred, (vi) to have given the power of
attorney set forth in Article 17, and (vii) to have given the consents and
waivers contained in this Agreement. Unless and until admitted as a Substituted
Limited Partner pursuant to Article 14 with respect to Depositary Units
transferred pursuant to this Section 13.4, the Record Unitholder of a Depositary
Receipt transferred pursuant to this Section 13.4 shall be an Assignee in
respect of such Depositary Units, whether or not such Record Unitholder is a
Limited Partner with respect to other Depositary Units. Except as specifically
provided in this Agreement, an Assignee shall not be treated as or have the
rights of a Limited Partner. The General Partner shall vote and exercise other
powers attributable to Depositary Units or undeposited Units of Assignees who
have not become Substituted Limited Partners, to the extent known by the General
Partner.
(C) Each distribution in respect of a Depositary Unit (or a Unit withdrawn
from the depositary account established with the Depositary) shall be paid by
the Partnership, directly or through the Depositary or through any other Person
or agent, only to the Record Unitholders thereof as of the Record Date set for
the distribution. Such payment shall constitute full payment and satisfaction of
the Partnership's liability in respect of such payment, regardless of any claim
of any Person who may have an interest in or with respect to such payment by
reason of an assignment or otherwise.
(D) Notwithstanding anything to the contrary herein, the Partnership shall
not be required to recognize for any purpose any purported transfer by a Limited
Partner or Assignee of all or any part of a Depositary Unit held by such Limited
Partner or Assignee until such transfer has been effected on the books of the
Transfer Agent.
(E) Any holder of a Unit or a Depositary Receipt (including a transferee
thereof) conclusively shall be deemed to have agreed to comply with and be bound
by all terms and conditions of this Agreement, with the same effect as if such
holder had executed a Transfer Application, whether or not such holder in fact
has executed such a Transfer Application. A request by any broker, dealer, bank,
trust company, clearing corporation, or nominee holder, to register transfer of
a Depositary Receipt, however signed (including by any stamp, mark, or symbol
executed or adopted with intent to authenticate the Depositary Receipt), shall
be deemed to have executed a Transfer Application by and on behalf of the
beneficial owner of such Depositary Receipt.
(F) Notwithstanding anything to the contrary herein (but subject to the
requirement that a purchaser be a United States Citizen or Resident Alien), a
purchaser of a Depositary Receipt from the Underwriters in connection with or
pursuant to the Initial Offering shall be required to execute a Transfer
Application to be delivered to the Partnership within 30 days of purchase. Each
such purchaser, by acquiring such Depositary Receipt in connection with or
pursuant to the Initial Offering, shall be deemed to have agreed to comply with
and to be bound by all terms and conditions of this Agreement, the Depositary
Agreement, and the Depositary Receipt and to have taken the other actions
specified in the Transfer Application and this Agreement as if such purchaser
had executed the
38
Limited Partners all purchasers of Depositary Receipts (who are United States
Citizens or Resident Aliens) from the Underwriters in connection with or
pursuant to the Initial Offering, and such admission shall be deemed to have
been made on the initial Closing Date. For purposes of this paragraph (F), if
fewer than all underwritten Units have been sold by the Underwriters as of the
initial Closing Date, only Persons who purchase Units from the Underwriters on
or prior to the last day of the calendar month in which the Closing Date occurs
shall be treated as having purchased their Units in connection with or pursuant
to the Initial Offering.
13.5 DEPOSITARY ARRANGEMENTS. The General Partner shall have full authority
to amend, extend, or terminate the Depositary Agreement or the services of a
Depositary if, in the sole discretion of the General Partner, it deems it
appropriate to do so. If the services of a Depositary are terminated, the
General Partner shall make substitute, comparable, or other arrangements to
facilitate trading of Units or interests in Units.
13.6 RESTRICTIONS ON TRANSFER; NON-UNITED STATES CITIZENS.
(A) Notwithstanding the other provisions of this Article 13, no transfer of
any Unit, Depositary Unit, or Partnership Interest of any Unitholder shall be
made if such transfer (i) would violate the then applicable Federal and state
securities laws or rules and regulations of the Securities and Exchange
Commission, state securities commissions, and any other governmental authorities
with jurisdiction over such transfer; (ii) would result in the Partnership being
treated as an association taxable as a corporation' for Federal income tax
purposes; (iii) would affect the Partnership's existence or qualification as a
limited partnership under the California Act; or (iv) would, in the judgment of
the General Partner, materially adversely affect the business or operation of
the Partnership.
(B) No Partnership Interest may be acquired by or transferred to a Person
who is not, or is determined by the General Partner not to be, or does not
represent in writing that he is, a United States Citizen or Resident Alien.
(C) In the event a Unitholder or nominee of a Unitholder is not or ceases
to be a United States Citizen or Resident Alien for any reason whatsoever, or
fails to provide satisfactory evidence to the General Partner of such status
within 15 days of a request therefore, his Units and Depositary Units shall be
subject to redemption by the Partnership. The Partnership at any time shall have
the absolute right, in the discretion of the General Partner, either (i) to
redeem such Units and Depositary Units, or (ii) to permit such Unitholder to
continue to hold his Units and Depositary Units. The procedures for redemption
shall be as follows, unless modified pursuant to Section 13.6(D):
(1) The General Partner shall, not later than the 30th day before the date
fixed for redemption, give notice of redemption to the Unitholder, at his last
address designated on the records of the Partnership or Depositary, by
registered or certified mail, postage prepaid. The notice shall be deemed to
have been given when so mailed. The notice shall specify the Units or Depositary
Units to be redeemed, the date fixed for redemption, the place of payment, that
payment of the redemption price will be made upon surrender of the Depositary
Receipt or the Certificate evidencing the Units or Depositary Units to be
redeemed, and that on and after the date fixed for redemption no further
allocations or distributions to which the Unitholder would otherwise be entitled
in respect of such Units or Depositary Units will accrue or be made.
(2) The redemption price per Unit or Depositary Unit shall be the Unit
Price (the date of determination of which shall be the date fixed for
redemption) multiplied by the number of Units or Depositary Units to be
redeemed. The redemption price shall be paid, in the sole discretion of the
General Partner, in cash or by a combination of cash and delivery of a
promissory note of the Partnership in the principal amount of the redemption
price (less cash paid), bearing interest at the rate of 10% annually, and
payable in three equal annual installments of principal, together with accrued
interest, commencing one year after the redemption date.
(3) Upon surrender by or on behalf of the Unitholder, at the place
specified in the notice of redemption, of the Depositary Receipt or the
Certificate evidencing the Units or Depositary Units
19
to be redeemed, duly endorsed in blank or accompanied by an assignment duly
executed in blank, the former Unitholder or his duly authorized representative
shall be entitled to receive the payment therefore. No interest will be paid on
amounts of cash deposited with the Depositary or set aside for payments
hereunder.
(4) After the redemption date, the Units or Depositary Units redeemed shall
no longer be deemed issued and outstanding.
(5) Nothing in this Section 13.6(C) shall prevent the recipient of a notice
of redemption from transferring his Units or Depositary Units before the
redemption date if such transfer is otherwise permitted under this Agreement.
Upon receipt of notice of such a transfer, the General Partner shall withdraw
the notice of redemption, provided the transferee of such Units or Depositary
Units certifies in the Transfer Application that he, and, if he is a nominee
holding for the account of another Person, that to the best of his knowledge
such other Person, is a United States Citizen or Resident Alien. If the
transferee fails to make such certification, such redemption shall be effected
on the original redemption date.
(D) The General Partner, in its sole discretion, may establish such
additional or different procedures it deems necessary or advisable to implement
the restrictions set forth in this Section 13.6.
13.7 GENERAL PARTNER'S RIGHT TO PURCHASE UNITS.
(A) Notwithstanding any other provision of this Agreement, in the event
that the number of outstanding Units held by holders other than the General
Partner or its Affiliates is less than 10% of the aggregate number of Units sold
from time to time to Persons other than the General Partner or its Affiliates,
at any time after September 30, 1991, the General Partner or an Affiliate
thereof shall then have the right, exercisable in its sole discretion, to call
for purchase and purchase all, but not less than all, of the Depositary Units
and undeposited Units that remain outstanding and held by Persons other than the
General Partner and its Affiliates, at a price per Unit equal to the following
percentage of the Unit Price of a Unit as of the date fixed by the General
Partner for such purpose (which determination date shall be no more than 90 days
prior to the Purchase Date):
130% of the Unit Price from October 1, 1991 to September 30, 1996;
120% of the Unit Price from October 1, 1996 to September 30, 2001; and
110% thereafter.
(B) In the event the General Partner or its Affiliate elect to exercise the
rights to purchase Depositary Units and undeposited Units pursuant to paragraph
(A) above, the General Partner or its Affiliate shall deliver to the Purchase
Agent written notice of such election to purchase (hereinafter called the
"Notice of Election to Purchase") and shall cause the Purchase Agent to mail a
copy of such Notice of Election to Purchase to the Record Unitholders of
Depositary Receipts and to the Record Unitholders of undeposited Units (other
than the General Partner and its Affiliates) at least 10, but not more than 60,
days prior to the Purchase Date. Such Notice of Election to Purchase shall also
be published in daily newspapers of general circulation printed in the English
language and published in the Borough of Manhattan, New York, New York and in
San Francisco, California. The Notice of Election to Purchase shall specify the
Purchase Date and the purchase price and state that the General Partner or its
Affiliate elects to purchase such Depositary Units and undeposited Units, upon
surrender thereof in exchange for payment, at such office or offices of the
Purchase Agent as the Purchase Agent may specify, or as may be required by any
securities exchange on which the Depositary Units are listed or admitted to
trading. Any such Notice of Election to Purchase mailed to a Record Unitholder
of Depositary Receipts at his address as reflected in the records of the
Depositary or, with respect to undeposited Units, to a Record Unitholder of such
Units at his address as reflected in the records of the Partnership, shall be
conclusively presumed to have been given whether or not the owner receives such
notice. On or prior to the Purchase Date, the General Partner or its Affiliate
shall deposit with the Purchase Agent cash in an amount equal to the Purchase
Funds. If the Notice of Election to Purchase shall have been duly given as
aforesaid at least 10 days prior to the Purchase Date. and if on or prior to
40
the Purchase Date the Purchase Funds shall have been deposited with the Purchase
Agent in trust for the benefit of the holders of Depositary Units and
undeposited Units subject to purchase as provided herein, then from and after
the Purchase Date, notwithstanding that any Depositary Receipts or, with respect
to undeposited Units, any Certificate for Units shall not have been surrendered
for purchase, all rights of the holders of such Depositary Units and undeposited
Units shall thereupon cease, except the right to receive the purchase price
therefor, without interest, upon surrender to the Purchase Agent of the
Depositary Receipts representing Depositary Units or Certificates representing
unde- Units, and such Depositary Units and undeposited Units shall thereupon be
deemed to be transferred to the General Partner or its Affiliate on the record
books of the Depositary and the Partnership, and the General Partner or its
Affiliate, as applicable, shall be deemed to be the owner of all such Depositary
Units and undeposited Units from and after the Purchase Date and shall have all
rights as the owner of such Depositary Units and undeposited Units (including,
without limitation, all rights as owner of such Depositary Units and undeposited
Units pursuant to Articles 9, 10, and 16).
(C) At any time from and after the Purchase Date, a holder of an
outstanding Depositary Unit or undeposited Unit subject to purchase as provided
in this Section may surrender his Depositary Receipt evidencing such Depositary
Unit or Certificate evidencing such undeposited Unit to the Purchase Agent in
exchange for payment of the purchase price specified in Section 13.7(A), without
interest thereon.
ARTICLE 14
ADMISSION OF SUBSTITUTED AND ADDITIONAL LIMITED PARTNERS
14.1 ADMISSION OF SUBSTITUTED LIMITED PARTNERS.
(A) Any person shall have the right to request admission as a Substituted
Limited Partner subject to the conditions of and in the manner permitted by the
terms of this Agreement. By transfer of a Depositary Receipt, the transferor is
deemed to have given the transferee the right to request admission as a
Substituted Limited Partner subject to the conditions of and in the manner
permitted under this Agreement. A transferee who does not execute a Transfer
Application, however, shall have only the right to negotiate such Depositary
Receipt *to a purchaser or other transferee, subject to Section 13.6. Each
transferee of a Depositary Receipt (including any Person, such as a broker,
dealer, bank, trust company, clearing corporation, other nominee holder, or an
agent of any of the foregoing; acquiring such Depositary Unit for the account of
another Person) shall apply to become a Substituted Limited Partner with respect
to Depositary Units transferred to such Person by executing and delivering a
Transfer Application at the time of such transfer. Such transferee shall become
a Substituted Limited Partner with respect to Depositary Units transferred at
such time as the General Partner consents thereto, which consent may be given or
withheld in the General Partner's sole discretion. If such consent is withheld,
such transferee shall be an Assignee. An Assignee is entitled to an interest in
the Partnership equivalent to that of a Limited Partner with respect to the
allocations and the right to receive distributions from the Partnership,
including liquidating distributions, but will not have the right to vote on
Partnership matters and will otherwise be subject to the limitations under the
California Act on the rights of an assignee who has not become a limited
partner. Unless the Depositary is notified to the contrary, the General I
Partner shall be deemed to have given its consent to the admission of a
transferee as a Substituted Limited Partner, and such admission shall be
effective, at and from the close of business on the last business day of the
calendar month in which a properly executed Transfer Application is received by
a Transfer Agent.
(B) Under the terms of the Depositary Agreement, the Depositary is
obligated to prepare, as of the close of business on the last business day of
each month, a list or other appropriate evidence setting forth the transfers of
Depositary Units registered by all Transfer Agents since the last business day
of the preceding month (the "transfer record"), setting forth the business day
on which such Substituted Limited Partner was admitted to the Partnership and,
as promptly as practicable after the last business day of each month, to submit
the transfer record to the General Partner.
41
(C) Any Limited Partner who transfers all of his Units and Depositary Units
with respect to which he has been admitted as a Limited Partner shall cease to
be a Limited Partner of the Partnership upon a transfer of such Units and
Depositary Units in accordance with Article 13 and shall have no further rights
as a Partner in or with respect to the Partnership (whether or not the Assignee
of such former Limited Partner is admitted to the Partnership as a Substituted
Limited Partner).
(D) No person shall be entitled to become a Substituted Limited Partner
except in accordance with this Section 14.1.
(E) The General Partner will vote and exercise other powers attributable to
Units and Depositary Units owned by an Assignee that has not been accepted as a
Substituted Limited Partner, in the General Partner's sole discretion.
14.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS. A Person who makes a Capital
Contribution to the Partnership shall be admitted to the Partnership as an
Additional Limited Partner upon furnishing to the General Partner (a) an
acceptance, in form satisfactory to the General Partner, of all the terms and
conditions of this Agreement, including, without limitation, the power of
attorney granted in Article 17, and (b) such other documents or instruments as
may be required in order to effect his admission as a Limited Partner, and such
admission shall become effective on the date that the General Partner determines
in its sole discretion and issues to such Additional Limited Partner a
certificate evidencing ownership of his Units.
14.3 NO ACTION NECESSARY BY UNITHOLDERS. No action or consent by
Unitholders shall be required in connection with the admission of Additional or
Substituted Limited Partners to the Partnership for Limited Partners added
pursuant to Sections 8.3, 8.4, 8.10, 14.1, 14.2, or otherwise pursuant to this
Agreement. Only the consent of the General Partner is necessary for the
admission or substitution of any Limited Partners to the Partnership after the
filing of the Certificate of Limited Partnership for Limited Partners added
pursuant to Sections 8.3, 8.4, 8.10, 14.1, 14.2, or otherwise pursuant to this
Agreement.
ARTICLE 15
CHANCES IN THE GENERAL PARTNER
15.1 GENERAL PARTNER CEASING TO BE THE GENERAL PARTNER.
(A) The General Partner shall cease to be a general partner of the
Partnership only upon the occurrence of any one or more of the following events:
(1) The General Partner's withdrawal from the Partnership;
(2) The General Partner's removal as the General Partner pursuant to
Section 15.2(B);
(3) Effective as provided in Section 15.1(B) below, an order for
relief against the General Partner is entered under Chapter 7 of the
Federal Bankruptcy Code, or the General Partner: (a) makes a general
assignment for the benefit of creditors; (b) files a voluntary petition
under the Federal Bankruptcy Code; (c) files a petition or answer seeking
for the General Partner any bankruptcy, reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any statute, law, or regulation; (d) files an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in any proceeding of this
nature; or (e) seeks, consents to, or acquiesces in the appointment of a
trustee. receiver, or liquidator of the General Partner or of all or any
substantial part of the General Partner's properties;
(4) The death of an individual General Partner;
(5) The entry by a court of competent jurisdiction of an order
adjudicating an individual General Partner incompetent to manage the
General Partner's person or property;
42
(6) In the case of a General Partner that is a separate partnership,
the dissolution and termination of the separate partnership; or
(7) In the case of a General Partner that is a corporation, the filing
of a certificate of dissolution, or its equivalent, for the corporation or
the revocation of its charter.
(B) Any event described in Section 15.1 (A) (3) shall cause the General
Partner to cease to be a general partner of the Partnership only as provided in
this Section 15.1(B). Immediately upon the later of (1) the entering of the
order for relief under Chapter 7 of the Federal Bankruptcy Code or (2) the final
disposition of any appeal by the General Partner from the entering of such an
order, and immediately upon the occurrence of any of the other events described
in Section 15.1 (A)(3), the General Partner shall give notice of the event to
the Partners. The General Partner shall cease to be a General Partner 120 days
after, such notice is given.
(C) If the cessation of the General Partner pursuant to Section 15.1 would
result in a dissolution of the Partnership, the Organizational Limited Partner
shall automatically become a General Partner so as to prevent the dissolution of
the Partnership. The Organizational Limited Partner shall continue to be a
General Partner until determined otherwise by a Majority Interest.
15.2 WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER.
(A) Airlease Management Services, Inc. covenants and agrees that it shall
continue to act as General Partner of the Partnership until the date' which is
10 years after the initial Closing Date, subject to its right to transfer its
interest as a General Partner pursuant to Section 13.2 and subject to this
Section 15.2(A). At any time after the date which is 10 years from the Closing
Date, the General Partner may withdraw from the Partnership without liability,
penalty, or cost to it, effective upon at least 90 days advance written notice
to the Limited Partners, such withdrawal to take effect on the date specified in
such notice. If the General Partner gives a notice of withdrawal, a Majority
Interest may, prior to the effective date of such withdrawal, elect a successor
General Partner. If no successor General Partner is elected, the Partnership
shall be dissolved pursuant to Section 16.1. The General Partner may also
withdraw from the Partnership, at any time and without liability, penalty, or
cost to it, if its continued status as the general partner of the Partnership
would be prohibited by law or would materially adversely affect the Partnership.
(B) The General Partner may be removed upon the vote of Limited Partners
holding 66 2/3% or more of the outstanding Units. Any such action by the Limited
Partners for removal of the General Partner must also provide for the election
of a new General Partner. The right of the Limited Partners to remove the
General Partner shall not exist or be exercised unless the Partnership has
received an opinion of independent counsel that the removal of the General
Partner and the selection of a successor General Partner will not result in (i)
the loss of limited liability of any Unitholder or (ii) the treatment of the
Partnership as an association taxable as a corporation for Federal income tax
purposes.
(C) Airlease Management Services, Inc. covenants and agrees that it will
remain a Related Entity for at least 10 years after the Closing Date and so long
thereafter as it is the General Partner; provided that it may cease to be a
Related Entity if its continued status as a Related Entity would by prohibited
by law or would materially adversely affect the Partnership.
15.3 Admission of Successor General Partner. A successor General Partner
selected pursuant to Section 15.2 or the transferee of or successor to the
Partnership Interest of the General Partner shall be admitted to the Partnership
as the General Partner, effective as of the date determined by the General
Partner and the successor General Partner. An amendment or restatement of the
Certificate of Limited Partnership shall be filed with the Secretary of State of
the State of California effecting such substitution as promptly as practicable.
15.4 Rights on Removal or Withdrawal. A Departing General Partner shall be
entitled to all compensation accrued as of the date of cessation as the General
Partner and shall have the same rights
43
to inspect and make copies or excerpts of the books and records of the
Partnership as is provided to Limited Partners until all amounts due the
Departing General Partner as of the date the General Partner ceased to be a
General Partner have been paid. The Departing General Partner shall be a
creditor of the Partnership as to all such amounts owed to it by the
Partnership, and shall not have any portion of its interest as General Partner
converted to an interest as a Limited Partner or Assignee except as provided in
Section 15.7. As to any Units so held or received, the Departing General Partner
shall be entitled to exercise all of the voting rights provided under this
Agreement as a Partner.
15.5 LIABILITY ON REMOVAL OR WITHDRAWAL. If, at the time of the Departing
General Partner's departure, the Partnership is indebted to the Departing
General Partner under this Agreement or any other instrument or agreement for
funds advanced, properties sold; services rendered, or costs and expenses
incurred by the Departing General Partner, the Partnership shall, within 60 days
after the effective date of such Departing General Partner's departure, pay to
the Departing General Partner the full amount of such indebtedness. Upon
departure, the Departing General Partner shall have no liability for any debts
or liabilities of the Partnership incurred after the date of cessation as a
General Partner.
15.6 SUCCESSOR AND PREDECESSOR GENERAL PARTNER. Unless the General Partner
has been removed as a General Partner pursuant to Section 15.2(B), the General
Partner shall have the right to transfer its business, including a transfer by
operation of law, as provided in Section 13.2, and any Person continuing the
business of the General Partner shall immediately become a General Partner of
this Partnership and any successor or reconstituted partnership and shall have
the exclusive right to continue the Partnership and shall continue the business
of the Partnership pursuant to the terms and provisions of this Agreement
without any action or vote of any Person. When any Person ceases to be a General
Partner under this Agreement or a partner, director, officer, employee, agent,
or Affiliate of a General Partner, that Person shall continue to have the
benefit of any provisions of this Agreement providing for indemnity, exculpation
or insurance. which protected the Person as the General Partner or a partner,
director, officer, employee, agent, or Affiliate of the General Partner, or
which limited or defined the liability of the Person with respect to activities
in which such Person engaged as the General Partner.
15.7 Interest of Departing General Partner and Successor.
(A) A Departing General Partner shall, at the option of its successor
exercisable prior to the effective date of the departure of the Departing
General Partner, promptly receive from its successor in exchange for its
interest as a General Partner, an amount in cash equal to the fair market value
of the Departing General Partner's interest as a General Partner, determined as
of the effective date of departure. If the option is exercised, the Departing
General Partner shall, as of the effective date of departure, cease to share in
any allocations or distributions with respect to its interest as a General
Partner. For purposes of this Section 15.7, the fair market value of the
Departing General Partner's Partnership Interest as a General Partner herein
shall be such value as may be agreed by the Departing General Partner and the
successor.
(B) If the successor to a Departing General Partner does not exercise the
option described in paragraph (A) above, the interest of the Departing General
Partner as a General Partner of the Partnership shall be converted into Units on
a basis agreed by the Partnership and the Departing General Partner.
(C) In the absence of an agreement pursuant to (A) or (B) above within 30
days after the effective date of the Departing General Partner's departure, the
value of the interests of the Departing General Partner shall be determined by
an appraiser selected by the Departing General Partner and its successor, the
determination of which shall be conclusive as to the matter. If those parties
cannot agree as to such appraiser within 45 days after the effective date of
such departure, then such appraiser shall be designated by two appraisers
selected by the Departing General Partner and its successor.
44
(D) If the successor to a Departing General Partner does not exercise the
option described in paragraph (A) above, the successor shall at the effective
date of its admission to the Partnership contribute to the capital of the
Partnership cash or property equal to 1% of the Capital Accounts of all Partners
and Assignees. In such event, such successor shall be entitled to 1% of all
Partnership allocations and distributions.
ARTICLE 16
DISSOLUTION, WINDING UP, AND LIQUIDATION
16.1 DISSOLUTION. The Partnership shall be dissolved upon the expiration of
its term on December 31, 2036 or upon the first occurrence of one of the
following:
(A) A General Partner ceases to be a General Partner (other than by
removal) unless (1) at the time there is at least one other General Partner or
(2) all Partners agree in writing to continue the business of the Partnership
and to admit one or more General Partners;
(B) An election by the General Partner to dissolve or discontinue the
Partnership which is approved by a Majority Interest;
(C) The Partnership becomes bankrupt; or
(D) The sale or disposition of all or substantially all Partnership Assets
(other than a sale or disposition the proceeds of which are reinvested by the
General Partner pursuant to Section 3.3), including the cessation of active
business, the distribution of all cash, and the termination of reserves for
liabilities.
16.2 CONTINUATION OF THE BUSINESS OF THE PARTNERSHIP. Upon the General
Partner ceasing to be a General Partner or a dissolution of the Partnership, the
business of the Partnership may be continued as follows:
(A) If the General Partner ceases to be a general partner of the
Partnership, any then remaining General Partner, including the Organizational
Limited Partner who becomes a General Partner pursuant to Section 15.1(C)
(without the necessity for the consent of the Unitholders), shall have the right
to continue and/or reconstitute or reform the Partnership and no dissolution
shall have been deemed to occur.
(B) Unless a higher vote is required by the California Act, upon an event
of dissolution described in Section 16.1(A), the Partnership shall thereafter be
liquidated in due course unless a Majority Interest pursuant to Section 7.9(A)
(4) elects to continue the Partnership. Unless an election to continue the
Partnership is made within 150 days of the event of dissolution, the Partnership
shall conduct only activities necessary to wind up its affairs. If such an
election to continue the Partnership is made then:
(i) within such 150-day period a successor General Partner shall be
selected by a Majority Interest;
(ii) the Partnership shall continue; and
(iii) all necessary steps shall be taken to amend the Agreement, and
the successor General Partner may for this purpose exercise the powers of
attorney granted pursuant to Article 17.
(C) In all other events where a dissolution has occurred, upon the approval
of a Majority Interest to continue the business of the Partnership, unless the
California Act requires a higher vote.
16.3 AUTHORITY TO WIND UP. If dissolution of the Partnership occurs for any
reason, the General Partner (unless such General Partner hasp ceased to be a
General Partner pursuant to Section 15.1 (A) (2), (3), (4), (5), (6), or (7) )
shall have the authority (which may be delegated by it to a legal
45
representative) to wind up the business and affairs of the Partnership. If the
Partnership is dissolved pursuant to Section 16.1 and not continued pursuant to
Section 16.2, and the General Partner does not or can not wind up the business
and affairs of the Partnership, any Person designated by a decree of court or
designated by approval of a Majority Interest shall wind up the affairs of the
Partnership and shall be entitled to compensation therefor as approved by the
court or an approval of a Majority Interest.
16.4 ACCOUNTING. Upon dissolution (if the business of the Partnership is
not continued), and again upon the termination of the Partnership after the
winding up of the affairs of the Partnership is complete, an accounting of the
Partnership shall be made and it shall be audited or reviewed by the independent
public accountants of the Partnership, and a report thereof as audited or
reviewed shall be furnished to the General Partner or its legal representative
and to all Unitholders.
16.5 WINDING UP AND LIQUIDATION. Upon dissolution of the Partnership where
an election to continue the business of the Partnership has not been made, it
shall be wound up and liquidated as rapidly as business circumstances permit. If
the liquidator determines that an immediate sale of part or all of the
Partnership Assets would be impractical or would cause undue loss to the
Unitholders, the liquidator may, in its absolute discretion, distribute to some
or all Partners and Assignees, in lieu of cash, as tenants in common undivided
interests in such assets as the liquidator deems unsuitable for liquidation. The
liquidator may defer liquidation or distribution of assets to the Partners and
Assignees in kind if it determines that a sale or such a distribution would be
impractical or would cause undue loss to the Unitholders. The liabilities of the
Partnership shall be entitled to payment in the following order:
(A) Those to creditors, in the order of priority as provided by law, except
those to secured creditors the obligations owed to whom will be assumed or
otherwise transferred on liquidation of Partnership Assets;
(B) Those amounts deemed necessary by the General Partner or the Person(s)
winding up the affairs of the Partnership for any contingent liabilities or
obligations of the Partnership shall be set aside as a reserve for contingent
liabilities to be distributed at such time and in such manner hereunder as the
Person(s) winding up the affairs of the Partnership shall determine in his or
its sole discretion; and
(C) To the Partners as provided in Section 10.6.
16.6 NO RECOURSE AGAINST THE GENERAL PARTNER. The Unitholders shall look
solely to the assets of the Partnership for the payment of any income allocated
to the Limited Partners or Assignees or the return of Capital Contributions, and
if the assets of the Partnership remaining after payment or discharge of the
debts and liabilities of the Partnership are insufficient to return the Capital
Contributions, they shall have no recourse against the General Partner (subject
to Section 16.8), any director, officer, employee, partner, agent, or Affiliate
of the General Partner, or any Limited Partner or Assignee for such purpose.
16.7 CLAIM OF LIMITED PARTNERS AND ASSIGNEES. No Limited Partner or
Assignee shall have the right or power to demand or receive property other than
cash, whether as a return of capital, a distribution, a payment on liquidation,
or otherwise.
16.8 GENERAL PARTNER'S OBLIGATION TO MAKE UP NEGATIVE CAPITAL ACCOUNT. If,
immediately prior to the dissolution and termination of the Partnership, the
General Partner's Capital Account has a deficit balance and the Partnership
assets available for distribution upon dissolution and termination are
insufficient to provide distributions to Limited Partners equal to their Capital
Contributions less distributions previously received from any source, the
General Partner shall be obligated to contribute to the Partnership that amount
of capital (if any) equal to the lesser of (i) an amount sufficient to restore
the General Partner's Capital Account to zero: or (ii) 1.01% of the aggregate
Capital Contributions of. the Limited Partners, less any capital previously
contributed by the General Partner.
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ARTICLE 17
POWER OF ATTORNEY
Each Limited Partner (including any Additional or Substituted Limited
Partner), each Person who executes a Transfer Application, and each Assignee who
accepts Depositary Units is deemed to irrevocably constitute, appoint, and
empower the General Partner (and any successor by merger, transfer, election, or
otherwise), and each of the General Partner's authorized officers and
attorneysin-fact, with full power of substitution, as the true and lawful agent
and attorney-in-fact of such Unitholder, with full power and authority in such
Unitholder's name, place, and stead and for such Unitholder's use or benefit:
(A) to make, execute, verify, consent to, swear to, acknowledge, make oath
as to, publish, deliver, file, and/or record in the appropriate public offices
(i) all certificates and other instruments, including, at the option of the
General Partner, this Agreement and the Certificate of Limited Partnership and
all amendments and restatements thereof, that the General Partner deems
appropriate or necessary to qualify, or continue the qualification of, the
Partnership as a limited partnership (or a partnership in which the Limited
Partners have limited liability) in the State of California and all
jurisdictions in which the Partnership may or may intend to conduct business or
own assets; (ii) all other certificates, instruments, and documents as may be
requested by, or may be appropriate or necessary under the laws of any state or
other jurisdiction in which the Partnership may or may intend to conduct
business or own assets; (iii) all instruments that the General Partner deems
appropriate or necessary to reflect any amendment, change, or modification of
this Agreement in accordance with the terms hereof (iv) all conveyances and
other instruments or documents that the General Partner deems appropriate or
necessary to effectuate or reflect the dissolution, termination, and liquidation
of the Partnership pursuant to the terms of this Agreement; (v) any and all
financing statements, continuation statements, mortgages, or other documents
necessary to grant to or perfect for secured creditors of the Partnership,
including the General Partner and its Affiliates, a security interest, mortgage,
pledge or lien on all or any of the Partnership Assets; (vi) all instruments or
papers required to continue the business of the Partnership pursuant to this
Agreement; (vii) all instruments (including this Agreement and the Certificate
of Limited Partnership and amendments and restatements thereof) relating to the
admission of any Partner pursuant to this Agreement; (viii) all artifacts,
affidavits, instruments and documents as may be necessary or desirable in
connection with documentation and registration of Aircraft with the FAA and any
other governmental authority having jurisdiction over the Partnership or the
Partnership's Aircraft, and (ix) all other instruments as the attorneys-in-fact
or any one of them may deem necessary or advisable to carry out fully the
provisions of this Agreement in accordance with its terms; and
(B) to enter into the Depositary Agreement and deposit all Units of such
Unitholder in the depositary account established by the Depositary pursuant to
the Depositary Agreement.
The execution and delivery by any of said attorneys-in-fact of any such
agreements, amendments, consents, certificates, or other instruments shall be
conclusive evidence that such execution and delivery was authorized hereby.
Nothing herein contained shall be construed as authorizing any Person acting as
attorney-in-fact pursuant to this Article 17 to take action as an
attorney-in-fact for any Unitholder to increase in any way the liability of such
Unitholder beyond the liability expressly set forth in this Agreement, or to
amend this Agreement except in accordance with Article 18.
The appointment by each Unitholder of the Persons designated in this
Article 17 as attorneys-in- shall be deemed to be a power of attorney coupled
with an interest in recognition of the fact that each of the Unitholders under
this Agreement will be relying upon the power and authority of such Persons to
act pursuant to this power of attorney for the orderly administration of the
affairs of the Partnership. The foregoing power of attorney is hereby declared
to be irrevocable, and it shall survive. and shall be not affected by, the
subsequent death, incompetency, dissolution, disability, incapacity, bankruptcy,
or termination of any Unitholder and it shall extend to such Unitholder's heirs,
successors. and assigns. Each Unitholder hereby agrees to be bound by any
representations made by any Person
47
acting as attorney-in-fact pursuant to this power of attorney in accordance with
this Agreement. Each Unitholder hereby waives any and all defenses that may be
available to contest, negate, or disarm the action of any Person taken as
attorney-in-fact under this power of attorney in accordance with this Agreement.
Each Unitholder shall execute and deliver to the General Partner, within 15 days
after receipt of the General Partner's request therefor, all such further
designations, powers of attorney, and other instruments as the General Partner
deems necessary to effectuate this Agreement and the purposes of the
Partnership, and if not so executed and delivered, shall be deemed to be given
within such 15-day period to the same extent as if so executed and delivered to
the General Partner.
ARTICLE 18
AMENDMENTS TO PARTNERSHIP DOCUMENTS
18.1 AMENDMENTS BY THE GENERAL PARTNER.
The General Partner may without prior notice or consent of any Unitholder
amend any provision of this Agreement (1) to elect for the Partnership to be
bound by any successor statute governing limited partnerships and, if in the
General Partner's opinion, the amendment does not have a material adverse effect
on the Unitholder' s (other than those who consent thereto) or to elect for the
Partnership to be reorganized as a limited partnership governed by and under the
laws of a jurisdiction other than California, pursuant to the power granted in
Section 4.12, (2) to conform this Agreement tochanges in the California Act or
the FAA Act or interpretations thereof which, in the sole discretion of the
General Partner, it believes appropriate, necessary or desirable, p rovided that
in its reasonable opinion such amendment does not have a materially adverse
effect upon the Unitholders or the Partnership, (3) if the amendment is
necessary, in the opinion of counsel to the General Partner, to prevent the
Partnership or the General Partner or the directors or officers of the General
Partner from being in any manner subject to the provisions of the Investment
Company Act of 1940, the Investment Advisers Act of 1940, or "plan asset"
regulations adopted under the Employee Retirement Income Security Act of 1974,
whether or not substantially similar to plan asset regulations currently applied
or proposed by the Department of Labor, provided that such amendment does not
have a materially adverse effect upon the Unitholders or the Partnership, (4) to
reflect the exercise of any power granted to the General Partner under this
Agreement, (5) to make any change which, in the sole discretion of the General
Partner, is advisable to qualify or to continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or that is necessary
or advisable, in the sole discretion of the General Partner, to ensure that the
Partnership will not be treated as an association taxable as a corporation for
Federal income tax purposes, (6) to make any change that is necessary or
advisable, in the sole discretion of the General Partner, to satisfy any
requirements, conditions or guidelines contained in any opinion, directive,
order, ruling or regulation of any Federal or state agency or contained in any
Federal or state statute or that is necessary or desirable to facilitate the
trading of the Depositary Units or comply with any rule, regulation, guideline,
or requirement of any securities exchange or market system on which the
Depositary Units are or will be listed for trading, (7) to amend the provisions
of Articles 8 or 9 or both if the Partnership is advised at any time by legal
counsel that the allocations provided in Article 9 are unlikely to be respected
for Federal income tax purposes, in which case the General Partner is empowered
to amend such provisions to the minimum extent necessary in accordance with the
advice of counsel to effect the plans of allocations and distributions provided
in this Agreement (new allocations made by the General Partner in reliance upon
the advice of counsel described above shall be deemed to be made pursuant to a
fiduciary obligation of the General Partner to the Partnership and the
Unitholders, and no such new allocation shall give rise to any claim or cause of
action by any Unitholder), in addition to the right given to the General Partner
in Section 9.2(E) and 9.3(E), (8) to correct a mistake, clerical or technical
error, ambiguity, or omission in this Agreement, (9) as necessary to reflect the
respective allocations, distributions, voting, liquidation, and other rights,
preferences, privileges, and restrictions with respect to new Units or interests
issued by the Partnership, or (10) to effect any other amendment that does not
have a
48
materially adverse effect on the Unitholders (other than to Unitholders who
consent to the amendment); provided, however, that the General Partner shall not
make any of the foregoing amendments unless the Partnership shall have received
the favorable written opinion of counsel to the effect that such amendment (i)
shall not cause the Limited Partners to be deemed to be taking part in the
management and control of the business and affairs of the Partnership so as to
subject the Limited Partners to unlimited liability thereof, (ii) will not cause
the Partnership to be treated as an association taxable as a corporation for
Federal income tax purposes, and (iii) is otherwise permissible under the
California Act. The amendment shall promptly thereafter be disclosed to the
Unitholders. In the event an amendment shall have been approved pursuant to this
Article 18, the General Partner shall execute such amendment, certificate, and
other documents as may be reasonably required for the purpose of effectuating
the same; provided, however, that nothing in this Article 18 shall be construed
to limit the authority of the General Partner to admit Additional Limited
Partners or Substituted Limited Partners.
18.2 AMENDMENT PROCEDURES.
Except as provided in Sections 18.1 and 18.3, all amendments to this
Agreement shall be made solely in accordance with the following procedures:
(A) Any amendments of this Agreement must be proposed either:
(1) By the General Partner, by submitting the text of the
proposed amendment to all Limited Partners in writing; or
(2) By Limited Partners owning (as Limited Partners and not as
Assignees) at least 25% of the total Units and Depositary Units owned
by Limited Partners (as Limited Partners and not as Assignees), by
submitting their proposed amendment in writing to the General Partner.
The General Partner shall, within 60 days after the receipt of any
such proposed amendment, or as soon thereafter as is reasonably
practicable, submit the text of the proposed amendment to all Limited
Partners. The General Partner may include in such submission its
recommendation as to the proposed amendment.
(B) If an amendment is proposed pursuant to this Section 18.2, the
General Partner shall seek the written consent of the Limited Partners to
such amendment or shall call a meeting of the Limited Partners to consider
and vote on the proposed amendment, unless, in the opinion of counsel to
the General Partner, such proposal would be illegal under applicable law,
if adopted, in which case the General Partner shall not be required to take
any further action with respect thereto.
(C) A proposed amendment, other than those set forth in Section 18.1,
shall be effective only if approved by the General Partner and a Majority
Interest, unless a greater percentage of the Limited Partners is required
by any other provision of this Agreement.
18.3 RESTRICTED AMENDMENTS.
(A) Except with the affirmative vote of the General Partner and Limited
Partners owning 95% of the outstanding Units for which the Partnership has valid
current addresses, no amendment shall be adopted which would (i) result in the
loss of limited liability of any Unitholder who does not consent thereto, or
(ii) change the form of the Partnership to a general partnership.
(B) Upon the approval of a Majority Interest, the form of the Partnership
may be changed to a corporation if the General Partner has determined that such
change is advisable as a result of amendments to the Code that result in the
Partnership being taxed as a corporation.
(C) Notwithstanding the provisions of Section 18.1, no provision of this
Agreement which establishes a percentage of votes required of the Partners to
take any action shall be amended, altered, changed, or rescinded in any respect
which would have the effect of reducing the voting requirement, unless such
action is approved by Limited Partners holding outstanding Units whose aggregate
percentage interests in such Units constitute not less than the voting
requirements sought to be
49
reduced. This Section 18.3(C) shall only be amended with the approval by the
General Partner and Limited Partners owning 95% of the outstanding Units for
which the Partnership has valid current addresses.
18.4 AMENDMENTS NEEDING CONSENT OF THE GENERAL PARTNER. Notwithstanding any
other provision of this Agreement, without the consent of the General Partner
(and any Departing General Partner that would be affected thereby), this
Agreement may not be amended to modify the compensation, distributions, or
rights of reimbursement to which the General Partner or Departing General
Partner is entitled or affect the duties of the General Partner or the
indemnification or the protection from liability which the General Partner or
Departing General Partner and their officers, directors, agents, employees,
Affiliates, and assigns are entitled.
18.5 AMENDMENTS TO CERTIFICATE OF LIMITED PARTNERSHIP.
(A) The General Partner shall cause to be filed with the California
Secretary of State, within 30 days after the happening of any of the following
events, an amendment to the Certificate of Limited Partnership reflecting the
occurrence of any of the following events:
(1) A change in the name of the Partnership;
(2) A change in either of the following:
(i) The street address of the Partnership's principal executive
office;
(ii) If the principal executive office is not in California, the
street address of an office in California;
(3) A change in the address or withdrawal of the General Partner, or a
change in the address of the agent for service of process, unless a
corporate agent is designated, or appointment of a new agent for service of
process;
(4) The admission of a General Partner and that Partner's address; or
(5) The discovery by the General Partner of any false or erroneous
material statement contained in the Certificate of Limited Partnership.
(B) Any certificate of limited partnership filed or recorded in
jurisdictions other than California shall be amended as required by applicable
law.
(C) The Certificate of Limited Partnership may also be amended at any time
in any other manner deemed appropriate by the General Partner.
18.6 AMENDMENT REGARDING NEW GENERAL PARTNER. In connection with the
admission to the Partnership of any successor General Partner, the General
Partner shall take all steps necessary and appropriate to prepare and record or
file any amendment or restatement to this Agreement and the Certificate of
Limited Partnership that may be required with respect to such admission and may
for this purpose exercise the power of attorney granted pursuant to Article 17.
ARTICLE 19
MISCELLANEOUS PROVISIONS
19.1 NOTICES. All notices or other communications required or permitted to
be given pursuant to this Agreement shall, in the case of notices or
communications required or permitted to be given to Unitholders, be in writing
and shall be considered as properly given or made if personally delivered or if
mailed by United States first class mail, postage prepaid, or if sent by prepaid
telegram, and addressed to such Unitholder's address for notices as it appears
on the records of the Partnership, and, in the case of notices or communications
required or permitted to be given to the General Partner, shall be in writing
and shall be considered as properly given or made if personally delivered, or if
sent by prepaid telegram, or if mailed by United States certified or registered
mail return receipt requested,
50
postage prepaid, and addressed to the General Partner at 2988 Campus Drive, San
Mateo, California 94403. Any Unitholder may change the address for notices, by
giving notice of such change to the Partnership, and the General Partner may
change its address for notices by giving notice of such change to all
Unitholders. Commencing on the 10th day after the giving of such notice, such
newly designated address shall be such Person's address for the purpose of all
notices or other communications required or permitted to be given pursuant to
this Agreement. Any notice or other communication shall be deemed to have been
given as of the date on which it is personally delivered or, if mailed or
telegraphed, the date on which it is deposited in the United States mails or
transmitted, in each case in compliance with the terms of this Section 19.1,
except that any notice or other communication mailed or telegraphed to the
General Partner which is not received by the General Partner within 10 days
after the date of its mailing or transmission shall be deemed to have been given
as of the date actually received by the General Partner.
19.2 CHOICE OF VENUE AND LAW. Action to enforce any provision of this
Agreement or in any action brought by the Partners or Assignees against the
General Partner or the Partnership shall be brought in San Francisco,
California. This Agreement shall be governed by and construed under the laws of
the State of California.
19.3 ARTICLE AND SECTION-HEADINGS. The headings in this Agreement are
inserted for convenience and identification only and are in no way intended to
describe, interpret, define, or limit the scope, extent, or intent of this
Agreement or any provision hereof.
19.4 SOLE AGREEMENT. This Agreement and the exhibits hereto constitute the
entire understanding of the parties hereto with respect to the subject matter
hereof and supersede all prior or contemporaneous agreements and understandings
pertaining thereto.
19.5 FORCE MAJEURE. If the General Partner is rendered unable, wholly or in
part, by "force majeure" (as herein defined) to carry out any of its obligations
under this Agreement, other than the obligation hereunder to make money
payments, the obligations of the General Partner, insofar as it is affected by
such force majeure, shall be suspended during, but no longer than, the
continuance of such force majeure. The term "force majeure" as used herein shall
mean an act. of God, strike, lockout or other industrial disturbance, act of
public enemy, war, blockade, public riot, lightning, fire, storm, flood,
explosion, governmental restraint, unavailability of equipment, and any other
cause, whether of the kind specifically enumerated above or otherwise, which is
not within the control of the General Partner.
19.6 REMEDIES CUMULATIVE. The remedies of the parties under this Agreement
are cumulative and shall not exclude any other remedies to which any Person may
be lawfully entitled.
19.7 WAIVER. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement, or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute a waiver
of any such breach or any other covenant, duty, agreement, or condition.
19.8 WAIVER OF ACTION FOR PARTITION. Each of the parties hereto irrevocably
waives during the cerm of the Partnership any right that he may have to maintain
any action for partition with respect to Partnership Assets.
19.9 ASSIGNABILITY. Subject to the restrictions on transferability
contained herein, each and all of the covenants, terms, provisions, and
agreements herein contained shall be binding upon and inure to the benefit of
the successors, heirs, devisees, executors, administrators, legal
representatives, and assigns of the respective parties hereto.
19.10 GENDER AND NUMBER. Whenever the context requires, the gender of all
words used hereby shall include the masculine, feminine, and neuter, the
singular of all words shall include the singular and plural, and the plural of
all words shall include the singular and plural.
51
19.11 FURTHER ACTION. The Unitholders shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
19.12 CREDITORS. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Partnership.
19.13 CONSTRUCTION. If any language is stricken or deleted from this
Agreement, such language shall be deemed never to have appeared herein and no
other implication shall be drawn therefrom. The language in all parts of this
Agreement shall be in all cases construed according to its fair meaning and not
strictly for or against the General Partner or the Unitholders.
19.14 SEVERABILITY. If any provision of this Agreement, or the application
thereof, shall, for any reason and to any extent, be invalid or unenforceable,
the remainder of this Agreement and the application of such provision to other
Persons or circumstances shall not be affected thereby, but rather shall be
enforced to the maximum extent permissible under applicable law.
19.15 SURVIVAL. It is the express intention and agreement of all parties to
this Agreement that all covenants, agreements, statements, representations,
warranties, and indemnities made in this Agreement shall survive the execution
and delivery of this Agreement.
19.16 EXECUTION IN COUNTERPARTS. To facilitate execution, this Agreement
may be executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all the parties
hereto.
52
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
GENERAL PARTNER:
AIRLEASE MANGEMENT SERVICES, INC.
By:____________________________________
Title: President
_________________________________
ORGANIZATIONAL LIMITED PARTNER:
UNITED STATES AIRLEASE HOLDING, INC.
By:____________________________________
Title: President
_________________________________
LIMITED PARTNERS:
NORTH AMERICAN AIRCRAFT FINANCE
CORPORATION
By:____________________________________
Title: Executive Vice President
_________________________________
OTHER LIMITED PARTNERS (pursuant
to powers-of-attorney to the General
Partner)
For the purposes of Section 3.5 only:
UNTIED STABS AIRLEASE. INC.
By:______________________________________
Title: President
___________________________________
53
EXHIBIT I
TO AMENDED AND
RESTATED AGREEMENT OF
LIMITED PARTNERSHIP
OF AIRLEASE LTD., A
CALIFORNIA LIMITED
PARTNERSHIP
CERTIFICATE
FOR
LIMITED PARTNERSHIP UNITS
OF
AIRLEASE LTD., A CALIFORNIA LIMITED PARTNERSHIP
No.__________ __________ Units
Airlease Management Services, Inc., as the General Partner of Airlease Ltd.,
A California Limited Partnership, hereby certifies that
is the registered owner of units of limited partnership interest in the
Partnership ("Units"). The rights, preferences, privileges, and restrictions of
the Units are set forth in the Amended and Restated Agreement of Limited
Partnership under which the Partnership was formed and is existing, and in the
Certificate of Limited Partnership filed for record in the Office of the
Secretary of State of the State of California, copies of which are on file at
the General Partner's office at 2988 Campus Drive, San Mateo, California 94403.
THIS CERTIFICATE IS NON-NEGOTIABLE AND IS NOT TRANSFERABLE EXCEPT UPON DEATH OR
BY OPERATION OF LAW OR TO THE GENERAL PARTNER OR THE PARTNERSHIP.
Airlease, Ltd., A California
Limited Partnership
By Airlease Management Services,
Inc., General Partner
Dated:_________________ By:____________________________________
Title:_________________________________
BY ACCEPTANCE OF THIS CERTIFICATE FOR LIMITED PARTNERSHIP UNITS, AND AS A
CONDITION TO BEING ENTITLED TO ANY RIGHTS IN OR BENEFITS WITH RESPECT TO THE
UNITS EVIDENCED HEREBY, A HOLDER HEREOF (INCLUDING ANY TRANSFEREE HEREOF) IS
DEEMED TO HAVE AGREED, WHETHER OR NOT SUCH HOLDER IS ADMITTED TO THE PARTNERSHIP
AS A SUBSTITUTED LIMITED PARTNER WITH RESPECT TO THE UNITS EVIDENCED HEREBY, TO
COMPLY WITH AND BE BOUND BY ALL TERMS AND CONDITIONS OF THE AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP UNDER WHICH THE PARTNERSHIP WAS FORMED AND IS
EXISTING (INCLUDING, WITHOUT LIMITATION, PROVISIONS THEREOF RELATING TO
CONFLICTS OF INTEREST, LIMITATIONS ON LIABILITY, REDEMPTION, AND INDEMNIFICATION
OF THE GENERAL PARTNER THEREOF), A COPY OF WHICH HAS BEEN AVAILABLE FOR
INSPECTION AND MAY BE OBTAINED UPON REQUEST FROM THE PARTNERSHIP. A PERSON WHO
I$ NOT A UNITED STATES CITIZEN OR RESIDENT ALIEN IN THE UNITED STATES MAY NOT
HOLD ANY INTEREST IN THE PARTNERSHIP, AND ACQUISITIONS BY OR TRANSFERS TO SUCH
PERSON ARE NULL AND VOID.