Exhibit 10.09
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THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ICON CASH FLOW PARTNERS L.P. SEVEN
This Third Amended and Restated Agreement of Limited Partnership, dated
as of the September 12, 1995 (this "Agreement"), is made and entered into by and
among ICON Capital Corp., a Connecticut corporation ("ICON"), as general partner
(hereinafter referred to as the "General Partner"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as the
original limited partner (the "Original Limited Partner"), and such additional
Limited Partners as may be admitted to the Partnership upon the Initial Closing
Date or any subsequent Closing Date pursuant to the terms hereof; such
additional Limited Partners hereinafter each referred to as a "Limited Partner"
and collectively referred to as the "Limited Partners"; and the General Partner
and the Limited Partners hereinafter occasionally referred to collectively as
the "Partners").
WITNESSETH:
WHEREAS, on May 23, 1995, the General Partner filed a Certificate of
Limited Partnership, dated as of May 23, 1995, establishing ICON Cash Flow
Partners L.P. Seven (the "Partnership") under and pursuant to the Delaware
Revised Uniform Limited Partnership Act (the "Delaware Act").
WHEREAS, on September 12, 1995, the General Partner and Original
Limited Partner have determined that it is necessary and appropriate to amend
and restate the original Agreement of Limited Partnership in certain respects;
and
WHEREAS, on November 2, 1995, the General Partner and Original Limited
Partner have determined that it is necessary and appropriate to amend and
restate the original Agreement of Limited Partnership in certain respects; and
WHEREAS, on November 8, 1995, the General Partner and Original Limited
Partner have determined that it is necessary and appropriate to amend and
restate the original Agreement of Limited Partnership in certain respects; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the receipt and sufficiency of which are
hereby acknowledged, the General Partner and each Limited Partner, intending to
be legally bound, hereby agree as follows:
Section 1. ESTABLISHMENT OF PARTNERSHIP.
The parties hereto hereby enter into this Agreement and do hereby set
forth the terms of the Partnership established under and pursuant to the
provisions of the Delaware Act, which terms shall govern the rights and
liabilities of the Partners, except as otherwise herein expressly stated.
Section 2. NAME, PRINCIPAL OFFICE, NAME AND ADDRESS OF
REGISTERED AGENT FOR SERVICE OF PROCESS.
2.1 Legal Name and Address.
The Partnership shall be conducted under the name "ICON Cash Flow
Partners L.P. Seven". The principal office and place of business of the
Partnership shall be ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such
other address as the General Partner may from time to time determine and specify
by written notice to the Limited Partners. The Partnership may also maintain
such other offices and places of business as the General Partner may deem
advisable at any other place or places within the United States and, in
connection therewith, the General Partner shall qualify and remain qualified,
and shall use its best efforts to qualify and keep the Partnership qualified, to
do business under the laws of all such jurisdictions as may be necessary to
permit the Partnership legally to conduct its business in such jurisdictions.
The registered office of the Partnership in the State of Delaware shall be at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇. The name of its registered
agent at such address shall be The Corporation Trust Company. The General
Partner may change the registered office and the registered agent of the
Partnership, with prior written notice to the Limited Partners.
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2.2 Address of Partners.
The principal place of business of the General Partner and the places
of residence of the Limited Partners shall be those addresses set forth opposite
their respective names in Schedule A to this Agreement (as such may be
supplemented or amended from time to time). Any Partner may change his, her or
its respective place of business or residence, as the case may be, by giving
Notice of such change to the Partnership (and, in the case of the General
Partner, by also giving Notice thereof to all of the Limited Partners), which
Notice shall become effective upon receipt.
Section 3. PURPOSES AND POWERS.
3.1 Purposes.
The Partnership has been organized for the object and purpose of (a)
acquiring, investing in, purchasing, owning, holding, leasing, re-leasing,
financing, refinancing, borrowing, managing, maintaining, operating, improving,
upgrading, modifying, exchanging, assigning, encumbering, creating security
interests in, pledging, selling, transferring or otherwise disposing of, and in
all respects otherwise dealing in or with, Equipment of all kinds, (b) lending
and providing financing to other Persons for their acquisition of items of
equipment and other tangible and intangible personal property of all kinds,
pursuant to financing arrangements or transactions secured by various items of
equipment (or interests therein and leases and licenses thereof) and other such
personal property in any part of the world (including, without limitation, all
land, waters and space under, on or above such part of the world), and (c)
establishing, acquiring, conducting and carrying on any business suitable,
necessary, useful or convenient in connection therewith, in order to generate
monthly cash distributions to the Limited Partners during the term of the
Partnership.
3.2 Investment Objectives and Policies.
The Equipment acquired by the Partnership shall be selected from among
new, used and reconditioned (i) office and management information systems,
graphic processing equipment, photocopying equipment and, communications and
related peripheral equipment, (ii) printing equipment, (iii) materials handling
equipment, (iv) machine tools and manufacturing equipment, (v) medical
diagnostic and testing equipment, (vi) aircraft, rail, over-the-road and marine
equipment and (vii) miscellaneous equipment of other types that meet the
investment objectives of the Partnership and shall be leased to Lessees under
Full-Payout Leases and Operating Leases. The Financing Transactions entered into
by the Partnership shall be with Users that are Creditworthy and shall be
evidenced by a written promissory note of such User evidencing the irrevocable
obligation of such User to repay the principal amount thereof, together with
interest thereon, in accordance with the terms thereof, which repayment
obligation may be collateralized by a security interest in tangible or
intangible personal property and in any lease or license of such personal
property, as well as the revenues arising thereunder, or in such other assets of
such User as the General Partner may deem to be appropriate. All funds held by
the Partnership (including, without limitation, Subscription Monies released to
the Partnership on any Closing Date) that are not invested in Equipment,
Financing Transactions or Reserves shall be invested by the Partnership in
Permitted Investments.
3.3 Powers.
In furtherance of the above purposes, the Partnership shall have the
power:
(a) to acquire, invest in, purchase, own, hold, lease, release,
finance, refinance, borrow, manage, maintain, operate, improve, upgrade, modify,
exchange, assign, encumber, create security interests in, pledge, sell, transfer
or otherwise dispose of, and in all respects otherwise deal in or with,
Equipment and other tangible and intangible personal property of all kinds in
any part of the world (including, without limitation, all land, waters and space
under, on or above such part of the world);
(b) to invest substantially all Cash From Operations (other than those
necessary to pay the expenses of the Partnership and to make First Cash
Distributions) and Cash From Sales in additional Investments during the
Reinvestment Period as provided in Section 8.1(a) hereof;
(c) to enter into joint ventures, partnerships and other business,
financing and legal and beneficial ownership arrangements with respect to
equipment and other tangible and intangible personal property and financing
arrangements deemed prudent by the General Partner in order to achieve
successful operations for the Partnership;
(d) to purchase and hold securities issued by any Person if, in the
General Partner's opinion, the purchase is an advisable or necessary step in the
acquisition and financing by the Partnership of Investments;
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(e) to hold interests in property, both real and personal, tangible and
intangible, including, without limitation, contract rights, lease rights, debt
instruments and equity interests in corporations, partnerships (both limited and
general and including, subject to the provisions of this Agreement, Affiliated
Entities), joint ventures and other entities (including, but not limited to,
common and preferred stock, debentures, bonds and other securities of every kind
and nature); provided that the Partnership may make such Investments only in
furtherance of its investment objectives and in accordance with its investment
policies;
(f) subject to any applicable statutes and regulations, to lend and
borrow money to further the purposes of the Partnership, to issue and accept
evidences of indebtedness in respect thereof, and to secure the same by
mortgages or pledges or grants of liens on, or other security interests in,
Investments of the Partnership and accept such kinds and amounts of security for
loans, leases and licenses it makes to others as the General Partner in its sole
and absolute discretion shall deem appropriate; and
(g) to do all things, carry on any activities and enter into, perform,
modify, supplement or terminate any contracts necessary to, connected with, or
incidental to, or in furtherance of, the purposes of the Partnership, all so
long as such things, activities and contracts may be lawfully done, carried on
or entered into by the Partnership under the Delaware Act and the laws of the
United States of America and under the terms of this Agreement.
Section 4. TERM.
The term of the Partnership commenced upon the filing of the
Certificate of Limited Partnership with the Secretary of State of the State of
Delaware on May 23, 1995 and shall terminate at midnight on December 31, 2015,
unless sooner dissolved or terminated as provided in Section 11 of this
Agreement.
Section 5. PARTNERS AND CAPITAL.
5.1 General Partner.
The General Partner has contributed $1,000, in cash, as its Capital
Contribution to the Partnership.
The General Partner shall use its best efforts to maintain, at all
times from and after the date of this Agreement through and including the
Termination Date, a Net Worth that is at least sufficient for the Partnership to
qualify, in the opinion of Tax Counsel to the Partnership, as a partnership for
federal income tax purposes and to satisfy the net worth requirements for a
"sponsor" under the NASAA Guidelines.
5.2 Original Limited Partner.
The Original Limited Partner has made a capital contribution of $1,000
to the Partnership.
By his execution hereof, the Original Limited Partner hereby agrees to
withdraw as Original Limited Partner, and the parties hereto agree to return to
him his capital contribution of $1,000 and to retire his original Partnership
Interest of ten (10) Units upon the Initial Closing Date and admission of
additional Limited Partners.
5.3 Limited Partners.
(a) From and after the Initial Closing Date, there shall be one class
of limited partners, the Interests of which shall consist of up to 1,000,000
Units that shall initially be held by the Limited Partners.
(b) Any Person desiring to become a Limited Partner shall execute and
deliver to the General Partner a subscription agreement, substantially in the
form filed as an exhibit to the Prospectus, and such other documents as the
General Partner shall reasonably request, which other documents shall be in form
and substance reasonably satisfactory to the General Partner, pursuant to which,
among other things, such Person shall, subject to acceptance of his subscription
by the General Partner, agree to be bound by all terms and provisions of this
Agreement. Units will be sold only to Persons (i) who represent that they have
either (a) an annual gross income of at least $30,000 and a net worth of at
least $30,000 or (b) a net worth of at least $75,000 or (ii) who satisfy the
suitability standards applicable in the state of their residence or domicile, if
more stringent than the standards described in clause (i) above.
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(c) Each Limited Partner (other than Affiliated Limited Partners and
Limited Partners entitled to Volume Discounts) shall make a Capital
Contribution, in cash, in an amount equal to the Gross Unit Price to the capital
of the Partnership for each Unit or fraction thereof purchased. Each Affiliated
Limited Partner shall make a Capital Contribution, in cash, in an amount equal
to the Net Unit Price for each Unit or fraction thereof purchased. Each Limited
Partner entitled to a Volume Discount shall make a Capital Contribution, in
cash, to the capital of the Partnership in an amount equal to the Gross Unit
Price for each Unit or fraction thereof purchased less the amount of the Volume
Discount.
(d) Limited Partners (except residents of certain States) must purchase
a minimum of (i) twenty-five (25) whole Units other than (ii) ▇▇▇ or Qualified
Plans (including ▇▇▇▇▇ Plans) may purchase a minimum of ten (10) whole Units.
Above such minimum purchase requirements, Limited Partners may subscribe for
additional Units or fractions thereof equal to 1/10,000th of a Unit or any
multiple thereof (unless prohibited by applicable law) at the Gross Unit Price,
Net Unit Price or Gross Unit Price less Volume Discount, whichever shall be
applicable.
(e) The General Partner and any Affiliate of the General Partner shall
have the right to subscribe for Units for its own account for investment
purposes only; provided that the aggregate number of Units purchased by the
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General Partner and such Affiliates collectively shall not exceed ten (10%)
percent of all Units subscribed for by non-Affiliated Persons.
(f) No subscribers shall be admitted to the Partnership unless and
until the Minimum Offering shall be achieved. Upon the determination by the
General Partner that the Minimum Offering has been achieved, the General Partner
shall set the Initial Closing Date. Following the Initial Closing Date, a
Closing may be held on the last day of any Segment (or, if such day is not a
business day, on the next preceding business day), provided that no Closing
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shall be required to be held on such last day of any Segment (or the next
preceding business day) if the number of Units subscribed for but as to which
the subscribers have not been admitted to the Partnership as Limited Partners as
of such date is insufficient, in the sole and absolute discretion of the General
Partner, to justify the administrative burden and expense of holding a Closing,
and provided, further, that the Final Closing Date may, in the sole and absolute
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discretion of the General Partner, be held on a day other than the last day of a
Segment, and shall be held as promptly as practicable after the Termination
Date. As promptly as is practicable following the admission of each subscriber
as Limited Partner, the General Partner shall send notice to such Limited
Partner in confirmation thereof.
(g) Subscriptions for Units shall promptly be accepted or rejected by
the General Partner after their receipt by the Partnership (but in any event not
later than 30 days thereafter) and a confirmation of receipt thereof sent by the
General Partner. The General Partner retains the unconditional right to refuse
to admit any subscriber as a Limited Partner.
(h) Each Subscriber shall be admitted to the Partnership as a Limited
Partner, and shall for all purposes of this Agreement become and be treated as a
Limited Partner, as of the first day immediately following the Closing Date as
of which such Subscribers is admitted to the Partnership or the Final Closing
Date or as of the first day of the Segment immediately following any subsequent
Closing Date (other than the Final Closing Date), as the case may be, next
following the acceptance of their subscriptions by the General Partner and the
receipt by the General Partner of all Subscription Monies payable in connection
therewith. Any subscriber who is a resident of the Commonwealth of Massachusetts
and who has been admitted as a Limited Partner of the Partnership within five
(5) business days following the date he or she receives a copy of the Prospectus
(as evidenced by his or her signature on the Subscription Agreement or a
separate receipt for the Prospectus) may, by giving written notice to the
General Partner or Dealer-Manager within such five (5) day period, rescind his
or her subscription and shall receive a prompt refund of his or her subscription
plus simple interest at 8% per annum from the date such subscription was
received by the Partnership until returned to such subscriber less
distributions, if any, made to such subscriber from the Escrow Account and the
Partnership.
(i) The name and address of each Limited Partner and the amount of the
Capital Contribution made by such Limited Partner are set forth on Schedule A
hereto, as such may be supplemented or amended from time to time. Promptly
following each Closing Date (and, in any event, within 5 business days
thereafter), the General Partner shall amend Schedule A to this Agreement to
reflect the name, address and Capital Contribution of each Limited Partner
admitted to the Partnership as a result of such Closing; provided that any
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failure so to amend such Schedule A following any Closing Date shall not in any
way affect the admission of any Limited Partner to the Partnership for all
purposes of this Agreement if such Limited Partner was duly and properly
admitted to the Partnership as a result of such Closing.
(j) From the date hereof to, but not including, the Initial Closing
Date, all funds in respect of Units for which subscriptions have been received
("Subscription Monies") shall be deposited in the Escrow Account. From and after
the Initial Closing Date, all Subscription Monies shall be held by the
Partnership in a Qualified Subscription Account until the release thereof on the
applicable Closing Date. Both the Escrow Account and any Qualified Subscription
Account shall be established
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by the General Partner for the sole purpose of holding and investing
Subscription Monies pending admission of subscribers to the Partnership as
Limited Partners.
(k) On the Initial Closing Date or any subsequent Closing Date,
whichever may be applicable, all Subscription Monies then held in the Escrow
Account or any Qualified Subscription Account, as the case may be, with respect
to Units purchased by any Limited Partner admitted to the Partnership as a
result of such Closing, together with any interest earned thereon, shall be
released to the Partnership. Any interest earned on such Subscription Monies
prior to such release shall be paid to such Limited Partner promptly after such
Closing Date. If the number of Units subscribed for are not sufficient to
constitute the Minimum Offering, all Subscription Monies deposited by any
subscriber shall be returned, together with any interest earned thereon and
without deduction for any Front-End Fees, to such subscriber. Furthermore, any
Subscription Monies deposited by any subscriber who is not accepted by the
General Partner to become a Limited Partner shall be promptly returned, together
with any interest earned thereon and without deduction for any Front-End Fees,
to such subscriber. In no event shall any Subscription Monies be held in the
Escrow Account or a Qualified Subscription Account for more than one year beyond
the Effective Date before either being released to the Partnership upon a
Closing or returned to the subscriber.
5.4 Partnership Capital.
(a) No Partner shall be paid interest on any Capital Contribution
(except any interest earned on Subscription Monies as provided in Section
5.3(k)).
(b) Except as provided in Section 10.5 and except that the 10 Units
purchased by the Original Limited Partner shall be redeemed at par on the
Initial Closing Date as provided in Section 5.2, the Partnership shall not
redeem or repurchase any Unit. No Partner shall have the right to withdraw or
receive any return of such Partner's Capital Contribution, except as
specifically provided in this Agreement, and no Capital Contribution may be
returned to any Partner in the form of property other than cash.
(c) Except as otherwise specifically provided herein, no Limited
Partner shall have priority over any other Limited Partner either as to (i) the
return of such Limited Partner's Capital Contribution or Capital Account, (ii)
such Limited Partner's share of Profits and Losses or (iii) such Limited
Partner's share of distributions of Cash From Operations and Cash From Sales.
(d) Neither the General Partner nor any Affiliate of the General
Partner shall have any personal liability for the repayment of the Capital
Contribution of any Limited Partner except, and solely to the extent, provided
in Section 6.3, Section 9.3(a) and Section 11.2(a)(iii), above.
5.5 Capital Accounts.
(a) A separate Capital Account shall be established and maintained for
the General Partner and for each Limited Partner.
(b) The Capital Account of the General Partner initially shall be
$1,000.
(c) The Capital Account of each Limited Partner initially shall be the
amount of such Limited Partner's Capital Contribution.
(d) The Capital Account of each Partner shall be increased by (i) the
amount of any additional money contributed by such Partner to the Partnership,
(ii) the fair market value of any property contributed by such Partner to the
Partnership (net of liabilities secured by such contributed property that the
Partnership is considered to assume or take subject to under Code Section 752)
and (iii) allocations to such Partner of Partnership Profits (or items thereof),
and items of income and gain specially allocated pursuant to Section 8.2(f)
hereof. The Capital Account of each Partner shall be decreased by (i) the amount
of money distributed to or on behalf of such Partner by the Partnership, (ii)
the fair market value of any property distributed to or on behalf of such
Partner by the Partnership (net of liabilities secured by such distributed
property that such Partner is considered to assume or take subject to under Code
Section 752), and (iii) allocations to such Partner of Partnership Losses (or
items thereof) and items of loss and deduction specially allocated pursuant to
Section 8.2(f) hereof.
(e) For purposes of this Agreement, a Partner who has more than one
Interest in the Partnership shall have a single Capital Account that reflects
all such Interests, regardless of the class of Interests owned by such Partner
(e.g., general or limited) and regardless of the time or manner in which such
Interests were acquired.
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(f) If an Interest is sold or otherwise transferred, the Capital
Account of the transferor with respect to such Interest shall carry over to the
transferee in accordance with Treas. Reg. Section 1.704-1(b)(2)(iv)(l). However,
if the transfer causes a termination of the Partnership under Code Section
708(b)(1)(B), the Capital Account that carries over to the transferee will be
adjusted in accordance with the constructive liquidation and reconstitution
rules under Treas. Reg. Section 1.708-1.
(g) For any taxable year in which the Partnership has a Code section
754 election in effect, the Capital Accounts shall be maintained in accordance
with Treas. Reg. Section 1.704-1(b)(2)(iv)(m).
(h) Upon the occurrence of the events specified in Treas. Reg. Section
1.704-1(b)(2)(iv)(f)5, the Partners' Capital Accounts shall be adjusted and
thereafter maintained to reflect the revaluation of Partnership assets on the
books of the Partnership in accordance with such Treasury Regulation and Treas.
Reg. Sections 1.704-1(b)(2)(iv)(f) through (h).
(i) Notwithstanding anything herein to the contrary, the Partners'
Capital Accounts shall at all times be maintained in the manner required by
Treas. Reg. Section 1.704-1(b)(2)(iv), and any questions or ambiguities arising
hereunder shall be resolved by reference to such Treasury Regulations. Further,
such Treasury Regulations shall govern the maintenance of the Capital Accounts
to the extent this Agreement is silent as to the treatment of a particular item.
In the event Treas. Reg. Section 1.704-1(b)(2)(iv) shall fail to provide
guidance as to how adjustments to the Capital Accounts should be made to reflect
particular adjustments to Partnership capital on the books of the Partnership,
such Capital Account adjustments shall be made in a manner that is consistent
with the underlying economic arrangement of the Partners and is based wherever
practicable, on federal tax accounting principles.
5.6 Additional Capital Contributions.
(a) The General Partner shall not be required to make any Capital
Contributions in addition to its initial $1,000 Capital Contribution except
pursuant to and in accordance with Section 11.2(a)(iii) of this Agreement.
(b) No Limited Partner shall be required to make any Capital
Contribution in addition to the initial price paid for such Limited Partner's
Units pursuant to the Offering.
5.7 Loans by Partners.
Except as provided in Section 11.2(a)(iii), no loan by any Partner or
any Affiliate of any Partner to the Partnership (including, without limitation,
any Partnership Loan) shall constitute a Capital Contribution to the Partnership
or increase the Capital Account balance of any Partner, but shall be treated,
for all purposes, as indebtedness of the Partnership payable or collectible only
out of the assets of the Partnership in accordance with the terms and conditions
upon which such loan was made.
5.8 No Right to Return of Capital.
No Partner shall be entitled to demand or receive any distribution of
or with respect to such Partner's Capital Contribution or Capital Account,
except as specifically provided under this Agreement.
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Section 6. GENERAL PARTNER.
6.1 Extent of Powers and Duties.
(a) General.
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Except as expressly limited by the provisions of this Agreement, the
General Partner shall have complete and exclusive discretion in the management
and control of the affairs and business of the Partnership and shall be
authorized to employ all powers necessary, convenient or appropriate to carry
out the purposes, conduct the business and exercise the powers of the
Partnership. Without limiting the generality of the foregoing, the General
Partner shall provide such asset management personnel and services as the
General Partner, in its sole and absolute discretion, may deem necessary or
appropriate to conduct the business activities of the Partnership and the
day-to-day management of its assets, including, but not limited to, leasing,
licensing, re-leasing and re-licensing the Equipment, monitoring the use of
collateral for the Leases and Financing Transactions, arranging for necessary
licensing, registration, maintenance and repair of the Equipment (to the extent
Lessees or Users are not contractually obligated to do so and the General
Partner expressly assumes such duties), collecting revenues, paying Operating
Expenses, determining that the Equipment is used in accordance with all
operative contractual arrangements and providing clerical and bookkeeping
services necessary to provide tax, financial and regulatory reporting to the
Limited Partners and for the operations of the Partnership. The General Partner
may employ on behalf of the Partnership, to the extent that it, in its sole
judgment shall deem advisable, managerial, sales, maintenance, administrative or
secretarial personnel, agents and other Persons, including any of its
Affiliates, which it determines are necessary for the maintenance of any of the
Partnership's property, and/or the operation of the business of the Partnership,
may engage and retain attorneys, accountants or brokers to the extent that, in
the judgment of the General Partner, their professional services are required
during the term of the Partnership, as well as employ the services of its
Affiliates to assist the General Partner in its managerial duties, and may
compensate all such Persons from the assets of the Partnership at rates which
it, in its sole judgment, deems fair and reasonable; provided that (i) the
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compensation, price or fee payable to any of its Affiliates shall not exceed an
amount which is comparable and competitive with the compensation, price or fee
which would be charged by non-Affiliates to render comparable services which
could reasonably be made available to the Partnership upon comparable terms;
(ii) all services for which the Sponsor is to receive compensation from the
Partnership (other than as provided in Section 6.4 hereof) shall be embodied in
a written contract which (A) precisely describes the services to be rendered and
all compensation to be paid therefor and (B) is terminable by either party
without penalty on 60 days notice; (iii) the compensation, price and fees and
other terms of any such contract shall be fully disclosed in the prospectus as
the Effective Date; and (iv) the Sponsor must, at the time such services are to
be rendered, be engaged in the business of providing such services to
non-Affiliates and derive at least 75% of its gross revenues for such services
therefrom. Any such contract may only be amended in a manner which is either
more favorable to the Sponsor or less favorable to the Partnership by the vote
or consent of a Majority Interest of the Limited Partners. Except as otherwise
provided in this Agreement, the General Partner shall possess and enjoy with
respect to the Partnership all of the rights and powers of a partner of a
partnership without limited partners to the extent permitted by Delaware law.
(b) Powers and Duties.
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(i) General Powers and Duties. The General Partner shall
diligently and faithfully exercise its discretion to the best of its
ability and use its best efforts during so much of its time as the
General Partner, in its sole and absolute discretion, may deem to be
necessary or appropriate to carry out the purposes and conduct the
business of the Partnership in accordance with this Agreement and in
the best interests of the Partnership and so as, consistent therewith,
to protect the interests of the Limited Partners. The General Partner
shall have responsibility as a fiduciary for the safekeeping and use of
all funds and assets of the Partnership, whether or not in its
immediate possession or control, and shall not employ, or permit any
other Person to employ, such funds or assets in any manner other than
as permitted by this Agreement. Notwithstanding anything to the
contrary herein stated or implied, the Limited Partners may not
contract away the fiduciary duty owed to such Limited Partners by the
Sponsor under common law. The General Partner shall be responsible and
shall use its best efforts and exercise discretion to the best of its
ability: (A) to acquire, invest in, purchase, own, hold, lease,
license, re-lease, re-license, finance, refinance, borrow, manage,
maintain, operate, improve, upgrade, modify, exchange, assign,
encumber, create security interests in, pledge, sell, transfer or
otherwise dispose of, and in all respects otherwise deal in or with,
Equipment and Financing Transactions (except as limited by Section
11.1) and to contract with others to do the same on behalf of the
Partnership; (B) to select and supervise the activities of any
equipment management agents for the Partnership; (C) to assure the
proper application of revenues of the Partnership; (D) to maintain
proper books of account for the Partnership and to prepare reports of
operations and tax returns required to be furnished to (1) the
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Partners pursuant to this Agreement or (2) taxing bodies or other
governmental agencies in accordance with applicable laws and
regulations; (E) to employ the Dealer-Manager to select Selling Dealers
to offer and sell Units; and (F) to assure the doing of all other
things necessary, convenient or advisable in connection with the
supervision of the affairs, business and assets of the Partnership. In
establishing criteria for the resolution of conflicts of interest
between the Partnership, on the one hand, and the General Partner or
any Affiliate of the General Partner, on the other hand, the General
Partner shall not abdicate or ignore its fiduciary duty to the
Partnership.
(ii) Amplification of Powers. In amplification, and not by way
of limitation, of the powers of the General Partner expressed herein,
the General Partner shall have, subject to the provisions of this
Agreement, full power and authority, as herein provided or as provided
in the Delaware Act, on behalf of the Partnership, in order to carry
out and accomplish its purposes and functions: (A) to expend
Partnership capital and income; (B) to purchase, lease, license, sell,
exchange, improve, divide, combine and otherwise in all respects
transact business with respect to interests in real and personal
property of any and all kinds whatsoever, both tangible and intangible,
including, without limitation, equipment, contract rights, lease
rights, debt instruments and equity interests in corporations,
partnerships (both limited and general and including, subject to the
provisions of this Agreement, Affiliated Entities), joint ventures and
other entities (including, but not limited to, common and preferred
stock, debentures, bonds and other securities of every kind and
nature), and, in connection therewith, to execute, deliver, amend,
modify and cancel documents and instruments relating to real and
personal property of whatever kind and description, including, but not
limited to, mortgages, leases and other documents of title or
conveyance, assumption agreements pertaining to such agreements, powers
of attorney and other contracts, instruments and agreements of all
kinds and to employ engineers, contractors, attorneys, accountants,
brokers, appraisers, and such other consultants, advisors, artisans and
workmen as may be necessary or advisable, in the sole and absolute
discretion of the General Partner, for all such purposes; (C) to invest
any and all funds held by the Partnership in accordance with the
provisions of clause (x) of this Section 6.1(b) of this Agreement; (D)
to designate depositories of the Partnership's funds, and the terms and
conditions of such deposits and drawings thereon; (E) to borrow money
or otherwise to procure extensions of credit for the Partnership
(except that neither the Partnership nor the Sponsor shall borrow money
solely for the purpose of making First Cash Distributions which the
Partnership would otherwise be unable to make) and, in connection
therewith, to execute, seal, acknowledge and deliver agreements,
promissory notes, guarantees and other written documents constituting
obligations or evidences of indebtedness and to pledge, hypothecate,
mortgage, assign, transfer or convey mortgages or security interests in
the Equipment and other assets of the Partnership as security therefor;
(F) to hold all or any portion of the Investments and other assets of
the Partnership in the name of one or more trustees, nominees, or other
entities or agents of or for the Partnership; (G) to establish Reserves
in accordance with clause (vii) of this Section 6.1(b); and (H) to take
all such actions and execute all such documents and other instruments
as the General Partner may deem necessary, convenient or advisable to
accomplish or further the purposes of the Partnership or to protect and
preserve Partnership assets to the same extent as if the General
Partner were itself the owner thereof.
(iii) Admission of Limited Partners. The General Partner shall
have the right to accept or refuse to accept, in its sole and absolute
discretion, the admission of any Limited Partner (including any
Substitute Limited Partner and the General Partner and any Affiliate of
the General Partner) to the Partnership; provided, however, that the
General Partner shall not admit any Person as a Limited Partner (except
the Original Limited Partner) unless:
(A) such Person shall agree, in writing, to be bound by the
provisions of this Agreement;
(B) such Person shall represent, in writing, that such Person
is or is not a United States Person, as the case may be;
(C) prior to the admission of such Person, the Minimum
Offering shall have been achieved;
(D) the General Partner shall believe that such Person is
"suitable" in all respects under the laws of the state in
which such Person resides;
(E) the General Partner shall have no reason to believe that
the admission of such Person to the Partnership (1) would
cause the Partnership to lose its Partnership status for
federal income tax purposes, (2) would disqualify the
Partnership to engage or to continue to engage in any business
which it is otherwise eligible to transact or (3) would cause
an impermissible percentage of Units to be owned by non-United
States citizens for purposes of any applicable title
registration law; and
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(F) such admission would not cause the "equity participation"
in the Partnership by "benefit plan investors" (both within
the meaning of DOL Reg. Section 2510.3-101(f)) to equal or
exceed 25%.
In connection with such right, the General Partner shall have the
authority to do all things necessary or advisable, in the sole and
absolute discretion of the General Partner, to effect the admission of
the Limited Partners, including, but not limited to, (x) registering
the Units under the Securities Act and (y) effecting the qualification
of, or obtaining exemptions from the qualification of, the Units for
sale with state securities regulatory authorities.
(iv) Authority To Enter into Dealer-Manager Agreement. The
General Partner shall have the authority to enter into, on behalf of
the Partnership, the Dealer-Manager Agreement, substantially in the
form filed as an exhibit to the Registration Statement, with the
Dealer-Manager.
(v) Authority to Enter into Selling Dealer Agreements. The
General Partner shall have the authority to enter into, on behalf of
the Partnership, or to authorize the Dealer-Manager so to enter into,
separate selling dealer agreements, each substantially in the form
filed as an exhibit to the Registration Statement (the "Selling Dealer
Agreements" and each a "Selling Dealer Agreement"), with NASD-member
broker dealers selected by the General Partner or the Dealer-Manager
(the "Selling Dealers" and each a "Selling Dealer").
(vi) Authority to Enter Into Escrow Agreement. The General
Partner shall have the authority to enter into, on behalf of the
Partnership, the Escrow Agreement, substantially in the form filed as
an exhibit to the Registration Statement, with the Escrow Agent,
pursuant to which, among other things, the Escrow Agent shall agree to
act as the Escrow Agent with respect to all Subscription Monies
received prior to the Initial Closing Date and the Escrow Agent shall
be entitled to receive for its services in such capacity such
compensation as the General Partner may deem reasonable under the
circumstances, which compensation shall be deemed to be and shall
constitute an Organization and Offering Expense payable by the General
Partner.
(vii) Reserves. The General Partner shall initially establish
for the Partnership, and shall use its best efforts to maintain,
Reserves, of which an amount not in excess of 3% of Gross Offering
Proceeds may be treated as having been invested or committed to
investment for purposes of Section 8.6 of this Agreement. Reserves,
once expended, need not be restored, provided, however, that any such
-------- -------
Reserves that are restored in the sole and absolute discretion of the
General Partner shall be restored from Cash From Operations.
(viii) Insurance. The General Partner shall cause the
Partnership to purchase and maintain such insurance policies as the
General Partner deems reasonably necessary to protect the interests of
the Partnership (to the extent that such policies are not maintained by
Lessees, Users or other Persons for the benefit of the Partnership).
The General Partner is authorized, on behalf of the Partnership, to
purchase and pay the premiums for such types of insurance, including,
without limitation, extended coverage liability and casualty and
workers' compensation, as would be customary for any Person owning
comparable property and engaged in a similar business, and the General
Partner and any Affiliate of the General Partner and their respective
employees and agents may be named as additional insured parties
thereunder, provided the cost of premiums payable by the Partnership is
not increased thereby. Notwithstanding the foregoing, the Partnership
shall not incur or assume the cost of any portion of any insurance
which insures any party against any liability the indemnification of
which is prohibited by Section 6.3 of this Agreement.
(ix) Commission Loans. The General Partner may incur
Indebtedness on behalf of the Partnership in an amount up to the total
Sales Commissions payable (up to 8% of the Gross Offering Proceeds) for
the purpose of permitting the Partnership to acquire additional
Investments following each Closing, the cost of any such indebtedness
shall be payable as an operating expense of the Partnership.
(x) Reinvestment. During the Reinvestment Period, the
Partnership may reinvest all or a substantial portion of its Cash From
Operations and Cash From Sales in additional Investments in furtherance
of, and consistent with, the Partnership's purposes and investment
objectives set forth in Sections 3.1 and 3.2.
(c) Delegation of Powers.
--------------------
Except as otherwise provided under this Agreement or by law, the
General Partner may, in its sole and absolute discretion, delegate all or any of
its duties under this Agreement to, and may elect, employ, contract or deal
with, any Person (including, without limitation, any Affiliate of the General
Partner).
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(d) Reliance by Third Parties.
-------------------------
No Person dealing with the Partnership or its assets, whether as
assignee, lessee, licensee, purchaser, mortgagee, grantee or otherwise, shall be
required to investigate the authority of the General Partner in selling,
assigning, leasing, licensing, mortgaging, conveying or otherwise dealing with
any Investments or other assets or any part thereof, nor shall any such
assignee, lessee, purchaser, licensee, mortgagee, grantee or other Person
entering into a contract with the Partnership be required to inquire as to
whether the approval of the Partners for any such assignment, lease, license,
sale, mortgage, transfer or other transaction has been first obtained. Any such
Person shall be conclusively protected in relying upon a certificate of
authority or of any other material fact signed by the General Partner, or in
accepting any instrument signed by the General Partner in the name and behalf of
the Partnership or the General Partner.
6.2 Limitations on the Exercise of Powers of General Partner.
The General Partner shall have no power to take any action prohibited
by this Agreement or by the Delaware Act. Furthermore, the General Partner shall
be subject to the following in the administration of the Partnership's business
and affairs:
(a) Limitations on Indebtedness.
---------------------------
From and after the date when all Capital Contributions have been
invested or committed to investment in Investments and Reserves (not exceeding
3% of Gross Offering Proceeds), used to pay permitted Front-End Fees or returned
to the Limited Partners (as provided in Section 8.7, below), the Partnership
shall not incur or assume additional Indebtedness in connection with the
acquisition of any Investment to the extent that the sum of (i) the principal
amount of any such additional Indebtedness plus (ii) the aggregate principal
amount of all Indebtedness then outstanding would exceed 80% of the aggregate
Purchase Price paid by the Partnership for Investments then held by the
Partnership (inclusive of any Investment then being acquired).
(b) Investment Company Status.
-------------------------
The General Partner shall use its best efforts to assure that the
Partnership shall not be deemed an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
(c) Sales and Leases of Equipment From or to the General Partner and
----------------------------------------------------------------
its Affiliates.
--------------
The Partnership shall neither purchase, lease or license Investments
from, nor sell, lease or license Investments to, the General Partner or any
Affiliate of the General Partner (including, without limitation, any Program in
which the General Partner or any such Affiliate has an interest) except as
provided in this Section. The Sponsor shall not purchase any equipment or
Financing Transactions from the Partnership or any affiliated program which it
has sponsored (whether held by them on an interim basis or otherwise.
Notwithstanding the first sentence of this Section (c), the Partnership may
purchase Affiliated Investments if:
(i) the General Partner determines that the making of such
Affiliated Investment is in the best interests of the Partnership;
(ii) such Investment is purchased by the Partnership at a
Purchase Price which does not exceed the sum of (A) the net cost to the
General Partner or such Affiliate of acquiring and holding same
(adjusted for any income received and expenses paid or incurred while
holding same) plus (B) any compensation to which the General Partner
and any Affiliate of the General Partner is otherwise entitled pursuant
to this Agreement;
(iii) there is no difference in the interest terms of the
Indebtedness secured by the Investment at the time it is acquired by
the General Partner or such Affiliate and the time it is acquired by
the Partnership;
(iv) neither the General Partner nor any Affiliate of the
General Partner realizes any gain, or receives any other benefit, other
than compensation for its services, if any, permitted by this
Agreement, as a result of the Partnership making such Affiliated
Investment; and
(v) at the time of transfer thereof to the Partnership, the
General Partner or such Affiliate had held such
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Affiliated Investment on an interim basis (generally not longer than
six months) for the purposes of (A) facilitating the acquisition of
such Investment by the Partnership, (B) borrowing money or obtaining
financing for the Partnership or (C) any other lawful purpose related
to the business of the Partnership.
(d) Loans to or from the General Partner and its Affiliates.
-------------------------------------------------------
No loans may be made by the Partnership to the General Partner or any
Affiliate of the General Partner. The General Partner or any Affiliate of the
General Partner, however, may, from time to time, loan or advance funds to the
Partnership (each such loan or advance being hereinafter called a "Partnership
Loan") in accordance with this Section 6.2(d). The terms of any Partnership Loan
permitted to be made hereunder shall include the following:
(i) any interest payable by the Partnership in connection with
such Partnership Loan shall be charged at an annual rate of interest
not in excess of the lesser of the following: (A) the rate of interest
payable by the General Partner or such Affiliate in connection with
such borrowing (in the event that the General Partner or any Affiliate
shall borrow money for the specific purpose of making such Partnership
Loan), (B) the rate of interest that would be charged to the
Partnership (without reference to the General Partner's or such
Affiliate's financial abilities or guarantees) by unrelated lending
institutions on a comparable loan for the same purpose in the same
geographic area (if neither the General Partner nor any such Affiliate
has borrowed money to make such Partnership Loan) or (C) a rate of
interest equal to the rate of interest from time to time announced by
The Chase Manhattan Bank (National Association) at its principal
lending offices in New York, New York as its prime lending rate plus 3%
per annum;
(ii) all payments of principal and interest on such
Partnership Loan shall be due and payable within twelve months after
the date on which such Partnership Loan is made; and
(iii) neither the General Partner nor any such Affiliate may
receive points or other financial charges or fees in any amount in
respect of such Partnership Loan (except that the General Partner or
such Affiliate may be reimbursed, dollar for dollar, for the actual
reasonable out-of-pocket expenses (including, without limitation, any
points or other financial charges or fees) incurred by it in connection
with the making of such Partnership Loan), provided that nothing in
--------
this clause (iii) shall prohibit any increase in Acquisition Fees and
Management Fees otherwise payable to the General Partner or such
Affiliate in accordance with this Agreement, notwithstanding that such
increase may be an indirect result of the making of such Partnership
Loan.
If the General Partner or any Affiliate of the General Partner
purchases Equipment in its own name and with its own funds in order to
facilitate ultimate purchase by the Partnership, the General Partner or
such Affiliate, as the case may be, shall be deemed to have made a
Partnership Loan in an amount equal to the purchase price paid for such
Equipment and shall be entitled to receive interest on such amount in
accordance with clause (i) above. Any advances made by the General
Partner or any Affiliate of the General Partner for the purpose of
paying Organizational and Offering Expenses shall not constitute a
Partnership Loan, but shall be reimbursed to the General Partner or
such Affiliate (to the extent possible) from the O & O Expense
Allowance without interest thereon in accordance with, and to the
extent provided in, Section 6.4(e) of this Agreement.
(e) No Exchange of Interests for Investments.
----------------------------------------
The Partnership shall not acquire any Investments in exchange for
Interests in the Partnership.
(f) Joint Venture Investments.
-------------------------
The Partnership may make Investments in Joint Ventures, provided that:
--------
(i) at the time any such Investment in a Joint Venture is
made, the maximum amount of Gross Offering Proceeds which the
Partnership may so invest shall equal an amount equal to the smallest
of 25% of (A) the Maximum Offering, (B) the sum of (1) the cumulative
Gross Offering Proceeds raised as of the Closing Date next preceding
such investment and (2) the Gross Offering Proceeds which the General
Partner reasonably estimates the Partnership to raise from such Closing
Date to the Termination Date) or (C) the cumulative Gross Offering
Proceeds actually raised as of the Termination Date; and
(ii) the General Partner shall have determined that:
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(A) such Investment is in the best interests of the
Partnership; and
(B) such Investment shall not result in duplicate
fees to the General Partner or any Affiliate of the
General Partner;
(iii) in the case of any Joint Venture with any non-Affiliated
Person, the Partnership must acquire a controlling interest in such
Joint Venture and the non-Affiliate must acquire the non-controlling
interest therein and such Joint Venture must own and lease specific
Equipment and/or invest in one or more specific Financing Transactions;
and
(iv) in the case of any Joint Venture with any Program
sponsored by the General Partner or any Affiliate of the General
Partner, all of the following conditions are met:
(A) all Programs, including the Partnership,
participating in such Joint Venture shall have
substantially identical investment objectives and
shall participate in such Joint Venture on
substantially the same terms and conditions;
(B) the compensation payable by the Partnership to
the General Partner or any Affiliate of the General
Partner by the Partnership and by each other Program
sponsored by any of them in connection with such
Joint Venture shall be substantially identical;
(C) the Partnership shall have a right of first
refusal with respect to the purchase of any equipment
or other tangible or intangible personal property or
financing transactions held by such Joint Venture;
and
(D) the purpose of such Joint Venture shall be either
(1) to effect appropriate diversification for the
Partnership and the other Programs participating in
such Joint Venture or (2) to relieve the Sponsor or
one or more Programs sponsored by it of the
obligation to acquire, or to acquire from any of
them, equipment or other tangible or intangible
personal property or financing transactions at any
time subject to a purchase commitment entered into
pursuant to Section 6.2(c) of this Agreement.
Subject to the other provisions of this Agreement, the Partnership may
employ, or transact business with, any Person, notwithstanding the fact
that any Partner or any Affiliate thereof may have (or have had) an
interest in or connection with such Person and provided that neither
the Partnership nor the other Partners shall have any rights by virtue
of this Agreement in or to any income or profits derived therefrom.
(g) Exchange, Merger, Roll-Up or Consolidation of the Partnership
-------------------------------------------------------------
Prohibited.
----------
The Partnership shall not (i) be a party to any exchange offer, merger,
Roll-Up or similar combination with any other legal entity (including any
Roll-Up Entity) or (ii) reorganize itself if such reorganization would have the
effect of an exchange offer, merger, Roll-Up or similar combination. Neither the
Partnership nor the General Partner shall solicit, or engage or compensate
members, or persons associated with members, of the NASD to solicit, proxies
from any Limited Partners authorizing any exchange offer, merger, Roll-Up or
similar combination or any such reorganization. The General Partner is not
authorized to take any action inconsistent herewith.
(h) No Exclusive Listings.
---------------------
No exclusive listing for the sale of Equipment or other Investments, or
of any other Partnership assets, shall be granted to the General Partner or any
Affiliate of the General Partner.
(i) Other Transactions Involving the General Partner and its
--------------------------------------------------------
Affiliates.
----------
Except as specifically permitted by this Agreement, the General Partner
is prohibited from entering into any agreements, contracts or arrangements on
behalf of the Partnership with the General Partner or any Affiliate of the
General Partner. Furthermore, neither the General Partner nor any such Affiliate
shall receive directly or indirectly a commission or fee (except as permitted by
Section 6.4) in connection with the reinvestment of Cash From Sales and Cash
From Operations (including casualty insurance proceeds) in new Investments. In
addition, in connection with any agreement entered into by the Partnership with
the General Partner or any such Affiliate, no rebates or "give-ups" may be
received by the General Partner or
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any such Affiliate, nor may the General Partner or any such Affiliate
participate in any reciprocal business arrangements that could have the effect
of circumventing any of the provisions of this Agreement. Neither the General
Partner nor any Affiliate shall, directly or indirectly, pay or award any
commissions or other compensation to any Person engaged by a potential investor
as an investment advisor as an inducement to such Person to advise such
potential investor of interests in a particular Program; provided, however, that
-------- -------
this Section 6.2(i) shall not prohibit the payment to any such Person of the
Underwriting Fees and Sales Commissions otherwise in accordance with the terms
of this Agreement.
(j) Sale of All or Substantially All Assets; Dissolution.
----------------------------------------------------
During the Reinvestment Period, the General Partner may not dissolve
the Partnership or sell or otherwise dispose of all or substantially all of the
assets of the Partnership without the Consent of the Majority Interest.
(k) No Investments in Limited Partnership Interests of other Programs.
-----------------------------------------------------------------
The Partnership shall not invest in limited partnership interests of any other
Program; provided, however, that nothing herein shall preclude the Partnership
from making investments in Joint Ventures, to the extent and in the manner
provided in this Section.
6.3 Limitation on Liability of General Partner and its Affiliates;
Indemnification.
(a) The General Partner, and any Affiliate engaged in the performance
of services on behalf of the Partnership (hereinafter sometimes referred to as
an "Indemnitee"), shall, except as provided to the contrary in this Section 6.3,
(i) be indemnified by the Partnership from assets of the Partnership (and not by
the Limited Partners) for any liability, loss, cost and expense of litigation
(collectively referred to herein as "Liabilities") suffered by such Indemnitee,
and (ii) have no liability, responsibility, or accountability in damages or
otherwise to the Partnership or any Partner for any loss suffered by the
Partnership or any Partner, which arises out of any action or inaction of such
Indemnitee if (A) the General Partner has determined, in good faith, that such
course of conduct was in the best interests of the Partnership and (B) such
course of conduct did not constitute negligence or misconduct by such
Indemnitee. Notwithstanding the foregoing, each Indemnitee shall be liable,
responsible and accountable, and the Partnership shall not be liable to any such
Indemnitee for any portion of such Liabilities, which resulted from such
Indemnitee's own fraud, negligence, misconduct or, if applicable, breach of
fiduciary duty to the Partnership or any Partner, as determined by a court of
competent jurisdiction. Subject to Section 6.3(c) hereof, if any action, suit,
or proceeding shall be pending against the Partnership or an Indemnitee which is
alleged to relate to, or arise out of, any action or inaction of the General
Partner or any Affiliate, the Partnership shall have the right to employ, at the
expense of the Partnership, separate counsel of its choice in such action, suit,
or proceeding.
Any amounts payable by the Partnership to an Indemnitee pursuant to
this Section 6.3 shall be recoverable only out of the assets of the Partnership
and no Limited Partner shall have any personal liability on account thereof. The
Partnership shall not incur or assume the cost of that portion of liability
insurance which insures the General Partner or any Affiliate for any liability
as to which the General Partner or such Affiliate is prohibited from being
indemnified pursuant to this Section 6.3.
(b) The Partnership shall not furnish indemnification to an Indemnitee
or to any person acting as a Selling Dealer for any Liabilities imposed by a
judgment in a suit arising from or out of a violation of federal or state
securities laws unless (i)(A) there has been a successful adjudication on the
merits in favor of such Indemnitee or Selling Dealer on each count involving
alleged securities laws violations by such Indemnitee or Selling Dealer, (B)
such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction or (C) a court of competent jurisdiction shall have
approved a settlement of the claims against the Indemnitee and indemnification
in respect of the costs thereof, and (ii) the court shall have been advised by
the General Partner as to the current position of the Securities and Exchange
Commission, the Securities Divisions of the Commonwealths of Massachusetts and
Pennsylvania, the States of Missouri and Tennessee and any other relevant
regulatory body with respect to the issue of indemnification for securities law
violations.
(c) The provision of advances from Partnership funds to an Indemnitee
for legal expenses and other costs incurred as a result of any legal action
initiated against an Indemnitee by a Limited Partner of the Partnership in his
capacity as such is prohibited. However, the provision of advances from
Partnership funds to an Indemnitee for legal expenditures and other costs
incurred as a result of any initiated suit, action or proceeding is permissible
only if (i) such suit, action or proceeding relates to or arises out of, or is
alleged to relate to or arise out of, any action or inaction on the part of the
Indemnitee in the performance of its duties or provision of its services on
behalf of the Partnership; (ii) such suit, action or proceeding is initiated by
a third party who is not a Limited Partner; and (iii) the Indemnitee undertakes
to repay any funds advanced pursuant to this Section 6.3 in cases in which such
Indemnitee would not be entitled to indemnification under 6.3(a) and 6.3(b). If
advances are permissible under this Section 6.3, the Indemnitee shall furnish
the Partnership with an undertaking as set forth in the foregoing sentence and
shall thereafter have the right to ▇▇▇▇ the Partnership for, or otherwise
request that the
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Partnership pay, at any time and from time to time after such Indemnitee has
become obligated to make payment therefor, any and all amounts for which such
Indemnitee believes in good faith that such Indemnitee is entitled to
indemnification under this Section 6.3. The Partnership shall pay any and all
such bills and honor any and all such requests for payment for which the
Partnership is liable as determined above. In the event that a final
determination is made that the Partnership is not so obligated in respect to all
or any portion of the amounts paid by it or if the Indemnitee enters into a
stipulation or settlement with like effect, such Indemnitee will refund such
amount, plus interest thereon at the then prevailing market rate of interest,
within 60 days of such final determination, and in the event that a final
determination is made that the Partnership is so obligated in respect to any
amount not paid by the Partnership to a particular Indemnitee or if the
Partnership enters into a stipulation or settlement with like effect, the
Partnership will pay such amount to such Indemnitee.
6.4 Compensation of General Partner and its Affiliates.
Neither the General Partner nor any Affiliate of the General Partner
shall, in their respective capacities as such, receive any salary, fees,
profits, distributions or other compensation except in accordance with this
Section 6.4.
(a) Allocations and Distributions.
-----------------------------
The General Partner shall be entitled to receive the allocations and
distributions provided for under Section 8 in respect of the Interest held by it
as General Partner.
(b) Underwriting Fees.
-----------------
Underwriting Fees shall be paid by the Partnership to the
Dealer-Manager in respect of each Unit sold.
(c) Sales Commissions.
-----------------
Sales Commissions shall be paid by the Partnership to the
Dealer-Manager and each Selling-Dealer in respect of the respective Units sold
by each of them, provided that no Sales Commissions shall be payable by the
--------
Partnership in respect of any Units sold to Affiliated Limited Partners, and,
provided further, that the Sales Commissions payable with regard to sales of
-------- -------
Units subject to Volume Discounts shall be reduced by the amount of such Volume
Discounts.
(d) Due Diligence Expenses.
----------------------
Due Diligence Expenses actually incurred in connection with the
Offering shall be paid or reimbursed by the Partnership to the Dealer-Manager
and each Selling Manager, provided that the Dealer-Manager shall be entitled to
--------
payment of or reimbursement for Due Diligence Expenses only after each Selling
Dealer (whether prospective or actual) shall have first been paid or reimbursed
for all Due Diligence Expenses of such Selling Dealer, and provided, further,
-------- -------
that the amount of Due Diligence Expenses actually paid to the Dealer-Manager
shall reduce, dollar-for-dollar, the amount of the O & O Expense Allowance
otherwise payable by the Partnership to the General Partner pursuant to Section
6.4(e) of this Agreement.
(e) O & O Expense Allowance.
-----------------------
The Partnership shall pay, immediately following each Closing Date, the
O & O Expense Allowance to the General Partner, whether or not the full amount
thereof is actually incurred by the General Partner or any Affiliate of the
General Partner, without deduction for Underwriting Fees and Sales Commissions.
The General Partner shall distribute to the Dealer-Manager all or such portion
of the O & O Expense as the General Partner shall, in its sole and absolute
discretion, deem appropriate and the Partnership shall have no separate
liability to the Dealer-Manager for any Organizational and Offering Expenses
incurred by it. The General Partner shall bear any Organizational and Offering
Expenses incurred by the General Partner or any Affiliate of the General Partner
(including, without limitation, the Dealer-Manager) in excess of the O & O
Expense Allowance.
(f) Acquisition Fees.
----------------
In connection with any Investment, the Partnership shall pay to the
General Partner, for services rendered in connection with acquiring such
Investment, an Acquisition Fee equal to the difference (to the extent greater
than zero) between (i) 3.0% of the Purchase Price paid by the Partnership for
any (A) item of Equipment or (B) Financing Transaction, as the case may be, and
(ii) the aggregate amount of Acquisition Fees paid by or on behalf of the
Partnership to any other Person in connection with such Investment; provided,
--------
however, that:
-------
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(i) no Acquisition Fees may be paid by or on behalf of the Partnership to
any finder or broker that is an Affiliate of the General Partner;
(ii) the Partnership shall not pay any Acquisition Fees, or part thereof,
that would cause the Partnership's Investment in Equipment and Financing
Transactions to be less than the greater of (x) 80% of the Gross Offering
Proceeds from the Partnership's sale of Units, reduced by .0625% for each
1% of Indebtedness encumbering any Investment acquired by the Partnership,
and (y) 75% of such Gross Offering Proceeds; and
(iii) the aggregate sum of (A) Acquisition Fees and (B) all other Front-End
Fees, which, in each case, may be paid to any Person pursuant to this
Agreement in connection with all Investments made by the Partnership from
any source (including, without limitation, Net Offering Proceeds,
Partnership indebtedness or reinvestment of excess Cash Flows) shall not
exceed an amount equal to the product of multiplying (x) the Gross Offering
Proceeds by (y) a percentage equal to (1) 100% minus (2) the greater of the
two percentages calculated under clause (x) or clause (y) of subsection
6.4(f)(ii), above.
The following are examples of application of the formula in clause
(ii), above:
(1) No Indebtedness - 80% to be committed to Investment in Equipment
and Financing Transactions.
(2) 50% Indebtedness - 50% x .0625% = 3.125%
80% - 3.125% = 76.875% to be committed to
Investment in Equipment and Financing
Transactions.
(3) 80% Indebtedness - 80% x .0625% = 5%
80% - 5% = 75% to be committed to Investment in
Equipment and Financing Transactions.
To calculate the percentage of Indebtedness encumbering Investments, the
aggregate amount of such Indebtedness shall be divided by the aggregate
Purchase Price (without deduction for Front-End Fees) paid for all
Investments. Such percentage of Indebtedness so calculated would be
multiplied by .0625% to determine the percentage to be deducted from 80%.
If any payment of Acquisition Fees causes the Partnership to experience a
shortfall in its required Investment in Equipment and Financing Transactions
(computed under clause (ii) above) or the aggregate amount of Acquisition Fees
paid by the Partnership to exceed the amount determined in accordance with
clause (iii) above, the General Partner shall refund to the Partnership that
portion of Acquisition Fees received by it to the extent necessary to correct
such shortfall or overpayment, as the case may be, together with interest
thereon at the rate of 1.0% per month to the extent that such refund is not made
within 30 days.
Where the Partnership purchases an item of Equipment or any Financing
Transaction from the General Partner or one of its Affiliates pursuant to
Section 6.2(d) for a Purchase Price which includes an Acquisition Fee amount,
such Acquisition Fee amount shall be deemed paid pursuant to this Section 6.4(d)
and there shall be no duplicative payment thereof.
(g) Management Fees.
---------------
Each month, for management services rendered, the Partnership shall pay to
the General Partner such portion of the Management Fees as shall be attributable
to Gross Revenues actually received by the Partnership during such month;
provided that Management Fees shall be payable solely out of Gross Revenues
--------
received during the month in which paid; and provided, further, that such
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Management Fees shall be paid in any month only after payment of any accrued and
unpaid First Cash Distributions for such month and for any previous month (in
each case, up to an amount equal to 8.0% per annum of each respective Limited
Partner's unreturned Capital Contribution), and, to the extent that the
Partnership does not have sufficient Cash From Operations in any month to pay
such proportion of all such First Cash Distributions, the payment of such
Management Fees shall be deferred and paid, without interest, in the next
following month in which the Partnership generates sufficient Cash From
Operations for the payment thereof.
(h) Subordinated Remarketing Fees.
-----------------------------
For rendering services in connection with the sale of any Investment, the
Partnership shall pay to the General Partner the applicable Subordinated
Remarketing Fee; provided that:
--------
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(i) no such Subordinated Remarketing Fee shall be paid in connection with
the sale of any Investment to the extent that the Cash From Sales realized
thereby is reinvested in additional Investments;
(ii) in no event shall any such Subordinated Remarketing Fee be paid prior
to Payout; and
(iii) the General Partner shall not be entitled to receive any amount of
Subordinated Remarketing Fees to the extent that such amount would cause
the total commissions paid to all Persons, in connection with the sale of
such Investments, to exceed a fee for such services which is reasonable,
customary and competitive in light of the size, type and location of such
Investment.
After Payout, any and all Subordinated Remarketing Fees previously earned by the
General Partner shall be paid, without any interest thereon, by the Partnership,
prior to any other distributions to the Partners.
(i) Partnership Expenses.
--------------------
(i) Reimbursement. Except as otherwise provided in this Section 6.4(i),
expenses of the Partnership, other than those incurred and otherwise
reimbursed in accordance with Sections 6.4(b) through (h), shall be billed
directly to and paid by the Partnership.
(ii) Goods and Third-Party Services. The General Partner and any Affiliate
of the General Partner may be reimbursed for the actual cost of goods and
services used for or by the Partnership and obtained by it or them from
non-Affiliates.
(iii) Administrative Services Provided by the General Partner and
Affiliates. Subject to clause (iv) of this Section 6.4(i), the General
Partner and any Affiliate of the General Partner may be reimbursed for
Operating Expenses which are actually incurred by it or them in connection
with the performance or arrangement of administrative services reasonably
necessary, convenient or advisable, in the discretion of the General
Partner, to the prudent operation of the Partnership (including, without
limitation, legal, accounting, remarketing and agency expenses) provided
--------
that the reimbursement for same shall be limited to the lesser of (A) its
or their actual cost of providing same or (B) the amount the Partnership
would be required to pay to non-Affiliates for comparable administrative
services in the same geographic location and provided further, that no
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reimbursement is permitted for such services if the General Partner or any
such Affiliate is entitled to compensation in the form of a separate fee
pursuant to other provisions of this Section 6.4.
(iv) Limitations on Reimbursements. Neither the General Partner nor any
Affiliate of the General Partner shall be reimbursed by the Partnership for
amounts expended by it with respect to the following:
(A) salaries, fringe benefits, travel expenses or other
administrative items incurred by or allocated to any Controlling
Person of the General Partner or of any such Affiliate;
(B) expenses for rent, depreciation and utilities or for capital
equipment or other administrative items (other than as specified
respectively in paragraphs (ii) and (iii) of this Section 6.4(i),
above).
6.5 Other Interests of the General Partner and its Affiliates.
The General Partner shall be required to devote only such time to the
affairs of the Partnership as the General Partner shall, in its sole and
absolute discretion, determine in good faith to be necessary for the business
and operations of the Partnership.
The General Partner and any Affiliate of the General Partner may engage in,
or possess an interest in, business ventures (other than the Partnership) of
every kind and description, independently or with others, including, but not
limited to, serving as sponsor or general partner of other Programs and
participating in the equipment leasing and financing businesses, whether or not
such business ventures may be competitive with the business or Investments of
the Partnership. Neither the Partnership nor any Limited Partner shall have any
rights in and to such independent ventures or the income or profits therefrom by
reason of the General Partner's position with the Partnership.
Neither the General Partner nor any Affiliate of the General Partner shall
be obligated to present any particular
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investment opportunity to the Partnership, and the General Partner and each such
Affiliate shall have the right, subject only to the provisions of the next
following paragraph, to take for its own account (individually or otherwise), or
to recommend to any Affiliated Entity (including the Partnership), any
particular investment opportunity, considering, among other things, the
following factors with respect to itself and each Affiliated Entity:
(a) its own and each Affiliated Entity's general investment
objectives and policies, including, without limitation, cash distribution
objectives and leverage policies;
(b) its own and each Affiliated Entity's existing portfolio,
including the diversification thereof (by type of equipment, by length of
lease term, by industry and by geographic area) and the effect the making
of such investment would have thereon;
(c) the cash available to it and to each Affiliated Entity for the
purpose of making such investment and the length of time such funds have
been available;
(d) its own and each Affiliated Entity's current and long-term
liabilities; and
(e) the estimated income tax consequences of such investment to it
and each Affiliated Entity and to the individual investors participating
therein.
If, considering such factors and any other appropriate factors, the General
Partner determines that any investment opportunity would be equally suitable for
various Affiliated Entities, the General Partner shall make such investment
opportunity available to such Affiliated Entities on a rotation basis, with the
order of priority determined by the date of each Affiliated Entity's initial
closing.
Notwithstanding the foregoing, until all Capital Contributions have been
invested or committed to investment in Investments and Reserves (not exceeding
3% of Gross Offering Proceeds), used to pay permitted Front-End Fees or returned
to the Limited Partners (as provided in Section 8.7, below), the General Partner
and each Affiliate of the General Partner shall present to the Partnership
first, before any other Affiliated Entity (including any Affiliated Entity that
the General Partner or any such Affiliate advises or manages), the opportunity
to purchase any Investment meeting the investment objectives and policies of the
Partnership, other than a Lease relating to:
(i) used equipment previously leased by the General Partner or any such
Affiliate to third parties that becomes available for re-lease;
(ii) groups of items of equipment to be leased on terms providing various
cost recovery terms for various items, where the Partnership may not, in
accordance with this Agreement, purchase all items in the group;
(iii) equipment to be leased to a third party on favorable terms, from a
cost recovery viewpoint, subsequent to the lease by the General Partner or
its Affiliates to the same third party of other items of equipment on
substantially less favorable terms;
(iv) equipment as to which a prospective or existing lessee indicates to
the General Partner or its Affiliate that it will not lease or continue to
lease through the General Partner or such Affiliate unless the General
Partner or such Affiliate acquires and retains such equipment in its own
equipment portfolio; or
(v) equipment subject to a lease that by its terms is not assignable to
an entity such as the Partnership (leases that permit assignment to a
"financial institution" shall not, without more, be deemed assignable to
the Partnership).
In the event of a conflict between two or more Affiliated Entities
(including the Partnership) that are advised or managed by the General Partner
and that are seeking to re-lease or sell similar equipment contemporaneously,
the first opportunity to re-lease or sell equipment shall generally be allocated
to the Affiliated Entity attempting to re-lease or sell equipment that was
subject to the lease that expired first or, if two or more leases expire
simultaneously, the lease which was first to take effect; provided, however,
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that the General Partner may, in its discretion, otherwise provide opportunities
to re-lease or sell equipment if such equipment is subject to remarketing
commitments or if there are other circumstances, in the General Partner's
judgment, under which the withholding of such an opportunity would be
inequitable or uneconomic for a particular Affiliated Entity.
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If the financing available from time to time to two or more Affiliated
Entities (including the Partnership) is less than the aggregate amount then
sought by them, the available financing shall generally be allocated to the
investment entity that has been seeking financing the longest.
Nothing in this Section 6.5 shall be deemed to diminish the General
Partner's overriding fiduciary obligation to the Partnership or to act as a
waiver of any right or remedy the Partnership or other Partners may have in the
event of a breach of such obligation.
Section 7. POWERS AND LIABILITIES OF LIMITED PARTNERS.
7.1 Absence of Control Over Partnership Business.
The Limited Partners hereby consent to the exercise by the General Partner
of the powers conferred on the General Partner by this Agreement. No Limited
Partner shall participate in or have any control over the Partnership's business
or have any right or authority to act for, or to bind or otherwise obligate, the
Partnership (except one who is also the General Partner, and then only in its
capacity as the General Partner). No Limited Partner shall have the right to
have the Partnership dissolved and liquidated or to have all or any part of such
Limited Partner's Capital Contribution or Capital Account returned except as
provided in this Agreement.
7.2 Limited Liability.
The liability of each Limited Partner in such capacity shall be limited to
the amount of such Limited Partner's Capital Contribution and pro rata share of
any undistributed Profits and other assets of the Partnership. Except as may
otherwise be required by law or by this Agreement, after the payment of all
Subscription Monies for the Units purchased by such Limited Partner, no Limited
Partner shall have any further obligations to the Partnership, be subject to any
additional assessment or be required to contribute any additional capital to, or
to loan any funds to, the Partnership.
No Limited Partner shall have any personal liability on account of any
obligations and liabilities of, including any amounts payable by, the
Partnership under or pursuant to, or otherwise in connection with, this
Agreement or the conduct of the business of the Partnership.
Section 8. DISTRIBUTIONS AND ALLOCATIONS.
8.1 Distribution of Distributable Cash From Operations and Distributable
Cash From Sales.
(a) During the Reinvestment Period, the General Partner shall determine in
its sole discretion what portion, if any, of the Partnership's Distributable
Cash From Operations and Distributable Cash From Sales shall be invested and
reinvested in additional Investments and which portion shall be distributed to
the Partners; provided, however, that the General Partner shall not reinvest,
but shall distribute to the extent available, Distributable Cash From Operations
and Distributable Cash From Sales to Limited Partners in an amount equal to the
following amounts for the periods specified (pro rated, as necessary, for
periods of less than one year):
(i) For the period beginning with a Limited Partner's admission to the
Partnership and ending with the expiration or termination of the
Reinvestment Period, each Limited Partner shall be entitled to receive
monthly cash distributions, to the extent that Distributable Cash From
Operations and Distributable Cash From Sales are sufficient for such
purpose. The annual amount of such distributions will be computed by
multiplying 10.75% by each Limited Partner's respective original Capital
Contribution reduced by any portion thereof which has been (A) returned to
such Limited Partner pursuant to Section 8.6, or (B) redeemed by the
Partnership pursuant to Section 10.5, of this Agreement. A ratable portion
(i.e., one-twelfth) of such annual distribution amount shall be payable
monthly; and
Any portion of the monthly distribution amounts described in this clause
(i) which exceeds the sum of Distributable Cash From Operations and
Distributable Cash From Sales for any year (if any) shall be distributable
(if at all) solely at the discretion of the General Partner. Each monthly
cash distribution amount shall be computed as provided in the preceding
sentence on a non-cumulative basis (that is, without increase for any
portion of the monthly cash distribution amount computed pursuant to this
clause (i) which the Partnership is unable to make, and without reduction
for any cash distributions actually made, in any prior period.
(ii) Each Limited Partner is entitled to receive monthly cash distributions
(if the distributions described in paragraph
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(i) above are not adequate) in amounts which would permit the Limited
Partners to pay federal, state and local income taxes resulting from
Partnership Operations (assuming that all Limited Partners are subject to
income taxation at a 31% cumulative tax rate on taxable distributions for
GAAP purposes). Such distributions will be made, to the extent that
Distributable Cash From Operations and Distributable Cash From Sales are
sufficient for such purpose.
(b) During the Disposition Period, no Available Cash From Operations or
Available Cash From Sales shall be reinvested in additional Investments, and all
Available Cash From Operations and Available Cash From Sales shall be
distributed to the Partners.
(c) Distributions of Distributable Cash From Operations and Distributable
Cash From Sales (collectively, "Distributable Cash") shall be made to the
Partners monthly. Subject to Section 8.1(a), the amount of each such monthly
distribution shall be determined by the General Partner, in its sole discretion,
based upon the amount of the Partnership's then available Distributable Cash and
other funds of the Partnership and the General Partner's estimate of the
Partnership's total Distributable Cash for such Fiscal Year. Prior to Payout,
distributions pursuant to this Section 8.1(c) shall be made 99% to the Limited
Partners and 1% to the General Partner; provided, however, that prior to the
-------- -------
admission to the Partnership of any Limited Partners, such distributions shall
be made 1% to the Original Limited Partner and 99% to the General Partner. After
Payout, distributions pursuant to this Section 8.1(c) shall be tentatively
attributed and distributed 90% to the Limited Partners and 10% to the General
Partner; provided, however, that, if at the time of Payout, each respective
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Limited Partner has not yet received total cash distributions pursuant to this
Section 8.1(c) equal to 150% of such Limited Partner's original Capital
Contribution (reduced by any amounts paid to such Limited Partner (i) as a
return of his uninvested Capital Contributions pursuant to Section 8.6 and (ii)
in redemption of his Units pursuant to Section 10.5), distributions shall
continue to be made 99% to the Limited Partners and 1% to the General Partner
until the total cash distributions made to the Limited Partners equal 150% of
the Limited Partners' aggregate original Capital Contributions. The amount
tentatively attributed to the General Partner pursuant to the previous sentence
and not theretofore distributed to the General Partner shall be distributed to
the General Partner, without interest, out of the first Distributable Cash
available to the Partnership after the Limited Partners have received
distributions equal to 150% of their aggregate original Capital Contributions.
(d) Notwithstanding the provisions of Section 8.1(c), distributions of
Distributable Cash made during the Disposition Period shall be made in
accordance with the provisions of Section 11.3.
8.2 Allocations of Profits and Losses.
(a) The Profits and Losses of the Partnership shall be determined for
each Fiscal Year or Fiscal Period.
(b) Except as otherwise provided in this Agreement, whenever a
proportionate part of the Partnership's Profits or Losses is allocated to a
Partner, every item of income, gain, loss or deduction entering into the
computation of such Profits or Losses, or arising from the transactions with
respect to which such Profits or Losses were realized, shall be allocated to
such Partner in the same proportion.
(c) Profits for any Fiscal Period during the Reinvestment Period shall be
allocated to the Partners as follows:
(i) first, 1% to the General Partner and 99% to the Limited Partners
until the Limited Partners have been allocated Profits equal to the excess,
if any, of their aggregate Unpaid Target Distributions over their aggregate
Capital Account balances;
(ii) next, in a manner that will cause (A) the excess of the Limited
Partners' aggregate Capital Account balances over the amount of their
aggregate Unpaid Target Distributions and (B) the General Partner's Capital
Account balance, to be in the ratio of 90% to 10%; and
(iii) thereafter, 90% to the Limited Partners and 10% to the General
Partner.
(d) Profits for any Fiscal Period during the Disposition Period shall be
allocated to the Partners as follows:
(i) first, to the Partners in proportion to and to the extent of the
deficit balances, if any, in their respective Capital Accounts;
(ii) next, 1% to the General Partner and 99% to the Limited Partners until
the Limited Partners have been allocated Profits equal to the excess, if
any, of their aggregate Unpaid Target Distributions over their aggregate
Capital
A-19
Account balances;
(iii) next, in a manner that will cause (A) the excess of the Limited
Partners' aggregate Capital Account balances over the amount of their
aggregate Unpaid Target Distributions and (B) the General Partner's Capital
Account balance, to be in the ratio of 90% to 10%; and
(iv) thereafter, 90% to the Limited Partners and 10% to the General
Partner.
(e) Losses for any Fiscal Period shall be allocated to the Partners as
follows:
(i) first, 1% to the General Partner and 99% to the Limited Partners
until the Limited Partners have been allocated Losses equal to the excess,
if any, of their aggregate Capital Account balances over their aggregate
Adjusted Capital Contributions;
(ii) next, to the Partners in proportion to and to the extent of their
respective remaining positive Capital Account balances, if any; and
(iii) thereafter, 1% to the General Partner and 99% to the Limited
Partners; provided, however, that if and to the extent that an allocation
of Losses to any Limited Partner pursuant to this Section 8.2(e) or Section
8.2(f) would result in any Limited Partner having an Adjusted Capital
Account Deficit, such Losses shall be allocated to all other Partners in
accordance with this Section 8.2(e) and, when no Limited Partner can be
allocated any such Losses without violating the limitation contained in
this proviso, such remaining Losses shall be allocated to the General
Partner.
(f) Special Allocations.
-------------------
The following special allocations shall, except as otherwise provided, be
made prior to allocations in Section 8.2(a)-(e) in the following order:
(i) Minimum Gain Charge-Back. Notwithstanding any other provision of this
------------------------
Section 8, if there is a net decrease in Partnership Minimum Gain or in any
Partner Nonrecourse Debt Minimum Gain during any Fiscal Period, prior to
any other allocation pursuant this Section 8, each Partner shall be
specifically allocated items of Partnership income and gain for such Fiscal
Period (and, if necessary, subsequent Fiscal Periods) in an amount and
manner required by Treas. Reg. Sections 1.704-2(f) and 1.704-2(i)(4) or any
successor provisions. The items to be so allocated shall be determined in
accordance with Treas. Reg. Section 1.704-2(j)(2) or any successor
provision.
(ii) Partnership Nonrecourse Deductions. Partnership Nonrecourse
----------------------------------
Deductions for any Fiscal Period shall be allocated 99% to the Limited
Partners and 1% to the General Partner.
(iii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
------------------------------
any Fiscal Period shall be allocated to the Partner who made or guaranteed
or is otherwise liable with respect to the loan to which such Partner
Nonrecourse Deductions are attributable in accordance with principles of
Treas. Reg. Section 1.704-2(i) or any successor provision.
(iv) Qualified Income Offset. If in any Fiscal Period, any Partner has an
-----------------------
Adjusted Capital Account Deficit, whether resulting from an unexpected
adjustment, allocation or distribution described in Treas. Reg. Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) or otherwise, such Partner shall be
allocate items of Partnership income and gain (consisting of a pro rata
portion of each item of Partnership income, including gross income, and
gain for such Fiscal Period) sufficient to eliminate such Adjusted Capital
Account Deficit as quickly as possible, to the extent required by such
Treasury Regulation. It is the intention of the parties that this
allocation provision constitute a "qualified income offset" within the
meaning of Treas. Reg. Section 1.704-1(b)(2)(ii)(d).
(v) Curative Allocations. The special allocations provided for in the
--------------------
proviso of Section 8.2(e) and in Sections 8.2(f)(i)-(iv) are intended to
comply with certain requirements of Treas. Reg. Sections 1.704-1 and 1.704-
2. To the extent that any of such special allocations shall have been made,
subsequent allocations of income, gains, losses and deductions and items
thereof ("curative allocations") shall be made as soon as possible and in a
manner so as to cause, to the extent possible without violating the
requirements of Treas. Reg. Sections 1.704-1 and 1.704-2, the Partners'
Capital Account balances to be as nearly as possible in the same
proportions in which they would have been
A-20
had such special allocations not occurred. In making such curative
allocations, due regard shall be given to the character of the Profits and
Losses and items thereof that were originally allocated pursuant to the
provision of Sections 8.2(e) and Sections 8.2(f)(i)-(iv) in order to put
the Partners as nearly as possible in the positions in which they would
have been had such special allocations not occurred.
If the General Partner determines, after consultation with Tax
Counsel, that the allocation of any item of Partnership income, gain, loss
or deduction is not specified in this Section 8 (an "unallocated item"), or
that the allocation of any item of Partnership income, gain, loss or
deduction hereunder is clearly inconsistent with the Partners' economic
interests in the Partnership determined by reference to this Agreement, the
general principles of Treas. Reg. Section 1.704-1(b) and the factors set
forth in Treas. Reg. Section 1.704-1(b)(3)(ii) (a "misallocated item"),
then the General Partner may allocate such unallocated items and reallocate
such misallocated items, to reflect such economic interests.
(vi) Special Allocation of State, Local and Foreign Taxes. Any state,
----------------------------------------------------
local or foreign taxes imposed on the Partnership by reason of a Partner
being a citizen, resident or national of such state, locality or foreign
jurisdiction, including any item(s) of taxable income or tax loss resulting
therefrom, shall be specially allocated to such Partner.
(vii) Transactions with Partnership. If, and to the extent that, any
-----------------------------
Partner is deemed to recognize any item of income, gain, loss, deduction or
credit as a result of any transaction between such Partner and the
Partnership pursuant to Code Sections 482, 483, 1272-1274, 7872 or any
similar provision now or hereafter in effect, any corresponding Profits or
Losses or items thereof shall be allocated to the Partner who was charged
with such item.
(viii) Fees and Commissions Paid to General Partner. It is the intent of
--------------------------------------------
the Partnership that any amount paid or deemed paid to the General Partner
as a fee or payment described in Section 6.4 shall be treated as a
"guaranteed payment" or a payment to a partner not acting in his capacity
as a partner pursuant to Section 707(c) of the Code to the extent possible.
If any such fee or payment is deemed to be a distribution to the General
Partner and not a guaranteed payment or a payment to a partner not acting
in his capacity as a partner, the General Partner shall be allocated an
amount of Partnership gross ordinary income equal to such payment.
(ix) Selling Commissions, Underwriting Fees, Acquisition Fees and O & O
------------------------------------------------------------------
Expense Allowance. Selling Commissions, Underwriting Fees, Acquisition Fees
-----------------
and the O & O Expense Allowance shall be allocated 100% to the Limited
Partners. Organizational and Offering Expenses, in excess of Sales
Commissions, Underwriting Fees and the O & O Expense Allowance, shall be
allocated 100% to the General Partner.
8.3 Distributions and Allocations Among the Limited Partners.
(a) Except to the extent otherwise provided herein, all distributions of
Distributable Cash and all allocations of Profits and Losses and items thereof
for any Fiscal Year or Fiscal Period shall be distributed or allocated, as the
case may be, among the Limited Partners in proportion to their respective
numbers of Units. Each distribution of Distributable Cash shall be made to the
Limited Partners (or their respective assignees) of record as of the last day of
the month next preceding the date on which such distribution is made.
(b) All distributions of Distributable Cash and all allocations of
Profits and Losses or items thereof for any Fiscal Year in which any Limited
Partners are admitted to the Partnership, shall be allocated among the Limited
Partners as follows:
(i) first, the Operations and Sales of the Partnership shall be deemed
to have occurred ratably over such Fiscal Year, irrespective of the actual
results of Operations or Sales of the Partnership during or within any
given Segment;
(ii) second, (A) each Limited Partner who was admitted to the Partnership
prior to the commencement of such Fiscal Year shall be deemed to have held
his respective Units commencing as of the first Segment in such Fiscal
Year; (B) each Limited Partner who was admitted to the Partnership as of
the first day of any subsequent Segment in such Fiscal Year in accordance
with Section 5.3(h), shall be deemed to have held his respective Units
commencing with such Segment; and (C) each Limited Partner who was admitted
to the Partnership commencing as of the day following the Initial Closing
Date or the Final Closing Date (where such Initial Closing Date or Final
Closing Date falls on other than the 15th day or last day of a month or
next preceding business day), shall be deemed to have held his respective
Units for a fraction of the Segment within which such Limited Partner was
admitted to the Partnership, determined by dividing the number of days
within such Segment following the Initial Closing Date or Final Closing
Date, as the case may be, by the number of days in such Segment;
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(iii) third, all Profits and Losses for such Fiscal Year shall be allocated
among the Limited Partners in the ratio that the number of Units held by
each Limited Partner multiplied by the number of Segments (pro rated for
fractions of Segments) in such Fiscal Year that such Units were held by
such Limited Partner bears to the sum of that calculation for all Limited
Partners; and
(iv) Third, all monthly distributions of cash made to the Limited Partners
pursuant to Section 8.1(c) shall be distributed among the Limited Partners
in the ratio that the number of Units held by each Limited Partner
multiplied by the number of Segments (pro rated for fractions of Segments)
in the month preceding the month in which the distribution is made that
such Units were held by such Limited Partner bears to the sum of that
calculation for all Limited Partners. If the General Partner determines at
any time that the sum of the monthly distributions made to any Limited
Partner during or with respect to a Fiscal Year does not (or will not)
properly reflect such Limited Partner's share of the total distributions
made or to be made by the Partnership for such Fiscal Year, the General
Partner shall, as soon as practicable, make a supplemental distribution to
such Limited Partner, or withhold from a subsequent distribution that
otherwise would be payable to such Limited Partner, such amount as shall
cause the total distributions to such Limited Partner for such Fiscal Year
to be the proper amount.
(c) In the event of a transfer of a Unit during a Fiscal Year in
accordance with Section 10, the transferor and transferee shall be allocated a
ratable share of Profits and Losses for such Fiscal Year based on the number of
Segments (pro rated for fractions of Segments) in such Fiscal Year that each
held such transferred Units. Monthly distributions made by the Partnership in
accordance with Section 8.1(c) shall be allocated between the transferor and
transferee (and subsequently adjusted, if necessary) in the manner set forth in
clause (iv) and the last sentence of Section 8.3(b).
(d) Each distribution made to a Limited Partner pursuant to Section
8.1(c), 8.6 or 11.3 of this Agreement, any interest on Subscription Monies
relating to such Limited Partner's Units paid to such Limited Partner pursuant
to Section 5.3(k), and any amount paid to such Limited Partner in redemption of
such Limited Partner's Units pursuant to Section 10.5 shall be applied as
follows:
(i) first, in reduction of such Limited Partner's Unpaid Cumulative
Return, to the extent thereof, as determined immediately before such
distribution; and
(ii) then, in reduction of such Limited Partner's Adjusted Capital
Contribution, to the extent thereof, as determined immediately before such
distribution.
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8.4 Tax Allocations: Code Section 704(c); Revaluations.
(a) In accordance with Code section 704(c) and the Treasury Regulations
thereunder, income, gain, loss, and deduction, and items thereof, with respect
to any property contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the Partners so as to take account of any
variation between the adjusted basis of such property to the Partnership for
federal income tax purposes and its initial Gross Asset Value.
(b) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to Clause (ii) of the definition of Gross Asset Value herein
and Section 5(h) hereof, subsequent allocations of income, gain, loss and
deduction, and items thereof, with respect to such asset shall take account of
any variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in a manner consistent with the requirements
of Proposed Treas. Reg. Section 1.704-3(a)(4) or the corresponding provision of
final or successor Treasury Regulations.
(c) Any elections or other decisions relating to the allocations required
by clauses (a) and (b) of Section 8.4 shall be made in a manner that reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant to
this clause (c) of Section 8.4 are solely for purposes of federal, state, and
local taxes and shall not affect, or in any way be taken into account in
computing, any Partner's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this Agreement.
8.5 Compliance with NASAA Guidelines Regarding Front-End Fees.
Notwithstanding anything in this Agreement to the contrary, in the event
the Partnership fails, at any time after the expiration of 30 months from the
date of the Prospectus, to comply with the restrictions set forth in Section
6.4(b) through (f) above, the General Partner shall appropriately adjust the
allocations and distributions set forth in this Section 8 so as to comply with
the requirements contained in NASAA Guidelines. No adjustment proposed to be
made pursuant to this Section 8.5 shall require the General Partner to obtain
the consent of the Limited Partners unless such proposed adjustment adversely
effects the allocations or distributions made, or to be made, to any Limited
Partner.
8.6 Return of Uninvested Capital Contribution.
In the event that 100% of Net Offering Proceeds have not been used to make
Investments or committed to Reserves to the extent permitted to be treated as
Investments pursuant to Section 6.1(b)(vii) within the later of (i) twenty-four
(24) months after the Effective Date of the Offering or (ii) 12 months of the
receipt thereof by the Partnership, the amount of such uninvested Net Offering
Proceeds shall be promptly distributed by the Partnership to the Limited
Partners, pro rata based upon their respective number of Units, as a return of
capital, without interest and without reduction for Front-End Fees in respect of
such uninvested Capital Contributions (which distributions shall not in any
event exceed the related Capital Contribution of any Limited Partner). Funds
shall be deemed to have been committed to investment and need not be returned to
a Limited Partner to the extent written agreements in principle, commitment
letters, letters of intent or understanding, option agreements or any similar
contracts or understandings are executed and not terminated during the
applicable twenty-four (24) or twelve (12) month period described above, if such
investments are ultimately consummated within a further period of twelve (12)
months. Funds deemed committed which are not actually so invested within such
twelve (12) month period will be promptly distributed, without interest and
without reduction for Front-End Fees in respect of such uninvested Net Offering
Proceeds, to the Limited Partners on a pro rata basis, as a return of capital.
8.7 Partner's Return of Investment in the Partnership.
Each Limited Partner shall look solely to the assets of the Partnership for
the return of his Capital Contribution and for any other distributions with
respect to his Partnership Interest. If the assets of the Partnership remaining
after payment or discharge, or provision for payment or discharge, of its debts
and liabilities are insufficient to return such Capital Contribution or to make
any other distribution to such Partner, he shall not have any recourse against
the personal assets of any other Partner, except to the limited extent set forth
in Section 6.3, Section 9.3(a) and Section 11.2(a)(iii).
8.8 No Distributions in Kind.
Distributions in kind shall not be permitted except upon dissolution and
liquidation of the Partnership's assets and may only then be made to a
liquidating trust established for the purposes of (a) liquidating the assets
transferred to it and (b) distributing the net cash proceeds of such liquidation
in cash to the Partners in accordance with the provisions of this Agreement.
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8.9 Partnership Entitled to Withhold.
The Partnership shall at all times be entitled to withhold or make payments
to any governmental authority with respect to any federal, state, local or
foreign tax liability of any Partner arising as a result of such Partner's
participation in the Partnership. Each such amount so withheld or paid shall be
deemed to be a distribution for purposes of Section 8 and Section 11, as the
case may be, to the extent such Partner is then entitled to a distribution. To
the extent that the amount of such withholdings or payments made with respect to
any Partner exceeds the amount to which such Partner is then entitled as a
distribution, the excess shall be treated as a demand loan, bearing interest at
a rate equal to twelve percent (12%) per annum simple interest from the date of
such payment or withholding until such excess is repaid to the Partnership (i)
by deduction from any distributions subsequently payable to such Partner
pursuant to this Agreement or (ii) earlier payment of such excess and interest
by such Partner to the Partnership. Such excess and interest shall, in any case,
be payable not less than 30 days after demand therefore by the General Partner,
which demand shall be made only if the General Partner determines that such
Partner is not likely to be entitled to distributions within 12 months from the
date of such withholding or payment by the Partnership in an amount sufficient
to pay such excess and interest. The withholdings and payments referred to in
this Section 8.9 shall be made at the maximum applicable statutory rate under
the applicable tax law unless the General Partner shall have received an opinion
of counsel or other evidence, satisfactory to the General Partner, to the effect
that a lower rate is applicable, or that no withholding or payment is required.
Section 9. WITHDRAWAL OF GENERAL PARTNER.
9.1 Voluntary Withdrawal.
The General Partner may not voluntarily withdraw as a General Partner from
the Partnership unless (a) the Limited Partners have received 60 days' advance
written notice of the General Partner's intention to withdraw, (b) the
Partnership shall have received an opinion of Tax Counsel to the Partnership to
the effect that such withdrawal will not constitute a termination of the
Partnership or otherwise materially adversely affect the status of the
Partnership for federal income tax purposes and (c) a Substitute General Partner
shall have been selected and such Substitute General Partner (i) shall have
expressed a willingness to be admitted to the Partnership, (ii) shall have
received the specific written Consent of the Majority Interest to such admission
and (iii) shall have a Net Worth sufficient, in the opinion of Tax Counsel to
the Partnership, for the Partnership to continue to be classified as a
partnership for federal income tax purposes and to satisfy the net worth
requirements for "sponsors" under the NASAA Guidelines.
9.2 Involuntary Withdrawal.
The General Partner shall be deemed to have involuntarily withdrawn as a
General Partner from the Partnership upon the removal of the General Partner
pursuant to the Consent of the Majority Interest or upon the occurrence of any
other event that constitutes an event of withdrawal under the Delaware Act as
then in effect.
For purposes of this Section 9.2 and Section 13, neither the General
Partner nor any Affiliate of the General Partner will participate in any vote by
the Limited Partners to (a) involuntarily remove the General Partner or (b)
cancel any management or service contract with the General Partner or any such
Affiliate.
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9.3 Consequences of Withdrawal.
(a) Upon the voluntary withdrawal of the General Partner in accordance
with Section 9.1, the General Partner, or its estate, successors or legal
representatives, shall be entitled to receive from the Partnership (i) an amount
equal to the positive balance, if any, in the General Partner's Capital Account
(as adjusted to the date of such withdrawal by allocation pursuant to Section 8
of any Profits or Losses or other allocable items realized by the Partnership
through such date of Withdrawal and any unrealized gains and losses inherent in
the Partnership's assets as of such date), provided, however, that in no event
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shall such amount exceed the fair market value of the Partnership Interest then
held by the General Partner, as calculated in accordance with the provisions of
clause (c) of this Section 9.3, plus or minus, as the case may be, (ii) an
amount equal to the difference between (A) any amounts due and owing to the
General Partner by the Partnership and (B) any amounts due and owing by the
General Partner to the Partnership. The right of the General Partner, or its
estate, successors or legal representatives, to receipt of such amount shall be
subject to (x) any claim for damages by the Partnership or any Partner against
the General Partner, or its estate, successors or legal representatives, that
such withdrawal shall have been made in contravention of this Agreement and (y)
if the General Partner has a negative balance in its Capital Account after
making the adjustments provided for in the first sentence of this clause (a) of
Section 9.3, payment to the Partnership of an amount equal to the lesser of (1)
the amount of such deficit balance or (2) the excess of 1.01% of the total
Capital Contributions of the Limited Partners over the capital previously
contributed by the General Partner.
(b) Upon involuntary withdrawal of the General Partner as such from the
Partnership in accordance with Section 9.2, the Partnership shall pay to the
General Partner (i) the fair market value of the Partnership Interest then held
by the General Partner, as calculated in the manner set forth in clause (c) of
this Section 9.3, plus or minus, as the case may be, (ii) an amount equal to the
difference between (A) any amounts due and owing to such withdrawn General
Partner by the Partnership and (B) any amounts due and owing by such withdrawn
General Partner to the Partnership, and, upon such payment, the General
Partner's Interest in the income, losses, distributions and capital of the
Partnership shall be terminated.
(c) For purposes of this Section 9.3, the fair market value of the
withdrawn General Partner's Interest shall be determined, in good faith, by such
General Partner and the Partnership, or, if they cannot agree, by arbitration in
accordance with the then current rules of the American Arbitration Association
by two independent appraisers, one selected by the withdrawn General Partner and
one by the Limited Partners. In the event that such two appraisers are unable to
agree on the value of the withdrawn General Partner's Interest within 90 days,
they shall within 20 days thereafter jointly appoint a third independent
appraiser whose determination shall be final and binding; provided, however,
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that if the two appraisers are unable to agree within such 20 days on a third
appraiser, the third appraiser shall be selected by the American Arbitration
Association. The expense of arbitration shall be borne equally by the withdrawn
General Partner and the Partnership.
(d) The method of payment to the General Partner upon withdrawal, whether
voluntary or involuntary, must be fair and must protect the solvency and
liquidity of the Partnership. When the withdrawal is voluntary, the method of
payment will be presumed to be fair if it provides for a non-interest-bearing,
unsecured promissory note of the Partnership, with principal payable, if at all,
from distributions that the withdrawn General Partner otherwise would have
received under the Partnership Agreement had the General Partner not withdrawn.
When the withdrawal is involuntary, the method of payment will be presumed to be
fair if it provides for a promissory note bearing interest on the outstanding
principal amount thereof at the lesser of (i) the rate of interest (inclusive of
any points or other loan charges) which the Partnership would be required to pay
to an unrelated bank or commercial lending institution for an unsecured, 60
month loan of like amount or (ii) the rate of interest from time to time
announced by The Chase Manhattan Bank (National Association) at its principal
lending offices in New York, New York as its prime lending rate plus 3% and
providing for repayments of principal thereunder in sixty (60) equal monthly
installments, together with accrued but unpaid interest.
9.4 Liability of Withdrawn General Partner.
If the business of the Partnership is continued after withdrawal of the
General Partner, the General Partner, or its estate, successors or legal
representatives, shall remain liable for all obligations and liabilities
incurred by it or by the Partnership while it was acting in the capacity of
General Partner and for which it was liable as General Partner, but shall be
free of any obligation or liability incurred on account of or arising from the
activities of the Partnership from and after the time such withdrawal shall have
become effective.
9.5 Continuation of Partnership Business.
In the event that the General Partner withdraws from the Partnership, the
General Partner, or its estate, successors or
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legal representatives, shall deliver to the Limited Partners Notice stating the
reasons for such withdrawal. If, within 90 days following such withdrawal, any
Person shall be admitted to the Partnership as a Substitute General Partner,
such Substitute General Partner shall execute a counterpart of this Agreement
and the business of the Partnership shall continue. If no Substitute General
Partner shall have been so admitted to the Partnership within 90 days following
the date of the General Partner's withdrawal, then the Partnership shall be
dissolved.
Section 10. TRANSFER OF UNITS.
10.1 Withdrawal of a Limited Partner.
A Limited Partner may withdraw from the Partnership only by Assigning or
having redeemed all Units owned by such Limited Partner in accordance with this
Section 10. The withdrawal of a Limited Partner shall not dissolve or terminate
the Partnership. In the event of the withdrawal of any Limited Partner because
of death, legal incompetence, dissolution or other termination, the estate,
legal representative or successor of such Limited Partner shall be deemed to be
the Assignee of the Partnership Interest of such Limited Partner and may become
a Substitute Limited Partner upon compliance with the provisions of Section
10.3.
10.2 Assignment.
(a) Subject to the provisions of Sections 10.2(b) and (c) and 10.3 of
this Agreement, any Limited Partner may Assign all or any portion of the Units
owned by such Limited Partner to any Person (the "Assignee"); provided that
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(i) such Limited Partner and such Assignee shall each execute a written
Assignment instrument, which shall:
(A) set forth the terms of such Assignment;
(B) in the case of assignments other than by operation of law,
state the intention of such Limited Partner that such Assignee
shall become a Substitute Limited Partner and, in all cases,
evidence the acceptance by the Assignee of all of the terms and
provisions of this Agreement;
(C) include a representation by both such Limited Partner and
such Assignee that such Assignment was made in accordance with all
applicable laws and regulations (including, without limitation,
such minimum investment and investor suitability requirements as
may then be applicable under state securities laws); and
(D) otherwise be satisfactory in form and substance to the
General Partner; and
(ii) such Assignee shall pay to the Partnership an aggregate amount, not
exceeding $150.00, of expenses reasonably incurred by the Partnership in
connection with such Assignment.
(b) Notwithstanding the foregoing, unless the General Partner shall
specifically Consent, no Units may be Assigned:
(i) to a minor or incompetent (unless a guardian, custodian or
conservator has been appointed to handle the affairs of such Person);
(ii) to any Person if, in the Opinion of Tax Counsel, such Assignment
would result in the termination of the Partnership's taxable year or its
status as a partnership for federal income tax purposes, provided that the
--------
Partnership may permit such Assignment to become effective if and when, in
the opinion of Tax Counsel, such Assignment would no longer result in the
termination of the Partnership's taxable year or its status as a
partnership for federal income tax purposes;
(iii) to any Person if such Assignment would affect the Partnership's
existence or qualification as a limited partnership under the Delaware Act
or the applicable laws of any other jurisdiction in which the Partnership
is then conducting business;
(iv) to any Person not permitted to be an Assignee under applicable law,
including, without limitation, applicable federal and state securities
laws;
(v) if such Assignment would result in the transfer of a Partnership
Interest representing less than twenty-five (25)
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Units, or ten (10) Units in the case of a Qualified Plan (unless such
Assignment is of the entire Partnership Interest owned by such Limited
Partner);
(vi) if such Assignment would result in the retention by such Limited
Partner of a portion of its Partnership Interest representing less than the
greater of (A) twenty-five (25) Units, or ten (10) Units in the case of a
Qualified Plan, and (B) the minimum number of Units required to be
purchased under minimum investment standards applicable to an initial
purchase of Units by such Limited Partner;
(vii) if, in the reasonable belief of the General Partner, such Assignment
might violate applicable law;
(viii) if the effect of such Assignment would be to cause the "equity
participation" in the Partnership by "benefit plan investors" (both within
the meaning of DOL Reg. Section 2510.3-101(f)) to equal or exceed 25%; or
(ix) if such transfer would cause an impermissible percentage of Units to
be owned by non-United States citizens.
Any attempt to make any Assignment of Units in violation of this Section
10.2(b) shall be null and void ab initio.
(c) So long as there are adverse federal income tax consequences from
being treated as a "publicly traded partnership" for federal income tax
purposes, the General Partner shall not permit any interest in a Unit to be
Assigned on a secondary public market (or a substantial equivalent thereof) as
defined under the Code and any Treasury Regulations or published notices
promulgated thereunder (a "Secondary Market") and, if the General Partner
determines in its sole and absolute discretion, that a proposed Assignment was
effected on a Secondary Market, the Partnership and the General Partner have the
right to refuse to recognize any such proposed Assignment and to take any action
deemed necessary or appropriate in the General Partner's reasonable discretion
so that such proposed Assignment is not, in fact, recognized. For purposes of
this Section 10.2(c), any Assignment which results in a failure to meet the
"safe-harbor" provisions of Notice 88-75 (July 5, 1988) issued by the IRS, or
any substitute safe-harbor provisions subsequently established by Treasury
Regulations or published notices, shall be treated as causing the Units to be
publicly traded. The Limited Partners agree to provide all information
respecting Assignments, which the General Partner deems necessary in order to
determine whether a proposed transfer occurred or will occur on a Secondary
Market.
(d) Assignments made in accordance with this Section 10.2 shall be
effective for record purposes and for purposes of Section 8 as of the first day
of the Segment following the date upon which all of the conditions of this
Section 10.2 shall have been satisfied.
10.3 Substitution.
(a) An Assignee of a Limited Partner shall be admitted to the
Partnership as a Substitute Limited Partner only if:
(i) the General Partner has reasonably determined that all conditions
specified in Section 10.2 have been satisfied and that no adverse effect to
the Partnership does or may result from such admission; and
(ii) such Assignee shall have executed a transfer agreement and such
other forms, including a power of attorney to the effect required by
Section 15, as the General Partner reasonably may require to determine
compliance with this Section 10.
(b) An Assignee of Units who does not become a Substitute Limited
Partner in accordance with this Section 10.3 and who desires to make a further
Assignment of his Units shall be subject to all the provisions of Sections 10.2,
10.3 and 10.4 to the same extent and in the same manner as a Limited Partner
desiring to make an Assignment of his Units. Failure or refusal of the General
Partner to admit an Assignee as a Substitute Limited Partner shall in no way
affect the right of such Assignee to receive distributions from Distributable
Cash From Operations and Distributable Cash From Sales and the share of the
Profits or Losses for Tax Purposes to which his predecessor in interest would
have been entitled in accordance with Section 8.
10.4 Status of an Assigning Limited Partner.
Any Limited Partner that shall Assign the entire Partnership Interest owned
by such Limited Partner to an Assignee who shall become a Substitute Limited
Partner shall cease to be a Limited Partner in the Partnership and shall no
longer have any of the rights or privileges of a Limited Partner in the
Partnership.
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10.5 Limited Right of Presentment for Redemption of Units.
(a) Commencing with the second full calendar quarter following the
Final Closing Date and at any time and from time to time thereafter until
termination of the Partnership, any Limited Partner (other than an Affiliated
Limited Partner) may request that the Partnership redeem, and, subject to the
availability of funds in accordance with clause (b) below and the other
provisions of this Section 10.5 and provided that the Partnership shall not, in
any calendar year, redeem Partnership Interests that, in the aggregate, exceed
2% of the total Partnership Interests outstanding as of the last day of such
year, with the prior Consent of the General Partner, the Partnership shall
redeem, for cash, up to 100% of the Partnership Interest of such Limited
Partner, at the Applicable Redemption Price. The Partnership shall be under no
obligation to redeem Units of a Limited Partner and shall do so only in the sole
and absolute discretion of the General Partner.
(b) No reserves shall be established by the Partnership for the
redemption of Units. The availability of funds for the redemption of any Unit
shall be subject to the availability of sufficient Distributable Cash.
Furthermore, Units may be redeemed only if such redemption would not impair the
capital or the Operations of the Partnership and would not result in the
termination under the Code of the Partnership's taxable year or of its federal
income tax status as a partnership.
(c) A Limited Partner desiring to have a portion or all of his Units
redeemed shall submit a written request to the General Partner on a form
approved by the General Partner duly signed by all owners of such Units on the
books of the Partnership. Redemption requests hereunder shall be deemed given on
the earlier of the date the same is (i) personally delivered with receipt
acknowledged, or (ii) mailed by certified mail, return receipt requested,
postage prepaid, at the General Partner's address set forth herein. Requests
arising from death, major medical expense and family emergency related to
disability or a material loss of family income, collectively "Hardship
Redemptions" shall be treated as having been received at 12:01 A.M. EST and all
other redemption requests shall be deemed received with the start of the
business day during which received. The General Partner shall promptly accept or
deny each redemption request. The General Partner shall, in its sole discretion,
decide whether a redemption is in the best interests of the Partnership.
(d) In the event that the General Partner receives requests for the
Partnership to redeem more Units than there are funds sufficient to redeem, the
General Partner shall honor redemption requests in the order in which duly
executed and supported redemption requests are received. The General Partner
shall use its reasonable efforts to honor requests for redemptions of Units with
the same request date first as to Hardship Redemptions, second so as to provide
liquidity for IRAs or Qualified Plans to meet required distributions and finally
as to all other redemption requests.
(e) Within 30 days following the date upon which the General Partner
receives a written request from any Limited Partner to redeem Units held by such
Limited Partner, the General Partner shall deliver written notice to such
Limited Partner indicating (i) the number, if any, of such Units to be redeemed
and (ii) if appropriate, the date of redemption thereof, which shall be a date
within 30 days following the date of such notice, and the Applicable Redemption
Price with respect thereto. Not less than ten (10) days prior to the redemption
date specified in the Partnership's notice, the Limited Partner requesting
redemption shall deliver to the Partnership all transfer instruments and other
documents reasonably requested by the Partnership to evidence such redemption
and the Partnership shall pay to such Limited Partner the Applicable Redemption
Price per Unit redeemed. In the event that all Units of any Limited Partner are
so redeemed, such Limited Partner shall be deemed to have withdrawn from the
Partnership and shall, from and after the date of the redemption of all Units of
such Limited Partner, cease to have the rights of a Limited Partner.
Section 11. DISSOLUTION AND WINDING-UP.
11.1 Events Causing Dissolution.
The Partnership shall be dissolved upon the happening of any of the
following events (each a "Dissolution Event"):
(a) the withdrawal of the General Partner, unless a Substitute
General Partner shall have been admitted to the Partnership in accordance with
Section 9.5; or
(b) the voluntary dissolution of the Partnership (i) by the General
Partner with the Consent of the Majority Interest or (ii) subject to Section 13,
by the Consent of the Majority Interest without action by the General Partner;
or
(c) the Sale of all or substantially all of the assets of the
Partnership (which Sale prior to the end of the Reinvestment Period requires the
Consent of the Majority Interest); or
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(d) the expiration of the Partnership term specified in Section 4 of
this Agreement; or
(e) the Operations of the Partnership shall cease to constitute legal
activities under the Delaware Act or any other applicable law; or
(f) any other event which causes the dissolution or winding-up of the
Partnership under the Delaware Act to the extent not otherwise provided herein.
11.2 Winding Up of the Partnership; Capital Contribution by the
General Partner Upon Dissolution.
(a) Upon the occurrence of a Dissolution Event, the winding-up of the
Partnership and the termination of its existence shall be accomplished as
follows:
(i) the General Partner (or if there shall be none, such
other Person as shall be selected by the Consent of the Majority
Interest, or if no such other Person is so selected, such other Person
as is required by law to wind up the affairs of the Partnership, which
Person, in either event, may exercise all of the powers granted to the
General Partner herein and is hereby authorized to do any and all acts
and things authorized by law and by this Agreement for such purposes
and any and all such other acts or things consistent therewith as may
be expressly authorized by the Majority Interest) shall proceed with
the liquidation of the Partnership (including, without limitation, the
Sale of any remaining Investments and cancellation of the Certificate
of Limited Partnership), and is hereby authorized to adopt such plan,
method or procedure as may be deemed reasonable by the General Partner
(or such other Person effecting the winding up) to effectuate an
orderly winding-up;
(ii) all Profits or Losses or items thereof and all amounts
required to be specially allocated pursuant to Section 8.2(f) for the
period prior to final termination shall be credited or charged, as the
case may be, to the Partners in accordance with Section 8;
(iii) in the event that, after all requirements of clauses (i)
and (ii) of this Section 11.2(a) shall have been accomplished, the
General Partner shall have a deficit balance in its Capital Account,
the General Partner shall contribute within thirty (30) days to the
Partnership as a Capital Contribution an amount equal to the lesser of
(A) the amount of such deficit balance or (B) the excess of 1.01% of
the total Capital Contributions of the Limited Partners over the
capital previously contributed by the General Partner (for this
purpose, any payments made by the General Partner as co-signatory or
guarantor of any of the indebtedness of the Partnership and not yet
reimbursed to the General Partner at the time of dissolution of the
Partnership and any amounts due and unpaid to the General Partner on,
under or with respect to any Partnership Loans at the time of such
dissolution shall be deemed to be Capital Contributions by the General
Partner to the Partnership and any obligation of the Partnership to
reimburse or repay such amounts shall thereupon cease);
(iv) the proceeds from Sales and all other assets of the
Partnership shall be applied and distributed in liquidation as
provided in Section 11.3; and
(v) the General Partner (or such other Person effecting the
winding up) shall file such certificates and other documents as shall
be required by the Delaware Act, the Code and any other applicable
laws to terminate the Partnership.
(b) If the winding-up of the Partnership is effected by the General
Partner, the General Partner shall be compensated for its services in connection
therewith as provided in Section 6.4 of this Agreement and, if such winding up
is effected by any such other Person (whether selected by the Majority Interest
or as required by law), such other Person shall be compensated for its services
in connection therewith in an amount not in excess of the amount customarily
paid to non-affiliated third parties rendering similar services in respect of
similar entities in the same geographic location.
11.3 Application of Liquidation Proceeds Upon Dissolution.
Following the occurrence of any Dissolution Event, the proceeds of
liquidation and the other assets of the Partnership shall be applied as follows
and in the following order of priority:
(a) first, to the payment of creditors of the Partnership in order of
priority as provided by law, except obligations to Partners or their Affiliates;
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(b) next, to the setting up of any reserve that the General Partner
(or such other Person effecting the winding-up) shall determine is reasonably
necessary for any contingent or unforeseen liability or obligation of the
Partnership or the Partners; such reserve may, in the sole and absolute
discretion of the General Partner (or such other Person effecting the winding
up) be paid over to an escrow agent selected by it to be held in escrow for the
purpose of disbursing such reserve in payment of any of the aforementioned
contingencies, and at the expiration of such period as the General Partner (or
such other Person effecting the winding up) may deem advisable, to distribute
the balance thereafter remaining as provided in clauses (c)-(e) of this Section
11.3.
(c) next, to the payment of all obligations to the Partners in
proportion to and to the extent of advances made by each Partner pursuant to the
provisions of this Agreement;
(d) next, to the payment of all reimbursements to which the General
Partner or any Affiliate of the General Partner may be entitled pursuant to this
Agreement; and
(e) thereafter, to the Partners in proportion to and to the extent of
the positive balances of their Capital Accounts.
11.4 No Recourse Against Other Partners.
Following the occurrence of any Dissolution Event, each Limited
Partner shall look solely to the assets of the Partnership for the return of,
and any return on, such Limited Partner's Capital Contribution. If, after the
complete payment and discharge of all debts, liabilities and other obligations
of the Partnership, the assets of the Partnership are insufficient to provide
the return of, or a return on, the Capital Contribution of any Limited Partner,
such Limited Partner shall have no recourse against any other Limited Partner or
the General Partner, except to the extent that the General Partner is obligated
to make an additional Capital Contribution to the Partnership pursuant to
Section 11.2(a)(iii) hereof.
Section 12. FISCAL MATTERS.
12.1 Title to Property and Bank Accounts.
Except to the extent that trustees, nominees or other agents are
utilized as permitted by Section 6.1(b)(ii)(F), all Investments and other assets
of the Partnership shall be held in the name of the Partnership. The funds of
the Partnership shall be deposited in the name of the Partnership in such bank
account or accounts as shall be designated by the General Partner, and
withdrawals therefrom shall be made upon the signature of the General Partner or
such Person or Persons as shall be designated in writing by the General Partner.
The funds of the Partnership shall not be commingled with the funds of any other
Person.
12.2 Maintenance of and Access to Basic Partnership Documents.
(a) The General Partner shall maintain at the Partnership's
principal office, the following documents:
(i) the Participant List;
(ii) a copy of the Certificate of Limited Partnership and all
amendments thereto, together with executed copies of any powers of
attorney pursuant to which the Certificate or any such amendment has
been executed;
(iii) copies of this Agreement and any amendments hereto;
(iv) copies of the audited financial statements of the Partnership
for the three most recently completed Fiscal Years, including, in each
case, the balance sheet and related statements of operations, cash
flows and changes in Partners' equity at or for such Fiscal Year,
together with the report of the Partnership's independent auditors
with respect thereto;
(v) copies of the Partnership's federal, state and local income tax
returns and reports, if any, for the three most recently completed
Fiscal Years;
(vi) records as required by applicable tax authorities including
those specifically required to be maintained by "tax shelters", if so
required by the Partnership; and
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(vii) investor suitability records for Units sold by any Affiliate of
the General Partner.
(b) Each Limited Partner and his designated representative shall be
given access to all of the foregoing records of the Partnership and such other
records of the Partnership which relate to business affairs and financial
condition of the Partnership, and may inspect the same and make copies of the
same (subject, in the case of copying the Participant's List, to compliance with
clause (c) of this Section 12.2) at such Limited Partner's expense, during
normal business hours upon reasonable advance written notice to the General
Partner, which notice shall specify the date and time of the intended visit and
identify with reasonable specificity the documents which such Limited Partner or
its representative will wish to examine or copy or both.
(c) A copy of the Participant List shall be mailed to any Limited
Partner making written request for the Participant List within ten (10) days of
such request (or, if later, within seven (7) days of the Partnership's receipt
of such request); provided that the General Partner may request, and shall be
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entitled to first receive, (i) reimbursement of the reasonable cost of copying
and mailing of the Participant List to the Limited Partner, and (ii) a
representation from such Limited Partner that the Participant List is not being
requested for a commercial purpose unrelated to such Limited Partner's interest
as a Limited Partner relative to the affairs of the Partnership. The purposes
for which a Limited Partner may request a copy of the Participant List include,
without limitation, matters relating to the Limited Partners' voting rights
under this Agreement and the exercise of Limited Partners' proxy rights under
federal or state securities laws.
(d) If the General Partner refuses or neglects to (i) permit a
Limited Partner or his duly authorized representative to examine the Participant
List (as provided in Paragraph (b) of this Section 12.2) or (ii) produce and
mail a copy of the Participant List within ten (10) days after such request (or,
if later, within seven (7) days of the Partnership's receipt of the applicable
Limited Partner's written request) (as provided in Paragraph (c) of this Section
12.2), the General Partner shall be liable to such Limited Partner for the
costs, including attorneys' fees, incurred by such Limited Partner to compel
production of the Participant List, and for the actual damages suffered by such
Limited Partner by reason of such refusal or neglect; provided, that it shall be
--------
a defense to liability under this clause (d) that (x) the requesting Limited
Partner has failed or refused to make the representation described in clause
(c)(ii) of this Section 12.2 after being requested to do so by the General
Partner or (y) the actual purpose and reason for such Limited Partner's requests
for inspection or for a copy of the Participant List is to secure such List for
the purpose of (1) selling, or reproducing and selling, such List or any portion
of the information contained therein, or (2) using such List or any of such
information for a commercial purpose other than in the interest of the Limited
Partner relative to the affairs of the Partnership. The remedies provided under
this Section 12.2 to Limited Partners requesting copies of the Participant List
are in addition to, and shall not in any way limit, other remedies available to
Limited Partners under federal law or the laws of any state.
12.3 Financial Books and Accounting.
The General Partner shall keep, or cause to be kept, complete and
accurate financial books and records with respect to the business and affairs of
the Partnership. Except to the extent otherwise required by the accounting
methods adopted by the Partnership for federal income tax purposes, such books
and records shall be kept on an accrual basis and all financial statements of
the Partnership shall be prepared for each Fiscal Year in accordance with
generally accepted accounting principles as applied within the United States of
America.
12.4 Fiscal Year.
Except as may otherwise be determined from time to time by the General
Partner (in a manner which is consistent with the Code and the Treasury
Regulations thereunder or is consented to by the IRS), the Fiscal Year of the
Partnership for both federal income tax and financial reporting purposes shall
end on December 31 of each year.
12.5 Reports.
(a) Quarterly Reports. Within 60 days after the end of each of the
first three Fiscal Quarters of each Fiscal Year, the General Partner shall send,
to each Person who was a Limited Partner at any time during such Fiscal Quarter,
the following written materials:
(i) a report containing the same financial information as is
contained in the Partnership's quarterly report on Form 10-Q filed
with the Commission under the Securities Exchange Act of 1934, as
amended, which shall include unaudited financial statements for the
Partnership at and for such Fiscal Quarter, including a balance sheet
and related
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statements of operations, cash flows and changes in Partners' equity,
all of which financial statements shall be prepared in accordance with
Section 12.3;
(ii) a tabular summary, prepared by the General Partner, with respect
to the fees and other compensation and costs and expenses which were
paid or reimbursed by the Partnership to the Sponsor during such
Fiscal Quarter, identified and properly allocated as to type and
amount. Such tabulation shall (A) include a detailed statement
identifying any services rendered or to be rendered to the Partnership
and the compensation received therefor and (B) summarize the terms and
conditions of any contract, which was not filed as an exhibit to the
Registration Statement, as amended and in effect as on the Effective
Date. The requirement for such summary shall not be circumvented by
lump-sum payments to non-Affiliates who then disburse the funds to, or
for the benefit of, the Sponsor; and
(iii) until all Capital Contributions have been invested or committed
to investment in Investments and Reserves (not exceeding 3% of Gross
Offering Proceeds), used to pay permitted Front-End Fees or returned
to the Limited Partners (as provided in Section 8.7, above), a special
report concerning all Investments made during such Fiscal Quarter
which shall include (A) a description of the types of Equipment
acquired and Financing Transactions made, (B) the total Purchase Price
paid for such categories of Investments, (C) the amounts of Capital
Contributions and indebtedness used to acquire such Investments, (D)
the Acquisition Fees and Acquisition Expenses paid (identified by
party) in connection therewith and (E) the amount of Capital
Contributions, if any, which remain unexpended and uncommitted to
pending Investments as of the end of such Fiscal Quarter.
(b) ANNUAL REPORTS. Within 120 days after the end of each Fiscal
Year, the General Partner shall send to each Person who was a Limited Partner at
any time during such Fiscal Year the following written materials:
(i) financial statements for the Partnership for such Fiscal Year,
including a balance sheet as of the end of such Fiscal Year and
related statements of operations, cash flows and changes in Partners'
equity, which shall be prepared in accordance with Section 12.3 and
shall be accompanied by an auditor's report containing an opinion of
the Accountants;
(ii) an analysis, prepared by the General Partner (which need not be
audited, but shall be reviewed, by the Accountants), of distributions
made to the General Partner and the Limited Partners during such
Fiscal Year separately identifying the portion (if any) of such
distributions from:
(A) Cash Flow during such period;
(B) Cash Flows from prior periods;
(C) Cash From Sales;
(D) Capital Contributions originally used to establish a
Reserve;
(iii) a status report with respect to each piece of Equipment and each
Financing Transaction which individually represents at least 10% of
the aggregate Purchase Price of the Partnership's Investments held at
the end of such Fiscal Year, which report shall state:
(A) the condition of each such item of Equipment and of any
personal property securing any Financing Transaction to which
such report applies;
(B) how such Equipment was being utilized as of the end of
such Fiscal Year (i.e., leased, operated directly by the
Partnership or held for lease, repair or sale);
(C) the remaining term of any Lease to which such Equipment
is subject;
(D) the projected or intended use of such Equipment during
the next following Fiscal Year;
(E) the method used to determine values set forth therein;
(F) such other information as may be relevant to the value or
use of such Equipment or any personal property securing any
such Financing Transaction as the General Partner, in good
faith, deems appropriate;
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(iv) the annual report shall contain a breakdown of all fees and
other compensation paid, and all costs and expenses reimbursed, to the
Sponsor by the Partnership during such Fiscal Year identified (and
properly allocated) as to type and amount:
(A) In the case of any fees and other compensation, such
breakdown shall identify the services rendered or to be
rendered to the Partnership and the compensation therefor and
shall summarize the terms and conditions of any contract which
was not filed as an exhibit to the Registration Statement, as
amended and in effect on the Effective Date. The requirement
for such information shall not be circumvented by lump-sum
payments to non-Affiliates who then disburse the funds to, or
for the benefit of, the Sponsor;
(B) In the case of reimbursed costs and expenses, the General
Partner shall also prepare an allocation of the total amount
of all such items and shall include support for such
allocation to demonstrate how the Partnership's portion of
such total amounts were allocated between the Partnership and
any other Programs in accordance with this Agreement and the
respective governing agreements of such other Programs. Such
cost and expense allocation shall be reviewed by the
Accountants in connection with their audit of the financial
statements of the Partnership for such Fiscal Year in
accordance with the American Institute of Certified Public
Accountants United States Auditing standards relating to
special reports and such Accountants shall state that, in
connection with the performance of such audit, such
Accountants reviewed, at a minimum, the time records of, and
the nature of the work performed by, individual employees of
the Sponsor, the cost of whose services were reimbursed; and
(C) The additional costs of the special review required by
this clause will be itemized by the Accountants on a Program
by Program basis and may be reimbursed to the Sponsor by the
Partnership in accordance with this subparagraph only to the
extent such reimbursement, when added to the cost for all
administrative services rendered, does not exceed the
competitive rate for such services as determined in such
report;
(v) until all Capital Contributions have been invested or committed
to investment in Investments and Reserves (not exceeding 3% of Gross
Offering Proceeds), used to pay permitted Front-End Fees or returned
to the Limited Partners (as provided in Section 8.7, above), a special
report concerning all Investments made during such Fiscal Year which
shall include (A) a description of the types of Equipment acquired or
Financing Transactions made, (B) the total Purchase Price paid for
such categories of Investments, (C) the amounts of Capital
Contributions and indebtedness used to acquire such Investments, (D)
the Acquisition Fees and Acquisition Expenses paid (identified by
party) in connection therewith and (E) the amount of Capital
Contributions, if any, which remain unexpended and uncommitted to
pending Investments as of the end of such Fiscal Year.
12.6 Tax Returns and Tax Information.
The General Partner shall:
(a) prepare or cause the Accountants to prepare, in accordance with
applicable laws and regulations, the tax returns (federal, state, local and
foreign, if any) of the Partnership for each Fiscal Year within 75 days after
the end of such Fiscal Year; and
(b) deliver to each Partner by March 15 following each Fiscal Year a
Form K-1 or other statement setting forth such Partner's share of the
Partnership's income, gains, losses, deductions, and items thereof, and credits
if any, for such Fiscal Year.
12.7 Accounting Decisions.
All decisions as to accounting matters, except as specifically
provided to the contrary herein, shall be made by the General Partner in
accordance with the accounting methods adopted by the Partnership for federal
income tax purposes or otherwise in accordance with generally accepted
accounting principles. Such decisions must be acceptable to the Accountants, and
the General Partner may rely upon the advice of the Accountants as to whether
such decisions are in accordance with the methods adopted by the Partnership for
federal income tax purposes or generally accepted accounting principles.
12.8 Federal Tax Elections.
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The Partnership, in the sole and absolute discretion of the General
Partner, may make elections for federal tax purposes as follows:
(a) In case of a transfer of all or part of the Partnership Interest
of a Partner, the Partnership, in the absolute discretion of the General
Partner, may timely elect pursuant to Section 754 of the Code (or corresponding
provisions of future law), and pursuant to similar provisions of applicable
state or local income tax laws, to adjust the basis of the assets of the
Partnership. In such event, any basis adjustment attributable to such election
shall be allocated solely to the transferee.
(b) All other elections, including but not limited to the adoption of
accelerated depreciation and cost recovery methods, required or permitted to be
made by the Partnership under the Code shall be made by the General Partner in
such manner as will, in the opinion of the General Partner (as advised by Tax
Counsel or the Accountants as the General Partner deems necessary) be most
advantageous to the Limited Partners as a group. The Partnership shall, to the
extent permitted by applicable law and regulations, elect to treat as an expense
for federal income tax purposes all amounts incurred by it for state and local
taxes, interest and other charges which may, in accordance with applicable law
and regulations, be considered as expenses.
12.9 Tax Matters Partner.
(a) The General Partner is hereby designated as the "Tax Matters
Partner" under Section 6231(a)(7) of the Code and may hereafter designate its
successor as Tax Matters Partner, to manage administrative and judicial tax
proceedings conducted at the Partnership level by the Internal Revenue Service
with respect to Partnership matters. Any Partner shall have the right to
participate in such administrative or judicial proceedings relating to the
determination of Partnership items at the Partnership level to the extent
provided by Section 6224 of the Code. The Limited Partners shall not act
independently with respect to tax audits or tax litigation affecting the
Partnership, and actions taken by the General Partner as Tax Matters Partner in
connection with tax audits shall be binding in all respects upon the Limited
Partners.
(b) The Tax Matters Partner shall have the following duties;
(i) To the extent and in the manner required by applicable law and
regulations, the Tax Matters Partner shall furnish the name, address,
Interest and taxpayer identification number of each Partner to the
Secretary of the Treasury or his delegate (the "Secretary"); and
(ii) To the extent and in the manner required by applicable law and
regulations, the Tax Matters Partner shall keep each Partner informed
of administrative and judicial proceedings for the adjustment at the
Partnership level of any item required to be taken into account by a
Partner for income tax purposes (such judicial proceedings referred to
hereinafter as "judicial review").
(c) Subject to Section 6.3 hereof, the Partnership shall indemnify
and reimburse the Tax Matters Partner for all expenses, including legal and
accounting fees, claims, liabilities, losses and damages incurred in connection
with any administrative or judicial proceeding with respect to the tax liability
of the Partners. The payment of all such expenses shall be made before any
distributions are made from Cash from Operations or Cash From Sales. Neither the
General Partner nor any Affiliate nor any other Person shall have any obligation
to provide funds for such purpose. The taking of any action and the incurring of
any expense by the Tax Matters Partner in connection with any such proceeding,
except to the extent required by law, is a matter in the sole and absolute
discretion of the Tax Matters Partner; and the provisions on limitations of
liability of the General Partner and indemnification set forth in Section 6.3 of
this Agreement shall be fully applicable to the Tax Matters Partner in its
capacity as such.
(d) The Tax Matters Partner is hereby authorized, but not required:
(i) to enter in to any settlement with the IRS or the Secretary with
respect to any tax audit or judicial review, in which agreement the
Tax Matters Partner may expressly state that such agreement shall bind
the other Partners, except that such settlement agreement shall not
bind any Partner who (within the time prescribed pursuant to Section
6224(c)(3) of the Code and regulations thereunder) files a statement
with the Secretary providing that the Tax Matters Partner shall not
have the authority to enter into a settlement agreement on the behalf
of such Partner;
(ii) in the event that a notice of a final administrative adjustment
at the partnership level of any item required to be taken into account
by a Partner for tax purposes (a "final adjustment") is mailed to the
Tax Matters Partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax
Court,
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the District Court of the United Sates for the district in which the
partnership's principal place of business is located, the United
States Court of Claims or any other appropriate forum;
(iii) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed
by the Secretary, to file a petition for judicial review with respect
to such request;
(v) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be
taken in to account by a Partner for tax purposes, or an item affected
by such item; and
(vi) to take any other action on behalf of the Partners or the
Partnership in connection with any administrative or judicial tax
proceeding to the extent permitted by applicable law or regulations.
12.10 Reports to State Authorities.
The General Partner shall prepare and file with all appropriate state
regulatory bodies and other authorities all reports required to be so filed by
state securities or "blue sky" authorities and by the NASAA Guidelines.
Section 13. MEETINGS AND VOTING RIGHTS OF THE LIMITED PARTNERS.
13.1 Meetings of the Limited Partners.
(a) A meeting of the Limited Partners may be called by the General
Partner on its own initiative, and shall be called by the General Partner
following its receipt of written request(s) for a meeting from Limited Partners
holding 10% or more of the then outstanding Units, to act upon any matter on
which the Limited Partners may vote (as set forth in this Agreement). Every such
request for a meeting shall state with reasonable specificity (i) the purpose(s)
for which such meeting is to be held and (ii) the text of any matter, resolution
or action proposed to be voted upon by the Limited Partners at such meeting
(which text the General Partner shall, subject to the provisions of Section
13.3, submit an accurate summary of such proposal in its Notice of such meeting
to the Limited Partners). Within ten days following the receipt of such a
request, the General Partner shall give Notice to all Limited Partners of such
meeting in the manner and for a time and place as specified in paragraph
13.1(b). In addition, the General Partner acting on its own initiative may, and
following its receipt of written request(s) therefor from Limited Partners
holding more than 10% of the then outstanding Units shall, submit for action by
Consent of the Limited Partners, in lieu of a meeting, any matter on which the
Limited Partners may vote (as set forth in this Section 13.
(b) A Notice of any such meeting (or action by written Consent
without a meeting) shall be given to all Limited Partners either (i) personally
or by mail (if such meeting is being called, or Consent action is being
solicited, by the General Partner upon the request of the Limited Partners) or
(ii) by regular mail (if such meeting is being called, or Consent action is
being solicited, by the General Partner on its own initiative) and a meeting
called pursuant to such Notice shall be held (or Consent action taken) not less
than 15 days nor more than 60 days after the date such Notice is distributed.
Such Notice shall be delivered or mailed to each Limited Partner at his record
address, or at such other address as he may have furnished in writing to the
General Partner for receipt of Notices, and shall state the place, date and time
of such meeting (which shall be the place, date and time, if any, specified in
the request for such meeting or such other place, date and time as the General
Partner shall determine to be reasonable and convenient to the Limited Partners)
and shall state the purpose(s) for which such meeting is to be held. If any
meeting of the Limited Partners is properly adjourned to another time or place,
and if any announcement of the adjournment of time or place is made at the
meeting, it shall not be necessary to give notice of the adjourned meeting. The
presence in person or by proxy of the Majority Interest shall constitute a
quorum at all meetings of the Limited Partners; provided, however, that, if
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there be no such quorum, holders of a majority of the Interests so present or so
represented may adjourn the meeting from time to time without further notice,
until a quorum shall have been obtained. No Notice of any meeting of Limited
Partners need be given to any Limited Partner who attends in person or is
represented by proxy (except when a Limited Partner attends a meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business on the ground that the meeting is not lawfully called or
convened) or to any Limited Partner otherwise entitled to such Notice who has
executed and filed with the records of the meeting, either before or after the
time thereof, a written waiver of such Notice.
(c) For the purpose of determining the Limited Partners entitled to
vote on any matter submitted to the Limited Partners at any meeting of such
Limited Partners (or to take action by Consent in lieu thereof), or any
adjournment thereof, the General Partner or the Limited Partners requesting such
meeting may fix, in advance, a date as the record date, which
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shall be a date not more than fifty (50) days nor less than ten (10) days prior
to any such meeting (or Consent action), for the purpose of any such
determination.
(d) Any Limited Partner may authorize any Person or Persons to act
for such Limited Partner by proxy in respect of all matters as to which such
Limited Partner is entitled to participate, whether by waiving Notice of any
meeting, taking action by Consent or voting as to any matter or participating at
a meeting of the Limited Partners. Every proxy must be signed by a Limited
Partner or his attorney-in-fact. No proxy shall be valid after the expiration of
eleven months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Limited Partner executing
it.
(e) At each meeting of the Limited Partners, the Limited Partners
present or represented by proxy may adopt such rules for the conduct of such
meeting as they shall deem appropriate, provided that such rules shall not be
inconsistent with the provisions of this Agreement.
13.2 Voting Rights of the Limited Partners.
Subject to Section 13.3, the Limited Partners, acting by Consent of
the Majority Interest may take the following actions without the concurrence of
the General Partner:
(a) amend this Agreement, other than (1) in any manner to allow the
Limited Partners to take part in the control or management of the Partnership's
business, and (2) without the specific Consent of the General Partner, to alter
the rights, powers and duties of the General Partner as set forth in this
Agreement;
(b) dissolve the Partnership;
(c) remove the General Partner and elect one or more Substitute
General Partners; and
(d) approve or disapprove of the Sale or series of Sales of all or
substantially all the assets of the Partnership except for any such Sale or
series of Sales in the ordinary course of liquidating the Partnership's
Investments during the Disposition Period.
In determining the requisite percentage in interest of Units necessary
to approve a matter on which the Sponsor may not vote or consent, any Units
owned by the Sponsor shall not be included. With respect to any Interests owned
by the Sponsor, the Sponsor may not vote on matters submitted to the Limited
Partners regarding the removal of the Sponsor or regarding any transaction
between the Program and the Sponsor. In determining the requisite percentage and
interest of Interests necessary to approve a matter in which a Sponsor may not
vote or consent, any Interests owned by the Sponsor shall not be included.
13.3 Limitations on Action by the Limited Partners.
The rights of the Limited Partners under Section 13.2 shall not be
exercised or be effective in any manner (a) to subject a Limited Partner to
liability as a general partner under the Delaware Act or under the laws of any
other jurisdiction in which the Partnership may be qualified or own an item of
Equipment or (b) to contract away the fiduciary duty owed to such Limited
Partner by the Sponsor under common law. Any action taken pursuant to Section
13.2 shall be void if any non-Affiliated Limited Partner, within 45 days after
such action is taken, obtains a temporary restraining order, preliminary
injunction or declaratory judgment from a court of competent jurisdiction on
grounds that, or an opinion of legal counsel selected by the Limited Partners to
the effect that, such action, if given effect, would have one or more of the
prohibited effects referred to in this Section 13.3. For purposes of this
Section 13.3, counsel shall be deemed to have been selected by the Limited
Partners if such counsel is affirmatively approved by the Consent of the
Majority Interest within 45 days of the date that the holders of 10% or more of
the Units propose counsel for this purpose.
Section 14. AMENDMENTS.
14.1 Amendments by the General Partner.
Subject to Section 13.2 of this Agreement and all applicable law, this
Agreement may be amended, at any time and from time to time, by the General
Partner without the Consent of the Majority Interest to effect any change in
this Agreement for the benefit or protection of the Limited Partners, including,
without limitation:
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(a) to add to the representations, duties or obligations of the
General Partner or to surrender any right or power granted to the General
Partner herein;
(b) to cure any ambiguity, to correct or supplement any provision
herein that may be inconsistent with any other provision herein or to add any
other provision with respect to matters or questions arising under this
Agreement that will not be inconsistent with the terms of this Agreement;
(c) to preserve the status of the Partnership as a "limited
partnership" for federal income tax purposes (or under the Delaware Act or any
comparable law of any other state in which the Partnership may be required to be
qualified);
(d) to delete or add any provision of or to this Agreement required
to be so deleted or added by the staff of the Commission, by any other federal
or state regulatory body or other agency (including, without limitation, any
"blue sky" commission) or by any Administrator or similar such official;
(e) to permit the Units to fall within any exemption from the
definition of "plan assets" contained in Section 2510.3-101 of Title 29 of the
Code of Federal Regulations;
(f) if the Partnership is advised by Tax Counsel, by the
Partnership's Accountants or by the IRS that any allocations of income, gain,
loss or deduction provided for in this Agreement are unlikely to be respected
for federal income tax purposes, to amend the allocation provisions of this
Agreement, in accordance with the advice of such Tax Counsel, such Accountants
or the IRS, to the minimum extent necessary to effect as nearly as practicable
the plan of allocations and distributions provided in this Agreement; and
(g) to change the name of the Partnership or the location of its
principal office.
14.2 AMENDMENTS WITH THE CONSENT OF THE MAJORITY INTEREST.
In addition to the amendments permitted to be made by the General
Partner pursuant to Section 14.1, the General Partner may propose to the Limited
Partners, in writing, any other amendment to this Agreement. The General Partner
may include in any such submission a statement of the purpose for the proposed
amendment and of the General Partner's opinion with respect thereto. Upon the
Consent of the Majority Interest, such amendment shall take effect; provided,
--------
however, that (a) no such amendment shall increase the liability of any Partner
-------
or adversely affect any Partner's share of distributions of cash or allocations
of Profits or Losses for Tax Purposes or of any investment tax credit amounts of
the Partnership without in each case the consent of each Partner affected
thereby; and (b) no such amendment shall modify or amend this Section 14 without
the consent of each Limited Partner.
Section 15. POWER OF ATTORNEY.
15.1 APPOINTMENT OF ATTORNEY-IN-FACT.
By their subscription for Units and their admission as Limited
Partners hereunder, Limited Partners make, constitute and appoint the General
Partner, each authorized officer of the General Partner and each Person who
shall thereafter become a Substitute General Partner during the term of the
Partnership, with full power of substitution, the true and lawful attorney-in-
fact of, and in the name, place and stead of, such Limited Partner, with the
power from time to time to make, execute, sign, acknowledge, swear to, verify,
deliver, record, file and publish:
(a) this Agreement, Schedule A to this Agreement and the Certificate
of Limited Partnership under the Delaware Act and any other applicable laws of
the State of Delaware and any other applicable jurisdiction, and any amendment
of any thereof (including, without limitation, amendments reflecting the
addition of any Person as a Partner or any admission or substitution of other
Partners or the Capital Contribution made by any such Person or by any Partner)
and any other document, certificate or instrument required to be executed and
delivered, at any time, in order to reflect the admission of any Partner
(including, without limitation, any Substitute General Partner and any
Substitute Limited Partner);
(b) any other document, certificate or instrument required to reflect
any action of the Partners duly taken in the manner provided for in this
Agreement, whether or not such Limited Partner voted in favor of or otherwise
consented to such action;
(c) any other document, certificate or instrument that may be
required by any regulatory body or other agency or the
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applicable laws of the United States, any state or any other jurisdiction in
which the Partnership is doing or intends to do business or that the General
Partner deems advisable;
(d) any certificate of dissolution or cancellation of the Certificate
of Limited Partnership that may be reasonably necessary to effect the
termination of the Partnership; and
(e) any instrument or papers required to continue or terminate the
business of the Partnership pursuant to Sections 9.5 and 11 hereof; provided
--------
that no such attorney-in-fact shall take any action as attorney-in-fact for any
Limited Partner if such action could in any way increase the liability of such
Limited Partner beyond the liability expressly set forth in this Agreement or
alter the rights of such Limited Partner under Section 8, unless (in either
case) such Limited Partner has given a power of attorney to such
attorney-in-fact expressly for such purpose.
15.2 AMENDMENTS TO AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP.
(a) Each Limited Partner is aware that the terms of this Agreement
permit certain amendments of this Agreement to be effected and certain other
actions to be taken or omitted by, or with respect to, the Partnership, in each
case with the approval of less than all of the Limited Partners, if a specified
percentage of the Partners shall have voted in favor of, or otherwise consented
to, such action. If, as and when:
(i) any amendment of this Agreement is proposed or any action is
proposed to be taken or omitted by, or with respect to, the
Partnership, which amendment or action requires, under the terms of
this Agreement, the Consent of the Partners;
(ii) Partners holding the percentage of Interests specified in this
Agreement as being required for such amendment or action have
consented to such amendment or action in the manner contemplated by
this Agreement; and
(iii) any Limited Partner has failed or refused to consent to such
amendment or action (hereinafter referred to as the "non-consenting
Limited Partner"),
then each non-consenting Limited Partner agrees that each attorney-in-fact
specified in Section 15.1 is hereby authorized and empowered to make, execute,
sign, acknowledge, swear to, verify, deliver, record, file and publish, for and
on behalf of such non-consenting Limited Partner, and in his name, place and
▇▇▇▇▇, any and all documents, certificates and instruments that the General
Partner may deem necessary, convenient or advisable to permit such amendment to
be lawfully made or such action lawfully taken or omitted. Each Limited Partner
is fully aware that he has executed this special power of attorney and that each
other Partner will rely on the effectiveness of such special power of attorney
with a view to the orderly administration of the Partnership's business and
affairs.
(b) Any amendment to this Agreement reflecting the admission to the
Partnership of any Substitute Limited Partner shall be signed by the General
Partner and by or on behalf of the Substitute Limited Partner. Any amendment
reflecting the withdrawal or removal of the General Partner and the admission of
any Substitute General Partner of the Partnership upon the withdrawal of the
General Partner need be signed only by such Substitute General Partner.
15.3 POWER COUPLED WITH AN INTEREST.
The foregoing grant of authority by each Limited Partner:
(a) is a special power of attorney coupled with an interest in favor
of such attorney-in-fact and as such shall be irrevocable and shall survive the
death, incapacity, insolvency, dissolution or termination of such Limited
Partner;
(b) may be exercised for such Limited Partner by a signature of such
attorney-in-fact or by listing or referring to the names of all of the Limited
Partners, including such Limited Partner, and executing any instrument with a
single signature of any one of such attorneys-in-fact acting as attorney-in-fact
for all of them; and
(c) shall survive the Assignment by any Limited Partner of the whole
or any portion of such Limited Partner's Partnership Interest, provided that, if
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any Assignee of an entire Partnership Interest shall have furnished to the
General Partner a power of attorney complying with the provisions of Section
15.1 of this Agreement and the admission to the Partnership of
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such Assignee as a Substitute Limited Partner shall have been approved by the
General Partner, this power of attorney shall survive such Assignment with
respect to the assignor Limited Partner for the sole purpose of enabling such
attorneys-in-fact to execute, acknowledge and file any instrument necessary to
effect such Assignment and admission and shall thereafter terminate with respect
to such Limited Partner.
Section 16. GENERAL PROVISIONS.
16.1 NOTICES, APPROVALS AND CONSENTS.
All Notices, approvals, Consents or other communications hereunder
shall be in writing and signed by the party giving the same, and shall be deemed
to have been delivered when the same are (a) deposited in the United States mail
and sent by first class or certified mail, postage prepaid, (b) hand delivered,
(c) sent by overnight courier or (d) telecopied. In each case, such delivery
shall be made to the parties at the addresses set forth below or at such other
addresses as such parties may designate by notice to the Partnership:
(a) If to the Partnership or the General Partner, at the principal
office of the Partnership, to:
ICON Cash Flow Partners L.P. Seven
c/o ICON Capital Corp.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to any Limited Partner, at the address set forth in Schedule A
hereto opposite such Limited Partner's name, or to such other address as may be
designated for the purpose by Notice from such Limited Partner given in the
manner hereby specified.
16.2 FURTHER ASSURANCES.
The Partners will execute, acknowledge and deliver such further
instruments and do such further acts and things as may be required to carry out
the intent and purpose of this Agreement.
16.3 CAPTIONS.
Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provisions hereof.
16.4 BINDING EFFECT.
Except to the extent required under the Delaware Act and for fees,
rights to reimbursement and other compensation provided as such, none of the
provisions of this Agreement shall be for the benefit of or be enforceable by
any creditor of the Partnership.
16.5 SEVERABILITY.
If one or more of the provisions of this Agreement or any application
thereof shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and any
other application thereof shall not in any way be affected or impaired thereby,
and such remaining provisions shall be interpreted consistently with the
omission of such invalid, illegal or unenforceable provisions.
16.6 INTEGRATION.
This Agreement constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings of the parties in connection
therewith that conflict with the express terms of this Agreement. No covenant,
representation or condition not expressed in this Agreement shall affect, or be
effective to interpret, change or restrict, the express provisions of this
Agreement.
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16.7 APPLICABLE LAW.
This Agreement shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware, including, without limitation,
the Delaware Act (except and solely to the extent that provisions of the laws of
any other jurisdiction are stated to be applicable in any section of this
Agreement), without giving effect to the conflict of laws provisions thereof.
16.8 COUNTERPARTS.
This Agreement may be signed by each party hereto upon a separate
counterpart (including, in the case of a Limited Partner, a separate
subscription agreement or signature page executed by one or more such Partners),
but all such counterparts, when taken together, shall constitute but one and the
same instrument.
16.9 CREDITORS.
No creditor who makes a loan to the Partnership shall have or acquire
at any time, as a result of making such a loan, any direct or indirect interest
in the profits, capital or property of the Partnership other than as a secured
creditor except solely by an assignment of the interest of the Limited Partner
as provided herein above.
16.10 INTERPRETATION.
Unless the context in which words are used in this Agreement otherwise
indicates that such is the intent, words in the singular shall include the
plural and in the masculine shall include the feminine and neuter and vice
versa.
16.11 SUCCESSORS AND ASSIGNS.
Each and all of the covenants, terms, provisions and agreements herein
contained shall be binding upon and inure to the benefit of the successors and
assigns of the respective parties hereto.
16.12 WAIVER OF ACTION FOR PARTITION.
Each of the parties hereto irrevocably waives, during the term of the
Partnership, any right that he may have to maintain any action for partition
with respect to the property of the Partnership.
Section 17. DEFINITIONS.
Defined terms used in this Agreement shall have the meanings specified
below. Certain additional defined terms are set forth elsewhere in this
Agreement. Unless the context requires otherwise, the singular shall include the
plural and the masculine gender shall include the feminine and neuter, and vice
versa, and "Article" and "Section" references are references to the Articles and
Sections of this Agreement.
"ACCOUNTANTS" means KPMG Peat Marwick LLP, or such other firm of
independent certified public accountants as shall be engaged from time
to time by the General Partner on behalf of the Partnership.
"ACQUISITION EXPENSES" means expenses (other than Acquisition Fees)
incurred and paid to any Person which are attributable to selection
and acquisition of Equipment and Financing Transactions, whether or
not acquired or entered into, including legal fees and expenses,
travel and communications expenses, costs of credit reports and
appraisals, non-refundable option payments on equipment and other
tangible or intangible personal property not acquired, commissions,
selection fees, fees payable to finders and brokers which are not
Affiliates of the Sponsor, accounting fees and expenses, costs of each
acquisition of an item of Equipment or a Financing Transaction
(including the negotiation of Leases and the negotiation and
documentation of Partnership borrowings, including commitment or
standby fees payable to Lenders), insurance costs and miscellaneous
other expenses however designated.
"ACQUISITION FEES" means, in connection with any Investment, the
amount payable from all sources (including without limitation, Gross
Offering Proceeds, Indebtedness and reinvestments) in respect of (a)
all fees and commissions paid by any party in connection with the
selection and purchase of any item of Equipment and the negotiation
and consummation of any Financing Transaction by the Partnership,
however designated and however
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treated for tax or accounting purposes, and (b) all finder's fees and
loan fees or points paid in connection therewith to a Lender not
affiliated with the Sponsor, but not any Acquisition Expenses.
In calculating Acquisition Fees, fees payable by or on behalf of the
Partnership to finders and brokers which are not Affiliates of the
Sponsor shall be deducted from the amount of Acquisition Fees payable
to the Sponsor, and no such fees may be paid to any finder or broker
which is an Affiliate of the Sponsor.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Capital
Account as of the end of any taxable year, the amount by which the
balance in such Capital Account is less than zero. For this purpose, a
Partner's Capital Account balance shall be (a) reduced for any items
described in Treas. Reg. Section 1.704-1(b)(2)(ii)(d)(4),(5), and (6),
(b) increased for any amount such Partner is unconditionally obligated
to contribute to the Partnership no later than the end of the taxable
year in which his Units, or the General Partner's Partnership Interest,
are liquidated (as defined in Treas. Reg. Section 1.704-1(b)(2)(ii)(g))
or, if later, within 90 days after such liquidation, and (c) increased
for any amount such Partner is treated as being obligated to contribute
to the Partnership pursuant to the penultimate sentences of Treas. Reg.
Sections 1.704-2(g)(1) and 1.704-2(i)(5) (relating to Minimum Gain).
"ADJUSTED CAPITAL CONTRIBUTION" means, as to any Limited Partner, as of
the date of determination, such Limited Partner's Capital Contribution
reduced, but not below zero, by all distributions theretofore made to
such Limited Partner by the Partnership which are deemed to be in
reduction of such Limited Partner's Capital Contribution pursuant to
Section 8.3(d)(ii).
"ADMINISTRATOR" means the official or agency administering the
securities laws of a state.
"AFFILIATE" means, with respect to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common
control with such Person, (b) any officer, director or partner of such
Person, (c) any other Person owning or controlling 10% or more of the
outstanding voting securities of such Person and (d) if such Person is
an officer, director or partner, any other Person for which such Person
acts in such capacity.
"AFFILIATED ENTITY" means any investment entity of whatever form that
is managed or advised by the General Partner.
"AFFILIATED INVESTMENT" means any Investment in which the General
Partner, any Affiliate of the General Partner or any Program sponsored
by the General Partner or any Affiliate of the General Partner
(including, without limitation, any Program in which the General
Partner or any such Affiliate has an interest) either has or in the
past has had an interest, but excluding any Joint Venture.
"AFFILIATED LIMITED PARTNER" means any officer, employee or securities
representative of the General Partner or any Affiliate of the General
Partner or of any Selling Dealer who is admitted as a Limited Partner
at a Closing.
"AGREEMENT" means this Agreement of Limited Partnership, as the same
may hereafter be amended, supplemented or restated from time to time.
"APPLICABLE REDEMPTION PRICE" means, with respect to any Unit, the
amount (determined as of the date of redemption of such Unit):
(a) during the Reinvestment Period, equal to 85% of the original
Capital Contribution of such Limited Partner less the sum of (i) 100%
of previous distributions to such Limited Partner of uninvested Capital
Contributions pursuant to Section 8.6, (ii) 100% of previous
distributions to such Limited Partner in redemption of a portion or all
of his Units pursuant to Section 10.5, (iii) 100% of previous
distributions of Distributable Cash, (iv) 100% of any previous
allocations to such Limited Partner of investment tax credit amounts
and (v) the aggregate amount, not exceeding $150.00, of expenses
reasonably incurred by the Partnership in connection with the
redemption such Unit; and
(b) during the Disposition Period, equal to 100% of the balance of the
Capital Account of such Limited Partner as of the end of the month next
preceding such date of redemption less the sum of (i) such Limited
Partner's pro rata share (without giving effect to such redemption) of
Profits and Losses of the Partnership (as reasonably estimated by the
General Partner) for the period commencing on the first calendar day of
the month in which such redemption date shall occur and (ii) the
aggregate amount, not exceeding $150.00, of expenses reasonably
incurred by the Partnership in connection with the redemption such
Unit;
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provided, however, that in no event shall the applicable redemption price
-------- -------
computed under either clause (a) or (b) of this definition exceed an amount
equal to such Limited Partner's Capital Account balance as of the end of the
calendar quarter preceding such redemption minus cash distributions which have
been made or are due to be made for the calendar quarter in which the redemption
occurs (for a redemption of all Units owned by such Limited Partner or that
portion of such amount which is proportionate to the percentage of such Limited
Partner's Units which are redeemed in the case of partial redemptions).
"Assignee" means any Person to whom any Partnership Interest has been Assigned,
in whole or in part, in a manner permitted by Section 10.2 of this Agreement.
"Assignment" means, with respect to any Partnership Interest or any part
thereof, the offer, sale, assignment, transfer, gift or otherwise disposition
of, such Partnership Interest, whether voluntarily or by operation of law,
except that in the case of a bona fide pledge or other hypothecation, no
Assignment shall be deemed to have occurred unless and until the secured party
has exercised his right of foreclosure with respect thereto; and the term
"Assign" has a correlative meaning.
"Available Cash From Operations" means Cash From Operations as reduced by (a)
payments of all accrued but unpaid Management Fees not required to be deferred,
and (b) after Payout, payments of all accrued but unpaid Subordinated
Remarketing Fees.
"Available Cash From Sales" means Cash From Sales, as reduced by (a) payments of
all accrued but unpaid Management Fees not required to be deferred, and (b)
after Payout, payments of all accrued but unpaid Subordinated Remarketing Fees.
"Book Value" means, with respect to any Partnership property, the Partnership's
adjusted basis for federal income tax purposes, adjusted from time to time to
reflect the adjustments required or permitted by Treas. Reg. Section 1.704-
1(b)(2)(iv)(d)-(g).
"Capital Account" means the capital account maintained for each Partner pursuant
to Section 5.5 of this Agreement
"Capital Contributions" means (1) as to the General Partner, its initial $1,000
contribution to the capital of the Partnership plus such additional amounts as
may be contributed to the capital of the Partnership by the General Partner and
(2) as to any Limited Partner, the gross amount of investment in the Partnership
actually paid by such Limited Partner for Units, without deduction for Front-End
Fees (whether payable by the Partnership or not).
"Cash Flow" means the Partnership's cash funds provided from normal operations
of the Partnership and from Financing Transactions (but excluding Cash from
Sales), without deduction for depreciation, but after deducting cash funds used
to pay all other cash expenses, debt payments, capital improvements and
replacements (other than cash funds withdrawn from reserves).
"Cash From Operations" means Cash Flow (a) reduced by amounts allocated to
Reserves to the extent deemed reasonable by the General Partner and (b)
increased by any portion of Reserves then deemed by the General Partner as not
required for Partnership operations.
"Cash From Refinancings" means the cash received by the Partnership as a result
of any borrowings by the Partnership, reduced by (a) all Indebtedness of the
Partnership evidencing such borrowings, and (b) the portion of such cash
allocated to Reserves to the extent deemed reasonable by the General Partner.
"Cash From Sales" means the cash received by the Partnership as a result of a
Sale reduced by (a) all Indebtedness of the Partnership required to be paid as a
result of the Sale, whether or not then payable (including, without limitation,
any liabilities on an item of Equipment sold that are not assumed by the buyer
and any remarketing fees required to be paid to Persons who are not Affiliates
of the General Partner), (b) the Subordinated Remarketing Fee (to the extent
permitted to be paid at the time pursuant to Section 6.4(f) of this Agreement),
(c) any accrued but previously unpaid Management Fees to the extent then
payable, (d) any Reserves to the extent deemed reasonable by the General Partner
and (e) all expenses incurred in connection with such Sale. In the event the
Partnership takes back a promissory note or other evidence of indebtedness in
connection with any Sale, all payments subsequently received in cash by the
Partnership with respect to such note shall be included in Cash From Sales upon
receipt, irrespective of the treatment of such payments by the Partnership for
tax or accounting purposes. If, in payment for Equipment sold, the Partnership
receives purchase money obligations secured by liens on such Equipment, the
amount of such obligations shall not be included in Cash From Sales until and to
the extent the obligations are realized in cash, sold or otherwise disposed of.
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"Closing" means the admission of Limited Partners to the Partnership in
accordance with Section 5.3 of this Agreement.
"Closing Date" means any date on which any Limited Partner shall be admitted to
the Partnership, and includes the Initial Closing Date and any subsequent
Closing Date, including the Final Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended, and in effect from
time to time, or corresponding provisions of subsequent laws.
"Commission" means the Securities and Exchange Commission.
"Commission Loans" means Indebtedness of the Partnership authorized by
Section 6.1(b)(ix).
"Competitive Equipment Sale Commission" means that brokerage fee paid for
services rendered in connection with the purchase or sale of Equipment and the
sale or absolute assignment for value of Financing Transactions which is
reasonable, customary and competitive in light of the size, type and location of
the Equipment or other collateral securing the applicable Partnership Investment
which is so transferred.
"Consent" means either (a) consent given by vote at a meeting called and held in
accordance with the provisions of Section 13.1 of this Agreement or (b) the
written consent without a meeting, as the case may be, of any Person to do the
act or thing for which the consent is solicited, or the act of granting such
consent, as the context may require.
"Controlling Person" means, with respect to the General Partner or any of
Affiliate of the General Partner, any of its chairmen, directors, presidents,
secretaries or corporate clerks, treasurers, vice presidents, any holder of a 5%
or larger equity interest in the General Partner or any such Affiliate, or any
Person having the power to direct or cause the direction of the General Partner
or any such Affiliate, whether through the ownership of voting securities, by
contract or otherwise.
"Counsel" and "Counsel to the Partnership" means ▇▇▇▇▇▇▇ Breed ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
New York, New York, or any successor law firm selected by the General Partner.
"Credit Committee" means a committee established by the General Partner to
establish credit review policies and procedures, supervise the efforts of the
credit department and approve significant transactions and transactions which
differ from the standards and procedures it has established. The Credit
Committee will, at all times, consist of three persons designated by the General
Partner.
"Creditworthy" means, when used herein with respect to a prospective Lessee or
User, that (1) the Credit Committee of the General Partner has made the
determination, in its reasonable business judgment, after review of financial,
credit, operational and other information concerning such prospective Lessee or
User, that such party is currently able and is expected to continue throughout
the term of such transaction to be able to meet its obligations to the
Partnership in a timely and complete manner, (2) the Lease or Financing
Transaction is adequately secured by Equipment and/or other collateral obtained,
directly or indirectly, from the Lessee or User (or a guarantor or other party)
and (3) the Lessee or User has satisfied substantially all other criteria
established by the Credit Committee as a condition to the Partnership's
investment in such Lease or Financing Transaction.
"Cumulative Return" means, as to any Limited Partner, an amount equal to an
eight (8%) percent annual cumulative return on such Limited Partner's Adjusted
Capital Contribution (calculated before application of any distribution made to
such Limited Partner pursuant on the date of such calculation) as outstanding
from time to time, compounded daily from a date not later than the last day of
the calendar quarter in which the original Capital Contribution is made
"Dealer-Manager" means ICON Securities Corp., an Affiliate of the General
Partner.
"Dealer-Manager Agreement" means the agreement entered into between the General
Partner and the Dealer-Manager, substantially in the form thereof filed as an
exhibit to the Registration Statement.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act, 6
Del. Code ▇▇▇. tit. 6, Section 17-101, et seq., as amended from time to time,
and any successor to such Delaware Act.
"Disposition Period" means the period commencing on the first day following the
end of the Reinvestment Period and continuing for the period deemed necessary by
the General Partner for orderly termination of its operations and affairs and
liquidation or disposition of the Partnership's Investments and other assets and
the realization of maximum
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Liquidation Proceeds therefor, which period is expected to continue not less
than six (6), and not more than thirty (30), months beyond the end of the
Reinvestment Period and which, in any event, will end no later than ten and one-
half (10 1/2) years after the Final Closing Date.
"Distributable Cash" has the meaning specified in Section 8.1(c) of this
Agreement.
"Distributable Cash From Operations" means Available Cash From Operations as
reduced by (1) amounts which the General Partner determines shall be reinvested
through the end of the Reinvestment Period in additional Equipment and Financing
Transactions and which ultimately are so reinvested.
"Distributable Cash From Sales" means Available Cash From Sales, as reduced by
(1) amounts which the General Partner determines shall be reinvested through the
end of the Reinvestment Period in additional Equipment and Financing
Transactions and which ultimately are so reinvested.
"Due Diligence Expenses" means fees and expenses actually incurred for bona fide
due diligence efforts expended in connection with the Offering in a maximum
amount not to exceed the lesser of (i) 1/2 of 1% of Gross Offering Proceeds and
(ii) the maximum amount permitted to be reimbursed under Appendix F to Article
III of the NASD Rules of Fair Practice].
"Effective Date" means the date the Registration Statement is declared
effective by the Commission.
"Equipment" means any new, used or reconditioned capital equipment and related
property acquired by the Partnership, including, but not limited to, the types
of equipment referred to in Section 3.2 of this Agreement and shall also be
deemed to include other tangible and intangible personal property which at any
time is subject to, or the collateral for, a Lease.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Escrow Account" means an interest-bearing account established and maintained by
the General Partner with the Escrow Agent, in accordance with the terms of the
Escrow Agreement, for the purpose of holding, pending the distribution thereof
in accordance with the terms of this Agreement, any Subscription Monies received
from Persons who are to be admitted as Limited Partners as a result of the
Closing occurring on the Initial Closing Date.
"Escrow Agent" means The Bank of New York (NJ) or another United States banking
institution with at least $50,000,000 in assets, which shall be selected by the
General Partner to serve in such capacity pursuant to the Escrow Agreement.
"Escrow Agreement" means that certain Escrow Agreement, dated as of July 10,
1993, between the General Partner and the Escrow Agent, substantially in the
form thereof filed as an exhibit to the Registration Statement, as amended and
supplemented from time to time as permitted by the terms thereof.
"Final Closing Date" means the last Closing Date on which any Limited Partner
(other than a Substitute Limited Partner) shall be admitted to the Partnership,
which shall be as soon as practicable following the Termination Date.
"Financing Transaction" means any extension of credit or loan to any User, which
is secured by a security interest in tangible or intangible personal property
and in any lease or license of such property.
"First Cash Distributions" means, with respect to any Limited Partner, all
distributions made to such Limited Partner by the Partnership during the
Reinvestment Period equal to an eight percent (8%) annual, cumulative return on
the amount of such Limited Partner's Capital Contribution (as reduced by any
amounts of uninvested Capital Contributions distributed to such Limited Partner
pursuant to Section 8.6 and by any amount paid to such Limited Partner in
redemption of such Limited Partner's Units pursuant to Section 10.5).
"Fiscal Period" means any interim accounting period established by the General
Partner within a Fiscal Year.
"Fiscal Quarter" means, for each Fiscal Year, the three-calendar-month period
which commences on the first day of such Fiscal Year and each additional three-
calendar-month period commencing on the first day of the first month following
the end of the preceding such period within such Fiscal Year (or such shorter
period ending on the last day of a Fiscal Year).
"Fiscal Year" means the Partnership's annual accounting period established
pursuant to Section 12.4 of this Agreement.
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"Front-End Fees" means fees and expenses paid by any Person for any services
rendered during the Partnership's organizational and offering or acquisition
phases (including Sales Commissions, Underwriting Fees, O & O Expense Allowance,
Acquisition Fees and Acquisition Expenses (other than any Acquisition Fees or
Acquisition Expenses paid by a manufacturer of equipment to any of its employees
unless such Persons are Affiliates of the Sponsor) and Leasing Fees, and all
other similar fees however designated).
"Full-Payout Lease" means any lease or license, entered into or acquired from
time to time by the Partnership, pursuant to which the aggregate noncancelable
rental or royalty payments due during the initial term of such lease or license,
on a present value basis, are at least sufficient to permit the Partnership to
recover the Purchase Price of the Equipment subject to such lease or license.
"General Partner" means ICON Capital Corp., a Connecticut corporation, and any
Person who subsequently becomes an additional or Substitute General Partner duly
admitted to the Partnership in accordance with this Agreement, in such Person's
capacity as a general partner of the Partnership.
"Gross Asset Value" means, with respect to any asset of the Partnership, the
asset's adjusted tax basis, except that:
(a) the initial Gross Asset Value of any asset contributed by a Partner to the
Partnership shall be the fair market value of such asset on the date of
contribution;
(b) the Gross Asset Values of all Partnership assets shall be adjusted to equal
their respective gross fair market values at such times as the Partners' Capital
Accounts are adjusted pursuant to Section 5.5(h) hereof;
(c) the Gross Asset Value of any Partnership asset distributed to any Partner
shall be the gross fair market value of such asset on the date of distribution;
(d) to the extent not otherwise reflected in the Partners' Capital Accounts, the
Gross Asset Values of Partnership assets shall be increased (or decreased) to
appropriately reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b); and
(e) if on the date of contribution of an asset or a revaluation of an asset in
accordance with (b)-(d) above, the adjusted tax basis of such asset differs from
its fair market value, the Gross Asset Value of such asset shall thereafter be
adjusted by reference to the depreciation method described in Treas. Reg.
Section 1.704-1(b)(2)(iv)(g)(3).
"Gross Offering Proceeds" means the gross amount of Capital Contributions
(before deduction of Front-End Fees payable by the Partnership and the discount
for Sales Commissions) of all Limited Partners admitted to the Partnership.
"Gross Revenue" means gross cash receipts of the Partnership from whatever
source including, but not limited to, (a) rental and royalty payments realized
under Leases, (b) principal and interest payments realized under Financing
Transactions and (c) interest earned on funds on deposit for the Partnership
(other than Subscription Monies).
"Gross Unit Price" means $100.00 for each whole Unit, and $.01 for each
1/10,000th Unit, purchased by a Limited Partner (other than an Affiliated
Limited Partner).
"Indebtedness" means, with respect to any Person as of any date, all obligations
of such Person (other than capital, surplus, deferred income taxes and, to the
extent not constituting obligations, other deferred credits and reserves) that
could be classified as liabilities (exclusive of accrued expenses and trade
accounts payable incurred in respect of property purchased in the ordinary
course of business which are not overdue or which are being contested in good
faith by appropriate proceedings and are not so required to be classified on
such balance sheet as debt) on a balance sheet prepared in accordance with
generally accepted accounting principles as of such date.
"Independent Expert" means a Person with no material current or prior business
or personal relationship with the Sponsor who is engaged to a substantial extent
in the business of rendering opinions regarding the value of assets of the type
held by the Partnership, and who is qualified to perform such work.
"Initial Closing Date" means the first Closing Date for the Partnership on which
Limited Partners with Interests equal to, or greater than, the Minimum Offering
are admitted to the Partnership.
"Interest" or "Partnership Interest" means the limited partnership unit or other
indicia of ownership in the Partnership. The entire ownership interest of a
Partner in the Partnership, whether held by such Partner or an
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immediate or subsequent Assignee thereof, including, without limitation, such
Partner's right (a) to a distributive share of the Cash From Operations, Cash
From Sales and any other distributions of cash from operation or sale of the
Partnership's Investments or liquidation of the Partnership and its assets, and
of the Partnership's Profits or Losses for Tax Purposes and (b) if a General
Partner, to participate in the management of the business and affairs of the
Partnership.
"Investment in Equipment and Financing Transactions" means the aggregate amount
of Capital Contributions actually paid or allocated to the purchase, manufacture
or renovation of Equipment acquired, and investment in Financing Transactions
entered into or acquired, by the Partnership together with other cash payments
such as interest, taxes and Reserves allocable thereto (not exceeding 3% of
Capital Contributions) and excluding Front-End Fees.
"Investments" means, collectively, the Partnership's portfolio, from time to
time, of Equipment, Leases and Financing Transactions, including any equity
interest of the Partnership therein, whether direct or indirect, through a
nominee, Joint Venture or otherwise.
"▇▇▇" means an Individual Retirement Account and its related funding vehicle.
"IRS" or "Service" means the Internal Revenue Service or any successor agency
thereto.
"Involuntary Withdrawal" means, with respect to the General Partner, the removal
or involuntary withdrawal of the General Partner from the Partnership pursuant
to Section 9.2 of this Agreement.
"Joint Venture" means any syndicate, group, pool, general partnership, business
trust or other unincorporated organization through or by means of which the
Partnership acts jointly with any Program sponsored by the General Partner or
any Affiliate of the General Partner or with any non-Affiliated Person to invest
in Equipment, Leases or Financing Transactions.
"Lease" means any Full-Payout Lease and any Operating Lease.
"Leasing Fees" means the total of all fees and commissions paid by any party in
connection with the initial Lease of Equipment acquired by the Partnership.
"Lender" means any Person that lends cash or cash equivalents to the
Partnership, including any Person that acquires by purchase, assignment or
otherwise an interest in the future rents payable under any Lease and in the
related Equipment or other assets or in payments due under any Financing
Transaction, and any property securing, any such transaction.
"Lessee" means a lessee or license under a Lease.
"Limited Partner" means any Person who is the owner of at least one Unit and who
has been admitted to the Partnership as an Limited Partner and any Person who
becomes a Substitute Limited Partner, in accordance with this Agreement, in such
Person's capacity as a Limited Partner of the Partnership.
"Majority" or "Majority Interest" means Limited Partners owning more than 50% of
the aggregate outstanding Units.
"Management Fees" means, for any Fiscal Year, an annual fee in an amount equal
to the lesser of (a) the sum of (i) an amount equal to 5% of annual gross rental
revenues realized under Operating Leases, (ii) an amount equal to 2% of annual
gross rental payments realized under Full-Payout Leases that are Net Leases,
(iii) an amount equal to 2% of annual gross principal and interest revenues
realized in connection with Financing Transactions and (iv) an amount equal to
7% of annual gross rental revenues from Equipment owned and operated by the
Partnership in the manner contemplated by the NASAA Guidelines (i.e., the
General Partner provides both asset management and additional services relating
to the continued and active operation of such Equipment, such as on-going
marketing and re-leasing or re-licensing of Equipment, hiring or arranging for
the hiring of crews or operating personnel for such Equipment and similar
services), and (b) the amount of reasonable management fees customarily paid to
non-affiliated third parties rendering similar services in the same geographic
location and for similar types of equipment.
"Maximum Offering" means receipt and acceptance by the Partnership of
subscriptions by Persons eligible to purchase a total of 1,000,000 Units of
Partnership Interest on or before the Final Closing Date.
"Minimum Offering" means receipt and acceptance by the Partnership of
subscriptions for not less than 12,000
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Units (excluding the ten (10) Units subscribed for by the Original Limited
Partner and any Units in excess of 600 Units collectively subscribed for by the
General Partner or any Affiliate of the General Partner).
"NASAA Guidelines" means the Statement of Policy regarding Equipment Programs
adopted by the North American Securities Administrators Association, Inc., as in
effect on the date of the Prospectus.
"NASD" means the National Association of Securities Dealers, Inc.
"Net Disposition Proceeds" means the proceeds realized by the Partnership from
the Sale or other disposition of an item of Equipment (including insurance
proceeds or lessee indemnity payments arising from the loss or destruction of
the Equipment), Financing Transactions, or any other Partnership property, less
all related Partnership liabilities.
"Net Lease" means a Lease under which the Lessee assumes responsibility for, and
bears the cost of, insurance, taxes, maintenance, repair and operation of the
leased or licensed asset and where the noncancelable rental or royalty payments
pursuant to such Lease are absolutely net to the Partnership.
"Net Offering Proceeds" means the Gross Offering Proceeds minus the Underwriting
Fees, Sales Commissions and the O & O Expense Allowance payable by the
Partnership.
"Net Unit Price" means the Gross Unit Price less an amount equal to 8% of the
Gross Unit Price (equivalent to Sales Commissions) for each Unit or fraction
thereof purchased by an Affiliated Limited Partner.
"Net Worth" means, with respect to any Person as of any date, the excess, on
such date, of assets over liabilities, as such items would appear on the balance
sheet of such Person in accordance with generally accepted accounting
principles.
"Notice" means a writing containing the information required by this Agreement
to be communicated to any Person, personally delivered to such Person or sent by
registered, certified or regular mail, postage prepaid, to such Person at the
last known address of such Person.
"O & O Expense Allowance" means the aggregate amount equal to the product of (a)
the number of Units subscribed for in the Offering and (b) $3.50.
"Offering" means the offering of Units pursuant to the Prospectus.
"Offering Period" means the period from the Effective Date to the Termination
Date.
"Operating Expenses" means (a) all costs of personnel (including officers or
employees of the General Partner or its Affiliates other than Controlling
Persons) involved in the business of the Partnership, allocated pro rata to
their services performed on behalf of the Partnership, but excluding overhead
expenses attributable to such personnel); (b) all costs of borrowed money, taxes
and assessments on Partnership Investments and other taxes applicable to the
Partnership; (c) legal, audit, accounting, brokerage, appraisal and other fees;
(d) printing, engraving and other expenses and taxes incurred in connection with
the issuance, distribution, transfer, registration and recording of documents
evidencing ownership of an interest in the Partnership or in connection with the
business of the Partnership; (e) fees and expenses paid to independent
contractors, bankers, brokers and services, leasing agents and sales personnel
consultants and other equipment management personnel, insurance brokers and
other agents (all of which shall only be billed directly by, and be paid
directly to, the provider of such services); (f) expenses (including the cost of
personnel as described in (a) above) in connection with the disposition,
replacement, alteration, repair, refurbishment, leasing, licensing, re-leasing,
re-licensing, financing, refinancing and operation of Partnership Equipment and
Financing Transactions (including the costs and expenses of insurance premiums,
brokerage and leasing and licensing commissions, if any, with respect to its
Investments and the cost of maintenance of its Equipment; (g) expenses of
organizing, revising, amending, converting, modifying or terminating the
Partnership; (h) expenses in connection with distributions made by the
Partnership to, and communications and bookkeeping and clerical work necessary
in maintaining relations with, its Limited Partners, including the costs of
printing and mailing to such Person evidences of ownership of Units and reports
of meetings of the Partners and of preparation of proxy statements and
solicitations of proxies in connection therewith; (i) expenses in connection
with preparing and mailing reports required to be furnished to the Limited
Partners for investor, tax reporting or other purposes, and reports which the
General Partner deems it to be in the best interests of the Partnership to
furnish to the Limited Partners and to their sales representatives; (j) any
accounting, computer, statistical or bookkeeping costs necessary for the
maintenance of the books and records of the Partnership (including an allocable
portion of the Partnership's costs of acquiring and owning computer equipment
used in connection with the operations and reporting activities of the
Partnership and any other investment programs sponsored by the General Partner
or any of its Affiliates, the
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Partnership's interest in which equipment shall be liquidated in connection with
the Partnership's liquidation); (k) the cost of preparation and dissemination of
the informational material and documentation relating to potential sale,
refinancing or other disposition of Equipment and Financing Transactions; (l)
the costs and expenses incurred in qualifying the Partnership to do business in
any jurisdiction, including fees and expenses of any resident agent appointed by
the Partnership; and (m) the costs incurred in connection with any litigation or
regulatory proceedings in which the Partnership is involved.
"Operating Lease" means a lease or license, entered into or acquired from time
to time by the Partnership, pursuant to which the aggregate noncancelable rental
or royalty payments during the original term of such lease or license, on a net
present value basis, are not sufficient to recover the Purchase Price of the
Equipment leased or licensed thereby.
"Operations" means all operations and activities of the Partnership except
Sales.
"Organizational and Offering Expenses" means (a) all costs and expenses incurred
in connection with, and in preparing the Partnership for, qualification under
federal and state securities laws and subsequently offering and distributing the
Units to the public (except for Sales Commissions and Underwriting Fees payable
to the General Partner, the Dealer-Manager or any Selling Dealer), including but
not limited to, (i) printing costs, (ii) registration and filing fees, (iii)
attorneys', accountants' and other professional fees and (iv) Due Diligence
Expenses and (b) the direct costs of salaries to and expenses (including costs
of travel) of officers and directors of the General Partner or any Affiliate of
the General Partner while engaged in organizing the Partnership and registering
the Units.
"Original Limited Partner" means ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
"Participant List" means a list, in alphabetical order by name, setting forth
the name, address and business or home telephone number of, and number of Units
held by, each Limited Partner, which list shall be printed on white paper in a
readily readable type size (in no event smaller than 10-point type) and shall be
updated at least quarterly to reflect any changes in the information contained
therein.
"Partner" means the General Partner (including any Substitute General Partner)
and any Limited Partner (including the Original Limited Partner and any
Substitute Limited Partner).
"Partner Nonrecourse Debt" means any Partnership nonrecourse liability for which
any Partner bears the economic risk of loss within the meaning of Treas. Reg.
Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning specified in Treas. Reg.
Section 1.704-2(i)(3), and such additional amount as shall be treated as Partner
Nonrecourse Minimum Gain pursuant to Treas. Reg. Section 1.704-2(j)(1)(iii).
"Partner Nonrecourse Deductions" shall consist of those deductions and in those
amounts specified in Treas. Reg. Sections 1.704-2(i)(2) and (j).
"Partnership" means ICON Cash Flow Partners L.P. Seven, the limited partnership
formed pursuant to, and governed by the terms of, this Agreement.
"Partnership Loan" means any loan made to the Partnership by the General Partner
or any Affiliate of the General Partner in accordance with Section 6.2(d) of
this Agreement.
"Partnership Minimum Gain" has the meaning specified in Treasury Regulation
Section 1.704-2(b)(2) and (d) and such additional amount as shall be treated as
Partnership Minimum Gain pursuant to Treas. Reg. Section 1.704-2(j)(1)(iii).
"Partnership Nonrecourse Deductions" shall consist of those deductions and in
those amounts specified in Treas. Reg. Sections 1.704-2(c) and (j).
"Payout" means the time when the aggregate amount of cash distributions (from
whatever sources) to a Limited Partner equals the amount of such Limited
Partner's Capital Contribution plus an amount equal to an eight (8%) percent
annual cumulative return on such Capital Contribution, compounded daily from a
date not later than the last day of the calendar quarter in which such Capital
Contribution is made (determined by treating distributions actually made to a
Limited Partner as first being applied to satisfy such 8% return on capital
which has accrued and has not been paid and applying any excess distributions as
a return of such Limited Partner's Capital Contribution). Income earned on
escrowed funds and distributed to Limited Partners may be used to satisfy the
cumulative return requirement.
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"Permitted Investment" means an investment in any of (a) certificates of deposit
or savings or money-market accounts insured by the Federal Deposit Insurance
Corporation of banks located in the United States; (b) short-term debt
securities issued or guaranteed by the United States Government or its agencies
or instrumentalities, or bank repurchase agreements collateralized by such
United States Government or agency securities, (c) other highly liquid types of
money-market investments and (d) shares of one or more public investment
companies (but excluding any such company managed by any Affiliate of the
General Partner) registered with the Commission whose assets exceed $10,000,000
and are invested in such money market investments and held by an independent
custodian.
"Person" shall mean any natural person, partnership, trust, corporation,
association or other legal entity, including, but not limited to, the General
Partner and any Affiliate of the General Partner.
"Prior Program" means any Program previously sponsored by the General Partner or
any Affiliate of the General Partner.
"Prior Public Programs" means ICON Cash Flow Partners, L.P., Series A, ICON Cash
Flow Partners, L.P., Series B, ICON Cash Flow Partners, L.P., Series C, ICON
Cash Flow Partners, L.P., Series D, and ICON Cash Flow Partners, L.P., Series E
and ICON Cash Flow Partners L.P. Six.
"Profits" or "Losses" means, for any Fiscal Year, the Partnership's taxable
income or loss for such Fiscal Year, determined in accordance with Code section
703(a) (for this purpose, all items of income, gain, loss or deduction required
to be stated separately pursuant to Code section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses shall be applied to
increase such taxable income or reduce such loss;
(b) any expenditure of the Partnership described in Code section 705(a)(2)(B),
or treated as such pursuant to Treas. Reg. Section 1.704-1(b)(2)(iv)(i) and not
otherwise taken into account in computing Profits and Losses shall be applied to
reduce such taxable income or increase such loss;
(c) gain or loss resulting from a taxable disposition of any asset of the
Partnership shall be computed by reference to the Gross Asset Value of such
asset and the special depreciation calculations described in Treas. Reg. Section
1.704-1(b)(2)(iv)(g), notwithstanding that the adjusted tax basis of such asset
may differ from its Gross Asset Value;
(d) in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss for such
Fiscal Year, there shall be taken into account depreciation, amortization or
other cost recovery determined pursuant to the method described in Treas. Reg.
Section 1.704-1(b)(2)(iv)(g)(3); and
(e) any items which are specially allocated pursuant to Section 8.2(f) shall not
be taken into account in computing Profits or Losses.
"Profits from Operations" or "Losses from Operations" means all Profits for Tax
Purposes or Losses for Tax Purposes of the Partnership other than Profits for
Tax Purposes or Losses for Tax Purposes generated by Sales.
"Profits from Sales" or "Losses from Sales" means all Profits for Tax Purposes
or Losses for Tax Purposes of the Partnership generated by Sales.
"Program" means a limited or general partnership, Joint Venture, unincorporated
association or similar organization, other than a corporation, formed and
operated for the primary purpose of investment in and the operation of or gain
from an interest in equipment.
"Prospectus" means the prospectus included as part of the Registration Statement
on Form S-1 (No. 33-36376) in the final form in which such prospectus is filed
with the Commission pursuant to Rule 424(b) under the Securities Act and as
thereafter supplemented or amended pursuant to Rule 424(c) under the Securities
Act.
"Purchase Price" means, with respect to any Investment, the price paid by, or on
behalf of, the Partnership for or in connection with the purchase or improvement
of any item of Equipment or the acquisition or consummation of any Financing
Transaction, as the case may be, including the amount of the related Acquisition
Fees and all liens and encumbrances on such item of Equipment or Financing
Transaction (but excluding "points" and prepaid interest), plus that portion of
the reasonable, necessary and actual expenses (limited to accounting, auditing
or other such services, interest and principal payments, and loan commitment and
other financing fees on funds used to acquire or maintain
A-49
Equipment or Financing Transactions) incurred by the General Partner or any such
Affiliate in acquiring Equipment or Financing Transactions on an arm's length
basis with a view to transferring such Equipment or Financing Transaction to the
Partnership, which is allocated to the Equipment or Financing Transaction in
question in accordance with allocation procedures employed by the General
Partner or such Affiliate from time to time and within generally accepted
accounting principles, reduced (to a negative figure, if applicable) by the
aggregate amount of any revenues from such Equipment or Financing Transaction
payable to the General Partner or such Affiliate during the period from such
acquisition until the Equipment is transferred to the Partnership.
"Qualified Plan" means a pension, profit-sharing or stock bonus plan, including
▇▇▇▇▇ Plans, meeting the requirements of Sections 401 et seq. of the Code, as
amended, and its related trust.
"Qualified Subscription Account" means the interest-bearing account established
and maintained by the Partnership for the purpose of holding, pending the
distribution thereof in accordance with the terms of this Agreement, of
Subscription Monies received from Persons who are to be admitted as Limited
Partners as a result of Closings to be held subsequent to the Initial Closing
Date.
"Registration Statement" means the Registration Statement on Form S-1
(No. 33-36376) filed with the Commission under the Securities Act in the form in
which such Registration Statement is declared to be effective.
"Reinvestment Period" means the period commencing with the Initial Closing Date
and ending five (5) years after the Final Closing Date; provided that such
--------
period may be extended at the sole and absolute discretion of the General
Partner for a further period of not more than an additional 36 months.
"Reserves" means reserves established and maintained by the Partnership for
working capital and contingent liabilities, including repairs, replacements,
contingencies, accruals required by lenders for insurance, compensating balances
required by lenders and other appropriate items, in an amount not less than (a)
during the Reinvestment Period, 1.0% of Gross Offering Proceeds and (b) during
the Disposition Period, the lesser of (1) 1% of Gross Offering Proceeds and (2)
1% of the Partnership's aggregate Adjusted Capital Accounts.
"Roll-Up" means any transaction involving the acquisition, merger, conversion,
or consolidation, either directly or indirectly, of the Partnership and the
issuance of securities of a Roll-Up Entity. Such term does not include (a) a
transaction involving securities of the Partnership if they have been listed on
a national securities exchange or traded through the National Association of
Securities Dealers Automated Quotation National Market System for at least 12
months; or (b) a transaction involving the conversion of only the Partnership to
corporate, trust or association form if, as a consequence of such transaction,
there will be no significant adverse change in (i) Partnership's voting rights;
(ii) the term of existence of the Partnership; (iii) Sponsor's compensation; or
(iv) the Partnership's investment objectives.
"Roll-Up Entity" means any partnership, corporation, trust, or other entity that
is created by, or surviving after, the successful completion of a proposed Roll-
Up transaction.
"Sale" means the sale, exchange, involuntary conversion, foreclosure,
condemnation, taking, casualty (other than a casualty followed by refurbishing
or replacement), or other disposition of any of the Partnership's Equipment and
Financing Transactions.
"Sales Commissions" means, with respect to any Unit, an amount equal to 8.0% of
the Gross Offering Proceeds attributable to the sale of such Unit.
"Schedule A" means Schedule A attached to and made a part of, this Agreement,
which sets forth the names, addresses, Capital Contributions and Interests of
the Partners, as amended or supplemented from time to time to add or delete, as
the case may be, such information with respect to any Partner.
"Secondary Market" has the meaning specified in Section 10.2(c) of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Segment" shall mean each period consisting of that portion of any calendar
month that includes either the first through the fifteenth day of such month or
the sixteenth through the last day of such month, commencing with the first such
period ending after the Initial Closing Date; provided that the first Segment
--------
shall begin on the first day after the Initial Closing Date and end on the
earlier of the fifteenth or the last day of the month in which the Initial
Closing Date occurs and the final Segment shall end on the date of final
liquidation of the Partnership.
"Selling Dealer" means each member firm of the National Association of
Securities Dealers, Inc. which has been
A-50
selected by the General Partner or the Dealer-Manager to offer and sell Units
and which has entered into a Selling Dealer Agreement with the General Partner
or the Dealer-Manager.
"Selling Dealer Agreement" means each of the agreements entered into between the
General Partner or the Dealer-Manager and any Seller Dealer, each substantially
in the respective form thereof filed as an exhibit to the Registration
Statement.
"Sponsor" means any Person directly or indirectly instrumental in organizing, in
whole or in part, the Partnership or any Person who will manage or participate
in the management of the Partnership, and any Affiliate of such Person. The term
Sponsor does not include any Person whose only relationship to the Partnership
is that of (1) an independent equipment manager and whose only compensation is
as such or (2) a wholly independent third party, such as an attorney, accountant
or underwriter, whose only compensation is for professional services rendered in
connection with the Offering.
"Subordinated Remarketing Fee" means, with respect to any Investment, a fee in
the amount equal to the lesser of (a) 3% of the contract sales price applicable
to such Investment, or (b) one-half of that brokerage fee that is reasonable,
customary and competitive in light of the size, type and location of such
Investment.
"Subscription Agreement" means the Subscription Agreement substantially
in the form thereof filed as an exhibit to the Prospectus.
"Subscription Monies" has the meaning specified in Section 5.3(j) of this
Agreement.
"Substitute General Partner" means any Assignee of or successor to the General
Partner admitted to the Partnership in accordance with Section 9.5 of the
Agreement.
"Substitute Limited Partner" means any Assignee of Units who is admitted to the
Partnership as a Limited Partner pursuant to Section 10.3 of this Agreement.
"Tax Counsel" means ▇▇▇▇▇▇▇ Breed ▇▇▇▇▇▇ & ▇▇▇▇▇▇, New York, New York, or such
other tax counsel acceptable to the General Partner.
"Tax Matters Partner" means the Person designated pursuant to Section 6231(a)(7)
of the Code to manage administrative and judicial tax proceedings conducted at
the Partnership level by the Internal Revenue Service with respect to
Partnership matters. The General Partner is designated Tax Matters Partner for
the Partnership in Section 12.6(e) of this Agreement.
"Termination Date" means the earliest of (a) the date on which the Maximum
Offering has been sold, (b) twenty-four (24) months following the Effective
Date, and (c) the termination of the Offering by the General Partner at any
time.
"Treasury Regulation" or "Treas. Reg." means final or temporary regulations
issued by the United States Treasury Department pursuant to the Code.
"Underwriting Fees" means, in the aggregate, fees in an amount equal to 2.0% of
the Gross Offering Proceeds of Units sold.
"Unit" means a Unit of Partnership interest held by any Limited Partner.
"Unpaid Cumulative Return" means, as to any Limited Partner, the amount of such
Limited Partner's Cumulative Return calculated through the date as of which such
Unpaid Cumulative Return is being calculated, reduced (but not below zero) by
the aggregate distributions theretofore made to such Limited Partner by the
Partnership pursuant to Sections 8.1(c) and 11.3 of this Agreement which are
deemed to be a reduction of such Limited Partner's Unpaid Cumulative Return
pursuant to Section 8.3(d)(i).
"Unpaid Target Distribution" means, as to any Limited Partner, as of any given
date, the sum of such Partner's Adjusted Capital Contribution plus such Limited
Partner's Unpaid Cumulative Return.
"User" means any (a) manufacturer, (b) unrelated third-party lessor of equipment
to non-Affiliated equipment users, (c) equipment user to whom the Partnership
provides financing pursuant to a Financing Transaction and (d) intangibles user
to whom the Partnership leases or licenses intangible assets pursuant to a
Financing Transaction.
"Volume Discount" means the following discounts in the price of Units to which
investors purchasing Units in volume are entitled:
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------------------------------- -------------------- ------------------------
Net Purchase
Number of Units Discount Price
--------------- -------- -----
------------------------------- -------------------- ------------------------
2,499 or less None $100.00
------------------------------- -------------------- ------------------------
2,500 to 4,999 $2.50 $ 97.50
------------------------------- -------------------- ------------------------
5,000 to 9,999 $3.50 $ 96.50
------------------------------- -------------------- ------------------------
10,000 to 19,999 $4.50 $ 95.50
------------------------------- -------------------- ------------------------
20,000 or more $6.50 $ 93.50
=============================== ==================== ========================
"Voluntary Withdrawal" means, with respect to the General Partner, the voluntary
withdrawal from the Partnership of the General Partner as the General Partner of
the Partnership, or the voluntary sale, assignment, encumbrance or other
disposition of all of the General Partner's General Partnership Interest
pursuant to Section 9.1 of this Agreement.
"Withdrawal" means, with respect to the General Partner, the Voluntary or
Involuntary Withdrawal of such General Partner.
"Withdrawn General Partner" means a General Partner which has completed a
Withdrawal in accordance with the provisions of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
GENERAL PARTNER: ORIGINAL LIMITED PARTNER:
ICON CAPITAL CORP.
BY: BY:
/s/ Beaufort ▇. ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------- ---------------------------
BEAUFORT ▇. ▇. ▇▇▇▇▇▇, President ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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SCHEDULE A
NAMES, ADDRESSES AND CAPITAL CONTRIBUTIONS OF PARTNERS
Name and Address Capital Contributions Made
---------------- --------------------------
I. General Partner
ICON Capital Corp. $1,000
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
II. Original Limited Partner
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ $1,000
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
A-53
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ICON CASH FLOW PARTNERS L.P. SEVEN
TABLE OF CONTENTS
-----------------
Page
----
Section 1. ESTABLISHMENT OF PARTNERSHIP.............................................................. 1
Section 2. NAME, PRINCIPAL OFFICE, NAME AND ADDRESS OF REGISTERED AGENT
FOR SERVICE OF PROCESS................................................................... 1
2.1 Legal Name and Address.................................................................... 1
2.2 Address of Partners....................................................................... 1
Section 3. PURPOSES AND POWERS....................................................................... 2
3.1 Purposes.................................................................................. 2
3.2 Investment Objectives and Policies........................................................ 2
3.3 Powers.................................................................................... 2
Section 4. TERM...................................................................................... 3
Section 5. PARTNERS AND CAPITAL...................................................................... 3
5.1 General Partner........................................................................... 3
5.2 Original Limited Partner.................................................................. 3
5.3 Limited Partners.......................................................................... 3
5.4 Partnership Capital....................................................................... 5
5.5 Capital Accounts.......................................................................... 5
5.6 Additional Capital Contributions . . . . .................................................. 6
5.7 Loans by Partners.......................................................................... 6
5.8 No Right to Return of Capital.............................................................. 6
Section 6. GENERAL PARTNER............................................................................ 6
6.1 Extent of Powers and Duties................................................................ 6
6.2 Limitations on the Exercise of Powers of General Partner................................... 9
6.3 Limitation on Liability of General Partner and its Affiliates; Indemnification............ 12
6.4 Compensation of General Partner and its Affiliates........................................ 13
6.5 Other Interests of the General Partner and its Affiliates................................. 16
Section 7. POWERS AND LIABILITIES OF LIMITED PARTNERS................................................ 17
7.1 Absence of Control Over Partnership Business.............................................. 17
7.2 Limited Liability......................................................................... 17
Section 8. DISTRIBUTIONS AND ALLOCATIONS............................................................. 18
8.1 Distribution of Distributable Cash from Operations and Distributable Cash from Sales ..... 18
8.2 Allocations of Profits and Losses......................................................... 19
8.3 Distributions and Allocations Among the Limited Partners.................................. 21
8.4 Tax Allocations: Code Section 704(c); Revaluations........................................ 22
8.5 Compliance with NASAA Guidelines Regarding Front-End Fees................................. 22
8.6 Return of Uninvested Capital Contribution................................................. 22
8.7 Partner's Return of Investment in the Partnership......................................... 22
8.8 No Distributions in Kind ................................................................. 22
8.9 Partnership Entitled to Withhold.......................................................... 23
Section 9. WITHDRAWAL OF GENERAL PARTNER............................................................. 23
9.1 Voluntary Withdrawal...................................................................... 23
9.2 Involuntary Withdrawal.................................................................... 23
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9.3 Consequences of Withdrawal................................................................ 23
9.4 Liability of Withdrawn General Partner.................................................... 24
9.5 Continuation of Partnership Business...................................................... 24
Section 10. TRANSFER OF UNITS......................................................................... 24
10.1 Withdrawal of a Limited Partner........................................................... 24
10.2 Assignment................................................................................ 25
10.3 Substitution.............................................................................. 26
10.4 Status of an Assigning Limited Partner.................................................... 26
10.5 Limited Right of Presentment for Redemption of Units...................................... 26
Section 11. DISSOLUTION AND WINDING-UP................................................................ 27
11.1 Events Causing Dissolution................................................................ 27
11.2 Winding Up of the Partnership; Capital Contribution by the General Partner
Upon Dissolution.......................................................................... 27
11.3 Application of Liquidation Proceeds Upon Dissolution...................................... 28
11.4 No Recourse Against Other Partners........................................................ 29
Section 12. FISCAL MATTERS............................................................................ 29
12.1 Title to Property and Bank Accounts....................................................... 29
12.2 Maintenance of and Access to Basic Partnership Documents.................................. 29
12.3 Financial Books and Accounting............................................................ 30
12.4 Fiscal Year............................................................................... 30
12.5 Reports................................................................................... 30
12.6 Tax Returns and Tax Information........................................................... 32
12.7 Accounting Decisions...................................................................... 32
12.8 Federal Tax Elections..................................................................... 32
12.9 Tax Matters Partner....................................................................... 33
12.10 Reports to State Authorities.............................................................. 34
Section 13. MEETINGS AND VOTING RIGHTS OF THE LIMITED PARTNERS........................................ 34
13.1 Meetings of the Limited Partners.......................................................... 34
13.2 Voting Rights of the Limited Partners..................................................... 35
13.3 Limitations on Action by the Limited Partners............................................. 35
Section 14. AMENDMENTS................................................................................ 35
14.1 Amendments by the General Partner......................................................... 35
14.2 Amendments with the Consent of the Majority Interest...................................... 36
Section 15. POWER OF ATTORNEY......................................................................... 36
15.1 Appointment of Attorney-in-Fact........................................................... 37
15.2 Amendments to Agreement and Certificate of Limited Partnership............................ 37
15.3 Power Coupled With an Interest............................................................ 37
Section 16. GENERAL PROVISIONS........................................................................ 37
16.1 Notices, Approvals and Consents........................................................... 37
16.2 Further Assurances........................................................................ 38
16.3 Captions.................................................................................. 38
16.4 Binding Effect............................................................................ 38
16.5 Severability.............................................................................. 38
16.6 Integration............................................................................... 38
16.7 Applicable Law............................................................................ 38
16.8 Counterparts.............................................................................. 38
16.9 Creditors................................................................................. 39
16.10 Interpretation............................................................................ 39
16.11 Successors and Assigns.................................................................... 39
16.12 Waiver of Action for Partition............................................................ 39
Section 17. DEFINITIONS............................................................................... 39
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