EXHIBIT B
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
November 29, 1996
atel7-9/lpa.4
ATEL CAPITAL EQUIPMENT FUND VII, L.P.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
1. NAME AND PRINCIPAL PLACE OF BUSINESS............................ B-1
2. DEFINITIONS..................................................... B-1
3. BUSINESS AND PURPOSE............................................ B-8
4. TERM............................................................ B-9
5. GENERAL PARTNER................................................. B-9
6. INITIAL AND ADDITIONAL LIMITED PARTNERS......................... B-9
Section 6.1 Initial Limited Partners........................... B-9
Section 6.2 Additional Limited Partners........................ B-9
Section 6.3 Conditions to Admission............................ B-9
Section 6.4 Admission as a Limited Partner..................... B-10
Section 6.5 Limitation on Additional Insurance................. B-10
Section 6.6 Escrow............................................. B-10
Section 6.7 Capital Account.....................................B-10
7. LIABILITY AND STATUS OF LIMITED PARTNERS.........................B-11
8. COMPENSATION TO THE GENERAL PARTNER AND/OR
AFFILIATES OF THE GENERAL PARTNER..............................B-11
Section 8.1 General Limitation..................................B-11
Section 8.2 Acquisition Stage...................................B-11
Section 8.3 Operating Stage.....................................B-11
Section 8.4 Payment of Fees on Removal..........................B-14
Section 8.5 Employment of Broker-Dealers........................B-14
9. FUND EXPENSES AND RESERVES.......................................B-14
Section 9.1 Reimbursement of General Partner....................B-14
Section 9.2 Limitation on Reimbursement.........................B-14
Section 9.3 Fund Expenses.......................................B-15
Section 9.4 Reserves............................................B-16
10. ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS... .................B-16
Section 10.1 Allocation of Net Income and Net
Loss Prior to Initial Closing Date...............B-17
Section 10.2 Allocation of Net Income and Net
Loss After Initial Closing Date..................B-17
Section 10.3 Special Allocations................................B-19
Section 10.4 Distribution of Cash From Operations...............B-19
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Section 10.5 Distribution of Cash From Sales
or Refinancing..................................B-19
Section 10.6 Distributions of Cash From
Reserve Account.................................B-20
Section 10.7 Determination of Amounts to
be Distributed..................................B-21
Section 10.8 Consent to Allocations............................B-21
Section 10.9 Limitation on Distributions.......................B-21
Section 10.10 Allocation to General Partner.....................B-21
Section 10.11 Return of Unused Capital..........................B-21
Section 10.12 General Partner Interest..........................B-21
Section 10.13 Distributions in Kind.............................B-21
Section 10.14 Withholding Taxes.................................B-22
11. ASSIGNMENT OF FUND INTERESTS.....................................B-22
Section 11.1 Limitations on Transfer............................B-22
Section 11.2 Distributions and Effective
Date of Transfer ................................B-23
Section 11.3 Governmental Restrictions..........................B-24
Section 11.4 Non-Complying Transfers............................B-24
Section 11.5 Misrepresentations and Forfeit.....................B-24
12. SUBSTITUTED LIMITED PARTNERS.....................................B-24
Section 12.1 Limitations on Substitution........................B-24
Section 12.2 Consent to Admission...............................B-25
Section 12.3 Amendment of Agreement.............................B-25
13. REPURCHASE OF FUND INTERESTS.....................................B-25
14. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS..........................B-26
Section 14.1 Books of Account and Records.......................B-26
Section 14.2 Audited Annual Financial Statements................B-28
Section 14.3 Other Annual Reporting.............................B-28
Section 14.4 Quarterly Reports..................................B-29
Section 14.5 Unaudited Quarterly
Financial Statements.............................B-29
Section 14.6 Other Quarterly Reports............................B-29
Section 14.7 Tax Returns........................................B-29
Section 14.8 Governmental Reports...............................B-30
Section 14.9 Maintenance of Suitability Records.................B-30
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15. RIGHTS, AUTHORITY, POWERS AND RESPONSIBILITIES
OF THE GENERAL PARTNER...........................................B-30
Section 15.1 Services of the General Partner....................B-30
Section 15.2 Authority of the General Partner...................B-30
Section 15.3 General Powers and Fiduciary Duty..................B-34
Section 15.4 Limitations on General
Partner's Authority.............................B-34
Section 15.5 Limitation on General Partner's
Liability.......................................B-39
Section 15.6 Tax Matters Partner................................B-39
Section 15.7 Minimum Investment in Equipment /
Maximum Front-End Fees..........................B-39
Section 15.8 Reliance on General Partner's Authority............B-40
16. RIGHTS, POWERS AND VOTING RIGHTS OF
THE LIMITED PARTNERS.............................................B-41
Section 16.1 Limitation on Limited Partner Authority............B-41
Section 16.2 Voting Rights......................................B-41
Section 16.3 Voting Procedures..................................B-41
Section 16.4 Limitations on Limited Partner Rights..............B-43
Section 16.5 Limitations on Power to Amend Agreement............B-43
Section 16.6 Limited Partner List...............................B-44
Section 16.7 Dissenters' Rights and Limitations on
Mergers and Roll-ups............................B-44
17. TERMINATION OF A GENERAL PARTNER AND TRANSFER
OF A GENERAL PARTNER'S INTEREST..................................B-46
Section 17.1 Removal or Withdrawal..............................B-46
Section 17.2 Other Terminating Events...........................B-46
Section 17.3 Election of Successor General Partner;
Continuation of Fund Business....................B-46
Section 17.4 Admission of Successor or
Additional General Partner.......................B-47
Section 17.5 Effect of a Terminating Event......................B-47
Section 17.6 Election of Additional General Partner.............B-48
Section 17.7 Assignment of General
Partner's Interest...............................B-48
Section 17.8 Limited Partners' Participation
in General Partner's Bankruptcy..................B-48
18. CERTAIN TRANSACTIONS.............................................B-49
19. TERMINATION AND DISSOLUTION OF THE FUND..........................B-49
Section 19.1 Termination and Dissolution........................B-49
Section 19.2 Accounting and Liquidation.........................B-50
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20. SPECIAL POWER OF ATTORNEY........................................B-50
Section 20.1 Execution of Power of Attorney.....................B-50
Section 20.2 Special Power of Attorney..........................B-51
21. INDEMNIFICATION..................................................B-51
Section 21.1 Indemnification of the General Partner.............B-51
Section 21.2 Limitations on Indemnification.....................B-52
Section 21.3 Insurance..........................................B-53
22. MISCELLANEOUS....................................................B-53
Section 22.1 Counterparts.......................................B-53
Section 22.2 Successors and Assigns.............................B-53
Section 22.3 Severability.......................................B-53
Section 22.4 Notices............................................B-53
Section 22.5 Captions...........................................B-53
Section 22.6 Number and Pronouns................................B-53
Section 22.7 General Partner Address............................B-54
Section 22.8 Limited Partner Address............................B-54
Section 22.9 Construction.......................................B-54
Section 22.10 Qualification to Do Business.......................B-54
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF ATEL CAPITAL EQUIPMENT FUND VII, L.P.
This PARTNERSHIP AGREEMENT (the "Agreement"), entered into as of the 17th day of
May, 1996, by and between ATEL Financial Corporation ("ATEL"), a California
Corporation, as the General Partner (the "General Partner"), and ▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇ as the initial Limited Partners, whereby the parties together agrees
to form a limited partnership pursuant to the California Revised Limited
Partnership Act is hereby amended and restated in its entirety this 29th day of
November, 1996, as set forth below:
1. NAME AND PRINCIPAL PLACE OF BUSINESS
The name of the Fund shall be ATEL Capital Equipment Fund VII, L.P. or
such other name as the General Partner shall hereafter designate in writing to
the Limited Partners. The Fund's principal place of business shall be ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place or
places in the State of California as the General Partner may hereafter
determine.
2. DEFINITIONS
The following terms used in this Agreement shall (unless otherwise
expressly provided herein or unless the context otherwise requires) have the
following respective meanings:
"Acquisition Expenses" shall mean expenses including, but not limited
to, legal fees and expenses, travel and communication expenses, costs of
appraisals, accounting fees and expenses, and miscellaneous expenses relating to
selection and acquisition of Equipment, whether or not acquired.
"Acquisition Fees" shall mean the total of all fees and commissions
paid by any party in connection with the initial purchase or manufacture of
Equipment. Included in the computation of such fees or commissions shall be any
commission, selection fee, financing fee, nonrecurring management fee, or any
fee of a similar nature, however designated.
"Adjusted Capital Account Deficit" shall mean, with respect to any
Partner, the deficit balance if any, in such Partner's Capital Account as of the
end of the relevant fiscal year, after giving effect to the following
adjustments: (a) Crediting to such Capital Account any amounts which such
Partner is obligated to restore or is deemed to be obligated to restore pursuant
to Regulations sections 1.704-2(g)(1) and 1.704-2(i)(5); and (b) Debiting to
such Capital Account the items described in Regulations Section 1.704-
1(b)(2)(ii)(d)(4),(5) and (6). This definition is intended to
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comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Adjusted Invested Capital" shall mean, as of any date, the Original
Invested Capital attributable to the Units held by any Person on or before such
date, as decreased (but not below zero) by the amount which (i) all
Distributions from Cash from Operations and Cash from Sales and Refinancing with
respect to such Units on or before the date of determination pursuant to any
provision of this Agreement exceed (ii) the Priority Distribution attributable
to such Units for such period.
"Affiliate" of a Person shall mean (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(ii) any Person owning or controlling 10% or more of the outstanding voting
securities or beneficial interests of such Person, (iii) any officer, director,
trustee or partner of such Person and (iv) if such Person is an officer,
director, trustee, partner or holder of 10% or more of the voting securities or
beneficial interests of such Person, any other company for which such Person
acts in such capacity. However, such term shall not include a Person who is a
partner in a partnership or joint venture with the Fund if such Person is not
otherwise an Affiliate.
"Assignee" shall mean a Person who has acquired a beneficial interest
in one or more Units from a third party but who is neither a substituted Holder
nor an Assignee of Record.
"Assignee of Record" shall mean an Assignee who has acquired a
beneficial interest in one or more Units whose ownership has been recorded on
the books of the Partnership and which ownership is the subject of a written
instrument of assignment, the effective date of which assignment has passed.
"ATEL" shall mean ATEL Financial Corporation, a California
corporation.
"Capital Account" shall mean, with respect to any Partner, such
Partner's Capital Account determined in accordance with Section 6.7.
"Cash from Operations" shall mean the excess of Gross Revenues over
cash disbursements (including the Equipment Management Fee and amounts
reinvested by the Fund in Equipment in compliance with Section 15.4.18) without
reduction for depreciation and amortization of intangibles such as organization
and underwriting costs but after a reasonable allowance for cash for repairs,
replacements, contingencies and anticipated obligations, as determined by the
General Partner. Cash from Operations shall not include Cash from Sales or
Refinancing or Cash from Reserve Account.
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"Cash from Reserve Account" shall mean that portion of the Net
Proceeds not utilized in the acquisition of Equipment, including cash maintained
according to the provisions of Section 9.4.
"Cash from Sales or Refinancing" shall mean the net cash realized by
the Fund from the sale, refinancing or other disposition of any Equipment
(including insurance proceeds or lessee indemnity payments arising from the loss
or destruction of any Equipment through casualty) after payment of all expenses
related to the transaction (including, subject to the subordination provisions
of Section 8.3.2, the Equipment Resale Fee); provided, however that Cash from
Sales or Refinancing shall not include Cash from Reserve Account or Cash from
Operations.
"Closing Date" shall mean such date designated by the General Partner for
the termination of the offering of Units, but not later than November 29, 1998.
Extension of the offering beyond one year from the date of the Prospectus shall
be subject to the qualification of the offering for any such extension in those
jurisdictions which may limit the offering period to one year. "Initial Closing
Date" shall mean the date on which subscribers for Units, other than the initial
Holder, are first admitted to the Fund as Holders. "Final Closing Date" shall
mean the last date on which subscribers for Units are admitted to the Fund as
Holders.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent federal revenue laws.
"Distributions" shall mean any cash, tax credits or other property
allocated to or distributed to Holders and the General Partner arising from
their respective interests in the Fund, but shall not include any compensation
payable to the General Partner under the provisions of Article 8 or Article 9,
except as otherwise provided herein.
"ERISA" shall mean the Employment Retirement Income Security Act of
1974, as amended.
"Equipment" shall mean the equipment acquired and owned by the Fund to
be leased by the Fund to others as well as any Fund interest in equipment,
including without limitation its rights, whether direct or indirect, in all
trusts, joint ventures, leases, chattel paper, options and other contract rights
with respect to equipment.
"Equipment Management Fee" shall mean the fee payable to an Affiliate
of the General Partner under the provisions of Section 8.3.1 of this Agreement.
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"Equipment Re-lease Fee" shall mean the fee payable to an Affiliate of
the General Partner under the provisions of Section 8.3.3 of this Agreement.
"Equipment Resale Fee" shall mean the fee payable to an Affiliate of
the General Partner, under the provisions of Section 8.3.2 of this Agreement.
"Front-End Fees" shall mean fees and expenses paid by any party for any
services rendered during the Fund's organization and acquisition phase including
Organization and Offering Expenses, Leasing Fees, Acquisition Fees, Acquisition
Expenses, and any other similar fees, however designated. Notwithstanding the
foregoing, Front-End Fees shall not include any Acquisition Fees or Acquisition
Expenses paid by a manufacturer of Equipment to any of its employees unless such
Persons are Affiliates of the General Partner.
"Full Payout Lease" shall mean a lease under which the non-cancellable
rental payments due during the initial term of the lease are at least sufficient
to cover the purchase price of the Equipment leased.
"Fund" shall mean the limited partnership created under this
Agreement.
"Fund Manager" shall mean the General Partner, ATEL Financial
Corporation or its successor as General Partner of the Fund.
"Fund Minimum Gain" shall have the meaning set forth in Regulations
section 1.704-2(d)(1).
"General Partner" shall mean ATEL Financial Corporation ("ATEL"), a
California corporation, or any other Person or Persons which succeed it in such
capacity. The General Partner is referred to throughout the Prospectus as "ATEL"
or the "Fund Manager."
"Gross Income" shall mean the gross income of the Fund within the
meaning of section 61(a) of the Code.
"Gross Proceeds" shall mean the aggregate total of the Original
Invested Capital of the initial and all of the additional Holders.
"Gross Revenues" shall mean all revenues from the operation and lease
of the Equipment other than from security deposits paid by lessees thereof. The
term "Gross Revenues" shall not include revenues from the sale, refinancing or
other disposition of Equipment.
"High Payout Lease" shall mean a lease under which the noncancellable
rental payments and other payment obligations of the lessee due through the
initial term of the lease are equal to at
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least 90% of the original purchase price paid by the Fund for the
Equipment.
"Holders" shall mean owners of Units who are either Partners or
Assignees of Record, and reference to a "Holder" shall be to any one of them.
The General Partner shall not be considered to be a Holder except to the extent
it also owns Units.
"Incentive Management Fee" shall mean the fee payable to an Affiliate
of the General Partner under the provisions of Section 8.3.4 of this Agreement.
"Independent Expert" shall mean a person with no current material or
prior business or personal relationship with the General Partner or any of its
Affiliates who is engaged to a substantial extent in the business of rendering
opinions regarding the value of assets of the type held by the Fund, and who is
qualified to perform such work.
"▇▇▇" shall mean an individual retirement account qualifying under
Section 408 of the Code.
"Investment in Equipment" shall mean the amount of Gross Proceeds
actually paid or allocated to the purchase of Equipment acquired by the Fund,
any amount of Gross Proceeds reserved pursuant to Section 9.4 hereof up to a
maximum of 3% of Gross Proceeds and other cash payments such as interest and
taxes, but excluding Front-End Fees.
"Leasing Fees" shall mean the total of all fees and commissions paid by
any party in connection with the initial lease of equipment acquired by the
Fund.
"Limited Partners" shall mean the initial limited partners and
any other Persons who are admitted to the Fund as additional or
substituted limited partners. Reference to a "Limited Partner"
shall refer to any one of them.
"Net Income" or "Net Loss" shall mean the taxable income or taxable
loss of the Fund (including the Fund's share of income or loss of any
partnership, venture or other entity which owns a particular item of Equipment),
as determined for federal income tax purposes, computed by taking into account
each item of Fund income, gain, loss, deduction or credit not already included
in the computation of taxable income and taxable loss.
"Net Lease Provisions" shall mean contractual arrangements under which
the lessee assumes responsibility for, and bears the cost of, insurance, taxes,
maintenance, repair and operation of the leased asset and where non-cancellable
rental payments under the lease are absolutely net to the lessor,
notwithstanding that some minor costs or responsibilities remain with the Fund
as lessor or that the Fund retains the option to require and pay for a higher
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standard of care or greater level of maintenance or insurance than would be
imposed on the lessee under the terms of the lease.
"Net Proceeds" shall mean the total Gross Proceeds less
Organization and Offering Expenses.
"Nonrecourse Deductions" has the meaning given it in
Regulations section 1.704-2(b)(1).
"Nonrecourse Liability" means a Partnership liability with respect to
which no Partner or Related Person bears the economic risk of loss.
"Operating Lease" shall mean a lease under which the aggregate rental
payments due during the initial term of the lease are less than the purchase
price of the Equipment leased.
"Organization and Offering Expenses" shall mean those expenses incurred
in connection with preparing the Fund for registration and subsequently offering
and distributing Units to the public, including selling commissions and all
advertising expenses except advertising expenses related to the leasing of
Equipment.
"Original Invested Capital" shall mean the amount in cash contributed
by each Partner to the capital of the Fund for his interest in the Fund, which
amount shall be attributed to Units in the hands of a subsequent Holder.
"Partner Nonrecourse Debt" has the meaning given it in
Regulations section 1.704-2(b)(4).
"Partners" shall mean collectively the General Partner and Holders who
are admitted to the Fund as Limited Partners and reference to a "Partner" shall
be to any one of the Partners.
"Partnership Agreement" or "Agreement" shall mean this Agreement of
Limited Partnership of ATEL Capital Equipment Fund VII, L.P., as it may be
amended from time to time.
"Person" shall mean any natural person, partnership, corporation,
association or other legal entity.
"Priority Distribution" for any calendar year or other period shall
mean, with respect to the Units held by any Person, the average Adjusted
Invested Capital with respect to such Units during such period multiplied by 10%
per annum (calculated on a cumulative basis, compounded daily, from the last day
of the calendar quarter in which the capital contribution of the initial
purchaser of such Units was received by the Fund and pro rated for any fraction
of a calendar year for which such calculation is made).
"Prospectus" shall mean the final prospectus filed in
connection with the registration of the Units with the Securities
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and Exchange Commission on Form S-1, as amended, together with any supplement
thereto which may be subsequently filed with such Commission.
"Purchase Price of Equipment" shall mean the price paid upon the
purchase or sale of a particular item of equipment, including the amount of
Acquisition Fees and all liens and mortgages on the equipment, but excluding
points and prepaid interest.
"Qualified Plan" shall mean employee trusts (or employer individual
retirement accounts), ▇▇▇▇▇ Plans and corporate retirement plans qualifying
under Section 401(a) of the Code.
"Regulations" shall mean the income tax regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Reimbursable Administrative Expenses" shall mean the ordinary
recurring administration expenses incurred by the Fund Manager and reimbursed by
the Fund. Such expenses shall not include interest, depreciation, equipment
maintenance or repair, third party services or other non-administrative
expenses.
"Reinvestment Period" shall mean the period commencing with the Initial
Closing Date and ending on a date 72 months after the last day of the fiscal
year during which the Final Closing Date occurs.
"Related Person" means a Person having an relationship with a Partner
that is described in Regulations section 1.752-4(b).
"Resident Alien" shall mean a resident alien as defined within the
Federal Aviation Act of 1958, as amended from time to time, or any successor
statute, or any regulations adopted pursuant to such Act or any successor
statute.
"Roll-Up" shall mean a transaction involving the acquisition, merger,
conversion or consolidation, either directly or indirectly, of the Fund and the
issuance of securities of a Roll-Up Entity. Such term does not include:
(a) any transaction if the securities of the Fund have
been for at least twelve months traded through the National
Association of Securities Dealers, Inc. Automated Quotation
National Market System; or
(b) a transaction involving the conversion to corporate, trust
or association form of only the Fund, if, as a consequence of the
transaction, there will be no significant adverse change in any of the
following
(i) the Limited Partners voting rights;
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(ii) the term of existence of the Fund;
(iii) the terms of compensation of the General
partner and its Affiliates; or
(iv) the Fund's investment objectives.
"Roll-Up Entity" means the partnership, trust, corporation or other
entity that would be created or would survive after the successful completion of
a proposed Roll-Up transaction.
"Service" shall mean the United States Internal Revenue
Service or its successor.
"Sponsor" shall mean any Person directly or indirectly instrumental in
organizing, wholly or in part, a Program or any Person who will manage or
participate in the management of a Program, and any Affiliate of any such
Person. Sponsor does not include the Program itself or a Person whose only
relation with the Program is that of an independent equipment manager and whose
only compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants and underwriters whose only compensation
is for professional services rendered in connection with the offering of Program
interests.
"Substantially All of the Assets" shall mean, unless the context
otherwise dictates, Equipment representing 66 2/3% or more of the net book value
of all Equipment as of the end of the most recently completed fiscal quarter.
"Unit" shall mean the interest in the Fund representing Original
Invested Capital in the amount of $10 and shall entitle the Holder thereof to
the rights herein provided.
"United States Citizen" shall mean a "citizen of the United States" as
defined within the Federal Aviation Act of 1958, as amended from time to time,
or any successor statute, or any regulations adopted pursuant to such Act or any
successor statue.
3. BUSINESS AND PURPOSE
The primary purpose of the Fund is to purchase, own, lease and sell
various types of Equipment pursuant to such arrangements as the General Partner
in its discretion may enter into on behalf of the Fund. The Fund may enter into
ventures, partnerships and other business arrangements with respect to Equipment
to the extent deemed prudent by the General Partner in order to achieve
successful operations for the Fund, subject to the provisions of Section 15.4.8.
The Fund may also engage in such other lawful activities as may be deemed by the
General Partner to be incident to its primary purpose or prudent and in the
Fund's best interest. The Fund's investment objectives shall be those set forth
in the Prospectus, and the General Partner may not make any material change to
such investment objectives without first obtaining the
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written consent or approval of Limited Partners owning more than 50% of the
total outstanding Units entitled to vote.
4. TERM
The Fund commenced as of the 17th day of May, 1996 and shall continue
until the 31st day of December, 2017, unless previously terminated in accordance
with the provisions of this Agreement.
5. GENERAL PARTNER
5.1 The General Partner has contributed $100 in cash to the Fund and at
all times during the existence of the Fund the General Partner shall have a
present and continuing interest in Net Income, Net Losses and Distributions
according to the provisions of Article 10.
5.2 In the event that, immediately prior to the dissolution of the Fund
referred to in Article 19, the General Partner shall have a deficiency in its
Capital Account as determined in accordance with generally accepted accounting
principles, then the General Partner shall contribute in cash to the capital of
the Fund an amount equal to the lesser of (a) the deficiency in the General
Partner's Capital Account or (b) 1.01% of the Original Invested Capital which
has not been returned pursuant to Section 10.12. This Section 5.2 is intended to
comply with Regulation Section 1.704-1(b), and shall be interpreted and applied
in a manner consistent with such regulation.
6. INITIAL AND ADDITIONAL LIMITED PARTNERS
6.1 Initial Limited Partners. ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇, as the initial
Limited Partners, have each contributed the sum of $250 to the capital of the
Fund and each has received 25 Units in return therefor.
6.2 Additional Limited Partners. The Fund intends to sell and issue to
Holders not less than 120,000 nor more than 15,000,000 additional Units and to
admit as additional Limited Partners the Persons who contribute cash to the
capital of the Fund for such Units.
6.3 Conditions to Admission. Subject to the provisions of Section 6.6, each
Person who acquires any such additional Units shall become a Limited Partner in
the Fund at such time as he has: (i) purchased 250 or more Units (200 Units in
case of an ▇▇▇ or ▇▇▇▇▇ Plan), (ii) contributed the sum of $10 in cash for each
Unit purchased (or such lesser net amount as may be provided in accordance with
the terms described in the Prospectus under "Plan of Distribution"), (iii)
executed and filed with the Fund a written instrument which sets forth an
intention to become a Limited Partner and requests admission to the Fund in that
capacity, together with such other instruments as the General Partner may
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deem necessary or desirable to effect such admission, including the written
acceptance and adoption by such Person of the provisions of this Agreement, and
the execution, acknowledgment and delivery to the General Partner of a special
power of attorney, the form, style and content of which are more fully described
herein, and (iv) the General Partner accepts such Person as a Limited Partner in
the Fund.
6.4 Admission as a Limited Partner. Each Person who subscribes for Units
under Section 6.2 shall be admitted to the Fund promptly after the General
Partner's acceptance of such subscription, but, except as provided in Section
6.6, in no event later than 30 days after the receipt by the Fund of such
subscription.
6.5 Limitation on Additional Issuance. The Fund shall not issue any
additional Units after the Final Closing Date.
6.6 Escrow. All Original Invested Capital of Holders shall be received by
the Fund in trust, and shall be deposited in an escrow account with First Trust
of California, National Association, San Francisco, California, or in any other
banking institution designated by the General Partner, as escrow holder for the
Original Invested Capital, until such time as subscriptions for a total of
120,000 Units, in addition to the Unit purchased by the initial Holder,
representing Original Invested Capital of $1,200,000 have been deposited
therein. Not less than 15 days after receipt of a minimum of $1,200,000 of such
additional Original Invested Capital, the Fund will admit subscribers into the
Fund as additional Holders. At the time a subscriber is admitted as a Holder,
the escrow holder shall transfer the subscriber's Original Invested Capital to
the Fund. If the $1,200,000 minimum is not obtained on or before a date one year
from the date of the Prospectus, all Original Invested Capital will be promptly
refunded to the investors. In any event, any interest earned on Original
Invested Capital while in escrow shall be paid to investors.
6.7 Capital Account. An individual Capital Account shall be maintained for
each Partner. The Capital Account of a Partner shall consist of the Original
Invested Capital of such Partner, increased by (i) any additional contributions
to capital and (ii) such Partner's share of Fund Net Income, and decreased by
(i) Distributions to such Partner and (ii) such Partner's share of Fund Net
Loss. In the event a Partner transfers all or a portion of his Units, the
Assignee shall succeed to the Capital Account of the transferor (as adjusted for
all events preceding the date the transferee is deemed admitted to the Fund
under Section 10.3.1) according to the number of Units, and the allocable
portion of the transferor's Capital Account, so transferred. No Holder shall
have the obligation to restore any deficit in his Capital Account upon
termination or dissolution of the Fund. The foregoing provisions of this Section
6.7 are intended to comply with Regulation Section 1.704-1(b), and shall be
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interpreted and applied in a manner consistent with such Regulations.
7. LIABILITY AND STATUS OF LIMITED PARTNERS
Holders shall not be bound by, or be personally liable for, the
expenses, liabilities or obligations of the Fund. However, in accordance with
Section 15666 of the California Revised Limited Partnership Act, Partners will
be obligated to return any Distribution from the Fund to the extent that,
immediately after giving effect to the Distribution, all liabilities of the Fund
(other than liabilities as to which recourse of creditors is limited to specific
Fund property and liabilities to Partners on account of their interest in the
Fund) exceed the fair value of its assets (including, as to assets serving as
security for nonrecourse liabilities, only that portion of the fair value of
such assets which exceeds the amount of such nonrecourse liabilities).
8. COMPENSATION TO THE GENERAL PARTNER AND/OR AFFILIATES OF THE
GENERAL PARTNER
8.1 General Limitation. The General Partner and its Affiliates
shall receive compensation only as specified by this Agreement.
8.2 Acquisition Stage. The Fund shall pay no Acquisition Fees to the
General Partner or any of its Affiliates, and, except as expressly provided
herein, no other leasing commission, Equipment purchase fee, finder's fee or
other compensation shall be paid or payable by the Fund to the General Partner
or to any Affiliate of the General Partner in connection with the acquisition of
specific Equipment (including Equipment acquired upon the reinvestment of Cash
from Operations or Cash from Sales or Refinancing).
8.3 Operating Stage
8.3.1 Equipment Management Fee. As compensation for its
services rendered generally in supervising the management of the
Equipment and other ongoing services and activities including, among
others, arranging for necessary maintenance and repair of Equipment,
collecting revenues, paying operating expenses, determining that the
Equipment is being used in accordance with all operative contractual
arrangements, property and sales tax monitoring, preparation of
financial data, and supervising the performance of such services (it
being understood and agreed that the provision of such services does
not constitute a part of the duties or obligations of the General
Partner as general partner of the Fund), ATEL Equipment Corporation, an
Affiliate of the General Partner, or another Affiliate of the General
Partner, shall be entitled to receive the Equipment Management Fee
which shall be payable for each fiscal quarter and shall be an amount
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equal to (i) 3.5% of the Gross Revenues from Operating Leases, except
that if the services are performed by nonaffiliated Persons under the
active supervision of the General Partner or its Affiliate, then the
amount payable to the General Partner or such Affiliate shall be 1% of
the Gross Revenues from such Operating Leases, and (ii) 2% of Gross
Revenues from Full Payout Leases which contain Net Lease Provisions. It
is the intention of the Fund that the Equipment Management Fee shall be
a fixed management fee with respect to each item of Equipment.
8.3.2 Equipment Resale Fee. As compensation for remarketing
services rendered in connection with the sale of Equipment, ATEL
Equipment Corporation, an Affiliate of the General Partner, or another
of the Affiliates of the General Partner, shall be entitled to receive
an amount equal to the lesser of (i) 3% of the sales price of the
Equipment, or (ii) one-half the normal competitive equipment sale
commission charged by unaffiliated parties for such services. Such fee
is payable only after the Holders have received a return of their
Original Invested Capital plus a Priority Distribution. In addition,
the total commissions paid to all parties in connection with the sale
of Equipment by the Fund shall not exceed the normal competitive sales
commission charged by unaffiliated parties for such services. The
subordination provisions referred to in the second sentence of this
paragraph shall only apply to the amounts earned by the General Partner
and its Affiliates.
8.3.3 Equipment Re-lease Fee. Subject to the provisions of
Section 15.4.28, ATEL Equipment Corporation, an Affiliate of the
General Partner, or another of the Affiliates of the General Partner,
may provide Equipment re-leasing services to the Fund, provided that
all of the following conditions are met:
(i) The General Partner or its Affiliates have and
will maintain adequate staff to render such services to
the Fund;
(ii) The fee for such services shall not exceed the lesser
of the competitive rate for comparable services for similar
equipment or 2% of gross rental payments derived from the
re-lease of such Equipment after the time the re-lease is
consummated as a result of the recipient's efforts, and such
fee is payable as each rental payment is received by the Fund
over the term of the re-lease;
(iii) No such re-lease fee is payable in connection
with the re-lease of Equipment to a previous lessee or
its Affiliates;
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(iv) The General Partner or its Affiliates have rendered
substantial re-leasing services in connection with such
re-lease; and
(v) The General Partner or its Affiliates are
compensated for rendering Equipment management services
pursuant to Section 8.3.1.
8.3.4 Incentive Management Fee. As compensation for the
services rendered in establishing and maintaining the composition of
the Fund's Equipment portfolio and its acquisition and debt strategies,
and for supervising Fund administration and investor services,
including the preparation of reports and maintenance of financial and
operating data of the Fund, Securities and Exchange Commission and
Internal Revenue Service filings, returns and reports, the General
Partner or an Affiliate of the General Partner, shall be entitled to
receive an Incentive Management Fee in an amount equal to (i) 4% of all
Distributions of Cash from Operations until such time as the Holders
have received aggregate Distributions in an amount equal to their
Original Invested Capital plus a Priority Distribution, and (ii)
thereafter, in an amount equal to 7.5% of all Distributions of Cash
from Operations and Cash from Sales or Refinancing. For the purposes of
calculating the Incentive Management Compensation for any period during
which the Fund has available both Cash from Operations and Cash from
Sales or Refinancing, Distributions to Holders shall first be treated
as consisting of Cash from Operations unless specifically designated
otherwise by the General Partner.
8.3.5 Other Services. Except as set forth in this Article 8
and Article 9 hereof, no other services may be performed by the General
Partner or its Affiliates for the Fund except in extraordinary
circumstances (which shall be defined as an emergency situation
requiring immediate action by the General Partner or its Affiliate and
the service is not immediately available from an unaffiliated party).
Any such other services must meet the following criteria: (i) the
compensation, price or fee therefor must be comparable and competitive
with the compensation, price or fee of any other Person who is
rendering comparable services or selling or leasing comparable goods
which could reasonably be made available to the Fund and shall be on
competitive terms, (ii) the fees and other terms of the contract shall
be fully disclosed to Holders, (iii) the General Partner or its
Affiliates must be previously engaged in the business of rendering such
services or selling or leasing such goods, independently of the Fund
and as an ordinary and ongoing business and at least 75% of such
Person's gross revenues from such activity must be derived from other
than Affiliates of the General Partner, and (iv) all services for which
the General Partner or its Affiliates are to receive compensation
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shall be embodied in a written contract which precisely describes the
services to be rendered and all compensation to be paid, which contract
may only be modified by a vote of the majority of the Holders. Said
contract shall contain a clause allowing termination without penalty on
60 days notice.
8.4 Payment of Fees on Removal. Should a General Partner be removed
from the Fund according to provisions of Article 17, any portion of any fee or
commission payable to the General Partner according to the provisions of this
Article 8 which is then accrued and due, but not yet paid, shall be paid by the
Fund to the General Partner in cash within 30 days of the date of expulsion as
stated in the written notice of expulsion, except to the extent any amount
payable under Section 8.3.4 is included in calculating the purchase price for
the General Partner's interest in the Fund under Section 17.5.2 hereof.
8.5 Employment of Broker-Dealers. The Fund may employ underwriters and
selected broker-dealers, including Affiliates of the General Partner as set
forth in the Prospectus, for the sale of Units.
9. FUND EXPENSES AND RESERVES
9.1 Reimbursement of General Partner. Except as set forth in this Article
9, all of the Fund's expenses shall be billed directly to and paid by the Fund.
The General Partner and its Affiliates may be reimbursed for the following Fund
expenses: (i) Organization and Offering Expenses not in excess of 15% of Gross
Proceeds up to $25,000,000 plus 14% of all Gross Proceeds in excess of
$25,000,000 (or an amount equal to 12% of the Gross Proceeds if, upon
termination of the offering of Units, the total Gross Proceeds are in an amount
less than $2,000,000); (ii) the actual cost of goods and materials used for and
by the Fund and obtained from entities unaffiliated with the General Partner;
and (iii) administrative services necessary to the prudent operation of the
Fund, provided that such reimbursement for administrative services will be at
the lower of (A) the actual cost of such services, or (B) the amount which the
Fund would be required to pay independent parties for comparable administrative
services in the same geographic location; provided further that, beginning with
the first full year after the termination of the offering of Units, the total
amount of Reimbursable Administrative Expenses payable by the Fund for the
remainder of its term may not exceed a cumulative limit. This cumulative limit
on such Reimbursable Administrative Expenses will equal, as of any date, a
maximum of (i) 0.5% of the Gross Proceeds per annum if the total Gross Proceeds
are at least 90% of the maximum Gross Proceeds; (ii) 0.75% of the Gross Proceeds
per annum if the total Gross Proceeds are at least 75%, but less than 90%, of
the maximum Gross Proceeds; and (iii) 1% of the Gross Proceeds per annum if the
total Gross Proceeds are less than 75% of the maximum Gross Proceeds. In
addition, beginning with the first full year after the termination of the
offering of Units, the maximum amount of Reimbursable Administrative Expenses
payable by the Fund for any single year shall be limited to an amount equal to
1% of the Gross Proceeds.
9.2 Limitation on Reimbursement. The General Partner and its
Affiliates will not be reimbursed by the Fund for the following expenses:
9.2.1 Services for which the General Partner or its Affiliates
are entitled to compensation in the form of a separate fee pursuant to
Article 8 hereof;
9.2.2 Rent or depreciation, utilities or capital equipment and
other administrative items of the Sponsor;
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9.2.3 Salaries, fringe benefits, travel expenses or
administrative items incurred by or allocated to any Controlling Person
of the General Partner or its Affiliates. For purposes of this
subparagraph, "Controlling Person" shall mean any person, regardless of
title, who performs executive or senior management functions for the
General Partner or its Affiliates similar to those of executive
management or senior management, and directors, or those holding 5% or
more equity interest in the General Partner or its Affiliates; or
persons having the power to direct or cause the direction of the
General Partner or Affiliates through ownership of voting securities,
by contract or otherwise. It is not intended that every person who
carries a title such as vice president, senior vice president,
secretary, controller or treasurer be considered a Controlling Person;
9.2.4 Organization and Offering Expenses of the Fund to the
extent such Organization and Offering Expenses exceed 15% of the Gross
Proceeds up to $25,000,000 plus 14% of all Gross Proceeds in excess of
$25,000,000 (or an amount equal to 12% of the Gross Proceeds if, upon
termination of the offering of Units, the total Gross Proceeds are in
an amount less than $2,000,000), and the General Partner guarantees
payment of any such excess expenses, which guarantee is without
recourse to, or reimbursement by, the Fund; and
9.2.5 All other expenses which are unrelated to the business
of the Fund.
9.3 Fund Expenses. Subject to Sections 9.1 and 9.2, the Fund shall pay
all expenses of the Fund which may include, but are not limited to: (i) all
costs of personnel employed by the Fund and involved in the business of the Fund
(which may include personnel who are employed by a General Partner or one or
more Affiliates), (ii) all taxes and assessments on Equipment and other taxes
applicable to the Fund, (iii) legal, appraisal, audit, accounting, brokerage and
other fees, (iv) printing, engraving and other
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expenses and taxes incurred in connection with the issuance, distribution,
transfer, registration and recording of documents evidencing ownership of an
interest in the Fund or in connection with the business of the Fund, (v) fees
and expenses paid to independent contractors, brokers and servicers, leasing
agents, consultants, equipment lease brokers, insurance brokers and other
agents, (vi) expenses in connection with the acquisition, disposition,
replacement, alteration, repair, leasing and operation of Equipment (including
the costs and expenses of insurance premiums, equipment lease brokerage and
leasing commissions and of maintenance of such Equipment), (vii) the cost of
insurance as required in connection with the business of the Fund, (viii)
expenses of organizing, revising, amending, converting, modifying or terminating
the Fund, (ix) the cost of preparation and dissemination of the informational
material and documentation relating to potential sale or other disposition of
Equipment, (x) costs incurred in connection with any litigation in which the
Fund is involved, as well as the examination, investigation or other proceedings
conducted by any regulatory agency, including legal and accounting fees incurred
in connection therewith, (xi) costs of any computer equipment or services used
for or by the Fund, (xii) costs of any accounting, or statistical bookkeeping
equipment necessary for the maintenance of the books and records of the Fund,
and (xiii) the costs of supervision and expenses of professionals employed by
the Fund in connection with any of the foregoing, including attorneys,
accountants and appraisers; provided, however, that the cost of any services
relating to items (vi) or (vii) above must either be attributable to services
performed by Persons other than the General Partner or its Affiliates, be
compensated by a specific fee described in Article 8 (and thus would not be
reimbursable by the Fund, as provided in Section 9.2.1) or comply with the
requirements for compensation for "other services" as provided in Section 8.3.5.
9.4 Reserves. The Fund shall initially establish a cash reserve for
general working capital purposes in an amount equal to at least one-half of 1%
of the Gross Proceeds. Upon the disposition of each item of Equipment, any cash
reserve which was specifically allocated to that Equipment need not be
maintained thereafter, but may be applied as reserves for other Equipment. Any
cash reserve used as aforesaid need not be restored and if restored, may be
restored out of Gross Revenues.
10. ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS
10.1 Allocation of Net Income and Net Loss Prior to Initial Closing
Date. From the commencement of the Fund until the Initial Closing Date Net
Income and Net Loss shall be allocated 99% to the General Partner and 1% to the
initial Holders.
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10.2 Allocation of Net Income and Net Loss After Initial
Closing Date.
10.2.1 Commencing with the Initial Closing Date, Net Income
and Net Loss shall be allocated 92.5% to the Holders and 7.5% to the
General Partner.
10.2.2 Notwithstanding Section 10.2.1 of this Agreement, items
of Net Loss arising out of the Fund's payment of expenditures
classified as syndication expenses pursuant to Regulations section
1.709-2(b) with respect to each Unit shall be specially allocated to
the Holder who acquires such Unit.
10.3 Special Allocations
10.3.1 Except as provided in section 10.3.2, Net Income, Net
Loss and Distributions allocable to the Holders shall be determined on
a quarterly basis and shall be allocated among the Holders in the ratio
in which the number of Units held by each of them bears to the total
number of Units held by all Holders as of the last day of the fiscal
quarter with respect to which such Net Income, Net Loss and
Distributions are attributable; provided, however, that, with respect
to Net Income, Net Loss and Distributions attributable to the offering
period of the Units (including the full quarter in which the offering
terminates), such Net Income, Net Loss and Distributions shall be
apportioned among the Holders in the ratio in which (i) the number of
Units held by each Holder multiplied by the number of days during such
period that such Holder was the owner of such Units bears to (ii) the
amount obtained by totaling the number of Units outstanding on each day
during such period. No Net Income, Net Loss and Distributions with
respect to any quarter shall be allocated to Units repurchased by the
Fund during such quarter, and such Units shall not be deemed to have
been outstanding during such quarter for purposes of the foregoing
allocations.
10.3.2 Notwithstanding anything in this Agreement to the
contrary, the following items of Fund income and loss shall be
specially allocated to the Partners in the manner described below:
(i) Gain characterized as recapture income under Sections 1245 or
1250 of the Code shall be allocated to those Partners who
claimed the deductions giving rise to such recapture income.
(ii) Except as provided in Section 10.3.2(iii), in the event any
Partner unexpectedly receives any adjustments, allocations or
distributions described in sections 1.704- 1(b)(2)(ii)(d)(4),
(5) or (6) of the Regulations, items of Fund gross income and
gain (consisting of a pro rata
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portion of each item of the Fund's income, including gross
income, and gain for such year) shall be allocated to such
Partner in an amount and manner sufficient to eliminate, to
the extent required by Regulations, the Negative Capital
Account balances (or any increase in the amount thereof)
created by such adjustments, allocations or distributions as
quickly as possible. This Section 10.3.2(ii) is intended to
comply with the qualified income offset requirement in Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
(iii) If there is a net decrease in Fund Minimum Gain during
any Fund fiscal year, each Partner shall be specially
allocated items of Fund income and gain for such year
(and, if necessary, subsequent years) in proportion to,
and to the extent of, an amount equal to the portion of
such Partner's share of the net decrease in Fund Minimum
Gain during such year. The items to be so allocated
shall be determined in accordance with Section 1.704-
2(f)(6) of the Regulations. This Section 10.3.2(iii) is
intended to comply with the minimum gain chargeback
requirement in such Section of the Regulations and shall
be interpreted consistently therewith.
(iv) After giving effect to the allocations set forth in
Sections 10.3.2(ii) and 10.3.2(iii), in the event any
Partner receives any actual or deemed distribution (i.e.,
----
under section 752 of the Code) during a taxable year which
exceeds the adjusted tax basis of such Partner's interest in
the Fund at the end of such taxable year (determined
immediately before giving effect to such distribution), such
Partner shall be allocated an amount of gross income or gain
equal to such excess.
(v) In the event any fee to which the General Partner or an
Affiliate thereof is entitled is treated as a Fund
distribution by the Service, a special allocation of Fund
gross income shall be made annually to the General Partner or
an Affiliate thereof in an amount equal to any such
recharacterized fee for that taxable year.
(vi) The General Partner will specifically allocate items of
gain from the sale or other disposition of items of
Equipment for any year in which the sale or disposition
of any item of Equipment occurs (and, if necessary,
subsequent years) to any Holder in such amounts and in
such manner so as to equalize the Capital Account
balances of the Holders; provided, however, that such
allocations are reasonably consistent with, and
reasonably supportable under, the Code.
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(vii) Net Loss shall not be allocated to any Holder if such
allocation would cause or increase an Adjusted Capital
Account Deficit for such Holder at the end of any Fiscal
Year, and any such Net Loss shall instead be allocated to
the General Partner. This limitation shall be applied on
a Holder by Holder basis so as to allocate the maximum
permissible Net Loss to each Holder under Section 1.704-
1(b)(2)(ii)(d) of the Regulations.
(viii) To the extent an adjustment to the adjusted tax basis of
any Fund asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be specially allocated
to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted
pursuant to such Section of the Regulations.
(ix) Except as otherwise provided herein, Nonrecourse Liabilities
and Nonrecourse Deductions shall be allocated 92.5% to the
Holders and 7.5% to the General Partner.
(x) Any deduction attributable to Partner Nonrecourse Debt shall
be allocated to the Partners that bear the economic risk of
loss for the Partner Nonrecourse Debt.
10.4 Distribution of Cash From Operations. Cash from
Operations shall be distributed as follows:
10.4.1 First, 88.5% to the Holders, 7.5% to the General
Partner and 4% to the General Partner or its Affiliate designated as
the recipient of the Incentive Management Fee, until each Holder has
received aggregate Distributions from all sources in an amount equal to
his Original Invested Capital plus a Priority Distribution (so that a
Holder will be deemed to have received Distributions of Original
Invested Capital only to the extent that Distributions to the Holder
exceed the amount of the Priority Distribution); and
10.4.2 Thereafter, 85% to the Holders, 7.5% to the General
Partner and 7.5% to the General Partner or its Affiliate designated as
the recipient of the Incentive Management Fee.
10.5 Distribution of Cash From Sales or Refinancing. Cash
from Sales or Refinancing shall be distributed as follows:
10.5.1 First, 92.5% to the Holders and 7.5% to the General
Partner until each Holder has received aggregate Distributions from
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all sources in an amount equal to his Original Invested Capital plus a
Priority Distribution (so that a Holder will be deemed to have
received Distributions of Original Invested Capital only to the extent
that Distributions to the Holder exceed the amount of the Priority
Distribution); and
10.5.2 Thereafter, 85% to the Holders, 7.5% to the General
Partner and 7.5% to the General Partner or its Affiliate designated as
the recipient of the Incentive Management Fee.
Notwithstanding anything to the contrary herein, however, no cash
Distribution shall be made to a Holder to the extent that, after giving effect
to all allocations under sections 10.1, 10.2 and 10.3 which would accompany such
Distribution (including allocations of gross income and gain under section
10.3.2(iv)), such Distribution would exceed the tax basis of the Holder to whom
such Distribution is otherwise payable.
10.6 Distributions of Cash from Reserve Account. Distributions of Cash
from Reserve Account, if any, shall be distributed in the same manner as Cash
from Sales or Refinancing.
10.7 Determination of Amounts to be Distributed. The General Partner
shall have sole discretion in determining the amount of any Distributions.
Subject to provisions of Section 15.4.18 of this Agreement, the General Partner
may use any funds of the Fund not distributed to Holders to purchase additional
Equipment during the Reinvestment Period or otherwise as permitted by this
Agreement; provided, however, that the General Partner will not reinvest in
Equipment, but will distribute, subject to payment of any obligations of the
Fund, such available Cash from Operations and Cash from Sales or Refinancing as
may be necessary to cause total Distributions to Holders to equal the following
amounts for the specified periods:
10.7.1 Prior to the end of the year in which the Final Closing
Date occurs, an amount equal to the lesser of (i) a 10% per annum
noncumulative, noncompounded return on their Original Invested Capital,
or (ii) 90% of such amounts which are available for Distributions;
10.7.2 In each of the six years after the end of the year in
which the Final Closing Date occurs, an amount equal to a noncumulative
and noncompounded return on the Holders' Original Invested Capital of
10% per annum; and
10.7.3 Such amounts with respect to each year which are
sufficient to allow a Holder in a 31% federal income tax bracket (but
not a higher bracket) to pay the federal income taxes and state income
taxes due with respect to Net Income derived by him from the Fund for
such year.
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10.8 Consent to Allocations. The methods hereinabove set forth by which
Distributions and allocations of Net Income and Net Loss are made and
apportioned are hereby expressly consented to by each Partner as an express
condition to becoming a Partner.
10.9 Limitation on Distributions. All Distributions are subject to the
payment of Fund expenses and to maintenance and repair of Equipment.
10.10 Allocation to General Partner. To the extent that the Fund shall
be entitled to any deduction for federal income tax purposes as a result of any
interest in Net Income or Net Loss granted to a General Partner, such deduction
shall be allocated for federal income tax purposes to such General Partner.
10.11 Return of Unused Capital. In the event that any portion of the
Net Proceeds received by the Fund during the first twelve months after the date
of the Prospectus is not invested or committed for investment within eighteen
months of the date of the Prospectus, or in the event any portion of the Net
Proceeds received by the Fund thereafter is not invested or committed for
investment within six months from the Final Closing Date (except for any amounts
used to pay Fund operating expenses, including amounts set aside for reserves as
set forth in Section 9.4), such portion of the Net Proceeds shall be distributed
to the Holders pro rata by the Fund as a return of capital. In addition, the
General Partner shall contribute to the Fund, and the Fund shall distribute pro
rata to the Holders, the amount by which (x) the amount of unused capital
distributed pursuant to the foregoing sentence, divided by (y) the percentage of
the Gross Proceeds which remain after payment of all Front End Fees, exceeds the
unused capital so distributed. For the purposes of this Section 10.11, funds
will be deemed to have been committed to investment and will not be returned to
the Holders to the extent written agreements in principle or letters of
understanding were executed at any time prior to the end of said period,
regardless of whether any such investment is actually consummated, and to the
extent any funds have been reserved to make contingent payments in connection
with any Equipment, regardless of whether any such payment is actually made.
10.12 General Partner Interest. In no event shall the General
Partner's interest in each material item of income, gain, loss, deduction,
credit or distributions be less than 1% of each such item at any time during the
existence of the Fund.
10.13 Distributions in Kind. Distributions in kind shall not be
permitted except upon dissolution and liquidation, and then only to a
liquidating trust which has been established for the purpose of the liquidation
of the assets of the Fund, and the distribution of cash in accordance with the
terms of the Partnership Agreement.
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10.14 Withholding Taxes.
10.14.1 In the event the Fund pays to any federal, state or
local government authority any amount of tax, penalty, interest, fee or other
expenditure which is attributable to the particular status of one or more
Holders including, without limitation, the status of a Holder as a nonresident
of California or any other state imposing such a charge, the General Partner
shall treat such tax, penalty, interest or fee, and in its discretion may treat
other related Fund expenditures, as a distribution of Cash from Operations or
Cash from Sales or Refinancing as appropriate, to such Holders. Such a
distribution shall reduce the amount of Cash from Operations or Cash from Sales
or Refinancing otherwise payable by the Fund to such Holders. Such Holders shall
be distributed any refund of any such tax, penalty, interest or other amounts
received by the Fund; provided, however, that the distribution due such Holders
shall be reduced by any Fund expenses (and such expenses shall be specially
allocated to such Holders) incurred in connection with the payment or obtaining
of the refund of such taxes, penalties, interest or other amounts and the Fund
shall have no duty or obligation to seek to obtain or collect any such refund or
expend any amount to reduce the amount of any withholding, penalty, interest or
other amount otherwise payable to any government authority. The General Partner
may require from a Holder the appropriate documentation with respect to any
distribution hereunder.
10.14.2 As security for any withholding tax or other amount
referred to in section 10.14.1 or other liability or obligation to which the
Fund may be subject as a result of any act or status of any Holder, the Fund
shall have (and each Holder hereby grants to the Fund) a security interest in
all Cash from Operations or Cash from Sales or Refinancing distributable to such
Holder to the extent of the amount of such withholding tax or other liability or
obligation. The Fund shall have a right of set-off against any such
distributions of Cash from Operations or Cash from Sales or Refinancing in the
amount of such withholding tax or other liability or obligation.
11. ASSIGNMENT OF FUND INTERESTS
11.1 Limitations on Transfer. A Holder may not transfer all or part of
his legal and equitable interest in his Units except in compliance with the
provisions of this Agreement. The General Partner may condition any proposed
transfer on receipt by the Fund of such representations and warranties of the
transferor and the assignee, opinions of counsel for the Fund and other
assurances as it may deem necessary and appropriate as to:
11.1.1 such assignments or transfers not resulting, in the
opinion of counsel for the Fund, in the Fund being considered to have
terminated within the meaning of Section 708 of the Code;
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11.1.2 the assignee not being a minor or an incompetent;
11.1.3 the transfer or assignment not violating federal or
state securities laws;
11.1.4 the transferor or the assignee not holding Units
representing Original Invested Capital of less than $2,500 ($2,000 in
the case of IRAs and ▇▇▇▇▇ Plans);
11.1.5 such assignee being a Citizen of the United States;
11.1.6 such assignment or transfer not causing the assets of
the Fund to be deemed "plan assets" for ERISA purposes;
11.1.7 such assignment or transfer not constituting a transfer
"on a secondary market (or the substantial equivalent thereof)" within
the meaning of Section 7704 of the Code or otherwise adversely
affecting the tax status of the Fund; and
11.1.8 the transferor filing with the Fund a duly executed and
acknowledged counterpart of the instrument effecting such assignment or
transfer, which instrument evidences the written acceptance by the
assignee or transferee of all of the terms and provisions of this
Agreement, contains a representation that such assignment or transfer
was made in accordance with all applicable laws and regulations
(including any investor suitability requirements) and in all other
respects being satisfactory in form and substance to the General
Partner.
11.2 Distributions and Effective Date of Transfer. An Assignee of
Record shall be entitled to receive Distributions from the Fund attributable to
the Units acquired by reason of such assignment from and after the effective
date of the assignment of such Units; provided, however, that notwithstanding
anything herein to the contrary, the Fund and the General Partner shall be
entitled to treat the assignor of such Units as the absolute owner thereof in
all respects, and shall incur no liability for allocations of Net Income, Net
Loss or Distributions, or transmittal of reports and notices required to be
given to Holders hereunder, which are made in good faith to such assignor until
such time as the written instrument of assignment has been received by the Fund
and recorded on its books and the effective date of the assignment has passed.
The effective date of such assignment on which the Assignee shall be deemed an
Assignee of Record shall be the last day of the first full calendar month
following the later of (i) the date set forth on the written instrument of
assignment or (ii) the date on which the Fund has actual notice of the
assignment of Units and has received complete documentation of the assignment.
Notwithstanding anything to the contrary contained herein, no Distributions
shall
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be made in any calendar quarter with respect to Units repurchased by the Fund
during such calendar quarter.
11.3 Governmental Restrictions. No assignment, sale, transfer, exchange
or other disposition of Units may be made except in compliance with the then
applicable rules of any other applicable governmental authority. All Units
originally issued pursuant to qualification under the California Corporate
Securities Law of 1968 shall be subject to, and all documents of assignment and
transfer evidencing such securities shall bear, the following legend condition:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES."
No transfer of any such Unit shall be made unless the transferor shall have
obtained, if necessary, the written consent of the California Commissioner of
Corporations to such transfer.
11.4 Non-Complying Transfers. Any assignment, sale, exchange or other
transfer in contravention of any of the provisions of this Article 11 shall
be void and shall not bind or be recognized by the Fund.
11.5 Misrepresentation and Forfeit. Subject to the discretion of the
General Partner, in the event a Holder who originally obtained Units in the
Fund's offering misrepresented that he was a Citizen of the United States, or
that it was not an ▇▇▇ or Qualified Plan or purchasing on behalf of an ▇▇▇ or
Qualified Plan, such person fails to remain a Citizen of the United States, or a
subsequent transferee of Units is not or fails to remain a Citizen of the United
States, such Person may, in the General Partner's discretion if it deems that
the Fund will fail certain citizenship requirements with respect to its
Equipment, be required to forfeit such Units to the Fund and no longer be
entitled to cash Distributions or allocations of the Fund, receipt of Fund
reports and voting privileges, although he may realize proceeds upon the
transfer of his Units to a Citizen of the United States, which subsequent
transferee would be entitled to the full economic benefits and other privileges
attributable to such Units.
12. SUBSTITUTED LIMITED PARTNERS
12.1 Limitations on Substitution. No Assignee shall have the right to
become a substituted Limited Partner of the Fund in place of his assignor unless
all of the following conditions are first satisfied:
12.1.1 A duly executed and acknowledged written instrument of
assignment covering no less than 250 Units (200 in the case of an ▇▇▇ or ▇▇▇▇▇
B-24
Plan) shall have been filed with the Fund, which instrument shall
specify the number of Units being assigned and set forth the intention
of the assignor that the Assignee succeed to the assignor's interest as
a substituted Limited Partner.
12.1.2 The assignor and Assignee shall have executed and
acknowledged such other instruments as the General Partner may deem
necessary or desirable to effect such substitution, including the
written acceptance and adoption by the Assignee of the provisions of
this Agreement, as the same may be amended and his execution,
acknowledgment and delivery to the General Partner of a special power
of attorney, the form and content of which are described herein;
12.1.3 The written consent of the General Partner to such
substitution shall have been obtained, the granting of which may be
withheld by the General Partner in its sole discretion;
12.1.4 A transfer fee not to exceed $100 shall have been paid
to the Fund to cover all reasonable expenses connected with such
substitution; and
12.1.5 The provisions of Section 11.1 and 11.3 of this
Agreement are complied with.
12.2 Consent to Admission. By executing or adopting this Agreement,
each Holder hereby consents to the admission of additional or substituted
Holders by the General Partner and to any Assignee becoming a substituted
Holder, in accordance with the provisions herein.
12.3 Amendment of Agreement. The General Partner shall cause this
Agreement to be amended to reflect the admission and/or substitution of Limited
Partners at least once in each fiscal quarter.
13. REPURCHASE OF FUND INTERESTS
13.1 In the event a Holder ceases to be a United States Citizen or
Resident Alien for any reason whatsoever, he may be required, in the General
Partner's discretion, to tender his Units to the Fund for repurchase as of the
date of such event. The Fund will have the absolute right to purchase such Units
at a price equal to 100% of the Holder's Capital Account as of such date, in all
cases determined as of the last day of the quarter prior to the fiscal quarter
during which such Units are repurchased. IT SHOULD BE NOTED THAT THE FUND WILL
NOT BE OBLIGATED TO PURCHASE UNITS FROM HOLDERS WHO CEASE TO BE
UNITED STATES
CITIZENS OR RESIDENT ALIENS.
13.2 The General Partner may otherwise use available Reserves to
repurchase Units, in its discretion and on terms it determines to be appropriate
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under given circumstances, in the event the Fund Manager deems such repurchase
to be in the best interest of the Fund; provided, the Fund shall never be
required to repurchase any Units. Upon the repurchase of any Units by the Fund,
the tendered Units shall be canceled and shall no longer be deemed to represent
an interest in the Fund; and, provided further, that any such repurchase shall
not impair the capital of the Fund, or cause the Fund or any of its remaining
Partners to incur an adverse tax consequence as a result of such repurchase.
13.3 The General Partner shall cause this Agreement to be amended to
reflect the change in the interests of the Holders (including the person whose
Units were repurchased) in the Net Income, Net Loss and Distributions of the
Fund at least once in each fiscal quarter.
13.4 Neither the General Partner nor its Affiliates may request the
Fund to repurchase any Units owned by them.
14. BOOKS, RECORDS, ACCOUNTINGS AND REPORTS
14.1 Books of Account and Records. The General Partner shall, for
income tax purposes, keep on an accrual basis adequate books of account and
records of the Fund wherein shall be recorded and reflected all of the
contributions to the capital of the Fund and all of the expenses and
transactions of the Fund.
14.1.1 Such books of account and records shall include
the following:
(i) A current list of the full name and last known
business or residence address and business telephone number of
each Partner set forth in alphabetical order together with the
Original Invested Capital, the Units held and the share in Net
Income and Net Loss of each Partner, which list shall be
updated at least quarterly to reflect changes in the
information contained therein;
(ii) A copy of the certificate of limited partnership
and all certificates of amendment, together with executed
copies of any powers of attorney pursuant to which any
certificate has been executed;
(iii) Copies of the Fund's federal, state and
local income tax or information returns and reports, if
any, for the six most recent taxable years;
(iv) Copies of the original of this Agreement and
all amendments;
(v) Financial statements of the Fund for the six
most recent fiscal years; and
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(vi) The Fund's books and records for at least the
current and past three fiscal years.
14.1.2 Such books of account and records shall be kept at the
principal place of business of the Fund in the State of California, and
each Limited Partner and his authorized representatives shall have, at
all times during normal business hours and at any other reasonable
time, free access to and the right to inspect and copy at their expense
such books of account and all records of the Fund.
14.1.3 Upon the request of a Limited Partner, the General
Partner shall mail to such Limited Partner within ten days of the
request a copy of the information described in Section 14.1.1(i), (ii)
and (iv). The information described in Section 14.1.1(i) shall be
printed in alphabetical order, on white paper, and in a readily
readable type size (in no event smaller than ten-point type). The Fund
may require payment of a reasonable charge for copy work.
14.1.4 If the General Partner neglects or refuses to exhibit,
produce or mail a copy of the information in Section 14.1.1(i) above as
requested and required under this Agreement, the General Partner shall
be liable to the Limited Partner requesting the information for the
costs, including attorneys' fees, incurred by the Limited Partner for
compelling production of the information and for actual damages
suffered by the Limited Partner by reason of such refusal or neglect.
It shall be a defense that the actual purpose and reason for the
requests for inspection or for a copy of the information is to secure
the list of Limited Partners or other information for the purpose of
selling such list or copies thereof, or of using the same for a
commercial purpose other than in the interest of the requesting person
as a Limited Partner relative to the affairs of the Fund. The General
Partner may require that a Limited Partner requesting the information
in Section 14.1.1(i) above represent that the list is not requested for
a commercial purpose unrelated to the Limited Partner's interest in the
Fund. The remedies provided hereunder to Limited Partners requesting
copies of the information in Section 14.1.1(i) above 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.
14.1.5 Subject to any change pursuant to Section 15.2.8, all
books and records of the Fund shall be kept on the basis of an annual
accounting period ending December 31, except for the final accounting
period which shall end on the dissolution or termination of the Fund.
All references herein to a "year of the Fund" are to such an annual
accounting period, and all references to a Fund "quarter" shall refer
to a calendar quarter unless and until such periods are changed by an
amendment hereto. Accelerated methods of depreciation
B-27
with respect to Fund assets and other elections available to the Fund
may be used by the Fund for purposes of reporting federal or state
income taxes.
14.2 Audited Annual Financial Statements. The General Partner shall
have prepared and distributed to the Holders at least annually, at Fund expense,
financial statements (each of which shall include a balance sheet, statement of
income or loss, statement of Partners' equity, and statement of cash flow)
prepared in accordance with generally accepted accounting principles and
accompanied by a report thereon containing an opinion of an independent
certified public accounting firm. Such opinion shall also state that reported
"Cash from Operations" is consistent with the definition of Cash from Operations
herein. Copies of such statements and report shall be distributed to each Holder
within 120 days after the close of each taxable year of the Fund.
14.3 Other Annual Reporting. The General Partner shall have prepared and
distributed to the Holders at least annually, at Fund expense: (i) a statement
of cash flow, (ii) Fund information necessary in the preparation of the Holders'
and Assignees' federal income tax returns; (iii) a report of the business of the
Fund, which shall include for each piece of Equipment which individually
represents at least 10% of the Fund's total investment in Equipment, a status
report to indicate: (a) the condition of the Equipment, (b) how the Equipment is
being used as of the end of the year (leased, operated, held for lease, repair,
or sale), (c) the remaining term of the Equipment leases, (d) the projected use
of Equipment for the next year (renewal of lease, re-lease, retirement, or
sale), and (e) such other information relevant to the value or use of the
Equipment as the General Partner deems appropriate, including the method used as
basis for valuation; (iv) a statement as to the compensation received by the
General Partner and its Affiliates from the Fund during the year, which
statement shall set forth the services rendered or to be rendered by the General
Partner and its Affiliates and the amount of fees received; (v) a report
identifying Distributions from: (a) Cash from Operations for that year, (b)
Gross Revenues of prior years held in reserves, (c) Cash from Sales or
Refinancing, and (d) Cash from Reserve Account and other sources; and (vi) a
special report prepared in accordance with the American Institute of Certified
Public Accountants United States Auditing Standards relating to special reports,
containing an opinion of an independent certified public accounting firm, to
report the breakdown of the costs reimbursed by the Fund to the General Partner
or its Affiliates. Such special report shall at a minimum provide: (a) a review
of the time records of individual employees, the costs of whose services were
reimbursed, and (b) a review of the specific nature of the work performed by
each such employee. The additional costs of such special report shall be
itemized by the auditors among all programs sponsored by the General Partner and
its Affiliates on a program-by-program basis and may be reimbursed to the
General Partner or its Affiliates to the extent that such reimbursement,
B-28
when added to the cost for administrative services rendered, does not exceed the
competitive rate for comparable services performed by independent parties in the
same geographic location. Copies of the reports hereunder shall be distributed
to each Holder within 120 days after the close of each taxable year of the Fund;
provided, however, that all Fund information necessary in the preparation of the
Holders' and Assignees' federal income tax returns shall be distributed to each
Holder and Assignee not later than 75 days after the close of each taxable year
of the Fund.
14.4 Quarterly Reports. The General Partner shall have prepared
quarterly, at Fund expense, commencing with the first full quarter after the
Closing Date: (i) a statement as to the compensation received by the General
Partner during such quarter from the Fund which statement shall set forth the
services rendered or to be rendered by the General Partner during such quarter
from the Fund and the amount of fees received, and (ii) other relevant
information. Copies of such statements shall be distributed to each Holder
within 60 days after the end of each quarterly period.
14.5 Unaudited Quarterly Financial Statements. The General Partner
shall have prepared, at Fund expense, a quarterly report covering each of the
first three quarters of Fund operations in each calendar year, unaudited
financial statements (each of which shall include a balance sheet, statement of
income or loss for said quarterly period and statement of Cash from Operations
and Cash from Sales or Refinancing for said quarterly period) and a statement of
other pertinent information regarding the Fund and its activities during the
quarterly period covered by the report. Copies of such statements and other
pertinent information shall be distributed to each Holder within 60 days after
the close of the quarterly period covered by the report of the Fund.
14.6 Other Quarterly Reports. The General Partner shall have prepared,
at Fund expense, after the end of each quarter in which Equipment is acquired
and until the Net Proceeds are fully invested or returned to investors, a notice
which shall describe therein: (i) a statement of the actual purchase price of
the Equipment, including the terms of the purchase, (ii) a statement of the
total amount of cash expended by the Fund to acquire such items of Equipment
(including and itemizing all commissions, fees, expenses and the name of each
payee), and (iii) a statement of the amount of proceeds in the Fund which remain
unexpended or uncommitted. Copies of such notice shall be distributed to each
Holder within 60 days after the end of such quarter. If deemed appropriate by
the General Partner such notice may be prepared and distributed to each Holder
more frequently than quarterly.
14.7 Tax Returns. The General Partner, at Fund expense, shall cause
income tax returns for the Fund to be prepared and timely filed with appropriate
authorities.
B-29
14.8 Governmental Reports. The General Partner, at Fund expense, shall
cause to be prepared and timely filed with appropriate federal and state
regulatory and administrative bodies, all reports required to be filed with such
entities under then current applicable laws, rules and regulations. Such reports
shall be prepared on the accounting or reporting basis required by such
regulatory bodies. Any Holder shall be provided with a copy of any such report
upon request without expense to him.
14.9 Maintenance of Suitability Records. The General Partner, at Fund
expense, shall maintain for a period of at least four years, a record of the
information obtained to indicate that a Holder meets the suitability standards
set forth in the Prospectus.
15. RIGHTS, AUTHORITY, POWERS AND RESPONSIBILITIES OF THE GENERAL
PARTNER
15.1 Services of the General Partner. The General Partner shall be
responsible for providing the following services to the Fund:
15.1.1 Supervising the organization of the Fund and
the offering and sale of Units;
15.1.2 Supervising Fund management, which includes (i)
establishing policies for the operation of the Fund; (ii) causing the
Fund's agents or employees to arrange for the provision of services
necessary to the operation of the Fund (including Equipment management
and investor, accounting and legal services, and services relating to
Distributions by the Fund); (iii) approving actions to be taken by the
Fund; (iv) providing advice, consultation, analysis and supervision
with respect to the functions of the Fund as an owner of the Equipment
(including, without limitation, decisions regarding adjustments to
rental schedules, the sale or disposition of Equipment and compliance
with federal, state and local regulatory requirements and procedures);
(v) executing documents on behalf of the Fund; (vi) having a fiduciary
responsibility for the safekeeping and use of all funds of the Fund,
whether or not in the General Partner's immediate possession or
control; and (vii) making all decisions as to accounting matters; and
15.1.3 Approval of the terms of the sale or other disposition
of Equipment, including establishing the terms for and arranging any
such transaction.
15.2 Authority of the General Partner. The conduct of the Fund's
business shall be controlled solely by the General Partner in accordance with
this Agreement. The General Partner shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Fund, whether or not in its
immediate possession or control, and shall have all authority, rights and powers
B-30
conferred by law and those required or appropriate to the management of the Fund
business which, by way of illustration but not by way of limitation, shall,
subject only to the provisions of Section 15.4, include the right, authority and
power:
15.2.1 To acquire, lease, sell, hold and dispose of Equipment,
interests therein or appurtenances thereto, as well as personal or
mixed property connected therewith, including the purchase, lease,
improvement, maintenance, exchange, trade or sale of such Equipment, at
such price, rental or amount, for cash, securities (in compliance with
appropriate securities regulations) or other property, and upon such
terms, as the General Partner deems in its sole discretion, to be in
the best interest of the Fund; provided that, as of the date of the
final investment of Net Proceeds and completion of the permanent
financing of the Equipment portfolio, at least 50% of the Fund's
Equipment, by aggregate purchase cost, shall be subject to initial
leases which are High Payout Leases.
15.2.2 To place record title to, or the right to use Fund
assets in, the name or names of a nominee or nominees, trustee or
trustees for any purpose convenient or beneficial to the Fund;
15.2.3 To acquire and enter into any contract of insurance
which the General Partner deems necessary or appropriate for the
protection of the Fund and the General Partner, for the conservation of
Fund assets, or for any purpose convenient or beneficial to the Fund;
15.2.4 To employ Persons in the operation and management of
the business of the Fund including, but not limited to, supervisory
managing agents, insurance brokers and equipment lease brokers and
Persons to perform, on behalf of the Fund, the activities enumerated in
Section 15.2.1, on such terms and for such compensation as the General
Partner shall determine, subject, however, to the limitations with
respect thereto as set forth in Article 8; provided that no Person is
employed to provide duplicative services; and provided further that
agreements with the General Partner or their Affiliates for the
services set forth in Article 8 shall contain the terms and limitations
as to fees and expenses as set forth in said Article 8 and any of such
agreements shall be terminable immediately upon dissolution of the Fund
under Section 19.1;
15.2.5 To prepare or cause to be prepared reports, statements
and other relevant information for distribution to Holders, as provided
in Article 14 and as they otherwise deem appropriate;
15.2.6 To open accounts and deposit and maintain funds in the
name of the Fund in banks or savings and loan associations; provided,
B-31
however, that the Fund funds shall not be commingled with the funds of
any other Person;
15.2.7 To cause the Fund to make or revoke any of the
elections referred to in the Code;
15.2.8 To select as the Fund's accounting year a calendar
year or such fiscal year as approved by the Service;
15.2.9 To determine the appropriate accounting method or
methods to be used by the Fund;
15.2.10 To offer and sell Units in the Fund directly or
through any licensed Affiliate of the General Partner or nonaffiliate
and to employ personnel, agents and dealers for such purpose;
15.2.11 To amend this Agreement to reflect the addition or
substitution of Holders, the reduction of capital accounts upon the
return of capital to Partners or the change in the interests of the
Holders in the Net Income, Net Loss and Distributions of the Fund after
the repurchase of Units;
15.2.12 To require in all Fund obligations that the General
Partner shall not have any personal liability thereon but that the
Person contracting with the Fund is to look solely to the Fund and its
assets for satisfaction of such obligations; and in the event that the
General Partner has personal liability with respect to any such
obligation, the General Partner may require its satisfaction prior to
obligations with respect to which the General Partner has no personal
liability; provided, however, that the inclusion of the aforesaid
provisions shall not materially affect the cost of the service or
material being supplied and all Fund obligations are satisfied in
accordance with prudent business practices as to the time and manner of
payment;
15.2.13 To execute and file certificates of amendment and
cancellation of the certificate of Limited Partnership, and
certificates of dissolution of the Fund;
15.2.14 Subject to the provisions of Article 10, to determine
the amount of Cash from Operations and Cash from Sales or Refinancing
used to purchase additional Equipment and to make Distributions;
15.2.15 To purchase Equipment in its own name, the name of an
Affiliate (other than an Affiliate which is 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) or in the name of a nominee, a trust or a
corporation or otherwise and hold title thereto on a temporary or
B-32
interim basis (generally not in excess of six months) for the purpose
of facilitating the acquisition of such Equipment or completion of
manufacture of the Equipment, or any other purpose related to the
business of the Fund; provided, however that: (i) the transaction is
in the best interest of the Fund; (ii) such Equipment is purchased by
the Fund for a purchase price no greater than the cost of such
Equipment to the General Partner or Affiliate (including any
out-of-pocket carrying costs), except for compensation permitted by
this Agreement; (iii) there is no difference in interest terms of the
loans secured by the Equipment at the time acquired by the General
Partner or Affiliate and the time acquired by the Fund; (iv) there is
no benefit arising out of such transaction to the General Partner or
its Affiliate apart from the compensation otherwise permitted by this
Agreement; and (v) all income generated by, and all expenses
associated with, Equipment so acquired shall be treated as belonging
to the Fund.
15.2.16 Subject to Sections 15.4.21 and 15.4.22, to borrow
money and, if security is required therefor, to mortgage or subject any
Equipment to any other security device, to obtain replacements of any
mortgage or other security device, and to prepay, in whole or in part,
refinance, increase, modify, consolidate or extend any mortgage or
other security device, all of the foregoing at such terms and in such
amounts as the General Partner, in its sole discretion, deems to be in
the best interests of the Fund;
15.2.17 To invest (i) the Gross Proceeds or Net Proceeds
temporarily prior to investment in Equipment, (ii) other funds of the
Fund prior to the investment in Equipment or the distribution to
Holders and (iii) the Fund's capital reserves, in short-term, highly
liquid investments where there is appropriate safety of principal;
15.2.18 In addition to any amendments otherwise authorized
herein, this Agreement may be amended from time to time by the General
Partner, without the consent of any of the Holders
(i) to add to the representations, duties or
obligations of the General Partner or its Affiliates or
surrender any right or power granted to the General
Partner or its Affiliates herein, for the benefit of the
Holders;
(ii) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect
to matters or questions arising under this Agreement which
will not be inconsistent with the provisions of this Agreement
B-33
provided that no amendment hereunder will change the voting
rights of Holders;
(iii) to delete or add any provision of this Agreement
required to be so deleted or added by the staff of the
Securities and Exchange Commission or by a state "Blue Sky"
administrator or similar such official, which addition or
deletion is deemed by such staff or official to be for the
benefit or protection of the Holders; or
(iv) to amend the provisions of Article 10 of this
Agreement relating to the allocations of Net Income, Net Loss
and Distributions among Partners or any other provisions
hereof if the Fund is advised at any time by the Fund's
accountants or legal counsel that the allocations or such
other provisions set forth in this Agreement are unlikely to
be respected, either because of promulgation of Regulations
under Sections 704 or 706 of the Code or other developments in
the law, but only to the minimum extent necessary in
accordance with such advice of accountants and/or counsel to
cause such provisions of this Agreement to be respected. Such
amendment or amendments made by the General Partner in
reliance upon the advice of the accountants or counsel
described above shall be deemed to be made pursuant to the
fiduciary obligation of the General Partner to the Fund and
the Holders, and no such amendment or amendments shall give
rise to any claim or cause of action by any Holder.
15.2.19 To execute, acknowledge and deliver any and all
instruments to effectuate the foregoing, and to take all such action in
connection therewith as the General Partner shall deem necessary or
appropriate.
15.3 General Powers and Fiduciary Duty. The General Partner shall,
except as otherwise provided in this Agreement, have all the rights and powers
and shall be subject to all the restrictions and liabilities of a general
partner of a limited partnership or a partner in a partnership without limited
partners as provided under the laws of the State of California. Notwithstanding
any other provision of this Agreement, in no event may the General Partner
modify or compromise, by contract or otherwise, its fiduciary duty to the Fund
or the Holders, whether such duty is imposed under the common law or by statute.
15.4 Limitations on General Partner's Authority. Neither the
General Partner nor any Affiliate shall have the authority to:
15.4.1 Enter into contracts with the Fund which would bind the
Fund after the expulsion, adjudication of bankruptcy or insolvency of a
General Partner, or continue the business of the Fund with Fund assets
B-34
after the occurrence of such an event;
15.4.2 Grant to the General Partner or any Affiliate an
exclusive listing for the sale of Fund assets, including Equipment;
15.4.3 Sell Substantially All of the Assets in a single sale,
or in multiple sales in the same twelve-month period, except in the
orderly liquidation and winding up of the business of the Fund upon its
termination and dissolution;
15.4.4 Pledge or encumber Substantially All of the Assets in a
single transaction or in multiple transactions in the same twelve-month
period other than in connection with the acquisition or improvement of
assets or the refinancing of existing obligations;
15.4.5 Alter the primary purpose of the Fund as set forth in
Article 3;
15.4.6 Receive from the Fund a rebate or give-up or
participate in any reciprocal business arrangements which would
circumvent the provisions of this Agreement, nor shall any such person
permit any reciprocal business arrangement which would circumvent the
restrictions herein against dealing with the General Partner and its
Affiliates;
15.4.7 Sell or lease any Equipment to any entity in which a
General Partner or any Affiliate has an interest, other than a joint
venture or similar program which complies with the conditions set forth
in Section 15.4.8 hereof;
15.4.8 Cause the Fund to invest in any program, partnership or
other venture unless: (i) it is a general partnership, equipment trust
or other form of joint venture, but not a limited partnership; (ii) the
other partner or joint owner is not a General Partner (but it may be an
Affiliate of a General Partner, provided the Affiliate is 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 operation of or gain from an
interest in equipment, which has substantially identical investment
objectives to those of the Fund); (iii) such general partnership or
joint venture owns and operates particular Equipment and the Fund or
the Fund and Affiliate, as the case may be, acquire the controlling
interest in such general partnership, or joint venture; (iv) the
agreement of partnership or joint venture does not authorize the Fund
to do anything as a partner or joint venturer with respect to the
Equipment which the Fund, or a General Partner, could not do directly
because of the provisions of this Agreement; (v) the Fund's investment
is on substantially the same terms and conditions as the investment of
B-35
any Affiliate; (vi) no compensation (other than as provided for by this
Agreement) is received in connection therewith by the General Partner
or any of its Affiliates, there are no duplicate equipment management
or any other duplicate fees and such investment shall not result in the
impairment, abrogation or circumvention of any of the terms or
provisions of this Agreement; (vii) the joint venture is in the best
interest of both co-venturers; and (viii) in joint venture arrangements
with an Affiliate of a General Partner, if all of the following
additional conditions are met: the compensation of the General Partner
is substantially identical to that received by the sponsor of such
Affiliate, the Fund has a right of first refusal to buy, if such
Affiliate wishes to sell, equipment held in the joint venture, and the
joint venture is established either for the purpose of effecting
appropriate diversification of the Fund's investment portfolio or for
the purpose of relieving the General Partner or its Affiliates or
nominees from a commitment entered into pursuant to Section 15.2.15 of
this Agreement; for the purposes of this Section, a controlling
interest shall include: (1) ownership of more than 50% of the venture's
capital or profits; or (2) provisions in the venture agreement giving
the Fund effective control;
15.4.9 Except as provided in the Sections 15.2.15, 15.4.7 and
15.4.8, purchase or lease Equipment from the Fund or sell or lease
Equipment to the Fund;
15.4.10 Cause the Fund to loan any funds or property to any
General Partner or Affiliate of a General Partner;
15.4.11 Cause the Fund to borrow from any of the General
Partner or its Affiliates on terms which provide for interest,
financing charges or fees in excess of the amounts charged by unrelated
lending institutions on comparable loans for the same purpose, or in
excess of the legder's cost of funds, or, in any event, to cause the
Fund to obtain "permanent financing" (defined as financing with a term
in excess of 12 months) from any such Person;
15.4.12 Cause the Fund to exchange Units for property
other than cash;
15.4.13 Do any action in contravention of this Agreement or
which would make it impossible to carry on the ordinary business of the
Fund;
15.4.14 Confess a judgment against the Fund in connection
with any threatened or pending legal action;
15.4.15 Possess any Equipment or assign the rights of the
Fund in specific Equipment for other than a Fund purpose;
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15.4.16 Admit a Person as a General Partner except with the
consent of the Holders as provided in Article 17 hereof;
15.4.17 Perform any act (other than an act required by this
Agreement or any act taken in good faith reliance upon counsel's
opinion) which would, at the time such act occurred, subject any Holder
to liability as a general partner in any jurisdiction;
15.4.18 Reinvest any funds of the Fund after the end of the
Reinvestment Period other than to invest in Equipment pursuant to
commitments entered into prior to the expiration of the Reinvestment
Period or in Equipment to be used in connection with Equipment under an
existing lease, or reinvest any funds of the Fund during the
Reinvestment Period unless such reinvestment is effected for all
Holders on the same terms and is otherwise in compliance with Section
10.7 hereof;
15.4.19 Invest any of the Gross Proceeds in Equipment which
is non-income producing;
15.4.20 Employ, or permit any Person to employ, the funds or
assets of the Fund in any manner except for the exclusive benefit of
the Fund; this provision shall not prohibit the General Partner from
causing Fund funds to be deposited in a separate Fund account with a
bank or other financial institution which aggregates all funds held on
behalf of the General Partner and its Affiliates in calculating
qualifying balances for purposes of discounts on service charges or
other account benefits, provided that the Fund benefits on a pro rata
basis from any such discounts or other favorable terms, and, provided
further, that no creditor of any party other than the Fund shall have
any recourse to funds held in the Fund's separate account;
15.4.21 Incur any indebtedness wherein the lender will have or
acquire, at any time as a result of making the loan, any direct or
indirect interest in the profit, capital or property of the Fund other
than as a secured creditor; or incur any indebtedness specifically for
the purpose of funding operating distributions, provided however that
the Fund may enter into refinancing transactions with respect to its
Equipment and distribute net proceeds from any such refinancing to the
extent consistent with its investment objectives;
15.4.22 Incur aggregate Fund borrowings which, as of the date
of the final investment of the Net Proceeds and, thereafter, on the
date any subsequent indebtedness is incurred, are in excess of 50% of
the purchase price of all Equipment on a combined basis. "Purchase
price" for purposes of this Section 15.4.22 shall mean the sum of the
cash downpayment and any indebtedness incurred in connection with
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the acquisition of an item of Equipment by the Fund, or to which the
Equipment is taken subject, plus any Acquisition Fees paid, but does
not include loan points, prepaid interest, or other prepaid expenses;
15.4.23 Commingle Fund funds with those of any other Person;
15.4.24 Except as otherwise provided herein, cause the Fund to
enter into any transaction with any other partnership in which a
General Partner or any of its Affiliates have an interest, including,
but not limited to, any transaction involving the sale, lease or
purchase of any Equipment to or from the Fund, the rendering of
services to or from the Fund, or the lending of any monies or other
property to or from the Fund;
15.4.25 Directly or indirectly pay or award any finder's fees,
commissions or other compensation to any Person engaged by a potential
investor for investment advice as an inducement to such advisor to
advise the purchaser regarding the purchase of Units; provided,
however, that the General Partner shall not be prohibited from paying
the normal sales commissions payable to a registered broker-dealer or
other properly-licensed Person for selling Units;
15.4.26 Operate the Fund in such a manner as to have the Fund
classified as an "investment company" for purposes of the Investment
Company Act of 1940;
15.4.27 Invest any of the Gross Proceeds in units of limited
partnership interest, junior mortgages, deeds of trust or other similar
instruments or obligations;
15.4.28 Cause the Fund to enter into any agreements with a
General Partner or any Affiliate of a General Partner which are not
subject to termination without penalty by either party upon not more
than 60 days' written notice, except for agreements which comply with
the provisions of Section 15.2.15 or those which comply with the
provisions of Section 15.4.8 and relate to the purchase of Equipment by
the Fund and an Affiliate as joint venturers;
15.4.29 Cause the Fund to acquire any single item of Equipment
that has a contract purchase price in excess of $1,000,000 unless prior
to final funding of the acquisition it obtains an appraisal of the
Equipment from a qualified independent third party appraiser;
15.4.30 Cause the Fund to invest cash in an aggregate amount
in excess of $30,000,000 in Equipment leased to a single lessee.
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15.5 Limitation on General Partner's Liability. The General Partner
shall have no personal liability for the repayment of the Original Invested
Capital of any Holder or to repay the Fund any portion or all of any negative
balance in its Capital Account, except as otherwise provided in Section 5.2.
15.6 Tax Matters Partner. ATEL is hereby designated as the "Tax Matters
Partner" in accordance with Section 6231(a)(7) of the Code and, in connection
therewith and in addition to all other powers given therein, shall have all
other powers needed to perform fully hereunder including, without limitation,
the power to retain all attorneys and accountants of its choice and the right to
settle any audits without the consent of Limited Partners. The designation made
in this paragraph is hereby consented to by each Partner as an express condition
to becoming a Partner. The Fund hereby indemnifies ATEL from and against any
damages or losses (including attorney's fees) arising out of or incurred in
connection with any action taken or omitted to be taken by it in carrying out
its responsibilities as tax matters partner, subject to the same conditions
under which indemnification is provided the General Partner in Article 21
hereof.
15.7 Minimum Investment in Equipment / Maximum Front-End Fees. The
General Partner must commit not less than 85.875% of the Gross Proceeds to
Investment in Equipment, with the balance thereof available to pay Organization
and Offering Expenses and Front End Fees, however designated. Under the North
American Securities Administrators Association, Inc. ("NASAA") Statement of
Policy concerning Equipment Programs, as amended through October 24, 1991
(referred to herein as the "NASAA Guidelines"), the Fund is required to commit a
minimum percentage of the Gross Proceeds to Investment in Equipment, calculated
as the greater of: (i) 80% of the Gross Proceeds reduced by 0.0625% for each 1%
of indebtedness encumbering the Fund's Equipment; or (ii) 75% of such Gross
Proceeds. Based on the formula in the NASAA Guidelines, with 50% portfolio
leverage the Fund's minimum Investment in Equipment would equal 76.875% of Gross
Proceeds (80% - [50% x .0625%] = 76.875%), and the Fund's minimum Investment in
Equipment would therefore exceed the NASAA Guideline minimum by 9%. The NASAA
Guidelines permit the Fund Manager and its Affiliates to receive compensation in
the form of a carried interest in Fund Net Income, Net Loss and Distributions
equal to 1% for the first 2.5% of excess Investment in Equipment over the NASAA
Guidelines minimum, 1% for the next 2% of such excess, and 1% for each
additional 1% of excess Investment in Equipment. With a minimum Investment in
Equipment of 85.875% and 50% leverage, the Fund Manager and its Affiliates may
receive an additional carried interest equal to 6.5% of Net Profit, Net Loss and
Distributions under the foregoing formula (2.5% + 2% + 4.5% = 9%; 1% + 1% + 4.5%
= 6.5%]. At the lowest permitted level of minimum Investment in Equipment, the
NASAA Guidelines would permit the Fund Manager and its Affiliates to receive a
promotional interest equal to 5% of Distributions of Cash from Operations and 1%
of Distributions of Sale or Refinancing Proceeds until Limited
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Partners have received total Distributions equal to their Original Invested
Capital plus an 8% per annum cumulative return on their Adjusted Invested
Capital, and, thereafter, the promotional interest could increase to 15% of all
Distributions. With the additional carried interest calculated as described
above, the maximum aggregate fees payable to the Fund Manager and Affiliates
under the NASAA Guidelines as carried interest and promotional interest would
equal 11.5% of Distributions of Cash from Operations (6.5% + 5% = 11.5%), and
7.5% of Distributions of Sale or Refinancing Proceeds (6.5% + 1% = 7.5%), before
the subordination level was reached, and 21.5% of all Distributions thereafter.
The amounts to be paid under the terms hereof will equal 11.5% of Distributions
of Cash from Operations (4% as the Incentive Management Fee plus 7.5% as the
Fund Manager's Interest in the Fund) and 7.5% of Distributions of Sale or
Refinancing Proceeds (as the Fund Manager's 7.5% Interest in the Fund) before
the Priority Return, and 15% of all Distributions thereafter (7.5% as the
Incentive Management Fee plus 7.5% as the Fund Manager's Interest in the Fund).
Upon completion of the offering of Units, final commitment of Net Proceeds to
acquisition of Equipment and establishment of final levels of permanent
portfolio debt encumbering such Equipment, the Fund Manager shall calculate the
maximum carried interest and promotional interest payable to the Fund Manager
and its Affiliates under the NASAA Guidelines and compare such total permitted
fees to the total of the Incentive Management Fees and Fund Manager's Interest
in the Fund. If and to the extent that the fees payable to the Fund Manager and
its Affiliates as the Incentive Management Fee and the Fund Manager's Interest
in the Fund should exceed the maximum promotional interest plus carried interest
permitted under the NASAA Guidelines, as described above, the fees payable to
the Fund Manager and its Affiliates shall be reduced as described herein. In
such event, this Agreement shall be amended immediately to reduce the Fund
Manager's Interest in the Partnership by an amount sufficient to cause the total
of the Incentive Management Fees and such Interest to comply with the
limitations in the NASAA Guidelines on the aggregate of promotional interests
and carried interests. A comparison of the Front End Fees actually paid by the
Fund and the NASAA Guideline maximums shall be repeated, and any required
adjustments shall be made, at least annually thereafter.
15.8 Reliance on General Partner's Authority. The General Partner shall
conduct the business of the Fund, devoting such time thereto as it, in its sole
discretion, shall determine to be necessary to manage the Fund business and
affairs in an efficient manner. Any Person dealing with the Fund or the General
Partner may rely upon a certificate signed by the General Partner as authority
with respect to: (i) the identity of the General Partner or any Holder hereof;
(ii) the existence or non-existence of any fact or facts which constitute a
condition precedent to acts by the General Partner or are in
any other manner germane to the affairs of the Fund; (iii) the Persons who are
authorized to execute and deliver any instrument or document on behalf of the
Fund; or (iv) any act or failure to act by the Fund as to any other matter
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whatsoever involving the Fund or any Partners.
16. RIGHTS, POWERS AND VOTING RIGHTS OF THE LIMITED PARTNERS
16.1 Limitation on Limited Partner Authority. Limited Partners shall
take no part in the control, conduct or operation of the Fund and shall have no
right or authority to act for or bind the Fund except as expressly provided
herein.
16.2 Voting Rights. Limited Partners shall have the right, by the vote
of Limited Partners who own more than 50% of the total outstanding Units
entitled to vote (a "majority-in-interest"), to approve the following matters
affecting the basic structure of the Fund:
16.2.1 Removal or withdrawal of a General Partner;
16.2.2 Subject to the further requirements of Article
17, continuation of the Fund and election of a successor General
Partner upon the termination of a General Partner;
16.2.3 Termination and dissolution of the Fund;
16.2.4 Amendment of this Agreement, provided such amendment is
not for any of the purposes set forth in Sections 16.4 or 16.5, and
provided, further, that the Limited Partners shall have the right to
approve or disapprove by separate vote each proposed amendment to this
Agreement;
16.2.5 The pledge or granting of a security interest in, or
sale of, Substantially All of the Assets in a single transaction, or in
multiple transactions in the same twelve-month period, except in the
liquidation and winding up of the business of the Fund upon its
termination and dissolution; and
16.2.6 The extension of the term of the Fund.
16.3 Voting Procedures. In any vote of the Limited Partners, each
Limited Partner shall be entitled to cast one vote for each Unit which he owns
as of the designated record date. Notwithstanding any other provision of this
Agreement, any Units held by a General Partner or an Affiliate of a General
Partner will not be entitled to vote, and will not be considered to be
"outstanding" Units for purposes of any vote, upon matters which involve a
conflict between the interests of such General Partner and the Fund, including,
but not limited to, any vote on the proposed removal or withdrawal of such
General Partner or on any proposed amendment to this Agreement which would
expand or extend the rights, authorities or powers of such General Partner.
16.3.1 Meetings of the Limited Partners to vote upon
any matters as to which the Limited Partners are authorized to
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take action under this Agreement, as the same may be amended from time
to time, may be called at any time by the General Partner or by one or
more Limited Partners holding more than 10% of the outstanding Units by
delivering written notice, either in person or by registered mail, of
such meeting to the General Partner. Promptly, but in any event within
10 days following receipt of such request, the General Partner shall
cause a written notice, either in person or by certified mail, to be
given to the Limited Partners entitled to vote at such meeting, which
notice shall state that a meeting will be held at a time and place
fixed by the General Partner, which is to be convenient to the Partners
as a group, and which is not less than 15 days nor more than 60 days
after the mailing of the notice of the meeting; provided, however, that
such maximum period for the giving of notice and the holding of
meetings may be extended for an additional 60 days if such extension is
necessary to obtain the qualification with the California Commissioner
of Corporations of the matters to be acted upon at such meeting, the
clearance by the Securities and Exchange Commission or other
appropriate governing agency of the solicitation materials to be
forwarded to Limited Partners in connection with such meeting or any
other administrative authorizations which may be required. Included
with the notice of a meeting shall be a detailed statement of the
action proposed, including a verbatim statement of the wording of any
resolution proposed for adoption by the Limited Partners and of any
proposed amendment to this Agreement. All expenses of the meeting and
notification shall be borne by the Fund.
16.3.2 In order to establish the Partners of record entitled
to act upon matters by vote or written consent, the General Partner or
Limited Partners holding more than 10% of the Units may fix in advance
a record date (the "Record Date") which is not more than 60 nor less
than 10 days prior to the date of the meeting or the date upon which
written consents are to be delivered. If no Record Date is fixed in the
notice of meeting or action by written consent, the Record Date shall
be deemed to be at the close of business on the business day next
preceding the date on which notice is given. A new Record Date shall be
fixed if a meeting is adjourned for more than 45 days from the date set
for the original meeting.
16.3.3 Upon adjournment of a meeting to another time or place,
notice of the new time or place shall be announced at the meeting at
which adjournment is taken. If the adjournment is for more than 45 days
or if, after the adjournment, a new Record Date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to
each Partner of record entitled to vote at the meeting.
16.3.4 Personal presence of the Limited Partners at a
meeting shall not be required, provided that sufficient ▇▇▇▇▇
▇-▇▇
are represented at the meeting, by Limited Partners appearing in person
and/or by duly executed proxies, to take any action proposed for a vote
at such meeting. Attendance by a Limited Partner at any meeting and
voting in person shall revoke any proxies of such Limited Partner
submitted with respect to action proposed to be taken at such meeting.
Submission of a later proxy with respect to any action shall revoke an
earlier one as to such action. Only the votes, whether in person or by
proxy, of Limited Partners holding Units as of the Record Date
established for such meeting shall be counted.
16.3.5 Any matter as to which the Limited Partners are
authorized to take action under this Agreement or under law may be
taken by the Limited Partners without a meeting and shall be as valid
and effective as action taken by the Limited Partners at a meeting duly
assembled, if written consents to such action by the Limited Partners
are (i) signed by the Limited Partners entitled to vote upon such
action at a meeting who held, as of the Record Date for such actions,
the number of Units required to authorize such action and (ii)
delivered to the General Partner as of the date set for such action.
Any action taken without a meeting shall be effective 15 days after the
required minimum number of Limited Partners have signed the consent and
shall be effective immediately if the General Partner and Limited
Partners holding at least 90% of the outstanding Units as of the Record
Date have signed the consent.
16.3.6 In the event that there shall be no General Partner,
the Limited Partners may take action without a meeting by the written
consent of Limited Partners having the requisite voting power of the
Limited Partners entitled to vote.
16.4 Limitations on Limited Partner Rights. No Holder shall have the
right or power to: (i) withdraw or reduce his contribution to the capital of the
Fund except as a result of the repurchase of the Units as provided in Article
13, the dissolution of the Fund or as otherwise provided by law, (ii) bring an
action for partition against the Fund, (iii) cause the termination and
dissolution of the Fund by court decree or otherwise, except as set forth in
this Agreement, or (iv) demand or receive property other than cash in return for
his contribution. No Holder shall have priority over any other Holder either as
to the return of contributions of capital or as to Net Income, Net Loss or
Distributions. Other than upon the termination and dissolution of the Fund as
provided by this Agreement there has been no time agreed upon when the
contribution of each Holder may be returned.
16.5 Limitations on Power to Amend Agreement. Except as provided
in Section 15.2.18, and notwithstanding anything to the contrary contained in
this Agreement, this Agreement may not, without the consent of each of the
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Partners who would be adversely affected thereby, be amended to:
16.5.1 Convert a Holder into a general partner;
16.5.2 Modify the limited liability of a Holder;
16.5.3 Alter the interest of any Partner in Net
Income, Net Loss or Distributions; or
16.5.4 Affect the status of the Fund as a partnership
for federal income tax purposes.
16.6 Limited Partner List. Upon the written request of a Limited
Partner, the General Partner will furnish to such Limited Partner or his
representative, at his expense, a list containing the name and address of the
Units held of record by each Limited Partner, as provided in Section 14.1.3.
16.7 Dissenters' Rights and Limitations on Mergers and Roll-ups.
16.7.1 Any proposal that the Fund enter into a Roll-Up will
require approval by Limited Partners of not less than 90% of the
outstanding Units. Limited Partners who dissent with respect to a
Roll-Up proposal will have the rights of a dissenting limited partner
as provided under Sections 15679.1 through 15679.14 of the California
Revised Limited Partnership Act. The Fund shall not reimburse the
sponsor of a proposed Roll-Up for the costs of its proxy contest in the
event the Roll-Up is not approved by the Limited Partners as provided
herein.
16.7.2 In connection with a proposed Roll-Up, an appraisal of
all Fund assets shall be obtained from a competent, independent expert
(defined as a Person with no current material or prior business or
personal relationship with the General Partner or its Affiliates who is
engaged to a substantial extent in the business of rendering opinions
regarding the value of assets of the type held by the Fund, and who is
qualified to perform such work). If the appraisal will be included in a
Prospectus used to offer the securities of a Roll-Up Entity, the
appraisal shall be filed with the SEC and the states as an Exhibit to
the Registration Statement for the offering. Accordingly, an issuer
using the appraisal shall be subject to liability for violation of
Section 11 of the Securities Act of 1933 and comparable provisions
under state laws for any material misrepresentations or material
omissions in the appraisal. Fund assets shall be appraised on a
consistent basis. The appraisal shall be based on an evaluation of all
relevant information, and shall indicate the value of the Fund's assets
as of a date immediately prior to the announcement of the proposed
Roll-Up transaction. The appraisal shall assume an orderly liquidation
B-44
of Fund assets over a 12-month period. The terms of the engagement of
the Independent Expert shall clearly state that the engagement is for
the benefit of the Fund and its Holders. A summary of the independent
appraisal, indicating all material assumptions underlying the
appraisal, shall be included in a report to the Holders in connection
with a proposed Roll-Up transaction.
16.7.3 In connection with a proposed Roll-Up, the Person
sponsoring the Roll-Up transaction shall offer to Holders who vote "no"
on the proposal the choice of:
(a) accepting the securities offered in the proposed
Roll-Up transaction; or
(b) one of the following:
(i) remaining as Holders in the Fund, and
preserving their interests therein on the same
terms and conditions as existed previously; or
(ii) receiving cash in an amount equal to the
Holders' pro-rata share of the appraised value
of the net assets of the Fund.
16.7.4 The Fund shall not participate in any proposed Roll-Up
transaction which would result in Holders having democracy rights which
are less than those provided for under this Agreement. If the resulting
entity is a corporation, the voting rights of Holders shall correspond
to the voting rights provided for in this Agreement to the greatest
extent possible.
16.7.5 The Fund shall not participate in any proposed Roll-Up
transaction which includes provisions which would operate to materially
impede or frustrate the accumulation of shares by any purchaser of the
securities of the Roll-Up Entity (except to the minimum extent
necessary to preserve the tax status of the entity). The Fund shall not
participate in any proposed Roll-Up transaction which would limit the
ability of a Holder to exercise the voting rights of the securities of
the Roll-Up Entity on the basis of the number of Units held by that
Holder.
16.7.6 The Fund shall not participate in any proposed Roll-Up
Transaction in which Holders' rights of access to the records of the
Roll-Up Entity will be less than those provided for under this
Agreement.
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17. TERMINATION OF A GENERAL PARTNER AND TRANSFER OF A GENERAL
PARTNER'S INTEREST
17.1 Removal or Withdrawal. The following conditions shall
govern the voluntary withdrawal or removal of a General Partner:
17.1.1 The General Partner may not voluntarily withdraw from
the Fund without the approval of Limited Partners holding more than 50%
of the total outstanding Units entitled to vote.
17.1.2 A General Partner may be removed upon a vote of Limited
Partners owning more than 50% of the total outstanding Units entitled
to vote. Written notice of removal of a General Partner shall be served
either by certified or by registered mail, return receipt requested, or
by personal service. Such notice shall set forth the date upon which
the removal is to become effective.
17.2 Other Terminating Events. In the event of the adjudication of
bankruptcy, filing of a certificate of dissolution, death or adjudication of
insanity or incompetency of a General Partner (each of such events, as well as
removal, resignation and withdrawal of a General Partner, being herein referred
to as a "Terminating Event"), the Fund shall be dissolved and shall be
liquidated under the provisions of Article 19, subject to the provisions of
Section 17.3.
17.3 Election of Successor General Partner; Continuation of Fund
Business. The following provisions shall govern the election of a successor
General Partner and continuation of the business of the Fund upon the occurrence
of a Terminating Event with respect to a General Partner (the "Retiring General
Partner"):
17.3.1 If at the time of a Terminating Event the Fund has one
or more General Partners other than the Retiring General Partner, any
remaining General Partner or a majority-in-interest of the Limited
Partners may elect, within 90 days thereafter, to continue the Fund
business, in which case the Fund shall not dissolve. So long as there
is at least one remaining General Partner which so elects, or if a
majority-in-interest of the Limited Partners so elect and a remaining
General Partner does not so elect, any remaining General Partner which
is not willing to elect to continue the Fund business will be deemed to
have been removed from the Fund by vote of the Limited Partners.
17.3.2 If at the time of a Terminating Event the Retiring
General Partner is the sole remaining General Partner, the Fund shall
be dissolved unless a majority-in-interest of the Limited Partners
elect to continue the Fund business. In the event of such election, the
Fund business may be continued if the Limited Partners making such
election,
B-46
within 90 days after the occurrence of the Terminating Event, elect a
successor General Partner and continue the Fund's business on the same
terms and conditions as are contained herein, but with a name which
does not include or in any way refer to the name of any Retiring
General Partner.
17.4 Admission of Successor or Additional General Partner.
The following conditions shall be satisfied before any Person shall
become a successor General Partner or an additional General
Partner:
17.4.1 Such Person shall have been elected in
accordance with Section 17.3 or 17.6;
17.4.2 Such Person shall have accepted and agreed to
be bound by all the terms and provisions of this Agreement;
17.4.3 If such Person is a corporation, it shall have provided
the Fund with evidence satisfactory to counsel for the Fund of its
authority to become a General Partner and to be bound by this
Agreement; and
17.4.4 Any amendments and filings required or appropriate
under the California Revised Limited Partnership Act shall have been
made.
17.5 Effect of a Terminating Event. Upon the occurrence of
a Terminating Event, the following provisions shall be applicable:
17.5.1 The Retiring General Partner shall immediately cease to
be a General Partner and shall not have any right to participate in the
management of the affairs of the Fund or to receive any fees under this
Agreement not already paid or earned; provided, however, that the
Retiring General Partner shall receive all amounts then accrued and
payable by the Fund and shall be, and shall remain, liable as a General
Partner for all obligations and liabilities incurred by the Fund prior
to the effective date of the Terminating Event, but shall be free from
any obligation or liability incurred on account of the activities of
the Fund from and after such time.
17.5.2 If the business of the Fund is continued, as aforesaid,
the Retiring General Partner shall be entitled to receive from the Fund
the then present fair market value of its interest in the Fund,
determined by agreement of the Retiring General Partner and the
remaining or new General Partners, or, if they cannot agree, by
arbitration in accordance with the then current rules of the American
Arbitration Association. The expense of such arbitration shall be borne
equally by the Fund and the Retiring General Partner, and such
arbitration shall be conducted in San Francisco, California unless
otherwise agreed by both parties. The Fund shall forthwith pay to the
Retiring General Partner
B-47
an amount equal to the then present fair market value of the interest
so determined. If the Retiring General Partner has voluntarily
withdrawn from the Fund, payment shall be in the form of a non-interest
bearing unsecured promissory note with principal payable, if at all,
out of Distributions the Retiring General Partner would otherwise have
received under this Agreement had such General Partner not been
terminated. If the Retiring General Partner has been terminated
involuntarily, the payment shall be in the form of an interest bearing
promissory note payable in equal annual installments over a term of not
less than five years. Such payment when made shall constitute complete
and full discharge of all amounts to which the Retiring General Partner
is entitled in respect to such interest.
17.5.3 All executory contracts between the Fund and the
Retiring General Partner or any Affiliate thereof (unless such
Affiliate is also an Affiliate of the remaining or new General Partner
or Partners) may be terminated by the Fund effective upon written
notice to the party so terminated. The Retiring General Partner or any
Affiliate thereof (unless such Affiliate is also an Affiliate of the
remaining or new General Partner or Partners) may also terminate and
cancel any such executory contract effective upon 60 days' prior
written notice of such termination and cancellation given to the
remaining or new General Partner or Partners, if any, or to the Fund.
17.6 Election of Additional General Partner. Limited Partners owning in
excess of 50% of the outstanding Units may at any time and from time to time
elect an additional General Partner, and, upon satisfaction of the conditions
set forth in Section 17.4, the Person so elected shall be admitted as an
additional General Partner. Admission of an additional General Partner shall not
cause dissolution of the Fund.
17.7 Assignment of General Partner's Interest. A General Partner's
interest in the Fund shall not be assignable without the consent of Limited
Partners owning in excess of 50% of the total outstanding Units, unless such an
assignment is to an entity which succeeds to all of the assets of the assigning
General Partner and of which at least 80% of the voting and beneficial interest
is controlled by Persons controlling 80% or more of the voting and beneficial
interest of the assigning General Partner. Any entity to which the entire
interest of a General Partner in the Fund is assigned in compliance with this
Section 17.7 shall be substituted as a General Partner by the filing of
appropriate amendments to this Agreement.
17.8 Limited Partners' Participation in General Partner's Bankruptcy.
In the event the General Partner is subject to a voluntary or involuntary
petition for reorganization or liquidation under the federal Bankruptcy Act, the
General Partner will cause separate counsel to be retained on behalf of the
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Fund, at Fund expense, to represent the Limited Partners' interests in the
bankruptcy action. In such event, the Fund will also bear any reasonable and
necessary expenses of a duly appointed committee of Limited Partners incurred
while acting on behalf of all of the Limited Partners as a group in connection
with such bankruptcy action.
18. CERTAIN TRANSACTIONS
The General Partner and its Affiliates, the Holders, any shareholder,
officer, director, partner or employee thereof, or any Person owning a legal or
beneficial interest therein, may engage in or possess an interest in any other
business or venture of every nature and description, independently or with
others, including, but not limited to, the ownership, financing, leasing,
operation, management and brokerage of equipment. Except as described in the
Prospectus, and subject to their fiduciary duties to the Fund, neither the
General Partner nor its Affiliates shall be obligated to present to the Fund any
particular investment opportunity, regardless of whether such opportunity is of
such character that the Fund could take advantage thereof if it were presented
to the Fund, and the General Partner and its Affiliates shall have the right to
take for their own accounts (individually or otherwise) or to recommend to
others any such investment opportunity.
19. TERMINATION AND DISSOLUTION OF THE FUND
19.1 Termination and Dissolution. The Fund shall be terminated
and dissolved upon the earliest to occur of the following:
19.1.1 The withdrawal, removal, adjudication of bankruptcy,
insolvency, insanity or incompetency, death or dissolution of a General
Partner unless a remaining General Partner or a majority-in-interest of
the Limited Partners, within 90 days of the date of such event, elects
to continue the business of the Fund, and, if necessary, elects a
replacement general partner, in the manner provided in Article 17;
provided that expenses incurred on behalf of the General Partner and/or
Limited Partners in the continuation or reformation, or attempted
continuation or reformation, of the Fund hereunder shall be deemed
expenses of the Fund;
19.1.2 The Limited Partners owning more than 50% of
the total outstanding Units vote in favor of dissolution and
termination of the Fund;
19.1.3 The term of the Fund expires; or
19.1.4 The Fund disposes of all interests in Equipment and its
other assets and receives final payment in cash of the proceeds of such
dispositions.
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19.2 Accounting and Liquidation. Upon the dissolution and termination
of the Fund for any reason, the General Partner shall take full account of the
Fund assets and liabilities, shall liquidate the assets as promptly as is
consistent with obtaining the fair value thereof, and shall apply and distribute
the proceeds therefrom in the following order:
19.2.1 To the payment of creditors of the Fund but excluding
secured creditors whose obligations will be assumed or otherwise
transferred on the liquidation of Fund assets;
19.2.2 To the repayment of any outstanding loans made by the
General Partner to the Fund; and
19.2.3 To the General Partner and Holders in accordance with
their respective Capital Account balances, after giving effect to all
allocations described in Article 10 of this Agreement; provided,
however, that prior to any allocation under Section 10 of this
Agreement, Gross Income shall be specially allocated to the General
Partner to the extent, if any, necessary to cause its Capital Account
balance to be zero as of the close of such final taxable year (after
crediting the General Partner's Capital Account with the General
Partner's share of Fund Minimum Gain). For purposes of making the
foregoing allocation, Net Income and Net Loss for the final taxable
year of the Fund shall first tentatively be computed by including all
Gross Income as an element thereof; then, to the extent, if any, that
the Capital Account balance of the General Partner is negative as of
the close of such final taxable year (after giving effect to all Fund
distributions), Gross Income shall be separately stated and allocated
away from the Holders and to the General Partner pursuant to this
Section 19.2.3.
19.2.4 Distributions in liquidation shall be made by the end
of the taxable year in which the liquidation occurs or, if later,
within 90 days of the liquidating event and shall otherwise comply with
Regulations Section 1.704-1(b).
20. SPECIAL POWER OF ATTORNEY
20.1 Execution of Power of Attorney. By executing this Agreement, each
Holder is hereby granting to the General Partner a special power of attorney
irrevocably making, constituting and appointing ATEL, its duly
appointed officers, and any one of them, as the attorney-in-fact for such
Holder, with power and authority to act alone in his name and on his behalf to
execute, acknowledge and swear to the execution, acknowledgement and filing of
the following documents:
20.1.1 This Agreement, any separate certificates of
limited partnership, as well as any amendments to the
foregoing which, under the laws of the State of California or
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the laws of any other state, are required to be filed or which
the General Partner deems advisable to file;
20.1.2 Any other instrument or document which may be required
to be filed by the Fund under the laws of any state or by any
governmental agency, or which the General Partner deems advisable to
file; and
20.1.3 Any instrument or document which may be required to
effect the continuation of the Fund, the admission of an additional or
substituted Holder, or the dissolution and termination of the Fund
(provided such continuation, admission or dissolution and termination
are in accordance with the terms of this Agreement), or to reflect any
reductions in amount of contributions of Partners.
20.2 Special Power of Attorney. The special power of attorney
being granted hereby:
20.2.1 Is a special power of attorney coupled with an
interest, is irrevocable, shall survive the death or legal incapacity
of the granting Holder, and is limited to those matters herein set
forth;
20.2.2 May be exercised by a single General Partner acting
alone for each Holder by a facsimile signature of such General Partner
or by one of its officers, or by listing all of the Holders executing
any instrument with a single signature of a General Partner, or of one
of the corporate General Partner's officers, acting as
attorney-in-fact; and
20.2.3 Shall survive an assignment by a Holder of all or any
portion of his Units except that, where the Assignee of the Units owned
by a Holder has been approved by the General Partner for admission to
the Fund as a substituted Holder, the special power of attorney shall
survive such assignment for the sole purpose of enabling the General
Partner to execute, acknowledge and file any instrument or document
necessary to effect such substitution.
21. INDEMNIFICATION
21.1 Indemnification of the General Partner. The Fund, its
receiver or its trustee, shall indemnify, save harmless and pay all judgments
and claims against the General Partner and any of its Affiliates who perform
services for the Fund from any liability, loss or damage incurred by them or the
Fund by reason of any act performed or omitted to be performed by them when
acting in connection with the business of the Fund, including costs and
attorneys' fees and any amounts expended in the settlement of any claims or
liability, loss or damage; provided, however, that, if such liability, loss or
claim arises out of any action or inaction of the General Partner or Affiliates
who perform services for the
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Fund, the General Partner or Affiliates who perform services for the Fund must
have determined, in good faith, that such course of conduct was in the best
interest of the Fund and did not constitute fraud, negligence, breach of
fiduciary duty or misconduct by the General Partner or Affiliates who perform
services for the Fund; and provided further, that any such indemnification shall
be recoverable only from the assets of the Fund and not from the assets of the
Holders. All judgments against the Fund and the General Partner, wherein a
General Partner is entitled to indemnification, must first be satisfied from
Fund assets before such General Partner may be held responsible. Persons
entitled to indemnification hereunder shall be entitled to receive advances for
attorney's fees and other legal costs and expenses arising out of claims made
against them, provided that (i) no such advances may be made for such fees,
costs or expenses resulting from claims made by Holders; and (ii) advances for
such fees and expenses relating to claims made by parties other than Holders may
only be made if the action relates to the performance of duties or services by
the indemnified party on behalf of the Fund, the indemnified party obtains an
opinion of independent counsel that such party will be entitled to
indemnification pursuant to this Agreement under the specific circumstances of
the claim in question, and the indemnified party undertakes in writing prior to
receipt of such advances that such party will repay in full any such advanced
funds together with interest thereon in the event that, upon the ultimate
disposition of the claim, the party would not be entitled to indemnification
hereunder. Nothing contained herein shall constitute a waiver by a Holder of any
right which he may have against any party under federal or state securities
laws.
21.2 Limitations on Indemnification. Notwithstanding anything to the
contrary contained in the foregoing Section 21.1, neither the General Partner
nor any of its Affiliates performing services for the Fund nor any party acting
as a broker-dealer shall be indemnified from any liability, loss or damage
incurred by them in connection with (i) any claim or settlement involving
violations of state or federal securities laws by the General Partner or by any
Affiliate performing services for the Fund; or (ii) any liability imposed by
law, such as liability for fraud, bad faith or negligence; provided, however,
that indemnification will be allowed for settlements and related expenses of
lawsuits alleging securities law violations, and for expenses incurred in
successfully defending such lawsuits, provided that a court either (x) approves
the settlement and finds that indemnification of any payment in settlement and
related costs should be made; or (y) approves indemnification of litigation
costs if a successful defense is made, or a dismissal with prejudice is
obtained, as to the indemnitee on the merits of each count involving alleged
securities law violations; and (z) the parties seeking indemnification apprise
the court of the positions of the securities law administrators of any state in
which the Units were offered or sold, including the Massachusetts Securities
Division, and the Securities and Exchange Commission with respect to
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indemnification for securities laws violations before seeking court approval for
indemnification. Furthermore, the General Partner shall indemnify the Fund
against any loss or liability which it may incur as a result of the violation by
the General Partner or any of its Affiliates performing services for the Fund of
any state or federal securities laws.
21.3 Insurance. The Fund shall not pay for any insurance covering
liability of the General Partner or any of its Affiliates for actions or
omissions for which indemnification is not permitted hereunder; provided,
however, that nothing contained herein shall preclude the Fund from purchasing
and paying for such types of insurance, including extended coverage liability
and casualty and worker's compensation, as would be customary for any Person
owning comparable Equipment and engaged in a similar business or from naming the
General Partner and any of its Affiliates as additional insured parties
thereunder, provided that such addition does not add to the premiums payable by
the Fund.
22. MISCELLANEOUS
22.1 Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on all
parties hereto, notwithstanding that all of the parties are not signatory to the
original or the same counterpart.
22.2 Successors and Assigns. The terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the successors and
assigns of the respective Partners.
22.3 Severability. In the event any sentence or paragraph of this
Agreement is declared by a court of competent jurisdiction to be void, such
sentence or paragraph shall be deemed severed from the remainder of this
Agreement and the balance of this Agreement shall remain in effect.
22.4 Notices. All notices under this Agreement shall be in writing and
shall be given to the Person entitled thereto, by personal service or by mail,
posted to the address maintained by the Fund for such Person or at such other
address as he may specify in writing.
22.5 Captions. Article and section titles or captions contained in this
Agreement are inserted only as a matter of convenience and for reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement nor the intent of any provision hereof.
22.6 Number and Pronouns. Whenever required by the context hereof, the
singular shall include the plural, and vice-versa; the masculine gender shall
include the feminine and neuter genders, and vice-versa.
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22.7 General Partner Address. The address of the General
Partner is:
ATEL Financial Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
22.8 Limited Partner Addresses. The names, addresses and
capital contributions of the Limited Partners are set forth on
Exhibit I attached hereto, which exhibit shall be maintained at the
principal place of business of the Fund.
22.9 Construction. Notwithstanding the place where this Agreement may
be executed by any of the parties hereto, the parties expressly agree that all
the terms and provisions hereof shall be construed under the laws of the State
of California and that the Fund shall be governed by the California Revised
Limited Partnership Act, as amended, governing limited partnerships formed under
California law.
22.10 Qualification to Do Business. In the event the business of the
Fund is carried on or conducted in states in addition to the State of
California, then the parties agree that this Fund shall exist under the laws of
each state in which business is actually conducted by the Fund, and they
severally agree to execute such other and further documents as may be required
or requested in order that the General Partner may qualify the Fund to conduct
business in such states. The power of attorney granted to the General Partner by
each Holder in Article 20 shall constitute authority for the General Partner to
perform the ministerial duty of qualifying the Fund under the laws of any state
in which it is necessary to file documents or instruments of qualification. A
Fund office or principal place of business in a state may be designated from
time to time by the General Partner.
GENERAL PARTNER: INITIAL LIMITED PARTNERS:
ATEL FINANCIAL CORPORATION
By:________________________________ _____________________________
▇▇▇▇▇ ▇▇▇▇
_____________________________
▇▇▇▇▇ ▇▇▇▇
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EXHIBIT I
Schedule of Limited Partners
Capital
Name Address Contribution
▇▇▇▇▇ ▇▇▇▇ c/o ATEL Financial $250/25 Units
Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ c/o ATEL Financial $250/25 Units
Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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