APPENDIX A
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP
OF
LEASE EQUITY APPRECIATION FUND II, L.P.
TABLE OF CONTENTS
I. DEFINITIONS.............................................................................. 1
1.1 Defined Terms.................................................................. 1
II. FORMATION OF PARTNERSHIP................................................................. 11
2.1 Formation of Partnership....................................................... 11
III. NAME..................................................................................... 11
3.1 Name........................................................................... 11
IV. PLACES OF BUSINESS....................................................................... 11
4.1 Principal Place of Business.................................................... 11
4.2 Other Places of Business....................................................... 11
V. NAMES AND ADDRESSES OF PARTNERS.......................................................... 11
5.1 Names and Addresses of Partners................................................ 11
VI. PURPOSES AND OBJECTIVES.................................................................. 12
6.1 Purposes....................................................................... 12
6.2 Investment Objectives.......................................................... 12
VII. TERM..................................................................................... 12
7.1 Term........................................................................... 12
VIII. PARTNERS AND CAPITAL..................................................................... 12
8.1 General Partner................................................................ 12
8.2 Original Limited Partner....................................................... 12
8.3 Limited Partners............................................................... 12
8.4 Partnership Capital............................................................ 14
8.5 Capital Accounts............................................................... 14
8.6 Additional Capital Contributions............................................... 15
8.7 Loans by Partners.............................................................. 16
8.8 No Right to Return of Capital.................................................. 16
IX. POWERS, RIGHTS AND DUTIES OF GENERAL PARTNER............................................. 16
9.1 Extent of Powers and Duties.................................................... 16
9.2 Limitations on the Exercise of Powers of General Partner....................... 19
9.3 Limitation on Liability of General Partner and its Affiliates; Indemnification. 22
9.4 Compensation of General Partner and its Affiliates............................. 23
9.5 Other Interests of the General Partner and its Affiliates...................... 25
▇. ▇▇▇▇▇▇ AND LIABILITIES OF LIMITED PARTNERS............................................... 26
10.1 Absence of Control Over Partnership Business................................... 26
10.2 Limited Liability.............................................................. 26
XI. DISTRIBUTIONS AND ALLOCATIONS............................................................ 27
11.1 Distribution of Distributable Cash............................................. 27
11.2 Allocations of Income and Loss................................................. 27
11.3 Distributions and Allocations Among the Limited Partners....................... 29
11.4 Tax Allocations: Code Section 704(c); Revaluations............................. 30
11.5 Return of Uninvested Capital Contribution...................................... 30
11.6 No Distributions in Kind....................................................... 30
11.7 Partnership Entitled to Withhold............................................... 31
XII. WITHDRAWAL OF GENERAL PARTNER............................................................ 31
12.1 Voluntary Withdrawal........................................................... 31
12.2 Involuntary Withdrawal......................................................... 31
12.3 Consequences of Withdrawal..................................................... 32
12.4 Liability of Withdrawn General Partner......................................... 32
12.5 Notice of Withdrawal; Admission of Substitute General Partner; Dissolution if
No Substitute General Partner Approved......................................... 32
XIII. TRANSFER OF UNITS........................................................................ 33
13.1 Withdrawal of a Limited Partner................................................ 33
13.2 Assignment..................................................................... 33
13.3 Substitution................................................................... 34
13.4 Status of an Assigning Limited Partner......................................... 35
13.5 Limited Right of Presentment for Redemption of Units........................... 35
XIV. DISSOLUTION AND WINDING-UP............................................................... 36
14.1 Events Causing Dissolution..................................................... 36
14.2 Winding Up of the Partnership; Capital Contribution by the General Partner Upon
Dissolution.................................................................... 37
14.3 Application of Liquidation Proceeds Upon Dissolution........................... 38
14.4 No Recourse Against Other Partners............................................. 38
XV. FISCAL MATTERS........................................................................... 38
15.1 Title to Property and Bank Accounts............................................ 38
15.2 Maintenance of and Access to Basic Partnership Documents....................... 38
15.3 Financial Books and Accounting................................................. 40
15.4 Fiscal Year.................................................................... 40
15.5 Reports........................................................................ 40
15.6 Tax Returns and Tax Information................................................ 42
15.7 Accounting Decisions........................................................... 42
15.8 Federal Tax Elections.......................................................... 42
15.9 Tax Matters Partner............................................................ 42
XVI. MEETINGS AND VOTING RIGHTS OF THE LIMITED PARTNERS....................................... 43
16.1 Meetings of the Limited Partners............................................... 43
16.2 Voting Rights of the Limited Partners.......................................... 44
16.3 Limitations on Action by the Limited Partners.................................. 45
XVII. AMENDMENTS............................................................................... 45
17.1 Amendments by the General Partner.............................................. 45
XVIII. POWER OF ATTORNEY........................................................................ 46
18.1 Appointment of Attorney-in-Fact................................................ 46
18.2 Amendments to Agreement and Certificate of Limited Partnership................. 46
18.3 Power Coupled With an Interest................................................. 46
XIX. GENERAL PROVISIONS....................................................................... 47
19.1 Notices, Approvals and Consents................................................ 47
19.2 Further Assurances............................................................. 47
19.3 Captions....................................................................... 47
19.4 Binding Effect................................................................. 47
19.5 Severability................................................................... 48
19.6 Integration.................................................................... 48
19.7 Applicable Law................................................................. 48
19.8 Counterparts................................................................... 48
19.9 Creditors...................................................................... 48
19.10 Successors and Assigns......................................................... 48
19.11 Waiver of Action for Partition................................................. 48
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AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
LEASE EQUITY APPRECIATION FUND II, L.P.
This Amended and Restated Agreement of Limited Partnership is made and entered
into by and among LEAF FINANCIAL CORPORATION, a corporation organized and
existing under the laws of the State of Delaware, as the General Partner,
▇▇▇▇▇ ▇▇▇▇▇▇, as the "Original Limited Partner," and such other persons who
may be admitted from time to time as Limited Partners.
ARTICLE I - DEFINITIONS
1.1 DEFINED TERMS
Defined terms used in this Agreement shall have the meanings specified below.
Certain additional defined terms are set forth elsewhere in this Agreement.
Unless the context otherwise requires, the singular shall include the plural and
the masculine gender shall include the feminine and neuter, and vice versa, and
"Article" and "Section" references are references to the Articles and Sections
of this Agreement.
(a) "ACCOUNTANTS" means any firm of independent certified public
accountants that is engaged from time to time by the General
Partner on behalf of the Partnership.
(b) "ACQUISITION EXPENSES" means expenses (other than
Acquisition Fees) incurred and paid to any Person which are
attributable to the selection and acquisition of
Investments, whether or not acquired, including, but not
limited to, legal fees and expenses, travel and
communication expenses, costs of credit reports, appraisals
and reference materials used to evaluate transactions, non-
refundable option payments on Investments not acquired,
accounting fees and expenses, insurance costs and
miscellaneous other expenses, however designated.
(c) "ACQUISITION FEES" means all fees and commissions paid by
any party in connection with the initial purchase or funding
of any Investment, including fees payable to finders and
brokers which are not Affiliates of the General Partner.
Also, included in the computation of such fees or
commissions shall be any commission, selection fee,
financing fee, non-recurring management fee, or any fee of a
similar nature, however designated.
(d) "ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any
Capital Account as of the end of any taxable year, the
amount by which the balance in such Capital Account is less
than zero. For this purpose, a Partner's Capital Account
balance shall be:
(i) reduced for any items described in Treas. Reg.
Section 1.704- 1(b)(2)(ii)(d)(4),(5), and (6);
(ii) increased for any amount such Partner is
unconditionally obligated to contribute to the
Partnership no later than the end of the taxable
year in which his or her Units, or the General
Partner's Partnership Interest, are liquidated (as
defined in Treas. Reg. Section 1.704-
1(b)(2)(ii)(g)) or, if later, within 90 days after
such liquidation; and
(iii) increased for any amount such Partner is treated as
being obligated to contribute to the Partnership
pursuant to the penultimate sentences of Treas.
Reg. Sections 1.704-2(g)(1) and 1.704-2(i)(5)
(relating to minimum gain).
(e) "ADJUSTED CAPITAL CONTRIBUTION" means, as to any Limited
Partner, as determined from time to time, the Limited
Partner's Capital Contribution reduced, but not below zero,
by all distributions previously made to the Limited Partner
by the Partnership which are deemed to reduce the Limited
Partner's Capital Contribution under Section 11.3(d)(ii),
and by all payments previously made to the Limited Partner
in Redemption of a portion or all of the Limited Partner's
Units under Section 13.5.
(f) "ADMINISTRATOR" means the official or agency administering
the securities laws of a state or other political
subdivision of the United States.
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(g) "AFFILIATE" means, with respect to any Person:
(i) any other Person directly or indirectly
controlling, controlled by or under common control
with such Person;
(ii) any officer, director or partner of such Person;
(iii) any other Person owning or controlling 10% or more
of the outstanding voting securities of such
Person; and
(iv) if such Person is an officer, director or partner,
any other Person for which such Person acts in such
capacity.
(h) "AFFILIATED LIMITED PARTNER" means the General Partner and
any officer, director, employee or other Affiliate of the
General Partner, the Dealer-Manager, the Selling Dealers and
any registered representative or principal of a Selling
Dealer, registered investment advisors and their clients and
investors who buy units through the officers and directors
of the General Partner, to the extent they purchase Units
under Section 8.3(c) and are admitted as a Limited Partner
at a Closing.
(i) "AFFILIATED PROGRAM" means any Program formed by the General
Partner or any Affiliate of the General Partner or in which
the General Partner or any of its Affiliates has an
interest.
(j) "AGREEMENT" means this Amended and Restated Agreement of
Limited Partnership, as it may hereafter be amended,
supplemented or restated from time to time.
(k) "ASSIGNEE" means any Person to whom any Unit or Partnership
Interest has been Assigned, in whole or in part, in a manner
permitted by Section 13.2.
(l) "ASSIGNMENT" means, with respect to any Unit or Partnership
Interest or any part thereof, the sale, assignment,
transfer, gift or other disposition of such Unit or
Partnership Interest, whether voluntarily or by operation of
law, except that in the case of a bona fide pledge or other
hypothecation, no Assignment shall be deemed to have
occurred unless and until the secured party has exercised
his right of foreclosure with respect thereto.
(m) "BOOK VALUE" means, with respect to any Partnership
property, the Partnership's adjusted basis for federal
income tax purposes, adjusted from time to time to reflect
the adjustments required or permitted by Treas. Reg. Section
1.704-1(b)(2)(iv)(d)-(g).
(n) "CAPITAL ACCOUNT" means the capital account maintained for
each Partner under Section 8.5.
(o) "CAPITAL CONTRIBUTIONS" means:
(i) as to the General Partner, its initial $1,000
contribution to the capital of the Partnership plus
any additional amounts as may be contributed to the
capital of the Partnership by the General Partner;
and
(ii) as to any Limited Partner, the gross amount of
investment in the Partnership actually paid by such
Limited Partner, i.e. either the Gross Unit Price
or the Net Unit Price, without deduction for Front-
End Fees (whether payable by the Partnership or
not), but excluding funds reinvested under Section
9.1(b)(xxvii).
(p) "CASH FLOW" means the Partnership's Gross Revenue, without
deduction for depreciation, but after deducting cash funds
used to pay all other expenses, debt payments, capital
improvements and replacements (other than cash funds
withdrawn from Reserves).
(q) "CLOSING" means the admission of Limited Partners to the
Partnership in accordance with Section 8.3.
(r) "CLOSING DATE" means any date on which any Limited Partner
is admitted to the Partnership, and includes the Initial
Closing Date, any subsequent Closing Date and the Final
Closing Date.
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(s) "CODE" means the Internal Revenue Code of 1986, as amended,
or corresponding provisions of subsequent laws.
(t) "COMMISSION" means the Securities and Exchange Commission.
(u) "CONSENT" means:
(i) consent given by vote at a meeting called and held
in accordance with the provisions of Section 16.1;
or
(ii) the written consent without a meeting of any Person
to do the act or thing for which the consent is
solicited; or
(iii) the act of granting such consent;
as the context may require.
(v) "CONTROLLING PERSON" means, with respect to the General
Partner or any Affiliate of the General Partner, any of its
chairmen, directors, presidents, or other executive or
senior officers, any holder of a 5% or greater equity
interest in the General Partner or any such Affiliate, or
any Person having the power to direct or cause the direction
of the General Partner or any such Affiliate, whether
through the ownership of voting securities, by contract or
otherwise.
(w) "COUNSEL" and "COUNSEL TO THE PARTNERSHIP" means any law
firm that may be engaged from time to time by the General
Partner on behalf of the Partnership.
(x) "CUMULATIVE RETURN" means, as to any Limited Partner, an
amount equal to an 8% annual (0.66667% monthly) cumulative
return on the Limited Partner's Adjusted Capital
Contribution (without reduction for any distribution made or
to be made to the Limited Partner on the date of
calculation) calculated from a date not later than the last
day of the calendar quarter in which the Capital
Contribution of the Limited Partner as to which the
Cumulative Return is being calculated was made.
(y) "DEALER-MANAGER" means:
(i) Anthem Securities, Inc., an Affiliate of the
General Partner, the broker/dealer which will
manage the offering and sale of the Units in all
states other than Minnesota and New Hampshire; and
(ii) ▇▇▇▇▇ Funding, Inc., the broker/dealer which will
manage the offering and sale of the Units in
Minnesota and New Hampshire.
(z) "DEALER-MANAGER AGREEMENT" means the agreement entered into
between the General Partner and the Dealer-Manager,
substantially in the form thereof filed as an exhibit to the
Registration Statement.
(aa) "DEALER-MANAGER FEE" means, in the aggregate, fees payable
to the Dealer-Manager in an amount equal to 3% of the Gross
Unit Price per Unit sold.
(bb) "DELAWARE ACT" means the Delaware Revised Uniform Limited
Partnership Act, as amended, and any successor thereto.
(cc) "DISTRIBUTABLE CASH" means Cash Flow plus any amounts
released from Reserves by the General Partner, less amounts
allocated to Reserves by the General Partner.
(dd) "DUE DILIGENCE EXPENSES" means fees and expenses actually
incurred for bona fide due diligence efforts expended in
connection with the Offering, not to exceed .5% of the Gross
Unit Price per Unit sold.
(ee) "EFFECTIVE DATE" means the date the Registration Statement
is declared effective by the Commission.
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(ff) "EQUIPMENT" means any new, used or reconditioned equipment
and related property acquired by the Partnership, or in
which the Partnership has acquired a direct or indirect
interest, and shall also be deemed to include such equipment
and related property or other tangible and intangible
personal property which at any time is subject to, or the
collateral for, a Lease or a Secured Loan.
(gg) "ESCROW ACCOUNT" means an interest-bearing account
established and maintained by the Partnership, the General
Partner and the Dealer-Manager with the Escrow Agent in
accordance with the terms of the Escrow Agreement for the
purpose of holding, pending the distribution thereof in
accordance with the terms of this Agreement, any
Subscription Monies received from Persons who are to be
admitted as Limited Partners on the Initial Closing Date.
(hh) "ESCROW AGENT" means Commerce Bank, NA, or another United
States banking institution with at least $50 million in
assets, which shall be selected by the General Partner to
serve in such capacity pursuant to the Escrow Agreement.
(ii) "ESCROW AGREEMENT" means the Escrow Agreement between the
Partnership and the Escrow Agent, filed as an exhibit to the
Registration Statement, as amended and supplemented from
time to time as permitted by the terms thereof.
(jj) "FINAL CLOSING DATE" means the last Closing Date on which
any Limited Partner (other than a Substitute Limited
Partner) shall be admitted to the Partnership, which shall
be as soon as practicable following the Termination Date.
(kk) "FINANCING TRANSACTION" means:
(i) any extension of credit or loan which is secured by
a security interest in Equipment or other tangible
or intangible personal property; any Lease of such
property or any Secured Loan;
(ii) any notes issued in connection with a
securitization of equipment leases, lease
receivables or Secured Loans; or
(iii) any transaction in which Equipment, equipment
leases or Secured Loans are sold to a Person for
purposes of securitization and with customary
retained rights or interests.
(ll) RESERVED
(mm) "FISCAL PERIOD" means any interim accounting period
established by the General Partner within a Fiscal Year.
(nn) "FISCAL QUARTER" means, for each Fiscal Year, the 3-
calendar-month period which commences on the first day of
such Fiscal Year and each additional 3-calendar-month period
commencing on the first day of the first month following the
end of the preceding such period within such Fiscal Year (or
such shorter period ending on the last day of a Fiscal
Year).
(oo) "FISCAL YEAR" means the Partnership's annual accounting
period established pursuant to Section 15.4.
(pp) "FRONT-END FEES" means fees and expenses paid by any Person
for any services rendered during the Partnership's
organizational and offering or acquisition phases, including
Sales Commissions, Dealer-Manager Fees, Organization and
Offering Expense Allowances, Acquisition Fees and
Acquisition Expenses (other than any Acquisition Fees or
Acquisition Expenses paid by a manufacturer of equipment to
any of its employees unless such Persons are Affiliates of
the General Partner) and all other similar fees however
designated.
(qq) "FULL-PAYOUT LEASE" means any lease pursuant to which the
aggregate noncancellable rental payments due during the
initial term of such lease, on a net present value basis,
are at least sufficient to permit the Partnership to recover
the Purchase Price of the Equipment subject to such lease.
(rr) "GENERAL PARTNER" means LEAF Financial Corporation, and its
successors or permitted assigns, as general partner of the
Partnership.
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(ss) "GROSS ASSET VALUE" means, with respect to any asset of the
Partnership, the asset's adjusted tax basis, except that:
(i) the initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall
be the gross fair market value of such asset at the
time of such contribution;
(ii) the Gross Asset Values of all Partnership assets
shall be adjusted to equal their respective gross
fair market values at the time specified in Treas.
Reg. Section 1.704- 1(b)(2)(iv)(f)(5) if the
Partnership so elects;
(iii) the Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair
market value of such asset on the date of
distribution;
(iv) to the extent not otherwise reflected in the
Partners' Capital Accounts, the Gross Asset Values
of Partnership assets shall be increased (or
decreased) to appropriately reflect any adjustments
to the adjusted basis of such assets pursuant to
Code Section 734(b) or Code Section 743(b); and
(v) if on the date of contribution of an asset or a
revaluation of an asset in accordance with clauses
(ii) through (iv), above, the adjusted tax basis of
such asset differs from its fair market value, the
Gross Asset Value of such asset shall thereafter be
adjusted by reference to the depreciation method
described in Treas. Reg. Section 1.704-
1(b)(2)(iv)(g)(3).
(tt) "GROSS OFFERING PROCEEDS" means the gross amount of Capital
Contributions, before deduction of Front-End Fees, of all
Limited Partners admitted to the Partnership.
(uu) "GROSS REVENUE" means gross cash receipts of the Partnership
from whatever source, excluding Capital Contributions.
(vv) "GROSS UNIT PRICE" means $100.
(ww) "INCOME" or "LOSS" means, for any Fiscal Year, the
Partnership's taxable income or loss for such Fiscal Year,
determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Code Section
703(a)(1) shall be included in taxable income or loss), with
the following adjustments:
(i) any income of the Partnership that is exempt from
federal income tax and not otherwise taken into
account in computing Income or Losses shall be
applied to increase such taxable income or reduce
such loss;
(ii) any expenditure of the Partnership described in
Code Section 705(a)(2)(B), or treated as such
pursuant to Treas. Reg. Section 1.704-
1(b)(2)(iv)(i) and not otherwise taken into account
in computing Income and Loss, shall be applied to
reduce such taxable income or increase such loss;
(iii) gain or loss resulting from a taxable disposition
of any asset of the Partnership shall be computed
by reference to the Gross Asset Value of such asset
and the special depreciation calculations described
in Treas. Reg. Section 1.704- 1(b)(2)(iv)(g),
notwithstanding that the adjusted tax basis of such
asset may differ from its Gross Asset Value;
(iv) in lieu of the depreciation, amortization, and
other cost recovery deductions taken into account
in computing such taxable income or loss for such
Fiscal Year, there shall be taken into account
depreciation, amortization or other cost recovery
determined pursuant to the method described in
Treas. Reg. Section 1.704-1(b)(2)(iv)(g)(3); and
(v) any items which are specially allocated pursuant to
Section 11.2(f) shall not be taken into account in
computing Income or Loss.
(xx) "INDEBTEDNESS" means, with respect to any Person as of any
date, all obligations of such Person (other than capital,
surplus, deferred income taxes and, to the extent not
constituting obligations, other deferred credits
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and reserves) that could be classified as liabilities
(exclusive of accrued expenses and trade accounts payable
incurred in respect of property purchased in the ordinary
course of business which are not overdue or which are being
contested in good faith by appropriate proceedings and are
not so required to be classified on such balance sheet as
debt) on a balance sheet prepared in accordance with
generally accepted accounting principles as of such date.
(yy) "INDEPENDENT EXPERT" means a Person with no material current
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 appraisals and who is
qualified to perform the work.
(zz) "INITIAL CLOSING DATE" means the first Closing Date for the
Partnership on which Limited Partners with Units equal to,
or greater than, the Minimum Offering are admitted to the
Partnership.
(aaa) "INVESTMENT IN EQUIPMENT" means the aggregate amount of
Capital Contributions actually paid or allocated to the
purchase, manufacture or renovation of Equipment acquired by
the Partnership, together with other cash payments such as
interest, taxes and Reserves allocable thereto (to the
extent that Reserves do not exceed 3% of Capital
Contributions), but excluding Front-End Fees.
(bbb) "INVESTMENT COMMITTEE" means a committee of the board of
directors of the General Partner to establish credit review
policies and procedures, supervise the efforts of the
General Partner's credit department, approve significant
transactions and transactions which differ from the
standards and procedures the Investment Committee has
established and, pursuant to Section 9.5, to resolve
conflicts in allocating Investments among Programs.
(ccc) "INVESTMENTS" means the Partnership's portfolio, from time
to time, of Equipment, Leases and Secured Loans.
(ddd) "▇▇▇" means an Individual Retirement Account.
(eee) "IRS" means the Internal Revenue Service or any successor
agency thereto.
(fff) "LEASE" means any Full-Payout Lease, any Operating Lease and
any residual value interest therein.
(ggg) "LENDER" means any Person that lends cash or cash
equivalents to the Partnership, including any Person that
acquires by purchase, assignment or otherwise an interest in
the future amounts payable under any Lease or Secured Loan
and in the related Equipment or other assets or in payments
due under any Financing Transaction, and any property
securing any such transaction.
(hhh) "LESSEE" means a lessee under a Lease.
(iii) "LIMITED PARTNER" means any Person who is the owner of at
least one Unit and who has been admitted to the Partnership
as a Limited Partner or an Affiliated Limited Partner and
any Person who becomes a Substitute Limited Partner, in
accordance with this Agreement, in such Person's capacity as
a Limited Partner of the Partnership.
(jjj) "LIQUIDATION PERIOD" means the period commencing on the
first day following the end of the Reinvestment Period and
continuing for the period deemed necessary by the General
Partner for orderly termination of the Partnership's
operations and affairs, and for liquidation or disposition
of the Partnership's Investments.
(kkk) "MAJORITY" or "MAJORITY INTEREST" means Limited Partners
owning more than 50% of the aggregate outstanding Units.
(lll) "MANAGEMENT FEES" means, for any month, the following fees
one or all of which may be payable to the General Partner,
in an amount equal to the lesser of the maximum fees set
forth below in (i) through (iv) below, compared with, in
each case, the fees which are reasonable, competitive, and
would customarily be paid to non-affiliated third-parties
rendering similar services in the same geographic location
and for similar types of investments. The maximum permitted
Management Fees for (i) through (iv) are as follows:
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(i) an amount equal to 0.08335% (1% annually) of Gross
Revenues on Operating Leases managed by third-
parties under the General Partner's supervision;
(ii) an amount equal to 0.33333% (4% annually) of Gross
Revenues on Operating Leases managed by the General
Partner or its Affiliates;
(iii) an amount equal to 0.16667% (2% annually) of Gross
Revenues on Full-Payout Leases which contain Net
Lease Provisions; and/or
(iv) an amount equal to 0.16667% (2% annually) of Gross
Revenues on Secured Loans.
(mmm) "MAXIMUM OFFERING" means receipt and acceptance by the
Partnership of subscriptions for 600,000 Units on or before
the Final Closing Date.
(nnn) "MINIMUM OFFERING" means receipt and acceptance by the
Partnership of subscriptions for not less than 20,000 Units,
excluding the 10 Units subscribed for by the Original
Limited Partner and any Units subscribed for by the General
Partner or its officers, directors, employees or other
Affiliates.
(ooo) "NASD" means the National Association of Securities Dealers,
Inc.
(ppp) RESERVED
(qqq) "NET LEASE PROVISIONS" means 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 the non-cancellable rental
payments under the lease are absolutely net to the lessor.
Notwithstanding, a lease may be deemed to contain net lease
provisions even if some minor costs or responsibilities
remain with the lessor or if the lessor retains the option
to require and pay for a higher standard of care or a
greater level of maintenance or insurance, than would be
imposed on the lessee under the terms of the lease.
(rrr) "NET OFFERING PROCEEDS" means the Gross Offering Proceeds
minus the Dealer-Manager Fees, Sales Commissions, Due
Diligence Expenses and the Organization and Offering Expense
Allowance payable by the Partnership.
(sss) "NET UNIT PRICE" means the Gross Unit Price less an amount
equal to 7% of the Gross Unit Price (equivalent to the Sales
Commission) for each Unit or fraction thereof purchased by
an Affiliated Limited Partner.
(ttt) "NET WORTH" means, for any Person subscribing for Units, the
excess of total assets over total liabilities as determined
by generally accepted accounting principles, but excluding
home, home furnishings and automobiles. Provided, however,
that with respect to the General Partner, "Net Worth" means
the excess of total assets over total liabilities as
determined by generally accepted accounting principles,
except that if any of the assets have been depreciated, then
the amount of depreciation relative to any particular asset
may be added to the depreciated cost of the asset to compute
the total asset. The amount of depreciation may be added
only to the extent that the amount resulting after adding
depreciation does not exceed the fair market value of the
asset.
(uuu) "NOTICE" means a writing containing the information required
by this Agreement to be communicated to any Person,
personally delivered to such Person or sent by registered,
certified or regular mail, postage prepaid to such Person at
the last known address of such Person, or sent by telefax
and receipt is confirmed by telephone during normal business
hours.
(vvv) "OFFERING" means the offering of Units pursuant to the
Prospectus.
(www) "OFFERING PERIOD" means the period from the Effective Date
to the Termination Date.
(xxx) "OPERATING LEASE" means a lease pursuant to which the
aggregate noncancellable rental payments during the original
term of such lease, on a net present value basis, are not
sufficient to recover the Purchase Price of the Equipment
leased thereby.
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(yyy) "OPERATIONS" means all operations and activities of the
Partnership except Sales.
(zzz) "ORGANIZATION AND OFFERING EXPENSE ALLOWANCE" means an
amount equal to 3.5% of the Gross Offering Proceeds.
(aaaa) "ORGANIZATION AND OFFERING EXPENSES" means:
(i) all costs and expenses incurred in connection with,
and in preparing the Partnership for, qualification
under federal and state securities laws and the
securities laws of any other jurisdiction in which
Units may be offered or sold and subsequently
offering and distributing the Units to the public
(except for Sales Commissions and Dealer-Manager
Fees) including, without limitation:
(A) printing costs;
(B) registration and filing fees;
(C) attorneys', accountants' and other
professional fees;
(D) Due Diligence Expenses; and
(ii) the direct costs of salaries to and expenses
(including costs of travel) of officers and
directors of the General Partner or any Affiliate
of the General Partner while engaged in organizing
the Partnership and registering, offering and
selling the Units.
(bbbb) "PARTICIPANT LIST" means a list, in alphabetical order by
name, setting forth the name, address and business or home
telephone number of, and number of Units held by, each
Limited Partner. The list shall be printed on white paper in
a readily readable type size (in no event smaller than 10-
point type) and shall be updated at least quarterly to
reflect any changes in the information contained therein.
(cccc) "PARTNER" means the General Partner (including any
Substitute General Partner) and any Limited Partner
or Affiliated Limited Partner (including the Original Limited
Partner and any Substitute Limited Partner).
(dddd) "PARTNER NONRECOURSE DEBT" means any Partnership nonrecourse
liability for which any Partner bears the economic risk of
loss within the meaning of Treas. Reg. Section 1.704-
2(b)(4).
(eeee) "PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning
specified in Treas. Reg. Section 1.704-2(i)(3), and such
additional amount as shall be treated as Partner Nonrecourse
Minimum Gain pursuant to Treas. Reg. Section 1.704-
2(j)(1)(iii).
(ffff) "PARTNER NONRECOURSE DEDUCTIONS" consist of those deductions
and in those amounts specified in Treas. Reg. Sections
1.704-2(i)(2) and (j).
(gggg) "PARTNERSHIP" means Lease Equity Appreciation Fund II, L.P.
(hhhh) "PARTNERSHIP INTEREST" means the Units owned by a Limited
Partner or the percentage interest in the Partnership held
by the General Partner.
(iiii) "PARTNERSHIP LOAN" means any loan made to the Partnership
by the General Partner or any Affiliate of the General
Partner in accordance with Section 9.2(c).
(jjjj) "PARTNERSHIP MINIMUM GAIN" has the meaning specified in
Treas. Reg. Sections 1.704-2(b)(2) and (d) and such
additional amount as shall be treated as Partnership Minimum
Gain pursuant to Treas. Reg. Section 1.704- 2(j)(1)(iii).
(kkkk) "PARTNERSHIP NONRECOURSE DEDUCTIONS" consist of those
deductions and in those amounts specified in Treas. Reg.
Sections 1.704-2(c) and (j).
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(llll) "PAYOUT" means the time when the aggregate amount of cash
distributions (from whatever sources) to a Limited Partner
equals the amount of the Limited Partner's Capital
Contribution plus the Cumulative Return compounded daily (in
this case only) from the last Closing Date.
(mmmm) "PERSON" means any natural person, partnership, trust,
corporation, association or other legal entity.
(nnnn) "PROGRAM" means a limited or general partnership, joint
venture, unincorporated association or similar
unincorporated organization formed and operated for the
primary purpose of investment in, and the operation of, or
gain from, an interest in equipment, equipment leases or
related instruments.
(oooo) "PROSPECTUS" means the prospectus included as part of the
Registration Statement, as supplemented or amended.
(pppp) "PURCHASE PRICE" means, with respect to any Investment, the
price paid by, or on behalf of, the Partnership for or in
connection with the purchase, acquisition or funding of the
Investment, including the amount of the related Acquisition
Fees, Acquisition Expenses, and all liens and encumbrances
on the Investment, but excluding "points" and prepaid
interest. "Purchase Price" also includes, with respect to
options to acquire an Investment, the sum of the exercise
price and the price paid to acquire the option.
(qqqq) "QUALIFIED PLAN" means a pension, profit-sharing or stock
bonus plan, including ▇▇▇▇▇ Plans, meeting the requirements
of Sections 401 et seq. of the Code, and its related trust.
(rrrr) "QUALIFIED SUBSCRIPTION ACCOUNT" means the interest-bearing
account established and maintained by the Partnership for
the purpose of holding Subscription Monies received
subsequent to the Initial Closing Date.
(ssss) "REDEMPTION" means the purchase of Units from Limited
Partners by the Partnership under Section 13.5.
(tttt) "REGISTRATION STATEMENT" means the Registration Statement on
Form S-1 filed with the Commission under the Securities Act
in the form in which the Registration Statement is declared
to be effective for the offer and sale of the Partnership's
Units.
(uuuu) "REINVESTMENT PERIOD" means the period beginning with the
Initial Closing Date and ending five years after the Final
Closing Date.
(vvvv) "REINVESTMENT PERIOD CASH DISTRIBUTIONS" means, with respect
to any Limited Partner, all distributions made to the
Limited Partner by the Partnership during the Reinvestment
Period up to the Cumulative Return.
(wwww) "RE-LEASING FEE" means, with respect to any Equipment, a fee
payable to the General Partner for providing re-leasing
services to the Partnership, not to exceed the lesser of:
(i) the competitive rate for comparable services for
similar equipment; or
(ii) 2% of gross rental revenues derived from the re-
lease of the Equipment after the time that the re-
lease of the Equipment has been consummated as a
result of the efforts of the General Partner or its
Affiliates.
(xxxx) "RESERVES" means reserves established and maintained by the
Partnership for working capital and contingent liabilities.
(yyyy) "ROLL-UP" means any transaction involving the acquisition,
merger, conversion or consolidation, either directly or
indirectly, of the Partnership with, and the issuance of
securities of, a Roll-Up Entity. The term does not include:
(i) a transaction involving securities of the
Partnership if they have been listed on a national
securities exchange or traded through the NASDAQ
Stock Market (National Market System) for at least
12 months; or
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(ii) a transaction involving only the conversion of the
Partnership to corporate, trust or association form
if, as a consequence of the transaction, there will
be no significant adverse change in:
(A) Limited Partners' voting rights;
(B) the term of existence of the Partnership;
(C) the compensation of the General Partner or
its Affiliates from the Partnership;
(D) the Partnership's investment objectives;
or
(E) the income taxation of the Partnership or
the Limited Partners.
(zzzz) "ROLL-UP ENTITY" means any partnership, corporation, trust,
or other entity that is created by, or surviving after, the
successful completion of a proposed Roll-Up transaction.
(aaaaa) "SALE" means the sale, exchange, involuntary conversion,
foreclosure, condemnation, taking, casualty (other than a
casualty followed by refurbishing or replacement), or other
disposition of an Investment.
(bbbbb) "SALES COMMISSIONS" means, with respect to any Unit, an
amount equal to 7% of the Gross Unit Price per Unit sold.
(ccccc) "SECURED LOAN" means a loan or other extension of credit
provided by the Partnership to a third-party end user to
finance the end user's purchase of Equipment, with that
Equipment being used as collateral for the repayment of the
loan.
(ddddd) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(eeeee) "SELLING DEALER" means each member firm of the NASD which
has been selected by the Partnership or the Dealer-Manager
to offer and sell Units and has entered into a Selling
Dealer Agreement.
(fffff) "SELLING DEALER AGREEMENT" means each of the agreements
entered into between the Partnership or the Dealer-Manager
and any Seller Dealer with respect to the offer and sale of
Units.
(ggggg) "SUBORDINATED REMARKETING FEE" means, with respect to any
Investment, a fee in the amount equal to the lesser of:
(i) 3% of the contract sales price applicable to the
Investment; or
(ii) one-half of a brokerage fee that is reasonable,
customary and competitive in light of the size,
type and location of the Investment.
(hhhhh) "SUBSCRIPTION AGREEMENT" means the subscription agreement
substantially in the form filed as an exhibit to the
Prospectus.
(iiiii) "SUBSCRIPTION MONIES" means the funds subscribed by Limited
Partners for the purchase of Units.
(jjjjj) "SUBSTITUTE GENERAL PARTNER" means any Assignee of or
successor to the General Partner admitted to the Partnership
in accordance with Section 12.5.
(kkkkk) "SUBSTITUTE LIMITED PARTNER" means any Assignee of Units who
is admitted to the Partnership as a Limited Partner under
Section 13.3.
(lllll) "TERMINATION DATE" means the earliest of:
(i) the date on which the Maximum Offering has been
sold;
(ii) two years following the Effective Date (subject to
the renewal, requalification or consent of each
Administrator requiring the renewal,
requalification or consent with respect to the
extension of the
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Offering Period beyond one year following the
Effective Date in the Administrator's
jurisdiction); or
(iii) the date determined by the General Partner.
(mmmmm) "TREASURY REGULATION" or "Treas. Reg." means final or
temporary regulations issued by the United States Treasury
Department pursuant to the Code.
(nnnnn) "UNIT" means a unit of Limited Partner interest in the
Partnership held by any Limited Partner, including rights to
profits, losses, income, gain, credits, deductions, cash
distributions, returns of capital, voting rights and other
attributes of the Units all as provided by, and subject to
the terms and provisions of, this Agreement.
(ooooo) "UNPAID CUMULATIVE RETURN" means, as to any Limited Partner,
the amount of the Limited Partner's Cumulative Return
calculated through the date as of which the Unpaid
Cumulative Return is being calculated, reduced (but not
below zero) by the aggregate distributions previously made
to the Limited Partner by the Partnership which are deemed
to be a reduction of the Limited Partner's Unpaid Cumulative
Return under Section 11.3(d)(i).
ARTICLE II - FORMATION OF PARTNERSHIP
2.1 FORMATION OF PARTNERSHIP
The General Partner and the Original Limited Partner have previously formed
the Partnership as a limited partnership under the Delaware Act. The General
Partner and the Original Limited Partner hereby amend and restate in its
entirety the original Agreement of Limited Partnership of the Partnership and
agree that this Amended and Restated Agreement of Limited Partnership shall
govern the rights and liabilities of the Partners, except as otherwise herein
expressly provided.
ARTICLE III - NAME
3.1 NAME
The business of the Partnership shall be conducted under the name "Lease
Equity Appreciation Fund II, L.P." or such other name as the General Partner
shall hereafter designate in writing to the Limited Partners.
ARTICLE IV - PLACES OF BUSINESS
4.1 PRINCIPAL PLACE OF BUSINESS
The principal office and place of business of the Partnership shall be ▇▇▇ ▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The General Partner may
from time to time change the principal place of business and, in such event,
the General Partner shall notify the Limited Partners of such change in
writing no later than 60 days following the effective date of such change.
4.2 OTHER PLACES OF BUSINESS
The Partnership may maintain such other offices and places of business within
or outside the State of Delaware as the General Partner deems advisable.
ARTICLE V - NAMES AND ADDRESSES OF PARTNERS
5.1 NAMES AND ADDRESSES OF PARTNERS
The name and address of the General Partner shall be as set forth in Section
19.1, and the names and addresses of the Limited Partners shall be as set
forth in their respective Subscription Agreements, as the same may be
supplemented or amended from time to time. Any Partner may change his, her or
its respective place of business or residence, as the case may be, by giving
Notice of such change to the Partnership (and, in the case of the General
Partner, by also giving Notice thereof to all of the Limited Partners), which
Notice shall become effective upon receipt by the Partnership.
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ARTICLE VI - PURPOSES AND OBJECTIVES
6.1 PURPOSES
The purpose and business of the Partnership is to:
(a) acquire, invest in, purchase, own, hold, lease, re-lease,
finance, refinance, loan, borrow, manage, maintain, operate,
improve, upgrade, modify, exchange, assign, encumber, create
or receive security interests in, pledge, sell, transfer or
otherwise dispose of, and in all respects otherwise deal in
or with, Equipment and Leases of all kinds; and
(b) engage in any and all businesses and to do any and all
things permitted to a limited partnership under the Delaware
Act.
6.2 INVESTMENT OBJECTIVES
The investment objectives of the Partnership in conducting its business shall
be to:
(a) preserve, protect and return the Capital Contributions of
the Partners;
(b) generate regular distributions sufficient to provide the
Cumulative Return to the Partners;
(c) during the Reinvestment Period, distribute the Cumulative
Return and then reinvest the excess Distributable Cash in
additional Investments; and
(d) provide distributions to Partners after the Reinvestment
Period until the sale of all Investments.
ARTICLE VII - TERM
7.1 TERM
The term of the Partnership began with the filing of the Certificate of
Limited Partnership with the Secretary of State of the State of Delaware on
March 30, 2004 and will end at midnight on December 31, 2029, unless sooner
dissolved or terminated as provided in Article XIV of this Agreement.
ARTICLE VIII - PARTNERS AND CAPITAL
8.1 GENERAL PARTNER
The General Partner has contributed $1,000, in cash, as its Capital
Contribution to the Partnership. The General Partner shall use its best
efforts to maintain, at all times from and after the date of this Agreement
through and including the Termination Date, a net worth that is at least
sufficient to satisfy the Net Worth requirements for a general partner under
policies adopted by Administrators.
8.2 ORIGINAL LIMITED PARTNER
The Original Limited Partner has made a capital contribution of $1.00 to the
Partnership. By execution hereof, the Original Limited Partner agrees to
withdraw as Original Limited Partner, and the parties hereto agree to return
the capital contribution of $1.00 and to retire the original 10 Units on the
Initial Closing Date and admission of additional Limited Partners.
8.3 LIMITED PARTNERS
(a) From and after the Initial Closing Date, there shall be one
class of Limited Partners.. The General Partner is hereby
authorized to obtain capital for the Partnership through the
offer and sale of up to 600,000 Units to the Limited
Partners.
(b) Any Person desiring to become a Limited Partner shall
execute and deliver to the General Partner a Subscription
Agreement and such other documents as the General Partner
shall reasonably request. These documents shall be in form
and substance reasonably satisfactory to the General
Partner. Among other
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things, each Person shall, subject to acceptance of his
subscription by the General Partner, agree to be bound by
all terms and provisions of this Agreement. Units will be
sold only to Persons:
(i) who represent that they have either:
(A) an annual gross income of at least $45,000
and a Net Worth of at least $45,000; or
(B) a Net Worth of at least $150,000; or
(ii) who satisfy the suitability standards applicable in
the state or other jurisdiction of their residence
or domicile, if more stringent than the standards
described in clause (i) above.
(c) At the time of subscribing each Limited Partner (other than an
Affiliated Limited Partner) shall make a Capital Contribution,
in cash, in an amount equal to the Gross Unit Price for each
Unit purchased. At the time of subscribing each Affiliated
Limited Partner shall make a Capital Contribution, in cash, in
an amount equal to the Net Unit Price for each Unit purchased.
Each Limited Partner (except Ohio Residents) may elect on his
Subscription Agreement to have his Partnership distributions
reinvested in additional Units during the Offering Period, on
the same terms as the purchase of the Limited Partner's
original Units, other than the minimum required number of
Units, to the extent that Units are available for purchase. In
particular, the purchase price of these additional Units shall
be the same price the Limited Partner paid for his original
Units, either the Gross Unit Price or the Net Unit Price.
(d) Limited Partners must purchase a minimum of 25 Units, other
than IRAs or Qualified Plans which may purchase a minimum of
10 Units, unless a different minimum number of Units is
required by the Administrator of the Limited Partner's state
or other jurisdiction of residence. Limited Partners may
subscribe for additional Units at the Gross Unit Price or
Net Unit Price, whichever shall be applicable.
(e) The General Partner and any Affiliate of the General Partner
shall have the right to subscribe for Units for its own
account for investment purposes only; provided that the
aggregate number of Units purchased by the General Partner
and its Affiliates collectively shall not exceed 10% of all
Units sold.
(f) No subscribers shall be admitted to the Partnership unless
and until the Minimum Offering shall be achieved. Upon the
determination by the General Partner that the Minimum
Offering has been achieved, the General Partner shall set
the Initial Closing Date. Following the Initial Closing
Date, weekly Closings will be held. The General Partner
shall notify each subscriber whose subscription has been
accepted by the General Partner as promptly as practical of
such subscriber's admission as a Limited Partner.
(g) Subscriptions for Units shall promptly be accepted or
rejected by the General Partner after their receipt by the
Partnership (but in any event not later than 30 days
thereafter) and a confirmation of acceptance sent by the
General Partner. The General Partner shall have the
unconditional right to refuse to admit any subscriber as a
Limited Partner. Each subscriber has the right to cancel his
or her subscription before it has been accepted by the
General Partner by providing written notice to the General
Partner, signed by each subscriber, of their intent to
cancel, in a form satisfactory to the General Partner. The
Partnership may not complete a sale of Units to any Limited
Partner until at least five business days after the date the
Limited Partner received a final Prospectus.
(h) Each Person whose subscription is accepted by the General
Partner shall be admitted to the Partnership as a Limited
Partner, and shall for all purposes of this Agreement become
and be treated as a Limited Partner, not later than 15 days
after the Initial Closing Date or, thereafter, the last day
of the calendar month following the date the subscription
was accepted by the Partnership.
(i) The amount of the Capital Contribution made by each Limited
Partner shall be set forth on the Partnership's books and
records, which shall be supplemented or amended from time to
time promptly following each Closing Date to reflect the
name, address and Capital Contribution of each Limited
Partner admitted to the Partnership as a result of such
Closing; provided that any failure so to attend to such
books and records following any Closing Date shall not in
any way affect the admission of any Limited Partner to the
Partnership for all purposes of this Agreement if such
Limited Partner was admitted to the Partnership at such
Closing.
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(j) The General Partner shall establish the Escrow Account and
the Qualified Subscription Account. From the date hereof to,
but not including, the Initial Closing Date, all
Subscription Monies shall be deposited in the Escrow
Account. From and after the Initial Closing Date, all
Subscription Monies shall be held by the Partnership in the
Qualified Subscription Account until the release thereof on
the applicable Closing Date.
(k) On the Initial Closing Date or any subsequent Closing Date,
all Subscription Monies then held in the Escrow Account or
any Qualified Subscription Account, as the case may be, with
respect to Units purchased by any Person admitted to the
Partnership as a result of such Closing, together with any
interest earned thereon, shall be released to the
Partnership. The Partnership shall pay such interest to the
Limited Partners, as their interests may appear, promptly
after such Closing Date. Subscription Monies deposited by
any Person whose subscription is rejected by the General
Partner shall be immediately returned to that Person,
together with any interest earned thereon and without
deduction for any Front-End Fees. In no event shall any
Subscription Monies be held in the Escrow Account or a
Qualified Subscription Account beyond the Termination Date
before either being released to the Partnership upon a
Closing or, if the Minimum Offering has not been achieved,
returned to the subscriber.
(l) Notwithstanding anything to the contrary set forth in this
Agreement, Subscription Monies of Persons who are residents
of Iowa and Pennsylvania shall be held in a separate Escrow
Account by the Escrow Agent. Subscriptions of Iowa and
Pennsylvania residents shall not be used in computing the
Minimum Offering. At such time as 30,000 Units have been
sold and subscriptions therefor accepted by the Partnership,
the Subscription Monies of Iowa and Pennsylvania residents
whose subscriptions have been accepted by the Partnership
shall be released from the Escrow Account to the Partnership
and such Iowa and Pennsylvania residents shall be admitted
to the Partnership as Limited Partners.
8.4 PARTNERSHIP CAPITAL
(a) No Partner shall be paid interest on any Capital
Contribution, except for interest earned on Subscription
Monies as provided in Section 8.3(k).
(b) In addition to the redemption of the Original Limited
Partner's Units as provided in Section 8.2, the Partnership
may Redeem Units presented by Limited Partners for
Redemption pursuant to Section 13.5 in the General Partner's
sole and absolute discretion. The Partnership shall not
Redeem or repurchase any Unit except as set forth in the
preceding sentence. No Partner shall have the right to
withdraw or receive any return of such Partner's Capital
Contribution, except as specifically provided in this
Agreement, and no Capital Contribution may be returned to
any Partner in the form of property other than cash.
(c) Except as otherwise specifically provided in this Agreement,
no Limited Partner shall have priority over any other
Limited Partner as to:
(i) the return of such Limited Partner's Capital
Contribution or Capital Account;
(ii) such Limited Partner's share of Income and Losses;
or
(iii) such Limited Partner's share of Distributable Cash.
(d) Neither the General Partner nor any Affiliate of the General
Partner shall have any personal liability for the repayment
of the Capital Contribution of any Limited Partner except to
the extent specifically provided in this Agreement.
8.5 CAPITAL ACCOUNTS
(a) A separate Capital Account shall be established and
maintained for the General Partner and for each Limited
Partner.
(b) The Capital Account of the General Partner initially shall
be $1,000.
(c) The Capital Account of each Limited Partner initially shall
be such Limited Partner's Capital Contribution.
(d) The Capital Account of each Partner shall be increased by:
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(i) the amount of any additional money contributed by
such Partner to the Partnership;
(ii) the fair market value of any property contributed
by such Partner to the Partnership (net of
liabilities secured by such contributed property
that the Partnership is considered to assume under
Code Section 752); and
(iii) allocations to such Partner of Income (or items
thereof), including but not limited to items of
income and gain specially allocated pursuant to
Section 11.2(f).
(e) The Capital Account of each Partner shall be decreased by:
(i) the amount of money distributed to or on behalf of
such Partner by the Partnership;
(ii) the fair market value of any property distributed
to or on behalf of such Partner by the Partnership
(net of liabilities secured by such distributed
property that such Partner is considered to assume
under Code Section 752); and
(iii) allocations to such Partner of Partnership Losses
(or items thereof), including but not limited to
items of loss and deduction specially allocated
pursuant to Section 11.2(f).
(f) For purposes of this Agreement, a General Partner who also
owns Units as a Limited Partner shall have a single Capital
Account that reflects both its General Partner and Limited
Partner interests in the Partnership, regardless of the time
or manner in which such interests were acquired.
(g) If the Partnership Interest of a General Partner or a Unit
is sold or otherwise transferred, the Capital Account of the
transferor with respect to the Partnership Interest or the
Unit transferred shall carry over to the transferee in
accordance with Treas. Reg. Section 1.704-1(b)(2)(iv)(l).
However, if the transfer causes a termination of the
Partnership under Code Section 708(b)(1)(B), the Capital
Account that carries over to the transferee shall be
adjusted in accordance with the constructive contribution
and liquidation rules under Treas. Reg. Section 1.708-1.
(h) For any taxable year in which the Partnership has a Code
Section 754 election in effect, the Capital Accounts shall
be maintained in accordance with Treas. Reg. Section 1.704-
1(b)(2)(iv)(m). The Partnership shall not be required to
make any elections pursuant to Code Section 754.
(i) Upon the occurrence of the events specified in Treas. Reg.
Section 1.704-1(b)(2)(iv)(f), the Partners' Capital Accounts
shall be adjusted and thereafter maintained to reflect the
revaluation of Partnership assets on the books of the
Partnership in accordance with such Treasury Regulation and
Treas. Reg. Sections 1.704-1(b)(2)(iv)(f) through (h).
(j) Notwithstanding anything herein to the contrary, the
Partners' Capital Accounts shall at all times be maintained
in the manner required by Treas. Reg. Section 1.704-
1(b)(2)(iv), and any questions or ambiguities arising under
this Agreement shall be resolved by reference to such
Treasury Regulations. Further, such Treasury Regulations
shall govern the maintenance of the Capital Accounts to the
extent this Agreement does not provide for the treatment of
a particular item. In the event Treas. Reg. Section 1.704-
1(b)(2)(iv) does not provide for a particular item, such
Capital Account adjustments shall be made in a manner that
is consistent with the underlying economic arrangement of
the Partners based, wherever practicable, on federal tax
accounting principles.
8.6 ADDITIONAL CAPITAL CONTRIBUTIONS
(a) The General Partner shall not be required to make any
Capital Contribution in addition to its initial $1,000
Capital Contribution except pursuant to and in accordance
with Section 14.2(c)(ii) of this Agreement.
(b) No Limited Partner shall be required to make any Capital
Contribution in addition to the Capital Contribution
required under Section 8.3(c).
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8.7 LOANS BY PARTNERS
Except as provided in Section 14.2(c)(ii), no loan by any Partner or any
Affiliate of any Partner to the Partnership (including, without limitation,
any Partnership Loan) shall constitute a Capital Contribution to the
Partnership or increase the Capital Account balance of any Partner, but shall
be treated, for all purposes, as Indebtedness of the Partnership payable or
collectible only out of the assets of the Partnership in accordance with the
terms and conditions upon which such loan was made.
8.8 NO RIGHT TO RETURN OF CAPITAL
No Partner shall be entitled to demand or receive any distribution of, or with
respect to, such Partner's Capital Contribution or Capital Account except as
specifically provided in this Agreement.
ARTICLE IX - POWERS, RIGHTS AND DUTIES OF GENERAL PARTNER
9.1 EXTENT OF POWERS AND DUTIES
(a) GENERAL. Except as expressly limited by the provisions of
this Agreement, the General Partner shall have complete and
exclusive discretion to manage and control the affairs and
business of the Partnership and may employ all powers
necessary, convenient or appropriate to carry out the
purposes, conduct the business and exercise the powers of
the Partnership.
The General Partner shall have fiduciary responsibility for
the safekeeping and use of all funds and assets of the
Partnership, whether or not in the General Partner's
immediate possession or control.
(b) POWERS AND DUTIES. Pursuant to the authority granted in this
Section 9.1, and subject only to the limitations otherwise
provided in this Agreement, the General Partner's powers and
duties shall include, but not be limited to, the following:
(i) to acquire, invest in, purchase, own, hold, lease,
re-lease, finance, refinance, borrow, loan, manage,
maintain, operate, improve, upgrade, modify,
exchange, assign, encumber, create and receive
security interests in, pledge, sell, transfer or
otherwise dispose of, and in all respects otherwise
deal in or with, Investments and other tangible or
intangible property (including securities, debt
instruments, contract rights, lease rights, equity
interests and, to the extent permitted by Section
9.1(b)(xviii), joint ventures), and to contract
with others to do the same on behalf of the
Partnership;
(ii) to select and supervise the activities of any
Equipment management agents for the Partnership;
(iii) to assure the proper application of revenues of the
Partnership;
(iv) to maintain proper books of account for the
Partnership and to prepare reports of operations
and tax returns required to be furnished to the
Partners pursuant to this Agreement or to taxing
bodies or other governmental agencies, including
Administrators, in accordance with applicable laws
and regulations;
(v) to employ the Dealer-Manager to select Selling
Dealers to offer and sell Units;
(vi) to invest any and all funds held by the
Partnership;
(vii) to designate depositories of the Partnership's
funds, and establish the terms and conditions of
such deposits and drawings thereon;
(viii) to enter into Financing Transactions and otherwise
to borrow money or procure extensions of credit for
the Partnership (except that neither the
Partnership nor the General Partner shall borrow
money solely for the purpose of making Reinvestment
Period Cash Distributions which the Partnership
would otherwise be unable to make) and, in
connection therewith, to execute, seal, acknowledge
and deliver agreements, promissory notes,
guarantees and other written documents evidencing
Financing Transactions or constituting obligations
or evidences of Indebtedness and to
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pledge, hypothecate, mortgage, assign, transfer or
convey mortgages or security interests in
Investments or any other assets of the Partnership
as security therefor;
(ix) to hold all or any portion of the Investments and
other assets of the Partnership in the name of one
or more trustees, nominees, or other entities or
agents of or for the Partnership;
(x) to acquire and enter into any contract which the
General Partner deems necessary or appropriate for
the protection of the Partnership and (subject to
Sections 9.2(b), 9.2(c) and 9.2(g)) the General
Partner, for the conservation of Partnership
assets, or for any purpose convenient or beneficial
to the Partnership;
(xi) to employ agents, employees, managers, accountants,
attorneys, consultants and other persons in the
operation and management of the business of the
Partnership including, but not limited to,
Affiliates of the General Partner, supervisory
managing agents, management agents, and lease, loan
or securities brokers, on such terms and for such
compensation as the General Partner shall
determine, provided, however, that, with respect to
services provided by the General Partner or its
Affiliates, compensation for such services shall be
limited as specifically set forth in this
Agreement;
(xii) to cause the Partnership to make or revoke any of
the elections referred to in Sections 108, 732, 754
and 1017 of the Code or any similar provisions
enacted in lieu thereof;
(xiii) to select as the accounting year for the
Partnership the calendar year or such fiscal year
as may be approved by the IRS;
(xiv) to determine the accounting method or methods to be
used by the Partnership (the Partnership intends
initially to use the accrual method of accounting
in maintaining its books and records);
(xv) to require in all Partnership obligations to any
Person other than a Limited Partner, as such, that
the General Partner shall not have any personal
liability thereon, but that the person or entity
contracting with the Partnership must look solely
to the Partnership and its assets for satisfaction;
(xvi) to invest temporarily the Gross Offering Proceeds
or Net Offering Proceeds prior to making or
acquiring Investments in short term, highly liquid
investments where there is appropriate safety of
principal;
(xvii) to execute or sign, individually or jointly, a
check or certificate on behalf of the Partnership;
(xviii) to cause the Partnership to invest in a joint
venture to own one or more Investments with any one
or more Affiliated Programs if:
(A) doing so is in the best interest of the
Partnership and the Affiliated Program;
(B) the Partnership and the Affiliated Program
have substantially identical investment
objectives;
(C) there are no duplicate fees;
(D) compensation of the sponsor of the
Affiliated Program is substantially
identical to the compensation of the
General Partner;
(E) the Partnership has the right of first
refusal to purchase any Investment jointly
owned with the Affiliated Program which
the Affiliated Program wishes to sell;
(F) the respective investments in the
Investment by the Partnership and the
Affiliated Program are on substantially
the same terms and conditions; and
(G) the joint venture is entered into either
for the purpose of effecting appropriate
diversification for the Partnership and
the Affiliated Program, or for the purpose
of relieving the General Partner or its
Affiliates from a commitment entered into
pursuant to Section 9.2(b);
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(xix) to pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise, upon
such terms as it may determine and upon such
evidence as it may deem sufficient, any obligation,
suit, liability, cause of action or claim,
including those relating to federal, state or local
taxation, either in favor of or against the
Partnership;
(xx) to establish and maintain Reserves for such
purposes and in such amounts, and to increase or
reduce such amounts, as it deems appropriate from
time to time (but generally not less than 1% of the
Gross Offering Proceeds);
(xxi) subject to Section 8.3, to do all things necessary
or advisable, in its sole and absolute discretion,
to effect the admission of the Limited Partners,
including, but not limited to, registering the
Units under the Securities Act and effecting the
qualification of, or obtaining exemptions from the
qualification of, the Units for sale with
Administrators, and determining that the purchase
of Units is a suitable and appropriate investment
for each Limited Partner, based on information
provided by each Limited Partner regarding his
financial situation and investment objectives;
(xxii) to enter into the Dealer-Manager Agreement on
behalf of the Partnership;
(xxiii) to enter into on behalf of the Partnership, or to
authorize the Dealer-Manager to enter into,
separate Selling Dealer Agreements;
(xxiv) to enter into the Escrow Agreement on behalf of the
Partnership and provide for such compensation to
the Escrow Agent as the General Partner may deem
reasonable under the circumstances, which
compensation shall be deemed to be and shall
constitute an Organization and Offering Expense
payable by the General Partner;
(xxv) to cause the Partnership to Redeem, or elect not to
Redeem, Units, in its sole and absolute discretion,
upon request therefor by a Limited Partner as
provided in Section 13.5;
(xxvi) to cause the Partnership to obtain and pay the
premiums with respect to insurance policies
covering such risks as the General Partner deems
reasonably necessary to protect the interests of
the Partnership; provided that the General Partner,
its Affiliates and their respective employees and
agents may be named as additional insured parties
thereunder only if the cost of premiums payable by
the Partnership is not increased thereby; and
provided further, that the Partnership shall not
incur or assume the cost of any portion of any
insurance which insures any party against any
liability the indemnification of which is
prohibited by Section 9.3(b);
(xxvii) during the Reinvestment Period, but subject to the
limitations and requirements of Section 11.1(b), to
reinvest all or a substantial portion of the
Partnership's Distributable Cash in additional
Investments;
(xxviii) subject to Section 9.2(m), to enter into on behalf
of the Partnership arrangements with itself or its
Affiliates to provide services for the Partnership,
if necessary, in addition to those provided for
under this Agreement or the Origination & Servicing
Agreement, which additional arrangements must meet
the following criteria:
(A) the compensation, price or fee charged for
providing such services 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 and materials
which could reasonably be made available
to the Partnership;
(B) the fees and other terms of the contract
shall be fully disclosed; and
(C) the General Partner or its Affiliate
providing the services must be
independently engaged in the business of
providing those services to Persons other
than Affiliates of the General Partner, and
at least 75% of its gross revenue from
providing those services must be derived
from sources other than the General Partner
and its Affiliates.
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(xxix) to take all such actions and execute all such
documents and other instruments as the General
Partner may deem necessary, convenient or advisable
to accomplish or further the purposes or objectives
of the Partnership or to protect and preserve
Partnership assets.
(c) DELEGATION OF POWERS. Except as otherwise provided under
this Agreement or by law, the General Partner may, in its
sole and absolute discretion, delegate all or any of its
duties under this Agreement to, and may elect, employ,
contract or deal with, any Person including, without
limitation, the General Partner or any Affiliate of the
General Partner.
(d) RELIANCE BY THIRD-PARTIES. No Person dealing with the
Partnership or its assets, whether as assignee, lessee,
purchaser, borrower, mortgagee, grantee or otherwise, shall
be required to investigate the authority of the General
Partner in selling, assigning, leasing, mortgaging,
conveying or otherwise dealing with any Investments or other
assets or any part thereof, nor shall any such assignee,
lessee, purchaser, mortgagee, grantee or other Person
entering into a contract with the Partnership be required to
inquire as to whether the approval of the Partners for any
such assignment, lease, sale, mortgage, transfer or other
transaction has been first obtained. Any such Person shall
be conclusively protected in relying upon a certificate of
authority or of any other material fact signed by the
General Partner, or in accepting any instrument signed by
the General Partner in the name and on behalf of the
Partnership or the General Partner.
9.2 LIMITATIONS ON THE EXERCISE OF POWERS OF GENERAL PARTNER
The General Partner shall have no power to take any action prohibited by this
Agreement or by the Delaware Act. Furthermore, the General Partner shall be
subject to the following in the administration of the Partnership's business
and affairs:
(a) INVESTMENT COMPANY STATUS. The General Partner shall use its
best efforts to assure that the Partnership shall not be
deemed to be an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(b) SALES AND LEASES OF INVESTMENTS FROM OR TO THE GENERAL
PARTNER AND ITS AFFILIATES. The Partnership shall neither
purchase nor lease Investments from, nor sell or lease
Investments to, the General Partner, any Affiliate of the
General Partner or any Affiliated Program (including any
Investment in which the General Partner or any of its
Affiliates has an interest) except as provided in this
Section 9.2(b). Notwithstanding the foregoing, the
Partnership may purchase Investments from the General
Partner or any of its Affiliates (but not including an
Affiliated Program) if:
(i) the General Partner determines that the making of
such Investment is in the best interests of the
Partnership;
(ii) such Investment is purchased by the Partnership at
a Purchase Price which does not exceed the sum of:
(A) the net cost to the General Partner or the
Affiliate of acquiring and holding same
(adjusted for any income received, capital
or investment returned and reasonable and
necessary expenses paid or incurred while
holding same); plus
(B) any compensation to which the General
Partner and any Affiliate of the General
Partner is otherwise entitled pursuant to
this Agreement;
(iii) there is no difference in the provisions or formula
establishing the interest rate of any Indebtedness
secured by the Investment at the time it is
acquired by the General Partner or such Affiliate
and the time the Investment is acquired by the
Partnership;
(iv) neither the General Partner nor any Affiliate of
the General Partner realizes any gain, or receives
any other benefit, other than compensation for its
services, if any, permitted by this Agreement, as a
result of the Partnership making such Investment;
and
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(v) at the time of transfer thereof to the Partnership,
the General Partner or such Affiliate had held such
Investment on an interim basis (generally not
longer than 6 months) for the purposes of:
(A) facilitating the acquisition of such
Investment by the Partnership;
(B) borrowing money or obtaining financing for
the Partnership; or
(C) any other lawful purpose related to the
business of the Partnership.
(c) LOANS TO OR FROM THE GENERAL PARTNER AND ITS AFFILIATES. No
loans may be made by the Partnership to the General Partner
or any Affiliate of the General Partner. The General Partner
or any Affiliate of the General Partner may loan or advance
funds to the Partnership provided that:
(i) any interest or other financing charges or fees
payable by the Partnership in connection with the
loan shall not exceed the lesser of the following:
(A) the rate of interest and other amounts
paid or payable by the General Partner or
the Affiliate in connection with the loan
(if the General Partner or the Affiliate
borrowed money for the specific purpose of
making the loan); or
(B) the rate of interest and other amounts
that would be charged to the Partnership
(without reference to the General
Partner's or the Affiliate's financial
abilities or guarantees) by unrelated
lending institutions on a comparable loan
for the same purpose in the same
geographic area (if neither the General
Partner nor the Affiliate borrowed money
to make the loan); and
(ii) all payments of principal and interest on the loan
must be due and payable within 12 months after the
date on which the loan is made.
If the General Partner or any Affiliate of the General
Partner purchases an Investment in its own name and with its
own funds in order to facilitate the ultimate purchase of
the Investment by the Partnership, the General Partner or
the Affiliate, as the case may be, shall be deemed to have
made a loan, to the Partnership in the amount of the
Purchase Price and shall be entitled to receive interest on
that amount in accordance with clause (i) above. However,
any advances made by the General Partner or any Affiliate of
the General Partner for the purpose of paying Organization
and Offering Expenses shall not constitute a loan to the
Partnership. Instead, these advances shall be reimbursed to
the General Partner or the Affiliate (to the extent
possible) from the Organization and Offering Expense
Allowance without interest thereon in accordance with, and
to the extent provided in, Section 9.4(e).
(d) NO EXCHANGE OF PARTNERSHIP UNITS FOR INVESTMENTS. The
Partnership shall not acquire any Investments in exchange
for Units.
(e) ROLL-UPS. Any proposal that the Partnership enter into a
Roll-Up shall require the Consent of a Majority Interest.
The Partnership shall not reimburse the sponsor of a
proposed Roll-Up for the costs of its proxy contest, nor
bear any other costs of the transaction if the Roll-Up is
not approved by a Majority Interest. Any proposed Roll-Up
shall also be subject to the following:
(i) An Appraisal of all Partnership assets shall be
obtained from a competent, independent expert. For
purposes of this clause (i), an independent expert
is 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 Partnership, 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 Commission and applicable
Administrators as an exhibit to the registration
statement for the offering. Partnership 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 Partnership's assets as of a date
immediately prior to the announcement of the
proposed Roll-Up transaction. The appraisal shall
assume an orderly liquidation of Partnership assets
over a 12-month period. The terms of the engagement
of the independent expert shall clearly state that
the engagement is
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for the benefit of the Partnership and its Limited
Partners. A summary of the independent appraisal,
indicating all material assumptions underlying the
appraisal, shall be included in a report to the
Limited Partners in connection with a proposed
Roll-Up transaction.
(ii) The Person sponsoring the Roll-Up transaction shall
offer to Limited Partners 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:
(1) remaining as Limited Partners,
and preserving their Units in
the Partnership on the same
terms and conditions as existed
previously; or
(2) receiving cash in an amount
equal to the Limited Partners'
pro-rata share of the appraised
value of the net assets of the
Partnership.
(iii) The Partnership shall not participate in any
proposed Roll-Up transaction which would result in
Limited Partners having voting rights which are
less than those provided for under this Agreement.
If the Roll-Up Entity is a limited partnership, the
voting rights of Limited Partners shall correspond
to the voting rights provided for in this Agreement
to the greatest extent possible.
(iv) The Partnership shall not participate in any
proposed Roll-Up transaction which includes
provisions which would operate to materially impede
or frustrate the accumulation of Units 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 Partnership
shall not participate in any proposed Roll-Up
transaction which would limit the ability of a
Limited Partner to exercise the voting rights of
the securities of the Roll-Up Entity on the basis
of the number of Units held by that Limited
Partner.
(v) The Partnership shall not participate in any
proposed Roll-Up transaction in which Limited
Partners' rights of access to the records of the
Roll-Up Entity will be less than those provided for
under this Agreement.
(f) NO EXCLUSIVE LISTINGS. No exclusive listing for the sale of
Investments, or of any other Partnership assets, shall be
granted to the General Partner or any Affiliate of the
General Partner.
(g) OTHER TRANSACTIONS INVOLVING THE GENERAL PARTNER AND ITS
AFFILIATES. Except as specifically permitted by this
Agreement, including but not limited to the Origination &
Servicing Agreement, Section 9.1(b)(xxviii) and Subsection
(m) below, the General Partner shall not enter into any
agreements, contracts or arrangements on behalf of the
Partnership with the General Partner, any Affiliate of the
General Partner or any Affiliated Program. Except as
permitted by Section 9.4, neither the General Partner nor
any Affiliate of the General Partner shall receive, directly
or indirectly, a commission or fee in connection with the
reinvestment of Distributable Cash in new Investments.
Neither the General Partner nor any of its Affiliates may
receive any rebates or "give-ups," nor may the General
Partner or any of its Affiliates participate in any
reciprocal business arrangements that could have the effect
of circumventing any of the provisions of this Agreement.
(h) PAYMENTS TO INVESTOR ADVISORS. Neither the General Partner
nor any Affiliate of the General Partner shall, directly or
indirectly, pay or award any commissions or other
compensation to any Person engaged by a potential investor
as an investment advisor as an inducement to such Person to
advise the potential investor concerning the Units.
Provided, however, this Section 9.2(h) shall not prohibit
the payment to any such Person of the Dealer-Manager Fees,
Sales Commissions, and Due Diligence Expenses in accordance
with the terms of this Agreement.
(i) SALE OF ALL OR SUBSTANTIALLY ALL ASSETS; DISSOLUTION. During
the Reinvestment Period, the General Partner may not
dissolve the Partnership or sell or otherwise dispose of all
or substantially all of the assets of the Partnership
without the Consent of a Majority Interest, except that the
General Partner may sell all or substantially all of the
Partnership's assets as part of a Financing Transaction on
behalf and for the benefit of the Partnership.
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(j) NO INVESTMENTS IN OR UNDERWRITING OF INTERESTS OF OTHER
PROGRAMS. The Partnership shall not invest in or underwrite
the equity interests of any other Program; provided,
however, that nothing herein shall preclude the Partnership
from making investments in joint ventures to the extent and
in the manner provided in Section 9.1(b)(xviii).
(k) USE OF PARTNERSHIP'S ASSETS. The General Partner shall not
employ, or permit any Person to employ, the Partnership's
funds or assets in any manner except for the exclusive
benefit of the Partnership. In addition, the Partnership
shall not invest from time to time more than 20% of its
funds and assets, including but not limited to Capital
Contributions and the proceeds of Financing Transactions
then available for investment, in Secured Loans.
(l) FIDUCIARY DUTY TO LIMITED PARTNERS. Neither the General
Partner nor any Affiliate shall permit a Limited Partner to
contract away the fiduciary duty owed to the Limited Partner
by the General Partner or its Affiliates under Delaware law,
and common law to the extent applicable.
(m) CONTRACTS FOR GOODS AND SERVICES. All services or goods for
which the General Partner or any of its Affiliates is to
receive compensation which are not otherwise described in
this Agreement or the Origination & Servicing Agreement
shall be embodied in a written contract which precisely
describes the services to be rendered and all compensation
to be paid. Other than contracts specifically authorized
under this Agreement, including without limitation the
Origination & Servicing Agreement, the contract may only be
modified by a Majority vote of the Limited Partners, and the
contract shall contain a clause allowing termination without
penalty by Majority vote of the Limited Partners on 60 days
notice to the Limited Partners.
9.3 LIMITATION ON LIABILITY OF GENERAL PARTNER AND ITS AFFILIATES;
INDEMNIFICATION
(a) Neither the General Partner nor any Affiliate of the General
Partner shall have any liability to the Partnership or to
any Partner for any loss suffered by the Partnership which
arises out of any action or inaction of the General Partner
or such Affiliate, acting on behalf of or performing
services for the Partnership, if the General Partner or such
Affiliate, in good faith, determined that such course of
conduct was in the best interests of the Partnership and
such course of conduct did not constitute negligence or
misconduct of the General Partner or such Affiliate. The
General Partner and any such Affiliate shall be indemnified
by the Partnership against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any
claims sustained by them, or any of them, in connection with
actions taken or not taken on behalf of the Partnership or
within the scope of the General Partner's authority,
provided that the same were not the result of negligence or
misconduct on the part of the General Partner or any such
Affiliate and the General Partner or such Affiliate, in good
faith, determined that the action or inaction giving rise
thereto was in the best interests of the Partnership.
(b) Notwithstanding the above, the General Partner and its
Affiliates and any person acting as a broker-dealer shall
not be indemnified by the Partnership for any losses,
liabilities or expenses arising from or out of an alleged
violation of federal or state securities laws unless:
(i) there has been a successful adjudication on the
merits of each count involving securities law
violations as to the particular indemnitee and a
court of competent jurisdiction shall approve
indemnification of the litigation costs; or
(ii) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as
to the particular indemnitee and a court of
competent jurisdiction shall approve
indemnification of the litigation costs; or
(iii) a court of competent jurisdiction approves a
settlement of the claims against a particular
indemnitee and a court of competent jurisdiction
shall find that indemnification of the settlement
and related costs should be made.
In any claim for indemnification for federal or state
securities law violations, the party seeking indemnification
shall apprise the court of the position of the Commission
and, if a position be taken by it,
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the Administrator in any jurisdiction in which Units have
been sold with respect to the issue of indemnification for
securities law violations before seeking court approval for
the indemnification.
(c) Any amounts payable pursuant to the provisions of this
Section 9.3 shall be recoverable solely out of the assets of
the Partnership and not from the Limited Partners. The
Partnership shall not incur the cost of that portion of any
insurance which insures any party against any liability the
indemnification of which is herein prohibited; provided,
however, that with respect to public liability insurance
obtained by the Partnership in connection with any
Investment or operations of the Partnership, the General
Partner shall be permitted to add itself as an additional
insured thereunder so long as and to the extent that the
General Partner shall pay for the incremental premium costs
resulting from its being added as an additional insured. For
purposes of this Section 9.3, "public liability insurance"
shall include insurance which would cover damage to property
or personal injury to non-affiliated persons incurred during
the performance of services related to the Partnership and
its operations.
9.4 COMPENSATION OF GENERAL PARTNER AND ITS AFFILIATES
Neither the General Partner nor any of its Affiliates shall receive any
compensation except in accordance with this Section 9.4, Section
9.1(b)(xxviii), Section 9.2(m), Section 14.2, and Section 15.9.
(a) ALLOCATIONS AND DISTRIBUTIONS. The General Partner shall be
entitled to receive the allocations and distributions
provided in Article XI and Article XIV in respect of its
Partnership Interest.
(b) DEALER-MANAGER FEES. Dealer-Manager Fees shall be paid by
the Partnership to the Dealer-Manager for each Unit sold.
(c) SALES COMMISSIONS. Sales Commissions shall be paid by the
Partnership to the Dealer-Manager and each Selling Dealer
for the respective Units sold by each of them, provided that
no Sales Commissions shall be payable by the Partnership for
any Units sold to Affiliated Limited Partners.
(d) DUE DILIGENCE EXPENSES. The General Partner shall pay Due
Diligence Expenses from the Organization and Offering
Expense Allowance; provided that no Due Diligence Expenses
shall be payable by the General Partner for any Units sold
to the General Partner and its Affiliates, or any Units sold
through the officers and directors of the General Partner.
(e) ORGANIZATION AND OFFERING EXPENSE ALLOWANCE. The Partnership
shall pay, immediately following each Closing Date, the
Organization and Offering Expense Allowance to the General
Partner without deduction for Dealer-Manager Fees and Sales
Commissions payable by the Partnership. The General Partner
shall distribute to the Dealer-Manager from its Organization
and Offering Expense Allowance the amount that is necessary
to pay the Due Diligence Expenses as determined by the
General Partner and the Dealer-Manager. The General Partner
shall bear any Organization and Offering Expenses incurred
by the General Partner or any Affiliate of the General
Partner (including, without limitation, the Dealer-Manager)
in excess of the Organization and Offering Expense
Allowance.
(f) ACQUISITION FEES AND ACQUISITION EXPENSES. In connection
with any Investment, the Partnership shall pay to the
General Partner, for services rendered in connection with
acquiring such Investment, an Acquisition Fee equal to the
difference (to the extent greater than zero) between:
(i) 2% of the Purchase Price paid by the Partnership
for any Investment; and
(ii) the aggregate amount of Acquisition Fees paid by or
on behalf of the Partnership to any other Person in
connection with such Investment.
Provided, however, that:
(i) no Acquisition Fees shall be paid by or on behalf
of the Partnership to any finder or broker that is
an Affiliate of the General Partner except to the
extent permitted by this Section 9.4(f);
(ii) Acquisition Fees shall include Acquisition
Expenses, except that for purposes of this Section
9.4 fees payable to finders or brokers which are
not Affiliates of the General Partner that are
otherwise
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included within Acquisition Fees shall be treated
as an expense of the Partnership payable as
provided in Section 9.4(j) and shall not be treated
as Acquisition Fees or Acquisition Expenses except
for purposes of determining the Purchase Price of
the Investment; and
(iii) the Partnership shall not pay any Acquisition Fees,
fees payable to finders or brokers which are not
Affiliates of the General Partner, or other Front-
End Fees, or part thereof, that would cause the
Partnership's Investment in Equipment (including
Equipment which at any time is subject to, or the
collateral for, Leases or Secured Loans) to be less
than the greater of:
(1) 80% of the Gross Offering Proceeds from
the Partnership's sale of Units, reduced
by .0625% for each 1% of Indebtedness
encumbering any Investment acquired by the
Partnership; or
(2) 75% of the Gross Offering Proceeds.
To calculate the percentage of Indebtedness encumbering
Investments, the aggregate amount of such Indebtedness shall
be divided by the aggregate Purchase Price (without
deduction for Front-End Fees) paid for all Investments. The
quotient so calculated shall be multiplied by .0625% to
determine the percentage to be deducted from 80%. Where the
Partnership purchases an Investment from the General Partner
or one of its Affiliates pursuant to Section 9.2(b) for a
Purchase Price which includes an Acquisition Fee amount,
such Acquisition Fee amount shall be deemed paid pursuant to
this Section 9.4(f) and there shall be no duplicative
payment thereof.
(g) MANAGEMENT FEES. Each month, for management services
rendered, the Partnership shall pay to the General Partner
such portion of the Management Fees as shall be attributable
to Gross Revenues actually received by the Partnership
during such month; provided that Management Fees shall be
paid in any month only after payment of (or addition of cash
to Reserves sufficient to pay) any accrued and unpaid
Reinvestment Period Cash Distributions for such month. To
the extent that the Partnership does not have sufficient
Distributable Cash in any month for Reinvestment Period Cash
Distributions for such month, the payment of such Management
Fees shall be deferred and paid, without interest, in the
next following month in which the Partnership generates
sufficient Distributable Cash therefor. Reserves for
Reinvestment Period Cash Distributions created as set forth
in the first sentence of this Section 9.4(g) may not be used
for any purpose other than making Reinvestment Period Cash
Distributions.
(h) SUBORDINATED REMARKETING FEES. For services rendered in
connection with the sale of any Investment, the Partnership
shall pay to the General Partner the applicable Subordinated
Remarketing Fee; provided that:
(i) in no event shall any such Subordinated Remarketing
Fee be paid prior to Payout (provided that, for
purposes of this clause (i) only, the Cumulative
Return necessary to calculate Payout shall be
calculated using daily compounding); and
(ii) the General Partner shall not be entitled to
receive that portion of any Subordinated
Remarketing Fee that would cause the total
commissions paid to all Persons in connection with
the sale of such Investments to exceed a fee for
such services which is reasonable, customary and
competitive in light of the size, type and location
of such Investment. After Payout, any and all
Subordinated Remarketing Fees previously earned by
the General Partner shall be paid, without any
interest thereon, by the Partnership, prior to any
other distributions to the Partners.
(i) RE-LEASING FEE. For services rendered in connection with the
re-lease of Equipment, the Partnership shall pay the
applicable Re-Leasing Fee to the General Partner; provided
that:
(i) the General Partner shall maintain adequate staff
to provide re-leasing services;
(ii) the fee shall be paid as each rental payment is
made over the term of the lease;
(iii) no fee shall be paid or reimbursed where the
equipment is re-leased to the previous lessee or
its Affiliates;
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(iv) the General Partner or its Affiliates shall have
rendered substantial re-leasing services in
connection with such re-lease; and
(v) the General Partner or its Affiliates have been
compensated in Management Fees for rendering
management services.
(j) PARTNERSHIP EXPENSES.
(i) Except as otherwise provided in this Section
9.4(j), expenses of the Partnership, other than
those incurred or otherwise reimbursed in
accordance with subsections (b) through (i) of this
Section 9.4, shall be billed directly to and paid
by the Partnership.
(ii) Subject to clause (iv), the General Partner and any
Affiliate of the General Partner may be reimbursed
for the actual cost of goods, materials and
services used for or by the Partnership and
obtained by it or them from non-Affiliates of the
General Partner.
(iii) Subject to clause (iv), the General Partner and any
Affiliate of the General Partner may be reimbursed
for the administrative services reasonably
necessary, convenient or advisable, in the
discretion of the General Partner, to the prudent
operation of the Partnership (including, without
limitation, legal, accounting, remarketing and
agency expenses) provided that such reimbursement
shall not exceed the lesser of:
(A) its or their actual cost; or
(B) the amount the Partnership would be
required to pay to non-Affiliates for
comparable administrative services in the
same geographic location;
provided, further, that there shall be no
reimbursement for such services if the General
Partner or any such Affiliate is entitled to
compensation in the form of a separate fee pursuant
to other provisions of this Section 9.4.
(iv) Neither the General Partner nor any Affiliate of
the General Partner shall be reimbursed by the
Partnership for amounts expended by it with respect
to the following:
(A) salaries, fringe benefits, travel expenses
or other administrative items incurred by
or allocated to any Controlling Person of
the General Partner or of any such
Affiliate; or
(B) rent, depreciation, utilities, capital
equipment or other administrative items.
9.5 OTHER INTERESTS OF THE GENERAL PARTNER AND ITS AFFILIATES
The General Partner shall be required to devote only such time to the affairs
of the Partnership as the General Partner shall, in its sole and absolute
discretion, determine in good faith to be necessary for the business and
operations of the Partnership. The General Partner and any Affiliate of the
General Partner may engage in, or possess an interest in, business ventures
(other than the Partnership) of every kind and description, independently or
with others, including, but not limited to, serving as sponsor or general
partner of other Programs and participating in the equipment leasing business,
whether or not such business ventures may be competitive with the business or
Investments of the Partnership; provided, however, that the General Partner
and its Affiliates may not offer for sale interests in another Program prior
to the Termination Date unless such other Program has investment objectives
that are different from the Partnership's. Neither the Partnership nor any
Limited Partner shall have any rights in and to such independent ventures or
the income or profits therefrom by reason of the General Partner's position
with the Partnership.
Neither the General Partner nor its Affiliates shall be obligated to present
any particular investment opportunity to the Partnership. The General Partner
and its Affiliates shall have the right to invest in equipment, portfolios of
equipment subject to existing equipment leases, and in leasing and re-leasing
opportunities, on its or their own behalf or on behalf of other Programs. The
General Partner and each such Affiliate shall have the right, subject only to
the provisions of the immediately succeeding paragraph, to take for its own
account (individually or otherwise), or to recommend to any Affiliated
Program, any particular investment opportunity.
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Any conflicts in determining and allocating Investments between the General
Partner and Affiliated Programs on the one hand and the Partnership on the
other hand will be resolved by the Investment Committee, which will evaluate
the suitability of all prospective Investments. If the Investments available
from time to time to the Partnership and to other Affiliated Programs is less
than the aggregate amount of Investment then sought by them, the available
Investment shall be allocated by the General Partner to an Affiliated Program
(including the Partnership) after taking into consideration at least the
following factors:
(i) which Affiliated Program has been seeking Investments or
reinvesting Cash Flow from its Investments for the longest
period of time;
(ii) whether the Affiliated Program has the cash required for the
investment;
(iii) whether the amount of debt to be incurred with respect to
the investment is acceptable for the Affiliated Program;
(iv) the effect the investment would have on the Affiliated
Program's cash flow;
(v) whether the investment would further diversify, or unduly
concentrate, the Affiliated Program's Investments in a
particular lessee, class or type of equipment, location,
industry, etc.; and
(vi) whether the term of the investment is within the term of the
Affiliated Program.
In the event of a conflict between two or more Affiliated Programs (including
the Partnership) that are seeking to re-lease or sell similar equipment
contemporaneously (except to the extent that such re-lease or sale is to the
lessee, or an Affiliate of the lessee, from the Affiliated Program), the first
opportunity to re-lease or sell equipment shall generally be allocated to the
Affiliated Program (including the Partnership) attempting to re-lease or sell
equipment that was subject to the lease that expired first or, if two or more
leases expire simultaneously, the lease which was first to take effect;
provided, however, that the General Partner may, in its discretion, otherwise
provide opportunities to re-lease or sell equipment if such equipment is
subject to remarketing commitments. Notwithstanding anything to the contrary
provided in this Section 9.5, the General Partner may allocate an opportunity
that does not comply with the foregoing restrictions if there are other
circumstances, in the General Partner's judgment, under which the withholding
of such an opportunity would be inequitable or not economically feasible for a
particular Affiliated Program (including the Partnership).
If the financing available from time to time to two or more Affiliated
Programs (including the Partnership) is less than the aggregate amount then
sought by them, the available financing shall generally be allocated to the
investment entity that has been seeking financing the longest.
ARTICLE X - POWERS AND LIABILITIES OF LIMITED PARTNERS
10.1 ABSENCE OF CONTROL OVER PARTNERSHIP BUSINESS
The Limited Partners hereby consent to the exercise by the General Partner of
the powers conferred on the General Partner by this Agreement. No Limited
Partner shall participate in or have any control over the Partnership's
business or have any right or authority to act for, or to bind or otherwise
obligate, the Partnership (except one who is also a General Partner, and then
only in its capacity as a General Partner). No Limited Partner shall have the
right to have the Partnership dissolved and liquidated or to have all or any
part of such Limited Partner's Capital Contribution or Capital Account
returned except as provided in this Agreement.
10.2 LIMITED LIABILITY
The liability of each Limited Partner, in his capacity as such, shall be
limited to the amount of such Limited Partner's Capital Contribution and pro
rata share of any undistributed Income, Cash Flow and other assets of the
Partnership. Except as may otherwise be required by law or by this Agreement,
after a Limited Partner pays all Subscription Monies attributable to the
purchase of his Units, such Limited Partner shall have no further obligations
to the Partnership, be subject to any additional assessment or be required to
contribute any additional capital to, or to loan any funds to, the
Partnership.
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ARTICLE XI - DISTRIBUTIONS AND ALLOCATIONS
11.1 DISTRIBUTION OF DISTRIBUTABLE CASH
(a) Prior to the admission to the Partnership of any Limited
Partners, distributions of Distributable Cash shall be made
1% to the Original Limited Partner and 99% to the General
Partner.
(b) Upon admission of any Limited Partners other than the
Original Limited Partner and during the Reinvestment Period,
provided that Distributable Cash is sufficient for such
purposes, the General Partner shall apply Distributable Cash
in the following order of priority:
(i) first, 1% to the General Partner and 99% to the
Limited Partners in an amount:
(A) which is equal to the Limited Partners' Unpaid
Cumulative Return; and
(B) which includes an amount of Distributable Cash
resulting from Sales and refinancings of the
Partnership's Investments sufficient for the
Limited Partners to pay their federal, state and
local income taxes, if any, resulting from those
Sales, assuming the Limited Partners are in a 30%
tax bracket; and
(ii) thereafter, to investment and reinvestment in
Investments or, if the General Partner shall elect
not to invest or reinvest such Distributable Cash,
1% to the General Partner and 99% to the Limited
Partners.
(c) During the Liquidation Period, no Distributable Cash shall
be reinvested in additional Investments. All Distributable
Cash shall be distributed 1% to the General Partner and 99%
to the Limited Partners.
(d) Distributions of Distributable Cash shall be made to the
Partners monthly. Subject to Section 11.1(b), the amount of
each such monthly distribution shall be determined by the
General Partner, in its sole discretion, based upon the
amount of the Partnership's then available Distributable
Cash and other funds of the Partnership and the General
Partner's estimate of the Partnership's total Distributable
Cash for such Fiscal Year.
11.2 ALLOCATIONS OF INCOME AND LOSS
(a) The Income and Loss of the Partnership shall be determined
for each Fiscal Year or Fiscal Period.
(b) Except as otherwise provided in this Agreement, whenever a
proportionate part of the Partnership's Income or Loss is
allocated to a Partner, every item of income, gain, loss or
deduction entering into the computation of such Income or
Loss, or arising from the transactions with respect to which
such Income or Loss was realized, shall be allocated to such
Partner in the same proportion.
(c) Income for any Fiscal Period during the Reinvestment Period
shall be allocated 1% to the General Partner and 99% to the
Limited Partners.
(d) Income for any Fiscal Period during the Liquidation Period
shall be allocated to the Partners as follows:
(i) first, to the Partners in proportion to and to the
extent of the deficit balances, if any, in their
respective Capital Accounts; and
(ii) thereafter, 1% to the General Partner and 99% to
the Limited Partners.
(e) Losses for any Fiscal Period shall be allocated to the
Partners as follows:
(i) first, 1% to the General Partner and 99% to the
Limited Partners until the Limited Partners have
been allocated Losses equal to the excess, if any,
of their aggregate Capital Account balances over
their aggregate Adjusted Capital Contributions;
(ii) next, to the Partners in proportion to and to the
extent of their respective remaining positive
Capital Account balances, if any; and
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(iii) thereafter, 1% to the General Partner and 99% to
the Limited Partners;
provided, however, that if and to the extent that an
allocation of Losses to any Limited Partner pursuant to this
Section 11.2(e) or Section 11.2(f) would result in any
Limited Partner having an Adjusted Capital Account Deficit,
such Losses shall be allocated to all other Partners in
accordance with this Section 11.2(e) and, when no Limited
Partner can be allocated any such Losses without violating
the limitation contained in this proviso, such remaining
Losses shall be allocated to the General Partner.
(f) SPECIAL ALLOCATIONS. The following special allocations
shall, except as otherwise provided, be made prior to
allocations in Sections 11.2(a) through (e) in the following
order:
(i) MINIMUM GAIN CHARGE-BACK. Notwithstanding any other
provision of this Article XI, if there is a net
decrease in Partnership Minimum Gain or in any
Partner Nonrecourse Debt Minimum Gain during any
Fiscal Period, before any other allocation under
this Article XI each Partner shall be specially
allocated items of Partnership Income and gain for
such Fiscal Period (and, if necessary, subsequent
Fiscal Periods) in an amount and manner required by
Treas. Reg. Sections 1.704-2(f) and 1.704-2(i)(4)
or any successor provisions. The items to be so
allocated shall be determined in accordance with
Treas. Reg. Section 1.704-2(j)(2) or any successor
provision.
(ii) PARTNERSHIP NONRECOURSE DEDUCTIONS. Partnership
Nonrecourse Deductions for any Fiscal Period shall
be allocated 99% to the Limited Partners and 1% to
the General Partner.
(iii) PARTNER NONRECOURSE DEDUCTIONS. Partner Nonrecourse
Deductions for any Fiscal Period shall be allocated
to the Partner who made or guaranteed or is
otherwise liable with respect to the loan to which
such Partner Nonrecourse Deductions are
attributable in accordance with the principles of
Treas. Reg. Section 1.704-2(i) or any successor
provision.
(iv) QUALIFIED INCOME OFFSET. If in any Fiscal Period,
any Partner has an Adjusted Capital Account
Deficit, whether resulting from an unexpected
adjustment, allocation or distribution described in
Treas. Reg. Section 1.704-1(b)(2)(ii)(d)(4), (5) or
(6) or otherwise, such Partner shall be allocated
items of Partnership Income (consisting of a pro
rata portion of each item of Partnership Income for
such Fiscal Period) sufficient to eliminate such
Adjusted Capital Account Deficit as quickly as
possible, to the extent required by such Treasury
Regulation. It is the intention of the parties that
this allocation provision constitute a "qualified
income offset" within the meaning of Treas. Reg.
Section 1.704-1(b)(2)(ii)(d).
(v) CURATIVE ALLOCATIONS. The special allocations
provided for in Section 11.2(e) and in Sections
11.2(f)(i) through (iv) are intended to comply with
Treas. Reg. Sections 1.704-1 and 1.704-2. To the
extent that any of those special allocations have
been made, subsequent allocations of Income, Loss
and items thereof ("curative allocations") shall be
made as soon as possible and in a manner so as to
cause, to the extent possible without violating the
requirements of Treas. Reg. Sections 1.704-1 and
1.704-2, the Partners' Capital Account balances to
be as nearly as possible in the same proportions in
which they would have been had the special
allocations not occurred. In making these curative
allocations, due regard shall be given to the
character of the Income and Loss and items thereof
that were originally allocated under the provisions
of Section 11.2(e) and Sections 11.2(f)(i) through
(iv) in order to put the Partners as nearly as
possible in the positions in which they would have
been had those special allocations not occurred.
(g) MISALLOCATED ITEMS. If the General Partner determines, after
consultation with Counsel, that the allocation of any item
of Income or Loss is not specified in this Article XI (an
"unallocated item"), or that the allocation of any item of
Income or Loss under this Article XI is clearly inconsistent
with the Partners' economic interests in the Partnership
determined by reference to this Agreement, the general
principles of Treas. Reg. Section 1.704-1(b) and the factors
set forth in Treas. Reg. Section 1.704-1(b)(3)(ii) (a
"misallocated item"), then the General Partner may allocate
the unallocated items, and reallocate the misallocated
items, to reflect the Partners' economic interests in the
Partnership.
(h) SPECIAL ALLOCATION OF STATE, LOCAL AND FOREIGN TAXES. Any
state, local or foreign
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taxes imposed on the Partnership by reason of a Partner
being a citizen, resident or national of a state, locality
or foreign jurisdiction, including any item(s) of Income or
Loss resulting therefrom, shall be specially allocated to
that Partner.
(i) TRANSACTIONS WITH PARTNERSHIP. If the adjusted basis of any
property contributed by a Partner to the Partnership exceeds
the fair market value of the property at the time of the
contribution (the "built-in loss"), then, except as provided
otherwise by Treasury Regulations, the built-in loss shall be
taken into account only in determining the amount of the tax
items allocated to the contributing Partner. In determining
the amount of tax items allocated to the other Partners, the
basis of the contributed property shall be treated as being
equal to its fair market value at the time of the
contribution. Subject to the foregoing, if, and to the extent
that, any Partner is deemed to recognize any item of Income or
Loss as a result of any transaction between such Partner and
the Partnership pursuant to Code Sections 482, 483, 1272-
1274, 7872 or any similar provision of the Code now or
hereafter in effect, any corresponding Income or Loss or items
thereof shall be allocated to the Partner who was charged with
such item.
(j) FEES AND COMMISSIONS PAID TO GENERAL PARTNER. It is the
intent of the Partnership that any amount paid or deemed
paid to the General Partner as a fee or payment described in
Section 9.4 shall be treated as a "guaranteed payment" or a
payment to a partner not acting in his capacity as a partner
pursuant to Section 707(c) of the Code to the extent
possible. If any such fee or payment is deemed to be a
distribution to the General Partner and not a guaranteed
payment or a payment to a partner not acting in his capacity
as a partner, the General Partner shall be allocated an
amount of Partnership gross ordinary income equal to such
payment.
(k) SALES COMMISSIONS, DEALER-MANAGER FEES, ACQUISITION FEES AND
ORGANIZATION AND OFFERING EXPENSE ALLOWANCE. Sales
Commissions, Dealer-Manager Fees, Acquisition Fees and the
Organization and Offering Expense Allowance shall be
allocated 100% to the Limited Partners. Organization and
Offering Expenses in excess of Sales Commissions, Dealer-
Manager Fees and the Organization and Offering Expense
Allowance shall be allocated 100% to the General Partner.
(l) TAX-EXEMPT ENTITIES. Notwithstanding any other provision of
this Agreement, if it is determined that the tax-exempt use
property rules of Section 168(h)(6) of the Code apply to the
Partnership because one or more of the Partnership's Limited
Partners are tax-exempt entities so that a portion of the
Partnership's depreciable basis in its assets must be
depreciated on a straight line basis over longer periods of
time than would otherwise be available to the Partnership,
the resulting depreciation adjustments shall be specially
allocated 100% to the Limited Partners that are tax-exempt
entities to be shared among them in the same manner as
allocations of depreciation generally are shared among
Limited Partners under Section 11.3.
11.3 DISTRIBUTIONS AND ALLOCATIONS AMONG THE LIMITED PARTNERS
(a) Except to the extent otherwise provided in this Agreement,
all distributions of Distributable Cash and all allocations
of Income and Loss and items thereof for any Fiscal Year or
Fiscal Period shall be distributed or allocated, as the case
may be, among the Limited Partners in proportion to their
respective numbers of Units. Each distribution of
Distributable Cash shall be made to the Limited Partners (or
their respective assignees) of record as of the last day of
the month next preceding the date on which the distribution
is made.
(b) All distributions of Distributable Cash and all allocations
of Income and Loss or items thereof for any Fiscal Year in
which any Limited Partners are admitted to the Partnership
shall be allocated among the Limited Partners as follows:
(i) first, the Operations and Sales of the Partnership
shall be deemed to have occurred ratably over such
Fiscal Year, irrespective of the actual results of
Operations or Sales of the Partnership;
(ii) second, all Income and Loss for such Fiscal Year
shall be allocated among the Limited Partners in
the ratio that the number of Units held by each
Limited Partner multiplied by the number of days in
such Fiscal Year that such Units were held by such
Limited Partner bears to the sum of that
calculation for all Limited Partners; and
(iii) third, all monthly distributions of cash made to
the Limited Partners under Section 11.1 shall be
distributed among the Limited Partners in the ratio
that the number of Units held by each Limited
Partner multiplied by the number of days in the
month preceding the month in which the distribution
is made that the Units were held by the Limited
Partner bears to the sum of that calculation for
all Limited Partners. If the General Partner
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determines at any time that the sum of the monthly
distributions made to any Limited Partner during or
with respect to a Fiscal Year does not (or will
not) properly reflect the Limited Partner's share
of the total distributions made or to be
made by the Partnership for the Fiscal Year, the
General Partner shall, as soon as practicable, make
a supplemental distribution to the Limited Partner,
or withhold from a subsequent distribution that
otherwise would be payable to the Limited Partner,
such amount as shall cause the total distributions
to the Limited Partner for the Fiscal Year to be
the proper amount.
(c) In the event of a transfer of a Unit during a Fiscal Year in
accordance with Article XIII, the transferor and transferee
shall be allocated a ratable share of Income and Losses for
the Fiscal Year based on the number of days in the Fiscal
Year that each held the transferred Unit.
(d) Each distribution made to a Limited Partner under Sections
11.1, 11.5 or 14.3 and any interest on Subscription Monies
relating to the Limited Partner's Units paid to the Limited
Partner under Section 8.3(k), shall be applied as follows:
(i) first, in reduction of the Limited Partner's Unpaid
Cumulative Return, to the extent thereof, as
determined immediately before the distribution; and
(ii) thereafter, in reduction of the Limited Partner's
Adjusted Capital Contribution, as determined
immediately before the distribution.
11.4 TAX ALLOCATIONS: CODE SECTION 704(C); REVALUATIONS.
(a) In accordance with Code section 704(c) and the Treasury
Regulations thereunder, Income, Loss and items thereof, with
respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated
among the Partners so as to take account of any variation
between the adjusted basis of such property to the
Partnership for federal income tax purposes and its initial
Gross Asset Value.
(b) In the event the Gross Asset Value of any Partnership asset
is adjusted pursuant to clause (ii) of Section 1.1(ss) and
Section 8.5(h), subsequent allocations of Income, Loss, and
items thereof with respect to such asset shall take account
of any variation between the adjusted basis of such asset
for federal income tax purposes and its Gross Asset Value in
a manner consistent with the requirements of Proposed Treas.
Reg. Section 1.704-3(a)(6) or the corresponding provision of
any final or successor Treasury Regulations.
(c) Any elections or other decisions relating to the allocations
required by subsections (a) and (b) of this Section 11.4
shall be made in a manner that reasonably reflects the
purpose and intention of this Agreement. Allocations under
this subsection (c) are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way
be taken into account in computing, any Partner's Capital
Account or share of Income or Losses under any provision of
this Agreement.
11.5 RETURN OF UNINVESTED CAPITAL CONTRIBUTION
If 100% of Net Offering Proceeds have not been used to make Investments,
committed to Reserves (to the extent Reserves are permitted to be treated as
Investments under Section 1.1(ccc)) or used to pay permitted Front-End Fees
within 24 months from the date of the Prospectus, the amount of such
uninvested Net Offering Proceeds shall be promptly distributed by the
Partnership to the Limited Partners, pro rata based upon their respective
number of Units, as a return of capital, without interest. Funds shall be
deemed to have been committed to investment and need not be returned to a
Limited Partner to the extent written agreements in principle, commitment
letters, letters of intent or understanding, option agreements or any similar
contracts are executed and not terminated during the applicable 24-month
period described above, if such investments are ultimately consummated within
a further period of 12 months. Funds deemed committed which are not actually
so invested within such 12 month period will be promptly distributed, without
interest, to the Limited Partners on a pro rata basis, as a return of capital,
except that investments using funds from Ohio investors must be completed
within a three-month period or such funds must be returned.
11.6 NO DISTRIBUTIONS IN KIND
Distributions in kind shall not be permitted except upon dissolution and
liquidation of the Partnership's assets and then only to a liquidating trust
established for the purpose of liquidating the assets transferred to it and
distributing the net cash proceeds of such liquidation in cash to the Partners
in accordance with the provisions of this Agreement.
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11.7 PARTNERSHIP ENTITLED TO WITHHOLD
The Partnership shall at all times be entitled to withhold or make payments to
any governmental authority with respect to any federal, state, local or
foreign tax liability of any Partner or former Partner arising as a result of
such Partner's participation in the Partnership. Each such amount so withheld
or paid shall be deemed to be a distribution for purposes of Article XI and
Article XIV, as the case may be, to the extent such Partner is then entitled
to a distribution. To the extent that the amount of such withholdings or
payments made with respect to any Partner exceeds the amount to which such
Partner is then entitled as a distribution, the excess shall be treated as a
demand loan, bearing interest at a rate equal to 12% per annum simple interest
from the date of such payment or withholding until such excess is repaid to
the Partnership either by:
(i) deduction from any distributions subsequently payable to
such Partner under this Agreement; or
(ii) earlier payment of such excess and interest by such Partner
to the Partnership.
The excess withholdings or payments, together with interest thereon, shall, in
any case, be payable not less than 30 days after demand therefor by the
General Partner. However, the General Partner shall demand payment only if it
determines that the Partner is not likely to be entitled to distributions
within 12 months from the date of such withholding or payment by the
Partnership in an amount sufficient to pay such excess and interest. If the
payments referred to in this Section 11.7 are made on behalf of a Person who
cannot be identified, the General Partner shall treat the payments as a
distribution of Distributable Cash made 1% to the General Partner and 99% to
the Limited Partners, provided that this deemed distribution shall not reduce
the Limited Partners' Unpaid Cumulative Return or Adjusted Capital
Contribution under Section 11.3(d). Also, the withholdings and payments
referred to in this Section 11.7 shall be made at the maximum applicable
statutory rate under the applicable tax law unless the General Partner has
received an opinion of Counsel, at the Partner's expense, or other evidence,
satisfactory to the General Partner, to the effect that a lower rate is
applicable or that no withholding or tax payment is required.
ARTICLE XII - WITHDRAWAL OF GENERAL PARTNER
12.1 VOLUNTARY WITHDRAWAL
The General Partner may not voluntarily withdraw as a General Partner from the
Partnership unless:
(a) the Limited Partners have received 60 days' advance written
notice of the General Partner's intention to withdraw;
(b) the Partnership has received an opinion of Counsel to the
Partnership to the effect that the withdrawal will not
constitute a termination of the Partnership or otherwise
materially adversely affect the status of the Partnership
for federal income tax purposes; and
(c) a Substitute General Partner has been selected, and the
Substitute General Partner has:
(i) consented to its admission as General Partner;
(ii) received the specific written Consent of a Majority
Interest to its admission as General Partner; and
(iii) a Net Worth sufficient, in the opinion of Counsel
to the Partnership, for the Partnership to continue
to be classified as a partnership for federal
income tax purposes and to satisfy the Net Worth
requirements for "sponsors" under applicable laws,
rules, regulations and policies of Administrators.
12.2 INVOLUNTARY WITHDRAWAL
The General Partner shall be deemed to have involuntarily withdrawn as a
General Partner from the Partnership upon the removal of the General Partner
pursuant to the Consent of the Majority Interest or upon the occurrence of any
other event that constitutes an event of withdrawal under the Delaware Act as
then in effect. For purposes of this Section 12.2 and Article XVI, neither the
General Partner nor any Affiliate of the General Partner may participate in
any vote by the Limited Partners to involuntarily remove the General Partner.
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12.3 CONSEQUENCES OF WITHDRAWAL
(a) Upon withdrawal of the General Partner as such from the
Partnership:
(i) the Partnership shall pay to the withdrawn General
Partner the fair market value of the Partnership
Interest then held by the General Partner,
calculated in the manner set forth in subsection
(b), below, and payable as set forth in subsection
(c), below; and
(ii) an amount equal to the difference between any
Management Fees and other fees accrued but not yet
paid to the General Partner, plus all other amounts
due and owing to the General Partner by the
Partnership, minus any amounts due and owing by the
General Partner to the Partnership, which shall be
payable in cash within 30 days of the date of
withdrawal, by the debtor party to the creditor
party.
(b) For purposes of this Section 12.3, the fair market value of
the withdrawn General Partner's Partnership Interest shall
be determined, in good faith, by the withdrawn General
Partner and the Partnership, or, if they cannot agree, by
arbitration in accordance with the then current rules of the
American Arbitration Association. The expense of arbitration
shall be borne equally by the withdrawn General Partner and
the Partnership.
(c) The method of payment to the General Partner upon
withdrawal, whether voluntary or involuntary, must be fair
and must protect the solvency and liquidity of the
Partnership. When the withdrawal is voluntary, the method of
payment will be presumed to be fair if it provides for a
non-interest-bearing, unsecured promissory note of the
Partnership, with principal payable, if at all, from
distributions that the withdrawn General Partner otherwise
would have received under the Partnership Agreement had the
General Partner not withdrawn. When the withdrawal is
involuntary, unless otherwise agreed by the withdrawn
General Partner and the Partnership, the method of payment
shall be a promissory note providing for repayments of
principal thereunder in 60 equal monthly installments,
together with accrued but unpaid interest, bearing interest
on the outstanding principal amount thereof at the lesser
of:
(i) the rate of interest (inclusive of any points or
other loan charges) which the Partnership would be
required to pay to an unrelated bank or commercial
lending institution for an unsecured, 60 month loan
of like amount; or
(ii) the "Prime Rate" of interest published in the Money
Rates section of the Wall Street Journal, plus 4%.
12.4 LIABILITY OF WITHDRAWN GENERAL PARTNER
If the business of the Partnership is continued after withdrawal of the
General Partner, the General Partner, or its estate, successors or legal
representatives, shall remain liable for all obligations and liabilities
incurred by it or by the Partnership while it was acting in the capacity of
General Partner and for which it was liable as General Partner, but they shall
be free of any obligation or liability incurred on account of or arising from
the activities of the Partnership from and after the time such withdrawal
became effective.
12.5 NOTICE OF WITHDRAWAL; ADMISSION OF SUBSTITUTE GENERAL PARTNER;
DISSOLUTION IF NO SUBSTITUTE GENERAL PARTNER APPROVED
If the General Partner voluntarily withdraws from the Partnership, the General
Partner, or its estate, successors or legal representatives, shall deliver to
the Limited Partners a Notice stating the reasons for such withdrawal. Within
90 days following a voluntary or involuntary withdrawal, a Majority Interest
shall agree in writing to continue the business of the Partnership and to the
appointment, effective as of the date of the withdrawn General Partner's
withdrawal, of a Substitute General Partner. Such Substitute General Partner
shall execute a counterpart of this Agreement. If such action is not taken
within 90 days following the date of the General Partner's withdrawal, then
the Partnership shall dissolve.
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ARTICLE XIII - TRANSFER OF UNITS
13.1 WITHDRAWAL OF A LIMITED PARTNER
A Limited Partner may withdraw from the Partnership only by Assigning or
Redeeming all Units owned by the Limited Partner in accordance with this
Article XIII. The withdrawal of a Limited Partner shall not dissolve or
terminate the Partnership. If a Limited Partner withdraws because of death,
legal incompetence, dissolution or other termination, the estate, legal
representative or successor of the Limited Partner shall be deemed to be the
Assignee of the Limited Partner's Units and may become a Substitute Limited
Partner on compliance with the provisions of Section 13.3.
13.2 ASSIGNMENT
(a) Subject to the provisions of subsections 13.2(b) and (c),
below and Section 13.3, any Limited Partner may Assign all
or any portion of his Units to an Assignee if:
(i) the Limited Partner and the Assignee each execute a
written Assignment, which:
(A) sets forth the terms of the Assignment;
(B) in the case of Assignments other than by
operation of law, states the intention of
the Limited Partner that the Assignee
shall become a Substitute Limited Partner
and, in all cases, evidences the
acceptance by the Assignee of all of the
terms and provisions of this Agreement;
and
(C) includes a representation by both the
Limited Partner and the Assignee that the
Assignment was made in accordance with all
applicable laws and regulations
(including, without limitation, the
minimum investment and investor
suitability requirements as may then be
applicable under state securities laws);
and
(ii) the Assignee pays to the Partnership an aggregate
amount, not exceeding $150, of expenses reasonably
incurred by the Partnership in connection with the
Assignment.
(b) Notwithstanding the foregoing, unless the General Partner
specifically Consents, no Units may be Assigned:
(i) to a minor or incompetent (unless a guardian,
custodian or conservator has been appointed to
handle the affairs of that Person);
(ii) to any Person if, in the opinion of Counsel, the
Assignment would result in the termination of the
Partnership's taxable year or its status as a
partnership for federal income tax purposes,
provided that the Partnership may permit the
Assignment to become effective if and when, in the
opinion of Counsel, the Assignment would no longer
result in the termination of the Partnership's
taxable year or its status as a partnership for
federal income tax purposes;
(iii) to any Person if the Assignment would affect the
Partnership's existence or qualification as a
limited partnership under the Delaware Act or the
applicable laws of any other jurisdiction in which
the Partnership is then conducting business;
(iv) to any Person not permitted to be an Assignee under
applicable law, including, without limitation,
applicable federal and state securities laws;
(v) if the Assignment would result in the transfer of
less than 25 Units, or 10 Units in the case of a
Qualified Plan or ▇▇▇ (unless the Assignment is all
the Units owned by the Limited Partner);
(vi) if the Assignment would result in the retention by
the Limited Partner of a portion of his Units
representing less than the greater of 25 Units, or
10 Units in the case of a Qualified Plan or ▇▇▇, or
the minimum number of Units required to be
purchased under minimum investment standards
applicable to an initial purchase of Units by the
Limited Partner as set forth in the Prospectus;
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(vii) if, in the reasonable belief of the General
Partner, the Assignment might violate applicable
law; or
(viii) if the effect of the Assignment would be to cause
the "equity participation" in the Partnership by
"benefit plan investors" (both within the meaning
of Department of Labor Reg. Section 2510.3-101(f))
and other tax-exempt investors (as determined by
the General Partner after consultation with Counsel
to the Partnership) to equal or exceed 25%.
Any attempt to make any Assignment of Units in violation of
this Section 13.2(b) shall be without force or effect.
(c) So long as there are adverse federal income tax consequences
from being treated as a "publicly traded partnership" for
federal income tax purposes, the General Partner shall not
permit any interest in a Unit to be Assigned (including
Redemptions of Units under Section 13.5) on a "Secondary
Market." For purposes of this Section 13.2(c), any
Assignment which fails to meet one or more of the secondary
market "safe-harbor" provisions of Treas. Reg. Section
1.7704-1 or any substitute safe-harbor provisions that
subsequently may be established by Treasury Regulations or
published notices, shall be treated as an Assignment on a
Secondary Market under this Section 13.2(c).
If the General Partner determines, in its sole and absolute
discretion, that an Assignment was or will be effected on a
Secondary Market, the Partnership and the General Partner
shall not recognize the Assignment and shall not admit the
transferee as a substitute Limited Partner, nor recognize
any rights of the transferee in the Partnership, such as the
right to receive distributions of Distributable Cash or any
interest in Partnership capital or profits. Each Limited
Partner agrees to provide to the General Partner all
information with regard to any Assignment by the Limited
Partner which the General Partner deems necessary in order
to determine whether the Assignment by the Limited Partner
occurred or will occur on a Secondary Market.
(d) Assignments made in accordance with this Section 13.2 shall
be considered effective on the last day of the month on
which all of the conditions of this Section 13.2 have been
satisfied. Distributions to the Assignee shall begin the
month following effectiveness of the Assignment.
13.3 SUBSTITUTION
(a) An Assignee of a Limited Partner shall be admitted to the
Partnership as a Substitute Limited Partner only if:
(i) the General Partner has reasonably determined that
all conditions specified in Section 13.2 have been
satisfied and that no adverse effect to the
Partnership does or may result from the admission;
and
(ii) the Assignee has executed a transfer agreement and
the other forms, including a power of attorney to
the effect required by Article XVIII, as the
General Partner reasonably may require to determine
compliance with this Article XIII.
(b) An Assignee of Units who does not become a Substitute
Limited Partner in accordance with this Section 13.3 and who
desires to make a further Assignment of his Units shall be
subject to all the provisions of Sections 13.2, 13.3 and
13.4 to the same extent and in the same manner as a Limited
Partner desiring to make an Assignment of his Units. Failure
or refusal of the General Partner to admit an Assignee as a
Substitute Limited Partner, if the Assignment otherwise
complies with Section 13.2, and subsection (c) thereof in
particular, shall not affect the right of the Assignee to
receive Distributable Cash and the share of Income or Losses
to which his predecessor in interest would have been
entitled in accordance with Article XI and Article XIV.
(c) The Partnership shall amend its records at least once each
calendar quarter to effect the substitution of substituted
Limited Partners.
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13.4 STATUS OF AN ASSIGNING LIMITED PARTNER
If a Limited Partner Assigns all of his Units to an Assignee who becomes a
Substitute Limited Partner, the assignor Limited Partner shall cease to be a
Limited Partner in the Partnership and shall no longer have any of the rights
or privileges of a Limited Partner.
13.5 LIMITED RIGHT OF PRESENTMENT FOR REDEMPTION OF UNITS
(a) LIMITED RIGHT TO REDEEM UNITS. Subject to the limitations
set forth below, beginning with the admission of a Limited
Partner to the Partnership, each Limited Partner (other than
the General Partner or its Affiliates if they own Units) may
request that the Partnership Redeem, for cash, up to 100% of
the Limited Partner's Units. This right of presentment shall
be subject to the limitations set forth below.
(i) The Partnership shall be under no obligation to
Redeem any Units of a Limited Partner and shall do
so only with the prior Consent of the General
Partner, which is in the sole and absolute
discretion of the General Partner. In this regard,
the General Partner may take into consideration the
time of year during which a Redemption is made, and
the effect making a Redemption would have on the 2%
limit described below.
(ii) The Partnership shall not, in any calendar year,
Redeem Units that, in the aggregate, along with all
Units otherwise transferred in that calendar year,
would exceed 2% of the total Units outstanding as
of the last day of that year.
(iii) No reserves shall be established by the Partnership
for the Redemption of Units. The availability of
funds for the Redemption of any Unit shall be
subject to the availability of sufficient Cash
Flow. Furthermore, Units may be Redeemed only if
the Redemption would not impair the capital or the
Operations of the Partnership and would not result
in the termination under the Code of the
Partnership's taxable year or of its federal income
tax status as a partnership, all as determined in
the sole discretion of the General Partner.
(b) APPLICABLE REDEMPTION PRICE. The Redemption price for a
Limited Partner's Units (the "Applicable Redemption Price")
will depend on when the Limited Partner presents his Units
for Redemption and shall be determined as set forth below.
If a Limited Partner presents his Units for Redemption:
(i) during the Offering Period, the Redemption price
for one Unit will equal the net asset value for one
Unit at the time the Redemption request is
received, as that value is determined by the
General Partner in its sole discretion;
(ii) during the Reinvestment Period, the Redemption
price for one Unit will equal 100% of the Limited
Partner's Adjusted Capital Contribution for one
Unit, plus 4% for each full twelve-month period
since the Limited Partner was admitted as a Limited
Partner, less the sum of:
(A) 100% of previous distributions made to the
Limited Partner on account of one Unit;
and
(B) 100% of any previous allocations to the
Limited Partner of investment tax credit
amounts, if any, for one Unit; or
(iii) during the Liquidation Period, the Redemption price
for one Unit will equal the equity for one Unit as
set forth on the Partnership's balance sheet in its
most recent Form 10-Q filed before the Redemption
request, less 100% of any distributions made to the
Limited Partner on account of one Redeemed Unit
since the date of the balance sheet.
(c) PROCEDURE FOR PRESENTMENT. A Limited Partner desiring to
have a portion or all of his Units Redeemed shall submit a
written request to the General Partner on a form approved by
the General Partner and duly signed by all owners on the
books of the Partnership of the Units to be Redeemed.
Redemption requests shall be deemed given on the earlier of
the date they are:
(i) personally delivered with receipt acknowledged; or
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(ii) mailed by certified mail, return receipt requested,
postage prepaid, at the General Partner's address
set forth in this Agreement.
Requests arising from death, major medical expense and
family emergency related to disability or a material loss of
family income, collectively "Hardship Redemptions," shall be
treated as having been received at 12:01 A.M. EST on the day
of receipt and all other Redemption requests shall be deemed
received with the start of the business day during which
received.
(d) PRIORITY OF REDEMPTION REQUESTS. If the General Partner
receives requests for the Partnership to redeem more Units
than there are funds sufficient to redeem, the General
Partner shall use its reasonable efforts to honor requests
for Redemptions of Units with the same request date first as
to Hardship Redemptions, second so as to provide liquidity
for IRAs or Qualified Plans to meet required distributions
and finally as to all other Redemption requests.
(e) NOTICE AND CLOSING OF REDEMPTION OF UNITS. Within 30 days
following the date on which the General Partner receives a
written request from any Limited Partner to Redeem the
Limited Partner's Units, the General Partner shall deliver a
written notice to the Limited Partner (the "Notice"):
(i) stating the number, if any, of the Units to be
Redeemed; and
(ii) if appropriate:
(A) stating the date of the Redemption of the
Units, which shall be a date within 30
days following the date of the Notice;
(B) stating the Applicable Redemption Price
with respect to the Units to be Redeemed;
and
(C) advising the Limited Partner that not less
than 10 days before the Redemption date
stated in the Notice (the "Delivery Date")
that the Limited Partner must duly execute
and deliver to the Partnership all
transfer instruments and other documents
requested by the Partnership to evidence
the Redemption of the Units. In the
General Partner's discretion, these
transfer instruments and documents may be
prepared by the Partnership and enclosed
with the Notice.
On or before the Redemption date stated in the Notice, the
Partnership shall pay the Applicable Redemption Price to the
Limited Partner for each Unit Redeemed if:
(i) all of the Limited Partner's transfer instruments
and other documents requested by the Partnership
are duly executed and returned to the Partnership
no later than the Delivery Date stated in the
Notice; and
(ii) the transfer instruments and other documents are in
good order and acceptable to the General Partner,
in its sole discretion.
(f) EFFECT OF REDEMPTION. Any Limited Partner who Redeems all of
the Units owned by the Limited Partner shall cease to be a
Limited Partner in the Partnership and shall no longer have
any of the rights or privileges of a Limited Partner in the
Partnership.
ARTICLE XIV - DISSOLUTION AND WINDING-UP
14.1 EVENTS CAUSING DISSOLUTION
The Partnership shall be dissolved on the happening of any of the following
events (each a "Dissolution Event"):
(a) the withdrawal of the General Partner, whether voluntarily
or involuntarily, unless a Substitute General Partner has
been admitted to the Partnership in accordance with Section
12.5;
(b) the voluntary dissolution of the Partnership either by:
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(i) the General Partner with the Consent of the
Majority Interest; or
(ii) the Consent of a Majority Interest without action
by the General Partner;
(c) the Sale of all or substantially all of the assets of the
Partnership not constituting a Financing Transaction;
(d) the expiration of the Partnership term specified in Article
VII;
(e) the operations of the Partnership cease to constitute legal
activities under the Delaware Act or any other applicable
law; or
(f) any other event which causes the dissolution or winding-up
of the Partnership under the Delaware Act.
14.2 WINDING UP OF THE PARTNERSHIP; CAPITAL CONTRIBUTION BY THE GENERAL
PARTNER UPON DISSOLUTION
(a) Dissolution of the Partnership shall be effective on the day
on which the event occurs giving rise to the dissolution,
but the Partnership shall not terminate until a certificate
of termination has been filed in accordance with the
Delaware Act and the assets of the Partnership have been
distributed as provided in Section 14.3. Notwithstanding the
dissolution of the Partnership, before it is terminated, as
provided above, its business and the affairs of the
Partners, as such, shall continue to be governed by this
Agreement.
(b) On dissolution of the Partnership, the General Partner shall
liquidate the assets of the Partnership and apply and
distribute the proceeds as set forth in Section 14.3.
Notwithstanding anything to the contrary contained in this
Article XIV, if the General Partner determines that an
immediate sale of part or all of the Partnership assets
would cause undue loss to the Partners, the General Partner,
in order to avoid such loss, may, after having notified all
of the Limited Partners, to the extent not then prohibited
by law, defer liquidation of, and withhold from distribution
for a reasonable time, any assets of the Partnership except
those necessary to satisfy the Partnership's debts and
obligations.
(c) In connection with the dissolution of the Partnership:
(i) all Income or Losses or items thereof, and all
amounts required to be specially allocated for the
period before final termination, shall be credited
or charged, as the case may be, to the Partners in
accordance with Article XI;
(ii) if after all requirements of clause (i) of this
Section 14.2(c) have been accomplished, the General
Partner has a deficit balance in its Capital
Account, the General Partner shall contribute
within 30 days to the Partnership as a Capital
Contribution an amount equal to the lesser of:
(A) the amount of the deficit balance; or
(B) the excess of 1.01% of the total Capital
Contributions of the Limited Partners over
the capital previously contributed by the
General Partner.
For this purpose, any payments made by the General
Partner as co-signatory or guarantor of any of the
Indebtedness of the Partnership and not yet
reimbursed to the General Partner at the time of
dissolution of the Partnership and any amounts due
and unpaid to the General Partner with respect to
any Partnership Loans at the time of dissolution
shall be deemed to be Capital Contributions by the
General Partner to the Partnership and any
obligation of the Partnership to reimburse or repay
those amounts shall cease;
(iii) the proceeds from Sales and all other assets of the
Partnership shall be applied and distributed in
liquidation as provided in Section 14.3; and
(iv) the General Partner (or any other Person effecting
the winding up) shall file all certificates and
other documents as may be required by the Delaware
Act, the Code and any other applicable laws to
terminate the Partnership.
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(d) Whether the winding-up of the Partnership is effected by the
General Partner or any other Person (whether selected by the
Majority Interest or as required by law), either the General
Partner or the other Person, as the case may be, shall be
compensated for its services in connection therewith in an
amount not in excess of the amount customarily paid to non-
affiliated third-parties rendering similar services in
respect of similar entities in the same geographic location.
14.3 APPLICATION OF LIQUIDATION PROCEEDS UPON DISSOLUTION
Following the occurrence of any Dissolution Event, the proceeds of liquidation
Sales and the other assets of the Partnership shall be applied as follows and
in the following order of priority:
(a) first, to the payment of creditors of the Partnership in
order of priority as provided by law, except obligations to
Partners or their Affiliates;
(b) next, to the setting up of any Reserve that the General
Partner (or any other Person effecting the winding-up)
determines is reasonably necessary for any contingent or
unforeseen liability or obligation of the Partnership or the
Partners; the Reserve may, in the sole and absolute
discretion of the General Partner (or the other Person
effecting the winding up) be paid over to an escrow agent
selected by it to be held in escrow for the purpose of
disbursing the Reserve in payment of any of the
aforementioned contingencies, and at the expiration of such
period as the General Partner (or the other Person effecting
the winding up) deems advisable, to distribute the remaining
balance as provided in subsections (c) through (f), below;
(c) next, to the payment of all obligations to the Partners in
proportion to and to the extent of advances made by each
Partner under the provisions of this Agreement;
(d) next, to the payment of all reimbursements to which the
General Partner or any Affiliate of the General Partner may
be entitled under this Agreement;
(e) next, to the Partners in proportion to and to the extent of
the positive balances of their Capital Accounts; and
(f) thereafter, 1% to the General Partner and 99% to the Limited
Partners.
14.4 NO RECOURSE AGAINST OTHER PARTNERS
Each Limited Partner shall look solely to the assets of the Partnership for
the return of, and any return on, the Limited Partner's Capital Contribution
(whether before or after a Dissolution Event). If, after the complete payment
and discharge of all debts, liabilities and other obligations of the
Partnership, the assets of the Partnership are insufficient to provide the
return of, or a return on, the Capital Contribution of any Limited Partner,
the Limited Partner shall have no recourse against any other Limited Partner
or the General Partner, except to the extent that the General Partner is
obligated to make an additional Capital Contribution to the Partnership under
Section 14.2.
ARTICLE XV - FISCAL MATTERS
15.1 TITLE TO PROPERTY AND BANK ACCOUNTS
Unless trustees, nominees or other agents are used as permitted by this
Agreement, all Investments and other assets of the Partnership shall be held
in the name of the Partnership. The funds of the Partnership shall be
deposited in the name of the Partnership in any bank account or accounts as
are designated by the General Partner, and withdrawals therefrom shall be made
on the signature of the General Partner or any Person or Persons as are
designated in writing by the General Partner. The funds of the Partnership
shall not be commingled with the funds of any other Person.
15.2 MAINTENANCE OF AND ACCESS TO BASIC PARTNERSHIP DOCUMENTS
(a) The General Partner shall maintain at the Partnership's
principal office, the following documents:
(i) the Participant List;
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(ii) a copy of the certificate of limited partnership
and all amendments thereto, together with executed
copies of any powers of attorney under which the
certificate or any such amendment has been
executed;
(iii) copies of this Agreement and any amendments hereto;
(iv) copies of the audited financial statements of the
Partnership for the three most recently completed
Fiscal Years, including, in each case, the balance
sheet and related statements of operations, cash
flows and changes in Partners' equity at or for
such Fiscal Year, together with the report of the
Partnership's independent auditors with respect
thereto;
(v) copies of the Partnership's federal, state and
local income tax returns and reports, if any, for
its three most recently completed Fiscal Years;
(vi) records as required by applicable tax authorities
including those specifically required to be
maintained by "tax shelters," if so required of the
Partnership; and
(vii) investor suitability records for Units sold for a
period of six years.
(b) Each Limited Partner and his designated representative shall
be given access to the records specified in Section
15.2(a)(i)-(vi) and any other records of the Partnership
which relate to the business affairs and financial condition
of the Partnership, and may inspect the same and make copies
of the same (subject, in the case of copying the Participant
List, to compliance with subsection (c), below), subject to
a reasonable copying charge, during normal business hours
upon reasonable advance written notice to the General
Partner, which notice shall specify the date and time of the
intended visit and identify with reasonable specificity the
documents which such Limited Partner or his representative
will wish to examine or copy or both.
(c) In addition, the General Partner shall mail a copy of the
Participant List to, or as directed by, any Limited Partner
within 10 days of receipt by the Partnership of a written
request therefor together with a check in payment of the
copying charge permitted pursuant to subsection (b);
provided that, in connection with any request for a copy of
the Participant List, such Limited Partner shall certify as
provided in the penultimate sentence of subsection (d),
below.
(d) If the General Partner refuses or neglects to:
(i) permit a Limited Partner or his representative to
examine the Participant List at the office of the
Partnership during normal business hours and with
reasonable notice to the General Partner; or
(ii) mail a copy of the Participant List as required by
subsection (c);
the General Partner shall be liable to such Limited Partner
who requested the Participation List for the costs,
including reasonable attorneys' fees, incurred by such
Limited Partner to compel production of the Participant
List, and for the actual damages (if any) suffered by such
Limited Partner by reason of such refusal or neglect. It
shall be a defense that the requesting Limited Partner has
failed or refused to provide the General Partner with the
certification called for in the next sentence or that the
actual purpose and reason for a request for inspection or a
copy of the Participant List is to secure the Participant
List or other information for the purpose of the sale,
reproduction or other use thereof for a commercial purpose
other than in the interest of the Limited Partner relative
to the affairs of the Partnership. In connection with any
such request, the General Partner will require the Limited
Partner requesting the Participant List to certify that the
Participant List is not being requested for the purpose of
the sale, reproduction or other use thereof for a commercial
purpose unrelated to such Limited Partner's interest in the
Partnership or for any unlawful purpose. The remedies
provided under this Section 15.2(d) to Limited Partners
requesting copies of the Participant List are in addition
to, and shall not in any way limit, other remedies available
to Limited Partners under federal law or the laws of any
state.
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15.3 FINANCIAL BOOKS AND ACCOUNTING
The General Partner shall keep, or cause to be kept, complete and accurate
financial books and records with respect to the business and affairs of the
Partnership. Except to the extent otherwise required by the accounting methods
adopted by the Partnership for federal income tax purposes, such books and
records shall be kept on an accrual basis and all financial statements of the
Partnership shall be prepared for each Fiscal Year in accordance with
generally accepted accounting principles as applied within the United States
of America.
15.4 FISCAL YEAR
Except as may otherwise be determined from time to time by the General Partner
(in a manner which is consistent with the Code and the Treasury Regulations
thereunder or as consented to by the IRS), the Fiscal Year of the Partnership
for both federal income tax and financial reporting purposes shall end on
December 31 of each year.
15.5 REPORTS
(a) QUARTERLY REPORTS. Within 60 days after the end of each of
the first three Fiscal Quarters of each Fiscal Year, the
General Partner shall send to each Person who was a Limited
Partner at any time during such Fiscal Quarter the following
written materials:
(i) a report containing the same financial information
as is contained in the Partnership's quarterly
report on Form 10-Q filed with the Commission under
the Securities Exchange Act of 1934, as amended;
(ii) a detailed statement identifying any services
rendered or to be rendered to the Partnership by
the General Partner or any of its Affiliates and
the compensation received therefor and summarizing
the terms and conditions of any contract which was
not filed as an exhibit to the Registration
Statement; provided that the requirement for such
statement shall not be circumvented by lump-sum
payments to non-Affiliates who then disburse the
funds to, or for the benefit of, the General
Partner or its Affiliates; and
(iii) until all Capital Contributions have been invested
or committed to investment in Investments and
Reserves, used to pay permitted Front-End Fees or
returned to the Limited Partners (as provided in
Section 11.5), a special report concerning all
Investments made during such Fiscal Quarter which
shall include:
(A) a description of the types of Investments
made;
(B) the total Purchase Price paid for each
category of Investment;
(C) the amounts of cash used to acquire such
Investments;
(D) the Acquisition Fees and Acquisition
Expenses paid, identified by party, in
connection therewith; and
(E) the amount of Capital Contributions, if
any, which remain unexpended and
uncommitted to pending Investments as of
the end of such Fiscal Quarter.
(b) ANNUAL REPORTS. Within 120 days after the end of each Fiscal
Year, the General Partner shall send to each Person who was
a Limited Partner at any time during such Fiscal Year the
following written materials:
(i) financial statements for the Partnership for such
Fiscal Year, including a balance sheet as of the
end of such Fiscal Year and related statements of
operations, cash flows and changes in Partners'
equity, which shall be prepared in accordance with
Section 15.3 and shall be accompanied by an
auditor's report containing an opinion of the
Accountants;
(ii) an analysis prepared by the General Partner (which
need not be audited, but shall be reviewed by the
Accountants) of distributions made to the General
Partner and the Limited Partners during such Fiscal
Year, separately identifying the portion (if any)
of such distributions from:
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(A) Cash Flow during such period;
(B) Cash Flow from prior periods which had
been held as Reserves;
(C) Cash Flow from Sales; and
(D) Capital Contributions originally used to
establish a Reserve;
(iii) a status report with respect to each Investment
which individually represents at least 10% of the
aggregate Purchase Price of the Partnership's
Investments held at the end of such Fiscal Year,
which report shall state:
(A) the condition of the Equipment and each
material item thereof and of any
collateral securing any Investment to
which such report applies;
(B) how such Equipment or collateral was being
used as of the end of such Fiscal Year
(i.e., leased, operated directly by the
Partnership or held for lease, repair or
Sale);
(C) the projected or intended use of such
Equipment or collateral during the next
following Fiscal Year;
(D) the remaining term of the Investment; and
(E) such other information as may be relevant
to the value or use of such Equipment or
collateral as the General Partner, in good
faith, deems appropriate;
(iv) a breakdown of all fees and other compensation
paid, and all costs and expenses reimbursed, to the
General Partner or its Affiliates by the
Partnership during such Fiscal Year identified (and
properly allocated) as to type and amount:
(A) in the case of any fees and other
compensation, such breakdown shall provide
the information required under Section
15.5(a)(ii); and
(B) in the case of reimbursed costs and
expenses, the General Partner shall also
prepare an allocation of the total amount
of all such items in accordance with this
Agreement. Such cost and expense
allocation shall be reviewed by the
Accountants in connection with their audit
of the financial statements of the
Partnership for such Fiscal Year in
accordance with the American Institute of
Certified Public Accountants United States
Auditing standards relating to special
reports and such Accountants shall state
that, in connection with the performance
of such audit, such Accountants reviewed,
at a minimum, the time records of, and the
nature of the work performed by,
individual employees of the General
Partner or its Affiliates, the cost of
whose services were reimbursed. The
additional costs of the special review
required by this clause will be itemized
by the Accountants on a Program by Program
basis and shall be reimbursed to the
General Partner by the Partnership only to
the extent that such reimbursement, when
added to the cost for administrative
services rendered, does not exceed the
amount the Partnership would be required
to pay independent parties for comparable
administrative services in the same
geographic location; and
(v) a special report containing the information
required by Section 15.5(a)(iii).
(c) REPORTS TO STATE SECURITIES LAW ADMINISTRATORS. The General
Partner shall submit to all state securities law
Administrators, including Arizona, California and Ohio, any
information which such Administrator requires, including,
but not limited to, reports and statements required by this
Agreement to be distributed to Limited Partners, or reports
required to be filed with the Administrator by state
securities laws, regulations or policies.
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15.6 TAX RETURNS AND TAX INFORMATION
The General Partner shall:
(a) prepare or cause the Accountants to prepare, in accordance
with applicable laws and regulations, the tax returns
(federal, state, local and foreign, if any) of the
Partnership for each Fiscal Year within 75 days after the
end of such Fiscal Year; and
(b) deliver to each Partner by March 15 following each Fiscal
Year a Schedule K-1 or other statement setting forth such
Partner's share of the Partnership's Income or Loss for such
Fiscal Year.
15.7 ACCOUNTING DECISIONS
All decisions as to accounting matters, except as specifically provided to the
contrary in this Agreement, shall be made by the General Partner in accordance
with the accounting methods adopted by the Partnership for federal income tax
purposes or otherwise in accordance with generally accepted accounting
principles. Such decisions must be acceptable to the Accountants, and the
General Partner may rely upon the advice of the Accountants as to whether such
decisions are in accordance with the methods adopted by the Partnership for
federal income tax purposes or generally accepted accounting principles.
15.8 FEDERAL TAX ELECTIONS
The Partnership, in the sole and absolute discretion of the General Partner,
may make elections for federal tax purposes as follows:
(a) In case of a transfer of all or part of a General Partner's
Partnership Interest or a Limited Partner's Units, the
Partnership may timely elect under Section 754 of the Code
(or corresponding provisions of future law), and under
similar provisions of applicable state or local income tax
laws, to adjust the basis of the assets of the Partnership.
In that event, any basis adjustment attributable to the
election shall be allocated solely to the transferee.
(b) All other elections, including but not limited to the
adoption of accelerated depreciation and cost recovery
methods, required or permitted to be made by the Partnership
under the Code shall be made by the General Partner in such
manner as will, in the opinion of the General Partner
(as advised by Counsel or the Accountants as the General
Partner deems necessary), be most advantageous to the
Limited Partners as a group. The Partnership shall, to the
extent permitted by applicable law and regulations, elect to
treat as an expense for federal income tax purposes all
amounts incurred by it for state and local taxes, interest
and other charges which may, in accordance with applicable
law and regulations, be considered as expenses.
15.9 TAX MATTERS PARTNER
(a) The General Partner is hereby designated the Partnership's
"Tax Matters Partner" under Section 6231(a)(7) of the Code,
and may hereafter designate its successor as Tax Matters
Partner, to manage administrative and judicial tax
proceedings conducted at the Partnership level by the IRS
with respect to Partnership matters. Any Partner, other than
the Tax Matters Partner, shall have the right to participate
in such administrative or judicial proceedings relating to
the determination of Partnership items at the Partnership
level to the extent provided by Section 6224 of the Code and
at the Partner's own expense. The Limited Partners shall not
act independently with respect to tax audits or tax
litigation affecting the Partnership, and actions taken by
the General Partner as Tax Matters Partner in connection
with tax audits shall be binding in all respects upon the
Limited Partners, except as provided below.
(b) The Tax Matters Partner shall have the following duties:
(i) to the extent and in the manner required by
applicable law and regulations, the Tax Matters
Partner shall furnish the name, address, number of
Units and taxpayer identification number of each
Limited Partner to the Secretary of the Treasury or
his delegate (the "Secretary"); and
(ii) to the extent and in the manner required by
applicable law and regulations, the Tax Matters
Partner shall keep each Limited Partner informed of
administrative and judicial proceedings for
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the adjustment at the Partnership level of any item
required to be taken into account by a Limited
Partner for income tax purposes (such judicial
proceedings referred to hereinafter as "judicial
review").
(c) Subject to Section 9.3, the Partnership shall indemnify and
reimburse the Tax Matters Partner for all expenses,
including legal and accounting fees, claims, liabilities,
losses and damages incurred in connection with any
administrative or judicial proceeding with respect to the
tax liability of the Partners. The payment of all such
expenses shall be made before any distributions are made
from Distributable Cash. Neither the General Partner nor any
Affiliate nor any other Person except the Partnership shall
have any obligation to provide funds for such purpose. The
taking of any action and the incurring of any expense by the
Tax Matters Partner in connection with any such proceeding,
except to the extent required by law, shall be in the sole
and absolute discretion of the Tax Matters Partner. The
provisions on limitations of liability of the General
Partner and indemnification set forth in Section 9.3 shall
be fully applicable to the General Partner acting in its
capacity as Tax Matters Partner.
(d) The Tax Matters Partner is hereby authorized, but not
required:
(i) to enter in to any settlement with the IRS with
respect to any tax audit or judicial review, in
which agreement the Tax Matters Partner may
expressly state that such agreement shall bind the
other Partners, except that such settlement
agreement shall not bind any Partner who (within
the time prescribed pursuant to Section 6224(c)(3)
of the Code and regulations thereunder) files a
statement with the IRS providing that the Tax
Matters Partner shall not have the authority to
enter into a settlement agreement on the behalf of
such Partner;
(ii) if a notice of a final administrative adjustment at
the partnership level of any item required to be
taken into account by a Partner for tax purposes (a
"final adjustment") is mailed to the Tax Matters
Partner, to seek judicial review of such final
adjustment, including the filing of a petition for
readjustment with the Tax Court, the District Court
of the United States for the district in which the
Partnership's principal place of business is
located, the United States Court of Claims or any
other appropriate forum;
(iii) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment
with the IRS at any time and, if any part of such
request is not allowed by the IRS, to file a
petition for judicial review with respect to such
request;
(v) to enter into an agreement with the IRS to extend
the period for assessing any tax which is
attributable to any item required to be taken in to
account by a Partner for tax purposes, or an item
affected by such item; and
(vi) to take any other action on behalf of the Partners
or the Partnership in connection with any
administrative or judicial tax proceeding to the
extent permitted by applicable law or regulations.
ARTICLE XVI - MEETINGS AND VOTING RIGHTS OF THE LIMITED PARTNERS
16.1 MEETINGS OF THE LIMITED PARTNERS
(a) A meeting of the Limited Partners for any purpose(s) may be
called by the General Partner. A meeting of the Limited
Partners shall be called by the General Partner following
its receipt of written request(s), either in person or by
registered mail, for a meeting on any matter on which the
Limited Partners may vote as set forth in this Article XVI
from Limited Partners holding 10% or more of the then
outstanding Units. Every such request for a meeting shall
state with reasonable specificity the purpose(s) for which
such meeting is to be held and the text of any matter,
resolution or action proposed to be voted upon by the
Limited Partners at such meeting. Within 10 days following
the receipt of such a request, the General Partner shall
give Notice to all Limited Partners of such meeting in the
manner and for a time and place as specified in Section
16.1(b). In addition, the General Partner may, and if so
requested by the Limited Partners in the manner described
above, shall, submit the proposed matter, resolution or
action for action by Consent of the Limited Partners, in
lieu of a meeting.
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(b) A Notice of any such meeting or action by written Consent
shall be given to all Limited Partners either:
(i) personally or by certified mail (if such meeting is
being called, or Consent action is being solicited,
by the General Partner upon the request of the
Limited Partners); or
(ii) by regular mail (if such meeting is being called,
or Consent action is being solicited, by the
General Partner).
A meeting called pursuant to such Notice shall be held, or
Consent action taken, not less than 15 days nor more than 60
days after the date such Notice is distributed, subject to
extension to the extent necessary to comply with applicable
requirements of the Commission and Administrators. Such
Notice shall be delivered or mailed to each Limited Partner
at his record address, or at such other address as he may
have furnished in writing to the General Partner as his
address for receipt of Notices and, with respect to
meetings, shall state the place, date and time of such
meeting (which shall be the place, date and time specified
in the request for such meeting or, if none, such other
place, date and time as the General Partner shall determine
to be reasonable and convenient to the Limited Partners)
and, with respect both to meetings or solicitations of
Consent actions, shall state the purpose(s) for which such
meeting is to be held or Consent action requested.
If any meeting of the Limited Partners is properly adjourned
to another time or place, and if any announcement of the
adjournment of time or place is made at the meeting, it
shall not be necessary to give notice of the adjourned
meeting. The presence in person or by proxy of a Majority
Interest shall constitute a quorum at all meetings of the
Limited Partners; provided, however, that, if there be no
such quorum, holders of a majority of the Units so present
or so represented may adjourn the meeting from time to time
without further notice, until a quorum shall have been
obtained. No 7Notice of any meeting of Limited Partners need
be given to any Limited Partner who attends in person or is
represented by proxy (except when a Limited Partner attends
a meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business
on the ground that the meeting is not lawfully called or
convened) or to any Limited Partner otherwise entitled to
such Notice who has executed and filed with the records of
the meeting, either before or after the time thereof, a
written waiver of such Notice.
(c) For the purpose of determining the Limited Partners entitled
to vote on any matter submitted to the Limited Partners at
any meeting of such Limited Partners, or to take action by
Consent in lieu thereof, or any adjournment thereof, the
General Partner or the Limited Partners requesting such
meeting may fix, in advance, a date as the record date,
which shall be a date not more than 60 days nor less than 10
days prior to any such meeting (or Consent action), for the
purpose of any such determination.
(d) Any Limited Partner may authorize any Person or Persons to
act for such Limited Partner by proxy in respect of all
matters as to which such Limited Partner is entitled to
participate, including matters proposed for actions by
Consent. Every proxy must be signed by a Limited Partner or
his attorney-in- fact. No proxy shall be valid after the
expiration of eleven months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Limited Partner executing
it.
(e) At each meeting of the Limited Partners, the Limited
Partners present or represented by proxy may adopt such
rules for the conduct of such meeting as they shall deem
appropriate, provided that such rules shall not be
inconsistent with the provisions of this Agreement.
16.2 VOTING RIGHTS OF THE LIMITED PARTNERS
Subject to Section 16.3, the Limited Partners, acting by Consent of the
Majority Interest or by vote of the Majority Interest at a meeting duly called
for such purpose, may take the following actions without the concurrence of
the General Partner:
(a) amend this Agreement;
(b) dissolve the Partnership;
(c) remove the General Partner and elect one or more Substitute
General Partners;
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(d) approve or disapprove of the Sale or series of Sales of all,
or substantially all, of the assets of the Partnership,
except for any Sale or series of Sales that is in connection
with a Financing Transaction or in the ordinary course of
liquidating the Partnership's Investments during the
Liquidation Period; and
(e) modify or terminate on 60 days notice any contract or
arrangement with the General Partner or any of its
Affiliates to provide goods or services for the Partnership,
other than contracts specifically authorized under this
Agreement, including without limitation the Origination &
Servicing Agreement, as provided for in Section 9.2(m).
The General Partner and its Affiliates may not vote or Consent on matters
submitted to the Limited Partners regarding the removal of the General Partner
or regarding any transaction between the Partnership and the General Partner
or any of its Affiliates. In determining the requisite percentage of Units
necessary to approve a matter on which the General Partner or its Affiliates
may not vote or Consent, any Units owned by the General Partner or its
Affiliates shall not be included in either the numerator or the denominator.
16.3 LIMITATIONS ON ACTION BY THE LIMITED PARTNERS
This Agreement may not be amended by the Limited Partners so as to:
(a) allow the Limited Partners to take part in the control or
management of the Partnership's business or otherwise
subject a Limited Partner to liability as a general partner
under the Delaware Act or under the laws of any other
jurisdiction in which the Partnership may be qualified or
own an Investment;
(b) alter the rights, powers, duties or obligations of the
General Partner without the Consent of the General Partner;
(c) contract away the fiduciary duty owed to any Limited Partner
by the General Partner;
(d) except in connection with the offer and sale of the Units as
provided in this Agreement, alter the interest of any
Partner in any item of Income or Loss or in distributions
without the consent of each affected Partner; or
(e) without the consent of all of the Limited Partners, amend
the provisions of this Agreement relating to how this
Agreement may be amended.
ARTICLE XVII - AMENDMENTS
17.1 AMENDMENTS BY THE GENERAL PARTNER
In addition to any amendments by the Limited Partners under Section 16.2, as
limited by Section 16.3, this Agreement may be amended, at any time and from
time to time, by the General Partner without the Consent of a Majority
Interest:
(a) to add to the representations, duties or obligations of the
General Partner or to surrender any right or power granted
to the General Partner in this Agreement;
(b) to cure any ambiguity in this Agreement, to correct or
supplement any provision in this Agreement that may be
inconsistent with any other provision in this Agreement, or
to add any provision to this Agreement with respect to
matters or questions arising under this Agreement that is
not inconsistent with the other provisions of this
Agreement;
(c) to preserve the status of the Partnership as a partnership
for federal income tax purposes, or as a limited partnership
under the Delaware Act or any comparable law of any other
state in which the Partnership may be required to be
qualified;
(d) to delete any provision of this Agreement, or add any
provision to this Agreement, required to be so deleted or
added by the staff of the Commission, by any other federal
or state regulatory body or other agency (including, without
limitation, any "blue sky" commission), or by any
Administrator or similar such official;
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(e) to permit the Units to fall within any exemption from the
definition of "plan assets" contained in Section 2510.3-101
of Title 29 of the Code of Federal Regulations;
(f) if the Partnership is advised by Counsel, the Partnership's
Accountants or the IRS that any allocations of Income or
Loss provided for in this Agreement are unlikely to be
respected for federal income tax purposes, to amend the
allocation provisions of this Agreement, in accordance with
that advice to the minimum extent necessary to comply with
federal income tax requirements and still effect, as nearly
as practicable, the original plan of allocations and
distributions set forth in this Agreement; and
(g) to change the name of the Partnership or the location of its
principal office.
ARTICLE XVIII - POWER OF ATTORNEY
18.1 APPOINTMENT OF ATTORNEY-IN-FACT
By subscribing for Units and being admitted as a Limited Partner under this
Agreement, each Limited Partner makes, constitutes and appoints the General
Partner, each authorized officer of the General Partner and each Person who
thereafter becomes a Substitute General Partner during the term of the
Partnership, with full power of substitution, the true and lawful attorney-in-
fact of, and in the name, place and stead of, such Limited Partner, with the
power from time to time to make, execute, sign, acknowledge, swear to, verify,
deliver, record, file and publish:
(a) this Agreement, the Partnership's certificate of limited
partnership and any amendment of any thereof, including,
without limitation, amendments reflecting the addition of
any Person as a Partner or any admission or substitution of
other Partners (or the Capital Contribution made by any such
Person or by any Partner) and any other document,
certificate or instrument required to be executed and
delivered, at any time, in order to reflect the admission of
any Partner (including, without limitation, any Substitute
General Partner and any Substitute Limited Partner);
(b) any other document, certificate or instrument required to
reflect any action of the Partners duly taken in the manner
provided for in this Agreement, whether or not such Limited
Partner voted in favor of or otherwise consented to such
action;
(c) any other document, certificate or instrument that may be
required by any regulatory body or other agency or the
applicable laws of the United States, any state or any other
jurisdiction in which the Partnership is doing or intends to
do business or that the General Partner deems advisable;
(d) any certificate of dissolution or cancellation of the
certificate of limited partnership that may be reasonably
necessary to effect the termination of the Partnership; and
(e) any instrument or papers required to continue or terminate
the business of the Partnership under Section 12.5 and
Article XIV; provided that no such attorney-in-fact shall
take any action as attorney-in-fact for any Limited Partner
if such action could in any way increase the liability of
such Limited Partner beyond the liability expressly set
forth in this Agreement or alter the rights of such Limited
Partner under Article XI, unless (in either case) such
Limited Partner has given a power of attorney to such
attorney-in-fact expressly for such purpose.
18.2 AMENDMENTS TO AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP
If, under this Agreement, any action, adoption proposal, right, power or
authority requires the Consent, vote, ratification or approval of fewer than
all of the Limited Partners, then, on the satisfaction of that requirement,
the Consent, vote, ratification or approval shall be deemed, and each Limited
Partner hereby agrees that it shall constitute, that of all of the Limited
Partners for all purposes, including unanimity requirements under the Delaware
Act. Limited Partners who did not respond in connection with the proposed
Consent, vote, ratification or approval shall be deemed to have abstained for
all purposes under this Agreement.
18.3 POWER COUPLED WITH AN INTEREST
The grant of authority by each Limited Partner in Section 18.1:
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(a) is a special power of attorney coupled with an interest in
favor of the attorney-in-fact and shall be irrevocable and
shall survive the death, incapacity, insolvency, dissolution
or termination of the Limited Partner;
(b) may be exercised for the Limited Partner by a signature of
the attorney-in-fact or by listing or referring to the names
of all of the Limited Partners, including that Limited
Partner, and executing any instrument with a single
signature of any one of the attorneys-in-fact acting as
attorney-in- fact for all of them; and
(c) shall survive the Assignment by any Limited Partner of all
or any portion of the Limited Partner's Units, provided
that, if any Assignee of all of a Limited Partner's Units
has furnished to the General Partner a power of attorney
complying with the provisions of Section 18.1 and the
admission to the Partnership of the Assignee as a Substitute
Limited Partner has been approved by the General Partner,
this power of attorney shall survive the Assignment with
respect to the assignor Limited Partner for the sole purpose
of enabling the attorneys-in-fact to execute, acknowledge
and file any instrument necessary to effect the Assignment
and admission and shall thereafter terminate with respect to
the assignor Limited Partner.
ARTICLE XIX GENERAL PROVISIONS
19.1 NOTICES, APPROVALS AND CONSENTS
All Notices, approvals, Consents or other communications under this Agreement
shall be in writing and signed by the party giving the same and, except as
otherwise specifically provided in this Agreement, shall be deemed to have
been delivered when the same are deposited in the United States mail and sent
by first class or certified mail, postage prepaid; hand delivered; sent by
overnight courier; or sent by telecopy and confirmed by telephone during
normal business hours.
In each case, delivery shall be made to the parties at the addresses set forth
below or at any other addresses as the parties may designate by Notice to the
Partnership as specified in Section 5.1:
(a) If to the Partnership: Lease Equity Appreciation Fund II,
L.P., ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, with a copy to c/o LEAF Financial Corporation,
General Partner, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; Telephone Number: 302-658-
5600 (the Partnership) and 215-574-1636 (the General
Partner); Telecopier Number: ▇▇▇-▇▇▇-▇▇▇▇ (the Partnership)
and 215-574-8176 (the General Partner).
(b) If to the General Partner: LEAF Financial Corporation, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
Telephone Number: ▇▇▇- ▇▇▇-▇▇▇▇; Telecopier Number: 215-574-
8176.
(c) If to any Limited Partner, at the address set forth in the
Limited Partner's Subscription Agreement unless a different
address has been provided to the Partnership under Section
5.1.
19.2 FURTHER ASSURANCES
The Partners agree to execute, acknowledge and deliver all further instruments
and do all further acts and things as may reasonably be necessary to carry out
the intent and purpose of this Agreement.
19.3 CAPTIONS
Captions contained in this Agreement are inserted only as a matter of
convenience and do not define, limit, extend or describe the scope of this
Agreement or the intent of any provisions of this Agreement.
19.4 BINDING EFFECT
Except to the extent required under the Delaware Act and for fees, rights to
reimbursement and other compensation provided as such, none of the provisions
of this Agreement shall be for the benefit of, or be enforceable by, any
creditor of the Partnership.
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19.5 SEVERABILITY
If one or more of the provisions of this Agreement or any application thereof
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained in this
Agreement and any other application thereof shall not in any way be affected
or impaired thereby, and the remaining provisions shall be interpreted
consistently with the omission of the invalid, illegal or unenforceable
provisions.
19.6 INTEGRATION
This Agreement constitutes the entire agreement among the parties pertaining
to the subject matter of this Agreement and supersedes all prior and
contemporaneous agreements and understandings of the parties in connection
with the subject matter of this Agreement that conflict with the express terms
of this Agreement. No covenant, representation or condition not expressed in
this Agreement shall affect, or be effective to interpret, change or restrict,
the express provisions of this Agreement.
19.7 APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware, including, without limitation,
the Delaware Act (except and solely to the extent that provisions of the laws
of any other jurisdiction are stated to be applicable in any section of this
Agreement), without giving effect to the conflict of laws provisions thereof.
19.8 COUNTERPARTS
This Agreement may be signed by each party to this Agreement on a separate
counterpart (including, in the case of a Limited Partner, a separate
Subscription Agreement or signature page executed by one or more such
Partners), but all such counterparts, when taken together, shall constitute
but one and the same instrument.
19.9 CREDITORS
No creditor who makes a loan to the Partnership shall have or acquire at any
time, as a result of making the loan, any direct or indirect interest in the
profits, capital or property of the Partnership other than as a secured
creditor.
19.10 SUCCESSORS AND ASSIGNS
Each and every covenant, term, provision and agreement contained in this
Agreement shall be binding on and inure to the benefit of the successors and
assigns of the respective parties to this Agreement. In furtherance of and not
in limitation of the foregoing, the General Partner may assign, as collateral
security or otherwise, any items of compensation payable to it under the terms
of this Agreement. Notwithstanding any such assignment, however, the General
Partner, and not any such assignee, shall remain solely liable for its
obligations under this Agreement.
19.11 WAIVER OF ACTION FOR PARTITION
Each of the parties to this Agreement irrevocably waives during the term of
the Partnership any right that he may have to maintain any action for
partition with respect to the Partnership's Investments and other property and
assets.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of this
31st day of March, 2004.
GENERAL PARTNER:
LEAF FINANCIAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Its: President and Chief Operating Officer
ORIGINAL LIMITED PARTNER:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
LIMITED PARTNERS:
By: LEAF FINANCIAL CORPORATION, as Attorney in Fact
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Its: President and Chief Operating Officer
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